Document:

Exhibit
10.2

Sauer-Danfoss Inc.
2006 Omnibus Incentive Plan

Performance Unit Award Agreement

You
have been selected to be a Participant in the Sauer-Danfoss Inc. 2006 Omnibus
Incentive Plan (the “Plan”), as specified below:

	
  Participant:

  	
   

  

 

	
  Date of Award:

  	
   

  

 

	
  Target Number of Performance Units Awarded:

  	
   

  

 

	
  Performance Period:

  	
   

  

 

	
  Performance Measure: Simple Average Annual Return on Net
  Assets Pursuant to Sec. 3 below

  

 

	
  This document constitutes part of the prospectus
  covering securities

  that have been registered under the Securities Act of 1933.

  

 

THIS
AWARD AGREEMENT, effective as of the Date of Award set forth above, represents
the award of Performance Units by Sauer-Danfoss Inc., a Delaware U.S.A.
corporation (the “Company”), to the Participant named above, pursuant to the
provisions of the Plan.

The
Plan provides a complete description of the terms and conditions governing
Performance Units. If there is any inconsistency between the terms of this
Award Agreement and the terms of the Plan, the Plan’s terms shall completely
supersede and replace the conflicting terms of this Award Agreement. All
capitalized terms shall have the meanings ascribed to them in the Plan, unless
specifically set forth otherwise herein. For purposes of this Award Agreement,
the term Sauer-Danfoss Group shall mean the Company, its Subsidiaries and any
Affiliate designated as such by the Committee pursuant to Section 2.1 of
the Plan. In consideration of the mutual promises contained herein, and other
good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties hereto agree as follows:

1.      Employment
by the Company.   The Performance
Units granted hereunder are awarded on the condition that the Participant
remains employed by the Sauer-Danfoss Group from the Date of Award through the
end of the Performance Period, as specified above. Notwithstanding the
preceding sentence and subject to Section 4, the Participant will not vest
in the Performance Units covered by this Award Agreement until the date of
payment as provided in Section 4. However, neither such condition
regarding further employment nor the award of the Performance Units shall
impose upon the Sauer-Danfoss Group any obligation to retain the Participant in
its employ for any given period or upon any specific terms of employment.

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2.      Earning Performance Units.   Subject
to the terms of the Plan and this Award Agreement, the Participant shall be
entitled to receive payment of the number and value of Performance Units earned
by the Participant over the Performance Period, where the number of Performance
Units is determined as a function of the extent to which the corresponding
performance goals have been achieved.

3.      Performance Measure.   The
Performance Measure under this Award Agreement shall be the Simple Average
Annual Return on Net Assets as derived from the consolidated financial
statements of the Company for the Performance Period as defined above. Annual
Return on Net Assets (“Annual RoNA”) is defined as earnings before taxes, net
interest expense, and minority interest per the audited consolidated financial
statements of the Company for the fiscal year divided by the average Net Assets
for the four quarters in the fiscal year (i.e. the sum of Net Assets at the
beginning of the year plus Net Assets at the end of each of the next four
quarters divided by five). Net Assets are defined as the sum of total equity
including minority interests, and all interest bearing indebtedness shown in
the consolidated balance sheet of the Company. The Simple Average Annual RoNA
is defined as the sum of the three Annual RoNA calculations for each of the
three fiscal years comprising the Performance Period divided by three.

Achievement
of a Simple Average Annual RoNA over the Performance Period equal to 14% will
entitle the Participant to payment of the Target Number of Performance Units
Awarded as set forth above, subject to other provisions of the Plan and this
Award Agreement. Achievement of a Simple Average Annual RoNA equal to 16% shall
entitle the Participant to payment of 200% of the Target Number of Performance
Units Awarded. Achievement of a Simple Average Annual RoNA of 8% shall entitle
the Participant to payment of 25% of the Target Number of Performance Units
Awarded. Achievement of a Simple Average Annual RoNA between 8% and 16% shall
entitle the Participant to payment of the number of Performance Units
interpolated according to a performance achievement function defined by the
foregoing achievement levels, and as reflected on the graph attached hereto. Achievement
of a Simple Average Annual RoNA of less than 8% shall result in no payment of
Performance Units to the Participant under this Award Agreement.

4.      Form and Timing of Payment of
Performance Units.   Payment of
earned Performance Units shall be made within seventy-five (75) calendar
days follow­ing the close of the applicable Performance Period. [Subject to the Plan, the Committee has authorized that the future
payment of any earned Performance Units under this Award Agreement shall be
made 100% in Shares.  The Sauer-Danfoss
Group shall withhold from any such payout Shares having a value equivalent to
the amount needed to satisfy the minimum statutory tax withholding requirements
of the Sauer-Danfoss Group in the appropriate taxing jurisdiction.]

[Subject
to the Plan, the Committee has authorized that the future payment of any earned
Performance Units under this Award Agreement shall be made 100% in cash, less
applicable tax withholdings. For purposes of this cash payment, the value of an
earned 

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Performance
Unit will be equal to the Fair Market Value, as defined in the Plan, of a Share
of common stock of the Company as of the close of the Performance Period.]

5.      Voting Rights and Dividends.   During
the Performance Period and until the date of payment of Performance Units as
provided for in Section 4, the Participant will not have voting rights
with respect to the Performance Units. During the Performance Period and until
and including the date of payment of Performance Units as provided in Section 4
and as approved by the Committee or the Board, the Participant shall receive
all dividends, dividend equivalents and other distributions paid with respect
to a number of shares of common stock of the Company equal to the Target Number
of Performance Units Awarded under this Award Agreement. Any such payment of
dividend, dividend equivalent or other distribution will be made on one of the
Participant’s next two regular paydays following the specified record date.

Notwithstanding the previous paragraph, if the Participant is no longer
employed by the Sauer-Danfoss Group but retains a right to a pro-rated payment
under the provisions of Section 6 of this Award Agreement, the right to
receive dividends, dividend equivalents and other distributions as provided in
the previous paragraph will cease.

6.      Termination of Employment Due to Death,
Disability, or Retirement.   In the event the
employment of a Participant with the Sauer-Danfoss Group is terminated by
reason of death, Disability, or Retirement during the Performance Period, the
Participant or the Participant’s beneficiary or estate, as the case may be,
shall be entitled to receive a prorated payment of the Performance Units. The
prorated payment shall be determined by the Committee, in its sole discretion,
based on the number of full months of the Participant’s employment during the
Performance Period, in relation to the total number of months in the
Performance Period, and shall further be adjusted based on the achievement of
the pre-established performance goals set forth in Section 3.

The prorated
payment of Performance Units pursuant to this Section 6 shall be made at
the same time as payments are made to Participants who did not terminate
employment during the Performance Period as set forth in Section 4.

For purposes of
this Section 6, to the extent permitted by Code Section 409A,
Disability shall have the meaning ascribed to such term in the Participant’s
governing long-term disability plan, or if not so permitted, then the
definition ascribed to such term in Code Section 409A. For purposes of
this Section 6, Retirement means a termination from employment with the
Sauer-Danfoss Group on the normal retirement date on which a Participant
qualifies for full (i.e., unreduced for early retirement or other actuarial
reductions) retirement benefits under the Participant’s governing defined
benefit retirement plan, as identified by the Committee.

7.      Termination of Employment for Other Reasons.   In
the event that the Participant, prior to the payout date set forth in Section 4,
terminates employment with the Sauer-Danfoss Group for any reason other than
those reasons set forth in Section 6, or in the event that the
Sauer-Danfoss Group terminates the employment of the Participant with cause
prior to the payout date set forth in Section 4 or without cause prior to
the end of the Performance Period, all Performance Units 

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awarded
to the Participant under this Award Agreement shall be forfeited by the
Participant; provided, however, that the Committee, in its sole discretion, may
waive such automatic forfeiture provision and pay out on a pro rata basis in
accordance with Section 6. When the Committee exercises its sole
discretion regarding forfeiture, it may take into consideration and individual
facts and circumstances that it deems relevant for purposes of achieving the
desired objectives under the Plan. Any determination regarding forfeiture under
this Section 7 for a given Participant shall not dictate any required
result for a different Participant in a similar or different situation.

8.      Change in Control.   In
the event of a Change in Control (as defined in the Plan) during the
Performance Period, the Target Number of Performance Units Awarded shall become
payable in full and such payment shall be made within seventy-five (75)
calendar days following the date of the Change in Control. The Committee, in
its sole discretion, may make such payment of the Target Number of Performance
Units Awarded in the form of cash or in Shares (or in a combination thereof). The
number of Shares to be issued, if any, shall be equal to the number of earned
Performance Units designated by the Committee to be paid in Shares. The amount
of cash to be paid if any shall be equal to the Fair Market Value, as defined
in the Plan, of a share of the common stock of the Company as of the date of
the Change in Control multiplied by the number of Performance Units designated
by the Committee to be paid in cash.

9.      Nontransferability.   Performance
Units may not be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than by will or by the laws of descent and distribution.
Further, except as otherwise determined by the Committee and provided in this
Award Agreement, a Participant’s rights under the Plan shall be exercisable
during the Participant’s lifetime only by the Participant or the Participant’s
legal representative.

10.
   Adjustments in Authorized Shares.   The
Committee shall have the sole discretion to adjust the number of Performance
Units awarded pursuant to this Award Agreement, in accordance with Section 4.4
of the Plan.

11.
   Tax Withholding.   The
Sauer-Danfoss Group shall have the power and the right to deduct or withhold,
or require the Participant or beneficiary to remit to the Sauer-Danfoss Group,
an amount sufficient to satisfy federal, state, and local taxes, domestic or
foreign, required by law or regulation to be withheld with respect to any taxable
event arising as a result of this Award Agreement. For Awards payable in
Shares, the Sauer-Danfoss Group’s power and right to withhold includes the
right to withhold Shares with a value equivalent to the amount needed to
satisfy the minimum statutory tax withholding requirements of the Sauer-Danfoss
Group in the appropriate taxing jurisdiction.

12.
   Share Withholding.   With
respect to withholding required upon any other taxable event arising as a
result of Awards granted hereunder, the Participant may elect, subject to the
approval of the Committee, to satisfy the withholding requirement, in whole or
in part, by having the Sauer-Danfoss Group withhold Performance Units having a
Fair Market Value on the date the tax is to be determined equal to the minimum
statutory total tax which could be withheld on the 

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transaction.
All such elections shall be irrevocable, made in writing, signed by the
Participant, and shall be subject to any restrictions or limitations that the
Committee, in its sole discretion, deems appropriate.

13.
   Covenant Not to Compete.   Without
the consent of the Company, the Participant shall not, directly or indirectly,
anywhere in the world, at any time during the Participant’s employment with the
Sauer-Danfoss Group, and for a period of eighteen (18) months following the
termination of Participant’s employment with the Sauer-Danfoss Group for any
reason, be associated or in any way connected as an owner, investor, partner,
director, officer, employee, agent, or consultant with any business entity
directly engaged in the manufacture and/or sale of products competitive with
any Material Product or Product Lines of the Sauer-Danfoss Group; provided,
however, that the Participant shall not be deemed to have breached this
undertaking if his sole relation with such entity consists of his holding,
directly or indirectly, an equity interest in such entity not greater than two
percent (2%) of such entity’s outstanding equity interest, and the class of
equity in which the Participant holds an interest is listed and traded on a
broadly recognized national or regional securities exchange. For purposes
hereof, the term “Material Product or Product Line of the Sauer-Danfoss Group”
shall mean any product or product line of the Sauer-Danfoss Group, the consolidated
gross sales of which during any calendar year during the five (5) year
period preceding the Participant’s undertaking such employment were at least
$10 million.

The
Participant acknowledges that: (a) the services to be performed by him for
the Sauer-Danfoss Group are of a special, unique, unusual, extraordinary, and
intellectual character; (b) the business of the Sauer-Danfoss Group is
worldwide in scope and its products are marketed throughout the world; (c) the
Sauer-Danfoss Group competes with other businesses that are or could be located
in any part of the world; and (d) the provisions of this Section 13
are reasonable and necessary to protect the Sauer-Danfoss Group’s business.

If any
covenant in this Section 13 is held to be unreasonable, arbitrary, or
against public policy, such covenant will be considered to be divisible with
respect to scope, time, and geographic area, and such lesser scope, time, or
geographic area, or all of them, as a court of competent jurisdiction may
determine to be reasonable, not arbitrary, and not against public policy, will
be effective, binding, and enforceable against the Participant.

The
period of time applicable to any covenant in this Section 13 will be
extended by the duration of any violation by the Participant of such covenant.

The
Participant will, while the covenants under this Section 13 are in effect,
give notice to the Company, within ten days after accepting any other
employment, of the identity of the Participant’s employer. The Company may
notify such employer that the Participant is bound by this Award Agreement and,
at the Company’s election, may furnish such employer with a copy of this Award
Agreement or relevant portions thereof.

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Any
nonenforcement of this Section 13 will not be construed to be a waiver by
the Company to enforce such provision in the future. If the Participant has
received a payment under this Award Agreement, the Company retains the right to
demand verification of employment and compliance with this Section 13 at
any time prior to the date that is eighteen (18) months after the end of the
Performance Period. The Company or any member of the Sauer-Danfoss Group may
seek restitution and repayment of the total payments made to the Participant
under this Award Agreement if the Company determines that the Participant has
violated this Section 13 during the eighteen (18) month period following
the end of the Performance Period.

14.    Disclosure
of Confidential Information.   Without the consent of the
Company, the Participant shall not disclose to any other person Confidential
Information (as defined below) concerning the Sauer-Danfoss Group or any of its
trade secrets of which the Participant has gained knowledge during his employment
with the Sauer-Danfoss Group. Any trade secrets of the Sauer-Danfoss Group will
be entitled to all of the protections and benefits under the Iowa Code
Annotated Section 550.1 through 550.8 and any other applicable law. If any
information that the Company deems to be a trade secret is found by a court of
competent jurisdiction not to be a trade secret for purposes of this Award
Agreement, such information will, nevertheless, be considered Confidential
Information for purposes of this Award Agreement. The Participant hereby waives
any requirement that the Company submits proof of the economic value of any
trade secret or posts a bond or other security. None of the foregoing
obligations and restrictions apply to any part of the Confidential Information
that the Participant demonstrates was or became generally available to the
public other than as a result of a disclosure by the Participant.

The
Participant will not remove from the premises of the Sauer-Danfoss Group
(except to the extent such removal is for purposes of the performance of the
Participant’s duties at home or while traveling, or except as otherwise
specifically authorized by the Company), any document, record, notebook, plan,
model, component, device, or computer software or code, whether embodied in a
disk or in any other form, that contains Confidential Information
(collectively, the “Proprietary Items”). The Participant recognizes that, as
between the Company or any member of the Sauer-Danfoss Group and the
Participant, all of the Proprietary Items, whether or not developed by the
Participant, are the exclusive property of the Company or the member of the
Sauer-Danfoss Group, as the case may be. Upon termination of this Award
Agreement by either party, or upon the request of the Company or any member of
the Sauer-Danfoss Group during the employment period, the Participant will
return to the Company or the Sauer-Danfoss Group member all of the Proprietary
Items in the Participant’s possession or subject to the Participant’s control,
and the Participant shall not retain any copies, abstracts, sketches, or other
physical embodiment of any of the Proprietary Items.

For
purposes of this Award Agreement, Confidential Information shall include any
and all information concerning the business and affairs of the Sauer-Danfoss
Group, including, without limitation, product specifications, data, know-how,
formulae, compositions, processes, designs, sketches, photographs, graphs,
drawings, samples, inventions and ideas, past, current, and planned research
and development, current and planned distribution methods and processes,
customer lists, current and anticipated customer requirements, price lists,
market studies, 

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business
plans, computer software and programs (including object code and source code),
computer software and database technologies, systems, structures, and
architectures (and related formulae, compositions, processes, improvements,
devices, know-how, inventions, discoveries, concepts, ideas, designs,
methods and information), historical financial statements, financial
projections and budgets, historical and projected sales, capital spending
budgets and plans, the names and backgrounds of key personnel, agents,
personnel training and techniques and materials, insurance products, premium structures,
information relating to suppliers and supplies, sales and marketing information
and strategy, notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Sauer-Danfoss Group containing or based, in
whole or in part, on any information included in the foregoing, and any
information, however documented, that is a trade secret within the meaning of
the Iowa Code Annotated Section 550.1 through 550.8.

Any
nonenforcement of this Section 14 will not be construed to be a waiver by
the Company to enforce such provision in the future. If the Participant has
received a payment under this Award Agreement, the Company retains the right to
demand verification of compliance with this Section 14 at any time prior
to the date that is eighteen (18) months after the end of the Performance
Period. The Company or any member of the Sauer-Danfoss Group may seek
restitution and repayment of the total payments made to the Participant under
this Award Agreement if the Company determines that the Participant has
violated this Section 14 during the eighteen (18) month period following
the end of the Performance Period.

15.     Nonsolicitation.   Without
the written consent of the Company, the Participant shall not, at any time
during Employment and for a period of eighteen (18) months following the
termination of Participant’s employment with the Sauer-Danfoss Group for any
reason (a) employ or retain or arrange to have any other person, firm, or
other entity employ or retain or otherwise participate in the employment or
retention of any person who is an employee or consultant of the Sauer-Danfoss
Group; or (b) solicit or arrange to have any other person, firm, or other
entity solicit or otherwise participate in the solicitation of business from
any entity that was a customer of the Sauer-Danfoss Group during the time of
the Participant’s employment, whether or not the Participant had personal
contact with such person.

Any
nonenforcement of this Section 15 will not be construed to be a waiver by
the Company to enforce such provision in the future. If the Participant has
received a payment under this Award Agreement, the Company retains the right to
demand verification of compliance with this Section 15 at any time prior
to the date that is eighteen (18) months after the end of the Performance
Period. The Company or any member of the Sauer-Danfoss Group may seek
restitution and repayment of the total payments made to the Participant under
this Award Agreement if the Company determines that the Participant has
violated this Section 15 during the eighteen (18) month period following
the end of the Performance Period.

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16.    Injunctive Relief and Additional Remedy;
Essential and Independent Covenants.   The Participant
acknowledges that the injury that would be suffered by the Sauer-Danfoss Group
as a result of a breach of the provisions of this Award Agreement (including
any provision of Sections 13, 14, and 15) would be irreparable and that an
award of monetary damages to the Sauer-Danfoss Group for such a breach would be
an inadequate remedy. Consequently, the Company or any member of the
Sauer-Danfoss Group will have the right, in addition to any other rights it may
have, to obtain injunctive relief to restrain any breach or threatened breach
or otherwise to specifically enforce any provision of this Award Agreement, and
the Company or any member of the Sauer-Danfoss Group will not be obligated to
post bond or other security in seeking such relief. Without limiting the
Sauer-Danfoss Group’s rights under this Section 16 or any other remedies
of the Sauer-Danfoss Group, if the Participant breaches any of the provisions
of Sections 13, 14, or 15, the Sauer-Danfoss Group will have the right to cease
making any payments otherwise due to the Participant under this Award
Agreement.

The
covenants by the Participant in Sections 13, 14, and 15 are essential elements
and preconditions to this Award Agreement, and without the Participant’s
agreement to comply with such covenants, the Company would not have entered
into this Award Agreement with the Participant. The Company and the Participant
have been afforded the opportunity to consult their respective counsel and have
been advised or had the opportunity to obtain advice, in all respects
concerning the reasonableness and propriety of such covenants (including,
without limitation, the time period of restriction and the geographical area of
restriction set forth in Section 13), with specific regard to the nature
of the business conducted by the Sauer-Danfoss Group. The Participant’s
covenants in Sections 13, 14, and 15 are independent covenants and the
existence of any claim by the Participant against the Company or any member of
the Sauer-Danfoss Group under this Award Agreement or otherwise, will not
excuse the Participant’s breach of any covenant in Sections 13, 14, or 15.

If
this Award Agreement or the Participant’s employment with the Sauer-Danfoss
Group is terminated, this Award Agreement will continue in full force and
effect as is necessary or appropriate to enforce the covenants and agreements
of the Participant in Sections 13, 14, 15, and 16.

17.     Beneficiary
Designation.   The Participant may, from time to time,
name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under this Award Agreement is to be paid in
case of his or her death before he or she receives any or all of such benefit.
Each such designation shall revoke all prior designations by the Participant,
shall be in a form prescribed by the Company, and will be effective only when
filed by the Participant in writing with the Vice President — Human Resources
during the Participant’s lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant’s death shall be paid to the
Participant’s estate.

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Beneficiary
Designation (name, address, and relationship):

______________________________________________

______________________________________________

______________________________________________

18. Administration.
This Award Agreement and the rights of the Participant hereunder are subject to
all the terms and conditions of the Plan, as the same may be amended from time
to time, as well as to such rules and regulations as the Committee may
adopt for administration of the Plan. It is expressly understood that the
Committee is authorized to administer, construe, and make all determinations
necessary or appropriate to the administration of the Plan and this Award
Agreement, all of which shall be binding upon the Participant. Any
inconsistency between the Award Agreement and the Plan shall be resolved in
favor of the Plan.

19.
Continuation of Employment. This Award Agreement
is not an employment agreement, it shall not confer upon the Participant any
right to continuation of employment by the Sauer-Danfoss Group, nor shall this
Award Agreement interfere in any way with the Sauer-Danfoss Group’s right to
terminate the Participant’s employment at any time, subject to employment laws
in the appropriate jurisdiction.

20.
No Vested Right In Future Awards.
Participant acknowledges and agrees (by executing this Award Agreement) that
the granting of Awards under this Award Agreement are made on a fully
discretionary basis by the Committee and that this Award Agreement does not
lead to a vested right to further Awards in the future. Further, the Awards set
forth in this Award Agreement constitute a non-recurrent benefit and the terms
of this Award Agreement are only applicable to the Awards distributed pursuant
to this Award Agreement.

21.
Use of Personal Data. Participant
acknowledges and agrees (by executing this Award Agreement) to the collection,
use, processing and transfer of certain personal data as described in this Section 21.
The Participant understands that he or she is not obliged to consent to such
collection, use, processing and transfer of personal data. However, the
Participant understands that his or her failure to provide such consent may
affect his or her ability to participate in the Plan. The Participant
understands that the Company may hold certain personal information about the
Participant, including his or her name, salary, nationality, job title,
position evaluation rating along with details of all past Awards and current
Awards outstanding under the Plan, for the purpose of managing and administering
the plan (the “Data”). The Company and other members of the Sauer-Danfoss Group
will transfer Data amongst themselves as necessary for the purpose of
implementation, administration and management of the Plan. The Company or
another member of the Sauer-Danfoss Group may further transfer Data to any
third parties assisting in the implementation, administration and management of
the Plan. These various recipients of Data may be located in Europe, or
elsewhere throughout the world, including the United States. The Participant
authorizes these various recipients of Data to receive, possess, use, retain
and transfer the Data, in electronic or other form, for the purposes of
implementing, administering and managing the Plan, including any required
transfer of such Data as may be 

 9
 

 

required
for the subsequent holding of Shares on the Participant’s behalf by a broker or
other third party with whom the Participant may elect to deposit any Shares
acquired pursuant to the Plan. The Participant understands that he or she may,
at any time, review Data with respect to the Participant and require any
necessary amendments to such Data. The Participant also understands that he or
she may withdraw the consents to use Data herein by notifying the Company in
writing; however, the Participant understands that by withdrawing his or her
consents to use Data, the Participant may affect his or her ability to
participate in the Plan.

22.
Severability. In the event that any
provision of this Award Agreement shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of
this Award Agreement, and this Award Agreement shall be construed and enforced
as if the illegal or invalid provision had not been included.

23. Miscellaneous.
The Committee may terminate, amend, or modify the Plan; provided, however, that
no such termination, amendment, or modification of the Plan shall adversely
affect in any material way the Participant’s rights under this Award Agreement,
without the Participant’s written approval.

24. Award Agreement. This Award
Agreement shall be subject to all applicable laws, rules, and regulations, and
to such approvals by any governmental agencies or national securities exchanges
as may be required.

All
obligations of the Company under the Plan and this Award Agreement, with
respect to the Performance Units granted hereunder, shall be binding (i) on
the Company and on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all of the business and/or
assets of the Company; and (ii) on the Participant and his or her heirs
and legal representatives.

Each
of the terms of this Award Agreement is deemed severable in whole or in part,
and if any term or provision, or the application thereof, in any circumstance
should be illegal, invalid or unenforceable, the remaining terms and provisions
will not be affected thereby and will remain in full force and effect.

To
the extent not preempted by federal law, this Award Agreement is deemed to have
been made and entered into in the State of Iowa and in all respects the rights
and obligations of the parties will be governed by, and construed and enforced
in accordance with, the laws of the State of Iowa without regard to the
principles of conflict of laws. Any and all lawsuits, legal actions or
proceedings against either party arising out of this Award Agreement will be
brought in Story County, Iowa or federal court of competent jurisdiction
sitting nearest to Ames, Iowa, and each party hereby submits to and accepts the
exclusive jurisdiction of such court for the purpose of such suit, legal action
or proceeding. Each party irrevocably waives any objection it may now have or hereinafter
have to this choice of venue of any suit, legal action or proceeding in any
such court and further waives any claim that any suit, legal action or
proceeding brought in any such court has been brought in an inappropriate
forum.

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[ 25.
Designation as Covered Employee for Annual Incentive Plan Year

For
purposes of Section 13 of the Plan, Participant has been designated as a
Covered Employee for purposes of determining the Covered Employee Annual
Incentive Award for the performance period from January 1, _____ to December 31,
_____. By executing this Award Agreement, the Company and the Participant
acknowledge and agree that, solely for purposes of the performance period from January 1,
_____ to December 31, _____, the Plan will serve as a successor plan to
the Annual Officer Performance Incentive Plan as provided for in Section 5(b) of
the Participant’s employment agreement and the Participant’s annual incentive
will be determined solely by the Covered Employee’s Annual Incentive Award
provisions of Section 13 of the Plan. The Company and the Participant
further acknowledge and agree that, for purposes of the employment agreement,
during the performance period from January 1, _____ to December 31,
_____, the term Target Incentive Opportunity shall mean xx% of the Participant’s
annualized base salary. ]

IN
WITNESS WHEREOF, the parties have caused this Award Agreement to be executed
effective as of ______________________.

                                                                                                               Sauer-Danfoss
Inc.

                                                                                                               By:__________________________________

                                                                                                            __________________________________

                                                                                                                       Participant

 

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Long-Term
Incentive Plan Payout Chart

_____________ Grant

 

 

Average
RoNA _______ - _______

 12Exhibit
10.1

MEMBERSHIP INTEREST PURCHASE AGREEMENT

BY AND AMONG

FORTRESS
AMERICA ACQUISITION CORPORATION,

 

VTC,
L.L.C.,

 

VORTECH,
LLC,

 

THOMAS
P. ROSATO

 

AND

 

GERARD
J. GALLAGHER

 

 

 

Effective
June 5, 2006

 

 

 

TABLE OF CONTENTS

This
Table of Contents is for convenience of reference only and is not intended to
define, limit or describe the scope, intent or meaning of any provision of this
Agreement.

