Document:

<PAGE>

                                                                   EXHIBIT 10.18

                                 AMENDMENT NO. 3
                                       TO
                          SECURITIES PURCHASE AGREEMENT

         This Amendment No. 3 to Securities Purchase Agreement ("Amendment No.
3") is made as of May 14, 2004 by and among HEALTH FITNESS CORPORATION, a
Minnesota corporation (the "Company"), HEALTH FITNESS REHAB, INC., a Minnesota
corporation ("Rehab"), FITNESS CENTERS OF AMERICA, a California corporation
("Fitness"), HEALTH FITNESS CORPORATION OF CANADA, INC., an Alberta, Canada
corporation ("HFC Canada"), and BAYVIEW CAPITAL PARTNERS LP, a Delaware limited
partnership (the "Purchaser"). The Company, Rehab, Fitness, and HFC Canada are
referred to in this Amendment No. 3 each individually as a "Loan Party" and
collectively as the "Loan Parties."

                                   BACKGROUND

         A. The Loan Parties and the Purchaser entered into a Securities
Purchase Agreement dated as of August 25, 2003, as amended by Amendment No. 1
dated as of December 5, 2003 and Amendment No. 2 dated April 2, 2004 (the
"Agreement").

         B. The Loan Parties have informed the Purchaser that the following
Events of Default have occurred under the Agreement (the "Existing Defaults"):

                  (i) the Loan Parties did not comply with the Senior Cash Flow
         Leverage Ratio as of January 31, 2004, February 29, 2004 and March 31,
         2004, as required by Paragraph A of the Financial Covenants Rider to
         the Agreement;

                  (ii) the Loan Parties did not comply with the Senior Leverage
         Ratio as of January 31, 2004 and March 31, 2004, as required by
         Paragraph B of the Financial Covenants Rider to the Agreement; and

                  (iii) the Loan Parties and the Purchaser did not mutually
         agree to an amended and restated Financial Covenants Rider on or prior
         to April 30, 2004, as required by Section 9.01(p) of the Agreement.

         C. The Loan Parties have informed the Purchaser that the Loan Parties
intend to amend the Senior Credit Agreement pursuant to a Second Amendment to
Credit Agreement and Waiver of Defaults by and between the Loan Parties and
Wells Fargo Bank, N.A. (the "Wells Fargo Amendment").

         D. The Loan Parties have requested, and the Purchasers have agreed to
(i) waive the Existing Defaults, (ii) consent to the Wells Fargo Amendment, and
(iii) amend certain terms and provisions of the Agreement, as set forth in this
Amendment No. 3.

<PAGE>

         NOW, THEREFORE, in consideration of the foregoing and the mutual
promises set forth below, the parties agree as follows:

         1. Capitalized Terms. Except as specified in this Amendment No. 3, all
terms of the Agreement remain unchanged. Capitalized terms used in this
Amendment No. 3 and not otherwise defined have the meanings given to them in the
Agreement.

         2. Waiver and Consent. Subject to the satisfaction of the conditions
set forth in Section 5 below and in reliance upon the agreements and
representations and warranties of the Loan Parties set forth in this Amendment
No. 3, the Purchaser waives the Existing Defaults and consents to the Wells
Fargo Amendment. The waiver and consent are strictly limited to the Existing
Defaults and the Wells Fargo Amendment and (i) are not a consent to any waiver
or modification of any other term or condition of the Agreement or, with respect
to the Existing Defaults, for any period ending on a date other than that
applicable to the Existing Defaults, and (ii) do not prejudice any right or
remedy that the Purchaser may now have or may in the future have under or in
connection with the Agreement. Further, the waiver and consent are provided by
the Purchaser as an accommodation to the Loan Parties and are not a course of
action upon which the Loan Parties may rely in the future.

         3. Amendment to the Agreement. The Financial Covenants Rider attached
to the Agreement, as amended and restated by Amendment No. 1, is amended and
replaced in its entirety by the Financial Covenants Rider attached as Exhibit A
to this Amendment No. 3.

