Exhibit 10.1

STOCK PURCHASE AGREEMENT

BY AND AMONG

KFORCE GOVERNMENT HOLDINGS INC.,

A FLORIDA CORPORATION,

KFORCE INC.,

A FLORIDA CORPORATION,

RDI SYSTEMS, INC.,

A TEXAS CORPORATION,

THE SHAREHOLDERS SIGNATORY HERETO

AND

NANCY R. KUDLA, AS

COMPANY SHAREHOLDER REPRESENTATIVE

DATED AS OF

DECEMBER 2, 2008

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TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS    1 ARTICLE II SALE OF STOCK    1     2.1      Sale of
Stock.    1     2.2      Purchase Price; Payment.    2     2.3      Purchase
Price Adjustment.    2     2.4      Closing Date.    5     2.5      Further
Assurances.    5     2.6      Access to Books and Records following Closing;
Shareholders’ Access.    5     2.7      Company Shareholder Representative.    5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY    7     3.1     
Organization and Qualification; Subsidiaries.    8     3.2      Capitalization;
Ownership of Stock.    9     3.3      Authorization and Validity of Agreement.
   9     3.4      Consents and Approvals.    10     3.5      No Violation.    10
    3.6      Financial Statements.    10     3.7      Compliance with Law;
Licenses and Permits.    11     3.8      Environmental Compliance.    11     3.9
     Absence of Certain Changes.    12     3.10      No Undisclosed Liabilities.
   14     3.11      Litigation.    14     3.12      Employee Benefit Matters.   
14     3.13      Taxes.    16     3.14      Real Property.    19     3.15     
Material Contracts.    20     3.16      Employees.    21     3.17      Labor
Matters; Compliance.    22     3.18      Insurance; Surety Bonds.    22     3.19
     Intellectual Property.    23     3.20      Books and Records.    25  
  3.21      Certain Payments.    25     3.22      Relationships with Related
Persons.    25     3.23      Brokers and Finders.    25     3.24      Directors
and Officers.    26     3.25      Bank Accounts.    26     3.26      Accounts
Receivable.    26     3.27      Government Contracts.    26     3.28      Title
to Assets.    31     3.29      Power of Attorney.    31     3.30      Customers
and Suppliers.    31     3.31      Disclaimer of Additional Representations.   
31     3.32      Disclosure.    31 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS    32     4.1      Organization of Certain Shareholders.    32

 

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    4.2      Authorization.    32     4.3      Execution and Validity.    32  
  4.4      Consents and Approvals; No Violations.    32     4.5     
Capitalization.    32     4.6      Broker’s Fees.    33     4.7      Disclosure.
   33 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER    33     5.1     
Organization and Qualification.    33     5.2      Authorization and Validity of
Agreement.    33     5.3      Consents and Approvals.    33     5.4      No
Violation.    33     5.5      Due Diligence.    34     5.6      Financing.    34
    5.7      Brokers and Finders.    34     5.8      Disclaimer.    34     5.9
     Disclosure.    35 ARTICLE VI COVENANTS    35     6.1      Reasonable
Efforts; Notices and Consents.    35     6.2      Public Announcements.    35  
  6.3      D&O Insurance.    35     6.4      Employee Benefits.    36     6.5
     Non-Compete Agreements for Shareholders.    36     6.6      Waiver, Release
and Discharge.    38     6.7      Confidentiality.    38     6.8     
Cooperation by Founding Shareholders.    39 ARTICLE VII CLOSING DELIVERIES    39
    7.1      Deliveries of Purchaser at Closing.    39     7.2      Deliveries
of the Shareholders and the Company at Closing.    39 ARTICLE VIII FEES AND
EXPENSES; WAIVER    41     8.1      Fees and Expenses.    41     8.2     
Waivers.    41 ARTICLE IX INDEMNIFICATION AND SURVIVAL    41     9.1     
Survival Period.    41     9.2      Shareholders’ Obligations to Indemnify.   
41     9.3      Purchaser’s Obligations to Indemnify.    42     9.4     
Procedure for Indemnification — Third Party Claims.    42     9.5      Procedure
for Indemnification — Other Claims.    43     9.6      Limitations on
Indemnification.    43     9.7      Indemnification Exclusive Remedy.    45  
  9.8      Right of Setoff Against Working Capital.    45     9.9      Time
Limitations.    46     9.10      Nature of Shareholders’ Obligations.    46
ARTICLE X TAX MATTERS    46   10.1      Section 338(h)(10) Election.    46  
10.2      Preparation and Filing of Tax Returns; Straddle Periods and
Pre-Closing Date Tax Returns.    47

 

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  10.3      Amended Tax Returns.    48   10.4      Transfer Taxes.    49   10.5
     Cooperation.    49 ARTICLE XI MISCELLANEOUS    49   11.1      Notices.   
49   11.2      Entire Agreement; Amendment.    50   11.3      Assignment;
Binding Effect.    50   11.4      Validity.    50   11.5      Counterparts.   
50   11.6      Governing Law.    50   11.7      Enforcement; Venue; Service of
Process.    50   11.8      Arbitration.    51   11.9      Interpretation and
Construction.    52   11.10      Delivery by Facsimile.    52   11.11      Joint
Preparation.    53   11.12      Guaranty by the Guarantor.    53

 

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LIST OF ANNEXES, EXHIBITS AND SCHEDULES

 

ANNEXES    I    Shareholder Ownership EXHIBITS    A    Definitions B    Form of
Escrow Agreement C    Form of Confidentiality and Non-Disclosure Agreement D   
Form of Employment Agreement and Restrictive Covenants with Glen D. Shaffer E   
Opinion of the Company and the Shareholders’ Counsel F    Allocation G   
Permitted Encumbrances SCHEDULES    3.1(a)    Trade Names and Fictitious Names
3.1(b)    Subsidiaries 3.2(a)    Capitalization 3.2(b)    Ownership of Stock 3.4
   Consents and Approvals 3.5    No Violation 3.6    Financial Statements 3.7(a)
   Compliance with Law 3.7(b)    Company Permits 3.8    Environmental Compliance
3.9    Absence of Certain Changes 3.10    No Undisclosed Liabilities 3.11   
Litigation 3.12(a)    Company Benefit Plans 3.12(g)    Termination Provisions of
Company Benefit Plans 3.12(i)    Group Health Plans 3.12(l)    Material Payments
3.13(c)    Tax Returns 3.14(b)    Leased Real Property 3.15(a)    Material
Contracts 3.15(b)    Unenforceable Material Contracts 3.16(a)    Company
Employees 3.16(c)    Company Employees Not Subject to a Confidentiality and
Non-Disclosure Agreement 3.16(d)    Payments to Company Employees Contingent
Upon Closing 3.17    Labor Matters; Compliance 3.18    Insurance; Surety Bonds

 

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3.19(a)      Intellectual Property 3.19(b)      Patents and Trademarks 3.19(c)
     Intellectual Property owned by Third Parties 3.19(e)      Intellectual
Property Assignments 3.19(f)      Protection of Intellectual Property 3.19(g)
     Written Confidentiality Agreements or Written Source Code Escrow Agreements
3.22      Relationships with Related Persons 3.24      Directors and Officers
3.25      Bank Accounts 3.26      Accounts Receivable 3.27(a)(i)      Government
Contracts 3.27(a)(ii)      Task Orders 3.27(a)(iii)      Funding of Government
Contracts and Task Orders 3.27(a)(iv)      Government Contract Bids 3.27(c)     
Termination for Convenience 3.27(g)      Government Audits 3.27(r)      Facility
Security Clearances 3.30(a)      Customers 3.30(b)      Suppliers 5.3     
Consents and Approvals 5.4      No Violation

 

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STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (this “Agreement”), is entered into on December 2,
2008, to be effective as of 11:59 p.m. on November 30, 2008 (the “Effective
Time”), by and among Kforce Government Holdings Inc., a Florida corporation
(“Purchaser”), Kforce Inc., a Florida corporation (“Guarantor”), RDI Systems,
Inc., a Texas corporation doing business as dNovus RDI (the “Company”), the
undersigned owners and holders of all of the issued and outstanding capital
stock of the Company whose names are set forth on Annex I attached hereto
(collectively, the “Shareholders” and each individually, a “Shareholder”) and
Nancy R. Kudla, as representative of the Shareholders of the Company (the
“Company Shareholder Representative”).

WITNESSETH:

WHEREAS, each of the Shareholders owns the number of the shares of common stock,
$0.01 par value (the “Stock”), of the Company set forth opposite such
Shareholder’s name on Annex I attached hereto, which shares of the Stock
represent all of the issued and outstanding capital stock of the Company;

WHEREAS, the Shareholders desire to sell to Purchaser, and Purchaser desires to
purchase from the Shareholders, all of the Stock, subject to the terms and
conditions of this Agreement;

WHEREAS, Purchaser is a wholly-owned subsidiary of the Guarantor, and the
Guarantor will guarantee the obligations of Purchaser under this Agreement;

WHEREAS, it is contemplated that the parties will make an election
under Section 338(h)(10) of the Code with respect to the acquisition of the
Company by Purchaser as contemplated under this Agreement; and

WHEREAS, it is the intention of the parties hereto that, upon consummation of
the purchase and sale of the Stock pursuant to this Agreement, Purchaser will
own all of the outstanding shares of capital stock of the Company.

NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements of the parties hereinafter contained, the parties hereby agree as
follows:

ARTICLE I

DEFINITIONS

For purposes of this Agreement, capitalized terms shall have the meanings
specified or referred to in Exhibit A attached hereto.

ARTICLE II

SALE OF STOCK

2.1 Sale of Stock. On the Closing Date, and subject to the terms and conditions
herein stated, each of the Shareholders agrees to sell, assign, transfer and
deliver to Purchaser,

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and Purchaser agrees to purchase from such Shareholder, the number of shares of
the Stock shown opposite such Shareholder’s name on Annex I attached hereto. At
the Closing, the respective certificates representing the shares of the Stock
shall be duly endorsed in blank, or accompanied by stock powers duly executed in
blank, by the Shareholder transferring the same and constituting all of the
outstanding capital stock of the Company.

2.2 Purchase Price; Payment.

(a) As consideration for the purchase of the Stock, Purchaser shall pay to the
Shareholders: (i) an amount equal to Thirty-Eight Million Dollars ($38,000,000)
(the “Base Amount”), increased or decreased, as the case may be, by the
Adjustment Amount as provided in Section 2.3 (the “Purchase Price”);

(b) At the Closing, Purchaser shall deliver the following:

(i) Purchaser shall deliver to Wells Fargo Bank, N.A., as escrow agent (the
“Escrow Agent”), an aggregate amount equal to Three Million Dollars ($3,000,000)
(the “Escrow Amount”). The Escrow Amount shall be maintained and disbursed by
the Escrow Agent subject to the terms and conditions of an escrow agreement in
substantially the form of Exhibit B attached hereto (the “Escrow Agreement”) by
and among Purchaser, the Company Shareholder Representative and the Escrow
Agent;

(ii) Purchaser shall deliver to the Shareholders, in proportion to their
respective percentage ownership in the Company as set forth in Annex I hereto,
an aggregate amount equal to (A) the Base Amount, increased or decreased, as the
case may be, by the Estimated Adjustment Amount as provided in Section 2.3 (the
“Estimated Purchase Price”) minus the Escrow Amount. All amounts payable under
this Section 2.2(b)(ii) shall be paid by wire transfer of immediately available
funds, allocated among the Shareholders in accordance with Annex I hereto, to
the accounts of the Shareholders, written notice of which accounts shall have
been provided to Purchaser by the Company Shareholder Representative not less
than two (2) Business Days prior to the Closing; and

(c) Following the Closing Date, upon the final determination of the Adjustment
Amount and the Purchase Price, Purchaser or the Shareholders, as the case may
be, shall make the payment as provided in Section 2.3.

2.3 Purchase Price Adjustment.

(a) Closing Working Capital Adjustment Amount. Concurrently with the execution
and delivery of this Agreement, the Company shall deliver a schedule setting
forth the estimated Current Assets and estimated Current Liabilities of the
Company as of the Closing Date and setting forth a calculation of the Estimated
Working Capital as of the Closing Date (as delivered, the “Estimated Working
Capital Schedule”). The Estimated Working Capital Schedule as delivered by the
Company and the Company Shareholder Representative shall serve as the basis for
calculating the Estimated Purchase Price on the Closing Date. Except as
otherwise provided in this Agreement or agreed between the parties in writing,
the Estimated Working Capital Schedule shall be prepared in accordance with
GAAP, consistently applied with past accounting practices of the Company, and
the Company’s audited financial statements.

 

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Purchaser acknowledges and agrees that such Estimated Working Capital Schedule
shall contain material information based on good faith estimates by the Company
of the Company’s financial condition and results of operations as of the Closing
Date. For purposes of this Agreement, “Estimated Working Capital” shall be the
amount (positive or negative) equal to (i) estimated Current Assets minus
(ii) estimated Current Liabilities, each as set forth in the Estimated Working
Capital Schedule. For purposes of determining the Estimated Purchase Price
pursuant to Section 2.2(b)(ii), the Base Amount shall be reduced, on a
dollar-for-dollar basis, by the amount that the Estimated Working Capital is
less than Three Million Dollars ($3,000,000), or increased, on a
dollar-for-dollar basis, by the amount that the Estimated Working Capital is
greater than Three Million Dollars ($3,000,000), as the case may be (the amount
of such decrease or increase, the “Estimated Adjustment Amount”).

(b) Post Closing Adjustment Amount; Payment. In order to determine the actual
Working Capital as of the Closing Date and any corresponding adjustment to the
Purchase Price, Purchaser shall cause the Company to prepare a schedule setting
forth the Current Assets and Current Liabilities of the Company as of the
Closing Date and setting forth a calculation of the Working Capital as of the
Closing Date (as finally determined, and subject to Sections 2.3(c), 2.3(d) and
2.3(e), the “Working Capital Schedule”). The Working Capital Schedule shall be
prepared in accordance with GAAP, consistently applied with past accounting
practices of the Company, and the Company’s audited financial statements. For
purposes of this Agreement, “Working Capital” shall be the amount (positive or
negative) equal to (i) Current Assets minus (ii) Current Liabilities, each as
set forth in the Working Capital Schedule. For purposes of determining the
Purchase Price pursuant to Section 2.2(a), on the basis of the Working Capital
Schedule, subject, however, to the rights of Purchaser and the Company
Shareholder Representative as provided in Section 2.3(d), the Base Amount shall
be reduced, on a dollar-for-dollar basis, by the amount that the Working Capital
as of the Closing Date is less than Three Million Dollars ($3,000,000), or
increased, on a dollar-for-dollar basis, by the amount that the Working Capital
as of the Closing Date is greater than Three Million Dollars ($3,000,000), as
the case may be (the amount of such decrease or increase, the “Adjustment
Amount”). In the event that the Purchase Price exceeds the Estimated Purchase
Price, then Purchaser shall, within five (5) Business Days of the final
determination of the Adjustment Amount in accordance with this Section 2.3(b),
pay to the Shareholders (on a pro rata basis) cash in an aggregate amount equal
to the amount by which the Purchase Price exceeds the Estimated Purchase Price.
In the event that the Estimated Purchase Price exceeds the Purchase Price, then
the Shareholders shall, within five (5) Business Days of the final determination
of the Adjustment Amount in accordance with this Section 2.3(b), pay (in
proportion to their respective percentage ownership in the Company as set forth
in Annex I hereto) to Purchaser the amount by which the Estimated Purchase Price
exceeds the Purchase Price.

(c) Delivery of Adjustment Documents; Disputes. Purchaser shall, no later than
seventy-five (75) days following the Closing Date, deliver to the Company
Shareholder Representative: (i) the Working Capital Schedule; (ii) a statement
of the calculation of the final Adjustment Amount, based on the Working Capital
Schedule; (iii) a statement of the resulting Purchase Price; and (iv) to the
extent known to Purchaser, a reasonably detailed description of the reasons for
each discrepancy, if any, between the Estimated Working Capital Schedule and the
Working Capital Schedule (collectively, the above (i) - (iv) are the “Adjustment
Documents”). The Adjustment Documents shall be final and binding on, and deemed
accepted

 

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by, Purchaser and the Shareholders, unless within forty-five (45) days after the
Company Shareholder Representative’s receipt thereof, the Company Shareholder
Representative provides Purchaser with written notice of objection with respect
to the Adjustment Documents (an “Objection Notice”). The Objection Notice shall
specify in reasonable detail each item on the Adjustment Documents that the
Shareholders dispute, the nature of any objection so asserted, and any portions
of the Adjustment Documents the Shareholders do not dispute. During the period
from the Company Shareholder Representative’s receipt of the Adjustment
Documents until the final resolution of all disputes raised by any Objection
Notice, Purchaser and the Company shall provide the Company Shareholder
Representative and her representatives reasonable access during normal business
hours and in a manner not to interfere in the normal operations of the Company
to all Books and Records of the Company relevant to the determination of the
Working Capital or otherwise used in preparation of the Adjustment Documents
(and to all relevant personnel employed by the Company prior to the Closing)
solely for the purposes of evaluating the Adjustment Documents.

(d) Resolution of Disputes. During the forty-five (45) day period following the
date on which the Objection Notice is received by Purchaser, Purchaser and the
Company Shareholder Representative shall use commercially reasonable efforts to
resolve any dispute raised thereby. If Purchaser and the Company Shareholder
Representative are unable to resolve the dispute within such forty-five (45) day
period, then any disputed matter set forth in the Objection Notice which remains
unresolved shall, upon the request of either Purchaser or the Company
Shareholder Representative, be submitted for final determination to Grant
Thornton LLP (such firm, or such other firm as Purchaser and the Company
Shareholder Representative shall agree upon in writing, the “Independent
Accounting Firm”). Each of Purchaser and the Company Shareholder Representative
shall be entitled to submit to the Independent Accounting Firm such documents
and materials and to make such presentations and arguments as such party shall
deem necessary or appropriate. The Independent Accounting Firm shall, based
solely on such documents, materials, presentations and arguments, render a
written report as to the resolution of each disputed matter set forth in the
Objection Notice which remains outstanding and as to the calculation of the
Adjustment Amount and the final Purchase Price. Purchaser and the Company
Shareholder Representative shall use commercially reasonable efforts to cause
the Independent Accounting Firm to render its written report within forty-five
(45) days after its receipt of any such disputed matter. The Independent
Accounting Firm shall have exclusive jurisdiction over, and resort to the
Independent Accounting Firm shall be the sole recourse and remedy of the parties
against one another or any other Person with respect to, any disputes referred
to it under this under this Section 2.3(d). The Independent Accounting Firm’s
determination shall be conclusive and binding on all parties and shall be
enforceable in a court of law. The fees and expenses of the Independent
Accounting Firm shall be paid by the party (i.e., Purchaser, on the one hand, or
the Company Shareholder Representative, on the other hand) whose last proposed
written offer for the settlement of the terms in dispute prior to the
commencement of such dispute resolution, taken as a whole, has a greater
mathematical difference from the final determination of the Independent
Accounting Firm. If the final determination of the Independent Accounting Firm
is equal to the mathematical difference between the last proposed written offers
of Purchaser and the Company Shareholder Representative, then Purchaser, on the
one hand, and the Company Shareholder Representative, on the other hand, shall
each pay one-half of the fees and expenses of the Independent Accounting Firm.

 

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(e) Final Consideration. The Adjustment Amount and Purchase Price shall become
final and binding upon the parties upon the earliest of: (i) the failure by the
Company Shareholder Representative to object thereto within the period permitted
under, and otherwise in accordance with, the requirements of Section 2.3(c);
(ii) the written agreement between the Company Shareholder Representative and
Purchaser with respect thereto; or (iii) the decision by the Independent
Accounting Firm with respect to disputes under Section 2.3(d).

2.4 Closing Date. The closing under this Agreement (the “Closing”) shall occur
on December 2, 2008 (the “Closing Date”) and shall be effective as of the
Effective Time.

2.5 Further Assurances. Each of the Shareholders hereby agrees that, from time
to time, at Purchaser’s request and without further consideration, such
Shareholder will execute and deliver to Purchaser such other and further
instruments of conveyance, assignment and transfer and take such other action as
Purchaser may reasonably require to more effectively convey, transfer and assign
the Stock to Purchaser.

2.6 Access to Books and Records following Closing; Shareholders’ Access.
Following the Closing, for the longer of four (4) years after the Closing or the
period required by applicable law, and upon reasonable prior written notice to
Purchaser from the Shareholders, Purchaser shall permit the Shareholders to have
access during normal business hours to the Books and Records of the Company
relating to periods prior to the Closing Date (which shall be retained by
Purchaser for such period) for the purpose of preparing the Shareholders’
federal and state income tax returns, defending any audits of such returns or
the Shareholders tax returns for prior years and fulfillment of the Shareholders
obligations pursuant to Article X.

