ex10_1.htm


    
      
        

      

      Exhibit
        10.1

       

      


      AGREEMENT
        AND PLAN OF MERGER AND REORGANIZATION

       

       

      dated
        as
        of

       

       

      July
        27, 2007

       

       

      among

       

       

      SALVADOR
        IMAGING, INC.,

       

       

      DAVID
        GARDNER,

       

       

      SALVADOR
        FOUNDATION CHARITABLE REMAINDER UNITRUST,

       

       

      JAMES
        R. LONG,

       

       

      PATRICIA
        LONG,

       

       

      KERRY
        RHEA,

       

       

      LISA
        J. RHEA,

       

       

      PHOTON
        DYNAMICS, INC.,

       

       

      SALVADOR
        ACQUISITION, INC.,

       

      


      SALVADOR
        ACQUISITION, LLC

       

      and

       

       

      DAVID
        GARDNER, as Shareholders’ Representative

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      TABLE
        OF CONTENTS

       

      
        	 	 	
                PAGE

              
	 	 	 
	
                ARTICLE
                  1

              
	
                DEFINITIONS

              
	 
	
                Section
                  1.01.

              	
                Definitions

              	
                2

              
	
                Section
                  1.02.

              	
                Other
                  Definitional and Interpretative Provisions

              	
                6

              
	
                 

              	 	 
	
                ARTICLE
                  2

              
	
                THE
                  MERGER

              
	 
	
                Section
                  2.01.

              	
                The
                  Mergers.

              	
                7

              
	
                Section
                  2.02.

              	
                Merger
                  Consideration

              	
                8

              
	
                Section
                  2.03.

              	
                Conversion
                  of Shares

              	
                9

              
	
                Section
                  2.04.

              	
                Conversion
                  of Shares in the Second Merger

              	
                9

              
	
                Section
                  2.05.

              	
                Surrender
                  and Payment

              	
                10

              
	
                Section
                  2.06.

              	
                Fractional
                  Shares

              	
                11

              
	
                Section
                  2.07.

              	
                Withholding
                  Rights

              	
                11

              
	
                Section
                  2.08.

              	
                Lost
                  Certificates

              	
                11

              
	 	 	 
	
                ARTICLE
                  3

              
	
                INITIAL
                  SURVIVING CORPORATION; THE SURVIVING ENTITY

              
	 
	
                Section
                  3.01.

              	
                Articles
                  of Incorporation and Bylaws of the Initial Surviving
                  Corporation

              	
                12

              
	
                Section
                  3.02.

              	
                Directors
                  and Officers

              	
                12

              
	
                Section
                  3.03.

              	
                Certificate
                  of Formation and Limited Liability Company

              	
                12

              
	
                Section
                  3.04.

              	
                Managers
                  and Officers

              	
                12

              
	 	 	 
	
                ARTICLE
                  4

              
	
                REPRESENTATIONS
                  AND WARRANTIES OF THE COMPANY

              
	 
	
                Section
                  4.01.

              	
                Corporate
                  Existence and Power

              	
                13

              
	
                Section
                  4.02.

              	
                Corporate
                  Authorization

              	
                13

              
	
                Section
                  4.03.

              	
                Capitalization

              	
                13

              
	
                Section
                  4.04.

              	
                Ownership
                  of Shares; Stock Option Plan

              	
                14

              
	
                Section
                  4.05.

              	
                Subsidiaries

              	
                14

              
	
                Section
                  4.06.

              	
                Authorizations

              	
                14

              
	
                Section
                  4.07.

              	
                Governmental
                  Authorization

              	
                14

              
	
                Section
                  4.08.

              	
                Non-contravention

              	
                15

              
	
                Section
                  4.09.

              	
                Financial
                  Statements

              	
                15

              
	
                Section
                  4.10.

              	
                Absence
                  of Certain Changes

              	
                15

              
	
                Section
                  4.11.

              	
                No
                  Undisclosed Liabilities

              	
                17

              
	
                Section
                  4.12.

              	
                Agreements,
                  Contracts and Commitments

              	
                17

              
	
                Section
                  4.13.

              	
                Validity
                  of Contracts

              	
                19

              
	
                Section
                  4.14.

              	
                No
                  Renegotiations

              	
                20

              
	
                Section
                  4.15.

              	
                Products
                  and Services 

              	
                20

              


      

      

        
          
            
            

          

          
            i

            
              

            

          

          
            
            

          

        

      

       

      
        	
                Section
                  4.16.

              	
                IntellectualProperty

              	
                20

              
	
                Section
                  4.17.

              	
                Insurance
                  Coverage

              	
                24

              
	
                Section
                  4.18.

              	
                Litigation.

              	
                24

              
	
                Section
                  4.19.

              	
                Licenses
                  and Permits

              	
                24

              
	
                Section
                  4.20.

              	
                Compliance
                  with Laws and Court Orders

              	
                25

              
	
                Section
                  4.21.

              	
                Finders’
                  Fees

              	
                25

              
	
                Section
                  4.22.

              	
                Employee
                  Benefit Plans

              	
                25

              
	
                 

              	 	 
	
                ARTICLE
                  5

              
	
                REPRESENTATIONS
                  AND WARRANTIES OF SELLERS

              
	 
	
                Section
                  5.01.

              	
                Private
                  Placement Qualification

              	
                26

              
	 	 	 
	
                ARTICLE
                  6

              
	
                REPRESENTATIONS
                  AND WARRANTIES OF PARENT

              
	 
	
                Section
                  6.01.

              	
                Corporate
                  Existence and Power

              	
                27

              
	
                Section
                  6.02.

              	
                Corporate
                  Authorization

              	
                27

              
	
                Section
                  6.03.

              	
                Governmental
                  Authorization

              	
                27

              
	
                Section
                  6.04.

              	
                Non-contravention

              	
                27

              
	
                Section
                  6.05.

              	
                SEC
                  Filings

              	
                28

              
	
                Section
                  6.06.

              	
                Parent
                  Common Stock

              	
                28

              
	 	 	 
	
                ARTICLE
                  7

              
	
                COVENANTS

              
	 
	
                Section
                  7.01.

              	
                Obligations
                  of the Merger Subsidiaries

              	
                28

              
	
                Section
                  7.02.

              	
                Parent
                  Financial Covenant

              	
                28

              
	
                Section
                  7.03.

              	
                Employee
                  Benefits

              	
                28

              
	
                Section
                  7.04.

              	
                Further
                  Assurances

              	
                29

              
	 	 	 
	
                ARTICLE
                  8

              
	
                TAX
                  MATTERS

              
	 
	
                Section
                  8.01.

              	
                Tax
                  Definitions

              	
                29

              
	
                Section
                  8.02.

              	
                Tax
                  Representations

              	
                30

              
	
                Section
                  8.03.

              	
                Covenants

              	
                31

              
	
                Section
                  8.04.

              	
                Cooperation
                  on Tax Matters

              	
                32

              
	
                Section
                  8.05.

              	
                Tax
                  Indemnification

              	
                33

              
	
                Section
                  8.06.

              	
                Certain
                  Disputes

              	
                34

              
	
                Section
                  8.07.

              	
                Purchase
                  Price Adjustment

              	
                35

              
	
                Section
                  8.08.

              	
                Tax-Free
                  Reorganization Treatment

              	
                35

              
	
                Section
                  8.09.

              	
                Survival

              	
                35

              
	 	 	 
	
                ARTICLE
                  9

              
	
                SURVIVAL
                  OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

              
	 	 
	
                Section
                  9.01.

              	
                Survival
                  of Representation and Warranties

              	
                35

              


      

      

        
          
            
            

          

          
            ii

            
              

            

          

          
            
            

          

        

      

       

      
        	
                Section
                  9.02.

              	
                Indemnification

              	
                36

              
	
                Section
                  9.03.

              	
                Indemnification
                  Notice

              	
                38

              
	
                Section
                  9.04.

              	
                Shareholders’
                  Representative

              	
                38

              
	
                Section
                  9.05.

              	
                No
                  Claims for Disclosed Matters

              	
                40

              
	
                 

              	 	 
	
                ARTICLE
                  10

              
	
                MISCELLANEOUS

              
	 
	
                Section
                  10.01.

              	
                Notices

              	
                40

              
	
                Section
                  10.02.

              	
                Amendments
                  and Waivers

              	
                42

              
	
                Section
                  10.03.

              	
                Expenses

              	
                42

              
	
                Section
                  10.04.

              	
                Successors
                  and Assigns

              	
                42

              
	
                Section
                  10.05.

              	
                Governing
                  Law

              	
                42

              
	
                Section
                  10.06.

              	
                Jurisdiction

              	
                42

              
	
                Section
                  10.07.

              	
                WAIVER
                  OF JURY TRIAL

              	
                43

              
	
                Section
                  10.08.

              	
                Counterparts;
                  Effectiveness

              	
                43

              
	
                Section
                  10.09.

              	
                Entire
                  Agreement

              	
                43

              
	
                Section
                  10.10.

              	
                Captions

              	
                43

              
	
                Section
                  10.11.

              	
                Severability

              	
                43

              
	
                Section
                  10.12.

              	
                Specific
                  Performance

              	
                43

              


      


      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      


      INDEX
        TO ANNEXES

       

      
        	
                Annex
                  I

              	
                Written
                  Consent of the Shareholders

              
	
                Annex
                  II

              	
                Merger
                  Consideration

              
	
                Annex
                  III

              	
                Registration
                  Rights Agreement

              
	
                Annex
                  IV

              	
                David
                  Gardner Employment Agreement

              
	
                Annex
                  V

              	
                James
                  R. Long Employment Agreement

              
	
                Annex
                  VI

              	
                Kerry
                  Rhea Employment Agreement

              
	
                Annex
                  VII

              	
                Gardner
                  Non-competition Agreement

              
	
                Annex VIII         
                  

              	
                Assignment
                  Agreement

              
	
                Annex
                  IX

              	
                Promissory
                  Note

              


      


      
        
          
          

        

        
          iv

          
            

          

        

        
          
          

        

      


      AGREEMENT
        AND PLAN OF MERGER AND REORGANIZATION

      


      AGREEMENT
        AND PLAN OF MERGER AND REORGANIZATION (this “Agreement”) dated
        as of July 27, 2007 among Salvador Imaging, Inc., a Colorado corporation
        (the
“Company”), David Gardner, Salvador Foundation Charitable
        Remainder Unitrust (“Trust”), James R. Long, Patricia Long,
        Kerry Rhea, Lisa J. Rhea (together with Trust, David Gardner, James R. Long,
        Patricia Long and Kerry Rhea, the “Sellers”), Photon Dynamics,
        Inc., a California corporation (“Parent”), Salvador
        Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of
        Parent (“Merger Subsidiary I”), Salvador Acquisition, LLC,
        a Delaware limited liability company and a wholly-owned subsidiary of Parent
        (“Merger Subsidiary II” and, together with Merger Subsidiary I,
        the “Merger Subsidiaries”), and David Gardner, as shareholders’
representative (“Shareholders’ Representative”).

       

      WHEREAS,
        upon the terms and subject to the conditions of this Agreement and in accordance
        with Colorado Law and Delaware Law, Parent, the Sellers and the Company will
        enter into a business combination transaction pursuant to which Merger
        Subsidiary I will merge with and into the Company (the “First
        Merger”), with the Initial Surviving Corporation (as defined herein)
        then merging with and into Merger Subsidiary II (the “Second
        Merger” and, together with the First Merger, the
“Mergers”).

       

      WHEREAS,
        it is intended that the Mergers will together qualify for U.S. federal income
        tax purposes as a reorganization within the meaning of Section 368(a)(1)(A)
        of
        the U.S. Internal Revenue Code of 1986, as amended (the
“Code”).

       

      WHEREAS,
        the Board of Directors of the Company (i) has determined that the Mergers
        are
        fair to, and in the best interests of, the Company and its shareholders and
        has
        approved and adopted this Agreement and the transactions contemplated by
        this
        Agreement and (ii) has recommended the approval and adoption of this Agreement
        by the shareholders of the Company in accordance with Colorado Law.

       

      WHEREAS,
        concurrently with the execution and delivery of this Agreement, the Company
        has
        obtained the irrevocable approval and adoption by the Sellers, which constitute
        all of the holders of the Company’s capital stock, of this Agreement and the
        Mergers contemplated hereby pursuant to a written consent in the form of
        Annex I
        hereto (the “Written Consent”) signed by
        each of the Sellers;

       

      WHEREAS,
        concurrently with the execution and delivery of this Agreement, and as a
        condition and inducement to Parent’s, Merger Subsidiary I’s and Merger
        Subsidiary II’s willingness to enter into this agreement, David Gardner,
        James R. Long and Kerry Rhea have entered into employment agreements in the
        forms attached hereto as Annexes IV, V and VI, respectively (the “Key
        Employee Employment Agreements”), and David Gardner has entered into a
        non-competition agreement (the “Gardner Non-competition
        Agreement”) and Trust has assigned its rights under that certain
        License Agreement among David Gardner, the Company and Salvador Systems LLC,
        a
        Delaware limited liability company and a wholly-owned subsidiary of Parent
        (the
“Assignment Agreement”), in the forms attached hereto as
        Annexes VII and VIII, respectively; and

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      WHEREAS,
        the Company and the Sellers, on the one hand, and Parent and the Merger
        Subsidiaries, on the other hand, desire to make certain representations,
        warranties, covenants and other agreements in connection with the
        Mergers.

       

      NOW,
        THEREFORE, in consideration of the foregoing and the mutual covenants and
        agreements herein contained, and intending to be legally bound hereby, Parent,
        the Sellers, the Merger Subsidiaries and the Company hereby agree as
        follows:

       

       

      ARTICLE
        1

      DEFINITIONS

       

      Section
        1.01.  Definitions.  Article 1 As used herein, the
        following terms have the following meanings:

       

      “Affiliate”
        means, with respect to any Person, any other Person directly or indirectly
        controlling, controlled by, or under common control with such
        Person.

       

      “Applicable
        Law” means, with respect to any Person, any federal, state or local law
        (statutory, common or otherwise), constitution, treaty, convention, ordinance,
        code, rule, regulation, order, injunction, judgment, decree, ruling or other
        similar requirement enacted, adopted, promulgated or applied by a Governmental
        Authority that is binding upon or applicable to such Person, as amended unless
        expressly specified otherwise.

       

      “Business
        Day” means a day, other than Saturday, Sunday or other day on which
        commercial banks in New York, New York are authorized or required by Applicable
        Law to close.

       

      “Colorado
        Law” means the Business Corporation Act and the Corporations and
        Associations Act of the State of Colorado.

       

      “Company
        Balance Sheet” means the internally prepared balance sheet of the
        Company as of June 30, 2007.

       

      “Company
        Balance Sheet Date” means June 30, 2007.

       

      “Company
        Stock” means the common stock of the Company.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      “Delaware
        Law” means the General Corporation Act of the State of Delaware and the
        LLC Act.

       

      “ERISA”
        means the Employee Retirement Income Security Act of 1974.

       

      “ERISA
        Affiliate” of any entity means any other entity that, together with
        such entity, would be treated as a single employer under Section 414 of the
        Code.

