**Exhibit 2.2**

 

**STOCKPURCHASE AGREEMENT**

 

**THIS STOCK PURCHASE AGREEMENT** (this “Agreement”) is entered into asof this 8th day of February, 2006, by and among (i) SI International,Inc., a Delaware corporation (the “Buyer”), (ii) ZEN TECHNOLOGY,INC., a Virginia corporation (the “Company”), (iii) DONALD E.REED, (iv) LESLIE W. BUTLER, (v) BARBARA M. REED and (vi)CINDY  A. ANDRE. Each Person named in (iii) through (vi) above isreferred to herein individually as a “Seller” and collectively as the “Sellers.” The Buyer, the Company and the Sellers are referred to herein individually as a“Party” and collectively as the “Parties.”  The capitalizedterms used herein and not otherwise defined herein have the meanings given tosuch terms as set forth in Appendix A hereto.

 

**WHEREAS**, the Sellers are the record and beneficialowners of all of the issued and outstanding capital stock and other equitysecurities of the Company (other than the Company Common Stock subject to theRestricted Stock Repurchase Agreements);

 

**WHEREAS**, simultaneously herewith, the Company andeach Restricted Stock Participant (other than Cindy A. Andre) are entering intoRestricted Stock Repurchase Agreements, pursuant to which, immediately prior tothe Closing, the Company shall repurchase the shares of Company Common Stockheld by such Restricted Stock Participants on the terms and conditions setforth therein; and

 

**WHEREAS**, upon the terms and subject to theconditions set forth herein, the Buyer desires to purchase from the Sellers andthe Sellers desire to sell to the Buyer all of the then issued and outstandingcapital stock and other equity securities of the Company (the “StockPurchase”).

 

**NOW, THEREFORE**, in consideration of the premises and themutual promises herein made, and in consideration of the representations,warranties, and covenants herein contained, the Parties agree as follows:

 

# **ARTICLE ISTOCK PURCHASE**

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## **1.1**           Stock Purchase. On the terms and subject to theconditions of this Agreement, the Buyer agrees to purchase from each of the Sellers,and each of the Sellers agrees to sell to the Buyer, the Shares owned by suchSeller, free and clear of all Encumbrances, which Shares collectivelyconstitute and shall constitute as of the Closing Date all of the issued andoutstanding shares of the capital stock of the Company, for the considerationspecified in Section 1.2.

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## **1.2**           Purchase Price. The aggregate maximum purchaseprice (the “Purchase Price”) to be paid in exchange for the acquisitionby Buyer of all outstanding capital stock of the Company, including withoutlimitation all shares of Restricted Stock to be repurchased by the Companybefore the Closing pursuant to the Restricted Stock Repurchase Agreements, andall outstanding unexpired and unexercised options, warrants or other rights toacquire or receive any capital stock of the Company, whether vested orunvested, if any, shall be Sixty Million Dollars

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## **($60,000,000),subject to adjustment as set forth in this Agreement. The Purchase Price shallbe comprised of (i) an amount to be paid in cash at Closing as per the flow offund memorandum, plus (ii) post-Closing payments in cash equal toFifty-Four Million Dollars ($54,000,000), in the aggregate, less any amountpaid in cash at Closing, as adjusted pursuant to Section 1.4 hereof and asreduced by the amount of the Aggregate Restricted Stock Repurchase Payments(the “First Post-Closing Payment”), and (iii) post-Closing paymentsin cash equal to Six Million Dollars ($6,000,000), in the aggregate, asadjusted pursuant to the terms and conditions hereof (the “SecondPost-Closing Payment”). Subject to the terms and conditions of thisAgreement, at the Closing, each Seller shall have the right to receive, withrespect to each of his or her shares of Company Common Stock issued andoutstanding immediately prior to the Closing, (i) in accordance with thisSection 1.2(a), an amount in cash equal to the First Per SharePost-Closing Amount, plus (ii) in accordance with Section 1.3 hereof,an amount in cash equal to the Second Per Share Post-Closing Amount. Subject tothe terms and conditions hereof, the Buyer shall pay the First Per SharePost-Closing Amount to each Seller, with respect to each of his or her sharesof Company Common Stock issued and outstanding immediately prior to theClosing, on the next business day following the Closing in cash by the deliveryof immediately available funds; provided, however, the SellerRepresentative may, by written notice delivered at least two (2) business daysprior to Closing, direct the Buyer to pay a portion of the Purchase Price toSellers at the Closing Date in accordance with the flow of funds memorandum, inan aggregate amount to all of the Sellers not greater than Twenty MillionDollars ($20,000,000). The Buyer shall pay the Second Per Share Post-ClosingAmount to each Seller, with respect to each of his or her shares of CompanyCommon Stock issued and outstanding immediately prior to the Closing, inaccordance with Section 1.3 hereof. “First Per Share Post-ClosingAmount” means an amount per share of Company Common Stock equal to(i) the First Post-Closing Payment divided by (ii) the Fully DilutedShare Number. “Second Per Share Post-Closing Amount” means an amount pershare of Company Common Stock equal to (i) the Second Post-Closing Paymentdivided by (ii) the Fully Diluted Share Number. “Fully Diluted ShareNumber” means the result obtained by adding (A) the aggregate numberof shares of Company Common Stock outstanding immediately prior to the Closing,including, without limitation, the aggregate number of shares of Company CommonStock subject to any outstanding Restricted Stock Awards as of immediatelyprior to the Closing (excluding any shares that have been repurchased pursuantto a Restricted Stock Repurchase Agreement), and (B) the aggregate numberof shares of Company Common Stock into which all options, warrants or otherconvertible securities or other rights to acquire or receive shares of CompanyCommon Stock, whether vested or unvested, outstanding immediately prior to theClosing, if any, could be converted.**

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## **1.3**           Second Post-Closing Payment.

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### **(a)**           Subject to the terms and conditions hereof, includingwithout limitation, offset as set forth in Section 9.3 below, the Buyershall pay the Second Per Share Post-Closing Amount to each Seller, with respectto each of his or her shares of Company Common Stock issued and outstandingimmediately prior to the Closing, on the date that is fifteen (15) monthsafter the Closing Date in cash by the delivery of immediately available funds.

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### **(b)**           Notwithstanding anything herein contained to the contrary,as of the Closing, the Buyer’s obligation to pay the Second Per SharePost-Closing Amount to each Seller, with respect to each of his or her sharesof Company Common Stock issued and outstanding

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### **immediatelyprior to the Closing, shall be subordinate and subject in right of payment tothe prior payment in full of all Senior Debt (as defined in the SubordinationAgreement in substantially the form attached hereto as Exhibit A,to be entered into as of the Closing Date by and among Buyer, each Seller andWachovia Bank, National Association (or any assignor, successor or other Personwho assumes such Senior Debt or replaces Wachovia Bank, National Association orprovides indebtedness for borrowed money to the Buyer) (the “SubordinationAgreement”)) as further set forth in the Subordination Agreement, and eachSeller, by signing this Agreement, agrees to execute and deliver theSubordination Agreement on or prior to the Closing and agrees to take suchaction as may be necessary or appropriate to effectuate the subordination asprovided in the Subordination Agreement.**

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## **1.4**           Adjustments to First Post-Closing Payment.

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### **(a)**           At least five (5) business days prior to the Closing,the Company and the Buyer shall finalize an Estimated Closing Balance Sheet asof the Closing Date on a post-Closing basis (the “Estimated Closing BalanceSheet”), which shall be prepared in accordance with Modified GAAP.

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### **(b)**           The First Post-Closing Payment shall be reduced orincreased, as indicated below, without duplication, by the following amounts,if any, as set forth on the Estimated Closing Balance Sheet:  (i) theFirst Post-Closing Payment shall be reduced by the amount of any indebtednessof the Company for borrowed money as of the Closing Date, including withoutlimitation, the amount of any indebtedness owed by the Company pursuant to theCompany’s promissory notes, dated December 30, 2005, to Donald E. Reed andLeslie W. Butler and the amount of any Qualified Accounts Payable as of theClosing Date (“Indebtedness for Borrowed Money”); (ii) the FirstPost-Closing Payment shall be reduced by the amount of all liabilities notincurred in the ordinary course of business of the Company in existence as ofthe Closing Date, including, without limitation, (x) any amount paid orpayable under the Restricted Stock Plan, any amount paid or payable under theRestricted Stock Repurchase Agreements, any other Liability for severance orother compensation provided or payable to employees or consultants of theCompany in connection with the Stock Purchase and any Liability for tenureawards, directed performance awards and severance payments described in Schedule3.6 (and, in each case, any employee withholding Taxes and any employerpayroll Taxes thereon) and (y) any unpaid transaction fees and expensesrelated to the Stock Purchase and the transactions contemplated hereby incurredby the Company or any Seller, including without limitation financial advisoryfees, legal fees and expenses, broker and finder fees and expenses ofaccountants (collectively, the “Non-Ordinary Course Liabilities”);(iii) the First Post-Closing Payment shall be reduced by the amount of theEstimated Working Capital Deficit, if any; and (iv) the First Post-ClosingPayment shall be increased by the amount of the Estimated Working CapitalSurplus, if any. Such adjustments shall be referred to herein collectively asthe “Estimated Closing Adjustment”. The Estimated Closing Adjustment shallbe determined without regard to the limitations set forth in Sections 9.4and 9.5 hereof.

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### **(c)**           At least two (2) business days prior to the Closing,the Parties shall agree upon a flow of funds memorandum which shall set forthall payments required to be made by or on behalf of all Parties at the Closing,including for each such payment an identification of the payor, the payee, theamount and the wire transfer information.

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## **1.5**           Restricted Stock Plan. As of the Closing, the RestrictedStock Plan and all Restricted Stock Awards granted by the Company pursuant tothe Restricted Stock Plan or otherwise shall have been terminated andcancelled. The Company shall terminate the Restricted Stock Plan and all otherequity-related plans prior to the Closing, and neither Buyer nor the Companyshall have any Liability thereunder. The Company agrees that, pursuant to thisSection 1.5, (a) the Company and each Restricted Stock Participant (otherthan Cindy A. Andre) shall consummate the transactions contemplated by theRestricted Stock Repurchase Agreement in accordance with the terms thereof,(b) upon the consummation thereof, the certificates for all issued andoutstanding shares of Company Common Stock subject to such Restricted StockAwards shall be surrendered to the Company by the holder thereof and(c) upon the consummation thereof, the shares of Company Common Stockrepurchased pursuant to the Restricted Stock Repurchase Agreements shall ceaseto be outstanding and shall become authorized and unissued capital stock. TheCompany shall not amend or terminate any Restricted Stock Repurchase Agreement,or waive any provision thereof, without the Buyer’s prior written consent. TheCompany shall execute or cause to be executed such further documents,assignments and assurances, and take or cause to be taken such further actions,as may reasonably be requested by the Buyer to consummate the closings undereach Restricted Stock Repurchase Agreement and the transactions contemplatedthereby with each Restricted Stock Participant (other than Cindy A. Andre).Subject to the terms and conditions hereof, the shares of Company Common Stocksubject to the Restricted Stock Award granted to Cindy A. Andre shall bepurchased pursuant to Section 1.2 above.

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## **1.6**           Post-Closing Adjustment.

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### **(a)**           Within seventy-five (75) days following the Closing Date,the Buyer shall furnish the Seller Representative with a balance sheet of theCompany as of the Closing Date on a post-Closing basis (the “Closing BalanceSheet”) prepared in accordance with Modified GAAP, which shall set forththe Closing Working Capital of the Company, the Indebtedness for BorrowedMoney, the Non-Ordinary Course Liabilities and, as applicable, the ClosingWorking Capital Deficit or the Closing Working Capital Surplus (collectively,the “Closing Adjustments”). Each Seller shall assist the Buyer in thepreparation of the Closing Balance Sheet if reasonably requested by the Buyer.

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### **(b)**           The Seller Representative shall have a period offifteen (15) days after receipt of the Closing Balance Sheet to notify theBuyer of its election to accept or reject the Closing Balance Sheet. In thecase of a rejection, such notice must contain the reasons for such rejection inreasonable detail and must set forth the amount of the requested adjustment (ora reasonable estimate thereof). In the event no notice is received by the Buyerduring such fifteen (15) day period, the Closing Balance Sheet and anyrequired adjustments resulting therefrom shall be deemed accepted by the SellerRepresentative and the Sellers and final and binding on the Parties hereto. Inthe event that the Seller Representative shall timely reject the ClosingBalance Sheet, the Buyer and the Seller Representative shall promptly (and inany event within thirty (30) days following the date upon which the SellerRepresentative shall reject the Closing Balance Sheet), attempt to make a jointdetermination of the Closing Adjustments and such determination and anyrequired adjustments resulting therefrom shall be final and binding on theParties hereto solely for purposes of this Section 1.6.

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### **(c)**           In the event the Seller Representative and the Buyer shallbe unable to agree upon a joint determination of Closing Adjustments within onehundred twenty (120) days from the Closing Date, then within one hundred thirty(130) days from the Closing Date, the Buyer and the Seller Representative shallsubmit the dispute to the Accounting Firm. The Buyer and the SellerRepresentative shall request that the Accounting Firm render its determinationprior to the expiration of one hundred sixty (160) days from the Closing Dateand such determination and any required adjustments resulting therefrom shallbe final and binding on all the Parties hereto solely for purposes of thisSection 1.6. The fees and expenses of the Accounting Firm shall be allocated tobe paid by the Buyer and/or the Sellers, respectively, based upon thepercentage which the portion of the total amount contested and not awarded tosuch party bears to the total amount contested, as determined by the AccountingFirm. Nothing stated or disclosed in the Closing Balance Sheet or in connectionwith the determination thereof shall waive or be deemed to waive any inaccuracyor breach of any representation or warranty made by the Company or any Selleror any right to indemnification hereunder and shall be without prejudice to anyother right or remedy of the Buyer under this Agreement, at equity or at law.

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### **(d)**           If the Closing Working Capital as finally determined inaccordance with the provisions of this Section 1.6 is less than theEstimated Working Capital, then the amount of the difference shall be paid bythe Sellers to the Buyer, in proportion to their respective First Per SharePost-Closing Amounts, as an adjustment to the Purchase Price by wire transferin immediately available funds within seven (7) days after suchdetermination. If the Closing Working Capital as finally determined in accordancewith the provisions of this Section 1.6 is more than the Estimated WorkingCapital, then the amount of the difference shall be paid by the Buyer to theSellers as an adjustment to the Purchase Price by wire transfer in immediatelyavailable funds in proportion to their respective First Per Share Post-ClosingAmounts within seven (7) days after such determination.

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### **(e)**           If the Indebtedness for Borrowed Money and/or theNon-Ordinary Course Liabilities determined pursuant to this Section 1.6exceed the Indebtedness for Borrowed Money and/or the Non-Ordinary CourseLiabilities, respectively, set forth on the Estimated Closing Balance Sheet,such excess shall be paid as an adjustment to the First Post-Closing Payment bythe Sellers to the Buyer by wire transfer in immediately available funds withinseven (7) days after such determination. If the Indebtedness for BorrowedMoney and/or the Non-Ordinary Course Liabilities determined pursuant to thisSection 1.6 are less than the Indebtedness for Borrowed Money and/or theNon-Ordinary Course Liabilities, respectively, set forth on the EstimatedClosing Balance Sheet, such deficit shall be paid as an adjustment to the FirstPost-Closing Payment by the Buyer to the Sellers, in proportion to theirrespective First Per Share Post-Closing Amounts, by wire transfer inimmediately available funds within seven (7) days after suchdetermination. The adjustments described in Sections 1.6(d) and(e) shall be referred to collectively as the “Post-Closing Adjustment”.If either Party does not so pay to the other Party by the due date, suchamounts shall be deemed Damages under Article IX hereof which shall bepaid in full without regard to the limitations set forth in Sections 9.4and 9.5 hereof.

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## **1.7**           Stock Options and Warrants. Prior to the Closing, the Sellersshall cause the Company to terminate and cancel any options to purchase CompanyCommon Stock (“Company Stock Options”) and any warrants to purchaseCompany Common Stock (“Company Warrants”).

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## **Buyershall neither assume any options or warrants nor be required by the terms ofthis Agreement to replace any options or warrants with comparable options orwarrants. The Company shall terminate all stock option plans and other stock orequity-related plans of the Company prior to the Closing, and neither Buyer northe Company shall have any liability or obligation thereunder. No adjustmentshall be made in the Purchase Price paid in the Stock Purchase as a result ofany cash proceeds received by the Company from the date hereof to the ClosingDate pursuant to the exercise of options, warrants or other rights to acquireor receive Company Common Stock.**

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## **1.8**           Withholding of Tax. Buyer will be entitled (but notobligated) to deduct and withhold from the consideration otherwise payablepursuant to this Agreement to any holder of Company Common Stock such amountsas Buyer (or any Affiliate thereof) shall determine in good faith that they arerequired to deduct and withhold with respect to the making of such paymentunder the Code or any provision of federal, state, local or foreign Tax Law. Tothe extent that amounts are so withheld by Buyer, such withheld amounts will betreated for all purposes of this Agreement as having been paid to the holder ofthe Company Common Stock in respect of whom such deduction and withholding weremade by Buyer.

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## **1.9**           Lost, Stolen or Destroyed Certificates. In the event anycertificates representing outstanding shares of Company Common Stock shall havebeen lost, stolen or destroyed, Buyer shall pay in exchange for such lost,stolen or destroyed certificates, upon the making of an affidavit of that factby the holder thereof, the applicable Purchase Price; provided, however,that Buyer may, in its discretion and as a condition precedent to the paymentthereof, require the holder of such lost, stolen or destroyed certificates todeliver a bond in such sum as Buyer may reasonably direct as indemnity againstany claim that may be made against Buyer with respect to the certificatesalleged to have been lost, stolen or destroyed.

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# **ARTICLE IICLOSING**

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## **2.1**           Time and Place of the Closing. The Closing shalltake place at the offices of Morrison & Foerster LLP, 1650 TysonsBoulevard, Suite 300, McLean, Virginia, as soon as practicable followingthe satisfaction or waiver of the conditions set forth in Articles VII andVIII hereof and in any event within three (3) business days thereafter, oron such other date as the Buyer and the Seller Representative may mutuallydetermine.

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## **2.2**           Deliveries. At the time of the Closing,(i) each of the Sellers will deliver to the Buyer stock certificatesrepresenting all of the Shares owned by such Seller, endorsed in blank oraccompanied by duly executed assignment documents, (ii) the Company, theSeller Representative and each of the Sellers will deliver to the Buyer thevarious certificates, instruments, and documents referred to inSection 7.8 below, and (iii) the Buyer will deliver to the SellerRepresentative and the Sellers the certificates, instruments and documentsreferred to in Section 8.4 below.

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## **2.3**           Seller Representative.

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### **(a)**           Each Seller designates Donald E. Reed (the “SellerRepresentative”) as his or her representative for purposes of thisAgreement. The Sellers and their respective successors shall be bound by anyand all actions taken by the Seller Representative on their behalf under orotherwise relating to this Agreement and the other documents contemplatedhereby and the transactions contemplated hereunder and thereunder as if suchactions were expressly ratified and confirmed by each of them in writing. Inthe event any Seller Representative is unable or unwilling to serve or shallresign, a successor Seller Representative shall be selected by the Sellersholding a majority of the shares of Company Common Stock outstandingimmediately prior to the Closing. A Seller Representative may not resign,except upon 30 days prior written notice to Buyer. In the event of a noticeof proposed resignation, or any death, disability or other replacement of aSeller Representative, a successor shall be appointed effective immediatelythereafter (and, in the case of a death of a Seller Representative, thesuccessor shall be deemed to be the executor or other representative of suchSeller Representative’s estate) and Buyer shall be notified promptly of suchappointment by the successor Seller Representative. No resignation, nor anyother replacement, of any Seller Representative is effective against the Buyeruntil selection of a successor and prior written notice to the Buyer of suchselection (such consent not to be unreasonably withheld). Each successor SellerRepresentative shall have all the power, rights, authority and privileges herebyconferred upon the original Seller Representative.

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### **(b)**           The Buyer shall be entitled to rely upon any actions,communication or writings taken, given or executed by the Seller Representativeon behalf of the Sellers. All communications or writings to be sent to theSellers pursuant to this Agreement may be addressed to the SellerRepresentative and any communication or writing so sent shall be deemed noticeto all of the Sellers hereunder. The Sellers consent and agree that the SellerRepresentative is authorized to accept deliveries, including any notice, onbehalf of each Seller pursuant hereto.

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### **(c)**           The Seller Representative is hereby appointed andconstituted the true and lawful attorney-in-fact of each Seller, with fullpower of substitution in such Seller’s name and on such Seller’s behalf to actaccording to the terms of this Agreement and the other documents contemplatedhereby in the absolute discretion of the Seller Representative; and in generalto do all things and to perform all acts including, without limitation,executing and delivering all agreements, certificates, receipts, instructions,notices and other instruments contemplated by or deemed advisable in connectionwith this Agreement and the other documents contemplated hereby, including withoutlimitation Article IX hereof. This power of attorney and all authorityhereby conferred is granted subject to the interest of the other Sellershereunder and in consideration of the mutual covenants and agreements madeherein, and shall be irrevocable and shall not be terminated by any act of anySeller, by operation of law, whether by such Seller’s death or disability or byany other event.

