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

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

EXHIBIT 10.57

STOCK PURCHASE AGREEMENT

by and among

IDENTIX PUBLIC SECTOR, INC.
a Virginia corporation

IDENTIX INCORPORATED
a Delaware corporation

and

ALION SCIENCE AND TECHNOLOGY CORPORATION
a Delaware corporation

Dated: February 13, 2004

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

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

 

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

 

TABLE OF CONTENTS

                              Page

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

1.   DEFINITIONS     1   2.   PURCHASE PRICE     9  
 
  2.1   Purchase and Sale of the Stock     9  
 
  2.2   The Closing     10  
 
  2.3   Intentionally Omitted     10  
 
  2.4   Adjustment to Purchase Price     10  
 
  2.5   Section 338(h)(10) Election     11  
 
  2.6   Payments     11   3.   REPRESENTATIONS AND WARRANTIES OF COMPANY AND
SELLER     12  
 
  3.1   Company Organization     12  
 
  3.2   Company Authorization; Corporate Documentation     12  
 
  3.3   Intentionally Omitted     13  
 
  3.4   Intentionally Omitted     13  
 
  3.5   Company Binding Agreement     13  
 
  3.6   Company: No Breach     13  
 
  3.7   Permits     14  
 
  3.8   Company Compliance With Laws     14  
 
  3.9   Title to and Sufficiency of Assets     14  
 
  3.10   Condition of Personal Property     14  
 
  3.11   Accounts Receivable     14  
 
  3.12   Intellectual Property     15  
 
  3.13   Contracts     17  
 
  3.14   Litigation     19  
 
  3.15   Financial Statements     19  
 
  3.16   Liabilities     19  
 
  3.17   Tax Matters     19  
 
  3.18   Insolvency Proceedings     21  
 
  3.19   Employee Benefit Plans; ERISA     21  
 
  3.20   Insurance     24  
 
  3.21   Environmental Matters     24  
 
  3.22   Real Estate     25  
 
  3.23   No Other Agreement To Sell     25  
 
  3.24   Company Transactions with Certain Persons     25  
 
  3.25   Intentionally Omitted     26  
 
  3.26   No Affiliates     26  
 
  3.27   Employees and Contractors     26  
 
  3.28   Organizational Conflicts of Interest     27  
 
  3.29   Government Audits     27  

 

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

 

                              Page

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

 
  3.30   Labor Relations     27  
 
  3.31   Board Approval     27  
 
  3.32   Company: Brokers     28  
 
  3.33   Government Contracts     28  
 
  3.34   Defense Articles, Defense Services and Technical Data     32  
 
  3.35   Bank Accounts     32  
 
  3.36   Suppliers and Customers     32  
 
  3.37   Events Subsequent to Most Recent Fiscal Year End     32  
 
  3.38   Intentionally Omitted     35  
 
  3.39   Seller Organization     35  
 
  3.40   Seller Authorization; Corporate Documentation     35  
 
  3.41   Title to the Stock     35  
 
  3.42   Capitalization     35  
 
  3.43   Seller: Binding Agreement     35  
 
  3.44   Seller: No Breach     36  
 
  3.45   Seller Compliance With Laws     36  
 
  3.46   No Other Agreement to Sell     36  
 
  3.47   Seller: Transactions with Certain Persons     36  
 
  3.48   Board Resolutions     37  
 
  3.49   Seller: Brokers     37  
 
  3.50   Disclaimer     37   4.   REPRESENTATIONS AND WARRANTIES OF BUYER     37
 
 
  4.1   Organization     37  
 
  4.2   Corporate Authorization     37  
 
  4.3   Binding Agreement     37  
 
  4.4   Buyer: No Breach     38  
 
  4.5   Brokers     38  
 
  4.6   Board Approval     38  
 
  4.7   Intentionally Omitted     38  
 
  4.8   Investment Intent     38  
 
  4.9   Litigation     38  
 
  4.10   Buyer Financing     38   5.   COVENANTS     38  
 
  5.1   Noncompetition     39  
 
  5.2   Non-Solicitation by Seller after Closing     39  
 
  5.3   Non-Solicitation by Buyer     39  
 
  5.4   Damages     39  
 
  5.5   Reasonable Restraint     39  
 
  5.6   Severability; Reformation     39  
 
  5.7   Materiality     40  
 
  5.8   Confidentiality     40  
 
  5.9   Insurance     40  
 
  5.10   Cost Allowability     41  

ii

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

 

                              Page

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

 
  5.11   Employee Benefits     41  
 
  5.12   Use of Identix Name     42  
 
  5.13   Public Announcements     43  
 
  5.14   Relocation of Seller’s Personnel     43  
 
  5.15   License for Software     43  
 
  5.15   Post-Closing Receipts; Cash of Company     43  
 
  5.17   Email Forwarding     43   6.   CONDITIONS TO BUYER’S OBLIGATIONS     44
  7.   CONDITIONS TO COMPANY’S AND SELLER’S OBLIGATIONS     44   8.   CLOSING  
  44  
 
  8.1   Timing     44   9.   CLOSING DOCUMENTS     44  
 
  9.1   Closing Documents to be Delivered by Company and Seller     44  
 
  9.2   Closing Documents to be Delivered by Buyer     46  
 
  9.3   Intentionally Omitted     47  
 
  9.4   Other Closing Documents and Actions     47   10.   INTENTIONALLY OMITTED
    47   11.   INDEMNIFICATION     47  
 
  11.1   Indemnification by Seller     47  
 
  11.2   Indemnification by Buyer     47  
 
  11.3   Survival     48  
 
  11.4   Certain Limitations on Indemnification Obligations     48  
 
  11.5   Defense of Claims     49  
 
  11.6   Non-Third Party Claims     50  
 
  11.7   Tax Treatment     50  
 
  11.8   No Right of Contribution     50  
 
  11.9   Mitigation     50  
 
  11.10   Reduction of Liability     50   12.   POST CLOSING MATTERS     51  
 
  12.1   Cooperation     51  
 
  12.2   Litigation Support     51  
 
  12.3   Transition     52  

iii

 

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

 

                              Page

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

 
  12.4   Termination of Certain Employees     52  
 
  12.5   Books and Records     52  
 
  12.6   Intentionally Omitted     52  
 
  12.7   Taxes     52   13.   EXPENSES     54   14.   FURTHER ASSURANCES     54
  15.   AMENDMENT; BENEFIT AND ASSIGNABILITY     54   16.   NOTICES     55   17.
  WAIVER     55   18.   ENTIRE AGREEMENT     55   19.   COUNTERPARTS     56  
20.   CONSTRUCTION     56   21.   EXHIBITS AND DISCLOSURE SCHEDULES     56   22.
  SEVERABILITY     56   23.   CHOICE OF LAW     56   24.   COUNSEL     56   25.
  REMEDIES     56  

iv

 

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

 

     
Exhibit A
  Closing Date Balance Sheet and Working Capital Calculation and Category
Summary
 
   
Exhibit B
  Form of Escrow Agreement
 
   
Exhibit C
  Form of Reseller Agreement
 
   
Exhibit D
  Form    Sublease Agreement
 
   
Exhibit E
  Form    Sublease Agreement
 
   
Exhibit F
  Form    Sublease Assignment
 
   
Exhibit G
  Form Master Lease Assignment
 
   
Exhibit H
  Form Estoppel Certificate
 
   
Exhibit I
     Services Agreement
 
   
Exhibit J
     Services Agreement
 
   
Exhibit K
     Services Agreement
 
   
Schedule 3.1
  Company Organization
 
   
Schedule 3.6
  Company: No Breach
 
   
Schedule 3.7
  Permits
 
   
Schedule 3.8
  Company Compliance with Laws
 
   
Schedule 3.9
  Title to and Sufficiency of Assets
 
   
Schedule 3.10
  Condition of Personal Property
 
   
Schedule 3.11
  Accounts Receivable
 
   
Schedule 3.12
  Intellectual Property
 
   
Schedule 3.13
  Contracts
 
   
Schedule 3.14
  Litigation
 
   
Schedule 3.15
  Financial Statements
 
   
Schedule 3.16
  Liabilities

v

 

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

 

     
Schedule 3.17
  Tax Matters
 
   
Schedule 3.19
  Employee Benefit Plans; ERISA
 
   
Schedule 3.20
  Insurance
 
   
Schedule 3.21
  Environmental Matters
 
   
Schedule 3.22
  Real Estate
 
   
Schedule 3.24
  Company Transactions with Certain Persons
 
   
Schedule 3.26
  No Affiliates
 
   
Schedule 3.27
  Employees and Contractors
 
   
Schedule 3.28
  Organizational Conflicts of Interest
 
   
Schedule 3.29
  Government Audits
 
   
Schedule 3.30
  Labor Relations
 
   
Schedule 3.32
  Company: Brokers
 
   
Schedule 3.33
  Government Contracts
 
   
Schedule 3.35
  Bank Accounts
 
   
Schedule 3.36
  Suppliers and Customers
 
   
Schedule 3.37
  Events Subsequent to Most Recent Fiscal Year End
 
   
Schedule 3.44
  Seller: No Breach
 
   
Schedule 3.45
  Seller Compliance with Laws
 
   
Schedule 3.47
  Seller: Transactions with Certain Persons
 
   
Schedule 3.49
  Seller: Brokers
 
   
Schedule 4.4
  Buyer: No Breach
 
   
Schedule 5.10
  Cost Allowability
 
   
Schedule 12.4
  Terminated Employees

 

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

 

STOCK PURCHASE AGREEMENT

     THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as of the
13th day of February, 2004, by and among ALION SCIENCE AND TECHNOLOGY
CORPORATION, a Delaware corporation (“Buyer”), IDENTIX PUBLIC SECTOR, INC., a
Virginia corporation (“Company”), and IDENTIX INCORPORATED, a Delaware
corporation (“Seller”).

RECITALS

     A. Seller owns all of the issued and outstanding capital stock of Company,
consisting of 100 shares of common stock, $0.10 par value per share (the “Common
Stock”). All of the Common Stock issued and outstanding as of the Closing (as
defined below) is referred to as the “Stock.”

     B. Seller desires to sell and convey the Stock to Buyer, and Buyer desires
to purchase the Stock from Seller, upon the terms and conditions set forth in
this Agreement.

     C. All references to the business of Company conducted prior to the date of
this Agreement shall exclude Legislative Demographic Services, Inc. (“LDS”), a
Delaware corporation and a wholly owned subsidiary of Seller which was sold to
Seller by Company on January 30, 2004, and the business conducted by LDS.

AGREEMENT

     NOW, THEREFORE, in consideration of the mutual covenants, conditions and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

     1. DEFINITIONS. As used in this Agreement, the following terms will have
the respective meanings set forth below:

     “Additional Amount” shall have the meaning set forth in Section 2.1(e)
hereof.

     “Affiliate” of an entity means any other Person that, directly or
indirectly, Controls, is Controlled by, or is under common Control with, such
entity. The term “Control” (including, with correlative meaning, the terms
“Controlled by” and “under common Control with”), as used with respect to any
entity, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such entity, whether
through the ownership of voting securities, by contract or otherwise.

     “Affiliated Group” shall have the meaning set forth in the Code.

     “Arbiter” has the meaning set forth in Section 2.4(b) hereof.

 

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

 

     “Assets” means all cash and cash equivalents, marketable securities and
Personal Property of Company, all Contracts, Leases and Property Warranties to
which Company is a party, all Permits held by Company, all Intellectual Property
and all other assets of Company as of the date of this Agreement and as of the
Closing Date.

     “Assignment of Master Lease” shall have the meaning set forth in Section
9.1 hereof.

     “Benefit Plan” shall have the meaning set forth in Section 3.19(a) hereof.

     “Buyer” shall have the meaning set forth in the Preamble to this Agreement.

     “Buyer Parties” shall have the meaning set forth in Section 11.1 hereof.

     “Cap Amount” shall have the meaning set forth in Section 11.4(b) hereof.

     “Cash Purchase Price” shall have the meaning set forth in Section 2.1(a)
hereof.

     “Closing” shall have the meaning set forth in Section 2.2 hereof.

     “Closing Date” shall have the meaning set forth in Section 2.2 hereof.

     “Closing Date Balance Sheet” shall have the meaning set forth in Section
2.4(b) hereof.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Common Stock” shall have the meaning set forth in the Recitals to this
Agreement.

     “Company” shall have the meaning set forth in the Preamble to this
Agreement.

     “Company Balance Sheet” shall have the meaning set forth in Section 3.15
hereof.

     “Contracts” means all items listed on Schedule 3.13, Schedule 3.22 and
Schedule 3.33 and all other contracts, agreements, binding arrangements, bonds,
notes, indentures, mortgages, debt instruments, licenses (and all other
contracts, agreements or binding arrangements concerning Intellectual Property),
franchises, leases and other instruments or obligations of any kind, written or
oral (including any amendments and other modifications thereto), to which
Company is a party or which are binding upon Company or the Assets, and which
are in effect on the date hereof.

     “Copyrights” shall have the meaning set forth in the definition of
Intellectual Property contained in this Section 1.

     “DCAA” means the Defense Contract Audit Agency of the United States
Government.

     “Deductible Amount” shall have the meaning set forth in Section 11.4(a).

     “Disclosure Schedules” means the disclosure schedules prepared by Seller
and Company and delivered to Buyer, which disclosure schedules are attached to
this Agreement as of the date hereof and constitute a part hereof.

-2-

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

 

     “Employee Welfare Benefit Plan” shall have the meaning set forth in
Section 3(1) of ERISA.

     “Environmental Condition” means any contamination or damage to the
environment caused by or relating to the use, handling, storage, treatment,
recycling, generation, transportation, release, spilling, leaching, pumping,
pouring, emptying, discharging, injection, escaping, disposal, dumping or
threatened release of Hazardous Materials by Company or any other Person. With
respect to claims by employees or other third parties, Environmental Condition
shall also include the exposure of persons to amounts of Hazardous Materials.

     “Environmental Laws” means any federal, state, or local Law relating to
natural resources, pollution, protection of human health or the environment, or
actual or threatened releases, discharges, or emissions into the environment or
within structures.

     “Effective Time” shall have the meaning set forth in Section 8.1 hereof.

     “ERISA” shall have the meaning set forth in Section 3.8 hereof.

     “Escrow Agent” shall have the meaning set forth in Section 2.1(e) hereof.

     “Escrow Agreement” shall have the meaning set forth in Section 2.1(e)
hereof.

     “Estoppel Certificate” shall have the meaning set forth in Section 9.1
hereof.

     “Financial Statements” shall have the meaning set forth in Section 3.15
hereof.

     “Form 8023” shall have the meaning set forth in Section 2.5 hereof.

     “GAAP” means generally accepted accounting principles in the United States
of America as consistently applied by Seller.

     “Government” means the government of the United States of America, its
agencies and instrumentalities, or the government of any state or municipality.

     “Governmental Authority” means any federal, state, local, foreign or other
governmental, quasi-governmental or administrative body, instrumentality,
department or agency or any court, tribunal, administrative hearing body,
arbitration panel, commission, or other similar dispute-resolving panel or body
having jurisdiction over a specified matter and/or Person.

     “Government Bid” means any offer made by Company prior to the Closing Date
which, if accepted, would result in a Government Contract.

     “Government Contract” means any prime contract, subcontract, teaming
agreement or arrangement, joint venture, basic ordering agreement, pricing
agreement, letter contract or other similar arrangement of any kind, that are
currently active in performance or that had been active in performance at any
time in the five (5) year period prior to the Closing Date, between Company, on
the one hand, and (i) any Governmental Authority, (ii) any prime contractor of a
Governmental Authority in its capacity as a prime contractor, or (iii) any
subcontractor with

-3-

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

 

respect to any contract of a type described in clauses (i) or (ii) above, on the
other hand. A task, purchase or delivery order under a Government Contract shall
not constitute a separate Government Contract, for purposes of this definition,
but shall be part of the Government Contract to which it relates.

     “Hazardous Materials” means any substance, material, liquid or gas defined
or designated as hazardous or toxic (or by any similar term) under any
Environmental Law, or any other material regulated, or that could result in the
imposition of Liability, under any Environmental Law, including, without
limitation, petroleum products and friable materials containing more than one
percent (1.0%) asbestos by weight.

     “Identix Sublease Agreement” shall have the meaning set forth in Section
9.1 hereof.

     “Identix Support Services Agreement” shall have the meaning set forth in
Section 9.1 hereof.

     “Improvements” means all leasehold improvements and fixtures located on the
Leased Premises.

     “Intellectual Property” means all of the following as they exist in any
jurisdiction throughout the world, in each case, to the extent owned by or
licensed to Company: (i) patents, patent applications and the inventions,
designs and improvements described and claimed therein, patentable inventions,
and other patent rights (including any divisionals, continuations,
continuations-in-part, substitutions, or reissues thereof, whether or not
patents are issued on any such applications and whether or not any such
applications are amended, modified, withdrawn, or refiled) (collectively,
“Patents”); (ii) trademarks, service marks, trade dress, trade names, brand
names, Internet domain names, designs, logos, or corporate names (including, in
each case, the goodwill associated therewith), whether registered or
unregistered, and all registrations and applications for registration thereof
(collectively, “Trademarks”), but excluding the names “Identix” and “Anadac” and
any designs, logos or other items described herein which are associated with
such names; (iii) copyrights, including all renewals and extensions, copyright
registrations and applications for registration, and non-registered copyrights
(collectively, “Copyrights”); (iv) trade secrets, confidential business
information, concepts, ideas, designs, research or development information,
processes, procedures, techniques, technical information, specifications,
operating and maintenance manuals, engineering drawings, methods, know-how,
data, mask works, discoveries, inventions, modifications, extensions,
improvements, and other proprietary rights (whether or not patentable or subject
to copyright, trademark, or trade secret protection) (collectively, “Trade
Secrets”); (v) computer software programs, including all source code, object
code, and documentation related thereto (“Software”); and (vi) all licenses, and
sublicenses, and other agreements or permissions related to the preceding
property.

     “Intercompany Accounts Payable” means the following categories of accounts
payable in connection with Company’s general ledger account for intercompany
charges    , which account serves as a clearing account for all monies due to
Seller for various services, products and allocations associated with Company’s
business:

-4-

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

 

          (a) Security Deposits: relate to Seller’s cash deposits in the    
account that have been made on behalf of Company’s business (including    );

          (b) Corporate Information Services Allocation: include, without
limitation, help desk services, network lines, computer depreciation, PBX phone
leases and expense, network software, server software and hardware related to
the corporate consolidated Information Technology infrastructure costs to
support Seller’s “internal” and “external internet” networks (based on a per
person allocation);

          (c) Insurance: relates to the insurance policies, including, without
limitation, monthly Blue Cross Blue Shield (actual Company cost), CNA insurance,
general liability insurance and workers compensation insurance, that are held at
the Seller level and directly support Company’s business; and

          (d) Other: relates to the general intercompany clearing account for
any charges that Seller incurs which are directly attributable to Company’s
business (e.g., relocation services are provided through the corporate policy
and actual charges are invoiced to Company through the intercompany account).
The current “Other” balance is comprised of the quarterly 401K match for the
second quarter of fiscal 2004, relocation expenses for    the allocation of the
   license for Company employees and    software charges that were incorrectly
billed to Seller.