       

      “GAAP”
        means generally accepted accounting principles in the United
        States.

       

      “Governmental
        Authority” means any transnational, domestic or foreign federal, state
        or local, governmental authority, court or agency, including any political
        subdivision thereof.

       

      “Intellectual
        Property Rights” means (i) inventions, whether or not patentable,
        reduced to practice or made the subject of one or more pending patent
        applications, (ii) national and multinational statutory invention registrations,
        patents and patent applications (including all reissues, divisions,
        continuations, continuations-in-part, extensions and reexaminations thereof)
        registered or applied for in the United States and all other nations throughout
        the world, all improvements to the inventions disclosed in each such
        registration, patent or patent application, (iii) rights of publicity, (iv)
        trademarks, service marks, trade dress, logos, domain names, trade names
        and
        corporate names (whether or not registered) in the United States and all
        other
        nations throughout the world, including all variations, derivations,
        combinations, registrations and applications for registration of the foregoing
        and all goodwill associated therewith, (v) copyrights (whether or not
        registered) and registrations and applications for registration thereof in
        the
        United States and all other nations throughout the world, including all
        derivative works, moral rights, renewals, extensions, reversions or restorations
        associated with such copyrights, now or hereafter provided by law, regardless
        of
        the medium of fixation or means of expression, (vi) mask works,
        (vii) computer software (including source code, object code, firmware,
        operating systems and specifications), (viii) trade secrets
        and, whether or not confidential, business information (including pricing
        and cost information, business and marketing plans and customer and supplier
        lists) and know-how (including manufacturing and production processes and
        techniques and research and development information), (ix) industrial designs
        (whether or not registered), (x) databases and data collections,
        (xi) copies and tangible embodiments of any of the foregoing, in whatever
        form or medium, (xii) all rights to obtain and rights to apply for patents,
        and to register trademarks and copyrights, (xiii) all rights in all of the
        foregoing provided by treaties, conventions and common law and (xiv) all
        rights to sue or recover and retain damages and costs and attorneys’ fees for
        past, present and future infringement or misappropriation of any of the
        foregoing.

       

      “knowledge”
        in the case of the Company, means the knowledge of its officers and David
        Gardner as of the time of the execution of this Agreement and, in the case
        of
        Parent, means the knowledge of its “executive officers” within the meaning of
        the 1934 Act as of the time of execution of this Agreement.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      “Licensed
        Intellectual Property Rights” means all Intellectual Property Rights
        owned by a third party and licensed or sublicensed to the Company or for
        which
        the Company has obtained a covenant not to be sued.

       

      “Lien”
        means, with respect to any property or asset, any mortgage, lien, pledge,
        charge, security interest, encumbrance or other adverse claim of any kind
        in
        respect of such property or asset.  For purposes of this Agreement, a
        Person shall be deemed to own subject to a Lien any property or asset that
        it
        has acquired or holds subject to the interest of a vendor or lessor under
        any
        conditional sale agreement, capital lease or other title retention agreement
        relating to such property or asset.

       

      “LLC
        Act” means the Delaware Limited Liability Company Act.

       

      “Material
        Adverse Effect” means, with respect to any Person, a material adverse
        effect on the condition (financial or otherwise), business, assets or results
        of
        operations or prospects of such Person and its Subsidiaries, taken as a
        whole.

       

      “1933
        Act” means the Securities Act of 1933, as amended.

       

      “1934
        Act” means the Securities Exchange Act of 1934, as
        amended.

       

      “Owned
        Intellectual Property Rights” means all Intellectual Property Rights
        owned by the Company.

       

      “Parent
        Disclosure Schedule” means the disclosure schedule dated the date
        hereof regarding this Agreement that has been provided by Parent to the
        Company.

       

      “Parent
        SEC Documents” means (i) the annual reports of Parent on Form 10-K for
        its fiscal year ended September 30, 2006,  the quarterly reports of
        Parent on Form 10-Q for its fiscal quarters ended December 31, 2006 and March
        31, 2007, (iii) its proxy or information statements relating to meetings
        of or
        actions taken without a meeting by Parent’s shareholders since September 30,
        2006, and (iv) all of its other reports filed with the SEC since September
        30,
        2006.

       

      “Parent
        Stock” means the common stock of Parent.

       

      “Person”
        means an individual, corporation, partnership, limited liability company,
        association, trust or other entity or organization, including a government
        or
        political subdivision or an agency or instrumentality thereof.

       

      “SEC”
        means the Securities and Exchange Commission.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      “Shareholder”
        means a holder of Company Stock as of the date hereof.

       

      “Subsidiary”
        means, with respect to any Person, any entity of which securities or other
        ownership interests having ordinary voting power to elect a majority of the
        board of directors or other persons performing similar functions are at any
        time
        directly or indirectly owned by such Person.

       

      “Third
        Party” means any Person, including as defined in Section 13(d) of the
        1934 Act, other than Parent or any of its Affiliates.

       

      (b)         Each
        of the following terms is defined in the Section set forth opposite such
        term:

       

      
        	
                Term

              	
                Section

              
	
                Accounting
                  Referee

              	
                8.06

              
	
                Agreement

              	
                Preamble

              
	
                Average
                  Parent Stock Price

              	
                2.02

              
	
                Certificates

              	
                2.05

              
	
                Closing

              	
                2.01

              
	
                Closing
                  Cash Consideration

              	
                2.02

              
	
                Closing
                  Date

              	
                2.01

              
	
                Code

              	
                Recitals

              
	
                Company

              	
                Preamble

              
	
                Company
                  Disclosure Schedules

              	
                Article
                  4

              
	
                Company
                  Securities

              	
                4.03

              
	
                Cover

              	
                7.02

              
	
                Damages

              	
                9.02

              
	
                Diligence
                  Binder

              	
                Article
                  4

              
	
                Effective
                  Time

              	
                2.01

              
	
                Employees

              	
                7.03

              
	
                Employee
                  Plans

              	
                4.22

              
	
                Exchange
                  Agent

              	
                2.05

              
	
                Indemnification
                  Notice

              	
                9.03

              
	
                Indemnified
                  Party

              	
                9.02

              
	
                Initial
                  Surviving Corporation

              	
                2.01

              
	
                Key
                  Employee Employment Agreements

              	
                Recitals

              
	
                Late
                  Payment

              	
                2.02

              
	
                Loss

              	
                8.05

              
	
                Material
                  Contract

              	
                4.12

              
	
                Merger

              	
                2.01

              
	
                Merger
                  Consideration

              	
                2.02

              
	
                Merger
                  Subsidiaries

              	
                Preamble

              
	
                Note

              	
                2.02

              
	
                Objection
                  Notice

              	
                9.03

              
	
                Parent

              	
                Preamble

              
	
                Parent
                  Indemnitee

              	
                8.01

              
	
                Payment
                  Event

              	
                10.03

              


      

      

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      
        	
                Term

              	
                Section

              
	
                Permits

              	
                4.19

              
	
                Post-Closing
                  Tax Period

              	
                8.01

              
	
                Pre-Closing
                  Tax Period

              	
                8.01

              
	
                Registration
                  Rights Agreement

              	
                2.02

              
	
                Returns

              	
                8.02

              
	
                Schedule

              	
                Article
                  4

              
	
                Second
                  Effective Time

              	
                2.01

              
	
                Sellers

              	
                Preamble

              
	
                Shareholders’
                  Representative

              	
                Preamble

              
	
                Surviving
                  Entity

              	
                2.01

              
	
                Returns

              	
                8.02

              
	
                Tax

              	
                8.01

              
	
                Taxing
                  Authority

              	
                8.01

              
	
                Threshold
                  Amount

              	
                9.02

              
	
                Total
                  Cash Consideration

              	
                2.02

              
	
                Total
                  Stock Consideration

              	
                2.02

              
	
                Written
                  Consent

              	
                Recitals

              


      

      


      Section
        1.02.  Other Definitional and Interpretative
        Provisions.  The words “hereof”, “herein” and “hereunder” and
        words of like import used in this Agreement shall refer to this Agreement
        as a
        whole and not to any particular provision of this Agreement.  The
        captions herein are included for convenience of reference only and shall
        be
        ignored in the construction or interpretation hereof.  References to
        Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits
        and Schedules of this Agreement unless otherwise specified.  All
        Exhibits and Schedules annexed hereto or referred to herein are hereby
        incorporated in and made a part of this Agreement as if set forth in full
        herein.  Any capitalized terms used in any Exhibit or Schedule but not
        otherwise defined therein, shall have the meaning as defined in this
        Agreement.  Any singular term in this Agreement shall be deemed to
        include the plural, and any plural term the singular.  Whenever the
        words “include”, “includes” or “including” are used in this Agreement, they
        shall be deemed to be followed by the words “without limitation”, whether or not
        they are in fact followed by those words or words of like
        import.  “Writing”, “written” and comparable terms refer to printing,
        typing and other means of reproducing words (including electronic media)
        in a
        visible form.  References to any agreement or contract are to that
        agreement or contract as amended, modified or supplemented from time to time
        in
        accordance with the terms hereof and thereof; provided that with
        respect to any agreement or contract listed on any schedules hereto, all
        such
        amendments, modifications or supplements must also be listed in the appropriate
        schedule.  References to any Person include the successors and
        permitted assigns of that Person.  References from or through any date
        mean, unless otherwise specified, from and including or through and including,
        respectively.  References to “law”, “laws” or to a particular statute
        or law shall be deemed also to include any Applicable Law.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      ARTICLE
        2

      THE
        MERGER

       

      Section
        2.01.  The Mergers.

       

      (a)         As
        soon as practicable after execution of this Agreement by all parties hereto,
        the
        consummation of the transactions contemplated by this Agreement (the
“Closing”, such date, the “Closing Date”) will
        be held at the offices of Davis Polk & Wardwell, 1600 El Camino Real, Menlo
        Park, California 94025, or at such other place as the parties may
        agree.  On the Closing Date, the Company and Merger Subsidiary I will
        file a statement of merger with the Colorado Secretary of State, a certificate
        of merger with the Delaware Secretary of State and make all other filings
        or
        recordings required by Colorado Law and Delaware Law in connection with the
        First Merger.  The First Merger shall become effective at such time
        (the “Effective Time”) as the statement of merger and
        certificate of merger are duly filed with the Secretaries of State of the
        States
        of Colorado and Delaware, respectively, or at such later time as may be
        specified in the statement of merger and certificate of merger.

       

      (b)         At
        the Effective Time, Merger Subsidiary I shall be merged with and into the
        Company in accordance with Colorado Law and Delaware Law, whereupon the separate
        existence of Merger Subsidiary I shall cease, and the Company shall be the
        surviving corporation (the “Initial Surviving
        Corporation”).

       

      (c)         From
        and after the Effective Time, the Initial Surviving Corporation shall possess
        all the rights, powers, privileges and franchises and be subject to all of
        the
        obligations, liabilities, restrictions and disabilities of the Company and
        Merger Subsidiary I, all as provided under Colorado Law and Delaware
        Law.

       

      (d)         Immediately
        following the Effective Time, the Initial Surviving Corporation and Merger
        Subsidiary II shall file a statement of merger with the Colorado Secretary
        of
        State, a certificate of merger with the Delaware Secretary of State and make
        all
        other filings or recordings required by Colorado Law and the LLC Act in
        connection with the Second Merger.  The Second Merger shall become
        effective at such time (the “Second Effective Time”) as the
        statement of merger and certificate of merger are duly filed with the
        Secretaries of State of the States of Colorado and Delaware, respectively,
        or at
        such later time as may be specified in the statement of merger and certificate
        of merger.

       

      (e)         At
        the Second Effective Time, the Initial Surviving Corporation shall be merged
        with and into Merger Subsidiary II in accordance with Colorado Law and the
        LLC
        Act, whereupon the separate existence of the Initial Surviving Corporation
        shall
        cease, and Merger Subsidiary II shall be the surviving entity (the
“Surviving Entity”).

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (f)         From
        and after the Second Effective Time, the Surviving Entity shall possess all
        the
        rights, powers, privileges and franchises and be subject to all of the
        obligations, liabilities, restrictions and disabilities of the Initial Surviving
        Corporation and Merger Subsidiary II, all as provided under Colorado Law
        and the
        LLC Act.

       

      (g)         Following
        the Closing, Parent shall take the necessary action to wind up Salvador Systems,
        LLC, a Delaware limited liability company, and a wholly-owned Subsidiary
        of
        Parent.

       

      Section
        2.02.  Merger Consideration.  At the Effective
        Time, the merger consideration (the “Merger Consideration”)
        shall be calculated as follows:

       

      (a)         Cash
        Consideration.  Subject to the indemnification provisions of
        Article 8 and Article 9, the total amount of cash consideration (the
“Total Cash Consideration”) shall be calculated as $8,000,000,
        less the amount by which the Company’s legal, accounting and other out-of-pocket
        costs associated with the transaction exceeds $60,000.  The Total Cash
        Consideration shall be payable to Trust as follows:

       

      
          
          (i)          $2,666,666, less
          the amount by which the Company’s legal, accounting and other out-of-pocket
          costs associated with the transaction exceeds $60,000, payable at
          Closing.

         

         
          (ii)          The sum of $5,333,334
          shall be paid by delivery of a non-negotiable promissory note delivered
          by
          Parent to Trust, in the form attached hereto as Annex IX (the
“Note”).  The Note shall bear interest at the rate of
          five percent (5%) per annum, with principal and interest payable as
          follows:

         

        (A)              Interest
          on the outstanding principal balance shall be paid quarterly, commencing
          on
          September 30, 2007 and payable on the last day of each calendar quarter
          thereafter;

         

        (B)              principal
          in the amount of $2,666,667 shall be payable on the date of the fifteen
          month
          anniversary of the Closing Date; and

         

        (C)              the
          remaining principal balance of $2,666,667 shall be payable on the date
          of the
          thirty month anniversary of the Closing Date.

         
If
        any
        payment of principal or interest under the Note is not paid to the holder
        of the
        Note upon the date that is due under the Note (a “Late
        Payment”), the holder of the Note shall send a notice to Parent in
        accordance with Section 10.01 of this Agreement notifying Parent of such
        Late
        Payment.  Parent shall have thirty days from the receipt of such
        notice to satisfy its obligation with respect to such Late Payment without
        penalty.  If Parent’s obligation with respect to the Late Payment has
        not been satisfied during the 30-day period, then the outstanding principal
        balance of the Note shall bear interest at the rate of ten percent (10%)
        per
        annum from the date that the Late Payment was originally due until the date
        that
        Parent fully satisfies its obligation with respect to such Late
        Payment.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (b)         Stock
        Consideration.  The total amount of stock consideration (the
“Total Stock Consideration”) shall be 1,084,406 shares of
        Parent Stock.  David Gardner, James R. Long, Patricia Long, Kerry Rhea
        and Lisa H. Rhea shall receive the Total Stock Consideration ratably in
        accordance with their percentage ownership of the Company Stock, as provided
        in
        Annex II, attached hereto.