	
  ARTICLE I Definitions and Rules of Construction

  	
  1

  
	
  1.1

  	
  Definitions

  	
  1

  
	
  1.2

  	
  Rules of Construction

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE II Closing; Purchase Price; Adjustments; Escrow

  	
  14

  
	
  2.1

  	
  Closing

  	
  14

  
	
  2.2

  	
  Purchase Consideration; Employee Payments and Stock
  Grants

  	
  14

  
	
  2.4

  	
  Cash Consideration and Net Working Capital
  Adjustments

  	
  20

  
	
  2.5

  	
  Financial Issue Resolution Process

  	
  22

  
	
  2.6

  	
  Members’ Representative

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE III Representations and Warranties of the Members and
  the Companies

  	
  24

  
	
  3.1

  	
  Organization and Power

  	
  24

  
	
  3.2

  	
  Authorization and Enforceability

  	
  24

  
	
  3.3

  	
  No Violation

  	
  25

  
	
  3.4

  	
  Consents

  	
  25

  
	
  3.5

  	
  Financial Statements

  	
  25

  
	
  3.6

  	
  Relationships with Affiliates

  	
  26

  
	
  3.7

  	
  Indebtedness to/from Officers, Directors, Members
  and Employees

  	
  27

  
	
  3.8

  	
  No Adverse Change

  	
  27

  
	
  3.9

  	
  Conduct of the Business

  	
  27

  
	
  3.10

  	
  Capital Structure; Equity Interests

  	
  27

  
	
  3.11

  	
  Title to Membership Interests

  	
  28

  
	
  3.12

  	
  Articles, Operating Agreements and Records

  	
  28

  
	
  3.13

  	
  Assets — In General

  	
  28

  
	
  3.14

  	
  Real Property Interests

  	
  29

  
	
  3.15

  	
  Personal Property

  	
  29

  
	
  3.16

  	
  Intellectual Property Rights

  	
  29

  
	
  3.17

  	
  Scheduled Contracts and Proposals

  	
  30

  
	
  3.18

  	
  Government Contracting

  	
  32

  
	
  3.19

  	
  Clients

  	
  39

  
	
  3.20

  	
  Backlog

  	
  39

  
	
  3.21

  	
  Compliance with Laws

  	
  39

  
	
  3.22

  	
  Environmental Matters

  	
  40

  
	
  3.23

  	
  Licenses and Permits

  	
  40

  
	
  3.24

  	
  Absence of Certain Business Practices

  	
  40

  
	
  3.25

  	
  Litigation

  	
  41

  
	
  3.26

  	
  Personnel Matters

  	
  41

  
	
  3.27

  	
  Labor Matters

  	
  43

  
	
  3.28

  	
  ERISA

  	
  44

  
	
  3.29

  	
  Tax Matters

  	
  47

  
	
  3.30

  	
  Insurance

  	
  49

  
	
   

  	
   

  	
   

  

 

 

	
  3.31

  	
  Bank Accounts

  	
  49

  
	
  3.32

  	
  Powers of Attorney

  	
  49

  
	
  3.33

  	
  No Broker

  	
  50

  
	
  3.34

  	
  Security Clearances

  	
  50

  
	
  3.35

  	
  No Unusual Transactions

  	
  50

  
	
  3.36

  	
  Full Disclosure

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV Representations and Warranties of FAAC

  	
  53

  
	
  4.1

  	
  Organization and Power

  	
  53

  
	
  4.2

  	
  Authorization and Enforceability

  	
  53

  
	
  4.3

  	
  No Violation

  	
  53

  
	
  4.4

  	
  Consents

  	
  54

  
	
  4.5

  	
  Authorization of Stock Consideration

  	
  54

  
	
  4.6

  	
  Capitalization

  	
  54

  
	
  4.7

  	
  Public Disclosure Documents

  	
  55

  
	
  4.8

  	
  Litigation

  	
  55

  
	
  4.9

  	
  Brokers

  	
  55

  
	
  4.10

  	
  Full Disclosure

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE V Covenants

  	
  56

  
	
  5.1

  	
  Conduct of the Companies

  	
  56

  
	
  5.2

  	
  Access to Information Prior to the Closing;
  Confidentiality

  	
  56

  
	
  5.3

  	
  Best Efforts

  	
  56

  
	
  5.4

  	
  Consents

  	
  57

  
	
  5.5

  	
  Access to Books and Records Following the Closing

  	
  57

  
	
  5.6

  	
  Members’ Post-Closing Confidentiality Obligation

  	
  57

  
	
  5.7

  	
  Expenses

  	
  58

  
	
  5.8

  	
  Certain Closing Payments

  	
  58

  
	
  5.9

  	
  No Solicitation of Competitive Transactions

  	
  59

  
	
  5.10

  	
  Personnel

  	
  60

  
	
  5.11

  	
  Certain Tax Matters

  	
  60

  
	
  5.12

  	
  Public Announcements

  	
  63

  
	
  5.13

  	
  Communications with Customers and Suppliers

  	
  63

  
	
  5.14

  	
  Evergreen Agreement

  	
  63

  
	
  5.15

  	
  Post Closing Covenants Regarding Management of FAAC

  	
  64

  
	
  5.16

  	
  Welfare Plans

  	
  64

  
	
  5.17

  	
  Cooperation in Connection with Proxy Materials

  	
  65

  
	
  5.18

  	
  Continuing Related Party Transactions

  	
  65

  
	
  5.19

  	
  Update of Disclosure Schedules

  	
  66

  
	
  5.20

  	
  Threatened Litigation

  	
  67

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI Deliveries by All Parties at Closing

  	
  67

  
	
  6.1

  	
  Conditions to All Parties Obligations

  	
  67

  
	
  6.2

  	
  Conditions to the Members Obligations

  	
  67

  
	
  6.3

  	
  Conditions to FAAC’s Obligations

  	
  68

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII Deliveries by Members and the Companies at Closing

  	
  70

  
	
   

  	
   

  	
   

  

 

 

	
  7.1

  	
  Members’ and the Companies’ Closing Certificate

  	
  70

  
	
  7.2

  	
  Consents

  	
  70

  
	
  7.3

  	
  Estimated Closing Balance Sheet

  	
  70

  
	
  7.4

  	
  Resignations of Directors and Officers

  	
  71

  
	
  7.5

  	
  Termination of Credit Facility/Facilities

  	
  71

  
	
  7.6

  	
  Release of Liens

  	
  71

  
	
  7.7

  	
  Phantom Membership Interest Releases

  	
  71

  
	
  7.8

  	
  Comfort Letters

  	
  71

  
	
  7.9

  	
  Evergreen Release

  	
  71

  
	
  7.10

  	
  Senior Executive Employment Agreements

  	
  71

  
	
  7.11

  	
  Key Employee Employment Agreements

  	
  71

  
	
  7.12

  	
  Stock Consideration Documents

  	
  71

  
	
  7.13

  	
  Voting Agreement

  	
  72

  
	
  7.14

  	
  Escrow Agreements

  	
  72

  
	
  7.15

  	
  Related Party Termination Agreements

  	
  72

  
	
  7.16

  	
  New VTC Lease and VTC Lease Appraisal

  	
  72

  
	
  7.17

  	
  Further Instruments

  	
  72

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII Deliveries by FAAC at Closing

  	
  72

  
	
  8.1

  	
  Officer’s Certificate

  	
  72

  
	
  8.2

  	
  Closing Consideration and Escrow Deposits

  	
  73

  
	
  8.3

  	
  Stock Consideration Documents

  	
  73

  
	
  8.4

  	
  Senior Executive Employment Agreement

  	
  73

  
	
  8.5

  	
  Key Employee Employment Agreements

  	
  73

  
	
  8.6

  	
  Management of FAAC

  	
  73

  
	
  8.7

  	
  Escrow Agreements

  	
  73

  
	
  8.8

  	
  Employee Stock Grants

  	
  73

  
	
  8.9

  	
  Further Instruments

  	
  73

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX Survival and Indemnification

  	
  74

  
	
  9.1

  	
  Survival of Representations and Warranties

  	
  74

  
	
  9.2

  	
  Indemnification

  	
  74

  
	
  9.3

  	
  General Indemnity Escrow Account

  	
  79

  
	
  9.4

  	
  Effect of Investigation

  	
  80

  
	
   

  	
   

  	
   

  
	
  ARTICLE X Termination

  	
  80

  
	
  10.1

  	
  Termination

  	
  80

  
	
  10.2

  	
  Procedure and Effect of Termination

  	
  81

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI Miscellaneous

  	
  81

  
	
  11.1

  	
  Further Assurances

  	
  81

  
	
  11.2

  	
  Notices

  	
  82

  
	
  11.3

  	
  Governing Law

  	
  83

  
	
  11.4

  	
  Entire Agreement

  	
  83

  
	
  11.5

  	
  Severability

  	
  83

  
	
  11.6

  	
  Amendment

  	
  83

  
	
  11.7

  	
  Effect of Waiver or Consent

  	
  83

  
	
   

  	
   

  	
   

  

 

 

	
  11.8

  	
  Rights and Remedies Cumulative

  	
  84

  
	
  11.9

  	
  Parties in Interest; Limitation on Rights of Others

  	
  84

  
	
  11.10

  	
  Assignability

  	
  84

  
	
  11.11

  	
  Dispute Resolution and Arbitration

  	
  84

  
	
  11.12

  	
  Jurisdiction; Court Proceedings; Waiver of Jury
  Trial

  	
  86

  
	
  11.13

  	
  No Other Duties

  	
  86

  
	
  11.14

  	
  Reliance on Counsel and Other Advisors

  	
  86

  
	
  11.15

  	
  Waiver of Rights Against Company’s Trust Fund

  	
  86

  
	
  11.16

  	
  Counterparts

  	
  87

  

 

 

SCHEDULES

	
  Schedule

  	
   

  	
  Title

  
	
  1.1

  	
   

  	
  Bonds

  
	
  3.1(b)

  	
   

  	
  Jurisdictions
  where each of the Companies is qualified or licensed to do business; good standing

  
	
  3.4(a)

  	
   

  	
  Consents

  
	
  3.5(c)

  	
   

  	
  Undisclosed
  Liabilities

  
	
  3.5(e)

  	
   

  	
  Letters
  of Credit and Guarantees

  
	
  3.5(f)

  	
   

  	
  Contingent
  or Deferred Acquisition Expenses or Payments

  
	
  3.6

  	
   

  	
  Interest
  of Affiliates and Members in Property or Contracts of the Companies

  
	
  3.9(a)

  	
   

  	
  Cooperative
  Business Arrangements

  
	
  3.9(b)

  	
   

  	
  Letters
  of Intent and Non-Competition Agreements

  
	
  3.9(c)

  	
   

  	
  Non-Disclosure
  Arrangements

  
	
  3.10(a)

  	
   

  	
  Owners
  of Equity Interests of the Companies

  
	
  3.13

  	
   

  	
  Assets-In
  General

  
	
  3.14

  	
   

  	
  Real
  Property Interests

  
	
  3.15(a)

  	
   

  	
  Personal
  Property, owned or leased

  
	
  3.15(b)

  	
   

  	
  UCC
  Financing Statements

  
	
  3.16(a)

  	
   

  	
  Commercial
  Software and Intellectual Property Rights

  
	
  3.16(b)

  	
   

  	
  Intellectual
  Property Rights used by, but not owned by the Companies

  
	
  3.16(c)

  	
   

  	
  Rights
  of other Persons to Intellectual Property Rights or Intellectual Property

  
	
  3.16(d)

  	
   

  	
  No
  Infringement

  
	
  3.16(f)

  	
   

  	
  Government
  Data and Software Rights

  
	
  3.17(a)

  	
   

  	
  List
  of Scheduled Contracts

  

 

 

	
  3.17(b)

  	
   

  	
  Status
  of Scheduled Contracts

  
	
  3.17(c)

  	
   

  	
  List
  and Status of Bids, Proposals or Quotations

  
	
  3.18(b)

  	
   

  	
  List
  of Government Contracts and Government Subcontracts

  
	
  3.18(c)

  	
   

  	
  List
  of Bids

  
	
  3.18(d)

  	
   

  	
  List
  of Teaming Agreements

  
	
  3.18(e)

  	
   

  	
  List
  of Company Subcontracts

  
	
  3.18(f)

  	
   

  	
  List
  of Marketing Agreements

  
	
  3.18(g)

  	
   

  	
  Status
  of Government Contracts, Subcontracts and Bids

  
	
  3.18(i)

  	
   

  	
  Audits

  
	
  3.18(j)

  	
   

  	
  Financing
  Arrangements

  
	
  3.18(k)

  	
   

  	
  Protests

  
	
  3.18(l)

  	
   

  	
  Claims

  
	
  3.18(m)

  	
   

  	
  Multiple
  Award Schedules

  
	
  3.18(n)

  	
   

  	
  Government
  Furnished Property

  
	
  3.18(o)

  	
   

  	
  Former
  Government Officials

  
	
  3.18(p)

  	
   

  	
  Ethics
  Policy

  
	
  3.18(q)

  	
   

  	
  Timekeeping
  Policy

  
	
  3.20

  	
   

  	
  Backlog

  
	
  3.23(a)

  	
   

  	
  Permits

  
	
  3.25(a)

  	
   

  	
  Litigation
  Pending or Threatened

  
	
  3.25(b)

  	
   

  	
  Claims

  
	
  3.25(c)

  	
   

  	
  Indemnification
  Obligations

  
	
  3.26(a)

  	
   

  	
  List
  and Positions of Personnel

  
	
  3.26(b)

  	
   

  	
  Phantom
  Membership Interest Payments

  
	
  3.26(d)

  	
   

  	
  Personnel
  Policies and Manuals

  
	
  3.26(e)

  	
   

  	
  Personnel
  Agreements

  

 

 

	
  3.26(f)

  	
   

  	
  Discontinuation
  of Employment

  
	
  3.26(h)

  	
   

  	
  Leased
  Employees/Independent Contractors

  
	
  3.28(b)

  	
   

  	
  List
  of Plans

  
	
  3.28(g)

  	
   

  	
  Filings

  
	
  3.28(j)

  	
   

  	
  Time
  of Vesting or Payment

  
	
  3.28(l)

  	
   

  	
  Compliance

  
	
  3.28(m)

  	
   

  	
  Self
  Insured Plans

  
	
  3.29

  	
   

  	
  Tax
  Matters

  
	
  3.30(a)

  	
   

  	
  Insurance
  Policies

  
	
  3.30(b)

  	
   

  	
  Insurance
  Claims

  
	
  3.31

  	
   

  	
  Bank
  Accounts

  
	
  3.34

  	
   

  	
  Facility
  Clearances

  
	
  3.35

  	
   

  	
  No
  Unusual Transactions

  

 

 

EXHIBITS

	
  A

  	
   

  	
  Financial Statements

  
	
  B

  	
   

  	
  Convertible Promissory
  Note

  
	
  C

  	
   

  	
  Acquisition Agreement

  
	
  D

  	
   

  	
  Registration Rights
  Agreement

  
	
  E

  	
   

  	
  Lock Up Agreement

  
	
  F

  	
   

  	
  Lock Up Escrow Agreement

  
	
  G

  	
   

  	
  Restricted Stock Plan

  
	
  H

  	
   

  	
  Restricted Stock Agreement

  
	
  I-1

  	
   

  	
  Balance Sheet Escrow
  Agreement

  
	
  I-2

  	
   

  	
  General Indemnity Escrow
  Agreement

  
	
  J

  	
   

  	
  Phantom Membership
  Interest Release

  
	
  K

  	
   

  	
  Evergreen Acquisition
  Agreement

  
	
  L-1

  	
   

  	
  Rosato Employment
  Agreement

  
	
  L-2

  	
   

  	
  Gallagher Employment
  Agreement

  
	
  M

  	
   

  	
  Key Employee Employment
  Agreement

  
	
  N

  	
   

  	
  Voting
  Agreement

  
	
  O

  	
   

  	
  Members/Companies Closing
  Certificate

  
	
  P

  	
   

  	
  FAAC Closing Certificate

  

 

 

 

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

MEMBERSHIP
INTEREST PURCHASE AGREEMENT (“Agreement”), dated June 5, 2006 (the “Effective
Date”), by and among (i) Fortress America Acquisition Corporation, a
Delaware corporation (“FAAC”); (ii) VTC, L.L.C., a Maryland limited
liability company (“VTC”); (iii) Vortech, LLC, a Maryland limited
liability company (“Vortech”); Thomas P. Rosato and Gerard J. Gallagher
(who together own all of the outstanding membership interests of both VTC and
Vortech (each a “Member” and jointly the “Members”)); and
(iv) Thomas P. Rosato in his capacity as the “Members’ Representative” (as
defined in Section 2.5(a)).

RECITALS:

R-1.         The Members are the
holders and owners of all of the issued and outstanding “Equity Interests” (as
hereinafter defined) of each VTC and Vortech (the “Membership Interests”).

R-2.         FAAC desires to
acquire all of the outstanding Membership Interests and the Members and VTC and
Vortech desire the same, upon the terms and subject to the conditions of this
Agreement.

R-3.         Between the Effective
Date and the “Closing Date” (as hereinafter defined), FAAC intends to change
its name to “Fortress International Group, Inc.”

NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained in this
Agreement, and intending to be legally bound hereby, the parties agree as
follows:

ARTICLE I

Definitions and Rules of Construction       

1.1           Definitions.

As used in this Agreement, the following terms shall have the meanings
as set forth below:

“Acquired Business” means the collective operations and business
activities of the Companies as conducted and existing as of the Closing Date.

“Acquisition Agreement” has the meaning set forth in Section
2.2(d).

“Acquisition Proposal” has the meaning set forth in Section
5.9(a).

“Active” has the meaning set forth in Section 3.18(a).

“Adjusted Closing Net Working Capital” has the meaning set forth
in Section 2.4(b).

 

1

 

“Affiliate” means, as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person.  For purposes
of this definition, “control” of a Person means the power, directly or
indirectly, either to (a) vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person or
(b) direct or cause the direction of the management and policies of such
Person, whether by contract or otherwise.

“Agreement” has the meaning set forth in the Preamble.

“Acquisition Agreement” has the meaning set forth in Section
2.2(d).

“Acquisition Proposal” has the meaning set forth in Section 5.8.

“Assumed Debt” has the meaning set forth in Section 2.2(c).

“Audited Financial Statements” means collectively the audited
consolidated balance sheets and statements of income, changes in shareholders’
equity, and cash flow together with accompanying notes of the Companies as of
December 31, 2003 and December 31, 2004 together with the December 31, 2005
Financial Statements.

“Auditor” has the meaning set forth in Section 2.5.

“Average Share Value” shall mean the average closing price of a
share of FAAC common stock on the Nasdaq OTC market for the twenty (20)
consecutive trading days prior to public announcement by FAAC of the
contemplated purchase of the Membership Interests pursuant to this Agreement;
provided that for purposes of this Agreement, the Average Share Value shall be
capped and shall not exceed $5.75, regardless of what the FAAC common stock is
actually then trading at.

“Balance Sheet Escrow Account” has the meaning set forth in
Section 2.3.

“Balance Sheet Escrow Agreement” has the meaning set forth in
Section 2.3.

“Balance Sheet Escrow Deposit” has the meaning set forth in
Section 2.3.

“Balance Sheet Escrow Funds” has the meaning set forth in
Section 2.3.

“Base Net Working Capital Amount” means One Million Dollars
($1,000,000).

“Benefit Arrangement” has the meaning set forth in Section
3.28(a).

“Bid” has the meaning set forth in Section 3.18(a).

“Bonus
Pool” has the meaning set forth in Section 3.26(b).

“Business Day” shall mean any day other than a Saturday, Sunday,
or any Federal holiday.  If any period
expires on a day that is not a Business Day or any event or condition is
required by the terms of this Agreement to occur or be fulfilled on a day that
is not a Business 

 

2

 

Day,
such period shall expire or such event or condition shall occur or be
fulfilled, as the case may be, on the next succeeding Business Day.

“Cash Consideration” has the meaning set forth in
Section 2.4.

“Claimant” has the meaning set forth in Section 11.11(a).

“Claims” means jointly all Third-Party Claims and Direct Claims.

“Closing” has the meaning set forth in Section 2.1.

“Closing Balance Sheet” has the meaning set forth in Section
2.4(d).

“Closing Date” has the meaning set forth in Section 2.1.

“Closing Net Working Capital” has the meaning set forth in
Section 2.4(b).

“Closing Purchase Consideration” has the meaning set forth in
Section 2.2.

“COC” has the meaning set forth in Section 3.18(m).

“Code” means the Internal Revenue Code of 1986, as amended from
time to time, or corresponding provisions of subsequent superseding federal
revenue Laws.

“Commercial Software” means commercially available Software
licensed pursuant to a standard license agreement with a value of more than
$1,000 and excluding any software, as to which a license is implied by sale of
a product.

“Companies” means Vortech and VTC together and “Company”
refers to either of them.

“Companies’ Information” has the meaning set forth in
Section 5.17.

“Company Subcontract” has the meaning set forth in Section
3.18(a).

“Confidentiality Agreement” has the meaning set forth in Section
5.2.

“Consultant” means all persons who (i) are or have been engaged
as consultants by either of the Companies or (ii) otherwise provide services to
either of the Companies under a contractual arrangement.

“Contemplated Transactions” means the transactions contemplated
by this Agreement and the other Transaction Documents.

“Continuing Related Party Transactions” has the meaning set
forth in Section 3.6.

“Convertible Promissory Note” has the meaning set forth in
Section 2.2(b).

 

3

 

“Copyrights” means all United States and foreign copyright
registrations and applications therefor.

“Damages” has the meaning set forth in Section 2.6(b).

“December 2005 Balance Sheet” means the audited consolidated
balance sheets of the Companies as of December 31, 2005 included in the
December 2005 Financial Statements.

“December 2005 Financial Statements” means the audited
consolidated balance sheets and statements of income, changes in shareholders’
equity, and cash flow together with accompanying notes of the Companies as of
December 31, 2005, a copy of which is included in the Financial Statements
attached as Exhibit A.

“Direct Claim” and “Direct Claims” mean any claim or
claims (other than Third Party Claims) by an Indemnified Party against an
Indemnifying Party for which the Indemnified Party may seek indemnification
under this Agreement.

“Direct Claim Notice” has the meaning set forth in Section
9.2(d).

“Direct Claim Notice Period” has the meaning set forth in
Section 9.2(d).

“Disclosure Schedules” has the meaning set forth in the
definition of “Schedule.”

“Disclosure Schedule Update Losses” means Losses that may be
sustained, suffered or incurred by FAAC Indemnitees and that are related to
facts and circumstances reflected in the Updated Disclosure Schedules, but not
in the Disclosure Schedules dated as of the date of this Agreement.

“Dispute Notice” has the meaning set forth in Section 11.11(a).

“D&O Indemnification Claims” means actions, suits, claims
trials, written demands, arbitrations, proceedings and actions relating to
indemnification under or with respect to indemnification provisions in the
Companies Articles of Organization or Operating Agreements (collectively, the “D&O
Indemnification Claims”)

“Earn Out Closing Price Thresholds” and “Earn Out Closing Price
Threshold” have the meanings set forth in Section 2.2(e).

“Earn Out Consideration” has the meaning set forth in Section
2.2(e).

“Earn Out Dispute Notice” has the meaning set forth in Section
2.2(e).

“Earn Out Notice Period” has the meaning set forth in Section
2.2(e).

“Earn Out Threshold Share Value” has the meaning set forth in
Section 2.2(e).

“Earn Out Statement” has the meaning set forth in Section
2.2(e).

 

4

 

“Effective Date” has the meaning set forth in the Preamble.

“Effected Earn Out Closing Price Thresholds” has the meaning set
forth in Section 2.2(e).

“Employee Bonuses” has the meaning set forth in Section 3.26(b).

“Employee Stock Grants” and “Employee Stock Grant” have
the meanings set forth in Section 2.2(g).

“Entity” means any general partnership, limited partnership,
limited liability partnership, limited liability company, corporation, joint
venture, trust, business trust, cooperative, association, foreign trust or
foreign business organization.

“Environmental Laws” means any and all Federal, state, local and
foreign statutes, laws (including case or common law), regulations, ordinances,
rules, judgments, orders, decrees, codes, injunctions, permits, concessions,
grants, franchises, licenses, or agreements relating to human health, the
environment or omissions, discharges or releases of pollutants, contaminants,
Hazardous Substances or wastes into the environment including, without
limitation, ambient air, surface water, ground water, facilities, structures,
or land, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the investigation, clean-up or
other remediation thereof.  Without
limiting the generality of the foregoing, “Environmental Laws” include:
(a) the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et
seq., as amended; (b) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 26 U.S.C. § 4611 and 42 U.S.C. § 9601 et
seq., as amended; (c) the Superfund Amendment and Reauthorization Act
of 1984, as amended; (d) the Clean Air Act, 42 U.S.C. § 7401 et  seq.,
as amended; (e) the Clean Water Act, 33 U.S.C. 5 1251 et seq.; (f) the
Safe Drinking Water Act, 42 U.S.C. § 300f et  seq.; and
(g) the Occupational Safety and Health Act of 1976, 29 U.S.C.A. § 651, as
amended, and all rules and regulations promulgated thereunder.

“Environmental Liabilities” means all liabilities, whether
vested or unvested, fixed or unfixed, actual or potential, that arise under or
relate to Environmental Laws, as applied to the facilities and business of the Companies, including, without limitation: (i) the
investigation, clean-up or remediation of contamination or environmental
degradation or damage caused by or arising from the generation, use handling,
treatment, storage, transportation, disposal, discharge, release or emission of
Hazardous Substances; (ii) personal injury, wrongful death or property damage
claims; or (iii) claims for natural resource damages.

“Equity Interest” of any Person means any and all shares, rights
to purchase, warrants or options (whether or not currently exercisable),
participations or other equivalents of or interests in (however designated) the
equity (including without limitation common stock, preferred stock and limited
liability company, partnership and joint venture interests) of such Person.

“ERISA” has the meaning set forth in Section 3.28(a).

 

5

 

“ERISA Affiliate” has the meaning set forth in Section 3.28(a).

“Escrow Account” and “Escrow Accounts” have the meanings
referred to in Section 2.3.

“Escrow Agent” means and refers to SunTrust
Bank.

“Escrow Agreements” has the meaning set forth in Section 2.3.

“Escrow Deposits” has the meaning set forth in Section 2.3.

“Escrowed Funds” has the meaning set forth in Section 2.3.

“Estimated Closing Balance Sheet” has the meaning set forth in
Section 2.4(b).

“Estimated Closing Cash Purchase Price” has the meaning set
forth in Section 2.4(a).

“Evergreen” has the meaning set forth in Section 3.33.

“Evergreen Agreement” has the meaning set forth in Section 3.33.

“Evergreen Fees” has the meaning set forth in Section 5.14.

“Evergreen Release” has the meaning set forth in Section 5.14.

“Evergreen Stock Payment” has the meaning set forth in Section
5.8.

“Evergreen Stock Payment Amount” has the meaning set forth in
Section 5.8.

“Exchange Act” means the Securities Exchange Act of 1934, as
amended and the rules and regulations promulgated thereunder.

“Executive Employment Agreements” has the meaning set forth in
Section 5.10.

“FAAC” refers to Fortress America Acquisition Corporation, a
Delaware corporation.

“FAAC Indemnitees” has the meaning set
forth in Section 9.2(b)(i).

“FAAC Securities” has the meaning set
forth in Section 4.6.

“Financial Statements” means collectively (i) the Audited
Financial Statements and (ii) the Interim Financial Statements, copies of all
of which are attached hereto as Exhibit A.

“Financing Statements” has the meaning set forth in Section
3.15(b).

“Forfeited Shares” has the meaning set forth in Section 2.2(g).

 

6

 

“Form
5500” means the Internal Revenue Service Form 5500 Annual Return/ Report of
Employee Benefit Plan.

“GAAP” means generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other Person as may be approved by a significant segment of
the accounting profession in the United States.

“Gallagher” refers to Gerard J. Gallagher.

“General Indemnity Escrow” means the escrow established under
the General Indemnity Escrow Agreement to hold the General Indemnity Escrow
Funds.

“General Indemnity Escrow Account” has the meaning set forth in
Section 2.3.

“General Indemnity Escrow Agreement” has the meaning set forth
in Section 2.3.

“General Indemnity Escrow Deposit” has the meaning set forth in
Section 2.3.

“General Indemnity Escrow Funds” has the meaning set forth in
Section 2.3.

“Governmental Authority” means any nation or government, any
foreign or domestic Federal, state, county, municipal or other political
instrumentality or subdivision thereof and any foreign or domestic entity or
body exercising executive, legislative, judicial, regulatory, administrative or
taxing functions of or pertaining to government.

“Government Contract” has the meaning set forth in Section
3.18(a).

“Government Contractor” means a prime contractor or
subcontractor to a contract or subcontract, at any tier, as applicable, issued
by a Governmental Authority.

“Government-Furnished Property” has the meaning set forth in
Section 3.18(n).

“Government Subcontract” has the meaning set forth in Section
3.18(a).

“Hazardous Substances” means any substance that is toxic,
ignitable, reactive, corrosive, radioactive, caustic, or regulated as a
hazardous substance, contaminant, toxic substance, toxic pollutant, hazardous
waste, special waste, or pollutant, including, without limitation, petroleum,
its derivatives, by-products and other hydrocarbons, poly-chlorinated
bi-phenyls and asbestos regulated under, or that is the subject of, applicable
Environmental Laws.

“Highest Average Trading Price” has the meaning set forth in
Section 2.2(e).

“Indebtedness” means (a) indebtedness of either of the Companies
for borrowed money (including, without limitation, any pre-payment penalties
and costs associated with pre-payment of such indebtedness) but excluding the
Assumed Debt; (b) obligations of either of the Companies evidenced by bonds
(all of which performance bonds are shown on Schedule 1.1 of 

 

7

 

the
Disclosure Schedules), notes, debentures, bankers acceptances or similar
instruments; (c) obligations of either of the Companies under installment
sales, conditional sale, title retention or similar agreements or arrangements
creating an obligation with respect to the deferred purchase price of property
or services (other than customary trade credit); (d) obligations of either of
the Companies secured by a Lien on any property; and (e) guarantees by either
of the Companies in respect of Indebtedness.

“Indemnified Party” means and refers to a party that has the
right under ARTICLE IX to seek indemnification from an Indemnifying Party.

“Indemnifying Party” means and refers to a party that has
the  obligation under ARTICLE IX to
indemnify an Indemnified Party.

“Intellectual Property” means Software and Technology.

“Intellectual Property Rights” means rights that exist
under Laws respecting Copyrights, Patents, Trademarks and Trade Secrets.

“Interim Financial Statements” means the internally prepared
unaudited consolidated interim balance sheets and related interim consolidated
statements of operations, changes in Members equity and cash flows of the
Companies for the period January 1, 2006 through March 31, 2006, a copy of
which is included as part of the Financial Statements attached as Exhibit A
hereto.

“IRS” means and refers to the Internal Revenue Service.

“Key Employee Employment Agreements” has the meaning set forth
in Section 5.10(c).

“Key Employees” has the meaning set forth in Section 5.10(a).

“Knowledge of the Companies” means the actual knowledge of each
of Rosato and Gallagher.

“Knowledge of FAAC” means the actual knowledge of Harvey L.
Weiss or C. Thomas McMillen.

“Laws” means (a) all constitutions, treaties, laws,
statutes, codes, regulations, ordinances, orders, decrees, rules, or other
requirements with similar effect of any Governmental Authority, (b) all
judgments, orders, writs, injunctions, decisions, rulings, decrees and awards of
any Governmental Authority, and (c) all provisions of the foregoing, in
each case binding on or affecting the Person referred to in the context in
which such word is used; “Law” means any one of them and the words “Laws” and “Law”
include Environmental Laws.

“Lien” means any lien, statutory or otherwise, security
interest, mortgage, deed of trust, priority, pledge, charge, conditional sale,
title retention agreement, financing lease or other encumbrance or similar
right of others, or any agreement to give any of the foregoing.

 

8

 

“Lock Up Agreement” has the meaning
set forth in Section 2.2(d)(iv).

“Lock Up Escrow Agreement” has the meaning
set forth in Section 2.2(d)(iv).

“Lock Up Period” has the meaning set forth in Section 2.2(e).

“Lock Up Termination Date” means July 13, 2008.

“Losses” has the meaning set forth in Section 9.2(a)(i).

“Material Adverse Effect” means any change,
event or effect that is, or would reasonably be expected to be, materially
adverse to (i) the business, assets (whether tangible or intangible),
liabilities, financial condition, operations, results of operations or
prospects of the Companies, or (ii) the Companies’ ability to consummate the
transactions contemplated by this Agreement, except, in each case, any change,
event or effect directly resulting from (A) decreases in working capital
substantially consistent with the Companies’ internal projections; (B) any
adverse conditions, occurring after the date hereof, affecting the Companies industries
as a whole or the U.S. or world economies as a whole, that do not
disproportionately affect the Companies; or (C) taking any action required by
this Agreement.

“Material Negotiations” has the meaning set forth in Section
5.9(b).

“Maximum
Earn Out Closing Price Threshold” has the meaning set forth in Section
2.2(e).

“Members”
and “Member” have the meanings referred to in the Preamble.

“Members Indemnitees” has the meaning set forth in
Section 9.2(a).

“Membership Interests” means all of the issued and outstanding
Equity Interests of the Companies, all of which are owned by the Members.

“Members’
Proportionate Interests” means each of the Members’ proportionate interest
relative to the other Members, as determined by the number of Membership
Interests held by each Member on the Closing Date over the total number of
Membership Interests held by the Members in each Company as of the Closing
Date.  Each of the Members owns fifty
percent (50%) of each Company and accordingly each member has an aggregate fifty
percent (50%) interest in the Companies.

“Members’ Representative” has the meaning set forth in Section
2.6.

“Members’ Transaction Costs” has the meaning set forth in
Section 5.7.

“Minimum
Threshold Share Price” has the meaning set forth in Section 2.2(e).

“Non-Key
Employees” has the meaning set forth in Section 5.10(a).

“New
VTC Lease” has the meaning set forth in Section 5.18.

 

9

 

“Participating Employees” has the meaning set forth in Section
2.2(g).

“Patents” means issued patents, including United States and
foreign patents and applications therefor; divisions, reissues, continuations,
continuations-in-part, reexaminations, renewals and extensions of any of the
foregoing; and utility models and utility model applications.

“Pension Plan” has the meaning set forth in Section 3.28(a).

“Permits” has the meaning set forth in Section 3.23(a).

“Person” means any individual, person, Entity, or Governmental
Authority, and the heirs, executors, administrators, legal representatives,
successors and assigns of the “Person” when the context so permits.

“Personal Property” has the meaning set forth in Section
3.15(a).

“Personnel” has the meaning set forth in Section 3.26(a).

“Phantom Membership Interest Plan” has the meaning set forth in
Section 3.26(b).

“Phantom Membership Interest Release” has the meaning set forth
in Section 3.26(b).

“Plan” has the meaning set forth in Section 3.28(a).

“Post-Closing Tax Period” has the meaning set forth in Section
5.11(c)(ii)(A).

“Pre-Closing Tax Period” has the meaning set forth in Section
5.11(c)(i).

“Prior Period Returns” has the meaning set forth in Section
5.11(b).

“Proposals” has the meaning set forth in Section 3.17(c).

“Proposed Closing Balance Sheet” has the meaning set forth in
Section 2.4(d).

“Proposed Transaction” has the meaning set forth in Section
5.9(b).

“Proxy Materials” has the meaning set forth in Section 5.17.

“Public Disclosure Documents” has the
meaning set forth in Section 4.7(a).

“Purchase Consideration” has the meaning
set forth in Section 2.2.

“Real Property Interests” has the meaning set forth in
Section 3.14.

“Registration Rights Agreement” has the meaning set forth in
Section 2.2(b)(vi).

 

10

 

“Related Party Termination Agreements” has the meaning set forth
in Section 6.3(q).