         4. Representations and Warranties of the Loan Parties. To induce the
Purchaser to enter into this Amendment No. 3, the Loan Parties represent and
warrant to the Purchaser as follows:

                  4.1 No Material Adverse Change.  Since December 5,
2003, there has been no event or occurrence which has had or is reasonably
likely to have a Material Adverse Effect on any Loan Party.

                  4.2 No Event of Default. Except for the Existing Defaults, (i)
each Loan Party has performed all of its obligations under the Agreement and the
Ancillary Agreements to be performed by it on or before the date hereof and,
(ii) as of the date hereof, each Loan Party is in compliance with all applicable
terms and provisions of the Agreement and each of the Ancillary Agreements to be
observed and performed by it and no Event of Default or other event which, upon
notice or lapse of time or both, would constitute an Event of Default has
occurred.

                  4.3 Authority and Consents.

                           (a) The execution, delivery and performance of this
         Amendment No. 3 by each Loan Party have been duly authorized by each
         Loan Party and do not conflict with, or result in a default, right to
         accelerate, loss of rights under, or the creation of any Lien pursuant
         to, any provision of any Loan Party's Organizational Documents, or any
         agreement, law, rule or regulation, or any order, judgment or decree to
         which any Loan

                                       2

<PAGE>

         Party is a party or by which any Loan Party, or its respective
         properties are bound or affected (except for any Lien created under the
         Agreement or the Ancillary Agreements).

                           (b) Each Loan Party has full power and authority to
         enter into this Amendment No. 3 and to carry out the transactions
         contemplated by this Amendment No. 3. This Amendment No. 3 has been
         duly executed and delivered on behalf of each Loan Party and
         constitutes valid and binding obligations of each Loan Party
         enforceable in accordance with their respective terms, except to the
         extent that enforcement may be limited by applicable bankruptcy,
         reorganization, moratorium or similar laws of general applicability
         affecting the enforcement of creditors' rights and subject to general
         equitable principles which may limit the right to obtain equitable
         remedies.

                           (c) No consent is required to be obtained or made by
         any Loan Party in connection with the execution, delivery and
         performance of this Amendment No. 3 by each Loan Party.

                  4.4 No Adverse Claim. No events have taken place and no
circumstances exist on the date hereof which would give the Loan Parties a basis
to assert a defense, offset or counterclaim to any claim of the Purchaser under
the Agreement or any Ancillary Agreement.

         5. Conditions Precedent. The effectiveness of this Amendment No. 3 is
subject to satisfaction of the following conditions:

                  5.1 Representations and Warranties True. The representations
and warranties of the Loan Parties in this Amendment No. 3 are true and correct
on and as of the date hereof.

                  5.2 Compliance with Agreement. The Loan Parties have performed
and complied with all agreements and conditions required by this Amendment No. 3
to be performed and complied with by them prior to or as of the date hereof.

                  5.3 No Event of Default. Except for the Existing Defaults, as
of the date hereof, no condition or event exists or has occurred which would
constitute an Event of Default or which, after notice or lapse of time or both,
would constitute an Event of Default.

                  5.4 Delivery of Documents and Fees. The Loan Parties, or other
appropriate Persons at the direction or request of the Loan Parties, have
delivered to the Purchaser the following, duly executed as appropriate:

                           (a) this Amendment No. 3;

                           (b) a true, correct and complete copy of the Wells
         Fargo Amendment; and

                           (c) payment of all reasonable costs and expenses
         incurred by the Purchaser in connection with the drafting, negotiation
         and closing of the transactions contemplated by this Amendment No. 3.

                                       3

<PAGE>

         6. Survival of Representations and Warranties. The representations,
warranties, covenants and agreements set forth in this Amendment No. 3 will
survive the closing of the transactions contemplated hereby and will not be
affected by any examination or knowledge of, or the acceptance of any
certificate or opinion by, the Purchaser.