       

      (c)         Stock
        Consideration Registration Rights.  The Parent Stock being issued
        as Merger Consideration shall not be registered under the federal securities
        laws or under any state or foreign securities laws, and may not be sold,
        transferred, offered for sale, pledged, hypothecated or otherwise disposed
        of
        unless such transaction is pursuant to the terms of an effective registration
        statement under the 1933 Act and are registered under any applicable state
        or
        foreign securities laws or pursuant to an exemption from registration
        thereunder.  Those Sellers receiving Parent Stock as Merger
        Consideration shall have registration rights as set forth in a registration
        rights agreement in the form attached hereto as Annex III (the
“Registration Rights Agreement”).

       

      Section
        2.03.  Conversion of Shares.  At the Effective
        Time, by virtue of the Merger and without any action on the part of any
        party,

       

      (a)         except
        as otherwise provided in Section 2.03(b), each share of Company Stock issued
        and
        outstanding immediately prior to the Effective Time shall be converted into
        the
        right to receive the Merger Consideration in accordance with Section
        2.02.

       

      (b)         each
        share of Company Stock held by the Company as treasury stock or owned by
        Parent
        immediately prior to the Effective Time shall be canceled, and no payment
        shall
        be made with respect thereto; and

       

      (c)         each
        share of common stock of Merger Subsidiary I outstanding immediately prior
        to the Effective Time shall be converted into and become one share of common
        stock of the Initial Surviving Corporation and shall constitute the only
        outstanding shares of capital stock of the Initial Surviving
        Corporation.

       

      Section
        2.04.  Conversion of Shares in the Second
        Merger.  At the Second Effective Time, (i) each share of common
        stock of the Initial Surviving Corporation outstanding immediately prior
        to the
        Second Effective Time shall be converted into and become one unit of the
        Surviving Entity and shall constitute the only outstanding equity interests
        of
        the Surviving Entity and (ii) each unit of Merger Subsidiary II outstanding
        immediately prior to the Second Effective Time shall be cancelled.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      Section
        2.05.  Surrender and Payment.  Article 2 Parent
        will act as exchange agent (the “Exchange Agent”) for the
        purpose of exchanging certificates representing the shares of Company Stock
        (the
“Certificates”) for the Merger Consideration payable in respect
        of the shares of Common Stock evidenced by each such certificate.

       

      (b)         Annex
        II to this agreement is a payment schedule setting forth Article 3 the name
        and
        address of each Shareholder entitled to distribution of the Merger Consideration
        pursuant to Section 2.02 Article 4 the amount and form of consideration to
        which
        each such Shareholder is entitled upon compliance with Section 2.05(c) or
        Section 2.05(d), and Article 5 the wire transfer account information for
        each
        Shareholder, together with any supporting schedules and documentation (showing
        the number of shares held immediately prior to such time by each such Person,
        together with calculations of each such Person’s percentage ownership of the
        Company Stock and the amount then payable to such Person).  The
        Shareholders’ Representative shall be responsible for instructing the Exchange
        Agent as to the distribution of such amounts.  Parent (including
        Parent acting as Exchange Agent) may rely on the instructions of the
        Shareholders’ Representative for distributions and shall have no responsibility
        or liability with respect thereto; provided that the distribution
        instructions of the Shareholders’ Representative are followed.

       

      (c)         Each
        holder of outstanding Company Stock that has been converted into the right
        to
        receive the Merger Consideration will be entitled to receive, upon surrender
        to
        the Exchange Agent of a Certificate, the Merger Consideration payable for
        each
        share of Company Stock represented by such Certificate.  Until so
        surrendered, from and after the Effective Time each such Certificate shall
        represent for all purposes only the right to receive such Merger
        Consideration.

       

      (d)         If
        any portion of the Merger Consideration is to be paid to a Person other than
        the
        Person in whose name the surrendered Certificate is registered, it shall
        be a
        condition to such payment that Article 6 either such Certificate shall be
        properly endorsed or shall otherwise be in proper form for transfer and Article
        7 the Person requesting such payment shall pay to the Exchange Agent any
        transfer or other taxes required as a result of such payment to a Person
        other
        than the registered holder of such Certificate or establish to the satisfaction
        of the Exchange Agent that such tax has been paid or is not
        payable.

       

      (e)         After
        the Effective Time, there shall be no further registration of transfers of
        shares of Company Stock.  If, after the Effective Time, Certificates
        are presented to the Surviving Corporation, they shall be canceled and exchanged
        for the Merger Consideration provided for, and in accordance with the procedures
        set forth, in this Article 2.

       

      (f)         Parent
        shall not be liable to any Company Shareholder for any amounts paid to a
        public
        official pursuant to applicable abandoned property, escheat or similar
        laws.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (g)         No
        dividends or other distributions with respect to securities of Parent
        constituting part of the Merger Consideration, and no cash payment in lieu
        of
        fractional shares as provided in Section 2.06, shall be paid to the holder
        of
        any Certificates not surrendered until such Certificates are surrendered
        as
        provided in this Section.  Following such surrender, there shall be
        paid, without interest, to the Person in whose name the securities of Parent
        have been registered, Article 8 at the time of such surrender, the amount
        of any
        cash payable in lieu of fractional shares to which such Person is entitled
        pursuant to Section 2.06 and the amount of all dividends or other distributions
        with a record date after the Effective Time previously paid or payable on
        the
        date of such surrender with respect to such securities, and Article 9 at
        the
        appropriate payment date, the amount of dividends or other distributions
        with a
        record date after the Effective Time and prior to surrender and with a payment
        date subsequent to surrender payable with respect to such
        securities.

       

      Section
        2.06.  Fractional Shares.  No fractional shares of
        Parent Stock shall be issued in the First Merger.  All fractional
        shares of Parent Stock that a holder of shares of Company Stock would otherwise
        be entitled to receive as a result of the First Merger shall be aggregated
        and
        if a fractional share results from such aggregation, such holder shall be
        entitled to receive, in lieu thereof, an amount in cash without interest
        determined by multiplying the closing sale price of a share of Parent Stock
        on
        the NASDAQ Global Market on the trading day immediately preceding the Effective
        Time by the fraction of a share of Parent Stock to which such holder would
        otherwise have been entitled.

       

      Section
        2.07.  Withholding Rights.  Each of the Surviving
        Entity, the Initial Surviving Corporation, the Exchange Agent and Parent
        shall
        be entitled to deduct and withhold from the consideration otherwise payable
        to
        any Person pursuant to this Article 2 such amounts as it is required to deduct
        and withhold with respect to the making of such payment under any provision
        of
        federal, state, local or foreign tax law.  If the Surviving Entity,
        the Initial Surviving Corporation, the Exchange Agent or Parent, as the case
        may
        be, so withholds amounts, such amounts shall be treated for all purposes
        of this
        Agreement as having been paid to the holder of the shares of Company Stock
        in
        respect of which the Surviving Entity, the Initial Surviving Corporation,
        the
        Exchange Agent or Parent, as the case may be, made such deduction and
        withholding.

       

      Section
        2.08.  Lost Certificates.  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, in exchange for such lost, stolen
        or
        destroyed Certificate, the Merger Consideration to be paid in respect of
        the
        shares of Company Stock represented by such Certificate, as contemplated
        by this
        Article 2.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      ARTICLE
        3

      INITIAL
        SURVIVING CORPORATION; THE SURVIVING ENTITY

       

      Section
        3.01.  Articles of Incorporation and Bylaws of the Initial
        Surviving Corporation.  At the Effective Time, (i) the articles
        of incorporation of the Company as in effect immediately prior to the Effective
        Time shall be the articles of incorporation of the Initial Surviving
        Corporation, until thereafter amended as provided under Colorado Law and
        such
        articles of incorporation and (ii) the bylaws of the Company as in effect
        immediately prior to the Effective Time shall be the bylaws of the Initial
        Surviving Corporation, until thereafter amended in accordance with Colorado
        Law
        and as provided in the articles of incorporation of the Initial Surviving
        Corporation and such bylaws.

       

      Section
        3.02.  Directors and Officers.  The directors and
        officers of Merger Subsidiary I immediately prior to the Effective Time shall
        be
        the directors and officers of the Initial Surviving Corporation, each to
        hold
        such office in accordance with the provisions of Colorado Law and the articles
        of incorporation and bylaws of the Initial Surviving Corporation.

       

      Section
        3.03.  Certificate of Formation and Limited Liability
        Company.  The certificate of formation and limited liability
        company agreement of Merger Subsidiary II in effect immediately prior to
        the
        Second Effective Time shall be the certificate of formation and limited
        liability company agreement of the Surviving Entity unless and until amended
        in
        accordance with their terms and applicable law.

       

      Section
        3.04.  Managers and Officers.  The managers and
        officers of Merger Subsidiary II immediately prior to the Second Effective
        Time
        shall be the managers and officers of the Surviving Entity, each to hold
        office
        in accordance with the provisions of the LLC Act and the certificate of
        formation and limited liability company agreement of the Surviving
        Entity.

       

       

      ARTICLE
        4

      REPRESENTATIONS
        AND WARRANTIES OF THE COMPANY

       

      Except
        (i) as disclosed to Parent in the materials included in the binder of materials
        collected by the Company in response to Parent’s request for certain information
        delivered herewith (the “Disclosure Binder”) or (ii) as
        specifically disclosed in the schedules attached hereto (each a
“Schedule” and, together with the Disclosure Binder, the
“Company Disclosure Schedules”) the Company and David Gardner,
        jointly and severally, represent and warrant to Parent that:

       

      Section
        4.01.  Corporate Existence and Power.  The Company
        is a corporation duly incorporated, validly existing and in good standing
        under
        the laws of the State of Colorado and has all corporate powers required to
        carry
        on its business as now conducted.  The Company has heretofore
        delivered to Parent true and complete copies of the certificate of incorporation
        and bylaws of the Company as currently in effect.  The Company is not
        in violation of any of the provisions of its certificate of incorporation
        or
        bylaws.  The execution, delivery and performance by the Company of
        this Agreement and the consummation of the transactions contemplated hereby
        do
        not and will not contravene, conflict with, or result in any violation or
        breach
        of any provision of the certificate of incorporation or bylaws of the
        Company.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      Section
        4.02.  Corporate Authorization.  Article 10 The
        execution, delivery and performance by the Company of this Agreement and
        the
        consummation by the Company of the transactions contemplated hereby are within
        the Company’s corporate powers and have been duly authorized by all necessary
        corporate action on the part of the Company.  This Agreement
        constitutes a valid and binding agreement of the Company, subject to bankruptcy,
        insolvency, fraudulent transfer, reorganization, moratorium or similar laws
        relating to affecting creditors’ rights generally and to general principles of
        equity (regardless of whether enforcement is considered in a proceeding in
        equity or at law).

       

      (b)         At
        a meeting duly called and held, the Company’s Board of Directors (which meeting
        was not attended by Kevin Heher, who recused himself due to his position
        as an
        employee of Parent, has Article 11 determined that this Agreement and the
        transactions contemplated hereby are fair to and in the best interests of
        the
        Company’s shareholders, Article 12 approved and adopted this Agreement and the
        transactions contemplated hereby and Article 13 resolved to recommend approval
        and adoption of this Agreement by its shareholders.

       

      (c)         The
        Written Consent delivered concurrently with the execution of this Agreement
        constitutes a valid and effective approval of this Agreement, the Merger
        and the
        other transactions contemplated hereby by the Company’s shareholders and no
        other votes, approvals or consents of the holders of any of the Company’s
        capital stock are necessary in connection with the adoption of this Agreement
        or
        the consummation of the Merger.

       

      Section
        4.03.  Capitalization.  Article 14 The authorized
        capital stock of the Company consists of 5,000,000 shares of Company Stock,
        of
        which 100,000 shares are issued and outstanding.  All outstanding
        shares of capital stock of the Company have been duly authorized and validly
        issued and are fully paid and nonassessable.  No Company Affiliate
        owns any shares of capital stock of the Company.

       

      (b)         Except
        as set forth in this Section 4.03, there are no outstanding Article 15 shares
        of
        capital stock or voting securities of the Company, Article 16 securities
        of the
        Company convertible into or exchangeable for shares of capital stock or voting
        securities of the Company or Article 17 options or other rights to acquire
        from
        the Company, or other obligation of the Company to issue, any capital stock,
        voting securities or securities convertible into or exchangeable for capital
        stock or voting securities of the Company (the items in clauses (i), (ii),
        and
        (iii) being referred to collectively as the “Company
        Securities”).  There are no outstanding obligations of the
        Company to repurchase, redeem or otherwise acquire any of the Company
        Securities.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (c)         With
        the exception of those Agreement Concerning Shares among and between David
        Gardner, James R. Long, Patricia Long, Kerry Rhea and Lisa H. Rhea dated
        June
        29, 2007, there are no voting trusts, proxies, or other agreements or
        understandings with respect to the voting stock of the Company or any other
        matters involving any securities of the Company.

       

      Section
        4.04.  Ownership of Shares; Stock Option Plan. As of the date
        hereof, all of the outstanding shares of Company Stock are owned of record
        by
        the Persons, and in the respective amounts, set forth in Annex II of this
        Agreement.  The Company has not adopted or maintained any stock option
        plan or other plan providing for equity compensation to any
        Person.  No more than thirty-five (35) of the holders of the Company
        Stock are and, at the Effective Time, will be unaccredited investors within
        the
        meaning of Section (a) of Regulation D, Rule 501 of the Securities Act. At
        the
        Effective Time, each holder of Company Stock who is not an accredited investor
        within the meaning of said section will be represented by a duly authorized
        “purchaser representative,” as defined in Section (h), of Regulation D, Rule 501
        of the Securities Act.

       

      Section
        4.05.  Subsidiaries.  The Company has no
        Subsidiaries.

       

      Section
        4.06.  Authorizations.  The Company has all
        governmental licenses, authorizations, permits, consents and approvals required
        to carry on its business as now conducted, except for those licenses,
        authorizations, permits, consents and approvals the absence of which would
        not
        have, individually or in the aggregate, a Material Adverse Effect on the
        Company.  The Company is duly qualified to do business as a foreign
        corporation and is in good standing in each jurisdiction where such
        qualification is necessary, except for those jurisdictions where failure
        to be
        so qualified would not have, individually or in the aggregate, a Material
        Adverse Effect on the Company.

       

      Section
        4.07.  Governmental Authorization.  The execution,
        delivery and performance by the Company of this Agreement and the consummation
        by the Company of the transactions contemplated hereby require no action
        by or
        in respect of, or filing with, any Governmental Authority other than (i)
        the
        filing of a statement of merger with respect to the Merger with the Colorado
        Secretary of State and appropriate documents with the relevant authorities
        of
        other states in which the Company is qualified to do business, (ii) compliance
        with any applicable requirements of the 1933 Act, the 1934 Act, and any other
        applicable U.S. state or federal securities laws and (iii) any actions or
        filings the absence of which would not be reasonably expected to have,
        individually or in the aggregate, a Material Adverse Effect on the Company
        or to
        impair the ability of the Company to consummate the transactions contemplated
        by
        this Agreement.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      Section
        4.08.  Non-contravention.  The execution, delivery
        and performance by the Company of this Agreement and the consummation of
        the
        transactions contemplated hereby do not and will not (iv) contravene, conflict
        with or result in a violation or breach of any provision of any Applicable
        Law,
        (v) require any consent or other action by any Person under, constitute a
        default, or an event that, with or without notice or lapse of time or both,
        could become a default, under, or cause or permit the termination, cancellation,
        acceleration or other change of any right or obligation or the loss of any
        benefit to which the Company is entitled under any provision of any agreement
        or
        other instrument binding upon the Company or any license, franchise, permit,
        certificate, approval or other similar authorization affecting, or relating
        in
        any way to, the assets or business of the Company or (vi) result in the creation
        or imposition of any Lien on any asset of the Company.