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### **(d)**           The Seller Representative hereby acknowledges and agrees toserve as the Seller Representative in accordance with the applicable termshereof and to be bound by such terms. At Buyer’s request, the SellerRepresentative shall enter into an agreement in form and substance reasonablysatisfactory to Buyer and the Seller Representative in which the Seller

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### **Representativeacknowledges and agrees to serve as a Seller Representative and to be bound bythe applicable terms of this Agreement.**

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# **ARTICLE IIIREPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY**

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As a material inducement to the Buyer to enter intothis Agreement and to consummate the transactions contemplated hereby, theCompany and each of the Sellers, jointly and severally, represent and warrantto the Buyer, as of the date hereof and as of the Closing, as follows:

 

## **3.1**           Organization and Corporate Power. The Company is acorporation duly organized, validly existing and in good standing under thelaws of the Commonwealth of Virginia and the Company is qualified to dobusiness and in good standing in the State of Maryland and each otherjurisdiction where the character or location of its assets or its propertiesowned, leased or operated by it, or the nature of its activities makes suchqualification necessary, except to the extent that the failure to so qualify orbe in good standing has not had and would not reasonably be expected to have aMaterial Adverse Effect. All such jurisdictions in which the Company isqualified are set forth on Schedule 3.1. The Company has fullcorporate power and authority necessary to own and operate its properties, toconduct its business as now conducted and to perform its obligations underContracts to which it is a party or by which it is bound. The stock records andminute books of the Company are accurate, up to date and complete, and havebeen maintained in accordance with prudent business practices and allapplicable Laws. The Company has provided the Buyer with true, correct andcomplete copies of the stock records and minute books of the Company and suchrecords reflect that every material transaction of the Company has been dulyapproved or ratified by the Company. The minute books of the Company contain amaterially complete and accurate summary of all meetings of directors orshareholders or actions by written consent since the time of incorporation ofthe Company. The Company has not taken any corporate action without theapproval or ratification of the board of directors or shareholders where suchaction required the approval of the board of directors or shareholders underthe Virginia Stock Corporation Act, as amended (the “VSCA”). The stockledger or stock records of the Company accurately reflect all transactionsinvolving the capital stock of the Company. The Company is not in default underor in violation of any provision of its Articles of Incorporation or Bylaws orany resolution adopted by the Company’s board of directors or shareholders. TheCompany has not conducted any business under or otherwise used, for any purposeor in any jurisdiction, any fictitious name, assumed name, trade name or othername, other than the names set forth on Schedule 3.1.

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## **3.2**           Authority for Agreement. The Company has full power,authority and legal right to enter into and perform its obligations under thisAgreement and the other documents contemplated hereby to which the Company isor will be a party and to consummate the transactions contemplated hereby andthereby. The board of directors of the Company and the stockholders of theCompany have unanimously approved the Stock Purchase, this Agreement and theother documents contemplated hereby and the transactions contemplated herebyand thereby and authorized the execution, delivery and performance of thisAgreement and the other documents contemplated hereby and the consummation of thetransactions contemplated hereby and thereby. No other corporate proceedings onthe part of the Company or any shareholder of

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## **theCompany are, or will be, necessary to approve and authorize the execution,delivery and performance of this Agreement and the other documents contemplatedhereby and the consummation of the transactions contemplated hereby andthereby. This Agreement and the other documents contemplated hereby have beenduly executed and delivered by the Company and are legal, valid and bindingobligations of the Company, enforceable against it in accordance with theirrespective terms, except as enforceability may be limited by applicablebankruptcy, insolvency, reorganization, moratorium or other similar lawsaffecting the enforcement of creditors’ rights in general. As of the datehereof, the holders of the Company Common Stock that are parties to thisAgreement and the other Persons listed on Schedule 3.4(a) own(beneficially and of record) and have the right to vote, in the aggregate, 100%of the total issued and outstanding Company Common Stock.**

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## **3.3**           No Violation to Result. Except as set forth on Schedule 3.3,the execution, delivery and performance by the Company of this Agreement andthe other documents contemplated hereby and the consummation by the Company ofthe transactions contemplated hereby and thereby and the fulfillment by theCompany of the terms hereof and thereof, do not and will not, directly orindirectly (with or without notice or lapse of time):  (i) violate,breach, conflict with, constitute a default under, accelerate or permit theacceleration of the performance required by (x) any of the terms of theArticles of Incorporation or Bylaws of the Company or any resolution adopted bythe board of directors of the Company or shareholders of the Company, or(y) any Contract or Encumbrance to which the Company is a party or bywhich it is bound, or (z) any law, judgment, decree, order, rule,regulation, permit, license or other legal requirement of any GovernmentAuthority applicable to the Company; (ii) give any Person the right todeclare a default, exercise any remedy or accelerate the performance ormaturity under any such Contract or cancel, terminate or modify any such Contract;(iii) give any Government Authority or other Person the right to challengeany of the transactions contemplated by this Agreement; (iv) give anyGovernment Authority the right to revoke, withdraw, suspend, cancel, terminateor modify, any permit or license that is held by the Company or that otherwiserelates to the Company’s business or to any of the assets owned or used by theCompany; or (v) result in the creation or imposition of any Encumbrance,possibility of Encumbrance, or restriction in favor of any Person upon theShares or any of the properties or assets of the Company, except in the case of(i)(y) and (ii) as would not, individually or in the aggregate, reasonablybe expected to result in any Liability to the Company in excess of $25,000. Otherthan as set forth on Schedule 3.3, no notice to, filing with, orconsent of, any Person is necessary in connection with, and no “change ofcontrol” provision is triggered by, the approval, adoption, execution, deliveryor performance by the Company of this Agreement and the other documentscontemplated hereby or the consummation by the Company of the transactionscontemplated hereby or thereby. The Company has given all notices, made allfilings and obtained all consents set forth on Schedule 3.3 or willhave done so prior to the Closing.

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## **3.4**           Capitalization.

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### **(a)**           The authorized capital stock of the Company consists of OneHundred Thousand (100,000) shares of Company Common Stock, of which (x) SixHundred Sixty-Six and 67/100 (666.67) shares have been issued, (y) Thirty-Threeand 34/100 (33.34) shares shall be repurchased by the Company prior to theClosing pursuant to Section 1.5 hereof and (z) Six Hundred Thirty-Three and33/100 (633.33) shares shall be outstanding as of the Closing. There

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### **are noshares of the Company’s capital stock held in the Company’s treasury. Schedule 3.4(a)sets forth the names of the Company’s shareholders, the addresses of theCompany’s shareholders in their respective states of legal residence and thenumber of shares of Company Common Stock owned of record and beneficially byeach of such shareholders.**

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### **(b)**           All of the issued and outstanding shares of capital stockof the Company have been duly authorized and validly issued, and are fully paidand non-assessable. Except as set forth on Schedule 3.4(b), norestrictions on transfer, repurchase option, preemptive rights or rights offirst refusal exist with respect to any shares of capital stock of the Company,and no such rights arise by virtue of or in connection with the transactionscontemplated hereby; and, to the extent permitted by Law, the Sellers havewaived (or hereby waive) any and all such rights.

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### **(c)**           There is no:  (i) outstanding subscription,option, call, warrant or right (whether or not currently exercisable) toacquire or sell or issue, or otherwise relating to, any shares of the capitalstock or other securities of the Company; (ii) outstanding security,instrument or obligation that is or may become convertible into or exchangeablefor any shares of the capital stock or other securities of the Company;(iii) Contract under which the Company is or may become obligated to sellor otherwise issue any shares of its capital stock or any other securities; or(iv) condition or circumstance that may give rise to or provide a basisfor the assertion of a claim by any Person to the effect that such Person isentitled to acquire or receive any shares of capital stock or other securitiesof the Company. There are no outstanding stock appreciation, phantom stock,profit participation or other similar rights with respect to the Company. Schedule 3.4(c)sets forth (i) the total number of Restricted Stock Awards issued andoutstanding and (ii) the following information with respect to eachRestricted Stock Award outstanding as of immediately prior to theClosing:  (A) the name and address of the holder of the RestrictedStock Award, (B) the number of Restricted Stock Awards held by such holderand the number of such Restricted Stock Awards that are vested and unvested,(C) the vesting schedule applicable to such Restricted Stock Awards and(D) the date on which such Restricted Stock Award was granted.

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### **(d)**           Except as set forth on Schedule 3.4(d), thereare no proxies, voting rights, shareholders agreements or other agreements orunderstandings with respect to the voting or transfer of the capital stock ofthe Company. All shares of Company Common Stock have been issued in compliancewith (i) all applicable federal and state securities laws and otherapplicable legal requirements, and (ii) any pre-emptive rights, rights offirst refusal or other requirements set forth in applicable Contracts. Anyshares of capital stock or other securities repurchased, redeemed or otherwisereacquired by the Company were validly reacquired in compliance with(A) the applicable provisions of the corporate law of the Commonwealth ofVirginia and all other applicable Laws, and (B) any requirements set forthin applicable Contracts. The Company is not obligated to redeem or otherwiseacquire any of its outstanding shares of capital stock.

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### **(e)**           The Company has no (i) direct or indirect debt, equityor other investment or interest in any Person or any joint venture or(ii) except for the teaming agreements set forth on Schedule 3.4(e),strategic alliance or teaming agreements with any Person (either pursuant to awritten Contract or a Contract in the process of being negotiated). The Companyhas no commitments to contribute to the capital of, make loans to or sharelosses of, any Person (either pursuant to a written Contract or a Contract inthe process of being negotiated).

### ** **

### **10**

### ****

 

## **3.5**           Financial Statements.

## ** **

### **(a)**           Schedule 3.5(a) includes true, complete andcorrect copies of (i) the Year-End Financials and (ii) the InterimFinancials. Each of the Financial Statements (including in all cases the notesthereto, if any) is accurate and complete in all material respects, isconsistent with the Company’s books and records (which, in turn, are accurateand complete in all material respects), presents fairly the Company’s financialcondition and results of operations as of the times and for the periodsreferred to therein, and has been prepared in accordance with GAAP (subject, inthe case of Interim Financials, to normal and recurring adjustments which shallnot be material in the aggregate, and the absence of notes). During the periodscovered by the Financial Statements and since the Balance Sheet Date, there hasbeen no material change in the Company’s accounting policies. There have beenno transactions involving the business of the Company which properly shouldhave been set forth in the Financial Statements and which have not beenaccurately so set forth. Schedule 3.5(a) sets forth a list of anyoff-balance sheet financing arrangements of the Company and any non-operatingassets, prepaid items and deposits. Since December 31, 2001, the Company’saccounting firm has not informed the Company that it has any materialchallenges or disagreements regarding or pertaining to the Company’s accountingpolicies or practices. The Company has made available to the Buyer copies ofeach management letter or other letter delivered to the Company by itsaccounting firm in connection with the Financial Statements or relating to anyreview by such accounting firm of the internal controls of the Company.

### ** **

### **(b)**           Schedule 3.5(b) provides an accurate and completebreakdown and aging of all accounts receivable, notes receivable and otherreceivables of the Company as of the Balance Sheet Date. Except as set forth onSchedule 3.5(b), all existing accounts receivable, billed andunbilled, of the Company (including those accounts receivable reflected on theBalance Sheet that have not yet been collected and those accounts receivablethat have arisen since the Balance Sheet Date and have not yet been collected)(i) represent valid obligations of customers of the Company arising frombona fide transactions entered into in the ordinary course of business, and (ii) arecurrent and will be collected in full, without any counterclaim or set off,when due (and in no event later than ninety (90) days after the ClosingDate). Except as disclosed on Schedule 3.5(b), no Person has anyEncumbrance on such receivables or any part thereof, and no agreement fordeduction, free goods, discount or other deferred price or quantity adjustmentshall have been made with respect to any such receivables.

### ** **

### **(c)**           Schedule 3.5(c) identifies the revenues receivedfrom each customer of the Company and from each other Person from whom theCompany generated revenues in the fiscal year ended December 31, 2004 andin the first eleven (11) months of 2005. To the Knowledge of the Company,the relationship of the Company with each of its customers is a reasonably goodworking relationship, and since the fiscal year ended December 31, 2004,there has not been any material adverse change in the business relationship ofthe Company with any of its customers. No customer of the Company has terminatedor threatened in writing to terminate its relationship with the Company or hasduring the last twelve (12) months materially decreased, limited orotherwise changed the terms and conditions for the purchase of goods orservices from the Company, or threatened in writing to do so. All revenuesrecognized by the Company have been recognized in accordance with GAAP.

 

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### **(d)**           The accounts, books and records of the Company haverecorded therein in all material respects the results of operations and theassets and liabilities of the Company and each of its Subsidiaries, required tobe reflected under GAAP. To the Knowledge of the Company, the Company maintainsa system of accounting and internal controls and procedures as are reasonablynecessary, in light of the Company’s size and the nature of its business, toprovide assurances that (i) transactions are executed with management’sauthorization; (ii) transactions are recorded as necessary to permitpreparation of the financial statements of the Company and to maintainaccountability for the Company’s assets; (iii) access to the Company’sassets is permitted only in accordance with management’s authorization;(iv) the reporting of the Company’s assets is compared with existingassets at regular internals and appropriate action is taken with respect to anydifferences; (v) accounts, notes and other receivables and inventory arerecorded accurately, and proper and adequate procedures are implemented toeffect the collection thereof on a current and timely basis; and(vi) material information regarding the Company and its financialcondition is accumulated and communicated to the Company’s management. There isno fraud that involves management or, to the Knowledge of the Company, otheremployees who have a significant role in the Company’s internal controls.

### ** **

## **3.6**           Liabilities. There are no Liabilities of theCompany, other than:  (i) Liabilities reflected on the Balance Sheetand not previously paid or discharged; (ii) Liabilities incurred after theBalance Sheet Date arising in the ordinary course of business and consistentwith past practice; and (iii) immaterial Liabilities in no case to exceed$50,000 in the aggregate (none of which in the case of (i), (ii) or (iii)results from, arises out of, relates to, is in the nature of or was caused byany breach of contract, breach of warranty, tort, infringement or violation oflaw). The Company is not a guarantor or otherwise liable for any Liabilities ofany other Person other than endorsements for collection in the ordinary courseof business. Schedule 3.6 provides an accurate and completebreakdown and aging as of the Balance Sheet Date of all accounts payable of theCompany. Except as set forth on Schedule 3.6, all of which shall berepaid at or prior to Closing, the Company has no notes payable nor anyindebtedness for borrowed money.

## ** **

## **3.7**           Adverse Changes. Except as set forth on Schedule 3.7,since December 31, 2004, the Company has operated its business in theordinary course and consistent with past practice and the Company hasnot:  (i) suffered a Material Adverse Effect; (ii) suffered anytheft, damage, destruction, or casualty loss in excess of $50,000, or sufferedany interruption in the use of the Company’s assets or business (other than inthe ordinary and usual course of business) (whether or not covered byinsurance) or suffered any destruction of its books and records;(iii) declared, set aside or paid any dividend (whether in cash, stock orproperty) with respect to any capital stock of the Company or repurchased anycapital stock of the Company; (iv) granted any current or former director,officer, employee or consultant of the Company any bonus opportunity orincrease in compensation or benefits, (v) disclosed any confidentialinformation (other than to legal advisors of the Company or pursuant toagreements requiring the recipient to maintain the confidentiality of, andpreserving all rights of the Company in, such confidential information);(vi) made any capital expenditures that aggregate in excess of $200,000;(vii) taken any action, omitted any action or entered into any agreementor understanding which, if taken, omitted or entered into during the periodfrom the date of this Agreement until the Closing Date, would constitute abreach or violation of Section 6.2 hereof; or (viii) committed oragreed to any of the foregoing set forth in (i) through (vii) above.

 

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## **3.8**           Employee Benefit Plans.

## ** **

### **(a)**           Schedule 3.8(a) lists:  (i) each planfund, program, agreement or arrangement for the provision of executivecompensation, deferred or incentive compensation, profit sharing, stock bonus,bonus, stock option, restricted stock, phantom stock, stock purchase, termination,salary continuation, employee assistance, supplemental retirement, severance,vacation, sickness, disability, death, fringe benefit, insurance, medical orother benefits (whether provided through insurance, on a funded or unfundedbasis, or otherwise) to any current or former employee, director, consultant orindependent contractor, or any dependent, survivor or beneficiary with respectto any of the foregoing, which is maintained, administered or contributed to(directly or indirectly through a professional employer organization orotherwise) by the Company or any ERISA Affiliate of the Company, whether or notlegally binding; (ii) each Employee Pension Benefit Plan which has beenmaintained, administered or contributed to (directly or indirectly through aprofessional employer organization or otherwise) by the Company or any ERISAAffiliate in the past six (6) years (the “Pension Plans”); and(iii) each Employee Welfare Benefit Plan which is currently maintained,administered or contributed to (directly or indirectly through a professionalemployer organization or otherwise) by the Company or any ERISA Affiliate (suchplans, together with Employee Welfare Benefit Plans which were previouslymaintained, administered or contributed to by the Company or an ERISA Affiliate,collectively, the “Welfare Plans”) (collectively, all arrangementsdescribed in this Section 3.8(a) are hereinafter referred to as the “BenefitPlans”).

### ** **

### **(b)**           Each Pension Plan which is intended to qualify underSection 401(a) of the Code so qualifies (i) with respect to the formof its plan documents and (ii) in operation and each related trust isexempt from taxation under Code Section 501(a). Each Benefit Plan (andeach related trust, insurance contract or fund) has been maintained, funded andadministered in all material respects in accordance with its governinginstruments and all applicable Laws, including but not limited to, ERISA andthe Code. No Pension Plan has ever held Company Common Stock or other Companysecurities. No Pension Plan has ever been merged with or accepted CodeSection 414(l) transfers from another Employee Pension Benefit Plan. Withrespect to any applicable Company Employees, the Company has provided wages andfringe benefits under the Benefit Plans or otherwise in compliance with theService Contract Act of 1965 and its related regulations at 29 C.F.R. Part 4.

### ** **

### **(c)**           All contributions, premiums or other payments due under theterms of each Benefit Plan or required by applicable Law have been made withinthe time due. All unpaid amounts attributable to any such Benefit Plan for anyperiod prior to the Closing Date will be accrued on the Company’s consolidatedbooks and records in accordance with GAAP and, except to the extent of suchaccruals, the Company has no material Liability arising out of or in connectionwith the form or operation of the Benefit Plans or benefits accrued thereunderon or prior to the Closing Date.

### ** **

### **(d)**           There have been no Prohibited Transactions with respect toany Benefit Plan which could result in Liability to the Company, its ERISAAffiliates, or, to the Knowledge of the Company, any of their respectiveemployees. There has been no breach of fiduciary duty (including violationsunder Part 4 of Title I of ERISA) with respect to any Benefit Plan whichcould result in Liability to the Company, its ERISA Affiliates or, to theKnowledge of the

 

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### **Company,any of their respective employees. No action, suit, proceeding, hearing orinvestigation relating to any Benefit Plan (other than routine claims forbenefits) is pending or, to the Knowledge of the Company, has been threatened,and neither the Company nor any Seller has Knowledge of any fact that wouldreasonably be expected to form the basis for such action, suit, proceeding,hearing or investigation. No matters are currently pending with respect to anyBenefit Plan under the Employee Plans Compliance Resolution System maintainedby the IRS or any similar program maintained by any other Government Authority.**

### ** **

### **(e)**           Neither the Company, nor any ERISA Affiliate has eversponsored, maintained, contributed to, had any obligation to contribute to, orhad any other Liability under or with respect to any Employee Pension BenefitPlan covered by Title IV of ERISA, Section 302 of ERISA orSection 412 of the Code. Neither the Company nor any ERISA Affiliate hasever had any Liability under or with respect to any “multiemployer plan” asdefined in ERISA Section 3(37) or any “multiple employer welfarearrangement” as defined in Section 3(40)(A) of ERISA.

### ** **

### **(f)**            Neither the Company, nor any ERISA Affiliate has eversponsored, maintained, administered, contributed to, had any obligation tocontribute to, or had any other Liability under or with respect to any EmployeeWelfare Benefit Plan which provides health, life or other coverage for formerdirectors, officers or employees (or any spouse or former spouse or otherdependent thereof), other than benefits required by COBRA.

### ** **

### **(g)**           Neither the Company, nor any ERISA Affiliate has evermaintained a “voluntary employees beneficiary association” within the meaningof Section 501(c)(9) of the Code or any other “welfare benefit fund” asdefined in Section 419(e) of the Code.