         7. Governing Law. This Amendment No. 3 will be construed and enforced
in accordance with the substantive laws of the State of Minnesota without giving
effect to its conflicts of law principles.

         8. Entire Agreement. This Amendment No. 3 and the other documents
referred to herein, including but not limited to the Agreement, contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein. There are no restrictions, promises, warranties, covenants, or
undertakings, other than those expressly provided for herein. The Agreement (as
amended by this Amendment No. 3) supersedes all prior agreements and
undertakings between the parties with respect to such subject matter.

         9. No Waiver. Except for the waiver of the Existing Defaults provided
in Section 2, this Amendment No. 3 is not intended to operate as, and may not be
construed as, a waiver of any Event of Default whether known to the Purchaser or
unknown, and all rights and remedies of the Purchaser with respect to any such
Event of Default remain reserved.

         10. Payment of Expenses. As provided in Section 10.02(b) of the
Agreement, the Loan Parties agree to reimburse the Purchaser for all reasonable
costs and expenses incurred by such Purchaser in connection with the drafting,
negotiation and closing of the transactions contemplated hereby.

         11. Binding Nature of Loan Documents; Release. The Loan Parties
acknowledge and agree that the terms, conditions and provisions of the Agreement
and of each Ancillary Agreement executed and delivered in connection with the
Agreement are fully binding and enforceable agreements, and are not subject to
any defense, counterclaim, set off or other claim of any kind or nature. The
Loan Parties reaffirm and restate their duties, obligations and liabilities
under the Agreement and each Ancillary Agreement executed by them in connection
with the Agreement. The Loan Parties, on their own behalf and on behalf of their
predecessors, successors and assigns, acknowledge that as of the date hereof,
none of such parties has any claims or causes of action of any kind whatsoever
pertaining to or arising out of the transactions contemplated by the Agreement
against the Purchaser or any of its affiliates, officers, directors, employees,
agents, attorneys, representatives, predecessors, successors or assigns. Each of
the Loan Parties releases the Purchaser and each of its affiliates, officers,
directors, employees, agents, attorneys, representatives, predecessors,
successors or assigns, from any and all claims, causes of action, demands and
liabilities of any kind whatsoever pertaining to or arising out of the
transactions contemplated by the Agreement, this Amendment No. 3 and each of the
Ancillary Agreements, whether direct or indirect, fixed or contingent,
liquidated or nonliquidated, disputed or undisputed, known or unknown, which any
of the Loan Parties has or may acquire in the future relating in any way to any
event, circumstance, action or failure to act from the beginning of time through
the date hereof.

                                       4

<PAGE>

         12. Reference to the Agreement. From and after the date of this
Amendment No. 3, each reference in the Agreement to "this Agreement,"
"hereunder," "hereof," "herein," or words of similar meaning referring to the
Agreement, and each reference in any Ancillary Agreement to the Agreement or
"thereunder," "thereof," "therein" or words of similar meaning referring to the
Agreement mean and are a reference to the Agreement as amended by this Amendment
No. 3.

         13. Counterparts. This Amendment No. 3 may be executed in any number of
counterparts, each of which will be an original, but all of which will
constitute one and the same instrument. Any executed counterpart of this
Amendment No. 3 delivered by facsimile or other electronic transmission to a
party to this Amendment No. 3 will constitute an original counterpart of this
Amendment No. 3.

         14. No Other Modification. Except as expressly amended by the terms of
this Amendment No. 3, all other terms of the Agreement remain unchanged and in
full force and effect.

                                    * * * * *

                                       5

<PAGE>

         IN WITNESS WHEREOF, this Amendment No. 3 has been duly executed by the
parties hereto on the day and year first above written.