       

      Section
        4.09.  Financial Statements.  The
        internally-prepared balance sheet as of June 30, 2007 and the related statement
        of income for the year ended June 30, 2007 of the Company provided to Parent
        and
        attached hereto as Schedule 4.09 fairly present, the financial position of
        the
        Company as of the June 30, 2007 and their results of operations for the period
        then ended.  Such financial statements include all material
        adjustments that are necessary for a fair presentation of the financial position
        and results of operations of the Company as of the dates thereof and for
        the
        periods covered thereby.  

       

      Section
        4.10.  Absence of Certain Changes.  Except as
        otherwise disclosed herein or in the Company Disclosure Schedules, since
        the
        Company Balance Sheet Date, the business of the Company has been conducted
        in
        the ordinary course consistent with past practices and there has not
        been:

       

      (a)         any
        event, occurrence, development or state of circumstances or facts that has
        had
        or could reasonably be expected to have, individually or in the aggregate,
        a
        Material Adverse Effect on the Company;

       

      (b)         any
        declaration, setting aside or payment of any dividend or other distribution
        with
        respect to any shares of capital stock of the Company;

       

      (c)         with
        respect to any outstanding shares of capital stock or other securities of,
        or
        other ownership interests in, the Company, any direct or indirect (vii)
        reclassification, combination, split or subdivision or (viii) redemption,
        repurchase, purchase or other acquisition by the Company, except for repurchases
        by the Company of Company Stock made in connection with the termination of
        employment of Company employees;

       

      (d)         any
        incurrence, assumption or guarantee by the Company of any indebtedness for
        borrowed money;

       

      (e)         any
        creation or other incurrence by the Company of any material Lien on any material
        asset;

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (f)         any
        making of any loan, advance or capital contributions to or investment in
        any
        Person, except for reasonable advances to employees and consultants for travel
        and business expenses in the ordinary course of business consistent with
        past
        practices;

       

      (g)         any
        damage, destruction or other casualty loss (whether or not covered by insurance)
        affecting the business or assets of the Company that has had or could reasonably
        be expected to have, individually or in the aggregate, a Material Adverse
        Effect
        on the Company;

       

      (h)         any
        transaction or commitment made, or any contract or agreement entered into,
        by
        the Company relating to its assets or business (including the acquisition
        or
        disposition of any assets) or any relinquishment by the Company of any contract
        or other right, in either case, material to the Company other than those
        contemplated by this Agreement and other than the sale or nonexclusive license
        of Company products to the Company’s customers in the ordinary course of
        business;

       

      (i)         any
        change in any method of accounting or accounting principles or practice by
        the
        Company, except for any such change required by reason of a concurrent change
        in
        GAAP;

       

      (j)         any
        (ix) grant of any severance or termination pay to (or amendment to any existing
        arrangement with) any director, officer or employee of the Company, (x) increase
        in benefits payable to any director, officer or employee of the Company under
        any existing severance or termination pay policies or employment agreements,
        (xi) entering into any employment, deferred compensation or other similar
        agreement (or any amendment to any such existing agreement) with any director,
        officer or employee of the Company, (xii) establishment, adoption or amendment
        (except as required by applicable law) of any collective bargaining, bonus,
        profit-sharing, thrift, pension, retirement, deferred compensation,
        compensation, stock option, restricted stock or other benefit plan or
        arrangement covering any director, officer or employee of the Company, (xiii)
        increase in compensation, bonus or other benefits payable to any director
        of the
        Company, or, (xiv) except in the ordinary course of business, increase in
        compensation, bonus or other benefits payable to any officer or employee
        of the
        Company;

       

      (k)         any
        hiring, employment, or entry into a contact or agreement with any new employees
        or independent contractors other than as contemplated herein;

       

      (l)         any
        labor dispute, other than routine individual grievances, or any activity
        or
        proceeding by a labor union or representative thereof to organize any employees
        of the Company, which employees were not subject to a collective bargaining
        agreement at the Company Balance Sheet Date, or any lockouts, strikes,
        slowdowns, work stoppages or threats thereof by or with respect to such
        employees;

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (m)           any
        receipt of notice by the Company of any actual or threatened termination
        by any
        customer, supplier, distributor or other Person in connection with, and material
        to, the business of the Company;

       

      (n)         any
        material change in pricing or royalties set or charged by the Company to
        its
        customers or licensees or in pricing or royalties set or charged by suppliers
        or
        licensors to the Company;

       

      (o)         any
        material capital expenditure, or commitment for a capital expenditure, for
        additions or improvements to property, plant and equipment; or

       

      (p)         Any
        legally binding agreement by the Company or any officer or employee thereof
        in
        their capacities as such to do any of the things described in the preceding
        clauses (a) through (o) (other than negotiations with Parent and its
        representatives regarding the transactions contemplated by this
        Agreement).

       

      Section
        4.11.  No Undisclosed Liabilities.  There are no
        liabilities or obligations of the Company of any kind whatsoever, whether
        accrued, contingent, absolute, determined, determinable or otherwise, and
        there
        is no existing condition, situation or set of circumstances that could
        reasonably be expected to result in such a liability or obligation, other
        than:

       

      (a)         liabilities
        or obligations disclosed and provided for in the Company Balance Sheet or
        in the
        notes thereto, and

       

      (b)         liabilities
        or obligations incurred in the ordinary course of business consistent with
        past
        practices since the Company Balance Sheet Date that would not reasonably
        be
        expected to be, individually or in the aggregate, material to the
        Company.

       

      Section
        4.12.  Agreements, Contracts and
        Commitments.  Article 18  Except as provided to Parent
        in the Disclosure Binder delivered herewith, the Company is not a party to
        or
        bound by:

       

        
        (i)          any lease or
        sublease (whether of real or personal property) providing for annual rentals
        of
        $25,000 or more;

       

       
        (ii)          any agreement
        for the purchase or license of materials, supplies, goods, services, equipment
        or other tangible or intangible assets providing for either Article 19 annual
        payments by the Company of $50,000 or more or Article 20 aggregate payments
        by
        the Company of $50,000 or more;

       

       (iii)         
        any license, sales, distribution or other similar agreement providing for
        the
        sale or license by the Company of materials, supplies, goods, services,
        equipment or other assets that provides for either Article 21 annual payments
        to
        the Company of $50,000 or more or Article 22 aggregate payments to the Company
        of $50,000 or more;

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

       (iv)         
        any partnership, joint venture or other similar agreement or arrangement,
        other
        than those related to Salvador Systems LLC;

       

       
        (v)          any agreement,
        contract or commitment relating to the acquisition or disposition of any
        business (whether by merger, sale of stock, sale of assets or
        otherwise);

       

       (vi)         
        any agreement relating to indebtedness for borrowed money or the deferred
        purchase price of property (in either case, whether incurred, assumed,
        guaranteed or secured by any asset), except any such agreement with an aggregate
        outstanding principal amount not exceeding $50,000 and which may be prepaid
        on
        not more than 30 days’ notice without the payment of any penalty;

       

      (vii)         except
        for agreements by the Company with customers in the ordinary course of business
        consistent with past practices, any option (other than employee stock options),
        license, franchise or similar agreement;

       

                                            
        (viii)         any alliance, agency,
        dealer, sales representative, marketing, distribution, original equipment
        manufacturer, remarketer, joint marketing, channel partner or other similar
        agreement that does not provide for termination without compensation upon
        no
        more than 30 days notice;

       

       
        (ix)         any development or
        collaboration agreement or other agreement for development of products and
        services for the Company;

       

        
        (x)         any agreement that
        limits the freedom of the Company to compete in any line of business or with
        any
        Person or in any area or which could reasonably be expected to so limit the
        freedom of the Company after the Effective Time;

       

       
        (xi)         any mortgages,
        indentures, loans or credit agreements, security agreements or other agreements
        or instruments relating to the borrowing of money or extension of credit,
        other
        than those mortgages, indentures, loans or credit agreements, security
        agreements or other agreements or instruments that are not, individually
        or in
        the aggregate, material to the Company;

       

       (xii)        
        any agreement with any Affiliate of the Company, with any director or officer
        of
        the Company, or with any “associate” or any member of the “immediate family” (as
        such terms are respectively defined in Rules 12b-2 and 16a-1 of the 1934
        Act) of
        any such director or officer; or

       

      (xiii)        
        any employment or consulting agreement, contract or commitment with an employee
        or individual consultant or salesperson or consulting or sales agreement,
        contract or commitment with a firm or other organization other than as
        contemplated under this Agreement;


      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (xiv)        
        any employment or consulting agreement or any agreement with severance, change
        in control or similar arrangements, that will result in any obligation (absolute
        or contingent) of the Company to make any payment as a result of the
        consummation of the Merger, termination of employment or both;

       

       (xv)        
        any agreement or plan, including, without limitation, any stock option plan,
        stock appreciation rights plan or stock purchase plan, any of the benefits
        of
        which will be increased, or the vesting of benefits of which will be
        accelerated, by the occurrence of any of the transactions contemplated by
        this
        Agreement or the value of any of the benefits of which will be calculated
        on the
        basis of any of the transactions contemplated by this Agreement; or

       

      (xvi)        
        any other agreement, commitment, arrangement or plan not made in the ordinary
        course of business that is material to the Company, including without
        limitation, any agreement involving annual payments by any customer to the
        Company in excess of $150,000.

       

      Section
        4.13.  Validity of Contracts.  Each agreement,
        contract, plan, lease, arrangement or commitment disclosed required to be
        disclosed pursuant to this Article (each, a “Material
        Contract”) is a valid and binding agreement of the Company and is in
        full force and effect with respect to the Company and, to the knowledge of
        the
        Company, each other party thereto, and none of the Company or, to the knowledge
        of the Company, any other party thereto is in default or breach in any material
        respect under the terms of any such agreement, contract, plan, lease,
        arrangement or commitment, and, to the knowledge of the Company, no event
        or
        circumstance has occurred that, with notice or lapse of time or both, would
        reasonably be expected to constitute any event of default
        thereunder.  True and complete copies of each such agreement,
        contract, plan, lease, arrangement or commitment have been made available
        to
        Parent.  The Company has fulfilled all material obligations required
        pursuant to each Material Contract to have been performed by the Company
        prior
        to the date hereof, and to the knowledge of the Company, without giving effect
        to the Merger, the Company will be able to fulfill, when due, all of its
        obligations under the Material Contracts that remain to be performed after
        the
        date hereof.

       

      Section
        4.14.  No Renegotiations. To the knowledge of
        the Company, no person is renegotiating, or has a right (absent any default
        or
        breach of a Material Contract) pursuant to the terms of any Material Contract
        to
        renegotiate, any material amount paid or payable to the Company under any
        Material Contract or any other material term or provision of any Material
        Contract.  The Company has not received any written or verbal
        indication of an intention to terminate any of the Material Contracts by
        any of
        the parties to any of the Material Contracts.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      Section
        4.15.Productsand Services.  To the knowledge of the
        Company, each of the products and services produced, sold or licensed by
        the
        Company is, and at all times up to and including the sale thereof has been,
        (i)
        in compliance with the terms and requirements of any applicable warranty
        or
        other contract between the Company and such Person, (ii) in conformance with
        any
        promises or affirmations of fact made in connection with its sale, (iii)
        in
        compliance in all material respects with Applicable Law and (iv) fit for
        the
        ordinary purposes for which it is intended to be used.  Except for any
        deficiencies that can be corrected without incurring material expense, each
        product that has been sold by the Company to any Person was free of any design
        defects, construction defects or other defects or deficiencies at the time
        of
        sale.  All repair services and other services that have been performed
        by the Company were performed properly and in full conformity with the terms
        and
        requirements of all applicable warranties and other Contracts and with
        Applicable Law, except for any deficiencies that can be corrected without
        incurring material expense.  To the Company’s knowledge, the Company
        will not incur or otherwise become subject to any material liability arising
        directly or indirectly from any product manufactured or sold, or any repair
        services or other services performed by, the Company on or at any time prior
        to
        the Closing Date.  There are no material unresolved claims or
        threatened claims by any customer or other Person against the Company (i)
        under
        or based upon any warranty provided by or on behalf of the Company that have
        been received by the Company in writing, or (ii) under or based upon any
        other
        warranty relating to any product sold by the Company or any services performed
        by the Company.  To the Company’s knowledge no event has occurred, and
        no condition or circumstance exists, that could reasonably be expected (with
        or
        without notice or lapse of time) to directly or indirectly give rise to or
        serve
        as a basis for the assertion of any such claim.  No product
        manufactured or sold by the Company has been the subject of any recall or
        other
        similar action; and no event has occurred, and to the Company’s knowledge no
        condition or circumstance exists, that could (with or without notice or lapse
        of
        time) directly or indirectly give rise to or serve as a basis for any such
        recall or other similar action relating to any such product.

       

      Section
        4.16.  Intellectual Property.  (a) Schedule
        4.16(a)(i) contains a true and complete list of (A) all registrations or
        applications for registrations included in the Owned Intellectual Property
        Rights and (B) all unregistered Owned Intellectual Property Rights which
        are
        material to the business of the Company as now conducted.  The
        Disclosure Binder includes all agreements (whether written or otherwise,
        including license agreements, research agreements, development agreements,
        distribution agreements, settlement agreements, consent to use agreements
        and
        covenants not to sue, but excluding licenses for commercial off the shelf
        computer software that are generally available on nondiscriminatory pricing
        terms and have an aggregate acquisition cost of $500 or less) to which the
        Company is a party or otherwise bound and pursuant to which the Company grants
        or obtains the right to use or a covenant not to be sued under, any Intellectual
        Property Right.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (b)         To
        the knowledge of the Company having performed reasonable due diligence, the
        Licensed Intellectual Property Rights and the Owned Intellectual Property
        Rights
        together constitute all the Intellectual Property Rights necessary to, or
        used
        or held for use in, the conduct of the business of the Company as currently
        conducted and as proposed by the Company to be conducted.  There exist
        no restrictions on the disclosure, use, license or transfer of the Owned
        Intellectual Property Rights.  The consummation of the transactions
        contemplated by this Agreement will not alter, encumber, impair or extinguish
        any Owned Intellectual Property Rights or Licensed Intellectual Property
        Rights.

       

      (c)         The
        Company has not given to any Person an indemnity in connection with any
        Intellectual Property Right.