2.7 Company Shareholder Representative.

(a) The Company Shareholder Representative is hereby designated by the
Shareholders and the Company to serve as the representative of the Shareholders
with respect to the matters expressly set forth in this Agreement to be
performed by the Company Shareholder Representative.

(b) Without limiting the generality of Section 2.7(a), upon the execution of
this Agreement by the Shareholders, each of the Shareholders irrevocably
appoints the Company Shareholder Representative as the agent, proxy and
attorney-in-fact for such Shareholder for all purposes of this Agreement,
including the full power and authority on such Shareholder’s behalf, to the
extent permitted by law, to: (i) negotiate, execute and deliver the Escrow
Agreement (substantially in the form attached hereto as Exhibit B, together with
such additions, deletions, modifications or changes as the Company Shareholder
Representative shall approve, such Company Shareholder Representative’s
execution thereof to be conclusive evidence of such Company Shareholder
Representative’s approval and the authorization of the Escrow Agreement hereby);
(ii) amend, modify or waive any of the provisions of the Escrow Agreement or any
other agreement contemplated by this Agreement for the benefit of the
Shareholders in any manner in which the Company Shareholder Representative
believes to be in the best interests of such Shareholders; (iii) give all
notices (including service of process) required to be given by or on behalf of
any Shareholder under this Agreement, the Escrow Agreement or any other
agreement contemplated hereby; (iv) take any action (or determine to take no
action) in

 

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connection with the defense, settlement, compromise, arbitration and/or other
resolution of any claim for indemnification by any Purchaser Indemnified Party
pursuant to Article IX, including the release of any or all of the Escrow Amount
in satisfaction of any such claim and compliance with any Order in connection
with any such claim, or any other Proceeding in connection with this Agreement;
(v) assert, bring, prosecute, maintain, settle, compromise, arbitrate and/or
otherwise resolve on behalf of the Shareholders any claim for indemnification by
any Shareholder Indemnified Party pursuant to Article IX or any other Proceeding
in connection with this Agreement; (vi) take all actions (or determine to take
no action) as the Company Shareholder Representative may deem necessary,
appropriate or convenient in such Company Shareholder Representative’s sole
judgment to carry out the approvals and cooperation with respect to Tax Returns
and Tax matters as set forth in Article IX; and (vii) take all such other
actions (or determine to take no action) as the Company Shareholder
Representative may deem necessary, appropriate or convenient in such Company
Shareholder Representative’s sole judgment to carry out the foregoing. By such
Company Shareholder Representative’s execution hereof, the Company Shareholder
Representative hereby accepts such appointment. Each Shareholder irrevocably
appoints the Company Shareholder Representative as such Shareholder’s lawful
agent, for and in such Shareholder’s behalf, to accept and acknowledge service
of, and upon whom may be served, all necessary processes in any action, suit or
proceeding arising under this Agreement that may be had or brought against such
Shareholder’s successor and assigns, in any court of competent jurisdiction,
such service of process or notice to have the same force and effect as if served
upon each and every Shareholder.

(c) The Shareholders may, at any time, remove the Company Shareholder
Representative and appoint a substitute representative by unanimous written
consent signed by Shareholders (or, if applicable, their respective heirs, legal
representatives, successors and assigns). If the Company Shareholder
Representative is an individual and dies, becomes disabled, or becomes
incapacitated, or if the Company Shareholder Representative is an entity and
files bankruptcy, becomes insolvent, or dissolves, or if the Company Shareholder
Representative is otherwise unable to perform such Company Shareholder
Representative’s responsibilities hereunder or resigns or is removed from such
position, a substitute representative shall be appointed to fill such vacancy by
written consent of the persons then entitled to appoint a substitute
representative pursuant to this Section 2.7(c). Any such substitute
representative shall be deemed to be the Company Shareholder Representative for
all purposes of this Agreement. Upon the selection of such substitute
representative, the substituted representative shall promptly notify Purchaser
and the Escrow Agent in writing of such Company Shareholder Representative’s
appointment pursuant to this Section 2.7(c), which written notice shall be
accompanied by a copy of the written consent effectuating such appointment.
Until such notice is received, Purchaser will be entitled to rely on the actions
and statements of the previous Company Shareholder Representative.

(d) To the extent permitted by law, any claim or other Proceeding, whether in
law or equity, to enforce any right, benefit or remedy granted to the
Shareholders under this Agreement or the Escrow Agreement shall be asserted,
brought, prosecuted or maintained only by the Company Shareholder
Representative. All actions, decisions and instructions of the Company
Shareholder Representative, including the defense, settlement, compromise and/or
other resolution of any claims for indemnification by any Purchaser Indemnified
Party pursuant to Article IX, shall be conclusive and binding upon all of the
Shareholders, and no Shareholder

 

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shall have any right to object, dissent, protest or otherwise contest the same,
nor have any claim or cause of action against the Company Shareholder
Representative for any action taken or not taken, decision made or instruction
given by the Company Shareholder Representative under this Agreement or the
Escrow Agreement, except for fraud, gross negligence or willful misconduct by
the Company Shareholder Representative.

(e) Each of the Shareholders agrees that Purchaser shall be able to rely
conclusively on the actions, decisions and instructions of the Company
Shareholder Representative as to the settlement, compromise and/or other
resolution of any claims for indemnification by any Purchaser Indemnified Party
pursuant to Article IX or any other actions required or permitted to be taken by
the Company Shareholder Representative under this Agreement or the Escrow
Agreement, and no party hereunder shall have any claim or cause of action
against any Purchaser Indemnified Party for any action taken by such Purchaser
Indemnified Party in reliance upon the actions, decisions and instructions of
the Company Shareholder Representative.

(f) Each of the Shareholders shall, jointly and severally, indemnify and hold
harmless the Company Shareholder Representative from all Damages arising out of
or in connection with the Company Shareholder Representative’s execution,
delivery and performance of this Agreement and the Escrow Agreement and any
other agreement contemplated by this Agreement or the Escrow Agreement, except
for fraud, gross negligence or willful misconduct by the Company Shareholder
Representative.

(g) The provisions of this Section 2.7 are independent and severable, are
irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any Shareholder may have in
connection with the transactions contemplated by this Agreement.

(h) The provisions of this Section 2.7 shall be binding upon the heirs, legal
representatives, successors and assigns of each Shareholder, and any references
in this Agreement to a Shareholder shall mean and include the successors to the
rights of the Shareholders, hereunder, whether pursuant to testamentary
disposition, the laws of descent and distribution, assignment or otherwise.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the Company’s disclosure schedules delivered to Purchaser
on the date of this Agreement in connection with this Agreement (the “Company
Disclosure Schedules”), the Company hereby represents and warrants to Purchaser
that the statements contained in this Article III are correct and complete as of
the Closing Date. Nothing in the Company Disclosure Schedules shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the Company Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail; provided,
however, that any matter disclosed pursuant to one schedule or sub-schedule of
the Company Disclosure Schedules is deemed disclosed for such other schedules or
sub-schedules of the Company Disclosure Schedules if it is reasonably apparent
that such matter relates to such

 

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other schedules or sub-schedules of the Company Disclosure Schedules and the
level of particularity and manner of disclosure of the matter expressly
disclosed in one schedule or sub-schedule of the Company Disclosure Schedules
would make a reasonable person aware that such disclosure is relevant to such
other schedules or sub-schedules.

3.1 Organization and Qualification; Subsidiaries.

(a) The Company: (i) is duly organized, validly existing and in good standing
under the laws of the State of Texas; and (ii) has the requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. The Company is in good standing and duly
qualified to do business in each jurisdiction where the character of its
properties and assets owned or leased or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified and in good standing would not have a Material Adverse Effect on the
Company. True and complete copies of the Organizational Documents of the Company
have been made available to Purchaser. The Company has all licenses, permits,
and authorizations necessary to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. Schedule 3.1(a) of the
Company Disclosure Schedules sets forth all trade names or fictitious name under
which the Company has ever conducted business.

(b) Schedule 3.1(b) of the Company Disclosure Schedules sets forth each
Subsidiary, and for Subsidiary: (i) its name and jurisdiction of incorporation
or organization; (ii) its authorized capital stock or ownership interests;
(iii) the total number of its issued and outstanding shares of capital stock or
ownership interests; and (iv) the number of its issued and outstanding shares of
capital stock or ownership interests owned by the Company (collectively, the
“Subsidiary Interests”). Except as set forth on Schedule 3.1(b) of the Company
Disclosure Schedules, all contributions required to be made to each of the
Subsidiaries pursuant to the Organizational Documents of each of the
Subsidiaries by the holders of outstanding ownership interests of each of the
Subsidiaries has been made. The Company is and on the Closing Date will be the
sole record holder and beneficial owner of all of the Subsidiary Interests, free
and clear of all Encumbrances or other restriction on transfer. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Company to sell, transfer, or otherwise dispose of any
capital stock of any of the Subsidiary Interests, except as set forth on
Schedule 3.1(b) of the Company Disclosure Schedules. Except for the Subsidiaries
set forth in Schedule 3.1(b) of the Company Disclosure Schedules, the Company
does not own or have any right to acquire, directly or indirectly, any
outstanding capital stock of, or other equity interests in, any Person. Each of
the Subsidiaries is a corporation, partnership, limited liability company or
other entity duly organized, validly existing and (to the extent such concept is
applicable) in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate, partnership or
limited liability company power and authority to own or lease and operate its
properties and assets and to carry on its business as it is now being conducted.
Each of the Subsidiaries is in good standing and duly qualified to do business
in each jurisdiction where the character of its properties and assets owned or
leased or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified and in good standing
would not have a Material Adverse Effect on the Company. The Company has made
available to Purchaser true and complete copies of the Organizational Documents
with

 

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respect to each Subsidiary, which are, to the Company’s Knowledge, in full force
and effect as of the date hereof, and no other Organizational Documents are
applicable to or binding upon the Company.

3.2 Capitalization; Ownership of Stock.

(a) The entire authorized capital stock of the Company consists of one million
(1,000,000) shares of the Stock. As of the date of this Agreement, 92,000 shares
of the Stock were issued and outstanding and no shares were held in treasury.
All outstanding shares of the Stock are validly issued, fully paid and
nonassessable and are not subject to preemptive rights. Except as disclosed in
Schedule 3.2(a) of the Company Disclosure Schedules, there are no outstanding
subscriptions, options, warrants, calls, purchase rights, subscription rights,
conversion rights, exchange rights or other rights, commitments or any other
Contracts to which the Company is a party or by which the Company is bound which
obligate the Company to: (i) issue, deliver or sell or cause to be issued,
delivered or sold any additional shares of the Stock or any other capital stock
of the Company or any other securities convertible into, or exercisable or
exchangeable for, or evidencing the right to subscribe for, any such shares of
the Stock; or (ii) purchase, redeem or otherwise acquire any shares of the Stock
or any other capital stock of the Company. Except as described in Schedule
3.2(a) of the Company Disclosure Schedules, there are no voting trusts, proxies,
or shareholder agreements or other agreements or understandings to which the
Company is a party with respect to the voting of the capital stock of the
Company. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to the Company.

(b) Each Shareholder is the lawful owner of the number of the shares of the
Stock listed opposite the name of such Shareholder on Annex I attached hereto,
free and clear of all Encumbrances or other restriction on transfer other than
as described in Schedule 3.2(b) of the Company Disclosure Schedules.

3.3 Authorization and Validity of Agreement. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby in accordance with the terms
hereof. The Company’s board of directors has duly authorized the execution,
delivery and performance of this Agreement by the Company, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and the Shareholders and, assuming this
Agreement constitutes the legal, valid and binding obligation of Purchaser,
constitutes the legal, valid and binding obligation of the Company and the
Shareholders, enforceable against the Company and the Shareholders in accordance
with its terms, except: (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws of
general application affecting enforcement of creditors’ rights generally; and
(b) the availability of the remedy of specific performance or injunctive or
other forms of equitable relief may be subject to equitable defenses and would
be subject to the discretion of the court before which any proceeding therefor
may be brought; in each case regardless of whether such enforceability is
considered in a proceeding in equity or at law ((a) and (b) together, the
“Enforceability Limitations”).

 

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3.4 Consents and Approvals. Except as set forth in Schedule 3.4 of the Company
Disclosure Schedules, neither the execution and delivery of this Agreement by
the Company and the Shareholders nor the consummation by the Company and the
Shareholders of the transactions contemplated hereby will require on the part of
the Company, any of its Subsidiaries, or the Shareholders any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity or any other third party, except: (a) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not have an adverse impact on revenue in excess of
$2,000,000 or a fine, penalty or other Liability in excess of $1,000,000 or
prevent the consummation of the transactions contemplated hereby; or (b) where
such consent, approval, authorization, permit, filing or notification is
required as the result of the regulatory status of Purchaser.

3.5 No Violation. Except as set forth in Schedule 3.5 of the Company Disclosure
Schedules, none of the execution and delivery of this Agreement, the Escrow
Agreement or any other agreement contemplated by this Agreement by the Company
and the Shareholders, the performance by the Company of its obligations under
this Agreement, the Escrow Agreement or any other agreement contemplated by this
Agreement, nor the consummation by the Company and the Shareholders of the
transactions contemplated by this Agreement, the Escrow Agreement, or any other
agreement contemplated this Agreement will: (a) conflict with, violate or result
in any breach of the Organizational Documents of the Company or any of its
Subsidiaries; (b) result in a violation or breach of, constitute a default (with
or without notice or lapse of time, or both) under, give rise to any right of
termination, cancellation or acceleration of, or result in the imposition of any
Encumbrance (other than any Permitted Encumbrance) on any assets or property of
the Company or any of its Subsidiaries pursuant to, any Contract or Lease to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries or any of their respective assets or properties are
bound, except for such violations, breaches and defaults (or rights of
termination, cancellation or acceleration or lien or other charge or Encumbrance
(other than any Permitted Encumbrance)) as to which requisite waivers or
consents have been obtained or which would not have an adverse impact on revenue
in excess of $2,000,000 or a fine, penalty or other Liability in excess of
$1,000,000 or prevent the consummation of the transactions contemplated hereby;
or (c) assuming the consents, approvals, authorizations or permits and filings
or notifications referred to in Section 3.4 and this Section 3.5 are duly and
timely obtained or made, violate any Contract, Legal Requirement or Order
applicable to the Company, any of its Subsidiaries, or the Shareholders or any
of their respective assets and properties.

3.6 Financial Statements. Attached hereto on Schedule 3.6 of the Company
Disclosure Schedules are the: (a) audited balance sheet of the Company dated as
of December 31, 2007 (the “Balance Sheet”) and the related audited statement of
income, shareholders’ equity and cash flows for the year then ended; and (b) the
unaudited interim balance sheet of the Company dated as of October 31, 2008 and
the related income statement for the ten-month period then ended (collectively,
the “Company Financial Statements”). Also attached hereto on Schedule 3.6 of the
Company Disclosure Schedules are the: (a) compiled balance sheet of Core6
Solutions, LLC, a Texas limited liability company (“Core6”), dated as of
December 31, 2007 and the related compiled statement of income, shareholders’
equity and cash flows for the year then ended; and (b) the interim balance sheet
of Core6 dated as of October 31, 2008 and the related income statement for the
ten-month period then ended (collectively, the “Subsidiary Financial

 

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Statements,” and together with the Company Financial Statements, collectively,
the “Financial Statements”). Except as set forth on Schedule 3.6 on the Company
Disclosure Schedules and except for the absence of footnotes to the interim
Financial Statements and normal year-end adjustments (which will not be material
individually or in the aggregate) to such interim Financial Statements, the
Financial Statements have been prepared from, and are consistent with, the Books
and Records of the Company and the books and records of Core6, as applicable, in
accordance with GAAP, consistently applied with past practices of the Company
and Core6, as applicable, and fairly present in all material respects the
financial position, results of operation, shareholders’ equity and cash flows,
as the case may be, as of the respective dates thereof and for the respective
periods covered thereby of the Company and Core6, as applicable. AlliantCorps,
LLC, a Nevada limited liability company, has had no revenues since inception nor
has it had any expenses in excess $10,000 since inception.

3.7 Compliance with Law; Licenses and Permits.

(a) Except as set forth in Schedule 3.7(a) of the Company Disclosure Schedules,
each of the Company and its Subsidiaries has complied and is complying with, and
is not in violation of, or, to the Knowledge of the Company, under investigation
with respect to, and has not received any written notice alleging any
non-compliance or violation by the Company or any of its Subsidiaries with
respect to, any provision of any and all Legal Requirements and Orders that
apply to the Company or any of its Subsidiaries or their business or operations
or assets. To the Knowledge of the Company, no circumstances exist that are
reasonably likely to result in violations of any of the foregoing or which are
reasonably likely to give rise to a claim (without regard to the merits of such
claim) that the Company or any of its Subsidiaries or the conduct of their
business is not in compliance with any Legal Requirement or Order; provided,
however, that no representation is made in this Section 3.7 as to: (i) matters
relating to Taxes (it being understood that all representations relating to
Taxes are set forth in Section 3.13; (ii) matters relating to employee benefit
plans (it being understood that all representations relating to employee benefit
plans are set forth in Section 3.12); (iii) matters relating to environmental
matters (it being understood that all representations relating to environmental
matters are set forth in Section 3.8); and (iv) matters relating to Government
Contracts (it being understood that all representations relating to government
contract matters are set forth in Section 3.27).

(b) Schedule 3.7(b) of the Company Disclosure Schedules lists all material
governmental permits, licenses or authorizations held by the Company and each of
its Subsidiaries (the “Company Permits”), all of which are in full force and
effect as of the date hereof. The Company Permits constitute all material
governmental permits, licenses and authorizations required to conduct the
business of the Company and each of its Subsidiaries in the manner in which it
is currently conducted. Neither the Company nor any of its Subsidiaries is in
breach of or default under any Company Permit applicable to it, and neither the
Company nor any of its Subsidiaries has received any notice of any claim of any
breach or default or violation with respect to any such Company Permit.

3.8 Environmental Compliance. As of the date hereof: (a) the Company has
complied, and is in compliance in all material respects with, all applicable
Environmental Laws; (b) the Company has not received notice of nor is subject to
any Environmental Claim; (c) to the

 

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Company’s Knowledge, no circumstances exist that are reasonably likely to result
in violations of any Environmental Laws or which are reasonably likely to give
rise to a claim (without regard to the merits of such claim) that the Company or
the conduct of its business is not in compliance in any material respect with
Environmental Laws; (d) neither the Company nor any other Person acting on
behalf of the Company has disposed of, transported, stored, or arranged for the
disposal of any Hazardous Materials or owned any property or facility so as to
give rise to any Liabilities, including any Liability for fines, penalties,
response costs, corrective action costs, personal injury, property damage,
natural resources damages or attorneys’ fees, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Solid Waste Disposal Act, as amended or any other Environmental Laws; (e) the
business of the Company has not made, caused or contributed to any material
Release of any Hazardous Materials into the environment; and (f) the Company is
not subject to any compliance agreement or settlement agreement from an alleged
violation of Environmental Laws. The Company has obtained and at all times
complied with, and is in compliance with, all material permits, licenses and
other authorizations that are required pursuant to Environmental Laws for the
occupation of its facilities and the operation of its business; and a list of
all such material permits, licenses and other authorizations is set forth on
Schedule 3.8 of the Company Disclosure Schedule. The Company has not assumed,
undertaken, provided an indemnity with respect to, or otherwise become subject
to, any Liability, including without limitation any obligation for corrective or
remedial action, of any other Person relating to Environmental Laws.

