exv10w25



 


EXHIBIT 10.25


STOCK PURCHASE AGREEMENT


between


ALION SCIENCE AND TECHNOLOGY CORPORATION,


and


STATE STREET BANK & TRUST COMPANY, as Trustee of


The Employee Stock Ownership Plan Component of the


ALION SCIENCE AND TECHNOLOGY CORPORATION

EMPLOYEE OWNERSHIP, SAVINGS AND INVESTMENT TRUST


___________, 2002


 






 


STOCK PURCHASE AGREEMENT



     STOCK PURCHASE AGREEMENT (“Agreement"), dated as of      , 2002, by and
between ALION SCIENCE AND TECHNOLOGY CORPORATION, a Delaware corporation (the
“Company"), and STATE STREET BANK & TRUST COMPANY, a state chartered trust
company organized under the laws of the Commonwealth of Massachusetts, not in
its individual or corporate capacity, but solely as trustee (the “Trustee”) of
the employee stock ownership plan component of the ALION SCIENCE AND TECHNOLOGY
CORPORATION EMPLOYEE OWNERSHIP, SAVINGS AND INVESTMENT TRUST (the “Purchaser”)
which implements and forms a part of the ALION SCIENCE AND TECHNOLOGY
CORPORATION EMPLOYEE OWNERSHIP, SAVINGS AND INVESTMENT PLAN (the “Plan”). The
Purchaser and the Plan are hereinafter collectively referred to as the “ESOP.”
Capitalized terms used herein but not otherwise defined shall have the
meanings assigned to them in the Asset Purchase Agreement (as defined below).


RECITALS



     WHEREAS, the Company is simultaneously purchasing substantially all of the
assets related to IIT Research Institute’s (“IITRI”) business (as more fully
described in the Asset Purchase Agreement referred to below, the “Business”) of
providing advanced technological and scientific services in the fields of
research and development, engineering, and ordnance and explosive waste
remediation, for governmental and private sponsors pursuant to the Fourth
Amended and Restated Asset Purchase Agreement, dated November      , 2002 between
IITRI and the Company (the “Asset Purchase Agreement”); and


     WHEREAS, the Company desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase from the Company up to Three Million (3,000,000)
shares of common stock of the Company, $0.01 par value per share (“Common
Stock”), that once issued will (together with 100 shares of Common Stock
referred to in Section 1.4 below) be all of the outstanding Company Stock of
the Company (together, the “Shares”), subject to the terms and conditions of
this Agreement.


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


AGREEMENT



     SECTION 1. Purchase and Sale of Shares.


     1.1 Shares to be Sold. Subject to the terms and conditions of this
Agreement, at the Closing (as defined in Section 2.1), the Company shall issue
and sell to the Purchaser, and the Purchaser shall purchase from the Company,
the Shares.


 






 



     1.2 Purchase Price. The purchase price for each Share shall be Ten
Dollars ($10.00) and the aggregate purchase price (the “Purchase Price”) shall
be an amount equal to the product of the number of Shares invested in by
employees of the Company and the Business Subsidiary (as defined below)
pursuant to the offering described in the S-1 (as defined below) multiplied by
Ten Dollars ($10.00); provided, that in no event shall the Purchase Price be
less than Twenty Four Million Dollars ($24,000,000) or greater than Thirty
Million Dollars ($30,000,000). The Purchase Price shall be payable by the
Purchaser to the Company by wire transfer of immediately available funds to an
account designated by the Company.


     1.3 Use of Proceeds. The Company shall use all of the proceeds of the
Purchase Price that it receives hereunder to pay a portion of the Cash Purchase
Price (as defined in the Asset Purchase Agreement) pursuant to the Asset
Purchase Agreement.


     1.4 Special Contribution to the Initial ESOP Trust. After the Closing
Date, but no later than five Business Days thereafter, the Company shall make a
special contribution to the Beagle Holdings, Inc. Employee Stock Ownership and
401(k) Trust, established December 19, 2001 (the “Initial Trust”) of which
Stacy Mendler is presently the trustee (the “Initial Trustee”) as a special
contribution for the Plan’s fiscal year beginning October 1, 2002. Such
special contribution shall be in an amount sufficient to enable the Initial
Trustee to repay in full all amounts borrowed by the Initial Trust to purchase
the 100 shares of Common Stock held by it. It is contemplated that the Initial
Trustee will use the special contribution to immediately repay such loan. Upon
such repayment, the 100 shares of Common Stock held by the Initial Trust shall
thereupon become available for allocation to Plan participants as part of the
contributions for the Plan’s fiscal year beginning October 1, 2002, and the
Company shall take whatever actions are required to cause such 100 shares of
Common Stock to be transferred to the Purchaser following the above described
repayment, and the Purchaser shall hold on behalf of the Plan such 100 shares
of Common Stock for allocation to Plan participants. Immediately thereafter
the Initial Trust shall be dissolved.


     SECTION 2. Closing.


     2.1 Time and Place. The closing (“Closing”) of the purchase of the Shares
will be held at the offices of Baker & McKenzie in Chicago, Illinois, at 10:00
a.m. local time, on December [     ], 2002, or at such other time and place as
shall be mutually agreed upon by the parties. The date of the Closing is
sometimes referred to herein as the “Closing Date.”


     2.2 Deliveries.


     2.2.1 Deliveries by the Company. At the Closing, the Company shall
deliver, or cause to be delivered, to the Purchaser the following:


     (a)  The certificates representing the Shares, duly endorsed to the
Purchaser or with stock powers attached duly executed to the Purchaser,


 






 


in proper form for transfer, and with stamps for all applicable Federal,
state or local stock transfer taxes, if any, affixed thereto.


     (b)  The opinions of counsel to the Company referred to in Section 6.3.


     (c)  True and correct copies of the Company’s Certificate of Incorporation,
certified by the Secretary of State of the State of Delaware, and of its
By-laws, the Plan, the Trust Agreement (as defined below) and certain
resolutions of its Board of Directors with respect to (i) the adoption of the
Plan and the Trust Agreement, (ii) the appointment of the Trustee, (iii) the
approval of the Transaction Agreements (as defined below), and (iv) such other
matters as may be reasonably requested by the Purchaser, in each case certified
by the Secretary of the Company, which copies are true, correct and complete.


     (d)  True and correct copies of the Transaction Agreements executed by the
Company and each other party thereto, other than the Purchaser.


     "Transaction Agreements” shall mean this Agreement, the Trust Agreement,
dated [     ], 2002, between the Trustee and the Company (the “Trust
Agreement”), the Asset Purchase Agreement, the Mezzanine Note Securities
Purchase Agreement, the Mezzanine Investment Note, the Mezzanine Note Warrant,
the Seller Note Securities Purchase Agreement, the Seller Investment Note and
the Seller Note Warrant, and the First Union Line of Credit or if it is
replaced, the Replacement Line of Credit, the Guarantee, the Rights Agreement,
the Letter Agreement, dated [     ], 2002, between IITRI and the Company, and
the Registration Rights Agreement, dated the date hereof, between the Company
and the Purchaser, in each case including all the certificates and other
instruments attached to Exhibits hereto or thereto or delivered in connection
herewith or therewith.


     2.2.2 Deliveries by the Purchaser. At the Closing, the Purchaser shall
deliver, or cause to be delivered, to the Company the following:


     (a)  The Purchase Price as provided in Section 1.2.


     (b)  True and correct copies of each Transaction Agreement to which the
Purchaser is a party executed by it.


     SECTION 3. Representations and Warranties of the Company. The Company
represents and warrants to the Purchaser as follows:


     3.1 Organization, Corporate Standing and Investments. Each of the Company
and the Business Subsidiary is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation.
As of the date hereof, the Company is authorized to issue 15,000,000 shares of
Common Stock, and 100 shares of Common Stock are issued or outstanding, all of
which are held by the

 






 




Initial Trust, and Human Factors Applications, Inc. (the “Business
Subsidiary”) is authorized to issue [     ] shares of common stock, par value
$[     ] per share (the “Subsidiary Common Stock”) and [     ] shares of common
stock are issued and outstanding, all of which are held by the Company. Once
issued and sold as contemplated by this Agreement, all of the outstanding
shares of Common Stock will be held by the Purchaser and will be duly
authorized and validly issued, fully paid and non-assessable. The Company
shall convey to the Purchaser, at the Closing, good and valid title to the
Shares, free and clear of any liens, security interests, claims and
encumbrances. No other class of capital stock or other ownership interests of
the Company or the Business Subsidiary is authorized or outstanding. Except as
set forth on Schedule 3.1, there is no, and after giving effect to the
Transactions (as defined below) there will not be any, outstanding right,
subscription, warrant, call, unsatisfied preemptive right, option or other
agreement of any kind to purchase or otherwise to receive from the Company or
the Business Subsidiary any of the outstanding, authorized but unissued,
unauthorized or treasury shares of Common Stock or Subsidiary Common Stock and
there is no outstanding security of any kind of the Company convertible into
any such Common Stock or Subsidiary Common Stock. Except as set forth on
Schedule 3.1, the Company has, and after giving effect to the Transactions will
have, no direct or indirect equity interest in or loans to any partnership,
corporation, joint venture, business association or other entity, other than
the Business Subsidiary. Each of the Company and the Business Subsidiary has
full corporate authority to own, lease and operate its business, and is in good
standing and is qualified to transact business as a foreign corporation in all
states in which the nature of the Business or the properties owned by it, in
each case after giving effect to the consummation of the transactions
contemplated by the Transaction Agreements (the “Transactions”) require it to
qualify to transact business, except for such failures to qualify as would not,
individually or in the aggregate, have a Material Adverse Effect (as
hereinafter defined). The Company has been organized solely for the purposes
contemplated by the Transactions, and has no liabilities and no assets and has
not conducted any business, other than as contemplated by the Transactions.


     As used in this Agreement, the term “Material Adverse Effect” used in
connection with a party hereof means any event, change or effect that (i) is
materially adverse to the condition (financial or otherwise), assets,
liabilities, businesses, operations, results of operations or prospects of
such party taken as a whole, including, in the case of the Company, after
giving effect to the Transactions or (ii) adversely affects the ability of such
party to consummate the transactions contemplated in this Agreement.


     3.2 Necessary Authority. The Company has all requisite corporate power
and authority to enter into, deliver and perform this Agreement and the other
Transaction Agreements and to consummate the transactions contemplated herein
and therein. The execution, delivery and performance of this Agreement and the
other Transaction Agreements and the consummation of the transactions
contemplated herein and therein have been duly authorized by all necessary
action on the part of the Company. This Agreement and the other Transaction
Agreements, when executed and delivered by the Company, shall each constitute
its valid and legally binding obligation, enforceable against the Company in
accordance with its terms, except as the same may be

 






 




limited by (i) bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors’ rights generally and (ii) general
equitable principles regardless of whether the issue of enforceability is
considered in a proceeding at law or in equity.