“Related Party Transactions” and “Related Party Transaction”
have the meanings set forth in Section 3.6.

“Respondent” has the meaning set forth in Section 11.11(a).

“Representative” has the meaning set forth in Section 5.9(a).

“Rosato” refers to Thomas P. Rosato.

“SBIR” has the meaning set forth in Section 3.18(g).

“Schedule” as used in this Agreement together with a numerical
designation, means a schedule contained in the Disclosure Schedules of even
date herewith delivered by the Companies and/or the Members in connection with the execution and
delivery of this Agreement (the “Disclosure Schedules”).

“Scheduled Contracts” has the meaning set forth in
Section 3.17(a).

“SEC” means the United States Securities and Exchange
Commission.

“Securities Act” means the Securities Act of 1933, as amended,
and the rules promulgated thereunder.

“Self Insured Plan” and “Self Insured Plans” have the
meaning set forth in Section 3.28(m).

“Senior Executives” has the meaning set forth in Section
5.10(a).

“Senior Executive Employment Agreements” has the meaning set
forth in Section 5.10(b).

“Signia Threatened Litigation” has the meaning set forth in
Section 5.20.

“Software” means the manifestation, in tangible or physical
form, including, but not limited to, in magnetic media, firmware, and
documentation, of computer programs and databases, such computer programs and
databases to include, but not limited to, management information systems, and
personal computer programs.  The tangible
manifestation of such programs may be in the form of, among other things,
source code, flow diagrams, listings, object code, and microcode.  Software does not include any Technology.

“State Government” has the meaning set forth in Section 3.18(a).

“Stock Consideration” has the meaning set forth in Section
2.2(d).

“Stock Consideration Amount” has the meaning set forth in
Section 2.2(d).

 

11

 

“Stock Consideration Escrow Amount” shall be the amount equal to
the difference resulting from (i) the subtraction of Two Million Seven Hundred
Sixteen Thousand One Hundred Dollars $2,716,100 from (ii) the amount equal to
ten percent (10%) of the Closing Purchase Consideration.

“Stock Grant Documents” has the meaning set forth in Section
2.2(g).

“Stock Grant Shares” has the meaning set forth in Section
2.2(g).

“Stock Grant Shares Value” has the meaning set forth in Section
2.2(d).

“Straddle Period” and “Straddle Periods” have the
meanings set forth in Section 5.11(c)(i).

“Subcontract” has the meaning set forth in Section 3.18(a)(iv).

“Subsidiary” means and refers to any corporation, association or
other business entity of which more than fifty (50) percent of the issued and
outstanding shares of capital stock or equity interests is owned or controlled,
directly or indirectly, by either of the Companies, or FAAC, as the case may
be, and in which either of the Companies or FAAC, as the case may be, has the
power, directly or indirectly, to elect a majority of the directors.

“Survival Date” has the meaning set forth in Section 9.1.

“Surviving Representations” has the meaning set forth in
Section 9.1.

“Tax”
or “Taxes has the meaning set forth in Section 3.29(d).

“Tax
Return” and “Tax Returns” has the meaning set forth in Section
3.29(d).

“Taxing Authority” means any government or any subdivision,
agency, commission or authority thereof, or any quasi-governmental or private
body having jurisdiction over the assessment, determination, collection or
other imposition of Taxes.

“Teaming Agreement” has the meaning set forth in Section
3.18(a).

“Technology” means all types of technical information and
data,  whether or not reduced to tangible
or physical form, including, but not limited to:  know-how; product definitions and designs;
research and development, engineering, manufacturing, process, test, quality
control, procurement, and service specifications, procedures, standards, and
reports; blueprints; drawings; materials specifications, procedures, standards,
and lists; catalogs; technical information and data relating to marketing and
sales activity; and formulae.  Technology
does not include any Software.

“Terminated at Closing Related Party Transactions” has the
meaning set forth in Section 3.6.

 

12

 

“Third-Party Claims” means a claim made by an Indemnified Party
against an Indemnifying Party in connection with any third party litigation,
arbitration, action, suit, proceeding, claim or demand made upon the
Indemnified Party for which the Indemnified Party may seek indemnification from
the Indemnifying Party under the terms of this Agreement.

“Threshold Share Price Range” has the meaning set forth in
Section 2.2(e).

“Trademarks” means all United States and foreign trademark and
service mark registrations and applications therefor.

“Trade Secrets” means information in any form that is considered
to be proprietary information by the owner, is maintained on a confidential or
secret basis by the owner, and is not generally known to other parties.

“Transaction Documents” has the meaning set forth in
Section 3.2.

“Uncapped Non-Threshold Indemnifications” has the meaning set
forth in Section 9.2(f).

“Updated Disclosure Schedules” has the meaning set forth in
Section 5.19.

“U.S. Government” has the meaning set forth in Section 3.17(a).

“VEBA” has the meaning set forth in Section 3.28(d).

“Vortech” refers to Vortech, LLC, a Maryland limited liability
company.

“VTC” refers to VTC, L.L.C., a Maryland limited liability
company.

“VTC Lease Appraisal” has the meaning set forth in Section 5.18.

“VTC Lease Commitment” has the meaning set forth in Section
5.18.

“Welfare Plan” has the meaning set forth in Section 3.28(a).

1.2           Rules
of Construction.

Unless the context otherwise requires:

(a)            A capitalized term
has the meaning assigned to it;

(b)            An accounting term
not otherwise defined has the meaning assigned to it in accordance with GAAP;

(c)            References in the
singular or to “him,” “her,” “it,” “itself,” or other like references, and
references in the plural or the feminine or masculine reference, as the case
may be, shall also, when the context so requires, be deemed to include the
plural or singular, or the masculine or feminine reference, as the case may be;

 

13

 

(d)            References to
Articles, Sections and Exhibits shall refer to articles, sections and exhibits
of this Agreement, unless otherwise specified;

(e)            The headings in
this Agreement are for convenience and identification only and are not intended
to describe, interpret, define or limit the scope, extent, or intent of this
Agreement or any provision thereof;

(f)             This Agreement
shall be construed without regard to any presumption or other rule requiring
construction against the party that drafted and caused this Agreement to be
drafted;

(g)            References to “best
efforts” in this Agreement shall require commercially reasonable best efforts,
and not commercially unreasonable expenditures of money, time or other
resources; and

(h)            A monetary figure given in United States dollars shall be deemed to refer to the equivalent amount of foreign currency when used in a
context that refers to or includes operations conducted principally outside of
the United States.

ARTICLE II

Closing; Purchase Price; Adjustments; Escrow

2.1           Closing.

The closing (the “Closing”) of the Contemplated Transactions
shall take place at the offices of Squire, Sanders & Dempsey L.L.P., 8000
Towers Crescent Drive, Tysons Corner, Virginia 22182-2700, at 10:00 A.M. local
time on the third (3rd) Business Day after the conditions and
deliveries referred to in ARTICLES VI, VII and VIII have been satisfied, or at
such other time, date and place that shall be mutually agreed upon by the
parties hereto (the “Closing Date”). 
At the Closing, each of the Members shall sell, transfer, convey or
assign and deliver to FAAC, and FAAC shall purchase, acquire and accept from
the Members, the Membership Interests, free and clear of any and all Liens or
rights of any third party (and each of the Members shall thereafter cease to
have any rights or interests as a member of either of the Companies other than
any rights granted to the Members pursuant to the terms of this Agreement and
the other Transaction Documents) and FAAC shall (a) deliver to the Members’
Representative on behalf of the Members the Closing Purchase Consideration
pursuant to Section 2.2 and (b) grant to certain of the Companies’
employees the Employee Stock Grants pursuant to Section 2.2 below.

2.2           Purchase Consideration; Employee Payments and Stock
Grants.

                                As
payment in full for all of the Membership Interests, FAAC shall pay to the
Members’ Representative at Closing the “Closing Purchase Consideration”
that shall consist of (a) the “Cash Consideration”; (b) the “Convertible
Promissory Note”; (c) the “Assumed Debt”; and (d) the “Stock Consideration.”  Subsequent to the Closing the Members may be
entitled to receive additional “Earn Out Consideration.”  The Closing Purchase Consideration together
with any Earn Out Consideration is hereinafter jointly referred to as the “Purchase
Consideration.”

 

14

 

 

(a)           Cash
Consideration.  At the Closing cash
in the amount of the Cash Consideration shall be paid by wire transfer of
immediately available funds to an account or accounts designated by the Members’
Representative.  The Members’
Representative shall be responsible for directing the distribution of the Cash
Consideration to the Members (pro-rata in proportion to the Members’
Proportionate Interests), as adjusted to reflect that the Balance Sheet Escrow
and the General Indemnity Escrow Deposit shall be made in part from the Cash
Consideration that would otherwise be payable at Closing to the Members and
FAAC shall be entitled to fully rely on such directions.

(b)           Convertible
Promissory Note.  Eight Million
Dollars ($8,000,000) of the Closing Purchase Consideration shall be evidenced
by and payable under the terms of the Convertible Note in the form attached
hereto as Exhibit B (the “Convertible Promissory Note”).

(c)           Assumed
Debt.  Up to One Hundred Sixty One
Thousand Dollars ($161,000) of the Closing Purchase Consideration may be paid
and evidenced by long term debt of the Companies that (i) is assumable by FAAC
and (ii) FAAC agrees, in writing, to assume on or before the Closing Date
(the “Assumed Debt”).

(d)           Stock
Consideration.  Subject to Sections
2.3 and 5.8 a portion of the Closing Purchase Consideration equal to Eleven
Million Five Hundred Thousand Dollars ($11,500,000) less (1) the amount
of the Assumed Debt and (2) the value (the “Stock Grant Shares Value”)
of Stock Grant Shares, as determined pursuant to Section 2.2(d)(i) below (the “Stock
Consideration Amount”) shall be paid in the form of FAAC’s common stock (“Stock
Consideration”).

(i)            Stock
Grant Shares Value.  The Stock Grant
Shares Value shall be determined by multiplying the number of Stock Grant
Shares (485,252 shares) by the Average Share Value.

(ii)           FAAC
Shares Constituting Stock Consideration. 
The number of FAAC shares of common stock to be issued as Stock
Consideration shall be determined on the Closing Date by dividing the Stock
Consideration Amount by the Average Share Value.

(iii)            Delivery of Stock Certificates.  At the Closing (A) FAAC shall deliver, or
shall cause to be delivered to the Escrow Agent stock certificates for Stock
Consideration equaling the Stock Consideration Escrow Amount to hold in the
General Indemnity Escrow pursuant to Section 2.3 below (B) 500,000 shares
otherwise deliverable to the Members’ Representative on behalf of Rosato and
500,000 shares otherwise deliverable to the Members’ Representative on behalf
of Gallagher shall be delivered by FAAC to the escrow agent under the Lock Up
Escrow Agreements signed by Rosato and Gallagher respectively and (C) 33,643
shares otherwise deliverable to Rosato and 33,643 shares otherwise deliverable
to Gallagher shall be delivered by FAAC, on Rosato’s and Gallagher’s behalf, to
Evergreen (or other recipients identified by Evergreen), pursuant to Section
5.8(c).  The remaining Stock
Consideration  shall be delivered to the
Members’ Representative, to be distributed by the Members’ Representative pro
rata in proportion to the Members Membership Interests.

 

15

 

(iv)          Acquisition
Agreement; Registration Rights Agreement and Lock Up Agreement.  At the Closing, each Member and FAAC will
execute and deliver (A) an Acquisition Agreement in the form attached
hereto as Exhibit C (the “Acquisition Agreement”);
(B) a Registration Rights Agreement in the form attached hereto as Exhibit D
(the “Registration Rights Agreement”); (C) a Lock Up Agreement in the
form attached hereto as Exhibit E (the “Lock Up Agreement”) under
the terms of which all of the Stock Consideration is subject to various
restrictions described therein until the Lock Up Termination Date) and (D) a
Lock Up Escrow Agreement in the form attached hereto as Exhibit F (the “Lock
Up Escrow Agreement”).

(v)           Members’
Forfeiture of Stock Consideration. 
Notwithstanding anything to the contrary contained in this Section
2.2(d) and as described in further detail in the Lock Up Agreement, if during
the period the Stock Consideration is subject to the Lock Up Agreement (the
Closing Date through the Lock Up Termination Date, the “Lock Up Period”),
a Member’s employment under his Senior Executive Employment Agreement is
terminated pursuant to Section 5.1 thereof, then that Member shall forfeit as
of the “Termination Date” (as defined in the applicable Senior Executive
Employment Agreement) his share of the Stock Consideration deliverable to him
under the Lock Up Escrow Agreement (500,000 shares of FAAC stock in the case of
each of Rosato and Gallagher) shall be immediately deliverable to FAAC by the
escrow agent under and pursuant to the terms of the Lock Up Escrow
Agreement.  Each of the Members hereby
agrees to cooperate fully and execute any documents as FAAC may request to
cause any Stock Consideration forfeited under this Section 2.2(e)(iv) to be delivered
and returned to FAAC.

(e)           Earn
Out Consideration.  Subject to
Section 2.2(e)(iv) below, at the end of the Lock Up Period the Members shall be
entitled to receive up to Ten Million Dollars ($10,000,000.00) worth of
additional FAAC common stock (the “Earn Out Consideration”) depending on
whether during the Lock Up Period the highest average closing price of FAAC’s
common stock (on the Nasdaq OTC market or such other recognized stock market on
which FAAC’s stock is then being traded on) for sixty (60) consecutive trading
days (the “Highest Average Trading Price”) exceeds the applicable “Earn
Out Closing Price Thresholds” set forth below.

(i)            For
purposes of this Agreement (A) the “Earn Out Closing Price Thresholds”
are as follows (each of which is individually referred to as “Earn Out Closing
Price Threshold”); (B) the “Earn Out Threshold Share Value” for each
Earn Out Closing Price Threshold shall be the dollar amount ($1,000,000,
$2,000,000, $3,000,000 or $4,000,000 as the case may be) for that Earn Out
Closing Price Threshold as set forth below; (C) the “Minimum Threshold Share
Price” with respect to each Earn Out Closing Price Threshold is the maximum
price per share that is within that Earn Out Closing Price Threshold ($9.01,
$10.01, $12.01, or $14.01 as the case may be); and (D) the “Threshold Share
Price Range” for each Earn Out Closing Price Threshold shall be the price
per share range referenced therein ($9.01 - $10.00, $10.01 - $12.00, $12.01 -
$14.00 and $14.01, as the case may be).

(A)             If
during the Lock Up Period the Highest Average Trading Price never exceeds Nine
Dollars ($9.00) per share, then no FAAC common stock shall be issuable to the
Members at the end of the Lock Up Period.

 

16

 

(B)             If
during the Lock Up Period the Highest Average Trading Price is in excess of
Nine Dollars ($9.00), then the Members shall be entitled to receive One Million
Dollars ($1,000,000.00) of FAAC common stock.

(C)             If
during the Lock Up Period the Highest Average Trading Price is in excess of Ten
Dollars ($10.00), then the Members shall be entitled to receive, in addition to
the FAAC common stock referenced in Section 2.2(e)(i)(B) above, an additional
Two Million ($2,000,000.00) of FAAC common stock.

(D)            
If during the Lock Up Period the Highest Average Trading Price is in excess of
Twelve Dollars ($12.00), then the Members shall be entitled to receive, in
addition to the FAAC common stock referenced in Sections 2.2(e)(i)(B) and (C)
above, an additional Three Million Dollars ($3,000,000.00) of FAAC common stock.

(E)              If
during the Lock Up Period the Highest Average Trading Price is in excess of
Fourteen Dollars ($14.00) per share, then the Members shall be entitled to
receive , in addition to the FAAC common stock referenced in Sections
2.2(e)(i)(B) — (D) above, an additional Four Million Dollars ($4,000,000.00) of
FAAC common stock (based on the Highest Average Trading Price).

(ii)           FAAC
Shares Constituting Earn Out Consideration. 
The number of FAAC shares of common stock to be issued as Earn Out
Consideration shall be determined at the end of the Lock Up Period as follows:

(A)             determining
the Highest Average Trading Price during the Lock Up Period;

(B)             determining
which Earn Out Closing Price Thresholds are applicable (the applicable Earn Out
Price Thresholds being (y) the Earn Out Closing Price Thresholds for which the
Highest Average Trading Price falls within the applicable Threshold Share Price
Range (the “Maximum Earn Out Closing Price Threshold”) and (z) all other
Earn Out Price Thresholds for which the Highest Average Trading Price exceeds
the applicable Threshold Share Price Range (collectively with the Maximum Earn
Out Closing Price Threshold referred to as the “Effected Earn Out Closing
Price Thresholds”)); and

(C)             dividing
the applicable Earn Out Threshold Share Value for each of the Effected Earn Out
Closing Price Thresholds by the applicable Minimum Threshold Share Price for
each of the Effected Earn Out Closing Price Thresholds (other than the Maximum
Earn Out Closing Price Threshold for which the Earn Out Share Value shall be
divided by the Highest Average Trading Price).

FOR EXAMPLE

                                If
at the end of the Lock Up Period the Highest Average Trading Price was $14.50;
then (A) the Effected Earn Out Closing Price Thresholds consists of all of the
Earn Out Closing Price Thresholds; and (B) the division of (y) the Earn Out
Threshold Share Value for each of the Effected Earn Out Closing Price
Thresholds by the Minimum Threshold 

 

17

 

Share Price for each of the Effected Earn Out
Closing Price Thresholds other than the Maximum Earn Out Closing Price
Threshold and (z) the Earn Out Share Value for the Maximum Earn Out Closing
Price Threshold by the Highest Average Trading Price results in the following:

                                $1,000,000
∕ $9.01 per share   =       110,987 shares

                                $2,000,000
∕ $10.01 per share   =     199,800 shares

                                $3,000,000
∕ $12.01 per share   =      249,791 shares

                                $4,000,000
∕ $14.50 per share   =      275,862 shares

                                Total
Earn Out Consideration           836,440
shares

The
determination of the Highest Average Trading Price and the calculation of the
number of shares of FAAC stock that are issuable to the Members as Earn Out
Consideration shall be made as follows. 
Not later than twenty (20) Business Days after the Lock Up Period, the
Company’s senior financial executive shall provide the Members’ Representative
with a statement (the “Earn Out Statement”) setting forth the
calculation of the Earn Out Consideration that shall include the calculations
used to determine the Earn Out Consideration. 
The Members’ Representative shall have fifteen (15) days following
delivery of the Earn Out Statement (the “Earn Out Notice Period”) to
disagree with Earn Out Statement by written notice to the Company setting forth
in reasonable detail the amount and nature of the disagreement (each an “Earn
Out Dispute Notice”).   If the
Company does not receive an Earn Out Dispute Notice from the Members’
Representative within the Earn Out Notice Period, the Members’ Representative
shall be conclusively presumed to agree with the Earn Out Statement and the
Company shall promptly issue the Earn Out Consideration shown to be due on the
Earn Out Statement to the Members’ Representative pursuant to Section
2.2(e)(iii) below.  If the Company
receives an Earn Out Dispute Notice from the Members’ Representative within the
Earn Out Notice Period then the dispute shall be resolved pursuant to Section
11.11 below.

(iii)          Delivery
of Earn Out Consideration.  FAAC
shall deliver, or shall cause to be delivered to the Members’ Representative
stock certificates for any Earn Out Consideration issuable to the Members
pursuant to this Section 2.2(e) (to be distributed by the Members’
Representative pro rata to the Members in proportion to the Members’ Membership
Interests).

(iv)          Forfeiture
of Earn Out Consideration. 
Notwithstanding anything to the contrary contained in this Section
2.2(e), if during the Lock Up Period a Members’ employment under his Senior
Executive Employment Agreement is terminated pursuant to Section 5.1 thereof,
then that Member shall forfeit his share of the Earn Out Consideration and the
Earn Out Consideration otherwise issuable by the Company shall be reduced
proportionately to reflect the forfeiture of the Earn Out Consideration allocable
to the terminated Member.

 

18

 

(f)            Fractional and Restricted Shares.

(i)              Fractional
Shares.  If the calculation of the
number of shares of FAAC common stock to be received as Stock Consideration pursuant
to Section 2.2(d)(ii), or Earn Out Consideration pursuant to Section 2.2(e)(ii)
would result in the issuance of fractional shares, then the number of shares of
FAAC common stock that the Members would otherwise receive as Stock
Consideration, or Earn Out Consideration shall be rounded down to the nearest
whole number of shares (which shall be the Stock Consideration or Earn Out
Consideration payable to the Member(s) and the Member(s) shall receive as cash
the amount attributable to the fractional interest.

(ii)           Restricted
Shares.  The shares of FAAC’s common
stock to be issued pursuant to this Agreement as Stock Consideration and Earn
Out Consideration (A) have not been, and will not be at the time of issuance,
registered under the Securities Act, and will be issued in a transaction that
is exempt from the registration requirements of the Securities Act and (B) will
be “restricted securities” under the federal securities laws and cannot be
offered or resold except pursuant to registration under the Securities Act or
an available exemption from registration. All certificates evidencing the Stock
Consideration and Earn Out Consideration shall bear, in addition to any other
legends required under applicable securities laws, the following legend:

“THE SHARES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO
REGISTRATION UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION.”

(g)           Employees
Stock Grants.  As consideration for
executing their respective Key Employment Agreements FAAC agrees to grant to
certain employees to be designated by Rosato and approved in writing by FAAC
(the “Participating Employees”) restricted stock grants for 485,252 FAAC
Common Shares (collectively the “Stock Grant Shares”) in such amounts as
determined by Rosato and approved in writing by FAAC (collectively the “Employee
Stock Grants” and each an “Employee Stock Grant”).  The Employee Stock Grants shall be made
pursuant to a Stock Grant Plan and Stock Grant Agreement substantially in the
form attached hereto as Exhibits G and H respectively
(collectively the “Stock Grant Documents”) and under the terms of which
the Stock Grant Shares granted thereunder are subject to forfeiture to FAAC for
various reasons prior to the Lock Up Termination Date.  If any Stock Grant Shares issued to Employee
Participants under the Employee Stock Grants are forfeited to FAAC on or before
the third (3rd) anniversary of the Closing Date (collectively the “Forfeited
Shares”); FAAC shall cause shares of FAAC stock equal in number to the
Forfeited Shares to be issued equally to Rosato and Gallagher within thirty
(30) days after the effective date of the forfeiture as additional
consideration for their respective Membership Interests.  In connection with the issuance to Rosato or
Gallagher prior to the end of the Lock Up Period, of any FAAC common shares
pursuant to the previous sentence, Rosato and Gallagher will be required to
execute and deliver a Lock Up Agreement for such shares.

 

19

 

 

 

 

2.3          Escrows.  At the Closing, FAAC shall deposit with the
Escrow Agent the following (collectively the “Escrow Deposits”):  (1) $400,000 in cash from the Cash
Consideration (the “Balance Sheet Escrow Deposit”) to be held by the
Escrow Agent in an escrow account (the “Balance Sheet Escrow Account”)
pursuant to the terms of an escrow agreement substantially in the form of Exhibit
I-1 (the “Balance Sheet Escrow Agreement”); and (2) Two Million
Seven Hundred Sixteen Thousand One Hundred Dollars ($2,716,100) in cash from
the Cash Consideration and shares of FAAC stock having a value (as determined
by the Average Share Value) equal to the Stock Consideration Escrow Amount (the
“General Indemnity Escrow Deposit”) to be held by the Escrow Agent in an
escrow account (the “General Indemnity Escrow Account”) pursuant to the
terms of an escrow agreement substantially in the form of Exhibit I-2
(the “General Indemnity Escrow Agreement” and together with the Balance
Sheet Escrow Agreement the “Escrow Agreements”).  The escrow accounts set up by the Escrow
Agent with respect to each of the Escrow Agreements are hereinafter
individually referred to as an “Escrow Account” and collectively as the “Escrow
Accounts.”  The aggregate amount held
in the Escrow Accounts by the Escrow Agent at any time and from time to time,
together with any interest or appreciation thereon, shall be referred to as the
“Escrowed Funds” with that portion of the Escrowed Funds held from time
to time in the Balance Sheet Escrow Account being hereinafter sometimes
referred to as the “Balance Sheet Escrow Funds” and that portion of the
Escrowed Funds held from time to time in the General Indemnity Escrow Account
being hereinafter sometimes referred to as the “General Indemnity Escrow
Funds;”

(A)             The
Balance Sheet Escrow Funds shall be released and delivered to FAAC or the
Members’ Representative, as applicable, pursuant to Section 2.4(e).

(B)             The
General Indemnity Escrow Funds shall be released and delivered to FAAC or the
Members’ Representative, as applicable, pursuant to Section 9.3.

2.4          Cash
Consideration and Net Working Capital Adjustments.

(a)           Cash
Consideration.   The “Cash
Consideration” shall be an amount equal to Nineteen Million Dollars
($19,000,000) (the “Estimated Closing Cash Purchase Price”) as adjusted
upward or downward pursuant to Sections 2.4(b) and (c) below a portion of which
shall be deposited into the Escrow Accounts in accordance with Section 2.3.

(b)           Estimated
Closing Balance Sheet.  Not less than
two (2) Business Days prior to the Closing Date, the Members shall deliver to
FAAC an estimated, unaudited consolidated balance sheet (the “Estimated
Closing Balance Sheet”) of the Companies as of the Closing Date, together
with all supporting documentation.  The
Estimated Closing Balance Sheet shall be prepared by Members, in accordance
with GAAP and in a manner consistent with the December 2005 Balance Sheet except
that the Estimated Closing Balance Sheet shall include a calculation of the “Adjusted
Closing Net Working Capital” (hereinafter defined).  For purposes of this Agreement, the terms “Adjusted
Closing Net Working Capital” and “Closing Net Working Capital” shall have the
following meanings.

(i)            The
term “Adjusted Closing Net Working Capital” shall mean the “Closing Net
Working Capital” (as hereinafter defined and as adjusted pursuant to Section
2.4(d) below) of the Companies as shown on the Estimated Closing Balance Sheet
as reduced to reflect: 

 

20

 

(A)
the payment in full of any and all outstanding Indebtedness of the Companies
(other than the Assumed Debt), repaid at or prior to Closing pursuant to
Section 5.7; (B) the payment in full of any and all Members’ Transaction Costs
paid, or repaid by FAAC after the Closing Date or incurred by the Companies and
unreimbursed by the Members at or prior to the Closing pursuant to Section 5.7;
(C) the payment of all sums due at Closing with respect to the Phantom
Membership Interest Plan; (D) any portion of the Bonus Pool for which adequate
reserves are not otherwise maintained; or (E) payments made to employees in
connection with the Contemplated Transactions (other than normal compensation
or payments with respect to the Phantom Membership Interest Plan).

(ii)           The
term “Closing Net Working Capital” shall mean the amount as of the
Closing Date and as shown by the Closing Balance Sheet by which the Companies’
current assets (including without limitation unbilled receivables, security
deposits and prepaid expenses and excluding all assets which, in the normal
course of business, will not be converted to cash in one year and all
intangible assets) exceed their current liabilities (excluding all liabilities,
which in the normal course of business, will not be due in one year or less),
as such terms are defined under GAAP consistently applied.

(c)           Adjustments
to Estimated Closing Cash Purchase Price. 
The Estimated Closing Cash Purchase Price will be adjusted (i) downwards
on a dollar-for-dollar basis to the extent that the Adjusted Closing Net
Working Capital, as shown on the Estimated Closing Balance Sheet, is below the
Base Net Working Capital Amount and (ii) upwards on a dollar-for-dollar basis
to the extent that the Adjusted Closing Net Working Capital is above the Base
Net Working Capital Amount.

(d)           Closing
Balance Sheet and Adjusted Closing Net Working Capital.  Promptly following the Closing, FAAC will
cause Grant Thornton, LLP (or an
equivalent firm selected by FAAC) to review the
Estimated Closing Balance Sheet, including the Adjusted Closing Net Working
Capital, the Closing Net Working Capital as reflected thereon.  Based on such review, FAAC will deliver a
proposed Closing Balance Sheet, prepared in a manner consistent with Section
2.4(b) above together with all related work papers, to the Members’
Representative within sixty (60) days after the later of (i) the Closing Date,
or (ii) the date of receipt by FAAC of all information sufficient for FAAC to
complete its review of all aspects of the Estimated Closing Balance Sheet, but
in no event more than One Hundred Fifty (150) days after the Closing Date (the “Proposed
Closing Balance Sheet”). If within thirty (30) days
following delivery of the Proposed Closing Balance Sheet, the Members’
Representative has not given FAAC notice of his objection to the Proposed
Closing Balance Sheet (which notice must contain a statement in reasonable
detail of the basis of any such objection), then such Proposed Closing Balance
Sheet shall constitute the “Closing Balance Sheet,” and the Adjusted
Closing Net Working Capital and Closing Net Working Capital amounts included
therein shall constitute the “Adjusted Closing Net Working Capital” and “Closing
Net Working Capital.”  If the Members’
Representative gives notice of an objection, the parties shall use their
respective best efforts to resolve any dispute by negotiation.  If such dispute cannot be settled by
negotiation within thirty (30) days after
receipt by FAAC of the Members’ Representative’s notice, the dispute shall be
resolved in accordance with the Financial Issue Resolution Process set forth in
Section 2.5.

 

21

 

(e)           Final
Adjustment to the Estimated Closing Cash Purchase Price.  If the Adjusted Closing Net Working Capital
is such that Sections 2.4(d) and/or 2.5 do not require an adjustment to the
Estimated Closing Cash Purchase Price, then the Escrow Agent shall disburse to
the Members’ Representative the Balance Sheet Escrow within five (5) days after
the finalization of the Closing Balance Sheet pursuant to Sections 2.4(d)
and/or 2.5.  If the Adjusted Closing Net
Working Capital is such that Sections 2.4(d) or 2.5 require an adjustment to
the Estimated Closing Cash Purchase Price, any amount due to the Members by
FAAC in excess of the Balance Sheet Escrow shall be paid by FAAC to the Members’
Representative, and any amount due to FAAC from the Members shall be paid to
FAAC by the Escrow Agent from the Escrow and, if the amount due FAAC is in
excess of the Balance Sheet Escrow, then such excess shall be paid to FAAC by
the Members within five (5) days after the finalization of the Closing Balance
Sheet pursuant to Sections 2.4(d) and/or 2.5. 
In the event that the Members for any reason fails to make the payment
contemplated in the previous sentence, then FAAC may bring an indemnification
claim under ARTICLE IX and the Members shall be jointly and severally liable
for that payment.  Any earnings on the
Balance Sheet Escrow Funds, net of escrow expenses and taxes, shall be paid,
pro rata, to the parties receiving distributions from the Balance Sheet Escrow
Account.  All sums payable by the Escrow
Agent to the Members’ Representative under this Section 2.4(e) shall be paid by
the Escrow Agent to an account or accounts designated by the Members’
Representative.  The Members’
Representative shall be responsible for directing the distribution of the
Balance Sheet Escrow (pro-rata in proportion to the Members’ Proportionate Interests)
and the Escrow Agent shall be entitled to fully rely on such directions.

