Exhibit 10.18

 

CACI INTERNATIONAL INC

CACI, INC. - FEDERAL

CMS INFORMATION SERVICES, INC.

 

STOCK PURCHASE AGREEMENT

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

TABLE OF CONTENTS

 

Article 1 Definitions

   1      1.1    Certain Matters of Construction    1      1.2    Cross
References    2      1.3    Certain Definitions    3

Article 2 The Purchase And Sale of Shares

   7      2.1    Purchase of the Shares from the Stockholders    7      2.2   
Purchase Price    7           2.2.1 The Aggregate Purchase Price    7          
2.2.2 The Purchase Price Paid at the Closing    7           2.2.3 The Escrowed
Portion of the Purchase Price    8      2.3    Additional Actions    8      2.4
   Stockholders’ Representative    8      2.5    Adjustment to Purchase Price.
   9           2.5.1 Preparation of Closing Balance Sheet    9           2.5.2
Review of Closing Balance Sheet    10           2.5.3 Disputes    10          
2.5.4 Final Closing Balance Sheet    10           2.5.5 Adjustments to the
Purchase Price    11

Article 3 Representations And Warranties Of CMS and the Indemnifying
Stockholders

   11      3.1    Corporate Status of CMS    11      3.2    Capital Stock    11
          3.2.1 Authorized Stock of CMS    11           3.2.2 Options and
Convertible Securities of CMS    11      3.3    Subsidiaries    12      3.4   
Authority for Agreement; Noncontravention    12           3.4.1 Authority    12
          3.4.2 No Conflict    12      3.5    Financial Statements    13     
3.6    Absence of Material Adverse Changes    13      3.7    Absence of
Undisclosed Liabilities    13      3.8    Compliance with Applicable Law,
Charter and By-Laws    14      3.9    Litigation and Audits    14      3.10   
Tax Matters    14           3.10.1 Filing of Returns    14

 

- i -

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

    

3.10.2 Payment of Taxes

   14     

3.10.3 Assessments or Disputes

   15     

3.10.4 Waiver of Statute of Limitations

   15     

3.10.5 Collapsible Corporations, Golden Parachutes, Real Property Holding
Corporations

   15     

3.10.6 Tax Basis

   15     

3.10.7 Unpaid Taxes

   15     

3.10.8 Unclaimed Property

   16     

3.10.9 No Changes in Accounting, Closing Agreement, Installment Sale

   16     

3.10.10 S Corporation

   16     

3.10.11 Acquisitions

   16

3.11

  

Employee Benefit Plans

   16     

3.11.1 List of Plans

   16     

3.11.2 ERISA

   17     

3.11.3 Plan Determinations

   18     

3.11.4 Funding

   18     

3.11.5 Certain Other Matters

   18     

3.11.6 Welfare Plans

   19

3.12

  

Employment-Related Matters

   19     

3.12.1 Labor Relations

   19     

3.12.2 Employee List

   19     

3.12.3 Conduct of Directors and Officers

   20

3.13

  

Environmental

   20     

3.13.1 Environmental Laws

   20     

3.13.2 Environmental Claims

   20     

3.13.3 No Basis for Claims

   20     

3.13.4 Disclosure of Information

   21     

3.13.5 Liens

   21

3.14

  

No Broker’s or Finder’s Fees

   21

3.15

  

Assets Other Than Real Property

   21     

3.15.1 Title

   21     

3.15.2 Accounts Receivable

   21     

3.15.3 Condition

   21

3.16

  

Real Property

   22     

3.16.1 CMS Real Property

   22     

3.16.2 CMS Leases

   22     

3.16.3 Condition

   22

3.17

  

Agreements, Contracts and Commitments

   22     

3.17.1 CMS Agreements

   22     

3.17.2 Validity

   24     

3.17.3 Third-Party Consents

   24

3.18

  

Intellectual Property

   24     

3.18.1 No Conflicts

   24     

3.18.2 Proprietary Rights; Licenses

   25     

3.18.3 Employee Agreements

   26

3.19

   Insurance Contracts    26

 

- ii -

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

     3.20    Banking Relationships    26      3.21    No Contingent Liabilities
   26      3.22    Absence of Certain Relationships    26      3.23    Foreign
Corrupt Practices    27

Article 4 Representations And Warranties Of the Stockholders

   27      4.1    Title; Entirety of Interest    27      4.2    Claims    27  
   4.3    Authority    27      4.4    Enforceability    27      4.5    No
Conflicts    28

Article 5 Representations And Warranties Of Parent And Federal

   28      5.1    Corporate Status of Parent and Federal    28      5.2   
Authority for Agreement; Noncontravention    28           5.2.1 Authority of
Parent    28           5.2.2 No Conflict    28      5.3    SEC Statements,
Reports and Documents    29      5.4    Absence of Material Adverse Changes   
29      5.5    Financing Arrangements    29

Article 6 Conduct Prior To The Closing Date

   29      6.1    Conduct of Business of CMS    29      6.2    Conduct of
Business of Parent    31

Article 7 Additional Agreements

   32      7.1    Exclusivity    32      7.2    Expenses    32           7.2.1
General    32           7.2.2 Attorney Fees    32           7.2.3 Accountant
Fees    32           7.2.4 Uncovered Expenses    32      7.3    Insurance Tail
Policies    32      7.4    Indemnification    33           7.4.1 Claims for
Indemnification    33           7.4.2 Defense by Indemnifying Party    33       
   7.4.3 Limitation on Liability for Indemnity.    34      7.5    Access and
Information    35      7.6    Public Disclosure    35      7.7    Further
Assurances    35           7.7.1 Generally    35           7.7.2 Novation of
Contracts    36           7.7.3 Benefit Plan Disclosures    36      7.8   
Certain Tax Matters    36           7.8.1 338(h)(10) Election    36          
7.8.2 Allocation of Purchase Price    36           7.8.3 S Corporation Status   
36

 

- iii -

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

          7.8.4 Tax Periods Ending on or before the Closing Date    37          
7.8.5 Cooperation on Tax Matters    37           7.8.6 Tax Sharing Agreements   
37           7.8.7 Certain Taxes    38      7.9    Notification    38      7.10
   Termination of the ESOP    38      7.11    Termination of Existing
Shareholder Agreements    38

Article 8 Conditions Precedent

   38      8.1    Conditions Precedent to the Obligations of Each Party    38  
        8.1.1 No Illegality    38           8.1.2 Government Consents    38     
     8.1.3 No Injunction    39           8.1.4 Escrow Agreement    39          
8.1.5 Paying Agent Agreement    39      8.2    Conditions Precedent to
Obligation of Parent and Federal to Consummate the Transaction    39          
8.2.1 Representations and Warranties    39           8.2.2 Agreements and
Covenants    39           8.2.3 Legal Opinion    39           8.2.4 Closing
Documents    39           8.2.5 Third Party Consents    40           8.2.6
Diligence Review    40           8.2.7 Authority of the Trustee of the CMS
Corporation Employee Stock Ownership Plan    40           8.2.8 Non-Compete,
Non-Solicitation and Non-Disturbance Agreements    40           8.2.9 Employment
Agreements    40           8.2.10 Updated Employee List    40           8.2.11
Material Adverse Effect    40           8.2.12 No Outstanding Options, Warrants,
etc.    41           8.2.13 Resignations    41           8.2.14 Termination of
Employment Agreement with David C. Lucien    41           8.2.15 Termination of
Loans to Employees    41           8.2.16 Termination of Consulting Agreement
with Douglas Turner    41           8.2.17 Phase 2E    41           8.2.18
Maryland Qualification    41           8.2.19 Paying Agent Agreement    41     
     8.2.20 Audited Financials    41      8.3    Conditions to Obligations of
CMS and the Stockholders to Consummate the Transaction    41           8.3.1
Representations and Warranties    42           8.3.2 Agreements and Covenants   
42           8.3.3 Legal Opinion    42           8.3.4 Closing Documents    42  
        8.3.5 Payment of Purchase Price    42

 

- iv -

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

Article 9 Survival of Representations

   46      9.1    CMS’s and the Stockholders’ Representations    46      9.2   
Parent’s and Federal’s Representations    47

Article 10 Other Provisions

   47      10.1    Termination Events    47      10.2    Notices    48      10.3
   Transfer of Obligations    49      10.4    Entire Agreement    49      10.5
   Assignability    50      10.6    Accession    50      10.7    Validity    50
     10.8    Specific Performance    50      10.9    Governing Law    50     
10.10    Counterparts    50

 

- v -

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

STOCK PURCHASE AGREEMENT

 

STOCK PURCHASE AGREEMENT, dated as of February 12, 2004 (the “Agreement”), by
and among CACI International Inc, a Delaware corporation (“Parent”), CACI, INC.
- FEDERAL, a Delaware corporation and wholly-owned subsidiary of Parent
(“Federal”), CMS Information Services, Inc., a Virginia corporation (“CMS”), and
the stockholders of CMS listed on Schedule A attached hereto (each individually
a “Stockholder” and collectively, the “Stockholders”). Should the CMS
Information Services, Inc. Employee Stock Ownership Plan (the “ESOP”) accede to
this Agreement pursuant to Section 10.6 hereof, then, from and after the time of
such accession, the ESOP shall be deemed to be a Stockholder, and the
Stockholders shall be deemed to include the ESOP, for all purposes hereunder.

 

WITNESSETH

 

WHEREAS, as of the date hereof, each Stockholder owns the number of issued and
outstanding shares of common stock, $0.01 par value per share, of CMS (“CMS
Common Stock”) set forth opposite such Stockholder’s name on Schedule A hereto;

 

WHEREAS, the Stockholders own all of the issued and outstanding shares of CMS
Common Stock held by Persons other than the ESOP;

 

WHEREAS, the Stockholders wish to enter into this Agreement as of the date
hereof and sell all of their shares of CMS Common Stock (the “Shares”) and
Federal wishes to purchase all (but not less than all) of the Shares (the
“Transaction”);

 

WHEREAS, the ESOP does not wish to be a party to this Agreement as of the date
hereof, but may wish to accede to this Agreement prior to the Closing;

 

WHEREAS, Parent, Federal, the Stockholders and CMS wish to allow the ESOP to
accede to this Agreement at its option after the date hereof and prior to the
Closing, subject to certain terms and conditions; and

 

WHEREAS, Parent, Federal, the Stockholders and CMS wish to make certain
representations and warranties and other agreements in connection with the
Transaction;

 

NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereby agree as follows:

 

Article 1

DEFINITIONS

 

1.1 Certain Matters of Construction. A reference to an article, section, exhibit
or schedule shall mean an Article of, a Section in, or Exhibit or Schedule to,
this Agreement unless otherwise expressly stated. The titles and headings herein
are for reference purposes only and shall not in any manner limit the
construction of this Agreement, which shall be considered as a

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

whole. The words “include,” “includes,” and “including” when used herein shall
be deemed in each case to be followed by the words “without limitation.” 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 terms. Any agreement,
instrument, law or regulation defined or referred to herein or in any agreement
or instrument that is referred to herein means such agreement, instrument or law
or regulation 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 laws and regulations) by succession of comparable successor laws or
regulations and references to all attachments thereto and instruments
incorporated therein. References to a Person are also to its permitted
successors and assigns.

 

1.2 Cross References. The following terms defined elsewhere in this Agreement in
the Sections set forth below shall have the respective meanings therein defined:

 

Term

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

 

Definition

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

Acquisition Proposals

  Section 7.1

Agreement

  Preamble

Auditor

  Section 2.5.3

CMS Balance Sheet

  Section 3.5

CMS Common Stock

  Recitals

CMS Financial Statements

  Section 3.5

CMS Insurance Contracts

  Section 3.19

CMS Plans

  Section 3.11.1

CMS Proprietary Rights

  Section 3.18.1

CMS

  Preamble

CMS’s Accountant

  Section 2.2.2

CMS’s Counsel

  Section 2.2.2

Closing Balance Sheet

  Section 2.5.1

Closing Date

  Section 2.1

Closing

  Section 2.1

Direct Payment

  Section 2.2.2

Employee List

  Section 3.12.2

Encumbrances

  Section 3.15.1

Escrow Agent

  Section 2.2.3

Escrow Agreement

  Section 2.2.3

Escrow Payment

  Section 2.2.3

Escrow

  Section 2.2.3

ESOP

  Preamble

Expenses

  Section 7.2.1

Federal

  Preamble

Final Closing Balance Sheet

  Section 2.5.4

GAAP

  Section 2.5.1

Governmental Entity

  Section 3.4.2

Indemnification Claim

  Section 7.4.1

Indemnified Party

  Section 7.4.1

 

- 2 -

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

Indemnifying Party

  Section 7.4.1

Indemnifying Stockholders

  Section 2.2.3

Initial Balance Sheet

  Section 2.5.1

Insurance Tail Premiums

  Section 7.3

Notice of Claim

  Section 7.4.1

Objections

  Section 2.5.2

Parent Balance Sheet

  Section 5.3

Parent Demand Notice

  Section 7.1

Parent Indemnified Parties

  Section 7.4

Parent Indemnifying Parties

  Section 7.4

Parent Indemnity Basket

  Section 7.4.3

Parent

  Preamble

Permits

  Section 3.8

Purchase Price

  Section 2.2.1

Section 338(h)(10) Election

  Section 7.8.1

Shares

  Recitals

Stockholder Indemnified Parties

  Section 7.4

Stockholder Indemnifying Parties

  Section 7.4

Stockholder Indemnity Basket

  Section 7.4.3

Stockholders

  Recitals

Stockholders’ Representative

  Section 2.4

Third Party Claim

  Section 7.4.2

Transaction

  Recitals

Welfare Plan

  Section 3.11.6

 

1.3 Certain Definitions. As used herein, the following terms shall have the
following meanings:

 

Affiliate: with respect to any Person, any Person which, directly or indirectly,
controls, is controlled by, or is under common control with, such Person.

 

Affiliated Group: any affiliated group within the meaning of Code section
1504(a).

 

CMS Leases: each lease, sublease, license or other agreement under which CMS or
any Subsidiary uses, occupies or has the right to occupy any real property or
interest therein.

 

CMS Material Adverse Effect: any materially adverse change in or effect on CMS’s
financial condition, business, operations, assets, properties, results of
operations or prospects.

 

COBRA: the provisions of Section 4980B of the Code and Part 6 of Title I of
ERISA.

 

Code: the United States Internal Revenue Code of 1986, as amended from time to
time.

 

Commercial Software: packaged commercial software programs generally available
to the public through retail dealers in computer software or directly from the
manufacturer which have been licensed to CMS or a Subsidiary and which are used
in CMS’s or such

 

- 3 -

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

Subsidiary’s business but are in no way a component of or incorporated in or
specifically required to develop any of CMS’s or such Subsidiary’s products and
related trademarks and technology.

 

Control: (including with correlative meaning, controlled by and under common
control with): as used with respect to any Person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.

 

Environmental Claim: any actual notice alleging potential liability (including,
without limitation, potential liability for investigatory costs, cleanup costs,
response or remediation costs, natural resources damages, property damages,
personal injuries, fines or penalties) arising out of, based on or resulting
from (a) the presence, or release of any Material of Environmental Concern at
any location, or (b) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.

 

Environmental Laws: any and all Federal, state and local laws, statutes, rules
and regulations and common law relating to the environment or occupational
health and safety, including without limitation any and all statutes,
regulations, administrative decisions and orders pertaining to (a) treatment,
storage, disposal, generation and transportation of industrial, toxic or
hazardous materials or substances or solid or hazardous waste; (b) air, water
and noise pollution; (c) groundwater and soil contamination; (d) the release or
threatened release into the environment of industrial, toxic or hazardous
materials or substances, or solid or hazardous waste, including without
limitation emissions, discharges, injections, spills, escapes or dumping of
pollutants, contaminants or chemicals; (e) the protection or wild life, marine
life and wetlands, including without limitation all endangered and threatened
species; (f) storage tanks, vessels, containers, abandoned or discarded barrels,
and other closed receptacles; (g) health and safety of employees and other
persons; and (h) manufacturing, processing, using, distributing, treating,
storing, disposing, transporting or handling of materials regulated under any
law as pollutants, contaminants, toxic or hazardous materials or substances or
oil or petroleum products or solid or hazardous waste. As used above, the terms
“release” and “environment” shall have the meaning set forth in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended.

 

ERISA Affiliate: with respect to a party, any member (other than that party) of
a controlled group of corporations, group of trades or businesses under common
control or an affiliated service group that includes that party (as defined for
purposes of Sections 414(b), (c) and (m) of the Code).

 

ERISA: the Employee Retirement Income Security Act of 1974, as amended.

 

Exchange Act: the Securities Exchange Act of 1934, as amended.

 

Key Management Group: David C. Lucien, Chairman and Chief Executive Officer of
CMS; Robert B. Turner, President and Chief Operating Officer of CMS; Douglas K.