     3.3 Conflict; Change of Control. Subject to satisfaction of the
conditions set forth in Sections 6 and 7, and except as shown in Schedule 3.3,
neither the execution and delivery of this Agreement or any other Transaction
Agreements nor the consummation of the transactions contemplated hereby or
thereby will (i) conflict with or violate, (ii) result in any breach or default
(with or without notice or lapse of time, or both) under, (iii) give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or (iv) result in the creation of security
interest, claim, lien, charge or encumbrance upon any of the Transferred Assets
or the Shares pursuant to:


     3.3.1 any provision of the Certificate of Incorporation or By-laws of the
Company or the Business Subsidiary;


     3.3.2 any law, rule, regulation, ordinance, order, writ, injunction,
judgment or decree applicable to the Company or the Business Subsidiary or by
which any of the Company’s or the Business Subsidiary’s assets are or will be
bound or affected;


     3.3.3 any agreement, contract, note, mortgage, indenture, lease,
instrument, permit, clearance, approval, concession, franchise or license to
which the Company or the Business Subsidiary is or will be a party or by which
the Company or the Business Subsidiary, any of the Company’s or Business
Subsidiary’s assets, employees or consultants or the Shares may be bound or
affected (specifically including, but not limited to, any of the foregoing
relating to the United States Federal Government or any agency or
instrumentality thereof);


     in each case except where such conflict, violation, breach, default,
termination, cancellation, acceleration, creation or encumbrance would not be
material to either the Company and the Business Subsidiary, taken as a whole,
or the Business, whether before or after giving effect to the Transactions.


     3.4 Filings and Approvals. Subject to satisfaction of the conditions set
forth in Sections 6 and 7, and except as shown in Schedule 3.4 attached hereto,
neither the Company nor the Business Subsidiary is required to submit any
notice, declaration, report or other filing or registration with, or request
the consent, approval, order or authorization of, any Governmental Body (as
hereinafter defined) in connection with the execution, delivery or performance
by the Company of this Agreement, the other Transaction Agreements or the
consummation of the Transactions, except where the failure to make such
submission or request would not have been material to either the Company and
the Business Subsidiary, taken as a whole, or the Business, whether before or
after giving effect to the Transactions.


 






 


     "Governmental Body” shall mean any (i) nation, region, state, county,
city, town, village, district or other jurisdiction, (ii) Federal, State,
local, municipal, foreign or other government, (iii) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department or other entity and any court or other tribunal), (iv)
multinational organization, (v) body exercising, or entitled to exercise, any
administrative, executive, judicial, arbitral, legislative, policy, regulatory
or taxing authority or power of any nature, or (vi) official of any of the
foregoing.


     3.5 Financial Statements. The Company has furnished Purchaser with copies
of the unaudited consolidated operating results and balance sheet of the
selected operations of IITRI for the 40-week period ending July 5, 2002,
derived from the unaudited financial statements of IITRI, and the audited
consolidated operating results and balance sheets of the selected operations of
IITRI for the fiscal years ending September 30, 2001, September 30, 2000 and
September 30, 1999, derived from the audited financial statements of IITRI
(collectively, the “Financial Statements”). The Financial Statements have been
prepared in accordance with United States Generally Accepted Accounting
Principles (“GAAP”) consistently applied (except as may be indicated in the
notes thereto), and fairly present in all material respects the financial
position of the Business as at the dates thereof and the results of operations
and changes in financial position for the periods then ended. The reserves and
management accruals, including, without limitation, with respect to excess
billings and contract losses related to audits being performed by the DCAA (as
defined below), reflected in the Financial Statements are adequate in all
material respects.


     3.6 S-1. Each of the Form S-1 filed by the Company on October 4, 2002
registering the Shares (the “S-1”) and any supplement or post-effective
amendment filed with respect thereto (each, a “Supplement”) with the Securities
and Exchange Commission (the “SEC”) complies in all material respects with the
requirements of the Securities Act of 1933, as amended (the “Securities Act”)
and the rules and regulations of the SEC thereunder applicable to the S-1.
Each of the S-1 and each Supplement at the time it was filed did not, as of the
date hereof does not, and as of the effective date of such filing did not,
contain any untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of IITRI that are included in the S-1 comply as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the financial position of IITRI as at the dates thereof and the results
of its operations and cash flows for the periods then ended. The forecasted
financial information included in the S-1 is reasonable, represents the
Company’s management’s best estimate of its financial results through the
Company’s fiscal year ending in 2007, was prepared using the same accounting
policies used in preparing the Financial Statements and is based on reasonable
assumptions.


     3.7 Compliance with Law. The Company, the Business Subsidiary and IITRI
(with respect to the Business) are in compliance in all material respects, and
the

 






 




Business has been conducted so as to comply in all material respects, with
all laws, rules and regulations, judgments, decrees or orders of any
Governmental Body applicable to the Business or with respect to which
compliance is a condition of engaging in the Business, including, without
limitation the (i) Federal Acquisition Regulations, (ii) Truth in Negotiations
Act, (iii) Cost Accounting Standards and (iv) any other laws, regulations and
executive orders restricting the use and dissemination of information
classified for national security purposes and the exportation of certain
products or technical data. There are no material judgments or orders,
injunctions, decrees, stipulations or awards by any Governmental Body adversely
affecting the Company, the Business Subsidiary or IITRI (with respect to the
Business), any of the assets of the Company or the Business and none have been
issued or entered into with respect to the Business since October 1, 1997.


     3.8 No Defaults. Neither the Company nor the Business Subsidiary is in
violation of any provision of its Certificate of Incorporation or by-laws (or
other organizational or charter document). Except as set forth in Schedule
3.8, none of the Company, the Business Subsidiary or IITRI has received written
notice or otherwise has knowledge that it is or would be with the passage of
time, in default or violation of any term, condition or provision of (a) any
material judgment, decree, order, injunction or stipulation applicable to the
Company, the Business Subsidiary or IITRI (with respect to the Business) or (b)
any material agreement, note, mortgage, indenture, contract, lease or
instrument, permit, concession, franchise or license to which the Company, the
Business Subsidiary or IITRI (with respect to the Business) is a party or by
which the Company, the Business Subsidiary or IITRI (with respect to the
Business) or their respective assets or the Business may be bound.


     3.9 Litigation. Except as shown in Schedule 3.9, there is no action,
suit, proceeding, arbitration, claim or investigation pending or, to the
knowledge of the Company, threatened, against the Company, the Business
Subsidiary or IITRI or involving the Business, and no such action, suit,
proceeding, arbitration, claim or investigation could reasonably be expected
to, individually or in the aggregate, have a Material Adverse Effect. Schedule
3.9 sets forth with respect to each pending action, suit, proceeding,
arbitration, claim or investigation to which the Company or the Business
Subsidiary is a party or involving the Business to the extent that the
aggregate damages claimed for all such complaints exceed $50,000, the forum,
the parties thereto, a brief description of the subject matter thereof and the
amount of damages claimed. Except as otherwise indicated on Schedule 3.9, each
pending action, suit, proceeding, arbitration, claim or investigation set forth
on Schedule 3.9 is fully covered by a fully paid occurrence based insurance
policy. Neither the Business Subsidiary nor the Company is subject to or in
default with respect to any final judgment, writ, injunction, restraining order
or order of any nature, decree, rule or regulation of any court or Governmental
Body which, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.


     As used in this Agreement “knowledge of the Company” shall mean the
knowledge of Bahman Atefi, Stacy Mendler, Steve Trichka, C. Randall Crawford,
Barry S. Watson, Jack Hughes and Gary Amstutz, in their capacities as officers
with respect to

 






 




the Business and after due inquiry of the appropriate personnel involved
in the Business who have internal responsibility for the subject matter.


     3.10 No Material Adverse Effect. Since September 30, 2001, the Business
has been conducted in the ordinary course and, except for the Transactions and
as set forth in Schedule 3.10, there has not occurred:


     3.10.1 any Material Adverse Effect with respect to the Company and the
Business Subsidiary, taken as a whole, or the Business;


     3.10.2 any amendments or changes in the Certificate of Incorporation or
By-laws of the Company or the Business Subsidiary;


     3.10.3 any material damage, destruction or loss, whether covered by
insurance or not, involving the Company, the Business Subsidiary or the
Business;


     3.10.4 any increase in or modification of the compensation or benefits
payable or to become payable to any of the employees of the Company, the
Business Subsidiary or IITRI involved in the Business, except in the ordinary
course of business consistent with past practice;


     3.10.5 any increase in or modification of any bonus, pension, insurance or
other employee benefit plan, payment or arrangement made to, for or with any of
the employees of the Company, the Business Subsidiary or IITRI involved in the
Business, except in the ordinary course of the Business consistent with past
practice;


     3.10.6 any acquisition or sale of a material amount of property or assets
of the Company, the Business Subsidiary or IITRI relating to the Business
(other than the sale of assets pursuant to the Asset Purchase Agreement);


     3.10.7 any incurrence, assumption or guarantee by the Company, the
Business Subsidiary or IITRI relating to the Business of any debt for borrowed
money, except for the First Union Line of Credit or the Replacement Line of
Credit or as contemplated by the Transaction Agreements;


     3.10.8 any creation or assumption by the Company, the Business Subsidiary
or IITRI (with respect to the Business) of any mortgage, pledge, security
interest or lien on any asset (other than liens arising under the First Union
Line of Credit or the Replacement Line of Credit, liens arising under existing
lease financing arrangements, liens arising in the ordinary course of business
consistent with past practice which in the aggregate are not material and liens
for taxes not yet due and payable);


     3.10.9 any payment, discharge or satisfaction of any claim, liabilities or
obligations for borrowed money by the Company, the Business Subsidiary or IITRI
(with respect to the Business), other than in the ordinary course of business

 






 




consistent with past practice and other than liabilities reflected or
reserved against in the Financial Statements (or the notes thereto) or as
otherwise contemplated by the Transaction Agreements;


     3.10.10 any making of any loan, advance or capital contribution to or
investment in any person other than travel loans or advances made in the
ordinary course of business of the Company, the Business Subsidiary or IITRI
(with respect to the Business);


     3.10.11 any entry into, amendment of, relinquishment, termination or
non-renewal by the Company, the Business Subsidiary or IITRI of any contract,
lease transaction, commitment or other right or obligation related to the
Business requiring aggregate payments by or to the Company, the Business
Subsidiary or IITRI in excess of $250,000 other than (i) in the ordinary course
of the business or (ii) in connection with or preparation of the Asset Purchase
Agreement, this Agreement and the transactions contemplated therein or herein;


     3.10.12 any transfer or grant of a right under the Company Intellectual
Property Rights (as defined in Section 3.17), other than those transferred or
granted in the ordinary course of business consistent with past practice;


     3.10.13 any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of the Company, the Business Subsidiary or IITRI
involved in the Business;


     3.10.14 any declaration or distribution of cash or assets of the Company,
the Business Subsidiary or IITRI to the Illinois Institute of
Technology (“IIT”) or any affiliate of IIT, or any
agreement or business arrangement requiring any payment to IIT or any affiliate
of IIT;


     3.10.15 any agreement or amendment of any agreement related to the
Business to which the Company, the Business Subsidiary or IITRI is a party
pursuant to which any other party is granted exclusive rights with respect to
the Business or the assets transferred pursuant to the Asset Purchase
Agreement;


     3.10.16 except as described in the notes to the Financial Statements, any
change in the accounting methods or practices followed by the Business, the
Company, the Business Subsidiary or IITRI, including any change in any
assumption underlying, or method of calculating, any bad debt, contingency or
other reserve, except as may be required by changes in GAAP or by Securities
Exchange Commission requirements, make or change any material Tax election,
adopt or change any Tax accounting method, file any amendment to a material Tax
Return, enter into any material closing agreement, settle any material Tax
claim or assessment, or consent to any extension or waiver of the limitation
period applicable to any material Tax claim or assessment (for purposes of this
covenant a “material” Tax Return, closing agreement, Tax claim or assessment
shall mean a Tax Liability with respect to each such item in excess of
$50,000);


 






 




     3.10.17 any capital expenditure commitments with respect to the Business
in the aggregate in excess of $100,000 on an annual basis; or


     3.10.18 any agreement or arrangement made by the Company, the Business
Subsidiary or IITRI to take any action which, if taken prior to the date
hereof, would have made any representation or warranty set forth in this
Section 3.10 untrue or incorrect as of the date when made.