3.9 Absence of Certain Changes. Except as disclosed in Schedule 3.9 of the
Company Disclosure Schedules, since December 31, 2007, there has not been any
Material Adverse Effect on the Company and without limiting the generality of
the foregoing, since that date:

(a) the Company has not sold, leased, transferred, or assigned any of its
material assets, tangible or intangible, other than in the ordinary course of
business;

(b) no asset of the Company has been sold, leased, transferred, or assigned to
any of the Shareholders or any of their Affiliates;

(c) the Company has not entered into any Contract, lease, or license (or series
of related Contracts, leases, and licenses) other than Contracts with customers
either involving more than $75,000 or outside the ordinary course of business;

(d) no party (including the Company) has accelerated, terminated, or cancelled
any Contract, lease, or license (or series of related Contracts, leases, and
licenses) involving more than $75,000 to which the Company is a party or by
which it is bound;

(e) other than Permitted Encumbrances, there has not been any Encumbrances
imposed upon any of the Company’s material assets, tangible or intangible;

(f) the Company has not made any capital expenditure (or series of related
capital expenditures) either involving more than $75,000 or outside the ordinary
course of business;

 

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(g) the Company has not made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or series of
related capital investments, loans, and acquisitions);

(h) the Company has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation;

(i) the Company has not delayed or postponed the payment of accounts payable and
other Liabilities outside the ordinary course of business and in any case longer
than sixty (60) days past its due date;

(j) the Company has not cancelled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving more than
$75,000 or outside the ordinary course of business;

(k) the Company has not transferred, assigned, or granted any license or
sublicense of any rights under or with respect to any Intellectual Property;

(l) there has been no change made or authorized in the Organizational Documents
of the Company;

(m) the Company has not issued, sold, or otherwise disposed of any of its
capital stock, or granted any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any of its capital
stock;

(n) the Company has not declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its capital stock;

(o) the Company has not experienced any damage, destruction, or loss (whether or
not covered by insurance) to its property other than normal wear and tear;

(p) the Company has not made any loan to, or entered into any other transaction
with, any of its directors, officers, or employees that has not otherwise been
discharged or paid in full as of the date of this Agreement;

(q) the Company has not entered into or terminated any employment Contract or
collective bargaining agreement, written or oral, or modified the terms of any
such existing Contract or agreement;

(r) the Company has not granted any increase in the base compensation of any of
its directors, officers, and employees outside the ordinary course of business;

(s) the Company has not adopted, amended, modified, or terminated any bonus,
profit sharing, incentive, severance, or other plan, contract, or commitment for
the benefit of any of its directors, officers, or employees;

 

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(t) the Company has not made any other change in employment terms for any of its
directors and officers, nor has it made any other change in employment terms for
any of its employees outside the ordinary course of business;

(u) the Company has not made or pledged to make any charitable or other capital
contribution in excess of $10,000 for which payment is still due and owing as of
the date of this Agreement;

(v) there has not been any other occurrence, event, incident, action, failure to
act, or transaction outside the ordinary course of business involving the
Company that would have an adverse impact on revenue in excess of $2,000,000 or
result in a fine, penalty or other Liability in excess of $1,000,000;

(w) the Company has not made any loans or advances of money that has not
otherwise been discharged as of the date of this Agreement; and

(x) the Company has not committed to any of the foregoing.

3.10 No Undisclosed Liabilities. Except for: (a) Liabilities incurred in the
ordinary course of business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any Breach of Contract, Breach of
warranty, tort, infringement, or violation of any Legal Requirement);
(b) Liabilities and obligations reflected on the Company’s Balance Sheet;
(c) Liabilities incurred in connection with the transactions contemplated by
this Agreement (each of which, to the extent it is an economic Liability, will
be included in the calculation of Working Capital); (d) as set forth in Schedule
3.10 of the Company Disclosure Schedules; and (e) Liabilities or obligations to
perform, after the date hereof, any Material Contract, from December 31, 2007
until the date of this Agreement, the Company has not incurred any Liabilities
that would be required to be reflected in or reserved against in a balance sheet
of the Company prepared in accordance with GAAP applied in a manner consistent
with those used in the preparation of the Financial Statements. Except as set
forth in Schedule 3.10 of the Company Disclosure Schedules, the Company has no
Indebtedness as of the Closing Date.

3.11 Litigation. Except as disclosed in Schedule 3.11 of the Company Disclosure
Schedules, there are no pending or, to the Company’s Knowledge, threatened
Proceedings against the Company or any of its Subsidiaries by or before any
Governmental Entity, which, if adversely determined, would have a Material
Adverse Effect on the Company or any of its Subsidiaries. Except as disclosed in
Schedule 3.11 of the Company Disclosure Schedules, neither the Company nor any
of its Subsidiaries nor any of their respective assets are subject to any
outstanding and unsatisfied Order entered in any Proceeding. The Company is not
aware of any facts suggesting that any such action, suit, proceeding, hearing,
or investigation may be brought or, to the Company’s Knowledge, threatened
against the Company or any of its Subsidiaries, and to the Company’s Knowledge
there are no facts existing to form the basis for the foregoing.

3.12 Employee Benefit Matters.

(a) Schedule 3.12(a) of the Company Disclosure Schedules lists each Company
Benefit Plan that the Company maintains or to which the Company contributes or
is

 

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required to contribute or with respect to which the Company has or may have any
liability, all collective bargaining agreements pursuant to which contributions
have been made or obligations incurred (including both pension and welfare
benefits) by the Company and any ERISA Affiliate and all collective bargaining
agreements pursuant to which contributions are being made or obligations are
owed by such entities, and a written description of any Company Benefit Plan
that is not in writing.

(b) Each such Company Benefit Plan (and each related trust, insurance contract,
or fund) complies in form and in operation in all material respects with the
applicable requirements of ERISA, the Code, and other applicable laws.

(c) The requirements of Part 6 of Subtitle B of Title I of ERISA and
Section 4980B of the Code have been met in all material respects, where
applicable, with respect to each such Company Benefit Plan that is also a group
health plan as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the
Code, respectively. All premiums or other payments for all periods ending on or
before the Closing Date which are then due will have been paid on or prior to
the Closing Date with respect to each such Company Benefit Plan which is an
Employee Welfare Benefit Plan.

(d) True and complete copies of the Company Benefit Plans have been made
available to Purchaser, including, as applicable, true and complete copies of
any summary plan descriptions, the Form 5500 required to be filed, if any, in
each of the most recent three (3) plan years with schedules, the most recent
summary annual report and the most recent determination letter from the IRS. To
the extent applicable, any Company Benefit Plan intended to be qualified under
Section 401(a) of the Code meets and has met since the effective date of such
Company Benefit Plan, the requirements of a “qualified plan” under
Section 401(a) of the Code and is the subject of an opinion letter as a
prototype plan with respect to its status as a “qualified plan” and the Company
has no Knowledge of any fact that would jeopardize its reliance on such letter.

(e) No Company Benefit Plan has ever been covered by Title IV of ERISA or
Section 412 of the Code. The Company has not incurred any penalty under
Section 4975 of the Code or Section 502(i) of ERISA with respect to any Company
Benefit Plan. No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any such
Company Benefit Plan (other than routine claims for benefits) is pending or, to
the Company’s Knowledge, threatened. The Company has no Knowledge of any basis
that could reasonably be expected to result in any such action, suit,
proceeding, hearing, or investigation.

(f) All contributions required to be made as of the date of this Agreement to
the Company Benefit Plans have been made or provided for. Neither the Company
nor any ERISA Affiliate has contributed to, or been required to contribute to,
any Multiemployer Plan.

(g) Except as disclosed in Schedule 3.12(g) of the Company Disclosure Schedules,
each of the Company Benefit Plans can be terminated by Company within a period
of thirty (30) days, without material liability to the Company, Purchaser or any
of their respective ERISA Affiliates (other than ordinary administration
expenses).

 

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(h) None of the Company or any ERISA Affiliates maintain or contribute to or is
required to contribute to any benefit plan or arrangement providing medical,
health, or life insurance for current or future retired or terminated employees,
their spouses, or their dependents (other than in accordance with Part 6 of
Subtitle B of Title 1 of ERISA and Section 4980B of the Code or applicable state
insurance laws).

(i) Except as disclosed in Schedule 3.12(i) of the Company Disclosure Schedules,
all Company Benefit Plans that are group health plans of the Company have been
operated in compliance with the group health plan continuation coverage
requirements of Section 4980B of the Code and the Health Insurance Portability
and Accountability Act of 1996.

(j) With respect to each Company Benefit Plan that the Company maintains or to
which it contributes, there have been no Prohibited Transactions that would
result in a material liability to the Company, any Company Benefit Plan or a
Fiduciary of same. No Fiduciary has any material liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration of any such Company Benefit Plan or the investment or management
of the assets of any such Company Benefit Plan.

(k) Each Company Benefit Plan that is subject to Section 409A of the Code (a
“Section 409A Plan”) as of the Closing Date is indicated as such on Schedule
3.12(a) of the Company Disclosure Schedules. The Company has taken all actions
required to bring each Company Benefit Plan, and any compensation paid or awards
made under such Company Benefit Plans, into compliance with Section 409A of the
Code and regulatory guidance thereunder. Each Section 409A Plan has been
administered in compliance with Section 409A of the Code for the period
beginning January 1, 2005 through the Closing Date, and the documentation
implementing each Section 409A Plan reflects such administration. The Company
does not have any obligations to any employee or other service provider with
respect to any Section 409A Plan that might be subject to excise tax under
Section 409A of the Code.

(l) Except as set forth on Schedule 3.12(l), the execution of this Agreement and
the consummation of the transactions contemplated by this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Benefit Plan, employment agreement, trust
or loan that will or may result in any material payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any officer or employee of the Company.

(m) The Company has terminated the RDI Systems, Inc. DBA dNovus RDI 401(K) Plan,
with an effective date of termination of no later than immediately prior to the
Effective Time.

3.13 Taxes.

(a) Each of the Company and its Subsidiaries has filed all Tax Returns that it
was required to file. All such Tax Returns were correct and complete in all
material respects. All Taxes owed by each of the Company and its Subsidiaries
(whether or not shown on any Tax Return) have been paid except for Taxes not yet
due. Neither Company nor any of its

 

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Subsidiaries is currently the beneficiary of any extension of time within which
to file any Tax Return. No Governmental Entity in a jurisdiction where the
Company or any of its Subsidiaries does not file Tax Returns has notified the
Company or any of its Subsidiaries that it is or may be subject to taxation by
that jurisdiction. There are no Encumbrances (other than Permitted Encumbrances)
on any of the assets of the Company or any of its Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax.

(b) Each of the Company and its Subsidiaries has withheld and paid to the
applicable Tax Authority all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder, or other third party.

(c) None of the Shareholders, directors or officers of the Company or any of its
Subsidiaries expects any Tax Authority to assess any additional Taxes or assert
the incorrectness or incompleteness of any Tax Return for any period for which
Tax Returns have been filed. There is no dispute or claim concerning any Tax
liability or other Tax item of the Company or any of its Subsidiaries either:
(i) claimed or raised by any authority in writing; or (ii) as to which the
Company has Knowledge based upon personal contact with any agent of such
authority. Schedule 3.13(c) of the Company Disclosure Schedules lists all
federal, state, and local income Tax Returns filed with respect to each of the
Company and its Subsidiaries for all taxable periods since January 1, 2005,
indicates those Tax Returns that have been audited, and indicates all Tax
Returns that currently are the subject of audit. The Company has made available
to Purchaser complete copies of all federal, state and local income Tax Returns
of each of the Company and its Subsidiaries, examination reports of each of the
Company and its Subsidiaries, and statements of deficiencies of the Company and
its Subsidiaries assessed against or agreed to by each of the Company and its
Subsidiaries since January 1, 2005.

(d) Neither the Company nor any of its Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.

(e) The Company has not been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code. Neither the Company nor any
of its Subsidiaries is a party to any Tax allocation or sharing agreement.
Neither the Company nor any of its Subsidiaries: (i) has ever been a member of
an Affiliated Group filing a consolidated federal income Tax Return; or (ii) has
any liability for the Taxes of any Person under Treas. Reg. §1.1502-6 (or any
other provision of state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.

(f) The unpaid Taxes of the Company: (i) did not, as of the date of the Balance
Sheet, exceed the reserve for Tax liability (other than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) set
forth on the face of the Balance Sheet; and (ii) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company. The unpaid Taxes of each of the
Subsidiaries: (i) did not, as of December 31, 2007, exceed the reserve for Tax
liability (other than any reserve for deferred Taxes established to reflect
timing differences

 

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between book and Tax income) set forth on the face of any balance sheet of any
of the Subsidiaries; and (ii) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of each of the Subsidiaries. Since December 31, 2007, neither the
Company nor any of its Subsidiaries has incurred any Liability for any Taxes
arising from extraordinary gains or losses, as that term is used in GAAP outside
the ordinary course of business.

(g) Neither the Company nor any of its Subsidiaries will be required to include
any item of income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the Closing Date as a
result of: (i) a change in method of accounting under Section 481 of the Code
(or any corresponding provision of state, local, or foreign income Tax law);
(ii) any “Closing Agreement,” as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign income Tax law); (iii) any
installment sale or open transaction disposition made prior to the Closing Date;
or (iv) any prepaid amount or any comparable provision under state or foreign
Tax laws as a result of transactions, events or accounting methods employed
prior to this Agreement.

(h) The Company has been a validly electing S corporation within the meaning of
Sections 1361 and 1362 of the Code since inception, and will be an S corporation
up to and including the Closing Date. Each of the Subsidiaries has been a
partnership for Tax purposes since inception. The Company will not be liable for
any Tax under Section 1374 of the Code in connection with the deemed sale of the
Company’s assets caused by the Section 338(h)(10) Election.

(i) Neither the Company nor any of its Subsidiaries has, since inception:
(i) acquired assets from another corporation in a transaction in which the
Company’s or any of its Subsidiaries’ Tax basis for the acquired assets was
determined, in whole or in part, by reference to the Tax basis of the acquired
assets (or any other property) in the hands of the transferor; or (ii) acquired
more than 10% of any class of stock of any corporation or other Person.

(j) Neither the Company nor any of its Subsidiaries is a party to any Tax-order
of a foreign government.

(k) None of the assets of the Company or any of its Subsidiaries is “tax-exempt
use property” within the meaning of Section 168(h) of the Code.

(l) Neither the Company nor any of its Subsidiaries has ever participated in an
international boycott within the meaning of Section 999 of the Code.

(m) Neither the Company nor any of its Subsidiaries has ever had a permanent
establishment in any foreign country, as defined in any applicable Tax treaty or
convention between the United States of America and such foreign county.

(n) All material Tax elections with respect to each of the Company and its
Subsidiaries made during the fiscal years ending December 31, 2005, December 31,
2006 and December 31, 2007 are reflected on each of the Company’s and its
Subsidiaries’ Tax Returns for such periods, copies of which have been made
available to Purchaser.

 

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(o) There is no agreement, contract or arrangement to which the Company or any
of its Subsidiaries is a party that will, individually or collectively, result
in the payment of any amount that would not be deductible by reason of
Section 280G (as determined without regarding to Section 280G(b)(4)), 162 or 404
of the Code.

(p) Each of the Company and its Subsidiaries has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Section 6662 of the
Code. Neither the Company nor any of its Subsidiaries has consummated, has
participated in, or is currently participating in any transaction which was or
is a “Tax shelter” transaction as defined in Section 6662, 6011, 6111 or 6112 of
the Code or the Treasury Regulations promulgated thereunder (the “Regulations”).
Neither the Company nor any of its Subsidiaries has entered into any reportable
transaction as defined in Section 1.6011-4(b) of the Regulations.

3.14 Real Property.

(a) The Company does not own any real property.

(b) Schedule 3.14(b) of the Company Disclosure Schedules sets forth the address
of each parcel of Leased Real Property, and a true and complete list of all
Leases for each such Leased Real Property (including the date and name of the
parties to each such Lease). The Company has made available to Purchaser a true
and complete copy of each such Lease, and in the case of any oral Lease, a
written summary of the material terms of such Lease. Except as set forth in
Schedule 3.14(b) of the Company Disclosure Schedules, with respect to each of
the Leases:

(i) the Company’s possession and quiet enjoyment of the Leased Real Property
under such Lease has not been disturbed and there are no disputes with respect
to such Lease;

(ii) no security deposit or portion thereof deposited with respect to such Lease
has been applied in respect of a breach of or default under such Lease that has
not been redeposited in full;

(iii) the Company does not owe any brokerage commissions or finder’s fees with
respect to such Lease;

(iv) the other party to such Lease is not an Affiliate of, and otherwise does
not have any economic interest in, the Company;

(v) the Company has not subleased, licensed or otherwise granted any Person the
right to use or occupy the Leased Real Property or any portion thereof;

(vi) other than Permitted Encumbrances, the Company has not collaterally
assigned or granted any Encumbrance in such Lease or any interest therein; and

(vii) other than Permitted Encumbrances, there are no Encumbrances on the estate
or interest created by such Lease.

 

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3.15 Material Contracts.

(a) Schedule 3.15(a) of the Company Disclosure Schedules lists, as of the date
of this Agreement, the following Contracts (other than Government Contracts) to
which the Company is a party:

(i) any agreement (or group of related agreements) for the lease of personal
property to or from any Person providing for lease payments;

(ii) all Leases for Leased Real Property;

(iii) any agreement (or group of related agreements) for the purchase or sale of
supplies, products, or other personal property in excess of $75,000, or for the
furnishing to or receipt by the Company of services in excess of $75,000;

(iv) any agreement concerning a partnership or joint venture;

(v) any agreement (or group of related agreements) under which it has created,
incurred, assumed, or guaranteed any indebtedness for borrowed money, or any
capitalized lease obligation, or under which it has imposed an Encumbrance on
any of its assets, tangible or intangible, or any currency or interest rate
swap, collar or hedge agreement;

(vi) any agreement concerning confidentiality or non-competition or which
contains any covenant that purports to restrict the business activity of the
Company or limits its ability to engage in any line of business;

(vii) any agreement with (i) any Shareholder, (ii) Affiliates of any of the
Shareholders or (iii) any employee or director of the Company;

(viii) any agreement for the employment of any individual on a full-time,
part-time, consulting, or other basis or providing severance benefits;

(ix) any collective bargaining agreement;

(x) any agreement under which it has advanced or loaned any amount to any of its
directors, officers, and employees outside the ordinary course of business;

(xi) any agreement for the acquisition of securities or substantially all the
assets of any other Person (including by merger or consolidation);

(xii) any agreement containing an express undertaking to pay liquidated damages
or a penalty;

(xiii) any agreement under which the consequences of a default or termination
could reasonably be expected to have a Material Adverse Effect on the Company;
and

 

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(xiv) any other agreement not already disclosed pursuant to this Section 3.15(a)
(or group of related agreements) which involves the payment by the Company of
consideration in excess of $75,000.

The foregoing are referred to collectively as the “Material Contracts.” No
representation is made in this Section 3.15 as to matters relating to Government
Contracts (it being understood that all representations relating to Government
Contracts are set forth in Section 3.27).

(b) Except as set forth in Schedule 3.15(b) of the Company Disclosure Schedules:
(i) each Material Contract is legal, valid, binding and enforceable against the
Company and, to the Company’s Knowledge, each of the other parties to such
Material Contract, and is in full force and effect; (ii) each Material Contract
will, immediately following the Closing, be legal, valid, binding and
enforceable against the Company and, to the Company’s Knowledge, each of the
other parties to such Material Contract, and in full force and effect on
identical terms immediately following the consummation of the transactions
contemplated by this Agreement without the consent of any third party;
(iii) neither the Company nor, to the Company’s Knowledge, any other party to a
Material Contract is in material breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default, or
permit termination, modification, or acceleration, under such Material Contract;
and (iv) to the Company’s Knowledge, no party has repudiated any material
provision of a Material Contract. The Company has made available to Purchaser
complete and accurate copies of the Material Contracts. Each of the Company’s
customers are Governmental Entities, either directly or indirectly through
sub-contract, and the Company’s revenue is generated solely pursuant to
Government Contracts and Task Orders.

3.16 Employees.

(a) Schedule 3.16(a) of the Company Disclosure Schedules contains a complete and
accurate list of the following information for each person employed by the
Company in connection with the operation of its business, including each
employee on approved leave of absence, short-term disability leave or active
military leave (collectively, the “Company Employees”): employer; name; job
title; current compensation paid or payable and any change in compensation since
December 31, 2007; vacation and/or paid time off accrued; and service credited
for purposes of vesting and eligibility to participate under the Company Benefit
Plans. The Company employs no Persons in connection with the operation of its
business other than the Company Employees.

(b) To the Company’s Knowledge, no executive, manager or employee of the Company
(i) has any present intention to terminate his or her employment whether prior
to or following the Closing; or (ii) is a party to any confidentiality,
non-competition, proprietary rights or other such agreement between such
employee and any Person (other than the Company) that would be material to the
performance of such employee’s employment duties, or the ability of the Company
or Purchaser to conduct the business of the Company.

(c) Schedule 3.16(c) of the Company Disclosure Schedules sets forth each of the
Company Employees who has not entered into the form of confidentiality and
non-disclosure agreement attached as Exhibit C.

 

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(d) Except as set forth on Schedule 3.16(d) of the Company Disclosure Schedules:
(i) there are no Contracts with Company Employees pertaining to bonuses or other
compensation payable or contingent upon Closing; (ii) there are no stay or
retention agreements or arrangements with any Company Employees; (iii) there are
no severance agreements or similar agreements with any Company Employee; and
(iv) all of the Company Employees are subject to at will employment.