 

- 4 -

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

Turner, Vice Chairman of CMS; William H. Wilken, Secretary and Chief Information
Officer of CMS; Lanphuong Truong, Treasurer and Chief Financial Officer of CMS;
Charlie McQuillan, Division Vice President for Strategic Applications and
Consulting of CMS; Jim Roy, Division Vice President for Enterprise Solutions of
CMS; Mike Perro, Vice President of Business Development of CMS; and Bob
Werthmann, Director of Human Resources of CMS.

 

Knowledge of CMS: the actual, current knowledge of the Key Management Group and
each member thereof.

 

Letter of Intent: the letter dated November 19, 2003 from Stephen L. Waechter,
Executive Vice President and Chief Financial Officer of Parent, to David C.
Lucien, Chairman and Chief Executive Officer of CMS, expressing the companies’
intention to effect the stock purchase and related transactions, subject to
execution of this Agreement and other matters.

 

Liability: any liability or obligation, known or unknown, asserted or
unasserted, accrued or unaccrued, absolute or contingent, liquidated or
unliquidated, or otherwise, and whether due or to become due, including any
liability for Taxes.

 

Losses: the amount of any actual damages, liabilities, obligations,
deficiencies, losses (including without limitation any actual diminution in
value), expenditures, costs or expenses (including without limitation reasonable
attorneys’ fees and disbursements). For purposes of determining the amount of
any Loss, the amount of any Loss shall be reduced by any insurance proceeds
received or receivable in respect thereof (in each case net of costs of
recovery). For purposes of determining the amount of any Loss incurred by reason
of any breach of any representation or warranty made by CMS or the Stockholders
under this Agreement, each such representation or warranty would read as if all
qualifications as to materiality and knowledge were deleted therefrom.

 

Materials of Environmental Concern: petroleum and its by-products and any and
all other substances or constituents to the extent that they are regulated by,
or form the basis of liability under, any Environmental Law.

 

Net Worth: CMS’s total assets less total liabilities as of the Closing Date,
determined in accordance with GAAP. Any receipts from the exercise of stock
options after execution of the Letter of Intent and any related tax benefits to
CMS shall be excluded from assets in determining Net Worth.

 

Parent Material Adverse Effect: any change in or effect on the financial
condition, business, operations, assets, properties, results of operations of
Parent and Federal considered on a consolidated basis that would reasonably be
expected to impair the ability of Parent to provide funds for payment of the
entire Purchase Price in accordance with the terms of this Agreement.

 

Paying Agent Agreement: the paying agent agreement, substantially in the form
attached hereto as Exhibit G.

 

- 5 -

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

Permitted Encumbrances: (a) liens for current Taxes and other statutory liens
and trusts not yet due and payable or that are being contested in good faith,
(b) liens incurred in the ordinary course of business, such as carriers’,
warehousemen’s, landlords’ and mechanics’ liens and other similar liens arising
in the ordinary course of business, (c) liens on personal property leased under
operating leases, (d) liens, pledges or deposits incurred or made in connection
with workmen’s compensation, unemployment insurance and other social security
benefits, or securing the performance of bids, tenders, leases, contracts (other
than for the repayment of borrowed money), statutory obligations, progress
payments, surety and appeal bonds and other obligations of like nature, in each
case incurred in the ordinary course of business, (e) pledges of or liens on
manufactured products as security for any drafts or bills of exchange drawn in
connection with the importation of such manufactured products in the ordinary
course of business, (f) liens under Article 2 of the Uniform Commercial Code
that are special property interests in goods identified as goods to which a
contract refers, (g) liens under Article 9 of the Uniform Commercial Code that
are purchase money security interests, (h) those liens disclosed on Exhibit H
hereto, (i) such imperfections or minor defects of title, easements,
rights-of-way and other similar restrictions (if any) as are insubstantial in
character, amount or extent, do not materially detract from the value or
interfere with the present or proposed use of the properties or assets of the
party subject thereto or affected thereby, and do not otherwise adversely affect
or impair the business or operations of such party, and (j) accounts payable
incurred in the ordinary course of business.

 

Person: an individual, a corporation, a limited liability company, an
association, a partnership, an estate, a trust or any other entity or
organization.

 

SEC: the United States Securities and Exchange Commission, or any Governmental
Entity succeeding to its functions.

 

Securities Act: the Securities Act of 1933, as amended.

 

Security Interest: any mortgage, pledge, lien, encumbrance, charge, or other
security interest, other than (a) mechanic’s, materialman’s, and similar liens,
(b) liens for Taxes not yet due and payable, and (c) purchase money liens and
liens securing rental payments under capital lease arrangements.

 

Subsidiary: any corporation, association, or other business entity a majority
(by number of votes on the election of directors or persons holding positions
with similar responsibilities) of the shares of capital stock (or other voting
interests) of which is owned directly or indirectly by CMS.

 

Tax: any federal, state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code section 59A), 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.

 

- 6 -

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

Tax Return: any return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.

 

Treasury Regulation: a regulation promulgated by the United States Treasury
Department under one or more provisions of the Code.

 

Article 2

THE PURCHASE AND SALE OF SHARES

 

2.1 Purchase of the Shares from the Stockholders. Subject to and upon the terms
and conditions of this Agreement, and on the basis of the representations,
warranties, covenants, and agreements herein contained, at the closing of the
transactions contemplated by this Agreement (the “Closing”), the Stockholders
shall sell, transfer, convey or assign and deliver to Federal, and Federal shall
purchase, acquire and accept from the Stockholders, the Shares, free and clear
of any and all liens, claims, encumbrances or rights of any third party. At the
Closing, the Stockholders shall deliver to Federal stock powers or other
appropriate instruments of transfer duly executed. The Closing shall take place
at the offices of Parent in Arlington, Virginia, commencing at 9 a.m. local time
on February 29, 2004 or on such other date as the parties may agree after the
satisfaction or waiver of all conditions to the obligations of the parties to
consummate the transactions contemplated hereby (the “Closing Date”).

 

2.2 Purchase Price

 

2.2.1 The Aggregate Purchase Price. The aggregate purchase price (the “Purchase
Price”) to be paid by Federal for the Shares shall be $29,000,000 (Twenty-Nine
Million Dollars), assuming the satisfaction of the conditions set forth in
Section 8.2 and subject to adjustment as provided below in Section 2.5. All
payments of the Purchase Price under this Section 2.2 shall be made in
immediately available funds wired to one or more accounts designated by the
Stockholders’ Representative, by a certified check or by such other method as
may be agreed by the Stockholders’ Representative and Federal.

 

2.2.2 The Purchase Price Paid at the Closing. $25,000,000 (Twenty-Five Million
Dollars) of the total Purchase Price (the “Direct Payment”), less

 

  (a) the amount of the fees owed by CMS or the Stockholders (or any of them) to
John Woloszyn (“CMS’s Counsel”), which will be paid by Federal directly to CMS’s
Counsel pursuant to Section 7.2.2;

 

  (b) the amount of the fees owed by CMS or the Stockholders (or any of them) to
McGladrey and Pullen, L.L.P. (“CMS’s Accountant”), which will be paid by Federal
directly to CMS’s Accountant pursuant to Section 7.2.3; and

 

  (c) an amount equal to one-half of the Insurance Tail Premium.

 

shall be paid to the Stockholders by Federal on the Closing Date on the basis of
the allocations set forth on Schedule A hereto.

 

- 7 -

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

2.2.3 The Escrowed Portion of the Purchase Price. For the purpose of securing
the Stockholders’ obligations pursuant to Section 7.4, $4,000,000 (Four Million
Dollars) of the total Purchase Price (the “Escrow Payment”) shall be delivered
to an account (the “Escrow”) to be administered by Riggs Bank NA (the “Escrow
Agent”) pursuant to an escrow agreement substantially in the form of Exhibit A
(the “Escrow Agreement”). The Escrow Payment shall be delivered by Federal to
the Escrow Agent on behalf of the Stockholders named on Schedule B hereto (the
“Indemnifying Stockholders”) and as allocated among the Indemnifying
Stockholders asset forth on Schedule B.

 

2.3 Additional Actions. If, at any time after the Closing Date, any further
action is necessary or desirable to carry out the purposes of this Agreement or
to vest, perfect or confirm in Federal title to or ownership or possession of
the Shares acquired pursuant to this Agreement, the Stockholders, as well as the
officers and directors of CMS and Federal, are fully authorized in their name
and in the name of their respective corporations or otherwise to take, and will
take, all such lawful and necessary action to so vest, perfect or confirm in
Federal title to or ownership of the Shares, so long as such action is
consistent with this Agreement.

 

2.4 Stockholders’ Representative. The Stockholders hereby appoint David C.
Lucien as the true and lawful agent and attorney-in-fact (the “Stockholders’
Representative”) of the Stockholders with full power of substitution to act in
the name, place and stead of the Stockholders with respect to the surrender of
the stock certificates owned by each of the Stockholders to Federal in
accordance with the terms and provisions of this Agreement, and to act on behalf
of the Stockholders in any litigation or arbitration involving this Agreement,
act as the paying agent on behalf of the Stockholders, do or refrain from doing
all such further acts and things, and execute all such documents as the
Stockholders’ Representative shall deem necessary or appropriate in connection
with the transactions contemplated by this Agreement, including, without
limitation, the power:

 

2.4.1 to act for the Stockholders with regard to matters pertaining to
indemnification referred to in this Agreement, including the power to compromise
any indemnity claim on behalf of the Stockholders and to transact matters of
litigation;

 

2.4.2 to execute and deliver all ancillary agreements, certificates and
documents that the Stockholders’ Representative deems necessary or appropriate
in connection with the consummation of the transactions contemplated by this
Agreement;

 

2.4.3 to act as the paying agent and to receive funds and give receipts for
funds, including in respect of any adjustments to the Purchase Price, and to do
or refrain from doing the actions further described in the Paying Agent
Agreement;

 

2.4.4 to do or refrain from doing any further act or deed on behalf of the
Stockholders that the Stockholders’ Representative deems necessary or
appropriate in his sole discretion relating to the subject matter of this
Agreement and the Paying Agent Agreement as fully and completely as the
Stockholders could do if personally present; and

 

2.4.5 to receive service of process in connection with any claims under this
Agreement.

 

- 8 -

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

The appointment of the Stockholders’ Representative shall be deemed coupled with
an interest and shall be irrevocable, and Parent, Federal and CMS may
conclusively and absolutely rely, without inquiry, upon any action of the
Stockholders’ Representative in all matters referred to herein.

 

If David C. Lucien resigns, dies or is otherwise unable to serve as the
Stockholders’ Representative, the successor Stockholders’ Representative shall
be designated in writing by the Stockholders who held a majority of the CMS
Common Stock immediately prior to the Closing, and such designation shall be
binding upon all of the Stockholders.

 

If any individual Stockholders should die or become incapacitated, if any trust
or estate should terminate or if any other such event should occur, any action
taken by the Stockholders’ Representative pursuant to this Section 2.4 shall be
as valid as if such death or incapacity, termination or other event had not
occurred, regardless of whether or not the Stockholders’ Representative, Parent,
Federal or CMS shall have received notice of such death, incapacity, termination
or other event.

 

All notices and other deliveries required to be made or delivered by Parent,
Federal or CMS to the Stockholders shall be made to the Stockholders’
Representative for the benefit of the Stockholders and shall discharge in full
all notice requirements of Parent, Federal or CMS to the Stockholders with
respect thereto. The Stockholders hereby confirm all that the Stockholders’
Representative shall do or cause to be done by virtue of his appointment as the
Stockholders’ Representative of the Stockholders.

 

The Stockholders’ Representative shall act for the Stockholders on all of the
matters set forth in this Agreement in the manner the Stockholders’
Representative believes to be in the best interest of the Stockholders and
consistent with his and their obligations under this Agreement, but the
Stockholders’ Representative shall not be responsible to the Stockholders for
any loss or damages the Stockholders may suffer by the performance by the
Stockholders’ Representative of his duties under this Agreement, other than loss
or damage arising from his willful violation of the law or his duties hereunder.
The Stockholders’ Representative and his heirs and personal or legal
representatives shall be held harmless by the Stockholders from, and indemnified
against, any loss or damages arising out of or in connection with the
performance of his obligations in accordance with the provisions of this
Agreement, except for any of the foregoing arising out of his willful violation
of the law. The foregoing indemnity shall survive the resignation or
substitution of the Stockholders’ Representative.

 

Notwithstanding anything to the contrary herein, the Stockholders’
Representative shall have no liability or obligation to any Stockholder
Indemnified Party otherwise than, and only to the extent of, his individual
liability as a Stockholder as set forth in Section 7.4.

 

2.5 Adjustment to Purchase Price.

 

2.5.1 Preparation of Closing Balance Sheet. As soon as reasonably possible after
the Closing Date (but not later than 60 days thereafter), Federal shall prepare
or cause to be prepared and shall deliver to the Stockholders’ Representative a
Closing Balance Sheet for CMS as of the opening of business on the Closing Date
(the “Closing Balance Sheet”). The Closing Balance Sheet shall be prepared in
accordance with United States generally accepted accounting principles (“GAAP”).

 

- 9 -

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

2.5.2 Review of Closing Balance Sheet. The Stockholders’ Representative, upon
receipt of the Closing Balance Sheet, shall (a) review the Closing Balance Sheet
and (b) to the extent he may deem necessary, make reasonable inquiry of CMS,
Federal and their accountants (if any are used), relating to the preparation of
the Closing Balance Sheet. The Stockholders’ Representative and his employees
and advisors shall have full access upon prior written notice and during normal
business hours to the books, papers and records of CMS and its accountants (if
any are used), relating to the preparation of the Closing Balance Sheet in
connection with such inquiry and the preparation of any objections thereto
(“Objections”). The Closing Balance Sheet shall be binding and conclusive upon,
and deemed accepted by, the Stockholders’ Representative on behalf of the
Stockholders unless the Stockholders’ Representative shall have notified Federal
in writing of any Objections thereto within 30 days after receipt of the Closing
Balance Sheet.

 

2.5.3 Disputes. In the event of Objections, Federal shall have 20 days to review
and respond to such Objections, and Federal and the Stockholders’ Representative
shall attempt to resolve the differences underlying such Objections within 20
days following completion of Federal’s review of such Objections. Disputes
between Federal and the Stockholders’ Representative which cannot be resolved by
them within such 20-day period shall be referred no later than such 20th day for
decision to a nationally-recognized independent public accounting firm mutually
selected by the Stockholders’ Representative and Federal (the “Auditor”) (which
firm shall not be either of (a) the independent public accountants of Federal or
(b) the independent public accountants used by CMS prior to the Closing Date)
who shall act as arbitrator and determine, based solely on presentations by the
Stockholders’ Representative and Federal and only with respect to the remaining
differences so submitted, whether and to what extent, if any, the Closing
Balance Sheet requires adjustment. The Auditor shall deliver its written
determination to Federal and the Stockholders’ Representative no later than the
30th day after the remaining differences underlying such Objections are referred
to the Auditor, or such longer period of time as the Auditor reasonably
determines is necessary. The Auditor’s determination shall be conclusive and
binding upon the parties. The fees and disbursements of the Auditor shall be
allocated equally between Federal and the Stockholders. Federal and the
Stockholders shall make readily available to the Auditor all relevant
information, books and records and any work papers relating to the Closing
Balance Sheet and all other items reasonably requested by the Auditor. In no
event may the Auditor’s resolution of any difference be for an amount which is
outside the range of Federal’s and the Stockholders’ Representative’s
disagreement.

 

2.5.4 Final Closing Balance Sheet. The Closing Balance Sheet shall become final
and binding upon the parties upon the earlier of (a) the Stockholders’
Representative’s failure to object thereto within the period permitted under
Section 2.5.2, (b) the agreement between Federal and the Stockholders’
Representative with respect thereto and (c) the decision by the Auditor with
respect to any disputes under Section 2.5.3. The Closing Balance Sheet, as
adjusted pursuant to the agreement of the parties or decision of the Auditor,
when final and binding is referred to herein as the “Final Closing Balance
Sheet.”

 

- 10 -

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

2.5.5 Adjustments to the Purchase Price. As soon as practicable (but not more
than five business days) after the date on which the Final Closing Balance Sheet
shall have been determined in accordance with this Section 2.5, (a) the
Stockholders’ Representative, as paying agent, shall pay to Federal in
immediately available funds in United States Dollars the amount, if any, by
which the Net Worth in the Final Closing Balance Sheet is less than $6,100,000
(Six Million One Hundred Thousand Dollars), which shall constitute an immediate
adjustment of the Purchase Price in such amount or (b) Federal shall pay to the
Stockholders’ Representative, as paying agent, in immediately available funds in
United States Dollars the amount, if any, by which the Net Worth in the Final
Closing Balance Sheet is greater than $6,100,000 (Six Million One Hundred
Thousand Dollars), which shall constitute an immediate adjustment of the
Purchase Price in such amount.