LOAN PARTIES:                               PURCHASER:

HEALTH FITNESS CORPORATION                  BAYVIEW CAPITAL PARTNERS LP

                                            By:   Bayview Capital Management LLC
By:   /s/  Wesley W. Winnekins                    ------------------------------
      ------------------------------         Its: General Partner
 Its: CFO and Treasurer

                                            By:   Sean Epp
HEALTH FITNESS REHAB, INC.                        ------------------------------
                                             Its: Director
By:   /s/  Wesley W. Winnekins
      ------------------------------
 Its: CFO and Treasurer

FITNESS CENTERS OF AMERICA

By:   /s/  Wesley W. Winnekins
      ------------------------------
 Its: CFO and Treasurer

HEALTH FITNESS CORPORATION OF
CANADA, INC.

By:   /s/  Wesley W. Winnekins
      ------------------------------
 Its: CFO and Treasurer

                                       6

<PAGE>

                                    EXHIBIT A

                            FINANCIAL COVENANTS RIDER
                        TO SECURITIES PURCHASE AGREEMENT

A.       Fixed Charge Coverage Ratio. The Company will maintain its Fixed Charge
         Coverage Ratio, determined as of the end of each fiscal quarter, (i) on
         a year to date basis, beginning with the fiscal quarter ending June 30,
         2004 through the fiscal quarter ending December 31, 2004, at not less
         than 2.75 to 1.00, and (ii) on a trailing twelve month basis, beginning
         with the fiscal quarter ending March 31, 2005 and for each fiscal
         quarter thereafter, at not less than 2.75 to 1.00.

B.       EBITDA.

         (1)      The Company will achieve minimum EBITDA, determined as of the
                  end of each fiscal quarter on a year-to-date basis during each
                  fiscal quarter described below, at not less than the amount
                  set forth below opposite such quarter:

<TABLE>
<CAPTION>
                                                        Year-to-Date
Fiscal Quarter Ending                                  Minimum EBITDA
---------------------                                  --------------
<S>                                                    <C>
June 30, 2004                                            $1,300,000
September 30, 2004                                       $2,100,000
December 31, 2004                                        $3,000,000
</TABLE>

         (2)      The Company will achieve minimum EBITDA, determined as of the
                  end of each fiscal quarter on a trailing twelve month basis
                  during each fiscal quarter described below, at not less than
                  the amount set forth below opposite such quarter:

<TABLE>
<CAPTION>
                                                                         Trailing Twelve Month
Each Fiscal Quarter Ending                                                 Minimum EBITDA
--------------------------                                               ---------------------
<S>                                                                      <C>
March 31, 2005 through December 31, 2005                                       $3,250,000
March 31, 2006 through December 31, 2006                                       $3,500,000
March 31, 2007 through December 31, 2007                                       $4,000,000
March 31, 2008 through December 31, 2008                                       $4,500,000
and thereafter
</TABLE>

C. Cash Flow Leverage Ratio.

         (1)      The Company will at all times maintain its Cash Flow Leverage
                  Ratio, with the EBITDA computed on a basis annualized from
                  January 1, 2004 through the date of determination, determined
                  as of the last day of each fiscal quarter, at not more than
                  the ratio set forth below:

                         Financial Covenants Rider - 1

<PAGE>

<TABLE>
<CAPTION>
                                               Maximum Cash Flow
Fiscal Quarter Ending                           Leverage Ratio
---------------------                          ------------------
<S>                                            <C>
June 30, 2004                                   2.00 to 1.00
September 30, 2004                              1.75 to 1.00
December 31, 2004                               1.75 to 1.00
</TABLE>

         (2)      Beginning on the fiscal quarter ending March 31, 2005 and for
                  each fiscal quarter thereafter, the Borrower will at all times
                  maintain its Cash Flow Leverage Ratio on a trailing twelve
                  month basis determined as of the last day of each fiscal
                  quarter, at not more than 1.75 to 1.00.