### ** **

### **(h)**           All reports and information relating to each Benefit Plan requiredto be filed with a Government Authority have been timely filed and are accuratein all material respects; all reports and information relating to each suchBenefit Plan required to be disclosed or provided to participants or theirbeneficiaries have been timely disclosed or provided, and there are norestrictions on the right of the Company or any ERISA Affiliate to terminate ordecrease (prospectively) the level of benefits under any Benefit Plan after theClosing Date without Liability to any participant or beneficiary thereunder.

### ** **

### **(i)**            There has been delivered to Buyer, with respect to eachBenefit Plan, the following:  (i) a copy of the annual report (ifrequired under ERISA) with respect to each such Scheduled Benefit Plan for thelast three (3) years (including all schedules and attachments);(ii) a copy of the summary plan description, together with each summary ofmaterial modification required under ERISA with respect to such Benefit Plan;(iii) a true and complete copy of each written Benefit Plan and, withrespect to Pension Plans, each written plan document and all amendments theretowhich have been adopted since the inception of such plan; (iv) all trustagreements, insurance contracts, and similar instruments with respect to eachfunded or insured Benefit Plan; (v) copies of all nondiscrimination andtop-heavy testing reports for the last three (3) plan years with respectto each Benefit Plan that is subject to nondiscrimination and/or top-heavytesting; and (vi) any investment management agreements, administrativeservices contracts or similar agreements relating to the ongoing administrationand investment of any Benefit Plan.

 

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### **(j)**            Each ERISA Affiliate is identified on Schedule 3.8(j).

### ** **

### **(k)**           Each Benefit Plan sponsored by the Company is terminable atthe discretion of such entity with no more than thirty (30) days advancenotice and without cost to such entity. No Employee Pension Benefit Plan,including the assets of such plan, is subject to any charge, market valueadjustment, deferred rules charge or other fee that is payable by reason of thetermination of such plan or investment. The Company may, without cost, withdrawtheir employees, directors, officers and consultants from any Benefit Planwhich is not sponsored by such entity. No Benefit Plan has any provision whichwould reasonably be expected to increase or accelerate benefits or anyprovision which would reasonably be expected to increase Liability to theCompany or the Buyer as a result of the transactions contemplated hereby, aloneor together with any other event. No Benefit Plan imposes withdrawal charges,redemption fees, contingent deferred sales charges or similar expensestriggered by termination of the plan or cessation of participation orwithdrawal of employees thereunder. No officer, director, agent or employee ofthe Company or any ERISA Affiliate has made any oral or written representationwhich is inconsistent with the terms of any Benefit Plan which may be binding onsuch plan, the Company or any ERISA Affiliate.

### ** **

### **(l)**            Neither the Company nor any ERISA Affiliate sponsors,maintains, or contributes to a nonqualified deferred compensation plan withinthe meaning of Section 409A of the Code.

### ** **

## **3.9**           Employee Matters.

## ** **

### **(a)**           Schedule 3.9(a)(i) contains a complete and correctlist of all Company Employees as of November 30, 2005, their respective titlesas of the date hereof, the 2004 compensation paid to each such employee, the2005 compensation paid to each such employee through December 1, 2005, the dateand amount of each such employee’s most recent salary increase, the date ofemployment of each such employee and the accrued vacation time and sick leaveor other paid time off of each such employee. The Company has paid all bonusesdue to any Company Employee with respect to work performed by such CompanyEmployee in calendar year 2005. Except as set forth on Schedule 3.9(a)(ii),(i) the terms of employment or engagement of all directors, officers,Company Employees, agents, consultants and professional advisers of the Companyare such that their employment or engagement may be terminated at will withnotice given at any time and without Liability for payment of compensation ordamages, (ii) there are no severance payments which are or could becomepayable by the Company to any such person under the terms of any oral orwritten agreement or commitment or any Law, custom, trade or practice,(iii) there are no other agreements, contracts or commitments, oral orwritten, between the Company and any such person, (iv) as of the datehereof, to the Knowledge of the Company, no executive officer or materialnumber of management level or senior technical employees of the Company has anyplans to terminate his, her or their employment or relationship with theCompany and (v) to the Knowledge of the Company, there are no agreementsbetween any Company Employee and any other Person which would restrict, in anymanner, such Person’s ability to perform services for the Company or the Buyeror the right of any of them to compete with any Person or the right of any ofthem to sell to or purchase from any other Person.

 

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### **(b)**           The Company has not, nor has it ever been, bound by orsubject to (and none of its assets or properties are bound by or subject to)any arrangement with any labor union or other collective bargainingrepresentative. No employee of the Company is or has ever been represented byany labor union or covered by any collective bargaining agreement whileemployed by the Company and no campaign to establish such representation is inprogress. With respect to the Company, there is no pending or, to the Knowledgeof the Company, threatened (i) strike, slowdown, picketing, work stoppageor employee grievance process, (ii) material charge, grievance proceedingor other claim against or affecting the Company relating to the allegedviolation of any law pertaining to labor relations or employment matters,including any charge or complaint filed by an employee or union with theNational Labor Relations Board, the Equal Employment Opportunity Commission orany comparable Government Authority, (iii) union organizational activityor other labor or employment dispute against or affecting the Company, or(iv) application for certification of a collective bargaining agent.

### ** **

### **(c)**           Except as set forth on Schedule 3.9(c), theCompany is and has been in material compliance with all applicable Lawsrespecting employment and employment practices, terms and conditions ofemployment, and wages and hours, including, without limitation, any such lawsregarding employment documentation, equal employment opportunities, fairemployment practices, plant closings and mass layoffs, sexual harassment,discrimination based on sex, race, disability, health status, pregnancy,religion, national origin, age or other tortious conduct, workers’compensation, family and medical leave, the Immigration Reform and Control Act,the Service Contract Act of 1965 and occupational safety and healthrequirements, and the Company has not engaged in any unfair labor practice. TheCompany is not nor has it been liable for the payment of any compensation,damages, taxes, fines, penalties or other amounts, however designated, forfailure to comply with any of the foregoing. All Persons classified by theCompany as independent contractors do satisfy and have satisfied therequirements of law to be so classified, and the Company has fully andaccurately reported its compensation on IRS Forms 1099 when required to doso. No individual who has performed services for or on behalf of the Companyand who has been treated by the Company as an independent contractor, isclassifiable as a “leased employee” within the meaning ofSection 414(n)(2) of the Code with respect to the Company.

### ** **

### **(d)**           To the Knowledge of the Company, except as set forth in Schedule3.9(d), no third party has claimed or has reason to claim that any personemployed by or affiliated with the Company has (i) violated any of theterms or conditions of his or her employment, non-competition, non-solicitationor non-disclosure agreement with such third party, (ii) disclosed orutilized any trade secret or proprietary information or documentation of suchthird party, or (iii) interfered in the employment relationship betweensuch third party and any of its present or former employees. To the Knowledgeof the Company, no person employed by or affiliated with the Company hasemployed or has proposed to employ any trade secret or any information ordocumentation proprietary to any former employer or violated any confidentialrelationship which such person may have had with any third party, in connectionwith the development, manufacture or sale of any Product or proposed Product orthe development or sale of any service or proposed service of the Company.

### ** **

### **(e)**           Schedule 3.9(e) lists all the Company Employeeswho are currently on leave relating to work-related injuries and/or receivingdisability benefits under any Benefit Plan.

 

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## **3.10**         Taxes.

## ** **

### **(a)**           The Company has filed (or has had filed on its behalf) on atimely basis all Tax Returns it is required to have filed. All such Tax Returnsare materially correct and complete in all respects. Except as set forth on Schedule3.10(a), all Taxes required to have been paid by the Company (whether ornot shown on any Tax Return) have been paid on a timely basis. No claim hasever been made in writing (or to the Knowledge of the Company or any Seller, inany other manner) by a Government Authority in a jurisdiction where the Companydoes not file Tax Returns that it is or may be subject to taxation by thatjurisdiction. The Company has not commenced activities in any jurisdictionwhich would reasonably be expected to require the Company to make an initialfiling of any Tax Return with respect to Taxes imposed by a GovernmentAuthority that it had not previously been required to file in the immediatelypreceding taxable period. The Company has not requested or obtained anyextension of time within which to file any Tax Return, which Tax Return has notsince been filed. There are no Encumbrances on any of the assets of the Companythat arose in connection with any failure (or alleged failure) to pay any Tax.

### ** **

### **(b)**           The Company has complied in all material respects with allapplicable Laws, rules and regulations relating to withholding Taxes including,without limitation, the withholding and reporting requirements underSections 1441 through 1464, 3401 through 3406, and 6041 through 6048 ofthe Code, as well as any similar provisions under any other laws, and has,within the time and manner prescribed by law, withheld from employee wages andother payments and paid over to the proper Government Authority all amountsrequired to have been so withheld and paid.

### ** **

### **(c)**           There are no existing circumstances which reasonably may beexpected to result in the assertion of any claim for Taxes against the Companyby any Government Authority with respect to any period for which Tax Returns arerequired to have been filed or Tax is required to have been paid. There is noaudit or other proceeding presently pending or threatened with regard to anyTax Liability or Tax Return of (i) the Company or (ii) any Sellerrelating to the Company. Neither the Company nor any Seller has received awritten ruling from or entered into a written agreement with a GovernmentAuthority relating to any Tax if such ruling or agreement could have acontinuing effect with respect to any taxable period of the Company for whichthe Company has not filed a Tax Return. No issue has been raised by anyGovernment Authority with respect to Taxes of the Company in any priorexamination which, by application of the same or similar principles, wouldreasonably be expected to result in a proposed deficiency for any other taxableperiod.

### ** **

### **(d)**           No agreement, waiver or other document or arrangementextending, or having the effect of extending, the period for assessment orcollection of Taxes (including, but not limited to, any applicable statute oflimitation), has been executed or filed with any Government Authority by or onbehalf of the Company that has continuing effect; and no power of attorney withrespect to any Tax matter relating to the Company is currently in force.

### ** **

### **(e)**           The Company has not filed any consent or entered into anyagreement under Section 341(f) of the Code with respect to any of itsassets.

 

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### **(f)**            The Company is not a party to any agreement, contract,arrangement or plan that under certain circumstances could require any payment(within the meaning of Section 280G of the Code) of any employeeremuneration after the Closing Date that would be a “parachute payment” withinthe meaning of Section 280G of the Code.

### ** **

### **(g)**           The Company has not made or agreed to make, and is notrequired to make (other that pursuant to Section 448 of the Code by reason ofthe consummation of the Merger), any change in method of accounting of theCompany used by it in any Tax Return filed by the Company which change inmethod would require the Company to make an adjustment to its income pursuantto Section 481(a) of the Code (or any similar provision) on any Tax Returnfor any taxable period for which the Company has not yet filed a Tax Return;and neither is there any application pending with any Government Authorityrequesting permission for the Company to make any change in any accountingmethod, nor has the Company received any notice that a Government Authorityproposes to require a change in method of accounting used in any Tax Returnwhich has been filed by the Company.

### ** **

### **(h)**           The Company is not and has not been a party to any Taxallocation, Tax sharing or similar agreement or arrangement (other than anysuch agreement created by the execution of this Agreement). The Company(i) is not and has not been a member of an “affiliated group” (within themeaning of Section 1504 of the Code) or similar group of entities withwhich the Company joined, or was or may be required to join, for any taxableperiod in making a consolidated federal income Tax Return or other Tax Returnin which Tax Liability was or would be computed on a consolidated, combined,unitary or similar basis, and (ii) does and has not had a relationship toany other Person which would cause it to be liable for Taxes owing by any otherPerson, including, without limitation (A) under Treasury RegulationSection 1.1502-6 (or any similar provision of state, local, or foreignlaw), (B) as a transferee or successor, or (C) by contract.

### ** **

### **(i)**            The Company has not taken any action not in accordance withpast practice that would have the effect of deferring a measure of Tax from aperiod (or portion thereof) ending on or before the Closing Date to a period(or portion thereof) beginning after the Closing Date. The Company has nodeferred income or Tax Liability arising out of any transaction, includingwithout limitation, any (i) intercompany transaction (as defined inTreasury Regulation Section 1.1502-13), (ii) the disposal of anyproperty in a transaction accounted for under the installment method pursuantto Section 453 of the Code (other than any obligations of Buyer to makepayments in respect of the Purchase Price pursuant to this Agreement which aredeemed to have been received by the Company pursuant to the Section 338(h)(10)Elections), (iii) use of the long-term contract method of accounting, or(iv) receipt of any prepaid amount on or before the Closing Date, exceptto the extent adequately reserved for on its Balance Sheet.

### ** **

### **(j)**            Schedule 3.10(j) identifies all Tax Returns thatthe Company has filed on or after January 1, 2001 and the taxable periodcovered by each such Tax Return, and identifies all Tax Returns or periods(regardless of when filed) that have been audited or are currently the subjectof an audit by a Government Authority. The Company has provided to the Buyercomplete and accurate copies of all of the following materials that relate toTax periods ending after January 1, 2001:  (i) all income TaxReturns filed by or with respect to the Company, (ii) all

 

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### **electionsrelating to Taxes which have continuing effect for taxable years ending afterthe Closing Date filed by or on behalf of the Company with any Government Authority(other than elections which are included in or apparent from Tax Returnsreferred to in (i) above), (iii) all examination reports relating to Taxesof the Company issued as a result of audits, examinations or asserted failuresto file Tax Returns or pay Taxes, and (iv) all statements of Taxesassessed against the Company that were not shown on Tax Returns filed by theCompany before such assessment. To the extent requested, the Company has madeavailable to Buyer complete and accurate copies of all Tax documents.**

### ** **

### **(k)**           The Company has not been a United States real propertyholding corporation within the meaning of Section 897(c)(2) of the Code atany time during the preceding five (5) years.

### ** **

### **(l)**            No property owned by the Company is (i) propertyrequired to be treated as being owned by another Person pursuant to theprovisions of Section 168(f)(8) of the Internal Revenue Code of 1954, asamended and in effect immediately prior to the enactment of the Tax Reform Actof 1986, (ii) “tax-exempt use property” within the meaning ofSection 168(h)(1) of the Code or (iii) is “tax-exempt bond financedproperty” within the meaning of Section 168(g) of the Code.

### ** **

### **(m)**          The Company has not constituted either a “distributingcorporation” or a “controlled corporation” within the meaning ofSection 355(a)(1)(A) of the Code in a distribution qualifying (or intendedto qualify) under Section 355 of the Code (or so much of Section 356as relates to Section 355).

### ** **

### **(n)**           The Company has been a “small business corporation” withinthe meaning of Section 1361(b) of the Code at all times since January 1,1995. For all taxable years beginning on or after January 1, 1995, the Companyhas had in effect a valid election under Section 1362(a) of the Code, andduring all such taxable years has validly been treated in a similar manner forpurposes of the income tax laws of all states in which it has been subject totaxation where such treatment is legally available. The Company has not at anytime made any election or filing to be treated as a Subchapter C corporationfor state income Tax purposes in any of those states since its election underSection 1362(a) of the Code became effective.

### ** **

### **(o)**           The Company has not had at any time any “net unrealizedbuilt-in gain” within the meaning of Section 1374(d) of the Code thatwould give rise to taxation pursuant to Section 1374 of the Code (orcomparable provisions of state law) if all of the assets of the Company weredisposed of as of the Closing Date at their respective fair market values. The Companyhas not, in the past 10 years, (i) acquired assets from anothercorporation in a transaction in which the Company’s Tax basis for the acquiredassets was determined, in whole or in part, by reference to the Tax basis ofthe acquired assets (or any other property) in the hands of the transferor,(ii) acquired the stock of any corporation which was treated for federalincome tax purposes as having transferred its assets to the Company in atransaction to which Section 381 of the Code applied, whether by reason ofelection of qualified subchapter S subsidiary status (within the meaning ofSection 1361(b)(3)(B) of the Code) or otherwise, or (iii) become asuccessor to any Person by reason of any acquisition of a substantial part ofthe

 

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### **assetsof such Person, whether by contract or by operation of Law pursuant to a mergeror consolidation or similar transaction.**

### ** **

### **(p)**           Neither the Company nor any Seller knows or has reason tobelieve, after consultation with tax counsel, that the Buyer’s acquisition ofthe Company’s capital stock pursuant to this Agreement would not qualify as a “qualifiedstock purchase” within the meaning of Section 338 of the Code and TreasuryRegulations thereunder, as to which an election properly may be made underSection 338(h)(10).

### ** **

### **(q)**           The Company does not have a “permanent establishment” inany foreign country as such term is defined in any applicable Tax treaty orconvention between the United States and such foreign country and has not otherwisetaken steps or conducted business operations that have exposed, or will exposeit to the taxing jurisdiction of a foreign country. The Company has compliedwith all applicable tax laws and regulations of each country (includingpolitical subdivisions thereof) in which the Company, has performed services,even where such services relate or are provided solely to agencies of theUnited States government.

### ** **

### **(r)**            Neither Company nor any of its Subsidiaries is or has beena beneficiary or has otherwise participated in any “reportable transaction”within the meaning of Section 1.6011-4(b)(1) of the Treasury Regulationsthat was, is or to the Knowledge of the Company will ever be required to bedisclosed under Section 1.6011-4 of the Treasury Regulations, and no TaxReturn of Company or any of its Subsidiaries has (i) contained adisclosure statement under Section 6662 of the Code (or any predecessorprovision or comparable provision of Law), or (ii) been filed with respectto which the Company was advised by its return preparer to consider makingdisclosure with respect to Section 6662 of the Code, which disclosure wasnot made.

### ** **

### **(s)**           The Company has not participated in, or cooperated with, aninternational boycott within the meaning of Section 999 of the Code.

### ** **

### **(t)**            The Company (i) is not a party to any joint venture,partnership or other agreement or arrangement which is treated as a partnershipfor federal income Tax purposes or (ii) does not own any interest in anentity that is treated as an entity disregarded as separate from its owner forfederal Tax purposes, or as to which an election pursuant to TreasuryRegulation Section 301.7701-3 has been made.

### ** **

## **3.11**         Property.

## ** **

### **(a)**           The Company owns no real property and has never owned anyreal property. Schedule 3.11(a) sets forth an accurate and completelist of all real property leased by the Company or to which the Company mayhave any leasehold rights (collectively, the “Facilities”). True,complete and correct copies of all leases of real property listed on Schedule 3.11(a)have been delivered to the Buyer. Except as otherwise disclosed on Schedule 3.11(a),to the Knowledge of the Company, no person, firm or corporation, other than theowner of such real property and the Company, has any rights (including rightsarising under an installment contract, option to purchase, easement,right-of-way, lease, sublease or otherwise) with respect to the Facilities orany part thereof. All leases set forth on Schedule 3.11(a) are in

 

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### **fullforce and effect and constitute valid and binding agreements of the Companyand, to the Knowledge of the Company, the other party or parties thereto inaccordance with their respective terms.**

### ** **

### **(b)**           Schedule 3.11(b) sets forth an accurate list of allowned and leased personal property included on the Balance Sheet and all otherpersonal property owned or leased by the Company (i) as of the BalanceSheet Date, or (ii) acquired since the Balance Sheet Date, in the case of(i) and (ii) valued in excess of Ten Thousand Dollars ($10,000).True, complete and correct copies of all leases of personal property andequipment listed on Schedule 3.11(b) have been delivered to theBuyer. All of the personal property listed on Schedule 3.11(b) isin good working order and condition, ordinary wear and tear excepted. Allpersonal property used by the Company is either owned by the Company or leasedunder an agreement listed on Schedule 3.11(b). All leases set forthon Schedule 3.11(b) are in full force and effect and constitutevalid and binding agreements of the Company and, the other party or partiesthereto in accordance with their respective terms.

### ** **

### **(c)**           The Company has good and marketable title to the Company’sassets, free and clear of any and all Encumbrances and defects in title (otherthan Permitted Encumbrances). To the Knowledge of the Company, the Company’sassets, taken together, are adequate and sufficient for the operation of itsbusiness as currently conducted. There are no facts or conditions affecting theCompany’s assets which would, individually or in the aggregate, reasonably beexpected to interfere in any material respect with the use, occupancy oroperation thereof as currently used, occupied or operated, or their adequacyfor such use.

### ** **

## **3.12**         Contracts.

## ** **

### **(a)**           Schedule 3.12(a) sets forth an accurate andcomplete list of each Material Contract. To the Knowledge of the Company, noContract has been breached or cancelled by the other party, and the Company hasno Knowledge of any anticipated breach by any other party to any Contract (withor without notice or lapse of time). The Company has performed all theobligations required to be performed by it in connection with the Contracts andis not in default under or in breach of any Contract, and no event has occurredwhich with the passage of time or the giving of notice or both would reasonablybe expected to (i) result in a default or breach thereunder;(ii) give any Person the right to declare a default or exercise any remedyunder any Contract, (iii) give any Person the right to accelerate thematurity or performance of any Contract, or (iv) give any Person the rightto cancel, terminate or materially modify any Contract. The Company has notwaived any of its material rights under any Contract. The Company has nopresent expectation or intention of not fully performing any obligationpursuant to any Contract. Each Contract is legal, valid, binding, enforceableand in full force and effect, except as enforceability may be limited byapplicable bankruptcy, insolvency, reorganization, moratorium or other similarlaws affecting the enforcement of creditors’ rights in general, and shallcontinue as such following the consummation of the transactions contemplatedhereby. Except as set forth on Schedule 3.12(a), no Contractobligates the Company to process, manufacture or deliver products or performservices that shall result in a loss to the Company upon completion ofperformance.