 

Article 3

REPRESENTATIONS AND WARRANTIES OF CMS AND THE INDEMNIFYING STOCKHOLDERS

 

CMS and each of the Indemnifying Stockholders jointly and severally represent
and warrant to Parent and Federal as follows. Except where the context requires
otherwise, all references to “CMS” in this Article 3 refer to CMS and each of
the Subsidiaries.

 

3.1 Corporate Status of CMS. Except as set forth on Schedule 3.1 hereto, CMS is
a corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Virginia, with the requisite corporate power to own,
operate and lease its properties and to carry on its business as now being
conducted. Except as set forth on Schedule 3.1 hereto, CMS is duly qualified or
licensed to do business as a foreign corporation and is in good standing in all
jurisdictions in which the character of the properties owned or held under lease
by it or the nature of the business transacted by it makes qualification
necessary, except where failure to be so qualified would not have an CMS
Material Adverse Effect. All jurisdictions in which CMS is qualified to do
business are set forth on Schedule 3.1 hereto.

 

3.2 Capital Stock

 

3.2.1 Authorized Stock of CMS. The authorized capital stock of CMS consists of
40,000,000 shares of CMS Common Stock consisting of 20,000,000 shares of Voting
Common Stock - A, of which 7,676,192 shares are issued and outstanding, and
20,000,000 shares of Non-Voting Common Stock - B , of which 0 shares are issued
and outstanding. No shares of CMS Common Stock are held in Treasury. All of the
outstanding shares of CMS Common Stock have been duly authorized and validly
issued, were not issued in violation of any Person’s preemptive rights, and are
fully paid and nonassessable. The Stockholders together own of record and
beneficially all the outstanding shares of CMS Common Stock, other than the
386,545 shares of CMS Common Stock owned by the ESOP.

 

3.2.2 Options and Convertible Securities of CMS. Except as set forth on Schedule
3.2.2, there are no outstanding subscriptions, options, warrants, conversion
rights or other rights, securities, agreements or commitments obligating CMS to
issue, sell or otherwise dispose of shares of its capital stock, or any
securities or obligations convertible into, or exercisable or exchangeable for,
any shares of its capital stock. Except as set forth on Schedule 3.2.2,

 

- 11 -

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

there are no voting trusts or other agreements or understandings to which CMS or
any Stockholder is a party with respect to the voting of the shares of CMS
Common Stock and CMS is neither a party to, nor bound by, any outstanding
restrictions, options or other obligations, agreements or commitments to sell,
repurchase, redeem or acquire any outstanding shares of CMS Common Stock or any
other securities of CMS.

 

3.3 Subsidiaries. CMS owns all of the capital stock of each of the corporations
named on Schedule 3.3, and the jurisdiction and date of organization of each
such corporation, as well as the date on which CMS acquired or organized each
such corporation, is listed opposite the name of such corporation on such
schedule. CMS has no Subsidiaries other than those named on Schedule 3.3. Except
as set forth on Schedule 3.3, CMS has not acquired, sold, divested or liquidated
any corporate entity or line of business. There are no outstanding
subscriptions, options, warrants, conversion rights or other rights, securities,
agreements or commitments obligating any Subsidiary to issue, sell or otherwise
dispose of shares of their capital stock, or any securities or obligations
convertible into, or exercisable or exchangeable for, any shares of their
capital stock. There are no voting trusts or other agreements or understandings
to which any of CMS or any Subsidiary is a party with respect to the voting of
the shares of the capital stock of any Subsidiary and no Subsidiary is a party
to, or bound by, any outstanding restrictions, options or other obligations,
agreements or commitments to sell, repurchase, redeem or acquire any of its
securities.

 

3.4 Authority for Agreement; Noncontravention

 

3.4.1 Authority. CMS has the corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby to the extent
of its obligations hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, to the extent of CMS’s
obligations hereunder, have been duly and validly authorized by the board of
directors of CMS and no other corporate proceedings on the part of CMS are
necessary to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, to the extent of CMS’s
obligations hereunder. This Agreement and the other agreements contemplated
hereby to be signed by CMS have been duly executed and delivered by CMS and
constitute valid and binding obligations of CMS, enforceable against CMS in
accordance with their terms, subject to the qualifications that enforcement of
the rights and remedies created hereby and thereby is subject to (a) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium and other laws of
general application affecting the rights and remedies of creditors and (b)
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).

 

3.4.2 No Conflict. Except as set forth on Schedule 3.4.2 hereto, none of the
execution, delivery or performance of this Agreement and the agreements
referenced herein, nor the consummation of the transactions contemplated hereby
or thereby will (a) conflict with or result in a violation of any provision of
CMS’s charter documents or by-laws or the charter documents or by-laws of any
Subsidiary, (b) with or without the giving of notice or the lapse of time, or
both, conflict with, or result in any violation or breach of, or constitute a
default under, or result in any right to accelerate or result in the creation of
any lien, charge or encumbrance pursuant to, or right of termination under, any
provision of any note, mortgage, indenture, lease, instrument or other
agreement, permit, concession, grant, franchise, license, judgment, order,

 

- 12 -

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

decree, statute, ordinance, rule or regulation to which CMS or any Subsidiary is
a party or by which CMS or any Subsidiary, or any of their respective assets or
properties, are bound or which is applicable to CMS or any Subsidiary, or any of
their respective assets or properties. Except to the extent that novation is
required as further described in Section 7.7.2 below, no authorization, consent
or approval of, or filing with or notice to, any United States or foreign
governmental or public body or authority (each a “Governmental Entity”) is
necessary for the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for such consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not have an CMS Material Adverse Effect.

 

3.5 Financial Statements. CMS has previously furnished Parent with a copy of
CMS’s balance sheet as of December 31, 2003 and December 31, 2002 and CMS’s
statements of operations, cash flows and changes in stockholders’ equity for the
year then ended, and such balance sheets and statements of operations, cash
flows and changes in stockholder’s equity are accurate and complete. The
December 31, 2002 annual financial statements were audited by McGladrey &
Pullen, LLP, certified public accountants, and CMS has previously furnished
Parent with a copy of the report of McGladrey & Pullen, LLP on such audited
financial statements. Collectively, the financial statements referred to in the
immediately preceding sentence are sometimes referred to herein as the “CMS
Financial Statements” and CMS’s balance sheet as of December 31, 2003 is
referred to herein as the “CMS Balance Sheet.” Each of the balance sheets
included in the CMS Financial Statements (including any related notes) fairly
presents in all material respects CMS’s financial position as of their
respective dates, and the other statements included in the CMS Financial
Statements (including any related notes) fairly present in all material respects
CMS’s results of operations, cash flows and stockholders’ equity, as the case
may be, for the periods therein set forth, in each case in accordance with GAAP
consistently applied. There are no significant deficiencies in the design or
operation of CMS’s internal controls over financial reporting (as such concept
is defined in Rule 13a-15(f) under the Exchange Act) which could adversely
affect CMS’s ability to record, process, summarize, and report financial data.

 

3.6 Absence of Material Adverse Changes. Except as set forth on Schedule 3.6
hereto, since the date of the Letter of Intent, CMS has not suffered any CMS
Material Adverse Effect, and there has not occurred or arisen any event,
condition or state of facts of any character that could reasonably be expected
to result in an CMS Material Adverse Effect. Since the date of the Letter of
Intent, there have been no dividends or other distributions declared or paid in
respect of, or any repurchase or redemption by CMS of, any of the shares of
capital stock of CMS, nor has there been any commitment relating to any of the
foregoing.

 

3.7 Absence of Undisclosed Liabilities. Except as set forth on Schedule 3.7,
neither CMS nor any Subsidiary has any Liabilities that are not fully reflected
or provided for on, or disclosed in the notes to, the balance sheets included in
the CMS Financial Statements, except (a) Liabilities incurred in the ordinary
course of business since the date of the CMS Balance Sheet, none of which
individually or in the aggregate has had or could reasonably be expected to have
an CMS Material Adverse Effect, (b) Liabilities permitted or contemplated by
this Agreement, and (c) Liabilities expressly disclosed on the Schedules
delivered hereunder.

 

- 13 -

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

3.8 Compliance with Applicable Law, Charter and By-Laws. CMS and each Subsidiary
has all requisite licenses, permits and certificates from all Governmental
Entities necessary to conduct their respective businesses as currently
conducted, and to own, lease and operate their respective properties in the
manner currently held and operated (collectively, “Permits”), except as set
forth on Schedule 3.8 hereto and except for any Permits the absence of which, in
the aggregate, do not and could not reasonably be expected to have an CMS
Material Adverse Effect or prevent or materially delay the consummation of the
transactions contemplated hereby. All of such Permits are in full force and
effect. CMS and each Subsidiary is in compliance in all material respects with
all the terms and conditions related to such Permits. There are no proceedings
in progress, pending or, to the Knowledge of CMS, threatened, which may result
in revocation, cancellation, suspension, or any materially adverse modification
of any of such Permits. The businesses of CMS and the Subsidiaries are not
being, and have not been, conducted in violation of any applicable law, statute,
ordinance, regulation, rule, judgment, decree, order, Permit, concession, grant
or other authorization of any Governmental Entity. Neither CMS nor any
Subsidiary is in default or violation of any provision of its charter documents
or its by-laws. Also set forth on Schedule 3.8 hereto is a list of the
jurisdictions in which CMS or any Subsidiary is not authorized or qualified to
do business, but where employees of CMS or such Subsidiary conduct activities or
otherwise have a physical presence.

 

3.9 Litigation and Audits. Except for any claim, action, suit or proceeding set
forth on Schedule 3.9 or Schedule 3.10.3 hereto, (a) there is no investigation
by any Governmental Entity with respect to CMS or any Subsidiary pending or, to
the Knowledge of CMS, threatened, nor has any Governmental Entity indicated to
CMS or any Subsidiary an intention to conduct the same; (b) there is no claim,
action, suit, arbitration or proceeding pending or, to the Knowledge of CMS,
threatened against or involving CMS or any Subsidiary, or any of their
respective assets or properties, at law or in equity, or before any arbitrator
or Governmental Entity, that, if adversely determined, either singly or in the
aggregate, would have an CMS Material Adverse Effect or prevent or materially
delay the consummation of the transactions contemplated hereby; and (c) there
are no judgments, decrees, injunctions or orders of any Governmental Entity or
arbitrator outstanding against CMS or any Subsidiary.

 

3.10 Tax Matters

 

3.10.1 Filing of Returns. Each of CMS and the Subsidiaries has timely filed all
Tax Returns that it was required to file. All such Tax Returns were correct and
complete in all respects. All Taxes owed by any of CMS and the Subsidiaries
(whether or not shown on any Tax Return) have been paid. Neither CMS nor any of
the Subsidiaries is currently the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where CMS or any Subsidiary does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction. There are no Security Interests
on any of the assets of CMS or any Subsidiary that arose in connection with any
failure (or alleged failure) to pay any Tax.

 

3.10.2 Payment of Taxes. CMS and each of the Subsidiaries has withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder or
other third party.

 

- 14 -

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

3.10.3 Assessments or Disputes. None of the Key Management Group, nor any
director or officer (or employee responsible for Tax matters) of CMS or any
Subsidiary, expects any authority to assess any additional Taxes for any period
for which Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of CMS or any Subsidiary either (a) claimed or raised by any
authority or (b) as to which any of the Key Management Group or any of the
directors and officers (and employees responsible for Tax matters) of CMS or any
Subsidiary has knowledge based upon personal contact with any agent of such
authority. Schedule 3.10.3 lists all federal, state, local, and foreign income
Tax Returns filed with respect to CMS or any Subsidiary for taxable periods
ended on or after December 31, 1998, indicates those Tax Returns that have been
audited and indicates those Tax Returns that currently are the subject of audit.
CMS and the Subsidiaries has delivered to Federal correct and complete copies of
all income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by CMS or any Subsidiary.

 

3.10.4 Waiver of Statute of Limitations. Neither CMS nor any Subsidiary 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.

 

3.10.5 Collapsible Corporations, Golden Parachutes, Real Property Holding
Corporations. Neither CMS nor any Subsidiary has filed a consent under Code
section 341(f) concerning collapsible corporations. Neither CMS nor any
Subsidiary has made any payments, is obligated to make any payments or is a
party to any agreement that under certain circumstances could obligate it to
make any payments, that will not be deductible under Code section 280G. Neither
CMS nor any Subsidiary has been a United States real property holding
corporation within the meaning of Code section 897(c)(2) during the applicable
period specified in Code section 897(c)(1)(A)(ii). Neither CMS nor any
Subsidiary is a party to any Tax allocation or sharing agreement. Neither CMS
nor any Subsidiary (A) has been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was CMS) or (B) has any Liability for the Taxes of any Person (other than
CMS or a Subsidiary) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.

 

3.10.6 Tax Basis. Schedule 3.10.6 sets forth (a) the basis of CMS in each of the
assets of CMS and its qualified subchapter S Subsidiaries, the Fair Market Value
of the total assets of CMS on the day CMS became an S Corporation, the Fair
Market Value of each of CMS’s qualified subchapter S Subsidiaries on the day
each such qualified subsidiary became a qualified subchapter S Subsidiary, (b)
the adjusted tax basis of each of the assets of CMS on the day CMS became an S
corporation, and (c) the adjusted tax basis of each of the assets of each of
CMS’s qualified subchapter S subsidiaries on the day each such qualified
subchapter S subsidiary became a qualified subchapter S Subsidiary.

 

3.10.7 Unpaid Taxes. The unpaid Taxes of CMS and the Subsidiaries (a) did not,
as of the date of the CMS Balance Sheet, exceed the reserve for Tax liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the CMS
Balance Sheet (rather than in any notes thereto) and (b) 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 CMS and the Subsidiaries in
filing their Tax Returns.

 

- 15 -

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

3.10.8 Unclaimed Property. Except as set forth on Schedule 3.10.8, neither CMS
nor any Subsidiary has any assets that may constitute unclaimed property under
applicable law. CMS and the Subsidiaries have complied in all material respects
with all applicable unclaimed property laws. Without limiting the generality of
the foregoing, CMS and the Subsidiaries have established and followed procedures
to identify any unclaimed property and, to the extent required by applicable
law, remit such unclaimed property to the applicable governmental authority. The
records of CMS and the Subsidiaries are adequate to permit a governmental agency
or authority or other outside auditor to confirm the foregoing representations.

 

3.10.9 No Changes in Accounting, Closing Agreement, Installment Sale. Neither
CMS nor any Subsidiary 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 any (a) change in
method of accounting for a taxable period ending on or prior to the Closing Date
under Code section 481(c) (or any corresponding or similar provision of state,
local or foreign income Tax law); (b) ”closing agreement” as described in Code
section 7121 (or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the Closing Date; (c) deferred
intercompany gain or any excess loss account described in Treasury Regulations
under Code section 1502 (or any corresponding or similar provision of state,
local or foreign income Tax law); (d) installment sale or open transaction
disposition made on or prior to the Closing Date; or (e) prepaid amount received
on or prior to the Closing Date.

 

3.10.10 S Corporation. CMS (and any predecessor of CMS) has been a validly
electing S corporation within the meaning of Code sections 1361 and 1362 at all
times since September 1, 1995, and CMS will be an S corporation up to and
including the Closing Date. Schedule 3.10.10 identifies each Subsidiary, and
indicates each Subsidiary that is a “qualified subchapter S subsidiary” within
the meaning of Code section 1361(b)(3)(B). Each Subsidiary so identified has
been a qualified subchapter S subsidiary at all times since the date shown on
such schedule up to and including the Closing Date.

 

3.10.11 Acquisitions. Neither CMS nor any Subsidiary has (a) acquired assets
from another corporation in a transaction in which CMS’s 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 (b) acquired the stock of any corporation which is a qualified
subchapter S subsidiary.

 

3.11 Employee Benefit Plans

 

3.11.1 List of Plans. Schedule 3.11.1 hereto contains a correct and complete
list of all pension, profit sharing, retirement, deferred compensation, welfare,
legal services, medical, dental or other employee benefit or health insurance
plans, life insurance or other death benefit plans, disability, stock option,
stock purchase, restricted stock, stock compensation, bonus, vacation pay,
severance pay and other similar plans, programs or agreements, and every
material

 

- 16 -

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

written personnel policy, relating to any persons employed by CMS or any
Subsidiary or in which any person employed by CMS or any Subsidiary is eligible
to participate and which is currently maintained or that was maintained at any
time by CMS, any Subsidiary or any ERISA Affiliate of CMS or any Subsidiary
(collectively, the “CMS Plans”). CMS has delivered to Parent (a) accurate and
complete copies of all CMS Plan documents and all other material documents
relating thereto, including (if applicable) all documents establishing or
constituting any related trust, annuity contract, insurance contract or other
funding instruments, and summary plan descriptions relating to said CMS Plans,
(b) accurate and complete copies of the most recent financial statements and
actuarial reports with respect to all CMS Plans for which financial statements
or actuarial reports are required or have been prepared, and (c) accurate and
complete copies of all annual reports and summary annual reports for all CMS
Plans for which annual reports are required or have been prepared. CMS has also
delivered to Parent complete copies of other current plan summaries, employee
booklets, personnel manuals and other material documents or written materials
concerning the CMS Plans. Neither CMS nor any Subsidiary has any “defined
benefit plans” as defined in Section 3(35) of ERISA. Neither CMS nor any
Subsidiary has any current or contingent obligation to contribute to any
multiemployer plan (as defined in Section 3(37) of ERISA).