2.5          Financial
Issue Resolution Process.

Disputes
between FAAC and the Members’ Representative, that cannot be resolved by
negotiation within thirty (30) days after receipt by FAAC of the Members’
Representative’s notice in accordance with Section 2.4(d) shall be referred no
later than such 30th day for decision to a nationally recognized independent
public accounting firm mutually selected by the Members’ Representative and
FAAC (the “Auditor”) who shall act as arbitrator and determine, based
solely on presentations by the Members’ Representative and FAAC and only with
respect to the remaining differences so submitted.  If such accounting firm cannot be identified
within ten (10) business days after the identification of the need for dispute
resolution, the dispute shall be resolved in accordance with Section
11.11.  The Auditor shall deliver its
written determination to FAAC and the Members’ Representative no later than the
30th day after the remaining differences underlying the dispute are referred to
the Auditor, or such longer period of time as the Auditor determines is
necessary.  The Auditor’s determination
shall be conclusive and binding upon the parties.  The fees and disbursements of the Auditor
shall be allocated equally between FAAC and the Members’ Representative.  FAAC and the Members shall make readily
available to the Auditor all relevant information, books and records and any
work papers relating to the dispute and all other items reasonably requested by
the Auditor.  In no event may the Auditor’s
resolution of any difference be for an amount that is outside the range of FAAC’s
and the Members’ Representative’s disagreement.

 

22

 

2.6          Members’
Representative.

(a)           Thomas P. Rosato is
hereby  appointed as the Members’ true
and lawful representative, proxy, agent and attorney-in-fact (the “Members’
Representative”) for a term that shall be continuing and indefinite and
without a termination date except as otherwise provided herein, to act for and
on behalf of the Members in connection with or relating to the Transaction
Documents and the Contemplated Transactions, including, without limitation, to
give and receive notices and communications, to receive and accept service of
legal process in connection with any proceeding arising under the Transaction
Documents or in connection with the Contemplated Transactions, receive and
deliver amounts comprising the Purchase Consideration, to authorize delivery of
cash from each of the Escrow Accounts, to object to or accept any claims
against or on behalf of the Members pursuant to ARTICLE IX, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to such
amounts or claims, and to take all actions necessary or appropriate in the sole
opinion of the Members’ Representative for the accomplishment of the
foregoing.  Such agency may be changed at
any time and from time to time by the action of Members holding more than fifty
percent (50%) of the issued and outstanding Membership Interests just prior to
the Closing, and shall become effective upon not less than thirty (30) days
prior written notice to FAAC.  Any change
in the Members’ Representative shall become effective only upon delivery of
written notice of such change to FAAC. 
The Members’ Representative shall not receive compensation for his or
her services.  Notices, deliveries or
communications to or from the Members’ Representative by or to any of the
parties to the Transaction Documents shall constitute notices, deliveries or
communications to or from the Members.

(b)           The
Members’ Representative shall not be liable for any act done or omitted
hereunder in his capacity as Members’ Representative in the absence of gross
negligence or willful misconduct on his or her part.  The Members shall jointly and severally
indemnify the Members’ Representative and hold the Members’ Representative
harmless from and against any and all damages, actions, proceedings, demands,
liabilities, losses, taxes, fines, penalties, costs,
claims and expenses (including, without limitation, reasonable fees of counsel)
of any kind or nature whatsoever (whether or not arising out of third-party
claims and including all amounts paid in investigation, defense or settlement
of the foregoing) (“Damages”) that may be sustained or suffered by the
Members’ Representative in connection with the administration of its duties
hereunder, except where such Damages arise from or are the result of the
Members’ Representative’s gross negligence or willful misconduct.

(c)           Any
decision, act, consent or instruction taken or given by the Members’
Representative pursuant to this Agreement shall be and constitute a decision,
act, consent or instruction of the Members and shall be final, binding and
conclusive upon the Members.  The Escrow
Agent and FAAC may rely upon any such decision, act, consent or instruction of
the Members’ Representative as being the decision, act, consent or instruction
of the Members and shall have no duty to inquire as to the acts and omissions
of the Members’ Representative.  The
Escrow Agent and FAAC are hereby relieved from any liability to any Person for
any acts done by them in accordance with such decision, act, consent or
instruction of the Members’ Representative.

 

23

 

(d)           Notices
given to the Members’ Representative in accordance with Section 11.2 shall
constitute notice to the Members for all purposes under this Agreement.

(e)           This
Section 2.6 shall survive the termination or expiration of the Agreement or any
one or more of the Escrow Agreements.

ARTICLE III

Representations and Warranties of the Members and the Companies

Except as set forth in the Disclosure
Schedules, the Members and the Companies jointly and severally represent and
warrant to FAAC that each of the statements contained in this
ARTICLE  III is true and correct as of
the date of this Agreement and will be true and correct as of the Closing Date
as though made on the Closing Date:

3.1          Organization and Power.

(a)          Members.  Each of the Members has the full power and
authority to execute, deliver and perform this Agreement and the other
Transaction Documents to which it is a party and to consummate the Contemplated
Transactions.

(b)          Companies.  Each of the Companies (i) is a limited
liability company duly organized and validly existing and in good standing
under the laws of the State of Maryland, (ii) has all requisite corporate
power and authority to own or lease and to operate its properties and carry out
the businesses in which it is engaged, and (iii) is duly qualified or
licensed to do business as a foreign corporation in good standing in every
jurisdiction where its ownership of property, or the conduct of its business,
requires such qualification, other than jurisdictions in which the failure to
so qualify, individually or in the aggregate, would not have a material adverse
effect on it.  Schedule 3.1(b) of the
Disclosure Schedules lists each of the jurisdictions in which each of the
Companies is qualified or licensed to do business as a foreign limited
liability company.  Each of the Companies
is in good standing in each jurisdiction listed on Schedule 3.1(b) of the
Disclosure Schedules.

(c)          No Subsidiaries.  Neither of the Companies has any
Subsidiaries.

3.2          Authorization and Enforceability.

(a)          This Agreement has been, and each of
the other documents, agreements and instruments to be executed and delivered at
Closing (collectively with this Agreement, the “Transaction Documents”) will be, duly authorized, executed and
delivered by the Members and the Companies and constitutes, or in the case
of each Transaction Document other than this Agreement, as of the Closing Date will constitute, a valid and legally binding
agreement of the Members and the Companies enforceable in accordance with its
terms, subject to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors’ rights and to general
equitable principles.

 

24

 

3.3          No Violation.

Neither the execution, delivery or performance of this Agreement or any
of the other Transaction Documents by the Companies and the Members, nor the
consummation of the Contemplated Transactions will:

(a)          conflict with or violate any provision
of the certificate or articles of organization or operating agreement of either
of the Companies;

(b)          result in the creation of, or require
the creation of, any Lien upon any (i) Membership Interests or
(ii) property of either of the Companies;

(c)          result in (i) the termination,
cancellation, modification, amendment, violation, or renegotiation of any
contract, agreement, indenture, instrument, or commitment, or (ii) the
acceleration or forfeiture of any term of payment;

(d)          give any Person the right to
(i) terminate, cancel, modify, amend, vary, or renegotiate any contract, agreement,
indenture, instrument, or commitment, or (ii) to accelerate or forfeit any
term of payment either of which would have a Material Adverse Effect; or

(e)          violate any Law applicable to the
Companies or by which their properties are bound or affected which would have a
Material Adverse Effect.

3.4          Consents.

Except as set forth on Schedule 3.4(a) of the Disclosure Schedules,
neither the execution, delivery or performance of this Agreement by the
Companies and the Members, nor the consummation of the Contemplated
Transactions or compliance with the terms of the Transaction Documents, will
require (a) the consent or approval under any agreement or instrument or
(b) the Members or the Companies to obtain the approval or consent of, or
make any declaration, filing (other
than administrative filings with Taxing Authorities, foreign companies
registries and the like) or registration with, any Governmental
Authority and all such consents or approvals have been obtained or waived.

3.5          Financial Statements.

(a)          In General.  The Audited Financial Statements were
prepared in accordance with GAAP and the Interim Financial Statements were and
the Estimated Closing Balance Sheet will be internally prepared by the
Companies in a manner consistent with past practices for such internally
prepared unaudited financial statements. 
Throughout the periods involved, the Financial Statements fairly and
accurately present the consolidated financial position of the Companies, as of
the dates thereof, and the consolidated statements of operations, changes in
Members’ equity and cash flows for the periods then ended.

(b)          Financial Books and Records.  The financial books and records of the
Companies have been maintained in accordance with sound business practices,
including an adequate system of internal control, and fairly and accurately
reflect, in accordance with applicable Law and GAAP, and on a basis consistent
with past periods and throughout the 

 

25

 

periods involved, (i) the
financial position of the Companies and (ii) all transactions of the
Companies.  Neither of the Companies has
received any advice or notification from their respective independent certified
public accountants that they have used any improper accounting practice that would have the
effect of not reflecting or incorrectly reflecting in the books and records of the Companies any properties, assets, liabilities,
revenues, or expenses.

(c)          No Undisclosed Liabilities; Etc.  Except as set forth on Schedule 3.5(c)
of the Disclosure Schedules, neither of the
Companies has any liabilities or obligations of
any nature (whether known or unknown and whether absolute, accrued, contingent,
or otherwise), except for amounts of liabilities or obligations reflected or
reserved against in the Financial Statements.

(d)          Accounts Receivable.  All receivables (including intercompany and
unbilled receivables) reflected in the Financial Statements or recorded on the
books of each of the Companies resulted from the ordinary course of business,
have been properly recorded in the ordinary course of business and subject to
the reserves reflected in the Financial Statements, which reserves are adequate
and determined in accordance with GAAP applied on a basis consistent with prior
periods and throughout the periods involved, and are good and collectible
(subject to the reserves reflected in the Financial Statements) in full without
any discount, setoff or valid counterclaim (net of recovery from vendors or
subcontractors), in amounts equal to not less than the aggregate face amounts
thereof.

(e)          No Letters of Credit or Guarantees.  Except as reflected in the Financial
Statements or as set forth on Schedule 3.5(e) of the Disclosure Schedules, none
of the Companies (i) has any letters of credit outstanding as to which the
Companies have any actual or contingent reimbursement obligations; (ii) is a
party to or bound, either absolutely or on a contingent basis, by any agreement
of guarantee, indemnification or any similar commitment with respect to the
liabilities or obligations of any other Person (whether accrued, absolute, or
contingent); or (iii) is a party to any swap, hedge, derivative, or
similar instrument.

(f)          Contingent or Deferred Acquisition
Expenses or Payments.  Except as
otherwise disclosed on Schedule 3.5(f) of the Disclosure Schedules, neither of
the Companies is obligated or otherwise liable for the payment of any
contingent or deferred acquisition payments relating to the direct or indirect
acquisition of any business, enterprise, or combination.

3.6          Relationships
with Affiliates.

Except
as set forth on Schedule 3.6 of the Disclosure Schedules, no Member or any
Affiliate of any Member or the Companies has, or has had, any interest in any
property (real, personal, or mixed and whether tangible or intangible), used in
or pertaining to the business of the
Companies.  No Member or any Affiliate of
any Member, or the Companies is, or has owned (of record or as a beneficial
owner) an equity interest or any other financial or a profit interest in, a
Person that has (a) had business dealings or a material financial interest
in any transaction with the Companies or (b) engaged in competition with
the Companies with respect to any line of the products or services of the Companies in any market
presently served by the
Companies.  Except as set forth on
Schedule 3.6 of the Disclosure Schedules, no Member or any Affiliate of any
Member, or Company is a party to any contract or agreement with any of the
Companies.  The 

 

26

 

various
contracts, agreements and relationships shown on Schedule 3.6 of the Disclosure
Schedules (a) are hereinafter collectively referred to as the “Related Party
Transactions” and individually as a “Related Party Transaction” and (b)
as shown on Schedule 3.6 of the Disclosure Schedules are comprised of (i)
Related Party Transactions that are to be terminated at or before Closing
(collectively the “Terminated at Closing Related Party Transactions”)
and (ii) Related Party Transactions that are to continue after the Closing (the
“Continuing Related Party Transactions”).

3.7          Indebtedness
to/from Officers, Directors, Members and Employees.

Except as set forth on Schedule 3.7 of the Disclosure Schedules,
neither of the Companies is indebted, directly or indirectly, to any Person who
immediately prior to the Closing was a Member, officer or director of a Company
in any amount whatsoever, other than for salaries for services rendered or
reimbursable business expenses.  No
Member, officer, director, or employee is indebted to either of the Companies
except for advances made to employees of the Companies in the ordinary course
of business to meet reimbursable business expenses anticipated to be incurred
by such obligor.

3.8          No Adverse Change.

Since December 31, 2005, there has not been any change in the
businesses, operations, properties or condition, financial or otherwise of the
Companies that has had a Material Adverse Effect, nor has any event, condition
or contingency occurred that is reasonably likely to result in such an adverse
change.

3.9          Conduct of the Business.

(a)          Cooperative Business Arrangements.  Except as set forth on Schedule 3.9(a) of the
Disclosure Schedules none of the business of the Companies has been conducted
through any joint venture, teaming agreement or relationship, partnership or
other entity.

(b)          Letters of Intent, Non-Competition
Agreements and Non-Disclosure Agreements. 
Except as set forth in Schedule 3.9(b) of the Disclosure Schedules,
neither of the Companies is a party to any letters of intent, memoranda of
understanding, non-competition arrangements, non-disclosure agreements or
confidentiality agreements that remain in effect.

3.10        Capital Structure; Equity Interests.

(a)          Capital Structure.  The capitalization and record owners of all
of the Equity Interests of the Companies are as set forth on Schedule 3.10(a)
of the Disclosure Schedules and the Membership Interests of the Members as
shown on Schedule 3.10(a) of the Disclosure Schedules constitute the only issued
and outstanding Equity Interests in the Companies and neither of the Companies
(i) has any outstanding securities convertible into or exchangeable or
exercisable for any Equity Interests or (ii) has outstanding any rights to
subscribe for or to purchase, or any agreements providing for the issuance
(contingent or otherwise), of, or any calls against, commitments by or claims
against it of any character relating to, any shares of its Equity Interests or
any securities convertible into or exchangeable 

 

27

 

or exercisable for any
shares of its Equity Interests.  The
capitalization and record owners of all the Equity Interests as shown on  Schedules
3.10(a) of the Disclosure Schedules accurately list the names of each of the
Members, their principal addresses, and the number of Membership Interests
owned.

(b)          All Equity Interests in the Companies
previously issued and now cancelled were duly authorized and issued in
compliance with the applicable Maryland law, the Securities Act of 1933, as
amended, and any applicable state “Blue Sky” laws or exemptions therefrom.  All outstanding Membership Interests are duly
authorized have been validly issued, and owned beneficially and of record by
the Members, free and clear of any Lien, and were issued in compliance with the
Securities Act of 1933, as amended, and any applicable state “Blue Sky” laws or
exemptions therefrom.  None of the
Members has granted any proxy, or entered into any voting trust, voting
agreement or similar arrangement, with respect to his or her Membership
Interests.

3.11        Title to Membership Interests.

The Members own the Membership Interests of
record and beneficially in the amounts set forth on Schedule 3.10(a), free and
clear of any Liens, and upon completion of the Closing FAAC will own all of the
issued and outstanding Membership Interests of the Company free and clear of
any Liens.

3.12        Articles, Operating Agreements and Records.

True
and complete copies of the Articles of Organization and Operating Agreements,
as amended through the date hereof, 
minute books and membership interest record books of the Companies (i)
have been provided or made available to FAAC prior to the execution of this
Agreement, and (ii) are complete and correct in all material respects.  Such minute books contain a true and complete
record of all actions taken at all meetings and by all written consents in lieu
of meetings of the directors, member and committees of the boards of directors
of the Companies from their respective dates of incorporation through the date
hereof.  Neither of the Companies is in
violation of any provisions of its respective certificate of organization or
operating agreement.

3.13        Assets — In General.

Except
as set forth on Schedule 3.13 of the Disclosure Schedules, the assets and
rights of the Companies include (a) all of the assets and rights of the
Companies that were used in the conduct of their businesses as of December 31,
2005, subject to such changes as have occurred in the ordinary course of business
since December 31, 2005, and (b) all assets reflected in the December 2005
Financial Statements, subject to such changes as have occurred in the ordinary
course of business since December 31, 2005. 
Except as set forth on Schedule 3.13 of the Disclosure Schedules, each
of the Companies, has good and marketable title to all of their respective
assets, free and clear of any Lien. 
Except as set forth on Schedule 3.13 of the Disclosure Schedules, all
assets necessary for the conduct of the business of the Companies in accordance
with past practice are (a) in good operating condition and repair,
ordinary wear and tear excepted, (b) not in need of maintenance or repair,
except for ordinary routine maintenance 

 

28

 

or
repairs that are not material in nature or cost, and (c) adequate and
sufficient for the continuing conduct of the businesses of the Companies as
conducted prior to the date hereof.

3.14        Real Property Interests.

Except as set forth on Schedule 3.14 of the Disclosure Schedules,
neither of the Companies now
owns, or has ever owned, any real property. 
Schedule 3.14 of the Disclosure Schedules sets forth a list and summary
description of all leases, subleases, or other occupancies used by the Companies or to which any of them is a party (the “Real
Property Interests”).  Except as set
forth on Schedule 3.14 of the Disclosure Schedules, each of the Real
Property Interests listed and described on Schedule 3.14 of the Disclosure
Schedules is in full force and effect, and there is no default by either of the Companies under any such Real Property
Interests.

3.15        Personal Property.

(a)          Set forth on Schedule 3.15(a) of
the Disclosure Schedules is a list of all material equipment, machinery, motor
vehicles, and other tangible personal property owned or leased by the Companies
(the “Personal Property”).  Each
of the Companies has good title to all of their respective Personal Property,
free and clear of any Lien.

(b)          Schedule 3.15(b) of the Disclosure
Schedules is a true and correct list of all of the Uniform Commercial Code
Financing Statements filed and in force in the indicated jurisdictions with
respect to the Companies (the “Financing Statements”).  Except for those Financing Statements
indicated on Schedule 3.15(b) that are with respect to Indebtedness that shall
be repaid at Closing (and are to be terminated upon the repayment of that
Indebtedness) the Financing Statements relate only to leased property.  The only Financing Statements in force with
respect to the Companies relate to leased property.

3.16        Intellectual Property Rights.

(a)          Schedule 3.16(a) of the Disclosure Schedules includes a true and complete
list of all Commercial Software used by or in connection with the businesses of
each of the Companies.  Schedule 3.16(a)
of the Disclosure Schedules also includes a true and complete list of (i) all
Copyrights, Patents and Trademarks of the Companies used by or in connection
with the businesses of each of the Companies and (ii) all pending applications
for Copyrights, Patents and Trademarks filed by or on behalf of the Companies and used by or in connection
with the businesses of the
Companies as presently conducted.  None
of such rights is or has been opposed or held unenforceable.  Each of the aforesaid Intellectual Property
Rights is valid, subsisting and enforceable. 
Each of the aforesaid registered or issued Intellectual Property Rights
is duly registered in the name of the applicable Company, as appropriate.

(b)          Except as set forth on Schedule 3.16(b)
of the Disclosure Schedules, the business of the Companies as presently
conducted does not require or use any Intellectual Property Rights not owned by
or licensed to the Companies.  The Companies are the owners or have the
right to use the Intellectual Property Rights listed on Schedule 3.16(a) of the
Disclosure Schedules without making any payment to others or granting rights to
others in exchange therefor.

 

29

 

(c)          Except as set forth on Schedule 3.16(c) of
the Disclosure Schedules, (i) no Person (other than the
Companies) has any right to use any Intellectual Property Rights owned by the Companies and (ii) no member, director, officer or
employee of, or Consultant to, the Companies
has any right to use, other than in connection with the business activities of the Companies as presently conducted, any of the
Intellectual Property or Intellectual Property Rights.

(d)          The operation of the business of the
Companies in the normal course of business prior to the Effective Date does not
infringe in any respect upon the Intellectual Property Rights of any Person,
and no Person who does not have the right to use the Intellectual Property
Rights has claimed or asserted the right to use any Intellectual Property Rights
or to deny the right of either of the Companies the right to use same.  No proceeding alleging infringement of the
Intellectual Property Rights of any Person is pending or threatened against
either of the Companies.

(e)          With respect to
each Trade Secret of the Companies, the documentation relating to such Trade
Secret is current, accurate and in sufficient detail and content to identify
and explain it and allow its full and proper use without reliance on the
knowledge or memory of any individual. 
The Companies have taken all reasonable precautions to protect the
secrecy, confidentiality, and value of their respective Trade Secrets.  Such Trade Secrets are not part of the public
knowledge or literature, and have not been used, divulged, or appropriated either
for the benefit of any Person (other than the Companies) or to the detriment of
the Companies.

(f)          Schedule
3.16(f) of the Disclosure Schedules includes a true and complete list of any rights (e.g. unlimited, limited, restrictive, government purpose
license rights, and march-in) that any Governmental Authority has in any
copyrights, patents, trademarks, Technology, or Software that the Companies use in their respective businesses.  Except as set forth in Schedule
3.16(f) of the Disclosure Schedules,
neither of the Companies has developed any
item, component, process or software as a requirement of any Government
Contract, or for which any Governmental Authority paid some or all of the cost
of development.

3.17        Scheduled Contracts and Proposals.

(a)          Scheduled Contracts.  Schedule 3.17(a) of the Disclosure Schedules
is a true and complete list of all “Scheduled Contracts” (as hereinafter
defined) to which either of the Companies is a party, by which it is bound, or
which otherwise pertain to the businesses of the Companies.  For the purposes of this Section 3.17(a), the
term “Scheduled Contracts” shall mean the following written or oral
contracts, agreements, indentures, instruments, commitments and amendments
thereof with suppliers, customers, producers, consumers, lenders of the
Companies and other third parties that are currently in effect:

(i)              loan
and credit agreements, revolving credit agreements, security agreements,
guarantees, notes, agreements evidencing any lien, conditional sales
agreements, factoring agreements, leasing agreements, sale and leaseback and
synthetic lease agreements, or title retention agreements;

(ii)             hedging
and similar agreements;

 

30

 

(iii)            contracts
that involve the sale by the Companies
of goods, materials, supplies, or services (other than Government Contracts)
providing for payments over the life of the contract greater than $50,000;

(iv)           agreements
relating to Intellectual Property Rights listed on Schedule 3.16(a) of the Disclosure
Schedules;

(v)            contracts,
agreements, indentures, instruments or commitments by and between the Companies and Persons with whom the
Companies is not dealing at arm’s length;

(vi)           agreements
listed on Schedule 3.9(a) of the Disclosure Schedules;

(vii)          franchise,
distribution, license or consignment contracts or agreements;

(viii)         sales,
agency or advertising contracts, agreements, or commitments providing for
payments over the life of the contract greater than $50,000;

(ix)           leases
under which either of the Companies is the lessor or lessee other than
operating leases that require future payments by either of the Companies of
more than $10,000 per annum;

(x)            management
or service contracts or agreements, and contracts (other than agreements with
Consultants and agreements with independent contractors and sub-contractors)
and commitments providing for payments over the life of the company greater
than $50,000;

(xi)           contracts
or agreements with Consultants to the extent not otherwise disclosed on Schedule
3.26(e) of the Disclosure Schedules;

(xii)          agreements
of any kind with any Affiliate of the Companies;

(xiii)         agreements
of any kind relating to the business of the Companies
to which employees of the Companies,
or entities controlled by them, are parties; and

(xiv)         discount
policies and practices, if any.

(c)          Status of Scheduled Contracts.  Except as otherwise disclosed on Schedule
3.17(b) of the Disclosure Schedules, as of the Effective Date, (x) each of the
Scheduled Contracts is in full force and effect; (y) a true and complete copy
of each written Scheduled Contract (and all amendments thereto); and (z) there
are no oral modifications or amendments to any of the Scheduled Contracts.  In addition:

(i)              All
of the Scheduled Contracts have been legally awarded and are binding on the
parties thereto, and each of the Companies, as the case may be, is in material
compliance with all terms and conditions in such Scheduled Contracts;

 

31

 

(ii)             Neither
of the Companies has received any written notice of deficient performance or
administrative deficiencies relating to any Scheduled Contract;

(iii)            Neither
of the Companies has received any notice of any stop work orders, terminations,
cure notices, show cause notices or notices of default or breach under any of
the Scheduled Contracts, nor has any such action been threatened or asserted;

(iv)           Each
Scheduled Contract was entered into in the ordinary course of business and,
based upon assumptions that the Companies’ management believes to be reasonable
and subject to such assumptions being fulfilled;

(v)            There
are no Scheduled Contracts for the provision of goods or services by either of
the Companies that include a liquidated damages clause or unlimited liability
by the Companies, or liability for
consequential damages;

(vi)           There
are no Scheduled Contracts for the provision of goods or services by either of
the Companies that require the applicable Company to post a surety, performance
or other bond or to be an account party to a letter of credit or bank
guarantee;

(vii)          There
are no written claims of any type, or requests for equitable adjustments
outstanding or, to the Knowledge of the Companies, threatened under any
Scheduled Contracts in process and no money presently due to either of the
Companies on any Scheduled Contract has been withheld or set off or subject to
attempts to withhold or setoff; and

(viii)         No
party to a Scheduled Contract has notified either of the Companies that a
Company has breached or violated any Law or any certification, representation,
clause, provision or requirement of any Scheduled Contract.

(c)           Proposals.  Schedule 3.17(b) of the Disclosure Schedules
sets forth a true and accurate summary of all bids, proposals, offers, or
quotations made by the Companies
that were outstanding as of the date of this Agreement (collectively the “Proposals”),
true and complete copies of which have been made available to FAAC.  Schedule 3.17(b) of the Disclosure Schedules
identifies each Proposal by the party to whom such bid, proposal, or quotation
was made, the subject matter of such bid, proposal, or quotation and the
proposed price.

3.18        Government Contracting.

(a)          Definitions.  The following capitalized terms, when used in
this Section 3.18, shall have the respective meanings set forth below:

(i)           
“Active”, whether or not capitalized, when used to modify any Government
Contract, or Government Subcontract, means that final payment has not been made
on such Government Contract, or Government Subcontract and when used to modify
any Teaming Agreement, “active” means that such Teaming Agreement has not
terminated or expired.

(ii)           “Bid”
means any bid, proposal, offer or quotation made by either of the Companies or
by a contractor team or joint venture, in which either of the Companies is 

 

32

 

participating,
that, if accepted, would result in the award of a Government Contract or a
Government Subcontract.

(iii)          “Company
Subcontract” means any subcontract, basic ordering agreement, letter
subcontract, purchase order, task order, delivery order, consulting agreement
or other written agreement issued by either of the Companies or entered into
between either of the Companies and to any Person in support of either of the Companies’
performance of a Government Contract or Government Subcontract.

(iv)          “Government
Contract” means any prime contract, multiple award schedule contract, basic
ordering agreement, letter contract, and otherwise to include any  purchase order, task order or delivery order
issued thereunder between either of the Companies and either the U.S.
Government or a State Government.

(v)           “Government
Subcontract” means any subcontract issued to either of the Companies by a
Government prime contractor, including any basic ordering agreement, letter
subcontract, and otherwise any  purchase
order, task order or delivery order between one of the Companies and any prime
contractor to either the U.S. Government or a State Government.

(vi)          “State
Government” means any state, territory or possession of the United States
or any department or agency of any of the above with statewide jurisdiction and
responsibility.

(vii)         “Teaming
Agreement” has the same meaning as the term, “Contractor team arrangement,”
as defined in Federal Acquisition Regulation (“FAR”) 9.601.

(viii)        “U.S.
Government” means the United States Government or any department, agency or
instrumentality thereof.

(b)          Government Contracts and
Subcontracts.  Schedule 3.18(b) of
the Disclosure Schedules separately lists and identifies, in each case as of
the Effective Date:

(i)            Each
active Government Contract and Government Subcontract identified by contract
number, customer and date of award to the extent such information can be
provided consistent with national security (true and complete copies of which,
including all modifications and amendments thereto, have been provided to
FAAC); and

(ii)           Each
active Government Contract and Government Subcontract that was negotiated (or
modification thereto was negotiated) based on cost and pricing data that either
of the Companies certified as being current, complete and accurate pursuant to
the Truth in Negotiations Act (10 U.S.C. § 2306a; 41 U.S.C. § 256b).

(c)          Bids.  Schedule 3.18(c) of the Disclosure Schedules
separately lists and identifies as of the Effective Date each outstanding Bid,
identified by the Person to whom such Bid was made, the date submitted, the
subject matter of such Bid, and, to the Knowledge of the Companies, the
anticipated award date and whether any such Bid is dependent, in whole or in
part, on the “small business” or other status of the Companies under Applicable
Law.

 

33

 

(d)          Teaming Agreements.  Schedule 3.18(d) of the Disclosure Schedules
separately lists and identifies each active Teaming Agreement as of the
Effective Date to which either of the Companies is a party (true and complete
copies of which, including all modifications and amendments thereto, have been
provided to FAAC).

(e)          Company Subcontracts.

(i)            To
the Knowledge of the Company, each active Company Subcontract is in full force
and effect and is binding on the Companies, or either of them and, to the
Knowledge of the Companies, the other party thereto, except to the extent any
such failure to be in full force and effect and binding would not result in a
Material Adverse Effect.

(ii)           To
the Knowledge of the Company, each of the Companies has substantially complied
with all material terms and conditions of each active Company Subcontract,
except to the extent either Company’s failure so to have complied would not
result in a Material Adverse Effect.

(iii)          There
are no outstanding claims against either of the Companies arising out of or
relating to any active Company Subcontract, and to the Knowledge of the
Companies, there are not facts that might give rise to or result in such a
claim, except, in either case, for claims that would not result in a Material
Adverse Effect if asserted against and paid by either of the Companies.

(iv)          There
are no disputes between either of the Companies and any other party arising out
of or relating to any active Company Subcontract, and to the Knowledge of the
Companies, there are not facts that might give rise to or result in such a
dispute, except, in either case, for disputes that would not result in a
Material Adverse Effect if resolved. There are no outstanding claims against
either of the Companies arising out of or relating to any active Company
Subcontract, and to the Knowledge of the Companies, there are not facts that
might give rise to or result in such a claim, except in either case for claims
that would not result in a Material Adverse Effect if they were asserted
against and paid by either of the Companies against either of the Companies.

(f)          Marketing Agreements.  Schedule 3.18(f) of the Disclosure Schedules
separately lists and identifies as of the Effective Date each sales
representation, consulting and other agreement regarding marketing and selling
the Companies’ products and services to the U.S. Government, any State
Government or any foreign government (or department, agency or instrumentality
thereof), to which either of the Companies is (or has been at any time since
December 31, 2003) a party (true and complete copies of which, including all modifications
and amendments thereto, have been provided to FAAC).

(g)          Status.  Except as set forth on Schedule 3.18(g) of
the Disclosure Schedules, as of the Effective Date:

(i)            To
the Knowledge of the Companies, each active Government Contract and Government
Subcontract is in full force and effect, has been legally awarded and is 

 

34

 

binding
on the Companies, or either of them and, to the Knowledge of the Companies, the
other party thereto.

(ii)           To
the Knowledge of the Companies, each active Teaming Agreement is in full force
and effect and is binding on the Companies and, to the Knowledge of the
Companies, the other party thereto.

(iii)          To
the Knowledge of the Companies, each of the Companies has substantially
complied with all material terms and conditions of each active Government
Contract, Government Subcontract and Teaming Agreement, including all clauses,
provisions and requirements incorporated therein expressly, by reference or by
operation of Applicable Law.

(iv)          To
the Knowledge of the Companies, all representations and certifications
executed, acknowledged or set forth in or pertaining to any Bid submitted by
either of the Companies or to any Government Contract or Government Subcontract
awarded to either of the Companies, in each case since December 31, 2003, were
current, accurate and complete in all material respects as of their respective
effective dates, and each of the Companies has complied in all material
respects with all such representations and certifications.