 

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### **(b)**           The Company has provided the Buyer with a true and correctcopy of all written Contracts which are required to be disclosed on Schedule 3.12(a),in each case together with all amendments, waivers or any other changes thereto(all of which are disclosed on Schedule 3.12(a)). Schedule 3.12(b)contains an accurate and complete description of all material terms of all oralMaterial Contracts.

### ** **

### **(c)**           No Person is currently renegotiating, or has the right torenegotiate, any amount paid or payable to the Company under any Contract or anyother term or provision of any Contract.

### ** **

### **(d)**           Schedule 3.12(d) identifies and provides anaccurate and complete description of each proposed Contract as to which anypending bid, offer, written proposal, term sheet or similar document has beensubmitted or received by the Company.

### ** **

## **3.13**         Litigation. Except as set forth on Schedule 3.13,there is no litigation, suit, proceeding, action, claim, demand orinvestigation, at law or in equity or in any administrative or arbitrationproceeding, pending or, to the Knowledge of the Company, threatened against oraffecting the Company before any court, agency, authority or arbitrationtribunal. To the Knowledge of the Company, there are no facts that would bereasonably likely to result in any such litigation, suit, proceeding, action,claim or investigation. The Company is not subject to or in default withrespect to any notice, order, writ, injunction or decree of any GovernmentAuthority or arbitration tribunal.

## ** **

## **3.14**         Compliance with Laws. The Company has complied and iscurrently in compliance in all material respects with all applicable Laws,regulations, rules, orders, permits, judgments, decrees and other requirementsand policies imposed by any Government Authority and there are no violations ofany other ethical requirement applicable to the Company. Neither the Company,nor any Seller, nor any of the employees, partners, principals, agents orassignees of the Company or any Seller have committed (or taken any action topromote or conceal) any violation of the Foreign Corrupt Practices Act,15 U.S.C. sections 78dd-1, -2. The Company has all licenses, permits,approvals, qualifications or the like, from any Government, GovernmentAuthority or Person necessary for the conduct of its business as conducted allsuch items are in full force and effect and the Company is and has at all timesbeen in compliance with the terms thereof (other than immaterial licenses,permits, approvals, qualifications or the like required by any state or localGovernment Authority). Schedule 3.14 sets forth all licenses andpermits held by the Company which terminate or become renewable at any timeprior to the first anniversary of the date of this Agreement. Except as setforth on Schedule 3.14, to the Knowledge of the Company, there areno facts or circumstances in existence which are reasonably likely to preventthe Company from renewing each such license and permit. The Company has notreceived any written notice or citation for any actual or potentialnoncompliance with any of the foregoing in this Section 3.14, and, to theKnowledge of the Company, there exists no condition, situation or circumstance,nor has there existed such a condition, situation or circumstance, which, afternotice or lapse of time, or both, would reasonably be expected to constitutenoncompliance with or give rise to future Liability with regard to any of theforegoing in this Section 3.14.

 

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## **3.15**         Government Contracts.

## ** **

### **(a)**           Schedule 3.15(a) lists all Government Contracts andGovernment Bids as of November 30, 2005, including the name and number ofthe Government Contract and the applicable solicitation name and number for theGovernment Bid; the name of the other contracting party; the name of theGovernment Authority that is the customer (if different from the contractingparty); for task orders and delivery orders, the name and number of theGovernment Contract (including any blanket purchase agreement) under which theorder was issued or the Government Bid was submitted; the date the GovernmentContract was awarded; and the scheduled end date of the Government Contract.Except as set forth on Schedule 3.15(a), the Company has notentered into any Government Contract that has not been closed out or submittedany outstanding Government Bid that remains outstanding. The Company has madeavailable to the Buyer correct and complete copies of all Government Contractsand outstanding Government Bids. All Government Contracts constitute valid andbinding obligations of the Company and, to the Knowledge of the Company, of theother party or parties thereto, and are fully enforceable in accordance withtheir terms, except as enforceability may be limited by applicable bankruptcy,insolvency, reorganization, moratorium or other similar laws affecting theenforcement of creditors’ rights in general. To the extent required withrespect to any of the Government Contracts that have not been closed out,except as set forth on Schedule 3.15(a), the Company has obtainedeach novation or other consents from any Government Authority for (or hasprovided notice of) the assignment or transfer to the Company of all right,title and interest in and to such Government Contract.

### ** **

### **(b)**           Schedule 3.15(b) sets forth, as ofNovember 30, 2005, for each Government Contract, each project with a firmorder whereby the contractual value of work not yet performed (funded orunfunded) exceeds $50,000; the contractual value of such work not yet performedthereunder as of such date; and any dollar amounts included that are not yetfunded.

### ** **

### **(c)**           With respect to each Government Contract or Government Bid,(i) the Company has complied in all material respects with all terms andconditions of such Government Contract, including all provisions incorporatedby reference or by operation of law therein, (ii) the Company has compliedin all material respects with all requirements of all Laws pertaining to suchGovernment Contract, (iii) all representations and certifications executedby the Company pertaining to such Government Contract or Government Bid werecomplete and correct in all material respects as of their effective date andthe Company has complied with all representations and certifications,(iv) the Company has not submitted any materially inaccurate, untruthfulor misleading cost or pricing data, certification, bid, proposal, report,invoice, claim, or other information to a Government Authority, primecontractor, subcontractor, vendor or any other Person relating to anyGovernment Contract or Government Bid, (v) neither a Government Authoritynor any prime contractor, subcontractor, or any other Person has notified theCompany, either in writing or orally, that the Company has breached or violatedany law, certification, representation, clause, provision or requirementpertaining to such Government Contract or Government Bid, (vi) nocancellation, termination for convenience, termination for default, suspension,stop work order, cure notice, or show cause notice is currently in effect nor,to the Knowledge of the Company, is any such action being proposed orthreatened, pertaining to such Government Contract, (vii) no cost claimedor proposed by the Company pertaining to any Government Contract or GovernmentBid is the subject of any audit or investigation nor, to the

 

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### **Knowledgeof the Company, has any such audit or investigation been threatened,(viii) no Seller nor the Company has information that any option withrespect to such Government Contract will not be exercised or that anyGovernment Contract will be terminated, cancelled, or will otherwise come to anend prior to the end of its stated term (including all option periods),(ix) there are no pending recommendations by any Government auditor thatany cost claimed by the Company is unallowable, and (x) all amountspreviously charged to or presently carried as chargeable to anycost-reimbursable Government Contract are allowable pursuant to 48 C.F.R.Part 31. The Company is not in receipt or possession of any competitor orGovernment Authority’s proprietary or procurement sensitive information undercircumstances where there is reason to believe that such receipt or possessionis unlawful or unauthorized. The Company has not misused or disclosed anyclassified information or any records subject to the Privacy Act (5 U.S.C.§ 552a).**

### ** **

### **(d)**           (i) Neither the Company nor any of the Company’sdirectors, officers, employees, or (to the Knowledge of the Company) anyconsultants or agents is or has, during the past three (3) years, beenunder administrative, civil or criminal audit, indictment or information by anyGovernment Authority or, to the Knowledge of the Company, subject to anypending internal investigation by the Company with respect to any alleged actor omission arising under or relating to any Government Contract or GovernmentBid. (ii) During the past three (3) years, the Company has notconducted or initiated any internal investigation or made a voluntarydisclosure to any Government Authority with respect to any alleged act oromission arising under or relating to a Government Contract or Government Bid.

### ** **

### **(e)**           Schedule 3.15(e) lists each draft and final auditreport received by the Company during the past five (5) years with respectto the audit by any Government Authority of any Government Contract or of anyindirect cost, other cost or cost accounting practice of the Company. TheCompany has made available to the Buyer correct and complete copies of eachsuch report.

### ** **

### **(f)**            There exist (i) no outstanding claims against theCompany, either by any Government Authority or by any prime contractor,subcontractor, vendor or other Person, arising under or relating to anyGovernment Contract or Government Bid, (ii) no material delivery orperformance problems with respect to any Government Contract, (iii) noclaims or disputes between the Company and any Government Authority or betweenthe Company and any prime contractor, subcontractor, vendor, or other Person,in each case arising under or relating to any Government Contract or GovernmentBid, (iv) no circumstances in which the Company or any other party to aGovernment Contract has terminated, cancelled or waived any material term orcondition of any Government Contract, (v) no material projected cost overrunson any of the Government Contracts and (vi) to the Knowledge of theCompany, no circumstances in which the Company has an interest in any pendingor potential claim against any Government Authority or any prime contractor,subcontractor or vendor arising under or relating to any Government Contract orGovernment Bid.

### ** **

### **(g)**           No money due to the Company in an amount in excess of$50,000 pertaining to any Government Contract has been withheld or set off norhas any claim been made to withhold or set off money and the Company isentitled to all progress payments received with

 

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### **respectthereto, and the Company has not received nor expects to receive any requestswith respect to any Government Contract for equitable adjustment.**

### ** **

### **(h)**           The Company has neither been disqualified, debarred, orsuspended from participation in the award of contracts with the Government orany Government Authority (excluding for this purpose ineligibility to bid oncertain contracts due to generally applicable bidding requirements) nor, to theKnowledge of the Company, are there facts or circumstances that wouldreasonably be expected to warrant the institution of disqualification,suspension, or debarment proceedings or the finding of nonresponsibility orineligibility on the part of the Company or any director, officer, or employeeof the Company.

### ** **

### **(i)**            The Company’s cost accounting, estimating proposal andindirect rate proposal, confidential and classified information access andmaintenance, time-keeping and labor charging, wage classification and FairLabor Standards Act exemption, and procurement systems and the associatedentries reflected in the Company’s financial statements with respect to theGovernment Contracts and Government Bids are in material compliance with allapplicable Laws and Government Contract provisions, including, withoutlimitation, applicable cost principles and applicable cost accountingstandards.

### ** **

### **(j)**            Schedule 3.15(j) contains a complete and correctlist of all government-owned property at the Company’s facilities providedunder, necessary to perform the obligations under, or for which the Company isaccountable under the Government Contracts. All such government-owned propertyis administered, maintained, identified, tracked, used, managed, accounted forand disposed of in accordance with a government-approved property managementsystem and is in the condition described therein.

### ** **

### **(k)**           The Company has delivered or made available to the Buyercopies of all written negative past performance evaluations, comments orreviews by any Government Authority or any other Person in connection with anyGovernment Contract which copies were received by or made accessible to theCompany in the last three (3) years.

### ** **

### **(l)**            Each employee, agent, consultant, or representative of theCompany required to possess a Government security clearance (“SecurityClearance”) to engage in the performance of any Government Contractcurrently possesses a valid Security Clearance, and, to the Knowledge of theCompany, has not taken or failed to take any action which would reasonably beexpected to result in the termination of such valid Security Clearance, and haspossessed such Security Clearance since the date it was required.

### ** **

### **(m)**          Except as set forth on Schedule 3.15(m), noneof the Company’s current Government Contracts between the Company and the U.S.Government or a Governmental Authority was based in part on the Company’sstatus as a small business (including without limitation, a small disadvantagedbusiness (“SDB”), a woman-owned small business (“WOSB”), or aSmall Business Administration (“SBA”) Section 8(a) programparticipant). The Company is not claiming eligibility as a small business,including eligibility as an SDB, a WOSB or Section 8(a) Programparticipant, with respect to any pending Government Bid. The Company has neverbeen the subject of an SBA certificate of competency, size determination, sizeprotest, size appeal or a review of eligibility for SDB or 8(a) status afterinitial entry into such program.

 

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### **(n)**           Except for those liens listed on Schedule 3.15(n),made in accordance with 31 U.S.C. § 3727 (as amended), otherwiseknown as the Assignment of Claims Act, and 41 U.S.C. § 15 (as amended),otherwise known as the Assignment of Contracts Act, the Company has notassigned or otherwise conveyed or transferred, or agreed to assign, convey, ortransfer to any Person, any right, title or interest in or to any of theGovernment Contracts or Government Bids, or any account receivable relatingthereto, whether as a security interest or otherwise.

### ** **

### **(o)**           All technical data, computer software and computer softwaredocumentation (as those terms are defined under the Federal AcquisitionRegulation and its supplemental regulations) developed, delivered, or usedunder or in connection with the Government Contracts have been properly andsufficiently marked and protected so that no more than the minimum rights orlicenses required under applicable regulations and Government Contract terms,if any, have been provided. All disclosures, elections, and notices required byapplicable regulations and contract terms to protect ownership of inventionsdeveloped, conceived or first actually reduced to practice under GovernmentContracts have been made and provided.

### ** **

### **(p)**           Schedule 3.15(p) sets forth all of the Company’scontingent fee agreements relating to its Government sales and marketingefforts. Except as set forth on Schedule 3.15(p), each sucharrangement has been properly disclosed to the appropriate GovernmentAuthority.

### ** **

## **3.16**         Environmental and Safety Matters. The Company hasconducted its business in compliance in all material respects with allapplicable Environmental Laws. None of the properties currently or, to theKnowledge of the Company, formerly owned or operated by the Company contain anyHazardous Substance in amounts exceeding the levels permitted by applicableEnvironmental Laws. The Company has not received any written notices, demandletters or requests for information from any Government Authority or otherPerson, which has not heretofore been resolved with such Government Authorityor other Person, indicating that the Company may be in violation of, or liableunder, any Environmental Law. There are no civil, criminal or administrativeactions, suits, demands, claims, hearings, investigations or proceedingspending or, to the Knowledge of the Company, threatened against the Companyrelating to any violation, or alleged violation, of any Environmental Law. Noreports have been filed, or are required to be filed, by the Company concerningthe Release of any Hazardous Substance or the threatened or actual violation ofany Environmental Law which have not heretofore been resolved. No HazardousSubstance has been disposed of, Released or transported in violation of anyapplicable Environmental Law from any properties owned by the Company. To theKnowledge of the Company, no remediation or investigation of HazardousSubstances is occurring at any property operated or formerly operated by theCompany. To the Knowledge of the Company, the Company and any of its propertiesare not subject to any liabilities or expenditures (fixed or contingent)relating to any suit, settlement, court order, administrative order, regulatoryrequirement, judgment or claim asserted or arising under any Environmental Law.

## ** **

## **3.17**         Insurance. Schedule 3.17 listsand briefly describes each insurance policy maintained by, on behalf of, forthe benefit of or at the expense of the Company and any claims

 

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## **madethereunder. The Company has provided copies to the Buyer of all such insurancepolicies. All of such insurance policies are in full force and effect, and theCompany is not nor has it ever been in default with respect to its obligationsunder any such insurance policies and the Company has never been deniedinsurance coverage. The Company is current in all of its premiums for itsinsurance policies. Neither the Company nor any Seller knows of any threatenedtermination of, or material premium increase in excess of industry norms withrespect to, any such policies. The Company has no self-insurance orco-insurance programs.**

## ** **

## **3.18**         Intellectual Property.

## ** **

### **(a)**           The Company has sole title to and ownership of, orpossesses legally enforceable rights to use under valid and subsisting writtenlicense agreements, all Company Intellectual Property Rights, and the Companyhas not misappropriated, is not in conflict with and is not infringing upon theIntellectual Property Rights of any Person. The Company is the sole andexclusive owner of the Company Intellectual Property Rights free and clear ofany Encumbrances or other rights or claims of others, except for Third PartyIntellectual Property Rights. To the Knowledge of the Company, none of theCompany Intellectual Property Rights is being infringed by activities, productsor services of, or is being misappropriated by, any other Person.

### ** **

### **(b)**           Schedule 3.18(b) lists or describes (i) allregistered and pending applications for registration of Company IntellectualProperty Rights; (ii) all written agreements pursuant to which the Company ispermitted to use Third Party Intellectual Property Rights excludingcommercial-off-the shelf products that are used pursuant to a shrink wrap orother similar agreements; (iii) all material agreements or other arrangementsunder which the Company has provided or agreed to provide or make availableobject or source code to any Product to any Person, including, without limitation,to end-users (other than End-User Licenses); and (iv) each Material Contract,other than a Material Contract entered into by the Company in the ordinarycourse of business, pursuant to which the Company has granted to any Person anyrights with respect to any Company Intellectual Property Rights. The Companyhas made available to the Buyer correct and complete copies of allregistrations and applications and all licenses, sublicenses and agreements(excluding shrink wrap license agreements) relating to the Company IntellectualProperty Rights, each as amended to date. The Company is not a party to anyoral license, sublicense or other agreement which, if reduced to written form,would be required to be listed in Schedule 3.18(b) under the terms of thisSection 3.18(b).

### ** **

### **(c)**           Except as set forth on Schedule 3.18(c), withrespect to each item of Third Party Intellectual Property Rights, there are noroyalty, commission or other executory payment agreements, arrangements orunderstandings relating to such item.

### ** **

### **(d)**           The Company has made available to the Buyer copies of theCompany’s standard forms of end-user license agreements (“End-User Licenses”).Except as set forth on Schedule 3.18(d), to the Knowledge of theCompany, there are no material errors, omissions, issues or defects in theProducts. Except as set forth on Schedule 3.18(d), the Company has notmade any material oral or written representations or warranties with respect toits Products or services.

 

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### **(e)**           The Company has used reasonable efforts to protect andenforce its trade secrets and otherwise to safeguard and maintain the secrecyand confidentiality of all Company Intellectual Property Rights. Except as setforth on Schedule 3.18(e), all officers, employees and consultants ofthe Company who have had access to proprietary information or CompanyIntellectual Property Rights have executed and delivered to the Companyagreements (copies of which have been provided to the Buyer) to maintain theconfidentiality of the Company Intellectual Property Rights and to assign tothe Company all Intellectual Property Rights arising from the servicesperformed for the Company by such persons. No current or prior officers,employees or consultants of the Company have claimed any ownership interest inany Company Intellectual Property Rights as a result of having been involved inthe development of such property while employed by or consulting to theCompany, or otherwise. To the Knowledge of the Company, there has been noviolation of any confidentiality or nondisclosure agreement relating to theCompany Intellectual Property Rights. Except as set forth on Schedule 3.18(e)and except for the Third Party Intellectual Property Rights, all CompanyIntellectual Property Rights have been developed by employees of the Company,within the course and scope of their employment.

### ** **

### **(f)**            No Federal, state, local or other government funding oruniversity or college facilities were used in the development of the Productsand such Products were not developed pursuant to any contract or otheragreement with any Person except pursuant to contracts or agreements listed in Schedule 3.18(f).

### ** **

## **3.19**         Related Party Transactions. Except as set forth on Schedule 3.19,the Company has not, since December 31, 2001, extended or maintainedcredit, arranged for the extension of credit, or renewed an extension ofcredit, in the form of a personal loan to or for any director or officer (orequivalent thereof) of the Company. No officer or director of the Company hasreceived since December 31, 2001, nor is entitled to receive, any materialcompensation from any Person that has engaged in or is engaging in any materialtransaction with the Company. The Company is not a party to or bound by any Contractor other commitment or transaction with any Related Party, nor do any RelatedParties have any legal or beneficial interest in the assets or property ownedor used by the Company, in any Contracts to which the Company is a party, or inany other Person with which the Company is or has been party to a Contract.Except as set forth on Schedule 3.19, there are no outstandingclaims, accounts payable or receivable, intercompany loans, indebtedness, orother Liabilities, between the Company and any Seller or any Related Parties,and all such Liabilities have been, or will be prior to Closing, repaid infull.

## ** **

## **3.20**         Brokers. Except as set forth on Schedule 3.20,no Person has or will have, as a result of the transactions contemplated bythis Agreement, any right, interest or claim against or upon the Buyer, theCompany or any Seller for any commission, fee or other compensation payable asa finder or broker because of any act or omission by the Company or any Seller.

## ** **

## **3.21**         Bank Accounts; Powers of Attorney. Schedule 3.21sets forth a true, correct and complete list of the names and locations of allbanks and other financial institutions at which the Company maintains anaccount or safe deposit box, the names of all Persons authorized to withdrawtherefrom or have access thereto and the names of all Persons holding powers ofattorney from the Company as of the date of this Agreement.

 

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## **3.22**         Disclosure. To the actual knowledge of theCompany, no representation or warranty by the Company or any Seller containedin this Agreement, and no representation, warranty or statement contained inany list, certificate, schedule or other instrument, document, agreement orwriting furnished or to be furnished to the Buyer pursuant hereto, contains orwill contain any untrue statement of a fact or omits or will omit to state anymaterial fact necessary to make any statement herein or therein not misleading.