 

3.11.2 ERISA. None of CMS, the Subsidiaries and the ERISA Affiliates of CMS and
the Subsidiaries has incurred any “withdrawal liability” calculated under
Section 4211 of ERISA and there has been no event or circumstance which would
cause any of them to incur any such liability. No employee pension benefit plan
previously maintained by CMS, any Subsidiary or any ERISA Affiliate of CMS or
any Subsidiary which was subject to ERISA has been terminated; no proceedings to
terminate any such plan have been instituted within the meaning of Subtitle C of
Title IV of ERISA; and no reportable event within the meaning of Section 4043 of
said Subtitle C of Title IV of ERISA with respect to which the requirement to
file a notice with the Pension Benefit Guaranty Corporation has not been waived
has occurred with respect to any such CMS Plan, and no liability to the Pension
Benefit Guaranty Corporation has been incurred by CMS, any Subsidiary or any
ERISA Affiliate of CMS or any Subsidiary. Except as set forth on Schedule
3.11.2, with respect to all CMS Plans, CMS, the Subsidiaries and CMS’ and the
Subsidiaries’ ERISA Affiliates are in material compliance with all requirements
prescribed by all statutes, regulations, orders or rules currently in effect,
and have in all material respects performed all obligations required to be
performed by them. All returns, reports and disclosure statements required to be
made under ERISA and the Code with respect to all CMS Plans have been timely
filed or delivered. All fees required to be paid in connection with the
administration of any ERISA plan, and all fees required to be paid as a result
of the termination of any plan recordkeeping agreements, have been disclosed to
Parent and Federal. None of CMS, the Subsidiaries and the ERISA Affiliates of
CMS and the Subsidiaries, nor any of their directors, officers, employees or
agents, nor any trustee or administrator of any trust created under the CMS
Plans, has engaged in or been a party to any “prohibited transaction” as defined
in Section 4975 of the Code or Section 406 of ERISA which could subject CMS, any
Subsidiary, any Affiliate of CMS or any Subsidiary, any director or employee of
any CMS Plan or any trust relating to any CMS Plan, or any party dealing with
any CMS Plan or trust relating thereto to any tax or penalty on “prohibited
transactions” imposed by Section 4975 of the Code. Except as set forth on
Schedule 3.11.2, neither the CMS Plans nor any of the trusts created thereunder
have incurred any “accumulated funding deficiency,” as such term is defined in
Section 412 of the Code and regulations issued thereunder, whether or not
waived. Neither CMS nor any Subsidiary has at any time had an ERISA Affiliate.

 

- 17 -

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

3.11.3 Plan Determinations. Each CMS Plan intended to qualify under Section
401(a) of the Code has been determined by the Internal Revenue Service to so
qualify; copies of all determination letters have been delivered to Parent, and,
to the Knowledge of CMS, nothing has occurred since the date of such
determination letters which might cause the loss of such qualification or
exemption, or result in the imposition of any excise tax or income tax on
unrelated business income under the Code or ERISA with respect to any CMS Plan.
With respect to each CMS Plan which is a qualified profit sharing plan, all
employer contributions accrued for plan years ending prior to the Closing under
CMS Plan terms and applicable law have been made.

 

3.11.4 Funding. Except as set forth on Schedule 3.11.4:

 

(a) all contributions, premiums or other payments due or required to be made to
CMS Plans as of the date hereof have been made as of the date hereof or are
properly reflected on the CMS Balance Sheet;

 

(b) there are no actions, liens, suits or claims (other than routine claims for
benefits) pending or, to the Knowledge of CMS, threatened, with respect to any
CMS Plan, nor is any CMS Plan the subject of any pending (or to the Knowledge of
CMS, any threatened) investigation or audit by the Internal Revenue Service,
Department of Labor or the Pension Benefit Guaranty Corporation;

 

(c) no event has occurred, and, except for actions or matters relating to the
CMS Plans contemplated by, or resulting from this Agreement, there exists no
condition or set of circumstances, which presents a material risk of a partial
termination (within the meaning of Section 411(d)(3) of the Code) of any CMS
Plan; and

 

(d) with respect to any CMS Plan that is qualified under Section 401(k) of the
Code, individually and in the aggregate, no event has occurred, and there exists
no condition or set of circumstances in connection with which CMS could be
subject to any liability (except liability for benefits claims and funding
obligations payable in the ordinary course) that is reasonably likely to have an
CMS Material Adverse Effect under ERISA, the Code or any other applicable law.

 

3.11.5 Certain Other Matters. Except as reserved for on the Closing Balance
Sheet or the Final Closing Balance Sheet, CMS has no liability or potential
liability in any form whatsoever, and neither CMS nor any Subsidiary will have
liability or potential liability in any form whatsoever, with regard to any CMS
Plan, as a result of the any failure to perform non-discrimination testing on an
CMS Plan or any failure to amend an CMS Plan pursuant to the legislation
commonly known as “GUST” or the legislation commonly known as “EGTRRA.” All
employee contributions, including elective deferrals, to CMS’s and the
Subsidiaries’ 401(k) plan(s) have been segregated from CMS’s and the
Subsidiaries’ general assets and deposited into the trust(s) established
pursuant to such 401(k) plan(s) in a timely manner in accordance with the “plan
asset” regulations of the Department of Labor.

 

- 18 -

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

3.11.6 Welfare Plans. With respect to any CMS Plan that is an employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA) (a “Welfare Plan”)
and except as set forth on Schedule 3.11.6, (a) each Welfare Plan for which
contributions are claimed by CMS or any Subsidiary as deductions under any
provision of the Code is in material compliance with all applicable requirements
pertaining to such deduction, (b) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to a Welfare Plan, there
is no disqualified benefit (within the meaning of Section 4976(b) of the Code)
that would result in the imposition of a tax under Section 4976(a) of the Code,
(c) all CMS Plans that are group health plans (within the meaning of Section
4980B(g)(2) of the Code) comply, and in each and every case have complied, with
all of the applicable material requirements of COBRA, the Family Medical Leave
Act of 1993, the Health Insurance and Portability and Accountability Act of
1996, the Women’s Health and Cancer Rights Act of 1996, the Newborns’ and
Mothers’ Health Protection Act of 1996, and all similar provisions of state law
or foreign law applicable to employees of CMS, any Subsidiary or any ERISA
Affiliate of CMS or any Subsidiary. None of the CMS Plans promises or provides
retiree medical or other retiree welfare benefits to any person except as
required by applicable law, and none of CMS, the Subsidiaries and the ERISA
Affiliates of CMS and the Subsidiaries has represented, promised or contracted
(whether in oral or written form) to provide such retiree benefits to any
employee, former employee, director, consultant or other person, except to the
extent required by statute. No CMS Plan or employment agreement provides health
benefits that are not insured through an insurance contract. Each CMS Plan is
amendable and terminable unilaterally by CMS or a Subsidiary at any time without
liability to CMS or any Subsidiary as a result thereof and no CMS Plan, plan
documentation or agreement, summary plan description or other written
communication distributed generally to employees by its terms prohibits CMS or a
Subsidiary from amending or terminating any such CMS Plan.

 

3.12 Employment-Related Matters

 

3.12.1 Labor Relations. Except to the extent set forth on Schedule 3.12.1
hereto: (a) neither CMS nor any Subsidiary is a party to any collective
bargaining agreement or other contract or agreement with any labor organization
or other representative of employees of CMS or any Subsidiary; (b) there is no
labor strike, dispute, slowdown, work stoppage or lockout that is pending or, to
the Knowledge of CMS, threatened against or otherwise affecting CMS or any
Subsidiary, and neither CMS nor any Subsidiary has experienced the same; (c)
other than in the ordinary course of business neither CMS nor any Subsidiary has
closed any plant or facility, effectuated any layoffs of employees or
implemented any early retirement or separation program at any time, and neither
CMS nor any Subsidiary has planned or announced any such action or program for
the future with respect to which CMS or any Subsidiary has or may have any
material liability; and (d) all salaries, wages, vacation pay, bonuses,
commissions and other compensation due from CMS or any Subsidiary before the
date hereof have been paid or accrued as of the date hereof.

 

3.12.2 Employee List. CMS has heretofore delivered to Parent a list (the
“Employee List”) dated as of February 11, 2004 containing the name of each
person employed by CMS or any Subsidiary and each such employee’s position,
starting employment date and annual salary. The Employee List is correct and
complete as of the date of the Employee List. No third party has asserted any
claim or has any reasonable basis to assert any claim against

 

- 19 -

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

CMS or any Subsidiary that either the continued employment by, or association
with, CMS or any Subsidiary of any of the present officers or employees of, or
consultants to, CMS or any Subsidiary contravenes any agreement or law
applicable to unfair competition, trade secrets or proprietary information.

 

3.12.3 Conduct of Directors and Officers. No director or officer of CMS or any
Subsidiary has been involved in any of the events described in Item 401(f) of
Regulation S-K under the Securities Act.

 

3.13 Environmental

 

3.13.1 Environmental Laws. Except as set forth on Schedule 3.13.1 hereto, (a)
CMS and each Subsidiary is and has been in compliance with all applicable
Environmental Laws in effect on the date hereof; (b) neither CMS nor any
Subsidiary has received any written communication that alleges that it is or was
not in compliance with all applicable Environmental Laws in effect on the date
hereof; (c) there are no circumstances that may prevent or interfere with
compliance in the future with any applicable Environmental Laws; (d) all Permits
and other governmental authorizations currently held by CMS or any Subsidiary
pursuant to the Environmental Laws are in full force and effect, CMS and each
Subsidiary is in compliance with all of the terms of such Permits and
authorizations, and no other Permits or authorizations required pursuant to the
Environmental Laws are required by CMS or any Subsidiary for the conduct of its
respective business on the date hereof; (e) such Permits will not be terminated
or impaired or become terminable, in whole or in part, solely as a result of the
transactions contemplated hereby; and (f) the management, handling, storage,
transportation, treatment, and disposal by CMS and each Subsidiary of all
Materials of Environmental Concern is and has been in compliance with all
applicable Environmental Laws.

 

3.13.2 Environmental Claims. Except as set forth on Schedule 3.13.2 hereto,
there is no Environmental Claim pending or, to the Knowledge of CMS, threatened,
against or involving CMS or any Subsidiary or against any Person whose liability
for any Environmental Claim CMS or any Subsidiary has or may have retained or
assumed either contractually or by operation of law.

 

3.13.3 No Basis for Claims. Except as set forth on Schedule 3.13.3 hereto, there
are no past or present actions or activities by CMS or any Subsidiary, or any
circumstances, conditions, events or incidents, including the storage,
treatment, release, emission, discharge, disposal or arrangement for disposal of
any Material of Environmental Concern, whether or not by CMS or a Subsidiary,
that could reasonably form the basis of any Environmental Claim against CMS or
any Subsidiary or against any Person whose liability for any Environmental Claim
CMS or any Subsidiary may have retained or assumed either contractually or by
operation of law, including, without limitation, the storage, treatment,
release, emission, discharge, disposal or arrangement for disposal of any
Material of Environmental Concern or any other contamination or other hazardous
condition, related to the premises at any time occupied by CMS or any
Subsidiary. Without limiting the generality of the foregoing, except as set
forth on Schedule 3.13.3 hereto, neither CMS nor any Subsidiary has received any
notices, demands, requests for information, investigations pertaining to
compliance with or liability under Environmental Law or Materials of
Environmental Concern, nor, to the Knowledge of CMS, are any such notices,
demands, requests for information or investigations threatened.

 

- 20 -

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

3.13.4 Disclosure of Information. CMS and each Subsidiary has made, and during
the period between the date of this Agreement and the Closing Date will continue
to make, available to Parent and Federal all environmental investigations,
studies, audits, tests, reviews and other analyses conducted in relation to
Environmental Laws or Materials of Environmental Concern that are in the
possession, custody, or control of CMS or any Subsidiary and pertain to CMS, any
Subsidiary or any property or facility now or previously owned, leased or
operated by CMS or any Subsidiary.

 

3.13.5 Liens. No lien imposed relating to or in connection with any
Environmental Claim, Environmental Law, or Materials of Environmental concern
has been filed or has been attached to any of the property or assets which are
owned, leased or operated by CMS or any Subsidiary.

 

3.14 No Broker’s or Finder’s Fees. Neither CMS nor any Subsidiary has paid or
become obligated to pay any fee or commission to any broker, finder, financial
advisor or intermediary in connection with the transactions contemplated by this
Agreement.

 

3.15 Assets Other Than Real Property

 

3.15.1 Title. CMS or a Subsidiary has good and marketable title to all of the
tangible assets shown on the CMS Balance Sheet, and such title is in each case
free and clear of any Security Interest, lease or other encumbrance
(collectively, “Encumbrances”), except for (a) assets disposed of since the date
of the CMS Balance Sheet in the ordinary course of business and in a manner
consistent with past practices, (b) Liabilities, obligations and Encumbrances
reflected in the CMS Balance Sheet or otherwise in the CMS Financial Statements,
(c) Permitted Encumbrances, and (d) Liabilities, obligations and Encumbrances
set forth on Schedule 3.15.1 hereto. Each tangible assets of CMS or any
Subsidiary that has a present value of $1,000 or more or that is otherwise
material to CMS’s business or the business of any Subsidiary is listed on
Schedule 3.15.1.

 

3.15.2 Accounts Receivable. Except as set forth on Schedule 3.15.2, all
receivables shown on the CMS Balance Sheet and all receivables accrued by CMS or
any Subsidiary since the date of the CMS Balance Sheet, have been collected or
are collectible in all material respects in the aggregate amount shown, less any
allowances for doubtful accounts reflected therein, and, in the case of
receivables arising since the date of the CMS Balance Sheet, any additional
allowance in respect thereof is consistent with the allowance reflected in the
CMS Balance Sheet.

 

3.15.3 Condition. All material facilities, equipment and personal property owned
by CMS or any Subsidiary and used in the business or CMS or a Subsidiary are in
good operating condition and repair, ordinary wear and tear excepted, and all
such wear and tear taken in the aggregate is not material to CMS and does not
affect CMS’s business or the business of any Subsidiary or affect CMS’s
obligation to perform under this Agreement.

 

- 21 -

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

3.16 Real Property

 

3.16.1 CMS Real Property. Neither CMS nor any Subsidiary owns or has owned any
real property.

 

3.16.2 CMS Leases. Schedule 3.16.2 hereto lists all CMS Leases. Complete copies
of the CMS Leases, and all material amendments thereto (which are identified on
Schedule 3.16), have been made available by CMS to Parent. The CMS Leases grant
leasehold estates free and clear of all Encumbrances (except Permitted
Encumbrances) and no Encumbrances (except Permitted Encumbrances) have been
granted by or caused by the actions of CMS or any Subsidiary. The CMS Leases are
in full force and effect and are binding and enforceable against each of the
parties thereto in accordance with their respective terms subject to (a)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and
other laws of general application affecting the rights and remedies of creditors
and (b) general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law). Except as set forth on Schedule
3.16.2, neither CMS nor any Subsidiary, nor, to the Knowledge of CMS, any other
party to a CMS Lease, has committed a material breach or default under any CMS
Lease, nor has there occurred any event that with the passage of time or the
giving of notice or both would constitute such a breach or default, nor, to the
Knowledge of CMS, are there any facts or circumstances that would reasonably
indicate that CMS or any Subsidiary is likely to be in material breach or
default under any CMS Lease. Schedule 3.16.2 correctly identifies each CMS Lease
the provisions of which would be materially and adversely affected by the
transactions contemplated hereby and each CMS Lease that requires the consent of
any third party in connection with the transactions contemplated hereby. No
material construction, alteration or other leasehold improvement work with
respect to the real property covered by any CMS Lease remains to be paid for or
to be performed by CMS or any Subsidiary. Except as set forth on Schedule
3.16.2, no CMS Lease has an unexpired term which, including any renewal or
extensions of such term provided for in such CMS Lease, could exceed ten years.

 

3.16.3 Condition. All buildings, structures, leasehold improvements and
fixtures, or parts thereof, used by CMS or any Subsidiary in the conduct of its
business are in good operating condition and repair, ordinary wear and tear
excepted.

