STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as of the 6th 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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