3.17 Labor Matters; Compliance. The Company has not been negotiating, and is not
a party to, or bound by, any collective bargaining agreement or other labor
Contract since its inception. Since December 31, 2007, and except as set forth
on Schedule 3.17 of the Company Disclosure Schedules, there has not been, there
is not presently pending or existing and there is not, to the Company’s
Knowledge, threatened: (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process; (b) any Proceeding against or affecting the Company
relating to the alleged violation of any Legal Requirement pertaining to labor
relations or employment matters, including any charge or complaint filed by an
employee or union with the National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable Governmental Entity, organizational
activity, or other labor or employment dispute against or affecting the Company,
its premises or the Company Employees; (c) any application for certification of
a collective bargaining agent; or (d) any union organization activity pertaining
to the Company Employees. There is no lockout of any employees (including the
Company Employees) by the Company, and no such action is contemplated by the
Company. The Company has never implemented any layoff of employees that could
implicate the Worker Adjustment and Retraining Notification Act of 1988, as
amended, or any similar foreign, state, or local law, regulation, or ordinance,
and no such action will be implemented without advance notification to
Purchaser.

3.18 Insurance; Surety Bonds. Schedule 3.18 of the Company Disclosure Schedules
lists, with a summary thereof: (i) all insurance policies which are currently in
effect (including all “occurrence” insurance policies) covering the Company and
its rights, assets and Company Employees, including but not limited to workers’
compensation insurance; and (ii) each surety bond to which the Company is a
party or a principal. Copies of such polices and bonds have been made available
to Purchaser. All such policies and bonds are in full force and effect and all
premiums and payments due thereon before the Closing Date have been paid. The
Company has not received any written notice from or on behalf of any insurance
carrier issuing such policies or any surety issuing any surety bond that there
will be a cancellation or non-renewal of such policies or bonds or default under
such policies or bonds. To the Company’s Knowledge, the insurance policies and
surety bonds identified in Schedule 3.18 of the Company Disclosure Schedules are
in amounts customary for, and cover risks customarily insured against by, a
business of the type operated by the Company. In addition, Schedule 3.18 of the
Company Disclosure Schedule sets forth a list of all claims made by the Company
under its policies of insurance since January 1, 2007, and, except as set forth
in Schedule 3.18 of the Company Disclosure Schedules, to the Company’s
Knowledge, there have occurred no actions or omissions which may give rise to a
claim under any of the insurance policies. Except as set forth on Schedule 3.18
of the Company Disclosure Schedules, each of the insurance policies are
“occurrence” policies and not “claims made” policies.

 

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3.19 Intellectual Property.

(a) Except as set forth on Schedule 3.19(a), to the Company’s Knowledge, neither
the Company nor its business as presently conducted has or will interfere with,
infringe upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties; there are no facts indicating a
likelihood of the foregoing; and none of the Shareholders has ever received any
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or conflict (including any claim that the
Company must license or refrain from using any Intellectual Property rights of
any third party). There is no proceeding or action before any court or tribunal
related to any of Company’s Intellectual Property, other than registered
Intellectual Property prosecution proceedings with the applicable issuing or
granting governmental authorities. To the Company’s Knowledge, no third party
has interfered with, infringed upon, misappropriated, or otherwise come into
conflict with, any Intellectual Property rights of the Company.

(b) Schedule 3.19(b) of the Company Disclosure Schedules identifies each
domestic and foreign patent, trademark, copyright, and domain name registration
which has been issued to the Company with respect to any of its Intellectual
Property, identifies each domestic and foreign pending patent, trademark,
copyright, and domain name application or application for registration that the
Company has made with respect to any of its Intellectual Property, and
identifies each material license, sublicense, agreement, or other permission
that the Company has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). The Company has made
available to Purchaser correct and complete copies of all such patents,
registrations, applications, licenses, sublicenses, agreements, and permissions
(as amended to date). Schedule 3.19(b) of the Company Disclosure Schedules also
identifies each material trade name or unregistered trademark, service mark,
corporate name, Internet domain name, copyright and material computer software
item used by the Company in connection with its business, except for commercial
off-the-shelf software. With respect to each item of Intellectual Property
identified in Schedule 3.19(b) of the Company Disclosure Schedules, and except
as noted therein:

(i) the Company possesses all right, title, and interest in and to the item,
free and clear of any Encumbrance (other than Permitted Encumbrances), license,
or other restriction;

(ii) the item is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;

(iii) no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or, to the Company’s Knowledge, is threatened that
challenges the legality, validity, enforceability, use, or ownership of the
item; and

(iv) the Company has never agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or other conflict with respect to
the item.

(c) Schedule 3.19(c) of the Company Disclosure Schedules identifies each
material item of Intellectual Property that any third party owns and that the
Company uses pursuant to license, sublicense, agreement, or permission. The
Company has made available to

 

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Purchaser correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each item of
Intellectual Property identified in Schedule 3.19(c) of the Company Disclosure
Schedules, and except as noted therein, to the Company’s Knowledge:

(i) the license, sublicense, agreement, or permission covering the item is
legal, valid, binding, enforceable, and in full force and effect in all material
respects;

(ii) no party to the license, sublicense, agreement, or permission is in
material breach or default, and no event has occurred that with notice or lapse
of time would constitute a material breach or default or permit termination,
modification, or acceleration thereunder;

(iii) no party to the license, sublicense, agreement, or permission has
repudiated any material provision thereof;

(iv) the Company has not granted any sublicense or similar right with respect to
the license, sublicense, agreement, or permission; and

(v) no loss or expiration of the item is threatened, pending, or reasonably
foreseeable, except for patents and copyrights expiring at the end of their
statutory terms (and not as a result of any act or omission by the Shareholders,
or the Company, including without limitation, a failure by the Shareholders or
the Company to pay any required maintenance fees).

(d) The Company has taken all actions reasonably necessary to maintain and
protect the Company’s registered Intellectual Property, including without
limitation (i) paying all application, examination, registration, issue, renewal
and maintenance fees that have become due, and (ii) filing all necessary
documents and certificates including statements of use with the relevant patent,
copyright, trademark or other authorities.

(e) Except as set forth on Schedule 3.19(e), the Company has secured valid
written assignments from all consultants and employees who contributed to the
creation or development of Intellectual Property used by the Company in the
conduct of its businesses of the rights to such contributions to the extent that
the Company did not already own such Intellectual Property by operation of law.

(f) Except as set forth on Schedule 3.19(f), the Company has taken all
reasonable and necessary steps to protect and preserve the confidentiality of
all trade secrets, know-how, and software that is material to the Company’s
business. Except as set forth on Schedule 3.19(f), to the Company’s Knowledge,
there has not been any unauthorized disclosure of any third party Intellectual
Property by the Company, or by any employees or officers of the Company.

(g) All software material to the Company’s business: (i) is in the possession,
custody and control of the Company; and (ii) is stored in electronic form and
hard copy form, with up-to-date appropriately catalogued versions. No material
Company software in source code form has been provided to the Company’s
personnel except on a need-to-know basis and

 

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has not been presented or disclosed in source code form to any third party
(including without limitation, employees and officers of the Company or any of
its Subsidiaries) except under written confidentiality agreements or written
source code escrow agreements listed in Schedule 3.19(g) of the Company
Disclosure Schedules.

3.20 Books and Records. The Books and Records of the Company, all of which have
been made available to Purchaser, have been maintained in accordance with sound
business practices and, in reasonable detail, accurately and fairly reflect the
corporate activities and transactions (including, without limitation,
dispositions of property or assets of the Company or any Subsidiary with a value
greater than $75,000 in the aggregate since January 1, 2007). The minute books
of the Company contain accurate and complete records of all formal meetings held
of, and actions taken by, the Shareholders, the board of directors and
committees of the board of directors of the Company, all taken pursuant to the
Company’s Organizational Documents, and no formal meeting of any such
Shareholders, board of directors or committee thereof has been held for which
minutes have not been prepared and are not contained in such minute books. At
the Closing, all of such books and records will be in the possession of the
Company.

3.21 Certain Payments. Neither the Company nor any of its Subsidiaries nor any
of its directors, officers, agents, employees or other Person acting on behalf
of the Company or any of its Subsidiaries, has: (a) used any funds of the
Company or any of its Subsidiaries for unlawful contributions, payments, gifts,
gratuities, entertainment or other unlawful expenses related to political
activity; (b) made any unlawful payment or unlawfully offered anything of value
to foreign or domestic government officials or employees or to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns; (c) made any other unlawful payment; or (d) violated any
applicable export control, money laundering or anti-terrorism law or regulation,
nor have any of them otherwise taken any action which would cause the Company or
any of its Subsidiaries to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any applicable law of similar effect. Neither the
Company nor any of its Subsidiaries nor any of its directors, officers, agents,
employees or other Persons acting on behalf of the Company or any of its
Subsidiaries, has accepted or received any unlawful contributions, payments,
gifts, gratuities, entertainment or other expenses.

3.22 Relationships with Related Persons. Except as disclosed in Schedule 3.22 of
the Company Disclosure Schedules, none of the Company or the Shareholders nor
any other Affiliate of the Company or the Shareholders has any interest in any
property (whether real, personal or mixed and whether tangible or intangible)
used in the Company’s business. None of the Company, any Shareholder or any
other Affiliate of the Company owns an equity interest or any other financial or
profit interest in a Person that has had business dealings or a material
financial interest in any transaction with the Company other than business
dealings or transactions conducted in the ordinary course of business with the
Company on an arms-length basis. Except as disclosed in Schedule 3.22 of the
Company Disclosure Schedules, no Shareholder nor any Affiliate of the Company is
a party to any Contract with, or has any claim or right against, the Company.

3.23 Brokers and Finders. No broker, finder or investment bank has acted
directly or indirectly for the Company, nor has the Company incurred any
obligation to pay any brokerage, finder’s or other fee or commission in
connection with the transactions contemplated hereby,

 

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other than Houlihan Lokey, the fees and expenses of which shall be borne by the
Company and included in the calculation of Working Capital or will otherwise be
satisfied by the Company at or prior to the Closing.

3.24 Directors and Officers. Schedule 3.24 of the Company Disclosure Schedules
sets forth a complete list showing the names of and respective positions held by
all the directors and officers of the Company.

3.25 Bank Accounts. Set forth on Schedule 3.25 of the Company Disclosure
Schedules is a complete and accurate list of: (a) all bank accounts and accounts
with other financial institutions in which the Company has on deposit any cash
or cash equivalents or at which other securities of the Company are held;
(b) all permitted signatories and Persons authorized to access such accounts;
and (c) the addresses to which the statements related to such accounts are sent.

3.26 Accounts Receivable. Schedule 3.26 of the Company Disclosure Schedules sets
forth a complete list of all notes and accounts receivable of the Company,
showing the amounts due and an aging analysis thereof as of October 31, 2008.
The notes, accounts and other receivables shown on Schedule 3.26 and the
receivables arising after such date and reflected on the Books and Records of
the Company: (i) have arisen in the ordinary course of business; (ii) are valid
and binding obligations of each obligor thereto in the full amounts due and
reflected on the Books and Records of the Company; and (iii) are not in dispute
with the respective obligors therefor. None of such accounts receivable or any
other debts are or will as of the Closing Date be subject to any counterclaim or
set-off except to the extent of any such provision or reserve.

3.27 Government Contracts.

(a) (i) Schedule 3.27(a)(i) of the Company Disclosure Schedules lists all
Government Contracts and Task Orders that have not been closed out (“Active
Government Contracts”), and with respect to each such listed Active Government
Contract accurately sets forth: (A) the contract name; (B) the award date;
(C) the customer agency; (D) the contract period of performance; and (E) the
contract cost ceiling or value, if applicable. Neither the Company nor any of
its Subsidiaries holds any Government Contract which has been noted by the
Government as obtained because of “8(a)” status, small business status (except
as set forth on Schedule 3.27(a)(i) of the Company Disclosure Schedules), small
disadvantaged business status, protégé status, or other similar socioeconomic
status pursuant to Federal Acquisition Regulation (“FAR”) Part 19; (ii) Schedule
3.27(a)(ii) of the Company Disclosure Schedules lists all Task Orders that have
not been completed by either the Company or any of its Subsidiaries (“Active
Task Orders”); (iii) Schedule 3.27(a)(iii) of the Company Disclosure Schedules
lists for all Active Government Contracts and Task Orders, the current funding
(i.e., dollars obligated to such Government Contract or Task Order), amounts
billed to date, funded balance (i.e., current funding minus expenditures), and
the dollar value of priced contract options that have not been exercised (i.e.,
the unfunded backlog); and (iv) Schedule 3.27(a)(iv) of the Company Disclosure
Schedules lists all Government Contract Bids, including bids, offers or
proposals for Task Orders under current Government Contracts submitted by either
the Company or any of its Subsidiaries, and for which (no award has been or was
made ninety (90) days or more prior to the date of this Agreement,) and with
respect to each such Government Contract Bid, accurately lists: (A) the

 

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customer agency and title; (B) the solicitation (i.e., request for proposal
(RFP) or request for quotation) number or, if such Government Contract Bid is
for a Task Order under a prime contract, the applicable prime contract number;
(C) the date of proposal submission; (D) any statement in the solicitation about
an estimated period of performance; (E) the price proposal, if calculable; and
(F) whether the underlying solicitation states that it is set-aside aside for
8(a), small businesses, small disadvantaged businesses, or other preferential
status. Neither the Company nor any of its Subsidiaries has made or makes
herein, any representations with regard to the amount or likelihood of any
awards under such Government Contracts Bids. The Company has made available to
Purchaser true and complete copies of all Government Contracts and Task Orders
required to be listed on Schedule 3.27(a)(i) and all Government Contract Bids
and provided access to Purchaser to true and correct copies of all material
documentation and/or correspondence related to the Government Contracts, Task
Orders and Government Contract Bids, including but not limited to any such
documentation specifically requested by Purchaser. With respect to the
disclosure under Section 3.27(a), the Company may provide a single all-inclusive
list of Contracts and Task Orders so long as such list is clearly annotated.

(b) (i) Neither the Company nor any of its Subsidiaries has received written or,
to the Company’s Knowledge, oral notice of any material cost, schedule,
technical or quality problems (or other defaults, deficiencies in performance,
or disputes) that could, to the Company’s Knowledge, reasonably result in any
material claims or similar demands or allegations against, or liability on the
part of, the Company or any of its Subsidiaries (or successors in interest) by a
Governmental Entity, a prime contractor or a higher-tier subcontractor; (ii) to
the Company’s Knowledge, neither the Company nor any of its Subsidiaries is
reasonably likely in the near future to experience any material cost, schedule,
technical or quality problems (or other defaults, deficiencies in performance,
or disputes) that could reasonably result in claims or similar demands or
allegations against or liability on the part of the Company or any of its
Subsidiaries (or successors in interest) by a Governmental Entity, a prime
contractor or a higher-tier subcontractor; (iii) to the Company’s Knowledge, the
Government Contracts were legally awarded, are binding on either the Company or
its Subsidiaries, a prime contractor or higher-tier subcontractor to the
Government Contracts, and are in full force and effect; (iv) the Government
Contracts are not currently the subject of bid or award protest proceedings,
and, to the Company’s Knowledge, no Government Contracts are reasonably likely
to become the subject of bid or award protest proceedings; (v) no Person has
notified the Company or any of its Subsidiaries that any Governmental Entity
intends to seek either the Company’s or any of its Subsidiaries’ agreement to
lower rates or prices or otherwise to challenge such rates, prices or any
payments (including but not limited to challenges under the “Price Reductions”
clause of the Company’s GSA Schedule contracts), under any of the Government
Contracts or Government Contract Bids; (vi) no material organizational conflicts
of interest, actual or alleged, exist in connection with any Government Contract
or Government Contract Bid; and (vii) to the Company’s Knowledge, no material
personal conflicts of interest, actual or alleged, exist in connection with any
Government Contract or Government Contract Bid.

(c) Each of the Company and its Subsidiaries has complied in all material
respects with all material terms and conditions of each Government Contract and
Government Contract Bid, including but not limited to any term requiring most
favored customer pricing (i.e., the “Price Reductions” clause); (ii) each of the
Company and its Subsidiaries has complied, in all material respects, with all
statutory and regulatory requirements, including, but not limited to, the

 

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Service Contract Act, the Contract Disputes Act, the Procurement Integrity Act,
the Federal Procurement and Administrative Services Act, the Small Business Act,
the False Claims Act, the FAR (including but not limited to all agency FAR
supplements) and the Cost Accounting Standards, where and as applicable to each
Government Contract and Government Contract Bid; (iii) the representations,
certifications, and warranties made by each of the Company and its Subsidiaries
with respect to the Government Contracts or Government Contract Bids were
accurate in all material respects as of their effective date, were updated in
the event of any material change, and each of the Company and its Subsidiaries
has fully complied with all such certifications in all material respects;
(iv) no termination for default notice, cure notice, show cause notice, or other
material express challenges to either the Company’s or any of its Subsidiaries’
performance, have been issued with respect to any Government Contract or
Government Contract Bid, and, to the Company’s Knowledge, no event, condition or
omission has occurred or exists that would constitute grounds for such action;
(v) except as set forth on Schedule 3.27(c) of the Company Disclosure Schedules,
no termination for convenience notice has been issued or, to the Company’s
Knowledge, is likely to be issued in the near future, nor has either the Company
or any of its Subsidiaries been notified by a Governmental Entity that it will
not exercise an option under a Government Contract; (vi) no past performance
evaluation received by either the Company or any of its Subsidiaries with
respect to any such Government Contract has set forth a default or other
material failure to perform under such Government Contract; and (vii) no
material amount of money due to either the Company or any of its Subsidiaries
pertaining to any Government Contract or Government Contract Bid has been, or to
the Knowledge of the Company is reasonably likely to be, withheld or set-off.

(d) Neither the Company nor any of its Subsidiaries has taken any action or
failed to take any action, and is not a party to any litigation, that could
reasonably be expected to give rise to: (i) liability under the False Claims Act
or related common law causes of action based on misrepresentation;
(ii) liability for price adjustment under the Truth in Negotiations Act; or
(iii) any other liability for a reduction in the price of any Government
Contract, including but not limited to claims based on actual or alleged
defective pricing. To the Company’s Knowledge, there exist no reasonable grounds
for a claim of any liability of either the Company or any of its Subsidiaries by
any Governmental Entity as a result of defective cost and pricing data submitted
to any Governmental Entity or to any prime contractor or higher-tier
subcontractor.

(e) Neither the Company nor any of its Subsidiaries has ever been or is now,
suspended, debarred disqualified and has ever been notified that it has been
proposed for suspension, debarment or similar disqualification from bidding on
any Government Contract. No suspension, debarment or similar actions with
respect to Government Contracts have been commenced, or to the Company’s
Knowledge, threatened against either the Company or any of its Subsidiaries or
any of their officers or employees. To the Company’s Knowledge, there are no
valid, reasonable grounds for the either Company’s or any of its Subsidiaries’
suspension, debarment or similar disqualification from bidding on contracts or
subcontracts for or with any Governmental Entity.

(f) No negative determination of responsibility has been issued against either
the Company or any of its Subsidiaries within the past three (3) years with
respect to any Government Contract Bid.

 

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(g) Except for contract or governmental compliance audits of a routine nature,
which routine audits would not be reasonably expected to have a Material Adverse
Effect on either the Company or any of its Subsidiaries, or the Company’s or any
of its Subsidiaries’ businesses, or audits related to Taxes, since September 30,
2005: (i) neither the Company nor any of its Subsidiaries has undergone or is
undergoing any non-routine audit, inspection, investigation, survey or
examination of records by any Governmental Entity relating to any Government
Contract; and (ii) to the Company’s Knowledge, no such audit, review,
inspection, investigation, survey or examination of records is likely to occur
in the near future. Since September 30, 2005, except as set forth in Schedule
3.27(g) of the Company Disclosure Schedules, neither the Company nor any of its
Subsidiaries has received any written or (to the Company’s Knowledge) oral
notice that it is or was being specifically audited or investigated by any
Governmental Entity, including but not limited to the Government Accountability
Office, the Defense Contract Audit Agency, any state or federal agency Inspector
General, the contracting officer with respect to any Government Contract or the
Department of Justice (including any United States Attorney). This
representation does not relate to any potential Company or Subsidiary liability
for Taxes. Neither the Company nor any of its Subsidiaries has received any
written or (to the Company’s Knowledge) oral notice that any audit, review,
inspection, investigation, survey or examination of records described in
Schedule 3.27(g) of the Company Disclosure Schedules has revealed any fact,
occurrence or practice which could reasonably be expected to have a Material
Adverse Effect on either the Company or any of its Subsidiaries.

(h) Since September 30, 2005, neither the Company nor any of its Subsidiaries
has made any voluntary disclosure in writing to any Governmental Entity with
respect to any violation, irregularity, misstatement or omission arising under
or relating to a Government Contract or Government Contract Bid. To the
Company’s Knowledge, there exist no grounds for a claim by any Governmental
Entity that either the Company or any of its Subsidiaries should have made any
such voluntary disclosure.