     “Intercompany Note Payable” shall mean the undocumented note payable by
Company to Seller for prior period working capital requirements, in the original
principal amount of    , which note will be cancelled prior to the Closing.

     “Intercompany Note Receivable” shall mean the undocumented note payable by
LDS to Company for prior period working capital requirements in the original
principal amount of    .

     “Intercompany Trade Payables” means reseller trade payables associated with
the sales of Seller’s products made through the IT70 Contract (with respect to
which there is a corresponding trade accounts receivable to the end customer on
the Company Balance Sheet or the Closing Date Balance Sheet).

     “IRS” means Internal Revenue Service.

     “Knowledge of Company,” “Company’s Knowledge,” or words of similar import
shall mean the actual knowledge of    .

     “Knowledge of Seller,” “Seller’s Knowledge,” or words of similar import
shall mean the actual knowledge of    .

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

     “LDS” shall have the meaning set forth in the Recitals to this Agreement.

-5-

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

 

     “LDS Accounting Services Agreement” shall have the meaning set forth in
Section 9.1 hereof.

     “LDS Sublease Agreement” shall have the meaning set forth in Section 9.1
hereof.

     “LDS Support Services Agreement” shall have the meaning set forth in
Section 9.1 hereof.

     “Leases” shall have the meaning set forth in Section 3.22(a) hereof.

     “Leased Premises” shall have the meaning set forth in Section 3.22(a)
hereof.

     “Liability” means any liability, obligation or commitment of any nature
(whether absolute, accrued, contingent, or otherwise, whether matured or
unmatured, and whether due or to become due).

     “Liens” means all mortgages, deeds of trust, collateral assignments,
security interests, UCC financing statements, conditional or other sales
agreements, liens, pledges, hypothecations, and other encumbrances on or
ownership interests in the Assets or the Stock, as applicable.

     “Losses” means all actions, suits, proceedings, hearings, investigations,
charges, complaints, claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in settlement,
liabilities, obligations, Taxes, Liens, losses, expenses, and fees, including
court costs and reasonable attorneys’ fees and expenses.

     “Material Adverse Effect” means, with respect to any Person, a material
adverse effect on the business, condition, assets, liabilities, operations or
financial performance of such Person taken as a whole, provided, however, that
the term “Material Adverse Effect” shall not include any change in, or effect
on, Company directly or indirectly arising out of or attributable to (a) any
change in a Law, (b) changes or effects that generally affect the industry in
which Company operates (which changes do not disproportionately affect Company
in any material respect) (c) changes in general economic, regulatory or
political conditions, including terrorism events, the escalation of any war
whether declared or undeclared or other hostilities (which changes do not
disproportionately affect Company in any material respect) or (d) changes
arising out of, or attributable to, the announcement or pendency of the
transactions contemplated by this Agreement or the identity of Buyer.

     “Notices” shall have the meaning set forth in Section 16 hereof.

     “Ordinary Course of Business” means the ordinary course of the business of
Company consistent with past custom and practice (including with respect to
quantity and frequency), excluding the business and operations of LDS.

     “Patents” shall have the meaning set forth in the definition of
Intellectual Property contained in this Section 1.

     “Permits” means all federal, state, local or foreign permits, grants,
easements, consents, approvals, authorizations, exemptions, licenses,
franchises, certificates, or orders of, any

-6-

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

 

Governmental Authority or any other Person, required for Company to own the
Assets or conduct Company’s business as is now being conducted.

     “Permitted Liens” means (i) Liens for Taxes or governmental charges or
claims not yet due and payable, (ii) statutory Liens of landlords, carriers,
warehousemen, mechanics and materialmen and other similar Liens imposed by Law
in the Ordinary Course of Business for sums not yet due and payable, (iii) Liens
such as easements, rights-of-way, restrictions and other similar charges,
(iv) Liens that do not interfere with the use of the properties or Assets by
Company and which do not impair the value of such properties or Assets, and (v)
Liens set forth on Schedule 3.9.

     “Permitted Use” shall have the meaning set forth in Section 12.5 hereof.

     “Person” means any individual, partnership, joint venture, corporation,
trust, unincorporated organization, limited liability company, group,
Governmental Authority, and any other person or entity.

     “Personal Property” means all of the machinery, equipment, tools, vehicles,
furniture, leasehold improvements, office equipment, plant, spare parts, and
other tangible personal property which are owned or leased by Company,
including, without limitation, the Personal Property identified on
Schedule 3.10.

     “Property Warranties” means all of Company’s rights under any
manufacturers’, vendors’ or other warranties relating to the Assets.

     “Purchase Price” shall have the meaning set forth in Section 2.1(a) hereof.

     “Purchase Price Adjustment” shall mean the adjustment to the Purchase Price
determined and payable according to Section 2.4 hereof.

     “Regulations” means the United States treasury regulations promulgated
under the Code.

     “Rehired Employees” shall have the meaning set forth in Section 5.11(a)
hereof.

     “Representative” means, as to any Person, such Person’s Affiliates and its
and their directors, officers, employees, agents, advisors (including, without
limitation, financial advisors, counsel and accountants) and direct and indirect
controlling persons.

     “Reseller Agreement” shall have the meaning set forth in Section 9.1
hereof.

     “Resigning Employees” shall have the meaning set forth in Section 2.6
hereof.

     “Section 338 Election” shall have the meaning set forth in Section 2.5
hereof.

     “Seller” shall have the meaning set forth in the Preamble to this
Agreement.

     “Seller Parties” shall have the meaning set forth in Section 11.2 hereof.

-7-

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

 

     “Software” shall have the meaning set forth in the definition of
Intellectual Property contained in this Section 1.

     “Stock” shall have the meaning set forth in the Recitals to this Agreement.

     “Tax” means any federal, state, local or foreign income, gross receipts,
franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer,
registration, value added, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, environmental, customs, duties, real
property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing; it being understood that the
foregoing will include any transferee or secondary liability for a Tax and any
liability assumed or arising as a result of being (or ceasing to be) a member of
any Affiliated Group (or being included or required to be included in any Tax
Return relating thereto) or as a result of any Tax indemnity, Tax sharing, Tax
allocation or similar contract or arrangement.

     “Tax Return” means any return, declaration, report, claim for refund,
information return or other documents (including any related or supporting
schedules, statements or information, and including, without limitation, IRS
Form 8883 and any analogous form under state or local Law) filed or required to
be filed in connection with the determination, assessment or collection of any
Taxes of Company or any Affiliates of Company other than Seller or the
administration of any Laws or administrative requirements relating to any Taxes.

     “Tax Sharing Agreements” shall have the meaning set forth in Section
3.17(f) hereof.

     “Terminated Employees” shall have the meaning set forth in Section 12.4
hereof.

     “Trademarks” shall have the meaning set forth in the definition of
Intellectual Property contained in this Section 1.

     “Trade Secrets” shall have the meaning set forth in the definition of
Intellectual Property contained in this Section 1.

     “Transaction Documents” means this Agreement and each agreement, instrument
or document attached hereto as an exhibit and the other agreements, certificates
and instruments to be executed by any of the parties hereto in connection with
or pursuant to this Agreement.

     “ Sublease Assignment” shall have the meaning set forth in Section 9.1
hereof.

     “Working Capital” means the difference (whether positive or negative) of
(a) the current assets of Company as of the Closing Date, minus (b) the current
liabilities of Company as of the Closing Date, in each case as determined in the
same manner in which the Company’s working capital as of October 31, 2003 was
calculated. (For purposes of clarification, Exhibit A attached hereto includes a
working capital calculation and category summary for the Company as of
October 31, 2003.) For purposes of such Agreement: (1) “current assets” shall
exclude (i) any cash remaining on the balance sheet as of the Closing Date,
(ii) all intercompany notes receivable

-8-

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

 

from Seller, LDS or any other Affiliate of Seller, including the Intercompany
Note Receivable, and (iii) all other intercompany accounts receivable from
Seller, LDS or any other Affiliate of Seller, and (2) “current liabilities”
shall exclude the “home office allocation” portion of the intercompany payables
and the Intercompany Note Payable.

     2. PURCHASE PRICE.

          2.1 Purchase and Sale of the Stock. Upon all of the terms and subject
to all of the conditions of this Agreement, Seller hereby sells, transfers,
assigns and conveys to Buyer, and Buyer hereby purchases and accepts from
Seller, the Stock. In full payment for the Stock, Buyer shall pay:

               (a) concurrent with the execution of this Agreement, the amount
of    in the form of a cashier’s check or certified check made payable to Seller
(the “Cash Purchase Price” and, as such Cash Purchase Price may be adjusted by
the Purchase Price Adjustment and may be increased by the Additional Amount, and
collectively with the Intercompany Accounts Payable, the “Purchase Price”);

               (b) the Purchase Price Adjustment, if any, payable pursuant to
Section 2.4(c)(ii);

               (c) an amount equal to the Intercompany Accounts Payable as
follows:

                    (i) concurrent with the execution of this Agreement, the
amount of    in partial payment of the Intercompany Accounts Payables, in the
form of a cashier’s check or certified check made payable to Seller, and

                    (ii) the remaining balance of the Intercompany Accounts
Payable, as set forth on the Closing Date Balance Sheet, shall be paid in four
(4) equal monthly installments beginning on the last day of    and continuing on
the last day of each month thereafter, to and including    (unless any such date
is not a business day, in which case the payment to be made on such date shall
be made on the next succeeding business day), in cash by wire transfer of
immediately available funds to an account or accounts designated in advance in
writing by Seller; provided, however, that if the parties have not agreed upon
the Closing Date Balance Sheet as of    and have submitted such item to an
Arbiter for final determination, the first installment will be due two
(2) business days following such final determination;

               (d) within three (3) business days following receipt, from time
to time, of a payment by a trade debtor, each of the Intercompany Trade
Payables, in cash by wire transfer of immediately available funds to an account
or accounts designated in advance in writing by Seller. Concurrent with the
payment of an Intercompany Trade Payable, Buyer will provide written notice to
Seller of such payment and prepare and deliver to Seller an invoice/receipt
detailing receipt of payment from a trade debtor; and

               (e) concurrent with the execution of this Agreement, the amount
of    (the “Additional Amount”), in the form of a cashier’s check or certified
check to be

-9-

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

 

deposited in an escrow account held by    (the “Escrow Agent”), which amount,
plus accrued interest and earnings thereon, will be released pursuant to the
terms of the Escrow Agreement among Buyer, Seller and the Escrow Agent attached
hereto as Exhibit B (the “Escrow Agreement”).

          2.2 The Closing. The closing of the transactions contemplated by this
Agreement (the “Closing”) shall take place (and shall be deemed by the parties
to have taken place for legal purposes) at 8:00 a.m. E.S.T. on the date hereof,
in the manner described in this Agreement and as otherwise agreed to in writing
by the parties (the “Closing Date”). Notwithstanding the foregoing, the
consummation of the transaction contemplated by the this Agreement, solely for
tax and accounting purposes, shall be governed by Section 8.1 hereof. At the
Closing, (i) the various certificates, instruments, and documents referred to in
Section 9.1 below, (ii) the various certificates, instruments, and documents
referred to in Section 9.2 below, and (iii) the Cash Purchase Price, that
portion of the Intercompany Accounts Payable described in Section 2.1(c)(i)
hereof and the Additional Amount will each be delivered and/or paid in
accordance with the terms of this Agreement.

          2.3 Intentionally Omitted.

          2.4 Adjustment to Purchase Price.

               (a) As promptly as practicable, but no later than fifteen
(15) days after the Closing Date, Seller will prepare and deliver to Buyer a
balance sheet of Company as of the close of business on the Closing Date,
prepared in the same manner in which the Company’s balance sheet as of
October 31, 2003 was calculated, and with the cooperation of Buyer and the
assistance of certain of Buyer’s employees. (For purposes of clarification,
Exhibit A attached hereto includes the balance sheet of the Company and category
summary as of October 31, 2003.)

               (b) If Buyer disputes any items on such Closing Date balance
sheet, Buyer will, within fifteen (15) days after the receipt of such balance
sheet, deliver written notice to Seller of any objections thereto, which written
notice shall specify the rationale for such disagreement and the matters in
dispute, and the parties will attempt in good faith to reach an agreement as to
any matters in dispute. If Buyer and Seller, notwithstanding such good faith
effort, fail to resolve all matters in dispute within fifteen (15) days after
Buyer advises Seller of its objections, then any remaining disputed matters will
be finally and conclusively determined in accordance solely and exclusively with
this Agreement, by an independent auditing firm of recognized national standing
(the “Arbiter”) selected by Buyer and Seller, which firm will not be the regular
auditing firm of Buyer, Seller or Company. Promptly, but not later than ten
(10) days after its acceptance of its appointment, the Arbiter will determine
(based solely on written presentations by and a review of the working papers of
Seller, Buyer and their respective independent accountants and not by
independent review) only those matters in dispute and will render a written
report as to the disputed matters and the resulting balance sheet of Company as
of the Closing Date (in either case, whether determined by the parties without
involvement of the Arbiter as required by this subsection (b) or whether
determined by such Arbiter in accordance with this subsection (b), the “Closing
Date Balance Sheet”), which report will be conclusive and binding upon the
parties. The fees and expenses of the Arbiter will be borne 50% by Buyer and 50%
by Seller.

-10-

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

 

               (c) In the event that the amount of the Working Capital, as
finally determined based on the Closing Date Balance Sheet, is (i) less than
   , Seller shall pay to Buyer the amount of such shortfall in cash within five
(5) days after final determination of such amount in accordance with this
Section 2, by wire transfer of immediately available funds to an account
designated by Buyer or (ii) greater than    , Buyer shall pay to Seller the
amount of such excess in cash within five (5) days after final determination of
such amount in accordance with this Section 2, by wire transfer of immediately
available funds to an account designated by Seller.

               (d) The Purchase Price shall also be reduced dollar-for-dollar by
the balance, if any, of the Intercompany Note Payable plus any other liabilities
shown on the Closing Date Balance Sheet which are not taken into account in
connection with the calculation of Working Capital; provided, however, that the
Purchase Price shall not be reduced by the balance, if any, of any of the long
term liabilities described on Schedule 3.15 hereof that are shown on the Closing
Date Balance Sheet. Seller shall pay to Buyer the amount of such reduction in
cash within five (5) days after final determination of such amount in accordance
with this Section 2, by wire transfer of immediately available funds to an
account designated by Buyer.

               (e) For purposes of complying with the terms set forth herein,
each party will cooperate with and make available to the other party and its
independent accountants and representatives all information, records, data and
independent accountants’ working papers, and will permit access to its
facilities and personnel, as may be reasonably required in connection with the
preparation and analysis of the Closing Date Balance Sheet (and each of the
components thereof, including without limitation, Working Capital) and the
resolution of any disputes thereunder.

          2.5 Section 338(h)(10) Election. Seller and Buyer hereby covenant and
agree to validly elect under Section 338(h)(10) of the Code, and under any
analogous provision of state or local Law (each such election, a “Section 338
Election”) to treat the purchase of the Stock as a purchase of assets solely for
income tax purposes as provided under the Code. Within ninety (90) days after
Closing, Company and Seller shall deliver to Buyer an IRS Form 8023 executed by
Seller (“Form 8023”) and Seller shall cooperate with Buyer to take all actions
necessary and appropriate (including filing such additional forms, returns,
elections schedules and other documents as may be required) to effect and
preserve a timely election, in accordance with the provisions of Treasury
Regulation Section 1.338(h)(10)(1).

          2.6 Payments.. Seller shall pay all fees, commissions and charges of
any broker, finder or investment banker in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Company or Seller. Seller shall pay, on or before the Closing Date, all amounts
payable for legal, accounting and other fees and expenses related to the
transactions contemplated by this Agreement due by or on behalf of Company,
except to the extent included as a liability or reserve on the Closing Date
Balance Sheet (and thus taken into account in connection with the calculation of
Working Capital), in which case, Company shall retain such liabilities and pay
such amounts. Subject to Buyer’s reimbursement obligation with respect to
certain “Resigning Employees” (defined below) pursuant to Section 5.11(g)
hereof, Seller shall pay, or shall cause Company to pay, on or before Closing
(or following the Closing if paid by Seller or deducted from Working Capital in

-11-

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

 

connection with the calculation of the Purchase Price Adjustment in accordance
with Section 2.4 above), any accrued and unused vacation pay or sick leave and
severance payments or other bonus due to all Terminated Employees and to all
employees who voluntarily cease their employment effective as of or prior to the
Closing Date (“Resigning Employees”). For purposes of this Agreement, any
employees of Company who voluntarily cease their employment effective as of a
date which is after the Closing Date shall not be deemed to constitute
“Resigning Employees,” and any accrued and unused vacation pay or sick leave or
severance payments or other bonus due to such employees shall be the
responsibility of Buyer and/or the Company following the Closing.

          2.7 Additional Amount. If    then, upon written notice to the
Additional Amount Escrow Agent signed by Buyer and Seller, the Additional Amount
plus accrued interest and earnings thereon shall thereupon promptly be released
to Seller in accordance with the terms of the Escrow Agreement. In the event
that any of the foregoing conditions (including condition (ii) above, if
applicable) is not satisfied, then, upon written notice to the Additional Amount
Escrow Agent signed by Buyer and Seller, the Additional Amount plus accrued
interest and earnings thereon shall thereupon promptly be released to Buyer in
accordance with the terms of the Escrow Agreement. Notwithstanding the
foregoing, in the event that    , upon written notice to the Additional Amount
Escrow Agent signed by Buyer and Seller, the Additional Amount plus accrued
interest and earnings thereon shall thereupon promptly be released to Seller in
accordance with the terms of the Escrow Agreement.

     3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SELLER. Company represents
and warrants to Buyer the following matters contained in Sections 3.1 through
and including 3.18, Sections 3.20 through and including 3.37 and Section 3.50.
Seller represents and warrants to Buyer the following matters contained in
Sections 3.17, 3.19 and Sections 3.39 through and including 3.50. These
representations and warranties, and the information in the Disclosure Schedules
referenced therein, are true and correct as of the date of this Agreement.