     3.11 Absence of Undisclosed Liabilities. Except as shown in Schedule 3.11,
neither the Company, the Business Subsidiary nor the Business has, or will have
after giving effect to the Transactions, any liabilities or obligations
(whether absolute, accrued or contingent, and whether or not determined or
determinable), of a character which, under GAAP, should be accrued, shown or
disclosed on a balance sheet of the Business (including the footnotes thereto)
except liabilities (i) adequately provided for in the Financial Statements,
(ii) incurred in the ordinary course of business and not required under GAAP to
be reflected on the Financial Statements or (iii) incurred since September 30,
2001 which are not material, or (iv) arising under the Transaction Agreements.


     3.12 Certain Agreements. Except as set forth on Schedule 3.12, neither the
execution and delivery of this Agreement or any of the other Transaction
Agreements nor the consummation of the Transactions will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute, bonus or otherwise) becoming due to any director or employee
of the Company, the Business Subsidiary or IITRI involved in the Business,
under any Plan (as defined in Section 3.13) or otherwise, (ii) materially
increase any benefits otherwise payable under any Plan, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.


     3.13 ERISA. For purposes of this Agreement, “Plans” is defined to include
any (i) incentive compensation, retention, retirement, pension, group
insurance, death benefit, cafeteria, medical expense reimbursement, dependent
care, savings, deferred compensation, consulting, employment, severance pay or
termination pay, vacation pay, welfare or other employee benefit or fringe
benefit plan, program, policy or arrangement; or (ii) plan, program or
arrangement which is an “employee pension benefit plan” as such term is defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), or an “employee welfare benefit plan” as defined in Section
3(1) of ERISA. “Company Plans” means all Plans sponsored, maintained or
contributed to by the Company or any of its ERISA Affiliates that cover any
active, former or retired employee of the Company or Plans of IITRI that the
Company will be assuming or that portion of any Plan of IITRI for which the
Company will be assuming liability pursuant to the Asset Purchase Agreement.
“ERISA Affiliate” shall mean for purposes of this Agreement any trade or
business (whether or not incorporated) which is or ever has been treated as a
single employer with the Company under Section 414(b), (c), (m) or (o) of the
Code. Schedule 3.13 contains an accurate and complete list of each Company
Plan. To the extent applicable, each Company Plan complies in all material
respects with the terms of such Company Plan, the requirements of ERISA and the
Internal Revenue Code of 1986, as amended, (the “Code”) and all applicable
regulations thereunder, and any Company Plan and any trust related to each

 






 




such Company Plan intended to be qualified under Section 401(a) or Section
409 of the Code has either obtained a favorable determination letter as to its
qualified status from the Internal Revenue Service or still has a remaining
period of time under applicable Treasury Regulations or Internal Revenue
Service pronouncements in which to apply for such determination letter and to
make any amendments necessary to obtain a favorable determination and, in any
event, has been maintained in compliance with the terms of each such Company
Plan. To the extent any Company Plan with an existing determination letter from
the Internal Revenue Service must be amended to comply with the applicable
requirements of any legislation not covered by the Tax Reform Act of 1986, the
time period for effecting such amendments will not expire prior to the Closing
Date. The Company has furnished or will furnish within twenty-one (21) days of
the date hereof, Purchaser with copies of such Company Plans and the most
recent Internal Revenue Service letters and Forms 5500 with respect to any such
Company Plan. The Company has furnished or will furnish within 21 (twenty-one)
days of the date hereof, the Purchaser with copies of all insurance and annuity
policies and contracts and other funding arrangements and documents relevant to
any Company Plan. None of the Company Plans is a “multiemployer plan” as that
term is defined in Section 3(37) of ERISA. The Company has not been required
to contribute to, or withdraw from, and does not have any direct or indirect
liability whether contingent or otherwise with respect to any multiemployer
plan. No Company Plan is and no Plans previously sponsored or maintained by
the Company or IITRI are covered by Title IV of ERISA or Section 412 of the
Code. Except as set forth in Schedule 3.13, neither the Company nor any
officer or director of the Company has incurred any liability or penalty under
Sections 4975 through 4980 of the Code or Title I of ERISA, and each Company
Plan has been maintained and administered in all material respects in
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such Company Plans. With respect to any of
the Company Plans subject to Section 4975 of the Code or Section 406 of ERISA,
no “prohibited transaction,” as defined in Section 4975(c)(1) of the Code and
Section 406(a) and (b) of ERISA has occurred (at any time since the effective
date of each such Company Plan) or will occur as a result of the transactions
contemplated by this Agreement, which is not exempt or which will impose any
tax or penalty on the Company or any ERISA Affiliate. Other than with respect
to the ESOP, neither the consummation of the transactions contemplated by the
Transaction Agreements nor the execution of the Transaction Agreements will
accelerate or materially increase any liability under any Company Plan. No
suit, action or other litigation (excluding claims for benefits incurred in the
ordinary course of Company Plan activities) has been brought, or to the
knowledge of the Company is threatened, against or with respect to any such
Company Plan. All material contributions, reserves or premium payments
required by law or by contract to be made or accrued as of the date hereof to
the Plans have been made or accrued and there is no material action, suit or
claim pending with respect to any Company Plan as of the date hereof, other
than routine claims for benefits. Except as set forth in Schedule 3.13, no
Company Plan other than the ESOP provides benefits to any employees, officers,
directors or consultants after termination of employment other than as required
by Section 601 of ERISA or Section 4980(B) of the Code or applicable law.


 






 



     3.14 Major Contracts. Except for the Transaction Agreements and as shown
in Schedule 3.14, neither the Company, the Business Subsidiary nor IITRI (with
respect to the Business) is, or will be after giving effect to the Transaction,
a party to or subject to:


     3.14.1 any union contract or any employment contract or arrangement
providing for future annual compensation greater than $50,000 per year, written
or oral, with any officer, consultant, director or employee which is not
terminable by it on 30 days’ notice or less without penalty or obligation to
make payments related to such termination, other than (i) (in the case of
employees other than executive officers) such agreements as are not materially
different from standard arrangements offered to employees generally in the
ordinary course of business consistent with past practices, copies of which
have been provided to Purchaser and (ii) such agreements as may be imposed or
implied by law;


     3.14.2 any plans, contracts or arrangements which collectively require
aggregate payments by the Company, the Business Subsidiary or IITRI (with
respect to the Business) in excess of $20,000 per annum per individual, written
or oral, providing for bonuses, deferred compensation, severance pay or
benefits, or the like;


     3.14.3 any joint venture contract or arrangement or any other agreement
which has involved or is expected to involve a sharing of profits with other
persons;


     3.14.4 any agreement under which exclusive rights related to the Business
are granted or received;


     3.14.5 any lease for real or personal property involving aggregate
payments by the Company, the Business Subsidiary or IITRI (with respect to the
Business) on an annual basis in excess of $100,000;


     3.14.6 except for trade indebtedness incurred in the ordinary course of
business, any instrument evidencing or related in any way to indebtedness of
the Company, the Business Subsidiary or IITRI (with respect to the Business) in
the aggregate in excess of $100,000 for borrowed money by way of direct loan,
sale of debt securities, purchase money obligation, conditional sale,
guarantee, or otherwise;


     3.14.7 any material license agreement, either as licensor or licensee
(excluding nonexclusive software licenses granted to sponsors or end-users in
the ordinary course of business) expected by management to involve aggregate
payments in excess of $15,000 on an annual basis;


     3.14.8 any contract containing covenants purporting to limit the freedom
of the Company, the Business Subsidiary or IITRI (with respect to the Business)
to compete in any line of its business in any geographic area; or


     3.14.9 any other agreement, contract or commitment which contains an
obligation for payment by or to the Company, the Business Subsidiary or

 






 




IITRI (with respect to the Business) of at least $50,000 on an annual
basis or which involves IIT or any of its Affiliates.


     Each agreement, contract, mortgage, indenture, plan, lease, instrument,
permit, concession, franchise, arrangement, license and commitment listed in
Schedule 3.14, is valid and binding on the Company, the Business Subsidiary or
IITRI, as applicable, and is in full force and effect, and neither the Company,
the Business Subsidiary, IITRI nor, to the knowledge of the Company, any other
party thereto has breached any material provision of, or is in material default
under the terms of, any such agreement, contract, mortgage, indenture, plan,
lease, instrument, permit, concession, franchise, arrangement, license or
commitment. The Company has the right to receive the benefits of and to
perform under, each agreement, contract or commitment which would have been
assigned to the Company pursuant to the Asset Purchase Agreement but for the
inability of IITRI to obtain consent for the transfer of such agreement,
contract or commitment to the Company.


     3.15 Taxes.


     3.15.1 Except as shown on Schedule 3.15, all Tax Returns (as defined
below), statements, reports and forms (including estimated Tax Returns and
reports and information returns and reports) required to be filed with any
Taxing Authority (as defined below) with respect to any Taxable (as defined
below) period ending on or before the Closing Date, by or on behalf of the
Company or the Business Subsidiary (collectively, the “Company Returns”), have
been or will be filed when due in accordance with all applicable laws
(including any extensions of such due date), and all amounts shown due thereon
have been paid or have been fully accrued on the Financial Statements in
accordance with GAAP. Except to the extent provided for or disclosed in the
Financial Statements (including notes thereto), the Company Returns correctly
reflect in all material respects (and, as to any Company Returns not filed as
of the date hereof but filed prior to the Closing Date, will correctly reflect
in all material respects) the Tax liability and status of the Company and the
Business Subsidiary. Each of the Company and the Business Subsidiary has
withheld and paid to the applicable financial institution or Governmental Body
all amounts required to be withheld. Neither the Company nor the Business
Subsidiary (or any member of any affiliated or combined group of which the
Company or the Business Subsidiary has been a member) has granted any extension
or waiver of the limitation period applicable to any Company Returns. There is
no claim, audit, action, suit, proceeding, or investigation now pending or (to
the knowledge of Company) threatened against or with respect to the Company or
the Business Subsidiary in respect of any Tax or assessment. No written notice
of deficiency or similar document of any Governmental Body has been received by
the Company or the Business Subsidiary, and there are no liabilities for Taxes
(including liabilities for interest, additions to tax and penalties thereon and
related expenses) with respect to the issues that have been raised (and are
currently pending) by any Governmental Body that could, if determined adversely
to the Company or the Business Subsidiary, materially affect the liability of
the Company or the Business Subsidiary for Taxes in other Taxable periods.
Neither the Company, the Business Subsidiary, nor any other person on behalf of
the Company or the Business Subsidiary, has entered into any agreement or
consent

 






 




pursuant to Section 341(f) of the Code. There are no liens for Taxes upon
the assets of the Company or the Business Subsidiary except liens for current
Taxes not yet due. Neither the Company nor the Business Subsidiary has been or
will be required to include any material adjustment in Taxable income for any
Tax period (or portion thereof) pursuant to Section 481 or 263A of the Code or
any comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Closing Date.
There is no contract, agreement, plan or arrangement, including but not limited
to the provisions of this Agreement, covering any employee or former employee
of the Company or the Business Subsidiary that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to Section 162 (as unreasonable compensation) or pursuant to Section
280G of the Code. Each of the Company and the Business Subsidiary has provided
or made available to Purchaser or its designated representative true and
correct copies of all material Tax Returns, and, as reasonably requested by
Purchaser prior to or following the date hereof, information statements,
reports, work papers, Tax opinions and memoranda and other Tax data and
documents. Neither the Company nor the Business Subsidiary has been since its
formation a “United States real property holding corporation” within the
meaning of Section 897(c)(2) of the Code. Neither the Company nor the Business
Subsidiary is a party to (or obligated under) any Tax allocation, Tax
distribution, Tax sharing, Tax indemnity or similar agreement or arrangement
with respect to any Tax (including without limitation any such agreement or
arrangement imposed by operation of law), and neither the Company nor the
Business Subsidiary is assuming any liability or obligation in respect of Taxes
in connection with the Transactions.


