Exhibit 2.4
**ASSET PURCHASE AGREEMENT**
**BY AND AMONG**
**INDUS CORPORATION,**
**INDUS SECURE NETWORK SOLUTIONS, LLC,**
**AND**
**HALIFAX CORPORATION**
**Dated as of June 30, 2005**
 

 

**ASSET PURCHASE AGREEMENT**
          **ASSET PURCHASE AGREEMENT,**dated as of June 30, 2005 (this “Agreement”), by and amongINDUS Corporation, a Virginia corporation (“Parent”), INDUS Secure Network Solutions, LLC,a Virginia limited liability company and a wholly-owned subsidiary of Parent (the “Buyer”),and Halifax Corporation, a Virginia corporation (the “Seller”). Certain capitalized termsin this Agreement are defined in Section 8.1 hereof.
**W I T N E S S E T H:**
          **WHEREAS,**each of Parent and the Buyer desires for the Buyer to purchase or acquire from theSeller, and the Seller wishes to sell, assign and transfer to the Buyer, substantially all of theassets and properties used in connection with the business of the “Secure Network Services”division of the Seller as such business is presently conducted and has been conducted in the past(such business, the “Business”), all for the purchase price and the assumption of theliabilities set forth herein, and upon the terms and subject to the conditions hereinafter setforth.
          **NOW, THEREFORE,**in consideration of the covenants, representations and warranties made herein,and of the benefits to be derived hereby, the parties hereto agree as follows:
**ARTICLE I**
**SALE AND PURCHASE OF THE ASSETS**
     **1.1****Assets****.**On the basis of the representations, warranties, covenants and agreementsand subject to the satisfaction or waiver of the conditions set forth in this Agreement, at theClosing (as defined in Section 2.1), the Seller will sell, transfer, convey, assign and deliver tothe Buyer, and the Buyer will purchase or acquire from the Seller, all right, title and interest ofthe Seller in and to the assets, properties and other rights (excluding the Excluded Assets (asdefined in Section 1.2)) owned, leased, licensed or used by the Seller solely in the operation ofthe Business (the “Assets”) including, without limitation:
          (a) all accounts, notes and other receivables solely relating to the Business;
          (b) all of the Seller’s rights arising under the Contracts listed on Schedule 1.1(b)and any other Contracts solely applicable to the Business;
          (c) all of the Seller’s ownership or leasehold rights, as the case may be, in the Equipmentand the other assets set forth on Schedule 1.1(c);
          (d) all of the Seller’s rights in and to the Purchased Intellectual Property;
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          (e) all of the Seller’s intangible assets used solely in conducting the Business (to theextent not otherwise already included within Purchased Intellectual Property);
          (f) all of the Seller’s written or electronic information relating to the Business (including,without limitation, documentation, databases, downloads, product descriptions, vulnerabilityalerts, interoperability testing, general technical data, partner extranets, customer lists,customer files and other written accounts of the Seller), and other reasonably and specificallyrequested information, in each case, to the extent transferable;
          (g) all of the Seller’s permits, franchises and licenses used solely in conducting theBusiness, to the extent such licenses are transferable under applicable Law;
          (h) all of the Seller’s goodwill and going concern value relating solely to the Business andthe business appurtenant thereto;
          (i) all of the Seller’s deposits, credits, pre-paid expenses, deferred charges, advancepayments, security deposits, rights to escrows and prepaid items relating solely to the Contracts;
          (j) all of the Seller’s books, records, manuals, documents, correspondence, sales and creditreports, customer lists, literature, brochures, advertising material and the like incidental to orused in conducting the Business;
          (k) [intentionally omitted]
          (l) all of the Seller’s claims, claims in action, causes of action and judgments relatedsolely to the Business;
          (m) all of the Seller’s inventories used solely in conducting the Business, including allinventories of raw materials, work in process, finished products, goods, spare parts, replacementand component parts, and office and other supplies, including inventories held at any locationcontrolled by any Seller and inventories previously purchased and in transit to any Seller at suchlocations; and
          (n) rights with respect to the employment of the Division Employees (as defined in Section3.1.13.
Subject to the terms and conditions hereof, at the Closing, the Assets shall be transferred orotherwise conveyed to the Buyer free and clear of all liabilities, obligations and Liens of anynature whatsoever excepting only Assumed Liabilities (as defined in Section 1.3).
     **1.2****Excluded Assets****.**Notwithstanding the foregoing, the Assets shall not include theassets, properties and other rights of the Seller listed or described in Schedule 1.2attached hereto (collectively, the “Excluded Assets”), which Excluded Assets shall not besold or transferred to Buyer and shall be retained by the Seller:
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     **1.3****Assumption of Liabilities****.**Subject to the terms and conditions set forth herein,at the Closing, the Buyer shall assume and agree to pay, honor and discharge promptly as theybecome due the liabilities reflected on Schedule 1.3 attached hereto, including, withoutlimitation, any and all liabilities, obligations, commitments and claims of any nature whatsoeverrelated to or arising out of the Contracts, bids, proposals and other agreements listed onSchedule 1.3 after the Closing Date (including, without limitation the CBA (as defined inSection 3.1.13), except for any obligation, liability or claim resulting from any breach by anySeller of any such Contract occurring prior to the Closing Date (as defined in Section 2.1)(collectively, all such items contemplated by this sentence shall be referred to herein as the“Assumed Liabilities”); provided, however, subject to the terms contained in theSubcontract (as defined in Section 4.4(a)) (including, without limitation, Article I thereof), thatthe Buyer’s assumption of the Assumed Liabilities with respect to the prime Government Contractslisted on Schedule 4.4(a) shall be effective upon the novation of such prime GovernmentContracts to the Buyer and in such case Assumed Liabilities shall not include any obligation,liability or claim resulting from any breach by Seller of any such Contract occurring prior to suchnovation.
     **1.4****Excluded Liabilities****.**Notwithstanding any provision hereof or any schedule orexhibit hereto and regardless of any disclosure to Buyer, except for the Assumed Liabilities, theBuyer shall not assume any liabilities, obligations or commitments of the Seller relating to orarising out of the operation of the Business or the ownership of the Assets prior to the Closing,including, but not limited to accounts payable, Taxes or obligations or liabilities relative to theemployment or termination of any employees of the Seller as of the Closing Date (the “ExcludedLiabilities”).
**ARTICLE II**
**THE CLOSING**
     **2.1****Place and Date****.**The parties shall use commercially reasonable efforts toconsummate the closing of the sale and purchase of the Assets and the assumption of the AssumedLiabilities (the “Closing”) without being physically present at one location. If Closingat one location is required, such Closing shall take place at the offices of Venable LLP, 8010Towers Crescent Drive, Suite 300, Vienna, Virginia, and in any event, at 10:00 a.m., Eastern time,on the date of this Agreement, which date shall be referred to as the “Closing Date.”
     **2.2****Purchase Price****.**On the terms and subject to the conditions set forth in thisAgreement, Parent agrees to deliver or cause to be delivered the amounts set forth in clauses (a)and (b) of this Section 2.2 (collectively, the “Purchase Price”). The Purchase Price shallbe payable as follows:
          (a) An amount, in cash, equal to (i) Twelve Million Five Hundred Thousand Dollars($12,500,000), less (ii) the Escrow Amount (as defined in subsection (b) below), plus or minus(iii) the amount by which the Estimated Closing Date Net Assets (as defined in Section 2.4(a)) isgreater than, or less than, $1,271,000 (which amount the parties agree is the amount of the “NetAssets” of the Business as of December 31, 2004, defined as the total amount (in U.S. Dollars) ofthe assets of the Business less the liabilities of the Business as of such date, all as
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determined on a pro forma basis and set forth in the balance sheet of the Business prepared bySeller as of December 31, 2004 previously provided to Parent and attached hereto as Schedule2.4(a)(2)) (the “Cash Payment”), shall be paid to the Seller at Closing by wiretransfer of immediately available funds to such bank account or accounts as per writteninstructions of the Seller, given to Parent at least five days prior to the Closing; and
          (b) Three Million Dollars ($3,000,000) (the “Escrow Amount”) shall be delivered to theEscrow Agent pursuant to the terms and conditions of Section 2.3.
     **2.3****Escrow Amount****.**At Closing, Parent shall pay or cause to be paid the Escrow Amountto the Escrow Agent in cash payable by wire transfer of immediately available funds for deposit inan escrow account in accordance with the terms and conditions of the Escrow Agreement to be enteredinto by and among Parent, the Seller and the Escrow Agent in substantially the form attached heretoas Exhibit A (the “Escrow Agreement”). Six Hundred Twenty Five Thousand Dollars($625,000) of the Escrow Amount (the “Indemnification Escrow Amount”), plus any interest orother income earned thereon (such collective amount, the “Indemnification Escrow Fund”),shall serve as security for the payment of indemnification obligations of the Seller pursuant toSection 6.1 of this Agreement and shall be held and distributed by the Escrow Agent in accordancewith the terms and conditions of the Escrow Agreement. One Million Dollars ($1,000,000) of theEscrow Amount (the “Assignment Failure Escrow Amount”), plus any interest or other incomeearned thereon (such collective amount, the “Assignment Failure Escrow Fund”), shall serveas security for the payment of the Assignment Failure Amount if and when the Seller becomesobligated to pay such Assignment Failure Amount pursuant to Section 6.8 of this Agreement and shallbe held and distributed by the Escrow Agent in accordance with the terms and conditions of theEscrow Agreement. The entire Escrow Amount, plus any interest or other income earned thereon (suchcollective amount, the “Escrow Fund”), shall serve as security for the payment of theNovation Failure Amount if and when the Seller becomes obligated to pay such Novation FailureAmount pursuant to Section 6.7 of this Agreement and shall be held and distributed by the EscrowAgent in accordance with the terms and conditions of the Escrow Agreement.
     **2.4****Purchase Price Adjustment****.**
          (a) The Purchase Price shall be adjusted on a dollar-for-dollar basis (either up or down, asthe case may be) in accordance with this Section 2.4 based on the amount by which the Closing DateNet Assets (as defined below) either is greater than or less than $1,300,000 (the “EstimatedClosing Date Net Assets”), which amount was determined from the estimated pro forma balancesheet of the Business as of the Closing Date (the “Closing Date Balance Sheet”) attachedhereto as Schedule 2.4(a)(1), prepared by Seller consistently with the pro forma balancesheet of the Business as of December 31, 2004 previously provided to Parent and attached hereto asSchedule 2.4(a)(2). The term “Closing Date Net Assets” shall mean the total amount(in U.S. Dollars) of the assets of the Business less the liabilities of the Business determinedfrom on the Closing Date Balance Sheet (as defined in Section 2.4(b)).
          (b) Within forty-five (45) days after the Closing Date, Seller shall cause to be prepared anddelivered to the Parent (i) a pro forma balance sheet of the Business as of the
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Closing Date (the “Closing Date Balance Sheet”) and (ii) a statement of the ClosingDate Net Assets, each prepared consistently with Schedule 2.4(a)(1) and Schedule2.4(a)(2), together with the work papers or other supporting documentation used to prepare theClosing Date Balance Sheet. The Parent shall cooperate with Seller after the Closing Date infurnishing information, documents, evidence and other assistance to Seller to facilitate thecompletion of the Closing Date Balance Sheet within the aforementioned time period. If withinthirty (30) days following delivery of the Closing Date Balance Sheet, the Parent does not giveSeller written notice of its objection to the statement of the Closing Date Net Assets determinedfrom the Closing Date Balance Sheet (which such notice must contain a statement of the basis of theParent’s objection), then such statement shall be conclusive and binding on the parties.
          (c) If the Parent gives Seller a timely written notice of objection to the statement of theClosing Date Net Assets determined from the Closing Date Balance Sheet (which such notice mustcontain a statement of the basis of the Parent’s objection), and if the parties are unable toresolve the Parent’s objections within fifteen (15) days following such objection, then theissue(s) in dispute will be submitted to the Washington, D.C. office of BDO Seidman, LLP, or toanother independent public accounting firm of national standing mutually agreed upon by Parent andSeller (the “Auditor”), for resolution. The determination of the Auditor shall be setforth in a written notice delivered to Parent and the Seller by the Auditor and will be conclusiveand binding on the parties. The fees and expenses of the Auditor shall be split equally andseverally by Buyer and Parent, on the one hand, and Seller, on the other hand.
          (d) At such time as the statement of Closing Date Net Assets is finalized pursuant to Section2.4(b) or Section 2.4(c), as the case may be, if the Closing Date Net Assets are:
                  (i) less than the Estimated Closing Date Net Assets, the Seller shall pay to Parent the amountof such deficiency in cash within ten (10) Business Days after (x) expiration of the thirty- (30-)day period referred in Section 2.4(b) above or (y) the Auditor delivers written notice of itsdetermination pursuant to Section 2.4(c) above; and
                  (ii) greater than the Estimated Closing Date Net Assets, the Parent shall pay or caused to bepaid to Seller the amount of such deficiency in cash within ten (10) Business Days after (x)expiration of the thirty- (30-) day period referred in Section 2.4(b) above or (y) the Auditordelivers written notice of its determination pursuant to Section 2.4(c) above.
     **2.5****Procedure at Closing****.**On the Closing Date, the parties agree to take thefollowing steps listed below (provided, however, that upon their completion all such steps shall bedeemed to have occurred simultaneously):
                  (a) Parent shall pay the Cash Payment and the Escrow Amount in accordance with Sections 2.2,2.3 and 5.3.
                  (b) The Seller shall deliver to Parent and the Buyer the Closing documents specified inSection 5.1.
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                  (c) The Seller shall deliver to the Buyer such bills of sale, deeds, assignments, assumptionagreements, certificates of title and other documents and take other necessary action as may bereasonably requested by the Buyer in order to convey good and marketable title to all of theAssets, free and clear of all Liens and in order to carry out the intentions and purposes of thisAgreement.
**ARTICLE III**
**REPRESENTATIONS AND WARRANTIES**
     **3.1****Representations and Warranties of the Seller****.**The Seller hereby represents andwarrants to Parent and Buyer, subject to such exceptions as are specifically disclosed in thedisclosure schedule and schedule of exceptions (the “Seller Disclosure Schedules”)delivered herewith and dated as of the date hereof, as follows:
          **3.1.1****Organization and Qualification****.**The Seller is a corporation duly organized,validly existing and in good standing under the Laws of the Commonwealth of Virginia and has thenecessary corporate power and authority to conduct the Business as now conducted and to own, use,license and/or lease the Assets.
          **3.1.2****Authorization, etc****.**The Seller has the necessary corporate power and authorityto execute and deliver this Agreement and the other agreements which are attached (or forms ofwhich are attached) as exhibits hereto (such agreements, collectively with the novations to Buyerof prime Government Contracts listed on Schedule 4.4(a), the “AncillaryAgreements”) to which the Seller is a party, to perform fully its obligations hereunder andthereunder, and to consummate the transactions contemplated hereby and thereby. The execution anddelivery by the Seller of this Agreement and each of the Ancillary Agreements to which it is aparty, and the consummation of the transactions contemplated hereby and thereby, have been dulyauthorized by all requisite corporate action of the Seller. The Seller has duly executed anddelivered this Agreement and each of the Ancillary Agreements to which it is a party. ThisAgreement and each the Ancillary Agreements to which the Seller is or will become a partyconstitute or will constitute, as applicable, the legal, valid and binding obligations of theSeller enforceable against it in accordance with their respective terms.
          **3.1.3 [intentionally omitted]**
          **3.1.4****Meetings Regarding Business****.**Within the past five years**,**no deliberations bySellers’ board of directors or any committee of such board have ever addressed the Assets or theBusiness, including without limitation relating to the performance of the Business, any lack ofcustomer satisfaction related to the Business, or the Business’ performance of its GovernmentContracts or any other Assets.
          **3.1.5****No Conflicts****.**The execution and delivery by the Seller of this Agreement and theAncillary Agreements to which the Seller is or will be a party do not, and the performance by theSeller of its obligations under this Agreement and the Ancillary Agreements
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to which the Seller is or will be a party and the consummation of the transactionscontemplated hereby and thereby do not and will not:
                  (a) conflict with or result in a violation or breach of any of the terms, conditions orprovisions of the articles of incorporation or bylaws of the Seller;
                  (b) subject to obtaining the consents, approvals and actions, making the filings and givingthe notices disclosed in Schedule 3.1.5(b) of the Seller Disclosure Schedules, if any,conflict with or result in a violation or breach of any Law or Order applicable to the Seller orany of its assets and properties, including, without limitation, the Assets; or
                  (c) except as disclosed in Schedule 3.1.5(c) of the Seller Disclosure Schedules, (i)conflict with or result in a violation or breach of, (ii) constitute a default (or an event that,with or without notice or lapse of time or both, would constitute a default) under, (iii) requirethe Seller to obtain any consent, approval or action of, make any filing with or give any notice toany Person as a result or under the terms of, (iv) result in or give to any Person any right oftermination, cancellation, acceleration or modification in or with respect to, (v) result in orgive to any Person any additional rights or entitlement to increased, additional, accelerated orguaranteed payments or performance under, (vi) result in any contract termination or the impositionof any reduction in price, labor rate, direct rates, indirect rates or other economic benefit ofthe Contracts, (vii) result in the creation or imposition of (or the obligation to create orimpose) any Lien upon the Seller or any of its assets and properties, including, withoutlimitation, the Assets, under or (viii) result in the loss of any material benefit under, any ofthe terms, conditions or provisions of any Contract.