 

3.17 Agreements, Contracts and Commitments

 

3.17.1 CMS Agreements. Except as set forth on Schedule 3.17.1 hereto or any
other Schedule hereto, neither CMS nor any Subsidiary is a party to:

 

(a) any bonus, deferred compensation, pension, severance, profit-sharing, stock
option, employee stock purchase or retirement plan, contract or arrangement or
other employee benefit plan or arrangement;

 

(b) any employment agreement with any present employee, officer, director or
consultant (or former employees, officers, directors and consultants to the
extent there remain at the date hereof obligations to be performed by CMS or any
Subsidiary);

 

(c) any agreement for personal services or employment with a term of service or
employment specified in the agreement or any agreement for personal services;

 

- 22 -

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

(d) any agreement of guarantee or indemnification in an amount that is material
to CMS taken as a whole;

 

(e) any agreement or commitment containing a covenant limiting or purporting to
limit the freedom of CMS or any Subsidiary to compete with any Person in any
geographic area or to engage in any line of business;

 

(f) any lease other than the CMS Leases under which CMS or any Subsidiary is
lessee;

 

(g) any joint venture or profit-sharing agreement (other than with employees);

 

(h) except for trade indebtedness incurred in the ordinary course of business
and equipment leases entered into in the ordinary course of business, any loan
or credit agreements providing for the extension of credit to CMS or any
Subsidiary, or any instrument evidencing or related in any way to indebtedness
incurred in the acquisition of companies or other entities or indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, or otherwise that individually is in
the amount of $25,000 or more;

 

(i) any license agreement, either as licensor or licensee, involving payments
(including past payments) of $25,000 in the aggregate or more, or any
distributor, dealer, reseller, franchise, manufacturer’s representative, or
sales agency or any other similar material contract or commitment;

 

(j) any agreement granting exclusive rights to, or providing for the sale of,
all or any portion of the CMS Proprietary Rights (as defined in Section 3.18.1);

 

(k) any agreement or arrangement providing for the payment of any commission
based on sales other than to employees of CMS or a Subsidiary;

 

(l) any agreement for the sale by CMS or any Subsidiary of materials, products,
services or supplies that involves future payments to CMS or any Subsidiary of
more than $25,000;

 

(m) any agreement for the purchase by CMS or any Subsidiary of any materials,
equipment, services, or supplies, that either (i) involves a binding commitment
by CMS or a Subsidiary to make future payments in excess of $25,000 and cannot
be terminated by it without penalty upon less than three months’ notice or (ii)
was not entered into in the ordinary course of business;

 

(n) any agreement or arrangement with any third party for such third party to
develop any intellectual property or other asset expected to be used or
currently used or useful in the business of CMS or any Subsidiary;

 

- 23 -

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

(o) any agreement or commitment for the acquisition, construction or sale of
fixed assets owned or to be owned by CMS or any Subsidiary that involves future
payments by CMS or any Subsidiary of more than $25,000;

 

(p) any agreement or commitment to which present or former directors, officers
or Affiliates of CMS or any Subsidiary, or directors or officers of any
Affiliate of any of the foregoing, are also parties;

 

(q) any agreement not described above (ignoring, solely for this purpose, any
dollar amount thresholds in those descriptions) involving the payment or receipt
by CMS or any Subsidiary of more than $25,000, other than the CMS Leases;

 

(r) any agreement not described above that was not made in the ordinary course
of business and that is material to the financial condition, business,
operations, assets, results of operations or prospects of CMS; or

 

(s) any agreement that provides for any continuing or future obligation, actual
or contingent, of CMS or any Subsidiary, including but not limited to any
continuing representation or warranty or any indemnification obligation that
arose in connection with the disposition of any business or assets of CMS or any
Subsidiary.

 

3.17.2 Validity. Except as set forth on Schedule 3.17.2, all contracts, leases,
instruments, licenses and other agreements required to be set forth on Schedule
3.17.1 are valid and in full force and effect; neither CMS nor any Subsidiary,
nor to the Knowledge of CMS, any other party thereto, has breached any provision
of, or defaulted under the terms of any such contract, lease, instrument,
license or other agreement, except for any breaches or defaults that, in the
aggregate, would not be expected to have an CMS Material Adverse Effect or have
been cured or waived; and CMS has not received any “notice to cure” or a similar
notice from any Governmental Entity requesting performance under any contract,
instrument or other agreement between CMS or any Subsidiary and such
Governmental Entity.

 

3.17.3 Third-Party Consents. Schedule 3.17.3 identifies each contract and other
document set forth on Schedule 3.17.1 that requires the consent of a third party
in connection with the transactions contemplated hereby.

 

3.18 Intellectual Property

 

3.18.1 No Conflicts. Except as set forth on Schedule 3.18.1 hereto, CMS and each
Subsidiary owns, or has perpetual, fully paid, worldwide rights to use, all
patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, maskworks, net lists, schematics, technology, know-how,
computer software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material (excluding
Commercial Software) that are used in its respective business as currently
conducted (the “CMS Proprietary Rights”). Except as set forth on Schedule
3.18.1, CMS or a Subsidiary is the sole and exclusive owner or licensee of, with
all right, title and interest in and to (free and clear of any and all claims
and Encumbrances), all rights included among the CMS Proprietary Rights, and CMS
or a Subsidiary has sole and exclusive rights (and is not contractually
obligated to pay any compensation to any third party in respect thereof) to the
use

 

- 24 -

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

thereof or the material covered thereby in connection with the services or
products in respect of which CMS Proprietary Rights are being used or might
reasonably be used. No claims with respect to the CMS Proprietary Rights have
been asserted or, to the Knowledge of CMS, are threatened by any Person nor are
there any valid grounds for any bona fide claims (a) to the effect that the
manufacture, sale, licensing or use of any of the products of CMS or any
Subsidiary as now manufactured, sold or licensed or used or proposed for
manufacture, use, sale or licensing by CMS or any Subsidiary infringes on any
copyright, patent, trademark, service mark, trade secret or other proprietary
right, (b) against the use by CMS or any Subsidiary of any trademarks, service
marks, trade names, trade secrets, copyrights, patents, technology, know-how or
computer software programs and applications used in CMS’s or any Subsidiary’s
business as currently conducted or as proposed to be conducted, or (c)
challenging the ownership by CMS or any Subsidiary, or the validity or
effectiveness, of any of CMS Proprietary Rights. All material registered
trademarks, service marks and copyrights held by CMS or any Subsidiary are valid
and subsisting in the jurisdictions in which they have been filed. There is no
material unauthorized use, infringement or misappropriation of any of CMS
Proprietary Rights by any third party, including any employee or former employee
of CMS or any Subsidiary. No CMS Proprietary Right or product of CMS or any
Subsidiary is subject to any outstanding decree, order, judgment, or stipulation
restricting in any manner the use, licensing or transfer thereof by CMS or any
Subsidiary. Except as set forth in Schedule 3.18.1, neither CMS nor any
Subsidiary has entered into any agreement under which it is restricted from
selling, licensing or otherwise distributing any of its products to any class of
customers, in any geographic area, during any period of time or in any segment
of the market. CMS’s and the Subsidiaries’ products, packaging and documentation
contain copyright notices sufficient to maintain copyright protection on the
copyrighted portions of the CMS Proprietary Rights. Neither CMS nor any
Subsidiary is in violation of any license, sublicense or agreement described on
Schedule 3.18.2, except such violations as do not materially impair CMS’s or any
Subsidiary’s rights under such license, sublicense or agreement. Except as
disclosed in this Article 3, the execution and delivery of this Agreement by
CMS, and the consummation of the transactions contemplated hereby, will neither
cause CMS or any Subsidiary to be in violation or default under any such
license, sublicense or agreement, nor entitle any other party to any such
license, sublicense or agreement to terminate or modify such license, sublicense
or agreement. The Commercial Software used in the businesses of CMS and the
Subsidiaries in each case has been acquired and used by CMS or a Subsidiary, as
the case may be, on the basis of and in accordance with a valid license from the
manufacturer or the dealer authorized to distribute such Commercial Software,
free and clear of any claims or rights of any third parties. Neither CMS nor any
Subsidiary is in breach of any of the terms and conditions of any such license
and neither CMS nor any Subsidiary has been infringing upon any rights of any
third parties in connection with its acquisition or use of the Commercial
Software.

 

3.18.2 Proprietary Rights; Licenses. Set forth on Schedule 3.18.2 is a complete
list of all patents, trademarks, registered copyrights, trade names and service
marks, and any applications therefor, included in the CMS Proprietary Rights,
specifying, where applicable, the jurisdictions in which each such CMS
Proprietary Right has been issued or registered or in which an application for
such issuance and registration has been filed, including the respective
registration or application numbers and the names of all registered owners.
Except as set forth on Schedule 3.18.2, no software product currently marketed
by CMS or any Subsidiary has been registered for copyright protection with the
United States Copyright Office or any foreign offices

 

- 25 -

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

nor has CMS or any Subsidiary been requested to make any such registration. Set
forth on Schedule 3.18.2 is a complete list of all domain names, Secure Socket
Layer (SSL) certificates and other World Wide Web certificates owned by CMS or
any Subsidiary, which list includes all domain names used by CMS or any
Subsidiary in its business and respective registrars. Set forth on Schedule
3.18.2 is a complete list of all material licenses, sublicenses and other
agreements as to which CMS or any Subsidiary is a party and pursuant to which
CMS, any Subsidiary or any other Person is authorized to use any CMS Proprietary
Right or trade secrets material to the business of CMS or any Subsidiary; such
schedule includes the identity of all parties to such licenses, sublicenses and
other agreements, a description of the nature and subject matter thereof, the
applicable royalty and the term thereof. Complete lists of the Commercial
Software used in the businesses of CMS and each Subsidiary are set forth on
Schedule 3.18.2.

 

3.18.3 Employee Agreements. Except as set forth on Schedule 3.18.3, each
employee, officer and consultant of CMS or any Subsidiary has executed a
confidentiality and non-competition agreement in substantially the form attached
hereto as Exhibit 3.18.3. No employee, officer or consultant of CMS or any
Subsidiary is in violation of any term of any employment or consulting contract,
proprietary information and inventions agreement, non-competition agreement, or
any other contract or agreement relating to the relationship of any such
employee, officer or consultant with CMS, any Subsidiary or any previous
employer.

 

3.19 Insurance Contracts. Schedule 3.19 hereto lists all contracts of insurance
and indemnity in force at the date hereof with respect to CMS or any Subsidiary.
Such contracts of insurance and indemnity and those shown in other Schedules to
this Agreement (collectively, the “CMS Insurance Contracts”) insure against such
risks, and are in such amounts, as are appropriate and reasonable considering
CMS’s and the Subsidiaries’ property, business and operations. All of the CMS
Insurance Contracts are in full force and effect, with no default thereunder by
CMS or any Subsidiary which could permit the insurer to deny payment of claims
thereunder. All premiums due and payable thereon have been paid and neither CMS
nor any Subsidiary has received notice from any of its insurance carriers that
any insurance premiums will be materially increased in the future or that any
insurance coverage provided under any of the CMS Insurance Contracts will not be
available in the future on substantially the same terms as now in effect.
Neither CMS nor any Subsidiary has received or given a notice of cancellation
with respect to any of the CMS Insurance Contracts.

 

3.20 Banking Relationships. Schedule 3.20 hereto shows the names and locations
of all banks and trust companies in which CMS or any Subsidiary has accounts,
lines of credit or safety deposit boxes and, with respect to each account, line
of credit or safety deposit box, the names of all Persons authorized to draw
thereon or to have access thereto, as well as the account and other numbers of
designation thereof.

 

3.21 No Contingent Liabilities. Neither CMS nor any Subsidiary has any
contingent or conditional Liabilities or obligations of any kind arising from or
relating to any acquisition of a Subsidiary or line of business.

 

3.22 Absence of Certain Relationships. Except as set forth on Schedule 3.22,
none of (a) CMS, (b) any Subsidiary, (c) any officer of CMS or any Subsidiary,
(d) any Stockholder, or (e) any member of the immediate family of the Persons
listed in (a) through (d) of this

 

- 26 -

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

sentence, has any financial or employment interest in any subcontractor,
supplier, or customer of CMS or any Subsidiary (other than holdings in publicly
held companies of less than one percent (1%) of the outstanding capital stock of
any such publicly held company).

 

3.23 Foreign Corrupt Practices. None of CMS, the Subsidiaries, the Affiliate of
CMS and the Subsidiaries, and other Person associated with or acting for or on
behalf of the any of the foregoing, has directly or indirectly taken any action
which would cause CMS or any Subsidiary to be in violation of the United States
Foreign Corrupt Practices Act of 1977, as amended, or any rules and regulations
thereunder. None of CMS, the Subsidiaries, the Affiliate of CMS and the
Subsidiaries, and other Person associated with or acting for or on behalf of the
any of the foregoing, has directly or indirectly (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kick-back, or other payment to
any Person, private or public, regardless of form, whether in money, property or
services (i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of CMS, any
Subsidiary or any Affiliate of CMS or any Subsidiary, or (iv) in violation of
any law or regulation, or (b) established or maintained any fund or asset that
has not been recorded in the books and records of CMS or a Subsidiary.

 

Article 4

REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS

 

Each Stockholder represents and warrants to Parent and Federal as follows:

 

4.1 Title; Entirety of Interest. Such Stockholder is the sole legal owner of the
number of shares of CMS Common Stock set forth opposite his, her or its name on
Schedule A hereto, and has good and valid title to such shares, and, at Closing,
there shall exist no liens, claims, pledges, options, proxies, charges or
encumbrances of any kind or nature whatsoever affecting such shares; such shares
constitute the entirety of such Stockholder’s interest in CMS and such
Stockholder claims no other rights; other than this Agreement, such Stockholder
has no agreement or arrangement with any Person relating to the issuance, sale,
purchase, or transfer of any security of CMS or any Subsidiary.

 

4.2 Claims. Such Stockholder has no claims of any kind against CMS, any
Subsidiary, Federal or Parent (other than claims for the payment of wages,
salary, bonus or severance and the provision of benefits by CMS pursuant to the
terms of any employment by CMS of such Stockholder), or, if such Stockholder has
any such claims, then, effective upon consummation of the purchase and sale
contemplated by this Agreement, such Stockholder hereby forever waives and
releases all such claims.

 

4.3 Authority. Such Stockholder has the full power and legal capacity to
execute, deliver and carry out the terms and provisions of this Agreement
applicable to him, her or it and to consummate the transactions contemplated
hereby;

 

4.4 Enforceability. This Agreement constitutes a legal, valid and binding
obligation of such Stockholder enforceable against such Stockholder in
accordance with its terms; and

 

- 27 -

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

4.5 No Conflicts. the execution, delivery and performance of this Agreement by
Seller will not result in a breach or violation by Seller of, or constitute a
default by Seller under, any statute, ordinance, rule, regulation, franchise,
permit, agreement or instrument to which Seller is a party or by which Seller is
bound.

 

Article 5

REPRESENTATIONS AND WARRANTIES OF PARENT AND FEDERAL

 

Parent and Federal, jointly and severally, represent and warrant to CMS as
follows:

 

5.1 Corporate Status of Parent and Federal. Each of Parent and Federal is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with the requisite corporate power to own, operate and
lease its properties and to carry on its business as now being conducted.

 

5.2 Authority for Agreement; Noncontravention

 

5.2.1 Authority of Parent. Each of Parent and Federal has the corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the boards of directors of Parent and Federal and no other
corporate proceedings on the part of Parent or Federal are necessary to
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby. This Agreement and the other agreements
contemplated hereby to be signed by Parent or Federal have been duly executed
and delivered by Parent and/or Federal, as the case may be, and constitute valid
and binding obligations of Parent and/or Federal, as the case may be,
enforceable against Parent and/or Federal in accordance with their terms,
subject to the qualifications that enforcement of the rights and remedies
created hereby and thereby are subject to (a) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other laws of general
application affecting the rights and remedies of creditors and (b) general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).

 

5.2.2 No Conflict. Neither the execution and delivery of this Agreement by
Parent or Federal, nor the performance by Parent or Federal of its obligations
hereunder, nor the consummation by Parent or Federal of the transactions
contemplated hereby will (a) conflict with or result in a violation of any
provision of the Certificate of Incorporation or by-laws of either Parent or
Federal, or (b) with or without the giving of notice or the lapse of time, or
both, conflict with, or result in any violation or breach of, or constitute a
default under, or result in any right to accelerate or result in the creation of
any lien, charge or encumbrance pursuant to, or right of termination under, any
provision of any note, mortgage, indenture, lease, instrument or other
agreement, Permit, concession, grant, franchise, license, judgment, order,
decree, statute, ordinance, rule or regulation to which Parent, Federal or any
of Parent’s other Subsidiaries is a party or by which any of them or any of
their assets or properties is bound or which is applicable to any of them or any
of their assets or properties. No authorization, consent or approval of, or
filing with or notice to, any Governmental Entity is necessary for the execution
and delivery of

 

- 28 -

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

this Agreement by Parent or Federal or the consummation by Parent or Federal of
the transactions contemplated hereby, except for such consents, authorizations,
filings, approvals and registrations which if not obtained or made would not
have a Parent Material Adverse Effect.