     3.15.2 For purposes of this Agreement,


     "Tax” (and, with correlative meaning, “Taxes” and “Taxable”) shall mean
all taxes, charges, fees, levies, penalties or other assessments imposed by any
Governmental Body, including, but not limited to, income, excise, property,
sales, use, transfer, franchise, employment, unemployment, railroad retirement,
environmental, payroll, withholding social security, gross receipts, stamp,
real estate, use, business, license, occupation and other taxes, and including
any interest, penalties or additions attributable thereto; and


     "Tax Return” shall mean any return, report, information return,
declaration, claim for refund or other document (including any schedule or
related or supporting information) required to be supplied to any Governmental
Body with respect to Taxes, including amendments thereto.


     3.16 Interests of Officers and Directors. Except as set forth on Schedule
3.16, no officer or director of the Company, the Business Subsidiary, IITRI or
any “affiliate” or “associate” (as those terms are defined in Rule 405
promulgated under the Securities Act) of any such person has had, or will have
after giving effect to the Transactions, either directly or indirectly, a
material interest in: (i) any person or entity which purchases from or sells,
licenses or furnishes to the Business more than $60,000 per year in goods,
property, technology or intellectual or other property rights or services;

 






 




(ii)  any contract or agreement in an amount greater than $60,000 per year
to which the Company, the Business Subsidiary or IITRI (with respect to the
Business) is a party or by which the Company, the Business Subsidiary or IITRI
(with respect to the Business) or the assets of the Business may be bound or
affected; or (iii) any property, real or personal, tangible or intangible, used
by or pertaining to the Company, the Business Subsidiary or the Business,
including any interest in the Company Intellectual Property Rights, except for
rights under any Plan.


     3.17 Company’s Intellectual Property Rights. Except as shown in Schedule
3.17:


     3.17.1 after giving effect to the Transactions, the Company or the
Business Subsidiary will own or will otherwise be entitled to exercise, free
and clear of any liens, encumbrances or security interests, all right, title
and interest in and to all patents, trademarks, trade names, service marks,
copyrights, master work rights, trade secret rights and other intellectual
property rights, and any applications or registrations therefor, and all master
works, net lists, schematics, technology, source code, know-how, computer
software programs and all other tangible and intangible information or
material, that are used or currently proposed to be used in the Business as
currently conducted (collectively, the “Company Intellectual Property Rights”);


     3.17.2 neither the Company, the Business Subsidiary nor IITRI (with
respect to the Business) has any material infringement liability with respect
to any patent, trademark, service mark, copyright or other intellectual
property right of another, and no claims with respect to the Company
Intellectual Property Rights have been asserted or, to the knowledge of
Company, have been threatened in writing by any person, and the Company knows
of no claims (i) to the effect that the manufacture, sale or use of any product
or service as now used or offered or proposed for use or sale by the Company,
the Business Subsidiary or IITRI relating to the Business infringes any third
parties’ copyright, patent, trade secret, or other intellectual property right,
(ii) against the use by the Company, the Business Subsidiary or IITRI of any
Company Intellectual Property Rights, or (iii) challenging the ownership,
validity or effectiveness of any of the Company Intellectual Property Rights;


     3.17.3 to the knowledge of the Company, there has not been and there is
not now any material unauthorized use, infringement or misappropriation of any
of the Company Intellectual Property Rights by any third party, including any
employee or former employee of the Company, the Business Subsidiary or IITRI;
and


     3.17.4 no Company Intellectual Property Right is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting in
any manner the licensing thereof by the Company or the Business Subsidiary.
Neither the Company, the Business Subsidiary nor IITRI has entered into any
agreement granting any third party the right to bring infringement actions with
respect to, or otherwise to enforce rights with respect to, any Company
Intellectual Property Right. Subject to the march-in rights of any
Governmental Body, as applicable, the Company and the Business Subsidiary

 






 




have the exclusive right to file, prosecute and maintain all applications
and registrations with respect to the Company Intellectual Property Rights.


     3.18 Restrictions on Business Activities. There is no material agreement,
judgment, injunction, order or decree binding upon the Company, the Business
Subsidiary or IITRI relating to the Business which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of the Business by the Company, the Business Subsidiary or IITRI as
currently conducted or as currently proposed to be conducted by the Company and
the Business Subsidiary.


     3.19 Title to Assets; Liens; Condition of Equipment.


     3.19.1 After giving effect to the Transactions, each of the Company and
the Business Subsidiary will have good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its assets,
including the assets acquired under the Asset Purchase Agreement, free and
clear of any liens, except as reflected in the Financial Statements, as set
forth on Schedule 3.19 and for Permitted Liens. For purposes of this
Agreement, “Permitted Liens” means (i) liens for taxes, assessments or other
governmental charges or levies the payment of which is not due; (ii) landlord’s
liens in favor of the landlord of the leased real property and liens of
carriers, warehousemen, mechanics, materialmen and other liens imposed by law
incurred in the ordinary course of business for amounts not yet due or being
contested in good faith by appropriate proceedings; (iii) liens incurred or
deposits made in the ordinary course of business in connection with worker’s
compensation, unemployment insurance and other types of social security; and
(iv) such imperfections of title and encumbrances which are not substantial in
character, amount or extent, and which do not materially detract from the
value, or materially interfere with the present use, of the property subject
thereto or affected thereby.


     3.19.2 The foregoing assets that are to be acquired by the Company under
the Asset Purchase Agreement are taken as a whole, (i) adequate for the conduct
of the Business as currently conducted, (ii) suitable for the uses to which
they are currently employed, (iii) in good operating condition, normal wear and
tear excepted, (iv) regularly and properly maintained, (v) not obsolete,
dangerous or in need of renewal or replacement, except for renewal or
replacement in the ordinary course of business, and (vi) free from any inherent
defects.


     3.20 Governmental Authorizations and Licenses. Schedule 3.20 contains a
list of all authorizations and licenses by a Governmental Body held by the
Company and the Business Subsidiary. The Company and the Business Subsidiary
are the holders of all licenses, authorizations, permits, concessions,
certificates and other franchises of any Governmental Body required to operate
the Business, except where the failure to hold such licenses, authorizations,
permits, concessions, certificates or franchises would not be material to the
Business (collectively, the “Licenses”). The Licenses are, and subject to
obtaining consents pursuant to the Asset Purchase Agreement, will be after
giving effect to the Transactions, in full force and effect. There is not now
pending, and to the knowledge of the Company, there is not threatened in

 






 




writing, any action, suit, investigation or proceeding against the
Company, the Business Subsidiary or IITRI (with respect to the Business) before
any Governmental Body with respect to the Licenses, nor is there any issued or
outstanding written notice, order or complaint with respect to the violation by
the Company, the Business Subsidiary or IITRI (with respect to the Business) of
the terms of any License or any rule or regulation applicable thereto.


     3.21 Environmental Matters. Except as listed in Schedule 3.21:


     3.21.1 There is no substance that is regulated by any Governmental Body or
that has been designated by any Governmental Body to be radioactive, toxic,
hazardous, biohazardous or otherwise a danger to health or the environment (a
“Hazardous Material”) in, on or under any property used by the Business or that
the Company, the Business Subsidiary or IITRI in connection with the Business
has at any time owned, operated, occupied or leased.


     3.21.2 Neither the Company, the Business Subsidiary nor IITRI in
connection with the Business has transported, stored, used, manufactured,
released or exposed its employees or any other person to any Hazardous Material
in violation of any applicable statute, rule, regulation, order or law.


     3.21.3 IITRI in connection with the Business has, and upon the
consummation of the Transactions, the Company and the Business Subsidiary will
have, obtained all permits, licenses and other authorizations (“Environmental
Permits”) required to be obtained by any of them under the laws of any
Governmental Body relating to pollution or protection of the environment
(collectively, “Environmental Laws”), except where the failure to comply or
obtain such Environmental Permits would not be material to the Business. All
Environmental Permits are in full force and effect. Each of the Company, the
Business Subsidiary (and in the case of the Company and the Business
Subsidiary, including, without limitation, with respect to periods from and
after the consummation of the Transactions) and IITRI (with respect to the
Business) (i) is in compliance with in all material respects all terms and
conditions of the Environmental Permits and (ii) is in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws or contained in any regulation, code, plan,
order, decree, judgment, notice or demand letter issued, entered, promulgated
or approved thereunder, except where the failure to comply would not be
material to the Business. Neither the Company, the Business Subsidiary nor
IITRI (with respect to the Business) has received any written notice or is
aware of any past or present condition or practice which forms or could form
the basis of any claim, action, suit, proceeding, hearing or investigation
against the Company, the Business Subsidiary, IITRI or the Business arising out
of the manufacture, processing, distribution, use, treatment, storage, spill,
disposal, transport, or handling, or the emission, discharge, release or
threatened release into the environment, of any Hazardous Material.


     3.22 Insurance. Schedule 3.22 sets forth a list of all material insurance
policies and fidelity bonds the Company and the Business Subsidiary maintain
covering

 






 




the assets, business, equipment, properties, operations, employees,
officers and directors of the Company and the Business Subsidiary
(collectively, the “Insurance Policies”). The Insurance Policies cover such
risks and are in such amounts and with such deductibles and exclusions, as are
reasonable for the Business and the assets and properties of the Company and
the Business Subsidiary. There is no material claim by the Company or the
Business Subsidiary pending under any of the Insurance Policies as to which
coverage has been questioned, denied or disputed in writing by the underwriters
of such policies or bonds. All premiums due under all such material Insurance
Policies have been paid and the Company and the Business Subsidiary are
otherwise in compliance with the terms of such policies and bonds (or other
policies and bonds providing substantially similar insurance coverage). Except
as set forth in Schedule 3.22, neither the Company nor the Business Subsidiary
has received any written notice of threatened termination of, or material
premium increase with respect to, any of its material Insurance Policies.