(v)           Neither
the U.S. Government, any State Government nor any prime contractor,
subcontractor or other Person has notified either of the Companies that it has
breached or violated any Applicable Law or any certification or representation
pertaining to any Bid, Government Contract or Government Subcontract.

(vi)          To
the Knowledge of the Companies, no active Government Contract was awarded to
either of the Companies pursuant to the Small Business Innovative Research (“SBIR”)
program or any set-aside program (small business, small disadvantaged business,
8(a), woman owned business, etc.) or as a result of either of the Companies’ “small
business” or other status under Applicable Law.

(vii)         To
the Knowledge of the Companies, no active Government Subcontract was awarded to
either of the Companies as a result of its’ “small business” or other preferred
status.

(viii)        No
active Government Contract or Government Subcontract or outstanding Bid
includes a liquidated damages clause or any requirement to post a surety,
performance or other bond or to be an account party to a letter of credit or
bank guarantee.

(ix)          The
cost accounting practices that each of the Companies  is using (and has used since
December 31, 2003) to estimate and record costs in connection with the
submission of Bids and performance of Government Contracts and Government
Subcontracts are (and have been) in substantial compliance with Applicable Law,
including but not limited to, the FAR Cost Principles (48 C.F.R. Part 31) and
Cost Accounting Standards (48 C.F.R. Chap. 99), and have been properly
disclosed to the U.S. Government (if required to be disclosed by Applicable
Law).

 

35

 

(x)           To the Knowledge of the Companies, neither of the Companies
nor any of their respective directors, officers or employees is (or has been at
any time since December 31, 2003)
suspended or debarred from doing business with the U.S. Government or any State
Government, or is (or has been at any time since December 31, 2003) deemed nonresponsible or ineligible for U.S.
Government or State Government contracting; and to the Knowledge of the
Companies, there are no circumstances that would warrant in the future the
institution of suspension or debarment proceedings, criminal or civil fraud or
other criminal or civil proceedings or a determination of nonresponsibility or
ineligibility against either of the Companies or any of their respective
directors, officers or employees.

(xi)          Since
December 31, 2003, no Government Contract or Government Subcontract has
been terminated for convenience or default, no stop work order, cure notice,
show cause notice or other notice threatening termination or alleging
noncompliance with any material term has been issued to either of the Companies
with respect to any Government Contract or Government Subcontract, and to the
Knowledge of the Companies, no event, condition or omission has occurred or
exists that would constitute grounds for any such action with respect to any
active Government Contract or Government Subcontract.

(xii)         No
money presently due to either of the Companies on any active Government
Contract or Government Subcontract has been, or to the Knowledge of the
Companies threatened or likely to be, withheld or set off or subject to
attempts to withhold or setoff.

(xiii)        To
the Knowledge of the Companies, neither of the Companies is performing “at risk”
under any anticipated Government Contract or Government Subcontract or any
anticipated option exercise or modification thereof prior to award, option
exercise or modification, or has made any expenditures or incurred costs or
obligations in excess of any applicable limitation of government liability,
limitation of cost, limitation of funds or other similar clause(s) limiting the
U.S. Government’s liability on any active Government Contract or Government
Subcontract.

(xiv)        Each
of the Companies and their respective employees hold such security clearances
as are required to perform Government Contracts and Government Subcontracts of
the type performed prior to the date of this Agreement by each of them; to the
Knowledge of the Companies, there are no facts or circumstances that could
reasonably be expected to result in the suspension or termination of such
clearances or that could reasonably be expected to render either of the
Companies ineligible for such security clearances in the future; and each of
the Companies has complied in all respects with all security measures required
by the Government Contracts, Government Subcontracts or Applicable Law.

(h)          Investigations.

(i)            To
the Knowledge of the Companies, neither of the Companies, nor any of their
respective directors, officers or employees or any of its agents or consultants
is (or has been since December 31, 2003) under administrative, civil
(including, but not limited to, claims made under the False Claims Act, 18
U.S.C.§ 287) or criminal investigation, indictment or 

 

36

 

information,
audit or internal investigation with respect to any alleged irregularity,
misstatement, act or omission arising under or relating to any Government
Contract or Government Subcontract;

(ii)           To
the Knowledge of the Companies, neither of the Companies has made a voluntary
disclosure to the U.S. Government or any State Government with respect to any
alleged irregularity, misstatement or omission arising under or relating to a
Government Contract or Government Subcontract; and

(iii)          To
the Knowledge of the Companies, there is no irregularity, misstatement, act or
omission arising under or relating to any Government Contract or Government
Subcontract that has led or could reasonably be expected to lead, either before
or after the Closing Date, to any of the consequences set forth in (i)-(ii)
above, or to any other damage, penalty assessment, recoupment of payment, or
disallowance of cost.

(i)           Audits.

(i)            Schedule
3.18(i) of the Disclosure Schedules lists and identifies as of the Effective
Date each audit report, including without limitation reports issued by the
Defense Contract Audit Agency and any inspector general, and each notice of
cost disallowance received by either of the Companies since January 1, 2000
relating to any Bid, Government Contract or Government Subcontract (true and
complete copies of which have been provided to FAAC).

(ii)           Since
December 31, 2003, no cost in excess of $25,000 or group, type or class of
cost in excess of $125,000 in the aggregate and which was incurred or invoiced
by either of the Companies on any active Government Contract or Government
Subcontract has been disallowed or is otherwise the subject of a formal dispute
(excluding requests for clarification or back-up documentation, or correction
of good faith invoice errors).

(iii)          Neither
of the Companies has incurred any material costs on any active
cost-reimbursable Government Contract or Government Subcontract that are not “allowable”
costs pursuant to FAR § 31.201-2 (48 CFR § 31.201-2) and any other applicable
law or regulation and that have not been properly recorded as such in the
Companies’ cost accounting books and records.

(iv)          The
reserves established by the Companies with respect to possible adjustments to
the indirect and direct costs incurred by the Companies on any active
Government Contract or Government Subcontract are reasonable and are adequate
to cover any potential adjustments resulting from audits of any such Government
Contract or Government Subcontract.

(j)           Financing Arrangements.  Except as set forth on Schedule 3.18(j) of
the Disclosure Schedules, there exist no financing arrangements (e.g., an
assignment of moneys due or to become due) with respect to any active
Government Contract or Government Subcontract.

(k)          Protests.  Except as set forth on Schedule 3.18(k) of
the Disclosure Schedules, no outstanding Bid or active Government Contract or
Government Subcontract as of the Effective Date is subject to any protest to a
procuring agency, the United States Government Accountability Office, the
United States Small Business Administration or any other agency or 

 

37

 

court (whether one of the
Companies is the protestor, an interested party or neither), and to the Knowledge of the Companies, no outstanding Bid
or active Government Contract or Government Subcontract will become subject to
such a protest.

(l)           Claims.  Except as set forth on Schedule 3.18(l) of
the Disclosure Schedules, as of the Effective Date:

(i)            Neither
of the Companies has any interest in any pending or potential claim or request
for equitable adjustment against the U.S. Government, any State Government or
any prime contractor, subcontractor or vendor arising under or relating to any
Government Contract, Government Subcontract, Bid or Teaming Agreement.

(ii)           There
are no outstanding claims against either of the Companies, either by the U.S.
Government, any State Government or any prime contractor, subcontractor, vendor
or other third party, arising out of or relating to any Government Contract,
Government Subcontract, Bid or Teaming Agreement, and to the Knowledge of the
Companies, there are no facts that might give rise to or result in such a
claim.

(iii)          There
exist no disputes between either of the Companies and the U.S. Government, any
State Government, or any prime contractor, subcontractor, vendor or other third
party, arising out of or relating to any active Government Contract, Government
Subcontract, Company, Teaming Agreement or outstanding Bid, and to the
Knowledge of the Companies, there are no facts that might give rise to or
result in such a dispute.

(m)        Multiple Award Schedules.

(i)            With
respect to each active multiple award schedule Government Contract as of the
Effective Date, to the Knowledge of the Companies, the Companies have (1)
provided to the U.S. Government all information required by the applicable
solicitation or otherwise requested by the Government; (2) submitted
information that was current, accurate, and complete within the meaning of
applicable law and regulation; and (3) made all required disclosures of any
changes in the Companies’ respective commercial pricelist(s), discounts or
discounting policies prior to the completion of negotiations with the U.S.
Government.

(ii)           With
respect to each active multiple award schedule Government Contract as of the
Effective Date, Schedule 3.18(m) of the Disclosure Schedules identifies the
basis of award, customer (or category of customer(s) (“COC”)) and the
Government’s price or discount relationship to the identified COC as agreed to
by GSA and the Companies, or either of them, at time of award of such multiple
award schedule Government Contract.

(iii)          Neither
of the Companies has been notified or has any reason to believe that it has not
complied with the notice and pricing requirements of the Price Reduction clause
in each active multiple award schedule Government Contract listed on Schedule
3.18(a) of the Disclosure Schedules, and, to the Knowledge of the Companies,
there are no facts or circumstances that could reasonably be expected to result
in a demand by the U.S. Government for a refund based upon either of the
Companies’ failure to comply with the Price Reductions clause.

 

38

 

 

(iv)          To
the Knowledge of the Companies, each of the Companies has filed all reports
related to and paid all industrial funding fees required to be paid by the
Companies under any active multiple award schedule Government Contract.

(v)           Neither
of the Companies has received notice or
otherwise has reason to believe that any active orders issued to either
of the Companies pursuant to each active multiple award schedule Government
Contract are within the scope of such Government Contract.

(n)          Government Furnished Property.  Schedule 3.18(n) of the Disclosure Schedules
identifies as of the Effective Date all personal property, equipment and
fixtures loaned, bailed or otherwise furnished to either of the Companies by or
on behalf of the U.S. Government for use in the performance of an active
Government Contract or Government Subcontract (“Government-Furnished
Property”) and the active Government Contracts or Government Subcontracts
to which each item of Government-Furnished Property relates.  To the Knowledge of the Companies, the
Companies have complied in all material respects with all of its obligations
relating to the Government-Furnished Property.

(o)          Former Government Officials.  Except as set forth on Schedule 3.18(o) of
the Disclosure Schedules, neither of the Companies employ any former government
officials in key management positions or as consultants.

3.19         Clients.

Neither of the Companies has received any notice, or has any reason to
believe, that any supplier, producer, consumer, financial institution or other
party to any Scheduled Contract will not do business with the
Companies on substantially the same terms and conditions subsequent to the
Closing Date as before such date.

3.20         Backlog.

Schedule 3.20 of the Disclosure Schedules sets forth the contract
backlogs of the Companies, as of March 31, 2006.  Schedule 3.20 of the Disclosure
Schedules includes with respect to each contract listed thereon (a) the name of
each customer, (b) a reference as to whether the applicable contract is for a
fixed price or other type of contract, (c) the periods of performance, (d) the
contract revenue for 2004, 2005 and the first quarter 2006, (e) the dollar
value of the contract, (f) the contract revenue from inception, and (g) the
dollar amount of the backlog.

3.21         Compliance
with Laws.

Each of the Companies has been and is in compliance with each Law that
is or was applicable to it or the conduct or operation of its business or the
ownership or use of any of its assets, except where any such failure to be in
compliance with such Law would not reasonably be expected to have a Material
Adverse Effect on either or both of the Companies.  No event has occurred or circumstance exists
that (with or without notice or lapse of time) (a) would constitute or
result in a material violation by either of the Companies of (or failure on the
part of either of the Companies to comply in all material respects with) any
such applicable 

 

39

 

Law,
or (b) would give rise to any obligation on the part of the Companies to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature under any such applicable Law. 
Neither of the Companies has received, at any time during the past three
years, any notice or other communication (whether oral or written) from any
Governmental Authority regarding (a) any actual, alleged, or potential
violation of, or failure to comply with, any such applicable Law, or
(b) any actual, alleged, or potential obligation on the part of a Company
to undertake, or to bear all or any portion of the cost of, any remedial action
of any nature under any such applicable Law.

3.22         Environmental Matters.

To the Knowledge of the Companies, each of the Companies has complied
with, and is in compliance with, all applicable Environmental Laws and has no
Environmental Liabilities.

3.23         Licenses
and Permits.

(a)          Each of the Companies has all
licenses, permits and other authorizations from Governmental Authorities
necessary for the conduct of their respective business as conducted in the
normal course of business prior to and as of the date hereof (collectively “Permits”),
except for where the failure to obtain such Permits would not have a Material
Adverse Effect on them. 
Schedule 3.23(a) of the Disclosure Schedules sets forth a list of
all Permits held by each of the Companies.

(b)          To the Knowledge of the Companies and
except as set forth on Schedule 3.23(a) of the Disclosure Schedules and except
as would not have a Material Adverse Effect, (i) each of the Permits is in
full force and effect, (ii) each of the Companies is in full compliance with
the terms, provisions and conditions thereof, (iii) there are no
outstanding violations, notices of noncompliance, judgments, consent decrees,
orders or judicial or administrative actions, investigations or proceedings
adversely affecting any of said Permits, and (iv) no condition (including,
without limitation, this Agreement and the Contemplated Transactions) exists
and no event has occurred that (whether with or without notice, lapse of time
or the occurrence of any other event) would reasonably be expected to result in
the suspension or revocation of any of said Permits other than by expiration of
the term set forth therein, except in each case where such a suspension or
revocation would not reasonably be expected to have a Material Adverse Effect
on the Companies.

3.24         Absence of Certain Business Practices.

To
the Knowledge of the Companies, neither of the Companies,
nor any officer, employee or agent of the Companies,
or any other Person acting on their behalf has, directly or indirectly, since
the formation of the Companies, given, offered, solicited or agreed to give,
offer or solicit any contribution, gift, bribe, rebate, payoff, influence
payment, kickback or other payment, regardless of form and whether in money,
property or services, to any customer, supplier, governmental employee or other
Person who is or may be in a position to help or hinder the
Companies in connection with the design, development, manufacture,
distribution, marketing, use, sale, acceptance, maintenance or repair of their
respective products and services (or assist 

 

40

 

the
Companies in connection with any actual or proposed transaction relating to the
products and services of the Companies)
(a) that subjected or might have subjected either
of the Companies to any damage or penalty
in any civil, criminal or governmental litigation or proceeding, (b) that,
if not given in the past, might have had a Material Adverse Effect as it
relates to the products and services of the Companies,
(c) that, if not continued in the future, might have a Material Adverse
Effect, or subject the Companies
to suit or penalty in any private or governmental litigation or proceeding,
(d) for any purposes described in Section 162(c) of the Code, or
(e) for the purpose of establishing or maintaining any concealed fund or
concealed bank account.

3.25         Litigation.

(a)           Except
as set forth on Schedule 3.25(a) of the Disclosure Schedules, there are no:

(i)            actions, suits, claims, trials,
written demands, investigations, arbitrations, or other proceedings (whether or
not purportedly on behalf of the businesses of the Companies), pending or
threatened against or with respect to the Companies, or their respective  properties or businesses, but in all events
including D&O Indemnification Claims pending or threatened against or with
respect to the Companies or their respective properties or businesses; or

(ii)           outstanding judgments, orders,
decrees, writs, injunctions, decisions, rulings or awards against or with
respect to the Companies, or their respective
properties or businesses.

(b)           Neither
of the Companies (nor the businesses of either of them) are in default with
respect to any judgment, order, writ, injunction, decision, ruling, decree or
award of any Governmental Authority. 
Except as set forth on Schedule 3.25(b) of the Disclosure Schedules,
there is no reasonable basis for a claim against the Companies relating to
defective design, material, or performance.

(c)           Schedule
3.25(c) of the Disclosure Schedules contains a true and complete description of
all indemnification obligations of the Companies, including a description in
reasonable detail of any such obligation for which the indemnitee has given
notice of a claim or in connection with which there exits any facts that would
reasonably cause it to believe an indemnification claim will be made.

3.26         Personnel Matters.

(a)           True,
accurate, and complete lists of all of the directors, officers, and employees
of each of the Companies, as of May 4, 2006 (collectively, “Personnel”)
and their positions are included on Schedule 3.26(a) of the Disclosure
Schedules.  True and complete information
concerning the respective salaries, wages, and other compensation paid by the
applicable Company during 2004 and 2005 as well as dates of employment, and
date and amount of last salary increase, of such Personnel has been provided
previously to FAAC.

 

41

 

(b)           All
bonuses and other compensation owed by the Companies to their respective
employees and consultants for periods prior to December 31, 2005, have been
paid in full and all compensation owed and due by the Companies to their
respective employees and Consultants for periods after December 31, 2005 is
paid and current (other than bonuses).

(i)              A
bonus pool (the “Bonus Pool”) for fiscal year 2006 has been established
(which is shown and accrued for with adequate revenues on the Interim
Financials) from which bonuses are to be paid to certain employees of the Companies if and when
such bonuses are determined by the Companies’ management at the end of the
Companies’ 2006 fiscal year (the “Employee Bonuses”).

(ii)             Certain
employees of the Companies are entitled to “Phantom Membership Interest
Appreciation Rights” that are due and payable in full on the Closing Date (the “Phantom
Membership Interest Plan”).  Schedule
3.26(b) of the Disclosure Schedules shows the employees participating in the
Phantom Membership Interest Plan and the amounts payable at Closing for each
such participant.  At Closing the
Companies shall be responsible for paying all sums due under the Phantom
Membership Interest Plan and deliver to FAAC releases for each participant in
the Phantom Membership Interest Plan in the form allocated hereafter as Exhibit J
(the “Phantom Membership Interest Release”).

(iii)          The
Estimated Closing Balance Sheet shall include reserves for the Bonus Pool and
the payment of all sums due at Closing under the Phantom Membership Interest
Plan.

(c)           There
are no disputes, grievances, or disciplinary actions pending, or, to the
Knowledge of the Companies, threatened, by or between either of the Companies
and any Personnel.

(d)           All
personnel policies and manuals of the Companies are listed on Schedule 3.26(d)
of the Disclosure Schedules, and true, accurate, and complete copies of all
such written personnel policies and manuals have been provided to FAAC.

(e)           Except
for the Employee Bonuses or as otherwise listed on Schedule 3.26(e) of the
Disclosure Schedules, neither of the Companies is a party to any:

(i)              management,
employment, consulting, or other agreement with any Personnel or other person
providing for employment or payments over a period of time or for termination
or severance benefits, whether or not conditioned upon a change in control of
the Companies;

(ii)             bonus,
incentive, deferred compensation, severance pay, profit-sharing, stock
purchase, stock option, benefit, or similar plan, agreement, or arrangement,
whether written or unwritten;

(iii)            collective
bargaining agreement or other agreement with any labor union or other Personnel
organization (and no such agreement is currently being requested by, or is
under discussion by management with, any Personnel or others); or

 

42

 

(iv)           other
employment contracts, non-competition agreement, or other compensation
agreement or arrangement affecting or relating to Personnel or former Personnel
of the Companies, whether written or unwritten.

(f)            To
the Knowledge of the Companies and except as otherwise disclosed on Schedule
3.26(f) of the Disclosure Schedules, there do not exist any facts that would
give reasonable cause to believe that there will occur a discontinuation after
the Closing Date of any currently existing employment situation of any
executive and managerial Personnel with respect to either of the Companies on
the currently existing terms.

(g)           No
officer, director, agent or employee of, or Consultant to, either of the
Companies is bound by any contract or agreement that purports to limit the
ability of such officer, director, agent, employee, or Consultant to
(i) engage in or continue in any conduct, activity, or practice relating
to the business of either of the Companies or (ii) assign to the Companies or to any
other Person any rights to any Intellectual Property or any Intellectual
Property Right.

(h)           Except
as otherwise disclosed on Schedule 3.26(h) of the Disclosure Schedules, no
leased employee, as defined in Code Section 414(n), or independent contractor
performs service for either of the Companies.

3.27         Labor
Matters.

(a)           Neither
of the Companies is obligated by, or subject to, any order of the National
Labor Relations Board or other labor board or administration, or any unfair
labor practice decision.

(b)           Neither
of the Companies is a party or subject to any pending or, to the Knowledge of
the Companies, threatened labor or civil rights dispute, controversy or
grievance or any unfair labor practice proceeding with respect to claims of, or
obligations of, any employee or group of employees.  Neither of the Companies has received any
notice that any labor representation request is pending or is threatened with
respect to any employees of either of the Companies.

(c)           Each
of the Companies is in compliance with all applicable Laws and affirmative
action programs respecting employment and employment practices, terms and
conditions of employment and wages and hours, including but not limited to
Executive Order 11246, as amended, the Workers’ Adjustment Retraining
Notification Act and the Service Contract Act. 
This Section 3.27 does not extend to “ERISA” as defined in Section 3.28.

(d)           No
present or former employee of the Companies
has any claim against the Companies
(whether under Federal or state law, pursuant to any employment agreement, or
otherwise) on account of, or for: (i) overtime pay, other than for the
current payroll period; (ii) wages or salary (excluding bonuses and
amounts accruing under any pension or profit-sharing plan, including but not
limited to any Pension Plan or Welfare Plan (as such terms are defined in
Section 3.28)) for a period other than the current payroll period;
(iii) vacation, time off or pay in lieu of vacation or time off, other than
vacation or time off (or pay in lieu thereof) 

 

43

 

earned
in respect of the current or past fiscal year or accrued on the most recent
balance sheet for the Companies, or (iv) payment under any applicable workers’
compensation law.

3.28         ERISA.

(a)           Capitalized
terms used in this Section 3.28 that are not otherwise defined in this
Agreement shall have the meanings set forth below:

(i)              “Benefit
Arrangement” means any compensation or employment program (other than a
Pension Plan or Welfare Plan), including but not limited to, any fringe
benefit, incentive compensation, bonus, severance, deferred compensation and
supplemental executive compensation plan that either of the Companies maintains
or to which either of the Companies or any ERISA Affiliate contributes or has
any obligation to contribute, or with respect to which either of the Companies
or any ERISA Affiliate has any liability.

(ii)             “ERISA”
means the Employee Retirement Income Security Act of 1974, as the same may be
amended from time to time, as well as any rules and regulations promulgated
thereunder by any Governmental Authority, as from time to time in effect.

(iii)            “ERISA
Affiliate” means a corporation that is a member of a controlled group of
corporations with  either of the
Companies within the meaning of Code Section 414(b), a trade or business that
is under common control with either of the Companies within the meaning of Code
Section 414(c), or a member of an affiliated service group with either of the
Companies within the meaning of Code Sections 414(m) or (o), including any such
Entity that was an ERISA Affiliate at any time.

(iv)           “PBGC”
means the Pension Benefit Guaranty Corporation.

(v)            “Pension
Plan” means any employee pension benefit plan (as defined in ERISA Section
3(2)) either Company or
an ERISA Affiliate maintains or to which either of the Companies or an ERISA
Affiliate contributes or has any obligation to contribute, or with respect to
which either of the Companies or an ERISA Affiliate has any liability.

(vi)           “Plan”
means any Pension Plan, any Welfare Plan, and any Benefit Arrangement.

(vii)          “Welfare
Plan” means any employee welfare benefit plan (as defined in ERISA Section
3(1)) that either Company or
an ERISA Affiliate maintains or to which either Company or an ERISA Affiliate contributes or has any obligation to
contribute, or with respect to which either Company or an ERISA Affiliate has any liability.

(b)           Schedule
3.28(b) of the Disclosure Schedules sets forth a list of: (i) each Pension
Plan; (ii) each Welfare Plan; and (iii) each Benefit Arrangement.

(c)           the
Companies have delivered to FAAC true, accurate and complete copies of (i) the
documents comprising each Plan (or, with respect to any Plan that is unwritten,
a detailed written description of eligibility, participation, benefits, funding
arrangements, assets and any other matters that relate to the obligations of
the Companies or any ERISA Affiliate); (ii) 

 

44

 

all
trust agreements, insurance contracts or any other funding instruments related
to the Plans; (iii) all rulings, determination letters, no-action letters or
advisory opinions from the IRS, the U.S. Department of Labor, the PBGC or any
other Governmental Authority that pertain to each Plan and any open requests
therefor; (iv) the most recent actuarial and financial reports (audited and/or
unaudited) and the annual reports filed with any Governmental Authority with
respect to the Plans during the most recent three years; and (v) all summary
plan descriptions, summaries of material modifications, and memorandum,
employee handbooks and other written communications regarding the Plans.

(d)           Neither
of the Companies has, at any time within six (6) years prior to the Effective
Date, sponsored, maintained or contributed to a Pension Plan subject to Title
IV of ERISA, a multiemployer plan (as defined in ERISA Section 3(37)), or a
voluntary employees’ beneficiary association, as defined in Code Section
501(c)(9) (a “VEBA”).

(e)           Full
payment has been made of all amounts that are required under the terms of each
Plan to be paid as contributions with respect to all periods prior to the
Effective Date and any such amounts that are not required to be so paid under
any Welfare Plan, including any vacation pay plan, have been accrued on the
Financial Statements.

(f)            No
prohibited transaction within the meaning of ERISA Section 406 or Code Section
4975 has occurred with respect to any Pension Plan as of the date of this
Agreement, other than a transaction to which a statutory or administrative
exemption has been granted.

(g)           Except
as set forth on Schedule 3.28(g) of the Disclosure Schedules, the form of each
Pension Plan and Welfare Plan is in compliance with the applicable terms of
ERISA, the Code, and any other applicable laws, including, but not limited to,
the Americans with Disabilities Act of 1990, the Family Medical Leave Act of
1993, the Health Insurance Portability and Accountability Act of 1996, the
Uruguay Round Agreements Act, the Small Business Job Protection Act of 1996,
the Uniformed Services Employment and Reemployment Rights Act of 1994, the
Taxpayer Relief Act of 1997, the Internal Revenue Service Restructuring and
Reform Act of 1998, the Community Renewal Tax Relief Act of 2000, and the
Economic Growth and Tax Relief Reconciliation Act of 2001, and such plans have
been operated in compliance with such laws and the written Plan documents.  Neither of the
Companies, nor, any fiduciary of a Pension Plan has violated the requirements
of Section 404 of ERISA.  Except as set
forth on Schedule 3.28(g) of the Disclosure Schedules, all required reports and
descriptions of the Plans (including Internal Revenue Service Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions and Summaries of
Material Modifications) have been (when required) timely filed with the IRS,
the U.S. Department of Labor or other Governmental Authority and distributed as
required, and all notices required by ERISA or the Code or any other Laws with
respect to the Pension Plans and Welfare Plans have been appropriately given.

(h)           Each
Pension Plan that is intended to be qualified under Section 401(a) of the Code
is subject to a favorable determination letter from the IRS, and to the
Knowledge of the Companies there are no circumstances that will or could result
in revocation of any such favorable determination letter.  Each trust created under any Pension Plan has
been determined to 

 

45

 

be
exempt from taxation under Section 501(a) of the Code, and, to the Knowledge of
the Companies, there is no circumstance that will result in a revocation of
such exemption.

(i)            No
charge, complaint, action, suit, proceeding, hearing, investigation, claim or
demand with respect to a Plan or to the administration or the investment of the
assets of any Plan that either of the Companies or any ERISA Affiliate
maintains or has maintained, or to which either of the Companies or any ERISA
Affiliate contributes or has contributed, for the benefit of any current or
former employee (other than routine claims for benefits) is pending or, to the
Knowledge of the Companies, threatened that could reasonably be expected to
result in a material liability to either of the Companies or any ERISA
Affiliate or to such Plan or a fiduciary of such Plan.

(j)            Except
as required by the Code, the consummation of the transactions contemplated by
this Agreement will not accelerate the time of vesting or the time of payment,
or increase the amount of compensation due to any director, employee, officer,
former employee or former officer of either Company or an ERISA Affiliate.

(k)           No
written or oral representations have been made to any employee,  former employee, or director of either Company or any ERISA
Affiliate at any time promising or guaranteeing any employer payment or funding
for the continuation of medical, dental, life or disability coverage for any
period of time (except to the extent of coverage required under COBRA or other
applicable Law).

(l)            All nonqualified deferred compensation plans
maintained by either or both Companies, to the
extent such plans are maintained for the benefit of individuals that are
subject to United States Taxes, satisfy the requirements of Section 409A of the
Code.

(m)          Schedule
3.28(m) of the Disclosure Schedules identifies (i) all Welfare Plans that either or both Companies self insure (each a “Self
Insured Plan” and collectively the “Self Insured Plans”); (ii) the
administrator of each of the Self Insured Plans, (iii) the limits for each of
the Self Insured Plans and (iv) the plan year for each of the Self Insured
Plans.

(i)              Each
of the Self Insured Plans has been maintained in compliance, in all material
respects, with its terms.

(ii)             There
are no actions, suits, or claims (other than routine claims for benefits in the
ordinary course) pending or, to the Knowledge of the Companies, threatened, and
to the Knowledge of the Companies, there are no facts that reasonably could be
expected to give rise to any such claims.

(iii)            To
the Knowledge of the Companies, there are no benefit claims that either
individually or in the aggregate are significantly greater than what the
Companies generally experienced in the past.

(n)           No
act or omission has occurred,  with
respect to any Plan that would result in any penalty, tax or liability of any
kind imposed upon either of the Companies under 

 

46

 

applicable
Law, and to the Knowledge of the Companies, no condition exists that reasonably
could be expected to give rise to any such penalty, tax or liability.