          3.1 Company Organization. Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia, and is qualified or registered to do business in each jurisdiction in
which the nature of its business or operations would require such qualification
or registration except where the failure to be so qualified would not reasonably
be expected to have a Material Adverse Effect on Company. Company has full power
and authority to own, lease and operate its property and to carry on its
business as now conducted. The address of Company’s principal office and all of
Company’s additional places of business are listed on Schedule 3.1. Except as
set forth on Schedule 3.1, during the past five (5) years, Company has not been
known by or used any corporate, fictitious or other name in the conduct of
Company’s business or in connection with the use or operation of the Assets.

          3.2 Company Authorization; Corporate Documentation.

               (a) Company has the requisite power and authority to execute and
deliver this Agreement and the Transaction Documents to which it is a party, to
perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the other Transaction Documents

-12-

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

 

by Company, and Company’s consummation of the transactions contemplated hereby,
have been duly authorized by all requisite corporate or other action of Company.

               (b) The copies of the Articles of Incorporation of Company and
all amendments thereto, as certified by the State Corporation Commission of the
Commonwealth of Virginia, and the Bylaws of Company, as amended to date and
certified by its corporate secretary, copies of which have heretofore been
delivered to Buyer, are true, complete and correct copies of the Articles of
Incorporation and Bylaws of Company, as amended through and in effect on the
date hereof and as of the Closing Date.

               (c) The minute books and records of the corporate proceedings of
Company, copies of which have been delivered to Buyer and originals of which
will be delivered to Buyer on the Closing Date, are all of the minute books and
records of the corporate proceedings of Company Known by Seller or Company to
exist. There have been no changes, alterations or additions to such minute books
and records on or prior to the Closing Date that have not been furnished to
Buyer.

          3.3 Intentionally Omitted.

          3.4 Intentionally Omitted.

          3.5 Company Binding Agreement. This Agreement has been duly executed
and delivered by Company to Buyer, and constitutes the legal, valid and binding
agreement of Company, enforceable against Company in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other Laws
affecting creditors’ rights generally and the exercise of judicial discretion in
accordance with general equitable principles. Upon execution and delivery at the
Closing by Company, each other Transaction Document to which Company is, or is
specified to be, a party, will be duly and validly executed and delivered by
Company to Buyer on the Closing Date, and will constitute Company’s legal, valid
and binding obligation, enforceable against it in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other Laws
affecting creditors’ rights generally and the exercise of judicial discretion in
accordance with general equitable principles.

          3.6 Company: No Breach. Except as set forth on Schedule 3.6, the
execution, delivery and performance of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby by Company do not and will not (a) violate or conflict with Company’s
Articles of Incorporation or Bylaws, or, to the Knowledge of Company, any law,
statute, rule, regulation, ordinance, code, writ, injunction, decree, judgment
or order (collectively, “Laws”), directive, settlement, permit or license of any
Governmental Authority to which Company, the Stock or the Assets are subject, or
by which Company, the Stock or Assets may be bound, (b) (with or without giving
notice or the lapse of time or both) breach or conflict with, constitute or
create a default, or give rise to any right of termination, cancellation or
acceleration under, any of the terms, conditions or provisions of any Contract,
agreement, or other commitment to which Company is a party or by which Company,
the Stock or the Assets may be bound, (c) result in the imposition of a Lien on
the Stock or the Assets or (d) require any filing with, or Permit, consent or
approval of, or the giving of any notice to, any Governmental Authority or third
party.

-13-

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

 

          3.7 Permits. Company owns or possesses all right, title and interest
in all Permits required to own the Assets and conduct Company’s business as now
being conducted and as presently proposed to be conducted, except to the extent
that the failure to own or possess a Permit would not be reasonably expected to
have a Material Adverse Effect on Company. All Permits of Company are listed on
Schedule 3.7 and are valid and in full force and effect. No loss or expiration
of any Permit is pending or, to Company’s Knowledge, threatened or reasonably
foreseeable (including, without limitation, as a result of the transactions
contemplated hereby) other than expiration in accordance with the terms thereof,
which terms do not expire as a result of the consummation of the transactions
contemplated hereby.

          3.8 Company Compliance With Laws. Except as set forth in Schedule 3.8,
Company has complied with all Laws of any Governmental Authority applicable to
Company, the Stock, Company’s business and the Assets, except where failure to
be in compliance would not reasonably be expected to have a Material Adverse
Effect on Company. Specifically, but without limitation, Company has, in the
conduct of Company’s business, complied, except where failure to be in
compliance would not reasonably be expected to have a Material Adverse Effect on
Company, with all applicable Laws relating to the employment of labor, including
those concerning wages, hours, equal employment opportunity, pension and welfare
benefit plans (including the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder (“ERISA”)), and the payment
of Social Security and similar taxes, and Company is not liable for any
arrearages of wages or any tax penalties due to any failure to comply with any
of the foregoing. Except as set forth in Schedule 3.8, Company need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any Governmental Authority in order for the Parties to consummate
the transactions contemplated by this Agreement other than the (x) notices,
filings, authorizations, consents and approvals of such character that failure
to give or obtain when applicable would not reasonably be expected to have a
Material Adverse Effect on Company or affect the validity of this Agreement or
prevent the consummation of the transactions contemplated hereby and (y)
notices, filings, authorizations, consents and approvals which have been made,
given or obtained.

          3.9 Title to and Sufficiency of Assets. Except as set forth on
Schedule 3.9, Company has good and marketable title to all of the Assets
(excluding Intellectual Property which is addressed in Section 3.12 hereof),
free and clear of all Liens other than Permitted Liens. The Assets constitute
all of the assets, rights and properties that are used in the operation of
Company’s business as it is now conducted. Except as set forth on Schedule 3.9,
immediately following the Closing, all of the Assets will continue to be owned,
leased or available for use by Company on terms and conditions identical to
those under which, immediately prior to the Closing, Company owns or leases such
Assets.

          3.10 Condition of Personal Property. All Personal Property owned or
leased by Company with a value greater than    is set forth on Schedule 3.10
(with fixed assets being scheduled as of January 31, 2004 and furniture being
scheduled as of December 31, 2003). Except as set forth in Schedule 3.10, all
such items of Personal Property are in good operating condition and repair
(reasonable wear and tear excepted), and are suitable for their intended use.

          3.11 Accounts Receivable. All accounts receivable of Company shown on
all balance sheets included in the Financial Statements and the Closing Date
Balance Sheet arose

-14-

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

 

from sales actually made or services actually performed in the Ordinary Course
of Business and are valid receivables net of the reserves shown thereon. All
accounts receivable of Company as of December 31, 2003 are set forth on
Schedule 3.11. The accounts receivable shown on the Closing Date Balance Sheet
(i) represent bona fide claims of Company against debtors for products sold
and/or services performed, (ii) have arisen only in the Ordinary Course of
Business, consistent with past practice; (iii) are not subject to any defenses,
setoffs or counterclaims and (iv) have been collected or are fully collectible
net of reserves according to their terms in amounts not less than the aggregate
amounts thereof carried on the books of Company.

          3.12 Intellectual Property.

               (a) Disclosure.

                    (i) Except as set forth on Schedule 3.12(a)(i), Company has
no United States or foreign patents or patent applications, trademark or service
mark registrations or applications, internet domain name registrations or
applications, or copyright registrations or applications owned or licensed by
Company.

                    (ii) Except as set forth on Schedule 3.12(a)(ii), Company
has no licenses, sublicenses or other agreements or permissions under which
Company is a licensee or otherwise is authorized to use or practice any
Intellectual Property.

                    (iii) Company has no agreements including licenses and
sublicenses involving Intellectual Property currently in negotiation or
proposed.

               (b) Claims.

                    (i) No claim or action is pending or, to the Knowledge of
Company, threatened, and, to the Knowledge of Company, there exists no basis for
any claim that challenges the validity, enforceability, ownership, or right to
use, sell, license or sublicense any Intellectual Property, and no item of
Intellectual Property is subject to any outstanding order, ruling, decree,
stipulation, charge or agreement restricting in any manner the use, the
licensing, or the sublicensing thereof.

                    (ii) Company has not received any written notice that it has
infringed upon or otherwise violated the intellectual property rights of third
parties or received any claim, charge, complaint, demand or notice in writing
alleging any such infringement or violation, and to the Knowledge of Company
there exists no basis for any such claim.

                    (iii) To the Knowledge of Company, no third party is
infringing upon or otherwise violating any Intellectual Property.

                    (iv) Company has given the public notice of its Copyrights
and notice of its Trademarks as required by the applicable Trademark and
Copyright statutes.

-15-

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

 

               (c) No Infringement of Intellectual Property of Others. To the
Knowledge of Company, none of the Intellectual Property, products or services
owned, used, developed, provided, sold or licensed by Company, or used by or
licensed to Company by any Person infringe upon or otherwise violate any
intellectual property rights of any third party.

               (d) Administration and Enforcement. Company has taken all
reasonable actions to maintain and protect the Intellectual Property listed on
Schedule 3.12.

               (e) Software. All Software owned by Company is described in
Schedule 3.12(e). Except as set forth on Schedule 3.12(e), (i) such Software is
not subject to any transfer, assignment, site, equipment, or other operational
limitations; (ii) Company has the most current copy or release of the Software
so that the same may be subject to registration in the United States Copyright
Office; (iii) the Software includes all information sufficient to use such
Software in the conduct of the business or operations of Company as of the date
of this Agreement; (iv) there are no agreements or arrangements in effect with
respect to the marketing, distribution, licensing or promotion of the Software
by any third party; and (v) the Software performs in general conformance with
its documentation as respects the functionality and purposes for which such
Software is currently used by Company.

               (f) Trade Secrets. Except as disclosed on Schedule 3.12(f):
(i) Company has taken all commercially reasonable actions to protect its Trade
Secrets from unauthorized use or disclosure; (ii) to the Knowledge of Company
there has not been an unauthorized use or disclosure of such Trade Secrets;
(iii) to the Knowledge of Company, Company has the sole and exclusive right to
bring actions for infringement or unauthorized use of such Trade Secrets;
(iv) to the Knowledge of Company, none of such Trade Secrets infringes upon or
otherwise violates valid and enforceable intellectual property or trade secrets
of others; and (v) Company is not, nor as a result of the execution and delivery
of this Agreement or the performance of its obligations hereunder, will be, in
violation of any agreement relating to such Trade Secrets.

               (g) Employees, Consultants and Other Persons. Except as set forth
on Schedule 3.12(g), as of the date hereof, each present or past employee,
officer, consultant or any other Person who developed any part of any
Intellectual Property, either: (i) (A) is a party to an agreement that conveys
or obligates such person to convey to Company any and all right, title and
interest in and to all Intellectual Property developed by such Person in
connection with such Person’s employment with or engagement on behalf of
Company; and (B) as to copyrighted or copyrightable material created in the
course of such Person’s employment with or engagement on behalf of Company is a
party to a “work made for hire” agreement pursuant to which Company is deemed to
be the original owner/author of all proprietary rights in such material; or
(ii) otherwise has by operation of law vested in Company any and all right,
title and interest in and to all such Intellectual Property developed by such
Person in connection with such Person’s employment with, or engagement on behalf
of, Company.

               (h) Employee Breaches. Except as set forth on Schedule 3.12(h),
to the Knowledge of Company, no employee of Company has transferred Intellectual
Property or confidential or proprietary information to Company or to any third
party in violation of any Law or any term of any employment agreement, Patent or
invention disclosure agreement or other

-16-

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

 

contract or agreement relating to the relationship of such employee with Company
or any prior employer.

               (i) Related Parties; etc. Company does not use any Intellectual
Property owned by any director, officer, employee or consultant of Company. At
no time during the conception or reduction to practice of any of the
Intellectual Property owned by Company was any developer, inventor or other
contributor to such Intellectual Property operating under any grants from any
Governmental Authority or subject to any employment agreement, invention
assignment, nondisclosure agreement or other contract with any Person that could
adversely affect the rights of Company to any Intellectual Property.

               (j) Transfer. The execution by Company of this Agreement will not
result in the loss or impairment of the rights of Company to own or use any of
the Intellectual Property.

          3.13 Contracts. (a) Schedule 3.13(a) identifies or describes the
following Contracts (other than Government Contracts and Leases) in effect on
the date of this Agreement to which Company is a party that provide for
continuing obligations by or rights of any party thereto:

                    (i) any agreement (or group of related agreements) for the
lease of Personal Property to or from any Person providing for lease payments in
excess of    per annum;

                    (ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
Personal Property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year, result in a loss to
Company in excess of    , or involve consideration in excess of    ;

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

                    (iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of    or under
which it has imposed a Lien on any of its Assets, tangible or intangible, other
than the Permitted Liens;

                    (v) any agreement concerning confidentiality or
noncompetition (other than customary agreements with an employee);

                    (vi) any collective bargaining agreement;

                    (vii) any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis providing annual compensation
in excess of    ;

                    (viii) any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and employees;

-17-

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

 

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

                    (x) any license, sublicense or other agreements or
permissions under which Company is a licensee or otherwise is authorized to use
or practice any Intellectual Property;

                    (xi) any powers of attorney; or

                    (xii) any other agreement (or group of related agreements)
which will result in a loss to Company in excess of    or involves consideration
in excess of    .

               (b) In addition, Schedule 3.13(b) separately identifies all
Contracts set forth on Schedule 3.13(a) for which third party consents or
waivers must be obtained or notifications made on or prior to the Closing Date
(or which have been obtained) in order for such Contracts to continue in effect
on the same terms after the Closing Date as are applicable under those Contracts
as of the date hereof. Company has provided or made available to Buyer true and
complete copies of all written Contracts set forth on Schedule 3.13(a)
(including any and all amendments and other modifications to such Contracts) and
true and correct summaries of all non-written Contracts set forth on
Schedule 3.13(a) (including such oral Contracts related to Intellectual
Property). The Contracts listed on Schedule 3.13(a) consist of all of the
material Contracts (excluding Government Contracts and Leases) necessary to
conduct Company’s business as currently conducted and are in full force and
effect, and are valid, binding, and enforceable in accordance with their terms,
except to the extent that the enforceability thereof may be affected by
bankruptcy, insolvency, or similar Laws affecting creditors’ rights generally or
by court-applied equitable principles. There exists no breach, default or
violation on the part of Company or on the part of any other party to any such
Contract, nor has Company received written notice of any breach, default or
violation to any such Contract.

               (c) Except as expressly identified on Schedule 3.13(c), Company
has not received notice of an intention by any party to any Contract listed on
Schedule 3.13(a) that provides for a continuing obligation by any party thereto
on the date hereof to terminate such Contract or amend the terms thereof, other
than modifications in the Ordinary Course of Business that will not result in a
Material Adverse Effect on Company.

               (d) The consummation of the transactions contemplated by this
Agreement will not affect the validity, enforceability and continuation of the
Contracts on the same terms applicable to such Contracts as of the date hereof.

               (e) Company has not waived any rights under any Contract listed
on Schedule 3.13(a), and no event has occurred which either entitles, or would,
with notice or lapse of time or both, entitle any party to any such Contract
(other than Company) to declare breach, default or violation under any such
Contract or to accelerate, or which does accelerate, the maturity of any
indebtedness of Company under any such Contract.

-18-

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

 

          3.14 Litigation. Except as described on Schedule 3.14, there is no
litigation, proceeding (arbitral or otherwise), claim, action, suit, judgment,
mediation, arbitration, decree, settlement, order or investigation of any nature
pending or, to the Knowledge of Company or Seller, threatened before any court,
arbitrator or Governmental Authority against Company, its directors or officers,
its business, the Stock or the Assets, that would challenge any of the
transactions contemplated by this Agreement or any of the Transaction Documents.
Except as described on Schedule 3.14, there are no writs, injunctions, decrees,
arbitration decisions, unsatisfied judgments or similar orders outstanding
against Company, the Stock, Company’s business or the Assets. Company has no
obligation to indemnify any third party for defense, settlement and/or judgment
costs incurred by such third party.

          3.15 Financial Statements. Schedule 3.15 includes (a) true, complete
and correct copies of the unaudited financial statements of Company for the
fiscal year ended June 30, 2003, and (b) true, complete and correct copies of
the unaudited balance sheet of Company as of December 31, 2003 (the “Company
Balance Sheet”) and unaudited income statement of Company for the six-month
period ended December 31, 2003. The items described in (a) and (b) shall be
collectively referred to herein as the “Financial Statements.” Except as set
forth on Schedule 3.15, the Financial Statements have been prepared based on
previously applied GAAP treatments consistently applied throughout and among the
periods indicated therein and fairly present, in all material respects, the
financial condition of Company as of such dates and the results of operations of
Company for such periods.

          3.16 Liabilities. Company has no Liabilities, except (a) Liabilities
that are accrued and reflected on the Company Balance Sheet and statement of
income of Company as of and for the period ended December 31, 2003,
(b) Liabilities that are listed on Schedule 3.16 to this Agreement,
(c) Liabilities that have arisen in the Ordinary Course of Business since
December 31, 2003, or (d) obligations to perform after the date hereof any
Contracts which are required to be or are disclosed on Schedule 3.13(a), 3.22 or
3.33. Company is not a guarantor nor is it otherwise liable for any obligation
(including indebtedness) of any other person.

          3.17 Tax Matters.

               (a) Except as set forth in Schedule 3.17(a), all Tax Returns of
or with respect to Company have been properly prepared and timely filed. All
such Tax Returns are true, correct and complete in all material respects.
Company has paid or withheld (or caused to be paid or withheld) all Taxes shown
on such Tax Returns as due and payable. Company is not the beneficiary of any
extension of time within which to file any Tax Return. No claim has been made by
an authority in a jurisdiction where Company does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction.

               (b) Company has fully and timely paid (or adequately reserved for
in the Ordinary Course of Business and consistent with past practice) all Taxes
owed by Company for all taxable periods through and including the Closing Date,
except for such Taxes, if any, as are being contested in good faith.

               (c) Company has given or otherwise made available to Buyer true,
correct and complete copies of all Tax Returns (pro forma for Company),
examination reports

-19-

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

 

and statements of deficiencies for Company’s past three years, or transactions
consummated in the last forty-eight (48) months.

               (d) Company has made all required estimated Tax payments
sufficient to avoid any underpayment penalties.

               (e) Except as set forth on Schedule 3.17(e), neither Company nor
its predecessor is now or has at any time been a member of any affiliated,
consolidated, combined or unitary group as defined in Section 1504 of the Code
and the Treasury regulations promulgated thereunder.

               (f) Except as set forth on Schedule 3.17(f), as of and following
the Closing Date, Company is not a party to any agreement relating to the
sharing, allocation or indemnification of Taxes, or any similar agreement,
contract or arrangement (collectively, “Tax Sharing Agreements”) other than the
Tax Sharing Agreement provided to Buyer, and does not have any Liability for
Taxes of any Person as a transferee or successor, by contract, or otherwise.