          **3.1.6****Seller Financial Statements****.**Schedule 3.1.6 of the Seller DisclosureSchedules attaches (a) the pro forma balance sheet of the Business as at December 31, 2004 andrelated statement of statement of income for the nine (9) months ended December 31, 2004 (excludingthe notes related thereto), and (b) the pro forma balance sheet of the Business as at March 31,2005 (the “Most Recent Balance Sheet”) and related statement of income for the twelve (12)months ended March 31, 2005 (excluding the notes related thereto) (together, the “BusinessFinancials”). The accounting principles used in calculating individual line item balancescontained in the Business Financials are consistent with GAAP; provided, however, that the form ofpresentation, including, but not limited to, the absence of footnotes, is not in conformity withGAAP. The Business Financials are materially complete and correct, are in accordance with thebooks and records of the Seller and present fairly, in all material respects, the financialcondition and operating results of the Business as of the dates and during the periods indicatedtherein.
          **3.1.7****Assets****.**Except as disclosed in Schedule 3.1.7, the Seller has goodtitle to all the Assets free and clear of any and all Liens other than Permitted Liens. The Assetsconstitute all assets necessary for the conduct of the Business as now conducted and as conductedin the past two years and will be sufficient in all material respects to carry on the Businessafter Closing as now conducted and as conducted in the past two years, without interruption ordisruption. The Assets are in reasonably good repair and operating condition (subject to normalwear and tear) and there are no facts or conditions affecting the Assets which
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could, individually or in the aggregate, interfere in any material respect with the use,occupancy or operation thereof as currently used, occupied or operated, or their adequacy for suchuse.
          **3.1.8****Absence of Changes****.**The Seller has conducted the Business only through theSeller and not through any direct or indirect Subsidiary or Affiliate of the Seller. No part ofthe Business is operated by the Seller through any entity other than the Seller. Since March 31,2005, there has been no change in the condition (financial or otherwise), business, net worth,assets, properties or Liabilities of the Business which has had or is likely to have a MaterialAdverse Effect, and there has been no occurrence, circumstance or combination thereof which wouldreasonably be expected to result in any such Material Adverse Effect before or after the ClosingDate. In addition, without limiting the generality of the foregoing, except as expresslycontemplated by this Agreement and except as disclosed in Schedule 3.1.8 of the SellerDisclosure Schedules, since December 31, 2004:
                  (a) the Seller has not entered into any Contract, other than with Parent or its Affiliates,commitment or transaction or incurred any Liabilities with respect to the Business outside of theordinary course of business consistent with past practice;
                  (b) there has not been any material amendment or other material modification (or agreement todo so) or violation of the terms of any of the Contracts;
                  (c) the Seller has not entered into or amended any Contract pursuant to which any other Personis granted by the Seller production, marketing, distribution, licensing, sublicensing or similarrights with respect to any products or services of the Business or Purchased Intellectual Property;
                  (d) no Action or Proceeding has been commenced or, to the Knowledge of the Seller, has beenthreatened (whether orally or in writing), by or against the Seller relating to the Assets or theBusiness;
                  (e) there has not been any transfer (by way of a Contract or otherwise) by Seller to anyPerson of Seller’s rights in and to any Purchased Intellectual Property;
                  (f) the Seller has not made or agreed to make any material disposition or sale of, waiver ofrights to, license or lease of, or incurrence of any Lien on, any Assets;
                  (g) the Seller has not made or agreed to make any purchase of any assets and properties of anyPerson in connection with or related to the Business other than (i) acquisitions of inventory, orlicenses of assets or properties, in the ordinary course of the Business consistent with pastpractice, and (ii) other acquisitions in an amount not exceeding ten thousand dollars ($10,000) inthe case of any individual item or twenty-five thousand dollars ($25,000) in the aggregate;
                  (h) the Seller has not made or agreed to make any capital expenditures in connection with theBusiness or commitments for additions to property, plant or equipment used in the Businessconstituting capital assets in the aggregate in an amount exceeding twenty-five thousand dollars($25,000);
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                  (i) the Seller has not made or agreed to make any write-off or write-down, any determinationto write off or write-down, or revalue, any of the Assets, or change any reserves or Liabilitiesassociated therewith, in the aggregate in an amount exceeding five thousand dollars ($5,000);
                  (j) the Seller has not made or agreed to make payment, discharge or satisfaction, in an amountin excess of five thousand dollars ($5,000), in any one case, or twenty-five thousand dollars($25,000) in the aggregate, of any claim, Liability or obligation (whether absolute, accrued,asserted or unasserted, contingent or otherwise) relating to or adversely affecting the Business,other than the payment, discharge or satisfaction in the ordinary course of business of Liabilitiesreflected or reserved against in the Business Financials and other than Liabilities incurred in theordinary course of the Business since December 31, 2004;
                  (k) the Seller has not failed to pay or otherwise satisfy any Liabilities presently due andpayable of the Seller relating to the Business (other than delays in the ordinary course of theSeller’s business consistent with past practices that would not reasonably be expected to have aMaterial Adverse Effect), except such Liabilities relating to the Business which are beingcontested in good faith by appropriate means or procedures and which, individually or in theaggregate, are not material;
                  (l) except for borrowings against receivables in the ordinary course of business at the Sellercorporate level, the Seller has not incurred any Indebtedness or guaranteed any Indebtedness of anyother Person in connection with the Business;
                  (m) other than in the ordinary course of business for non-executive employees and other thanentering into the CBA, the Seller has not entered into, amended, modified or terminated anyemployment or compensation agreement with, or increased or otherwise changed any compensation orbenefits payable or to become payable by the Seller to, any director, employee, agent or consultantof the Seller who is employed by or providing service to the Seller in connection with theBusiness;
                  (n) there has been no material physical damage, destruction or other casualty loss (whether ornot covered by insurance) affecting any of the Assets; and
                  (o) neither the Seller or any of its Affiliates has entered into or approved any contract,arrangement or understanding or acquiesced in respect of, any arrangement or understanding, to do,engage in or cause, or having the effect of any of the foregoing.
          **3.1.9****No Undisclosed Liabilities****.**There are no Liabilities arising out of orotherwise directly or indirectly relating to the Assets or the Business except (i) as disclosed inSchedule 3.1.9 of the Seller Disclosure Schedules and (ii) as disclosed or reserved againstin the Business Financials.
          **3.1.10****Taxes****.**
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                  (a) The Seller has properly prepared and timely filed all Tax Returns required to be filed.All such Tax Returns are true, correct and complete in all material respects. All Taxes owed bythe Seller (whether or not shown on any Tax Return) have been paid except for Taxes not yet due.The Seller has not received any notice of Tax deficiency or additional assessment from anyGovernmental Authority with respect to Liabilities for Taxes payable by the Seller. Since December31, 2001, no claim has ever been made by any Governmental Authority in any jurisdiction where theSeller does not file Tax Returns that the Seller is or may be subject to taxation by thatjurisdiction. There are no Liens with respect to Taxes on any of the Assets.
                  (b) The Seller has withheld and paid all Taxes required to have been withheld and paid inconnection with amounts paid or owing to any employee, independent contractor, creditor,stockholder or other third party, and all Forms W-2 and 1099 required with respect thereto havebeen properly completed and timely filed.
                  (c) There is no material dispute or claim concerning any Tax Liability of the Seller either(A) claimed or raised by any Governmental Authority in writing or (B) as to which any of thestockholders, directors or officers of the Seller has Knowledge based upon personal contact withany agent of such Governmental Authority.
                  (d) Schedule 3.1.10(d) of the Seller Disclosure Schedule lists all federal, state,local, and foreign Tax Returns filed with respect to the Seller for taxable periods ended on orafter December 31, 2001, indicates those Tax Returns that have been audited, and indicates thoseTax Returns that currently are the subject of audit. The Seller has delivered to Buyer correct andcomplete copies of all federal Tax Returns, examination reports, and statements of deficienciesassessed against or agreed to by the Seller since January 1, 2001. The Seller has not waived anystatute of limitations in respect of Taxes or agreed to any extension of time with respect to a Taxassessment or deficiency.
                  (e) None of the Assumed Liabilities represent an obligation by the Seller to make any paymentsthat are not fully deductible as a result of the provisions set forth in Sections 162(m) or 280G ofthe Code or the Treasury Regulations thereunder (or any corresponding provisions of state, local orforeign Tax Law) or would result in an excise Tax to the recipient of any such payment underSection 4999 of the Code. The Seller is not a party to any Tax allocation or sharing agreement.The Seller (A) has never been a member of an “affiliated group” (within the meaning of Section1504(a) of the Code) filing a consolidated federal Income Tax Return, and (B) has no Liability forthe Taxes of any Person other than the Seller (i) under Treasury Regulation §1.1502-6 (or anysimilar provision of state, local or foreign Law), (ii) as a transferee or successor, (iii) bycontract, or (iv) otherwise.
                  (f) The unpaid Taxes of the Seller (A) did not, as of the most recent fiscal month end, exceedthe reserve for Tax Liabilities (rather than any reserve for deferred Taxes established to reflecttiming differences between book and Tax income) set forth on the face of the most recent balancesheet (rather than in any notes thereto) and (B) do not exceed that reserve as adjusted for thepassage of time through the Closing Date in accordance with the past custom and practice of theSeller in filing its Tax Returns.
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                  (g) The Seller has not been, and will not be, required to include any item of income in, orexclude any item of deduction from, taxable income for any Tax period (or portion thereof) endingon or after the Closing Date as a result of (A) any change in method of accounting for a Tax periodending on or prior to the Closing Date under Section 481 of the Code (or any corresponding orsimilar provision of state, local or foreign Income Tax Law); (B) any “closing agreement” asdescribed in Section 7121 of the Code (or any corresponding or similar provision of state, local orforeign Income Tax Law); or (C) any installment sale or open transaction disposition made on orprior to the Closing Date.
                  (h) The Seller has not distributed stock of another Person, and has not had its stockdistributed by another Person, in a transaction that was purported or intended to be governed inwhole or in part by Sections 355 or 361 of the Code.
          **3.1.11****Legal Proceedings****.**Except as set forth in Schedule 3.1.11 of theSeller Disclosure Schedules:
                  (a) there are no Actions or Proceedings pending or, to the Knowledge of the Seller, threatened(whether orally or in writing), against or adversely affecting the Seller relating to the Assets orthe Business or in connection with or relating to the transactions contemplated by this Agreement;
                  (b) to the Knowledge of the Seller, there are no facts or circumstances that could reasonablybe expected to give rise to any material Action or Proceeding against or adversely affecting theSeller relating to the Assets or the Business or in connection with or relating to the transactionscontemplated by this Agreement; and
                  (c) with respect to or otherwise affecting the Business or the Assets, the Seller has notreceived notice, and does not otherwise have Knowledge of any Orders outstanding against theSeller.
Schedule 3.1.11 of the Seller Disclosure Schedules sets forth all Actions or Proceedingsagainst or affecting, or, to the Knowledge of the Seller, threatened (whether orally or in writing)against, the Seller relating to the Assets or the Business during the three (3)-year period priorto the date hereof.
          **3.1.12****Compliance with Laws and Orders****.**The operation of the Business as currentlyconducted does not violate any Law or Order applicable to the Business, the Seller or any of itsassets and properties. Neither the Seller nor any of its directors, officers, Affiliates, agentsor employees has violated in any material respect or is currently in default or violation in anymaterial respect under, any Law or Order applicable to the Business or any of the Assets. TheSeller is not aware of any claim of violation, or of any actual violation, of any such Laws orOrders by the Seller, other than violations which could not reasonably be expected to have aMaterial Adverse Effect.
          **3.1.13****Employees, Labor Matters, etc****.**Schedule 3.1.13(a) lists each Personcurrently employed by the Seller solely in connection with the Business (the “DivisionEmployees”), and Schedule 3.1.13(b) lists each Person currently employed by the Sellerin part
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in connection with the Business and in part in connection with other of the Seller’sbusinesses or operations. The Division Employees constitute all persons necessary for the conductof the Business as now conducted and as conducted in the past two years and will be sufficient,assuming they continue to be employed by the Parent or Buyer after the Closing in connection withthe Business, in all material respects to carry on the Business after Closing as now conducted andas conducted in the past, without interruption or disruption. Except for that certain Agreementbetween Seller and Local 99-99A International Union of Operating Engineers effective April 1, 2005(the “CBA”) and except as disclosed on Schedule 3.1.13(c), the Seller is not aparty to any collective bargaining agreement with respect to any of its employees. The Seller hasmade all contributions and payments required under the CBA, including without limitation allcontributions to (a) the Health and Welfare Trust Fund of the International Union of OperatingEngineers, Local 99-99A (Article V), (b) the Central Pension Fund of the International Union ofOperating Engineers and Participating Employers (Article V), and (c) the Local 99 IUOE JointApprenticeship Trust (Article IV) (collectively, the “Trust Funds”). The Seller has noLiability under any of the Trust Funds except as expressly set forth in the CBA and, to theKnowledge of the Seller, none of the Trust Funds is underfunded. Furthermore, there is no pendingdispute, and the Seller has no knowledge of any potential dispute, between the Seller and any ofthe Trust Funds concerning the payment of any contributions. With respect to the Business, theSeller is in material compliance with all applicable Laws respecting employment and employmentpractices, terms and conditions of employment and wages and hours, and occupational safety andhealth pertaining to the Seller and is not engaged in any unfair labor practice within the meaningof any applicable Law, including Section 8 of the National Labor Relations Act. With respect tothe Business, there is no unfair labor practice, charge or complaint or any other matter against orinvolving the Seller pending or, to the Seller’s Knowledge, threatened (whether orally or inwriting) before any Governmental Authority. With respect to the Business, here is no labor strike,dispute, slowdown or stoppage pending or to the Seller’s Knowledge, threatened (whether orally orin writing) against the Seller. No certification or decertification question or organizationaldrive exists or has existed within the past twelve (12) months respecting the Business. The Sellerhas not experienced any organized work stoppage or other similar labor difficulty involving theDivision Employees. There are no charges, investigations, administrative proceedings or formalcomplaints of discrimination (including discrimination based upon sex, age, marital status, race,national origin sexual preference, handicap or veteran status) pending or, to the Seller’sKnowledge, threatened (whether orally or in writing) before any Governmental Authority, includingthe Equal Employment Opportunity Commission, against the Seller, and, to the Seller’s Knowledge, nobasis for any such material charge, investigation, administrative proceeding or complaint exists.With respect to the Business, except as set forth on Schedule 3.1.13(d), there have been noaudits of the equal employment opportunity practices of the Seller. The Seller has notmis-characterized or mis-classified any Division Employee as an independent contractor.
          **3.1.14****Plans; ERISA****.**
                  (a) Employee Benefit Plans. Schedule 3.1.14 sets forth a true and completelist of each “employee benefit plan,” as such term is defined in section 3(3) of ERISA, whether ornot subject to ERISA, and each bonus, incentive or deferred compensation, severance, termination,retention, change of control, stock option, stock appreciation, stock
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purchase, phantom stock or other equity-based, performance or other employee or retiree benefit orcompensation plan, program, arrangement, agreement, policy or understanding, whether written orunwritten, other than “multiemployer plans” within the meaning of section 4001(a)(3) of ERISA or asdescribed in Section 413 of the Code (each, a “Multiemployer Plan”), that provides benefitsor compensation with respect to any Division Employee (collectively, the “Plans”). TheSeller has provided or made available to the Parent complete and correct lists of all the benefitsenjoyed by the Division Employees and copies of all written Plans and descriptions of all unwrittenPlans. The Seller has not communicated to any Division Employee any intention or commitment tomodify any Plan or to establish or implement any other employee or retiree benefit or compensationarrangement applicable to any Division Employee.
                  (b) Each Plan has been administered in material compliance with all applicable Laws, includingwithout limitation ERISA, if applicable, and the applicable provisions of the Code, and inaccordance with its terms and any related agreements or documents. There is no pending or, to theSeller’s Knowledge, threatened (whether orally or in writing) assessment, complaint, proceeding orinvestigation of any kind before any Governmental Authority related to any Plan, nor is there anybasis therefore.
                  (c) Except with respect to the Central Pension Fund of the International Union of OperatingEngineers and Participating Employers, Seller does not contribute to any Multiemployer Plan or anyPlan subject to Section 412 of the Code or Section 302 or Title IV of ERISA; nor has Sellermaintained any such Multiemployer Plan or such other Plan for any employees for the 5 year periodpreceding the date of this Agreement for which Seller has liability under Title IV of ERISA as ofthe date of this Agreement. The Seller has no current responsibility to make any withdrawalliability payments to any such multiemployer plan, nor would the transaction contemplated by thisAgreement result in any withdrawal liability of Seller under any multiemployer plan, as determinedin accordance with Section 4203 and 4205 of ERISA, regardless of whether Parent or Buyer assumessuch multiemployer plan. Furthermore, there is no pending claim, and the Seller has no knowledgeof any potential claim, between the Seller and any multiemployer plan concerning payment of anywithdrawal liability payments. The Seller has not received any notice of any failure by amultiemployer plan to satisfy the minimum funding requirements of Section 412 of the Code, and hasnot applied for, and has not received, a waiver of such minimum funding requirements with respectto any multiemployer plan. Seller has provided or made available to the Parent a copy of anyopinion letter or determination letter issued by the IRS with respect to any Plan’s qualificationunder Code Section 401(a) or (k).