(i) Neither the Company nor any of its Subsidiaries has received any written
notice that any of the Company’s or any of its Subsidiaries’ employees,
consultants or agents is (or during the last five years has been), and to the
Knowledge of the Company, none is (or during the last five years has been) under
administrative, civil or criminal investigation or indictment by any
Governmental Entity with respect to the conduct of the business of the Company
or any of its Subsidiaries. Since September 30, 2005, neither the Company nor
any of its Subsidiaries has received written or (to the Company’s Knowledge)
oral notice of any, and to the Company’s Knowledge, there is no, pending
administrative, civil or criminal investigation of any officer, employee or
representative of either the Company or any of its Subsidiaries, nor has there
been any audit or investigation of either the Company or any of its Subsidiaries
or any officer, employee or representative of them relating to the business of
the Company or any of its Subsidiaries with respect to any Government Contract
or Government Contract Bid. Neither the Company nor any of its Subsidiaries has
received any subpoena or request for documents or information from any
Governmental Entity relating to any investigation (regardless of whether conduct
of the Company or any of its Subsidiaries is or was the subject of the
investigation), nor (to the Company’s Knowledge) has any employee or agent of
either the Company or any of its Subsidiaries given information or an interview
to a Governmental Entity in connection with any such investigation.

 

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(j) To the extent applicable, all indirect cost rates as defined in FAR subpart
42.7 are being billed consistent with the applicable Government Contract and the
FAR, including any Defense Contract Audit Agency-approved provisional or final
rates.

(k) To the extent applicable, each of the Company and its Subsidiaries is in
compliance in all material respects with all applicable national security
obligations, including those specified in the National Industrial Security
Program Operating Manual, DOD 5220.22-M (January 1995), and any supplements,
amendments or revised editions of such manual.

(l) Neither the Company nor any of its Subsidiaries has undertaken an internal
audit of any events or omissions that, at the time of the audit, were reasonably
expected to have a Material Adverse Effect on performance of a Government
Contract or Government Contract Bid or an adverse effect on either the Company
or any of its Subsidiaries as a whole.

(m) No services are being performed, and no products or goods are being provided
by either the Company or any of its Subsidiaries to any Governmental Entity for
which a Government Contract or Government order does not exist, or for which a
Government Contract or Government order exists, but the applicable contract cost
or funding ceiling has been reached.

(n) No payment has been made by either the Company or any of its Subsidiaries
or, to the Company’s Knowledge, by a Person acting on the Company’s or any of
its Subsidiaries’ behalf, to any Person (other than to any bona fide employee or
agent of the Company, as defined in subpart 3.4 of the FAR) which payment is or
was improperly contingent upon the award of any Government Contract or which
would otherwise be in violation of any applicable procurement law or regulation
or any other laws.

(o) Neither the Company nor any of its Subsidiaries has assigned or otherwise
conveyed or transferred, or agreed to assign, to any Person, any Government
Contracts, or any payments under or account receivable relating to the
Government Contracts.

(p) Neither the Company nor any of its Subsidiaries has yet reached agreement
with the cognizant government contracting officer or audit agency approving and
“closing” all indirect costs, in each case if any, charged to Government
Contracts for the years 2006 to the present. Each of the Company and its
Subsidiaries has reached agreement with the cognizant government contracting
officer or audit agency approving and “closing” all indirect costs charged to
Government Contracts all years prior to and including 2005 or the period to
examine records identified in GSA contract clause 552.215-71 has expired, and
those years are closed.

(q) No material personal property, equipment or fixtures were loaned, bailed or
otherwise furnished to either the Company or any of its Subsidiaries by a
Governmental Entity.

(r) Except to the extent prohibited by applicable law, regulation or contract,
Schedule 3.27(r) of the Company Disclosure Schedules sets forth all facility
security clearances held by each of the Company and its Subsidiaries.

 

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(s) To the Company’s Knowledge, each employee of either the Company or any of
its Subsidiaries performing services related to a Government Contract possessed
(during the time of such performance) all security clearances and material
required credentials (e.g., education and experience) specified in or required
by such Government Contract.

3.28 Title to Assets. The Company has good and indefeasible title to, or a valid
leasehold interest in, the properties and assets used by it, located on its
premises, or shown on the Balance Sheet or acquired as of the date hereof, free
and clear of all Encumbrances (other than Permitted Encumbrances), except for
properties and assets disposed of in the ordinary course of business since the
date of the Balance Sheet.

3.29 Power of Attorney. There are no outstanding powers of attorney executed on
behalf of the Company.

3.30 Customers and Suppliers.

(a) Schedule 3.30(a) of the Company Disclosure Schedules lists all of the
customers of the Company for each of the two (2) most recent fiscal years and
through October 31, 2008 and sets forth opposite the name of each such customer
the net sales attributable to such customer. For purposes of this Section 3.30
the term “customer” shall include any Governmental Entity.

(b) Schedule 3.30(b) of the Company Disclosure Schedules also lists all
suppliers of the Company that either: (i) has received payments from the Company
in excess of $75,000 in any of the two (2) most recent fiscal years or through
October 31, 2008; or (ii) is a party to any Contract or other arrangement (oral
or otherwise) that would cause the Company to incur any Liability or other
expense or fee in the event the Company were to terminate its relationship with
such supplier.

(c) Since the date of the Balance Sheet, no supplier of the Company has
indicated that it shall stop, or decrease the rate of, supplying materials,
products or services to the Company, and to the Company’s Knowledge, no customer
listed on Schedule 3.30(a) of the Company Disclosure Schedules has indicated
that it shall stop, or decrease the rate of, buying materials, products or
services from the Company.

3.31 Disclaimer of Additional Representations. EXCEPT AS EXPRESSLY SET FORTH IN
THIS Article III, THE COMPANY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, RELATING TO THE STOCK, THE COMPANY OR ANY OTHER MATTER, INCLUDING ANY
REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY, HABITABILITY, WORKMANSHIP,
PROFITABILITY, FUTURE PERFORMANCE, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT. ALL OF SUCH ADDITIONAL REPRESENTATIONS AND WARRANTIES ARE
HEREBY DISCLAIMED.

3.32 Disclosure. To the Company’s Knowledge, the representations and warranties
contained in this Article III do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Article III not misleading.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS

Each Shareholder, severally and not jointly, hereby represents and warrants to
Purchaser that the statements contained in this Article IV are correct and
complete as of the Closing Date with respect to such Shareholder.

4.1 Organization of Certain Shareholders. Such Shareholder (if a trust) is
validly existing under the laws of the State of Texas.

4.2 Authorization. Such Shareholder has the full legal right, power and
authority to execute and deliver this Agreement and to sell, assign, transfer
and convey the shares of the Stock so owned and held by such Shareholder
pursuant to this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery by such Shareholder of this Agreement, the
performance by such Shareholder of its obligations hereunder and the
consummation by such Shareholder of the transactions contemplated hereby have
been duly authorized by all necessary corporate or other organizational action,
if any.

4.3 Execution and Validity. This Agreement has been duly executed and delivered
by such Shareholder. Assuming the due and valid authorization, execution and
delivery hereof by Purchaser, the Company and the other Shareholders, this
Agreement is a valid and binding obligation of such Shareholder enforceable
against such Shareholder in accordance with its terms, except as limited by the
Enforceability Limitations.

4.4 Consents and Approvals; No Violations. None of the execution and delivery of
this Agreement by such Shareholder, the performance by such Shareholder of its
obligations hereunder, nor the consummation by such Shareholder of the
transactions contemplated hereby will: (a) conflict with, violate or result in
any breach of the Organizational Documents, if any, of such Shareholder, each as
amended to date, as the case may be; (b) require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity; (c) result in a violation or breach of, constitute a default (with or
without notice or lapse of time, or both) under, give rise to any right of
termination, cancellation or acceleration of, or result in the imposition of any
Encumbrance on any Stock pursuant to any Contract to which such Shareholder is a
party, or any of their his, her or its assets and properties; or (d) violate any
Contract, Legal Requirement or Order applicable to such Shareholder or any of
his, her or its assets and properties.

4.5 Capitalization. Annex I sets forth, opposite such Shareholder’s name, the
number of shares of Stock held of record by such Shareholder as of the date of
this Agreement, free and clear of all Encumbrances or other restriction on
transfer and such Shareholder has paid the agreed-upon consideration for each
such share of Stock. Except as set forth in Annex I opposite such Shareholder’s
name, such Shareholder does not hold of record any shares of capital stock or
other securities of the Company. Such Shareholder is not a party to any option,
warrant, purchase right, or other contract or commitment (other than this
Agreement) that could require such Shareholder to sell, transfer, or otherwise
dispose of any Stock. Such Shareholder is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the voting of any
Stock.

 

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4.6 Broker’s Fees. Such Shareholder has no Liability to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.

4.7 Disclosure. To the Shareholders’ Knowledge, the representations and
warranties contained in this Article IV and in Article III do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this Article IV or
in Article III not misleading.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

OF PURCHASER

Purchaser hereby represents and warrants to the Company and the Shareholders
that the statements contained in this Article V are correct and complete as of
the Closing Date.

5.1 Organization and Qualification. Purchaser: (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation; (b) has the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted; and (c) is in good standing and duly qualified to do business in each
jurisdiction in which the transaction of its business makes such qualification
necessary, except where the failure to be so organized, existing, qualified and
in good standing or to have such power or authority would not have a Material
Adverse Effect on Purchaser.

5.2 Authorization and Validity of Agreement. Purchaser has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby in accordance with the terms
hereof. The board of directors of Purchaser has duly authorized the execution,
delivery and performance of this Agreement by Purchaser, and no other corporate
proceedings on the part of Purchaser are necessary to authorize this Agreement
or the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Purchaser and, assuming this Agreement constitutes the legal,
valid and binding obligation of the Company and the Shareholders, constitutes
the legal, valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, except as limited by the Enforceability
Limitations.

5.3 Consents and Approvals. Neither the execution and delivery of this Agreement
by Purchaser nor the consummation by Purchaser of the transactions contemplated
hereby will require on the part of Purchaser any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, except as set forth in Schedule 5.3 of Purchaser’s disclosure schedules
delivered to the Company in connection with this Agreement (the “Purchaser
Disclosure Schedules”).

5.4 No Violation. Except as set forth in Schedule 5.4 of the Purchaser
Disclosure Schedules, neither the execution and delivery of this Agreement, the
Escrow Agreement or any other agreement contemplate by this Agreement by
Purchaser nor the consummation by Purchaser of the transactions contemplated by
this Agreement, the Escrow Agreement or any other agreement contemplate by this
Agreement will: (a) conflict with or violate the Organizational Documents of
Purchaser; (b) result in a violation or breach of, constitute a default

 

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(with or without notice or lapse of time, or both) under, give rise to any right
of termination, cancellation or acceleration of, or result in the imposition of
any Encumbrance (other than Permitted Encumbrances) on any assets or property of
Purchaser pursuant to, any Contract to which Purchaser is a party or by which
Purchaser or any of its assets or properties are bound, except for such
violations, breaches and defaults (or rights of termination, cancellation or
acceleration or lien or other charge or Encumbrance (other than Permitted
Encumbrances)) as to which consents have been obtained or which would not have a
Material Adverse Effect on Purchaser or prevent the consummation of the
transactions contemplated hereby; or (c) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in
Section 5.3 and this Section 5.4 are duly and timely obtained or made, violate
any Contract, Legal Requirement or Order applicable to Purchaser or any of its
assets or properties.

5.5 Due Diligence. Purchaser acknowledges that: (a) it has had access to the
properties and operations of the Company and has had the opportunity to meet
with and ask questions of the Company’s management to discuss the business,
assets, liabilities, financial condition, cash flow and operations of the
Company; and (b) all materials and information requested by Purchaser have been
provided to it to its reasonable satisfaction. Purchaser acknowledges that it
has made its own independent examination, investigation, analysis and evaluation
of the Company, including Purchaser’s own estimate of the value of the business
of the Company. Purchaser acknowledges that it has undertaken such due diligence
(including, without limitation, a review of the assets, liabilities, Books and
Records and Contracts of the Company) as it deems adequate, including that
described above. In entering into this Agreement, Purchaser acknowledges that it
has relied solely upon the aforementioned investigation, review and analysis and
not on any representations, warranties or statements of the Company or the
Shareholders, whether written or oral, or their respective representatives,
except the representations and warranties of the Company specifically set forth
in Article III of this Agreement. The foregoing shall not prevent any claim for
indemnification by Purchaser pursuant to Article IX. As of the date of this
Agreement, Purchaser has no Knowledge of a claim and has no present intent to
make any claim for indemnification under Article IX.

5.6 Financing. Purchaser has as of the date hereof and will have available to
it, at the Closing, immediately available funds necessary to consummate the
transactions contemplated by this Agreement.

5.7 Brokers and Finders. No broker, finder or investment bank has acted directly
or indirectly for Purchaser, nor has Purchaser incurred any obligation to pay
any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated hereby.

5.8 Disclaimer. Except for the express representations and warranties made by
the Company in Article III and the Shareholders in Article IV, neither the
Shareholders nor the Company makes any representation or warranty with respect
to:

(a) any projections, estimates or budgets heretofore delivered to or made
available to Purchaser of future revenues, expenses or expenditures or future
results of operations;

 

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(b) any information or documents (financial or otherwise) made available to
Purchaser or its counsel, accountants, advisers or representatives other than
information or documents specifically referenced in Article III or Article IV
hereof; or

(c) the merchantability, marketability, profitability or fitness for a
particular purpose of the business of the Company generally.

5.9 Disclosure. To Purchaser’s Knowledge, the representations and warranties
contained in this Article V do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Article V not misleading.

ARTICLE VI

COVENANTS

6.1 Reasonable Efforts; Notices and Consents. Subject to the terms and
conditions of this Agreement and applicable Legal Requirements, all of the
parties hereto shall act in good faith and use commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable, including
such actions or things as: (a) may be reasonably required to cause any of the
conditions to such party’s obligations to consummate the transactions
contemplated by this Agreement to be fully satisfied; (b) any other party may
reasonably request in order to cause any of the conditions to such other party’s
obligation to consummate the transactions contemplated by this Agreement to be
fully satisfied; or (c) may be reasonably required to cause any personal
guarantee or other obligation of either of the Founding Shareholders for the
benefit of the Company or any of its Subsidiaries to be released or otherwise
extinguished following the consummation of the transactions contemplated by this
Agreement. The parties shall and shall use commercially reasonable efforts to
cause their respective Affiliates, directors, officers, employees, agents,
attorneys, accountants and representatives to, consult and fully cooperate with
and provide assistance to each other in (x) obtaining all necessary consents,
approvals, waivers, licenses, permits, authorizations, registrations,
qualifications, or other permission or action by, and giving all necessary
notices to and making all necessary filings with and applications and
submissions to any Governmental Entity or other person or entity as soon as
reasonably practicable after filing and (y) in general, consummating and making
effective the transactions contemplated hereby. Prior to making any application
to or filing with any Governmental Entity or other Person in connection with
this Agreement, each party shall provide the other party with drafts thereof and
afford the other party a reasonable opportunity to comment on such drafts.

6.2 Public Announcements. The Company, Purchaser and the Shareholders will
consult with one another prior to issuing any press release or otherwise making
any public statements with respect to the transactions contemplated hereby and
shall not issue any such press release or make any public statement prior to
such consultation, except as may be required by applicable Legal Requirements.

6.3 D&O Insurance. (a) For a period of five (5) years following the Closing,
Purchaser shall maintain, or shall cause the Company to maintain, at no expense
to the beneficiaries,

 

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directors’ and officers’ liability insurance (“D&O Insurance”) for each current
officer and director of the Company as of the Closing Date with respect to
matters occurring at or prior to the Closing; provided, however, the costs of
such D&O Insurance shall be included in the calculation of Working Capital. In
the event any claim is made against present or former directors, officers or
employees of the Company that is covered or potentially covered by insurance,
neither the Company nor Purchaser shall do anything that would forfeit,
jeopardize, restrict or limit the insurance coverage available for that claim
until the final disposition thereof.

6.4 Employee Benefits.

(a) Purchaser currently anticipates that Purchaser shall provide, or shall cause
the Company to provide the Company Employees with: (i) salary or wage rates and
other cash compensation (including bonus opportunities); and (ii) employee
benefit plans and programs, that, in the aggregate, are substantially similar to
those provided to employees of Purchaser of comparable status and seniority.
With respect to such benefits, past service, compensation and expense credits of
such Company Employees shall be recognized for all purposes under such plans
(including, but not limited to, participation, eligibility, vesting and
calculation of benefits), and each employee or fringe benefit plan or program
available to Company Employees as contemplated hereby shall be applied to such
Company Employee.

(b) Nothing expressed or implied in this Agreement shall obligate Purchaser to:
(i) continue to employ any of the Company Employees following the Closing Date
or interfere with the right of Purchaser to modify the position or terms of any
Company Employee’s employment following the Closing Date; (ii) provide to the
Company Employees employee benefits on terms and conditions that are
substantially similar to the terms and conditions of the Seller’s employee
benefit plans; or (iii) continue to provide any Company Benefit Plan or any
other plan, program, arrangement or agreement or portion thereof for the Company
Employees following the Closing Date or interfere with the right of Purchaser to
amend or terminate any Company Benefit Plan or any other plan, program,
arrangement or agreement or portion thereof in whole or in part following the
Closing Date.

(c) Purchaser and the Company shall take any and all actions necessary or
appropriate in order to assist Purchaser and its Affiliates and the Company
Employees in implementing and completing any transfer of Company Benefit Plans’
assets to a plan of Purchaser or one of its Affiliates which may occur after the
Closing Date and at Purchaser’s discretion, including but not limited to
rollovers, including loan rollovers, made by electing employees from the
Company’s 401(k) plan to Purchaser’s or one of its Affiliates 401(k) plan.

(d) Nothing in this Section 6.4, express or implied, is intended to confer upon
any Person (including, for the avoidance of doubt, any Company Employee) any
right as a third-party beneficiary of this Agreement.

6.5 Non-Compete Agreements for Shareholders. Purchaser and the Shareholders
agree that the Purchase Price was determined on the basis that the transfer of
the Stock to Purchaser would provide Purchaser with the full benefit and
goodwill of the Company as it exists on the Closing Date. The Shareholders
acknowledge that it is proper for Purchaser to have assurance that the value of
the Company and its business will not be diminished by acts of the Company and
the Shareholders and their respective Affiliates after the Closing Date.
Accordingly, the Shareholders covenant and agree that the Shareholders shall
not:

(a) directly or indirectly, whether as an employee, officer, trustee,
consultant, owner, partner, agent, advisor or otherwise, render services within
the United States for any “competing organization” that does or seeks business
(whether by soliciting customers of the Company, or otherwise) in any of the
businesses engaged in by the Company or in which he or she worked or was
involved at the Company;

 

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(b) directly or indirectly, on his or her own behalf or on behalf of any other
Person, solicit to employ, or employ, any Company employee, Company officer,
Company director or contractor for services of the Company (collectively, the
“Restricted Persons”), unless such Restricted Person shall have ceased to be
employed by or otherwise associated with the Company and such cessation of
employment or association shall have occurred at least twelve (12) months prior
thereto; provided, however, that this Section 6.5(b) shall not prohibit any of
the Shareholders from making any general solicitation for employees (including
through the use of employment agencies) not specifically directed at any of the
Restricted Persons, provided that such Shareholder shall not hire any of such
Restricted Persons who respond to any such general solicitation without the
prior written consent of Purchaser; or

(c) directly or indirectly, contact, solicit or disrupt the contractual
relationship with the Company of any Person who is a current or former customer,
client or supplier of products or services of the Company, without obtaining the
prior written consent of the Company.

The obligations set forth above in this Section 6.5 shall commence on the
Closing Date and end on the five (5) year anniversary of the Closing Date with
respect to the Founding Shareholders, and end on the later of (x) the first
(1) year anniversary of the Closing Date and (y) one (1) year following the
termination of employment with the Company, with respect to Gena R. Marshall.
With respect to Glen D. Schaffer: (i) the obligations set forth in Section 6.5
shall commence on the Closing Date and end on the later of (x) the three
(3) year anniversary of the Closing Date and (y) one (1) year following the
termination of employment with the Company, and (ii) the obligations set forth
in Sections 6.5(b) and 6.5(c) shall commence on the Closing Date and end on the
later of (x) the five (5) year anniversary of the Closing Date and (y) one
(1) year following the termination of employment with the Company. For purposes
of this Section 6.5, a “competing organization” shall be any business involved
in the same or substantially similar business as the Company or which competes
in any way with the business of the Company, either directly or indirectly as a
contractor or subcontractor. The foregoing provisions shall not apply to
investments in shares of stock of a corporation traded on a national securities
exchange or on the national over-the-counter market which shall constitute less
than one percent (1%) of the outstanding shares of such stock of such
corporation. Nothing in this Agreement shall be construed to limit the
effectiveness of any employment agreement entered into between the Company
and/or Purchaser and any of the Persons set forth above and the restrictive
covenants set forth above are in addition to and not in derogation of any
restrictive covenant contained in any such employment agreement, whether entered
into prior to or following the Closing.