               (g) There are no outstanding agreements, waivers or arrangements
extending the statutory period of limitations applicable to any claim for, or
the period for the collection or assessment of, Taxes due from or with respect
to Company for any taxable period and no request for any such waiver or
extension is currently pending.

               (h) No closing agreement pursuant to Section 7121 of the Code (or
any predecessor provision) or any similar provision of any state, local or
foreign law has been entered into by or with respect to Company.

               (i) Except as set forth in Schedule 3.17(i), no audit or other
proceeding by any Governmental Authority is pending or, to the Knowledge of
Company or Seller, threatened with respect to any Taxes due from or with respect
to Company, and Company has not received any notification that such an audit or
proceeding may be commenced, with respect to any Taxes due from or with respect
to Company and all deficiencies for Taxes asserted or assessed against Company
(that are not being contested in good faith and for which adequate reserves for
the benefit of the Company have been established) have been fully and timely
paid, settled or properly reflected in the Financial Statements.

               (j) Company has not agreed to nor is required to make any
adjustment pursuant to Section 481(a) of the Code (or any predecessor
provision), there is no application pending with any Governmental Authority
requesting permission for any such change in any accounting method of Company
and no Governmental Authority has proposed any such adjustment or change in
accounting method.

               (k) Company has withheld (or will withhold) from its employees,
independent contractors, creditors, stockholders and third parties and timely
paid (or will timely pay) to the appropriate Taxing authority proper and
accurate amounts in all respects for all periods ending on or before the Closing
Date in compliance with all Tax withholding and remitting provisions of
applicable Laws and has complied in all respects with all Tax information
reporting provisions of all applicable Laws. Company is not, nor has it received
any notice that it is, in

-20-

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

 

violation (or with notice will be in violation) of any applicable Law relating
to the payment or withholding of Taxes.

               (l) Company has not filed a consent under former Section 341(f)
of the Code.

               (m) Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified Section 897(c)(1)(A)(ii) of the Code.

               (n) There are no Liens for Taxes upon the Assets of Company,
except for statutory Liens for current Taxes not yet due, and there are no
claims relating to Taxes that, if adversely determined, would result in any Lien
on any of the Assets of Company.

               (o) Company has not entered into a transaction that is being
accounted for under the installment method of Section 453 of the Code or similar
provision of state, local or foreign law.

               (p) No property owned by Company (i) is property required to be
treated as being owned by another Person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986,
(ii) constitutes “tax-exempt use property” within the meaning of
Section 168(h)(1) of the Code or (iii) is “tax-exempt bond financed property”
within the meaning of Section 168(g)(5) of the Code.

               (q) Company does not owe any “corporate acquisition indebtedness”
within the meaning of Section 279 of the Code.

               (r) Any adjustment of Taxes of Company made by a Governmental
Authority, which adjustment is required to be reported to the appropriate state,
local, or foreign taxing authorities, has been so reported.

          3.18 Insolvency Proceedings. Neither Company, nor any of the Stock or
the Assets is the subject of any pending or, to the Knowledge of Company or
Seller threatened insolvency proceedings of any character. Company has not made
an assignment for the benefit of creditors or taken any action with a view to or
that would constitute a valid basis for the institution of any such insolvency
proceedings. Company is not insolvent and will not become insolvent as a result
of entering into this Agreement.

          3.19 Employee Benefit Plans; ERISA.

               (a) Set forth on Schedule 3.19(a) is a true and complete list of
each deferred compensation, executive compensation, incentive compensation,
stock option, stock purchase or other stock-based compensation plan, employment
or consulting, severance or termination pay, holiday, vacation or other bonus
plan or practice, hospitalization or other medical, life or other insurance,
supplemental unemployment benefits, profit sharing, pension, or retirement plan,
program, agreement, commitment or arrangement, and each other employee benefit
plan, program, agreement or arrangement, including, without limitation, each
“employee

-21-

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

 

benefit plan” as such term is defined under Section 3(3) of ERISA, maintained or
contributed to or required to be contributed to by Company for the benefit of
any current or former employee or any current or former service provider (or any
dependent or beneficiary thereof) of Company, or with respect to which Company
has any Liability, whether direct or indirect, actual or contingent, whether
formal or informal, and whether legally binding or not (collectively, the
“Benefit Plans”).

               (b) With respect to each Benefit Plan, there are no benefit
obligations with respect to which current funding is required for which
contributions have not been made timely or properly accrued and there are no
unfunded benefit obligations that have not been accounted for by reserves, or
otherwise properly footnoted in accordance with generally accepted accounting
principles on the Seller’s financial statements. Company does not have any
Liability with respect to any collectively-bargained for plans subject to the
provisions of ERISA.

               (c) To the Knowledge of Company or Seller, each Benefit Plan is
in compliance with all applicable Laws, including, without limitation, ERISA and
the Code, except for such failure to comply with such regulations which would
not individually or in the aggregate have a Material Adverse Effect on Company.
Each Benefit Plan which is intended to be “qualified” within the meaning of
Section 401(a) of the Code has been amended to comply with all current
applicable legislation (including any regulations issued thereunder), and has
received a favorable determination letter from the Internal Revenue Service with
respect to its Tax-qualified status which considers all such current applicable
legislation or has applied for such letter, or is still within a remedial
amendment period as permitted under the Code or as announced by the Internal
Revenue Service. Neither Seller nor Company has any Knowledge of any fact which
would adversely affect the qualified status of such Benefit Plans or the exempt
status of their related trusts.

               (d) Except as set forth on Schedule 3.19(d), with respect to each
Benefit Plan which covers any current or former officer, director, consultant or
employee (or dependent or beneficiary thereof) of Company, Company has delivered
or made available to Buyer accurate and complete copies, if applicable, of:
(i) all Benefit Plan texts and agreements and related trust agreements or
annuity contracts; (ii) all summary plan descriptions and modifications thereto;
(iii) the most recent Forms 5500, if applicable, and annual report, including
all schedules thereto; (iv) the most recent annual and periodic accounting of
plan assets; (v) the most recent determination letter received from the IRS;
(vi) the most recent actuarial valuation; and (vii) all communications with any
Governmental Authority.

               (e) With respect to each Benefit Plan, to the Knowledge of Seller
or Company: (i) such Benefit Plan has been administered and enforced in
accordance with its terms, the Code and ERISA; (ii) no breach of fiduciary duty
has occurred; (iii) no dispute is pending or, to the Knowledge of Seller or
Company, threatened; (iv) no prohibited transaction, as defined in Section 406
of ERISA or Section 4975 of the Code, has occurred, excluding transactions
effected pursuant to a statutory or administration exemption; and (v) all
contributions and premiums due through the Closing Date have been made as
required under ERISA and the Code or have been fully accrued on the Financial
Statements.

               (f) No Benefit Plan is currently a “defined benefit plan” (as
defined in Code Section 414(j)), a “multiemployer plan” (as defined in ERISA
Section 3(37)) or a “multiple

-22-

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

 

employer plan” (as described in Code Section 413(c)) or is otherwise subject to
Title IV of ERISA or Code Section 412.

               (g) There is no arrangement under any Benefit Plan nor any
contract, agreement, plan or arrangement covering any Person that, individually
or collectively, would result in the payment of any amount that by operation of
Code Section 280G or 162(m) would not be deductible by Company. Prior to or
contemporaneously with the execution of this Agreement, Seller shall have caused
Company to pay, in full, any and all payments due to Company employees in
connection with certain employment agreements which contain a provision
regarding a bonus or other compensation to such employee as a result of the
consummation of the transactions contemplated by this Agreement.

               (h) Except as set forth on Schedule 3.19(h), there is no
contract, agreement, plan or arrangement (written or otherwise) which provides
medical, death or other welfare benefits with respect to current or former
employees or current or former service providers of Company beyond their
termination of employment (other than coverage mandated by Law, which is paid
solely by such employees); and (ii) with respect to each Benefit Plan which is
an Employee Welfare Benefit Plan there are no reserves, assets, surplus or
prepaid premiums under any such plan.

               (i) Except as disclosed on Schedule 3.19(i), the consummation of
the transactions contemplated by this Agreement and the other Transaction
Documents will not: (i) entitle any individual to severance pay, unemployment
compensation or other benefits or compensation; (ii) accelerate the time of
payment or vesting, or increase the amount of any compensation due, or in
respect of, any individual; or (iii) constitute or involve a prohibited
transaction (as defined in ERISA Section 406 or Code Section 4975), or
constitute or involve a breach of fiduciary responsibility within the meaning of
ERISA Section 502(l) or otherwise violate Part 4 of Subtitle B of Title I of
ERISA.

               (j) Company is not subject to any legal obligation to continue
any Benefit Plan and any such Benefit Plan may, without the consent of any
employee, beneficiary or other party, be amended in any respect or terminated
either before or after the Closing Date.

               (k) Except as set forth on Schedule 3.19(k), no Benefit Plan
exists that, as a result of the transaction contemplated by this Agreement,
could result in the payment to any current or former employee or director of
Company of any money or other property or could result in the acceleration or
provision of any other rights or benefits to any current or former employee or
director of Company, whether or not such payment, right or benefit would
constitute a parachute payment within the meaning of Code Section 280G.

               (l) There does not now exist, nor, to the Knowledge of Seller or
Company, do any circumstances exist that would reasonably be expected to result
in any, Controlled Group Liability resulting from Company being part of Seller’s
Controlled Group, as defined in Sections 414(b) and (c) of the Code, that would
have a Material Adverse Effect on Seller and/or Company now or Buyer and/or
Company following the Closing. For purposes of this Section 3.19(l), “Controlled
Group Liability” means (i) any and all Liabilities (A) under Title IV of ERISA,
(B) under Section 302 of ERISA, (C) under Sections 412 and 4971 of the Code, and

-23-

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

 

(D) as a result of a failure to comply with the continuation coverage
requirements of Section 601, et seq. of ERISA and Section 4980B of the Code; and
(ii) any other Liability under Title I of ERISA or Chapter 43 of the Code.

          3.20 Insurance. Schedule 3.20 lists all insurance policies (by policy
number, insurer, expiration date and type, amount and scope of coverage) held by
Company or Seller relating to the Assets, business, properties and employees of
Company, copies of which have been provided or made available to Buyer. Each
such insurance policy is (i) legal, valid, binding, enforceable and in full
force and effect as of the Closing, except as enforceability may be limited by
bankruptcy, insolvency or other Laws affecting creditors’ rights generally and
the exercise of judicial discretion in accordance with general equitable
principles, and (ii) the insurance policy insuring employee travel will be
legal, valid, binding, enforceable, and in full force and effect in favor of the
Company on identical terms following the consummation of the transactions
contemplated hereby. Company is not in default with respect to its obligations
under such insurance policy insuring employee travel, nor has Company been
denied insurance coverage thereunder. In the three (3) year period ending on the
date hereof, Company has not received any notice from, or on behalf of, any
insurance carrier relating to or involving any adverse change or any change
other than in the Ordinary Course of Business, in the conditions of insurance,
any refusal to issue an insurance policy or non-renewal of a policy, or
requiring or suggesting alteration of any of Company’s Assets, purchase of
additional equipment or modification of any of Company’s methods of doing
business. Company has not made any claim against any insurance policy as to
which the insurer is denying coverage.

          3.21 Environmental Matters.

               (a) There are no investigations, inquiries, administrative
proceedings, actions, suits, claims, legal proceedings or other proceedings
pending or, to the Knowledge of Company or Seller, threatened against Company
under or relating to any alleged violation of Environmental Laws including
without limitation those that involve or relate to Environmental Conditions, or
the release, use, disposal or arranging for disposal of any Hazardous Materials
on or from any real property constituting the Leased Premises or any other real
property or facility formerly owned, leased or used by Company.

               (b) There are no Hazardous Materials that have been released or
are being stored or are otherwise present on, under or about any real property
constituting the Leased Premises, and Hazardous Materials have not been
released, stored or are otherwise present on, under or about any real property
formerly owned, leased or operated by Company. Each of the Leased Premises,
during the period it was leased by Company, has been maintained by Company in,
and Company is and has at all times otherwise been in, compliance with all
applicable Environmental Laws.

               (c) Company has not disposed of, or arranged to dispose of,
Hazardous Materials in a manner or to a location that could reasonably be
expected to result in Liability to Company under or relating to Environmental
Laws. Neither Seller nor Company has any environmental audits, reports or other
material environmental documents relating to Company’s past or current
properties, facilities or operations.

-24-

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

 

               (d) Except as set forth in Schedule 3.21, Company has not
assumed, contractually or by operation of law, any Liabilities or obligations
under any Environmental Laws.

          3.22 Real Estate.

               (a) Leased Premises. Schedule 3.22 contains a complete and
accurate list of all premises leased by Company for the operation of Company’s
business (the “Leased Premises”), and of all leases related thereto
(collectively, the “Leases”). Company has delivered to Buyer a true and complete
copy of each of the Leases, and in the case of any oral Lease, a written summary
of the material terms of such Lease.

               (b) Leases Binding. The Leases are in full force and effect and
valid, binding and enforceable in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or other Laws affecting
creditors’ rights generally and the exercise of judicial discretion in
accordance with general equitable principles. There are currently no events of
default (whether with or without notice, lapse of time or both or the happening
or occurrence of any other event) under the Leases and, to the Knowledge of
Company, no event of default has occurred which (whether with or without notice,
lapse of time or both or the happening or occurrence of any other event) would
constitute a default thereunder on the part of Company, Seller or any other
party thereto. The current annual rent and term under each Lease are as set
forth on Schedule 3.22. Schedule 3.22 separately identifies all Leases for which
consents or waivers must be obtained on or prior to the Closing Date (or which
have been obtained) in order for such Leases to continue in effect according to
their terms after the Closing Date. Company has not waived in writing any rights
under any Lease which would be in effect on or after the date of this Agreement.
To the Knowledge of Company, no event has occurred which either entitles, or
would, on notice or lapse of time or both, entitle the other party to any Lease
to declare a default or to accelerate, or which does accelerate, the maturity of
any indebtedness of Company under any Lease.

               (c) Improvements and Fixtures. To the Knowledge of Company, the
Improvements are (i) structurally sound with no known defects; (ii) in good
operating condition and repair, subject to ordinary wear and tear; (iii) not in
need of maintenance or repair except for ordinary routine maintenance and
repair; and (iv) in material conformity with all applicable Laws relating
thereto currently in effect. All of the Improvements on the Leased Premises are
located entirely on such Leased Premises.

               (d) Owned Property. Company does not own any real property or,
except for the Leases, any interest in real property.

          3.23 No Other Agreement To Sell. Company has no legal obligation,
absolute or contingent, to any other Person to sell, encumber or otherwise
transfer Company, the Stock, the Assets or Company’s business (in whole or in
part), or effect any merger, consolidation, combination, share exchange,
recapitalization, liquidation, dissolution or other reorganization involving
Company, or to enter into any agreement with respect thereto.

          3.24 Company Transactions with Certain Persons. Except as set forth on
Schedule 3.24(a), no officer or director of Company, nor any member of any such
individual’s

-25-

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

 

immediate family (whether directly or indirectly through an Affiliate of such
Person) is presently, or within the past three (3) years has been, a party to
any transaction with Company, including without limitation, any Contract or
other arrangement (i) providing for the furnishing of services by (other than as
officers, directors or employees of Company or Seller); (ii) providing for the
rental of real or Personal Property; or (iii) otherwise requiring payments to
(other than for services or expenses as directors, officers or employees of
Company in the Ordinary Course of Business consistent with past practice), any
such individual or any corporation, partnership, trust or other entity in which
any such individual has an interest as a shareholder, officer, director, trustee
or partner. Other than Contracts listed on Schedule 3.24(a), Company does not
have outstanding any Contract or other arrangement or commitment with Seller or
any director, officer, employee, trustee or beneficiary of Company or Seller.
Except as set forth on Schedule 3.24(a), the assets of Company do not include
any receivable or other obligation from Seller or any director, officer,
employee, trustee or beneficiary of Company or Seller and the liabilities of
Company do not include any payable or other obligation or commitment to any such
Person. Schedule 3.24(b) identifies all Contracts, arrangements or commitments
set forth on Schedule 3.24(a) that cannot be terminated upon 60 days notice by
Company.

          3.25 Intentionally Omitted.

          3.26 No Affiliates. Except for Seller and LDS or as set forth on
Schedule 3.26, Company does not have (and has not had, during the three (3) year
prior to the date of this Agreement) any Affiliates, does not own (and has not
had, during the three (3) year prior to the date of this Agreement) any capital
stock or other equity securities of or any debt interest in any other
corporation and does not have (and has not had, during the three (3) year prior
to the date of this Agreement) any other type of ownership interest in any other
Person.

          3.27 Employees and Contractors.

               (a) Employees. Schedule 3.27(a) hereto sets forth a complete and
accurate list of all employees of Company as of the date of this Agreement
showing for each as of that date such employee’s name, job title or description,
salary level (including any bonus or deferred compensation arrangements other
than any such arrangements under which payments are at the discretion of
Company) and also showing any bonus, commission or other remuneration other than
salary paid during Company’s fiscal year ending June 30, 2003. Except as set
forth on Schedule 3.27(a), none of such employees is a party to a written
employment agreement or contract with Company and each is employed “at will.”
Except as set forth in Schedule 3.27(a), each such employee has entered into
Company’s standard form of employee non-disclosure, confidentiality and
assignment of inventions agreement with Company, a copy of which has been
previously delivered to Buyer.

               (b) Contractors. Schedule 3.27(b) contains a list of all
independent contractors (excluding subcontractors) currently engaged by Company,
along with the position, date of retention and rate of remuneration, most recent
increase (or decrease) in remuneration and amount thereof, for each such Person.
Except as set forth on Schedule 3.27(b), no independent contractor is a party to
a written agreement or contract with Company. Each such independent contractor
has entered into Company’s standard form of independent contractor/consultant

-26-

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

 

confidentiality, non-competition and assignment of inventions agreement with
Company, a copy of which has been previously delivered to the Buyer. For the
purposes of applicable Law, including without limitation the Code, all
independent contractors who are, or within the last three (3) years have been,
engaged by Company are bona fide independent contractors and not employees of
Company. Except as noted on Schedule 3.27(b), each independent contractor is
terminable upon thirty days notice, without any obligation to pay severance or a
termination fee.

          3.28 Organizational Conflicts of Interest. Except as set forth on
Schedule 3.28, Company has not had access to non-public information nor provided
systems engineering, technical direction, consultation, technical evaluation,
source selection services or services of any type, nor prepared specifications
or statements of work, nor engaged in any other conduct that would create in any
current Governmental Authority procurement, which Company is performing or
pursuing, an organizational conflict of interest as defined in the Federal
Acquisition Regulations (“FAR”) or other applicable Law.