          **3.1.15****Real Property****.**
                  (a) Schedule 3.1.15(a) of the Seller Disclosure Schedules contains a true and correctlist of (i) each parcel of real property leased, utilized and/or operated by the Seller (as lessoror lessee or otherwise) in connection, directly or indirectly, with the Business (the “LeasedReal Property”) and (ii) all Liens relating to or affecting any parcel of Leased Real Property.True, correct and complete copies of the documents under which the Leased Real Property is leased,subleased (to or by the Seller or otherwise), utilized, and/or operated (the “LeaseDocuments”) have been made available to Parent and such Lease Documents are
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unmodified and in full force and effect. The Seller does not own any real property other thanSeller owned leasehold improvements, if any, on Leased Real Property.
                  (b) Subject to the terms of the Lease Documents, the Seller has a valid and subsistingleasehold estate in and the right to quiet enjoyment of each of the Leased Real Properties for thefull term of the leases (including renewal periods) relating thereto. Each Lease Document referredto in Schedule 3.1.15(a) is a legal, valid and binding agreement, enforceable in accordancewith its terms in all material respects, except as such enforceability may be limited bybankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Lawsrelating to the enforcement of creditors’ rights generally and by general principles of equity, ofthe Seller, and of each other Person that is a party thereto, and except as set forth inSchedule 3.1.15(b) of the Seller Disclosure Schedules, there is no, and neither the Sellernor any of its Affiliates has received notice of any, default (or any condition or event which,after notice or lapse of time or both, would constitute a default) thereunder. The Seller does notowe brokerage commissions or finders fees with respect to any such Leased Real Property.
                  (c) Except as disclosed in Schedule 3.1.15(c) of the Seller Disclosure Schedules, allimprovements on the Leased Real Property (i) comply in all material respects with and are operatedin material accordance with applicable Laws and all applicable Liens, Consents, contracts,covenants and restrictions and (ii) are in all material respects in good operating condition and ina state of good maintenance and repair, ordinary wear and tear excepted, and such improvements arein all material respects adequate and suitable for the purposes for which they are presently beingused and there are no condemnation or appropriation proceedings pending or, to the Knowledge of theSeller, threatened (whether orally or in writing) against any of such real property or theimprovements thereon.
          **3.1.16****Tangible Personal Property****.**The Seller is in possession of and has good andmarketable title to, or has valid leasehold interests in or valid rights under contract to use, alltangible personal property used in the conduct of the Business, including tangible personalproperty reflected on the Business Financials and tangible personal property of the Businessacquired since March 31, 2005, other than property disposed of since such date in the ordinarycourse of business consistent with past practice. Except (a) for the Liens disclosed inSchedule 3.1.16 of the Seller Disclosure Schedules and purchase money liens on equipmentpurchases or product purchases in the ordinary course of the Business for which the purchase priceis not yet due and payable, or (b) as disclosed in Schedule 3.1.16 of the Seller DisclosureSchedules, all such tangible personal property of the Business (including plant, property andequipment) is owned by the Seller free and clear of all Liens and is suitable in all materialrespects for the conduct by the Seller of the Business as presently conducted, and is in goodworking order and condition in all material respects, ordinary wear and tear excepted, and its usecomplies in all material respects with all applicable Laws.
          **3.1.17****Intellectual Property****.**
                  (a) Schedule 3.1.17(a) of the Seller Disclosure Schedules lists all RegisteredPurchased Intellectual Property owned by the Seller as well as all material Purchased IntellectualProperty that is not Registered Purchased Intellectual Property.
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                  (b) The Seller has all requisite right, title and interest in or valid and enforceable rightsunder Contracts or Law to use all Purchased Intellectual Property that is used by the Seller toconduct the Business in the ordinary course. Each item of Purchased Intellectual Property listedin Schedule 3.1.17(a) of the Seller Disclosure Schedules is owned exclusively by the Seller(excluding Intellectual Property licensed to the Seller under any license) in its own name and isfree and clear of any Liens.
                  (c) Except as identified in Schedule 3.1.17(c) of the Seller Disclosure Schedules,since December 31, 2003, other than in the ordinary course of business, the Seller has nottransferred ownership of or granted any license of or other right to use or authorized theretention of any rights to use any Intellectual Property that is or was, as of that date, PurchasedIntellectual Property to any other Person.
                  (d) The Purchased Intellectual Property constitutes all the Intellectual Property used inand/or necessary to the conduct of the Business as currently conducted, including the design,development, distribution, marketing, manufacture, use, import, license, and sale of the products,technology and services of the Business.
                  (e) Schedule 3.1.17(e) of the Seller Disclosure Schedules lists all Contracts(including all inbound licenses) to which the Seller is a party with respect to any PurchasedIntellectual Property. Except as specifically identified in Schedule 3.1.17(e) of theSeller Disclosure Schedules, no Person other than the Seller has ownership rights to improvementsmade by the Seller in Purchased Intellectual Property that has been licensed to the Seller.
                  (f) Except as disclosed in Schedule 3.1.17(f) of the Seller Disclosure Schedules, theoperation of the Business by the Seller as currently conducted, including the design, development,use, import, manufacture and sale of the products, technology or services (including products,technology or services currently under development) of the Business (to the extent such isperformed by the Seller in the operation of the Business as currently conducted), does notinfringe, violate or misappropriate the Intellectual Property rights of any Person, and the Sellerhas not received written notice from any Person within the past two (2) years claiming that suchoperation of the Business infringes, violates or misappropriates the Intellectual Property rightsof any Person, including notice of infringement of third-party patent or other IntellectualProperty rights from a potential licensor of such rights.
                  (g) Each item of Registered Purchased Intellectual Property which has actually been andcurrently actually is registered in the name of the Seller is, to the Seller’s knowledge, valid andsubsisting, and all necessary registration and registration-related maintenance fees, renewal fees,and annuity fees in connection with such Registered Purchased Intellectual Property have been paidand all necessary registration-related documents and certificates in connection with suchRegistered Purchased Intellectual Property have been filed with the relevant patent, copyright,trademark or other authorities in the United States or foreign jurisdictions, as the case may be,for the purposes of maintaining such Registered Purchased Intellectual Property. In each case inwhich the Seller has acquired ownership of any Purchased Intellectual Property from any Person, theSeller has obtained a valid and enforceable assignment
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sufficient to irrevocably transfer all rights in such Intellectual Property (including theright to seek past and future damages with respect to such Intellectual Property) to the Sellerand, to the maximum extent provided for by and required to protect the Seller’s ownership rights inand to such Intellectual Property in accordance with applicable Laws, the Seller has recorded eachsuch assignment of Registered Purchased Intellectual Property with the relevant GovernmentalAuthority, including the PTO or the United States Copyright Office.
                  (h) There are no licenses or other contracts between the Seller and any other Person withrespect to Purchased Intellectual Property under which there is any dispute (or, to the Knowledgeof the Seller, facts that may reasonably lead to a dispute) regarding the scope of such license orcontract, or performance under such license or contract, including with respect to any payments tobe made or received by the Seller thereunder.
                  (i) To the Knowledge of the Seller, no Person is infringing, violating or misappropriating anyof the Seller’s rights in or to the Purchased Intellectual Property.
                  (j) The Seller has taken all commercially reasonable steps to protect and preserve Seller’sownership of Purchased Intellectual Property, except where the failure to so protect and preservePurchased Intellectual Property could not reasonably be expected to have a material adverse effecton the Business. The Seller has secured valid written assignments from all current and formerconsultants, third parties, Affiliates and employees (including any prior employees) whocontributed to the creation or development of the Purchased Intellectual Property. In the eventthat the consultant is or was concurrently employed by the Seller and a third party or thatPurchased Intellectual Property has been developed (in whole or in part) by an Affiliate, theSeller has taken appropriate steps to ensure that any Purchased Intellectual Property developed bysuch a consultant or Affiliate does not belong to the third party or Affiliate or conflict with thethird party’s or Affiliate’s employment agreement (such steps include ensuring that all researchand development work performed by such a consultant is not performed on the facilities of the thirdparty or using the resources of the third party).
          **3.1.18****Contracts****.**
                  (a) Schedule 3.1.18(a) of the Seller Disclosure Schedules contains a true and completelist of each of the Contracts (true, correct and complete copies or, if none, reasonably completeand accurate written descriptions of which, together with all amendments and supplements theretoand all waivers of any terms thereof, have been made available to Parent prior to the execution ofthis Agreement).
                  (b) Each Contract required to be disclosed in Schedule 3.1.18(a) of the SellerDisclosure Schedules is in full force and effect and constitutes a legal, valid and bindingagreement, enforceable in all material respects in accordance with its terms, except as suchenforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,moratorium or other similar Laws relating to the enforcement of creditors’ rights generally and bygeneral principles of equity. Except as disclosed in Schedule 3.1.18(b) of the SellerDisclosure Schedules, prior to the novation to Buyer of each Contract disclosed in Schedule3.1.18(a) there is no reduction in price, labor rate, direct costs, indirect costs or other
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reduction of economic benefit, or event of default or event or condition that, after notice orlapse of time or both, would constitute a violation, breach or event of default under any Contracton the part of the Seller or, to the Knowledge of the Seller, any other party thereto.
                  (c) Except as disclosed in Schedule 3.1.18(c) of the Seller Disclosure Schedules, theSeller is not a party to or bound by any Contract that (i) automatically terminates or allowstermination by the other party thereto upon consummation of the transactions contemplated by thisAgreement or the Ancillary Agreements or (ii) contains any covenant or other provision which limitsthe Seller’s ability to compete with any Person in any line of business or in any area orterritory.
                  (d) Schedule 3.1.18(d) of the Seller Disclosure Schedules lists (i) the customers ofthe Business and (ii) the ten (10) largest suppliers of the Business on the basis of cost of goodsor services purchased or accrued for in the Business Financials. Except as disclosed inSchedule 3.1.18(d) of the Seller Disclosure Schedules, no such customer or supplier hasceased or materially reduced its purchases from or sales or provision of services to the Sellersince December 31, 2003 or, to the Knowledge of the Seller, has threatened (whether orally or inwriting) to cease or materially reduce such purchases or sales or provision of services after thedate hereof. Except as disclosed in Schedule 3.1.18(d) of the Seller Disclosure Schedules,to the Knowledge of the Seller, no such customer or supplier is threatened with bankruptcy orinsolvency. With regard to supplier supporting the Business at Fort Bragg, Seller represents thatthe existing “Customer Maintenance” agreement obligates the supplier, Lenel, to maintain a level ofservice necessary for Buyer to provide support to Fort Bragg.
          **3.1.19****Government Contracts****.**
                  (a) (i) Schedule 3.1.19(a)(i) of the Seller Disclosure Schedules lists all GovernmentContracts (except for task orders and blanket purchasing agreements pursuant to GovernmentContracts), and with respect to each such listed Government Contract, Schedule 3.1.19(a)(i)of the Seller Disclosure Schedules accurately lists: (A) the contract name; (B) the award date;(C) the customer; (D) the contract end date; (E) the contract’s ceiling value; (F) the contract’sfunded value; and (G) as applicable, whether the current Government Contract is premised on theSeller’s small business status or other preferential status.
                    (ii) Schedule 3.1.19(a)(ii) of the Seller Disclosure Schedules lists the Seller’scurrent project charge codes, and with respect to each such charge code, Schedule3.1.19(a)(ii) of the Seller Disclosure Schedules accurately lists: (A) the customer; (B) thecustomer’s contract number corresponding to the charge code; (C) the customer’s order number; (D)the Seller’s internal project charge code number for each Government Contract; or if Seller tracksonly by task/delivery order, the Seller’s internal project charge code number for eachtask/delivery order; (E) the corresponding project name; (F) the end date; (G) inception to June30, 2005 funding; (H) inception to May 31, 2005 revenue received; (I) the ceiling value; and (J)payments due as of thirty (30) days or more prior to the date of this Agreement for work previouslyperformed and billed.
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                    (iii) Schedule 3.1.19(a)(iii) of the Seller Disclosure Schedules lists all GovernmentBids, including task order bids under current Government Contracts submitted by the Seller and forwhich no award has been made thirty (30) days or more prior to the date of this Agreement, and withrespect to each such Government Bid, Schedule 3.1.19(a)(iii) of the Seller DisclosureSchedules accurately lists: (A) the customer agency and title; (B) the request for proposal (RFP)number or, if such Government Bid is for a task order under a prime contract, the applicable primecontract number; (C) the date of proposal submission; (D) the expected award date, if known; (E)the estimated period of performance; (F) the estimated value based on the proposal, if any; and (G)whether such Government Bid is premised on the Seller’s small business status or other preferentialstatus. The Seller has delivered to Parent true, correct, and complete copies of all GovernmentContracts and of all Government Bids and provided access to Parent to true and correct copies ofall documentation related thereto requested by Parent.
                  (b) Except as set forth in Schedule 3.1.19(b) of the Seller Disclosure Schedules, (i)the Seller has not received any written, or, to Knowledge of the Seller, oral notification ofcost, schedule, technical or quality problems that could reasonably result in claims against theSeller (or successors in interest) by a Governmental Authority, a prime contractor, or ahigher-tier subcontractor; (ii) there are no Government Contracts pursuant to which the Seller isreasonably likely to experience cost, schedule, technical or quality problems that could reasonablyresult in claims against the Seller (or successors in interest) by a Governmental Authority, aprime contractor or a higher-tier subcontractor; (iii) all of the Government Contracts were legallyawarded, are binding on the parties thereto, and are in full force and effect; (iv) the GovernmentContracts are not currently the subject of bid or award protest proceedings, and, to the Knowledgeof the Seller no Government Contracts or Government Bids are reasonably likely to become thesubject of bid or award protest proceedings; and (v) no Person has notified the Seller or anyAffiliate, either in writing or, to Knowledge of the Seller, orally, that any GovernmentalAuthority intends to seek the Seller’s agreement to lower rates under any of the GovernmentContracts or Government Bids.
                  (c) Except as set forth in Schedule 3.1.19(c) of the Seller Disclosure Schedules: (i)the Seller has fully complied with all terms and conditions of each Government Contract andGovernment Bid to which it is a party, and has performed all obligations required to be performedby it thereunder; (ii) the Seller and any Affiliate has complied with all statutory, regulatory andlegal requirements, including, but not limited to, the Service Contract Act, the Contract DisputesAct, the Procurement Integrity Act, the Federal Procurement and Administrative Services Act, theFederal Acquisition Regulations (“FAR”) and related cost principles and the Cost AccountingStandards, where and as applicable to each of the Government Contracts and Government Bids; (iii)the representations, certifications and warranties made by the Seller with respect to theGovernment Contracts or Government Bids were accurate in all respects as of their effective date,and the Seller has fully complied with all such certifications; (iv) no termination for default,cure notice, show cause notice or other similar notice, either written or, to the Knowledge of theSeller, orally, has been issued and remains unresolved with respect to any Government Contract orGovernment Bid, and no event, condition or omission has occurred or exists that would constitutegrounds for such action; (v) no past performance evaluation received by the Seller or any Affiliatewith respect to any such
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Government Contract has set forth a default or other failure to perform thereunder ortermination or default thereof; and (vi) no money due to the Seller pertaining to any GovernmentContract or Government Bid has been withheld or set-off nor has there been any attempt to withholdor set-off any money due under any Government Contract; (vii) all invoices and claims (includingrequests for progress payments and provisional costs payments) submitted under each GovernmentContract were current, accurate and complete in all material respects as of their submission date;and (viii) neither the execution, delivery nor performance of this Agreement and the AncillaryAgreements does or will conflict with or result in a breach or default under any GovernmentContract.
                  (d) Except as set forth in Schedule 3.1.19(d) of the Seller Disclosure Schedules, withrespect to the Government Contracts, no Governmental Authority, prime contractor or higher-tiersubcontractor under a Government Contract or any other Person has notified the Seller or anyAffiliate, either in writing or, to the Knowledge of the Seller, orally, of any actual or allegedviolation or breach of any statute, regulation, representation, certification, disclosureobligation, contract term, condition, clause, provision or specification that could reasonably beexpected to have a Material Adverse Effect on the Business.
                  (e) The Seller has not taken any action and is not a party to any litigation that couldreasonably be expected to give rise to (i) liability under the False Claims Act, (ii) a claim forprice adjustment under the Truth in Negotiations Act, or (iii) any other request for a reduction inthe price of any Government Contract, including claims based on actual or alleged defectivepricing. There exists no basis for a claim of any liability of the Seller by any GovernmentalAuthority as a result of defective cost and pricing data submitted to any Governmental Authority.The Seller is not participating in any pending claim and to the Knowledge of the Seller there is nopotential claim under the Contract Disputes Act, or any other legal authority, against the UnitedStates Government or any prime contractor, subcontractor or vendor arising under or relating to anyGovernment Contract or Government Bid.
                  (f) Except as set forth in Schedule 3.1.19(f) of the Seller Disclosure Schedules, (i)no Government Contract has been terminated for default in the past ten (10) years; and (ii) neitherthe Seller nor any Affiliate has received any written or, to the Knowledge of the Seller , oralnotice terminating any Government Contract for convenience or indicating an intent to terminate anyof the Government Contracts for convenience.
                  (g) Except as set forth in Schedule 3.1.19(g) of the Seller Disclosure Schedules,neither the Seller nor any Affiliate has received any written or oral notice of any outstandingclaims or contract disputes to which the Seller or any Affiliate is a party relating to theGovernment Contracts or Government Bids and involving either a Governmental Authority, any primecontractor, any higher-tier subcontractor, vendor or any third party.