       

      (d)         To
        the knowledge of the Company having performed reasonable due diligence, the
        Company has not infringed, misappropriated or otherwise violated any
        Intellectual Property Right of any third person.  There is no claim,
        action, suit, investigation or proceeding pending against, or, to the knowledge
        of the Company, threatened against or affecting, the Company or, any present
        or
        former officer, director or employee of the Company Article 24 based upon,
        or
        challenging or seeking to deny or restrict, the rights of the Company in
        any of
        the Owned Intellectual Property Rights and the Licensed Intellectual Property
        Rights, Article 25 alleging that the use of the Owned Intellectual Property
        Rights or the Licensed Intellectual Property Rights or any services provided,
        processes used or products manufactured, used, imported, offered for sale
        or
        sold by the Company do or may conflict with, misappropriate, infringe or
        otherwise violate any Intellectual Property Right of any third party or Article
        26 alleging that the Company infringed, misappropriated or otherwise violated
        any Intellectual Property Right of any third party.  The Company has
        not received from any third party an offer to license any Intellectual Property
        Rights of such third party.

       

      (e)         None
        of the Owned Intellectual Property Rights and Licensed Intellectual Property
        Rights material to the operation of the business of the Company has been
        adjudged invalid or unenforceable in whole or part, nor has the Company received
        from any third party a communication alleging that any such Owned Intellectual
        Property Rights and Licensed Intellectual Property Rights are invalid or
        unenforceable in whole or part.  To the knowledge of the Company, all
        such Owned Intellectual Property Rights and Licensed Intellectual Property
        Rights are valid and enforceable.

       

      (f)         Other
        than those Owned Intellectual Property Rights that the Company co-owns with
        Parent or any of its Subsidiaries, the Company is the sole owner of all Owned
        Intellectual Property Rights and hold all right, title and interest in and
        to
        all Owned Intellectual Property Rights and the Licensed Intellectual Property
        Rights, free and clear of any Lien.  Except as provided for in
        agreements included in the Disclosure Binder, no Third Party holds any license
        rights, immunities from suit, or analogous rights under the Owned
        Intellectual Property Rights or under any exclusively licensed Licensed
        Intellectual Property Rights.  In each case where a patent or patent
        application, trademark registration or trademark application, service mark
        registration or service mark application, or copyright registration or copyright
        application included in the Owned Intellectual Property is held by assignment,
        the assignment has been duly recorded with the governmental authority from
        which
        the patent or registration issued or before which the application or application
        for registration is pending.  The Company has taken all actions
        necessary to maintain and protect the Owned Intellectual Property Rights
        and
        their rights in the Licensed Intellectual Property Rights, including payment
        of
        applicable maintenance fees and filing of applicable statements of
        use.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (g)         To
        the knowledge of the Company, no Person has infringed, misappropriated or
        otherwise violated any Owned Intellectual Property Right or Licensed
        Intellectual Property Right in a manner that would have a material effect
        on the
        operation of the business of the Company.  The Company has taken
        reasonable steps in accordance with normal industry practice to maintain
        the
        confidentiality of all Intellectual Property Rights material to the business
        or
        operation of the Company and the value of which to the Company is contingent
        upon maintaining the confidentiality thereof.  None of the
        Intellectual Property Rights that are material to the business or operation
        of
        the Company and the value of which to the Company is contingent upon maintaining
        the confidentiality thereof has been disclosed other than to employees,
        representatives and agents of the Company all of whom are bound by written
        confidentiality agreements substantially in the form previously disclosed
        to
        Buyer.

       

      (h)         The
        Company has taken reasonable steps in accordance with normal industry practice
        to preserve and maintain reasonably complete notes and records relating to
        the
        Owned Intellectual Property Rights and the Licensed Intellectual Property
        Rights.

       

      (i)         With
        respect to all patents and patent applications set forth in Schedule 4.16(a)(i):
        Article 27 each has been prosecuted in material compliance with all applicable
        rules, policies, and procedures of the United States Patent and Trademark
        Office
        or applicable foreign patent agencies and Article 28 to the knowledge of
        the
        Company, there is no material prior art relevant thereto that may render
        the
        claims unpatentable, invalid, or unenforceable.  With respect to
        pending applications and applications for registration of the Owned Intellectual
        Property Rights and the Licensed Intellectual Property Rights that are material
        to the business or operation of the Company, the Company is not aware of
        any
        reason that could reasonably be expected to prevent any such application
        or
        application for registration from being granted with coverage substantially
        equivalent to the latest amended version of the pending application or
        application for registration.  None of the trademarks, service marks,
        applications for trademarks and applications for service marks included in
        the
        Owned Intellectual Property Rights that are material to the business or
        operation of the Company has been the subject of an opposition or cancellation
        procedure.  None of the patents and patent applications included in
        the Owned Intellectual Property Rights that are material to the business
        or
        operation of the Company has been the subject of an interference, protest,
        public use proceeding or third party reexamination request.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (j)         All
        products sold by the Company or any licensee of the Company and covered by
        a
        patent, trademark or copyright included in the Owned Intellectual Property
        Rights have been marked with the notice (applicable as of the date hereof)
        of
        all nations requiring such notice in order to collect damages.

       

      (k)         To
        the extent that any Intellectual Property Right has been developed or created
        by
        a Third Party (including any current or former employee of the Company) for
        the
        Company, the Company has a written agreement with such Third Party with respect
        thereto, and the Company thereby has obtained ownership of and is the exclusive
        owner of such Intellectual Property Right.

       

      (l)         No
        government, university, college, or other educational institution or research
        center has any ownership or licensed interest in any Owned Intellectual Property
        Rights or any exclusively licensed Licensed Intellectual Property
        Rights.

       

      (m)           There
        are no actions that must be taken by the Company within 120 days of the Closing
        Date, including the payment of any registration, maintenance or renewal fees
        or
        the filing of any responses to office actions by the patent, copyright,
        trademark or other authorities in the United States or foreign jurisdictions,
        documents, applications or certificates for the purposes of obtaining,
        maintaining, perfecting or preserving or renewing any patents and patent
        applications, registered copyrights and copyright applications, registered
        trademarks and trademark applications and any other Intellectual Property
        Right
        that is the subject of an application, certificate, filing, registration
        or
        other document issued by, filed with, or recorded by, any private, state,
        government or other public legal authority (“Registered Intellectual
        Property Rights”) included in the Owned Intellectual Property Rights or
        exclusively licensed with the right to control prosecution or maintenance
        and
        included in the Licensed Intellectual Property Rights.  The Company
        has not claimed any status in the application for or registration of any
        Registered Intellectual Property Rights, including “small business status” in
        connection with U.S. patents and applications, that would not be applicable
        to
        Buyer.

       

      (n)         The
        Company has not received a written opinion of counsel with respect to the
        invalidity, non-infringement or unenforceability of any patent or patent
        application.

       

      Section
        4.17.  Insurance Coverage.  There is no claim by
        the Company pending under any of such policies or bonds as to which coverage
        has
        been questioned, denied or disputed by the underwriters of such policies
        or
        bonds or in respect of which such underwriters have reserved their
        rights.  All premiums due and payable as of the date of this Agreement
        under all such policies and bonds have been timely paid and the Company has
        otherwise complied fully with the terms and conditions of all such policies
        and
        bonds.  Such policies of insurance and bonds (or other policies and
        bonds providing substantially similar insurance coverage) have been in effect
        since 2001 and remain in full force and effect.  The Company has no
        knowledge of any threatened termination of, premium increase with respect
        to, or
        material alteration of coverage under, any of such policies or
        bonds.  Such policies and bonds are of the type and in amounts
        customarily carried by Persons conducting businesses similar to those of
        the
        Company.  The Company shall after the Effective Time continue to have
        coverage under such policies and bonds with respect to events occurring prior
        to
        the Effective Time.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      Section
        4.18.  Litigation. There is no action, suit, investigation or
        proceeding (or any basis therefor) pending against, or, to the knowledge
        of the
        Company, threatened against or affecting, the Company, any present or former
        officer, director or employee of the Company or any Person for whom the Company
        may be liable or any of their respective properties or that in any manner
        challenges or seeks to prevent, enjoin, alter or delay the Merger or any
        of the
        other transactions contemplated hereby before any court, arbitrator or mediator
        or before or by any Governmental Authority.

       

      Section
        4.19.  Licenses and Permits.  Except as
        disclosed to Parent in the Company Disclosure Schedules,  there are no
        material licenses, franchises, permits, certificates, approvals, security
        clearances or other similar authorizations affecting, or relating in any
        way to,
        the assets or business of the Company (the
“Permits”).  The Permits are valid and in full force
        and effect.  The Company is not in default under, and no condition
        exists that with notice or lapse of time or both would reasonably be expected
        to
        constitute a default under, the Permits.  None of the Permits will be
        terminated or impaired or become terminable, in whole or in part, as a result
        of
        the transactions contemplated hereby.  The Company has made all
        material filings with governmental entities and have received all material
        permits, registrations, licenses, franchises, certifications and other approvals
        necessary to conduct and operate its business as currently conducted or operated
        by it and to permit the Company to own or use its assets in the manner in
        which
        such assets are currently owned or used.

       

      Section
        4.20.  Compliance with Laws and Court Orders.  To
        the knowledge of the Company, (i) the Company is and has all times since
        its
        inception been conducted in compliance with, and (ii) has not been threatened
        to
        be charged with or given notice of any violation of, any Applicable
        Law.

       

      Section
        4.21.  Finders’ Fees.  There is no investment
        banker, broker, finder or other intermediary that has been retained by or
        is
        authorized to act on behalf of the Company or any of its shareholders who
        might
        be entitled to any fee or commission from the Company or any of its Affiliates
        in connection with the transactions contemplated by this Agreement.

       

      Section
        4.22.  Employee Benefit Plans.  Article 29 Schedule
        4.22(a) contains a correct and complete list identifying each “employee benefit
        plan,” as defined in Section 3(3) of ERISA, each employment, severance or
        similar contract, plan, arrangement or policy and each other plan or arrangement
        (written or oral) providing for compensation, bonuses, profit-sharing, stock
        option or other stock related rights or other forms of incentive or deferred
        compensation, vacation benefits, insurance (including any self-insured
        arrangements), health or medical benefits, employee assistance program,
        disability or sick leave benefits, workers’ compensation, supplemental
        unemployment benefits, severance benefits and post-employment or retirement
        benefits (including compensation, pension, health, medical or life insurance
        benefits) which is maintained, administered or contributed to by the Company
        or
        any ERISA Affiliate and covers any employee or former employee of the Company,
        or with respect to which the Company has any liability.  Copies of
        such plans (and, if applicable, related trust or funding agreements or insurance
        policies) and all amendments thereto and written interpretations thereof
        have
        been furnished to Parent together with the most recent annual report (Form
        5500
        including, if applicable, Schedule B thereto) and tax return (Form 990) prepared
        in connection with any such plan or trust.  Such plans are referred to
        collectively herein as the “Employee Plans.”

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (b)         The
        consummation of the transactions contemplated by this Agreement will not
        (either
        alone or together with any other event) entitle any employee or independent
        contractor of the Company to severance pay or accelerate the time of payment
        or
        vesting or trigger any payment of funding (through a grantor trust or otherwise)
        of compensation or benefits under, increase the amount payable or trigger
        any
        other material obligation pursuant to, any Employee Plan.

       

      (c)         There
        is no contract, plan or arrangement (written or otherwise) covering any employee
        or former employee of the Company that, individually or collectively, would
        entitle any employee or former employee to any severance or other payment
        solely
        as a result of the transactions contemplated hereby, or could give rise to
        the
        payment of any amount that would not be deductible pursuant to the terms
        of
        Section 280G or 162(m) of the Code.

       

      (d)         There
        has been no amendment to, written interpretation or announcement (whether
        or not
        written) by the Company or any of its Affiliates relating to, or change in
        employee participation or coverage under, an Employee Plan which would increase
        materially the expense of maintaining such Employee Plan above the level
        of the
        expense incurred in respect thereof for the fiscal year ended December 31,
        2006.

       

      (e)         There
        is no action, suit, investigation, audit or proceeding pending against or
        involving or, to the knowledge of the Company, threatened against or involving,
        any Employee Plan before any arbitrator, mediator or Governmental
        Authority.

       

      (f)         No
        employee or former employee of the Company will become entitled to any bonus,
        retirement, severance, job security or similar benefit or enhanced such benefit
        (including acceleration of vesting or exercise of an incentive award) as
        a
        result of the transactions contemplated hereby.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (g)         The
        Company is in material compliance with all currently applicable laws respecting
        employment and employment practices, terms and conditions of employment and
        wages and hours, and is not engaged in any unfair labor
        practice.  There is no unfair labor practice complaint pending or, to
        the knowledge of the Company, threatened against the Company before the National
        Labor Relations Board.

       

      (h)         The
        Company has provided to Parent a true and complete list of the names, titles
        (if
        applicable), annual salaries or wage rates and other compensation of all
        employees of the Company.  The Company has no knowledge that any of
        its officers or any other key employee of the Company intends to resign or
        retire as a result of the transactions contemplated by this Agreement or
        otherwise within one year after the Effective Time.

       

       

      ARTICLE
        5

      REPRESENTATIONS
        AD WARRANTIES OF SELLERS

       

      Section
        5.01.  Private Placement Qualification. As of the date hereof
        and through the Effective Time, each Seller represents that it will either
        be
        (i) an accredited investor, as defined in Section (a) of Regulation D, Rule
        501
        of the 1933 Act, or (ii) represented by a duly authorized “purchaser
        representative,” as defined in Section (h), of Regulation D, Rule 501 of the
        1933 Act.  Each Seller acknowledges (i) that it is informed as to
        the risks of the transactions hereby contemplated and of its ownership of
        Parent
        Stock, (ii) that it has had access to all material information concerning
        Parent and has had the opportunity to ask questions of Parent’s representatives;
        and (iii) that any Parent Stock received as Merger Consideration have not
        been registered under the federal securities laws or under any state or foreign
        securities laws, and that such Parent Stock may not be sold, transferred,
        offered for sale, pledged, hypothecated or otherwise disposed of unless such
        transaction is pursuant to the terms of an effective registration statement
        under the 1933 Act and are registered under any applicable state or foreign
        securities laws or pursuant to an exemption from registration
        thereunder.

       

       

      ARTICLE
        6

      REPRESENTATIONS
        AND WARRANTIES OF PARENT

       

      Except
        as
        set forth in the Parent Disclosure Schedule, Parent represents and warrants
        to
        the Company that:

       

      Section
        6.01.  Corporate Existence and Power.  Each of
        Parent and the Merger Subsidiaries has been duly incorporated or organized,
        as
        the case may be, validly existing and in good standing under the laws of
        its
        jurisdiction of incorporation or organization and has all corporate or limited
        liability company powers and all governmental licenses, authorizations, permits,
        consents and approvals required to carry on its business as now conducted,
        except for those licenses, authorizations, permits, consents and approvals
        the
        absence of which would not have, individually or in the aggregate, a Material
        Adverse Effect on Parent.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      Section
        6.02.  Corporate Authorization.  The execution,
        delivery and performance by Parent and the Merger Subsidiaries of this Agreement
        and the consummation by Parent and the Merger Subsidiaries of the transactions
        contemplated hereby are within the corporate or limited liability company
        powers
        of Parent and the Merger Subsidiaries and have been duly authorized by all
        necessary corporate and limited liability company action.  This
        Agreement constitutes a valid and binding agreement of each of Parent and
        the
        Merger Subsidiaries.