D.       Senior Leverage Ratio. The Company will maintain its Senior Leverage
         Ratio, determined as of the end of each fiscal quarter during each
         fiscal quarter described below, at not more than the ratio set forth
         below opposite such quarter:

<TABLE>
<CAPTION>
                                                         Maximum Senior
Fiscal Quarter Ending                                    Leverage Ratio
-----------------------------                            --------------
<S>                                                      <C>
June 30, 2004                                             4.00 to 1.00
September 30, 2004                                        3.25 to 1.00
December 31, 2004                                         2.75 to 1.00
March 31, 2005 and thereafter                             2.50 to 1.00
</TABLE>

E.       Capital Expenditures. The Loan Parties (calculated on a consolidated
         basis) will not make any Capital Expenditures which, in the aggregate,
         exceed $325,000 in any fiscal year.

F.       Defined Terms. For purposes of this Financial Covenants Rider, the
         following terms have the meanings indicated.

         "Capital Expenditures" of any Person means any expenditure of money for
         the purchase or construction of fixed assets or for the purchase or
         construction of any other assets, or for improvements or additions
         thereto, which are capitalized on such Person's balance sheet.

         "Cash Flow Leverage Ratio" means, as of any date, the ratio of the sum
         of the Company's (i) Senior Funded Debt and (ii) Subordinated Debt of
         the Purchaser's as of such date to its EBITDA.

         "Current Maturities of Long Term Debt" means as of a given date, the
         amount of the Company's long-term debt and capitalized leases which
         became due during the period ending on the designated date.

         "Debt" of any Person means (i) all items of indebtedness or liability
         which in accordance with GAAP would be included in determining total
         liabilities as shown on the liabilities side of a balance sheet of that
         Person as at the date as of which Debt is to be determined,

                         Financial Covenants Rider - 2
<PAGE>

         (ii) indebtedness secured by any Lien on property owned by such Person,
         whether or not the indebtedness secured thereby shall have been
         assumed, (iii) obligations of such Person to pay money under
         non-compete, consulting or similar agreements, and (iv) guaranties and
         endorsements (other than for purposes of collection in the ordinary
         course of business) by such Person and other contingent obligations of
         such Person in respect of, or to purchase or otherwise acquire,
         indebtedness of others. For purposes of determining a Person's
         aggregate Debt at any time, "Debt" shall also include the aggregate
         payments required to be made by such Person at any time under any lease
         that is considered a capitalized lease under GAAP. Unless otherwise
         stated, Debt means Debt of the Company and its Subsidiaries.

         "EBITDA" means, as of any date, the sum of (i) pretax earnings from
         continuing operations, (ii) Interest Expense and (iii) depreciation,
         depletion, and amortization of tangible and Intangible Assets, before
         (a) special extraordinary gains, (b) minority interests, and (c)
         miscellaneous gains and losses, in each case for the twelve-month
         period ending on such date (except where noted otherwise), computed and
         calculated in accordance with GAAP.

         "Escrow Account" means the account or accounts established under the
         Escrow Agreement.

         "Fixed Charge Coverage Ratio" means, as of any date, the ratio of (i)
         the Company's EBITDA, minus the sum of the Company's (A) Capital
         Expenditures and (B) taxes, to (ii) the sum of the Company's (A)
         Interest Expense (measured on the same basis as the Fixed Charge
         Coverage Ratio), and (B) Current Maturities of Long Term Debt.

         "Funded Debt" means all interest-bearing Debt of the Company or any
         Subsidiary.

         "Intangible Assets" means all intangible assets as determined in
         accordance with GAAP and including intellectual property rights,
         goodwill, accounts due from Affiliates or employees, deposits, deferred
         charges or treasury stock or any securities or Debt of the Company or
         its Subsidiaries or any other securities unless the same are readily
         marketable in the United States or entitled to be used as a credit
         against federal income tax liabilities, non-compete agreements and any
         other assets designated from time to time by the Senior Lender.