                  (h) Neither the Seller nor any of its respective directors, officers, Transferred Employees,or, to the Knowledge of the Seller, its non-Transferred employees, has ever been, nor is currently,suspended, debarred or proposed for suspension or debarment from bidding on any GovernmentContract, declared ineligible, or otherwise excluded from participation in the award of anyGovernment Contract or for any reason been listed on the List
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of Parties Excluded from Federal Procurement and Non-procurement programs. No suspension,debarment or exclusion proceeding actions with respect to Government Contracts have been commencedor threatened (whether orally or in writing) against the Seller, or any of their respectivedirectors, officers, Transferred Employees, or, to the Knowledge of the Seller, its non-Transferredemployees. No circumstances exist that would warrant the institution of suspension or debarmentproceedings against the Seller or its respective directors, officers, Transferred Employees, or, tothe Knowledge of the Seller, its non-Transferred employees.
                  (i) No negative determination of responsibility has been issued against the Seller or anyAffiliate with respect to any quotation, bid or proposal submitted to a Governmental Authority.
                  (j) Except as set forth in Schedule 3.1.19(j) of the Seller Disclosure Schedules,since January 1, 1998, (i) the Seller has not undergone and is not undergoing any audit,inspection, or investigation of records by any Governmental Authority relating to any GovernmentContract; (ii) neither the Seller nor any Affiliate has received written or oral notice of, andneither the Seller nor any Affiliate has undergone, any investigation, inspection or audit relatingto any Government Contract, and (iii) no such audit, inspection, or investigation, of records isthreatened, either in writing or, to Knowledge of the Seller, orally. Except as set forth inSchedule 3.1.19(j) of the Seller Disclosure Schedules, with respect to any GovernmentContract neither the Seller nor any Affiliate has received any official notice that Seller is orwas being specifically audited or investigated by the Government Accountability Office, the DefenseContract Audit Agency of the United States Government (the “DCAA”), any state or federalagency Inspector General, the contracting officer with respect to any Government Contract, or theDepartment of Justice (including any United States Attorney). The Seller has not received anywritten or, to the Knowledge of the Seller, oral notice that any audit, inspection, orinvestigation of records described in Schedule 3.1.19(j) of the Seller DisclosureSchedules, has revealed any fact, occurrence or practice which could reasonably be expected to havea Material Adverse Effect. Seller shall not be required to pay, repay, remit or otherwise refund,directly or indirectly, any amount to any Governmental Authority as a result of any audit,inspection, or examination of records by any Governmental Authority, including the DCAA, withrespect to services of the Seller or any Affiliate, at any time on or prior to December 31, 2004.
                  (k) During the last (5) years neither the Seller nor any Affiliate has conducted any internalaudit or investigation in connection with which the Seller has used any legal counsel, auditor,accountant or investigator, and (ii) neither the Seller nor any Affiliate has made any disclosureto any Governmental Authority or other customer or prime contractor or higher-tier subcontractorrelated to any suspected, alleged or possible violation of a contract requirement, any apparent oralleged irregularity, misstatement, or material omission arising under or relating to a GovernmentContract or Government Bid, or any violation of law or regulation.
                  (l) Except as set forth in Schedule 3.1.19(l), neither Seller, nor any Affiliate, northeir respective directors, officers or employees, have been engaged in or been charged with, orreceived or been advised in writing by any source, or advised verbally by an authorizedgovernmental officer or authorized point of contact of any prime contractor or higher
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tier subcontractor, of any charge, investigation, claim or assertion of, nor has Seller, norany Affiliate, nor their respective directors, officers or employees, been subject to any criminalindictment or information, lawsuit, subpoena, civil investigative demand, administrativeproceeding, voluntary disclosure, claim, dispute, mediation or arbitration with regard to, anymaterial violation of any requirement pertaining to a Government Contract or Government Bid,including material violations of any statutory or regulatory requirements, including withoutlimitation (i) defective pricing within the meaning of the Truth in Negotiations Act, as amended;(ii) accounting, estimating, inventory, material requirements planning, material management andaccounting systems, government property records or purchasing system deficiencies; (iii)mischarging of Direct Costs or Indirect Costs; (iv) delivery to the Government or to a Governmentprime or subcontractor of material, components, items or services that do not or did not meetspecifications or standards therefore, or delivery to the Government or to a Government prime orsubcontractor of foreign-made material, components or items where domestic-made material,components or items were required; (v) improperly soliciting, obtaining, attempting to solicit orobtain or making or attempting to make any payment for any non-public proprietary or sourceselection information; (vi) unallowable costs, including unallowable Direct Costs or IndirectCosts; (vii) improper testing or test reports; (viii) failure to abide by the terms of a GovernmentContract or a Government Bid; or (ix) Laws relating to any Government Contract or Government Bid,including the following: (A) the False Statements Act (18 U.S.C. 1001), (B) the False Claims Act(18 U.S.C. 287), (C) the False Claims Act (31 U.S.C. 3729), (D) the Bribery, Gratuities andConflicts of Interest Act (18 U.S.C. 201 and 5 U.S.C. 7353), (E) the Anti-Kickback Act (41 U.S.C.51, 54), (F) the Anti-Kickback Enforcement Act of 1986 (Pub. L. 99-634), (G) the Arms ExportControl Act (22 U.S.C. 277 et. seq.), (H) the Foreign Corrupt Practices Act (15 U.S.C. 78 m, 78dd-1, 78 ff), (I) the Export Administration Act (50 U.S.C. App. 2401 et. seq.), (J) the War andNational Defense Act (18 U.S.C. 793), (K) the Racketeer Influenced and Corrupt Organizations Act(18 U.S.C. 1961-68) or of any statute the violation of which would constitute “racketeeringactivity” within the meaning of such act, (L) the Conspiracy to Defraud the Government Act (18U.S.C. 371), (M) the Program Fraud Civil Remedies Act (Pub. L. 99-509), (N) the Byrd Amendment,Pub. L. 101-121, § 319, (O) “revolving door” legislation (37 U.S.C. 801, 41 U.S.C. 423, 18 U.S.C.207, 18 U.S.C. 208, 18 U.S.C. 218, 18 U.S.C. 281, 10 U.S.C. 2397, 10 U.S.C. 2397a, 10 U.S.C. 2397b,10 U.S.C. 2397), (P) the Defense Production Act (50 U.S.C. App. 2061), (Q) United Statesantiboycott laws (the Ribicoff Amendment to the 1976 Tax Reform Act, and the 1979 ExportAdministration Act), (R) the Defense Industrial Security Regulation (DoD 5220.22-R) or NationalIndustrial Security Program Operating Manual (DoD 5220.22-M), or any agreement with the DefenseSecurity Service, (S) the FAR, any applicable supplements thereto, alternative regulationsapplicable in lieu thereof, or applicable predecessor regulations, (T) the Service Contract Act of1965, as amended, (U) Cost Accounting Standards, (V) Treasury Department embargo and sanctionsregulations, 31 C.F.R. Part 500 et. seq., (W) the Small Business Act, as amended, (X) ExecutiveOrder 11246, as amended, and corresponding Department of Labor regulations, (Y) the Anti-AssignmentAct, 41 U.S.C. § 15, (Z) the Davis-Bacon Act, as amended, (AA) the Fair Labor Standards Act, asamended, (BB) the Walsh-Healey Act, as amended or (CC) the Drug-Free Workplace Act, as amended, norhas Seller conducted any internal investigation in connection with any such material violation onits own or with the assistance of any legal counsel, auditor, accountant or investigator outsideSeller.
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                  (m) All indirect and general, administrative and selling/bid and proposal/independent researchand development (G&A) expense rates are being billed consistent with DCAA-approved rates orprovisional rates.
                  (n) The Seller and its Division employees who hold security clearances are in compliance withall applicable national security obligations, including those specified in the National IndustrialSecurity Program Operating Manual, DOD 5220.22-M (January 1995), and any supplements, amendments orrevised editions thereof.
                  (o) There are no events or omissions that would reasonably be expected to result in a claim ordispute against the Seller by a Governmental Authority or any prime contractor, subcontractor,vendor or other third party arising under or relating to any Government Contract or Government Bid.
                  (p) The Seller has undertaken no internal audit of any events or omissions that, at the timeof the audit, the Seller or any Affiliate reasonably expected to have a material adverse effect onthe performance of a Government Contract or Government Bid or an adverse effect on the Business.In addition, all Government Bids listed on Schedule 3.1.19(a) of the Seller DisclosureSchedules were submitted in the ordinary course of business of the Seller, were based onassumptions believed by the management of the Seller to be reasonable, and the Seller reasonablybelieves all Government Bids listed on Schedule 3.1.19(a) of the Seller DisclosureSchedules are capable of performance by the Seller in accordance with the terms and conditions ofsuch Government Bid without a total program loss (calculated in accordance with the Seller’saccounting principles consistently applied).
                  (q) Except as set forth on Schedule 3.1.19(q) of the Seller Disclosure Schedules, noGovernment Contract has incurred or currently projects losses or cost overruns in an amountexceeding $5,000. No payment has been made by the Seller or by a Person acting on the Seller’sbehalf, to any Person (other than to any bona fide employee or agent of the Seller, as defined insubpart 3.4 of the FAR) which is or was improperly contingent upon the award of any GovernmentContract or which would otherwise be in violation of any applicable procurement law or regulationor any other Laws. The Seller is not subject to any “forward pricing” regulations or agreements ascontemplated, for example, in Section 9-1200 of the DCAA Contract Audit Manual (2005).
                  (r) Except as set forth on Schedule 3.1.19(r) of the Seller Disclosure Schedules, theSeller has not assigned or otherwise conveyed or transferred, or agreed to assign, to any Person,any Government Contracts, or any account receivable relating thereto, whether a security interestor otherwise.
                  (s) Except as set forth on Schedule 3.1.19(s) of the Seller Disclosure Schedules,where applicable, the Seller has reached agreement with the cognizant government audit agencyapproving and “closing” all indirect costs charged to Government Contracts for the years 1993through 2004.
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                  (t) Except as set forth on Schedule 3.1.19(t) of the Seller Disclosure Schedules, nopersonal property, equipment or fixtures are loaned, bailed or otherwise furnished to the Seller byor on behalf of a Government in connection with any Government Contracts or Government Bids.
                  (u) The Seller certifies that, (i) no claims (whether oral or written) exist against theSeller with respect to express warranties and guarantees contained in Government Contracts onproducts or services provided by the Seller; (ii) no such claims have been made against the Sellerin the past five (5) years; (iii) no amendment has been made to any written warranty or guaranteecontained in any Government Contract that would reasonably be expected to result in a MaterialAdverse Effect on the Business; and (iv) Seller has not taken any action which would reasonably beexpected to give any Person a right to make a claim under any written warranty or guaranteecontained in any Government Contract.
                  (v) Except to the extent prohibited by applicable Law, Schedule 3.1.19(v) of theSeller Disclosure Schedules sets forth all facility security clearances held by the Seller and itsAffiliates in connection with the operation of the Business.
                  (w) The Seller maintains systems of internal controls (including cost accounting systems,estimating systems, purchasing systems, proposal systems, billing systems and material managementsystems) that are in compliance with all applicable requirements of all of the Government Contractsand all applicable Laws.
                  (x) Neither the Seller, nor any of its respective employees, officers or agents, has violatedany legal, administrative or contractual restriction concerning the employment of (or discussionsconcerning possible employment with) current or former officials or employees of a state, local orfederal government (regardless of the branch of government), including, but not limited to, theso-called “revolving door” restrictions set forth at 18 U.S.C. § 207.
                  (y) Except as set forth on Schedule 3.1.19(y) of the Seller Disclosure Schedules, noneof Seller’s Government Contracts are premised upon Seller’s small business, small disadvantagedbusiness status, veteran owned status, protégé status, or other preferential status, nor did anyGovernmental Authority rely upon Seller’s small business, small disadvantaged business status,veteran owned status, protégé status, or other preferential status in evaluation any of Seller’squotations, bids, or proposals, or in making award of any Government Contract to Seller.
                  (z) All costs (both Direct Costs and Indirect Costs) charged to Seller pursuant to anyexisting subcontract agreements are and shall be allowable in accordance with applicableregulations and cost accounting standards. No incurred Direct Costs and/or Indirect Costs shall bedisallowed for any period of time prior to the Closing Date.
                  (aa) All Seller (or any Seller Affiliate) costs (both Direct Costs and/or Indirect Costs) thathave been, prior to Closing, charged to any Government Contract shall be allowable in accordancewith applicable cost accounting standards. All costs (both Direct Costs
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and Indirect Costs) to be charged by Seller (or any Seller Affiliate) to Buyer or Parentpursuant to the Transition Services Agreement (see Section 4.14 infra) shall be allowable inaccordance with applicable regulations and cost accounting standards.
                  (bb) Except as set forth on Schedule 3.1.19(bb) the Seller has not had access tonon-public information nor provided systems engineering, technical direction, consultation,technical evaluation, source selection services or services of any type, nor preparedspecifications of work, nor engaged in any other conduct that would create in connection with anyGovernment procurement an organizational conflict of interest as defined in the FAR or otherapplicable law.
                  (cc) Davis Bacon labor rates have not applied, and do not apply, to any of the GovernmentContracts listed in Schedule 3.1.19(a)(i), any of the entries listed on Schedule3.1.19(a)(ii), or any of the Government Bids listed in Schedule 3.1.19(iii).
          **3.1.20****Insurance****.**Schedule 3.1.20 of the Seller Disclosure Schedules containsa true and complete list of all insurance policies (by policy number, insurer, expiration date andtype, amount and scope of coverage) held by the Seller or its Affiliates relating, directly orindirectly, to the Assets and the Business, copies of which have been provided or made available toParent. In the three (3) year period ending on the date hereof, the Seller has not received anynotice from, or on behalf of, any insurance carrier relating to or involving any adverse change orany change other than in the ordinary course of business, in the conditions of insurance, anyrefusal to issue an insurance policy or non-renewal of a policy, or requiring or suggestingalteration of any of the Assets, purchase of additional equipment or modification of any of theSeller’s methods of doing business. Each policy listed in Schedule 3.1.20 of the SellerDisclosure Schedules is valid and binding and in full force and effect, all premiums due thereunderhave been paid and neither the Seller nor the Person to whom such policy has been issued hasreceived any notice of cancellation or termination in respect of any such policy or is in defaultthereunder, and the Seller does not have any Knowledge of any default by any other Personthereunder or of any reason or state of facts that is likely to lead to the cancellation of suchpolicies or of any threatened (whether oral or written) termination of, or material premiumincrease with respect to, any of such policies. The insurance policies listed in Schedule3.1.20 of the Seller Disclosure Schedules are in amounts and have coverages as required by anyContract to which Seller is a party or by which any of the Assets is bound. Schedule3.1.20 of the Seller Disclosure Schedules contains a list of all claims in excess of $10,000made under any insurance policies covering the Seller in respect of the Business or the Assets inthe last two (2) years. The Seller has not received any notice that any insurer under any policylisted (or required to be listed) in Schedule 3.1.20 of the Seller Disclosure Schedules isdenying, disputing or questioning liability with respect to a claim thereunder or defending under areservation of rights clause.
          **3.1.21****Accounts Receivable****.**Except as set forth in Schedule 3.1.21 of theSeller Disclosure Schedules, the accounts and notes receivable of the Seller reflected on theBusiness Financials, and all accounts and notes receivable arising subsequent to March 31, 2005 inconnection with or directly or indirectly relating to the Business, (a) arose from bona fide salestransactions in the ordinary course of business, consistent with past practice, and are payable onordinary trade terms, (b) are legal, valid and binding obligations of the respective debtors
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enforceable in accordance with their respective terms, except as the enforceability thereofmay be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium orother similar Laws relating to the enforcement of creditors’ rights generally and by generalprinciples of equity, (c) are not subject to any valid set-off or counterclaim, (d) have beencollected or are fully collectible (provided that after Closing Buyer uses (and Buyer herebycovenants that it will use) commercially reasonable efforts to collect the same) before the datethat is one hundred fifty (150) days after the applicable invoice date (provided that the accountdebtor has not affirmatively rejected such invoice), net of reserves according to their terms inamounts not less than the aggregate amounts thereof carried on the Most Recent Balance Sheet;provided, however, that (i) Buyer shall provide Seller with written notice on a periodic basis (noless frequently than every fifteen (15) days) of any accounts receivable amounts existing atclosing that have aged more than sixty (60) days from the date of the sale or other activity givingrise to such accounts receivable (it being the intent of the parties that Buyer shall be permittedto reasonably assist in the collections efforts with respect thereto) and (ii) if any accountsreceivable of Seller on the Closing Date is not ultimately collected in the time frames reflectedabove and Buyer exercises its indemnification rights pursuant to Section 6.1 hereof in connectionwith said uncollected accounts receivable, Buyer shall immediately thereafter transfer, assign andconvey to Seller all right, title and interest in and to such uncollected Accounts Receivable, and(e) do not represent obligations for goods sold on consignment, on approval or on a sale-or-returnbasis or subject to any other repurchase or return arrangement other than customers’ rights toinspect goods upon receipt and reject nonconforming goods.
          **3.1.22****Other Negotiations; Brokers; Third-Party Expenses****.**Neither the Seller nor anyof its officers, directors, managers, employees, agents, stockholders or Affiliates (nor anyinvestment banker, financial advisor, attorney, accountant or other Person retained by or actingfor or on behalf of the Seller or any such Person) (a) has entered into any contract or arrangementthat conflicts with any of the transactions contemplated by this Agreement or (b) except asdisclosed in Schedule 3.1.22 of the Seller Disclosure Schedules, has entered into anycontract or arrangement with any Person regarding any transaction involving the Seller which islikely to result in Parent, the Buyer or any general partner, limited partner, manager, officer,director, employee, agent or Affiliate of any of them being subject to any claim for Liability tosaid Person as a result of entering into this Agreement or the Ancillary Agreements to which Selleris a party or consummating the transactions contemplated hereby or thereby. Except as set forth inSchedule 3.1.22 of the Seller Disclosure Schedules, no broker, investment banker, financialadvisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or similar feeor commission in connection with this Agreement and the transactions contemplated hereby based onarrangements made by or on behalf of the Seller.