 

5.3 SEC Statements, Reports and Documents. Parent has filed all required forms,
reports, statements and documents with the SEC since July 1, 2000. The documents
so filed by Parent and available in the public records of the SEC include (a)
its Annual Reports on Form 10-K for its fiscal years ended June 30, 2001, June
30, 2002 and June 30, 2003, respectively, (b) its Quarterly Report on Forms 10-Q
for its fiscal quarter ended September 30, 2003, (c) all other forms, reports,
statements and documents filed or required to be filed by it with the SEC since
July 1, 2000, and (d) all amendments and supplements to all such reports and
registration statements filed by Parent with the SEC. The consolidated balance
sheet of Parent and its subsidiaries at September 30, 2003, including the notes
thereto, is hereinafter referred to as the “Parent Balance Sheet.”

 

5.4 Absence of Material Adverse Changes. Since the date of the Parent Balance
Sheet, Parent has not suffered any Parent Material Adverse Effect, nor has there
occurred or arisen any event, condition or state of facts of any character that
would result in a Parent Material Adverse Effect.

 

5.5 Financing Arrangements. Parent and Federal have funds available to them
sufficient to consummate the Transaction in accordance with the terms of this
Agreement.

 

Article 6

CONDUCT PRIOR TO THE CLOSING DATE

 

6.1 Conduct of Business of CMS. Except as set forth on Schedule 6.1 hereto,
between the date of this Agreement and the Closing Date or the date, if any, on
which this Agreement is earlier terminated pursuant to its terms, CMS and the
Subsidiaries shall each, except to the extent that Parent shall otherwise
consent in writing (such consent not to be unreasonably withheld), (a) carry on
its business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, pay its debts and taxes when due subject to good
faith disputes over such debts or taxes, pay or perform other material
obligations when due, except when subject to good faith disputes over such
obligations, and use all commercially reasonable efforts consistent with past
practices and policies to preserve intact its present business organizations,
keep available the services of its present officers and employees and preserve
its relationships with customers, suppliers and others having business
relationships with it, to the end that CMS’s and the Subsidiaries’ goodwill and
ongoing businesses shall be unimpaired at the Closing Date, and (b) promptly
notify Parent of any event or occurrence which will have or could reasonably be
expected to have an CMS Material Adverse Effect. In addition, between the date
of this Agreement and the Closing Date or the date, if any, on which this
Agreement is earlier terminated pursuant to its terms, neither CMS nor any
Subsidiary shall, except as set forth on Schedule 6.1 hereto or to the extent
that Parent shall otherwise consent in writing (such consent not to be
unreasonably withheld):

 

(a) amend its charter documents or by-laws;

 

- 29 -

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

(b) declare or pay any dividends or distributions on its outstanding shares of
capital stock or purchase, redeem or otherwise acquire for consideration any
shares of its capital stock or other securities except in accordance with
agreements existing as of the date hereof;

 

(c) issue or sell any shares of its capital stock, effect any stock split or
otherwise change its capitalization as it exists on the date hereof, or issue,
grant, or sell any options, stock appreciation or purchase rights, warrants,
conversion rights or other rights, securities or commitments obligating it to
issue or sell any shares of its capital stock, or any securities or obligations
convertible into, or exercisable or exchangeable for, any shares of its capital
stock;

 

(d) borrow or agree to borrow any funds or voluntarily incur, or assume or
become subject to, whether directly or by way of guaranty or otherwise, any
obligation or Liability, except obligations incurred in the ordinary course of
business consistent with past practices;

 

(e) pay, discharge or satisfy any claim, obligation or Liability in excess of
$25,000 (in any one case) or $50,000 (in the aggregate), other than the payment,
discharge or satisfaction in the ordinary course of business of obligations
reflected on or reserved against in the CMS Balance Sheet, or incurred since the
date of the CMS Balance Sheet in the ordinary course of business consistent with
past practices;

 

(f) except as required by applicable law, adopt or amend in any material
respect, any agreement or plan (including severance arrangements) for the
benefit of its employees;

 

(g) sell, mortgage, pledge or otherwise encumber or dispose of any of its assets
which are material, individually or in the aggregate, to the business of CMS or
any Subsidiary;

 

(h) acquire by merging or consolidating with, or by purchasing any equity or
partnership interest in or a material portion of the assets of, any business or
any corporation, partnership, association or other business organization or
division thereof, or otherwise acquire any assets which are material,
individually or in the aggregate, to the business of CMS or any Subsidiary;

 

(i) increase the following amounts payable or to become payable: (i) the salary
of any of its directors or officers, other than increases in the ordinary course
of business consistent with past practices and not exceeding, in any case, five
percent (5%) of the director’s or officer’s salary on the date hereof, (ii) any
other compensation of its directors or officers, including any increase in
benefits under any bonus, insurance, pension or other benefit plan made for or
with any of those persons, other than increases that are provided in the
ordinary course of business consistent with past practices to broad categories
of employees and do not discriminate in favor of the aforementioned persons, and
(iii) the compensation of any of its other employees, consultants or agents
except in the ordinary course of business consistent with past practices;

 

- 30 -

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

(j) dispose of, permit to lapse, or otherwise fail to preserve its rights to use
the CMS Proprietary Rights or enter into any settlement regarding the breach or
infringement of, all or any part of the CMS Proprietary Rights, or modify any
existing rights with respect thereto, and other than any such disposal, lapse,
failure, settlement or modification that does not have and could not reasonably
be expected to have an CMS Material Adverse Effect;

 

(k) sell, or grant any right to exclusive use of, all or any part of the CMS
Proprietary Rights;

 

(l) enter into any contract or commitment or take any other action that is not
in the ordinary course of its business or could reasonably be expected to have
an adverse impact on the transactions contemplated hereunder or that would have
or could reasonably be expected to have an CMS Material Adverse Effect;

 

(m) amend in any material respect any agreement to which it is a party, the
amendment of which will have or could reasonably be expected to have an CMS
Material Adverse Effect;

 

(n) waive, release, transfer or permit to lapse any claim or right (i) that has
a value, or involves payment or receipt by it, of more than $25,000 or (ii) the
waiver, release, transfer or lapse of which would have or could reasonably be
expected to have an CMS Material Adverse Effect;

 

(o) take any action that would materially decrease CMS’s Net Worth;

 

(p) make any change in any method of accounting or accounting practice other
than changes required to be made in order that CMS’s financial statements comply
with GAAP; or

 

(q) agree, whether in writing or otherwise, to take any action described in this
Section 6.1.

 

6.2 Conduct of Business of Parent. Between the date of this Agreement and the
Closing Date or the date, if any, on which this Agreement is earlier terminated
pursuant to its terms, Parent and Federal shall not, except to the extent that
CMS shall otherwise consent in writing (such consent not to be unreasonably
withheld), take any action that would materially impair Federal’s ability to pay
the aggregate Purchase Price or otherwise to perform its obligations under this
Agreement. Further, between the date of this Agreement and the Closing Date or
the date, if any, on which this Agreement is earlier terminated pursuant to its
terms, Parent and Federal shall, except to the extent that CMS shall otherwise
consent in writing (such consent not to be unreasonably withheld) promptly
notify CMS and the Stockholders’ Representative of any event or occurrence which
will have or could reasonably be expected to have an adverse effect on the
ability of Federal and Parent to pay the aggregate Purchase Price and otherwise
to perform their respective obligations hereunder.

 

- 31 -

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

Article 7

ADDITIONAL AGREEMENTS

 

7.1 Exclusivity. From and after the date of this Agreement until the earlier of
the Closing Date or the termination of this Agreement in accordance with Article
10 hereof, but in any event to and including March 1, 2004, neither CMS nor any
Stockholder will, directly or indirectly, through their respective affiliates,
agents, officers and directors, directly or indirectly, solicit, initiate, or
participate in discussions or negotiations or otherwise cooperate in any way
with, or provide any information to, any corporation, partnership, person, or
other entity or group concerning any tender offer, exchange offer, merger,
business combination, sale of substantial assets, sale of shares of capital
stock, or similar transaction involving CMS or any Subsidiary (all such
transactions being referred to herein as “Acquisition Proposals”).
Notwithstanding the foregoing, in the event that CMS at any time after the date
of the Letter of Intent and before the earlier of the Closing Date or the
termination of this Agreement in accordance with Article 10 hereof, accepts an
Acquisition Proposal from any person or entity other than Parent, Parent shall
be entitled, providing that neither Parent nor Federal is in a material breach
of any of its obligations hereunder, upon demand submitted in a form of a notice
to CMS (the “Parent Demand Notice”) to the payment of the sum of $250,000. CMS
shall make such payment within ten (10) days of its receipt of such Parent
Demand Notice.

 

7.2 Expenses

 

7.2.1 General. Except as provided in this Section 7.2, each party hereto shall
be responsible for its own costs and expenses in connection with the
Transaction, including fees and disbursements of consultants, brokers, finders,
investment bankers and other financial advisors, counsel and accountants
(“Expenses”).

 

7.2.2 Attorney Fees. At the Closing, Federal shall pay to CMS’s Counsel for fees
relating to the Transaction, which amount shall be deducted from the Direct
Payment due the Stockholders at the Closing.

 

7.2.3 Accountant Fees. At the Closing, Federal shall pay to CMS’s Accountant for
fees relating to the Transaction, which amount shall be deducted from the Direct
Payment due the Stockholders at the Closing.

 

7.2.4 Uncovered Expenses. Except with respect to those expenses described in
Sections 7.2.2 and 7.2.3, CMS and the Stockholders shall ensure that either: (a)
any Expenses incurred by CMS or the Stockholders are paid at or before the
Closing from the aggregate Purchase Price so that such Expenses do not continue
to be or do not become the liability of CMS after the Closing or (b) provision
is made for any such Expenses on CMS’s books for payment after the Closing (it
being understood that in such event the Net Worth on the Closing Balance Sheet
shall be reduced by any such Expenses).

 

7.3 Insurance Tail Policies. Parent, Federal and CMS shall cooperate to secure a
three-year “tail” to CMS’s directors and officers, insurance policies and
Federal shall pay the premiums for such policies (collectively, the “Insurance
Tail Premiums”).

 

- 32 -

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

7.4 Indemnification. Subject to the terms of this Section 7.4, from and after
the Closing Date, Parent, Federal, CMS, each of their respective subsidiaries
and Affiliates and their respective directors, officers, employees, Affiliates,
representatives, successor and assigns (collectively “Stockholder Indemnified
Parties”) shall be entitled to payment and reimbursement from the Indemnifying
Stockholders and their respective successors (the “Parent Indemnifying
Parties”), jointly and severally, of the amount of any Loss suffered, incurred
or paid by any Stockholder Indemnified Party (subject to subsection 7.4.3), by
reason of, in whole or in part, any misrepresentation or inaccuracy in, or
breach of, any representation or warranty made by CMS or any Stockholder in this
Agreement or any Exhibits or Schedules hereto or the certificates delivered
pursuant to this Agreement (where, for the purpose of determining such Loss,
each such representation or warranty would read as if all qualifications as to
materiality and knowledge were deleted therefrom and each such representation or
warranty would read as if made by the Stockholders). Subject to the terms of
this Section 7.4, from and after the Closing Date, the Stockholders and each of
their respective successors (collectively the “Parent Indemnified Parties”)
shall be entitled to payment and reimbursement from Parent, Federal and CMS (the
“Stockholder Indemnifying Parties”) of the amount of Loss suffered incurred or
paid by any Parent Indemnified Party by reason of any breach of any
representation or warranty made by Parent or Federal in this Agreement, the
breach or nonperformance of any covenant or obligation to be performed by Parent
or Federal hereunder (or CMS hereunder after the Closing Date) or under any
agreement executed in connection herewith, or any matter arising out of the
business of CMS after the Closing.

 

7.4.1 Claims for Indemnification. Upon obtaining knowledge of any facts, claim
or demand which has given rise to, or could reasonably give rise to, a claim for
indemnification hereunder (referred to herein as an “Indemnification Claim”),
the party seeking indemnification hereunder, the Stockholder Indemnified Party
or the Parent Indemnified Party, as the case may be (the “Indemnified Party”),
shall promptly give written notice of such facts, claim or demand (a “Notice of
Claim”) to the party from whom indemnification is sought, the Parent
Indemnifying Party or the Stockholder Indemnifying Party, as the case may be
(the “Indemnifying Party”). No failure or delay by the Indemnified Party in the
giving of a Notice of Claim shall reduce or otherwise affect the Indemnified
Party’s right to indemnification except to the extent that the Indemnifying
Party has been prejudiced thereby.

 

7.4.2 Defense by Indemnifying Party. In the event of a claim or demand asserted
by a third party (a “Third Party Claim”), the Indemnifying Party shall have the
right, but not the obligation, exercisable by written notice to the Indemnified
Party within 10 days of the date of the Notice of Claim concerning the
commencement or assertion of any Third Party Claim, to participate in the
defense of such Third Party Claim. If the Indemnifying Party gives such notice
of intent to defend, the Indemnifying Party shall assume the defense thereof as
follows: (a) the Indemnifying Party will defend the Indemnified Party against
the matter with counsel compensated by and chosen by the Indemnifying Party,
which choice of counsel shall be subject to the reasonable satisfaction of the
Indemnified Party; (b) the Indemnified Party may retain separate co-counsel at
the sole cost and expense of Indemnified Party; (c) the Indemnified Party will
not consent to the entry of any judgment or enter into any settlement with
respect to the matter without the written consent of the Indemnifying Party; and
(d) the Indemnifying Party will not consent to the entry of any judgment with
respect to the matter, or enter into any settlement that does not include a
provision whereby the plaintiff or claimant in the matter

 

- 33 -

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

releases the Indemnified Party from all liability with respect thereto, without
the written consent of the Indemnified Party. If, however, (y) no Indemnifying
Party notifies the Indemnified Party within 10 days after the Indemnified Party
has given notice of the matter, that the Indemnifying Party is assuming the
defense thereof, or (z), the maximum liability under such Third Party Claim is
greater than the available indemnification amount for the Indemnifying Party
(after taking into account the amount of all other claims for which the
Indemnifying Party may be or may be claimed to be liable and any limitations
contained in Section 7.4.3 hereof), then the Indemnified Party may defend
against, or enter into any settlement with respect to, the matter. The
Indemnified Party shall not settle such Third Party Claim without the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed.

 

7.4.3 Limitation on Liability for Indemnity.

 

(a) The Parent Indemnified Parties shall not be entitled to indemnification
pursuant to this Section 7.4 until the aggregate amount of all Losses suffered
by the Parent Indemnified Parties exceed $100,000 (One Hundred Thousand Dollars)
(the “Parent Indemnity Basket”) whereupon the Parent Indemnified Parties shall
be entitled to indemnification hereunder for the aggregate amount of all of such
Losses in excess of $100,000. The Parent Indemnity Basket shall be determined
without regard to any materiality qualification contained in any representation
or warranty.

 

(b) The Stockholder Indemnified Parties shall not be entitled to indemnification
pursuant to this Section 7.4 until the aggregate amount of all Losses, suffered
by the Stockholder Indemnified Parties exceeds $100,000 (One Hundred Thousand
Dollars) (the “Stockholder Indemnity Basket”) whereupon the Stockholder
Indemnified Parties shall be entitled to indemnification hereunder for the
aggregate amount of all of such Losses in excess of $100,000. Notwithstanding
the foregoing, the Stockholder Indemnified Parties shall be entitled to
indemnification, on a dollar-for-dollar basis, without reference to the
Stockholder Indemnity Basket for (i) all of their costs incurred in connection
with the termination of the ESOP and the distribution of its assets, (ii) all
Losses suffered, incurred or paid in connection with claims or demands made by
or on behalf of Mary Livingston, a former employee of CMS (excluding costs of
defense allocable to the efforts of employees of Parent or Federal) and (iii)
subject to the limitations set forth Section 9.1 all Losses suffered, incurred
or paid that relate to CMS’s reimbursement practices to the United States
Government. The Stockholder Indemnity Basket shall be determined without regard
to any materiality qualification contained in any representation or warranty.

