TABLE OF CONTENTS

		PAGE
1.	DEFINITIONS; INTERPRETATION	1
	1.1          Definitions	1
	1.2          Certain Interpretive Matters	11
2.	PURCHASE PRICE	12
	2.1          Purchase and Sale of the Company Common Stock and Purchase Price	12
	2.2          Closing and Payments at Closing	12
	2.3          Determination of Net Worth	13
	2.4          Adjustment to Purchase Price	13
	2.5          Form of Payments	14
3.	REPRESENTATIONS AND WARRANTIES OF PARENT, COMPANY AND STOCKHOLDER	14
	3.1          Organization	14
	3.2          Authorization; Corporate Documentation	15
	3.3          Title to the Company Common Stock, Etc.	15
	3.4          Capitalization	15
	3.5          Binding Agreement	16
	3.6          No Breach	16
	3.7          Permits	16
	3.8          Compliance With Laws	17
	3.9          Title to and Sufficiency of Assets	17
	3.10        Condition of Fixed Assets and Equipment	17
	3.11        Accounts Receivable	17
	3.12        Intellectual Property	17
	3.13        Contracts	19
	3.14        Litigation	20
	3.15        Financial Statements; Controls	20
	3.16        Liabilities	21
	3.17        Tax Matters	21
	3.18        Insolvency Proceedings	23
	3.19        Employee Benefit Plans; ERISA	23
	3.20        Insurance	25
	3.21        Environmental Matters	25
	3.22        Real Estate	26
	3.23        No Other Agreement To Sell	26
	3.24        Transactions with Certain Persons	26
	3.25        Disclosure	27
	3.26        Affiliates	27
	3.27        Employees and Contractors	27
	3.28        Government Audits	27
	3.29        Labor Relations	27
	3.30        Board and Stockholder Approval	28
	3.31        Brokers	28

 

 

 

	3.32        Government Contracts	28
	3.33        Defense Articles, Defense Services and Technical Data	32
	3.34        Bank Accounts	32
	3.35        Suppliers and Customers; Products	32
	3.36        Recent Events	33
	3.37        Sarbanes-Oxley Act/ Extensions of Credit	35
	3.38        SCI Documents Inventory	35
	3.39        Ethical Practices	35
4.	REPRESENTATIONS AND WARRANTIES OF PURCHASER	35
	4.1          Organization	35
	4.2          Necessary Authority	35
	4.3          No Conflicts	35
	4.4          Brokers	36
	4.5          Litigation; Compliance with Law	36
	4.6          Investment Intent	36
	4.7          Insolvency	36
	4.8          Financing	36
	4.9          Acknowledgement	36
5.	COVENANTS OF PARENT, COMPANY, STOCKHOLDER, AND PURCHASER	36
	5.1          Affirmative Covenants of Parent, Company and Stockholder	36
	5.2          Negative Covenants of Company	37
	5.3          Adverse Developments	38
	5.4          Potential Breach	38
	5.5          Access	38
	5.6          Financial Statements	38
	5.7          No Negotiations	38
	5.8          Confidentiality	39
	5.9          Permits	39
	5.10        Other Employee Matters	39
	5.11        Further Action; Efforts	40
	5.12        Standard Employee NDAs	40
	5.13        Tax Treatment	40
	5.14        U. S. Export Controls	40
	5.15        Canadian Tax Matters	41
6.	CONDITIONS TO PURCHASER’S OBLIGATIONS	41
	6.1          Representations and Warranties	41
	6.2          Compliance with Covenants	41
	6.3          Closing Documents	41
	6.4          Required Consents	41
	6.5          Absence of Litigation	41
	6.6          Execution of Key Personnel Retention Agreements	42
	6.7          Execution of Noncompetition/Consulting Agreements	42
	6.8          Audited Financial Statements	42

 

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	6.9          New Facility Lease Agreement	42
	6.10        Termination of Related Party Agreements	42
	6.11        Distribution of Stock of Subsidiaries/Canadian Tax Withholding	42
	6.12        Loan Agreements and Liens	42
	6.13        Mutual Release	43
	6.14        No Material Adverse Effect	43
	6.15        McTurbine Incorporated	43
	6.16        Termination of Company Profit Sharing Plan	43
7.	CONDITIONS TO PARENT’S, COMPANY’S AND STOCKHOLDER’S OBLIGATIONS	43
	7.1          Representations and Warranties	43
	7.2          Compliance with Covenants	43
	7.3          Closing Documents	43
	7.4          Required Consents	43
	7.5          Absence of Litigation	43
	7.6          Execution of Retention Agreements	44
8.	CLOSING	44
	8.1          Timing	44
9.	CLOSING DOCUMENTS	44
	9.1          Closing Documents to be Delivered by Parent, Company and/or Stockholder	44
	9.2          Closing Documents to be Delivered by Purchaser	45
	9.3          Other Closing Documents and Actions	46
10.	TERMINATION	46
	10.1        Termination	46
	10.2        Effect of Termination	46
11.	INDEMNIFICATION	47
	11.1        Indemnification by Parent and Stockholder	47
	11.2        Indemnification by the Purchaser	47
	11.3        Supplemental Indemnification	47
	11.4        Survival	48
	11.5        Certain Limitations on Indemnification Obligations	48
	11.6        Defense of Claims	49
	11.7        Non-Third Party Claims	50
	11.8        Liability of the Company	50
	11.9        Tax Treatment	50
	11.10      No Waiver	51
	11.11      No Right of Contribution	51
	11.12      Exclusive Remedy	51

 

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12.	POST CLOSING MATTERS	51
	12.1        Cooperation	51
	12.2        Litigation Support	51
	12.3        Books and Records	52
	12.4        Cooperation and Records Retention	52
	12.5        Tax Matters	52
	12.6        338(h)(10) Election	53
	12.7        Market Stand-Off	54
13.	EXPENSES	54
14.	AMENDMENT; BENEFIT AND ASSIGNABILITY	55
15.	NOTICES	55
16.	WAIVER	56
17.	ENTIRE AGREEMENT	56
18.	COUNTERPARTS	56
19.	CONSTRUCTION	56
20.	EXHIBITS AND DISCLOSURE SCHEDULE	57
21.	SEVERABILITY	57
22.	CHOICE OF LAW	57
23.	PUBLIC STATEMENTS	57
24.	WAIVER OF TRIAL BY JURY	57
25.	REMEDIES	57

 

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Exhibits
Exhibit A	Form of Escrow Agreement
Exhibit B-1	Form of Parent/Stockholder Non-Competition Agreement
Exhibit B-2	Form of Stockholder Consulting Agreement
Exhibit C	Form of Standard Employee NDA
Exhibit D	Form of Opinion Letter
Exhibit E	Form of New Facility Lease Agreement
Exhibit F	Form of Retention Agreement
Exhibit G	Form of Mutual Release
Exhibit H	Required Consents

 

Schedules
Disclosure Schedule

 

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STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this “ Agreement ”) is entered into as of the 6 th  day of November, 2006, by and among AAI Services Corporation, a Maryland corporation (“ Purchaser ”), M International, Inc., a Virginia corporation (“ Parent ”), Richard D. McConn, the sole stockholder of Parent (“ Stockholder ”) and McTurbine Inc., a Texas corporation (“ Company ”).

RECITALS

A.        Parent owns all of the issued and outstanding capital stock of Company, consisting of 10,000 shares of common stock, $1.00 par value per share (the “ Company Common Stock ”).