          **3.1.23****Solvency****.**Upon consummation of the transactions contemplated by this Agreementand the Ancillary Agreements, including without limitation receipt of the payments to be made tothe Seller as contemplated in this Agreement, the Seller will not be insolvent.
          **3.1.24****Warranty Obligations****.**True, correct and complete copies of all forms ofwritten warranties, indemnification obligations, guarantees and written warranty policies of theSeller in respect of any of the Seller’s products and services relating directly or indirectly tothe Business, which are currently in effect (the “Warranty Obligations”) and a list of theduration of
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each such Warranty Obligation have been made available to Parent prior to the execution ofthis Agreement. Except as set forth on Schedule 3.1.24 hereof, there are no WarrantyObligations currently subject to any dispute or, to the Knowledge of the Seller, threatened(whether orally or in writing) dispute. Except as disclosed in Schedule 3.1.24 of theSeller Disclosure Schedules, there have not been any material deviations from the WarrantyObligations, and no salesperson, employee or agent of the Seller other than corporate officers isauthorized to undertake warranty obligations to any customer or other Person in excess of suchWarranty Obligations.
          **3.1.25****Foreign Corrupt Practices Act****.**Neither the Seller nor, to the Knowledge of theSeller, any agent, employee or other Person acting on behalf of the Seller has, directly orindirectly, used any corporate funds for unlawful contributions, gifts, entertainment or otherunlawful expenses relating to political activity, made any unlawful payment to foreign or domesticgovernment officials or employees or to foreign or domestic political parties or campaigns fromcorporate funds, violated any provision of the Foreign Corrupt Practices Act of 1977, as amended,or made any bribe, rebate, payoff, influence payment, kickback or other similar unlawful payment.
          **3.1.26****Financial Projections****.**The Seller has made available to Parent certainfinancial projections with respect to the Business, which projections were prepared for internaluse only. The Seller makes no representation or warranty regarding the accuracy of suchprojections or as to whether such projections will be achieved, except that the Seller representsand warrants that such projections were prepared in good faith and are based on assumptionsbelieved by the Seller to be reasonable as of the date of this Agreement.
          **3.1.27****Approvals****.**
                  (a) Schedule 3.1.27(a) of the Seller Disclosure Schedules contains a list of allConsents of Governmental Authorities relating to the novations to Buyer of the prime GovernmentContracts listed on Schedule 4.4(a) which are required to be given to or obtained by theSeller in connection with the consummation of the transactions contemplated by this Agreement andthe Ancillary Agreements.
                  (b) Schedule 3.1.27(b) of the Seller Disclosure Schedules contains a list of allConsents from any and all Persons other than Governmental Authorities, including withoutlimitation Consents from the prime contractors relating to Seller’s government subcontracts, whichare required to be given to or obtained by the Seller in connection with the consummation of thetransactions contemplated by this Agreement and the Ancillary Agreements.
                  (c) Except as set forth on Schedules 3.1.27(a) (which Consents of GovernmentalAuthorities will be obtained after the Closing in accordance with Section 4.4(a) hereof) and3.1.27(b) (copies of which Consents have been provided to Parent prior to the executionhereof), no Consents from Governmental Authorities or from Persons other than GovernmentalAuthorities are necessary (i) in connection with the consummation of the transactions contemplatedby this Agreement and the Ancillary Agreements, including without limitation the Subcontract andthe assignment to Buyer of Seller’s current government
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subcontracts or (ii) for Buyer to conduct the Business in the manner it is currently beingconducted.
          **3.1.28****Disclosure****.**No representation or warranty made by the Seller contained in thisAgreement, and no statement contained in the Seller Disclosure Schedules or in any certificate,list or other writing furnished to Parent pursuant to any provision of this Agreement (includingthe Business Financials and the notes thereto), contains any untrue statement of a material fact oromits to state a material fact necessary in order to make the statements herein or therein, in thelight of the circumstances under which they were made, not misleading.
     **3.2****Representations and Warranties of Parent****.**Parent and Buyer hereby, jointly andseverally, represent and warrant to the Seller as follows:
          **3.2.1****Organization and Qualification****.**Parent is a corporation duly organized, validlyexisting and in good standing under the Laws of the Commonwealth of Virginia. The Buyer is alimited liability company validly existing and in good standing under the Laws of the Commonwealthof Virginia.
          **3.2.2****Authorization, etc****.**Each of Parent and the Buyer has the necessary power andauthority to execute and deliver this Agreement and the Ancillary Agreements to which it is aparty, to perform fully its obligations hereunder and thereunder, and to consummate thetransactions contemplated hereby and thereby. The execution and delivery by each of Parent and theBuyer of this Agreement and each of the Ancillary Agreements to which it is a party, and theconsummation of the transactions contemplated hereby and thereby, have been duly authorized by allrequisite corporate or limited liability company (as the case may be) action of Parent and theBuyer. Each of Parent and the Buyer has duly executed and delivered this Agreement and each of theAncillary Agreements to which it is a party. This Agreement and the Ancillary Agreements to whichParent and/or the Buyer is or will become a party constitute or will constitute, as applicable, thelegal, valid and binding obligation of Parent and/or the Buyer, as the case may be, enforceableagainst it in accordance with its respective terms.
          **3.2.3****Legal Proceedings****.**There are no:
                  (a) Actions or Proceedings pending or, to the Knowledge of Parent, threatened (whether orallyor in writing), against or adversely affecting Parent or the Buyer in connection with or relatingto the transactions contemplated by this Agreement; or
                  (b) facts or circumstances that could reasonably be expected to give rise to any Action orProceeding against or adversely affecting Parent or the Buyer in connection with or relating to thetransactions contemplated by this Agreement.
          **3.2.4****Other Negotiations; Brokers; Third-Party Expenses****.**Neither Parent, the Buyernor any of their respective officers, directors, managers, employees, agents, stockholders, membersor Affiliates (nor any investment banker, financial advisor, attorney, accountant or other Personretained by or acting for or on behalf of Parent, the Buyer or any such Person) (a) has enteredinto any contract or arrangement that conflicts with any of the transactions contemplated by thisAgreement or (b) has entered into any contract or arrangement
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with any Person regarding any transaction involving Parent or the Buyer which is likely toresult in the Seller or any general partner, limited partner, manager, officer, director, employee,agent or Affiliate of any of them being subject to any claim for Liability to said Person as aresult of entering into this Agreement or the Ancillary Agreements to which they are a party orconsummating the transactions contemplated hereby or thereby. No broker, investment banker,financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s orsimilar fee or commission in connection with this Agreement and the transactions contemplatedhereby based on arrangements made by or on behalf of Parent or the Buyer.
          **3.2.5****Approvals****.**
                  (a) Except for the Consents relating to the novations to Buyer of the prime GovernmentContracts listed on Schedule 4.4(a), no Consents of Governmental Authorities are requiredto be given to or obtained by Parent or the Buyer in connection with the consummation of thetransactions contemplated by this Agreement and the Ancillary Agreements.
                  (b) Except as set forth on Schedule 3.2.5 attached hereto, no Consents from anyPersons other than Governmental Authorities are required to be given to or obtained by Parent orthe Buyer in connection with the consummation of the transactions contemplated by this Agreementand the Ancillary Agreements.
          **3.2.6****Novation Risk**. Buyer was formed on May 19, 2005. For the purpose of affordingSeller the opportunity to assess the risk (or lack thereof) of a novation failure attributable toParent and Buyer, Parent and Buyer represent that during the five (5) years preceding Closing: (i)the Parent has fully complied with all terms and conditions of each of its government contracts andgovernment bids to which it is a party, and has performed all obligations required to be performedby it thereunder; (ii) the Parent has complied with all statutory, regulatory and legalrequirements, including, but not limited to, the Service Contract Act, the Contract Disputes Act,the Procurement Integrity Act, the Federal Procurement and Administrative Services Act, the FAR andrelated cost principles and the Cost Accounting Standards, where and as applicable to each of itsgovernment contracts and government bids; (iii) the representations, certifications and warrantiesmade by the Parent with respect to its government contracts or government bids were accurate in allrespects as of their effective date, and the Parent has fully complied with all suchcertifications; (iv) no termination for default, cure notice, show cause notice or other similarnotice, either written or, to the Knowledge of the Parent, orally, has been issued and remainsunresolved with respect to any of its government contracts or government bids, and no event,condition or omission has occurred or exists that would constitute grounds for such action; (v) nopast performance evaluation received by the Parent with respect to any of its government contractshas set forth a default or other failure to perform thereunder or termination for default thereof;(vi) no negative determination of responsibility has been issued against the Parent with respect toany quotation, bid or proposal submitted to a Governmental Authority and (vii) neither theexecution, delivery nor performance of this Agreement and the Ancillary Agreements does or willconflict with or result in a breach or default under any of its government contracts. For purposesof this section 3.2.6, the term “government contract” includes subcontracts where the U.S.Government is the ultimate
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customer. As of the Closing, Buyer and Parent and their applicable employees possess therequisite security clearance necessary to perform under each of the Government Contracts for whichSeller is required to novate or otherwise transfer or assign to Buyer hereunder, including, withoutlimitation, the Key Contract, pursuant to their respective terms existing as of the Closing Date.
**ARTICLE IV**
**COVENANTS**
     **4.1 [intentionally omitted]**
     **4.2****Covenant Not to Compete; Non-Solicitation; Confidentiality****.**
          (a) For a period commencing upon the Closing and ending on the third anniversary of theClosing, neither Seller nor any Affiliate shall anywhere in the United States, directly orindirectly, without the prior written consent of Parent: (i) engage or participate, directly orindirectly, either as principal, agent, employee, employer, consultant, stockholder, director,officer, partner or in any other individual or representative capacity whatsoever, in the conductor management of, or own any stock or other proprietary interest in, any business or enterprisethat conducts business or operations which are the same as or substantially similar to theBusiness; provided, however, that the Seller may purchase or otherwise acquire up to (but not morethan) three percent (3%), and Seller’s Affiliates may purchase or otherwise acquire up to (but notmore than) five percent (5%), of any class of the securities of any Person (but may not otherwiseparticipate in the activities of such Person) if such securities are listed on any national orregional securities exchange or have been registered under Section 12(g) of the Securities ExchangeAct of 1934, as amended.
          (b) For a period commencing upon the Closing and ending on the third anniversary of theClosing, neither the Seller nor any Affiliate thereof, on the one hand, nor the Buyer, Parent norany Affiliate thereof, on the other hand, shall solicit, hire or employ, or cause any other Personto solicit, hire or employ any employee or contractor then retained or employed by the other orretained or employed by the other within the one-year period immediately prior to suchsolicitation, hiring or employment; provided that the foregoing prohibition shall not (i) apply toany employment or consulting arrangement entered into with an individual who has responded to ageneral solicitation not specifically targeted at such individual or with an individual who hasapproached the applicable employer without having been initially solicited by the other or (ii)prohibit Buyer or Parent from hiring any Division Employee.
          (c) The Seller recognizes and acknowledges that it has had in the past, currently has, and inthe future may possibly have, access to certain confidential information of the Business, such aslists of customers, operational policies, and pricing and cost policies that are valuable, specialand unique assets of the Business. The Seller agrees that, from and after the date hereof, it willnot use or disclose to any Person confidential information with respect to the
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Business for any purpose or reason whatsoever, unless (a) such information becomes known tothe public generally through no fault of the Seller, (b) disclosure is required by applicable Lawor the order of any Governmental Authority under color of law, or (c) the Seller reasonablybelieves that such disclosure is required in connection with the defense of a lawsuit against theSeller; and provided further, that prior to disclosing any information pursuant to clause (a), (b)or (c) above, the Seller shall, if possible, give prior written notice thereof to Parent andprovide Parent with the opportunity to contest such disclosure.
          (d) Each of the covenants in this Section 4.2 is severable and separate, and theunenforceability of any specific covenant shall not affect the provisions of any other covenant.Moreover, in the event any court of competent jurisdiction shall determine that any specificcovenant or the scope, time or territorial restrictions thereof are unreasonable, then it is theintention of the parties that such restrictions be enforced to the fullest extent which the courtdeems reasonable, and this Agreement shall thereby be reformed.
          (e) Because of the difficulty of measuring economic losses to Parent and the Buyer, on the onehand, and Seller, on the other hand, as a result of a breach of the covenants contained in thisSection 4.2, and because of the immediate and irreparable damage that could be caused to suchparties for which such parties would have no other adequate remedy (and for which monetary damageswould not be sufficient), the parties agree that, in addition to any and all other remedies thatmay be available to the non-breaching party against the breaching party at law or in equity (whichsuch remedies, notwithstanding Article VI, shall be available to the non-breaching party), thecovenants contained in this Section 4.2 may be enforced by the non-breaching party against thebreaching party, by application for injunctions and restraining orders or other equitable relief.The parties hereby agree that the covenants set forth in this Section 4.2 are a material andsubstantial part of the transactions contemplated by this Agreement.
     **4.3****Employee Benefit Matters****.**
          (a) The Seller shall assume full responsibility and liability for offering and providing“continuation coverage” to any “qualified beneficiary” who is covered by a “group health plan”sponsored, maintained or contributed to by any Seller and who has experienced a “qualified event”or is receiving such “continuation coverage” on or prior to the Closing Date. Continuationcoverage, qualified beneficiary, qualifying event and group health plan shall have the meaningsgiven such terms under Section 4980B of the Code and Section 601 etseq. of ERISA.The Seller shall hold Parent and the Buyer and any entity required to be combined with Parent orthe Buyer under Section 414 of the Code (“Affected Parties”) harmless from and fullyindemnify (pursuant to Article VI hereof) such Affected Parties against any Losses (as defined inSection 6.1) incurred or suffered by such Affected Parties directly or indirectly, includingreasonable attorneys’ fees and expenses, which arise or result from the Seller’s breach of thisSection 4.3(a) or Parent or the Buyer being deemed to be a successor employer to the Seller.
          (b) The Seller shall be responsible for and shall cause to be discharged and satisfied in fullon or prior to Closing all amounts owed to any Division Employee or other employee of the Seller,including wages, salaries, any employment, incentive, compensation or bonus agreements or otherpayments relating to the period of employment by the Seller, or on
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account of the termination thereof, and the Seller shall indemnify Parent and the Buyer andhold Parent and the Buyer harmless (pursuant to Article VI hereof) from any Losses thereunder;provided, however, that Buyer shall provide credit under the Parent’s respective plan to theDivision Employees other than Jim Sherwood and Mike Saterbak (whose respective employmentagreements shall control with respect to sick leave) for their respective number of hours of sickleave set forth on Schedule 4.3(b) attached hereto; provided, further, that the partiesagree that Seller shall make payment of wages, salary or other compensation to the TransferredEmployees through July 1, 2005 (such payment to be made in the ordinary course on July 8, 2005 withBuyer promptly reimbursing Seller for such wages, salary and compensation applicable to the date ofJuly 1, 2005). Seller shall be responsible for and shall cause to be discharged as soon aspracticable after Closing any obligation for contributions owed to any Plans of Seller or any ERISAAffiliate of Seller with respect to the Division Employees relating to the period of employment bythe Seller, or on account of the termination thereof, and the Seller shall indemnify Parent and theBuyer and hold Parent and the Buyer harmless (pursuant to Article VI hereof) from any Lossesthereunder. Neither Parent nor Buyer shall assume any liability of Seller under any of the TrustFunds, as defined in Section 3.1.13, relating to the period of employment by Seller and suchliability shall remain the obligation of Seller, who shall indemnify Parent and the Buyer and holdParent and the Buyer harmless (pursuant to Article VI hereof) from any losses thereunder.
     **4.4****Consents****.**
          (a) Parent and the Seller acknowledge and agree that the requisite written Consents from theappropriate Governmental Authorities for the novation to Buyer of each of the prime GovernmentContracts listed on Schedule 4.4(a) shall be obtained after the Closing Date; provided,however, that with respect to Seller’s prime contract with the Army, Contract No. DAAB07-97-D3001,such contract shall not be novated but, rather, shall be subcontracted to Buyer. Effective uponthe Closing, the Seller and the Buyer have entered into Subcontract Agreement with respect to suchprime Government Contracts in the form attached hereto as Exhibit B (the“Subcontract”), pursuant to which, among other things, the practical benefits thereof shallbe vested in the Buyer prior to novation thereof.
          (b) Notwithstanding that it shall be solely the Seller’s obligation to obtain from thirdparties all Consents, assignments and/or estoppel certificates, including, without limitation, thewritten Consents for the novation to Buyer of the prime Government Contracts listed on Schedule4.4(a) and the Consents referred to in Section 6.8, (i) the Seller and Parent shall make goodfaith efforts, and cooperate with one another, to execute any required novation and secure allrequired Consents of Governmental Authorities, including the preparation and submission of allrequired filings, and all other Consents required in order to enable the Seller and the Buyer toeffect the transactions contemplated hereby in accordance with the terms and conditions hereof (ii)Seller shall, from and after the Closing Date, use commercially reasonable efforts to obtain fromthe applicable federal government contracting officer or agency a written consent to thesubcontracting of the Key Contract to Buyer contemplated in Section 4(a) hereof (notwithstandingthe fact that such consent is not required to be obtained by Seller pursuant to the terms of theKey Contract); and (iii) Parent shall take such reasonable actions as it deems necessary, includingwithout limitation making Jim Sherwood reasonably available to Seller in
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connection therewith, to support Seller’s obligation to obtain from third parties allConsents, assignments and/or estoppel certificates, including, without limitation, the writtenConsents for the novation to Buyer of the prime Government Contracts listed on Schedule4.4(a) and the Consents referred to in Section 6.8.