3.29         Tax Matters.

Except as set forth Schedule
3.29 of the Disclosure Schedules:

(a)           Each
of the Companies (i) is a limited liability company under Maryland law, taxable
as a partnership under Subchapter K of the Code, (ii) has never made an
election to be taxable as a corporation for federal or state income tax
purposes, and (iii) has never been a “publicly traded partnership” as defined
in Section 7704(b) of the Code.  Each
member of the Companies has timely reported on their individual income tax
returns their share of the items of income and deductions of the Companies as
reported to them on the Form K-1’s that they receive from the Companies;

(b)           The
fiscal year of each of the Companies ends on December 31;

(c)           Each
of the Members of the Companies is a United States citizen and is a resident of
the State of Maryland;

(d)           Each
of the Companies has duly and timely filed all federal, state, local and
foreign Tax reports, statements, documents and returns required to be filed by
them (the “Tax Returns”) and has timely paid all taxes and other charges
of any kind whatsoever due and payable to federal, state, local or foreign
taxing authorities (including, without limitation, those due and payable in
respect of the sales, use, properties, income, franchises, licenses, foreign
jurisdictions, levies, imposts, occupation, transfers, ad valorem, customs,
goods and services, withholding or payrolls of the Companies, including any
interest and penalties thereon and additions thereto) (“Taxes”).  The Companies are not currently the
beneficiary of any extension of time within which to file any Tax Return;

(e)           The
reserves for Taxes reflected in the December 2005 Balance Sheets of the
Companies are adequate and reflect all liability of the Companies for
Taxes.  Since December 31, 2005, the
Companies have not incurred any liability for Taxes outside the ordinary course
of business or otherwise inconsistent with past custom and practice;

(f)            There
are no Tax liens upon any property or assets of the Companies except liens for
current Taxes not yet due and payable;

(g)           All
Tax Returns and amendments thereof filed by the Companies are true, correct and
complete in all material respects;

(h)           All
Taxes that the Companies are or were required by law to withhold or collect
have been withheld or collected and, to the extent required, have been timely
paid to the proper governmental body or other person;

(i)            There
are no Tax allocation, indemnity, sharing or similar arrangements with respect
to or involving the Companies, and, after the date hereof, the Companies shall
not 

 

47

 

be
bound by any such tax sharing agreements or similar arrangements or have any
liability thereunder for amounts due in respect of periods on or prior to the
Closing Date;

(j)            The
Companies (i) have never been a partner for Tax purposes with respect to any
joint venture, partnership, or other arrangement or contract which is treated
as a partnership for income Tax purposes, (ii) do not own a single member
limited liability company which is treated as a disregarded entity, (iii) are
not a shareholder of a “controlled foreign corporation” as defined in Section
957 of the Code (or any similar provision of state, local or foreign law), and
(iv) are not a shareholder of a “passive foreign investment company” within the
meaning of Section 1297 of the Code;

(k)           The
Companies do not have and have not had a permanent establishment in any foreign
country, as defined in any applicable Tax treaty or convention between the
United States of America and such foreign country;

(l)            The
Companies have not entered into any transaction identified as a “listed
transaction” for purposes of Treasury Regulations section 1.6011-4(b)(2) or
301.6111-2(b)(2) and have not engaged in any reportable transaction within the
meaning of Sections 6111 and 6112 of the Code;

(m)          There
is no contract, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Companies that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to the Code;

(n)           There
is no pending or threatened claim, audit, action, suit, proceeding or
investigation against or with respect to (i) Taxes due and payable or claimed
to be due by the Companies, or (ii) any Tax Return;

(o)           No
deficiencies for any Tax relating to the Companies have been claimed, proposed,
asserted or assessed (tentatively or definitively) by any governmental or
taxing authority, including, without limitation, any sales and/or use Taxes
due; and no governmental or taxing authority in any jurisdiction in which
either of the Companies does not file Tax Returns has asserted that either of
the Companies are, or may be, subject to Tax in that jurisdiction.  There are no matters under discussion with
any Tax Authority, or known to either of the Companies, with respect to Taxes
that are likely to result in an additional liability for Taxes with respect to
either of the Companies.  The Companies
have delivered or made available to Buyer complete and accurate copies of
federal, state and local income Tax Returns of the Companies and its predecessors,
if any, for the years ended December 31, 2001, 2002, 2003, 2004 and 2005, and
complete and accurate copies of all examination reports and statements of
deficiencies assessed against or agreed to by the Companies or any predecessors
since December 31, 2001, with respect to Taxes of any type.  Neither the Companies nor any predecessor has
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency, nor has any
request been made in writing for any such extension or waiver;

 

48

 

 

(p)           No
power of attorney to deal with Tax matters of the Companies is currently in
force;

(q)           The
relevant statute of limitations for the assessment or proposal of a deficiency
against the Companies for Taxes has expired for taxable periods ending prior to
December 31, 2003;

(r)            Any
“nonqualified deferred compensation plan” (within the meaning of Section 409A
of the Code) to which the Companies are a party has at all times since the
effective date of Section 409A of the Code complied in form and in operation
with the requirements of paragraphs (2), (3), and (4) of Section 409A(a) of the
Code.  No event has occurred since the
effective date of Section 409A of the Code that would be treated by Section
409A(b) of the Code as a transfer of property for purposes of Section 83 of the
Code; and

(s)           The
Companies have disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Section 6662 of the Code.

3.30         Insurance.

(a)           The
Companies maintain the general liability, professional liability, product
liability, fire, casualty, motor vehicle, workers’ compensation, and other
types of insurance shown on Schedule 3.30(a) of the Disclosure Schedules,
which insurance is comprised of the types and in the amounts customarily
carried by businesses of similar size in the same industry and which are
reasonably necessary to adequately insure and protect the assets of the
Companies.  A list of all claims against
such insurance since January 1, 2006 that individually exceed $5,000 in amount
and the outcomes or status of such claims is set forth on Schedule 3.29 of
the Disclosure Schedules.

(b)           The
Companies maintain life insurance on those persons in the amounts as indicated
on Schedule 3.30(b) of the Disclosure Schedules.  With respect to each of the foregoing life
insurance policies (i) VTC is the
designated beneficiary and (ii) all premiums are current as of the date hereof
and there are no premiums due and unpaid as of the date hereof.

3.31         Bank Accounts.

Schedule 3.31 of the Disclosure Schedules sets forth (i) the name
of each Person with whom the Companies
maintains accounts or safety deposit boxes, (ii) the address where each such
account or safety deposit box is maintained, and (iii) the names of all Persons
authorized to draw thereon or to have access thereto.

3.32         Powers
of Attorney.

(a)           Neither
of the Companies has given any irrevocable power of attorney (other than such
powers of attorney given in the ordinary course of business with respect to
routine matters or as may be necessary or desirable in connection with the
consummation of the Contemplated Transactions) to any Person for any purpose
whatsoever.

 

49

 

(b)          Each
of the Members jointly and severally represents and warrants to FAAC that such
Shareholder has not given any irrevocable power of attorney (other than
pursuant to Section 2.5 hereof or other than such powers of attorney given in
the ordinary course of business with respect to routine matters or as may be
necessary or desirable in connection with the consummation of the Contemplated
Transactions) to any Person for any purpose whatsoever with respect to the
Companies.

3.33         No Broker.

Except for Evergreen Capital LLC (“Evergreen”), which was
retained by the Companies under two separate fee agreements both dated April 6,
2006 (jointly, the “Evergreen Agreement”), neither the Members nor the
Companies (or any of their respective Affiliates, directors, officers,
employees or agents) has employed or incurred any liability to any broker,
finder or agent for any brokerage fees, finder’s fees, commissions or other
amounts with respect to this Agreement or the Contemplated Transactions.

3.34         Security Clearances.

To
the Knowledge of the Companies, each of the Companies have the proper
procedures to conduct business of a classified nature up to the level of their
current clearances.  The levels and
locations of facility clearances are set forth on Schedule 3.34 of the
Disclosure Schedules.  Schedule 3.34
of the Disclosure Schedules identifies as of the Effective Date any employees
whose security clearance, to the Knowledge of the Companies, has been lost or
downgraded in the last twenty-four (24) months. 
Each of the Companies is in compliance in all material respects with
applicable agency security requirements, as appropriate, and has in place
proper procedures, practices and records to maintain security clearances
necessary to perform their current contracts.

3.35         No Unusual Transactions.

Except
as expressly contemplated by this Agreement, or as set forth in Schedule 3.35
of the Disclosure Schedules, since December 31, 2005, each of the Companies has
conducted its business in the ordinary course and in a manner consistent with
past practice and, without limiting the generality of the foregoing, neither of
the Companies has:

(a)           incurred
or discharged any secured or any unsecured liability or obligation (whether accrued,
absolute or contingent) other than liabilities and obligations disclosed in the
December 2005 Balance Sheet or the Estimated Closing Balance Sheet and
liabilities and obligations incurred since December 31, 2005 in the ordinary
course of business and in a manner consistent with past practices;

(b)              waived
or cancelled any claim, account receivable or trade account involving amounts
in excess of $25,000 in the aggregate;

(c)           made
any capital expenditures in excess of $25,000 in the aggregate;

 

50

 

(d)           sold
or otherwise disposed of or lost any capital asset or used any of its assets
other than, in each case, for proper corporate purposes and in the ordinary
course of business and in a manner consistent with past practices;

(e)           issued
any options to purchase any shares of its Equity Interests, or sold or
otherwise disposed of any shares of its Equity Interests or any warrants,
rights, bonds, debentures, notes or other security;

(f)            entered
into any transaction, contract, agreement, indenture, instrument or commitment
involving amounts in excess of $25,000 in the
aggregate other than in the ordinary course of business and in a manner
consistent with past practices or in connection with the Contemplated Transactions;

(g)           suffered
any extraordinary losses whether or not covered by insurance;

(h)           modified
its charter, bylaws or capital structure;

(i)            redeemed,
retired, repurchased, purchased, or otherwise acquired its Equity Interests,
options to purchase such stock, or any of its other corporate securities;

(j)            suffered
any material shortage or any material cessation or interruption of inventory
shipments, supplies or ordinary services;

(k)           entered
into an employment agreement or made (i) (A) any increase in the rate or change
in the form of compensation or remuneration payable to or to become payable to
any of its directors or officers, or (B) any increase in the rate or change in
the form of compensation or remuneration payable to or to become payable to any
of its employees, licensors, licensees, franchisors, franchisees, distributors,
agents, or suppliers, other than such increases or changes in the ordinary
course of business and consistent with past practices, or (ii) any bonus or
other incentive payments or arrangements with any of its, directors, officers,
employees, licensors, licensees, franchisors, franchisees, distributors,
agents, suppliers, or customers;

(l)            removed
any director or terminated any officer except those directors and officers who
will resign in accordance with Section 7.8;

(m)          entered
into, terminated, cancelled, amended or modified any material contract, other
than in the ordinary course of business or in connection with the Contemplated
Transactions;

(n)           made
any change in its accounting policies, practices and calculations as utilized
in the preparation of the December 2005 Financial Statements;

(o)           voluntarily
permitted any Person to subject the Membership Interests or the properties of the Companies to any
additional Lien;

(p)           (i)
made any loan or advance to, or (ii) assumed, guaranteed, endorsed or otherwise
become liable with respect to the liabilities or obligations of, any Person;

 

51

 

(q)           purchased
or otherwise acquired any corporate security or other equity interest in any
Person;

(r)            changed
its pricing, credit, or payment policies;

(s)           incurred
any Indebtedness other than to trade creditors and financial institutions in
the ordinary course of business and in a manner consistent with past practices;

(t)            except
as otherwise required by Law, entered into, amended, modified, varied, altered,
or otherwise changed any of the Plans;

(u)           changed its banking arrangements and signatories or
granted any powers of attorney;

(v)           purchased,
sold, leased, or otherwise disposed of any of its properties or any right,
title or interest therein other than in the ordinary course of business;

(w)          failed
to maintain its books in a manner that fairly and accurately reflects its
income, expenses and liabilities in accordance with applicable accounting
standards, including, without limitation, GAAP, and using accounting policies,
practices and calculations applied on a basis consistent with past periods and
throughout the periods involved;

(x)            failed
to maintain in full force and effect insurance policies on all of its
properties providing coverage and amounts of coverage comparable to the
coverage and amounts of coverage provided under its policies of insurance as
shown on Schedule 3.30(a) of the Disclosure Schedules;

(y)           failed
to perform duly and punctually in all material respects all of its contractual
obligations in accordance with the terms thereof, except where the failure to
do so would not have a Material Adverse Effect as to the Companies;

(z)            failed
to maintain and keep its properties in good condition and working order, except
for ordinary wear and tear;

(aa)         materially
modified or changed its business organization or materially and adversely
modified or changed its relationship with its suppliers, customers and others
having business relations with it;

(bb)         entered
into any contract, or agreement, or arrangement of any kind with a Member or
any Affiliate of any Member or the Companies; or modified, amended or expanded
any Related Party Transaction without the prior written consent of FAAC; or

(cc)         authorized,
agreed or otherwise committed to any of the foregoing.

3.36         Full Disclosure.

Neither this Agreement nor any Section, agreement, document or
certificate delivered pursuant hereto contains any untrue statement of a
material fact or omits to state a 

 

52

 

material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which such statements were made.  All documents and other papers delivered by
or on behalf of the Members and the Companies in connection with this Agreement
are true, complete and correct in all material respects.

ARTICLE IV

Representations and Warranties of FAAC

FAAC
represents and warrants to the Members:

4.1           Organization and Power.

(a)           FAAC
is a corporation duly organized, validly existing and in good standing under
the laws of Delaware and has full corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Contemplated Transactions.

(b)           FAAC
has all requisite corporate power to own or lease and operate its properties.

4.2           Authorization and Enforceability.

FAAC’s Board of Directors has duly authorized and
approved the execution and delivery of this Agreement and, subject to the
approval of FAAC’s shareholders, the execution and delivery of the other
Transaction Documents and the consummation of the Contemplated
Transactions.  As of the
Closing Date (a) FAAC will have duly authorized the execution and delivery of
and the performance of its obligations under the Transaction Documents and (b)
the Transaction Documents will constitute the legal, valid and binding
obligation of FAAC and shall be enforceable against FAAC in accordance with its
and their terms, respectively, subject to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors’ rights and to general equity principles.

4.3           No Violation.

None of the execution, delivery or performance of this Agreement or any
of the other Transaction Documents by FAAC and the consummation of the
Contemplated Transactions will:

(a)          conflict with or violate any provision
of the certificate of incorporation, any bylaw or any corporate charter or
document of FAAC;

(b)          result in the creation of, or require
the creation of, any Lien upon any (i) shares of shares of stock of FAAC
or (ii) property of FAAC;

(c)          result in (i) the termination,
cancellation, modification, amendment, violation, or renegotiation of any
contract, agreement, indenture, instrument, or commitment pertaining to the
business of FAAC, or (ii) the acceleration or forfeiture of any term of
payment;

 

53

 

(d)          give any Person the right to
(i) terminate, cancel, modify, amend, vary, or renegotiate any contract,
agreement, indenture, instrument, or commitment pertaining to the business of
FAAC, or (ii) to accelerate or forfeit any term of payment; or

(e)          violate any Law applicable to FAAC or
by which its properties are bound or affected.

4.4           Consents.

None of the execution, delivery or performance of this Agreement by
FAAC, nor consummation of the Contemplated Transactions or compliance with the
terms of the Transaction Documents will require (a) the consent or approval
under any agreement or instrument or (b) FAAC to obtain the approval or consent
of, or make any declaration, filing (other than administrative filings with
Taxing Authorities, foreign companies registries and the like) or registration
with, any Governmental Authority.

4.5           Authorization
of Stock Consideration.

The shares of FAAC common
stock to be issued pursuant to Section 2.2 to the Members as Stock
Consideration, when issued sold and delivered at Closing in accordance with the
terms of this Agreement, will (a) be duly authorized, validly issued, fully
paid and nonassessable, (b) not be subject to preemptive rights created by
statute, FAAC’s certificate of incorporation or bylaws or any agreement to
which FAAC is a party or by which FAAC is bound and (c) be free of restrictions
on transfer or Liens, other than restrictions on transfer under applicable
state and federal securities laws or restrictions or Liens imposed thereon by
the Members after the Closing.

 

4.6           Capitalization.

The
authorized capital stock of FAAC consists, and as of Closing will consist, of
50,000,000 shares of common stock and 1,000,000 shares of preferred stock, par
value $0.0001 per share, of which, (a) 9,550,000 shares of FAAC’s common stock
were issued and outstanding as of May 1, 2006, all of which were duly
authorized, validly issued, fully paid and nonassessable, (b) no shares of FAAC
common stock were held in the treasury of FAAC, and (c) no shares of FAAC’s
preferred stock were outstanding.  As of
the Effective Date hereof, and as of Closing, except as described in this
Section or on Schedule 4.6, (a) there are no outstanding (i) shares of capital
stock or other voting securities of FAAC, (ii) securities of FAAC convertible
into or exchangeable for shares of capital stock or voting securities of FAAC,
(iii) options or other rights to acquire from FAAC, or obligations of FAAC to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of FAAC, and (iv) equity
equivalents, interests in the ownership or earnings of FAAC or other similar
rights (collectively “FAAC Securities”), and (b) there are no
outstanding obligations of FAAC to repurchase, redeem or otherwise acquire any
FAAC Securities.

 

54

 

 

4.7           Public
Disclosure Documents.

(a)           FAAC
has timely filed with, or furnished to, the SEC each form, proxy statement or
report required to be filed with, or furnished to, the SEC by FAAC pursuant to
the Exchange Act (collectively, with FAAC’s prospectus filed with the SEC on
July 13, 2005, as amended to date, the “Public Disclosure Documents”).  The Public Disclosure Documents, as amended
prior to the date hereof, complied, as of the date of their filing with the
SEC, as to form in all material respects with the requirements of the Exchange
Act and Securities Act, as applicable. 
The information contained or incorporated by reference in the Public
Disclosure Documents was true, complete and correct in all material respects as
of the respective dates of the filing thereof with the SEC; and, as of such
respective dates, the Public Disclosure Documents did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

(b)           The
financial statements of FAAC included in the Public Disclosure Documents have
been prepared in accordance with the published rules and regulations of the SEC
and in conformity with GAAP applied on a consistent basis throughout the
periods indicated therein, except as may be indicated therein or in the notes
thereto, and presented fairly, in all material respects, the consolidated
financial position of FAAC as of the dates indicated, and the consolidated
results of the operations and cash flows of FAAC for the periods therein
specified (except in the case of quarterly financial statements for the absence
of footnote disclosure and subject, in the case of interim periods, to normal
year-end adjustments).

4.8           Litigation.

There is no action, suit,
proceeding, arbitration, claim, investigation or inquiry pending or, to FAAC’s
Knowledge, threatened by or before any governmental body or other forum against
the FAAC that (i) would reasonably be expected to have a Material Adverse
Effect as to FAAC, (ii) that questions the
validity of this Agreement or (iii) that seeks to prohibit, enjoin or otherwise
challenge the Contemplated Transactions.

 

4.9           Brokers.

FAAC
has not entered into any contract or other understanding with any Person, which
may result in the obligation of FAAC to pay any finder’s fee, commission or
other like payment in connection with this Agreement and the Contemplated
Transactions.

4.10         Full
Disclosure.

Neither
this Agreement nor any Section, agreement, document or certificate delivered
pursuant hereto contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances under which such statements
were made.  All documents and other
papers delivered by or on behalf of the FAAC in connection with this Agreement
are true, complete and correct in all material respects.

 

55

 

ARTICLE V

Covenants

5.1           Conduct of the Companies.

Except
as contemplated by this Agreement, during the period from the Effective Date to
the Closing Date, the Members will cause the Companies to conduct their
business and operations in the ordinary course and, to the extent consistent
therewith, to use reasonable efforts to preserve their respective current
relationships with customers, employees, suppliers and others having business
dealings with them.  Accordingly, and
without limiting the generality of the foregoing, during the period from the
date of this Agreement to the Closing Date, without the prior written consent
of FAAC, neither the Companies or the Members will take, and the Members will
not permit the Companies to take, any action that would cause the
representations set forth in Section 3.35 not to be true as of the Closing
Date, except as expressly contemplated by this Agreement.

5.2           Access to Information Prior to the Closing;
Confidentiality.

(a)           During
the period from the Effective Date through the Closing Date, the Members will
cause the Companies to give FAAC and its authorized representatives reasonable
access during regular business hours to all offices, facilities, books and
records of the Companies as FAAC may reasonably request; provided, however,
that (i) FAAC and its representatives shall take such action as is deemed
necessary in the reasonable judgment of the Members to schedule such access and
visits through a designated officer(s) of the Companies and in such a way as to
avoid disrupting the normal business of the Companies, (ii) the Companies shall
not be required to take any action that would constitute a waiver of the
attorney-client or other privilege and (iii) the Companies need not supply FAAC
with any information that, in the reasonable judgment of the
applicable Company is under a
contractual or legal obligation not to supply, including, without limitation,
as a result of any governmental or defense industrial security clearance
requirement or program requirements of any Governmental Authority prohibiting
certain persons from sharing information; provided, however, each of the
Companies and the Members will use their respective reasonable efforts to
enable FAAC to receive such information.

(b)           FAAC
will hold and will cause its employees, agents, affiliates, consultants,
representatives and advisors to hold any information that it or they receive in
connection with the activities and transactions contemplated by this Agreement
in strict confidence in accordance with and subject to the terms of the
Confidentiality Agreement dated as of January 16, 2006 between FAAC, the
Members and the Companies (the “Confidentiality Agreement”).

5.3           Best Efforts.

Subject
to the terms and conditions of this Agreement, each of the parties hereto will
use its best efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate the transactions contemplated by this
Agreement at the earliest practicable date.

 

56

 

5.4           Consents.

Without
limiting the generality of Section 5.3 hereof, each of the parties hereto will
use its best efforts to obtain all licenses, permits, authorizations, consents
and approvals of all third parties and governmental authorities necessary in
connection with the consummation of the transactions contemplated by this
Agreement prior to the Closing.  Each of
the parties hereto will make or cause to be made all filings and submissions
under laws and regulations applicable to it as may be required for the
consummation of the transactions contemplated by this Agreement.  FAAC, the Members and the
Companies will coordinate and cooperate with
each other in exchanging such information and assistance as any of the parties
hereto may reasonably request in connection with the foregoing.

5.5           Access to Books and Records Following the Closing.

Following
the Closing, FAAC shall permit the Members and their authorized representatives,
during normal business hours and upon reasonable notice, to have reasonable
access to, and examine and make copies of, all books and records of the
Companies and/or FAAC that relate to transactions or events occurring prior to
the Closing or transactions or events occurring subsequent to the Closing that
are related to or arise out of transactions or events occurring prior to the
Closing; provided, however, (a) that the Members and their
representatives shall take such action as is deemed necessary in the reasonable
judgment of FAAC and the Companies to schedule such access and visits through a
designated officer of the Companies and in such a way as to avoid disrupting the normal
business of FAAC and/or the Companies, (b) neither FAAC nor the Companies shall
be required to take any action that would constitute a waiver of the
attorney-client or other privilege and (c) neither FAAC nor the Companies need
supply the Members, or their representatives, with any information which, in
the reasonable judgment of FAAC or the Companies (as the case may be) is under
a contractual or legal obligation not to supply, including, without limitation,
as a result of any governmental or defense industrial security clearance
requirement or program requirements of any Governmental Authority prohibiting
certain persons from sharing information. 
FAAC agrees that it shall retain and shall cause the Companies to retain
all such books and records for a period of seven years following the Closing,
or for such longer period following the Closing as may be required by
applicable Law.

5.6           Members’ Post-Closing Confidentiality Obligation.

Following
the Closing, except as otherwise expressly provided in this Agreement or in
other agreements delivered in connection herewith, the Members shall, and shall
cause their respective Affiliates, officers agents and representatives, as
applicable to, (a) maintain the confidentiality of, (b) not use, and (c) not
divulge, to any Person any confidential or proprietary information of the Companies,
except with the prior written consent of FAAC or to the extent that such
information is required to be divulged by legal process, except as may
reasonably be necessary in connection with the performance of any
indemnification obligations under this Agreement or except as may be required
by Law; provided, however, that the foregoing limitations shall not
apply to information that (i) otherwise becomes lawfully available to the
Members, or their respective Affiliates, officers agents and representatives after
the Closing Date on a nonconfidential basis from a third party who is not under
an obligation of confidentiality to 

 

57

 

FAAC
or the Companies or (ii) is or becomes generally available to the public without
breach of this Agreement by the Members, or their respective Affiliates,
officers agents and representatives.

5.7           Expenses.

(a)           Except
as otherwise provided in this Section 5.7, each of the parties shall bear its
own expenses related to the Contemplated Transactions.  Notwithstanding the foregoing, all
compensation due Evergreen and other third-party costs of the Members or the
Companies with respect to the Contemplated Transactions and other the amounts
referred to on Schedule 5.7 of the Disclosure Schedules, including, but not
limited to all payments under the Phantom Membership Interest Plan due at
Closing and otherwise to terminate the Phantom Membership Interest Plan
(collectively, the “Members’ Transaction Costs”) shall be the
responsibility of the Members and, to the extent payable at Closing, and not
otherwise paid by the Members, shall be paid at Closing in accordance with
Section 5.8(a).

(b)           Notwithstanding
the foregoing, the obligation to pay Taxes shall be allocated pursuant to
Section 5.11 rather than this Section 5.7.

5.8           Certain Closing Payments.

(a)           The
Members shall be obligated to repay all Indebtedness of the Companies as of the
Closing (other than the Assumed Debt). 
In connection with the Closing, FAAC shall repay out of the Cash Consideration,
on behalf of the Members, (i) all Indebtedness of the Companies remaining
outstanding (other than the Assumed Debt), and (ii) all Members’ Transaction
Costs.  To the extent the amount of any
such payment can be determined, and paid, at or prior to the Closing, then a
downward adjustment shall be made in the Cash Consideration paid at Closing
equal to such amount.  In the event any
such payment cannot be determined or paid at or prior to Closing, then (i) the
parties to the Escrow Agreements shall instruct the Escrow Agent to pay any
such amount (from the Balance Sheet Escrow to the extent of any Balance Sheet
Escrow Funds and then from the General Indemnity Escrow) to FAAC within three
(3) Business Days of determination (which may be through delivery of an
invoice) and (ii) the Members hereby agree and covenant that they shall be
jointly and severally responsible for and shall immediately deposit in the
General Indemnity Escrow cash in the amount of the distributions made from the
Escrowed Funds to cover costs the Members are responsible for under this
Section 5.8.

(b)           It
is the intent of the parties that all Members shall be deemed to have repaid
any and all loans outstanding and owing by any of the Members to the Companies as of the Closing Date. Notwithstanding
anything in this Agreement to the contrary, the Members’ Representative shall
be permitted to make, or direct, non-pro rata distributions of the Cash
Consideration to the Members in order to account for any such deemed
repayments.

(c)           The
Members hereby instruct FAAC and FAAC hereby agrees that 67,826 shares of FAAC
common stock (the “Evergreen Stock Payment Amount”) otherwise payable to
Gallagher and Rosato pursuant to Section 2.2(d) above, shall be issued, on
Rosato’s and Gallagher’s behalf, to Evergreen, or such other recipients as may
be identified in writing by 

 

58

 

Evergreen
on or before the Closing Date as partial payment of the fees due Evergreen
under the Evergreen Agreement (the “Evergreen Stock Payment”).

(i)            As
a condition to receiving the Evergreen Stock Payment, Evergreen and any other
recipients identified by Evergreen, shall be required to sign a Lock Up
Agreement and Acquisition Agreement in the form attached hereto as Exhibit K.

(ii)           The
shares of FAAC’s common stock to be issued pursuant to this Agreement as the
Evergreen Stock Payment (A) have not been, and will not be at the time of
issuance, registered under the Securities Act, and will be issued in a
transaction that is exempt from the registration requirements of the Securities
Act and (B) will be “restricted securities” under the federal securities laws
and cannot be offered or resold except pursuant to registration under the
Securities Act or an available exemption from registration. All certificates
evidencing the Stock Consideration and Earn Out Consideration shall bear, in
addition to any other legends required under applicable securities laws, the
following legend:

“THE SHARES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO
REGISTRATION UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM REGISTRATION.”

5.9           No Solicitation of Competitive Transactions.

From
the date of this Agreement until the Closing, or, if earlier, the termination
of this Agreement in accordance with its terms, each of the Companies and each
of the Members agrees that they will not, directly or indirectly, through any
officer, director, employee, representative or agent or any of their
affiliates, (i) solicit, initiate, entertain or encourage any inquiries or
proposals that constitute, or could lead to, a proposal or offer for a merger,
consolidation, business combination, recapitalization, sale of substantial
assets, sale of a substantial percentage of shares of capital stock (including,
without limitation, by way of a public offering or private placement), joint
venture or similar transactions involving the Companies or any of its
subsidiaries, other than a transaction with FAAC and/or its affiliates (any of
the foregoing inquiries or proposals being referred to herein as an “Acquisition
Proposal”), (ii) engage in negotiations or discussions concerning, or
provide any non-public information to any person or entity relating to, any
Acquisition Proposal, or (iii) agree to, approve or recommend any Acquisition
Proposal.  The Members will notify FAAC
immediately (and not later than twenty-four (24) hours) after receipt of any
Acquisition Proposal or any request for non-public information in connection
with an Acquisition Proposal or for access to the properties, books or records
of the Companies by any person or entity that informs the Members or the
Companies  that it is considering making
or has made an Acquisition Proposal. 
Such notice shall be made orally (and shall be confirmed in writing)
and, subject to existing confidentiality, nondisclosure or other similar
agreements, shall indicate the identity of the party making the proposal and
the material terms and conditions of such proposal, inquiry or contract.  The Members and the Companies will prevent,
as applicable any of their respective directors, officers, affiliates, representatives
or agents (each a “Representative”) from taking any action 

 

59

 

prohibited
hereby if taken by the Members or the Companies.  If the Members or either of the Companies
learns of any such action taken by a Representative, the Member(s) or Companies
will immediately advise FAAC and provide the information specified herein.

5.10         Personnel.

(a)            Except as otherwise provided in
Section 5.10(e), FAAC intends that all Personnel employed by the Companies as
of the Closing Date, shall have the opportunity to continue as an employee of
FAAC following the Closing Date.  For
purposes of this Agreement, the Companies’ Personnel as of the Closing Date
shall be categorized sometimes as (i) the senior executives (consisting of
Thomas P. Rosato and Gerard J. Gallagher, the “Senior Executives”),
(ii) the “Key Employees” (which shall mean and refer to those
employees identified by FAAC on a written list previously provided to the
Companies and Members) and (iii) the “Non-Key Employees” (which shall
refer to all personnel other than the Senior Executives and the Key Personnel).

(b)            Simultaneously with the execution of
this Agreement, each of the Senior Executives shall enter into employment
agreements with FAAC in the form attached hereto as Exhibits L-1
and L-2 (jointly, the “Senior Executives Employment Agreements”)
with effectiveness contingent only on Closing.

(c)            Not less than fifty percent
(50%) of the Key Employees shall enter into employment agreements with FAAC in
the form attached hereto as Exhibit M (the “Key Employee Employment
Agreement”) with effectiveness contingent only upon Closing.

(d)            From
and after the Closing Date, the Senior Executives, any Key Employee who signs a
Key Employee Employment Agreement and the Non-Key Employees shall be given (to
the extent he or she elects to participate and it is permitted by Law), credit
for past service with either of the
Companies for purposes of participation and
vesting in any employee benefit plan offered by FAAC.

5.11         Certain Tax Matters.

(a)           Purchase Price allocation.

                                The Purchase
Consideration, as adjusted, and other amounts treated as purchase price for
income tax purposes will be allocated among the assets of the Companies shall
be mutually agreed to by FAAC and the Members within thirty (30) days after the
Closing.  FAAC, the Companies and the
Members shall use this allocation to prepare and file Internal Revenue Service
Form 8594 and any other tax returns, and no party to this Agreement may take
any inconsistent position.  The parties
to this Agreement shall cooperate in preparing, executing and filing with the
Internal Revenue Service all necessary information returns required by Section
1060 of the Code.  On or before the 60th
day after the Closing Date, FAAC shall send the Members a draft of Internal
Revenue Service Form 8594 containing FAAC’s proposed allocation of the Purchase
Price among the Transferred Assets, defined under Section 1060 of the Tax
Code.  Within 10 days after receipt of
Form 8594, the Members’ Representative shall notify FAAC 

 

60

 

whether
it disagree with the proposed allocation and, if the Members’ Representative
disagrees, the parties to this Agreement shall make a good faith attempt to
reach an agreement.

(b)           Tax
Periods Ending on or Before the Closing Date.

                                The Members
shall prepare, or cause to be prepared, and file, or cause to be filed, on a
timely basis (in each case, at their sole cost and expense) and on a basis
reasonably consistent with past practice, all Tax Returns with respect to the
Companies for taxable periods ending on or prior to the Closing Date and
required to be filed thereafter (the “Prior Period Returns”).  The Members shall provide a draft copy of
such Prior Period Returns to FAAC for its review at least fifteen (15) Business
Days prior to the due date thereof.  FAAC
shall provide its comments to the Members at least five Business Days prior to
the due date of such returns and the Members shall make all changes requested
by FAAC in good faith (unless the Members are advised in writing by the
independent outside accountants or attorneys that such changes (i) are contrary
to applicable Law, or (ii) will, or are likely to, have a material adverse
effect on the Members (provided that the Members agree to make any such changes
notwithstanding the application of this clause (ii) if the changes are
consistent with applicable Law and past practices of the Companies)).  Except as provided in Section 5.11(c), and
only to the extent such Taxes have not been accrued or otherwise reserved for
on the Closing Balance Sheets (and specifically reflected in Closing Net
Working Capital), the Members shall pay, or cause to be paid, all Taxes with
respect to the Companies shown to be due on such Prior Period Returns.  In the event that the Members for any reason
fail to make the payment contemplated in the previous sentence, then FAAC may
bring an indemnification claim under ARTICLE IX.