         "Interest Expense" means, as of any date, during the twelve-month
         period ending on such date (except where noted otherwise), the
         Company's total gross interest expense (excluding interest income), and
         shall in any event include (i) interest expensed (whether or not paid)
         on all Debt, (ii) the amortization of debt discounts, (iii) the
         amortization of all fees payable in connection with the incurrence of
         Debt to the extent included in interest expense, and (iv) the portion
         of any capitalized lease obligation allocable to interest expense.

         "Net Worth" means the aggregate of capital and retained earnings of the
         Company and its Subsidiaries, as determined on a consolidated basis in
         accordance with GAAP, except for

                         Financial Covenants Rider - 3

<PAGE>

         the purposes of this agreement the preferred stock of the Company shall
         be included in Net Worth.

         "Senior Debt" means all Debt of the Company or any Subsidiary other
         than Subordinated Debt.

         "Senior Funded Debt" means all interest-bearing Debt of the Company or
         any Subsidiary other than Subordinated Debt.

         "Senior Leverage Ratio" means, as of any date, the ratio of the
         Company's consolidated Senior Debt, reduced by the outstanding
         principal balance of the portion of the Escrow Account funded by the
         Senior Lender, to its consolidated Tangible Net Worth plus Subordinated
         Debt.

         "Subordinated Debt" means Debt of the Company or any Subsidiary which
         is subordinated in right of payment to all indebtedness of the Company
         to the Senior Lender, on terms that have been approved in writing by
         the Senior Lender and that have been noted by appropriate legend on all
         instruments evidencing the Subordinated Debt.

         "Tangible Net Worth" means the difference between (i) Net Worth and
         (ii) Intangible Assets.

                         Financial Covenants Rider - 4

<PAGE>

                           HEALTH FITNESS CORPORATION

                             COMPLIANCE CERTIFICATE

         The undersigned is the Chief Financial Officer of Health Fitness
Corporation, a Minnesota corporation (the "Company"). Pursuant to the Securities
Purchase Agreement dated as of August 25, 2003, as amended (the "Agreement"), by
and among the Company, the other Loan Parties thereto, Bayview Capital Partners
LP ("Bayview") and any other Purchasers thereto, the undersigned certifies to
each Purchaser that:

         1. The financial statements as of __________________, _____ and for the
period then ended which are attached to this certificate are complete and
correct in all material respects and fairly present the financial condition of
the Loan Parties and their Subsidiaries as of the date of the financial
statements and the results of operations for the period covered thereby, and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis.

         2. [ ] Unless indicated by checking the box at the beginning of this
paragraph, the undersigned does not have knowledge of the occurrence of any
Event of Default as defined in the Purchase Agreement, or of any event,
condition or occurrence which with the giving of notice or passage of time or
both would constitute an Event of Default (each a "Pending Event of Default"),
not previously reported to the Purchasers in a prior Compliance Certificate. If
the undersigned does have knowledge of any such Event of Default or Pending
Event of Default, the facts related to such Event of Default or Pending Event of
Default are attached hereto.

         3. As of the date and for the period ended on the date of the attached
financial statements, the actual and required financial covenants contained in
the Financial Covenants Rider are as follows:

<TABLE>
<CAPTION>
FINANCIAL COVENANT                   ACTUAL                           REQUIRED
-----------------------------        -------                          ---------
<S>                                  <C>                              <C>
Fixed Charge Coverage Ratio
Minimum EBITDA
Cash Flow Leverage Ratio
Senior Leverage Ratio
Capital Expenditures (annual)
</TABLE>

         4. Attached to this certificate are schedules showing the computation
of the actual ratios referred to above.

                                    * * * * *

                         Financial Covenants Rider - 5

<PAGE>

         IN WITNESS WHEREOF, the undersigned has executed this Compliance
Certificate this ________________ ____, ________.