     **4.5****Employment of Certain Employees****.**
          (a) Parent shall make after Closing an offer of employment to each of the Division Employeeslisted on Schedule 4.5 (the “Transferred Employees”), including without limitationMyron (Mike) Saterbak and James Sherwood (the “Key Employees”). This Section 4.5 shall notprohibit Parent or the Buyer from modifying, increasing or decreasing wages and benefits providedto any Transferred Employee or to Transferred Employees in general after the Closing Date or fromterminating any Transferred Employee after the Closing Date; provided, however, all TransferredEmployees covered by the CBA shall be employed pursuant to the terms of the CBA. The Seller shalluse reasonable efforts to assist Parent and/or the Buyer in hiring each Transferred Employee. TheSeller shall not take any action, directly or indirectly, to prevent or discourage any suchTransferred Employee from being employed by Parent or the Buyer, as the case may be, as of theClosing Date and shall not solicit, invite or induce or entice any such Transferred Employee toremain in the employ of the Seller or otherwise attempt to retain the services of any suchTransferred Employee, except with the prior written consent of the Parent. Effective upon theClosing Date, the Seller hereby waives, for the benefit of Parent and the Buyer, any and allrestrictions in any oral or written agreement with any Transferred Employee who Parent or the Buyerhires, relating to (i) non-competition with the Seller subsequent to termination of employmenttherewith or (ii) the maintenance of confidentiality of any information for the benefit of theSeller, but only to the extent such information is related to the Assets, the Business or Parent’sor the Buyer’s unrestricted enjoyment of the benefits thereof.
          (b) Seller shall take such actions as are necessary to cause the accounts or benefits of theTransferred Employees under any Plan maintained by Seller which is qualified under Code Section401(a) to be 100% vested and, if the respective Transferred Employee requests, distributable withina reasonable period following the Closing Date and receipt of such request in accordance with theprovisions of the Plan. If requested by Parent, Seller shall take such actions as are necessary toallow such Transferred Employees upon their request to rollover any loan notes included as part ofsuch accounts or benefits, to the extent permitted under such a qualified Plan of Seller, to aqualified retirement plan of Parent. Further, Seller shall cause any outstanding stock optionsheld by the Transferred Employees to acquire common stock of Seller to be 100% vested as of theClosing Date and to remain exercisable for a period of no less than ninety (90) days after theClosing Date (but no longer than the maximum term of the respective option).
     **4.6****Waiver of Bulk Sales Compliance; Transfer and Sales Tax****.**Parent and Buyer waivecompliance by Seller with applicable Laws of any jurisdiction relating to bulk transfers inconnection with the transactions contemplated by this Agreement; provided, however, that the Sellershall indemnify and hold Parent and the Buyer harmless (pursuant to Article VI hereof) from andagainst any Losses (as defined in Section 6.1) incurred by Parent or the Buyer based onnon-compliance with such bulk transfer provisions. Notwithstanding anything to the contrary set
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forth herein, nothing herein shall estop or prevent Parent, the Buyer or the Seller fromasserting, as a bar or defense to any action or proceeding brought under such provisions, that suchcode or law is not applicable to the transactions contemplated by this Agreement. Buyer and Sellershall each pay one-half of any sales, use, transfer and similar Taxes, if any, required to be paidin connection with the transactions contemplated by this Agreement.
     **4.7.****Notification of Certain Matters****.**The Seller shall give prompt notice to Parentof any material failure of the Seller to comply with or satisfy any covenant, condition oragreement to be complied with or satisfied by the Seller hereunder. Parent shall give promptnotice to the Seller of any material failure of Parent or the Buyer to comply with or satisfy anycovenant, condition or agreement to be complied with or satisfied by Parent or the Buyer hereunder.The delivery of any notice pursuant to this Section 4.7 shall not, without the express writtenconsent of the receiving party, be deemed to limit or otherwise affect the remedies availablehereunder to any party hereto.
     **4.8****Corporate Existence****.**The Seller shall not dissolve or liquidate and shallmaintain its corporate existence until the termination of the Seller’s indemnification obligationspursuant to Article VI.
     **4.9****Actions After the Closing****.**In case at any time after the Closing any furtheraction is necessary to carry out the purposes of this Agreement, each of the parties will take suchfurther action (including the execution and delivery of such further instruments and documents andany actions required of the Seller under Section 5.2) as another party reasonably may request, allthe sole cost and expense of the requesting party (unless the requesting party is entitled toindemnification therefor under Article VI). The Seller acknowledges and agrees that from and afterthe Closing Parent and the Buyer will be entitled to possession of all databases, documents, books,records (including Tax records), agreements, and financial data of any sort relating to theBusiness. The Seller shall promptly transfer and deliver to Parent any cash or property that theSeller may receive in respect of the Assets after the Closing. Parent shall promptly transfer anddeliver to the Seller any cash or property that Parent or the Buyer may receive in respect of theExcluded Assets after the Closing.
     **4.10****WARN Act****.**No party will take any action that will trigger liability orresponsibility for any of the parties pursuant to the federal Worker Adjustment and RetrainingNotification Act (“WARN Act”) or any analogous state or local version of the WARN Act.
     **4.11****Allocation of Purchase Price****.**The Purchase Price for the Assets shall beallocated among the Assets in accordance with Schedule 4.11 attached hereto (the“Allocation Schedule”). The parties shall (a) prepare and, where applicable, file eachreport relating to the federal, state, local, foreign and other Tax consequences of the purchaseand sale contemplated hereby (including the filing of IRS Form 8594) in a manner consistent withsuch Allocation Schedule and (ii) take no position in any Tax Return or other Tax filing,proceeding, audit or otherwise which is inconsistent with such Allocation Schedule.
     **4.12 [intentionally omitted]**
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     **4.13****Public Disclosure****.**Parent and the Seller shall consult with each other and usereasonable efforts to agree upon the text of any press release or public statement before issuingany press release or otherwise making any public statements with respect to the transactionscontemplated hereunder and shall not issue any such press release or make any such public statementprior to such consultation, except as may be required by applicable Laws or any listing agreementwith, or the rules of, the American Stock Exchange.
     **4.14****Transition Services Agreement****.**Simultaneously with the execution and delivery byall parties of the novation of the Key Contract (as defined in Section 6.7(a)) to Buyer, Seller andBuyer shall execute and deliver the Transition Services Agreement in the form attached hereto asExhibit C (the “Services Agreement”), pursuant to Buyer will subcontract to Sellercertain services included within such Key Contract, all as more particularly set forth therein.
     **4.15****Updating Seller Disclosure Schedules****.**
          (a) From and after the Closing Date until the earlier of the date that the last of theGovernment Contracts to be novated pursuant to FAR Subpart 42.12 and listed on Schedule4.4(a), including, without limitation, the Key Contract (the “Prime Contracts”), is novatedpursuant to the terms of this Agreement (the “Novation Date”) and the thirty (30) month anniversaryof the Closing Date (such period shall be referred to herein as the “Update Period”), Seller shallhave the continuing obligation to supplement or amend promptly the Seller Disclosure Schedulesdelivered at Closing concurrently with the execution and delivery of this Agreement (the “UpdatedSchedules”) with respect to any matter solely relating to any of the Prime Contracts (the “UpdatePeriod Matters”) arising or discovered during the Update Period which, if existing or known toSeller on the Closing Date, would have been required to have been set forth or described in theSeller Disclosure Schedules delivered at Closing with respect to any of the representations andwarranties contained in Section 3.1 that pertain to the Prime Contracts; provided, however, thatany matters arising during the Update Period that are due to an act, omission or fault of Buyer orParent during such Update Period shall not be deemed to be Update Period Matters. Seller shall bedeemed to have breached (an “Update Representations Breach”) any representations and warrantiescontained in Section 3.1 for which the Update Period Matters would have been responsive (the“Update Representations”) if existing or known to Seller on the Closing Date. The UpdateRepresentations shall survive the Closing until the earlier of (i) the six month anniversary of theNovation Date and (ii) the thirty (30) month anniversary of the Closing Date; provided, however,that the survival period contemplated under this Section 4.15(a) with respect to the UpdateRepresentations shall in no way diminish or limit the survival period contemplated by Section 6.6of this Agreement.
          (b) Buyer shall have indemnification rights contemplated by Section 6.1(a) (but subject to anyand all limitations applicable to Section 6.1(a) except as the survival period applicable to theUpdate Representations may be extended by Section 4.15(a) of this Agreement) with respect to Lossesincurred by Buyer as a result of any Update Representations Breach.
     **4.16****Agreement with Seneca Creek Consulting, LLC**. On or before the three monthanniversary of the Closing Date, upon Buyer’s or Parent’s written request to Seller, Seller shall
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promptly assign to Buyer all rights under that certain Agreement (the “Seneca Agreement”)dated March 16, 2005 between Seller and Seneca Creek Consulting, LLC (“Seneca”) and Buyer shallassume all obligations under such Seneca Agreement, including without limitation, any fees payableto Seneca thereunder, in each case at no additional cost to Buyer (the “Assignment andAssumption”). Each of Seller and Buyer shall execute such instruments as may reasonably berequired in order to accomplish such Assignment and Assumption. Neither Buyer nor Parent shallperform work with Volt Telecom in connection with the U.S. Army’s DSSMP Task Order Contract untilsuch time as the Assignment and Assumption occurs pursuant to the terms hereof.
**ARTICLE V**
**CLOSING OBLIGATIONS**
     **5.1****The Seller’s Obligations at Closing****.**At the Closing, the Seller (and such otherparties as shall be necessary or appropriate) shall execute and/or deliver, or cause to be executedand/or delivered, to Parent:
          (a) the Bill of Sale/Assignment and Assumption Agreement in the form attached hereto asExhibit D (the “Bill of Sale”) and such other assignments, instruments anddocuments as Parent shall reasonably request for the purpose of perfecting the title of the Buyerin the Assets;
          (b) copies of (i) all Consents of Governmental Authorities required to be obtained by theSeller in connection with the execution and delivery of this Agreement and the consummation of thetransactions contemplated hereby, and (ii) all other Consents (including, without limitation, allConsents required under the Contracts) required to be obtained in order to consummate the sale andtransfer of the Assets pursuant to this Agreement and the consummation of the other transactionscontemplated hereby (other than those Consents to be given or obtained after Closing pursuant toSection 4.4);
          (c) physical possession of the Assets;
          (d) copies of the resolutions of the Seller’s Board of Directors approving this Agreement andthe transactions contemplated herein, certified by the appropriate corporate officers of theSeller;
          (e) The Subcontract;
          (f) The Employment Agreements with each of the Key Employees in the form attached hereto asExhibit E-1 and Exhibit E-2 (the “Employment Agreements”);
          (g) the legal opinions of Ernest L. Ruffner, Esq. and Blank Rome, LLP, in each case dated theClosing Date, in the forms attached hereto as Exhibit F-1 and Exhibit F-2; and
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          (h) such other documents and instruments as Parent shall have reasonably requested.
     **5.2.****The Seller’s Further Assurances****.**From time to time after Closing, at Parent’srequest and expense, the Seller shall:
          (a) execute and deliver to Parent such instruments, and take such other and further action, asmay reasonably be required to carry out the intent and purpose of this Agreement; and
          (b) deliver to Parent and/or the Buyer such other data, papers and information as may bereasonably requested by Parent to assist Parent and/or the Buyer in the use of the Assets.
          If and to the extent that any asset, property or right of any Seller does not constitute an“Asset” as defined herein but is necessary to enable the Buyer to continue the Business as it isbeing conducted by the Seller prior to the Closing Date, the Seller, to the extent legallypermissible, shall grant to the Buyer a license or other appropriate right of usage with respect tosuch asset, property or right, at no additional cost or expense to the Buyer, as shall be necessaryto enable the Buyer to continue such business in the same manner as conducted by the Seller priorto the Closing Date. Nothing in this Section 5.2 shall relieve the Seller from any liability underthis Agreement for any breach of a representation or warranty hereunder.
     **5.3.****Parent’s Obligations at Closing****.**At Closing, Parent shall:
          (a) pay the Cash Payment to the Seller in accordance with Section 2.2; and
          (b) deliver the Escrow Amount to the Escrow Agent in accordance with Section 2.3; and
          (c) copies of the resolutions of Parent’s Board of Directors and Buyer’s Sole Member and SoleManager approving this Agreement and the transactions contemplated herein, certified by anappropriate officer of Parent and the Sole Member and Sole Manager of Buyer.
**ARTICLE VI**
**INDEMNIFICATION**
     **6.1****By the Seller****.**The Seller covenants and agrees to defend, indemnify and holdharmless Parent and the Buyer and their respective directors, officers, employees, assigns,successors and Affiliates from and against, and pay or reimburse such Persons for, any and allclaims, liabilities, obligations, losses, fines, costs (including increased costs), royalties,proceedings, deficiencies or damages, including out-of-pocket expenses and reasonable attorneys’and accountants’ fees incurred in the investigation or defense of any of the same or in assertingany of its rights hereunder (collectively, “Losses”), resulting from or arising out of:
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          (a) any inaccuracy of any representation or warranty made by the Seller under this Agreement;
          (b) any failure of the Seller to perform any covenant or agreement contained in thisAgreement;
          (c) the indemnification obligations of the Seller under Sections 4.3 or 4.6 hereof;
          (d) any Excluded Assets or Excluded Liabilities;
          (e) the operation of the Business and the Assets on or prior to the Closing Date (or, withrespect to Seller’s performance of a prime Government Contract listed on Schedule 4.4(a),provided that Buyer has complied with its obligations under the Subcontract and under applicableLaws, on or prior to the date such prime Government Contract is novated to Buyer pursuant to suchSection 4.4(a)), except with respect to the Assumed Liabilities;
          (f) the failure by Seller to assign to Buyer the CBA and vest fully in Buyer the economicbenefit currently enjoyed by Seller thereunder (including the imposition on Buyer of obligations nomore burdensome than those applicable to Seller thereunder), or the termination of DOS ClassifiedDocument Management Contract No. LMAQM-02-C-0049 (whether in the name of Seller or Parent or Buyeror an Affiliate of Parent or Buyer) resulting from or arising out of any such failure by Seller;and
          (g) the failure by Seller to assign to Buyer the Seller’s lease relating to the Leased RealProperty described at Schedule 3.1.15(a) (including the consent of the landlord thereunderto such assignment) and vest fully in Buyer the economic benefit currently enjoyed by Sellerthereunder (including the imposition on Buyer of obligations no more burdensome than thoseapplicable to Seller thereunder).
     **6.2****By Parent****.**Parent covenants and agrees to defend, indemnify and hold harmless theSeller and its directors, officers, employees, assigns, successors and Affiliates from and against,and pay or reimburse such Persons for, any and all Losses resulting from or arising out of:
          (a) any inaccuracy of any representation or warranty made by Parent or Buyer under thisAgreement;
          (b) any failure of Parent or the Buyer to perform any covenant or agreement contained in thisAgreement;
          (c) any Assumed Liabilities; or
          (d) the operation of the Business and the Assets after the Closing Date (or, with respect toSeller’s performance of a prime Government Contract listed on Schedule 4.4(a), providedthat Buyer has complied with its obligations under the Subcontract and under
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applicable Laws, after the date such prime Government Contract is novated to Buyer pursuant tosuch Section 4.4(a)).
     **6.3****Additional Provisions****.**
          (a) The maximum aggregate amount of indemnifiable Losses arising out of or resulting from thecauses enumerated in Sections 6.1(a) or 6.2(a) that may be recovered from the Seller or Parent asthe case may be shall not exceed Three Million One Hundred Thirty-Two Thousand and Two HundredFifty Dollars ($3,132,250) (the “Maximum Indemnity”); provided, however, that thelimitations set forth in this Section 6.3(a) shall not apply to indemnification claims arising fromany inaccuracy in or breach (or any claim by any third party alleging or constituting an inaccuracyor breach) of any representation or warranty contained in Sections 3.1.2, 3.1.7, 3.1.10 or 3.2.2.
          (b) No obligation of the Seller or Parent, as the case may be (each, an “IndemnifyingParty”), with respect to any indemnifiable Loss otherwise payable by such Indemnifying Partyunder Section 6.1(a) or 6.2(a), as the case may be, shall be payable until such time as allindemnifiable Losses payable by such Indemnifying Party shall exceed $125,000, at which time suchIndemnifying Party shall be liable in full for all Losses it is required to indemnify in excess of$62,500, subject to Section 6.3(a); provided, however, that the limitations set forth in thisSection 6.3(b) shall not apply to indemnification claims arising from any inaccuracy in or breach(or any claim by any third party alleging or constituting an inaccuracy or breach) of anyrepresentation or warranty contained in Sections 3.1.2, 3.1.7, 3.1.21 or 3.2.2.
          (c) To the extent that any Indemnifying Party discharges any claim for indemnificationhereunder, such Indemnifying Party shall be subrogated to all rights of the Indemnified Party (asdefined in Section 6.4) against third parties.