          3.29 Government Audits. Except as set forth on Schedule 3.29, neither
Company nor Seller has received any official notice that Company is or was being
specifically audited or, to the Knowledge of Company or Seller, investigated by
any Governmental Authority, nor has such audit or investigation been threatened.
Notwithstanding anything in this Agreement to the contrary, with regard to
Company’s incurred cost audits for fiscal year 2003, the removal of Seller’s
home office costs from Company’s indirect costs for these fiscal years will not
result in any monetary liability for Company or Buyer.

          3.30 Labor Relations. Except as disclosed on Schedule 3.30, Company is
not a party to any collective bargaining agreement or other contract or
agreement with any group of employees, labor organization or other
representative of any of the employees of Company and there are no activities or
proceedings of any labor union or other party to organize or represent such
employees. There has not occurred nor, to the Knowledge of Company or Seller,
been threatened any strike, slow-down, picketing, work-stoppage, or other
similar labor activity with respect to any such employees. Except as set forth
in Schedule 3.30, Company is in compliance with all Laws relating to employment
or the workplace, including, without limitation, provisions relating to wages,
hours, collective bargaining, safety and health, work authorization, equal
employment opportunity, immigration and the withholding of income Taxes,
unemployment compensation, workers’ compensation, employee privacy and right to
know and social security contributions, except where failure to be in compliance
would not reasonably be expected to have a Material Adverse Effect on Company.
Schedule 3.30 sets forth all unresolved labor controversies (including
unresolved grievances and age or other discrimination claims), if any, between
Company and Persons employed by or providing services to Company. Except as
disclosed on Schedule 3.30, to the Knowledge of Company or Seller, no officer or
employee of Company has any current plan to terminate his or her employment with
Company.

          3.31 Board Approval. Company has provided Buyer with true and correct
copies of all of its board of directors proceedings relating to the adoption and
approval of this Agreement and the transactions contemplated hereby, which are
in full force and effect as of the date hereof and shall be in full force and
effect as of the Closing Date.

-27-

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

 

          3.32 Company: Brokers. Except as set forth on Schedule 3.32, and
except for    , no broker, finder or investment banker or other Person is
directly or indirectly entitled to any brokerage, finder’s or other contingent
fee or commission or any similar charge in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Company.

          3.33 Government Contracts(a) .

               (a) (i) Schedule 3.33(a)(i) lists all active Government Contracts
(except for task orders and blanket purchasing agreements pursuant to Government
Contracts), and with respect to each such listed Government Contract,
Schedule 3.33(a)(i) accurately lists: (A) the contract name; (B) the award date;
(C) the customer; (D) the contract end date; and (E) as applicable, whether the
current Government Contract is premised on Company’s small business status,
small disadvantaged business status, protégé status, or other preferential
status.

                    (ii) Schedule 3.33(a)(ii) lists Company’s current project
charge codes, and with respect to each such charge code, Schedule 3.33(a)(ii)
accurately lists: (A) the customer; (B) the customer’s contract number
corresponding to the charge code; (C) the customer’s order number; (D) Company’s
internal project charge code number; (E) the corresponding project name; (F) the
end date; (G) inception to December 31, 2003 funding; (H) inception to
December 31, 2003 revenue received, and (I) payments due as of thirty (30) days
or more prior to the date of this Agreement for work previously performed and
billed. Schedule 3.33(a)(ii) also indicates the basis for billing with respect
to the charge codes that represent fixed price task orders.

                    (iii) Schedule 3.33(a)(iii) lists all Government Bids,
including task order bids under current Government Contracts submitted by
Company and for which no award has been made thirty (30) days or more prior to
the date of this Agreement, and with respect to each such Government Bid,
Schedule 3.33(a)(iii) accurately lists: (A) the customer agency and title;
(B) the request for proposal (RFP) number or, if such Government Bid is for a
task order under a prime contract, the applicable prime contract number, (C) the
date of proposal submission; (D) the expected award date, if known; (E) the
estimated period of performance; (F) the estimated value based on the proposal,
if any; and (G) except for Government Bids for task orders, whether such
Government Bid is premised on Company’s small business status, small
disadvantaged business status, protégé status, or other preferential status.
Company has delivered to Buyer true and complete copies of all Government
Contracts (except for task orders pursuant to such Government Contracts) and of
all Government Bids and provided access to Buyer to true and correct copies of
all documentation related thereto requested by Buyer.

                    (iv) Company has provided or made available to Buyer true
and complete copies of all written Government Contracts set forth on Schedule
3.33 (including any and all amendments and other modifications to such
Government Contracts) and true and correct summaries of all non-written
Government Contracts set forth on Schedule 3.33. The Government Contracts listed
on Schedule 3.33 consist of all of the Contracts (other than the Contracts
listed on Schedules 3.13 and 3.22) necessary to

-28-

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

 

conduct Company’s business as currently conducted and are in full force and
effect, and are valid, binding, and enforceable in accordance with their terms,
except to the extent that the enforceability thereof may be affected by
bankruptcy, insolvency, or similar laws affecting creditors’ rights generally or
by court-applied equitable principles.

                    (v) There exists no breach, default or violation on the part
of Company or on the part of any other party to any Government Contract nor has
Company received notice of any breach, default or violation to any Government
Contract. Except as expressly identified on Schedule 3.33(a)(v), the
consummation of the transactions contemplated by this Agreement will not affect
the validity, enforceability and continuation of the Government Contracts on the
same terms applicable to such Government Contracts as of the date hereof.
Company has not waived any rights under any such Government Contract. No event
has occurred which either entitles, or would, with notice or lapse of time or
both, entitle any party to any Government Contract (other than Company) to
declare breach, default or violation under any Government Contract or to
accelerate, or which does accelerate, the maturity of any indebtedness of
Company under any Government Contract.

               (b) Except as set forth on Schedule 3.33(b), (i) Company has not
received written notification of cost, schedule, technical or quality problems
that could reasonably result in claims against Company (or successors in
interest) by a Governmental Authority, a prime contractor or a higher-tier
subcontractor; (ii) there are no Government Contracts pursuant to which Company
is reasonably likely to experience cost, schedule, technical or quality problems
that could reasonably result in claims against Company (or successors in
interest) by a Governmental Authority, a prime contractor or a higher-tier
subcontractor; (iii) all of the Government Contracts were legally awarded, are
binding on the parties thereto, and are in full force and effect; (iv) the
Government Contracts are not currently the subject of bid or award protest
proceedings, and no Government Contracts or Government Bids are reasonably
likely to become the subject of bid or award protest proceedings; and (v) no
Person has notified Company that any Governmental Authority intends to seek
Company’s agreement to lower rates under any of the Government Contracts or
Government Bids, including but not limited to any task order under any
Government Bids.

               (c) Except as set forth on Schedule 3.33(c): (i) Company has
fully complied with all terms and conditions of each Government Contract and
Government Bid to which it is a party, except where the failure to be in
compliance would not reasonably be expected to have a Material Adverse Effect on
Company; (ii) Company has complied with all statutory and regulatory
requirements, including but not limited to the Service Contract Act, the
Contract Disputes Act, the Procurement Integrity Act, the Federal Procurement
and Administrative Services Act, the FAR and related cost principles and the
Cost Accounting Standards, where and as applicable to each of the Government
Contracts and Government Bids, (iii) the representations, certifications, and
warranties made by Company with respect to the Government Contracts or
Government Bids were accurate in all respects as of their effective date, and
Company has fully complied with all such certifications; (iv) no termination for
default, cure notice or show cause notice has been issued and remains unresolved
with respect to any Government Contract or Government Bid and, to the Knowledge
of Company or Seller, no event, condition or omission has occurred or exists
that would constitute grounds for such action; (v) no past performance

-29-

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

 

evaluation received by Company with respect to any such Government Contract has
set forth a default or other failure to perform thereunder or termination or
default thereof; and (vi) no money due to Company pertaining to any Government
Contract or Government Bid has been withheld or set-off.

               (d) Except as set forth on Schedule 3.33(d), with respect to the
Government Contracts, no Governmental Authority, prime contractor or higher-tier
subcontractor under a Government Contract or any other Person has notified
Company of any actual or alleged violation or breach of any statute, regulation,
representation, certification, disclosure obligation, contract term, condition,
clause, provision or specification that could reasonably be expected to affect
payments under Government Contracts or adversely affect the award of Government
Bids to Company in the future.

               (e) Except as set forth on Schedule 3.33(e),Company has not taken
any action and is not a party to any litigation that could reasonably be
expected to give rise to (i) Liability under the False Claims Act, (ii) a claim
for price adjustment under the Truth in Negotiations Act, or (iii) any other
request for a reduction in the price of any Government Contract, including but
not limited to claims based on actual or alleged defective pricing. To the
Knowledge of Company or Seller, there exists no basis for a claim of any
Liability of Company by any Governmental Authority as a result of defective cost
and pricing data submitted to any Governmental Authority. Company is not
participating in any pending claim and Company is unaware of any potential claim
under the Contract Disputes Act against the United States Government or any
prime contractor, subcontractor or vendor arising under or relating to any
Government Contract or Government Bid.

               (f) Each representation and/or certification made by Company that
it was a small business concern in each of its Government Contracts and
Government Bids was current and accurate as of its effective date.

               (g) Except as set forth on Schedule 3.33(g), (i) Company has not
received any written or any oral, show cause, cure, default or similar notice
relating to any Government Contract; (ii) no Government Contract has been
terminated for default in the past five (5) years; and (iii) Company has not
received any written or oral notice terminating any Government Contract for
convenience or indicating an intent to terminate any of the Government Contracts
for convenience.

               (h) Except as set forth on Schedule 3.33(h), Company has not
received any written notice of any outstanding claims or contract disputes to
which Company is a party (i) relating to the Government Contracts or Government
Bids and involving either a Governmental Authority, any prime contractor, any
higher-tier subcontractor, vendor or any third party; and (ii) relating to the
Government Contracts under the Contract Disputes Act or any other federal
statute.

               (i) Company has never been and is not now, suspended, debarred or
proposed for suspension or debarment from bidding on any Government Contract. No
suspension or debarment actions with respect to Government Contracts have been
commenced or threatened against Company or any of its officers or employees. To
the Knowledge of Company or Seller,

-30-

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

 

there is no valid basis for Company’s suspension or debarment from bidding on
contracts or subcontracts for or with any Governmental Authority.

               (j) No negative determination of responsibility has been issued
against Company with respect to any quotation, bid or proposal submitted to a
Governmental Authority.

               (k) [Redacted]

               (l) [Redacted]

               (m) Company has not received any written notice that any of
Company’s employees, consultants or agents is (or during the last five (5) years
has been) under administrative, civil or criminal investigation or indictment by
any Governmental Authority with respect to the conduct of the business of
Company. Company has not received written notice of any, and there is no,
pending investigation of any officer, employee or Representative of Company, nor
within the last five (5) years has there been any audit or investigation of
Company or any officer, employee or Representative of Company relating to the
business of Company resulting in an adverse finding with respect to any alleged
irregularity, misstatement or omission arising under or relating to any
Government Contract or Government Bid.

               (n) [Redacted]

               (o) Company is in compliance with all applicable national
security obligations, including those specified in the National Industrial
Security Program Operating Manual, DOD 5220.22-M (January 1995), and any
supplements, amendments or revised editions thereof.

               (p) [Redacted]

               (q) [Redacted]

               (r) [Redacted]

               (s) [Redacted]

               (t) [Redacted]

               (u) No personal property, equipment or fixtures are loaned,
bailed or otherwise furnished to Company by or on behalf of the United States
Government.

               (v) Company certifies that (i) no written claims, or claims
threatened in writing, exist against Company with respect to express warranties
and guarantees contained in Government Contracts on products or services
provided by Company; (ii) no such claims have been made against Company in the
past 5 years; (iii) no amendment has been made to any written warranty or
guarantee contained in any Government Contract that would reasonably be expected
to result in an adverse effect on Company; and (iv) Company has not taken any
action which would reasonably be expected to give any Person a right to make a
claim under any written warranty or guarantee contained in any Government
Contract.

-31-

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

 

               (w) Except to the extent prohibited by applicable Law,
Schedule 3.33(w) sets forth all facility security clearances held by Company.

               (x) Company maintains systems of internal controls (including,
but not limited to, cost accounting systems, purchasing systems, proposal
systems, billing systems and material management systems) that are in compliance
with all requirements of all of the Government Contracts and of applicable
government laws and regulations, except where failure to be in compliance would
not reasonably be expected to have a Material Adverse Effect on Company.

               (y) Neither Company nor any of the employees, officers or agents
of Company have violated any legal, administrative or contractual restriction
concerning the employment of (or discussions concerning possible employment
with) current or former officials or employees of a state, local or federal
government (regardless of the branch of government), including (not limited to)
the so-called “revolving door” restrictions set forth at 18 U.S.C. § 207.

               (z) Neither Company nor any of the employees, officers or agents
of Company have committed (or taken any action to promote or conceal) any
violation of the Foreign Corrupt Practices Act, 15 U.S.C. § 78dd-1, -2.

          3.34 Defense Articles, Defense Services and Technical Data. During the
past five (5) years, Company has not manufactured “defense articles,” exported
“defense articles” or furnished “defense services” or “technical data” to
foreign nationals in the United States or abroad, as those terms are defined in
22 Code of Federal Regulations Sections 120.6, 120.9 and 120.10, respectively.

          3.35 Bank Accounts. Schedule 3.35 lists the names and locations of all
banks and other financial institutions with which there is an account in
Company’s name, in each case listing the type of account, the account number
therefore, and the names of all Persons authorized to draw thereupon or have
access thereto and lists the locations of all safe deposit boxes used by
Company.

          3.36 Suppliers and Customers. Schedule 3.36 lists, by dollar volume
paid for the twelve (12) months ended on December 31, 2003, the twenty
(20) largest suppliers and the ten (10) largest customers of Company. To the
Knowledge of Company, (a) no Person listed on Schedule 3.36 intends or within
the last twelve (12) months has threatened to cancel or otherwise terminate any
relationships of such Person with Company, (b) no such Person has during the
last twelve (12) months materially decreased or, to the Knowledge of Company,
intends or has threatened to materially decrease or limit its relationships with
Company or limit its services or supplies to Company or its usage or purchase of
the services or products of Company and (c) to the Knowledge of Company, the
acquisition by the Buyer of the Stock and the consummation of the transactions
contemplated in this Agreement and the other Transaction Documents will not have
a Material Adverse Effect on the relationship of Company with any supplier or
customer listed on Schedule 3.36.

          3.37 Events Subsequent to Most Recent Fiscal Year End. Except as set
forth on Schedule 3.37, since June 30, 2003, there has not been any change in
the business, financial

-32-

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

 

condition, operations, results of operations, Assets, customer, supplier or
employee relations or future prospects of Company (other than changes in general
economic conditions) which has resulted in or would reasonably be expected have
a Material Adverse Effect on Company. Without limiting the generality of the
foregoing, since that date:

               (a) Company has not sold, leased, transferred, or assigned any of
its Assets, tangible or intangible, outside the Ordinary Course of Business,
except that Company sold or otherwise transferred the stock of LDS and the
Intercompany Note Receivable to Seller on January 30, 2004;

               (b) Company has not entered into any agreement, contract, lease,
or license (or series of related agreements, contracts, leases, and licenses)
either involving more than    or outside the Ordinary Course of Business;

               (c) no party (including Company) has accelerated, terminated,
made material modifications to, or cancelled any Contract, Lease, or license (or
series of related agreements, Contracts, Leases, and licenses) involving more
than    to which Company is a party or by which it is bound nor, to Company’s
Knowledge, threatened any of the foregoing actions;

               (d) except for the Permitted Liens, Company has not caused or
permitted any Lien to be imposed upon any of its Assets, tangible or intangible;

               (e) Company has not made any capital expenditure (or series of
related capital expenditures) either involving more than    or outside the
Ordinary Course of Business;

               (f) Company has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of, any other Person (or series
of related capital investments, loans, and acquisitions) either involving more
than    or outside the Ordinary Course of Business;

               (g) Company has not issued any note, bond, or other debt security
or created, incurred, assumed, or guaranteed any indebtedness for borrowed money
or capitalized lease obligations either involving more than    individually or
   in the aggregate;

               (h) Company has not incurred, created or otherwise become liable
for any indebtedness and has not delayed or postponed the payment of accounts
payable and other liabilities either involving more than    individually or
   in the aggregate, or outside the Ordinary Course of Business;

               (i) Company has not amended, cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business and has not accelerated collection of accounts
receivable or delayed payment of accounts payable;

               (j) Company has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;

-33-

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

 

               (k) there has been no change made or authorized in the articles
of incorporation or bylaws of Company;

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

               (m) except as disclosed in the Financial Statements, Company has
not declared, set aside, or paid any dividend or made any distribution with
respect to its capital stock (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of its capital stock, or granted any Person
any option or other right to acquire any shares of capital stock or other
securities of Company;

               (n) Company has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to property that is material, individually
or in the aggregate, to Company’s business or Assets;

               (o) Company has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees other than in
the Ordinary Course of Business;

               (p) Company has not entered into any employment contract
involving base compensation of    or more or any collective bargaining
agreement, written or oral, or modified the terms of any existing such contract
or agreement;

               (q) Company has not granted any increase in the compensation of
any of its directors, officers or employees;

               (r) Company has not adopted, terminated, amended, or modified any
bonus, profit sharing, incentive, severance, employee benefit or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Benefit Plan);

               (s) Company has not entered into or modified any retention,
severance or incentive agreement related to the transactions contemplated by
this Agreement;

               (t) Company has not made any other change in employment terms,
compensation or benefits for any of its directors, officers and employees;

               (u) Company has not changed any method or principle of accounting
except to the extent required by GAAP or as advised by Company’s independent
accountant;

               (v) Company has not made any Tax election or settled any Tax
Liability; and

               (w) Company has not committed to or agreed to undertake any of
the foregoing.

-34-

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

 

          3.38 Intentionally Omitted.

          3.39 Seller Organization. Seller is a corporation duly organized and
validly existing and in good standing under the laws of the State of Delaware.

          3.40 Seller Authorization; Corporate Documentation. Seller has the
requisite power and authority to execute and deliver this Agreement and the
Transaction Documents to which it is a party, to perform its obligations
hereunder and thereunder, and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the other
Transaction Documents by Seller, and Seller’s consummation of the transactions
contemplated hereby, including the sale of the Stock, have been duly authorized
by all requisite corporate or other action of Seller. Approval by the
shareholders of Seller is not required to consummate the transactions
contemplated hereby.

