EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

among

DUNDEE HOLDING, INC.,

DUNDEE MERGERCO, INC.

and

DONCASTERS GROUP LTD.,

as Guarantor

and

FASTECH, INC.

and

Charles E. Corpening II,

as Stockholder Representative

dated as of February 23, 2007

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TABLE OF CONTENTS

 

         Page

ARTICLE I

      THE MERGER    2

1.1.

  The Merger    2

1.2.

  Closing    3

1.3.

  Effective Time    3

1.4.

  Effects of the Merger    3

1.5.

  Certificate of Incorporation    3

1.6.

  Bylaws    3

1.7.

  Officers and Directors of Surviving Corporation    3

1.8.

  Effect on Capital Stock    3

1.9.

  Dissenting Shares    5

1.10.

  Further Assurances    6

ARTICLE II

      EXCHANGE AND PAYMENT    6

2.1.

  Exchange Agent; Payment Funds    6

2.2.

  Exchange Procedures    6

2.3.

  No Further Ownership Rights in Company Stock    7

2.4.

  Termination of Exchange Fund    8

2.5.

  No Liability    8

2.6.

  Lost Certificates    8

2.7.

  Stock Transfer Books    8

2.8.

  Debt and Working Capital Estimate    9

2.9.

  Closing Statement; Adjustment to Merger Consideration    9

2.10.

  Withholding Taxes    13

ARTICLE III

      REPRESENTATIONS AND WARRANTIES    13

3.1.

  Representations and Warranties of the Company    13

3.2.

  Representations and Warranties of Parent and Merger Sub    35

ARTICLE IV

      COVENANTS RELATING TO CONDUCT OF BUSINESS    37

4.1.

  Covenants of the Company    37

4.2.

  Control of Other Party’s Business    40

ARTICLE V

      ADDITIONAL AGREEMENTS    40

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5.1.

  Access; Information and Records; Confidentiality    40

5.2.

  Regulatory Approvals    41

5.3.

  Employee Benefits Matters    43

5.4.

  Fees and Expenses    44

5.5.

  Directors’ and Officers’ Indemnification and Insurance    44

5.6.

  Public Announcements    46

5.7.

  Notices of Certain Events    46

5.8.

  Tax Matters    46

5.9.

  Senior Subordinated Notes    48

5.10.

  Consents    48

5.11.

  Cooperation; Further Assurances    49

5.12.

  Textron; Acraline    49

5.13.

  Real Property    49

ARTICLE VI

      CONDITIONS PRECEDENT    50

6.1.

  Conditions to Each Party’s Obligation to Effect the Merger    50

6.2.

  Additional Conditions to Obligations of Parent and Merger Sub    50

6.3.

  Additional Conditions to Obligations of the Company    52

ARTICLE VII

      TERMINATION AND AMENDMENT    52

7.1.

  Termination    52

7.2.

  Effect of Termination    53

7.3.

  Extension; Waiver    54

ARTICLE VIII

      INDEMNIFICATION; ESCROW    54

8.1.

  Survival of Representations, Warranties and Agreements    54

8.2.

  Claims    54

8.3.

  Escrow Arrangements    58

8.4.

  Other Limitations    60

8.5.

  Environmental Matters    61

8.6.

  Stockholder Representative; Approval of Holders of Company Common Stock    64

8.7.

  Purchase Price Adjustment    65

ARTICLE IX

      GENERAL PROVISIONS    65

9.1.

  Notices    65

 

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9.2.

  Interpretation    66

9.3.

  Counterparts    67

9.4.

  Entire Agreement    67

9.5.

  No Third-Party Beneficiaries    67

9.6.

  Assignment    67

9.7.

  Amendment and Modification    67

9.8.

  Enforcement; Jurisdiction    67

9.9.

  Waiver of Jury Trial    68

9.10.

  Company Disclosure Schedule    68

9.11.

  No Recourse to Affiliates    68

9.12.

  Governing Law    68

9.13.

  Severability    68

9.14.

  Mutual Drafting    69

9.15.

  Definitions    69

9.16.

  Guarantee by the Guarantor    78

EXHIBITS

 

Exhibit A

  Forms of Letter of Transmittal (Company Common Stock and Company Preferred
Stock)

Exhibit B

  Opinion of the Company’s Counsel

Exhibit C

  Form of Escrow Agreement

Exhibit D

  Form of Estoppel Certificate

Exhibit E

  Environmental RECs

Exhibit F

  Environmental Indemnification Agreements

SCHEDULES

 

Company Disclosure Schedule

Schedule A

  Working Capital

Schedule B

  Survival Periods

 

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DEFINED TERMS

 