B.        Parent desires to sell and convey the Company Common Stock to Purchaser, and Purchaser desires to purchase the Company Common Stock from Parent, upon the terms and conditions set forth in this Agreement.

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; INTERPRETATION .

1.1     Definitions .  As used in this Agreement, the following terms have the respective meanings set forth below:

“ Actual Net Worth ” shall have the meaning set forth in Section 2.4 hereof.

“ Adverse Consequences ” means all out-of-pocket losses, liabilities, claims, damages, penalties, fines, judgments, awards, settlements, Taxes, Liens, costs, fees, expenses (including, but not limited to, reasonable attorneys’ fees) and disbursements.

“ Affiliate ” means any Person that, directly or indirectly, Controls, is Controlled by, or is under common Control with or of, 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.  In addition, an Affiliate shall include any joint venture entity of which a Person is a stockholder.

“ Affiliated Group ” shall have the meaning set forth in Section 1504(a) of the Code.

“ Airborne Engines ” shall have the meaning set forth in Section 6.11(a) .

“ Allocation Statement ” shall have the meaning set forth in Section 12.6(b) hereof.

“ Assets ” means all cash and cash equivalents, marketable securities, personal property and real 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, except for any assets owned solely by or used exclusively in the operations and business of Airborne Engines or KALZ.

“ Audited Financial Statements ” shall have the meaning set forth in Section 3.15(b) hereof.

“ Basket Amount ” shall have the meaning set forth in Section 11.5(a) hereof.

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

“ Business Day ” means a day, other than a Saturday or Sunday, on which commercial banks in Baltimore County, Maryland are open for the general transaction of business.

“ CITA ” shall have the meaning set forth in Section 5.15(a) hereof.

“ Classified Documents ” means CONFIDENTIAL, SECRET, and TOP SECRET documents, each as defined by Executive Order 12958, or any more recent Executive Order.

“ Classified Facility ” means any facility certified as acceptable for processing, discussing, or storing classified or collateral level information under the National Industrial Security Program Operating Manual or under the manuals or Laws of other Governmental Authorities.

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

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

“ Closing Date Purchase Price ” shall have the meaning set forth in Section 2.1 hereof.

“ Closing Payment ” shall have the meaning set forth in Section 2.2(c) hereof.

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

“ Cognizant Agency ” means the U.S. Department of Defense through its representatives in the Defense Security Service and each and every agency sponsoring or acting as Cognizant Security Authority for the Sensitive Compartmented Information Facilities maintained by the Company or for any access held by employees of the Company to the extent the Defense Security Service is not recognized as the Cognizant Authority for the Classified Facility or for sponsorship of those accesses.

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

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

“ Company Expenses ” shall mean the aggregate of all out-of-pocket fees and expenses payable by Company in connection with the consummation of the transactions contemplated hereby (or incurred in connection with the transactions hereunder) including any of the foregoing payable to legal counsel, accountants, investment bankers, financial advisors, brokers, finders, or consultants but excluding the costs of Audited Financial Statements or costs incurred in connection with the Dispute Resolution Procedure following the Closing.

“ Company Indebtedness ” means, at any given time, the outstanding principal of, and accrued and unpaid interest on, and any premiums, prepayment fees and penalties due upon prepayment and full

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satisfaction of, all bank or other third party indebtedness for borrowed money of the Company and its subsidiaries, including indebtedness under any bank credit agreement and any other related agreements; provided, that, for purposes of clarity, “Company Indebtedness” shall exclude normal due course trade payable leases and purchase orders issued in the Ordinary Course of Business.

“ Company Premises ” means the Leased Premises and/or any real property owned or formerly owned, leased or operated by Company, including without limitation the property formerly owned by Company and currently owned by KALZ located at 401 Junior Beck Drive, Corpus Christi, Texas.

“ Confidential Information ” means any information concerning the business and affairs of Company or the Assets, that is not generally available to the public, including know-how, trade secrets, customer lists, details of customer or consultant contracts, pricing policies, operational methods and marketing plans or strategies, and any information disclosed to Company by third parties to the extent that Company has an obligation of confidentiality in connection therewith.

“ Contracts ” means all 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 or the Closing Date, including those listed on the Disclosure Schedule.

“ 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.

“ Determination ” shall have the meaning set forth in the definition of Dispute Resolution Procedure.

“ Direct Costs ” shall have the meaning provided in Federal Acquisition Regulation (“ FAR ”) Part 31.

“ Disclosure Schedule ” means the disclosure schedule to this Agreement delivered to Purchaser by Parent upon execution and delivery of this Agreement.

“ Dispute Resolution Procedure ” means the procedure pursuant to which the items in dispute are referred by either Parent or Purchaser for determination as promptly as practicable to the Independent Accounting Firm, which shall be jointly engaged by Purchaser, on the one hand, and Parent, on the other hand, pursuant to an engagement letter in customary form which each of Purchaser and Parent shall execute.  If RSM McGladrey Inc. is unable to serve as the Independent Accounting Firm and Purchaser and Parent have failed to reach agreement on an Independent Accounting Firm within ten (10) calendar days following the termination of the twenty (20) calendar-day period set forth in the last sentence of Section 2.3(b) , then the Independent Accounting Firm shall be selected by the American Arbitration Association.  The Independent Accounting Firm shall prescribe procedures for resolving the disputed items and in all events shall make a written determination, with respect to such disputed items only (i.e., in connection with Section 2.3 , whether and to what extent, if any, the Estimated Net Worth Certificate and the accompanying calculations of the Net Worth of Company at Closing require adjustment based on the terms and conditions of this Agreement (a “ Determination ”).  The Determination shall be based solely on presentations with respect to such disputed items by Purchaser and Parent to the Independent

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Accounting Firm and not on the Independent Accounting Firm’s independent review; provided, that such presentations shall be deemed to include any work papers, records, accounts or similar materials delivered to the Independent Accounting Firm by Purchaser or Parent in connection with such presentations and any materials delivered to the Independent Accounting Firm in response to requests by the Independent Accounting Firm.  Each of Purchaser and Parent shall use its Reasonable Best Efforts to make its presentation as promptly as practicable following submission to the Independent Accounting Firm of the disputed items, and each such party shall be entitled, as part of its presentation, to respond to the presentation of the other party and any questions and requests of the Independent Accounting Firm.  Purchaser and Parent shall instruct the Independent Accounting Firm to deliver the Determination to Purchaser and Parent no later than thirty (30) calendar days following the date on which the disputed items are referred to the Independent Accounting Firm.  In deciding any matter, the Independent Accounting Firm (i) shall be bound by the provisions of Section 2.3(b) hereof, (ii) may not assign a value to any item greater than the greatest value for such item claimed by either Purchaser or Parent or less than the smallest value for such item claimed by Purchaser or Parent, and (iii) shall be bound by the express terms, conditions and covenants set forth in this Agreement, including the definitions contained herein.  In the absence of fraud or manifest error, the Determination shall be conclusive and binding upon Purchaser, Parent and Stockholder.  The Independent Accounting Firm shall consider only those items and amounts in the Purchaser’s certificate which Purchaser and Parent were unable to resolve.  All fees and expenses of the Independent Accounting Firm incurred in connection with any dispute over Purchaser’s certificate shall be borne by the parties based on the percentage which the portion of the contested amount not awarded to such party bears to the amount actually contested by the parties.  By way of example and not by way of limitation, if Parent seeks a $70,000 upward adjustment to Net Worth and the Independent Accounting Firm determines that there shall be a $40,000 upward adjustment, then Parent and Stockholder shall be responsible for three-sevenths (3/7th) of the fees and expenses and Purchaser shall be responsible for four-sevenths (4/7th) of the fees and expenses.