## ** **

# **ARTICLE IVREPRESENTATIONS AND WARRANTIES OF THE SELLERS**

# ** **

As a material inducement to the Buyer to enter intothis Agreement, each Seller, jointly and severally, represents and warrants tothe Buyer, as of the date hereof and as of the Closing, as follows:

 

## **4.1**           Authority for Agreement. Each Seller has full power,authority and legal right and capacity to enter into and perform such Seller’sobligations under this Agreement and each other document contemplated hereby towhich such Seller is or will be a party and to consummate the transactionscontemplated hereby and thereby. This Agreement and the other documentscontemplated hereby to which such Seller is a party have been duly executed anddelivered by such Seller and are legal, valid and binding obligations of suchSeller, enforceable against such Seller in accordance with their respectiveterms, except as enforceability may be limited by applicable bankruptcy,insolvency, reorganization, moratorium or other similar laws affecting theenforcement of creditors’ rights in general.

## ** **

## **4.2**           No Violation to Result. Except as set forth on Schedule 4.2,the execution, delivery and performance by each Seller of this Agreement andthe other documents contemplated hereby and the consummation by each Seller ofthe transactions contemplated hereby and thereby, do not and will not, directlyor indirectly (with or without notice or lapse of time): (i) violate, breach, conflict with, constitute a default under, accelerateor permit the acceleration of the performance required by any (x) contractor Encumbrance to which such Seller is a party or by which it is bound or(y) any Law, judgment, decree, order, rule, regulation, permit, license orother legal requirement of any Government Authority applicable to such Seller;(ii) give any Government Authority or other Person the right to challengeany of the transactions contemplated by this Agreement; or (iii) result inthe creation or imposition of any Encumbrance, possibility of Encumbrance, orrestriction in favor of any Person upon any Shares or any of the properties orassets of the Company. Other than as set forth on Schedule 3.3 or 4.2,no notice to, filing with, or consent of, any Person is necessary in connectionwith, nor is any “change of control” provision triggered by, the approval,adoption, execution, delivery or performance by each Seller of this Agreementand the other documents contemplated hereby nor the consummation by such Sellerof the transactions contemplated hereby or thereby. Each Seller has given allnotices, made all filings and obtained all consents set forth on Schedule 4.2or will have done so prior to Closing.

## ** **

## **4.3**           Company Stock. The Sellers and the other Personslisted on Schedule 3.4(a) are the sole holders of the issued andoutstanding shares of capital stock of the Company and each Seller and otherPerson listed on Schedule 3.4(a) holds of record and beneficially thenumber of

 

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## **sharesof Company Common Stock as are set forth opposite such Seller’s or other Person’sname on Schedule 3.4(a), free and clear of any Encumbrance (otherthan restrictions imposed by federal and state securities laws). All otherinformation in Section 3.4(a) and on Schedule 3.4(a) withrespect to such Seller or other Person is true, correct and complete. Except asset forth in this Agreement in Section 6.14 or on Schedule 3.4(d),there are no proxies, voting rights, shareholders agreements or otheragreements or understandings, to which any Seller is a party or by which anySeller is bound, with respect to the voting or transfer of the capital stock ofthe Company.**

## ** **

## **4.4**           Brokers. Except as set forth on Schedule 3.20,no Person has or will have, as a result of the transactions contemplated bythis Agreement, any right, interest or claim against or upon the Buyer, theCompany or any Seller for any commission, fee or other compensation payable asa finder or broker because of any act or omission by any Seller.

## ** **

## **4.5**           Disclosure. To the actual knowledge of anySeller, no representation or warranty by any Seller contained in thisAgreement, and no representation, warranty or statement contained in any list,certificate, schedule or other instrument, document, agreement or writingfurnished or to be furnished to, or made with, the Buyer pursuant hereto,contains or will contain any untrue statement of a fact or omits or will omitto state any material fact necessary to make any statement herein or thereinnot misleading.

## ** **

# **ARTICLE VREPRESENTATIONS AND WARRANTIES OF BUYER**

# ** **

The Buyer represents and warrants to the Sellers, asof the date hereof and as of the Closing, as follows:

 

## **5.1**           Organization. The Buyer is a corporation, dulyorganized, validly existing and in good standing under the laws of the State ofDelaware and is qualified to do business and in good standing in eachjurisdiction where the character or location of its assets or properties owned,leased or operated by it or the nature of its activities makes suchqualification necessary. The Buyer has full corporate power and authoritynecessary to own and operate its properties and to conduct its business asconducted.

## ** **

## **5.2**           Authority for Agreement. The Buyer has full power,authority and legal right to enter into and perform its obligations under thisAgreement and the other documents contemplated hereby to which the Buyer is orwill be a party and to consummate the transactions contemplated hereby andthereby. Upon due approval by the board of directors of the Buyer, theexecution, delivery and performance of this Agreement and the other documentscontemplated hereby and the consummation of the transactions contemplatedhereby and thereby shall be authorized. Other than due approval by the board ofdirectors of the Buyer, no other corporate proceedings on the part of the Buyerare necessary to approve and authorize the execution, delivery and performanceof this Agreement and the other documents contemplated hereby and theconsummation of the transactions contemplated hereby and thereby. Upon dueapproval by the board of directors of the Buyer, this Agreement and the otherdocuments contemplated hereby to which Buyer is a party shall be legal, validand binding obligations of the Buyer,

## ** **

## **30**

## ****

## ** **

## **enforceable against the Buyer inaccordance with their respective terms, except as enforceability may be limitedby applicable bankruptcy, insolvency, reorganization, moratorium or similarlaws affecting the enforcement of creditors’ rights in general.**

## ** **

5.3           No Violation toResult. Except as set forth on Schedule 5.3, the execution,delivery and performance by the Buyer of this Agreement and the other documentscontemplated hereby and the consummation by the Buyer of the transactionscontemplated hereby and thereby, do not and will not, directly or indirectly(with or without notice or lapse of time):  (i) violate, breach,conflict with, constitute a default under, accelerate or permit theacceleration of the performance required by, (x) any of the terms of theCertificate of Incorporation or Bylaws of the Buyer or any resolution adoptedby the board of directors of the Buyer or stockholders of the Buyer, or(y) any Contract or Encumbrance to which the Buyer is a party or by whichit is bound; or (z) any law, judgment, decree, order, rule, regulation,permit, license or other legal requirement of any Government Authorityapplicable to the Buyer; (ii) give any Government Authority or otherPerson the right to challenge any of the transactions contemplated by thisAgreement; or (iii) result in the creation or imposition of anyEncumbrance, possibility of Encumbrance, or restriction in favor of any Person,upon any of the properties or assets of the Buyer. Other than as set forth on Schedule 5.3or as otherwise expressly set forth herein, no notice to, filing with, orconsent of, any Person is necessary in connection with the execution, deliveryor performance by the Buyer of this Agreement and the other documentscontemplated hereby nor the consummation by the Buyer of the transactionscontemplated hereby or thereby.

## ** **

5.4           Litigation. Asof the date hereof, there is no litigation, suit, proceeding, action, claim,demand or investigation, at law or in equity or in any administrative orarbitration proceeding, pending or, to the Knowledge of the Buyer, threatenedagainst or affecting the Company before any court, agency, authority orarbitration tribunal that questions the validity of this Agreement or seeks toprohibit, enjoin or otherwise challenge the transactions contemplated hereby.

## ** **

5.5           Investment Intent.The Buyer is acquiring the capital stock of the Company for its own account,for investment purposes, and not with a view to resale or distribution of thecapital stock of the Company within the meaning of Section 2(11) of theSecurities Act of 1933, as amended.

## ** **

5.6           No AdditionalRepresentations. Buyer acknowledges that, except as expressly set forth inthis Agreement or in any certificate, schedule or other instrument or agreementdelivered or required to be delivered to the Buyer pursuant hereto (or anyother document delivered to the Buyer as a condition to the Closing pursuant toArticle VII hereof), none of the Sellers, the Company or any Person acting ontheir behalf makes, or shall be deemed to have made, any representation orwarranty, express or implied, as to the accuracy or completeness of any of theinformation or documents, financial or otherwise, regarding Sellers or theCompany that have been prepared and furnished in good faith and based on reasonableassumptions (including, without limitation, any estimates, projections,forecasts, budgets or other forward-looking information) and have been providedor otherwise made available to Buyer or any Person acting on behalf of Buyer(including, without limitation, in any management presentations, information oroffering memorandum, supplemental information or other materials or informationwith respect to any of the above) on or prior to the date hereof.

 

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5.7           Brokers. NoPerson has or will have, as a result of the transactions contemplated by thisAgreement, any right, interest or claim against or upon any of the Sellers forany commission, fee or other compensation payable as a finder or broker becauseof any act or omission by the Buyer.

## ** **

5.8           Disclosure. Tothe actual knowledge of the Buyer, no representation or warranty by the Buyercontained in this Agreement, and no representation, warranty or statementcontained in any list, certificate, schedule or other instrument,document, agreement or writing furnished or to be furnished to the Sellerpursuant hereto, contains or will contain any untrue statement of a fact oromits or will omit to state any material fact necessary to make any statementherein or therein not misleading.

 

# **ARTICLE VIADDITIONAL AGREEMENTS**

# ** **

6.1           Access to Propertiesand Records. The Company shall afford to the officers, employees,attorneys, accountants and other authorized representatives of the Buyerreasonable access during regular business hours to all of its assets,properties, books and records and employees in order to afford the Buyer asfull an opportunity of review, examination and investigation as it shallreasonably request of the affairs of the Company, and the Buyer and itsrepresentatives shall be permitted to make extracts from, or take copies of,such books, records (including the stock record and minute books) or otherdocumentation as may be reasonably necessary; providedthatno such access shall unreasonably interfere with the operations or business ofthe Company. The Company shall furnish or cause to be furnished to the Buyersuch reasonable financial and operating data and other information about theCompany, its business as presently conducted, as conducted in the past and asproposed to be conducted in the future, and properties and assets which any ofthe officers, employees, attorneys, accountants or other authorizedrepresentatives of the Buyer may reasonably request. No information orknowledge obtained in any investigation pursuant to this Section 6.1 shallaffect or be deemed to modify any representation or warranty of any Seller orthe Company contained herein or the conditions to the obligations of theparties to consummate the transactions contemplated by this Agreement or anyprovision hereof.

## ** **

6.2           Interim Covenants ofthe Company and the Sellers. From the date of this Agreement until theClosing Date, except to the extent expressly permitted by this Agreement orotherwise consented to by an instrument in writing signed by the Buyer or asotherwise set forth on Schedule 6.2, the Company and the Sellersshall (i) use their reasonable best efforts to keep intact the Company andits business, as presently conducted or as conducted in the past, and shall nottake or permit to be taken or do or suffer to be done anything other than inthe ordinary course of its business as the same is presently being conducted;(ii) use their reasonable best efforts to keep available the services ofthe directors, officers, employees, independent contractors and agents of theCompany and retain and maintain good relationships with its clients andmaintain the Company’s assets and the Facilities in good condition;(iii) perform their obligations under the Contracts and Government Contracts;(iv) use their reasonable best efforts to maintain the goodwill andreputation associated with the Company; and (v) on or prior to the ClosingDate, to the extent requested by the Buyer, take such actions as may berequired to

 

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## **terminate, contingent on theClosing, any or all of the Benefit Plans and withdraw Company Employees fromparticipation in any Benefit Plans that it does not sponsor. Without limitingthe generality of the foregoing, the Company shall not (and the Sellers shallnot cause or permit the Company to), except as permitted in writing by theBuyer or as set forth on Schedule 6.2:**

## ** **

(a)           adopt or propose anychange to the Company’s Articles of Incorporation, Bylaws or other organizationaldocuments;

### ** **

(b)           merge or consolidatewith any other Person or acquire a material amount of stock or assets of anyother Person or effect any business combination, recapitalization or similartransaction;

### ** **

(c)           purchase, sell, leaseor dispose of or make any contract for the purchase, sale, lease or dispositionof or make subject to a security interest or any other Encumbrance (other thana Permitted Encumbrance), any of the Company’s properties or assets, other thanin the ordinary and usual course of its business, consistent with therepresentations and warranties contained herein, and not in breach of any ofthe provisions of this Section 6.2, in each case for a consideration atleast equal to the fair value of such property or asset;

### ** **

(d)           grant any salaryincrease to, or increase the draw of, any of the officers, directors, or,except in the ordinary and usual course of its business or as set forth on Schedule 6.2(d),employees or agents of the Company, or grant or amend any Restricted StockAwards, or enter into any new, or amend or alter any existing, employment,bonus, incentive compensation, deferred compensation, profit sharing,retirement, pension, stock option, group insurance, death benefit or otherfringe or other Benefit Plan, trust agreement or other similar or dissimilararrangement, or any employment or consulting agreement;

### ** **

(e)           incur any bankindebtedness or borrowings, whether or not in the ordinary course of itsbusiness, or issue any commercial paper;

### ** **

(f)            enter into any leasesof real property;

### ** **

(g)           enter into any leasesof equipment and machinery except in the ordinary course of business;

### ** **

(h)           enter into any Contract(i) which would be required to be listed on Schedule 3.12 hadit been entered into prior to the date hereof (without the Buyer’s priorwritten consent which shall not be unreasonably withheld) or (ii) in whichany Affiliate of the Company or any Seller has any beneficial interest;

### ** **

(i)            amend or prematurelyterminate, or waive any material right or remedy under, any Contract (withoutthe Buyer’s prior written consent which shall not be unreasonably withheld);

### ** **

(j)            write-off asuncollectible, or establish any extraordinary reserve with respect to, anyaccount receivable or other receivable (without the Buyer’s prior written consentwhich shall not be unreasonably withheld);

 

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(k)           authorize for issuance,issue, sell, deliver or agree or commit to issue, sell or deliver (whetherthrough the issuance or granting of options, warrants, convertible orexchangeable securities, commitments, subscriptions, rights to purchase orotherwise) any shares of the Company’s capital stock or any other securities;

### ** **

(l)            redeem, purchase orotherwise acquire, directly or indirectly, any shares of the Company’s capitalstock or debt securities or any option, warrant or other right to purchase oracquire any such shares, or declare, accrue, set aside or pay any dividend orother distribution (whether in cash, stock or other property) with respect to suchcapital stock;

### ** **

(m)          create, incur or assumeany liability or indebtedness, except in the ordinary course of businessconsistent with past practices; or postpone or defer the creation, incurrence,or assumption of any liability or indebtedness that would otherwise be created,incurred or assumed in the ordinary course of business absent the execution ofthis Agreement;

### ** **

(n)           pay or apply any of theCompany’s assets to the direct or indirect payment, discharge, satisfaction orreduction of any amount, directly or indirectly, to or for the benefit of anySeller or any Affiliate thereof;

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(o)           change any of itsmethods of accounting or accounting practices in any respect;

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(p)           commence or settle anylegal proceeding, action, demand, or claim involving $10,000 or more;

### ** **

(q)           make, amend or revokeany election with respect to Taxes, amend any Tax Return, or settle orcompromise any Tax Liability;

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(r)            take any action, failto take any action or enter into any agreement or understanding that causes theCompany or any Seller to be in breach or violation of any of therepresentations or warranties made in this Agreement or commit a breach of oramend or terminate any Material Contract or any permit, license or other right;and

### ** **

(s)           agree or commit to doany of the foregoing.

### ** **

6.3           Publicity andDisclosure. The Buyer and the Company shall agree with each other as to theform and substance of any press release, publicity or other communicationrelated to this Agreement or the transactions contemplated hereby. No Party shallmake any disclosure of this Agreement or the existence, terms and conditionshereof (whether or not in response to an inquiry about the existence or subjectmatter of this Agreement) to any Person unless previously approved by theBuyer. Notwithstanding the foregoing, nothing contained herein shall prohibitthe Buyer from making any disclosure which the Buyer in good faith believes isrequired by, or advisable according to, applicable Laws, regulations or stockmarket rules, after using reasonable efforts to give notice to the SellerRepresentative and an opportunity to comment on such disclosure.

 

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6.4           No Solicitation; NoTrading.

## ** **

(a)           The Company and eachSeller shall not, and shall not authorize or knowingly permit any director,trustee, officer, employee, consultant, agent or any representative thereof,including without limitation, any broker disclosed in Article III orArticle IV hereof (collectively, “Representatives”), to, during theperiod commencing on the date of this Agreement and ending with the earlier tooccur of the Closing or the termination of this Agreement in accordance withits terms, directly or indirectly:  (a) solicit, accept, approve,encourage (including by way of furnishing information), initiate, or respond tothe submission of proposals or offers from any Person for, (b) participatein any discussions or negotiations pertaining to, or (c) furnish anyinformation to any Person, other than the Buyer, relating to, any acquisition orpurchase of all or a material amount of the assets of, or any equity interestin, the Company or a merger, consolidation or business combination involvingthe Company. The Company and each Seller shall discontinue any and allnegotiations with any Person with whom any of them is currently engagedregarding any of the above. If the Company or any Seller receives anyunsolicited offer or proposal relating to any of the above, the Company or suchSeller shall promptly notify the Buyer thereof, including the identity of theparty making such offer or proposal and the specific terms of such offer orproposal, and provide the Buyer with a copy thereof.

### ** **

(b)           The Company and each ofthe Sellers acknowledge and agree that each is aware (and that each of theirrespective Representatives is aware or, upon receipt of any material nonpublicinformation of Buyer, will be advised) of the restrictions imposed by theUnited States federal securities laws and other applicable foreign and domesticlaws on a Person possessing material nonpublic information about a publiccompany. The Company and each of the Sellers hereby agree that while any ofthem are in possession of such material nonpublic information, none of suchPerson or Persons shall purchase or sell any securities of the Buyer,communicate such information to any third parties, take any other action inviolation of such laws, or cause or encourage any third party to do any of theforegoing.

### ** **

6.5           Notification ofCertain Matters. The Company and the Sellers shall give prompt notice tothe Buyer of (a) the occurrence or non-occurrence of any event theoccurrence or non-occurrence of which would be likely to cause anyrepresentation or warranty of the Company or the Seller contained herein to beuntrue or inaccurate in any material respect at or prior to the Closing and(b) any material failure of the Company or any Seller to comply with orsatisfy any covenant, condition or agreement to be complied with or satisfiedby the Company or any Seller hereunder. The delivery of any notice pursuant tothis Section 6.5 shall not, without the express written consent of theBuyer, be deemed to (x) modify the representations or warranties hereunderof the Company or any Seller, (y) modify the conditions set forth in Article VIIor (z) limit or otherwise affect the remedies available hereunder to theBuyer.