 

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6.6 Waiver, Release and Discharge. In consideration for the portion of the
Purchase Price to be received by each Shareholder, and any other consideration
to be received by such Shareholder in connection with this Agreement and the
transactions contemplated hereby, effective from and after the Closing Date,
each Shareholder hereby irrevocably waives, releases and discharges the Company
and its directors, officers, employees, agents and Affiliates (as of before the
Closing), and the respective heirs, successors and assigns of the foregoing
Persons from any and all Liabilities to such Shareholder of any kind or nature
whatsoever, as a shareholder of the Company, in each case whether absolute or
contingent, liquidated or unliquidated, known or unknown, and whether arising
under any agreement or understanding or otherwise at law or equity, and no
Shareholder shall seek to recover any amounts in connection therewith or
thereunder from the Company or Purchaser; provided, however, that the foregoing
waiver, release and discharge shall not apply to: (i) Liabilities to such
Shareholder arising pursuant to the terms of this Agreement or the Escrow
Agreement; (ii) any accrued but unpaid compensation and benefits arising from
such Shareholder’s capacity as an employee of the Company on or prior to the
Closing Date provided that such accrued but unpaid compensation and benefits are
included in the calculation of Working Capital; and (iii) Liabilities to such
Shareholder for reimbursement in accordance with the Company’s policies of
reasonable business expenses incurred prior to the Closing provided that such
Liabilities are included in the calculation of Working Capital. Effective from
and after the Closing Date, each Shareholder hereby agrees that in no event
shall the Company or Purchaser or any of their respective directors, officers,
employees, agents and Affiliates, and the respective heirs, successors and
assigns of the foregoing Persons, have any Liability to any of the Shareholders
whatsoever for any Breaches of the representations, warranties, agreements or
covenants of the Company hereunder, and none of the Shareholders shall in any
event seek contribution from the Company for any Breaches of the
representations, warranties, agreements or covenants of the Company. Without
limiting the foregoing, effective upon delivery by Purchaser of the Purchase
Price, each Shareholder hereby irrevocably waives, releases and discharges the
Company and Purchaser (x) from all right or title to, or interest in, any Stock
or other capital stock or equity securities of the Company or options, warrants,
rights, contracts, calls, puts, rights to subscribe, conversion rights or other
Contracts providing for the issuance, disposition or acquisition of any of the
capital stock or other equity securities of the Company which such Shareholder
may have as of the Closing Date (after consummation of the transactions
contemplated hereby), and such Shareholder explicitly agrees to the immediate
termination and forfeiture, as of the Closing Date (after consummation of the
transactions contemplated hereby), to any such options, warrants or other rights
to acquire any Stock (whether or not earned or exercisable) and (y) from any and
all Liabilities to such Shareholder as the result of, in connection with,
relating to or incidental to or by virtue of any claim by such Shareholder that
such Shareholder, as of the Closing Date (after consummation of the transactions
contemplated hereby), owns or has any right or title to, or interest in, any
Stock or other capital stock or equity securities of the Company or options,
warrants, rights, contracts, calls, puts, rights to subscribe, conversion rights
or other Contracts providing for the issuance, disposition or acquisition of any
of the capital stock or other equity securities of the Company.

6.7 Confidentiality. Each Shareholder will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to Purchaser or
destroy, at the request and option of Purchaser, all tangible embodiments (and
all copies) of the Confidential Information

 

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that are in his, her, or its possession; provided, however, that each
Shareholder’s legal counsel shall be permitted to retain one copy of all
Confidential Information so requested to be returned or destroyed for so long as
such Shareholder causes its legal counsel to provide to Purchaser upon request
from time to time a complete and accurate list of such Confidential Information
being retained. In the event that any Shareholder is requested or required
pursuant to written or oral question or request for information or documents in
any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process to disclose any Confidential Information, such Shareholder will
notify Purchaser promptly of the request or requirement so that Purchaser may
seek an appropriate protective order or waive compliance with the provisions of
this Section 6.7. If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Shareholders is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else stand
liable for contempt, such Shareholder may disclose the Confidential Information
to the tribunal; provided, however, that the disclosing Shareholder shall use
his, her, or its commercially reasonable efforts to obtain, at the request of
Purchaser, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as Purchaser shall designate. The foregoing provisions shall not apply
to any Confidential Information that is generally available to the public
immediately prior to the time of disclosure unless such Confidential Information
is so available due to the actions of a Shareholder.

6.8 Cooperation by Founding Shareholders. Following the Closing, each of the
Founding Shareholders, at the reasonable request of Purchaser, shall be
available to Purchaser to respond to questions concerning the Company and its
Subsidiaries.

ARTICLE VII

CLOSING DELIVERIES

7.1 Deliveries of Purchaser at Closing. Concurrently with the execution of this
Agreement, Purchaser has delivered to the Shareholders:

(a) Escrow Agreement. The Escrow Agreement, executed by Purchaser and the Escrow
Agent, and the same shall be in full force and effect.

(b) Employment Agreement; Restrictive Covenants. Employment Agreement and
Restrictive Covenants with Glen D. Shaffer in substantially the form of Exhibit
D attached hereto, executed on behalf of the Company.

(c) Purchase Price. The Estimated Purchase Price, less the Escrow Amount, to the
Shareholders as provided in Section 2.2.

7.2 Deliveries of the Shareholders and the Company at Closing. Concurrently with
the execution of this Agreement, the Company and the Shareholders have delivered
to Purchaser:

(a) Escrow Agreement. The Escrow Agreement, executed by the Company Shareholder
Representative and Escrow Agent and the same shall be in full force and effect.

 

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(b) Third Party Consents. All third-party consents from any Person or
Governmental Entity referred to in this Agreement or in the Company Disclosure
Schedules necessary to consummate the transactions contemplated by this
Agreement.

(c) Opinion of Counsel. An opinion of counsel of the Company and the
Shareholders in form and substance as set forth in Exhibit E attached hereto,
addressed to Purchaser and on which Purchaser’s lenders shall be entitled to
rely, and dated as of the Closing Date.

(d) Payoff of Indebtedness. (i) payoff letters (the “Payoff Letters”) from each
holder of any Indebtedness setting forth the amount of such Indebtedness; and
(ii) UCC-3 termination statements in proper form for filing in the Office of
Secretary of State of the State of Texas sufficient to release any and all
Encumbrances held by third parties in connection with such Indebtedness; or, to
the extent applicable, (iii) evidence reasonably satisfactory to Purchaser
demonstrating that such Indebtedness has been so extinguished.

(e) Resignations. Resignations, effective as of the Closing, of each director
and officer of the Company other than those whom Purchaser shall have specified
in writing prior to the Closing.

(f) Employment Agreement; Restrictive Covenants. Employment Agreement and
Restrictive Covenants in substantially the form of Exhibit D attached hereto
executed by Glen D. Shaffer.

(g) Core6 Solutions Redemption. Evidence of the redemption by Core6 of a two
percent (2%) interest in Core6 from the Company, dated effective at or prior to
the Closing, including: (i) an executed redemption and assignment agreement; and
(ii) an executed amendment to the regulations of Core6 reflecting such
redemption and resulting change in ownership of Core6.

(h) Change in Plan Trustees. Documentation evidencing that Elaine Mendoza has
replaced the Founding Shareholders as the trustee of Core6’s 401(k) Plan.

(i) Certified Articles of Incorporation. Copies of the articles of incorporation
of the Company certified on or soon before the Closing Date by the Secretary of
State of Texas.

(j) Certificates of Good Standing. Copies of the certificate of good standing of
the Company issued on or soon before the Closing Date by the Secretary of State
of Texas and the Secretaries of State (or comparable officers) of the
jurisdictions where the Company is qualified to do business.

(k) Section 338 Forms. Executed copies of such Section 338 Forms as requested by
Purchaser prior to the Closing.

 

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ARTICLE VIII

FEES AND EXPENSES; WAIVER

8.1 Fees and Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants) shall be borne by the party which incurs such cost or expense;
provided, however, that all fees and disbursements of counsel, financial
advisors and accountants to the Shareholders shall be borne by the Company and
set forth in the calculation of Working Capital.

8.2 Waivers. No waiver by any party of any provision of this Agreement or any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the party making such waiver nor shall such waiver be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such default, misrepresentation, or breach of warranty or
covenant. The failure of any party to insist on strict compliance with this
Agreement or to assert any of its rights or remedies hereunder or with respect
hereto shall not constitute a waiver of such rights or remedies.

ARTICLE IX

INDEMNIFICATION AND SURVIVAL

9.1 Survival Period. The representations and warranties of Purchaser, the
Company and the Shareholders contained in this Agreement or in any certificate
delivered at the Closing shall survive the Closing Date and continue in effect
for a period of twenty four (24) months after the Closing Date; provided,
however, that: (a) the Core Representations and any matters in which the Company
is liable for actual fraud shall survive indefinitely, without limitation; and
(b) the representations and warranties set forth in Section 3.13 (Taxes) shall
survive for any applicable statute of limitations, plus ninety days (the
foregoing periods being referred to as the “Survival Period”). All covenants and
agreements that by their terms are to be performed after the Closing shall
expire upon the completion of performance or waiver thereof. Any representation
or warranty that would otherwise terminate in accordance with this Section 9.1
will continue to survive if a notice of claim for indemnification shall have
been given under this Article IX on or prior to such termination date until the
related claim for indemnification has been satisfied or otherwise resolved as
provided in this Article IX.

9.2 Shareholders’ Obligations to Indemnify. Subject to the limitations and
procedures contained in this Article IX, following the Closing, the Shareholders
shall, subject to Section 9.10, jointly and severally, indemnify, defend and
hold harmless Purchaser, the Company and each of their Affiliates, and their
respective directors, officers, employees and representatives (each, a
“Purchaser Indemnified Party,” provided that such term shall not include any
Shareholder regardless of his or her affiliation with the Company), from and
against any and all claims, losses, settlements, fines, liabilities, damages,
deficiencies, costs or expenses (including interest, penalties, costs of
investigation and defense and reasonable attorneys’ fees and disbursements)
whether or not involving a third-party claim (collectively, “Damages”),
suffered, sustained, incurred or required to be paid by any such Purchaser
Indemnified Party due

 

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to, based upon, arising out of or otherwise in respect of any Breach of any
representation, warranty, covenant and/or agreement of the Company or
Shareholders contained in this Agreement (or any schedule hereto or any
certificate delivered to Purchaser on behalf of the Shareholders pursuant
hereto).

9.3 Purchaser’s Obligations to Indemnify. Subject to the limitations and
procedures contained in this Article IX, following the Closing, Purchaser shall
indemnify, defend and hold harmless each Shareholder and its Affiliates, and
their respective directors, officers, employees, trustees and representatives
(each, a “Shareholder Indemnified Party” and, together with the Purchaser
Indemnified Parties, the “Indemnified Parties”), from and against any and all
Damages suffered, sustained, incurred or required to be paid by any such
Shareholder Indemnified Party due to, based upon, arising out of or otherwise in
respect of any Breach of any representation, warranty, covenant and/or agreement
of Purchaser contained in this Agreement (or any schedule hereto or any
certificate delivered to the Company or the Shareholders on behalf of Purchaser
pursuant hereto).

9.4 Procedure for Indemnification — Third Party Claims. The obligations and
Liabilities of any party against which indemnification is sought hereunder with
respect to claims resulting from the assertion of Liability by third parties
shall be subject to this Section 9.4.

(a) If any third party notifies any Indemnified Party with respect to any matter
(a “Third-Party Claim”) that may give rise to a claim for indemnification
against any other party (the “Indemnifying Party”) under this Article IX, then
the Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced. To the extent the Shareholders are the Indemnifying
Party, such notice shall be made to the Company Shareholder Representative.

(b) Any Indemnifying Party will have the right to defend the Indemnified Party
against the Third-Party Claim with counsel of his, her, or its choice reasonably
satisfactory to the Indemnified Party so long as: (i) the Indemnifying Party
notifies the Indemnified Party in writing within fifteen (15) days after the
Indemnified Party has given notice of the Third-Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Damages (subject to the limitations set forth in this Article
IX) that the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third-Party Claim; (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third-Party Claim and fulfill its
indemnification obligations hereunder; (iii) the Third-Party Claim involves only
money damages and does not seek an injunction or other equitable relief;
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the continuing
business interests or the reputation of the Indemnified Party; and (v) the
Indemnifying Party conducts the defense of the Third-Party Claim actively and
diligently within their reasonable discretion.

 

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(c) So long as the Indemnifying Party is conducting the defense of the
Third-Party Claim in accordance with Section 9.4(b): (i) the Indemnified Party
may retain separate co-counsel at his, her, or its sole cost and expense and
participate in the defense of the Third-Party Claim; (ii) the Indemnified Party
will not consent to the entry of any judgment on or enter into any settlement
with respect to the Third-Party Claim without the prior written consent of the
Indemnifying Party (not to be unreasonably withheld); and (iii) the Indemnifying
Party will not consent to the entry of any judgment on or enter into any
settlement with respect to the Third-Party Claim without the prior written
consent of the Indemnified Party (not to be unreasonably withheld).

(d) In the event any of the conditions in Section 9.4(b) is or becomes
unsatisfied: (i) the Indemnified Party may defend against, and consent to the
entry of any judgment on or enter into any settlement with respect to, the
Third-Party Claim in any manner his, her, or it may reasonably deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent from,
any Indemnifying Party in connection therewith); (ii) the Indemnifying Parties
will reimburse the Indemnified Party promptly and periodically for the
reasonable costs of defending against the Third-Party Claim (including
reasonable attorneys’ fees and expenses) within thirty (30) days of the request
for such reimbursement; and (iii) the Indemnifying Parties will remain
responsible for any Damages the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third-Party
Claim to the fullest extent provided in this Article IX.

9.5 Procedure for Indemnification — Other Claims. A claim for indemnification
for any matter not involving a third-party claim may be asserted by notice to
the party from whom indemnification is sought prior to the expiration of the
applicable Survival Period.

9.6 Limitations on Indemnification. The provisions of this Article IX are
subject to the following limitations:

(a) The Shareholders shall not be obligated to pay any indemnification amounts
for Damages pursuant to Section 9.2 until the aggregate amount of all Damages
pursuant thereto exceeds an amount equal to $200,000, whereupon the Purchaser
Indemnified Parties shall be entitled to indemnification under Section 9.2 for
all such Damages in excess of such amount, subject to paragraph (b) below.

(b) The maximum amount that all Purchaser Indemnified Parties shall be entitled
to recover under Section 9.2 shall in the aggregate not exceed an amount equal
to Seven Million Dollars ($7,000,000).

(c) No party shall be liable under this Article IX for any Damages resulting
from or relating to any misrepresentation, inaccuracy in or Breach of any
representation or warranty in this Agreement, any certificate delivered pursuant
to this Agreement or any Breach of any covenant or agreement in this Agreement
if the party seeking indemnification for such Damages had Knowledge of such
Breach prior to the Closing.

(d) As recourse for any claim by a Purchaser Indemnified Party pursuant to this
Article IX, such Purchaser Indemnified Party shall first seek payment out of the
Escrow

 

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Amount pursuant to and in the manner set forth in the Escrow Agreement prior to
exercising its rights under this Agreement including, without limitation, its
rights of offset as set forth in Section 9.8.

(e) Any amounts recoverable by any Indemnified Party pursuant to this Article IX
with respect to any Damages shall be limited to the actual damages or losses
suffered by the Indemnified Party (i.e., reduced by any insurance proceeds or
other payment or recoupment received, realized or retained by the Indemnified
Party as a result of the events giving rise to the claim for indemnification net
of any expenses related to the receipt of such proceeds, payment or recoupment,
including retrospective premium adjustments, if any), and no Indemnified Party
shall be entitled to recover from any other party hereto any amount in respect
to exemplary, punitive, special, indirect, consequential, remote or speculative
damages, including lost profits except: (i) in the case of fraud; or (ii) if the
Indemnified Party is liable for such damages as a result of a Third-Party Claim.
Notwithstanding anything to the contrary elsewhere in this Agreement, no
Indemnified Party or its Affiliates shall in any event be liable to any
Indemnifying Party or its Affiliates for loss of future revenue or income, cost
of capital, or loss of business reputation or opportunity except in the event
that the Indemnified Party is liable for such items as a result of a Third-Party
Claim. Upon the request of the Indemnifying Party, the Indemnified Party shall
provide the Indemnifying Party with information sufficient to allow the
Indemnifying Party to calculate the amount of the indemnity payment in
accordance with this Section 9.6. An Indemnified Party shall take all reasonable
steps to mitigate damages in respect of any claim for which it is seeking
indemnification and shall use commercially reasonable efforts to avoid any costs
or expenses associated with such claim and, if such costs and expenses cannot be
avoided, to minimize the amount thereof. Purchaser shall use commercially
reasonable efforts to pursue any available insurance coverage or other rights of
indemnity or reimbursement from third parties with respect to any Liability.
Each of the parties hereto further agrees that it shall not seek, and shall not
be entitled to, punitive damages, except: (i) in the case of fraud; or (ii) in
the event that a party is liable for punitive damages as a result of a
Third-Party Claim, as to any matter relating to this Agreement or the
transactions contemplated hereby.

(f) All references to GAAP contained in this Agreement refer to GAAP as in
effect as of the Closing Date and the Shareholders will have no liability (for
indemnification or otherwise) for any Damages arising out of any changes in GAAP
to the extent that such changes occur after the Closing Date. All references to
Legal Requirements contained in this Agreement refer to the applicable Legal
Requirements, and the interpretations thereof as in effect as of the Closing
Date, and Shareholders will have no liability (for indemnification or otherwise)
for any Damages arising out of any changes in Legal Requirements, or the
interpretations thereof, to the extent that such changes occur after such date.

(g) Each of the Shareholders and Purchaser will, and will cause each of the
Shareholder Indemnified Parties (to the extent controlled by such Shareholder)
or Purchaser Indemnified Parties, as applicable, to, use its commercially
reasonable best efforts to mitigate any Damages with respect to which it may be
entitled to seek indemnification pursuant to this Agreement.

(h) Notwithstanding the foregoing, the limitations in Sections 9.6(a) and 9.6(b)
will not apply to: (w) the failure or refusal of the Shareholders to deliver
good title to the

 

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Stock; (x) claims or losses arising from actual fraud committed by the
Shareholders or the Company upon Purchaser; (y) any Breach of the Core
Representations or any Breach of the representations set forth in Sections 3.4
(Consents and Approvals), 3.5 (No Violation), 3.13 (Taxes), 3.28 (Title to
Assets), and 4.4 (Consents and Approvals; No Violations); and (z) any
Indebtedness of the Company which is not included in the calculation of Working
Capital or otherwise paid at or prior to the Closing. Notwithstanding the
foregoing, the limitations in Section 9.6(a) will not apply to any Breach of the
representations set forth in Section 3.26 (Accounts Receivable).

(i) Notwithstanding anything to the contrary set forth in Article IX, the
maximum amount that all Purchaser Indemnified Parties shall be entitled to
recover in connection with a Breach by the Company of any of its representations
or warranties in this Agreement related to the Subsidiaries shall be only the
Damages related to such Breach which is attributable to the Company resulting
from its percentage ownership of such Subsidiary.

(j) This Section 9.6 is in no way intended to affect the obligation of Purchaser
to deliver the Purchase Price in accordance with the terms of this Agreement.

9.7 Indemnification Exclusive Remedy. The indemnification provided for in this
Article IX shall be the exclusive remedy in any action seeking damages or any
other form of monetary relief brought by any party to this Agreement against
another party to this Agreement with respect to any provision of this Agreement,
provided that nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement.
Purchaser hereby releases, waives, and discharges to the fullest extent
permitted under applicable Legal Requirements, and covenants not to sue or
assert any other claims, causes of action, and any and all other rights, known
or unknown, it or any indemnified person may have against the Company or the
Shareholders relating to this Agreement or the transactions contemplated hereby
arising under or based upon any Legal Requirement. Any indemnity payment under
this Article IX shall be treated as an adjustment to the Purchase Price for tax
purposes unless a final determination (which shall include the execution of a
Form 870-AD or successor form) with respect to the Indemnified Party or any of
its Affiliates causes any such payment not to be treated as an adjustment to the
Purchase Price consideration for U.S. Federal income tax purposes.