       

      Section
        6.03.  Governmental Authorization.  The execution,
        delivery and performance by Parent and the Merger Subsidiaries of this Agreement
        and the consummation by Parent and the Merger Subsidiaries of the transactions
        contemplated hereby require no action by or in respect of, or filing with,
        any
        Governmental Authority, other than (iii) the filing of a statement of merger
        with respect to the Merger with the Colorado Secretary of State and appropriate
        documents with the relevant authorities of other states in which Parent is
        qualified to do business, (iv) compliance with any applicable requirements
        of
        the 1933 Act, the 1934 Act and any other U.S. state or federal securities
        laws
        and (v) any actions or filings the absence of which would not be reasonably
        expected to have, individually or in the aggregate, a Material Adverse Effect
        on
        Parent or materially to impair the ability of Parent and the Merger Subsidiaries
        to consummate the transactions contemplated by this Agreement.

       

      Section
        6.04.  Non-contravention.  The execution, delivery
        and performance by Parent and the Merger Subsidiaries of this Agreement and
        the
        consummation by Parent and Merger Subsidiary of the transactions contemplated
        hereby do not and will not (vi) contravene, conflict with, or result in any
        violation or breach of any provision of the certificate of incorporation
        or
        bylaws or limited liability company agreement of Parent or the Merger
        Subsidiaries or (vii) assuming compliance with the matters referred to in
        Section 6.03, contravene, conflict with or result in a violation or breach
        of
        any provision of any Applicable Law, except for such contraventions, conflicts
        and violations that would not be reasonably expected to have, individually
        or in
        the aggregate, a Material Adverse Effect on Parent or materially to impair
        the
        ability of Parent and the Merger Subsidiaries to consummate the transactions
        contemplated by this Agreement.

       

      Section
        6.05.  SEC Filings.  Article 30 To the knowledge of
        Parent, as of its filing date, each Parent SEC Document complied as to form
        in
        all material respects with the applicable requirements of the 1933 Act and
        1934
        Act, as the case may be.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (b)         To
        the knowledge of Parent, as of its filing date, each Parent SEC Document
        filed
        pursuant to the 1934 Act did not contain any untrue statement of a material
        fact
        or omit to state any material fact necessary in order to make the statements
        made therein, in the light of the circumstances under which they were made,
        not
        misleading.

       

      Section
        6.06.  Parent Common Stock.  The shares of Parent
        Stock to be issued as Merger Consideration have been duly authorized and,
        when
        issued and delivered in accordance with the terms of this Agreement, will
        have
        been validly issued and will be fully paid and nonassessable and the issuance
        thereof is not subject to any preemptive or other similar right.

       

       

      ARTICLE
        7

      COVENANTS

       

      Section
        7.01.  Obligations of the Merger
        Subsidiaries.  Parent shall take all action necessary to cause
        the Merger Subsidiaries to perform its obligations under this
        Agreement.

       

      Section
        7.02.  Parent Financial Covenant.  Parent shall
        maintain at all times an amount of free and unrestricted cash equal to two
        times
        the amount owing on any outstanding balance of the Note
        (“Cover”).  In the event that Parent fails to
        maintain Cover for a period of thirty (30) consecutive days, Parent shall
        make
        its best efforts to obtain an unconditional standby letter of credit in an
        amount equal to the amount owing on the outstanding balance of the
        Note.

       

      Section
        7.03.  Employee Benefits.  Article 31 Parent shall
        offer to employees of the Company (the “Employees”), as soon as
        practicable after the Closing Date, health and welfare benefits comparable
        to
        the benefits offered by Parent to Parent employees, which benefits shall
        be
        subject to change at any time by Parent in its sole discretion.  Until
        Parent offers such benefits to the Employees, Parent shall provided health
        care
        benefits comparable to the benefits received by the Employees under the
        Company’s health plan, which benefits shall be subject to change at any time by
        Parent in its sole discretion.

       

      (b)         Parent
        shall credit the Employees with service consistent with their most recent
        date
        of hire with the Company as shown on the books and records of the Company
        for
        purposes of (i) eligibility to participate in Parent’s health and welfare plans
        and (ii) eligibility and vesting (but not benefit accrual) in any retirement
        plans of Parent.

       

      Section
        7.04.  Further Assurances.  Article 32 At and after
        the Effective Time, the officers and directors of the Surviving Entity shall
        be
        authorized to execute and deliver, in the name and on behalf of the Company
        or
        the Merger Subsidiaries, any deeds, bills of sale, assignments or assurances
        and
        to take and do, in the name and on behalf of the Company or the Merger
        Subsidiaries, any other actions and things to vest, perfect or confirm of
        record
        or otherwise in the Surviving Entity any and all right, title and interest
        in,
        to and under any of the rights, properties or assets of the Company acquired
        or
        to be acquired by the Surviving Entity as a result of, or in connection with,
        the Merger.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (b)         Each
        Seller shall, from time to time, execute and deliver, or cause to be executed
        and delivered, such additional or further transfers, waivers, assignments,
        endorsements and other instruments, or take any such other actions, as Parent
        or
        the Merger Subsidiaries may reasonably request to carry out the transactions
        expressly set forth in this Agreement.

       

       

      ARTICLE
        8

      TAX
        MATTERS

       

      Section
        8.01.  Tax Definitions.  The following terms, as
        used herein, have the following meanings:

       

      “Parent
        Indemnitee” means Parent, any of its Affiliates and, effective upon the
        Closing, the Surviving Entity.

       

      “Post-Closing
        Tax Period” means any Tax period beginning after the Closing Date; and,
        with respect to a Tax period that begins on or before the Closing Date and
        ends
        thereafter, the portion of such Tax period beginning after the Closing
        Date.

       

      “Pre-Closing
        Tax Period” means any Tax period ending on or before the Closing Date;
        and, with respect to a Tax period that begins on or before the Closing Date
        and
        ends thereafter, the portion of such Tax period ending on the Closing
        Date.

       

      “Tax”
        means (i) any tax, governmental fee or other like assessment or charge of
        any
        kind whatsoever (including, but not limited to, withholding on amounts paid
        to
        or by any Person), together with any interest, penalty, addition to tax or
        additional amount imposed by any governmental authority (a “Taxing
        Authority”) responsible for the imposition of any such tax (domestic or
        foreign), and any liability for any of the foregoing as transferee, (ii)
        in the
        case of the Company, liability for the payment of any amount of the type
        described in clause (i) as a result of being or having been before the
        Effective Time a member of an affiliated, consolidated, combined or unitary
        group, or a party to any agreement or arrangement, as a result of which
        liability of the Company to a Taxing Authority is determined or taken into
        account with reference to the activities of any other Person and (iii) liability
        of the Company for the payment of any amount with respect to the payment
        of any
        amount imposed on any Person of the type described in (i) or (ii) as a
        result of any existing express or implied agreement or arrangement (including,
        but not limited to, a tax sharing agreement, an indemnification agreement
        or
        arrangement).

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      “Tax
        Asset” means any net operating loss, net capital loss, investment tax
        credit, foreign tax credit, charitable deduction or any other credit or tax
        attribute that could be carried forward or back to reduce Taxes (including
        without limitation deductions and credits related to alternative minimum
        Taxes).

       

      Section
        8.02.  Tax Representations.  The Company represents
        and warrants to Parent that:

       

      (a)         Filing
        and Payment.  Except as set forth on Schedule 8.02(a) of the
        Company Disclosure Schedule, (i) all Tax returns, statements, reports,
        elections, declarations, disclosures, schedules and forms (including estimated
        tax or information returns and reports) filed or required to be filed with
        any
        Taxing Authority (“Returns”) by or on behalf of the Company
        prior to the Closing Date, have been filed when due in accordance with all
        applicable laws; (ii) as of the time of filing, such Returns were true and
        complete in all material respects; and (iii) all Taxes shown as due and payable
        on the Returns that have been filed have been timely paid, or withheld and
        remitted, to the appropriate Taxing Authority.

       

      (b)         Financial
        Records.  Except as set forth on Schedule 8.02(b) of the Company
        Disclosure Schedule, (i) the charges, accruals and reserves for Taxes with
        respect to the Company reflected on the books of the Company (excluding any
        provision for deferred income taxes reflecting either differences between
        the
        treatment of items for accounting and income tax purposes or carryforwards)
        are
        adequate to cover Tax liabilities accruing through the end of the last period
        for which the Company ordinarily records items on its books; and (ii) since
        the
        end of the last period for which the Company ordinarily records items on
        its  books, the Company has not incurred or accrued any liability for
        Taxes other than in the ordinary course of business.

       

      (c)         Procedure
        and Compliance.  Except as set forth on Schedule 8.02(c) of the
        Company Disclosure Schedule, (i) no Returns filed with respect to Tax years
        of
        the Company through the Tax year ended December 31, 2006 have been subject
        to
        examination by any Taxing Authority and no notice to commence an examination
        has
        been received by the Company or any Seller; (ii) the Company has not granted
        any
        extension or waiver of the statute of limitations period applicable to any
        Return, which period (after giving effect to such extension or waiver) has
        not
        yet expired; (iii) there is no claim, audit, action, suit, proceeding, or
        investigation now pending or, to the knowledge of the Company, threatened
        against or with respect to the Company in respect of any Tax or Return; and
        (iv)
        no adjustment that would increase the Tax liability of the Company has been
        made, proposed or threatened in writing by a Taxing Authority during any
        audit
        of a Pre-Closing Tax Period which could reasonably be expected to be made,
        proposed or threatened in an audit of any subsequent Pre-Closing Tax Period
        or
        Post-Closing Tax Period.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (d)         Taxing
        Jurisdictions.  Schedule 8.02 of the Company Disclosure Schedule
        sets forth a list of all jurisdictions (whether foreign or domestic) to which
        any Tax is properly payable by the Company. 

       

      (e)         S
        Corporation Status.  The Company (and any predecessor of the
        Company) was at all times during its existence until June 28, 2007 a validly
        electing S corporation, within the meaning of Sections 1361 and 1362 of the
        Code.  On June 29, 2007, the Company’s status as an S Corporation
        terminated.  The Company has not made any election under Treasury
        Regulations Section 301.7701-3 to be taxed other than as a corporation for
        U.S.
        federal income tax purposes.

       

      (f)         FIRPTA
        Certificate.  Parent has received a certification signed by the
        Company to the effect that no interest in the Company constitutes a United
        States real property interest, as defined in Section 897 of the
        Code.

       

      Section
        8.03.  Covenants.

       

      (a)         Without
        the prior written consent of Parent, none of the Sellers or the Company shall,
        to the extent it may affect or relate to the Company, make or change any
        Tax
        election, change any annual Tax accounting period, adopt or change any method
        of
        Tax accounting, file any amended Return, enter into any closing agreement,
        settle any Tax claim or assessment, surrender any right to claim a Tax refund,
        offset or other reduction in Tax liability, consent to any extension or waiver
        of the limitations period applicable to any Tax claim or assessment or take
        or
        omit to take any other action, if any such action or omission would have
        the
        effect of increasing the Tax liability or reducing any tax asset of the Company,
        Parent or any Affiliate of Parent.

       

      (b)         Shareholders’
        Representative shall prepare or cause to be prepared and file or cause to
        be
        filed all Returns for the Company for all periods ending on or prior to the
        Closing Date that are filed after the Closing Date.  Shareholders’
Representative shall permit Parent to review and comment on each such Return
        described in the preceding sentence at least 30 days prior to the due date
        for
        such Return, and shall provide Parent with all related
        workpapers.  Such Returns shall be prepared in a manner consistent
        with the Company’s prior practice.  Shareholders’ Representative shall
        not file any Returns described in this Section 8.03(c) without the prior
        written
        consent of Parent (which shall not be unreasonably withheld).  In the
        event that there is a dispute regarding the Returns, Section 8.07 shall
        apply.  To the extent permitted by applicable law, the Sellers shall
        include any income, gain, loss, deduction or other Tax items for such periods
        on
        their Returns in a manner consistent with the Schedule K-1s furnished by
        the
        Company to the Sellers for such periods.

       

      (c)         Prior
        to the Closing, the Company shall not make any payment of, or in respect
        of, any
        Tax to any Person or any Taxing Authority, except to the extent such payment
        is
        in respect of a Tax that is due or payable or has been properly estimated
        in
        accordance with applicable law as applied in a manner consistent with past
        practice of the Company.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (d)         All
        transfer, documentary, sales, use, stamp, registration, value added and other
        such Taxes and fees (including any penalties and interest) incurred in
        connection with transactions contemplated by this Agreement (including any
        real
        property transfer Tax and any similar Tax (for the avoidance of doubt, excluding
        state and federal income taxes, if any, payable by the Company in connection
        with the transactions contemplated by this Agreement)) shall be paid by Sellers
        (in proportion to their percentage ownership of the Company Stock, as set
        forth
        in Annex II to this Agreement) when due, and the Company will file all necessary
        Returns and other documentation with respect to all such Taxes and fees,
        with
        the costs of such Returns and other documentation to be borne by Sellers
        (in
        proportion to their percentage ownership of the Company Stock, as set forth
        in
        Annex II to this Agreement), and if required by applicable law, Parent will,
        and
        will cause its Affiliates to, join in the execution of any such Returns and
        other documentation.

       

      Section
        8.04.  Cooperation on Tax Matters.

       

      (a)         Parent
        and the Sellers shall cooperate fully, as and to the extent reasonably requested
        by the other party, in connection with the preparation and filing of any
        Return
        (including any report required pursuant to Section 6043 of the Code and all
        Treasury Regulations promulgated thereunder), any audit, litigation or other
        proceeding with respect to Taxes.  Such cooperation shall include the
        retention and (upon another party’s request) the provision of records and
        information which are reasonably relevant to any such audit, litigation or
        other
        proceeding and making employees available on a mutually convenient basis
        to
        provide additional information and explanation of any material provided
        hereunder.  Parent and the Sellers agree (i) to retain all books and
        records with respect to Tax matters pertinent to the Company relating to
        any
        Pre-Closing Tax Period, and to abide by all record retention agreements entered
        into with any Taxing Authority, and (ii) to give the other party reasonable
        written notice prior to destroying or discarding any such books and records
        and,
        if the other party so requests, Parent or the Sellers, as the case may be,
        shall
        allow the other party to take possession of such books and records.

       

      (b)         Parent
        and the Sellers further agree, upon request, to use all reasonable efforts
        to
        obtain any certificate or other document from any Governmental Authority
        or
        customer of the Company or any other Person as may be necessary to mitigate,
        reduce or eliminate any Tax that could be imposed (including but not limited
        to
        with respect to the transactions contemplated hereby).