          (d) Notwithstanding anything contained in this Agreement to the contrary, no Indemnified Partyhereunder shall be entitled to Losses in the nature of incidental or consequential damages.Further, the provisions of this Article VI and Article VII shall be the sole and exclusive recourseof the Indemnified Parties for any Losses either Seller, on the one hand, or Buyer and Parent, onthe other hand, may incur arising from or relating to this Agreement except (i) with respect to anyequitable remedy to which any such party may be entitled (including without limitation as providedin Section 4.2) and (ii) with respect to claims based on fraud or intentional misrepresentation.
          (e) Each Indemnified Party (as defined in Section 6.4) shall use commercially reasonableefforts to pursue all available insurance recoveries in connection with any indemnification claimhereunder.
     **6.4****Indemnification Procedures****.**In the case of any claim asserted by a third partyagainst a party entitled to indemnification under this Agreement (the “Indemnified Party”),notice shall be given by the Indemnified Party to the Indemnifying Party promptly after suchIndemnified Party has actual knowledge of any claim as to which indemnity may be sought, and
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the Indemnified Party shall permit the Indemnifying Party (at the expense of the IndemnifyingParty) to assume the defense of any claim or any litigation resulting therefrom; providedthat (a) the counsel for the Indemnifying Party who shall conduct the defense of such claim orlitigation shall be reasonably satisfactory to the Indemnified Party, (b) the Indemnified Party mayparticipate (but not control) in such defense at such Indemnified Party’s expense, and (c) theomission by any Indemnified Party to give notice as provided herein shall not relieve theIndemnifying Party of its indemnification obligation under this Agreement except to the extent thatsuch omission results in a failure of actual notice to such Indemnifying Party and suchIndemnifying Party incurs Losses as a result of such failure to give notice. Except with the priorwritten consent of the Indemnified Party, no Indemnifying Party, in the defense of any such claimor litigation, shall consent to entry of any judgment or enter into any settlement that providesfor injunctive or other nonmonetary relief affecting the Indemnified Party. The Indemnified Partyshall not settle or compromise any claim by a third party for which the Indemnified Party isentitled to indemnification hereunder without the prior written consent of the Indemnifying Party;provided, that in the event that an Indemnifying Party does not accept the defense of any matter asabove provided, the Indemnified Party shall have the full right to defend against any such claim ordemand and shall be entitled to settle or agree to pay in full such claim or demand. In any event,the Indemnifying Party and the Indemnified Party shall cooperate in the defense of any claim orlitigation subject to this Article VI and the records of each shall be available to the other withrespect to such defense. Any Indemnifying Party’s assumption of the defense of any claim or legalproceeding shall not prejudice the right of such Indemnifying Party thereafter to contest itsobligation to indemnify the Indemnified Party in respect to the claims asserted therein.
     **6.5****Indemnification Escrow Fund****.**Subject to the terms and conditions of the EscrowAgreement, the Indemnification Escrow Fund shall be available to any party entitled toindemnification pursuant to Section 6.1 (a “Parent Indemnified Party”) to satisfy anyindemnification obligations of the Seller under this Agreement. The rights of any ParentIndemnified Party with respect to the Indemnification Escrow Fund under this Agreement and theEscrow Agreement shall be in addition to and not in limitation of any other rights and remedies towhich such Parent Indemnified Party is or may be entitled under this Agreement or any of theAncillary Agreements, or at law or in equity, including injunctive relief.
     **6.6****Survival of Representations and Warranties, etc****.**Notwithstanding any right ofParent or the Seller (whether or not exercised) to investigate the affairs of the Seller or Parent,as the case may be, each party shall have the right to rely fully upon the representations,warranties, covenants and agreements of the other party contained in this Agreement or in anyinstrument delivered pursuant to this Agreement. Except for the representations and warranties setforth in Sections 3.1.2, 3.1.7, 3.1.10, 3.1.14 and 3.2.2, which shall survive the Closing andcontinue until the applicable statute of limitations has expired, and except as survival periodsapplicable to Update Representations may be extended (but not limited) pursuant to Section 4.15(a)of this Agreement, all of the representations and warranties contained in this Agreement or in anyinstrument delivered pursuant to this Agreement shall survive the Closing and continue until theeighteen (18) month anniversary of the Closing Date. No Action or Proceeding may be instituted toenforce, or seek damages or other remedies with respect to the breach of any representation orwarranty after the expiration of the period of survival for such representation or warranty as
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described above; provided, however, that any representation or warranty the inaccuracy ofwhich is made the basis of a claim for indemnification pursuant to Section 6.1(a) or Section 6.2(a)will survive until such claim is finally resolved if the Indemnified Party notifies theIndemnifying Party of such claim in reasonable detail prior to the date on which suchrepresentation or warranty and the respective indemnification obligation would otherwise expireunder this Agreement. Subject to Article VII, the covenants and agreements set forth in thisAgreement shall survive the Closing; provided, however, that in connection with a breach of saidcovenants and agreements, the non-breaching party shall only be permitted to make a claim againstthe breaching party prior to the expiration of applicable statutes of limitation.
     **6.7****Novation Failure Payment****.**
          (a) Upon the first to occur of (i) an affirmative rejection by the appropriate contractingofficer of a novation to the Buyer of that certain TAO Delivery Order issued under the Seller’s ITSchedule 70 FSS Contract and its BPA (No. W904TE-04-A-2648) with the United States Army(collectively, the “Key Contract”), or (ii) a failure of the Key Contract to be novated toBuyer on or prior to the second anniversary of the Closing (either, a “Novation Failure”),in each case not the result of any act, omission or fault of Buyer or Parent occurring afterClosing, then not later than five (5) Business Days after the occurrence of such Novation Failurethe Seller shall pay to Parent by wire transfer of immediately available funds Two Million Dollars($2,000,000) (the “Novation Failure Amount”); provided, that such payment shall first besatisfied by disbursement to Parent from the Escrow Fund and in accordance with the EscrowAgreement. In view of the difficulty of estimating the damages to Parent and the Buyer upon aNovation Failure, the Novation Failure Amount is agreed upon by the parties as the liquidateddamages that Parent and the Buyer will suffer as a result of the Novation Failure and not by way ofpenalty. The Novation Failure Amount shall be the sole recourse of Parent and the Buyer for aNovation Failure; provided, that in no event shall payment of the Novation Failure Amount pursuantto this Section 6.7 limit or restrict Parent’s and the Buyer’s available remedies under thisAgreement or any of the Ancillary Agreements, or at law or in equity, for any claim not resultingfrom or arising out of a Novation Failure. In addition, in no event shall payment of the NovationFailure Amount be applied to or counted against the Maximum Indemnity; provided, further that theforegoing proviso shall not diminish in any way the agreement among the parties that the solerecovery by Buyer and Parent for a Novation Failure shall be the Novation Failure Amount.
          (b) The rights of Parent with respect to the Escrow Amount under this Agreement and the EscrowAgreement shall be in addition to and not in limitation of any other rights and remedies to whichParent is or may be entitled under this Agreement, or at law or in equity, including injunctiverelief, to enforce payment of the full Novation Failure Amount.
     **6.8****Assignment Failure Payment****.**
          (a) If, for whatever reason other than any act, omission or fault of Buyer or Parent occurringafter Closing, Seller shall have failed to obtain and deliver to Parent or Buyer, on or prior tothe second anniversary of the Closing, Consents (or novations, as the case may be) from all of theGovernment Entities and/or Persons other than Governmental Entities listed on
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Schedule 6.8 to Buyer itself (in its name as such or as “a wholly-owned subsidiary” ofParent or pursuant to similar language) as an approved subcontractor on the correspondingSubcontract or Seller subcontract listed on Schedule 6.8 (such failure to obtain all suchConsents, an “Assignment Failure”), then not later than five (5) Business Days after theoccurrence of such Assignment Failure the Seller shall be obligated to pay to Parent that aggregatepercentage (up to 100%) of One Million Dollars ($1,000,000) that corresponds to those Consentslisted on Schedule 6.8 that have not been obtained and delivered to Parent or Buyeron or prior to the second anniversary of the Closing (such amount, the “Assignment FailureAmount”); provided, that such payment shall be satisfied by disbursement to Parent from theAssignment Failure Escrow Fund and in accordance with the Escrow Agreement; and provided, further,that Parent and Buyer may, in their sole and absolute discretion, elect to accept a Consent listedon Schedule 6.8 that does not expressly recognize Buyer itself (in its name as such or as“a wholly-owned subsidiary” of Parent or pursuant to similar language) as an approved subcontractoron the corresponding Subcontract or Seller subcontract listed on Schedule 6.8, and inconnection therewith forego the right to receive that portion of the Assignment Failure Escrow Fundthat corresponds to such Consent. Additionally, notwithstanding the foregoing timing provisions,upon receipt by any party of an affirmative rejection of Buyer itself (in its name as such or as “awholly-owned subsidiary” of Parent or pursuant to similar language) as an approved subcontractor onthe corresponding Subcontract or Seller subcontract listed on Schedule 6.8 (and withrespect to DOS Classified Document Management Contract No. LMAQM-02-C-0049, affirmative rejectionof novation as well), Parent shall be entitled to receive, not later than five (5) Business Daysafter such receipt, that aggregate percentage (up to 100%) of One Million Dollars ($1,000,000) thatcorresponds to such Subcontract or Seller subcontract listed on Schedule 6.8 related tosuch rejection; provided, that such payment shall be satisfied by disbursement to Parent from theAssignment Failure Escrow Fund and in accordance with the Escrow Agreement. (Any such affirmativerejection as described in the foregoing sentence shall also be considered an “Assignment Failure”and any such amount to which Parent shall be entitled as described in the foregoing sentence shallalso be considered an “Assignment Failure Amount.”) In view of the difficulty of estimating thedamages to Parent and the Buyer upon an Assignment Failure, the Assignment Failure Amount is agreedupon by the parties as the liquidated damages that Parent and the Buyer will suffer as a result ofthe Assignment Failure and not by way of penalty. The Assignment Failure Amount shall be the solerecourse of Parent and the Buyer for an Assignment Failure; provided, that in no event shallpayment of the Assignment Failure Amount pursuant to this Section 6.8 limit or restrict Parent’sand the Buyer’s available remedies under this Agreement or any of the Ancillary Agreements, or atlaw or in equity, for any claim not resulting from or arising out of an Assignment Failure. Inaddition, in no event shall payment of the Assignment Failure Amount be applied to or countedagainst the Maximum Indemnity; provided, further that the foregoing proviso shall not diminish inany way the agreement among the parties that the sole recovery by Buyer and Parent for anAssignment Failure shall be the Assignment Failure Amount.
          (b) The rights of Parent with respect to the Escrow Amount under this Agreement and the EscrowAgreement shall be in addition to and not in limitation of any other rights and remedies to whichParent is or may be entitled under this Agreement, or at law or in equity, including injunctiverelief, to enforce payment of the full Assignment Failure Amount.
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**ARTICLE VII**
**RESCISSION**
     **7.1****Rescission****.**
          (a) Parent and Buyer shall have the right to fully rescind this Agreement and the transactionscontemplated hereby (in lieu of receiving payment of the Novation Failure Amount) in the event thaton or prior to the six month anniversary of the Closing Date (i) Seller or Buyer receives writtennotice from the applicable government customer of an affirmative rejection of the novation of theKey Contract (not the result of actions, omissions or the fault of Buyer or Parent occurring afterClosing) and (ii) the applicable government customer takes affirmative action such that Seller isunable to provide Buyer with the economic benefit of the Key Contract by subcontract or otherwise(such date of rescission contemplated by this sentence shall be referred to herein as the“Rescission Date”). For the avoidance of doubt, after the six month anniversary of Closing, thesole and exclusive remedy of Buyer for a failure to novate the Key Contract (whether or notinvolving an affirmative rejection of the same but not the result of any act, omission or fault ofBuyer or Parent occurring after Closing) is the payment of the Novation Failure Amount pursuant tothe provisions contained in Section 6.7 hereof. The rescission right contemplated by this Section7.1(a) may be exercised by Parent and Buyer by delivering written notice to the Seller on or withinten (10) Business Days after the Rescission Date. The rescission under this Section 7.1(a) shallinclude, without limitation, all assignments, licenses, assumptions of liabilities and repayment toParent of the entire Purchase Price paid to the Seller and/or the disbursement to Parent of anyEscrow Amount held by the Escrow Agent. Each party to this Agreement will execute such instrumentsas necessary to effect the provisions of this Section 7.1(a).
          (b) Parent and Buyer shall also have the right, in addition to the right described insubsection (a) above, to fully rescind this Agreement and the transactions contemplated hereby inthe event that, on or prior to the date for commencement of performance for option year 4 ofSeller’s Contract No. S03HAL01 (as listed on Schedule 3.1.19(a)(i)) (the “NJVCSubcontract”), all of the following shall have transpired: (i) Seller shall have failed toobtain and deliver to Parent or Buyer (not the result of actions, omissions or the fault of Buyeror Parent occurring after Closing) a Consent from the National Geospatial-Intelligence Agency(formerly the National Imagery and Mapping Agency) to Buyer as the approved subcontractor under theNJVC Subcontract, (ii) Seller shall have failed to obtain and deliver to Parent or Buyer anaffirmative written acknowledgement from the National Geospatial-Intelligence Agency that noConsent from the National Geospatial-Intelligence Agency to Buyer (or to any other Person) assubcontractor is necessary in connection with the prime government contract underlying the NJVCSubcontract and (iii) Buyer shall not have received funding recognizing Buyer itself (in its nameas such or as “a wholly-owned subsidiary” of Parent or pursuant to similar language) as thesubcontractor in connection with any task order or special project, including option year 4, ineach case on the NJVC Subcontract; provided, however, that with respect to the foregoing clause(iii), a task order or special project prior to option year 4 shall be part of additional such taskorders or special projects also in the name of Buyer itself (in its name as such or as “awholly-owned subsidiary” of Parent or pursuant to similar language) as the subcontractor such thatit is
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reasonably apparent that no Person other than Buyer itself (in its name as such or as “awholly-owned subsidiary” of Parent or pursuant to similar language) has also been recognized as asubcontractor on the NJVC Subcontract or in connection with the prime government contractunderlying the NJVC Subcontract. The rescission right contemplated by this Section 7.1(b) may beexercised by Parent and Buyer by delivering written notice to the Seller on or within ten (10)Business Days after the Rescission Date. The rescission under this Section 7.1(b) shall include,without limitation, all assignments, licenses, assumptions of liabilities and repayment to Parentof the entire Purchase Price paid to the Seller and/or the disbursement to Parent of any EscrowAmount held by the Escrow Agent. Each party to this Agreement will execute such instruments asnecessary to effect the provisions of this Section 7.1(b).
     **7.2****Effect of Rescission****.**In the event of the rescission of this Agreement pursuantto Section 7.1(a) or (b), this Agreement shall forthwith become void, and there shall be noliability or obligation on the part of any party hereto or its officers, directors or stockholders.Notwithstanding the foregoing sentence, (a) the provisions of Article VI (but only with respect toclaims unrelated to a Novation Failure), Section 7.1, this Section 7.2, Section 8.1, Section 8.2and Section 8.6.4 shall remain in full force and effect and survive any termination of thisAgreement; and (b) each party shall remain liable for any breach of this Agreement prior to itstermination.
**ARTICLE VIII**
**DEFINITIONS, MISCELLANEOUS**
     **8.1****Definition of Certain Terms****.**The terms defined in this Section 8.1, whenever usedin this Agreement (including in the Schedules), shall have the respective meanings indicated belowfor all purposes of this Agreement. All references herein to a Section, Article or Schedule are toa Section, Article or Schedule of or to this Agreement, unless otherwise indicated.
          Actions or Proceedings: means any action, suit, complaint, petition, investigation,proceeding, arbitration, litigation or Governmental Authority investigation, audit or otherproceeding, whether civil or criminal, in law or in equity, or before any arbitrator orGovernmental Authority.
          Affected Parties: as defined in Section 4.3(a).
          Affiliate: of a Person means a Person that directly or indirectly through one or moreintermediaries, controls, is controlled by, or is under common control with, the first Person.“Control” (including the terms “controlled by” and “under common control with”) means thepossession, directly or indirectly, of the power to direct or cause the direction of the managementpolicies of a Person.
          Agreement: this Asset Purchase Agreement, including the Exhibits and Schedules hereto.
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          Ancillary Agreements: means the Escrow Agreement, the Subcontract, the Bill of Sale,the Services Agreement and the Employment Agreements.
          Auditor: as defined in Section 2.4(c).
          Assets: as defined in Section 1.1.
          Assignment and Assumption: as defined in Section 4.16.
          Assignment Failure: as defined in Section 6.8.
          Assignment Failure Amount: as defined in Section 6.8.
          Assignment Failure Escrow Amount: as defined in Section 2.3.
          Assignment Failure Escrow Fund: as defined in Section 2.3.
          Assumed Liabilities: as defined in Section 1.3.
          Bill of Sale: as defined in Section 5.1(a).
          Business: as defined in the preambles.
          Business Day: shall mean a day other than a Saturday, Sunday or other day on whichcommercial banks in Washington, D.C. are authorized or required to close.
          Business Financials: as defined in Section 3.1.6.
          Buyer: as defined in the first paragraph of this Agreement.
          Cash Payment: as defined in Section 2.2.
          Closing: as defined in Section 2.1.
          Closing Date: as defined in Section 2.1.
          Closing Date Balance Sheet: as defined in Section 2.4(a).
          Closing Date Net Assets: as defined in Section 2.4(a).
          Code: the Internal Revenue Code of 1986, as amended, and the rules and regulationspromulgated thereunder.
          Consent: any consent, approval, authorization, waiver, permit, concession, agreement,registration, or certificate of, or filing with or report or notice to, any authorizedrepresentative of a Person, including but not limited to any Governmental Authority.