(c)           Tax Periods Beginning Before and Ending After the
Closing Date.

(i)              FAAC
shall prepare or cause to be prepared and file or cause to be filed, on a basis
reasonably consistent with past practice, any Tax Returns of the Companies for
Tax periods that begin before the Closing Date and end after the Closing Date
(collectively, the “Straddle Periods” and each a “Straddle
Period”).  FAAC shall permit the
Members’ Representative to review and comment on each such Tax Return described
in the preceding sentence prior to filing, and FAAC shall make all changes
reasonably requested by the Companies
in good faith (unless FAAC is (A) advised in writing by its independent outside
accountants or attorneys that such changes are contrary to applicable Law or
(B) will, or are likely to, have a material adverse effect on FAAC or any of
its Affiliates (provided that FAAC agrees to make any such changes
notwithstanding the application of this clause (B) if the changes are
consistent with applicable Law and past practices of the Companies)).  Within fifteen (15) days after the date on
which FAAC pays any Taxes of the Companies with respect to any Straddle Period,
the Members shall, to the extent such Taxes have not been accrued or otherwise
reserved for on the Closing Balance Sheets (and specifically reflected in the
Closing Net Working Capital), pay to FAAC the amount of such Taxes that relates
to the portion of such Straddle Period ending on the Closing Date (the “Pre-Closing
Tax Period”).  In the event that the
Members for any reason fail to make the payment contemplated in the previous
sentence, then FAAC may bring an indemnification claim under ARTICLE IX.

 

61

 

(ii)             For purposes of
this Agreement:

(A)          In the case of any
gross receipts, income, or similar Taxes that are payable with respect to a
Straddle Period, the portion of such Taxes allocable to (1) the Pre-Closing Tax
Period and (2) the portion of the Straddle Period beginning on the day next
succeeding the Closing Date (the “Post-Closing Tax Period”) shall be
determined on the basis of a deemed closing at the end of the Closing Date of
the books and records of the Companies.

(B)           In
the case of any Taxes (other than gross receipts, income, or similar Taxes)
that are payable with respect to a Straddle Period, the portion of such Taxes
allocable to the portion of the Straddle Period prior to the Closing Date shall
be equal to the product of all such Taxes multiplied by a fraction the
numerator of which is the number of days in the Straddle Period from the
commencement of the Straddle Period through and including the Closing Date and
the denominator of which is the number of days in the entire Straddle Period; provided,
however, that appropriate adjustments shall be made to reflect specific
events that can be identified and specifically allocated as occurring on or
prior to the Closing Date (in which case the Members shall be responsible for
any Taxes related thereto) or occurring after the Closing Date (in which case,
FAAC shall be responsible for any Taxes related thereto).

(ii)             FAAC
shall be responsible for (A) any and all Taxes with respect to the Pre-Closing
Tax Period of any applicable Straddle Period to (but only to) the extent such
Taxes have been accrued or otherwise reserved for on the Closing Balance Sheet
and (B) any Taxes with respect to the Post-Closing Tax Period of the
Straddle Periods.

(d)           Cooperation
on Tax Matters.

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

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

 

62

 

(iii)          FAAC
and the Members further agree, upon request, to provide the other party with
all information that either party may be required to report pursuant to Section
6043 of the Code and all Treasury Department Regulations promulgated
thereunder.

(e)           Certain
Taxes.  All transfer, documentary,
sales, use, stamp, registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with the Contemplated
Transactions (including any transfer or similar tax imposed by any governmental
authority) shall be shared equally between FAAC on the one hand and the Members
on the other, and each shall be responsible for one-half of such Taxes.  The party required by Law to do so will file
all necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and
fees, and, if required by applicable Law, the other parties will join in the
execution of any such Tax Returns and other documentation.

(f)            Indemnification and Tax Contests.  FAAC’s and the Members’ indemnification
obligations with respect to the covenants in this Section 5.11 together with
the procedures to be observed in connection with any Tax Contest shall be
governed by ARTICLE IX.

5.12         Public Announcements.

None
of FAAC, the Companies or the Members, 
will issue any press release or make any public statement with respect
to this Agreement or the Contemplated Transactions, or disclose the existence
of this Agreement to any Person or entity, prior to the Closing and, after the
Closing, will not issue any such press release or make any such public
statement without the prior consent of the other parties (which consent shall
not be unreasonably withheld or delayed), subject to any applicable disclosure
obligations pursuant to Applicable Law provided that if FAAC proposes to issue
any press release or similar public announcement or communication in compliance
with any such disclosure obligations and related to the Contemplated Transactions,
FAAC shall use commercially reasonable efforts to consult in good faith with
the Members’ Representative before doing so.

5.13         Communications with Customers and Suppliers.

The
Members’ Representative and FAAC will mutually agree upon all communications
with suppliers and customers of the Companies relating to this Agreement and the Contemplated
Transactions prior to the Closing Date.

5.14         Evergreen
Agreement.

All
compensation due Evergreen with respect to the Contemplated Transactions
(collectively, the “Evergreen Fees”), whether under the Evergreen
Agreement or otherwise, is the Members’ responsibility.  The Members’ shall deliver to FAAC at the
Closing a release signed by Evergreen and in form reasonably satisfactory to
FAAC (the “Evergreen Release”) confirming that the Evergreen Fees have
been paid in full and releasing the Companies and FAAC from all liability with
respect to the Evergreen Agreement.  The
Members hereby agree to indemnify and hold FAAC harmless from and against any
indemnification claims brought by 

 

63

 

Evergreen
(or any person or entity bringing an indemnification claim through Evergreen)
under or with respect to the Evergreen Agreement.

5.15         Post
Closing Covenants Regarding Management of FAAC.

(a)           Voting
Agreement.  At Closing, the Members
agree to sign a Voting Agreement in the form attached hereto as Exhibit N.

(b)           FAAC Senior
Management.  Through the date of FAAC’s
2008 annual Shareholders meeting, senior management of FAAC to be:

	
  Harvey L. Weiss

  	
   

  	
  Chairman
  of the Board of Directors

  
	
  C.
  Thomas McMillen

  	
   

  	
  Vice
  Chairman of the Board of Directors

  
	
  Thomas P. Rosato

  	
   

  	
  Chief Executive Officer

  
	
  Gerard
  J. Gallagher

  	
   

  	
  President/Chief
  Operating Officer

  

 

(c)           FAAC
Board of Directors.  FAAC’s Board of
Directors shall be modified to consist of nine (9) directors serving three-year
staggered terms.

(d)           VTC
and Vortech Management.  Following
the Closing and for a period ending no sooner than the third anniversary of the
Closing Date, Thomas P. Rosato shall serve as the Chairman and Gerard J.
Gallagher shall serve as the Chief Executive Officer/President of both VTC and
Vortech with the authority customarily granted to persons serving in those
positions.

(e)           Equity
Incentive Plan.  Following the Closing,
FAAC will establish an equity incentive plan that will provide for the issuance
of equity rights to key employees of FAAC and the Companies representing 12% of
the FAAC issued and outstanding common stock, computed on a fully-diluted basis
together with the Employee Stock Grants.

5.16         Welfare
Plans

(a)           The
Estimated Closing Balance Sheet will reflect a reserve, estimated on the basis
of past experience and experience through the Closing Date, which will reflect
the estimated cost of the Companies’ self-insurance under the Self Insured
Plans through the Closing Date.  The
Companies will fully disclose to FAAC the basis of the computation of the
reserves for the Self Insured Plans reflected in the Estimated Closing Balance
Sheet.  The Companies are in the process
of replacing the Self Insured Plans with fully insured plans.  In connection with this replacement, the
Companies will be required to purchase an insurance “tail” for run-off
liability.  The Members shall jointly and
severally indemnify FAAC, subject to the limitations set forth in ARTICLE IX on
the indemnification obligations of the Members, for the amount of medical
claims and related administrative costs arising in respect of the run-off
period to the extent they exceed accrued reserves therefor as of the Closing
Date and are not covered by the “tail” or “stop loss” insurance.

(b)           Each
of the Companies shall cease to be a participating employer under the Plans
sponsored by Chesapeake Tower Systems, Inc. or an Affiliate as of the Closing
Date 

 

64

 

and,
prior to the Closing, shall provide Purchaser with written documentation
thereof satisfactory to Purchaser.

5.17         Cooperation
in Connection with Proxy Materials.

The Companies and the Members will, and will cause their respective
Representatives to fully cooperate with FAAC in connection with the preparation
of proxy materials, to be filed with the SEC and mailed to the shareholders of
FAAC seeking approval of the Contemplated Transactions by the FAAC shareholders
(such proxy materials, in the form mailed to the FAAC shareholders, the “Proxy
Materials”).  Without limiting the
generality of the foregoing, the Companies
and the Members shall cause the Companies (a) to provide, as soon as reasonably
possible after the Effective Date all information required to be disclosed
under Item 7 of Form S-4 under the Securities Act in a form that is customarily
included in proxy statements (the “Companies’ Information”) and (b) to
promptly review the Proxy Material when provided by FAAC.  The Members represent and warrant that the
Companies’ Information shall not contain any untrue statement of material fact
or omit a material fact necessary to make the statements in the Companies’
Information not misleading.  Further, the Companies will cause
McGladrey & Pullen LLP to deliver to FAAC, as of the date of the Proxy
Materials and at the expense of FAAC, letters, addressed to FAAC, in form and
substance satisfactory to FAAC and consistent with SAS No. 72, containing
statements and information of the type customarily included in auditors’ “comfort
letters” with respect to the audited financial statements, unaudited interim
financial statements, unaudited pro forma financial information and other
financial information of the Companies included in the Proxy Materials.

5.18         Continuing
Related Party Transactions.

(a)           To
the extent that any Continuing Related Party Transactions are modified,
amended, or expanded in any fashion, (including, but not limited to the award
of new business by either VTC or Vortech) after the Closing, all such
modifications, amendments, or expansions shall be expressly contingent upon the
prior written approval of the independent members of the FAAC Board of
Directors.

(b)           Prior
to the Closing (i) the lease commitment between VTC and TPR Realty Group III
L.L.C. to lease office space for a new corporate headquarters for VTC in
Columbia, Maryland (the “VTC Lease Commitment”) shall be reduced to a
Deed of Lease (the “New VTC Lease”) in form satisfactory to FAAC in its
sole discretion and (ii) the Members shall cause to be obtained from a real
estate appraiser an appraisal (the “VTC Lease Appraisal”) indicating
that the economic terms of the New VTC Lease are at or below the “market terms”
(the appraiser and the VTC Lease Appraisal to be acceptable to FAAC, in its
sole discretion).  If for any reason  (i) the VTC Lease Commitment is not reduced
to a Deed of Lease acceptable to FAAC in its sole discretion, or (ii) the
Members are unable to produce, prior to Closing, a VTC Lease Appraisal
acceptable to FAAC; then the VTC Lease Commitment and New VTC Lease shall be
terminated prior to Closing.

(c)           The
following Continuing Related Party Transactions shall be terminated on or
before the dates specified below:

 

65

 

(i)            As
soon as possible, but in all events, no later than March 31, 2007, Rosato will
cease to own any interest of any kind in Chesapeake Tower Systems, Inc.  If for any reason Rosato continues to own any
interest in Chesapeake Tower Systems, Inc. after March 31, 2007, any and all
contracts between the Companies and Chesapeake Tower Systems, Inc. shall be
terminable at will by FAAC, or the Companies without penalty, fee, or damages
of any kind or nature.

(ii)          
As soon as possible, but in all events, no later than December 31, 2007, Rosato
will cease to own any interest of any kind in L.H. Cranston Acquisition Group,
Inc. If for any reason Rosato continues to own any interest in L.H. Cranston
Acquisition Group, Inc. after December 31, 2007, any and all contracts between
the Companies and L.H. Cranston Acquisition Group, Inc. shall be terminable at
will by FAAC, or the Companies without penalty, fee, or damages of any kind or
nature.

(iii)          As
soon as possible, but in all events, no later than March 31, 2007, Rosato will
cease to own any interest of any kind in Telco Power and Cable LLC. If for any
reason Rosato continues to own any interest in Telco Power and Cable LLC after
March 31, 2007, any and all contracts between the Companies and Telco Power and
Cable LLC shall be terminable at will by FAAC, or the Companies without
penalty, fee, or damages of any kind or nature.

(d)           The
Members shall jointly and severally indemnify FAAC for any and all liability,
of any kind or nature related to any Continuing Related Party Transactions that
(i) do not conform in all respect to the requirements of Section 5.18(a) or
(ii) that are terminated on or before the time provided and otherwise pursuant
to Section 5.18(c).

(e)           The
Members shall jointly and severally indemnify FAAC for any and all liability,
of any kind and nature, under or with respect to that certain Corporate
Guaranty of Lease dated October 26, 2004 by which Vortech Consulting, L.L.C.
guaranteed the obligations of S3 Integration, L.L.C. under the terms of a Lease
dated October 25, 2004 by and between S3 Integration, L.L.C. and MIE Properties
Inc., as amended by a First Amendment dated August 22, 2005.

5.19         Update
of Disclosure Schedules.

The
Members and the Companies may, at their option, but no later than three (3)
Business Days prior to the Closing, deliver to FAAC the Disclosure Schedules
updated to the date of Closing (the “Updated Disclosure Schedules”).  Any Updated Disclosure Schedules shall be
prepared in a manner such that the Updated Disclosure Schedules clearly
indicate differences between the Disclosure Schedules as delivered on the
Effective Date and the Updated Disclosure Schedules.  To the extent that that there are Disclosure
Schedule Update Losses, the FAAC Indemnitees shall be entitled to
indemnification pursuant to Section 9.2, subject to the limitations of Section
9.2(f).

 

66

 

5.20         Threatened Litigation.

As disclosed on Schedule 5.25 of the Disclosure Schedules the Members
and either or both of the Companies have been threatened with litigation by
Signia Solutions, Inc. and/or Martin C. Licht 
(the “Signia Threatened Litigation”).  
The Members shall jointly and severally indemnify FAAC for any and all
liability, of any kind or nature related to the Signia Threatened Litigation
(the forgoing indemnification to be deemed to be and treated as an Uncapped and
Non-Threshold Indemnification for purposes of Section 9.2(f).

 

ARTICLE VI

Deliveries by All Parties at Closing

6.1           Conditions to All Parties
Obligations.

The obligations of the parties to consummate
the Contemplated Transactions are subject to the fulfillment prior to or at the
Closing of each of the following conditions (any or all of which may be waived
by the parties):

(a)           Injunctions.  There shall be no order or injunction of a
foreign or United States federal or state court or other Governmental Authority
of competent jurisdiction in effect precluding, restraining, enjoining or
prohibiting consummation of the Contemplated Transactions or otherwise
materially limiting or restricting ownership or the operation of the Acquired
Business;

(b)           Statutes; Consents.  No statute, rule, order, decree or regulation
shall have been enacted or promulgated after the date hereof by any
Governmental Authority of competent jurisdiction which prohibits the
consummation of the Contemplated Transactions or otherwise materially limits or
restricts ownership or operation of the business of the Companies and all
foreign or domestic governmental consents, orders and approvals required for
the consummation of the Contemplated Transactions as set forth on Schedule
6.1(b) of the Disclosure Schedules, shall have been obtained and shall be in
effect at the Closing and shall not materially limit or restrict ownership or
the operation of the business of the Companies;

(c)           Escrow Agreements.  Each of the parties hereto, together with the
Escrow Agent, shall have entered into the Escrow Agreements; and

(d)           Litigation.  No litigation regarding this Agreement or the
Contemplated Transactions shall have commenced or be pending or threatened.

6.2           Conditions to the Members
Obligations.

                                The
obligations of the Members to consummate the Contemplated Transactions are
subject to the fulfillment at or prior to the Closing of each of the following
conditions (any or all of which may be waived in whole or in part by the
Members’ Representative).

 

67

 

(a)           Representations and Warranties.  The representations and warranties of FAAC in
this Agreement shall be true and correct in all material respects as of the
date when made and at and as of the Closing Date as though such representations
and warranties were made at and as of the Closing Date, except for changes
permitted under or contemplated by this Agreement.

(b)           Performance.  FAAC shall have performed and complied with
all agreements, obligations, covenants and conditions required by this
Agreement to be so performed or complied with by FAAC at or prior to the
Closing.

(c)           Deliveries.  The Members shall have received the
deliveries contemplated by ARTICLE VIII.

6.3           Conditions to FAAC’s Obligations.

                                The
obligations of FAAC to consummate the Contemplated Transactions are subject to
the fulfillment at or prior to the Closing of each of the following conditions
(any or all of which may be waived in whole or in part by FAAC).

(a)           Representations and Warranties.  The representations and warranties of the
Members and the Companies in this Agreement shall be true and correct in all
material respects as of the date when made and at and as of the Closing Date as
though such representations and warranties were made at and as of the Closing
Date, except for those representations and warranties which address matters
only as of a particular date (which will be true and correct in all material
respects only as of such date), and except for changes permitted under or
contemplated by this Agreement.

(b)           Performance.  The Members and the Companies shall have
performed and complied with all agreements, obligations, covenants and
conditions required by this Agreement to be so performed or complied with by
the Members and the Companies at or prior to the Closing.

(c)           No Material Adverse Effect.  From December 31, 2005 until the Closing
Date, there shall have been no Material Adverse Effect, or the occurrence of an
event that has resulted or can reasonably be expected to result in such a
change, in the business, operations, properties, contracts, customer relations
or condition, financial or otherwise, of either or both of the Companies, other
than changes expressly permitted under or contemplated by this Agreement.

(d)           Deliveries.  FAAC shall have received the deliveries
contemplated by ARTICLE VII.

(e)           Matters Referred to in Disclosure
Schedules.  All matters, if any,
referred to in the Disclosure Schedules as being taken, in process, or intended
to be taken shall have been completed to the reasonable satisfaction of FAAC.

(f)            Approval by FAAC Shareholders.  Approval
of the Contemplated Transactions by the FAAC shareholders.

 

68

 

(g)           Phantom Membership Interest Plan.  The Phantom Membership Interest Plan is
terminated and Phantom Membership Interest Releases for every participant in
the Phantom Membership Interest Plan shall have been executed and delivered to
FAAC.

(h)           Certain Indebtedness.  All Indebtedness of the Companies and their
Subsidiaries (including, but not limited to, Indebtedness owed by any one or
more of the Companies to officers and directors of the Companies), and all
Indebtedness owed by any officers and directors to the Companies, shall be paid
in full.  

(i)            Members’ Transaction Costs.  Pursuant to Section 5.8, the Members’
Transaction Costs shall be paid in full. 

(j)            Comfort Letters.  FAAC shall have received “comfort letters,”
in customary form, from McGladrey & Pullen LLP dated the date of the
Proxy  Materials and the Closing Date (or
such other date or dates reasonably acceptable to FAAC) with respect to certain
financial statements and other financial information included in the Proxy
Statement as contemplated by Section 5.17.

(k)           Evergreen Release.  The execution and delivery to FAAC of the
signed Evergreen Release.

(l)            Senior Executive Employment
Agreements.  The execution
and delivery of the Senior Executive Employment Agreements.

(m)          Key Employee Employment
Agreements.  The
execution and delivery of the Key Employee Employment Agreements from not less
than fifty percent (50%) of the Key Employees.

(n)           Stock Consideration.  The execution and delivery of the Acquisition
Agreements, the Registration Rights Agreement, the Lock Up Agreement and the
Lock Up Escrow Agreement.

(o)           Voting Agreement. The execution
and delivery of the Voting Agreement.

(p)           Fairness Opinion.  Delivery of an opinion letter, in a form
satisfactory to FAAC, issued by FAAC’s financial advisor to the effect that the
Contemplated Transactions are fair from a financial point of view.

(q)           Termination of Related Party
Contracts.  The
termination of each of the Terminated at Closing Related Party Transactions
pursuant to one or more Termination Agreements (collectively the “Related
Party Termination Agreements”) acceptable to FAAC.

(r)            New VTC Lease and VTC Lease
Appraisal.  Execution, delivery and
approval by FAAC of the New VTC Lease and delivery to and approval by FAAC of
the VTC Lease Appraisal; or if either the New VTC Lease or VTC Lease Appraisal
are not acceptable to FAAC, the termination of the VTC Lease Commitment and New
VTC Lease.

 

69

 

 

 

 

ARTICLE
VII

Deliveries by Members and the Companies at Closing

On the Closing Date, the Members and/or the Companies shall deliver or
cause to be delivered to FAAC:

7.1           Members’ and the Companies’ Closing Certificate.

A
certificate in the form attached hereto as Exhibit O, dated as of the
Closing Date, signed by the Members and the Companies certifying that:

(i)            the
Members and the Companies respectively have performed and complied with all
agreements, obligations, covenants and conditions required by this Agreement to
be so performed or complied with by each of them, as applicable at or prior to
the Closing;

(ii)           from
the Effective Date until the Closing Date, there has been no Material Adverse
Effect, or the occurrence of an event that has resulted or can reasonably be
expected to result in such a change, in the business, operations, properties,
contracts, customer relations or condition, financial or otherwise, or
prospects of each of the Companies, other than changes expressly permitted
under or contemplated by this Agreement;

(iii)          no
suit, action, investigation or other proceeding is pending or threatened before
any Governmental Authority that seeks to restrain, prohibit or obtain damages
or other relief in connection with this Agreement or consummation of the
Contemplated Transactions or that questions the validity or legality of such
transactions;

(iv)          this
Agreement, the execution and delivery of all of the Transaction Documents and
the consummation of the Contemplated Transactions have been approved by all
necessary Members and company actions on the part of each of the Companies
(with copies of all resolutions to be attached to the certificate and to be
certified as true and correct in the certificate); and

(v)           the
representations and warranties of the Members and the Companies set forth in
this Agreement are true and correct as of the Closing Date (unless the
representation or warranty by its terms is made as of a specific date).

7.2           Consents.

Copies or other evidence reasonably satisfactory to
FAAC of the consents and approvals referred to in Section 6.1(b).

7.3           Estimated Closing Balance Sheet.

The
Estimated Closing Balance Sheet not less than two (2) Business Days prior to
the Closing Date pursuant to Section 2.3(b).

 

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7.4           Resignations
of Directors and Officers.

Written
resignations, dated as of the Effective Date, of all directors, officers and
managers of each of the Companies.

7.5           Termination
of Credit Facility/Facilities.

Evidence satisfactory to
FAAC that all amounts outstanding under any credit or loan agreements between
SunTrust Bank and related agreements and notes have been paid in full or will
be paid in full from proceeds of the Contemplated Transaction and that
documentation providing for the release of all Liens on the assets of the
Companies is available for filing immediately after the Closing.

7.6           Release
of Liens.

Except
as otherwise contemplated by Section 7.5, evidence satisfactory to FAAC that
all Liens on the Companies’ assets have been released or terminated, as the
case may be.

7.7           Phantom Membership Interest Releases.

Delivery
of the fully executed Phantom Membership Interest Releases.

7.8           Comfort Letters.

Delivery
of “Comfort letters” in customary form, from McGladrey & Pullen LLP dated
the date of the Proxy Materials and the Closing Date (or such other date, or
dates reasonably acceptable to FAAC) with respect to certain financial
statements and other financial information included in the Proxy Statement as
contemplated by Section 5.17.

7.9           Evergreen
Release.

Delivery
of the fully executed Evergreen Release.

7.10         Senior
Executive Employment Agreements.

Delivery
of fully executed Senior Executive Employment Agreements.

7.11         Key
Employee Employment Agreements.

Delivery
of fully executed Key Employee Employment Agreements from not less than fifty
percent (50%) of the Key Employees.

7.12         Stock
Consideration Documents.

Delivery
of the following documents fully executed by each of the Members:  Acquisition Agreements, Registration Rights
Agreement, Lock Up Agreement and Lock Up Escrow Agreement.

 

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7.13         Voting
Agreement.

Delivery
of fully executed Voting Agreement.

7.14         Escrow
Agreements.

Delivery
of fully executed Escrow Agreements.

7.15         Related
Party Termination Agreements.

Delivery
of fully executed Related Party Termination Agreements for each of the
Terminated At Closing Related Party Transactions.

7.16         New VTC Lease and VTC Lease
Appraisal.  

Delivery of the New VTC Lease and VTC Lease
Appraisal in form acceptable to FAAC; or if either the New VTC Lease or VTC
Lease Appraisal are not acceptable to FAAC, then documents acceptable to FAAC
terminating the VTC Lease Commitment and the New VTC Lease.

7.17         Further
Instruments.

Such
further instruments of assignments, conveyance or transfer or other documents
of further assurance as FAAC may reasonably request.

ARTICLE VIII

Deliveries by FAAC at Closing

On
the Closing Date, FAAC shall deliver or cause to be delivered to the Members,
or to the Escrow Agent, as applicable:

8.1           Officer’s Certificate.

A certificate in the form attached hereto as Exhibit P, dated as
of the Closing Date, signed by a senior officer of FAAC certifying that:

(a)            FAAC has performed
its obligations and complied to the extent applicable with all agreements,
obligations, covenants and conditions required by this Agreement to be so
performed or complied with by FAAC at or prior to the Closing;

(b)            no suit, action,
investigation or other proceeding is pending or threatened before any
Governmental Authority that seeks to restrain, prohibit or obtain damages or
other relief in connection with this Agreement or consummation of the
Contemplated Transactions or that questions the validity or legality of such
transactions;

(c)            this Agreement, the
execution and delivery of all of the Transaction Documents and the consummation
of the Contemplated Transactions have been approved by 

 

72

 

FAAC’s
board of directors (with copies of all resolutions to be attached to the
certificate and to be certified as true and correct in the certificate); and

(d)            the representations
and warranties of FAAC set forth in this Agreement are true and correct as of
the Closing Date (unless the representation or warranty is made as of a
specific date).

8.2           Closing Consideration and Escrow Deposits.

Pursuant
to Section 2.2, the Closing Consideration shall be delivered to the Members’
Representative and the Escrow Deposits shall be delivered to the Escrow Agent.

8.3           Stock
Consideration Documents.

Delivery of the following documents fully executed by FAAC:  Acquisition Agreements; Registration Rights
Agreement; Lock Up Agreement; and Lock Up Escrow Agreement.

8.4           Senior
Executive Employment Agreement.

Delivery of the Senior Executive Employment Agreement fully executed by
FAAC.

8.5           Key
Employee Employment Agreements.

Delivery
of the Key Employee Employment Agreements fully executed by FAAC.

8.6           Management
of FAAC.

Delivery
by FAAC of Amended and Restated Bylaws and various resolutions of FAAC’s Board
of Directors establishing and filling the executive and board seats and
otherwise implementing the provisions of Section 5.15(a).

8.7           Escrow
Agreements.

Delivery of the Escrow Agreements fully executed by FAAC.

8.8           Employee
Stock Grants.

Delivery
of the Employee Stock Grants.

8.9           Further Instruments.

Such
documents of further assurance as the Members may reasonably request.

 

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ARTICLE
IX

Survival and Indemnification

9.1           Survival
of Representations and Warranties.

(a)           Except
for the Surviving Representations, the representations and warranties of the
Members and the Companies on the one hand, and FAAC, on the other hand, in this
Agreement or in any certificate or document delivered on or before the Closing
Date, and subsections (a), (b) and (c) of Section 5.16, shall survive any due
diligence investigation by or on behalf of the parties hereto and the Closing
and shall remain effective until eighteen (18) months following the Closing
Date (the “Survival Date”).  After
the expiration of such period, the representations and warranties shall expire
and be of no further force and effect except to the extent that a claim or
claims shall have been asserted by FAAC or the Members, as the case may be,
with respect thereto on or before the expiration of such period, provided
however that the following representations and warranties (collectively the “Surviving
Representations”) shall survive the Survival Date until the date specified
below.

(i)            Claims
for indemnification based on breaches of representations and warranties of the
Members in Section 3.11(a) (Title to Membership Interests) shall survive the
Survival Date and claims for indemnification based on breaches of such
representations and warranties may be made at any time following the Closing.

(ii)           Claims
for indemnification based on breaches of representations and warranties of the
Members and the Companies in Sections 3.21 (Compliance with Laws), 3.22
(Environmental Matters), 3.24 (Absence of Certain Business Practices), 3.28
(ERISA) and 3.29 (Tax Matters) shall survive the Survival Date and claims for
indemnification based on breaches of such representations and warranties may be
made up to the date that is three (3) months after the expiration of the
applicable statute of limitations.

(iii)          Claims
for indemnification based on breaches of representations and warranties of the
Members and the Companies in Section 3.18 (Federal and State Government
Contracts) with respect to cost reimbursable Government Contracts shall survive
the Survival Date and claims based on breaches of such representations and
warranties may be made up to the date thirty (30) days after the applicable
Governmental Authority has agreed on final indirect cost rates for any fiscal
year that began prior to the Closing Date.

(b)           The
undersigned acknowledge and agree that the covenants contained in this
Agreement, including, but not limited to the covenants contained in ARTICLE V
above shall survive Closing and are unaffected by this Section 9.1.

9.2           Indemnification.

(a)           By FAAC.

(i)              Subject
to Section 9.2(g), FAAC shall protect, defend, indemnify and hold harmless the
Members and their respective agents, representatives, successors and assigns,
estates and heirs (“Members Indemnitees”) from and against any losses,
damages and 

 

74

 

expenses
(including, without limitation, except as provided in Section 9.2(d),
reasonable counsel fees, costs and expenses incurred in investigating and
defending against the assertion of such liabilities (collectively “Losses”))
that may be sustained, suffered or incurred by the Members Indemnities, and
that are related to (A) any breach by FAAC of its representations and
warranties in this Agreement, (B) any breach by FAAC of its covenants,
agreements or obligations in, or under, this Agreement, (C) Taxes as
provided in paragraph (ii) of this Section 9.2(a) or (D) any liabilities
of the Companies following the Closing
other than those liabilities for which the Members have agreed to indemnify
FAAC pursuant to Section 9.2(b) of this Agreement.

(ii)             The
obligations of FAAC under paragraph (i) of this Section 9.2(a) shall extend to
(A) all Taxes with respect to taxable periods beginning after the Closing Date
(including any Taxes with respect to transactions properly treated as occurring
on the day after the Closing Date pursuant to Treasury Regulations
Section 1.1502-76(b)(1)(ii)(B) or any similar provision of state,
local or foreign law) and (B) all Taxes (other than federal income Taxes)
with respect to Straddle Periods.

(b)           By the Members.

(i)              Subject
to Sections 9.2(e), 9.2(f), 9.2(h), 9.2(i) and 9.3 the Members jointly and
severally shall protect, defend, indemnify and hold harmless FAAC, and the
Companies and their respective Affiliates, and their officers, directors,
employees, agents, representatives, successors and assigns (“FAAC
Indemnitees”) from and against any Losses that may be sustained, suffered
or incurred by FAAC Indemnitees and that are related to (A) any breach by the
Members or the Companies of their respective representations and warranties in
this Agreement (including Disclosure Schedule Update Losses), (B) any breach by
the Members or the Companies of covenants and obligations in or under this
Agreement, including, but not limited to the Members obligations to make
payments to FAAC pursuant to Sections 2.2 and 2.4(e)
and the Members’ or the Companies’ obligations pursuant to ARTICLE V (including
but not limited to Members’ obligations under Sections 5.7, 5.8, 5.11(b),
5.11(c) and 5.14) (C) Taxes as provided in paragraph (ii) of this
Section 9.2(b), to the extent such Taxes have not been accrued or otherwise
reserved for on the Closing Balance Sheet (it being the intent of the parties
that all of the provisions of this Agreement shall be interpreted to avoid
requiring the Members to pay (or receive a reduction in the Purchase
Consideration) twice for the same Tax).