       

      Section
        8.05.  Tax Indemnification.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (a)         Each
        of David Gardner and Trust, jointly and severally, by adopting this Agreement,
        shall hereby agree to indemnify each Parent Indemnitee against and agree
        to hold
        each Parent Indemnitee harmless from any:

       

      (u)           Tax
        of the Company described in clause (i) of the definition of Tax related to
        a
        Pre-Closing Tax Period,

       

      (v)           Tax
        described in clause (ii) or (iii) of the definition of Tax,

       

      (w)           Tax
        of the Company resulting from a breach of the provisions of  Section
        8.02 or Section 8.03,

       

      (x)           Tax
        resulting from the application of Section 280G of the Code to any payment
        made
        pursuant to this Agreement or to any payment made as a result of, or in
        connection with, any transaction contemplated by this Agreement,

       

      (y)           liabilities,
        costs, expenses (including, without limitation, reasonable expenses of
        investigation and attorneys’ fees and expenses), losses, damages, assessments,
        settlements or judgments arising out of or incident to the imposition,
        assessment or assertion of any Tax described in (u), (v), (w), (x) or
        (y),

       

      (the
        sum
        of (u), (v), (w), (x), and (y), of this Section 8.05(a) being referred to
        herein
        as a “Loss”).

       

      (b)         For
        purposes of this Section, in the case of any Taxes that are imposed on a
        periodic basis and are payable for a Tax period that includes (but does not
        end
        on) the Closing Date, the portion of such Tax related to the portion of such
        Tax
        period ending on and including the Closing Date shall (x) in the case of
        any
        Taxes other than gross receipts, sales or use Taxes and Taxes based upon
        or
        related to income, be deemed to be the amount of such Tax for the entire
        Tax
        period multiplied by a fraction the numerator of which is the number of days
        in
        the Tax period ending on and including the Closing Date and the denominator
        of
        which is the number of days in the entire Tax period, and (y) in the case
        of any
        Tax based upon or related to income and any gross receipts, sales or use
        Tax, be
        deemed equal to the amount which would be payable if the relevant Tax period
        ended on the Closing Date.  All determinations necessary to give
        effect to the allocation set forth in the foregoing clause (y) shall be made
        in
        a manner consistent with prior practice of the Company.

       

      (c)         Not
        later than 30 days after receipt by Shareholders’ Representative of written
        notice from Parent stating that any Loss has been incurred by a Parent
        Indemnitee and the amount thereof and of the indemnity payment requested,
        the
        Sellers shall discharge their obligation to indemnify the Parent Indemnitee
        against such Loss by paying to Parent an amount equal to the amount of such
        Loss.  Notwithstanding the foregoing, if Parent provides Shareholders’
Representative with written notice of at least 30 days prior to the date
        on
        which the relevant Loss is required to be paid by any Parent Indemnitee,
        within
        that 30-day period the Sellers shall discharge their obligation to indemnify
        the
        Parent Indemnitee against such Loss by making payments to the relevant Taxing
        Authority or Parent, as directed by Parent, in an aggregate amount equal
        to the
        amount of such Loss.  The payment by a Parent Indemnitee of any Loss
        shall not relieve Sellers of their obligation under this Section
        8.05.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (d)         Parent
        agrees to give prompt notice to Shareholders’ Representative of any Loss or the
        assertion of any claim, or the commencement of any suit, action or proceeding
        in
        respect of which indemnity may be sought hereunder which Parent deems to
        be
        within the ambit of this Section 8.05 (specifying with reasonable particularity
        the basis therefor) and will give Shareholders’ Representative such information
        with respect thereto as Shareholders’ Representative may reasonably
        request.  Shareholders’ Representative may, at the Sellers’ expense,
        participate in the defense of any such suit, action or proceeding (including
        any
        Tax audit).  Parent shall keep Shareholders’ Representative reasonably
        informed of all developments on a timely basis and Parent shall not resolve
        any
        such suit, action or proceeding in a manner that could reasonably be expected
        to
        have an adverse impact on the Sellers’ indemnification obligations under this
        Agreement without Shareholders’ Representative written consent, which shall not
        be unreasonably withheld.  All of the parties hereto shall cooperate
        in the defense or prosecution of any claim.

       

      (e)         No
        investigation by Parent or any of its Affiliates at or prior to the Closing
        Date
        shall relieve the Sellers of any liability hereunder.

       

      (f)         Any
        claim of any Parent Indemnitee under this Section may be made and enforced
        by
        Parent on behalf of such Parent Indemnitee.

       

      Section
        8.06.  Certain Disputes.  Disputes arising under
        Section 8.05 and not resolved by mutual agreement within 30 days shall be
        resolved by a nationally recognized accounting firm with no material
        relationship with Parent, the Sellers or their Affiliates (the
“Accounting Referee”), chosen and mutually acceptable to both
        Parent and the Sellers within five days of the date on which the need to
        choose
        the Accounting Referee arises. The Accounting Referee shall resolve any disputed
        items within 30 days of having the item referred to it pursuant to such
        procedures as it may require. The costs, fees and expenses of the Accounting
        Referee shall be borne equally by Parent and the Sellers in proportion to
        their
        percentage ownership of the Company Stock, as set forth in Annex II to this
        Agreement.

       

      Section
        8.07.  Purchase Price Adjustment.  Any amount paid
        by the Sellers or Parent under Article 8 or Article 9 will be treated as
        an
        adjustment to the Merger Consideration.

       

      Section
        8.08.  Tax-Free Reorganization Treatment.  The
        parties intend (assuming no shares of Parent Stock are used to satisfy
        obligations under Article 9), if the Mergers are consummated, that the First
        and
        Second Mergers be treated as one integrated transaction, qualifying as a
        “reorganization” described in Code Section 368(a)(1)(A) and for this Agreement
        to constitute a “plan of reorganization” within the meaning of Treasury
        Regulations Section 1.368-2(g).  The parties agree to file all state
        and federal income tax returns in a manner consistent with the intent and
        form
        of this transaction.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      Section
        8.09.  Survival.  Notwithstanding anything in this
        Agreement to the contrary, the provisions of this Article 8 other than Section
        8.08, shall survive for the full period of the applicable statutes of
        limitations (giving effect to any waiver, mitigation or extension
        thereof).

       

       

      ARTICLE
        9

      SURVIVAL
        OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

       

      Section
        9.01.  Survival of Representation and
        Warranties.  The representations and warranties of the parties
        hereto contained in this Agreement shall survive the Effective Time until
        the
        second anniversary of the Closing Date (the “Survival Period”),
provided that the representations and warranties in Sections
        4.01,
        4.02, 4.07, 4.08, 4.18 and 4.21 shall survive indefinitely or until the latest
        date permitted by law and the representations and warranties contained in
        Article 8 shall survive in accordance with the terms of Section
        8.09.  The covenants and agreements of the parties hereto contained in
        this Agreement or in any certificate or other writing delivered pursuant
        hereto
        or in connection herewith shall survive the Closing Date indefinitely or
        for the
        shorter period explicitly specified therein, except that for such covenants
        and
        agreements that survive for such shorter period, breaches thereof shall survive
        indefinitely or until the latest date permitted by
        law.  Notwithstanding the preceding sentences, any breach of
        representation, warranty, covenant or agreement in respect of which indemnity
        is
        being sought under this Agreement shall survive the time at which it would
        otherwise terminate pursuant to the preceding sentences, if written notice
        of
        the inaccuracy or breach thereof giving rise to such right of indemnity shall
        have been given to the party against whom such indemnity may be sought prior
        to
        such time, but only to the extent of the indemnity being sought.  All
        of Parent’s and the Merger Subsidiaries’ representations and warranties
        contained herein or in any instrument delivered pursuant to this Agreement
        shall
        terminate at the Effective Time. 

       

      Section
        9.02.  Indemnification.  Article 33 Subject to the
        limitations made herein, Trust and David Gardner (the “Indemnifying
        Parties” shall jointly and severally indemnify, defend and hold
        harmless Parent and its Affiliates (including, after the Second Effective
        Time,
        the Surviving Entity), officers, directors, employees, agents, successors
        and
        assigns (collectively, the “Indemnified Parties”) for any and
        all damage, losses, liability, expenses, interest, awards, judgments and
        penalties (including reasonable expenses of investigation and reasonable
        attorneys’ and consultants’ fees and expenses in connection with any action,
        suit or proceeding whether involving a third party claim or a claim solely
        between the parties hereto but excluding any incidental, indirect or
        consequential damages, losses, liabilities or expenses, and excluding any
        lost
        profits or diminution in value) (“Damages”), incurred or
        suffered by any Indemnified Party arising out of any misrepresentation or
        breach
        of warranty (without giving effect to any qualification as to materiality
        or
        Material Adverse Effect contained therein in determining the amount of any
        Damages) or breach of covenant or agreement made or to be performed by the
        Company pursuant to this Agreement, in each case, other than Damages relating
        to
        Taxes, which shall be governed by Article 8.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (b)         The
        Sellers acknowledge and agree to the manner of indemnification payments provided
        for in this Article 9, notwithstanding that not all Sellers are subject to
        indemnification obligations under this Article 9.  The Sellers shall
        be free to make arrangements among themselves as regards to the sharing of
        indemnification payments made pursuant to this Article 9.

       

      (c)         No
        Indemnified Party shall be entitled to indemnification pursuant to this Article
        9 until such time as the total amount of all Damages that have been directly
        or
        indirectly suffered or incurred by any one or more of the Indemnified Parties,
        or to which any one or more of the Indemnified Parties has or have otherwise
        become subject, exceeds $200,000 in the aggregate (the “Threshold
        Amount”). At such time, the Indemnified Parties shall be entitled to be
        indemnified against and compensated only for the portion of such Damages
        exceeding the Threshold Amount.  For the avoidance of doubt,
        indemnification claims pursuant to Article 8 shall not be subject to this
        Section 9.02(c).

       

      (d)         The
        maximum aggregate indemnification obligation of the Indemnifying Parties
        under
        this Article 9 shall be $10,000,000.

       

      (e)         David
        Gardner may, at his election, discharge any indemnifiable claim for
        indemnification hereunder (in whole or in part) by surrendering shares of
        Parent
        Stock to Parent.  For claims made during the two year period following
        the Closing Date, the delivery of such shares of Parent Stock shall operate
        for
        all purposes as a complete discharge of the obligation to pay Damages pursuant
        to an indemnifiable claim in an amount equal to the product of (w) the number
        of
        shares of Parent Stock delivered by David Gardner pursuant to this Section
        9.02(e) and (x) $11.066.  For claims made after the two-year
        anniversary of the Closing Date, the delivery of such shares of Parent Stock
        shall operate for all purposes as a complete discharge of the obligation
        to pay
        Damages pursuant to an indemnifiable claim in an amount equal to the product
        of
        (y) the number of shares of Parent Stock delivered by David Gardner pursuant
        to
        this Section 9.02(e) and (z) the closing price of Parent Stock on The Nasdaq
        Global Market (or other applicable national exchange) on the Business Day
        prior
        to delivery of the Indemnification Notice setting forth the indemnifiable
        claim.

       

      (f)         Any
        amounts owed by Trust for indemnification claims pursuant to Article 8 or
        Article 9 shall be satisfied first by causing Parent to withhold amounts
        remaining due and payable on the Note by Parent.  The withholding and
        deduction of any such sum shall operate for all purposes as a complete discharge
        (to the extent of such sum) of the obligation to pay the amount from which
        such
        sum was withheld and deducted.  In the event that Trust’s
        indemnification obligation exceeds the balance due on the Note, the Trust
        shall
        be responsible for such excess indemnification obligation.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (g)         In
        the event that an Indemnified Party has delivered an Indemnification Notice
        pursuant to Section 9.03, Parent may withhold payments due on the Note up
        to the
        amount of alleged Damages set forth in the Indemnification Notice until the
        resolution of such claim.  Any amounts to be withheld shall be
        withheld first from the last payment of principal due on the Note, and then
        against earlier payments of principal to the extent that the alleged Damages
        exceed the amount due on the last payment of principal on the
        Note.  Upon the final determination of the matter asserted in the
        Indemnification Notice, any amounts remaining to be paid on the Note after
        offsetting for any Damages determined to be owed by Trust pursuant to the
        matter
        asserted in such Indemnification Notice, less any amounts for which an
        Indemnification Notice has been delivered but not yet determined, shall be
        paid
        in accordance with the terms of this Agreement and the Note.

       

      (h)         The
        representations and warranties (as modified by the Company Disclosure Schedule)
        and the covenants and agreements of the Company, and the rights and remedies
        that may be exercised by the Indemnified Parties, shall not be limited or
        otherwise affected by or as a result of any information furnished to, or
        any
        investigation made by or knowledge of, any Indemnified Party.

       

      (i)         In
        all matters relating to Article 8 or Article 9, the Shareholders’ Representative
        shall be the only party entitled to assert the rights of the Shareholders,
        and
        the Shareholders’ Representative shall perform all of the obligations of the
        Shareholders hereunder.  Parent shall be entitled to rely on all
        statements, representations and decisions of the Shareholders’
Representative.

       

      Section
        9.03.  Indemnification Notice.  a) Any Indemnified
        Party seeking indemnification under this Agreement shall give the Shareholders’
Representative notice of any matter that such Indemnified Party has determined
        has given rise to a right of indemnification under this Agreement, prior
        to the
        expiration of the applicable representations and warranties as set forth
        in
        Section 9.01.  Such Indemnification Notice shall specify (i) the
        specific provisions of this Agreement in respect of which such right of
        indemnification is claimed or arises (ii) the amount of Damages being claimed
        by
        the Indemnified Party, if known, and method of computation thereof, and (iii)
        the facts and circumstances supporting such claim (an “Indemnification
        Notice”).  The Shareholders’ Representative may object in a
        written statement to the claim made by the Indemnified Party in an
        Indemnification Notice by delivering a notice of such objection to the
        Indemnified Party prior to the expiration of the thirtieth (30th) day after
        delivery of the Indemnification Notice to the Shareholders’ Representative (an
“Objection Notice”).  If the Shareholders’
Representative does not object in writing within such 30-day
        period, such
        failure to so object shall be an irrevocable acknowledgment by the Shareholders’
Representative that the Indemnified Party is entitled to the full amount
        of
        Damages set forth in such Indemnification Notice.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (b)         In
        case the Shareholders’ Representative delivers an Objection Notice in accordance
        with Section 9.03, the Shareholders’ Representative and the Indemnified Party
        shall attempt in good faith to agree upon the rights of the respective parties
        with respect to each of such claims.  Within ten (10) Business Days
        after an Objection Notice is delivered to the Indemnified Party, the
        Shareholder’s Representative and a person having authority on behalf of the
        Indemnified Party to settle the dispute shall meet at a mutually acceptable
        time
        and place to attempt to resolve the dispute.  If the Shareholders’
Representative and the Indemnified Party should agree upon the rights of
        the
        respective parties with respect to each of such claims, a memorandum setting
        forth such agreement shall be prepared and signed by both parties.