## ** **

6.6           Tax Matters.

## ** **

(a)           Post-Closing TaxReturns; Tax Indemnity. Buyer shall properly and accurately prepare (orcause to be prepared) and file (or cause to be filed) each Tax Return requiredto be filed by the Company after the Closing Date for a taxable periodbeginning before the Closing Date, providedthat if requested bySeller Representative, Buyer shall make

 

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### **commercially reasonable efforts toengage Watkins, Meegan, Drury & Company, L.L.C. to prepare the incomeTax Returns of the Company for any taxable period ending on or before theClosing Date. To the extent any Tax shown as due on such Tax Return is payableby any Seller (taking into account indemnification obligations hereunder),(i) such Tax Return shall be prepared in a manner consistent with theprior practice of the Company, unless otherwise required by applicable TaxLaws; (ii) such Tax Return shall be provided to the Seller Representativeat least twenty (20) days prior to the due date for filing such return(or, if required to be filed within twenty (20) days of the Closing orwithin forty-five (45) days of the end of the taxable period to which such TaxReturn relates, as soon as possible following the Closing or the end of thetaxable period, respectively); and (iii) the Seller Representative shallhave the right to review and comment on such Tax Return and Buyer and SellerRepresentative shall cooperate to resolve any disagreements regarding reportingpositions to be taken in such Tax Returns. In the case of a disagreementconcerning a reporting position that is not controlled by clause (i) ofSection 6.6(a)(i) above, Seller Representative may select thereporting position with respect to such matter if (w) there is substantialauthority for such position within the meaning of Section 6662 of theCode, (x) no reserve for Tax liability would be required to be established inthe financial statements relating to the Buyer or the Company as a result ofpotential Tax liability that is not shown as due on such Tax Return, (y) suchreporting position will not be binding on the Buyer or the Company in thepreparation of Tax Returns in any taxable period ending after the Closing Dateand (z) adequate security (determined within the sole reasonable discretion ofBuyer) is provided to the Buyer to secure the indemnification obligations ofthe Sellers under Section 9.1(a)(vii) for Damages which could resultfrom the failure to sustain such Tax reporting position. Pursuant toSection 9.1(a)(vii), promptly upon request by Buyer, the Sellers shall payto the applicable Buyer Indemnified Party the amount of any Taxes paid orrequired to be paid by the Company that are attributable to any taxable periodbeginning on or before the Closing Date; provided, however, thatwith respect to a taxable period ending after the Closing Date, such indemnityshall be limited to the Taxes attributable to the portion of such period endingon the Closing Date as described in Section 6.6(b). For avoidance ofdoubt, all Taxes attributable to the Section 338(h)(10) Electionsshall be considered to be allocable to the taxable period or portion thereofending on the Closing Date, and subject to the foregoing indemnification by theSellers. To the extent permitted by applicable law, the Sellers shall includeany income, gain, loss, deduction or other Tax items for such periods on theirTax Returns in a manner consistent with the Schedule K-1s filed with theTax Returns of the Company filed pursuant to this Section 6.6. The Buyershall prepare (or cause to be prepared) and file (or cause to be filed) eachTax Return required to be filed by the Company after the Closing Date for ataxable period beginning after the Closing Date, and pay (or cause to be paid)all Taxes required to be paid by the Company with respect to any taxable periodbeginning after the Closing Date; providedthat the Buyer’sobligations to prepare and file such Tax Returns and pay such Taxes shall notprevent recovery of Damages to which any Indemnified Party is entitled underSection 9.1 in connection therewith.**

### ** **

(b)           Allocation of Taxes.The Sellers, the Buyer and the Company shall, to the extent permitted byapplicable law, cause the taxable period of the Company to end as of the closeof the Closing Date. The Buyer shall not cause the Company to take any actionson the Closing Date after the Closing that are out of the ordinary course ofbusiness, except as contemplated by this Agreement. For purposes of thisAgreement, Company Taxes incurred with respect to a taxable period thatincludes but does not end on the Closing Date, shall be

 

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### **allocated to the portion of theperiod ending on the Closing Date (i) except as provided in (ii) and(iii) below, to the extent feasible, on a specific identification basis,according to the date of the event or transaction giving rise to the Tax, and(ii) except as provided in (iii) below, with respect to periodicallyassessed ad valorem Taxes and Taxes not otherwise feasibly allocable tospecific transactions or events, in proportion to the number of days in suchperiod occurring before the Closing Date compared to the total number of daysin such period, and (iii) in the case of any Tax based upon or related toincome or receipts, in an amount equal to the Tax which would be payable if therelevant taxable period ended on the Closing Date (for the elimination ofdoubt, Taxes incurred by reason of the transactions contemplated by thisAgreement shall be allocated to the portion of the period ending on the ClosingDate). Any credits relating to a taxable period that begins before and endsafter the Closing Date shall be taken into account as though the relevant taxableperiod ended on the Closing Date. All determinations necessary to give effectto the foregoing allocations shall be made in a manner consistent with priorpractices of the Company.**

### ** **

(c)           Transfer Taxes, Etc.Notwithstanding any provision to the contrary in this Agreement, all TransferTaxes incurred by Sellers in connection with the transactions contemplated bythis Agreement shall be paid by the Sellers when due. The Sellers shall, attheir own expense, file all necessary Tax Returns and other documentation withrespect to all such Transfer Taxes. If required by applicable law, the Buyershall, and shall cause its Affiliates to, join in the execution of any such TaxReturns and other documentation.

### ** **

(d)           Tax Elections;Amended Returns. Except in connection with an audit resolved pursuant toSection 6.6(h) of this Agreement, no Party may amend a TaxReturn of the Company, or file or amend any Tax election of the Company, ineach case, with respect to a taxable period beginning before the Closing Datewithout the consent of the other Parties, which consent shall not beunreasonably withheld or delayed.

### ** **

(e)           Cooperation, Accessto Information, and Record Retention. The Sellers, the Company and theBuyer shall cooperate, and shall cause their representatives to cooperate, asand to the extent reasonably requested by any other Party hereto in connectionthe preparation and filing of Tax Returns as provided herein and any audit,litigation or other proceeding with respect to Taxes. Such cooperation shallinclude the provision of records and information which are reasonably relevantto any such Tax Return, audit, litigation or other proceeding and makingemployees available on a mutually convenient basis to provide additionalinformation and explanation of any material provided hereunder. The Sellers,the Buyer and the Company shall (i) retain all books and records withrespect to Company Taxes (including Tax Returns) relating to any taxable periodbeginning before the Closing Date until the expiration of the statute oflimitations for assessment of Taxes for such respective taxable period and(ii) give the other Parties hereto reasonable written notice prior totransferring, destroying or discarding any such books and records and, ifanother Party so requests, allow the other Party to take possession of suchbooks and records.

### ** **

(f)            Tax Certificates,Etc. The Parties further agree, upon request, to use reasonable efforts toobtain any certificate or other document from any Government Authority or anyother Person as may be necessary to mitigate, reduce or eliminate any Taxthat could be imposed.

 

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(g)           Termination of TaxSharing Agreements. All Tax sharing agreements or similar agreements withrespect to or involving the Company (other than any such agreement created bythe execution of this Agreement) shall be terminated as of the Closing Dateand, after the Closing Date, the Company shall not be bound thereby or have anyLiability thereunder.

### ** **

(h)           Tax Proceedings.Any Party who receives any notice of a pending or threatened Tax audit,assessment, or adjustment against or with respect to the Company whichmay give rise to Liability of another Party hereto (including pursuant tothe indemnification provisions of this Agreement), shall promptly notify suchother Party within ten (10) business days of the receipt of suchnotice. The Parties each agree to consult with and to keep the other Partieshereto informed on a regular basis regarding the status of any Tax audit orproceeding to the extent that such audit or proceeding could affect a Liabilityof such other Parties which could reasonably be a basis for a claim pursuant tothe indemnity obligations hereunder. The Seller Representative shall have theright to represent the Company’s interests in any Tax audit or administrativeor judicial proceeding and to employ counsel of its choice, but reasonablysatisfactory to Buyer, at the Sellers’ expense, but only to the extent suchaudit or other proceeding pertains to Tax periods ending on or before theClosing Date. Buyer shall have the right to participate in such proceeding atits own expense, and shall be entitled to control the disposition of any issueinvolved in such proceeding which does not affect a potential Liability of theSellers (including any indemnity obligation under this Agreement). Both theBuyer and the Sellers (through the Seller Representative) shall be entitled torepresent their respective interests in light of their responsibilities(including indemnity obligations) for the related Taxes, at their own expense,in any audit or administrative or judicial proceedings involving a Tax periodthat includes but does not end on the Closing Date. Notwithstanding theforegoing provisions of this Section 6.6, the Seller Representative shallnot, without the Buyer’s consent, agree to any settlement with respect to anyTax if such settlement could adversely affect any Tax Liability of the Buyer,any Affiliate of the Buyer, or (with respect to any taxable period (or portion thereof)beginning after the Closing Date) the Company. Except as provided in thisSection 6.6 the provisions of Article IX including the provisionstherein addressing settlement authority, shall govern the manner in which Taxaudit or administrative or judicial proceedings are resolved.

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(i)            Section 338(h)(10) Elections.The Sellers will join with the Buyer in making an election underSection 338(h)(10) of the Code (and any corresponding elections understate or local Tax law) (collectively, the “Section 338(h)(10) Elections”)with respect to the Stock Purchase under this Agreement. The Buyer shall beresponsible for the timely and accurate preparation and filing of all forms anddocuments required in connection with theSection 338(h)(10) Elections and shall provide the Sellers withproperly completed copies of Form 8023 (and any corresponding state orlocal Tax forms) prior to the Closing Date. The Sellers agree to execute anddeliver to the Buyer on the Closing Date any such forms that are or have beenprovided by the Buyer for execution and to promptly execute such other forms asmay be reasonably requested by the Buyer thereafter in connection withmaking or perfecting the Section 338(h)(10) Elections. The Partiesshall cooperate fully with each other and make available to each other such Taxdata and other information as may be reasonably required by the Buyer orthe Sellers in order to timely file the Section 338(h)(10) Elections.The Company and Sellers shall not revoke the Company’s election to be taxed asan S corporation within the meaning of Sections 1361 and 1362 of the Code. TheCompany and the Sellers shall not take or

 

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### **allow any action other than theStock Purchase pursuant to this Agreement that would result in the terminationof the Company’s status as a validly electing S corporation within the meaningof Sections 1361 and 1362 of the Code.**

### ** **

(j)            Purchase PriceAllocation. The Parties agree that the consideration to be paid pursuant toArticle I of this Agreement and other items properly includible in thedeemed sales price of the assets of the Company pursuant to theSection 338(h)(10) Elections shall be allocated, for Tax purposes,among the Company’s assets in a manner consistent with the provisions ofSection 338 and Section 1060 of the Code and all regulationspromulgated thereunder. The Buyer shall prepare IRS Form 8883 forinclusion with the federal income Tax Return of the Company ending on theClosing Date and any similar allocation required under state, local, or foreignlaw (collectively, “IRS Form 8883”). The Buyer shall permit theSeller Representative to review and comment on IRS Form 8883. The Company,the Sellers and the Buyer agree to report this transaction for federal Taxpurposes as a valid election under Section 338(h)(10) of the Code andin accordance with IRS Form 8883 as ultimately filed, and shall not takeany position or action inconsistent therewith upon examination of any TaxReturn, in any refund claim, in any litigation, investigation or otherwise; provided,however, that if, in any audit of any Tax Return of the Sellers, theCompany or the Buyer by a Government Authority, the fair market values arefinally determined to be different from IRS Form 8883, as adjusted, theBuyer, the Company and the Sellers may (but shall not be obligated to)take any position or action consistent with the fair market values as finallydetermined in such audit. Schedule 6.6(j) sets forth the fairmarket value of the assets of the Company that the Parties agree will be usedto allocate such consideration.

### ** **

(k)           Characterization ofIndemnity Payments. The Buyer and the Sellers agree to treat any paymentmade by the Sellers to the Buyer hereunder as an adjustment to the PurchasePrice.

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6.7           Litigation Support.In the event and for so long as any Party actively is contesting or defendingagainst any charge, complaint, action, suit, audit, proceeding, hearing,investigation, claim, or demand in connection with (i) any transactioncontemplated under this Agreement or (ii) any fact, situation,circumstance, status, condition, activity, practice, plan, occurrence, event,incident, action, failure to act, or transaction on or prior to the ClosingDate involving the Company, each of the other Parties will cooperate with suchParty or its counsel in the contest or defense, make available its personnel,and provide such testimony and access to its books and records as shall benecessary in connection with the contest or defense, all at the sole cost and expenseof the contesting or defending Party (unless the contesting or defending Partyis entitled to indemnification therefor under Article IX below).

## ** **

6.8           Reasonable Efforts.Each Party agrees to use all reasonable efforts promptly to take, or cause tobe taken, all actions and do or cause to be done all things necessary, properor advisable under applicable Laws to (a) obtain all consents, approvalsor actions of, make all filings with and give all notices to GovernmentAuthorities or any other Person required to consummate the Stock Purchase andthe other matters contemplated hereby, (b) provide such other informationand communications to such Government Authorities or other public or privatePersons as the other Party or such Government Authorities or other public orprivate Persons may reasonably request in connection therewith, and(c) execute such further documents, deeds,

 

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## **bills of sale, assignments andassurances and take such further actions as may reasonably be required toconsummate and make effective the transactions contemplated by this Agreementincluding the satisfaction of all conditions hereto. If applicable, the Partiesshall file all notices and other information and documents required under theHart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, as promptly aspracticable after the date hereof.**

## ** **

6.9           Payment ofObligations. Prior to the Closing, each Seller and each of the officers,directors, employees and Affiliates of the Company shall repay in full, inaccordance with their terms, all debts and other obligations, if any, owed tothe Company (except that, with respect to the promissory note evidencing CindyA. Andre’s obligation to reimburse the Company for the withholding Tax relatedto the grant to her of a Restricted Stock Award, Cindy A. Andre shall repay theamounts due under such promissory note in full on the first business dayfollowing the Closing by directing Buyer to pay to the Company, out of theFirst Per Share Post-Closing Payments to be paid to her, an amount equal to theamount payable to the Company under such promissory note).

## ** **

6.10         Company Employees.Each of the Company and the Sellers agrees that promptly after the date hereofit shall allow the Buyer to make a presentation to the Company Employees and tointerview such employees for continued employment with the Company after theClosing. Each of the Company and the Sellers will use all reasonable efforts tocause such Company’s employees to make available their employment services tothe Company after the Closing.

## ** **

6.11         Further Assurances.Each Seller and the Company will, either prior to or after the Closing, executesuch further documents, deeds, bills of sale, assignments and assurances andtake such further actions as may reasonably be required by Buyer toconsummate the Stock Purchase, to vest the Buyer with full title to all capitalstock of the Company and all assets, properties, privileges, rights, approvals,immunities and franchises of the Company and its business or to effect theother purposes of this Agreement.

## ** **

6.12         Benefit Plans.Upon Buyer’s request, the Company shall take action prior to the Closing Dateto terminate the Benefit Plans that it sponsors and to withdraw CompanyEmployees from participation in any Benefit Plans that it does not sponsor. TheBuyer expects to review the total compensation and benefits that the CompanyEmployees have received as employees of the Company before the Closing. Fromand after the Closing Date, the Buyer will make available to continuing CompanyEmployees a package of compensation and employee benefits that in the aggregateare substantially similar to that made available to the Buyer’s ownsimilarly-situated employees; provided, however, that the Buyershall in no event be obligated to provide any particular benefit to suchCompany Employees and shall retain full discretion to modify, amend, orterminate any of the benefits it makes available. Nothing in this Agreementshall be construed to create a right in any Company Employee to employment withthe Company, the Buyer or any of its subsidiaries, and, subject to any writtenagreement between a Company Employee and the Company, the Buyer or any of itssubsidiaries, the employment of each Company Employee who continues employmentwith the Company, the Buyer or any of its subsidiaries after the Closing Dateshall be “at will” employment.

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6.13         Seller Waiver andTermination. For the benefit of the Buyer, each of the Sellers and theCompany hereby waive (and none shall be of any further force or effect) allprovisions of

 

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## **Section 13.1-651 of the VSCAwith respect to this Agreement and the transactions contemplated hereby.**

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6.14         Disclosure Schedules.

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(a)           The DisclosureSchedules shall be arranged by the Sellers in paragraphs corresponding to thesubsections contained herein. Nothing in the Disclosure Schedules shall bedeemed to disclose an exception to any representation or warranty made inArticle III unless it describes the relevant facts in such reasonabledetail as the context requires. A fact or matter disclosed in the DisclosureSchedules with respect to one section or subsection shall be deemedto be disclosed with respect to each other section or subsection wheresuch disclosure is appropriate to the extent it is clear from reading the faceof such Disclosure Schedule (and not any other agreement or other documentreferred to therein or attached thereto) that such disclosure is applicable tosuch other sections or subsections of the Disclosure Schedules and providedthat an agreement or other document which is merely listed or identified in anysection or subsection of the Disclosure Schedules shall not be deemedto be disclosure with respect to any other section or subsection ofthe Disclosure Schedules.

## ** **

(b)           To the extent that anymatter arises or comes into existence between the date hereof and the Closingthat is required to be described by the Company or Sellers in the SellerDisclosure Schedules in order for such schedules to be true, correct andcomplete in all material respects at and as of the Closing, it is understoodand agreed that, from time to time prior to the Closing, the SellerRepresentative may propose to amend, supplement or revise the SellerDisclosure Schedules with respect to any such matter. If the Buyer reasonablydetermines that an amendment, supplement or revision proposed by the SellerRepresentative satisfies the terms and conditions of this Section 6.14,such amendment, supplement or revision shall be effective for purposes of theindemnification obligations set forth in Section 9.1(a)(i) withrespect to representations made at the Closing, but shall in no way beeffective for purposes of amending, supplementing or revising any representationmade as of the date hereof, or otherwise curing any misrepresentation made asof the date hereof, and shall be disregarded for purposes of Section 7.1and Section 11.1(a)(iii).

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(c)           To the extent that anymatter arises or comes into existence between the date hereof and the Closingthat is required to be described by the Buyer in the Buyer Disclosure Schedulesin order for such schedules to be true, correct and complete in all materialrespects at and as of the Closing, it is understood and agreed that, from timeto time prior to the Closing, the Buyer may propose to amend, supplementor revise the Buyer Disclosure Schedules with respect to any such matter. Ifthe Seller Representative reasonably determines that an amendment, supplementor revision proposed by the Buyer satisfies the terms and conditions of thisSection 6.14, such amendment, supplement or revision shall be effectivefor purposes of the indemnification obligations set forth inSection 9.1(b)(i) with respect to representations made at theClosing, but shall in no way be effective for purposes of amending,supplementing or revising any representation made as of the date hereof, orotherwise curing any misrepresentation made as of the date hereof, and shall bedisregarded for purposes of Section 8.1 and Section 11.1(a)(i).

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6.15         Selected AR. Ifthe Buyer actually collects any portion of the Selected AR after the Closingand on or before the first (1st) anniversary of the Closing Date, Buyer shallbe

 

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## **obligated to pay the Per ShareSelected AR Amount to each Seller, with respect to each of his or her shares ofCompany Common Stock issued and outstanding immediately prior to the Closing.Such payment, if any, shall be made in cash by the delivery of immediatelyavailable funds on a quarterly basis ending on the first (1st) anniversary ofthe Closing Date.**

 

# **ARTICLE VIICONDITIONS TO THE OBLIGATIONS OF THE BUYER**

# ** **

All obligations of the Buyer under this Agreement are subject to thefulfillment and satisfaction, prior to or at the time at which the Closing Dateis scheduled to occur, of each of the following conditions precedent, any oneor more of which may be waived, in part or in full, by the Buyer inwriting.

 

7.1           Representations andWarranties True at the Closing Date. All of the representations andwarranties of the Company and each of the Sellers contained in this Agreementshall be true, correct and complete in all material respects (except that allrepresentations and warranties in Section 3.4 and all representations andwarranties qualified by the words “material” or “in all material respects” orsimilar words shall be true, correct and complete in all respects), in eachcase when made on the date hereof and on and as of the Closing Date with thesame effect as though such representations and warranties had been made on andas of the Closing Date (provided that those representations and warranties thatare specifically made as of a particular calendar date or as of the date hereofshall be true, correct and complete in all material respects as of such date,except that any such representations and warranties in Section 3.4 and anysuch representations and warranties qualified by the words “material” or “inall material respects” or similar words shall be true, correct and complete inall respects as of such date) and each Seller and the Company shall haveexecuted and delivered to Buyer a certificate as of the Closing as to theforegoing.

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7.2           Performance. Allof the terms, covenants, agreements and conditions of this Agreement to becomplied with, performed or satisfied by the Company or any Seller on or beforethe Closing Date shall have been duly complied with, performed or satisfied onor before such date and each Seller and the Company shall have executed anddelivered to Buyer a certificate as of the Closing as to the foregoing.

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7.3           No Litigation.No temporary restraining order, preliminary or permanent injunction or otherorder or judgment issued by any court of competent jurisdiction or other legalor regulatory restraint or provision challenging the transactions contemplatedhereunder or limiting or restricting the conduct or operation of the Company orany Seller following the Closing shall be in effect, nor shall any proceedingbrought by an administrative agency or commission or other Government Authorityor other instrumentality, domestic or foreign, seeking any of the foregoing bepending. There shall be no action, suit, claim or proceeding of any naturepending or threatened, against the Buyer, the Company or any Seller, theirrespective properties or any of their respective officers or directors, thatcould have a Material Adverse Effect on the Company or the Buyer.

 

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7.4           No Material AdverseChange. There shall have been (i) no effect, event or change which,individually or in the aggregate, has had or could reasonably be expected tohave a Material Adverse Effect on the Company and (ii) no resignations orterminations of, or indications of an intention or plan to resign, employmentby an executive officer or any material number of management level or seniortechnical employees of the Company.

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7.5           Governmental,Regulatory and Other Consents and Approvals. All consents, approvals, assignmentsand actions of, filings with and notices to any Government Authority or anyother public or private Persons required of any Seller, the Company or theBuyer to consummate the Closing and the other matters contemplated hereby shallhave been obtained, including, without limitation, the expiration ortermination without the objection of any of the relevant federal authorities ofall applicable waiting periods (and any extensions thereof) under theHart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, as well asthose listed or required to be listed on Schedule 3.3 or Schedule 4.2.The board of directors of the Buyer shall have adopted and approved thisAgreement and the transactions contemplated hereby.

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7.6           Credit AgreementConsent. The Buyer shall have received the Credit Agreement Consent; provided,however, the condition in this Section 7.6 shall expire on thefifteenth (15th) day after the date hereof.

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7.7           Restricted StockAwards, Company Stock Options and Company Warrants. The Restricted StockPlan and each Restricted Stock Award shall have been terminated and each shareof Company Common Stock subject to any Restricted Stock Award (other thanshares of Company Common Stock subject to the Restricted Stock Award to CindyA. Andre) shall have been repurchased by the Company pursuant to a RestrictedStock Repurchase Agreement. Each Company Stock Option, if any, and each CompanyWarrant, if any, shall have been exercised or terminated. The Company shallhave delivered to the Buyer executed copies of all agreements, documents andcertificates related to the foregoing.