(ii)             The
obligations of the Members under paragraph (i) of this Section 9.2(b) shall
extend to (A) all Taxes with respect to taxable periods ending on or prior to
the Closing Date and (B) all Taxes with respect to Straddle Periods to the
extent that such Taxes (1) are allocable to the period prior to Closing
pursuant to Section 5.11(c) and (2) have not been accrued or otherwise reserved
for on the Closing Balance Sheet.  Such
obligations shall be without regard to whether there was any breach of any
representation or warranty under ARTICLE III with respect to such Tax or any
disclosures that may have been made with respect to ARTICLE III or
otherwise.  The indemnification
obligations under this paragraph (ii) shall apply even if the additional Tax
liability results from the filing of a return or amended return with respect to
a pre-Closing Date transaction or period (or portion of a period) by FAAC.  FAAC shall not cause or permit the Companies
to file an amended Tax Return with respect to any taxable period ending on or
prior to the Closing Date or any Straddle Period unless (y) the Members’
Representative consents in its sole discretion or (z) FAAC obtains a legal
opinion (in 

 

75

 

form
and content reasonably acceptable to the Members’ Representative) from counsel
reasonably acceptable to the Members’ Representative that such amendment is
legally required to be filed (provided, further, that such legal opinion may
not assume any facts that are disputed in good faith by the Members’
Representative).  In the event of any
conflict between the provisions of this Section 9.2(b)(ii) and any other
provision of this Agreement, the provisions of this Section shall control.

(c)           Procedure
for Third-Party Claims.

(i)              If
any Third-Party Claims shall be commenced, or any claim or demand shall be
asserted (other than audits or contests with Taxing Authorities relating to
Taxes), in respect of which the Indemnified Party proposes to demand
indemnification by Indemnifying Party under Sections 9.2(a) or 9.2(b), the
Indemnified Party shall notify the Indemnifying Party in writing of such demand
and the Indemnifying Party shall have the right to assume the entire control of
the defense, compromise or settlement thereof (including the selection of
counsel), subject to the right of the Indemnified Party to participate (with
counsel of its choice), but the fees and expenses of such additional counsel
shall be at the expense of the Indemnified Party.  The Indemnifying Party will not compromise or
settle any such action, suit, proceeding, claim or demand (other than, after
consultation with Indemnified Party, an action, suit, proceeding, claim or
demand to be settled by the payment of money damages and/or the granting of
releases, provided that no such settlement or release shall acknowledge
the Indemnified Party’s liability for future acts or obligate FAAC with respect
to activities of the Companies or the Members) without the prior written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld, or delayed.

(ii)             Notwithstanding
anything to the contrary contained in this Section 9.2(c), FAAC at its expense
shall have the sole right to control and make all decisions regarding interests
in any Tax audit or administrative or court proceeding relating to Taxes,
including selection of counsel and selection of a forum for such contest, provided,
however, that in the event such audit or proceeding relates to Taxes for
which the Members are responsible and have agreed to indemnify FAAC, (A) FAAC,
the Companies, and the Members shall cooperate in the conduct of any audit or
proceeding relating to such period, (B) the Members, acting through the Members’
Representative, shall have the right (but not the obligation) to participate in
all facets of such audit or proceeding at the Members’ expense (including, but
not limited to, the right to be present at all meetings and on all telephone
conversations and to receive copies of all correspondence, emails and other
forms of nonverbal communications related to the Taxes in question), (C) FAAC
shall not enter into any agreement with the relevant taxing authority
pertaining to such Taxes without the written consent of the Members’
Representative, which consent shall not unreasonably be withheld, and (D) FAAC
may, without the written consent of the Members, enter into such an agreement
provided that FAAC shall have agreed in writing to accept responsibility and
liability for the payment of such Taxes and to forego any indemnification under
this Agreement with respect to such Taxes.

(iii)            The
parties will keep each other informed as to matters related to any audit or
judicial or administrative proceedings involving Taxes for which
indemnification may be sought hereunder, including, without limitation, any
settlement negotiations.  Refunds of Tax
relating to periods ending prior to the Closing Date (or to that portion of a
Straddle Period 

 

76

 

that
is prior to Closing under the principles of Section 5.11(c)) shall be the
property of the Members, but only to the extent that such refunds are not
attributable to (A) net operating loss or other carrybacks from periods ending
after the Closing Date, or (B) refund claims that are initiated by FAAC (provided
that FAAC gives the Members’ Representative prior notice of such possible claim
and the Members decline to pursue such refund at its or their own expense); provided,
however, that FAAC shall in no event have an obligation to file or cause to
be filed a claim for refund with respect to any Taxes relating to any period.

(iv)           Any
indemnity payment or payment of Tax by the Members or its or their Affiliates
as a result of any audit or contest shall be reduced by the present value of
the correlative amount, if any, by which any Tax of FAAC or its Affiliates is
or  will be reduced for periods ending
after the Closing Date as a result thereof.

(v)            The
Indemnified Party shall cooperate fully in all respects with the Indemnifying
Party in any defense, compromise or settlement, subject to this Section 9.2(c)
including, without limitation, by making available all pertinent books, records
and other information and personnel under its control to the Indemnifying
Party.

(d)           Procedure
for Direct Claims.

(i)              Any
Direct Claim shall be asserted by written notice given by the Indemnified Party
to the Indemnifying Party (each a “Direct Claim Notice”).  The Indemnifying Party shall have a period of
twenty (20) Business Days from the date of receipt (the “Direct Claim Notice
Period”) within which to respond to a Direct Claim Notice.  If the Indemnifying Party does not respond in
writing within the Direct Claim Notice Period, then the Indemnifying Party
shall be deemed to have accepted responsibility for the claimed indemnification
and shall have no further right to contest the validity of that claim.  If the Indemnifying Party does respond in
writing within the Direct Claim Notice Period, and rejects the claim in whole
or in part, the Indemnified Party shall be free to pursue all remedies under
Section 11.11.  To the extent that any
FAAC Indemnitees prevail in a Direct Claim (or the Members’ Representative
concedes (on behalf of the Members), or otherwise does not timely respond to a
Direct Claim Notice made by FAAC) then the Direct Claim shall be satisfied from
the General Indemnity Escrow (and the Escrow Agent shall pay to FAAC from the
General Indemnity Escrow the amount of the Direct Claim) with no further action
required by the Members, or the Members’ Representative.  Direct Claims shall be satisfied from the
FAAC common stock and cash in the General Indemnity Escrow, pro rata in the
same proportion as the cash and the value of the FAAC common stock then in the
General Indemnity Escrow bear to one another (with the FAAC stock then in the
General Indemnity Escrow (valued at the closing price of the FAAC common stock
(on Nasdaq OTC, or such other recognized stock market on which the FAAC common
stock is then trading) on the last trading day immediately prior to the day of
delivery of such stock by the Escrow Agent to FAAC).  For example, if as of the date the Escrow
Agent makes a distribution of $500,000 to FAAC pursuant to this Section 9.2(d)
and the General Indemnity Escrow contains (A) $2,716,100 of cash and comprising
70.55% of the General Indemnity Escrow, and 
(B) FAAC common stock with a value of $1,334,000 (valued at the closing
price of the FAAC common stock (on Nasdaq OTC, or such other recognized stock
market on which the FAAC common stock is then trading) on the last trading day
immediately prior to the day of delivery of such stock by the Escrow Agent to
FAAC) comprising 29.45% of the General Indemnity Escrow; 

 

77

 

then
the distribution by the Escrow Agent to FAAC shall be comprised of cash in the
amount of $352,750 and FAAC common stock with a value of $142,250  (valued at the closing price of the FAAC
common stock (on Nasdaq OTC, or such other recognized stock market on which the
FAAC common stock is then trading) on the last trading day immediately prior to
the day of delivery of such stock by the Escrow Agent to FAAC).  In the event that a Direct Claim is in excess
of the General Indemnity Escrow, the Members shall be and remain jointly and
severally liable for any or all of such excess, subject to the limitations of
this ARTICLE IX, including without limitation, Sections 9.2(e) and 9.2(f).

(ii)             Costs
Related to Direct Claims. Notwithstanding anything in this Section 9.2 to
the contrary, except as otherwise may be ordered by a court of competent
jurisdiction, the Members Indemnitees and FAAC Indemnitees shall each bear
their own costs, including counsel fees and expenses, incurred in connection
with Direct Claims against FAAC and the Members, respectively hereunder that
are not based upon claims asserted by third parties.

(e)           Calculation
of Amount of Claims and Losses.  The
amount of any claims or losses subject to indemnification under Section 9.2(b)
shall be calculated net of any amounts recovered by FAAC or its Affiliates
(including the Companies after the Closing) under applicable insurance policies
held by FAAC or its Affiliates, and FAAC agrees to make or cause to be made all
reasonable claims for insurance under such policies that may be applicable to
the matter giving rise to the indemnification claim hereunder.  The amount of any claims or losses subject to
indemnification under Section 9.2(b) shall be calculated net of the present
value of any Tax benefits to FAAC or its Affiliates (including the Companies
after the Closing) resulting from the matter giving rise to the indemnification
claim hereunder (computed at the highest effective marginal tax rates at which
FAAC is then paying Taxes and limited to the extent that the Tax Benefits can
be utilized by FAAC).

(f)            Limitations on
Rights of FAAC Indemnitees.

(i)            Subject
to the provisions of Section 9.2(f)(ii) below the rights of FAAC Indemnitees to
indemnification by the Members for breaches of representations and warranties
hereunder shall be subject to the limitations:

(A)          The FAAC Indemnitees shall not be
entitled to indemnification with respect to a claim or claims of breach of
representation and warranty by the Members or the Companies unless (1) the
particular claim exceeds Eight Thousand Dollars ($8,000) and (2) the
aggregate amount of all such claims made thereunder exceed One Hundred Seventy
Five Thousand Dollars ($175,000), in which event the indemnity provided for in
this Section 9.2 shall be effective with respect to the total amount of such
damages in excess of $175,000; and

(B)           the Members’ aggregate maximum
liability to FAAC Indemnitees under this ARTICLE IX shall not exceed and be
limited to the General Indemnity Escrow;

(ii)           The
limitations in Section 9.2(f)(i) above shall not apply to the “Uncapped
Non-Threshold Indemnifications” as hereinafter defined and the Members
shall be 

 

78

 

jointly
and severally liable for Uncapped Non-Threshold Indemnifications up to an
aggregate amount of Five Million Dollars ($5,000,000) separate and apart from
the General Indemnity.  For purposes of
this Agreement, the term “Uncapped Non-Threshold Indemnifications” shall
mean and refer collectively to indemnification liabilities of the Members
pursuant to claims based (A) on the breach of Sections 2.4(e), 5.7, 5.8,
5.11(b), 5.11(c), 5.14, 5.16, 5.18, or 5.20; or (B) the representations
and warranties of the Members and the Companies pursuant to Section 3.11 (Title), Section 3.28 (ERISA),
Section 3.29 (Taxes), D & O Indemnification Claims (but only the D & O
Indemnification Claims) pursuant to Section 3.25 or clause (C) of
Section 9.2(b)(i); or (C) claims based on fraud, intentional
misrepresentation or criminal acts on the part of the Members and the Companies
and their respective officers, directors, agents, representative and trustees.

(iii)          The
rights of the FAAC Indemnitees to indemnification by the Members for Disclosure
Schedule Update Losses shall be subject to the limitations of Section 9.2(f)(i)
and (ii) above.

(g)           Limitations
on Rights of Members Indemnitees. 
The rights of Members Indemnitees to indemnification by FAAC for
breaches of representations and warranties hereunder shall be subject to the
limitation that Members Indemnitees shall not be entitled to indemnification
with respect to a claim or claims for a breach of representation and warranty
by FAAC unless the aggregate of damages with respect to all such claims exceeds
$100,000, in which event the indemnity provided for in this Section 9.2 shall
be effective with respect to the amount of such damages. The aforementioned
limitations shall not apply to the indemnification liabilities of FAAC with
respect to claims based on fraud, intentional misrepresentation, or criminal
acts on the part of FAAC.

(h)           Limitation
on Rights of Members. 
Notwithstanding anything to the contrary, the Members each acknowledge
and agree that that they shall have no right to make a claim against the
Companies pursuant to any indemnity provision or agreement or otherwise in
respect of Claims of FAAC Indemnitees pursuant to Section 9.2(b).

(i)            Limitations
on Remedies.  No party hereto shall
be liable to the other for indirect, special, incidental, consequential or
punitive damages claimed by such other party resulting from such first party’s
breach of its obligations, agreements, representations or warranties hereunder,
provided that nothing hereunder shall preclude any recovery by an Indemnitee
against an Indemnitor for third party claims.

9.3           General
Indemnity Escrow Account.

(a)           Pursuant to Section 2 and the General
Indemnity Escrow Agreement, at the Closing, FAAC shall deliver to the Escrow
Agent the General Indemnity Escrow Deposit and the Escrow Agent shall set up an
escrow account pursuant to the terms of the General Indemnity Escrow Agreement
to secure the Members’ indemnification obligations under this ARTICLE IX.  The remaining balance of the General
Indemnity Escrow, if any, less the sum of the total of all then outstanding
indemnity claims by FAAC Indemnitees (including amounts offset pursuant to
Section 9.4 that have not been resolved) together with any remaining escrowed
Stock Consideration, shall be delivered by the Escrow Agent to the Members’
Representative within 

 

79

 

five
(5) Business Days after the Survival Date the accounts designated by the Members’
Representative in accordance with the terms of the General Indemnity Escrow
Agreement.  The Members’ Representative
shall be responsible for directing the distribution of the General Indemnity
Escrow (pro-rata in proportion to the Members’ Proportionate Interests) and the
Escrow Agent shall be entitled to fully rely on such directions.  Each of the parties hereto agrees that they
shall promptly sign joint instructions authorizing the Escrow Agent to release
funds subject to outstanding claims (including funds held as a result of
offsets under Section 9.4) as those claims are resolved pursuant to Section
11.11.

(b)           Any earnings on the General Indemnity
Escrow Funds, net of escrow expenses and taxes, shall be paid, pro rata, to the
parties receiving distributions from General Indemnity Escrow Account.

9.4           Effect of Investigation.

                                The right to
indemnification or other remedies based on any representation, warranty,
covenant or obligation of the Members or the Companies contained in or made
pursuant to this Agreement or the Transaction Documents shall not be affected
by any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date occurs, with respect to the
accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant or obligation.  The
waiver of any condition to the obligation of FAAC to consummate the
Contemplated Transactions, where such condition is based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, shall not affect the right to indemnification or other
remedies based on such representation, warranty, covenant or obligation.

ARTICLE X

Termination

10.1         Termination.

This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned:

(a)           at
any time, by mutual written agreement of the Members and FAAC;

(b)           at
any time after November 30, 2006, by either the Members or FAAC upon five (5)
business days’ prior written notice to the other party, if the Closing shall
not have occurred for any reason other than a breach of this Agreement by the
terminating party;

(c)           by
FAAC, if there has been a material violation or breach by the Members of any
agreement, representation or warranty contained in the Agreement, that has
rendered the satisfaction of any condition to the obligations of FAAC
impossible and such violation or breach has not been waived by FAAC;

 

80

 

(d)           by
the Members, if there has been a material violation or breach by FAAC of any
agreement, representation or warranty contained in the Agreement, that has
rendered the satisfaction of any condition to the obligations of the Members
impossible and such violation or breach has not been waived by the Members; or

(e)           by
either FAAC or the Members if a court of competent jurisdiction shall have
issued an order permanently restraining or prohibiting the transactions
contemplated by the Agreement, and such order shall have become final and
nonappealable.

10.2         Procedure and Effect of Termination.

In
the event of the termination of this Agreement and the abandonment of the
transactions contemplated hereby, written notice thereof shall be given by a
terminating party to the other parties and this Agreement shall terminate and
the transactions contemplated hereby shall be abandoned without further action
by the Members or FAAC.  If this
Agreement is terminated pursuant to Section 10.1:

(a)           FAAC
shall upon written request from the Members return all documents, work papers
and other materials (and all copies thereof) obtained from the Members or the
Companies relating to the transactions contemplated hereby, whether so obtained
before or after the execution hereof, to the party furnishing the same, and all
confidential information received by FAAC with respect to the Companies shall
be treated in accordance with Section 5.2 and the Confidentiality Agreement referred
to in such Section;

(b)           At
the option of the Members, all filings, applications and other submissions made
pursuant to Sections 5.3 and 5.4 shall, to the extent practicable, be withdrawn
from the agency or other Person to which made;

(c)           The
obligations provided for in this Section 10.2, Sections 5.2 and 5.7, and in the
Confidentiality Agreement shall survive any such termination of this Agreement;
and

(d)           Notwithstanding
anything in this Agreement to the contrary, the termination of this Agreement
shall not relieve any party from liability for willful breach of this
Agreement.

ARTICLE XI

Miscellaneous

11.1         Further Assurances.

At
any time and from time to time after the Closing Date, the Members, the Members’
Representative, and the Companies will, upon the request of FAAC, and FAAC
will, upon the request of the Members or the Members’ Representative perform,
execute, acknowledge and deliver all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances as may be reasonably
required by any of them, to effect or evidence the Contemplated Transactions.

 

81

 

11.2         Notices.

All
necessary notices, demands and requests required or permitted to be given
hereunder shall be in writing and addressed as follows:

 

	
  If to Members’

  	
   

  	
  Thomas
  P. Rosato

  
	
    Representative

  	
   

  	
  11850
  Baltimore Avenue

  
	
   

  	
   

  	
  Beltsville,
  Maryland 20705

  
	
   

  	
   

  	
  Fax:

  
	
   

  	
   

  	
   

  
	
  With
  a copy to:

  	
   

  	
  William
  M. Davidow, Esquire

  
	
   

  	
   

  	
  210
  West Pennsylvania Avenue

  
	
   

  	
   

  	
  Suite
  400

  
	
   

  	
   

  	
  Towson,
  Maryland 21204-4515

  
	
   

  	
   

  	
  Fax:  (410) 832-2015

  
	
   

  	
   

  	
   

  
	
  If to FAAC:

  	
   

  	
  Fortress America Acquisition Corporation

  
	
   

  	
   

  	
  Attn: 
  Harvey L. Weiss, Chairman of the Board

  
	
   

  	
   

  	
  4100 North Fairfax Drive

  
	
   

  	
   

  	
  Suite 1150

  
	
   

  	
   

  	
  Arlington, Virginia  22203

  
	
   

  	
   

  	
   

  
	
  With
  a copy to:

  	
   

  	
  James
  J. Maiwurm

  
	
   

  	
   

  	
  Squire,
  Sanders & Dempsey L.L.P.

  
	
   

  	
   

  	
  8000
  Towers Crescent Drive, Suite 1400

  
	
   

  	
   

  	
  Tysons
  Corner, VA 22182-2700

  
	
   

  	
   

  	
  Fax:  (703) 720-7801

  

 

Notices
shall be delivered by a recognized courier service or by facsimile transmission
and shall be effective upon receipt, provided that notices shall be presumed to
have been received:

(a)           if
given by courier service, on the second Business Day following delivery of the
notice to a recognized courier service before the deadline for delivery on or
before the second Business Day following delivery to such service, delivery
costs prepaid, addressed as aforesaid; and

(b)           if
given by facsimile transmission, on the next Business Day, provided that
the facsimile transmission is confirmed by answer back, written evidence of
electronic confirmation of delivery, or oral or written acknowledgment of
receipt thereof by the addressee.

From
time to time, either party may designate a new address or facsimile number for
the purpose of notice hereunder by notice to the other party in accordance with
the provisions of this Section 11.2.

 

82

 

11.3         Governing Law.

This
Agreement shall in all respects be governed by, and construed in accordance
with, the laws (excluding conflict of laws rules and principles) of the State
of Maryland applicable to agreements made and to be performed entirely within
the State of Maryland, including all matters of construction, validity and
performance.

11.4         Entire Agreement.

This
Agreement, together with the Exhibits and Schedules hereto and the other
Transaction Documents, constitutes the entire agreement of the parties relating
to the subject matter hereof and supersedes all prior contracts or agreements,
whether oral or written.  There are no
representations, agreements, arrangements or understandings, oral or written,
between or among the parties relating to the subject matter of this Agreement
that are not fully expressed in this Agreement.

11.5         Severability.

Should
any provision of this Agreement or the application thereof to any person or
circumstance be held invalid or unenforceable to any extent: (a) such provision
shall be ineffective to the extent, and only to the extent, of such
unenforceability or prohibition and shall be enforced to the greatest extent
permitted by Law; (b) such unenforceability or prohibition in any jurisdiction
shall not invalidate or render unenforceable such provision as applied (i) to
other persons or circumstances or (ii) in any other jurisdiction; and (c) such
unenforceability or prohibition shall not affect or invalidate any other
provision of this Agreement.

11.6         Amendment.

                                Neither this
Agreement nor any of the terms hereof may be terminated, amended, supplemented
or modified orally, but only by an instrument in writing signed by the party
against which the enforcement of the termination, amendment, supplement, or
modification shall be sought.

11.7         Effect
of Waiver or Consent.

                                No waiver or
consent, express or implied, by any person to or of any breach or default by
any party in the performance by such party of its obligations hereunder shall
be deemed or construed to be a consent or waiver to or of any other breach or
default in the performance by such party of the same or any other obligations
of such party hereunder.  No single or
partial exercise of any right or power, or any abandonment or discontinuance of
steps to enforce any right or power, shall preclude any other or further
exercise thereof or the exercise of any other right or power.  Failure on the part of a party to complain of
any act of any party or to declare any party in default, irrespective of how
long such failure continues, shall not constitute a waiver by such person of
its rights hereunder until the applicable statute of limitation period has run.

 

83

 

11.8         Rights and Remedies Cumulative.

Except
where other remedies are expressly provided herein, indemnifications under
ARTICLE IX shall constitute the sole remedy for Losses identifiable pursuant to
Sections 9.2(a)(i), 9.2(b)(i), or 9.2(b)(iii) except with respect to fraud or
intentional misconduct by a party.  To
the extent this Agreement provides for other remedies in addition to the
indemnifications under ARTICLE IX, then such other remedies together with indemnifications
under ARTICLE IX shall be remedies.

11.9         Parties in Interest; Limitation on Rights of Others.

                                The terms of
this Agreement shall be binding upon, and inure to the benefit of, the parties
hereto and their respective legal representatives, successors and assigns.  Nothing in this Agreement, whether express or
implied, shall be construed to give any person (other than the parties hereto
and their respective legal representatives, successors and assigns and as
expressly provided herein and to the extent provided in ARTICLE IX, the
Indemnified Parties) any legal or equitable right, remedy or claim under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein, as a third party beneficiary or otherwise.

11.10       Assignability.

                                This Agreement
shall not be assigned by any party hereto without the prior written consent of
the other party hereto, provided, however, that the prior written
consent of the Members’ Representative shall not be required with respect to
(a) any assignment by FAAC of its rights and obligations under this Agreement
to an Affiliate of FAAC so long as such assignment does not relieve FAAC of its
obligations hereunder; or (b) any collateral assignment of FAAC’s rights and
remedies under this Agreement to any lender under credit and collateral
agreements, as such agreements may be amended, modified or replaced from time
to time, so long as such lender does not have the right to exercise any of FAAC’s
rights and remedies under this Agreement in the absence a default by FAAC under
the applicable credit and collateral documents. 
Each of the Members hereby agrees to execute and deliver (and authorize
the Members’ Representative to execute and deliver) such documents, instruments
and agreements as such lender may reasonably require to confirm, reaffirm or
perfect such collateral assignment.  This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.

11.11       Dispute Resolution and Arbitration.

                                In the event
that any dispute arises among the parties pertaining to the subject matter of
this Agreement, and the parties, through the senior management of FAAC and the
Members’ Representative, are unable to resolve such dispute within a reasonable
time through negotiations and mediation efforts, such dispute shall be resolved
as set forth in this Section 11.11.

(a)           The
procedures of this Section 11.11 may be initiated by a written notice (“Dispute
Notice”) given by one party (“Claimant”) to the other, but not
before thirty (30) days have passed during which the parties have been unable
to reach a resolution as described 
(unless 

 

84

 

any
party would be materially prejudiced by such delay).  The Dispute Notice shall be accompanied by
(i) a statement of the Claimant describing the dispute in reasonable detail and
(ii) documentation, if any, supporting the Claimant’s position on the
dispute.  Within twenty (20) days after
the other party’s (“Respondent”) receipt of the Dispute Notice and
accompanying materials, the parties shall submit the dispute to mediation in
the Washington, D.C. area under the rules of the American Arbitration
Association.  All negotiations and
mediation procedures pursuant to this paragraph (a) shall be confidential and
treated as compromise and settlement negotiations and shall not be admissible
in any arbitration or other proceeding.

(b)           If
the dispute is not resolved as provided in paragraph (a) within sixty (60) days
after the Respondent’s receipt of the Dispute Notice, the dispute shall be
resolved by binding arbitration.  Within
the sixty-day period referred to in the immediately preceding sentence, the
parties shall agree on a single arbitrator to resolve the dispute.  If the parties fail to agree on the
designation of an arbitrator within said sixty-day period, the American
Arbitration Association in the Washington, D.C. area shall be requested to
designate the single arbitrator.  If the
arbitrator becomes disabled, resigns or is otherwise unable to discharge the
arbitrator’s duties, the arbitrator’s successor shall be appointed in the same
manner as the arbitrator was appointed.

(c)           Except
as otherwise provided in this Section 11.11, the arbitration shall be conducted
in accordance with the Commercial Rules of the American Arbitration
Association, which shall be governed by the United States Arbitration Act.

(d)           Any
resolution reached through mediation and any award arising out of arbitration
(i) shall be binding and conclusive upon the parties; (ii) shall be limited to
a holding for or against a party, and affording such monetary remedy as is
deemed equitable, just and within the scope of this Agreement; (iii) may not
include special, incidental, consequential or punitive damages; (iv) may in
appropriate circumstances include injunctive relief; and (v) may be entered in
court in accordance with the United States Arbitration Act.

(e)           Arbitration
shall not be deemed a waiver of any right of termination under this Agreement,
and the arbitrator is not empowered to act or make any award other than based
solely on the rights and obligations of the parties prior to termination in
accordance with this Agreement.

(f)            The
arbitrator may not limit, expand, or otherwise modify the terms of this
Agreement.

(g)           The
laws of the State of Maryland shall apply to any mediation, arbitration, or
litigation arising under this Agreement.

(h)           Each
party shall bear its own expenses incurred in any mediation, arbitration or
litigation, but any expenses related to the compensation and the costs of any
mediator or arbitrator shall be borne equally by the parties to the dispute.

(i)            A
request by a party to a court for interim measures necessary to preserve a
party’s rights and remedies for resolution pursuant to this Section 11.11 shall
not be deemed a waiver of the obligation to mediate or of the agreement to
arbitrate.

 

85

 

(j)            The
parties, their representatives, other participants and the mediator or
arbitrator shall hold the existence, content and result of mediation or
arbitration in confidence.

11.12       Jurisdiction; Court Proceedings; Waiver of Jury Trial.

                                Subject to the
provisions of Section 11.11, any suit, action or proceeding against any party to
this Agreement arising out of or relating to this Agreement shall be brought in
any Federal or state court located in the Commonwealth of Virginia and each of
the parties hereby submits to the exclusive jurisdiction of such courts for the
purpose of any such suit, action or proceeding. 
A final judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by Law.  To the
extent that service of process by mail is permitted by applicable Law, each
party irrevocably consents to the service of process in any such suit, action
or proceeding in such courts by the mailing of such process by registered or
certified mail, postage prepaid, at its address for notices provided for
herein.  Each party irrevocably agrees
not to assert (a) any objection that it may ever have to the laying of venue of
any such suit, action or proceeding in any Federal or state court located in
the Commonwealth of Virginia and (b) any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient
forum.  Each party waives any right to a
trial by jury, to the extent lawful.

11.13       No Other Duties.

                                The only duties
and obligations of the parties are as specifically set forth in this Agreement,
and no other duties or obligations shall be implied in fact, law or equity, or
under any principle of fiduciary obligation.

11.14       Reliance on Counsel and Other Advisors.

                                Each party has
consulted such legal, financial, technical or other expert as it deems
necessary or desirable before entering into this Agreement.  Each party represents and warrants that it
has read, knows, understands and agrees with the terms and conditions of this
Agreement.

11.15       Waiver of Rights Against Company’s Trust Fund.

The
Companies and each of the Members acknowledges that they have read FAAC’s Final
Prospectus, dated July 13, 2005 (“Prospectus”) and understands that FAAC has
established a trust fund for the benefit of FAAC’s public shareholders and that
FAAC may disburse monies from the trust fund only (a) to FAAC’s public
shareholders in the event such shareholders elect to convert their shares, (b)
to FAAC’s  public shareholders upon its
liquidation if FAAC fails to consummate a business combination or (c) after or
concurrently with the consummation of a business combination.  Each of the Companies and each of the Members (i) hereby agrees that from
the period commencing from the Effective Date through the Closing he, she or it
do not have any right, title, interest or claim of any kind in or to any monies
in the trust fund for so long as they have not been distributed or required to
be distributed and (ii) will not seek recourse against monies in the trust fund
consistent with clause (i) of this sentence. 
This 

 

86

 

Section
shall survive the termination of this Agreement but shall terminate and be of
no further force and effect upon Closing.

11.16       Counterparts.

                                This Agreement
may be executed in several counterparts, all of which taken together shall be
deemed one and constitute a single instrument. 
Any manual signature upon this Agreement that is faxed, scanned or
photocopied shall for all purposes have the same validity effect and admissibility
in evidence as an original signature and the parties hereby waive any objection
to the contrary.

 

[Signatures on Following Page]

 

 

87

 

 

IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly

executed and delivered in its name and on its behalf, all as of the day and
year first above written.

	
   

  	
  FORTRESS
  AMERICA

  
	
   

  	
  ACQUISITION
  CORPORATION,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:   

  	
  /s/
  Harvey L. Weiss

  
	
   

  	
  Name:  Harvey L. Weiss

  
	
   

  	
  Title:  CEO and President

  
	
   

  	
   

  
	
   

  	
  VTC,
  L.L.C.,

  
	
   

  	
  a
  Maryland limited liability company

  
	
   

  	
   

  
	
   

  	
  By:  

  	
  /s/ Thomas P. Rosato

  
	
   

  	
  Name: Thomas P. Rosato

  
	
   

  	
  Title: Chairman

  
	
   

  	
   

  
	
   

  	
  VORTECH,
  LLC,

  
	
   

  	
  a
  Maryland limited liability company

  
	
   

  	
   

  
	
   

  	
  By:  

  	
  /s/ Thomas P. Rosato

  
	
   

  	
  Name: Thomas P. Rosato

  
	
   

  	
  Title: Chairman

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEMBERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Thomas P. Rosato

  
	
   

  	
  Thomas
  P. Rosato

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Gerard J. Gallagher

  
	
   

  	
  Gerard J. Gallagher

  
	
   

  	
   

  
	
   

  	
  MEMBERS’
  REPRESENTATIVE:

  
	
   

  	
   

  
	
   

  	
  /s/
  Thomas P. Rosato

  
	
   

  	
  Name:  Thomas P. Rosato

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