     3.23 Labor Matters. The Company, the Business Subsidiary and IITRI (with
respect to the Business) are, and have been for the past three years, in
compliance in all material respects with all currently applicable laws and
regulations respecting employment, discrimination in employment, terms and
conditions of employment and wages and hours and occupational safety and health
and employment practices, and is not engaged in any unfair labor practice. In
the past three years, neither the Company, the Business Subsidiary nor IITRI
(with respect to the Business) has received any written notice from any
Governmental Body, and there has not been asserted before any Governmental
Body, any claim, action or proceeding to which the Company, the Business
Subsidiary or IITRI is a party or involving the Company, the Business
Subsidiary or the Business, and there is neither pending nor, to the Company’s
knowledge, threatened any investigation or hearing concerning the Company, the
Business Subsidiary or IITRI (with respect to the Business), in each case
arising out of or based upon any such laws, regulations or practices. No
employee of the Company, the Business Subsidiary or IITRI involved in the
Business is represented by a union or other organization representing or, to
the knowledge of the Company, purporting to represent any employees of the
Company, the Business Subsidiary or IITRI involved in the Business, nor is the
Company, the Business Subsidiary or IITRI (with respect to the Business) a
party to or bound by any collective bargaining agreement. Neither the Company
or the Business Subsidiary has at any time during the last three years had,
nor, to the knowledge of the Company, is there now threatened, any strike, work
stoppage, other material labor dispute, picketing, concerted refusal to work
overtime or other similar labor activity, nor are there labor disputes
involving the Company, the Business Subsidiary or IITRI (with respect to the
Business) that are currently the subject of any grievance procedure,
arbitration or litigation, except as set forth in Schedule 3.9 or Schedule
3.23.


     3.24 Questionable Payments. No officer or director of the Company, the
Business Subsidiary or IITRI (with respect to the Business) has or has
authorized, and to the knowledge of the Company, no other employee of the
Company, the Business Subsidiary or IITRI involved in the Business, has: (i)
made any payments or provided services or other favors in the United States or
in any foreign country in order to obtain

 






 




preferential treatment or consideration by any Governmental Body with
respect to any aspect of the Business; or (ii) made any political contributions
which would not be lawful under the laws of the United States and the foreign
country in which such payments were made. Neither the Company, the Business
Subsidiary or IITRI (with respect to the Business) nor to the knowledge of the
Company, any director, officer or other employee of the Company, the Business
Subsidiary or IITRI involved in the Business, nor to the knowledge of the
Company, any sponsor or supplier of the Company, the Business Subsidiary or
IITRI (with respect to the Business) has been the subject of any inquiry or
investigation by any Governmental Body in connection with payments or benefits
or other favors to or for the benefit of any governmental or armed services
official, agent, representative or employee with respect to any aspect of the
Business with respect to any political contribution.


     3.25 Brokers. Other than VM Equity Partners, Inc., no broker, finder or
investment banker engaged by the Company or the Business Subsidiary is entitled
to any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement. In accordance with the terms of
the Asset Purchase Agreement, the Company has certain expense reimbursement
obligations with respect to fees that IITRI owes to Houlihan Lokey Howard &
Zukin Capital and Willamette Management Associates.


     3.26 Relationships. Neither the Company, the Business Subsidiary nor IITRI
has been notified or otherwise has knowledge that any of the ten largest
sponsors or ten largest suppliers of the Business set forth on Schedule 3.26
intend to cancel, discontinue, review outside of normal practice, materially
change or curtail their relationships with the Company, the Business Subsidiary
or the Business. A list of all of the contracts, agreements and commitments
related to the Business with any Governmental Body with respect to which there
is backlog, whether funded or unfunded, and the amount of such backlog, as of
September 30, 2002, has previously been delivered by the Company to the
Purchaser. The Company has not been notified that any such backlog listed in
Schedule 3.26 has been or will be canceled, materially modified or, if
currently unfunded, will not be funded.


     3.27 Put Options. Except as set forth in Schedule 3.27, the Company’s
ability to honor put options (the “Put Options”) which obligate the Company to
repurchase Shares distributed from time to time to Plan participants and
beneficiaries under the ESOP, as may be required by the ESOP, the Trust
Agreement and by applicable laws, regulations or rulings, is not restricted by
the provisions of any law, rule or regulation in effect as of the date hereof
(other than applicable provisions of the Delaware General Corporation law, and
applicable fraudulent conveyance, fraudulent transfer, bankruptcy and similar
laws) or by terms of any loan, financing or other agreement or instrument to
which the Company is a party or by which the Company is bound, including,
without limitation, the Company’s Certificate of Incorporation.


     3.28 ESOP and Trustee. The Company has taken all necessary actions
required of it (i) to establish the Plan and the Purchaser, (ii) to consummate
the transactions contemplated by the Transaction Agreements and (iii) to
appoint the Trustee


 






 




as trustee of the Purchaser. The Shares meet the requirements of Sections
4975(e)(8) and 409(l) of the Code.


     3.29 Audits. Except as set forth on Schedule 3.29, none of the three most
recent audits of the Business completed the by the Defense Contract Audit
Agency (the “DCAA”) (i) has resulted in the Company, the Business Subsidiary or
IITRI (with respect to the Business) having to adjust, repay or reimburse any
Governmental Body for any payments received by the Company, the Business
Subsidiary or IITRI or any of their respective subcontractors or (ii) has
reported that either the Company, the Business Subsidiary or IITRI (with
respect to the Business) is not in compliance with the DCAA’s internal control
systems and policies or applicable laws, regulations or standards. All DCAA
audits conducted with respect to the Business for period ending on or prior to
September 30, 2000 have been completed and closed.


     3.30 Security Clearances. The Company, the Business Subsidiary and IITRI
(with respect to the Business) and their employees involved in the Business
have all of the security clearances required to be maintained by them under all
of the contracts with any Governmental Bodies to which the Company, the
Business Subsidiary or IITRI (with respect to the Business) is a party or to
which the assets relating to the Business are bound. Neither the Company, the
Business Subsidiary nor IITRI (with respect to the Business) has received
within the past three years any written notice of any failure by it or its
employees to maintain such security clearances, nor has the Company, the
Business Subsidiary IITRI or, to the knowledge of the Company, any of their
respective employees involved in the Business taken any action that would
result in the loss of such security clearances.


     3.31 Pre-Contract Costs. As of the date hereof, the total costs incurred
by the Company, the Business Subsidiary and IITRI on behalf of the Business
prior to the execution of any contract or contract renewal (the “Pre-Contract
Costs”) do not exceed $     . Neither the Company, the Business Subsidiary nor
IITRI has received written notice that it will not be reimbursed for any
material portion of such Pre-Contract Costs.


     3.32 Anti-Takeover Statutes. The Board of Directors of the Company has
taken all appropriate and necessary actions to ensure that the Company has not
elected by any amendment to its certificate of incorporation to be governed by
Section 203 of the Delaware General Corporation Law (“DGCL”) and, accordingly,
the Purchaser’s acquisition of the Shares pursuant to this Agreement does not
constitute a “business combination” thereunder.


     3.33 Disclosure. No representation or warranty made by the Company in this
Agreement, nor any document, written information, statement, financial
statement, certificate, Schedule or Exhibit prepared and furnished or to be
prepared and furnished by the Company or its representatives pursuant hereto or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished. There are no events, facts or conditions

 






 




that, individually or in the aggregate, have resulted in, or could
reasonably be expected to result in, a Material Adverse Effect on the Company
that have not been set forth in this Agreement or in the Schedules hereunder
(and appropriately identified as such).


     3.34 Disclaimer. The representations and warranties set forth in this
Article III are the only representations and warranties made by the Company to
the Purchaser with respect to the Company, the Business Subsidiary, IITRI and
the Business. The Trustee and the Purchaser have the right to rely on such
representations and warranties notwithstanding any facts or circumstances
related to the Company, IITRI or the Business that the Trustee or the Purchaser
has knowledge of whether obtained from their due diligence review of the
Company, IITRI and the Business or otherwise.


     SECTION 4. Representations and Warranties of the Purchaser. The Trustee,
on behalf of the Purchaser, represents and warrants to the Company as follows:


     4.1 Necessary Authority. Subject to the accuracy of the representations
made by the Company in Section 3.28, the Trustee, on behalf of the Purchaser,
has full power and authority under the Plan and the Trust Agreement to enter
into, deliver and perform this Agreement and the other Transaction Agreements
and to consummate the transactions contemplated herein and therein. The
execution, delivery, and performance of this Agreement and the other
Transaction Agreements and the consummation of the transactions contemplated
herein and therein have been duly authorized by all necessary action on the
part of the Purchaser. This Agreement and the other Transaction Agreements to
which the Purchaser is a party, when executed by the Trustee on behalf of
Purchaser, each constitute the legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
except as the same may be limited by (i) ERISA, bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors’
rights generally now or hereafter in effect, and subject to the availability of
equitable remedies and (ii) general equitable principles regardless of whether
the issue of enforceability is considered in a proceeding at law or in equity.


     4.2 No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Agreements to which the Purchaser is a
party by the Trustee on behalf of the Purchaser and the consummation of the
transactions contemplated by this Agreement do not and will not (i) require the
consent or approval of, or filing with, any Person, except for the filings with
the Internal Revenue Service or the Department of Labor which may from time to
time be required by ERISA or the Code and the regulations thereunder, (ii)
constitute or result in the breach of any provision of, or constitute a default
under, the ESOP or any agreement, indenture or other instrument known to the
Trustee to which the Purchaser is a party or by which it or its assets may be
bound, or (iii) violate any law, regulation, judgment or order binding upon the
Purchaser or give rise to any liability to the Purchaser under Title I of ERISA
or Section 4975 of the Code.


 






 


     4.3 Investment Intent.


     4.3.1 The Shares to be acquired by the Purchaser pursuant to this
Agreement are being or will be acquired for the account of the ESOP, for
investment and not with a view to the distribution thereof within the meaning
of the Securities Act, and the Purchaser has no intention of distributing or
reselling such securities or any part thereof, without prejudice, however, to
the rights of Purchaser at all times to sell or otherwise dispose of all or any
part of the Shares under an effective registration statement under the
Securities Act, or under an exemption from such registration available under
the Securities Act, and subject, nevertheless, to the disposition of the
Purchaser property being at all times within its control. If the Purchaser
should in the future decide to dispose of any of the Shares, the Purchaser
understands and agrees that it may do so only in compliance with the Securities
Act and applicable state securities laws, as then in effect.


     4.3.2 The Purchaser understands that the Shares have not been registered
under the Securities Act, by reason of their issuance by the Company in a
transaction exempt from the registration requirements of the Securities Act and
that the transactions contemplated by this Agreement have not been reviewed by,
passed on or submitted to any Federal or state agency where an exemption is
being relied upon, and that the Company’s reliance thereon is based in part
upon the representations made by the Purchaser in this Agreement.


     4.3.3 The Purchaser understands that until such time as the Shares are
registered pursuant to the provisions of the Securities Act, any certificate or
certificates representing the Shares delivered pursuant to Section 1.1, or
thereafter upon transfer, exchange or substitution, will bear a legend in
substantially the following form, in addition to any legend required by the
Certificate of Incorporation of the Company:



	 
	THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN

REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE

SECURITIES LAW OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE

DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT

UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO

AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH

ACT AND SUCH LAWS



     SECTION 5. Covenants of the Company.