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

“ Environmental Claim ” means any claim for Adverse Consequences or indemnification of the Purchaser Parties pursuant to Section 11 , (a) based upon, arising out of or otherwise in respect of, any inaccuracy in or any breach of any representation or warranty of the Company contained in Section 3.21 hereof, and/or (b) pursuant to Section 11.3(d) .

“ 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 any other third parties, Environmental Condition shall also include the exposure of Persons to amounts of Hazardous Materials in amounts that have been determined to be deleterious to human health.

“ Environmental Insurance Policy ” means the Premises Pollution Liability II Insurance Policy from ACE/Illinois Union Insurance Company to be procured by Purchaser, in the form previously delivered to Parent and Company.

“ Environmental Laws ” means all currently applicable federal, state and local laws, ordinances, rules and regulations and standards, policies and other governmental requirements, administrative rulings and court judgments and decrees, including all amendments, and requirements applicable under common law that relate to (1) pollution; (2) the protection of human health and safety; (3) the protection or regulation of the environment, including without limitation, air, soils, wetlands, surface and underground water; (4) aboveground or underground storage tank regulation or removal; (5) wildlife; (6) protection or

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regulation of natural resources; (7) radioactive materials, including without limitation radon; (8) indoor air quality; and (9) chemicals, pesticides, mold or fungus or similar substances.  “Environmental Laws” include, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. , the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq. , the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq. , the Federal Water Pollution Control Act, 33 U.S.C. Section 1251, et seq. , the Hazardous Materials Transportation Act, 49 U.S.C. 5101, et seq. , the Clean Air Act, 42 U.S.C. Section 7401, et seq. , the Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq. , the Occupational Safety and Health Act, 29 U.S.C. Section 651, et  seq. , the Emergency Planning and Community Right to Know Act of 1986, 42 U.S.C. 11001, et seq. , The Atomic Energy Act, 42 U.S.C. Section 2014, et seq. , the National Environmental Policy Act, 42 U.S.C. Section 4321, et seq. , the Endangered Species Act, 16 U.S.C. Section 1531, et seq. , the Federal Insecticide, Fungicide & Rodenticide Act, 7 U.S.C. Section 136, et seq. , and their state analogs, all applicable state superlien or environmental clean-up or disclosure statutes in the state in which the Leased Premises is located, and all similar local laws, and all implementing regulations.

“ Environmental Noncompliance ” means any violation of any Environmental Law.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ ERISA Affiliate ” shall mean any member of Company’s “controlled group” as defined in Section 414(b), (c), (m) or (o) of the Code.

“ Escrow Account ” shall have the meaning set forth in Section 2.2(c)(i) hereof.

“ Escrow Agent ” shall have the meaning set forth in Section 2.2(c)(i) hereof.

“ Escrow Agreement ” shall have the meaning set forth in Section 2.2(c)(i) hereof.

“ Estimated Closing Date Balance Sheet ” shall have the meaning set forth in Section 2.3(a) hereof.

“ Estimated Net Worth ” shall have the meaning set forth in Section 2.3(a) hereof.

“ Estimated Net Worth Certificate ” shall have the meaning set forth in Section 2.3(a) hereof.

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

“ FAR ” shall have the meaning set forth in the definition of Direct Cost contained in this Section 1 .

“ FCPA ” means the Foreign Corrupt Practices Act of 1977, as amended.

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

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

“ Governmental Authority ” means any federal, state, local, foreign or other governmental, quasi-governmental or administrative body, instrumentality, department or agency or any court, tribunal,

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administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body.

“ 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, basic ordering agreement, letter contract or other similar arrangement of any kind, between Company, on the one hand, and (a) any Governmental Authority, (b) any prime contractor of a Governmental Authority in its capacity as a prime contractor, or (c) any subcontractor (or lower tier subcontractor) with respect to any contract of a type described in clauses (a) or (b) above, on the other hand awarded to the Company within the past three (3) years.  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.

“ Government Contracts Claim ” means any claim for Adverse Consequences or indemnification of the Purchaser Parties pursuant to Section 11 , (a) based upon, arising out of or otherwise in respect of, any inaccuracy in or any breach of any representation or warranty of the Company contained in  Sections 3.28, 3.32, 3.33, and/or 3.38 hereof, and/or (b) pursuant to Section 11.3(b) .

“ Hazardous Materials ” shall mean any materials regulated as hazardous or toxic under applicable Environmental Laws, or any other material regulated, or that could result in the imposition of liability, under Environmental Laws, including, without limitation, petroleum, petroleum products, fuel oil, crude oil or any fraction thereof, derivatives or byproducts of petroleum products or fuel oil, natural gas, mold, hazardous substances, toxic substances, polychlorinated biphenyls, any materials containing more than one percent (1%) asbestos by weight and any other substance determined to present a deleterious effect on human health or the environment.

“ Independent Accounting Firm ” shall mean RSM McGladrey Inc., or such other nationally recognized accounting firm mutually agreed upon by Purchaser and Parent; provided, however, that the Independent Accounting Firm may not have a business relationship with any of the Stockholder, Company, Parent, Purchaser, or United Industrial Corporation, or have had any such relationship within the three (3) years prior to its engagement hereunder.

“ Indirect Costs ” shall have the meaning provided in FAR Part 31.

“ Intellectual Property ” means all of the following as they exist in any jurisdiction throughout the world, in each case, to the extent owned by, licensed to, or otherwise used by Company:  (a) 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 ”);  (b) 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 ”); (c) works of authorship and all copyrights therein, including all renewals and extensions, copyright registrations and applications for registration, and non-registered copyrights (collectively, “ Copyrights ”); (d) 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,

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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 ”); (e) all domain name registrations, web sites and web pages and related rights, items and documentation related thereto (collectively, “ Internet Assets ”) (f) computer software programs, including all source code, object code, and documentation related thereto and all software modules, tools and databases (“ Software ”); (g) mask works, and (h) all licenses, and sublicenses, and other agreements or permissions related to the preceding property.

“ Interim Period ” shall have the meaning set forth in Section 5.11(b) hereof.

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

“ IP Licenses ” shall have the meaning set forth in Section 3.12(a)(ii) hereof.

“ IRS ” means Internal Revenue Service.

“ KALZ ” shall have the meaning set forth in Section 6.11(b) .

“ Key Personnel ” shall mean Kenneth Essary, Andrea Satterfield, Rafael Guerra and Jose Guzman.

“ Knowledge ” means (a) with respect to Company, the knowledge after Reasonable Inquiry of each of Stockholder, each other director of Company, Mehdi Protzuk, Kenneth Essary, Andrea Satterfield, John Ryan, Roberto Leal, Thomas Daiz Deleon, Rafael Guerra, Tom Kwiatkowski, Fernando Milia, Jose Guzman and Howard Lynch, (b) with respect to Parent, the knowledge after Reasonable Inquiry of each officer and/or director of Parent, (c) with respect to Stockholder, the knowledge after Reasonable Inquiry of Stockholder and (d) with respect to any other Person, the actual knowledge of such Person after Reasonable Inquiry.

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

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

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

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

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

“ Material Adverse Effect ” means, with respect to Company, any event, fact, condition, change, circumstance, occurrence or effect, that, either individually or in the aggregate with all other related events, facts, conditions, changes, circumstances, occurrences or effects (a) has had, or would reasonably be expected to have, a material adverse effect on the business, properties, assets, liabilities, condition (financial or otherwise), operations, or results of operations of Company or (b) does or would reasonably

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be expected to materially impair or delay the ability of Parent, Company or Stockholder to perform their obligations under this Agreement or to consummate the transactions contemplated hereby.