       

      Section
        9.04.  Shareholders’
Representative.  (a) Effective upon and pursuant to this
        Agreement, the Shareholders’ Representative shall be hereby appointed as the
        representative of the holders of Company Stock and as the attorney-in-fact
        and
        agent for and on behalf of each holder of Company Stock solely with respect
        to
        any claims by any Indemnified Party under Article 8 or Article 9 of this
        Agreement.  The Shareholders’ Representative hereby accepts such
        appointment.  The Shareholders’ Representative shall have the
        authority to take any and all actions and make any decisions required or
        permitted to be taken by the Shareholders’ Representative under this Agreement,
        including the exercise of the power to (i) agree to, negotiate, enter into
        settlements and compromises of, commence any suit, action or proceeding,
        and
        comply with orders of courts with respect to, claims by any Indemnified Party
        under Article 8 or Article 9 of this Agreement, and (ii) take all actions
        necessary in the judgment of the Shareholders’ Representative for the
        accomplishment of the foregoing.  The Shareholders’ Representative
        will have sole authority and power to act on behalf of each former shareholder
        of the Company with respect to the disposition, settlement or other handling
        of
        all claims for indemnification under this Agreement and all related rights
        or
        obligations of the former shareholders of the Company arising under this
        Agreement.  The Shareholders’ Representative shall use commercially
        reasonable efforts, based on contact information available to the Shareholders’
Representative, to keep the former shareholders of the Company reasonably
        informed with respect to actions of the Shareholders’ Representative pursuant to
        the authority granted the Shareholders’ Representative under this
        Agreement.  Each former shareholder of the Company shall promptly
        provide written notice to the Shareholders’ Representative of any change of
        address of such shareholder.

       

      (b)         In
        all matters relating to the disposition, settlement or other handling of
        claims
        pursuant to Article 8 under this Agreement, the Shareholders’ Representative (or
        his or her successor) shall be the only party entitled to assert the rights
        of
        the former shareholders of the Company.  A decision, act, consent or
        instruction of the Shareholders’ Representative hereunder shall constitute a
        decision, act, consent or instruction of all former holders of Company Stock
        and
        shall be final, binding and conclusive upon each of such shareholders, and
        Parent may rely upon any such decision, act, consent or instruction of the
        Shareholders’ Representative as being the decision, act, consent or instruction
        of each and every such holder of Company Stock.  Parent shall be
        relieved from any liability to any Person for any acts done by them in
        accordance with such decision, act, consent or instruction of the Shareholders’
Representative.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (c)         The
        Shareholders’ Representative shall have the right to recover from payments due
        on the Note, prior to any distribution to Trust, the Shareholders’
Representative’s reasonable out-of-pocket expenses incurred in serving in that
        capacity (the “Shareholders’ Representative’s
        Expenses”).  In the event outstanding payments on the Note
        are insufficient to satisfy the Shareholders’ Representative’s Expenses, then
        each Shareholder will be obligated to pay a percentage of the Shareholders’
Representative’s Expenses in excess of such funds proportionate to that holder’s
        percentage ownership of the Company Stock.

       

      (d)         The
        Shareholders’ Representative will incur no liability with respect to any action
        taken or suffered by any party in reliance upon any notice, direction,
        instruction, consent, statement or other document believed by such Shareholders’
Representative to be genuine and to have been signed by the proper person
        (and
        shall have no responsibility to determine the authenticity thereof), nor
        for any
        other action or inaction, except his own gross negligence, bad faith or willful
        misconduct.  In all questions arising under this Agreement, the
        Shareholders’ Representative may rely on the advice of outside counsel, and the
        Shareholders’ Representative will not be liable to anyone for anything done,
        omitted or suffered in good faith by the Shareholders’ Representative based on
        such advice.

       

      (e)         The
        holders of Company Stock shall severally but not jointly indemnify the
        Shareholders’ Representative and hold the Shareholders’ Representative harmless
        against any loss, liability or expense incurred without gross negligence,
        bad
        faith or willful misconduct, to the extent permitted by applicable law, on
        the
        part of the Shareholders’ Representative and arising out of or in connection
        with the acceptance or administration of the Shareholders’ Representative’s
        duties hereunder, including the reasonable fees and expenses of any legal
        counsel retained by the Shareholders’ Representative.

       

      (f)         At
        any time during the Survival Period, a majority-in-interest of holders of
        Company Stock may, by written consent, appoint a new representative as the
        Shareholders’ Representative.  Notice together with a copy of the
        written consent appointing such new representative and bearing the signatures
        of
        holders of a majority-in-interest of those holders must be delivered to Parent
        not less than ten (10) calendar days prior to such appointment.  Such
        appointment will be effective upon the later of the date indicated in the
        consent or the date such consent is received by Parent

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (g)         In
        the event that the Shareholders’ Representative becomes unable or unwilling to
        continue in his or its capacity as Shareholders’ Representative, or if the
        Shareholders’ Representative resigns as a Shareholders’ Representative, a
        majority-in-interest of the holders of Company Stock may, by written consent,
        appoint a new representative as the Shareholders’
Representative.  Notice and a copy of the written consent appointing
        such new representative and bearing the signatures of the holders of a
        majority-in-interest of such holders must be delivered to
        Parent.  Such appointment will be effective upon the later of the date
        indicated in the consent or the date such consent is received by
        Parent.

       

      Section
        9.05.  No Claims for Disclosed Matters.  No
        Indemnified Party may assert a claim for indemnification with respect to
        any
        matter which has been disclosed to Parent in the Company Disclosure
        Schedules.

       

       

      ARTICLE
        10

      MISCELLANEOUS

       

      Section
        10.01.  Notices.  All notices, requests and other
        communications to any party hereunder shall be in writing and delivered either
        (i) in person or (ii) by a nationally recognized courier service and shall
        be
        given,

       

      if
        to
        Parent or Merger Subsidiaries, to:

       

      Photon
        Dynamics, Inc.

      5970
        Optical Court

      San
        Jose,
        California 95138

      Attention:
        General Counsel

       

       

      with
        a
        copy to:

       

      Davis
        Polk & Wardwell

      1600
        El
        Camino Real

      Menlo
        Park, California 94025

      Attention:
        William M. Kelly, Esq.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      if
        to the
        Company, to:

       

      Salvador
        Imaging, Inc.

      4815
        List
        Drive, Suite 104

      Colorado
        Springs, Colorado 80919

      Attention:
        David Gardner

       

       

      with
        a
        copy to:

       

      Rothgerber
        Johnson & Lyons LLP

      90
        South
        Cascade Avenue, Suite 1100

      Colorado
        Springs, Colorado 80903

      Attention:
        H. William Mahaffey, Esq.

       

       

      if
        to the
        Sellers or to the Shareholder’s Representative, to:

       

      David
        Gardner

      4815
        List
        Drive, Suite 104

      Colorado
        Springs, Colorado 80919

      Attention:
        David Gardner

       

       

      with
        a
        copy to:

       

      Rothgerber
        Johnson & Lyons LLP

      90
        South
        Cascade Avenue, Suite 1100

      Colorado
        Springs, Colorado 80903

      Attention:
        H. William Mahaffey, Esq.

       

       

      or
        to
        such other address as such party may hereafter specify for the purpose by
        notice
        to the other parties hereto.  All such notices, requests and other
        communications shall be deemed received on the date of receipt by the recipient
        thereof if received prior to 5:00 p.m. on a Business Day in the place of
        receipt.  Otherwise, any such notice, request or communication shall
        be deemed to have been received on the next succeeding Business Day in the
        place
        of receipt.

       

      Section
        10.02.  Amendments and Waivers.  Article 34 Any
        provision of this Agreement may be amended or waived prior to the Effective
        Time
        if, but only if, such amendment or waiver is in writing and is signed, in
        the
        case of an amendment, by each party to this Agreement or, in the case of
        a
        waiver, by each party against whom the waiver is to be effective;
provided that, after the Company Shareholder Approval without their
        further approval, no such amendment or waiver shall reduce the amount or
        change
        the kind of consideration to be received in exchange for the shares of Company
        Stock.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      (b)         No
        failure or delay by any party in exercising any right, power or privilege
        hereunder shall operate as a waiver thereof nor shall any single or partial
        exercise thereof preclude any other or further exercise thereof or the exercise
        of any other right, power or privilege. The rights and remedies herein provided
        shall be cumulative and not exclusive of any rights or remedies provided
        by
        Applicable Law.

       

      Section
        10.03.  Expenses.  Except as otherwise provided
        herein, all costs and expenses incurred in connection with this Agreement
        shall
        be paid by the party incurring such cost or expense.

       

      Section
        10.04. Successors and Assigns.  The provisions
        of this Agreement shall be binding upon and inure to the benefit of the parties
        hereto and their respective successors and assigns; provided that no
        party may assign, delegate or otherwise transfer any of its rights or
        obligations under this Agreement without the consent of each other party
        hereto;
        except that Parent or The Merger Subsidiaries may transfer or assign its
        rights
        and obligations under this Agreement, in whole or from time to time in part,
        to
        one or more of their Affiliates at any time; provided that no such
        transfer or assignment shall relieve Parent of its obligations hereunder
        or
        enlarge, alter or change any obligation of any other party hereto or due
        to
        Parent.

       

      Section
        10.05.  Governing Law.  This Agreement shall be
        governed by and construed in accordance with the laws of the State of Colorado,
        without regard to the conflicts of law rules of such state.

       

      Section
        10.06.  Jurisdiction.  The parties hereto agree
        that any suit, action or proceeding seeking to enforce any provision of,
        or
        based on any matter arising out of or in connection with, this Agreement
        or the
        transactions contemplated hereby shall be brought in any federal court located
        in the State of Colorado or any Colorado state court, and each of the parties
        hereby irrevocably consents to the jurisdiction of such courts (and of the
        appropriate appellate courts therefrom) in any such suit, action or proceeding
        and irrevocably waives, to the fullest extent permitted by law, any objection
        that it may now or hereafter have to the laying of the venue of any such
        suit,
        action or proceeding in any such court or that any such suit, action or
        proceeding brought in any such court has been brought in an inconvenient
        forum.  Process in any such suit, action or proceeding may be served
        on any party anywhere in the world, whether within or without the jurisdiction
        of any such court.  Without limiting the foregoing, each party agrees
        that service of process on such party as provided in Section 10.01 shall
        be
        deemed effective service of process on such party.

       

      Section
        10.07.  WAIVER OF JURY TRIAL.  EACH OF THE PARTIES
        HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
        LEGAL
        PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
        CONTEMPLATED HEREBY.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

       

      Section
        10.08.  Counterparts; Effectiveness.  This
        Agreement may be signed in any number of counterparts, each of which shall
        be an
        original, with the same effect as if the signatures thereto and hereto were
        upon
        the same instrument. This Agreement shall become effective when each party
        hereto shall have received a counterpart hereof signed by all of the other
        parties hereto.  Until and unless each party has received a
        counterpart hereof signed by the other party hereto, this Agreement shall
        have
        no effect and no party shall have any right or obligation hereunder (whether
        by
        virtue of any other oral or written agreement or other
        communication).

       

      Section
        10.09.  Entire Agreement.  This Agreement, the Key
        Employee Employment Agreements, the Registration Rights Agreement, the Gardner
        Non-competition Agreement and the Assignment Agreement constitutes the entire
        agreement between the parties with respect to the subject matter of this
        Agreement and supersedes all prior agreements and understandings, both oral
        and
        written, between the parties with respect to the subject matter of this
        Agreement.

       

      Section
        10.10.  Captions.  The captions herein are included
        for convenience of reference only and shall be ignored in the construction
        or
        interpretation hereof.

       

      Section
        10.11.  Severability.  If any term, provision,
        covenant or restriction of this Agreement is held by a court of competent
        jurisdiction or other Governmental Authority to be invalid, void or
        unenforceable, the remainder of the terms, provisions, covenants and
        restrictions of this Agreement shall remain in full force and effect and
        shall
        in no way be affected, impaired or invalidated so long as the economic or
        legal
        substance of the transactions contemplated hereby is not affected in any
        manner
        materially adverse to any party.  Upon such a determination, the
        parties shall negotiate in good faith to modify this Agreement so as to effect
        the original intent of the parties as closely as possible in an acceptable
        manner in order that the transactions contemplated hereby be consummated
        as
        originally contemplated to the fullest extent possible.

       

      Section
        10.12.  Specific Performance.  The parties hereto
        agree that irreparable damage would occur if any provision of this Agreement
        were not performed in accordance with the terms hereof and that the parties
        shall be entitled to an injunction or injunctions to prevent breaches of
        this
        Agreement or to enforce specifically the performance of the terms and provisions
        hereof, in addition to any other remedy to which they are entitled at law
        or in
        equity.

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      


      IN
        WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
        executed by their respective authorized officers as of the day and year first
        above written.

       

      
        	 	
                SALVADOR
                  IMAGING, INC.

              	 
	 	 	 
	 	 	 
	 	
                By:

              	
                 
                  /s/ David Gardner

              	 
	 	 	
                Name:

              	
                David
                  Gardner

              	 
	 	 	
                Title:

              	
                President
                  & CEO

              	 
	 	 	 	 	 
	 	
                DAVID
                  GARDNER

              	 
	 	 	 
	 	 	 
	 	 	
                 
                  /s/ David Gardner

              	 
	 	 	 	 	 
	 	
                SALVADOR
                  FOUNDATION CHARITABLE REMAINDER UNITRUST

              	 
	 	 	 
	 	 	 
	 	
                By:

              	
                 
                  /s/ David Gardner

              	 
	 	 	
                Name:

              	
                David
                  Gardner

              	 
	 	 	
                Title:

              	
                Trustee

              	 
	 	 	 	 	 
	 	
                JAMES
                  R. LONG

              	 
	 	 	 
	 	 	 
	 	 	
                 
                  /s/ James R. Long

              	 
	 	 	 	 	 
	 	
                PATRICIA
                  LONG

              	 
	 	 	 
	 	 	 
	 	 	
                 
                  /s/ Patricia Long

              	 
	 	 	 	 	 
	 	
                KERRY
                  RHEA

              	 
	 	 	 
	 	 	 
	 	 	
                 
                  /s/ Kerry Rhea

              	 
	 	 	 	 	 
	 	
                LISA
                  J. RHEA

              	 
	 	 	 
	 	 	 
	 	 	
                 
                  /s/ Lisa J. Rhea

              	 


      

      


      


      [Signature
        Page to Agreement and Plan of Merger and Reorganization]

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      
        	 	
                PHOTON
                  DYNAMICS, INC.

              	 
	 	 	 
	 	 	 
	 	
                By:

              	
                /s/  Jeffrey
                  A. Hawthorne

              	 
	 	 	
                Name:

              	
                Jeffrey
                  A. Hawthorne

              	 
	 	 	
                Title:

              	
                President
                  and Chief Executive Officer

              	 
	 	 	 	 	 
	 	
                SALVADOR
                  ACQUISITION, INC.

              	 
	 	 	 
	 	 	 
	 	
                By:

              	
                /s/  Jeffrey
                  A. Hawthorne

              	 
	 	 	
                Name:

              	
                Jeffrey
                  A. Hawthorne

              	 
	 	 	
                Title:

              	
                Chief
                  Executive Officer

              	 
	 	 	 	 	 
	 	
                SALVADOR
                  ACQUISITION, LLC

              	 
	 	 	 
	 	 	 
	 	
                By:

              	
                /s/  Jeffrey
                  A. Hawthorne

              	 
	 	 	
                Name:

              	
                Jeffrey
                  A. Hawthorne

              	 
	 	 	
                Title:

              	
                Chief
                  Executive Officer

              	 
	 	 	 	 	 


      

      


      


      [Signature
        Page to Agreement and Plan of Merger and Reorganization]