          3.41 Title to the Stock. Upon delivery of the Stock to Buyer on the
Closing Date in accordance with this Agreement and upon payment of the Cash
Purchase Price at the Closing, the entire legal and beneficial interest in the
Stock and good, valid and marketable title thereto, free and clear of all Liens,
will pass to Buyer. Passage of such title to Buyer shall not relieve Buyer of
its remaining payment and other obligations under this Agreement.

          3.42 Capitalization. The authorized capital stock of Company consists
of 1,000,000 shares of Common Stock, 100 of which are issued and outstanding as
of the date of this Agreement. The Stock to be delivered by Seller to Buyer
constitutes all outstanding shares of capital stock of Company. The Stock (i)
has been duly and validly issued; (ii) is fully paid and nonassessable; (iii) is
held beneficially and of record by Seller; and (iv) was not issued in violation
of any preemptive rights or rights of first refusal or first offer. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to Company, nor are there any voting trusts, proxies, shareholder
agreements or any other agreements or understandings with respect to the voting
of the Stock. There are no options, warrants or other rights to subscribe for or
purchase any capital stock or other equity interests of Company or securities
convertible into or exchangeable for, or that otherwise confer on the holder any
right to acquire any capital stock of Company, or preemptive rights or rights of
first refusal or first offer nor are there any contracts, commitments,
agreements, understandings, arrangements or restrictions to which Seller or
Company is a party or by which Seller or Company is bound relating to any shares
of the Stock or any other equity securities of Company, whether or not
outstanding. All of the Stock and other securities of Company have been granted,
offered, sold and issued in compliance with all applicable state and federal
securities laws, rules and regulations.

          3.43 Seller: Binding Agreement. This Agreement has been duly executed
by Seller and delivered to Buyer, and constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other Laws
affecting creditors’ rights generally and the exercise of judicial discretion in
accordance with general equitable principles. Upon execution and delivery
thereof at the Closing by Seller, each other Transaction Document to which
Seller is, or is specified to be, a party, will be duly and validly executed by
Seller and delivered to Buyer on the Closing Date, and will constitute Seller’s
legal, valid and binding obligation, enforceable against

-35-

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

 

Seller in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other Laws affecting creditors’ rights generally and
the exercise of judicial discretion in accordance with general equitable
principles.

          3.44 Seller: No Breach. Except as set forth on Schedule 3.44, the
execution, delivery and performance of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby by Seller do not and will not (a) violate or conflict with Seller’s
Certificate of Incorporation or Bylaws, or, to the Knowledge of Seller
(including the actual knowledge of Seller’s Chief Executive Officer), any Laws
or directive, settlement, permit or license of any Governmental Authority to
which Seller or the Stock is subject, or by which Seller or the Stock may be
bound, (b) (with or without giving notice or the lapse of time or both) breach
or conflict with, constitute or create a default, or give rise to any right of
termination, cancellation or acceleration under, any of the terms, conditions or
provisions of any material agreement or other commitment to which Seller is a
party or by which Seller or the Stock may be bound, (c) result in the imposition
of a Lien on the Stock or (d) require any filing with, or Permit, consent or
approval of, or the giving of any notice to, any Governmental Authority or third
party.

          3.45 Seller Compliance With Laws. Seller has complied with all Laws of
any Governmental Authority applicable to Seller and the Stock, except where
failure to be in compliance would not reasonably be expected to have a Material
Adverse Effect on Company. Seller has, in connection with Company’s business,
complied, except where failure to be in compliance would not reasonably be
expected to have a Material Adverse Effect on Company, with all applicable Laws
relating to employment of labor, including those concerning wages, hours, equal
employment opportunity, pension and welfare benefit plans (including ERISA) and
the payment of Social Security Tax and similar Taxes and neither Seller nor
Company is liable for any arrearages of wages or any Tax penalties due to any
failure to comply with any of the foregoing. Except as set forth in Schedule
3.45, Seller need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Governmental Authority in order for
the Parties to consummate the transactions contemplated by this Agreement other
than the (x) notices, filings, authorizations, consents and approvals of such
character that failure to give or obtain when applicable would not have a
Material Adverse Effect on Company or affect the validity of this Agreement or
prevent the consummation of the transactions contemplated hereby and
(y) notices, filings, authorizations, consents and approvals which have been
made, given or obtained.

          3.46 No Other Agreement to Sell. Seller has no legal obligation,
absolute or contingent, to any other Person to sell, encumber or otherwise
transfer Company, the Assets, Company’s business or the Stock (in whole or in
part), or effect any merger, consolidation, combination, share exchange,
recapitalization, liquidation, dissolution or other reorganization involving
Company, or to enter into any agreement with respect thereto.

          3.47 Seller: Transactions with Certain Persons. Except as set forth on
Schedule 3.47, neither Seller, nor any officer or director of Seller, nor any
member of any such individual’s immediate family (whether directly or indirectly
through an Affiliate of such Person) is presently, or within the past three
(3) years has been, a party to any material transaction with Company, including
without limitation, any Contract or other arrangement (i)

-36-

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

 

providing for the furnishing of services by (other than as officers, directors
or employees of Company or Seller); (ii) providing for the rental of real or
Personal Property; or (iii) otherwise requiring payments to (other than for
services or expenses as directors, officers or employees of Company or Seller in
the Ordinary Course of Business consistent with past practice), any such
individual or any corporation, partnership, trust or other entity in which any
such individual has an interest as a shareholder, officer, director, trustee or
partner.

          3.48 Board Resolutions. Seller has provided Buyer with copies of all
board of directors proceedings relating to its adoption and approval of this
Agreement and the transactions contemplated hereby, which are in full force and
effect as of the date hereof and shall be in full force and effect as of the
Closing Date.

          3.49 Seller: Brokers. Except as set forth on Schedule 3.49, and    no
broker, finder or investment banker or other Person is directly or indirectly
entitled to any brokerage, finder’s or other contingent fee or commission or any
similar charge in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Company or Seller.

          3.50 Disclaimer. Except as expressly set forth in Section 3 hereof,
neither Company nor Seller makes any representation or warranty, express or
implied, at law or in equity, in respect of the Stock, Company, its business or
Assets, including, without limitation, representations and warranties with
respect to merchantability or fitness for any particular purpose. All other
representations or warranties are hereby disclaimed.

     4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
to Company and Seller the following matters contained in Section 4. These
representations, and any schedules referenced therein, are true and correct as
of the date of this Agreement.

          4.1 Organization. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.

          4.2 Corporate Authorization. Buyer has the requisite power and
authority to execute and deliver this Agreement and the other Transaction
Documents to which it is a party, to perform its obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Buyer of this Agreement and the other
Transaction Documents to which it is a party, and Buyer’s consummation of the
transactions contemplated hereby, have been duly authorized by all requisite
corporate or other action of Buyer.

          4.3 Binding Agreement. This Agreement has been duly executed by Buyer
and delivered to Company and Seller and constitutes the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other Laws
affecting creditors’ rights generally and the exercise of judicial discretion in
accordance with general equitable principles. Upon execution and delivery
thereof at the Closing by Buyer, each other Transaction Document to which Buyer
is, or is specified to be, a party, will be duly and validly executed by Buyer
and delivered to

-37-

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

 

Company and Seller on the Closing Date, and will constitute Buyer’s legal, valid
and binding obligation, enforceable against Buyer in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other Laws
affecting creditors’ rights generally and the exercise of judicial discretion in
accordance with general equitable principles.

          4.4 Buyer: No Breach. Except as set forth on Schedule 4.4, the
execution, delivery and performance of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby by Buyer do not and will not (a) violate or conflict with Buyer’s
Certificate of Incorporation or Bylaws or, to the knowledge of Buyer, any Laws
or directive, settlement, permit or license of any Governmental Authority to
which Buyer is subject, or by which Buyer is bound, (b) (with or without giving
notice or the lapse of time or both) breach or conflict with, constitute or
create a default, or give rise to any right of termination, cancellation or
acceleration under, any of the terms, conditions or provisions of any contract,
agreement, or other commitment to which Buyer is a party or by which Buyer may
be bound, or (c) require any filing with, or permit, consent or approval of, or
the giving of any notice to, any Governmental Authority or third party.

          4.5 Brokers. No broker, finder or investment banker or other Person is
directly or indirectly entitled to any brokerage, finder’s or other fee or
commission or any similar charge in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Buyer.

          4.6 Board Approval. Buyer has provided Seller and Company with true
and correct copies of all such board of directors proceedings relating to this
Agreement and the transactions contemplated hereby, which are in full force and
effect as of the date hereof and as of the Closing Date.

          4.7 Intentionally Omitted.

          4.8 Investment Intent. Buyer is acquiring the Stock for its own
account and not with a view to its distribution within the meaning of
Section 2(11) of the Securities Act of 1933, as amended, and the rules and
regulations issued pursuant thereto.

          4.9 Litigation. There is no litigation, proceeding (arbitral or
otherwise), claim, action, suit, judgment, mediation, arbitration, decree,
settlement, rule or order or investigation of any nature pending, or, to the
knowledge of Buyer, threatened before any court, arbitrator or governmental or
regulatory official, body or authority against Buyer, its directors or officers,
that would challenge any of the transactions contemplated by this Agreement or
any of the Transaction Documents.

          4.10 Buyer Financing. Buyer has sufficient cash, available lines of
credit or other sources of available funds to enable it to make payment of the
Purchase Price and any other amounts to be paid by it hereunder.

     5. COVENANTS

-38-

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

 

          5.1 Noncompetition. Seller and its Affiliates shall not, for a period
of two (2) years following the Closing Date (computed by excluding from such
computation any time during which Seller or an Affiliate is found by a court of
competent jurisdiction to have been in violation of any provision of this
Section 5.1), for any reason whatsoever, directly or indirectly, for themselves
or on behalf of or in conjunction with any other Person, engage, as a
shareholder, owner, partner, joint venturer, or in a managerial capacity, or as
an independent contractor, consultant, advisor or sales representative, in the
provision of services of the type previously provided or currently being
provided by Company employees, on behalf of Company, to United States Government
customers. Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Seller from acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business whose stock is traded on a
national securities exchange or market, or over-the-counter.

          5.2 Non-Solicitation by Seller after Closing. Seller and its
Affiliates shall not, for a period of two (2) years following the Closing Date,
call upon any person who is, at that time, an employee of Buyer or Company to
solicit such employee away from or out of the employ of Buyer or Company, as the
case may be; provided, however, that such restriction shall not apply to any
solicitation directed at the public in general online or in publications
available to the public in general, whether or not the individuals responding to
such general solicitations were also individuals that Seller, Company or Buyer
may have been acquainted with during the course of the transactions contemplated
by this Agreement.

          5.3 Non-Solicitation by Buyer. Buyer and its Affiliates shall not, for
a period of two (2) years following the execution of this Agreement, call upon
any person who is, at that time an employee of Seller to solicit such employee
away from or out of the employ of Seller; provided, however, that such
restriction shall not apply to any solicitation directed at the public in
general online or in publications available to the public in general, whether or
not the individuals responding to such general solicitations were also
individuals that Seller, Company or Buyer may have been acquainted with during
the course of the transactions contemplated by this Agreement.

          5.4 Damages. Because of the difficulty of measuring economic losses to
Seller, Buyer and/or Company as a result of a breach of the foregoing covenants,
and because of the immediate and irreparable damage that could be caused to
Seller, Buyer and/or Company for which it would have no other adequate remedy,
Seller, Buyer and Company agree that in the event of a breach by one of the
parties the non-breaching party may seek to enforce the foregoing covenants by
injunctions and restraining orders.

          5.5 Reasonable Restraint. The parties agree that the foregoing
covenants in Sections 5.1, 5.2, 5.3, and 5.4 impose a reasonable restraint on
Seller, Company and Buyer, as the case may be, in light of the activities and
business of the parties on the date of the execution of this Agreement.

          5.6 Severability; Reformation. The covenants in Sections 5.1, 5.2,
5.3, and 5.4 are severable and separate, and the unenforceability of any
specific covenant shall not affect the provisions of any other covenant in this
Agreement. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are

-39-

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

 

unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.

          5.7 Materiality. Seller, Company and Buyer hereby agree that the
covenants set forth in Sections 5.1, 5.2, 5.3, and 5.4 are a material and
substantial part of the transactions contemplated by this Agreement.

          5.8 Confidentiality.

          (a) Seller recognizes and acknowledges that it has had in the past,
currently has, and in the future may possibly have, access to certain
confidential information of Company and Buyer, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of Company’s and Buyer’s respective businesses. Seller agrees
that, at all times, it will not disclose confidential information with respect
to Company or Buyer to any Person for any purpose or reason whatsoever (except
to authorized Representatives of Seller and to counsel and other advisors;
provided, however, that such advisors (other than counsel) agree to the
confidentiality provisions of this Section 5.8(a), unless (i) such information
becomes known to the public generally through no fault of Seller,
(ii) disclosure is required by Law or the order of any Governmental Authority
under color of law, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party; and provided further, that prior to disclosing any information
pursuant to clause (i), (ii) or (iii) above, Seller shall, if possible, give
prior written notice thereof to Buyer and provide Buyer with the opportunity to
contest such disclosure.

          (b) Buyer recognizes and acknowledges that it has had in the past,
currently has, and in the future may possibly have, access to certain
confidential information of Seller, such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of Seller’s business. Buyer agrees that, at all times, it will not
disclose confidential information with respect to Seller to any Person for any
purpose or reason whatsoever, (except to authorized Representatives of Buyer and
to counsel and other advisors; provided, however, that such advisors (other than
counsel) agree to the confidentiality provisions of this Section 5.8(b), unless
(i) such information becomes known to the public generally through no fault of
Buyer, (ii) disclosure is required by Law or the order of any Governmental
Authority under color of law, or (iii) the disclosing party reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party; and provided further, that prior to disclosing any
information pursuant to clause (i), (ii) or (iii) above, Buyer shall, if
possible, give prior written notice thereof to Seller and provide Seller with
the opportunity to contest such disclosure.

          (c) The obligations of Seller, Company and Buyer to hold any
information in confidence shall be satisfied if they exercise the same care with
respect to such information as they would take to preserve the confidentiality
of their own similar information.

          5.9 Insurance. Seller shall take any action to cause the termination
of the insurance policy insuring employee travel for a period of thirty
(30) days following the Closing or until such policy is earlier terminated,
replaced or renewed by Buyer.

-40-

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

 

          5.10 Cost Allowability. Except as set forth on Schedule 5.10, all
Company costs (both direct and/or indirect) that have been, prior to Closing,
charged to any Government Contract shall be allowable in accordance with
applicable cost accounting standards. All costs (both direct and/or indirect) to
be charged to Company by Seller or any of its Affiliates pursuant to any
existing subcontract agreements shall be allowable in accordance with applicable
cost accounting standards.

          5.11 Employee Benefits.

               (a) Effective immediately following the Closing Date, Buyer will
provide to former employees of Company who accept offers of employment from
Buyer (the “Rehired Employees”) and their dependents, employee benefits which
are offered to current employees of Buyer through an employee benefit plan
provided by Buyer (including, as applicable, sick pay and vacation pay).

               (b) In addition to the foregoing, (A) coverage under such Buyer
employee benefit plans will be sufficient to eliminate any Liability of Company
and Seller to the Rehired Employees and their dependents for any benefits under
COBRA and (B) Buyer will assume all Company accrued vacation liabilities and
sick leave liabilities of the Rehired Employees effective immediately following
the Closing Date.

               (c) Effective immediately following the Closing Date, solely for
purposes of eligibility and vesting under the employee benefit plans of Buyer
providing benefits to Rehired Employees, Buyer will cause each such Rehired
Employee to be credited with his or her years of service with Company (and any
predecessor entities thereof) as of the Closing Date, to the same extent as such
Rehired Employees were entitled, as of the Closing Date, to credit for such
service under any similar Benefit Plan.

               (d) Effective immediately following the Closing Date, Buyer will
waive any pre-existing condition limitation under any Employee Welfare Benefit
Plan maintained by Buyer in which Rehired Employees and their eligible
dependents participate (except to the extent that such pre-existing condition
limitation would have been applicable as of the Closing Date under the
comparable Employee Welfare Benefit Plans of Seller and Company).

               (e) Rehired Employees and their dependents shall neither
participate in nor accrue benefits under any Seller sponsored Benefit Plans
following the Closing Date, and Seller shall cause the participation of all
Company employees and their dependents to cease effective immediately following
the Closing Date or otherwise in accordance with such Benefit Plans (except
where such action by Seller would be prohibited by applicable Laws or such
Benefit Plans). Neither Company nor Buyer shall succeed to any Seller sponsored
Benefit Plans, nor shall Company or Buyer be entitled to any assets of any
Seller sponsored Benefit Plans.

               (f) Seller shall remain responsible for any Liabilities relating
to any Terminated Employees or any Resigning Employees and their respective
dependents for any benefits under COBRA and, subject to subsection (g) below,
Seller shall be responsible for and pay, or cause Company to pay, on or prior to
the Closing, any accrued and unused vacation pay or

-41-

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

 

sick leave and severance payments or other bonus due to any Terminated Employees
or Resigning Employees in accordance with plan terms.

               (g) Buyer shall reimburse Seller for any accrued and unused
vacation pay, sick leave or bonus payments paid to each Resigning Employee who
delivers to Company a written resignation to the effect that Buyer’s purchase of
the Stock, the associated change of control of Company being effected by the
transactions contemplated by this Agreement, and/or the position, benefits or
salary being offered to such Resigning Employee by Buyer, is the reason for such
resignation, in each case within fifteen (15) days of Seller providing
satisfactory evidence of such payments and written resignations to Buyer.

          5.12 Use of Identix Name.

               (a) Within thirty (30) days after Closing, other than pursuant to
the limited license granted pursuant to the Reseller Agreement and pursuant to
this subsection (a), Buyer and its Affiliates (including Company) shall cease
representing Buyer or any of its Affiliates as an entity bearing the name, and
shall cease using the name, “Identix” or “Anadac,” including in any designs and
logos or any other trademarks, service marks, trade dress, trade names or brand
names, in any form or spelling, on any advertising, signage, stationery,
business cards, checks, purchase orders or acknowledgments, customer agreements,
other contracts or business documents or any other item included in the Assets
or located at the Leased Premises; provided, however, that Buyer may resell
certain products pursuant to the Reseller Agreement. Immediately following
Closing, Buyer shall cause Company to change its name to a name that does not
include “Identix” (but which may include “Public Sector,” provided that the name
otherwise bears no resemblance to the name of Seller). Notwithstanding the
foregoing, Seller hereby grants Company, effective upon Closing, a license to
use the “Identix” and “Anadac” names, trademarks, service marks, trade names and
brand names, including “Identix Public Sector,” and “IPS,” and any formulations
thereof (collectively the “Marks”) for the purpose of (i) performing and
administering (e.g., billing, invoicing and payment) the existing Government
Contracts, (ii) entering into and administering subcontracts and other vendor
relations with respect to the Government Contracts, (iii) any other incidental
use of the Marks as necessary for conducting the business of Company, for
example, in connection with expressing corporate experience or demonstrating
corporate qualifications, or as a corporate name for required filings and
disclosures, for phone listings and customer service and (iv) taking any and all
actions necessary to, and executing any documents necessary in connection with
Buyer’s efforts to, seek and effect a name change and/or novation of each of the
existing Government Contracts. Such license shall continue until the earlier to
occur that Buyer has effected a name change or novation (whichever occurs first)
of each Government Contract including all required Governmental Approvals. Buyer
agrees to use its best efforts to obtain such name changes and novations as
expeditiously as possible and shall advise Seller when all such name changes and
novations, as the case may be, have occurred.