“ Material Contracts ” shall have the meaning set forth in Section 3.13(a) .

“ Net Worth ” means the difference (whether positive or negative) of (a) the total assets of the Company as of the Closing Date immediately prior to the consummation of the purchase and sale of the Company Common Stock contemplated hereby, minus (b) the total liabilities of the Company as of the Closing Date immediately prior to the consummation of the purchase and sale of the Company Common Stock contemplated hereby, in each case as determined in accordance with GAAP applied on a basis consistent with the Audited Financial Statements; provided however, that, for purposes of the definition of “Net Worth,” whether or not the following is consistent with GAAP:

(i) “total assets” shall exclude (A) any receivable from (x) Parent or any of its Affiliates or (y) from any other Related Party outside of the Ordinary Course of Business, (B) intangible assets, (C) cash and cash equivalents of the Company; provided that Company shall have the right to dividend out or otherwise transfer any cash and cash equivalents to Parent prior to the Closing, and (D) deferred income taxes.

(ii) “total liabilities” shall exclude (A) to the extent paid or cancelled prior to or at the Closing, (including any amount paid in accordance with Section 2.2(c)(i)(C) ) any amount owed to (x) Parent or any of its Affiliates or (y) any other Related Party outside of the Ordinary Course of Business, (B) to the extent paid or cancelled prior to or at the Closing, the Company Indebtedness, and (C) any liabilities paid pursuant to Section 2.2(c)(i)(B) .  For purposes of clarity, “total liabilities” shall include (x) any and all amounts received by the Company pursuant to that certain Agreement to Grant Business Incentives to McTurbine, Inc. for the Creation of Jobs, effective as of July 25, 2005, by and between the Corpus Christi Job Business and Job Development Corporation, a Texas non-profit corporation, and Company up to an amount of $499,117 and (y) normal due course trade payable leases and purchase orders issued in the Ordinary Course of Business

“ Net Worth Threshold ” means Seven Million Nine Hundred Fifty-Three Thousand Dollars ($7,953,000).

“ New Facility Lease Agreement ” shall have the meaning set for the in Section 6.9 hereof.

“ Notices ” shall have the meaning set forth in Section 15 hereof.

“ Ordinary Course of Business ” means, with respect to a Person, an action taken by such Person  that is consistent with past custom and practice in the ordinary course of the normal day-to-day operations of the Person, or in the case of non-recurring actions, such action is taken in accordance with sound and prudent business practices and does not require separate specific authorization by the board of directors or equity holders of such person.

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

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

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

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“ Permits ” means all federal, state, local or foreign permits, grants, easements, consents, approvals, authorizations, exemptions, licenses, franchises, certificates, or orders of, any 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 (a) Liens for Taxes not yet due and payable, and (b) 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.

“ Permitted Use ” shall have the meaning set forth in Section 12.3 hereof.

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

“ 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 hereof.

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

“ Purchaser Material Adverse Effect ” shall have the meaning set forth in Section 4.1 hereof.

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

 “ Purchaser’s Representatives ” shall have the meaning set forth in Section 5.5 hereof.

“ Reasonable Best Efforts ” means the efforts that a reasonably prudent Person would use to achieve a result as expeditiously as reasonably possible.

“ Reasonable Inquiry ” means the investigation that a reasonably prudent manager (or applicable Person) would conduct to determine the accuracy of such matter.

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

“ Related Party ” means any officer, director or employee of Parent, any member of the “Knowledge” group or any member of any such individual’s immediate family, any Affiliate of any such  individual or member of such individual’s immediate family or any Affiliate of Parent, Company or Stockholder.

“ Representative ” means, as to any Person, such Person’s Affiliates and its and their directors, officers, employees, agents, advisors (including financial advisors, counsel and accountants) and direct and indirect controlling persons.

“ Retention Agreements ” shall have the meaning set forth in Section 6.6 hereof.

“ SCI ” or “ Sensitive Compartmented Information ” means such term as defined in the Director of Central Intelligence Directive 1/19, Security Policy for Sensitive Compartmented Information and Security Policy Manual (effective March 1, 1995).

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“SCI Documents” means such term as described in the Director of Central Intelligence Directive 1/19, Security Policy for Sensitive Compartmented Information and Security Policy Manual (effective March 1, 1995), as applied to documents containing Sensitive Compartmented Information for which Company is accountable.

“ Section 338(h)(10) Election ” shall have the meaning set forth in Section 12.6(a) hereof.

“ Section 409A Plan ” shall have the meaning set forth in Section 3.19(i) hereof.

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

“ Standard Employee NDAs ” shall have the meaning set forth in Section 5.12 hereof.

“ Statement Date ” shall have the meaning set forth in Section 3.15 hereof.

“ Subsection 116 Certificate ” shall have the meaning set forth in Section 5.15(a) hereof.

“ Subsidiary ” means, with respect to any Person, any corporation, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, association or other business entity, a majority of the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof.  For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership, association or other business entity if such Person or Persons shall be allocated a majority of partnership, association or other business entity gains or losses or shall be or control the managing director, managing member, general partner or other managing Person of such partnership, association or other business entity.  Unless the context requires otherwise, each reference to a Subsidiary shall be deemed to be a reference to a Subsidiary of the Company.

“ 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, having been, 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 Claim ” means any claim for Adverse Consequences or indemnification of the Purchaser Parties pursuant to Section 11 , (a) based upon, arising out of or otherwise in respect of, any inaccuracy in or any breach of any representation or warranty of the Company contained in this Agreement related to liability of Company for Taxes, including Section 3.17 , and (b) pursuant to Section 11.3(a) .

“ Tax Return ” means any return, declaration, report, claim for refund, information return or other documents (including any related or supporting schedules, statements or information) filed or required to

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be filed in connection with the determination, assessment or collection of any Taxes of Company or any Affiliate of Company other than Stockholder 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(g) hereof.

“ Taxing Authority ” means any Governmental Authority with the power to levy or collect Taxes.

“ 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.

“ Unaudited Financial Statements ” shall have the meaning set forth in Section 3.15(a) hereof.

“ Withheld Amount ” shall have the meaning set forth in Section 5.15(a) hereof.

1.2     Certain Interpretive Matters .  In this Agreement, unless the context otherwise requires: (a) words of the masculine or neuter gender shall include the masculine, neuter and/or feminine gender, and words in the singular number or in the plural number shall each include, as applicable, the singular number or the plural number; (b) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity; (c) any accounting term used and not otherwise defined in this Agreement or any Transaction Document has the meaning assigned to such term in accordance with GAAP; (d)  “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding or succeeding such term; (e) reference to any law (including statutes and ordinances) means such law as amended, modified codified or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder; and (f) any agreement, instrument, insurance policy, statute, regulation, rule or order defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument, insurance policy, statute, regulation, rule or order as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes, regulations, rules or orders) by succession of comparable successor statutes, regulations, rules or orders and references to all attachments thereto and instruments incorporated therein.  With respect to information contained in the Disclosure Schedule, Parent, Company and Stockholder shall use Reasonable Best Efforts to provide specific cross-references to each representation and warranty that is modified or otherwise affected by such information; provided, that, absent any such cross-reference, information disclosed on the Disclosure Schedule for any individual representation and warranty shall be deemed to be disclosed under and incorporated into any other representation and warranty if the relevance of such information to such other representation or warranty is reasonably apparent.  The parties further acknowledge and agree that: (i) this Agreement is the result of negotiations between the parties and shall not be deemed or construed as having been drafted by any one party, (ii) each party and its counsel have reviewed and negotiated the terms and provisions of this Agreement (including any Exhibits and Schedules attached hereto) and have contributed to its revision, (iii) the rule of construction to the effect that any ambiguities are resolved against the drafting party shall

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not be employed in the interpretation of this Agreement, and (iv) the terms and provisions of this Agreement shall be construed fairly as to all parties hereto and not in favor of or against any party, regardless of which party was generally responsible for the preparation of this Agreement.