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          Contract: any note, bond, mortgage, contract, prime contract, subcontract, license,lease, sublease, covenant, commitment, power of attorney, proxy, indenture, engagement letter oragreement, contract extension, rebid, existing proposal, bid, purchase order and other commitmentsor other agreement or arrangement, oral or written, directly or indirectly relating to theBusiness, to which the Seller is a party or by which the Seller or any of the Assets is bound,including any Government Contract.
          Direct Costs: as defined in FAR Section 2.101.
          Equipment: (i) all furniture, fixtures, vehicles, furnishings, molds, toolings, parts,tools, dials, jigs, patterns, office equipment, machine tools and other items of equipment owned orleased by the Seller that are used presently or are used on the Closing Date by the Seller solelyin the conduct of the Business, including without limitation those items listed on Schedule1.1(c); (ii) all computers, computer support equipment and software, telephone andcommunication systems and security systems owned or leased by the Seller that are presently used orused on the Closing Date by the Seller solely in the conduct of the Business, including withoutlimitation those items listed on Schedule 1.1(c); (iii) all other furniture, supplies,maintenance equipment and other incidental tangible personal property owned or leased by the Sellerthat are presently used or are used on the Closing Date by the Seller solely in the conduct of theBusiness; and (iv) all other items of tangible personal property owned or leased by the Seller thatare presently used or used on the Closing Date by the Seller solely in the conduct of the Business.
          ERISA: the Employee Retirement Income Security Act of 1974, as amended.
          ERISA Affiliate: each trade or business (whether or not incorporated) which, togetherwith the Seller, would be treated as a “single employer” within the meaning of Code sections414(b), (c), (m), (n) or (o).
          Escrow Agreement: as defined in Section 2.3.
          Escrow Agent: Branch Banking and Trust Company.
          Escrow Amount: as defined in Section 2.2.
          Estimated Closing Date Net Assets: as defined in Section 2.4(a).
          Excluded Assets: as defined in Section 1.2.
          Excluded Liabilities: as defined in Section 1.4.
          GAAP: generally applied accounting principles in the United States of America.
          Government: the government of the United States of America, its agencies andinstrumentalities; the government of any state of the United States of America, its agencies andinstrumentalities; and any local government located within the United States of America, itsagencies and instrumentalities.
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          Government Bid: any proposal or offer, solicited or unsolicited made by the Businessof Seller prior to the Closing Date which, if accepted, would result in a Government Contract. AGovernment Bid: (i) includes any proposal or offer made by the Business of Seller that has beenaccepted by the Business of Seller but has not resulted in a Government Contract prior to theClosing Date; and (ii) does not include any proposal or offer made by the Business ofSeller that has been accepted and has resulted in a Government Contract prior to the ClosingDate.
          Government Contract: any Contract of the Business that is currently active inperformance or that has otherwise not been closed out and released with no further liability to theBusiness of Seller, or that had been active in performance at any time in the five (5) year periodprior to the Closing Date, between the Business of Seller, on the one hand, and (i) anyGovernmental Authority, (ii) any prime contractor of a Governmental Authority in its capacity as aprime contractor, or (iii) any subcontractor at any tier with respect to any contract of a typedescribed in clauses (i) or (ii) above, on the other hand. A task, purchase or delivery orderunder a Government Contract shall not constitute a separate Government Contract, for purposes ofthis definition, but shall be part of the Government Contract to which it relates.
          Governmental Authority: any nation or government or any state, any entity exercisingexecutive, legislative, judicial, regulatory or administrative functions of or pertaining togovernment, including, without limitation, any government authority, agency, department, board,commission or instrumentality of the United States or any State of the United States.
          Income Tax: means (a) any income, alternative or add-on minimum tax, gross income,gross receipts, franchise, profits, including estimated taxes relating to any of the foregoing, orother similar tax or other like assessment or charge of similar kind whatsoever, excluding anyOther Tax, together with any interest and any penalty, addition to tax or additional amount imposedby any Governmental Authority responsible for the imposition of any such Tax (domestic or foreign);or (b) any Liability of a Person for the payment of any taxes, interest, penalty, addition to taxor like additional amount resulting from the application of Treas. Reg. Section 1.1502-6 orcomparable provisions of any Governmental Authority in respect of a Tax Return of a relevant groupor any Contract.
          Indemnified Party: as defined in Section 6.4.
          Indemnification Escrow Amount: as defined in Section 2.3.
          Indemnification Escrow Fund: as defined in Section 2.3.
          Indirect Costs: as defined in FAR Section 2.101.
          Intellectual Property: means all trademarks and trademark rights, trade names andtrade name rights, service marks and service mark rights, service names and service name rights,patents and patent rights, utility models and utility model rights, copyrights, mask work rights,brand names, trade dress, product designs, product packaging, business and product names, logos,slogans, rights of publicity, trade secrets, inventions (whether patentable or not), invention
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disclosures, improvements, processes, formulae, industrial models, processes, designs,specifications, technology, methodologies, computer software (including all source code and objectcode), firmware, development tools, flow charts, annotations, Web addresses, sites and domainnames, data bases and data collections and all rights therein, other proprietary rights andinformation (whether or not subject to statutory registration), and all related technicalinformation, manufacturing, engineering and technical drawings, know-how and all pendingapplications for and registrations of patents, utility models, trademarks, service marks andcopyrights, and the right to sue for past infringement, if any, in connection with any of theforegoing, and all documents, disks, records, files and other media on which any of the foregoingis stored.
          IRS: the United States Internal Revenue Service or any successor entity.
          Key Employees: as defined in Section 4.5.
          Law: all provisions of all (i) constitutions, statutes, laws (including the commonlaw), rules, regulations, ordinances, codes or orders of any Governmental Authority, and (ii)orders, decisions, injunctions, judgments, and decrees of any Governmental Authority.
          Leased Real Property: as defined in Section 3.1.15.
          Lease Documents: as defined in Section 3.1.15
          Liability or Liabilities: means all indebtedness, obligations and otherliabilities of a Person, whether absolute, accrued, contingent (or based upon any contingency),known or unknown, fixed or otherwise, or whether due or to become due.
          Lien: any mortgage, pledge, floating charge, hypothecation, right of others, claim,security interest, encumbrance, easement, covenant, encroachment, burden, title defect, lien orright of first refusal.
          Losses: as defined in Section 6.1.
          Material Adverse Effect: any event, occurrence, fact, condition, change or effect thatis materially adverse to the business, operations, results of operations, financial condition,properties, assets or liabilities of the Business when taken as a whole; provided, however, thatthe following, in and of themselves, are not and shall not contribute to or result in a MaterialAdverse Effect: (A) any changes in general economic conditions in the United States or changesgenerally affecting the industry in which Seller operates the Business (which changes do notdisproportionately affect the Business in any material respect), (B) any outbreak of hostilities orescalation thereof involving the United States or the declaration by the United States of war orany act of terrorism (which events do not disproportionately affect the Business in any materialrespect), (C) any effect resulting from any change in GAAP or other accounting requirements orprinciples or any change in applicable rules or regulations or the interpretation thereof, or (D)the announcement or pendency of any of the transactions contemplated hereby.
          Novation Failure: as defined in Section 6.7.
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          Novation Failure Amount: as defined in Section 6.7.
          Order: means any writ, judgment, decree, injunction or similar order of anyGovernmental Authority (in each such case whether preliminary or final).
          Other Tax: means any sales, use, ad valorem, business license, withholding, payroll,employment, excise, stamp, transfer, recording, occupation, premium, property, value added, customduty, severance, windfall profit or license tax, governmental fee or other similar assessment orcharge, together with any interest and any penalty, addition to tax or additional amount imposed byany Governmental Authority responsible for the imposition of any such tax (domestic or foreign).
          Parent: as defined in the first paragraph of this Agreement.
          Permitted Liens: Liens for Taxes not yet due and payable or which are being contestedin good faith and by appropriate proceedings if adequate reserves with respect thereto aremaintained on the Seller’s books in accordance with GAAP as consistently applied by the Seller.
          Person: any natural person, firm, partnership, association, corporation, company,trust, business trust, Governmental Authority or other entity.
          Plans: as defined in Section 3.1.14(a).
          PTO: the United States Patent and Trademark Office or any successor entity.
          Purchase Price: as defined in Section 2.2.
          Purchased Intellectual Property: means any Intellectual Property that (a) is owned byor licensed to the Seller; and (b) is used by the Seller in or necessary for the conduct of theBusiness.
          Registered Intellectual Property: means all United States, international and foreign:(a) patents and patent applications (including provisional applications); (b) registered trademarksand service marks, applications to register trademarks and servicemarks, intent-to-useapplications, or other registrations or applications to trademarks or servicemarks; (c) registeredcopyrights and applications for copyright registration; (d) any mask work registrations andapplications to register mask works; and (e) any other Intellectual Property that is the subject ofan application, certificate, filing, registration or other document issued by, filed with, orrecorded by, any state, government or other public legal authority.
          Registered Purchased Intellectual Property: means all Registered Intellectual Propertythat (a) is owned by or licensed to the Seller; and (b) is used by the Seller in or necessary forthe conduct of the Business.
          Seller: as defined in the first paragraph of this Agreement.
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          Seller Disclosure Schedules: as defined in Section 3.1.
          Subsidiary: each corporation or other Person in which a Person owns or controls,directly or indirectly, capital stock or other equity interests representing at least 50% of theoutstanding voting stock or other equity interests.
          Tax or Taxes: means Income Taxes and/or Other Taxes, as the context requires.
          Tax Laws: means the Code, federal, state, county, local or foreign laws relating toTaxes and any regulations or official administrative pronouncements released thereunder.
          Tax Returns: means any return, report, information return, schedule, certificate,statement or other document (including any (i) amendments thereof and (ii) related or supportinginformation) filed or required to be filed with, or, where none is required to be filed with aGovernmental Authority, the statement or other document issued by, a Governmental Authority inconnection with any Tax.
          Transaction Expenses: as defined in Section 8.2.
          Transferred Employees: as defined in Section 4.5.
          Treasury Regulations: means the federal Income Tax regulations promulgated under theCode, as amended from time to time, and including corresponding provisions of succeedingregulations.
          Warranty Obligations: as defined in Section 3.1.24.
     **8.2****Expenses****.**Subject to Article VI and Section 7.2, the Seller and Parent shall beartheir respective expenses, costs and fees (including attorneys’, auditors, and financing commitmentfees) in connection with the transactions contemplated hereby, including the preparation, executionand delivery of this Agreement and compliance herewith (the “Transaction Expenses”),whether or not the transactions contemplated hereby shall be consummated.
     **8.3****Severability****.**If any provision of this Agreement, including any phrase, sentence,clause, section or subsection is inoperative or unenforceable for any reason, such circumstancesshall not have the effect of rendering the provision in question inoperative or unenforceable inany other case or circumstance, or of rendering any other provision or provisions herein containedinvalid, inoperative, or unenforceable to any extent whatsoever.
     **8.4****Notices****.**All notices, requests, demands, waivers and other communicationsrequired or permitted to be given under this Agreement shall be in writing and shall be deemed tohave been duly given if (a) delivered personally, (b) sent by next-day or overnight mail ordelivery (with confirmation receipt) or (c) sent by fax (with overnight delivery of copy) asfollows:
          (i) if to Parent or the Buyer to,
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     INDUS Corporation  1951 Kidwell Drive, Eighth Floor  Vienna, Virginia 22182  Fax: (703) 506-6776  Attention: Chief Financial Officer     with a copy to:     Joseph C. Schmelter, Esq.  Venable LLP  8010 Towers Crescent Drive, Suite 300  Vienna, Virginia 22182  Fax: (703) 821-8949     (ii) if to the Seller:     Halifax Corporation  5250 Cherokee Avenue  Alexandria, Virginia 22312  Fax: (703) 658-2411  Attention: President and CEO     with a copy to:     Barry Genkin, Esq.  Blank Rome LLP  One Logan Square  Philadelphia, Pennsylvania 19103-6998  Fax: (215) 832-5514
     or, in each case, at such other address as may be specified in writing to the other partieshereto.
     All such notices, requests, demands, waivers and other communications shall be deemed to havebeen received (x) if by personal delivery on the day after such delivery, (y) if by next-day orovernight mail or delivery, on the day delivered, or (z) if by fax, on the next day following theday on which such fax was sent, provided that a copy is also sent by overnight (with confirmationreceipt) mail.
     **8.5****Knowledge****.**When used herein, the phrase “to the Knowledge of Seller,” “Known toSeller” or similar phrases means the actual knowledge of Charles McNew, James Sherwood, JosephSciacca, Ernest L. Ruffner, Doug Randalls and Myron (Mike) Saterbak, and the phrase “to theKnowledge of Parent,” “Known to Parent” or similar phrases means the actual knowledge of ShivramKrishnan, Donald Shoff, Al Blumenthal and Jeff Rosolio.
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     **8.6****Miscellaneous****.**
          **8.6.1****Headings****.**The headings contained in this Agreement are for purposes ofconvenience only and shall not affect the meaning or interpretation of this Agreement.
          **8.6.2****Entire Agreement****.**This Agreement (including the Exhibits and Schedules hereto)and the Ancillary Agreements constitute the entire agreement and supersede all prior agreements andunderstandings, both written and oral, between the parties with respect to the subject matterhereof, including, without limitation, that certain Letter of Intent dated May 3, 2005
          **8.6.3****Counterparts****.**This Agreement may be executed in several counterparts, each ofwhich shall be deemed an original and all of which shall together constitute one and the sameinstrument.
          **8.6.4****Governing Law, etc****.**This Agreement shall be governed in all respects, includingas to validity, interpretation and effect, by the internal laws of the Commonwealth of Virginia,without giving effect to the conflicts of law rules thereof. Each of Parent, the Buyer and theSeller hereby irrevocably submit to the jurisdiction of the state courts of the Commonwealth ofVirginia located in Fairfax County, Virginia and the United States District Court for the EasternDistrict of Virginia solely in respect of the interpretation and enforcement of the provisions ofthis Agreement and of the documents referred to in this Agreement, and hereby waive, and agree notto assert, as a defense in any action, suit or proceeding for the interpretation or enforcementhereof or of any such document, that it is not subject thereto or that such action, suit orproceeding may not be brought or is not maintainable in said courts or that the venue thereof maynot be appropriate or that this Agreement or any of such document may not be enforced in or by saidcourts, and the parties hereto irrevocably agree that all claims with respect to such action orproceeding shall be heard and determined in such a court.
          **8.6.5****Binding Effect****.**This Agreement shall be binding upon and inure to the benefitof the parties hereto and their respective heirs, successors and permitted assigns.
          **8.6.6****Assignment****.**This Agreement shall not be assignable or otherwise transferable byany party hereto without the prior written consent of the other parties hereto; provided, however,that that the prior written consent of the Seller shall not be required for any collateralassignment by Parent or Buyer of the Parent’s or Buyer’s rights and remedies under this Agreementto any lender of Parent or Buyer under credit and collateral agreements, as such agreements may beamended, modified or replaced from time to time. The Seller hereby agrees to execute and deliversuch documents, instruments and agreements not adverse to Seller and at the expense of Parent assuch lender may reasonably require to confirm, reaffirm or perfect such collateral assignment.
          **8.6.7****No Third Party Beneficiaries****.**Except as provided in Sections 6.1 and 6.2,nothing in this Agreement shall confer any rights upon any Person other than the parties hereto andtheir respective heirs, successors and permitted assigns.
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          **8.6.8****Amendment; Waivers, etc****.**No amendment, modification or discharge of thisAgreement, and no waiver hereunder, shall be valid or binding unless set forth in writing and dulyexecuted by the party against whom enforcement of the amendment, modification, discharge or waiveris sought. Any such waiver shall constitute a waiver only with respect to the specific matterdescribed in such writing and shall in no way impair the rights of the party granting such waiverin any other respect or at any other time. Neither the waiver by any of the parties hereto of abreach of or a default under any of the provisions of this Agreement, nor the failure by any of theparties, on one or more occasions, to enforce any of the provisions of this Agreement or toexercise any right or privilege hereunder, shall be construed as a waiver of any other breach ordefault of a similar nature, or as a waiver of any of such provisions, rights or privilegeshereunder. The rights and remedies herein provided are cumulative and are not exclusive of anyrights or remedies that any party may otherwise have at law or in equity. The rights and remediesof any party based upon, arising out of or otherwise in respect of any inaccuracy or breach of anyrepresentation, warranty, covenant or agreement or failure to fulfill any condition shall in no waybe limited by the fact that the act, omission, occurrence or other state of facts upon which anyclaim of any such inaccuracy or breach is based may also be the subject matter of any otherrepresentation, warranty, covenant or agreement as to which there is no inaccuracy or breach.
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     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first abovewritten.           **INDUS CORPORATION:**             By: /s/ Shivram M. Krishnan             Shivram M. Krishnan      President and CEO             **INDUS SECURE NETWORK SOLUTIONS, LLC:**             By: INDUS Corporation, Sole Member               By: /s/ Shivram M. Krishnan                 Shivram M. Krishnan        President and CEO             **HALIFAX CORPORATION:**             By: /s/ Charles L. McNew             Charles L. McNew      President and CEO  
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     The schedules and exhibits listed below are omitted pursuant to Regulation S-K, Item601(b)(2); Halifax Corporation agrees to furnish supplementally a copy of such schedules and/orexhibits to the Securities and Exchange Commission upon request.
**Schedules**
Schedule 1.1(b) — Contracts Included Within Assets