     5.1 Honoring Put Options. To the extent required by the ESOP, the Trust
Agreement and applicable law, the Company shall honor the Put Options and shall
fully perform its obligations with respect to the Put Options in accordance
with their terms, unless such performance would contravene any applicable law.
The Company shall not at any time permit its ability to honor the Put Options
to be restricted in any way by the provisions of any loan, financing instrument
or other agreement to which the


 






 



Company is a party or by which the Company is or may be bound. The
Company shall use reasonable efforts to maintain sufficient capital and/or
surplus and shall comply with all other requirements of state and federal law
in order to be legally permitted to honor the Put Options. If the provisions
of any applicable state or federal law shall prevent the Company from honoring
the Put Options, the Company shall, as soon as practicable, use reasonable
efforts to take all such actions as shall be required to enable the Company to
honor the Put Options, including, but not limited to, adjustments to its
capital and/or surplus.


     5.2 ESOP Submission. The Company will submit the ESOP and the Trust
Agreement to the IRS within the “remedial amendment period” (within the meaning
of Section 401(b) of the Code) for a determination (a “Determination”) that the
Plan and the Purchaser are qualified and tax-exempt under Sections 401(a) and
501(a) of the Code, respectively, and that the ESOP is an “employee stock
ownership plan,” within the meaning of 4975(e)(7) of the Code, and the Company
will timely make any amendments required by the IRS as a condition to the
issuance of such Determination. The Company shall promptly after availability,
upon request of the Trustee, provide to the Trustee copies of the application
to the IRS for such Determination and any amendments thereto, and shall provide
to the Trustee, promptly after availability and without request of the Trustee,
a copy of the Determination letter.


     5.3 Plan Qualification. The Company shall use its best efforts to cause
the Plan and the Purchaser at all times to be operated and administered so as
to be in compliance with the qualification and tax exemption requirements under
Sections 401(a) and 501(a) of the Code, respectively, and to cause the Plan to
qualify as an “employee stock ownership plan,” within the meaning of 4975(e)(7)
of the Code, and to be operated and administered in substantial compliance with
all applicable requirements of ERISA and the Code. The Company shall amend the
ESOP and the Trust Agreement in a timely manner as required in order to ensure
that such qualification is maintained from and after the effective date of the
ESOP and, following any such amendment of a material nature, to submit the ESOP
and the Trust Agreement to the IRS for a Determination. The Company shall
promptly provide the Trustee with copies of any amendments to the ESOP or the
Purchaser and, upon request of the Trustee, with copies of any application for
a Determination.


     5.4 S Corporation. The Company has executed the applicable election forms
or other filings required to be made for purposes of the Company’s election to
be taxed as an “S corporation” as such term is defined in Section 1361 of the
Code. The Company shall not, without prior authorization from the Purchaser,
take or omit to take any action, and shall use its best efforts to cause any
Person not to take or omit to take any action, that would reasonably be
expected to cause the Company not to be qualified as an “S corporation” as
defined in Section 1361 of the Code.


     5.5 Affiliate Transactions. The Company will not, nor will it permit the
Business Subsidiary to, without the written consent of the Purchaser, enter
into any transaction with an officer or director of the Company (an “Affiliate
Transaction”) or increase any amount payable pursuant to any Affiliate
Transaction, except as required by


 






 


the written terms of such transaction as in effect as of the date hereof
as disclosed in Schedule 3.16 or as duly approved by the Board of Directors of
the Company or the compensation committee thereof.


     5.6 Consents. The Company shall satisfy all of its obligations under
Section 7.05 of the Asset Purchase Agreement.


     5.7 Rights Under Certain Agreements. The Company shall enforce all of its
rights under the Asset Purchase Agreement, including without limitation its
rights under Article XIV thereof, and the other Transaction Agreements against
the Seller and IIT, unless it would not be commercially reasonable to enforce
such rights.


     5.8 Shareholders’ Rights. Without the prior written consent of the
Purchaser, from and after the Closing Date, the Company shall not, and shall
not permit any subsidiary or controlled affiliate of the Company to effect the first public offering of Voting Securities which would be listed on any
securities exchange pursuant to an effective registration statement filed under
the Securities Act. In addition,
the Company shall take all appropriate and necessary action under Section 203
of the DGCL and under any similar “anti-takeover,” “interested shareholder”,
“fair price”, “moratorium”, “control share acquisition” or other state or
federal anti-takeover statute or regulation, to ensure that neither the
Purchaser nor its transferees or their successors or assigns will become an
“interested shareholder” or other restricted person as a result of any of the
Transactions or any future transaction involving the Company or its securities
or assets, and shall refrain from taking any action that would cause any such
statute or regulation to be inapplicable to any other transaction, person or
entity without the prior written consent of the Purchaser. The Company shall
also refrain from taking any action inconsistent with, and shall use its best
efforts to ensure that the Purchaser fully enjoys, Purchaser’s right to elect a
majority of the Company’s board of Directors and to otherwise control the
Company, including its rights under the Rights Agreement.


     SECTION 6. Closing Conditions for the Benefit of the Purchaser.


     Each and every obligation of the Purchaser under this Agreement shall be
subject to the satisfaction, on or prior to the Closing, of each of the
following conditions, any of which may be waived in writing by the Trustee on
behalf of the Purchaser (except that the conditions set forth in Sections 6.5,
6.6 and 6.7 shall not be waived by the Purchaser):


     6.1 Representations and Warranties True. The representations and
warranties of the Company contained in this Agreement shall be true, correct
and complete in all material respects (except for any such representations and
warranties which are qualified by their term by a reference to materiality or
material adverse effect, which representations or warranties as so qualified
shall be true and correct in all respects) as of the date when made and at and
as of the Closing Date as though such representations and warranties were made
at and as of the Closing Date (except, to the

 






 


extent such representations and warranties are made as of a specific date
in which case such representations and warranties shall be true at and as of
such date.)


     6.2 Performance. Each obligation of the Company to be performed by them
on or before the Closing pursuant to the terms hereof shall have been duly
performed and complied with by the Closing.


     6.3 Opinions of Counsel to the Company. The Company shall have furnished
to the Trustee the opinion of (a) Baker & McKenzie, counsel to the Company, on
such corporate, tax and securities matters and in such form and scope as the
Trustee may reasonably request substantially in the form attached hereto as
Exhibit A, and (b) Silverstein and Mullens, counsel to the Company, on such
other matters and in such form and scope as the Trustee may reasonably request,
including but not necessarily limited to advice that (i) the Shares meet the
requirements of Sections 4975 (e)(8) and 409(l) of the Code, (ii) the ESOP and
Purchaser are qualified under Sections 401(a) and 501(a) of the Code and the
applicable provisions of Section 4975 of the Code, and (iii) the Company as of
the Closing, will qualify as an S corporation (as defined in Section 1361 of
the Code, and substantially in the form attached hereto as Exhibit B.


     6.4 Consents. Except as provided for in Section 7.05 of the Asset
Purchase Agreement, all approvals, consents, exemptions, authorizations, or
other actions by, or notices to, or filing with Governmental Bodies and other
Persons in respect of requirements of law necessary or required in connection
with the execution, delivery or performance by the Company or enforcement
against the Company of this Agreement or the Transaction Agreements and the
Transactions, including with respect to the operation of the Business, shall
have been obtained and be in full force and effect, and the Purchaser shall
have been furnished with appropriate evidence thereof, and all applicable
waiting periods shall have lapsed without extension or the imposition of any
conditions or restrictions.


     6.5 Opinion of Valuation Consultants. The Trustee shall have been
furnished with an opinion of Duff & Phelps LLC, in form and substance
acceptable to the Purchaser in its sole and absolute discretion, including to
the effect that (i) the consideration to be paid by the Purchaser for the
Shares is not in excess of “adequate consideration,” within the meaning of
Section 3(18) of ERISA and (ii) the transactions contemplated in connection
with the Transaction Agreements, are fair to the Purchaser from a financial
point of view, and such opinion shall remain in effect and shall not have been
withdrawn by such valuation consulting firm prior to the Closing.


     6.6 Trustee Approval. The Trustee, after considering the advice of its
advisors and such other information as it may deem necessary or advisable,
shall have reached the conclusions that (i) the purchase of the Shares
hereunder are prudent, fair and in the interest of the Plan and its
participants and beneficiaries and primarily for the benefit of such
participants and beneficiaries, (ii) the Purchase Price constitutes no more
than “adequate consideration” for the purchase of the Shares within the meaning
of Section 3(18) of ERISA and (iii) the purchase of the Shares hereunder will
not otherwise


 






 


result in a nonexempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code or violate the provisions of applicable law.


     6.7 Deliveries by Company. The Company shall have made the deliveries
required by Section 2.2.1.


     6.8 Trustee Fees. At the Closing, or on such later date as may be
specified in writing by the Trustee, the Company shall pay to the Trustee (and
its advisors) the fees and expenses as set forth in the retention letter
between the Company and the Trustee, dated February 7, 2002 (together with the
Indemnification Agreement attached thereto, the “Trustee Engagement Letter”).


     6.9 Equity Investment in the ESOP. Employees of IITRI and the Business
Subsidiary shall have elected to invest at least Twenty Four Million Dollars
($24,000,000) in the ESOP thereby purchasing at least Two Million Four Hundred
Thousand (2,400,000) Shares; provided, that in no event shall such employees be
permitted to invest greater than Thirty Million Dollars ($30,000,000) in the
ESOP (or purchase greater than Three Million (3,000,000) Shares).


     6.10 Asset Purchase Agreement; Transaction Agreements. The transactions
contemplated by the Asset Purchase Agreement and the Transaction Agreements
(other than this Agreement) shall have been consummated or shall be consummated
simultaneously herewith, in either case without amendment or waiver of the
terms and conditions contained therein.


     6.11 Employment Agreements. The Company shall have exercised its right
under Section 7.09.1 of the Asset Purchase Agreement to require that each
employee of IITRI who had an employment agreement with IITRI (other
than Stephen Trichka, Gary Amstutz and James Revetta) voluntarily
terminate such employment agreement as of the Closing Date (as defined in the
Asset Purchase Agreement).


     SECTION 7. Closing Conditions for the Benefit of the Company.


     Each and every obligation of the Company under this Agreement shall be
subject to the satisfaction, on or prior to the Closing, of each of the
following conditions, any of which may be waived in writing by the Company:


     7.1 Representations and Warranties True. The representations and
warranties of the Trustee on behalf of the Purchaser contained in this
Agreement shall be true and correct in all material respects (except for any
such representations and warranties which are qualified by their term by a
reference to materiality or material adverse effect, which representations or
warranties as so qualified shall be true and correct in all respects) as of the
date when made and at and as of the Closing Date as though such representations
and warranties were made at and as of the Closing Date (except, to the extent
such representations and warranties are made as of a specific date in which
case such representations and warranties shall be true at and as of such date.)


 






 


     7.2 The Purchaser’s Performance. Each of the obligations of the Trustee
on behalf of the Purchaser to be performed by it on or before the Closing
pursuant to the terms hereof shall have been duly performed and complied with
by the Closing.