 

(c) The aggregate liability of the Parent Indemnifying Parties for
indemnification under this Section 7.4 shall not exceed $4,000,000 (Four Million
Dollars). The aggregate liability of the Stockholder Indemnifying Parties for
indemnification under this Section 7.4 shall not exceed $4,000,000 (Four Million
Dollars). The joint and several liability of the Indemnifying Stockholders under
this Section 7.4 shall be in proportion to, and shall not exceed, such
Indemnifying Stockholder’s pro rata interest in the Escrow. Provided that Parent
and Federal are not otherwise in default of their obligations under Section 2.2
above, then to the extent that the amount then held in the Escrow is sufficient,
the amount that a Stockholder

 

- 34 -

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

Indemnified Party is entitled to receive in indemnification hereunder, or such
lesser amount as is then held in the Escrow, shall be released from the Escrow
and paid to such Stockholder Indemnified Party in partial (if the amount then
held in the Escrow is less than the amount such Stockholder Indemnified Party is
entitled receive in indemnification hereunder ) or full satisfaction of the
Parent Indemnifying Parties’ obligation hereunder, as the case may be.

 

(d) The Stockholders, other than the Indemnifying Stockholders, shall not be
subject to the indemnification obligations of this Section 7.4.

 

7.5 Access and Information. CMS shall afford to Parent, Federal, and to a
reasonable number of their respective officers, employees, accountants, counsel
and other authorized representatives full and complete access, upon reasonable
advance telephone notice, during regular business hours, throughout the period
prior to the earlier of the Closing Date or the termination of this Agreement
pursuant to its terms, to CMS’s and the Subsidiaries’ executives, offices,
properties, books and records, and CMS shall use reasonable efforts to cause its
representatives and independent public accountants to furnish to Parent such
additional financial and operating data and other information as to its
business, customers, vendors and properties as Parent may from time to time
reasonably request. Notwithstanding the foregoing, all visits to any office of
CMS or any Subsidiary will be coordinated and conducted so as to not be
disruptive to the operations of CMS or the Subsidiaries and with the intention
to preserve the confidentiality of the transactions contemplated hereby. In
connection with their due diligence investigations, Parent and Federal may
employ the services of a third party to provide document management and database
services. As one of the last matters of their due diligence investigations,
Parent and Federal shall be permitted to meet with CMS’s and the Subsidiaries’
significant customers.

 

7.6 Public Disclosure. Except as otherwise required by law, any press release or
other public disclosure of information regarding the proposed transaction
(including the negotiations with respect to the Transaction and the terms and
existence of this Agreement) shall be developed by Parent, subject to CMS’s
review. CMS and Parent agree that the non-disclosure obligations contained in
Section 11 of the Letter of Intent shall remain in full force and effect in
accordance with the terms thereof and hereof.

 

7.7 Further Assurances

 

7.7.1 Generally. Subject to terms and conditions herein provided and to the
fiduciary duties of the board of directors and officers or representatives of
any party, each of the parties agrees to use its commercially reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective this Agreement and the transactions contemplated
hereby. In case at any time any further action, including, without limitation,
the obtaining of waivers and consents under any agreements, material contracts
or leases and the execution and delivery of any licenses or sublicenses for any
software, is necessary, proper or advisable to carry out the purposes of this
Agreement, the proper officers and directors or representatives of each party to
this Agreement are hereby directed and authorized to use commercially reasonable
efforts to effectuate all required action.

 

- 35 -

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

7.7.2 Novation of Contracts. Each party agrees to use commercially reasonable
efforts to effect the novation of each contract with a Governmental Entity that
may require novation under its terms or under applicable laws or regulations,
and further agrees to provide all documentation necessary to effect each such
novation, including, without limitation, all instruments, certifications,
requests, legal opinions, audited financial statements, and other documents
required by Part 42 of the Federal Acquisition Regulation to effect a novation
of any contract with the Government of the United States. In particular and
without limiting the generality of the foregoing, CMS and the Subsidiaries shall
each continue to communicate with responsible officers of the Government of the
United States from time to time as may be appropriate and permissible, to
request speedy action on any and all requests for consent to novation.

 

7.7.3 Benefit Plan Disclosures. CMS and the Stockholders shall furnish all
resources necessary to complete the returns, reports or disclosures relating to,
but not yet required to be filed for, any and all CMS Plans, with respect to
current or prior plan years. CMS and the Stockholders will ensure accurate and
timely completion of such returns, reports and disclosures.

 

7.8 Certain Tax Matters

 

7.8.1 338(h)(10) Election. CMS and the Stockholders will join with Federal in
making an election under Section 338(h)(10) of the Code (and any corresponding
election under state, local, and foreign tax law) with respect to the purchase
and sale of the Shares hereunder (a “Section 338(h)(10) Election”). Each
Stockholder will include any income, gain, loss, deduction, or other tax item
resulting from the Section 338(h)(10) Election on his or her Tax Returns to the
extent required by applicable law. The Stockholders will also pay any Tax
imposed on CMS or the Subsidiaries attributable to the making of the Section
338(h)(10) Election, including (a) any Tax imposed under Code §1374, (b) any tax
imposed under Treas. Reg. section 1.338(h)(10)-1(e) example 5, or (c) any state,
local or foreign Tax imposed on CMS’s or the Subsidiaries’ gain, and the
Stockholders shall indemnify Federal, CMS and the Subsidiaries against any
adverse consequences arising out of any failure to pay any such Taxes.

 

7.8.2 Allocation of Purchase Price. Federal, the Stockholders and CMS agree that
the Purchase Price and the liabilities of CMS and the Subsidiaries (plus other
relevant items) will be allocated to the assets of CMS and its the Subsidiaries
for all purposes (including Tax and financial accounting purposes) in a manner
consistent with an allocation schedule to be prepared by Parent after the
Closing. Federal shall prepare such allocation schedule in accordance with Code
sections 338 and 1060 and the Treasury regulations thereunder, and shall permit
the Stockholders’ Representative an opportunity to review such allocation
schedule. Federal, CMS, the Subsidiaries and the Stockholders will file all Tax
Returns (including amended returns and claims for refund) and information
reports in a manner consistent with such allocation schedule.

 

7.8.3 S Corporation Status. CMS and the Stockholders will not revoke CMS’s
election to be taxed as an S corporation within the meaning of Code sections
1361 and 1362. CMS and the Stockholders will not take or allow any action other
than the sale of CMS’s stock pursuant to this Agreement that would result in the
termination of CMS’s status as a validly electing S corporation within the
meaning of Code sections 1361 and 1362.

 

- 36 -

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

7.8.4 Tax Periods Ending on or before the Closing Date. Federal shall prepare or
cause to be prepared and file or cause to be filed all Tax Returns for CMS and
the Subsidiaries for all periods ending on or prior to the Closing Date which
are filed after the Closing Date. Federal shall permit the Stockholders’
Representative to review and comment on each such Tax Return described in the
preceding sentence prior to filing. To the extent permitted by applicable law,
each Stockholder shall include any income, gain, loss, deduction or other tax
items for such periods on the Stockholder’s Tax Return in a manner consistent
with the Schedule K-1s furnished by or on behalf of CMS to the Stockholder for
such periods. The Stockholders shall pay Federal for all Taxes of CMS and the
Subsidiaries with respect to such periods within fifteen (15) days after payment
by Federal or CMS of such Taxes.

 

7.8.5 Cooperation on Tax Matters

 

(a) Federal, CMS, the Subsidiaries and the Stockholders shall cooperate fully,
as and to the extent reasonably requested by any party, in connection with the
filing of Tax Returns pursuant to this Section and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party’s request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. CMS, the Subsidiaries, and the Stockholders agree (i) to retain all
books and records with respect to Tax matters pertinent to CMS and the
Subsidiaries relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent notified
by Federal or the Stockholders’ Representative, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) to give the other reasonable
written notice prior to transferring, destroying or discarding any such books
and records and, if the other so requests, CMS or the Stockholders, as the case
may be, shall allow the other to take possession of such books and records.

 

(b) Federal and the Stockholders further agree, upon request, to use their best
efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).

 

(c) Federal and the Stockholders further agree, upon request, to provide the
other party with all information that either party may be required to report
pursuant to section 6043 of the Code and all Treasury regulations promulgated
thereunder.

 

7.8.6 Tax Sharing Agreements. All Tax sharing agreements or similar agreements
with respect to or involving CMS or any Subsidiary shall be terminated as of the
Closing Date and, after the Closing Date, CMS and the Subsidiaries shall not be
bound thereby or have any liability thereunder.

 

- 37 -

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

7.8.7 Certain Taxes. All transfer, documentary, sales, use, stamp, registration
and other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement, shall be paid by the Stockholders when due, and
each Stockholder will, at his or her own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Federal will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.

 

7.9 Notification. From the date hereof until the Closing Date, CMS shall
promptly disclose to Parent and Federal in writing any material variances from
the representations and warranties contained in Article 3 promptly upon
discovery thereof, in the form of “Updated Schedules” delivered to Parent and
Federal. From the date hereof until the Closing Date, Parent and Federal shall
promptly disclose to CMS in writing any material variances from Parent and
Federal representations and warranties contained in Article 5.

 

7.10 Termination of the ESOP. The parties shall cooperate to terminate the ESOP
effective as soon as possible following the Closing and to secure a
determination from the Internal Revenue Service that the ESOP forms a part of a
qualified plan as of its termination. All costs incurred by Parent, Federal and
CMS in connection with the termination of the ESOP and the distribution of its
assets shall be borne by the Stockholders and paid out of the Escrow on a
dollar-for-dollar basis, irrespective of the limitation set forth in Section
7.4.3(b) hereof.

 

7.11 Termination of Existing Shareholder Agreements. Effective upon Closing,
each Stockholder agrees to terminate, and hereby terminates, of existing
shareholder agreements or similar agreements governing or restricting the sale,
transfer or other disposition of the Shares. The foregoing termination shall
include, but not be limited to, the termination off all such restrictions
contained in CMS’s by-laws.

 

Article 8

CONDITIONS PRECEDENT

 

8.1 Conditions Precedent to the Obligations of Each Party. The obligations of
the parties hereto to effect the Transaction shall be subject to the fulfillment
at or prior to the Closing of the following conditions, any of which conditions
may be waived in writing prior to Closing by the party for whose benefit such
condition is imposed:

 

8.1.1 No Illegality. There shall not have been any action taken, and no statute,
rule or regulation shall have been enacted, by any state, federal or other
(including foreign) government agency since the date of this Agreement that
would prohibit or materially restrict the Transaction or any other material
transaction contemplated hereby.

 

8.1.2 Government Consents. All filings with and notifications to, and all
approvals and authorizations of, third parties (including, without limitation,
Governmental Entities) required for the consummation of the Transaction and the
other material transactions contemplated hereby shall have been made or obtained
and all such approvals and authorizations obtained shall be effective and shall
not have been suspended, revoked or stayed by action of any Governmental Entity.

 

- 38 -

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

8.1.3 No Injunction. No injunction or restraining or other order issued by a
court of competent jurisdiction that prohibits or materially restricts the
consummation of the Transaction contemplated hereby shall be in effect (each
party agreeing to use all reasonable efforts to have any injunction or other
order immediately lifted), and no action or proceeding shall have been commenced
or threatened in writing seeking any injunction or restraining or other order
that seeks to prohibit, restrain, invalidate or set aside consummation of the
transactions contemplated hereby.

 

8.1.4 Escrow Agreement. Each of the parties hereto, together with the Escrow
Agent, shall have entered into the Escrow Agreement.

 

8.1.5 Paying Agent Agreement. Each of the parties thereto shall have entered
into the Paying Agent Agreement.

 

8.2 Conditions Precedent to Obligation of Parent and Federal to Consummate the
Transaction. The obligation of Parent and Federal to consummate the Transaction
shall be subject to the fulfillment at or prior to the Closing of the following
additional conditions, any of which conditions may be waived in writing by
Parent or Federal prior to Closing:

 

8.2.1 Representations and Warranties. The representations and warranties of CMS
and the Stockholders contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date, except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date, except, in all such cases, for such
breaches, inaccuracies or omissions of such representations and warranties which
have neither had, nor reasonably would be expected to have, an CMS Material
Adverse Effect (it being understood that, for purposes of determining the
accuracy of such representations and warranties, any update of or modification
to the Schedules made or purported to have been made after execution of this
Agreement, including the Updated Schedules, shall be disregarded); and CMS and
the Stockholders shall have delivered to Parent a certificate to that effect,
dated the Closing Date and signed on behalf of CMS by the President and Chief
Financial Officer of CMS as well as by the Stockholders in their respective
individual capacities.

 

8.2.2 Agreements and Covenants. CMS shall have performed in all material
respects all of its agreements and covenants set forth herein that are required
to be performed at or prior to the Closing Date; and CMS and the Stockholders
shall have delivered to Parent a certificate to that effect, dated as of the
Closing Date and signed on behalf of CMS by the President and Chief Financial
Officer of CMS as well as by Stockholders in their respective individual
capacities.

 

8.2.3 Legal Opinion. Parent and Federal shall have received an opinion from John
Woloszyn in substantially the form attached hereto as Exhibit B.

 

8.2.4 Closing Documents. CMS and the Stockholders shall have delivered to Parent
the closing certificate described hereafter in this paragraph and such other
closing documents as Parent shall reasonably request (other than additional
opinions of counsel). The

 

- 39 -

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

closing certificate, dated as of the Closing Date, duly executed by CMS’s
secretary, shall certify as to (a) the signing authority, incumbency and
specimen signature of the signatories of this Agreement and other documents
signed on behalf of CMS in connection herewith, (b) the resolutions adopted by
the board of directors of CMS authorizing and approving the execution, delivery
and performance of this Agreement and the other documents executed in connection
herewith and the consummation of the transactions contemplated hereby and
thereby and state that such resolutions have not been modified, amended, revoked
or rescinded and remain in full force and effect, and (c) the charter documents
and by-laws of CMS.

 

8.2.5 Third Party Consents. All third party consents or approvals listed in
Schedule 3.17.3 hereto shall have been obtained by CMS and shall be effective
and shall not have been suspended, revoked, or stayed by action of any such
third party.

 

8.2.6 Diligence Review. Parent and its accountants and attorneys shall have
conducted a diligence investigation of all maters related to the business of CMS
deemed relevant by Parent or its accountants and attorneys to such diligence
investigation, and the results of such diligence investigation shall have been
satisfactory to Parent in its sole discretion.

 

8.2.7 Authority of the Trustee of the CMS Corporation Employee Stock Ownership
Plan. CMS shall have furnished to Parent and Federal evidence satisfactory
Parent and Federal in their discretion as to of the authority of the Trustee of
the ESOP to dispose of the Shares held by the ESOP pursuant to the terms of the
Transaction.

 

8.2.8 Non-Compete, Non-Solicitation and Non-Disturbance Agreements. CMS shall
have entered into a five-year non-competition, non-solicitation and
non-disturbance agreement with each of Douglas K. Turner and William H. Wilken,
and a three year non-competition, non-solicitation and non-disturbance agreement
with Robert B. Turner, each substantially in the form of Exhibit C.

 

8.2.9 Employment Agreements. Each of Charles McQuillan, James Roy, Michael
Perro, Robin Vallingdam and Michelle Walter, as well as at least 95% of CMS’s
and the Subsidiaries’ full-time, billable employees (as of November 19, 2003)
and at least 80% of CMS’s and the Subsidiaries’ part-time, billable employees
(as of November 19, 2003), shall have agreed to remain employees of CMS or the
Subsidiaries following the Closing Date and executed all of Parent’s standard
employment documents, including the CACI Code of Ethics and Business Conduct
Standards and the CACI Employment Agreement. Copies of the employment documents
referenced in the previous sentence are attached hereto as Exhibit D.

 

8.2.10 Updated Employee List. CMS shall have delivered to Federal a list dated
as of the Closing Date containing the name of each person then employed by CMS
and each such employee’s position and annual salary.

 

8.2.11 Material Adverse Effect. Since the date of this Agreement, CMS shall not
have suffered an CMS Material Adverse Effect, it being understood for the
purpose of this Section 8.2.11 that conditions that generally affect the
industries in which CMS participates or the economy of the United States as a
whole (including without limitation a general loss of consumer confidence) shall
neither constitute nor be taken into account in determining whether

 

- 40 -

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

there has occurred an CMS Material Adverse Effect; provided, however, that an
adverse change in the financial or legal condition, business or prospects of CMS
that is specific to CMS (including without limitation the actual or threatened
cancellation or reduction of a program) may be taken into account in determining
whether there has occurred an CMS Material Adverse Effect.

 

8.2.12 No Outstanding Options, Warrants, etc.. There shall be no outstanding
subscriptions, options, warrants, conversion rights or other rights, securities,
agreements or commitments obligating CMS or any Subsidiary to issue, sell or
otherwise dispose of shares of its capital stock, or any securities or
obligations convertible into, or exercisable or exchangeable for, any shares of
its capital stock.

 

8.2.13 Resignations. CMS shall have delivered to Parent and Federal resignations
of all members of the boards of directors of CMS and the Subsidiaries effective
as of the Closing.