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7.8           Closing Deliveriesof the Sellers and the Company. At the Closing, the Company, the SellerRepresentative and each of the Sellers, as appropriate, shall have performed anddelivered the following, subject to waiver, in part or in full, by theBuyer:

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(a)           the Sellers shall havedelivered the certificate(s) representing all issued and outstanding shares ofcapital stock of the Company, all of which shall be free and clear of anyEncumbrance, accompanied by stock powers duly endorsed in blank or accompaniedby duly executed instruments of transfer;

### ** **

(b)           the Company and theSellers shall have repaid or satisfied all of the Indebtedness for BorrowedMoney and all other Liabilities of the Company set forth or required to be setforth on the Estimated Closing Balance Sheet; and the Company shall havedelivered full releases of record, to the reasonable satisfaction of the Buyer,of all Encumbrances securing any such Liabilities of the Company which havebeen paid in full prior to or at the Closing, and shall deliver terminationstatements relating to all financing statements covering such Liabilities, ifany;

 

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(c)           each Seller shall haveexecuted and delivered a Subordination Agreement in the form attachedhereto as Exhibit A;

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(d)           each of Donald E. Reed,Leslie W. Butler and Cindy A. Andre shall have executed and delivered to theCompany a Consulting Agreement with the Company in the forms attached hereto asExhibits C-1, C-2 and C-3, respectively;

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(e)           each of the Sellers andall of the officers, directors, employees and Affiliates of the Company shallhave delivered to Buyer evidence of repayment in full in accordance with theirterms all debts and other obligations, if any, owed by any of them to theCompany (except for Cindy A. Andre solely with respect to the promissory notedescribed in Section 6.9);

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(f)            each director andofficer of the Company shall have delivered to the Company his or herrespective resignation as a director and officer of the Company, which shall beeffective as of the Closing;

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(g)           the Company and theSellers shall have delivered to the Buyer the original stock records of theCompany, books of account, minute books, minutes and other records of allmeetings of the Company, the corporate seal of the Company and such otherdocuments, records, keys and other items as shall be necessary for theoperation of the business of the Company;

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(h)           the Company shall haveexecuted and delivered to the Buyer a certificate of its secretary, settingforth the organizational documents of the Company and the resolutions of itsboard of directors and shareholders (or other evidence reasonably satisfactoryto the Buyer) authorizing the execution, delivery and performance of thisAgreement and the other documents contemplated hereby and the consummation ofthe transactions contemplated hereby and thereby, and certifying that suchorganizational documents and resolutions have not been amended or rescinded andare in full force and effect;

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(i)            the Company shall havedelivered to the Buyer a good standing certificate from the jurisdiction of itsincorporation and from each state in which it is qualified to do business, andits certified charter documents, each dated as of a date reasonably close tothe date hereof;

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(j)            the Company shall havedelivered to the Buyer all consents, licenses, permits and approvals as setforth on Schedule 3.3 and each Seller shall have delivered suchconsents as set forth on Schedule 4.2, each as required inconnection with the execution, delivery, performance, validity andenforceability of this Agreement and the continued conduct of the business ofthe Company as conducted or proposed to be conducted as of the Closing;

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(k)           any creditor of theCompany shall have delivered to the Company full written releases, to thereasonable satisfaction of Buyer, of all Liabilities and Encumbrances arisingfrom, relating to or securing any indebtedness for borrowed money of theCompany, including without limitation duly executed UCC filings, releases ofany assignment of payments with respect to any Government Contract and anagreement to forward and otherwise cooperate with respect to any paymentsreceived after the Closing Date;

 

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(l)            the Sellers and theCompany shall have delivered an opinion of counsel in the form attachedhereto as Exhibit D; and

### ** **

(m)          each Seller shall haveexecuted and delivered a FIRPTA Certification, which (i) states that suchSeller is not a foreign person, (ii) sets forth such Seller’s name,identifying number and address, and (iii) is signed by such Seller underpenalties of perjury, meeting the requirement of Treasury RegulationSection 1.1445-2(b)(2).

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# **ARTICLE VIIICONDITIONS TO THE COMPANY’S AND THE SELLERS’ OBLIGATIONS**

# ** **

All obligations of the Company and the Sellers under this Agreement aresubject to the fulfillment and satisfaction, prior to or at the time at whichthe Closing Date is scheduled to occur, of each of the following conditionsprecedent, any one or more of which may be waived, in part or infull, by the Seller Representative in writing.

 

8.1           Representations andWarranties True at the Closing Date. All of the representations andwarranties of the Buyer contained in this Agreement shall be true, correct andcomplete in all material respects (except that all representations andwarranties qualified by the words “material” or “in all material respects” orsimilar words shall be true, correct and complete in all respects), in eachcase when made on the date hereof and on and as of the Closing Date with thesame effect as though such representations and warranties had been made on andas of the Closing Date (provided that those representations and warranties thatare specifically made as of a particular calendar date or as of the date hereofshall be true, correct and complete in all material respects as of such date,except that any such representations and warranties qualified by the words “material”or “in all material respects” or similar words shall be true, correct andcomplete in all respects as of such date) and the Buyer shall have executed anddelivered to each Seller a certificate as of the Closing as to the foregoing.

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8.2           Performance. Allof the terms, covenants, agreements and conditions of this Agreement to becomplied with, performed or satisfied by the Buyer on or before the ClosingDate shall have been duly complied with, performed or satisfied on or beforesuch date and Buyer shall have executed and delivered to each Seller acertificate as of the Closing as to the foregoing.

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8.3           No Litigation.No temporary restraining order, preliminary or permanent injunction or otherorder issued by any court of competent jurisdiction or other legal orregulatory restraint or provision challenging the transactions contemplatedhereunder shall be in effect, nor shall any proceeding brought by anadministrative agency or commission or other Government Authority orinstrumentality, domestic or foreign, seeking any of the foregoing be pending.

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8.4           Closing Deliveriesof the Buyer. At the Closing, the Buyer shall have performed and deliveredthe following, subject to waiver, in part or in full, by the SellerRepresentative:

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(a)           the Buyer shall haveexecuted and delivered a certificate of its secretary, setting forth theorganizational documents of the Buyer and the resolutions of its board of

 

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### **directors (or other evidencereasonably satisfactory to the Seller Representative) authorizing the executionand delivery of this Agreement and the documents contemplated hereby and theconsummation of the transactions contemplated hereby and thereby, andcertifying that such organizational documents and resolutions have not beenamended or rescinded and are in full force and effect; and**

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(b)           the Buyer shall haveexecuted and delivered to each of Donald E. Reed, Leslie W. Butler and Cindy A.Andre a Consulting Agreement in the forms attached hereto as Exhibit C-1,C-2 and C-3, respectively.

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# **ARTICLE IXINDEMNITY**

# ** **

9.1           GeneralIndemnification.

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(a)           Each Seller, jointlyand severally, covenants and agrees to indemnify, defend, protect and holdharmless the Buyer Indemnified Parties from, against and in respect of allDamages suffered, sustained, incurred or paid by any Buyer Indemnified Party,in each case in connection with, resulting from or arising out of, directly orindirectly (whether or not involving a third party claim):  (i) theinaccuracy or breach of any representation or warranty made by the Company orany Seller set forth in this Agreement or in any other agreement or anycertificate delivered or provided in connection with or related to theconsummation of the transactions contemplated by this Agreement; (ii) thenonfulfillment of any covenant or agreement on the part of the Company orany Seller set forth in this Agreement or in any agreement or certificateexecuted and delivered by the Company or any Seller pursuant to this Agreementor in the transactions contemplated hereby; (iii) any Liabilities whicharise out of, relate to or are associated with the Restricted Stock Plan, anyRestricted Stock Award or any repurchase under any Restricted Stock RepurchaseAgreement; (iv) any Liability with respect to any matter or mattersdescribed on Appendix C; (v) the Benefit Plans and any and allbenefits accrued under the Benefit Plans as of the Closing Date and any and allother Liabilities arising out of, or in connection with the form oroperation of the Benefit Plans on or prior to the Closing Date; (vi) anyand all Liabilities resulting from any litigation, suit, proceeding, action,claim, demand or investigation pending or threatened against the Company whicharises out of the operations of the Company on or prior to the Closing Dateincluding, without limitation, any such matter listed on Schedule 3.13;and (vii) any and all Liabilities for Taxes (x) in connection with orarising out of the Company’s activities or business on or prior to the ClosingDate (determined, with respect to Tax periods that begin before and end afterthe Closing Date, in accordance with the allocation provisions ofSection 6.6(b)) in excess of the amount of such Taxes reflected as acurrent liability in the computation of Closing Working Capital, or(y) owing by any Person other than the Company for which the Companymay be liable, including, without limitation (A) under TreasuryRegulation Section 1.1502-6 (or any similar provision of state, local, orforeign law), (B) as a transferee or successor, or (C) by contract.

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(b)           The Buyer covenants andagrees to indemnify, defend, protect and hold harmless the Seller IndemnifiedParties from, against and in respect of all Damages suffered, sustained,incurred or paid by any Seller Indemnified Party, in each case in connectionwith,

 

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### **resulting from or arising out of,directly or indirectly (whether or not involving a third party claim): (i) the inaccuracy or breach of any representation or warranty made by theBuyer set forth in this Agreement or in any other agreement or any certificatedelivered or provided in connection with or related to the consummation of thetransactions contemplated by this Agreement; and (ii) the nonfulfillmentof any covenant or agreement on the part of the Buyer set forth in thisAgreement or in any agreement or certificate executed and delivered by theBuyer pursuant to this Agreement or in the transactions contemplated hereby.**

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9.2           IndemnificationProcedures. In the event of the assertion or commencement by any Person ofany claim or legal proceeding (whether against Buyer or against any otherPerson) with respect to which any Indemnified Party may be entitled toindemnification pursuant to this Article  IX, the Indemnified Party shallhave the right, at its election, to proceed with the defense (includingsettlement or compromise) of such claim or legal proceeding on its own; provided,however, that if the Indemnified Party settles or compromises any suchclaim or legal proceeding without the consent of the Indemnifying Party, suchsettlement or compromise shall not be conclusive evidence of the amount ofDamages incurred by the Indemnified Party in connection with such claim orlegal proceeding (it being understood that if the Indemnified Party requeststhat the Indemnifying Party consent to a settlement or compromise, theIndemnifying Party shall act reasonably in determining whether to provide suchconsent). The Indemnified Party shall give the Indemnifying Party prompt noticeafter it becomes aware of the commencement of any such claim or legalproceeding against the Indemnified Party; provided, however, anyfailure on the part of Indemnified Party to so notify the IndemnifyingParty shall not limit any of the obligations of the Indemnifying Party (or theSellers), or any of the rights of any Indemnified Party, under thisArticle  IX (except to the extent such failure materially adverselyprejudices the defense of such claim or legal proceeding). If the IndemnifiedParty does not elect to proceed with the defense (including settlement orcompromise) of any such claim or legal proceeding, the Indemnifying Partymay proceed with the defense of such claim or legal proceeding withcounsel reasonably satisfactory to the Indemnified Party; provided, however,that the Indemnifying Party may not settle or compromise any such claim orlegal proceeding without the prior written consent of the Indemnified Party(which consent may not be unreasonably withheld). No Buyer IndemnifiedParty (other than Buyer or any successor thereto or assign thereof) and noSeller Indemnified Party (other than the Seller Representative or any successorthereto or assign thereof) shall be permitted to assert any indemnificationclaim or exercise any other remedy under this Agreement unless, in the case ofthe Buyer Indemnified Parties, Buyer (or any successor thereto or assignthereof) or, in the case of the Seller Indemnified Parties, the SellerRepresentative (or successor thereto or assign thereof), shall have consentedto the assertion of such indemnification claim or the exercise of such otherremedy. Nothing herein shall be deemed to prevent the Indemnified Party frommaking a claim, and an Indemnified Party may make a claim hereunder, forpotential or contingent claims or demands; providedthat thenotice of such claim sets forth the specific basis for any such potential orcontingent claim or demand to the extent then reasonably feasible and theIndemnified Party has reasonable grounds to believe that such a claim or demandmay be made.

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9.3           Right of Offset.In the event that any Seller shall have an indemnification obligation forDamages to the Buyer or any Buyer Indemnified Party, the Buyer shall have theright (but not the obligation) to offset the amount of such Damages against anyportion of the Purchase Price owed to such Seller, including withoutlimitation, any portion of the Second Post-Closing

 

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## **Payment. If the Seller Representativehas contested any claim for Damages by any Buyer Indemnified Party inaccordance herewith, the Buyer shall have the right (but not the obligation) tooffset the amount of such Damages against any portion of the Purchase Priceowed to such Seller, including without limitation, any portion of the SecondPost-Closing Payment, until the Buyer receives (1) a written settlementagreement entered into by the Buyer and the Seller Representative, (2) anarbitration award issued in accordance with Section 12.9 hereof or(3) a final order or decision issued by a court of competent jurisdictionfrom which no appeal may be taken or for which the time to appeal hasexpired, as applicable, in any of which cases the Buyer will release the amountof such Damages offset pursuant hereto, if at all, in accordance therewith. Nolimitation on the Buyer’s ability to exercise the rights set forth in thisSection shall affect such Buyer Indemnified Party’s rights hereunder orotherwise. Such remedy shall be in addition to and not in limitation of anyinjunctive relief or other rights or remedies to which the Buyer or any BuyerIndemnified Party is or may be entitled at law or equity or in anyadministrative or arbitration proceeding or under this Agreement (including anyexhibits hereto).**

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9.4           Survival ofRepresentations, Warranties and Covenants. Each covenant and agreementcontained in this Agreement or in any agreement or other document deliveredpursuant hereto shall survive the Closing and be enforceable until suchcovenant or agreement has been fully performed. All representations andwarranties contained in this Agreement or in any agreement or other documentdelivered pursuant hereto shall survive the Closing until the date that isfifteen (15) months after the Closing Date and shall thereafter expire.The limitations on survivorship set forth in the preceding sentence of thisSection 9.4 shall not apply to (i) the representations and warrantiesset forth in Sections 3.2 (Authority), 3.4 (Capitalization), 3.20(Brokers), 4.3 (Company Shares), 4.4 (Brokers) and 5.7 (Brokers), all of whichshall survive without limitation (and in no event less than six(6) years), (ii) claims based on criminal matters, fraud orintentional misrepresentation, which shall survive without limitation (and inno event less than six (6) years), (iii) the representations andwarranties set forth in the Selected Government Contracts Sections, which shallsurvive for six (6) years after the Closing, or (iv) therepresentations and warranties set forth in Sections 3.8 (Employee BenefitPlans) and 3.10 (Taxes), which shall survive until the end of the applicablestatute of limitations (or any extension thereof) plus ninety (90) days.Notwithstanding the foregoing, any representation or warranty with respect towhich a claim has been made for a breach thereon prior to the end of theapplicable survival period shall survive past the applicable survival period,if necessary, at least until such claim is resolved.

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9.5           Limitations onIndemnification.

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(a)           There shall be noliability for Damages for breaches of representations and warranties unless anduntil the aggregate amount of all Damages for all claims asserted by the BuyerIndemnified Parties exceeds Five Hundred Thousand Dollars ($500,000); provided,however, after such amount of Damages exceeds Five Hundred ThousandDollars ($500,000), all Damages, excluding the first Two Hundred Fifty ThousandDollars ($250,000), shall be recoverable by the Buyer Indemnified Parties.There shall be no liability for Damages for breaches of representations andwarranties unless and until the aggregate amount of all Damages for all claimsasserted by the Seller Indemnified Parties exceeds Five Hundred ThousandDollars ($500,000); provided, however, after such amount of Damagesexceeds Five Hundred Thousand Dollars ($500,000), all Damages, excluding thefirst Two Hundred Fifty Thousand Dollars

 

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### **($250,000), shall be recoverable bythe Seller Indemnified Parties. The limitations set forth in thisSection 9.5(a) shall not apply to (i) the representations andwarranties set forth in Section 3.2 (Authority), Section 3.4(Capitalization), Section 3.8 (Employee Benefit Plans), Section 3.10(Taxes), the Selected Government Contracts Sections, Section 3.20(Brokers), Section 4.3 (Company Shares), Section 4.4 (Brokers) andSection 5.7 (Brokers), (ii) claims regarding Buyer’s obligation topay the Second Per Share Post-Closing Amount or (iii) claims based oncriminal matters, fraud or intentional misrepresentation, with respect towhich, in each case, all Damages shall be recoverable from the first dollar andshall be counted in determining whether the thresholds in thisSection 9.5(a) have been exceeded.**

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(b)           The indemnificationobligations of the Sellers for breaches of representations and warranties shallbe limited to an amount equal to Ten Million Dollars ($10,000,000). Theindemnification obligations of the Buyer for breaches of representations andwarranties shall be limited to an amount equal to Ten Million Dollars($10,000,000). The foregoing limitations in this Section 9.5(b) aboveshall not apply to (i) the representations and warranties set forth inSection 3.2 (Authority), Section 3.4 (Capitalization),Section 3.8 (Employee Benefit Plans), Section 3.10 (Taxes), theSelected Government Contracts Sections, Section 3.20 (Brokers),Section 4.3 (Company Shares), Section 4.4 (Brokers) andSection 5.7 (Brokers), (ii) claims regarding Buyer’s obligation topay the Second Per Share Post-Closing Amount or (iii) claims based oncriminal matters, fraud or intentional misrepresentation, with respect towhich, in each case, no Damages shall be counted in determining whether the capin this Section 9.5(b) has been exceeded.

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(c)           For purposes ofdetermining any breach of any representation or warranty for purposes ofindemnification under this Article IX, all representations and warrantiesshall be treated as if the words “materially,” “in all material respects” orsimilar words were omitted from such representations and warranties. Theindemnification obligations of the parties hereto and the rights and remediesthat may be exercised by an Indemnified Party shall not be limited orotherwise affected by or as a result of any information furnished to, or anyinvestigation made by or knowledge of any of the Indemnified Parties or any oftheir Representatives.

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(d)           The amount thatmay be recovered hereunder by an Indemnified Party shall be reduced by anamount equal to any insurance recovery actually received by the IndemnifiedParty (except to the extent of any repayment or increase in past, present orfuture insurance premiums or other similar repayment mechanisms payablefollowing the date of the claim giving rise to such increase, determined on a presentvalue basis) and shall be appropriately adjusted for calculations of therelated Tax consequences and for the time value of money. The Buyer shall havethe right to determine in its sole discretion whether to pursue any suchinsurance or Tax recovery.

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9.6           Waiver, Release andDischarge. Effective upon the Closing, except as expressly set forth inthis Agreement, each Seller hereby irrevocably waives, releases and dischargesthe Company, the Buyer and their respective Affiliates, directors, officers andemployees, from any and all Liabilities and obligations to the Seller of anykind or nature whatsoever, whether in his or her capacity as a Sellerhereunder, as a shareholder, officer, director or employee of the Company orotherwise (including, without limitation, in respect of rights of contributionor indemnification as a director or officer of the Company underSection 13.1 Chapter 9 of the

 

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## **VSCA or under the Articles ofIncorporation or Bylaws of the Company or otherwise), in each case whetherabsolute or contingent, liquidated or unliquidated, known or unknown, andwhether arising hereunder or under any other agreement or understanding orotherwise at law or equity or in any administrative or arbitration proceeding,and each Seller shall not seek to recover any amounts in connection therewithor thereunder from the Company. Each Seller waives, and acknowledges and agreesthat he or she shall not have and shall not exercise or assert (or attempt to exerciseor assert), any right of contribution, right of indemnity or other similarright or remedy against the Company, the Buyer and their respective Affiliates,directors, officers and employees, in connection with any actual or allegedbreach by the Company or any Seller of any representation, warranty orobligation set forth in this Agreement.**

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9.7           Exclusive Remedy.The provisions of this Article IX shall constitute the sole and exclusiveremedy from and after the Closing with respect to any Damages suffered,sustained, incurred or paid by any Indemnified Party resulting from or arisingout of any breach of any representation or warranty made in this Agreement orin any other agreement or any certificate delivered or provided pursuanthereto, except for specific performance and equitable remedies as set forth inArticle X and Section 12.3 and except in the case of criminalmatters, fraud or intentional misrepresentation.