     7.3 Deliveries by the Purchaser. The Purchaser shall have made the
deliveries required by Section 2.2.2.


     SECTION 8. Survival of Representations and Warranties; Indemnification.


     8.1 Survival.


     8.1.1 Representations and Warranties. The representations and warranties
made under this Agreement shall survive the Closing for a period of eighteen
months from the date hereof, except for those in (i) Sections 3.1, 3.2, 3.3,
3.19.1, 4.1 and 4.2 which shall survive without any expiration, (ii) Sections
3.13 and 3.21 which shall survive until the date upon which the liability to
which any such representation and warranty may relate is barred by all
applicable statutes of limitation and (iii) Sections 3.15 and 3.28 which shall
survive until the later to occur of (a) the date upon which the liability to
which any such representation and warranty may relate is barred by all
applicable statutes of limitation, and (b) the date upon which any claim for
refund or credit related to any such representation and warranty is barred by
all applicable statutes of limitation, and no claim or demand for
indemnification pursuant to Section 8.2 or otherwise shall be made after such
date, except for those claims or demands for indemnification pursuant to
Section 8.2, of which the Purchaser has notified the Company in writing prior
to such date in accordance with the terms of this Agreement.


     8.1.2 Covenants. The covenants and agreements set forth in Sections 5.4,
5.5, 5.7 and 5.8 (other than the last sentence of Section 5.8) shall survive
the Closing for so long as the Purchaser beneficially owns (as such term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended and
in effect from time to time (the “1934 Act”)), including, without limitation,
through participation in a “group” (within the meaning of Section 13(d)(3) of
the 1934 Act) or a voting trust, by subjecting the shares of Common Stock held
by it to a voting or similar agreement, or by having the right to cause or
direct the vote of any shares of Common Stock or other securities of the
Company held by any other Person, at least 20% of the then outstanding Voting
Securities (as defined below) of the Company. The covenants and agreements set
forth in the last sentence of Section 5.8 shall survive the Closing for so long
as the Purchaser beneficially owns (as such term is defined in Rule 13d-3 under
the 1934 Act), including, without limitation, through participation in a
“group” (within the meaning of Section 13(d)(3) of the 1934 Act) or a voting
trust, by subjecting the shares of Common Stock held by it to a voting or
similar agreement, or by having the right to cause or direct the vote of any
shares of Common Stock or other securities of the Company held by any other
Person, at least a majority of the then outstanding Voting Securities of the
Company.


 






 


     As used herein, the term “Voting Securities” shall mean any securities of
the Company, or any successor to the Company, entitling the holder thereof to
vote as a stockholder for any purpose or under any circumstance or any
securities convertible into or exchangeable for under any circumstance such
securities or any rights, warrants or options to acquire (through purchase,
exchange, conversion or otherwise) any such securities under any circumstance


     8.2 Indemnification.


     8.2.1 Purchaser’s Right to Indemnification. Subject to Section 8.2.2, the
Company agrees to defend, indemnify and hold Purchaser harmless against and
shall reimburse Purchaser for any actions, claims, proceedings, losses,
liabilities and damages, including reasonable attorneys’ fees (collectively,
“Damages”) incurred by the Purchaser on or after the Closing Date arising out
of:


     (a)  any inaccuracy of or any breach of any representation or warranty of
the Company contained in or made pursuant to this Agreement or any certificate
or instrument in connection herewith; or


     (b)  a breach of any covenant or agreement of the Company contained in or
made pursuant to this Agreement.


     8.2.2 Company’s Limitation of Liability.


     (a)  The liability of the Company to indemnify the Purchaser pursuant to
Section 8.2.1(a) and Section 8.2.1(b) hereof against any Damages sustained by
reason of any claim covered by Section 8.2.1(a) or Section 8.2.1(b) hereof
shall be limited to claims as to which the Purchaser has given the Company
written notice thereof, setting forth therein in reasonable detail the basis
for such claim, on or prior to the expiration of the survival periods set forth
in Section 8.1.1 and Section 8.1.2 hereof, respectively, whether or not any
Damages have then actually been sustained.


     (b)  The Company’s indemnity obligations pursuant to Section 8.2.1(a)
hereof shall be effective with respect to claims for Damages only after the
aggregate amount of all Damages for which the Company is liable thereunder
exceeds $250,000 and then only to the extent of such excess (the “Basket”).


     (c)  Subject to Section 8.2.2(d), the Company’s aggregate indemnity
obligations pursuant to Section 8.2.1(a) shall not exceed the Purchase Price
(the “Cap”).


     (d)  Notwithstanding anything to the contrary contained herein, the Basket
and Cap shall not be applicable to claims relating to any inaccuracy or breach
of any representation or warranty made in Sections 3.1, 3.2, 3.3, 3.19 and
3.21.


     8.2.3 Company’s Right to Indemnification. Subject to Section 8.2.4, the
Purchaser agrees to defend, indemnify and hold the Company harmless


 






 


against and shall reimburse the Company for any Damages incurred by the
Company on or after the Closing Date arising out of:


     (a)  any inaccuracy of or breach of any representation or warranty of
Purchaser contained in or made pursuant to this Agreement or any certificate or
instrument in connection herewith; or


     (b)  a breach of any covenant or agreement of Purchaser contained in or
made pursuant to this Agreement.


     8.2.4 Purchaser’s Limitation of Liability.


     (a)  The liability of Purchaser to indemnify the Company pursuant to
Section 8.2.3(a) hereof against any Damages sustained by reason of any claim
covered by Section 8.2.3(a) hereof shall be limited to claims as to which the
Company has given Purchaser written notice thereof, setting forth therein in
reasonable detail the basis for such claim, on or prior to the expiration of
the survival periods set forth in Section 8.1 hereof, whether or not any
Damages have then actually been sustained.


     (b)  Purchaser’s indemnity obligations pursuant to Section 8.2.3(a) hereof
shall be effective with respect to any claim for Damages only after the
aggregate amount of all Damages for which Purchaser is liable under this
Agreement exceeds the Basket, and only to the extent of such excess.


     (c)  Subject to Section 8.2.4(d), Purchaser’s aggregate indemnity
obligations pursuant to Section 8.2.3(a) shall not exceed the Cap.


     (d)  Notwithstanding any other provision hereof, the Basket and Cap shall
not be applicable to claims relating to any inaccuracy or breach of any
representation or warranty made in Sections 4.1 and 4.2.


     8.3 AB Technologies, Inc. Notwithstanding anything contained herein to
the contrary, the Company shall indemnify and hold the Purchaser harmless and
shall reimburse the Purchaser for any Damages incurred by the Company related
to earnout provisions or purchase price adjustments in connection with, or
other Damages arising out of or related to, the Asset Purchase Agreement, dated
as of February 7, 2000, between AB Technologies, Inc. and IITRI, including,
without limitation, the claims filed September 12, 2002 by Clyde O. Andrews and
William M. Bewley (collectively, the “AB Tech Shareholders”) against IITRI in
the Circuit Court for the County of Fairfax, Virginia and September 16, 2002 by
IITRI against the AB Tech Shareholders in the U.S. District Court, Eastern
District of Virginia, in each case to the extent such Damages in the aggregate
exceed $5,400,000. The liability of the Company to indemnify the Purchaser
pursuant to this Section 8.3 shall not be limited in any way by Section 8.1 or
8.2.2 hereof; provided, that there shall be no duplication of liability of the
Company for indemnification pursuant to Section 8.2. and this Section 8.3.


 






 


     8.4 Computation of Damages. For purposes of computing any Damages under
this Section 8 with respect to any representation, warranty, covenant or
agreement that is qualified as to materiality or Material Adverse Effect, the
amount of the Damages shall be the entire amount of Damages arising by reason
of the breach of such representation, warranty, covenant or agreement and not
merely the amount of such Damages in excess of an amount that constitutes
material Damages or in excess of an amount that constitutes a Material Adverse
Effect.


     8.5 Conditions of Indemnification.


     8.5.1 In the event the Purchaser or the Company has a reasonable good
faith basis for asserting a claim for Damages, such party shall give prompt
written notice to the other parties hereto briefly setting forth the basis of
the claim and the amount thereof (or, if not then determinable, a reasonable
good faith estimate of the amount thereof) in reasonable detail; provided, that
the failure to provide such notice in a timely fashion shall not affect the
right of the indemnified party unless and only to the extent that the
indemnifying party is actually prejudiced thereby.


     8.5.2 The obligations and liabilities of the Company and Purchaser with
respect to claims made by third parties shall be subject to the following terms
and conditions:


     (a)  The indemnified party will give the indemnifying party prompt notice
of any such claim as set forth in subpart (a) above; provided, that the failure
to provide such notice in a timely fashion shall not affect the right of the
indemnified party unless and only to the extent that the indemnifying party is
actually prejudiced thereby, and the indemnifying party shall have the right to
undertake the defense thereof by representatives chosen by it by giving written
notice to that effect within twenty (20) business days of receiving notice of
the third-party claim.


     (b) The indemnified party shall have the right to participate in the
defense or other disposition of any third-party claim, but the indemnifying
party shall not be liable for any legal fees or expenses subsequently incurred
by the indemnified party in connection with the defense thereof unless (i) the
indemnifying party agreed to pay such fees and expenses, (ii) the indemnifying
party shall have failed to employ counsel reasonably satisfactory to the
indemnified party in a timely manner, or (iii) the indemnified party shall have
been advised by counsel (either that was employed by the indemnifying party or
one of its own choosing) that representation of the indemnified party by
counsel provided by the indemnifying party pursuant to the foregoing would be
inappropriate due to actual or potential conflicting interests between the
indemnifying party and the indemnified party, including situations in which
there are one or more legal defenses available to the indemnified party that
are different from or additional to those available to the indemnifying party.
Neither the indemnified party nor the indemnifying party may settle any claim
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed.


 






 


     (c)  Anything in this Section 8 to the contrary notwithstanding, (i) if
there is a reasonable probability that a claim may materially and adversely
affect the indemnified party other than as a result of money damages or other
money payments, the indemnified party shall have the right, at its own cost and
expense, to defend, compromise or settle such claim upon prior notification to
the indemnifying party of its intent to do so; provided, however, that if such
claim is settled without the indemnifying party’s consent, the indemnified
party shall be deemed to have waived all rights hereunder against the
indemnifying party for money damages arising out of such claim, and (ii) the
indemnifying party shall not, without the written consent of the indemnified
party, settle or compromise any claim or consent to the entry of any judgment
which does not include as an unconditional term thereof the giving by the
claimant or the plaintiff to the indemnified party a release from all liability
in respect to such claim.


     (d)  In connection with any indemnification claim, the indemnified party
shall give the indemnifying party reasonable access to the books, records and
assets of the indemnified party which relate to the act, omission or occurrence
giving rise to such Damages and the right, upon prior notice during normal
business hours, to interview any appropriate personnel of the indemnified party
with respect thereto and the indemnified party otherwise shall cooperate with
the indemnifying party (and its insurance company, if applicable) in defending
any third-party claim.


     8.6 Trustee Indemnification. The indemnification described in this
Section 8 shall be in addition to, and shall not affect in way, the
Indemnification Agreement between the Trustee and the Company, dated February
7, 2002, attached to the Trustee Engagement Letter, or any other
indemnification provided to the Trustee pursuant to the Trust Agreement.