               (b) Upon the Closing and for a period of three (3) years
thereafter, Seller and its Affiliates will not represent Seller or any of its
Affiliates as an entity bearing the name, and shall not use the name, “Identix
Public Sector,” including in any designs and logos or any other trademarks,
service marks, trade dress, trade names or brand names, in any form or spelling,
on any advertising, signage, stationery, business cards, checks, purchase orders
or

-42-

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

 

acknowledgments, customer agreements, other contracts or business documents or
any other item; provided, however, that Seller may deplete existing, non-Company
specific stocks of such items and may refer to Company’s historical affiliation
with Seller in filings with any Governmental Authority or otherwise.

          5.13 Public Announcements. Promptly after execution of this Agreement,
Seller and Buyer shall issue a joint press release or separate press releases
relating to this Agreement, in either case, to be prepared jointly by Seller and
Buyer. Thereafter, Seller and Buyer shall consult with each other before issuing
any press release or otherwise making any public statements with respect to the
transactions contemplated hereunder and shall not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by applicable Law or the rules and regulations of, or any listing
agreement with, any national or international securities exchange.

          5.14 Relocation of Seller’s Personnel. In connection with the Identix
Sublease Agreement to be entered into by and between Buyer and Seller as of the
Closing Date, Seller agrees to relocate its personnel to the first floor of the
3975 Fair Ridge Drive, Fairfax, Virginia, office space as soon as reasonably
possible after all Company employees have been relocated following the Closing,
and in no event later than fifteen (15) days thereafter. Seller further agrees
to pay any moving and reconfiguring costs associated with such move, excluding
the reconfiguration of the office space to be occupied by LDS.

          5.15 License for Software. Seller hereby grants to Buyer and Company,
effective as of the Closing Date, a royalty-free license to use the fingerprint
identification and access software and system for entry into the property at
3975 Fair Ridge Drive, Fairfax, Virginia for so long as Buyer or Company
maintains offices at such location.

          5.16 Post-Closing Receipts; Cash of Company. In the event that any
party after the Closing Date receives any funds properly belonging to another
party in accordance with the terms of this Agreement, the receiving party will
promptly so notify such other party in writing as to the date of receipt and the
amount of funds received, will segregate and hold such funds in trust for the
benefit of such other party and will promptly deliver such funds, together with
any interest earned thereon (for each day in excess of five (5) days that such
funds are in the possession of the receiving party without having been delivered
to the other party), to an account or accounts designated in writing by such
other party. In accordance with the foregoing, the parties acknowledge and agree
that (a) Company has distributed all or substantially all of its cash and cash
equivalents to Seller as of or prior to the date of this Agreement and that any
cash deposits remaining in a lockbox or other bank account held by or on behalf
of Company at the Effective Time shall be the property of Seller and, to the
extent any such lockbox or bank account is not held by Seller, the amounts on
deposit therein shall be held in trust by Buyer and Company for the benefit of
Seller and promptly delivered after the Closing, together with any interest
earned thereon (for each day in excess of five (5) days that such funds are in
the possession of the receiving party without having been delivered to the other
party), by Buyer to an account or accounts designated in writing by Seller,
(b) all payments received by Seller after the Effective Time that are intended
for Company or to which Company is otherwise entitled shall be the property of
Buyer and/or Company (whether or not such payment related to accounts

-43-

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

 

receivable that should have been paid before the Effective Time) and (c) all
accounts payable due as of or prior to the date of this Agreement reflect the
obligation of Company prior to the Effective Time (but to the extent any such
accounts payable remain unpaid as of the Effective Time, they shall reflect the
obligation of Company and/or Buyer, but not Seller, and Company and/or Buyer,
but not Seller shall be solely responsible for and obligated to pay such
payables).

          5.17 Email Forwarding. Following its receipt of destination email
addresses from Buyer, and for a period of One Hundred Eighty (180) days
thereafter, Seller agrees promptly to forward to Buyer, using Buyer’s email
address “@alionscience.com” or as otherwise directed by Buyer, all email
messages received by Seller that were addressed to any of the Rehired Employees.

     6. CONDITIONS TO BUYER’S OBLIGATIONS. There are no conditions to the
obligation of Buyer to consummate this Agreement and the Closing of the
transactions contemplated hereunder and, to the knowledge of Buyer, neither
Seller nor Company is in breach of any of its representations, warranties,
covenants or other agreements contained in this Agreement or in any of the
exhibits hereto.

     7. CONDITIONS TO COMPANY’S AND SELLER’S OBLIGATIONS. There are no
conditions to the obligation of Seller or Company to consummate this Agreement
and the Closing of the transactions contemplated hereunder and, to the knowledge
of Seller or Company, Buyer is not in breach of any of its representations,
warranties, covenants or other agreements contained in this Agreement or in any
of the exhibits hereto.

     8. CLOSING.

          8.1 Timing. By mutual agreement of the parties, the Closing may take
place by conference call and telecopy with exchange of original signatures by
overnight mail; provided, however, that the cashier’s checks or certified checks
to be delivered in accordance with Section 2.1 shall be hand delivered at
Closing by a representative of Buyer to a representative of Seller. To the
extent permitted by Law and GAAP, notwithstanding anything in Section 2.2 hereof
to the contrary, solely for tax and accounting purposes, the effectiveness of
the consummation of the transactions contemplated by this Agreement shall be as
of midnight E.S.T. following the Closing (the “Effective Time”).

     9. CLOSING DOCUMENTS.

          9.1 Closing Documents to be Delivered by Company and Seller.
Concurrent with the execution of this Agreement, Company and Seller shall have
delivered to Buyer:

               (a) certificates representing the Stock, duly endorsed or
accompanied by stock powers duly executed in blank and otherwise in form
acceptable for transfer on the books of Company;

               (b) the stock book, stock ledger, minute book and corporate seal,
if any, of Company;

-44-

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

 

               (c) copies of resolutions of Company’s and Seller’s Boards of
Directors authorizing the execution, delivery and performance of this Agreement
and the transactions contemplated hereby, and of Company’s Articles of
Incorporation and Bylaws, as amended, certified by Company’s corporate
secretary;

               (d) in form and substance satisfactory to Buyer, the consents,
Permits, waivers, approvals or notices required for each of the Contracts
(including Government Contracts and Leases) for which the consent, Permit,
waiver or other approval of, or giving of notice to, a third party is required
in order for such Contract to continue in effect following the Closing on the
same terms as in effect on the date hereof (including, without limitation, those
listed on Schedule 3.13(b), Schedule 3.33(a) or Schedule 3.22 hereto), without
modification of any material provision of any such Contract;

               (e) in form and substance satisfactory to Buyer, the consents,
Permits, approvals and waivers of any Governmental Authority required on the
part of Seller or Company in order for the parties to consummate the
transactions contemplated hereby;

               (f) letters of resignation to Company, effective as of the
Closing Date, from each director of Company;

               (g) documentation evidencing the sale or transfer of all of the
stock of LDS to Seller;

               (h) an executed counterpart of the agreement providing Buyer and
Company the right to purchase and resell certain products of Seller to the
United States Government, in the form attached hereto as Exhibit C (the
“Reseller Agreement”);

               (i) an executed counterpart of the sublease agreement by and
between Seller and Buyer, in the form attached hereto as Exhibit D (the
“Sublease Agreement”), for the sublease of    square feet of office space
located at   ;

               (j) an executed counterpart of the sublease agreement by and
between LDS and Buyer, in the form attached hereto as Exhibit E (the
“   Sublease Agreement”), for the sublease of    square feet of office space
located at    ;

               (k) an executed counterpart of the Assignment of Sublease
Agreement between Company and Buyer, in the form attached hereto as Exhibit F
(the “    Sublease Assignment”), relating to the sublease of approximately    
square feet of office space located at    ;

               (l) an executed counterpart of the Assignment of Lease between
Company and Buyer, in the form attached hereto as Exhibit G (the “Assignment of
Master Lease”), relating to the lease of office space located at    ;

               (m) the written consent(s) of    , in form and substance
satisfactory to Buyer, to the Identix Sublease Agreement, the    Sublease
Agreement, the    Sublease Assignment and the Assignment of Master Lease, and a
written estoppel certificate from such Lessor/Landlord, in the form attached
hereto as Exhibit H (the “Estoppel

-45-

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

 

Certificate”), to the effect that Company is not in default under the Master
Lease as of the date of such certificate;

               (n) an executed counterpart of the agreement by and between
   and Buyer for the provision of support services to    , in the form attached
hereto as Exhibit I (the “   Support Services Agreement”);

               (o) an executed counterpart of the agreement by and between
   and Buyer for the provision of support services to    , in the form attached
hereto as Exhibit J (the “   Support Services Agreement”);

               (p) certificates from the Commonwealth of Virginia and from each
jurisdiction where Company is qualified to do business as a foreign corporation,
dated no earlier than twenty (20) days prior to the date of this Agreement, as
to the good standing of Company in such jurisdictions;

               (q) such documentation, in form and substance satisfactory to
Buyer, as will confirm (i) that all payments made by or on behalf of    or any
successor thereto under that certain Settlement Agreement between    and Company
(under the name “   .”) relating to    shall, upon and following Closing, be
made directly to an account designated by Buyer and (ii) that any payment
received by Seller or any Affiliate of Seller in connection with such Settlement
Agreement upon and following Closing shall be held in trust for, and promptly
remitted to, Buyer; and

               (r) an executed counterpart of the agreement by and between
   and Buyer for the provision of certain    services to    , in the form
attached hereto as Exhibit K (the “   Services Agreement”).

          9.2 Closing Documents to be Delivered by Buyer. Concurrent with the
execution of this Agreement, Buyer shall have delivered to Seller:

               (a) copies of resolutions of Buyer’s Board of Directors
authorizing the execution, delivery and performance of this Agreement and the
transactions contemplated hereby, and of Buyer’s Certificate of Incorporation
and Bylaws as amended, certified by Buyer’s corporate secretary;

               (b) an executed counterpart of the Reseller Agreement;

               (c) an executed counterpart of the    Support Services Agreement;

               (d) an executed counterpart of the    Support Services Agreement;

               (e) an executed counterpart of the    Sublease Agreement;

               (f) an executed counterpart of the    Sublease Agreement; and

               (g) an executed counterpart of the    Services Agreement; and

-46-

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

 

               (h) the consents, Permits, waivers, approvals and notices of any
Governmental Authority required on the part of Buyer in order for the parties to
consummate the transactions contemplated hereby.

          9.3 Intentionally Omitted.

          9.4 Other Closing Documents and Actions. The parties will also execute
such other documents and perform such other acts, before and after the Closing
Date, as may be necessary for the implementation and consummation of this
Agreement.

     10. INTENTIONALLY OMITTED.

     11. INDEMNIFICATION.

          11.1 Indemnification by Seller. Seller shall indemnify and hold Buyer
and its Affiliates and each of their respective shareholders, trustees,
directors, officers, employees and agents (collectively, the “Buyer Parties”)
harmless against and from and in respect of any and all Losses which are
incurred by virtue of or result from (a) (i) the inaccuracy in or breach of any
representation or warranty made by Seller or Company in this Agreement (as
modified by the Disclosure Schedules attached hereto, but not an inaccuracy in
or breach of any statement made in the Disclosure Schedules themselves) or (ii)
the non-fulfillment by Seller or Company of any covenant or agreement, in each
case as contained in this Agreement or in any of the Transaction Documents or in
any document or instrument delivered at the Closing pursuant hereto or thereto,
(b) Company’s ownership of LDS, (c) the failure of Washington Mutual Bank, FA,
to make any payment required under that certain Amended and Restated Sublease
Agreement dated November 26, 2002, as amended as of the date hereof; provided,
however, that if and to the extent that Seller becomes obligated to indemnify
the Buyer Parties pursuant to this subsection (c), Buyer shall take all actions
reasonably requested by Seller to assign to Seller, upon Seller’s satisfaction
of such indemnification obligations, all of Buyer’s (or any of its Affiliates’)
rights under such sublease to receive such corresponding payment(s) from
Washington Mutual Bank, FA, such that Seller will thereafter be entitled to
pursue any and all contribution, collection or other actions or remedies against
Washington Mutual Bank, FA in connection with such corresponding payment(s),
(d) the failure of Company to terminate the Terminated Employees in accordance
with Section 12.4 below, or (e) the successful enforcement by the Buyer Parties’
of their indemnification rights provided for hereunder.

          11.2 Indemnification by Buyer. Buyer agrees to indemnify and hold
Seller, its Affiliates and each of their respective shareholders, trustees,
directors, officers, employees and agents (collectively, the “Seller Parties”)
harmless against and from and in respect of any and all Losses which are
incurred by virtue of or result from (a) (i) the inaccuracy in or breach of any
representation or warranty made by Buyer or, (ii) the non-fulfillment or breach
of any covenant or agreement, in each case as made by or on behalf of Buyer in
this Agreement or in any of the Transaction Documents or in any document or
instrument delivered at the Closing pursuant hereto or thereto, (b) the
performance or non-performance after Closing of any Contract, the termination of
employment of any employee of Company effective following the Effective Time
(including the payment or failure to pay any accrued and unused vacation pay or
sick leave or severance payments or other bonus due to such employees) or any
other issue that arises or

-47-

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

 

relates to the ownership or operation of Company, any act or omission of Company
(which acts or omissions shall not include the exercise by any Person of its
rights under or in respect of this Agreement or any other agreement entered into
in connection with this Agreement) following the Closing, (c) excluding payment
of any accrued and unused vacation pay or sick leave or other bonus to any
Resigning Employees reimbursable by Buyer to Seller pursuant to Section 5.11(g),
all liabilities and obligations that may arise in connection with allegations of
wrongful or constructive termination by Company of the Terminated Employees and
Resigning Employees, including, but not limited to, any and all claims, suits,
actions, arbitrations or other legal or quasi-legal proceedings filed or
initiated with any Governmental Authority or with Seller or Company, including,
but not limited to, the fees, costs and expenses of defending any and all such
actions, and (d) the successful enforcement by the Seller Parties of their
indemnification rights provided for hereunder.

          11.3 Survival. All representations and warranties of the parties
hereto contained in this Agreement, the Transaction Documents or in any document
or instrument delivered at the Closing pursuant hereto or thereto shall survive
for two (2) years following the execution and delivery hereof, except for the
representations and warranties made in Sections 3.41 and 3.42, which shall
survive indefinitely, and the representations and warranties relating to Tax
matters and ERISA, contained in Sections 3.17 and 3.19, respectively, which
shall survive until the expiration of any applicable statute of limitations,
including any extensions or tolling of such statute of limitations, and then, in
the case of all representations and warranties, only to the extent that the
party asserting a claim shall have given notice of such claim to the other party
on or prior to the end of such applicable survival period. Except as otherwise
expressly provided herein, the covenants and agreements contained in this
Agreement shall survive for two (2) years following the execution and delivery
hereof and the consummation of the transactions contemplated hereby, and then
only to the extent that the party asserting a claim shall given notice of such
claim to the other party on or prior to the end of such applicable survival
period. Notwithstanding the fact that any Person may have the right to assert
claims for indemnification or reimbursement under or in respect of more than one
provision of this Agreement (including without limitation Section 2.4 hereof) or
any other agreement entered into in connection with this Agreement in respect of
any fact, event, condition or circumstance, no Person shall be entitled to
recover the amount of any adverse consequences suffered by such Person more than
once under all such agreements in respect of such fact, event, condition or
circumstance.

          11.4 Certain Limitations on Indemnification Obligations.
Notwithstanding anything else in this Agreement to the contrary:

               (a) Neither the Buyer Parties nor the Seller Parties, as
applicable, shall be entitled to receive any indemnification as set forth in
Sections 11.1 and 11.2, until the aggregate amount of all Losses incurred by
such party seeking indemnification exceeds    (the “Deductible Amount”), after
which, such party shall only be entitled to receive indemnification payments for
the amount of such indemnifiable Losses in excess of the Deductible Amount.

               (b) The maximum aggregate amount of indemnification payments
payable by each of the Buyer Parties or Seller Parties under Section 11 shall
not exceed

-48-

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

 

   (the “Cap Amount”). In the event that the Buyer Parties or Seller Parties, as
applicable, have incurred any indemnifiable Losses in excess of any applicable
Deductible Amount, upon written notice thereof to the indemnifying party
describing the amount of and basis for such Loss, the parties will attempt in
good faith to reach an agreement as to any matters or amounts in dispute. If the
authorized parties of each of Buyer and Seller, notwithstanding such good faith
effort, fail to resolve all matters in dispute within thirty (30) days after an
indemnified party notifies the indemnifying party of the Losses incurred
thereby, then either party may be submit the disputed matters to an independent
mediator selected by Buyer and Seller if the other party consents to such
mediation, which mediator will, for a period of not more than sixty (60) days,
attempt to assist the parties to resolve all disputes in connection with such
matter. Notwithstanding anything to the contrary contained in this
Section 11.4(b), at any time before, during or after the procedures described
above, an indemnified party may bring a claim on account of a Loss with an
appropriate Governmental Authority pursuant to the terms of this Agreement.

               (c) Notwithstanding the limitations set forth in Sections 11.3
and subsections (a) and (b) of this Section 11.4, in the case of Losses
resulting from (i) any fraudulent misrepresentation contained herein or in any
other Transaction Documents, the time periods for indemnification shall commence
running upon the discovery of such fraudulent misrepresentation and each party’s
indemnification obligation shall not be subject to the Deductible Amount or
limited by the Cap Amount, (ii) the    indemnification described in
Section 11.1(c), Seller’s indemnification shall not be subject to the Deductible
Amount or limited by the Cap Amount, and the time periods for indemnification
shall commence running upon the discovery of such failure to make adequate
payment by    or (iii) breach by Seller of its representation in the last
sentence of Section 3.19(g) hereof, Seller’s indemnification shall not be
subject to the Deductible Amount or limited by the Cap Amount.