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# **ARTICLE XCOVENANT NOT TO COMPETE**

# ** **

10.1         Prohibited Activities.For the period commencing with Closing and ending on the later of thethird (3rd) anniversary of the Closing and two (2) years afterthe date of termination of any employment or consulting arrangement with theBuyer, the Company or the Buyer’s Affiliates, no Seller shall, for any reasonwhatsoever, directly or indirectly, for himself or herself, or on behalf of orin conjunction with any other Person:

## ** **

(a)           engage as astockholder, officer, director, owner, partner, joint venturer, or in amanagerial capacity, whether as an employee, independent contractor, consultantor advisor, in any business selling any products or services in direct orindirect competition with the Buyer, the Company or the Buyer’s Affiliates; provided,however, that no Seller nor any of such Seller’s respective Affiliatesshall be precluded from the ownership of securities of corporations that arelisted on a national securities exchange or traded in the nationalover-the-counter market in an amount that shall not exceed one percent (1%) ofthe outstanding shares of any such corporation;

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(b)           employ, or call uponfor the purpose or with the intent of enticing or soliciting away from or outof the employ of the Buyer, the Company or any of the Buyer’s Affiliates, anyperson who is at that time, or was within one (1) year prior to thattime, an employee of the Buyer, the Company or any of the Buyer’s Affiliates;

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(c)           sell products orservices to, or call upon for the purpose of soliciting or selling products orservices to, any Person who is at that time, or has been withinone (1) year prior to that time, a customer or prospective customerof the Buyer, the Company or any of the Buyer’s Affiliates; or

 

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(d)           publish any statementor make any statement (under any circumstances reasonably likely to becomepublic) critical of the Buyer, the Company or any of the Buyer’s Affiliates, orin any way adversely affecting or otherwise maligning the reputation of theBuyer, the Company or any of the Buyer’s Affiliates.

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The parties intend that the covenants contained in thisSection 10.1 shall be deemed to be a series of separate covenants,one for each county in each state of the United States and, except forgeographic coverage, each such separate covenant shall be identified in termsto the covenant contained in this Section 10.1.

 

10.2         Confidentiality.

## ** **

(a)           Each Seller and each oftheir respective Affiliates, (i) shall treat and hold as confidential allinformation concerning this Agreement (except such information as is necessaryto be disclosed to such Seller’s advisors who agree or who have fiduciaryobligations to treat such information as confidential) and the business andaffairs of the Buyer, the Company and the Buyer’s Affiliates that is notalready generally available to the public (the “Confidential Information”),(ii) shall not disclose, transfer, transmit or use any of the ConfidentialInformation except in connection with this Agreement or in connection withtheir employment duties to the Buyer or the Company as authorized by the Buyeror the Company and (iii) shall deliver promptly to the Buyer, at therequest and option of the Buyer, all tangible embodiments (and all copies) ofthe Confidential Information which are in his or her possession or under his orher control. Each Seller hereby acknowledges that such Confidential Informationconstitutes proprietary and trade secret information of the Buyer or theCompany, as the case may be.

### ** **

(b)           In the event that anySeller is requested or required (by oral question or request for information ordocuments in any legal proceeding, interrogatory, subpoena, civil investigativedemand, or similar process) to disclose any Confidential Information, suchSeller shall notify the Buyer promptly of the request or requirement so thatthe Buyer may seek an appropriate protective order or waive compliancewith the provisions of this Section 10.2. If, in the absence of aprotective order or the receipt of a waiver hereunder, any Seller is, on theadvice of counsel, compelled to disclose any Confidential Information to anytribunal or other Government official or agency, such Seller may disclosethe Confidential Information to the tribunal; providedthat suchSeller shall use his or her best efforts to obtain, at the request and expenseof the Buyer, an order or other assurance that confidential treatment shall beaccorded to such portion of the Confidential Information required to bedisclosed as the Buyer shall designate.

### ** **

10.3         Damages. Becauseof the difficulty of measuring economic losses to the Buyer and its Affiliatesas a result of a breach of the foregoing covenants in this Article X, andbecause of the immediate and irreparable damage that could be caused to theBuyer and its Affiliates for which it would have no other adequate remedy, eachSeller agrees that the foregoing covenant may be enforced by the Buyer inthe event of breach by such Seller, in addition to, but not in lieu of, anyother available remedies, by injunctions and restraining orders and otherequitable remedies.

 

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10.4         Reasonable Restraint.It is agreed by the Parties that the foregoing covenants in this Article Ximpose a reasonable restraint on the applicable Seller in light of theactivities and business of the Buyer and its Affiliates on the date of theexecution of this Agreement and the current plans of the Buyer and itsAffiliates; but it is also the intent of the Parties, that such covenants beconstrued and enforced in accordance with the changing activities and businessof the Buyer, the Company and the Buyer’s Affiliates throughout the term ofthis covenant.

## ** **

10.5         Independent Covenant.All of the covenants in this Article X shall be construed as an agreementindependent of any other provision in this Agreement, and the existence of anyclaim or cause of action of any Seller against the Buyer, whether predicated onthis Agreement or otherwise, shall not constitute a defense to the enforcementby the Buyer of such covenants. It is understood by the Parties hereto that thecovenants contained in this Article X are essential elements of thisAgreement and that, but for the agreement of the Sellers to comply with suchcovenants, the Buyer would not have agreed to enter into this Agreement. EachSeller and the Buyer have independently consulted with their respective counseland have been advised concerning the reasonableness and propriety of suchcovenants with specific regard to the nature of the business conducted by theBuyer. Each Seller hereby agrees that all covenants contained in thisArticle X are material, reasonable and valid and waive any requirement ofthe Buyer to post a bond to strictly enforce the terms hereof. The covenants inthis Article X are severable and separate, and the unenforceability of anyspecific covenant shall not affect the provisions of any other covenant.Moreover, in the event any court of competent jurisdiction shall determine thatthe scope, time or territorial restrictions set forth are unreasonable, then itis the intention of the Parties that such restrictions be enforced to thefullest extent which the court deems reasonable, and the Agreement shallthereby be reformed. The covenants contained in Article X hereof shall notbe affected by any breach of any other provision hereof by any Party hereto butshall have no effect if this Agreement is terminated pursuant toArticle XI.

 

# **ARTICLE XITERMINATION**

# ** **

11.1         Termination.

## ** **

(a)           This Agreement may, bynotice given on or prior to the Closing Date, in the manner hereinafterprovided, be terminated and abandoned at any time prior to the Closing Date:

### ** **

(i)            by the SellerRepresentative if there has been a material misrepresentation or a materialdefault or breach by the Buyer with respect to its representations in thisAgreement or in any ancillary document or the due and timely performance of anyof the Buyer’s covenants and agreements contained in this Agreement or in anyancillary document, and such misrepresentation, default or breach shall nothave been cured within five (5) days after receipt by the Buyer ofnotice specifying particularly such misrepresentation, default or breach;

####  

(ii)           by the SellerRepresentative, if there has been an amendment, supplement or revision to theBuyer Disclosure Schedule;

 

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(iii)          by the Buyer if therehas been a material misrepresentation or a material default or breach by theCompany or any Seller with respect to any of their respective representationsin this Agreement or in any ancillary document or the due and timelyperformance by the Company or any Seller of any of their respective covenantsand agreements contained in this Agreement or in any ancillary document, andsuch misrepresentation, default or breach shall not have been cured within five (5) daysafter receipt by the Company or any Seller of notice specifying particularlysuch misrepresentation, default or breach;

####  

(iv)          by the Buyer if therehas been an amendment, supplement or revision to the Seller DisclosureSchedule;

####  

(v)           by mutual agreement ofthe Company and the Buyer;

####  

(vi)          by either the Company orthe Buyer if the Closing shall not have occurred on or before the ninety (90)days after the date hereof; providedthat the Party seeking toterminate this Agreement shall not because of its (and in the case of theCompany, any Seller’s) breach or violation of any representation, warranty orcovenant contained herein have caused the Closing not to have occurred;

####  

(vii)         by the Buyer if WachoviaBank, National Association, or other applicable lenders under the Amended andRestated Credit Agreement, refuse to provide the Credit Agreement Consent; provided,however, the Buyer’s rights under thisSection 11.1(a)(vii) shall expire on the fifteenth (15th)day after the date hereof; or

####  

(viii)        by the SellerRepresentative, on the one hand, or by the Buyer, on the other hand, if thereshall be a final nonappealable order of a federal or state court in effectpreventing the consummation of the transactions contemplated by this Agreement;or there shall be any action taken, or any statute, rule, regulation or orderenacted, promulgated or issued or deemed applicable to the transactions by anyGovernment Authority which would make the consummation of the transactionsillegal.

####  

(b)           In the event of thetermination of this Agreement pursuant to Section 11.1(a), (i) theStock Purchase shall be abandoned; (ii) the provisions of Article IX,this Article XI and Article XII shall remain in full force and effectand survive any termination of this Agreement; and (iii) each Party shallremain liable for any breach of this Agreement prior to its termination.

### ** **

# **ARTICLE XIIMISCELLANEOUS**

# ** **

12.1         Successors and Assigns.This Agreement shall inure to the benefit of and be binding upon the Partiesand their respective successors and assigns; provided, however,that neither the Company nor any of the Sellers may make any assignment ofthis Agreement or any interest herein without the prior written consent of theBuyer and, except in connection with the Credit Agreement Consent or otherwiseto Wachovia Bank, National Association (or any assignor, successor or otherPerson who assumes the Buyer’s Senior Debt or replaces Wachovia Bank, NationalAssociation or provides indebtedness for borrowed money to the Buyer), Buyer

 

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## **may not make any assignment ofthis Agreement or any interest herein without the prior written consent of theSeller Representative. Any such purported assignment without such prior writtenconsent shall be void and of no force or effect.**

## ** **

12.2         Governing Law.This Agreement shall in all respects be interpreted, construed and governed byand in accordance with the laws of the Commonwealth of Virginia, without regardto its conflicts or choice of laws principles.

## ** **

12.3         Specific Performance.Each Party acknowledges that the other Parties shall be irreparably harmed andthat there shall be no adequate remedy at law for any violation by any of themof any of the covenants or agreements contained in this Agreement. It is accordinglyagreed that, in addition to, but not in lieu of, any other remedies whichmay be available upon the breach of any such covenants or agreements, eachParty shall have the right to obtain injunctive relief to restrain a breach orthreatened breach of, or otherwise to obtain specific performance of, the otherParties’ covenants and agreements contained in this Agreement. All rights andremedies of the Parties under this Agreement shall be cumulative, and theexercise of one or more rights or remedies will not preclude the exercise ofany other right or remedy available under this Agreement or applicable Law.

## ** **

12.4         Severability. Eachsection, subsection and lesser section of this Agreement constitutesa separate and distinct undertaking, covenant and/or provision hereof. In theevent that any provision of this Agreement shall finally be determined to beunlawful, such provision shall be deemed severed from this Agreement, but everyother provision of this Agreement shall remain in full force and effect; provided,however, if such unlawful clause is so material to the Party for whosebenefit the clause was originally included so that such Party would not haveentered into this Agreement without such unlawful clause, the severability ofsuch clause shall be arbitrated pursuant to Section 12.9 hereof. Thepreceding sentence is in addition to and not in place of the severabilityprovisions in Article X.

## ** **

12.5         Amendment. ThisAgreement may be amended, supplemented or modified only by execution of aninstrument in writing signed by the Buyer, the Company and the SellerRepresentative.

## ** **

12.6         Waiver. Any Partyhereto may to the extent permitted by applicable Law (i) extend thetime for the performance of any of the obligations or other acts of the otherParties hereto, (ii) waive any inaccuracies in the representations andwarranties of the other Parties hereto contained herein or in any documentdelivered pursuant hereto or (iii) waive compliance with any of theagreements of the other Parties hereto contained herein. No such extension orwaiver shall be effective unless set forth in a written instrument dulyexecuted by or on behalf of the Party extending the time of performance orwaiving any such inaccuracy or non-compliance. No waiver by any Party of anyterm of this Agreement, in any one or more instances, shall be deemed to be orconstrued as a waiver of the same or any other term of this Agreement on anyfuture occasion.

## ** **

12.7         Notices. Allnotices, requests, consents, waivers, and other communications required orpermitted to be given hereunder shall be in writing and shall be deemed to havebeen duly given (a) if personally delivered, upon delivery or refusal ofdelivery; (b) if mailed by

 

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## **registered or certified UnitedStates mail, return receipt requested, postage prepaid, upon delivery orrefusal of delivery; or (c) if sent by a nationally recognized overnightdelivery service, upon delivery or refusal of delivery. All notices, consents,waivers, or other communications required or permitted to be given hereundershall be addressed as follows:**

## ** **

(a)           If to the Buyer:

### ** **

SI International, Inc.12012 Sunset Hills Road, Suite 800Reston, Virginia  20190Attention: Thomas E. Dunn

James E. Daniel

Telephone:  (703) 234-7000Facsimile:   (703) 234-7501

 

witha copy to:

 

Morrison &Foerster LLP1650 Tysons Boulevard, Suite 300McLean, Virginia 22102Attention:  Lawrence T. YanowitchTelephone:  (703) 760-7318Facsimile:  (703) 760-7777

 

(b)           If to any Seller or theSeller Representative:

### ** **

Donald E. Reed830 Randolph RoadSilver Spring, Maryland 20904

 

witha copy to:

 

Jenner & Block LLP601 Thirteenth Street, NW

Suite 1200 South

Washington, DC 20005-3823Attention:  Leslie H. LepowTelephone:  (202) 639-6090Facsimile:   (202) 639-6066

 

anda copy to:

 

Leslie W. Butler6060 Tower Court, No. 1404Alexandria, Virginia 22304

 

or at such other address oraddresses as the Party addressed may from time to time designate inwriting pursuant to notice given in accordance with this section.

 

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12.8         Expenses. Exceptas otherwise provided in Article IX, all costs and expenses of the Companyand any Seller (including, without limitation, financial advisory fees, legalfees and expenses, broker and finder fees, fees and expenses of accountants)incurred by the Company or any Seller in connection with the transactionscontemplated hereby shall be borne by the Sellers and all costs and expenses ofthe Buyer (including, without limitation, financial advisory fees, legal feesand expenses, broker and finder fees, fees and expenses of accountants)incurred by the Buyer in connection with the transactions contemplated herebyshall be borne by the Buyer. The Seller Representative may direct the Buyerto satisfy any of the Seller’s obligations under this Section 12.8 at theClosing, in which case the First Post-Closing Payment shall be reduced by acorresponding amount.

## ** **

12.9         Arbitration.

## ** **

(a)           Except as set forth inArticle X, Section 12.3 and Section 12.9(c) hereof, anydispute, difference, controversy or claim arising in connection with or relatedor incidental to, or question occurring under, this Agreement or the subjectmatter hereof shall be finally settled under the Commercial Arbitration Rules (the“Rules”) of the American Arbitration Association (“AAA”), unlessotherwise agreed, by an arbitral tribunal composed ofthree (3) arbitrators, at least one (1) of whom shall be anattorney experienced in corporate transactions, appointed by agreement of theBuyer and the Seller Representative in accordance with said Rules. In the eventBuyer and the Seller Representative fail to agree upon a panel of arbitratorsfrom the first list of potential arbitrators proposed by the AAA, the AAA willsubmit a second list in accordance with such Rules. In the event Buyer and theSeller Representative shall have failed to agree upon a full panel ofarbitrators from such second list, any remaining arbitrators to be selectedshall be appointed by the AAA in accordance with such Rules. If at the time ofthe arbitration Buyer and the Seller Representative agree in writing to submitthe dispute to a single arbitrator, such single arbitrator shall be appointedby agreement of Buyer and the Seller Representative in connection with theforegoing procedure or failing such agreement by the AAA in accordance withsuch Rules. All arbitrators shall be neutral arbitrators and subject toRule 19 of the Rules.

### ** **

(b)           The arbitrators shallnot have the authority to add to, detract from, or modify any provision hereofnor to award punitive damages to any injured Party. A decision by a majority ofthe arbitrators shall be final, conclusive and binding. The arbitrators shalldeliver a written and reasoned award with respect to the dispute to each of theparties, who shall promptly act in accordance therewith. Any arbitrationproceeding shall be held in Alexandria, Virginia.

### ** **

(c)           The Parties herebyexclude any right of appeal to any court on the merits of the dispute. Theprovisions of this Section 12.9 may be enforced in any court havingjurisdiction over the award or any of the Parties or any of their respectiveassets, and judgment on the award (including without limitation equitableremedies) granted in any arbitration hereunder may be entered in any suchcourt. Nothing contained in this Section 12.9 shall prevent any Party fromseeking injunctive or other equitable relief from any court of competentjurisdiction, without the need to resort to arbitration.

### ** **

(d)           In any arbitrationhereunder, the holders of Company Common Stock and their respective successorsshall be bound by any and all actions taken by the Seller

 

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### **Representative on their behalfpursuant to Section 2.3. All communications or writings sent to the SellerRepresentative shall be deemed notice to all of the holders of Company CommonStock hereunder.**

### ** **

12.10       Complete Agreement.This Agreement, those documents expressly referred to herein, including allexhibits and schedules hereto, and the other documents of even date herewith,together with the Confidentiality and Non-Disclosure Agreement, datedAugust 29, 2005, between the Company and Buyer (which shall automaticallyterminate at Closing and be of no further force or effect), embody the completeagreement and understanding among the Parties and supersede and preempt anyprior understandings, agreements or representation by or among the Parties,written or oral, which may have related to the subject matter herein.

## ** **

12.11       Absence of Third PartyBeneficiary Rights. No provision of this Agreement is intended, nor will beinterpreted, to provide or create any third party beneficiary rights or anyother rights of any kind in any client, customer, Affiliate, stockholder,employee or partner of any Party hereto or any other Person.

## ** **

12.12       Mutual Drafting.This Agreement is the mutual product of the Parties, and each provision hereofhas been subject to the mutual consultation, negotiation and agreement of eachof the Parties, and shall not be construed for or against any Party hereto.

## ** **

12.13       Further Representations.Each Party to this Agreement acknowledges and represents that it has beenrepresented by its own legal counsel in connection with the transactioncontemplated by this Agreement, with the opportunity to seek advice as to itslegal rights from such counsel. Each Party further represents that it is beingindependently advised as to the Tax or securities consequences of thetransactions contemplated by this Agreement and is not relying on anyrepresentation or statements made by any other Party as to such Tax andsecurities consequences.

## ** **

12.14       Gender. Unless thecontext clearly indicates otherwise, where appropriate the singular shallinclude the plural and the masculine shall include the feminine or neuter, and viceversa, to the extent necessary to give the terms defined herein and/orthe terms otherwise used in this Agreement the proper meanings.

## ** **

12.15       Headings. Theheadings in this Agreement are intended solely for convenience of reference andshall be given no effect in the construction or interpretation of thisAgreement.

## ** **

12.16       Counterparts. ThisAgreement may be executed in two or more counterparts, each of which whenexecuted and delivered shall be deemed an original and all of which, takentogether, shall constitute the same agreement. This Agreement and any documentor schedule required hereby may be executed by facsimile signaturewhich shall be considered legally binding for all purposes.

 

[Signatures appear on following page(s).]

 

57

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**IN WITNESS WHEREOF**, each Partyhereto has caused this Agreement to be signed as of the date first abovewritten.

 
|   | SI  INTERNATIONAL, INC.           |
|--------|----------------------------------------|
|   |                                   |
|   |                                   |
|   | By:                                    | /s/  Thomas E. Dunn |
|   | Name:  Thomas E. Dunn                  |
|   | Title:Executive  Vice President, Chief |
|   |                                   | Financial  Officer and Treasurer |
|   |                                   |
|   |                                   |
|   | ZEN  TECHNOLOGY, INC.             |
|   |                                   |
|   |                                   |
|   | By:                                    | /s/  Donald E. Reed |
|   | Name:  Donald E. Reed                  |
|   | Title:  Chief Executive Officer        |
|   |                                   |
|   |                                   |
|   | /s/  Donald E. Reed                    |
|   | DONALD E.  REED                   |
|   |                                   |
|   |                                   |
|   | /s/  Leslie W. Butler                  |
|   | LESLIE W.  BUTLER                 |
|   |                                   |
|   |                                   |
|   | /s/  Barbara M. Reed                   |
|   | BARBARA M.  REED                  |
|   |                                   |
|   |                                   |
|   | /s/  Cindy Andre                       |
|   | CINDY  ANDRE                           |
|        |                                        |  |  |

 

 

*[Signature page of Stock Purchase Agreement]*

 

----

 
| **APPENDICES**                                   |
|--------------------------------------------------|
|                                             |   |   |
| Appendix A                                  |   | Defined Terms |
|                                             |   |   |
| Appendix B                                  |   | Modified GAAP |
|                                             |   |   |
| Appendix C                                  |   | Certain  Matters |
|                                             |   |   |
| **EXHIBITS**                                     |
|                                             |   |   |
| Exhibit A                                   |   | Form of  Subordination Agreement |
|                                             |   |   |
| Exhibit B                                   |   | Form of  Restricted Stock Repurchase Agreement |
|                                             |   |   |
| Exhibit C-1                                 |   | Form of  Consulting Agreement – Donald E. Reed |
|                                             |   |   |
| Exhibit C-2                                 |   | Form of  Consulting Agreement – Leslie W. Butler |
|                                             |   |   |
| Exhibit C-3                                 |   | Form of  Consulting Agreement – Cindy A. Andre |
|                                             |   |   |
| Exhibit D                                   |   | Form of  Opinion of Counsel |
|                                             |   |   |
| [Appendices  and Exhibits Intentionally Omitted] |

 

----