9.8 Right of Setoff Against Working Capital. Any indemnification to which a
Purchaser is entitled under this Agreement as a result of any Damages it may
suffer shall first be made as a payment to Purchaser from the Escrow Amount in
accordance with the terms of the Escrow Agreement and, to the extent that the
aggregate amount of such indemnification exceeds the Escrow Amount plus any
interest accrued thereon, Purchaser shall have the option of setting off all or
any part of any remaining or additional Damages it may suffer (in lieu of
seeking any indemnification to which it is entitled under this Article IX)
against any payment to be made by Purchaser to the Shareholders, if any, under
Section 2.3 by notifying the Company Shareholder Representative of the same.
Neither the exercise nor the failure to exercise such right of setoff will
constitute an election of remedies or limit Purchaser in any manner in the
enforcement of any other remedies available to it nor will the exercise of such
right preclude the Company Shareholder Representative from disputing the
validity of same.

 

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9.9 Time Limitations. If the Closing occurs, no party shall have any liability
with respect to any Damages, unless on or before the Survival Period, the other
party is notified of a claim, specifying the factual basis of that claim in
reasonable detail to the extent then known. The parties hereto intend to shorten
the statute of limitations and agree that no claims or causes of action based
upon, directly or indirectly, any of the representations, warranties, covenants
or agreements terminated as provided in this Section 9.9 may be brought after
the expiration of the Survival Period.

9.10 Nature of Shareholders’ Obligations. Notwithstanding anything herein to the
contrary, except for actual fraud: (i) each Shareholder’s aggregate liability
under this Agreement shall in no event exceed the portion of the Purchase Price
paid or payable to such Shareholder pursuant to Section 2.2; (ii) no Shareholder
shall have any liability in excess of his or her pro rata share (based upon
proceeds received pursuant to this Agreement) of any Damages (except with
respect to any Breach of any representation or warranty made by such Shareholder
set forth in Article IV), and no Shareholder shall have any liability with
respect to any representation or warranty of any other Shareholder set forth in
Article IV; (iii) the Shareholders shall have no liability to indemnify the
Purchaser for any Damages to the extent reflected or reserved for in the
calculation of Working Capital; and (iv) the Shareholders shall have no
liability under this Article IX to the extent arising from actions taken or not
taken by the Purchaser or the Company, or any event or occurrence occurring,
after the Closing other than as a result of a Breach of representations,
warranties or covenants of the Company or any of the Shareholders.

ARTICLE X

TAX MATTERS

10.1 Section 338(h)(10) Election. Unless otherwise mutually agreed by the
Shareholders and Purchaser, the Company, the Shareholders and Purchaser shall
make a Code Section 338(h)(10) Election (and any corresponding elections under
state or local tax law) (collectively, the “Section 338(h)(10) Election” with
regard to Purchaser’s purchase of the Stock. The Shareholders shall cooperate
with Purchaser in making such elections, including executing all necessary IRS
Forms 8023 (and any applicable state or local forms) and otherwise taking such
other actions that are required under the Code or the Treasury Regulations to
make the Section 338(h)(10) Election (the “Section 338 Forms”). The Purchaser
and the Shareholders agree that the ADSP will be allocated to the assets of the
Company for all purposes (including Tax and financial accounting) as shown on
Exhibit F attached to this Agreement (the “Allocation”). The Allocation shall be
the allocation used by the Company, the Shareholders, and Purchaser in any and
all Tax Returns and shall be the allocation used in each IRS Form 8883 and any
supplements thereto for each of the “old target” and the “new target” as such
terms are used in Code Section 338(h)(10) and the applicable Treasury
Regulations. The Company, the Shareholders and Purchaser shall make all Tax
reports, Tax Returns and Tax refund claims and other statements, including IRS
Form 8883 or any equivalent statements, in a manner consistent with such
Allocation and shall not make inconsistent written statements on any Tax Returns
or during the course of any IRS or other Tax audit, except to the extent
required by applicable Legal Requirements. Each party agrees to notify the other
if the IRS or any other Tax authority proposes a reallocation of such amounts.
Each Shareholder will report any income resulting from the Section 338(h)(10)
Election, or cash to accrual change in accounting method, as the case may be.

 

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10.2 Preparation and Filing of Tax Returns; Straddle Periods and Pre-Closing
Date Tax Returns.

(a) The Company Shareholder Representative shall prepare or cause to be prepared
and file or cause to be filed, within the time (taking into account any
extensions) and manner provided by any Legal Requirements, all S Corporation Tax
Returns of the Company. The Shareholders shall include on their Tax Returns any
income, gain, loss, deduction or other Tax item provided for in the S
Corporation Tax Returns of the Company (including Tax items attributable to the
Section 338 (h)(10) Election) as required by any Legal Requirements and the
Shareholders shall pay all Taxes of the Company arising from the
Section 338(h)(10) Election (except with respect to Taxes that are the liability
of Purchaser pursuant to Section 10.2(b)). The Company Shareholder
Representative shall provide Purchaser with drafts of all S Corporation Tax
Returns prepared by the Company Shareholder Representative no later than thirty
(30) days prior to the earlier of the due date or filing date thereof. Purchaser
shall have the right to review and provide comments on any such S Corporation
Tax Returns during the fifteen (15) Business Day period following the receipt of
such S Corporation Tax Returns.

(b) Purchaser and the Company shall prepare or cause to be prepared and file or
cause to be filed, within the time (taking into account any extensions) and
manner provided by any Legal Requirements, all Tax Returns of the Company for
periods beginning prior to the Closing Date (other than Tax Returns referred to
in Section 10.2(a)) that are required to be filed after the Closing Date,
including those taxable periods beginning before and ending after the Closing
Date (a “Straddle Period”). Purchaser and the Company shall provide the
Shareholders with drafts of all such Tax Returns prepared by Purchaser or the
Company no later than thirty (30) days prior to the earlier of the due date or
filing date thereof. The Shareholders shall have the right to review and provide
comments on such Tax Returns during the fifteen (15) Business Day period
following the receipt of such Tax Returns. No later than five (5) Business Days
prior to the due date for the payment of any Taxes with respect to any such Tax
Return, the Shareholders shall pay the Company an amount equal to the portion of
the Taxes attributable to the taxable period or portion thereof ending on or
before the Closing Date (“Pre-Closing Date Tax Period”), determined in the case
of any Straddle Period under Section 10.2(d), other than Taxes included in
calculating Working Capital and any estimates thereof.

(c) The Shareholders and Purchaser shall consult with each other and attempt in
good faith to resolve any issues arising with respect to the Tax Returns
referred to in Sections 10.2(a) and 10.2(b) above and, if they are unable to do
so, the disputed items shall be resolved (within a reasonable time, taking into
account the deadline for filing such Tax Returns) by the Independent Accounting
Firm or, if unable to serve, by an independent nationally recognized accounting
firm acceptable to Purchaser and the Company Shareholder Representative. Upon
resolution of all such items, the relevant Tax Returns shall be timely filed on
that basis, provided, however, that if after using reasonable best efforts, the
parties are unable to resolve the matter in dispute before any Tax Return that
is the subject of a disagreement is due, such Tax Return may be filed as
prepared by Purchaser or the Company Shareholder Representative, as the case may
be, subject to adjustment or amendment upon resolution, and the making of any
payments necessary to give effect to the resolution. The fees and expenses of
the Independent Accounting Firm shall be paid by the party (i.e., Purchaser, on
the one hand, or the Company Shareholder Representative, on the other hand)
whose last proposed written offer for the settlement of the

 

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terms in dispute prior to the commencement of such dispute resolution, taken as
a whole, has a greater mathematical difference from the final determination of
the Independent Accounting Firm. If the final determination of the Independent
Accounting Firm is equal to the mathematical difference between the last
proposed written offers of Purchaser and the Company Shareholder Representative,
then Purchaser, on the one hand, and the Company Shareholder Representative, on
the other hand, shall each pay one-half of the fees and expenses of the
Independent Accounting Firm.

(d) For purposes of this Agreement, in the case of any Taxes that are payable
for a Straddle Period, the portion of such Taxes that relate to the Pre-Closing
Date Tax Period (i) in the case of any property or ad valorem Taxes, shall 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 (ii) in the case of all other Taxes, shall
be deemed equal to the amount which would be payable as computed on a
“closing-of-the-books” basis if the relevant Tax Period ended at the close of
business on the Closing Date.

(e) All Tax Returns prepared and filed pursuant to Sections 10.2(a) and 10.2(b)
shall be prepared and filed in accordance with applicable Legal Requirements and
in a manner consistent with past practices of the Company (to the extent
consistent with applicable Legal Requirements).

(f) Any Tax refund received by Purchaser or the Company (or any Affiliate of
Purchaser or the Company), and any amount of Tax credit to which Purchaser or
the Company (or any Affiliate of Purchaser or Company) becomes entitled, which
relates to a Pre-Closing Date Tax Period shall be for the account of the
Shareholders to the extent such refund or credit was not reflected in the
calculation of the Working Capital and any estimates thereof, and the associated
Tax was not borne directly or indirectly by Purchaser. Purchaser or the Company
(or any Affiliate of Purchaser or the Company) shall pay to the Shareholders any
refund or amount of credit within ten (10) days after receipt in the case of a
refund or use in the case of a credit. In the case of a refund or credit
applicable to a Straddle Period, the allocation of such refund or credit shall
be consistent with the principles of allocation set forth in Section 10.2(d).
Purchaser or the Company (or any Affiliate of Purchaser or the Company) shall be
entitled to retain from any payment required under this Section 10.2(f) any
reasonable costs (including the amount of any Tax liability incurred by the
Company as a result of receiving a refund or credit to which the Company is
entitled under this Section 10.2(f)) incurred by such party in obtaining the
refund or credit to which the Shareholders are entitled. Purchaser shall, at the
request and expense of the Shareholders, cause the Company to file for and use
its reasonable best efforts to obtain and expedite the receipt of any refund or
credit to which the Shareholders are entitled under this Section 10.2(f).
Purchaser and the Company shall permit the Shareholders to participate in (at
the Shareholders’ expense) the prosecution of any such refund or credit claim.

10.3 Amended Tax Returns. Neither Purchaser nor any of its Affiliates shall
amend, refile or otherwise modify, require the Shareholders to amend, refile or
otherwise modify, or cause or permit the Company to amend, refile or otherwise
modify, any Tax election or Tax Return with respect to any Pre-Closing Date Tax
Period without the prior written consent of the Shareholders, which consent
shall not be unreasonably withheld; provided, however, that nothing

 

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in this Section 10.3 shall require the Shareholders to consent to any action
that would result in adverse consequences to the Shareholders unless such action
is required to correct a Tax position taken on any Tax Return that was, when
taken, against applicable Tax law, or otherwise comply with applicable Tax law.

10.4 Transfer Taxes. As between Purchaser and the Shareholders, the Shareholders
shall, on a pro rata basis, bear responsibility for paying all transfer,
documentary, sales, use, stamp, registration and other such Taxes, and all
conveyance fees, recording charges and other fees and charges incurred in
connection with the consummation of the transactions contemplated by this
Agreement.

10.5 Cooperation. Purchaser and the Shareholders shall: (a) cooperate, as
reasonably requested, in connection with the preparation and filing of all Tax
Returns prepared and filed pursuant to this Article X and the making of Code
Section 754 elections with respect to the Subsidiaries; (b) make available to
the other, as reasonably requested, all information, records or documents with
respect to Tax matters pertinent to the Company for all taxable periods ending
on or before the Closing Date and for Straddle Periods; and (c) preserve
information, records or documents relating to Tax matters pertinent to the
Company that is in their possession or under their control until the expiration
of all limitations periods under applicable Legal Requirements.

ARTICLE XI

MISCELLANEOUS

11.1 Notices. All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed duly given or made: (a) when delivered
personally to the recipient; (b) one (1) Business Day after being sent to the
recipient by nationally recognized overnight courier service (charges prepaid);
and (c) one (1) Business Day after being sent to the recipient by confirmed
facsimile transmission, and addressed to the intended recipient as set forth
below:

(a) if to Purchaser, the Guarantor and/or the Company (following the Closing)
to:

Kforce Inc.

1001 East Palm Avenue

Tampa, Florida 33605

Facsimile: (813) 552-2970

Attention: Mr. Joseph J. Liberatore

with a copy to:

Holland & Knight LLP

100 North Tampa Street, Suite 4100

Tampa, Florida 33602

Facsimile: (813) 229-0134

Attention: Robert J. Grammig, Esq.

 

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(b) if to the Shareholders and/or the Company Shareholder Representative to:

the addresses set forth below their respective

names on the signature pages hereto

with a copy to:

Cox Smith Matthews Incorporated

112 E. Pecan, Suite 1800

San Antonio, Texas 78205

Attn: Scott B. Bankler

Fax: (210) 226-8395

or to such other Person or address or facsimile number as any party shall
specify by like written notice to the other parties hereto (any such notice of a
change of address to be effective only upon actual receipt thereof).

11.2 Entire Agreement; Amendment. This Agreement (including the schedules,
exhibits and other documents referred to herein) constitutes the entire
agreement between and among the parties hereto and supersedes all prior
agreements and understandings, oral and written, between or among any of the
parties with respect to the subject matter hereof. This Agreement may not be
amended or modified except by an instrument in writing signed on behalf of the
Company, Purchaser and the each of the Shareholders.

11.3 Assignment; Binding Effect. Neither this Agreement nor any of the rights,
benefits or obligations hereunder may be assigned, in whole or in part, by any
party (whether by operation of law or otherwise) without the prior written
consent of the other parties hereto. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties or their respective successors and assigns, any rights, remedies,
obligations or Liabilities under or by reason of this Agreement.

11.4 Validity. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.

11.5 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original and all of which together shall be deemed to
be one and the same instrument.

11.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without regard to
any applicable principles of conflicts of law.

11.7 Enforcement; Venue; Service of Process. In the event any party hereto shall
seek enforcement of any covenant, warranty or other term or provision of this
Agreement, the party

 

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which prevails in such enforcement proceedings shall be entitled to recover
reasonable attorneys’ fees actually incurred by it in connection therewith. The
parties hereto agree that this Agreement is performable in New Castle County,
Delaware and that the sole and exclusive venue for any arbitration proceedings
and enforcement of this Agreement shall be in New Castle County, Delaware. Each
of the parties hereto hereby irrevocably submits to the jurisdiction of the
courts of the State of Delaware for any such enforcement proceeding. However, if
a Delaware court rejects jurisdiction in any final adjudication, each party
irrevocably submits to the jurisdiction of the courts of the States of Florida
and Texas for any such enforcement proceeding. The parties hereto agree that the
service of process or any other papers upon them or any of them by registered
mail at their respective addresses where notices are to be sent pursuant to
Section 11.1 shall be deemed good, proper, and effective service upon them.

11.8 Arbitration. Any dispute arising out of or relating to this Agreement, any
schedule, certificate or other document delivered by any party in connection
with this Agreement or incident to the transactions contemplated hereby or
thereby or the breach, termination or validity hereof or thereof or otherwise
arising out of or relating to the transactions contemplated hereby and thereby,
or any other agreement among them or between any of them, whether entered into
prior to, on or subsequent to the date of this Agreement or those arising under
any Legal Requirement, shall be determined by binding arbitration in accordance
with the then-current Commercial Arbitration Rules of the American Arbitration
Association. If the amount in controversy in the arbitration exceeds Two Hundred
Fifty Thousand Dollars ($250,000), exclusive of interest, attorneys’ fees and
costs, the arbitration shall be conducted by a panel of three (3) neutral
arbitrators. Otherwise, the arbitration shall be conducted by a single neutral
arbitrator. The parties shall endeavor to select neutral arbitrators by mutual
agreement. If such agreement cannot be reached within thirty (30) calendar days
after a dispute has arisen which is to be decided by arbitration, any party or
the parties jointly shall request the American Arbitration Association to submit
to each party an identical panel of fifteen (15) persons. Alternate strikes
shall be made to the panel, commencing with the party bringing the claim, until
the names of three (3) persons remain, or one person if the case is to be heard
by a single arbitrator. The parties may, however, by mutual agreement request
the American Arbitration Association to submit additional panels of possible
arbitrators. The person(s) thus remaining shall be the arbitrator(s) for such
arbitration. If three (3) arbitrators are selected, the arbitrators shall elect
a chairperson to preside at all meetings and hearings. If a dispute is to be
resolved by a sole arbitrator in accordance with the terms hereof, or if the
dispute is to be resolved by a panel of three (3) arbitrators as provided
hereinabove, then such sole arbitrator or the chairperson of such panel, as the
case may be, shall be a member of a state bar engaged in the practice of law in
the United States or a retired member of a state or the federal judiciary in the
United States. The award of the arbitrator(s) shall require a majority of the
arbitrators in the case of a panel of arbitrators, shall be in writing and
reasoned, shall be based on the evidence admitted and the substantive law of the
State of Delaware and shall contain an award for each issue and counterclaim.
The award shall be made within thirty (30) days following the close of the final
hearing and the filing of any post hearing briefs authorized by the
arbitrator(s). The award of the arbitrator(s) shall be final and binding on the
parties hereto and the subject matter. The award shall be made within thirty
(30) days following the closing of the final hearing and the filing of any post
hearing briefs authorized by the attorneys. The arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C. §1-16, and judgment upon the award
rendered by the arbitrator(s) may be entered by any court having jurisdiction
thereof. The place of arbitration

 

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shall be in the State of Delaware. Each party shall be entitled to inspect and
obtain a copy of relevant documents in the possession or control of the other
party and to take depositions of the other parties’ employees, agents,
representatives and witnesses (including expert witnesses). All such discovery
shall be in accordance with procedures approved by the arbitrator(s). Unless
otherwise provided in the award, each party shall bear its own costs of
discovery. No party shall be entitled to submit interrogatories to the other
parties. All discovery shall be expedited, consistent with the nature and
complexity of the claim or dispute and consistent with fairness and justice. The
arbitrator(s) shall have the power to compel any party to comply with discovery
requests of the other parties and to issue binding orders relating to any
discovery dispute which shall be enforceable in the same manner as awards. The
arbitrator(s) also shall have the power to impose sanctions for abuse or
frustration of the arbitration process, including without limitation, the
refusal to comply with orders of the arbitrator(s) relating to discovery and
compliance with subpoenas. The arbitrator(s) are not empowered to award damages
(including, without limitation, punitive damages or multiple damages) in excess
of compensatory damages and in no event shall consequential, special or
exemplary damages be awarded, and each of the parties to this Agreement hereby
irrevocably waives any right to recover damages in excess of those damages
authorized by this Section 11.8. Each of the parties hereto hereby irrevocably
submits to the jurisdiction of the courts of the State of Delaware for entry of
any arbitration decision or to obtain any preliminary relief which may be
necessary and hereby consents to the enforcement by such courts of any award
rendered in such arbitration.

11.9 Interpretation and Construction. When a reference is made in this Agreement
to an Article, a Section, Exhibit or Schedule, such reference shall be to an
Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless
otherwise indicated. All Exhibits and Schedules referred to herein and attached
hereto are incorporated herein by reference. The Article and Section captions
used herein are for reference purposes only, and shall not in any way affect the
meaning or interpretation of this Agreement. References to a “Section” or
“Subsection” when used without further attribution shall refer to the particular
sections or subsections of this Agreement. Whenever the words “include,”
“includes” or “including” are used in this Agreement, they shall be deemed to be
followed by the words “without limitation.” Unless the context otherwise
required, “neither,” “nor,” “any,” “either” and “or” shall not be exclusive. The
words “hereof,” “herein” and “hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All terms defined in this Agreement
shall have the defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.

11.10 Delivery by Facsimile. This Agreement and any signed agreement or
instrument entered into in connection with this Agreement, and any amendments
hereto or thereto, to the

 

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extent signed and delivered by means of a facsimile machine or other electronic
transmission (i.e., e-mail), shall be treated in all manner and respects as an
original agreement or instrument and shall be considered to have the same
binding legal effect as if it were the original signed version thereof delivered
in person. At the request of any party hereto or to any such agreement or
instrument, each other party hereto or thereto shall re execute original forms
thereof and deliver them to all other parties. No party hereto or to any such
agreement or instrument shall raise the use of a facsimile machine other
electronic transmission (i.e., e-mail) to deliver a signature or the fact that
any signature or agreement or instrument was transmitted or communicated through
the use of a facsimile machine other electronic transmission (i.e., e-mail) as a
defense to the formation of a Contract and each such party forever waives any
such defense, except to the extent such defense related to lack of authenticity.

11.11 Joint Preparation. This Agreement has been prepared by the joint efforts
of the respective attorneys to each of the parties hereto. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties, and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.

11.12 Guaranty by the Guarantor. The Guarantor hereby guarantees the performance
(and not merely the collection) of Purchaser under the terms of this Agreement,
including, without limitation, all obligations to make payments to the
Shareholders under this Agreement, and waives notice of presentment, demand,
notice of nonpayment, protest, notice of protest, any other demands and notices
required by law (but not any notices required under this Agreement) and any
requirement that suit first be brought against Purchaser in order to enforce any
of such obligations.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
Closing Date.