          11.5 Defense of Claims. In the case of any claim for indemnification
under Section 11.1 or 11.2 arising from a claim of a third party (including the
IRS or any Governmental Authority), promptly upon receipt of notice or any
knowledge of such claims, and in no case later than ten (10) days thereafter, an
indemnified party shall give written notice, to the indemnifying party of any
claim, suit or demand of which such indemnified party has knowledge and as to
which it may request indemnification hereunder. The failure to give such notice
shall not relieve the indemnifying party of its indemnification obligations
hereunder, except to the extent that the indemnifying party is actually harmed
thereby. The indemnifying party shall have the right upon written notice to the
indemnified party within thirty (30) days, after receipt of a request for
indemnification from such party to defend and to direct the defense against any
such claim, suit or demand, in its name and at its expense, and with counsel
selected by the indemnifying party unless such claim, suit or demand seeks an
injunction or other equitable relief against the indemnified party. If the
indemnifying party elects to compromise or defend such claim, the indemnified
party shall, at the request and expense of the indemnifying party, cooperate in
the defense of such claim, suit or demand. If the indemnifying party elects not
to pay, compromise or defend such claim or fails to notify or inform the
indemnified party of its election as herein provided following a request
therefrom, the indemnified party may pay, compromise or defend such claim.
Except as set forth in the immediately preceding sentence, the indemnifying
party shall have no indemnification obligations with respect to any such claim,
suit or demand that is settled by the indemnified party without the prior
written consent of the

-49-

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

 

indemnifying party (which consent shall not be unreasonably withheld or
delayed); provided, however, that notwithstanding the foregoing, the indemnified
party shall not be required to refrain from paying any claim which has matured
by a court judgment or decree, unless an appeal is duly taken therefrom and
exercise thereof has been stayed, nor shall it be required to refrain from
paying any claim where the delay in paying such claim would result in the
foreclosure of a Lien upon any of the property or assets then held by the
indemnified party or where any delay in payment would have a Material Adverse
Effect on the indemnified party. The indemnifying party’s right to direct the
defense shall include the right to compromise or enter into an agreement
settling any claim by a third party; provided that no such compromise or
settlement shall obligate the indemnified party to agree to any settlement which
requires the taking of any action by the indemnified party other than the
delivery of a release, except with the consent of the indemnified party (such
consent not to be unreasonably withheld or delayed). Except as expressly
provided herein to the contrary, the indemnified party shall have the right to
participate at its sole cost and expense in the defense of any claim, suit or
demand with counsel selected by it subject to the indemnifying party’s right to
direct the defense. The fees and disbursements of such counsel shall be at the
expense of the indemnified party.

          11.6 Non-Third Party Claims. Any claim which does not arise out of or
result in a third party claim shall be asserted by written notice to the other
party or parties pursuant to Section 16 of this Agreement within thirty (30)
days after an indemnified party has any knowledge of a Loss. The recipient of
such notice shall have a period of sixty (60) days after receipt of such notice
within which to respond thereto. If the recipient does not respond within such
sixty (60) day period, the recipient shall be deemed to have accepted
responsibility for the Losses set forth in such notice and shall have no further
right to contest such Losses. If the recipient responds within such sixty
(60) days after the receipt of the notice and rejects such claim in whole or in
part, the party delivering such notice shall be free to pursue such remedies as
may be available to it under Section 11 of this Agreement.

          11.7 Tax Treatment. Unless otherwise required by applicable Law, all
indemnification payments shall constitute adjustments to the Purchase Price for
all Tax purposes, and no party shall take any position inconsistent with such
characterization.

          11.8 No Right of Contribution. Seller shall have no right to seek
contribution from Company or Buyer with respect to all or any part of any of
Seller’s indemnification obligations under Section 11.

          11.9 Mitigation. Each indemnified party shall have an obligation to
mitigate Losses under this Agreement, and to that end each party shall use its
reasonable best efforts and shall consult and cooperate with the other with a
view towards mitigating Losses that may give rise to claims for indemnification
under Section 11.

          11.10 Reduction of Liability. With respect to any Losses required to
be indemnified pursuant to this Agreement, so long as the indemnifying party has
complied with its indemnification obligations with respect thereto (a) to the
extent available, the indemnified party shall assign to the indemnifying party
any applicable proceeds under any warranty, insurance policy, litigation or
settlement which covers the matter which is the subject of the indemnification
(but only to the extent of indemnification actually paid by the indemnifying

-50-

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

 

party) and shall take reasonable steps to ensure that the indemnifying party
obtains the benefits of such warranty, policy, litigation or settlement,
including providing any notices as required under such warranty, policy,
litigation or settlement and (b) if the indemnified party receives proceeds on
account of such warranty, insurance policy, litigation or settlement with
respect to any Losses paid by the indemnifying party, then the indemnified party
shall reimburse the indemnifying party in an amount equivalent to such proceeds
up to the amount actually paid by the indemnifying party.

     12. POST CLOSING MATTERS. The parties agree as follows with respect to the
period following the Closing Date:

          12.1 Cooperation. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other party reasonably may
request, all at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification therefor under Section 11
hereof). Seller acknowledges and agrees that from and after the Closing Buyer
will be entitled to possession of and Seller will provide to Buyer all
documents, books, records (including Tax records), agreements, corporate minute
books and financial data of any sort relating to Company. Without limitation of
the foregoing, (a) Buyer agrees to use its best efforts to have Seller released
(whether by a replacement letter of credit or guaranty obligating Buyer, some
other manner of credit support, or otherwise) from Seller’s obligations under
those certain letters of credit with respect to Company’s leasehold obligations
at 300 M Street, S.E., Washington, D.C. and Company’s equipment lease
obligations under the “Stamford equipment lease,” as each is more particularly
described at Schedule 3.9 (items 4 and 5 thereunder, respectively) attached
hereto, as soon as possible after the Closing Date, and Buyer shall cause Seller
so to be released in no event later than 30 days after the Closing Date, and
(b) Seller agrees to use its best efforts to have Company released (whether by a
replacement letter of credit or guaranty obligating Buyer, some other manner of
credit support, or otherwise) from Company’s obligations under that certain
letter of credit in favor of Travelers Casualty and Surety Company of America,
as more particularly described at Schedule 3.9 (item 1 thereunder) attached
hereto, as soon as possible after the Closing Date, and Seller shall cause
Company so to be released in no event later than 30 days after the Closing Date.

          12.2 Litigation Support. In the event and for so long as any party is
actively contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement other than a dispute among the
parties to this Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that existed on or prior to the Closing Date
involving Company, each of the other parties will cooperate with such party and
such party’s counsel in the contest or defense, make available their personnel,
and provide such testimony and access to their books and records as shall be
reasonably necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending party (unless the contesting or
defending party is entitled to indemnification therefor under Section 11
hereof).

-51-

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

 

          12.3 Transition. Seller will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of Company from maintaining the same
business relationships with Company after the Closing as it maintained with
Company prior to the Closing. Seller will refer all customer inquiries relating
to the business of Company to Company and/or Buyer from and after the Closing.

          12.4 Termination of Certain Employees. On the Closing Date,
immediately following the Closing and concurrent with the employee meetings and
presentations contemplated by Buyer to occur at or around 9:00 a.m. E.S.T. on
the Closing Date, Company shall terminate the employment of those individuals
listed on Schedule 12.4 (the “Terminated Employees”) effective as of the close
of business on the Closing Date and, subject to Buyer’s reimbursement obligation
with respect to certain Resigning Employees under Section 5.11(g) hereof, Seller
shall cause Company to pay all accrued and unused vacation pay or sick leave and
severance payments or other bonus due to any Terminated Employees or Resigning
Employees that arise by reason of such terminations and/or resignations in
accordance with plan terms.

          12.5 Books and Records. Each party agrees that it will reasonably
cooperate with and make available (or cause to be made available) to the other
party, during normal business hours, all books and records, information and
employees (without substantial disruption of employment) retained, remaining in
existence or continuing to be employed after the Closing Date which are
necessary or useful in connection with any Tax inquiry, audit, or dispute, any
litigation or investigation or any other matter requiring any such books and
records, information or employees for any reasonable business purpose (a
“Permitted Use”). The party requesting any such books and records, information
or employees shall bear all of the out-of-pocket costs and expenses reasonably
incurred in connection with providing such books and records, information or
employees. All information received pursuant to this Section 12.5 shall be kept
confidential by the party receiving it, except to the extent that disclosure is
required by Law or is otherwise reasonably necessary in connection with any
Permitted Use.

          12.6 Intentionally Omitted

          12.7 Taxes.

               (a) Tax Matters for Periods Ending on or Before the Closing Date.
Seller shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns for Company for all periods ending on or prior to the Closing Date
which are filed after the Closing Date. Any Tax Returns filed pursuant hereto
must be consistent with the calculation of Working Capital. No later than ten
(10) days prior to filing, Seller shall deliver to Buyer all such Tax Returns
and any related work papers and shall permit Buyer to review and comment on each
such Tax Return and shall make such revisions to such Tax Returns as are
reasonably requested by Buyer. Seller shall timely pay to the appropriate taxing
authority any Taxes of Company with respect to such periods to the extent such
Taxes were not included as a Liability on the Closing Date Balance Sheet. The
costs, fees and expenses related to the preparation of such Tax Returns shall be
estimated and accrued as a Liability of Company for purposes of the Closing Date
Balance Sheet and shall be payable by Company.

-52-

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

 

               (b) Periods Beginning Before and Ending After the Closing Date.
To the extent that any Tax Returns of Company relate to any Tax periods which
begin before the Closing Date and end after the Closing Date, Buyer shall
prepare or cause to be prepared in a manner consistent with the prior Tax
Returns of Company (to the extent such positions are permissible under
applicable Tax Laws) and file or cause to be filed any such Tax Returns. Buyer
shall permit Seller to review and comment on each such Tax Return described in
the preceding sentence at least ten (10) days prior to filing such Tax Returns
and shall make such revisions to such Tax Returns as are reasonably requested by
the Seller. Any Taxes of Company with respect to the portion of such period
ending on the Closing Date, to the extent such Taxes were not included as a
Liability on the Closing Date Balance Sheet, shall be paid in cash by Seller.
The costs, fees and expenses related to the preparation of such Tax Returns
shall be paid by Buyer or Company. For purposes of this Section, in the case of
any Taxes that are imposed on a periodic basis and are payable for a taxable
period that includes but does not end on the Closing Date, the portion of such
Tax which relates to the portion of such taxable period ending on the Closing
Date shall (i) in the case of any Taxes other than Taxes based upon or related
to income or receipts, be deemed to be the amount of such Tax for the entire
taxable period multiplied by a fraction the numerator of which is the number of
days in the taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire taxable period, and (ii) in the case
of any Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant taxable period ended on the
Closing Date. Any credits relating to a taxable period that begins before and
ends after the Closing Date shall be taken into account as though the relevant
taxable period ended on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of Company.

               (c) Cooperation on Tax Matters.

                    (i) Buyer, Company, and Seller shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Section 12.7 and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
return 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. Company and Seller agree (A) to retain all books and records with
respect to Tax matters pertinent to Company relating to any taxable period
ending on or before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer or Seller, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, Company or
Seller, as the case may be, shall allow the other party to take possession of
such books and records.

                    (ii) Buyer and Seller 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

-53-

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

 

be imposed (including, but not limited to, with respect to the transactions
contemplated hereby).

               (d) Tax Sharing Agreements. All Tax Sharing Agreements or similar
agreements with respect to or involving Company, other than those set forth in
this Agreement shall be terminated as of the Closing Date and, after the Closing
Date, Company shall not be bound thereby or have any Liability thereunder.

               (e) Certain Taxes and Fees. All transfer, documentary, sales,
use, stamp, registration and other such Taxes, and all conveyance fees,
recording charges and other fees and charges (including any penalties and
interest) incurred in connection with consummation of the transaction
contemplated by this Agreement shall be paid by Buyer when due, and Buyer will,
at its own expense, file all necessary Tax Returns and other documentation with
respect to all such Taxes, fees and charges, and, if required by applicable Law,
Seller will join in the execution of any such Tax Returns and other
documentation.

     13. EXPENSES. Except as otherwise expressly set forth elsewhere in this
Agreement, Buyer shall bear its own legal and other fees and expenses incurred
in connection with its negotiating, executing and performing this Agreement,
including, without limitation, any related broker’s or finder’s fees, and each
of Company and Seller shall bear its respective legal and other fees and
expenses incurred in connection with their negotiating, executing and performing
this Agreement, including, without limitation, any related broker’s or finder’s
fees, for periods on or before the Closing Date in accordance with Section 2.6;
provided, however, that to the extent any such costs and expenses have been
incurred but not yet paid for by Company, they are fully reflected in the
calculation of Working Capital. Seller shall bear its own legal and other fees
and expenses incurred in connection with this Agreement after the Closing,
including, without limitation, any related broker’s or finder’s fees, subject to
the provisions of this Agreement.

     14. FURTHER ASSURANCES. From time to time at or after the Closing Date, at
the request of the other, Buyer and Seller each will execute and deliver such
other instruments of conveyance, assignment, transfer and delivery and take such
actions as the other reasonably may request in order to consummate, complete and
carry out the transactions contemplated hereby, including the execution and
delivery of such instruments and agreements as may be reasonably necessary or
advisable to fully effect the transfer of the Stock to Buyer. Without limiting
the foregoing, Seller agrees that in the event Buyer determines that it is
required under any Laws to prepare and/or include in any filings audited
financial statements for Company, Seller shall, at Buyer’s expense, cooperate
with and make available to Buyer and its independent accountants and
representatives all information, records, data and independent accountants’
working papers, and permit such access to its facilities and personnel, as may
be reasonably requested by Buyer in connection with the preparation of such
financial statements.

     15. AMENDMENT; BENEFIT AND ASSIGNABILITY. This Agreement may be amended
only by the execution and delivery of a written instrument by Company, Seller
and Buyer. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and permitted assigns, and
no other person or entity shall have any right (whether third party beneficiary
or otherwise) hereunder. This Agreement may not be

-54-

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

 

assigned by any party without the prior written consent of the other parties;
provided, however, that Buyer may assign all or any portion of this Agreement to
any Affiliate of Buyer, provided that no such assignment shall relieve Buyer of
any of its payment, performance or other obligations or Liabilities hereunder.

     16. NOTICES. All notices, demands and other communications pertaining to
this Agreement (“Notices”) shall be in writing addressed as follows:

     
If to Seller or Company:
  Identix Incorporated

  5600 Rowland Road

  Minnetonka, Minnesota 55343

  Attention: Mark S. Molina
 
   
with a copy to:
   
 
   
If to Buyer:
  Alion Science and Technology Corporation

  1750 Tysons Boulevard, Suite 1300

  McLean, Virginia 22102

  Attention: Manik K. Rath
 
   
With a copy to:
   

Notices shall be deemed given three (3) business days after being mailed by
certified or registered United States mail, postage prepaid, return receipt
requested, or on the first business day after being sent, prepaid, by nationally
recognized overnight courier that issues a receipt or other confirmation of
delivery. Any party may change the address to which Notices under this Agreement
are to be sent to it by giving written notice of a change of address in the
manner provided in this Agreement for giving Notice.

     17. WAIVER. Unless otherwise specifically agreed in writing to the
contrary: (i) the failure of any party at any time to require performance by the
other of any provision of this Agreement shall not affect such party’s right
thereafter to enforce the same; (ii) no waiver by any party of any default by
any other shall be valid unless in writing and acknowledged by an authorized
representative of the non-defaulting party, and no such waiver shall be taken or
held to be a waiver by such party of any other preceding or subsequent default;
and (iii) no extension of time granted by any party for the performance of any
obligation or act by any other party shall be deemed to be an extension of time
for the performance of any other obligation or act hereunder.

     18. ENTIRE AGREEMENT. This Agreement (including the Schedules, Exhibits and
Disclosure Schedules hereto, which are incorporated by reference herein) and the
Transaction Documents constitute the entire agreement between the parties with
respect to the subject matter hereof and referenced herein, and supersede and
terminate any prior agreements between the parties (written or oral) with
respect to the subject matter hereof.

-55-

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

 

     19. COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were on the same instrument. Facsimiles of signatures shall be deemed to be
originals.

     20. CONSTRUCTION. The headings of the Sections of this Agreement are for
convenience only and in no way modify, interpret or construe the meaning of
specific provisions of the Agreement.

     21. EXHIBITS AND DISCLOSURE SCHEDULES. The Exhibits and Disclosure
Schedules to this Agreement are a material part of this Agreement.

     22. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement is held by a Governmental Authority to be invalid, illegal or
unenforceable in any respect, the validity, legality, and enforceability of the
remaining provisions will not in any way be affected or impaired. Any illegal or
unenforceable term shall be deemed to be void and of no force and effect only to
the minimum extent necessary to bring such term within the provisions of
applicable Law and such term, as so modified, and the balance of this Agreement
shall then be fully enforceable.

     23. CHOICE OF LAW. This Agreement is to be construed and governed by the
internal Laws of the Commonwealth of Virginia, without regard to the conflicts
of Laws principles thereof. Buyer, Company and Seller irrevocably agree that any
legal action or proceeding arising out of or in connection with this Agreement
may be brought in any state or federal court having jurisdiction over Fairfax
County, Commonwealth of Virginia or the Eastern District of Virginia and each
party agrees not to assert, by way of motion, as a defense, or otherwise, in any
such action, suit or proceeding, that any claim is not subject personally to the
jurisdiction of such court, that the action, suit or proceeding is brought in an
inconvenient forum, that the venue of the action, suit or proceeding is improper
or that this Agreement or the subject matter hereof may not be enforced in or by
such court, and in accordance with the above agreements, hereby agrees not to
challenge such jurisdiction or venue.

     24. COUNSEL. Each party has been represented by its own counsel in
connection with the negotiation and preparation of this Agreement and,
consequently, each party hereby waives the application of any rule of law that
would otherwise be applicable in connection with the interpretation of this
Agreement, including but not limited to any rule of Law to the effect that any
provision of this Agreement shall be interpreted or construed against the party
whose counsel drafted that provision.

     25. REMEDIES. Except as specifically set forth in this Agreement, any party
having any rights under any provision of this Agreement will have all rights and
remedies set forth in this Agreement and all rights and remedies which such
party may have been granted at any time under any other contract or agreement.
Any such party will be entitled to (i) enforce such rights specifically, without
posting a bond or other security, and (ii) subject to the terms and limitations
contained in Section 11, recover damages by reason of a breach of any provision
of this Agreement.

-56-

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

 

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

            BUYER:

ALION SCIENCE AND TECHNOLOGY CORPORATION
      By:           Name:           Title:        

            COMPANY:

IDENTIX PUBLIC SECTOR, INC.
      By:           Name:           Title:        

            SELLER:

IDENTIX INCORPORATED
      By:           Name:           Title:      

-57-