2.              PURCHASE PRICE.

2.1     Purchase and Sale of the Company Common Stock and Purchase Price .  At the Closing and upon the terms and subject to the conditions of this Agreement, Parent shall sell, transfer, assign and convey to Purchaser, and Purchaser shall purchase and accept from Parent, the Company Common Stock.  In full payment for the Company Common Stock, Purchaser shall pay at Closing, in the manner described in Section 2.2(c), (a) Thirty-One Million Dollars ( $31,000,000   ), (b)(i) minus the amount by which the Net Worth Threshold exceeds Estimated Net Worth, or (ii) plus the amount by which the Estimated Net Worth exceeds the Net Worth Threshold, as the case may be, such estimate as determined in accordance with Section 2.3(a) hereof, (c) minus an amount equal to one-half of the premium payable for the Environmental Insurance Policy up to a maximum of $125,000.00 (the amount in (a) as adjusted by the amount in (b)(i) or (b)(ii), as applicable, and as adjusted by the amount in (c), the “ Closing Date Purchase Price ” and the Closing Date Purchase Price as otherwise adjusted pursuant to the terms of this Agreement is referred to as the “ Purchase Price ”).

2.2     Closing and Payments at Closing .

(a)           The Closing .  The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Holland & Knight LLP, 1600 Tysons Boulevard, Suite 700, McLean, VA 22102, commencing at 10:00 a.m. local time on the date that is two (2) Business Days following the satisfaction or the Purchaser’s waiver of the closing conditions set forth in Section 6 and the satisfaction or Parent’s waiver of the closing conditions set forth in Section 7 , in each case, other than those conditions that by their nature can only be satisfied at the Closing (such later date, the “ Closing Date ”).  Subject to the provisions of Section 10 , failure to consummate the purchase and sale provided for in this Agreement on the date and time and at the place determined pursuant to this Section 2.2(a) will not result in the termination of this Agreement and will not relieve any party of any obligation under this Agreement.

(b)           Closing Deliverables .  At the Closing, (i)  Parent or Stockholder will deliver to Purchaser the various certificates, instruments, and documents referred to in Section 9.1 below and (ii) Purchaser will deliver to Parent and Stockholder or the appropriate third parties the various certificates, instruments, and documents referred to in Section 9.2 below.

(c)           Payments at Closing .

(i)            At the Closing, Purchaser shall:

(A)          pay 10% of the Purchase Price by wire transfer of immediately available funds to an escrow account (the “ Escrow Account ”) to be established by Purchaser with an escrow agent to be mutually agreed upon by the parties (the “ Escrow Agent ”), to be held by the Escrow Agent pursuant to the terms of an escrow agreement, substantially in the form attached hereto as Exhibit A (the “ Escrow Agreement ”).

(B)           pay any unpaid Company Expenses that have not been paid by Parent, Company or Stockholder prior to Closing, and Purchaser shall reduce the amount of the Closing Date Purchase Price to be paid to Parent by the amount so paid;   and

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(C)           pay any unpaid Company Indebtedness that has not been paid by Company prior to Closing, and Purchaser shall reduce the amount of the Closing Date Purchase Price to be paid to Parent by the amount so paid.

The Closing Date Purchase Price minus the payments (or the assumption of liabilities) described in paragraphs (A), (B) and (C) of this Section 2.2(c)(i) is herein referred to as the “ Closing Payment .”

(ii)           At the Closing, Purchaser shall pay the Closing Payment to Parent by wire transfer of immediately available funds to an account designated by Parent (such account to be designated at least two (2) Business Days prior to the Closing Date).

2.3     Determination of Net Worth .

(a)           Determination of Estimated Net Assets .  Not later than three (3) nor more than five (5) Business Days prior to the Closing Date, the Company and Parent shall prepare and deliver to Purchaser a certificate certifying the Company’s and Parent’s good faith estimate of the Net Worth of Company as of the Closing Date (“ Estimated Net Worth ”), and including an estimated unaudited balance sheet of Company as of the Closing Date (“ Estimated Closing Date Balance Sheet ”).  As promptly as practicable but not later than one (1) Business Day prior to the Closing, Purchaser shall identify any adjustments that it believes are required to the certificate delivered by Company or Parent.  If Company or Parent disputes any such adjustments, Purchaser and Parent shall use Reasonable Best Efforts to resolve such dispute, after which Company or Parent shall re-deliver to Purchaser the certificate with such adjustments as the parties have agreed are appropriate.  The form of certificate finally delivered pursuant to this Section 2.3(a) and acceptable to the Purchaser, Company and Parent is referred to herein as the “ Estimated Net Worth Certificate .”

(b)           Determination of Actual Net Worth .  Within ninety (90) days after the Closing Date, Purchaser will prepare and deliver to Parent a certificate, signed by Purchaser, certifying Purchaser’s good faith determination of the actual Net Worth of Company as of the Closing Date, and identifying any adjustments to the Purchase Price as a result of such amounts being greater or less than the amounts set forth on the Estimated Net Worth Certificate.  If Parent does not object to Purchaser’s certificate within thirty (30) days after receipt, or accepts such certificate during such thirty (30) day period, the Purchase Price shall be adjusted as set forth in Purchaser’s certificate, and payment made in accordance with Section 2.4 .  If Parent objects to the Purchaser’s certificate, Parent shall notify Purchaser in writing of such objection within thirty (30) days after Parent receipt thereof (such notice setting forth in reasonable detail the basis for such objection).  During such thirty (30) day period, Purchaser shall permit Parent access to such work papers relating to the preparation of Purchaser’s certificate, as may be reasonably necessary to permit Parent to review in detail the manner in which Purchaser’s certificate was prepared.  Purchaser and Parent shall thereafter negotiate in good faith to resolve any such objections.  If Purchaser and Parent are unable to resolve all of such differences within twenty (20) calendar days of Purchaser’s receipt of Parent’s objections, the parties shall resolve the dispute by way of the Dispute Resolution Procedure.

2.4     Adjustment to Purchase Price .  The Net Worth amount determined in accordance with Section 2.3(b) (the “ Actual Net Worth ”) shall be used to calculate post-Closing adjustments to the Purchase Price as follows:

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(a)           If Actual Net Worth is equal to Estimated Net Worth, no adjustment to the Purchase Price shall be made;

(b)           If Estimated Net Worth was less than the Net Worth Threshold, and Actual Net Worth is less than Estimated Net Worth, then Parent shall pay Purchaser the difference between Estimated Net Worth and Actual Net Worth;

(c)           If Estimated Net Worth was less than the Net Worth Threshold, and Actual Net Worth is greater than Estimated Net Worth, then Purchaser shall pay Parent an amount equal to the difference between Actual Net Worth and Estimated Net Worth;

(d)           If Estimated Net Worth was equal to the Net Worth Threshold, and Actual Net Worth is less than the Net Worth Threshold, then Parent shall pay Purchaser the difference between the Net Worth Threshold and Actual Net Worth;

(e)           If Estimated Net Worth was equal to the Net Worth Threshold, and Actual Net Worth is greater than the Net Worth Threshold, then Purchaser shall pay Parent the difference between Actual Net Worth and the Net Worth Threshold;

(f)            If Estimated Net Worth was greater than the Net Worth Threshold, and Actual Net Worth is greater than Estimated Net Worth, then Purchaser shall pay Parent the difference between Actual Net Worth and Estimated Net Worth; and

(g)           If Estimated Net Worth was greater than the Net Worth Threshold, and Actual Net Worth is less than Estimated Net Worth, then Parent shall pay Purchaser the difference between Estimated Net Worth and Actual Net Worth.