HEALTH FITNESS CORPORATION

By:
   ------------------------------
 Its: Chief Financial Officer

                         Financial Covenants Rider - 6exv10w57

 

EXHIBIT 10.57

STOCK PURCHASE AGREEMENT

by and among

IDENTIX PUBLIC SECTOR, INC.

a Virginia corporation

IDENTIX INCORPORATED

a Delaware corporation

and

ALION SCIENCE AND TECHNOLOGY CORPORATION

a Delaware corporation

Dated: February 13, 2004

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page

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

 

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page

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

ii

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page

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

iii

 

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page

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

iv

 

 

	 	 	 
	Exhibit A

	 	Closing Date Balance Sheet and Working Capital Calculation
and Category Summary
	 
	 	 
	Exhibit B

	 	Form of Escrow Agreement
	 
	 	 
	Exhibit C

	 	Form of Reseller Agreement
	 
	 	 
	Exhibit D

	 	Form    Sublease Agreement
	 
	 	 
	Exhibit E

	 	Form    Sublease Agreement
	 
	 	 
	Exhibit F

	 	Form    Sublease Assignment
	 
	 	 
	Exhibit G

	 	Form Master Lease Assignment
	 
	 	 
	Exhibit H

	 	Form Estoppel Certificate
	 
	 	 
	Exhibit I

	 	   Services Agreement
	 
	 	 
	Exhibit J

	 	   Services Agreement
	 
	 	 
	Exhibit K

	 	   Services Agreement
	 
	 	 
	Schedule 3.1

	 	Company Organization
	 
	 	 
	Schedule 3.6

	 	Company: No Breach
	 
	 	 
	Schedule 3.7

	 	Permits
	 
	 	 
	Schedule 3.8

	 	Company Compliance with Laws
	 
	 	 
	Schedule 3.9

	 	Title to and Sufficiency of Assets
	 
	 	 
	Schedule 3.10

	 	Condition of Personal Property
	 
	 	 
	Schedule 3.11

	 	Accounts Receivable
	 
	 	 
	Schedule 3.12

	 	Intellectual Property
	 
	 	 
	Schedule 3.13

	 	Contracts
	 
	 	 
	Schedule 3.14

	 	Litigation
	 
	 	 
	Schedule 3.15

	 	Financial Statements
	 
	 	 
	Schedule 3.16

	 	Liabilities

v

 

 

	 	 	 
	Schedule 3.17

	 	Tax Matters
	 
	 	 
	Schedule 3.19

	 	Employee Benefit Plans; ERISA
	 
	 	 
	Schedule 3.20

	 	Insurance
	 
	 	 
	Schedule 3.21

	 	Environmental Matters
	 
	 	 
	Schedule 3.22

	 	Real Estate
	 
	 	 
	Schedule 3.24

	 	Company Transactions with Certain Persons
	 
	 	 
	Schedule 3.26

	 	No Affiliates
	 
	 	 
	Schedule 3.27

	 	Employees and Contractors
	 
	 	 
	Schedule 3.28

	 	Organizational Conflicts of Interest
	 
	 	 
	Schedule 3.29

	 	Government Audits
	 
	 	 
	Schedule 3.30

	 	Labor Relations
	 
	 	 
	Schedule 3.32

	 	Company: Brokers
	 
	 	 
	Schedule 3.33

	 	Government Contracts
	 
	 	 
	Schedule 3.35

	 	Bank Accounts
	 
	 	 
	Schedule 3.36

	 	Suppliers and Customers
	 
	 	 
	Schedule 3.37

	 	Events Subsequent to Most Recent Fiscal Year End
	 
	 	 
	Schedule 3.44

	 	Seller: No Breach
	 
	 	 
	Schedule 3.45

	 	Seller Compliance with Laws
	 
	 	 
	Schedule 3.47

	 	Seller: Transactions with Certain Persons
	 
	 	 
	Schedule 3.49

	 	Seller: Brokers
	 
	 	 
	Schedule 4.4

	 	Buyer: No Breach
	 
	 	 
	Schedule 5.10

	 	Cost Allowability
	 
	 	 
	Schedule 12.4

	 	Terminated Employees

 

 

STOCK PURCHASE AGREEMENT

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

RECITALS

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

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

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

AGREEMENT

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

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

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

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

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

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

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

-2-

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

-3-

 

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

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

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

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

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

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

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

-4-

 

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

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

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

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

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

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

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

     “IRS” means Internal Revenue Service.