     8.7 Other Rights. The indemnification described in this Section 8 shall
be in addition to, and shall not affect in any way, the rights of the parties
hereto under any of the other Transaction Agreements.


     SECTION 9. General.


     9.1 Execution of Counterparts. For the convenience of the parties, this
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
document.


     9.2 Notices. All notices which are required or may be given pursuant to
the terms of this Agreement or which any of the parties may desire to give
hereunder shall be in writing and delivered personally or sent by express
delivery, or by facsimile, or by registered or certified mail, with proof of
receipt, postage and expenses prepaid, return receipt requested, addressed as
follows:




	 	 	 
	If to the
Company to:	 	 



 






 




	 	 	 
	 	 	
Alion Science and Technology Corporatio

1759 Tysons Boulevard

Suite 1300

McLean, Virginia 22102

Attention: Steve Trichka, Esq.

Facsimile: (703) 714-6508

	 	 	
and with a copy to:

	 	 	
Baker & McKenzie

815 Connecticut Avenue, NW

Washington, DC 20006

Attention: Marc R. Paul, Esq.

Facsimile: (202) 452-7074

	If to the
Trustee or the
Purchaser to:
	 	 
	 	 	
State Street Bank & Trust Company

Alion Science and Technology Corporation

Employee Stock Ownership Trust

Batterymarch III

3 Pinehill Drive, 5th Floor

Quincy, MA 02169

Attention: Kelly Driscoll

Facsimile: (617) 664-2376

	 	 	
and with a copy to:

	 	 	
Paul, Weiss, Rifkind, Wharton & Garrison

1285 Avenue of the Americas

New York, NY 10019-6064

Attention: James H. Schwab

Facsimile: (212) 757-3990



or to such other address or addresses and to the attention of such other person
or person as any party may from time to time designate to the other party. Any
notice given in accordance with this Section 9.2 shall be deemed to have been
given when delivered personally, or when received if sent via overnight
delivery, facsimile, or registered or certified mail, return receipt
requested.


     9.3 Assignment, Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. No party shall assign any of its rights or obligations
hereunder without the prior written consent of the other parties, except that
the Trustee may assign its rights and obligations hereunder without consent to
any successor trustee of the Purchaser appointed in accordance with the
provisions of the Plan or to any purchaser of all or substantially all of the
Shares.


 






 


     9.4 Applicable Laws. This Agreement shall be construed and governed by
the laws of the State of Delaware applicable to agreements made and to be
performed entirely within such State to the extent not superseded by ERISA.


     9.5 Entire Agreement. This Agreement, together with the Schedules and
Exhibit attached hereto, the other Transaction Agreements and the Trustee
Engagement Letter and the Indemnification Agreement, constitutes the entire
agreement among the parties hereto regarding the subject matter hereof, and no
party hereto shall be bound by any communications between them on the subject
matter hereof unless such communications are in writing and bear a date
contemporaneous with or subsequent to the date hereof. Any prior written
agreements or letters of intent among the parties other than the Trustee
Engagement Letter and the Indemnification Agreement shall, upon the execution
of this Agreement, be null and void.


     9.6 Headings. The headings in the sections of this Agreement are inserted
for convenience only and shall not constitute a part hereof or affect the
meaning or interpretation hereof


     9.7 Amendment, Waiver, Discharge of the Agreement. This Agreement may not
be amended, released or discharged except by an instrument in writing signed on
behalf of each of the parties hereto. The failure of a party to enforce any
provision of this Agreement shall not be deemed a waiver by such party of any
other provision or subsequent breach of the same or any other obligation
hereunder.


     9.8 Action Taken as Trustee. The Trustee has executed and delivered this
Agreement, not in its individual or corporate capacity, but solely as Trustee
of the Purchaser. The performance of this Agreement by the Trustee and any and
all duties, obligations and liabilities of the Trustee hereunder will be
effected by the Trustee only as Trustee. The Trustee does not undertake nor
shall have any individual or corporate liability or obligation of any nature
whatsoever by virtue of the execution and delivery of this Agreement or the
representations, covenants or warranties contained herein or in any instrument
or certificate delivered pursuant hereto.


 






 


     IN WITNESS WHEREOF, each of the parties has executed this Stock
Purchase Agreement as of the day and year first above written.



	 
	ALION SCIENCE AND TECHNOLOGY CORPORATION
	 
	By:
	


     Name:

     Title





 

	 	
ALION SCIENCE AND
TECHNOLOGY CORPORATION
EMPLOYEE STOCK OWNERSHIP
TRUST
	 
	By:    	 	 	 	STATE STREET BANK &
TRUST COMPANY, not in its individual or
corporate capacity, but solely as Trustee of the
Alion Science and Technology Corporation
Employee Stock Ownership Trust
	 
	 	 	 	 	By:
	 	 	 	 	


    Name:

    Title:
	 
	 	 	 	 	







 






 







EXHIBIT A




 










 



TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	Page
	 	 	 	 	 	 	 	

	SECTION 1
	 	Purchase and Sale of Shares	 	 	31	 
	 	1.1
	 	Shares to be Sold	 	 	31	 
	 	1.2
	 	Purchase Price	 	 	32	 
	 	1.3
	 	Use of Proceeds	 	 	32	 
	 	1.4
	 	Inactive ESOP	 	 	32	 
	SECTION 2
	 	Closing	 	 	32	 
	 	2.1
	 	Time and Place	 	 	32	 
	 	2.2
	 	Deliveries	 	 	32	 
	SECTION 3
	 	Representations and Warranties of the Company	 	 	33	 
	 	3.1
	 	Organization, Corporate Standing and Investments	 	 	33	 
	 	3.2
	 	Necessary Authority	 	 	34	 
	 	3.3
	 	Conflict; Change of Control	 	 	35	 
	 	3.4
	 	Filings and Approvals	 	 	35	 
	 	3.5
	 	Financial Statements	 	 	36	 
	 	3.6
	 	S-1		 	 	 	36	 
	 	3.7
	 	Compliance with Law	 	 	36	 
	 	3.8
	 	No Defaults	 	 	37	 
	 	3.9
	 	Litigation	 	 	37	 
	 	3.10
	 	No Material Adverse Effect	 	 	38	 
	 	3.11
	 	Absence of Undisclosed Liabilities	 	 	40	 
	 	3.12
	 	Certain Agreements. ,	 	 	40	 
	 	3.13
	 	ERISA	 	 	40	 
	 	3.14
	 	Major Contracts	 	 	42	 
	 	3.15
	 	Taxes	 	 	43	 
	 	3.16
	 	Interests of Officers and Directors	 	 	44	 
	 	3.17
	 	Company's Intellectual Property Rights.  :	 	 	45	 
	 	3.18
	 	Restrictions on Business Activities	 	 	46	 
	 	3.19
	 	Title to Assets; Liens; Condition of Equipment	 	 	46	 
	 	3.20
	 	Governmental Authorizations and Licenses	 	 	46	 
	 	3.21
	 	Environmental Matters	 	 	47	 
	 	3.22
	 	Insurance.  the Business Subsidiarythe Business Subsidiary	 	 	47	 
	 	3.23
	 	Labor Matters	 	 	48	 
	 	3.24
	 	Questionable Payments	 	 	48	 
	 	3.25
	 	Brokers	 	 	49	 
	 	3.26
	 	Relationships	 	 	49	 
	 	3.27
	 	Put Optionst	 	 	49	 
	 	3.28
	 	ESOP and Trustee	 	 	49	 
	 	3.29
	 	Audits	 	 	50	 
	 	3.30
	 	Security Clearances	 	 	50	 



 






 




	 	 	 	 	 	 	 	 	 	 
	 	3.31
	 	Pre-Contract Costs	 	 	50	 
	 	3.32
	 	Anti-Takeover Statutes	 	 	50	 
	 	3.33
	 	Disclosure	 	 	50	 
	 	3.34
	 	Disclaimer	 	 	51	 
	SECTION 4
	 	Representations and Warranties of the Purchaser	 	 	51	 
	 	4.1
	 	Necessary Authority	 	 	51	 
	 	4.2
	 	No Conflicts	 	 	51	 
	 	4.3
	 	Investment Intent	 	 	52	 
	SECTION 5
	 	Covenants of the Company	 	 	52	 
	 	5.1
	 	Honoring Put Options	 	 	52	 
	 	5.2
	 	ESOP Submission	 	 	53	 
	 	5.3
	 	Plan Qualification	 	 	53	 
	 	5.4
	 	S Corporation	 	 	53	 
	 	5.5
	 	Affiliate Transactions	 	 	53	 
	 	5.6
	 	Consents	 	 	54	 
	 	5.7
	 	Rights Under Certain Agreements	 	 	54	 
	 	5.8
	 	Shareholders' Rights	 	 	54	 
	SECTION 6
	 	Closing Conditions for the Benefit of the Purchaser	 	 	54	 
	 	6.1
	 	Representations and Warranties True	 	 	54	 
	 	6.2
	 	Performance	 	 	55	 
	 	6.3
	 	Opinions of Counsel to the Company	 	 	55	 
	 	6.4
	 	Consents	 	 	55	 
	 	6.5
	 	Opinion of Valuation Consultants	 	 	55	 
	 	6.6
	 	Trustee Approval	 	 	55	 
	 	6.7
	 	Deliveries by Company	 	 	56	 
	 	6.8
	 	Trustee Fees	 	 	56	 
	 	6.9
	 	Equity Investment in the ESOP	 	 	56	 
	 	6.10
	 	Asset Purchase Agreement; Transaction Agreements	 	 	56	 
	 	6.11
	 	Employment Agreements	 	 	56	 
	SECTION 7
	 	Closing Conditions for the Benefit of the Company	 	 	56	 
	 	7.1
	 	Representations and Warranties True	 	 	56	 
	 	7.2
	 	The Purchaser's Performance	 	 	57	 
	 	7.3
	 	Deliveries by the Purchaser	 	 	57	 
	SECTION 8
	 	Survival of Representations and Warranties; Indemnification	 	 	57	 
	 	8.1
	 	Survival of Representations and Warranties	 	 	57	 
	 	8.2
	 	Indemnification	 	 	58	 
	 	8.3
	 	Computation of Damages	 	 	59	 
	 	8.4
	 	Conditions of Indemnification	 	 	60	 
	 	8.5
	 	Trustee Indemnification	 	 	61	 
	 	8.6
	 	Other Rights	 	 	61	 



 






 




	 	 	 	 	 	 	 	 	 	 
	SECTION 9
	 	General	 	 	61	 
	 	9.1
	 	Execution of Counterparts	 	 	61	 
	 	9.2
	 	Notices	 	 	61	 
	 	9.3
	 	Assignment, Successors and Assigns	 	 	62	 
	 	9.4
	 	Applicable Laws	 	 	63	 
	 	9.5
	 	Entire Agreement	 	 	63	 
	 	9.6
	 	Headings	 	 	63	 
	 	9.7
	 	Amendment, Waiver, Discharge of the Agreement	 	 	63	 
	 	9.8
	 	Action Taken as Trustee	 	 	63	 



Schedules


[To come]


Exhibits


A. Opinion of Baker & McKenzie

B. Opinion of Silverstein and Mullens