All payments to be made to either Purchaser or Parent pursuant to this Section 2.4 shall be made by check or by wire transfer of immediately available funds to Parent’s accounts or Purchaser’s account, as applicable, within three (3) Business Days after the date on which Actual Net Worth is finally determined pursuant to Section 2.3 above.

2.5     Form of Payments .  Except as expressly provided herein, all payments hereunder shall be made by delivery to the recipient by depositing, by bank wire transfer, the required amount (in immediately available funds) in an account of the recipient, which account shall be designated by the recipient in writing at least two (2) Business Days prior to the date of the required payment.

3.             REPRESENTATIONS AND WARRANTIES OF PARENT, COMPANY AND STOCKHOLDER .   Except as set forth on the Disclosure Schedule (subject to the second sentence of Section 1.2 hereof), Parent, Company and Stockholder jointly and severally represent and warrant to Purchaser the following matters:

3.1     Organization .

(a)           Company is a corporation duly incorporated, validly existing and in good standing under the Laws of the jurisdiction of its incorporation, and is qualified or registered to do business and in good standing in each jurisdiction in which the nature of its business or operations would require such qualification or registration except where the failure to be qualified or registered would not have a Material Adverse Affect.  Company is qualified or registered to do business in each jurisdiction

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listed on the Disclosure Schedule.  The address of Company’s principal office and all of Company’s additional places of business are listed on the Disclosure Schedule.  Except as set forth on the Disclosure Schedule, 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.  The Disclosure Schedule lists all current directors and officers of Company.

(b)           As of the Closing Date, Company will have no Subsidiaries.

(c)           Parent is a corporation duly incorporated, validly existing and in good standing under the Laws of the jurisdiction of its incorporation.

3.2     Authorization; Corporate Documentation .

(a)           Each of Parent, Company and Stockholder has the requisite corporate or other power and authority to execute and deliver this Agreement and the other Transaction Documents to which it/he is a party, to perform its/his 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 Parent and Company, and Parent’s and Company’s consummation of the transactions contemplated hereby, have been duly authorized by all requisite corporate or other action of Parent and Company.

(b)           The copies of the Articles of Incorporation of Company and all amendments thereto, as certified by the State of Texas, and the Bylaws of Company, as amended to date and certified by its corporate secretary, copies of which have heretofore been made available to Purchaser, 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.  The minute books and records of the corporate proceedings of Company, copies of which have been made available to Purchaser, are true, correct and complete.  There have been no material changes, alterations or additions to such minute books and records of the corporate proceedings of Company on or prior to the Closing Date that have not been furnished to Purchaser’s counsel.

3.3     Title to the Company Common Stock, Etc .   Parent owns good, valid and marketable title to the Company Common Stock, free and clear of any and all Liens and upon delivery of the Company Common Stock to Purchaser on the Closing Date in accordance with this Agreement and upon Purchaser’s delivery of the Closing Payment to Parent at the Closing pursuant to Section 2.2(c) , the entire legal and beneficial interest in the Company Common Stock and good, valid and marketable title to the Company Common Stock, free and clear of all Liens (other than any imposed by acts of Purchaser or its Affiliates), will pass to Purchaser.

3.4     Capitalization .  The authorized capital stock of Company consists of 1,000,000 shares of Common Stock, $1.00 par value per share.  The Company Common Stock to be delivered by Parent to Purchaser constitutes all outstanding shares of capital stock of Company.  The Company Common Stock (i) has been duly and validly issued; (ii) is fully paid and nonassessable; (iii) is held beneficially and of record solely by Parent; 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 Company Common Stock.  Except for the purchase of the Company Common Stock by Purchaser contemplated by this Agreement, there are no options, warrants or other rights to subscribe for or purchase any capital

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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 Parent, Company or Stockholder is a party or by which Parent, Company or Stockholder is bound relating to any shares of the Company Common Stock or any other equity securities of Company, whether or not outstanding.  All of the Company Common Stock and other securities of Company have been granted, offered, sold and issued in compliance with all applicable foreign, state and federal securities Laws.

3.5     Binding Agreement .  This Agreement has been duly executed by Parent, Company and  Stockholder and delivered to Purchaser, and constitutes the legal, valid and binding agreement of Parent, Company and Stockholder, enforceable against Parent, Company and Stockholder 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 Parent, Company and/or Stockholder, each other Transaction Document to which Parent, Company or Stockholder is, or is specified to be, a party, will be duly and validly executed by Parent, Company and Stockholder and delivered to Purchaser on the Closing Date, and will constitute (assuming, in each case, the due authorization, execution and delivery by each other party thereto) each of Parent’s, Company’s and Stockholder’s legal, valid and binding obligation, enforceable against it or them, as the case may be, in accordance with such Transaction Document’s 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     No Breach .  Except as set forth on the Disclosure Schedule, the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby by Parent, Company and Stockholder do not and will not (A) violate or conflict with Parent’s or Company’s respective Articles of Incorporation, Bylaws, or any other organizational or other constituent document or any law, statute, rule, regulation, ordinance, code, directive, writ, injunction, settlement, permit, license, decree, judgment or order (collectively, “ Laws ”) of any Governmental Authority to which Parent, Company, Stockholder, the Company Common Stock or the Assets are subject, or by which Parent, Company, Stockholder, the Company Common 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 material Contract to which Parent, Company or Stockholder is a party or by which Parent, Company, or Stockholder, the Company Common Stock of the Assets may be bound, (C) result in the imposition of a Lien on the Company Common 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.

3.7     Permits .  Except as set forth on the Disclosure Schedule, 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.  All material Permits of Company are listed on the Disclosure Schedule and are valid and in full force and effect.  No loss or expiration of any Permit is pending or, to the Knowledge of Parent, Company or Stockholder, threatened (including as a result of the transactions contemplated hereby) other than expiration in accordance with the terms thereof (excluding any expiration because of the consummation of the transactions contemplated hereby).

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3.8     Compliance With Laws .  Except as set forth on the Disclosure Schedule, Parent, Company and Stockholder have complied  in all material respects with all Laws of any Governmental Authority applicable to Company, the Company Common Stock, its business and the Assets; provided that the representation and warranty made in this Section 3.8 shall not supersede or diminish in any way any other representation or warranty made herein, including without limitation the representations and warranties made in Sections 3.12 , 3.17 , 3.19 , 3.21 , 3.32 , 3.33 , 3.38 and 3.39 .

3.9     Title to and Sufficiency of Assets .  Except as set forth on the Disclosure Schedule, Company has good and marketable title to all of the Assets (excluding all Intellectual Property), 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 or that are used or held by Company for use in the operation of Company’s business. Each item of the Company’s inventory is usable in the Ordinary Course of Business.