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

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

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

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

-5-

 

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

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

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

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

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

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

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

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

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

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

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

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

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

-6-

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

-7-

 

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

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

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

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

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

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

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

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

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

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

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

-8-

 

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

     2. PURCHASE PRICE.

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

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

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

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

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

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

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

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

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

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

          2.3 Intentionally Omitted.

          2.4 Adjustment to Purchase Price.

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

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

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

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

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

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

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

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

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

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

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

          3.2 Company Authorization; Corporate Documentation.

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

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

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

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

          3.3 Intentionally Omitted.

          3.4 Intentionally Omitted.

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

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

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

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

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

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

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

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

          3.12 Intellectual Property.

               (a) Disclosure.

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

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

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

               (b) Claims.

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

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

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

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

-15-

 

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

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

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

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

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

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

-16-

 

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

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

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

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

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

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

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

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

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

                    (vi) any collective bargaining agreement;

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

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

-17-

 

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

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

                    (xi) any powers of attorney; or

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

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

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

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

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

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

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

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

          3.17 Tax Matters.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

          3.19 Employee Benefit Plans; ERISA.

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

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

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

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

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

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

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

-22-

 

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

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

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

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

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

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

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

-23-

 

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

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

          3.21 Environmental Matters.

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

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

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

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

          3.22 Real Estate.

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

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

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

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

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

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

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

          3.25 Intentionally Omitted.

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

          3.27 Employees and Contractors.

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

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

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

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

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

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

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

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

          3.33 Government Contracts(a) .

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

               (k) [Redacted]

               (l) [Redacted]

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

               (n) [Redacted]

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

               (p) [Redacted]

               (q) [Redacted]

               (r) [Redacted]

               (s) [Redacted]

               (t) [Redacted]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

-33-

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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          3.38 Intentionally Omitted.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

          4.7 Intentionally Omitted.

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

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

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

     5. COVENANTS

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

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

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

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

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

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

-39-

 

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

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

          5.8 Confidentiality.

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

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

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

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

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

          5.11 Employee Benefits.

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

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

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

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

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

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

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

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

          5.12 Use of Identix Name.

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

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

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

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

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

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

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

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

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

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

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

     8. CLOSING.

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

     9. CLOSING DOCUMENTS.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

               (b) an executed counterpart of the Reseller Agreement;

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

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

               (e) an executed counterpart of the    Sublease Agreement;

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

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

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

          9.3 Intentionally Omitted.

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

     10. INTENTIONALLY OMITTED.

     11. INDEMNIFICATION.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

          12.6 Intentionally Omitted

          12.7 Taxes.

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

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

               (c) Cooperation on Tax Matters.

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

                    (ii) Buyer and Seller further agree, upon request, to use their
best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could

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

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

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

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

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

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

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

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

	 	 	 
	If to Seller or Company:

	 	Identix Incorporated
	

	 	5600 Rowland Road
	

	 	Minnetonka, Minnesota 55343
	

	 	Attention: Mark S. Molina
	 
	 	 
	with a copy to:
	 	 
	 
	 	 
	If to Buyer:

	 	Alion Science and Technology Corporation
	

	 	1750 Tysons Boulevard, Suite 1300
	

	 	McLean, Virginia 22102
	

	 	Attention: Manik K. Rath
	 
	 	 
	With a copy to:
	 	 

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

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

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

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

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

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

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

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

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

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

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

	 	 	 	 	 
	 	BUYER:

ALION SCIENCE AND TECHNOLOGY CORPORATION

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	COMPANY:

IDENTIX PUBLIC SECTOR, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	SELLER:

IDENTIX INCORPORATED

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

-57-

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