 

8.2.14 Termination of Employment Agreement with David C. Lucien. The Employment
Agreement by and between CMS and David C. Lucien dated as of February 19, 2003
shall have been terminated and all obligations to Mr. Lucien pursuant thereto
shall have been fully satisfied.

 

8.2.15 Termination of Loans to Employees. All amounts owed to CMS by current or
former directors, officers and employees of CMS shall have been paid in full.

 

8.2.16 Termination of Consulting Agreement with Douglas Turner. The consulting
agreement by and between CMS and Douglas Turner shall have been terminated and
all obligations to Mr. Turner pursuant thereto shall have been satisfied.

 

8.2.17 Phase 2E. The Company shall obtain a full release of the non-competition
provisions of the agreement dated April 18, 2002, as amended between Phase 2E
and the Company.

 

8.2.18 Maryland Qualification. The Company shall have reinstated its
qualification to do business in Maryland.

 

8.2.19 Paying Agent Agreement. The parties shall have agreed upon the form of a
paying agent agreement.

 

8.2.20 Audited Financials. Prior to Closing, the Company shall provide to Parent
and Federal audited Financial Statements for the year ending December 31, 2003.

 

- 41 -

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

8.3 Conditions to Obligations of CMS and the Stockholders to Consummate the
Transaction. The obligation of CMS and the Stockholders to consummate the
Transaction shall be subject to the fulfillment at or prior to the Closing of
the following additional conditions, any of which may be waived in writing by
CMS or the Stockholders’ Representative prior to Closing:

 

8.3.1 Representations and Warranties. The representations and warranties of
Parent and Federal contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date, except for changes contemplated
by this Agreement and except for those representations and warranties which
address matters only as of a particular date (which shall remain true and
correct as of such date), with the same force and effect as if made on and as of
the Closing Date, except in all such cases, for such breaches, inaccuracies or
omissions of such representations and warranties which have neither had nor
reasonably would be expected to have a Parent Material Adverse Effect; and
Parent shall have delivered to CMS a certificate to that effect, dated the date
of the Closing and signed on behalf of Parent by the Chief Executive Officer and
Chief Financial Officer of Parent.

 

8.3.2 Agreements and Covenants. Parent and Federal shall have performed in all
material respects all of their agreements and covenants set forth herein that
are required to be performed at or prior to the Closing Date; and Parent shall
have delivered to CMS a certificate to that effect, dated as of the Closing Date
and signed on behalf of Parent by the Chief Executive Officer and Chief
Financial Officer of Parent.

 

8.3.3 Legal Opinion. CMS shall have received a legal opinion from Parent in
substantially the form attached hereto as Exhibit F.

 

8.3.4 Closing Documents. Parent and Federal shall have delivered to CMS closing
certificates of Parent and Federal and such other closing documents as CMS shall
reasonably request (other than additional opinions of counsel). Each of the
closing certificates of Parent and Federal, dated as of the Closing Date, duly
executed by the secretary of Parent and Federal, respectively, shall certify as
to (a) the signing authority, incumbency and specimen signature of the
signatories of this Agreement and other documents signed on behalf of Parent and
Federal in connection herewith, (b) the resolutions adopted by the board of
directors of Parent and Federal authorizing and approving the execution,
delivery and performance of this Agreement and the other documents executed in
connection herewith and the consummation of the transactions contemplated hereby
and thereby and state that such resolutions have not been modified, amended,
revoked or rescinded and remain in full force and effect, and (c) the
Certificate of Incorporation and By-Laws of Parent and the Certificate of
Incorporation and By-Laws of Federal.

 

8.3.5 Payment of Purchase Price. Parent shall have tendered the aggregate Direct
Payment to the Stockholders pursuant to the provisions of Section 2.2.2 hereof
and shall have delivered the Escrow Payment to the Escrow Agent pursuant to the
provisions of Section 2.2.3 hereof.

 

Article 9

SURVIVAL OF REPRESENTATIONS

 

9.1 CMS’s and the Stockholders’ Representations. All representations and
warranties made by CMS and the Stockholders in this Agreement, or any
certificate or other writing delivered by CMS or any of its Affiliates pursuant
hereto or in connection herewith shall survive the Closing and any investigation
at any time made by or on behalf of Parent and shall

 

- 42 -

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

terminate on the date which is Twenty-Four (24) months after the Closing Date
(except that Indemnified Party claims pending on such date continue until
resolved). It is nevertheless understood by the parties that Parent and Federal
within 10 years from Closing may make claims and demands, up to $250,000 against
the Indemnifying Stockholders regarding CMS’s reimbursement practices to the
United States Government. The covenants made by CMS or the Stockholders in this
Agreement or any certificate or other writing delivered by CMS or any of its
Affiliates pursuant hereto or in connection herewith shall survive the Closing
and any investigation at any time made by or on behalf of Parent.

 

9.2 Parent’s and Federal’s Representations. All representations and warranties
made by Parent and Federal in this Agreement or any certificate or other writing
delivered by Parent, Federal or any of their respective Affiliates pursuant
hereto or in connection herewith shall terminate at the Closing.

 

Article 10

OTHER PROVISIONS

 

10.1 Termination Events. This Agreement may be terminated and the Transaction
abandoned at any time prior to the Closing Date; provided, however, that upon
any such termination the surviving obligations of the parties under the Letter
of Intent, including the obligations of confidentiality and non-solicitation,
shall continue in full force and effect in accordance with the terms of the
Letter of Intent:

 

(a) by mutual written consent of Parent and CMS;

 

(b) by Parent, if there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of CMS or any
Stockholder and such breach has not been cured within ten business days after
written notice to CMS (provided, that neither Parent nor Federal is in material
breach of the terms of this Agreement, and provided further, that no cure period
shall be required for a breach which by its nature cannot be cured) such that
the conditions set forth in Section 8.2.1 or Section 8.2.2 hereof, as the case
may be, will not be satisfied;

 

(c) by Parent, if CMS, its board of directors or any Stockholder shall have (i)
withdrawn, modified or amended in any material respect the approval of this
Agreement or the transactions contemplated herein, or (ii) taken any public
position inconsistent with its approval or recommendation, including, without
limitation, having failed (without the consent of Parent) after a reasonable
period of time to reject or disapprove any Acquisition Proposal (or after a
reasonable period of time to recommend to its shareholders such rejection or
disapproval), and in that event CMS shall pay to Parent the amount specified in
Section 7.1;

 

(d) by CMS, if there has been a breach of any representation, warranty, covenant
or agreement contained in this Agreement on the part of Parent or Federal and
such breach has not been cured within ten business days after written notice to
Parent (provided, that CMS is not in material breach of the terms of this
Agreement, and provided further, that no cure period shall be required for a
breach which by its nature cannot be cured) such that the conditions set forth
in Section 8.3.1 or Section 8.3.2 hereof, as the case may be, will not be
satisfied;

 

- 43 -

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

(e) by CMS, if Parent or Federal or their respective boards of directors shall
have withdrawn, modified or amended in any material respect the approval of this
Agreement or the transactions contemplated herein (provided, that neither CMS
nor any Stockholder is in material breach of the terms of this Agreement) and in
that event Parent shall pay to CMS the amount specified in Section 7.1;

 

(f) by any party hereto if: (i) there shall be a final, non-appealable order of
a federal or state court in effect preventing consummation of the Transaction;
(ii) there shall be any final action taken, or any statute, rule, regulation or
order enacted, promulgated or issued or deemed applicable to the Transaction by
any Governmental Entity which would make consummation of the Transaction illegal
or which would prohibit Parent’s or Federal’s ownership or operation of all or a
material portion of the stock or assets of CMS, or compel Parent or Federal to
dispose of or hold separate all or a material portion of the business or assets
of CMS or Parent or Federal as a result of the Transaction; or

 

(g) by any party hereto if the Transaction shall not have been consummated by
[March 1], 2004 , provided that the right to terminate this Agreement under this
Section 10.1(g) shall not be available to any party whose failure to fulfill any
material obligation under this Agreement has been the cause of, or resulted in,
the failure of the Closing Date to occur on or before such date.

 

Any termination of this Agreement duly effected by any party pursuant to this
Section 10.1 shall constitute a termination of this Agreement as to all parties.

 

10.2 Notices. All notices and other communications hereunder to any party shall
be contained in a written instrument addressed to such party at the address set
forth below or such other address as may hereafter be designated in writing by
the addressee to the addressor listing all parties and shall be deemed given (a)
when delivered in person or duly sent by facsimile or electronic mail to a
facsimile number or electronic mail address furnished by the addressee for the
purpose of receiving notices and other communications, (b) three days after
being duly sent by first class mail, postage prepaid, or (c) two days after
being duly sent by Federal Express or other recognized express courier service:

 

To Parent and Federal:

 

CACI International Inc

1100 North Glebe Road

Arlington, VA 22201

Attention: Dr. J. P. London, Chairman

 

- 44 -

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

with copies to:

 

Jeffrey P. Elefante

Executive Vice President, General Counsel and Secretary

CACI International Inc

1100 North Glebe Road

Arlington, VA 22201

 

and

 

Dean F. Hanley

Foley Hoag LLP

155 Seaport Boulevard

Boston, MA 02210

 

To CMS:

 

David C. Lucien

Chief Executive Officer

CMS Information Services, Inc.

301 Maple Avenue West

Vienna, VA 22180

 

with a copy to:

 

John Woloszyn

Warehouse at Camden Yards

323 West Camden Street

Suite 675

Baltimore, MD 21201

 

To any Stockholder or the Stockholders’ Representative: at the addresses set
forth on Schedule A.

 

After the Closing, all notices that would have been deliverable to CMS prior to
the Closing Date shall be directed to CMS care of Federal at the address
specified above.

 

10.3 Transfer of Obligations. Upon the Closing, all obligations of CMS hereunder
shall become joint and several obligations of the Stockholders and shall cease
to be obligations of CMS.

 

10.4 Entire Agreement. Unless otherwise herein specifically provided (including
as specified in Sections 7.6 and 10.1 with respect to the Letter of Intent),
this Agreement and the documents and instruments and other agreements among the
parties hereto as contemplated by or referred to herein constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof, including the
Letter of Intent. Each party hereto acknowledges that, in entering this
Agreement and completing the transactions contemplated hereby, such party is not
relying on any representation, warranty, covenant or agreement not expressly
stated in this Agreement or in the agreements among the parties contemplated by
or referred to herein.

 

- 45 -

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

10.5 Assignability. This Agreement is not intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder, except as
otherwise expressly provided herein. Neither this Agreement nor any of the
rights and obligations of the parties hereunder shall be assigned or delegated,
whether by operation of law or otherwise, without the written consent of all
parties hereto.

 

10.6 Accession. The ESOP shall immediately become a party to this Agreement by
executing and delivering to Parent a counterpart signature page in the form of
Exhibit I hereto (the “Accession”). From and after the time of its execution and
delivery of the Accession, the ESOP shall be deemed to be a Stockholder, and the
Stockholders shall be deemed to include the ESOP, for all purposes hereunder.

 

10.7 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, each of which shall remain in full force and
effect.

 

10.8 Specific Performance. The parties hereto acknowledge that damages alone may
not adequately compensate a party for violation by another party of this
Agreement. Accordingly, in addition to all other remedies that may be available
hereunder or under applicable law, any party shall have the right to any
equitable relief that may be appropriate to remedy a breach or threatened breach
by any other party hereunder, including the right to enforce specifically the
terms of this Agreement by obtaining injunctive relief in respect of any
violation or non-performance hereof.

 

10.9 Governing Law This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the Commonwealth of Virginia, without
regard to its principles of conflicts of laws.

 

10.10 Counterparts. This Agreement may be executed in one or more counterparts,
all of which together shall constitute one and the same agreement.

 

* * * * *

 

- 46 -

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

IN WITNESS WHEREOF, the parties have duly executed this Stock Purchase Agreement
under seal as of the date first above written.

 

CACI International Inc

By:

 

 

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

   

Stephen L. Waechter

   

Executive Vice President,

   

Chief Financial Officer, Treasurer

   

and Director of Business Services

CACI, INC. - FEDERAL

By:

 

 

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

   

Stephen L. Waechter

   

Executive Vice President,

   

Chief Financial Officer, Treasurer

   

and Director of Business Services

    CMS Information Services, Inc.

By:

 

 

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

   

David C. Lucien

   

Chairman & CEO

     

 

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

David C. Lucien, as the Stockholders’

Representative

     

 

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

David C. Lucien, individually

 

[Signature Page to Stock Purchase Agreement]

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

 

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

Douglas K. Turner

             

 

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

Robert B. Turner

              WILLIAM H. WILKEN TRUST

By:

 

 

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

 

, Trustee

   

                                                                 (signature)

Name:

 

 

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

        (printed)

 

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

Virgil McCaleb

   

 

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

Mireille McCaleb

   

 

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

Lynne Giordano

   

 

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

Paul Palmer

   

 

[Signature Page to Stock Purchase Agreement]

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

 

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

Ruth Buys

 

 

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

Christopher Carspecken

 

 

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

Thomas Anderson

 

 

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

Charles McQuillan

 

 

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

Lanphuong Troung

 

 

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

John Giordano

 

[Signature Page to Stock Purchase Agreement]

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

List of Exhibits and Schedules

 

Exhibit

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

 

Description

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

A   Escrow Agreement B   Form of Opinion of [Counsel] C   Form of Non-Compete,
Non-Solicitation and Non-Disturbance Agreement D   CACI employment documents E  
RESERVED F   Form of Opinion of Counsel to CACI International Inc G   Paying
Agent Agreement H   Schedule of Liens I   ESOP Accession 3.18.3   Form of CMS
Employee Agreement

 

Schedule

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

 

Description

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

A   Stockholders. B   Indemnifying Stockholders. 3.1   Corporate Status of CMS.
3.2   Capital Stock 3.2.2   Capital Stock - Options and Convertible Securities
of CMS. 3.4   Authority for Agreement; Noncontravention 3.4.2   Authority for
Agreement; Noncontravention - No Conflict. 3.6   Absence of Material Adverse
Changes. 3.7   Absence of Undisclosed Liabilities. 3.8   Compliance with
Applicable Law, Charter and By-Laws. 3.9   Litigation and Audits. 3.10.3   Tax
Matters - Assessments or Disputes 3.10.6   Tax Matters - Tax Basis 3.11.1  
Employee Benefit Plans - List of Plans 3.11.2   Employee Benefit Plans - ERISA
3.11.4   Employee Benefit Plans - Funding 3.11.6   Employee Benefit Plans -
Welfare Plans 3.12   Employment-Related Matters 3.12.1   Employment-Related
Matters - Labor Relations. 3.13   Environmental 3.13.1   Environmental -
Environmental Laws. 3.13.2   Environmental - Environmental Claims. 3.13.3  
Environmental - No Basis for Claims. 3.15   Assets Other Than Real Property
3.15.1   Assets Other Than Real Property - Title. 3.15.2   Assets Other Than
Real Property - Accounts Receivable. 3.16   Real Property 3.16.2   Real Property
- CMS Leases. 3.17   Agreements, Contracts and Commitments 3.17.1   Agreements,
Contracts and Commitments - CMS Agreements. 3.17.2   Agreements, Contracts and
Commitments - Validity.

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

Schedule

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

 

Description

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

3.17.3   Agreements, Contracts and Commitments - Third-Party Consents. 3.18  
Intellectual Property 3.18.1   Intellectual Property - No Conflicts. 3.18.2  
Intellectual Property - Proprietary Rights; Licenses. 3.18.3   Intellectual
Property - Employee Agreements. 3.19   Insurance Contracts. 3.20   Banking
Relationships. 3.22   Absence of Certain Relationships. 6.1   Conduct of
Business of CMS.

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

EXHIBIT I

 

ACCESSION

 

This Accession is executed by the undersigned pursuant to Section 10.6 of that
certain Stock Purchase Agreement dated as of February     , 2004 by and among
CACI International Inc, CACI, INC.—FEDERAL, CMS Information Services, Inc. and
the stockholders of CMS listed on Schedule A thereto (the “Agreement”).
Capitalized terms used but not defined herein shall have the respective meanings
ascribed to such terms in the Agreement. By the execution of this Accession, the
undersigned agrees as follows:

 

1. Acknowledgment. The undersigned acknowledges that the undersigned is selling
its shares of CMS Common Stock subject to the terms and conditions of the
Agreement.

 

2. Agreement. The undersigned hereby adopts the Agreement with the same force
and effect as if the undersigned were originally a party thereto.

 

3. Notice. Any notice required or permitted by the Agreement shall be given to
the undersigned at the address listed beneath the undersigned’s signature below.

 

EXECUTED AND DATED this              day of February, 2004.

 

CMS Information Services, Inc.

Employee Stock Ownership Plan

By:

 

 

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

   

Ruth Buys, Trustee

     

Address:

 

 

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

   

 

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

Facsimile:

 

 

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