3.10  Condition of Fixed Assets and Equipment .  All items of fixed assets and equipment with a value greater than $5,000 are set forth on the Disclosure Schedule.  Except as set forth in the Disclosure Schedule, all items of fixed assets and equipment with a value greater than $5,000 individually used or useful in the operation of Company’s business, 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 are valid and enforceable receivables net of reserves shown thereon.  All accounts receivable set forth on the Estimated Closing Date Balance Sheet (i) are valid and enforceable receivables net of reserves shown thereon, and (ii) are subject to no set offs or counterclaim.

3.12  Intellectual Property .

(a)           (i)            The Disclosure Schedule sets forth all United States and foreign patents and patent applications, trademark and service mark registrations and applications, internet domain name registrations and applications, and copyright registrations and applications owned by Company, specifying as to each item, as applicable:  (A) the nature of the item, including the title; (B) the owner of the item; (C) the jurisdictions in which the item is issued or registered or in which an application for issuance or registration has been filed; and (D) the issuance, registration or application numbers and dates.

(ii)           The Disclosure Schedule sets forth all licenses, sublicenses and other agreements or permissions (“ IP Licenses ”) (other than shrink wrap licenses or other similar licenses for commercial off-the-shelf software with a license fee of $1,000 or less per seat, but no more than $25,000 in the aggregate for each software program, which are not required to be listed, although such licenses shall be “IP Licenses” as that term is used herein) under which Company is a licensee or otherwise is authorized to use or practice any Intellectual Property, and for each such IP License, describes (A) the applicable Intellectual Property licensed, sublicensed or used and (B) the scope of such licenses, sublicenses and other agreements or permissions granted.

(b)           Ownership .  Company owns, free and clear of all Liens (other than Permitted Liens) and has the unrestricted right to use, sell, license, transfer or assign, all Intellectual Property, except for the Intellectual Property that is the subject of the IP Licenses.

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(c)           Licenses .  Company has a valid, and to the Knowledge of Parent, Company or Stockholder enforceable, license to use all Intellectual Property that is the subject of the IP Licenses. The IP Licenses include all of the licenses, sublicenses and other agreements or permissions necessary to operate the Company’s business as such business is presently operated.  Company has substantially performed all obligations imposed on it in the IP Licenses, has made all payments required to date, and is not in material breach or default thereunder.  To the Knowledge of Parent, Company or Stockholder, no other party to the IP Licenses is in material breach or default thereunder.

(d)           Claims .

(i)            No claim or action is pending or, to the Knowledge of Parent, Company or Stockholder, threatened, challenging the validity, enforceability, ownership, or right to use, sell, license or sublicense any Intellectual Property.

(ii)           Neither Parent, Company nor Stockholder has received any notice that Company has infringed upon or otherwise violated the intellectual property rights of third parties or received any claim, charge, complaint, demand or notice alleging any such infringement or violation and, to the Knowledge of Parent, Company or Stockholder, there is no basis for such a claim against Company.

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

(f)            Software .  All Software owned by Company (as opposed to licensed by the Company) is described in the Disclosure Schedule. Such owned 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. Such owned Software is free from any material defect and does not contain any mechanism for viruses, worms, time bombs, or unauthorized backdoor access that could be used to interfere with the operation of such Software. Company does not use any open source, or free software.

(g)           Trade Secrets .  Except as disclosed in the Disclosure Schedule or as required pursuant to the filing of any Patent application, regarding Company’s Trade Secrets:  (i) Company has taken all commercially reasonable actions to protect such Trade Secrets from unauthorized use or disclosure, (ii) to the Knowledge of Parent, Company or Stockholder, there has not been an unauthorized use or disclosure of such Trade Secrets by Company or its employees.

(h)           Employees, Consultants and Other Persons .  Except as set forth on the Disclosure Schedule, as of the date hereof, each present or past employee, officer, consultant or any other Person who developed any part of any Intellectual Property for the Company executed an agreement that conveys 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 the Company. Company has not waived, transferred, rejected or otherwise taken any steps or made any omissions that would prevent the vesting in Company of 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.

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(i)            Employee Breaches .  To the Knowledge of Parent, Company or Stockholder, no employee of Company has used or transferred Intellectual Property or information that is confidential or proprietary information in violation of any Law or any term of any Contract.

(j)            Related Parties; etc .  Except as disclosed on the Disclosure Schedule, Company does not use any Intellectual Property owned by any director, officer, employee or consultant of Company.

(k)           Transfer .  Except as set forth in the Disclosure Schedule, the execution and consummation of this Agreement by Parent, Company or Stockholder will not result in the loss, impairment or restriction of the rights of Company to own or use any of the Intellectual Property, and Company is not, nor as a result of the execution and delivery of this Agreement or the performance of its obligations hereunder will it be, in violation of any IP License.

3.13  Contracts .

(a)           The Disclosure Schedule contains a complete, current and correct list of all of the following types of Contracts to which the Company is a party or by which any of its properties or assets are bound (the “ Material Contracts ”) (provided that for the purposes of this Section 3.12(a)(i) , the term Contracts shall not include (i) Government Contracts and Leases and (ii) any Contracts and Leases related exclusively to Airborne Engines or KALZ):

(i)            any Contract which involves expenditures or receipts by Company (other than Contracts which do not require payments or yield receipts of more than $25,000 in any twelve (12) month period or more than $100,000 in the aggregate);

(ii)           any Contract containing a covenant or covenants which purport to limit the Company’s ability or right to engage in any lawful business activity or to compete with any Person (including all non-competition and non-solicitation agreements);

(iii)          any Contract with any of its officers, directors,  employees or Affiliates, not otherwise listed on the Disclosure Schedule, including all noncompetition, severance, and indemnification Contracts (other than such Contracts that are required to be terminated at or prior to the Closing pursuant hereto);

(iv)          any agreement presently in effect for the license of any patent, copyright, trade secret or other proprietary information agreements involving the payment by or to the Company in excess of $25,000 in any twelve (12) month period or more than $100,000 in the aggregate;

(v)           any power of attorney;

(vi)          any Contract entered into outside the Ordinary Course of Business and presently in effect, involving payment to or obligations of in excess of $25,000 in any twelve (12) month period or more than $100,000 in the aggregate, not otherwise described in this Section 3.12(a) ; and

(vii)         any loan agreement, agreement of indebtedness, note, security agreement, guarantee or other document pursuant to or in connection with the Company’s receipt or

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extension of credit for money borrowed in excess of $25,000 in any twelve (12) month period or more than $100,000 in the aggregate.

(b)           All of Company’s oral Material Contracts that are responsive to the categories listed above are identified on the Disclosure Schedule, other than those oral Material Contracts which may be terminated at any time without any requirement that the Company make any payments thereunder except in connection with products purchased or services rendered prior to the date of termination.

(c)           All of the Material Contracts 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 in any material way 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, to the Knowledge of Parent, Company or Stockholder, on the part of any other party to any such Material Contract nor has Parent or Company received notice of any breach, default or violation.  Parent or Company has not received notice of an intention by any party to any such Material Contract that provides for a continuing obligation by any party thereto on the date hereof to terminate such Material Contract or amend the terms thereof, other than modifications in the Ordinary Course of Business that do not adversely affect Company or modifications requested by Purchaser.  The consummation of the transactions contemplated by this Agreement will not affect the validity, enforceability and continuation of the Material Contracts on the same terms applicable to such Contracts as of the date hereof in any way.  To the Knowledge of Parent, Company or Stockholder, no event has occurred which either entitles, or would, with notice or lapse of time or both, entitle any party to any such Material Contract to declare breach, default or violation under any such Material Contract.