 

COMPANY: RDI SYSTEMS, INC. By:  

/s/ Nancy R. Kudla

  Nancy R. Kudla, Chief Executive Officer PURCHASER: KFORCE GOVERNMENT HOLDINGS
INC. By:  

/s/ David M. Kelly

Name:   David M. Kelly Title:   Vice President GUARANTOR: KFORCE INC. By:  

/s/ Judy M. Genshino-Kelly

Name:   Judy M. Genshino-Kelly Title:   Treasurer COMPANY SHAREHOLDER
REPRESENTATIVE:

/s/ Nancy R. Kudla

Nancy R. Kudla

 

Address:   46 Champions Run   San Antonio, TX 78258

[SHAREHOLDER SIGNATURE PAGES TO FOLLOW]

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STOCK PURCHASE AGREEMENT

Counterpart Signature Pages

IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
Closing Date.

 

SHAREHOLDER:

/s/ Nancy R. Kudla

Printed Name:   Nancy Rebecca Kudla

 

Address:   46 Champions Run   San Antonio, Texas 78258

--------------------------------------------------------------------------------

STOCK PURCHASE AGREEMENT

Counterpart Signature Pages

IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
Closing Date.

 

SHAREHOLDER:

/s/ Frank M. Kudla, Jr.

Printed Name:   Frank M. Kudla, Jr.

 

Address:   46 Champions Run   San Antonio, Texas 78258

--------------------------------------------------------------------------------

STOCK PURCHASE AGREEMENT

Counterpart Signature Pages

IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
Closing Date.

 

SHAREHOLDER:

/s/ Glen D. Shaffer

Printed Name:   Glen D. Shaffer

 

Address:   1032 Guadalupe Bend   Boerne, Texas 78006

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STOCK PURCHASE AGREEMENT

Counterpart Signature Pages

IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
Closing Date.

 

SHAREHOLDER:

/s/ Gena R. Marshall

Printed Name:   Gena R. Marshall

 

Address:   145 Persimmon Hill   Bulverde, Texas 78163

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STOCK PURCHASE AGREEMENT

Counterpart Signature Pages

IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
Closing Date.

 

SHAREHOLDER: ADAM STEPHEN KUDLA TRUST By:  

/s/ Frank M. Kudla, Jr.

  Frank M. Kudla, Jr., Trustee

 

Address:   46 Champions Run   San Antonio, Texas 78258

--------------------------------------------------------------------------------

STOCK PURCHASE AGREEMENT

Counterpart Signature Pages

IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
Closing Date.

 

SHAREHOLDER: FRANK MICHAEL KUDLA, III TRUST By:  

/s/ Frank M. Kudla, Jr.

  Frank M. Kudla, Jr., Trustee

 

Address:   46 Champions Run   San Antonio, Texas 78258

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STOCK PURCHASE AGREEMENT

Counterpart Signature Pages

IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
Closing Date.

 

SHAREHOLDER: NATHANIEL PARCON KUDLA TRUST By:  

/s/ Frank M. Kudla, Jr.

  Frank M. Kudla, Jr., Trustee

 

Address:   46 Champions Run   San Antonio, Texas 78258

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STOCK PURCHASE AGREEMENT

Counterpart Signature Pages

IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
Closing Date.

 

SHAREHOLDER: TIMOTHY LOUIS KUDLA TRUST By:  

/s/ Frank M. Kudla, Jr.

  Frank M. Kudla, Jr., Trustee

 

Address:   46 Champions Run   San Antonio, Texas 78258

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ANNEX I

SHAREHOLDER OWNERSHIP

 

Shareholder Name

   Number of Shares of
Common Stock    Percentage Ownership  

Nancy R. Kudla

   56,354    61.25 %

Frank M. Kudla, Jr.

   15,366    16.70 %

Glen D. Shaffer

   10,000    10.87 %

Gena R. Marshall

   2,000    2.17 %

Frank Michael Kudla, III Trust

   2,070    2.25 %

Nathaniel Parcon Kudla Trust

   2,070    2.25 %

Adam Stephen Kudla Trust

   2,070    2.25 %

Timothy Louis Kudla Trust

   2,070    2.25 %            

Total:

   92,000    100.00 %

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EXHIBIT A

DEFINITIONS

“Active Government Contract” shall have the meaning set forth in
Section 3.27(a).

“Active Task Order” shall have the meaning set forth in Section 3.27(a).

“Adjustment Amount” shall have the meaning set forth in Section 2.3(b).

“ADSP” shall have the meaning set forth in the Instructions to IRS Form 8883.

“Adjustment Documents” shall have the meaning set forth in Section 2.3(c).

“Affiliate” is used in this Agreement to indicate a relationship with one or
more Persons and when used shall mean any corporation or organization of which
such Person is an executive officer, director or partner or is directly or
indirectly the beneficial owner of ten percent (10%) or more of any class of
equity securities or financial interest therein; any trust or other estate in
which such person has a beneficial interest or as to which such Person serves as
trustee or in any similar fiduciary capacity; any relative or spouse of such
person, or any relative of such spouse (such relative being related to the
person in question within the second degree); any director or executive officer
of such Person; or any Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the Person specified.

“Affiliated Group” means an affiliated group as defined in Section 1504 of the
Code (or any analogous combined, consolidated or unitary group defined under
state, local or foreign income Tax law) of which the Company is or has been a
member.

“Agreement” shall have the meaning set forth in the preamble.

“Allocation” shall have the meaning set forth in Section 10.1.

“Balance Sheet” shall have the meaning set forth in Section 3.6.

“Base Amount” shall have the meaning set forth in Section 2.2(a).

“Books and Records” means all files, documents, instruments, papers, books and
records relating to the business of the Company and in the possession or control
of, or otherwise reasonably obtainable by, the Company, including financial
statements, Tax Returns and related work papers and letters from accountants,
budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute
books, stock certificates and books, stock transfer ledgers, Contracts,
licenses, customer lists, computer files and programs, retrieval programs,
operating data and plans, environmental studies and plans, and payroll and
benefits information pertaining to employees of the Company.

“Breach” means that a “Breach” of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be

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deemed to have occurred if there is or has been any inaccuracy in or breach of,
or any failure to perform or comply with, such representation, warranty,
covenant, obligation, or other provision, and the term “Breach” means any such
falsity, inaccuracy, breach, failure, claim, occurrence, or circumstance.

“Business Day” means any day other than (a) a Saturday or Sunday or (b) any
other day on which the banks located in the States of Florida or Texas are
required or authorized to close.

“Closing” shall have the meaning set forth in Section 2.4.

“Closing Date” shall have the meaning set forth in Section 2.4.

“Code” means the Internal Revenue Code of 1986 or any successor law.

“Company” shall have the meaning set forth in the preamble.

“Company Benefit Plans” means any: (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan;
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan; (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan); (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program; or (e) any bonus, profit sharing, incentive, severance,
or other plan, program or arrangement for the benefit of any of its directors,
officers, and employees.

“Company Disclosure Schedules” shall have the meaning set forth in the
introduction to Article III.

“Company Employees” shall have the meaning set forth in Section 3.16(a).

“Company Financial Statements” shall have the meaning set forth in Section 3.6.

“Company Permits” shall have the meaning set forth in Section 3.7(b).

“Company Senior Management” means Steve Jones, Steve Hall, Paul Westover, Greg
Choban, Tom Bevan and Graham Palmer.

“Company Shareholder Representative” shall have the meaning set forth in the
preamble, as may be modified from time to time pursuant to Section 2.7.

“Confidential Information” means any information concerning the businesses and
affairs of the Company that is not already generally available to the public.

“Contract” means any agreement, contract, instrument, obligation, promise,
commitment or undertaking (whether written or oral and whether express or
implied).

“Core Representations” means those representations and warranties set forth in
Section 3.1 (Organization and Qualification; Subsidiaries), Section 3.2
(Capitalization; Ownership of Stock), Section 3.3 (Authorization and Validity of
Agreement), Section 4.1 (Organization of Certain Shareholders), Section 4.2
(Authorization), Section 4.3 (Execution and Validity) and Section 4.5
(Capitalization).

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“Core6” shall have the meaning set forth in Section 3.6.

“Current Assets” means all current assets of the Company (e.g., cash, cash
equivalents, accounts receivable, Tax and other receivables, prepaid expenses,
deposits, and inventory) required to be set forth on a balance sheet prepared in
accordance with GAAP, consistently applied with past practices of the Company
and the Company’s audited financial statements. Notwithstanding the foregoing,
“Current Assets” shall not include any deferred Tax asset.

“Current Liabilities” means any current Liabilities and obligations of the
Company of the type required to be set forth on a balance sheet prepared in
accordance with GAAP, consistently applied with past practices of the Company,
and the Company’s audited financial statements. For purposes of determining
Working Capital and any estimates thereof, “Current Liabilities” shall include
(a) all liabilities and obligations that are contingent upon the consummation
of, or arise in connection with, the transactions contemplated hereby,
including, without limitation, consulting, legal and accounting expenses,
severance and bonus payments and any other fees, pay-off amounts and any other
amounts necessary to satisfy any closing obligations of the Company and of the
Shareholders that are borne by the Company as contemplated under Section 8.1,
(b) any expenses and fees incurred by the Company or Purchaser, as applicable to
procure and maintain the D&O Insurance contemplated under Section 6.3, and
(c) any other amounts or Liabilities referred to in this Agreement that are to
be included in the calculation of Working Capital, including, without
limitation, any current Liability or obligation for any Tax. Notwithstanding the
foregoing, “Current Liabilities” shall not include the current portion of any
long-term debt and/or any deferred Tax Liability.

“Damages” shall have the meaning set forth in Section 9.2.

“D&O Insurance” shall have the meaning set forth in Section 6.3.

“Effective Time” shall have the meaning set forth in the preamble.

“Employee Pension Benefit Plan” has the meaning set forth in Sec. 3(2) of ERISA.

“Employee Welfare Benefit Plan” has the meaning set forth in Sec. 3(1) of ERISA.

“Encumbrance” means any mortgage, pledge, encumbrance, lien, charge, claim,
community property interest, covenant, equitable interest including any
equitable servitude, lien, security interest, right of first refusal, or other
similar restriction.

“Enforceability Limitations” shall have the meaning set forth in Section 3.3.

“Environmental Claim” means any and all administrative, regulatory or judicial
actions, suits, demand letters, claims, liens or written notices of violation of
or Liability arising under any Environmental Law relating to the Company.

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“Environmental Laws” means any applicable Legal Requirement relating to (a) the
protection, investigation or restoration of the environment, public health and
safety, worker health and safety, pollution, the environment or natural
resources or (b) the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
Hazardous Material.

“ERISA” means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that act or any
successor law.

“ERISA Affiliate” means any other person or entity under common control with the
Company within the meaning of Section 414(b), (c), (m) or (o) of the Code and
the regulations under the Code or Section 4001 of ERISA.

“Escrow Agent” shall have the meaning set forth in Section 2.2(b)(i).

“Escrow Agreement” shall have the meaning set forth in Section 2.2(b)(i).

“Escrow Amount” shall have the meaning set forth in Section 2.2(b)(i).

“Estimated Adjustment Amount” shall have the meaning set forth in
Section 2.3(a).

“Estimated Purchase Price” shall have the meaning set forth in
Section 2.2(b)(ii).

“Estimated Working Capital” shall have the meaning set forth in Section 2.3(a).

“Estimated Working Capital Schedule” shall have the meaning set forth in
Section 2.3(a).

“FAR” shall have the meaning set forth in Section 3.27(a).

“Fiduciary “ has the meaning set forth in Sec. 3(21) of ERISA.

“Financial Statements” shall have the meaning set forth in Section 3.6.

“Founding Shareholders” means Frank M. Kudla, Jr. and Nancy R. Kudla.

“GAAP” means generally accepted accounting principles.

“Government Contract” means any contract of the Company with a Governmental
Entity to provide goods or services, including without limitation any blanket
purchasing agreement; the term “Government Contract” also shall include any
subcontract (at any tier) of the Company with another entity that holds either a
prime contract with a Governmental Entity or a subcontract (at any tier) under
such a prime contract. For purposes of this definition, a Task Order under a
Government Contract shall not constitute a separate Government Contract, but
shall be part of the Government Contract to which it relates.

“Government Contract Bid” means any outstanding bid, offer, proposal or quote
for goods or services to be delivered to or in support of a Governmental Entity
under a proposed prime contract, proposed subcontract (at any tier) under a
proposed prime contract or Task Order.

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“Governmental Entity” means any: nation, state, county, city, town, village,
district, or other jurisdiction of any nature; federal, state, local, municipal,
foreign, or other government; governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any court
or other tribunal); or body legally exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.

“Guarantor” shall have the meaning set forth in the preamble.

“Hazardous Materials” means any hazardous substance, the use, transportation or
disposition of which is regulated by any Legal Requirement or by any
Governmental Entity, including, without limitation, any petroleum product or
by-product, material containing asbestos, lead or polychlorinated biphenyls,
noise, mixtures, pollutants, pesticides, toxic chemicals, contaminants,
radiation, radioactive material or radon.

“Houlihan Lokey” means Houlihan Lokey Howard & Zukin.

“Indebtedness” means (i) any indebtedness for borrowed money or interest-bearing
debt, (ii) letters of credit, (iii) any guarantees or other liabilities
(contingent or otherwise) with respect to any Indebtedness or obligation of any
other Person, (iv) any liabilities or obligations to or with respect to, or
Contracts with, any current or former Shareholder(s) of the Company, or (v) any
liability or compensation payments owed, accrued or payable in connection with
accrued vacation or sick leave to any Shareholder.

“Indemnified Parties” shall have the meaning set forth in Section 9.3.

“Indemnifying Party” shall have the meaning set forth in Section 9.4(a).

“Independent Accounting Firm” shall have the meaning set forth in
Section 2.3(d).

“Intellectual Property” means all of the following in any jurisdiction
throughout the world: (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names, and rights in telephone numbers,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including source code, executable code, data,
databases, and related

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documentation), (g) all material advertising and promotional materials, (h) all
other proprietary rights, and (i) all copies and tangible embodiments thereof
(in whatever form or medium), and (j) other intellectual property of any kind or
nature now existing or hereafter arising.

“IRS” means the Internal Revenue Service.

“Knowledge” means with respect to the Company, the actual knowledge of the
Shareholders and the Company’s directors and officers after reasonable inquiry
of the Company Senior Management regarding the subject matter in question, and
means with respect to Purchaser, the actual knowledge of the executive officers
of Purchaser after reasonable inquiry of persons having supervisory authority
over the subject matter in question.

“Leased Real Property” means all leasehold or subleasehold estates and other
rights to use or occupy any land, buildings, structures, improvements, fixtures,
or other interest in real property held by the Company.

“Leases” means all leases, subleases, licenses, concessions and other agreements
(written or oral), including all amendments, extensions, renewals, guaranties,
and other agreements with respect thereto, pursuant to which the Company holds
any Leased Real Property, including the right to all security deposits and other
amounts and instruments deposited by or on behalf of the Company thereunder.

“Legal Requirement” means any federal, state, local, municipal, provincial,
foreign, international or other law, statute, constitution, treaty, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Entity.

“Liability” means any liability, debt obligation, deficiency, Tax, penalty,
fine, claim, cause of action or other loss, cost or expense of any kind or
nature whatsoever, whether asserted or unasserted, absolute or contingent, known
or unknown, accrued or unaccrued, liquidated or unliquidated, and whether due or
to become due and regardless of when asserted.

“Material Adverse Effect” means any effect or change that would be (or could
reasonably be expected to be) materially adverse to the business, assets,
condition (financial or otherwise), operating results, operations, or business
prospects of the Company, taken as a whole, or to the ability of the
Shareholders and the Company to consummate timely the transactions contemplated
hereby (regardless of whether or not such adverse effect or change can be or has
been cured at any time or whether Purchaser has knowledge of such effect or
change on the date hereof).

“Material Contracts” shall have the meaning set forth in Section 3.15.

“Multiemployer Plan” has the meaning set forth in Sec. 3(37) of ERISA.

“Objection Notice” shall have the meaning set forth in Section 2.3(c).

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“Order” means any decision, judgment, order, writ, injunction, decree, award or
determination (whether temporary, preliminary or permanent) of any Governmental
Entity.

“Organizational Documents” means (a) the articles or certificate of
incorporation and the bylaws of a corporation, (b) the partnership agreement and
any statement of partnership of a general partnership, (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership, (d) the articles of organization and regulations of a limited
liability company, (e) any charter or similar document adopted or filed in
connection with the creation, formation, or organization of a Person and (f) any
amendment to any of the foregoing.

“Payoff Letters” shall have the meaning set forth in Section 7.2(d).

“Permitted Encumbrances” means (i) Encumbrances that are set forth on Exhibit G
attached hereto, (ii) Encumbrances for Taxes not delinquent or the validity of
which are being contested in good faith by appropriate proceedings and as to
which adequate reserves have been established on the Company’s financial
statements in accordance with GAAP consistently applied with past practices of
the Company, (iii) statutory landlord’s, mechanic’s, carrier’s, workmen’s,
repairmen’s or other similar Encumbrances arising or incurred in the ordinary
course of business for amounts which are not due and payable and which would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company’s business as currently conducted thereon, and (iv) Encumbrances arising
from zoning ordinances which are not material to the Company’s business as
currently conducted thereon.

“Person” means any natural person, corporation, limited liability company,
partnership, unincorporated organization or other entity.

“Pre-Closing Date Tax Period” shall have the meaning set forth in
Section 10.2(b).

“Proceeding” means any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal, at law or in equity) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Entity or arbitrator.

“Prohibited Transaction” has the meaning set forth in Sec. 406 of ERISA and Code
Sec. 4975.

“Purchase Price” shall have the meaning set forth in Section 2.2(a).

“Purchaser” shall have the meaning set forth in the preamble.

“Purchaser Disclosure Schedules” shall have the meaning set forth in
Section 5.3.

“Purchaser Indemnified Party” shall have the meaning set forth in Section 9.2.

“Regulations” shall have the meaning set forth in Section 3.13(p).

“Release” means any spilling, leaking, pumping, emitting, emptying, discharging,
injection, escaping, leaching, migrating, dumping, or disposing of Hazardous
Materials (including the abandonment or discarding of barrels, containers or
other closed receptacles containing Hazardous Materials) into the environment.

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“Restricted Persons” shall have the meaning set forth in Section 6.5(b).

“S Corporation” means a corporation that has made a valid election to be taxed
under Subchapter S of Chapter 1 of the Code.

“S Corporation Tax Return” means any U.S. Form 1120S Tax Return or the state and
local equivalent thereof.

“Section 338 Forms” shall have the meaning set forth in Section 10.1.

“Section 338(h)(10) Election” shall have the meaning set forth in Section 10.1.

“Section 409A Plan” shall have the meaning set forth in Section 3.12(k).

“Shareholder Indemnified Party” shall have the meaning set forth in Section 9.3.

“Shareholder(s)” shall have the meaning set forth in the preamble.

“Stock” shall have the meaning set forth in the recitals.

“Straddle Period” shall have the meaning set forth in Section 10.2(b).

“Subsidiary” means, with respect to any Person, any corporation, limited
liability company, partnership, association, or other business entity of which:
(a) if a corporation, a at least 40% of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof; or (b) if a limited
liability company, partnership, association, or other business entity (other
than a corporation), at least 40% of the partnership or other similar ownership
interests thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons own a majority ownership interest in
such a business entity (other than a corporation) if such Person or Persons
shall be allocated at least 40% of such business entity’s gains or losses or
shall be or control any managing director or general partner of such business
entity (other than a corporation). The term “Subsidiary” shall include all
Subsidiaries of such Subsidiary.

“Subsidiary Financial Statements” shall have the meaning set forth in
Section 3.6.

“Subsidiary Interests” shall have the meaning set forth in Section 3.1(b).

“Survival Period” shall have the meaning set forth in Section 9.1.

“Task Order” means any task, purchase, or delivery order under a Government
Contract.

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“Tax” or “Taxes” (and, with correlative meaning, “Taxable” and “Taxation”) means
any federal, state, local or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.

“Tax Authority” means any Governmental Entity responsible for the imposition of
any Tax (domestic or foreign).

“Tax Period” means any period prescribed by any Governmental Entity for which a
Tax Return is required to be filed or a Tax is required to be paid.

“Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any such document
prepared on a consolidated, combined or unitary basis and also including any
schedule or attachment thereto, and including any amendment thereof.

“Third-Party Claim” shall have the meaning set forth in Section 9.4(a).

“Treasury Regulations” means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

“Working Capital” shall have the meaning set forth in Section 2.3(b).

“Working Capital Schedule” shall have the meaning set forth in Section 2.3(b).