3.14  Litigation .  Except as described on the Disclosure Schedule, there is no litigation, proceeding (arbitral or otherwise), claim, action, suit, judgment, decree, settlement, rule or order or investigation of any nature currently pending, rendered since December 31, 2001, threatened by, or, to Parent’s, Company’s or Stockholder’s Knowledge, threatened against, Parent, Company, its directors, officers or Stockholder (provided that any litigation involving Parent, the directors, officers of Company or Stockholder must be related to Company’s business, the Company Common Stock or the Assets), Company’s business, the Company Common Stock or the Assets.  There are no writs, injunctions, decrees, arbitration decisions, unsatisfied judgments or similar orders outstanding or in effect against Company, the Company Common Stock, Company’s business or the Assets.

3.15  Financial Statements; Controls .

(a)           The Disclosure Schedule sets forth true, correct and complete copies of the consolidated unaudited balance sheet, income statement and statement of cash flows of Company  (including any related notes and schedules) as of and for the fiscal year ended June 30, 2006 (the “ Statement Date ”) (such financial statements, the “ Unaudited Financial Statements ”).  The Unaudited Financial Statements were prepared in accordance with the books and records of Company and its Subsidiaries, and present fairly the financial condition and the results of operations of Company and/or its Subsidiaries as of the Statement Date and for the fiscal year ended the Statement Date.  The Unaudited Financial Statements have been prepared in accordance with GAAP, consistently applied throughout and among the periods indicated (provided that such statements do not contain footnotes required by GAAP and are subject to normal year-end audit adjustments none of which would reasonably be expected to be material).

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(b)           The consolidated and consolidating audited balance sheet, income statement and statement of cash flows of the Company as of and for the fiscal year ended June 30, 2006 to be delivered pursuant Section 6.8 hereof (the “ Audited Financial Statements ” and together with the Unaudited Financial Statements, the “ Financial Statements ”), will be, when delivered, prepared in accordance with the books and records of the Company and its Subsidiaries, and will present fairly the financial condition and results of operations of the Company and/or its Subsidiaries as of the respective dates thereof.  The Audited Financial Statements will be prepared in accordance with GAAP consistently applied throughout and among the periods indicated.

(c)           The Company maintains accurate books and records reflecting its assets and liabilities and maintains proper and adequate internal accounting controls that provide assurance that (i) the Company maintains no off-the-book accounts and that the Company’s assets are used only in accordance with the Company’s management directives, (ii) transactions are executed with management’s authorization; (iii) transactions are recorded as necessary to permit preparation of the financial statements of the Company and to maintain accountability for the Company’s assets; (iv) access to the assets of the Company is permitted only in accordance with management’s authorization; (v) the reporting of assets of the Company is compared with existing assets at regular intervals; and (vi) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection of accounts, notes and other receivables on a current and timely basis.

3.16  Liabilities .   Company has no liabilities, obligations or commitments of any nature (whether absolute, accrued, contingent or otherwise, whether matured or unmatured and whether due or to become due), including Tax liabilities due or to become due, except (a) liabilities that are accrued and reflected on the unaudited balance sheet and statement of income of Company as of and for the period ended on the Statement Date, (b) liabilities that are listed on the Disclosure Schedule to this Agreement, (c) liabilities that have arisen in the Ordinary Course of Business (other than liabilities for breach of any Contract) since the Statement Date (d) obligations to perform after the date hereof any Contracts which are required to be or are disclosed on the Disclosure Schedule and (e) liabilities incurred in the Ordinary Course of Business (other than liability for breach of any Contract) that are reflected in the determination of Actual Net Worth, and in the case of clauses (a)-(d), none of which would reasonably be expected to have a Material Adverse Effect.

3.17  Tax Matters .

(a)           All Tax Returns required to have been filed by the Company have been timely filed.  All such Tax Returns are true, correct and complete in all material respects.  The Company has paid or withheld (or caused to be paid or withheld) all Taxes due and owing or required to be withheld, respectively, whether or not shown on any Tax Return.  No claim has ever been made by a Taxing Authority in a jurisdiction where Company does not file Tax Returns that Company is subject to taxation by that jurisdiction.

(b)           Company has given to Purchaser true, correct and complete copies of (i) all income Tax Returns filed by the Company for tax periods ending on or after December 31, 2003, (ii) the most recently filed Tax Return filed by the Company for all non-income Tax Returns, and (iii) examination reports and statements of deficiencies issued by any Taxing Authority with respect to any of Company’s past four (4) years.

(c)           Company has made all required estimated Tax payments sufficient to avoid any underpayment penalties with respect to Taxes required to be paid by it.

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(d)           None of Parent or Stockholder is a “foreign person” within the meaning of Section 1445 of the Code.

(e)           Except as set forth on the Disclosure Schedule, and except for the Affiliated Group (or other consolidated, combined or unitary group) of which Parent is the parent company, each of the Company and each Subsidiary of Company (i) is not now and has not at any time been a member of any Affiliated Group required to join in the filing of consolidated federal income Tax Returns, and (ii) has not otherwise joined in the filing of Tax Returns on a consolidated, combined or unitary group basis.

(f)            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 ”, and does not have, by contract or otherwise, any liability for Taxes of any Person as a transferee or successor.

(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 payable by Company for any taxable period and no written, or to the Knowledge of Parent, Company or Stockholder oral, request from a Taxing Authority 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 on behalf of Company which would have binding effect on Company for any taxable year ending after the Closing Date.

(i)            Except as set forth on the Disclosure Schedule, (i) No audit or other proceeding by any Taxing Authority is pending or threatened in writing with respect to any Taxes due from Company, (ii) neither Parent, Company nor Stockholder has received any written notification that such an audit or proceeding may be commenced, with respect to any Taxes due from Company, (iii) to the Knowledge of Parent, Company or Stockholder, there is no proceeding referred to in (i) or (ii) above based upon personal contact with any agent of a Taxing Authority with any employee or Representative of the Company, and (iv) all deficiencies for Taxes asserted or assessed against Company have been fully and timely paid, or otherwise settled with the relevant Taxing Authority, or are properly reflected in the Financial Statements.

(j)            Prior to Closing, Company has not made a change in method of accounting and has not agreed to and is not required to make a change in method of accounting in its Tax Returns that would require Company to make any adjustment to its computation of income pursuant to Section 481(a) of the Code (or any predecessor provision), there is no application pending with any Taxing Authority requesting permission for any such change in any accounting method of the Company and no Taxing  Authority has proposed in writing any such adjustment or change in accounting method and, to the Knowledge of Parent, Company or Stockholder, there has been no oral proposal for any such adjustment or change in accounting method based upon personal contact of any agent of a Taxing Authority with any employee or Representative of the Company.

(k)           Company has withheld from its employees, independent contractors, creditors, stockholders and third parties and timely paid to the appropriate Taxing Authority proper and accurate amounts in all respects required to have been so withheld or paid over, respectively, in

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compliance with all Tax withholding and remitting provisions of applicable Laws and has complied in material all respects with all Tax information reporting provisions of all applicable Laws.  Except as set forth on the Disclosure Schedule, Company is not, nor has Parent, Company or Stockholder received any written, or to the Knowledge of Parent, Company or Stockholder oral, notice that has not been cured or settled alleging that Company is, in violation (or with notice will be in violation) of any applicable Law relating to the payment or withholding of Taxes.

(l)            There is no contract, agreement, plan or arrangement covering any Person that, individually or collectively, obligates Company to make any payment of any amount that would not be deductible by Company by reason of Section 280G of the Code.

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

(n)