     Page

Affiliate

   69

Aggregate Exercise Price

   69

Agreement

   1

AICPA

   72

Arbiter

   11

Asserted Liability

   57

Balance Sheet

   17

Basket

   55

Benefit Plans

   69

Board of Directors

   69

Books and Records

   69

Business Day

   69

Business IT Systems

   20

Buyer Indemnified Persons

   54

Certificate

   4

Certificate of Incorporation

   3

Certificate of Merger

   3

CFIUS

   16

Claim Notice

   56

Claims Notice

   63

Closing

   3

Closing Common Merger Consideration

   69

Closing Date

   3

Closing Date Debt

   10

Closing Date Working Capital

   10

Closing Merger Consideration

   69

Closing Statement

   9

Code

   70

Common Stock Merger Consideration

   70

Company

   1

Company Affiliate Transactions

   33

Company Board Approval

   17

Company Class A Common Stock

   1

Company Class B Common Stock

   2

Company Common Stock

   2

Company Disclosure Schedule

   70

Company Employees

   70

Company Expenses

   70

Company Intellectual Property

   20

Company Material Contracts

   22

 

iv

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Company Option Plans

   70

Company Options

   70

Company Organizational Documents

   14

Company Preferred Stock

   1

Company Registered Intellectual Property

   20

Company Series B Preferred Stock

   1

Company Series C Preferred Stock

   1

Company Stock

   2

Company Stockholders Agreement

   70

Contract

   70

Covered Persons

   45

Credit Agreement

   71

D&O Indemnified Persons

   44

Damages

   54

Debt

   70

DGCL

   1

Dissenting Shares

   5

dollars\ or \$

   71

Effective Time

   3

Environmental Approvals

   30

Environmental Laws

   71

Environmental Sampling

   61

ERISA

   72

ERISA Affiliate

   72

Escrow Agent

   58

Escrow Agreement

   58

Escrow Fund

   58

Escrow Period

   59

Estimated Closing Statement

   9

Estimated Debt

   9

Estimated Working Capital

   9

Exchange Act

   17

Exchange Agent

   6

Exchange Fund

   6

Exon-Florio

   16

Expenses

   44

Extended Representations

   72

FastenTech

   72

Final Adjustment Amount

   12

Final Closing Statement

   72

Final Debt

   72

Final Working Capital

   72

First Release Date

   59

Foreign Antitrust Laws

   16

Fully Diluted Shares

   72

 

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GAAP

   72

GAAP Consistently Applied

   72

German Subsidiaries

   28

Government Bids

   33

Government Contracts

   33

Governmental Authority

   16

Guarantor

   1

High Reference Amount

   73

Holdback Consideration

   73

Holdco Financing

   73

HSR Act

   16

Indemnified Persons

   55

Indemnifying Person

   56

Indenture

   74

Intellectual Property

   74

IP Contracts

   74

Knowledge

   75

Knowledge of Parent

   75

Knowledge of the Company

   75

Leased Real Property

   18

Letter of Transmittal

   7

Liabilities

   18

Licenses and Permits

   74

Liens

   15

Low Reference Amount

   74

Material Adverse Effect

   74

Material Business

   42

Materials of Environmental Concern

   75

Maximum Amount

   56

Merger

   1

Merger Consideration

   75

Merger Sub

   1

Mini-Basket

   55

Money Rates

   13

Negative EWC Adjustment

   75

Non-U.S. Benefit Plans

   28

Notice of Disagreement

   10

Owned Real Property

   19

Parent

   1

PBGC

   26

Per Diem Taxes

   47

Per Share Adjustment Consideration

   75

Per Share Closing Common Merger Consideration

   75

Per Share Holdback Consideration

   75

Per Share Merger Consideration

   75

 

vi

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Per Share Stockholder Expense Amount

   75

Permitted Liens

   75

Person

   76

Positive EWC Adjustment

   76

Post-Closing Tax Period

   76

Pre-Closing Tax Period

   76

Preferred Per Share Merger Consideration

   76

Preferred Stock Merger Consideration

   76

Proceeding

   76

Real Property

   18

REC

   61

Recognized Environmental Condition

   61

Redemption

   48

Release

   76

Remaining Holdback Consideration

   59

Remedial Action

   77

Remediation Standard

   62

Required Company Vote

   18

SEC

   17

SEC Reports

   17

Second Release Date

   59

Seller Indemnified Persons

   55

Seller Indemnifying Person

   55

Senior Subordinated Notes

   73

Significant Customer

   33

Significant Supplier

   33

Special Holdback Amount

   77

Stockholder Representative

   1

Stockholder Representative Expense Amount

   77

Straddle Period

   77

Subcontracts

   33

Subsidiary

   77

Survival Periods

   77

Surviving Corporation

   3

Tax

   77

Tax Return

   77

Taxes

   77

Tender

   48

Termination Date

   53

the other party

   78

Third Party Licensed Intellectual Property

   20

Unsatisfied Claim

   59

Violation

   15

Working Capital

   78

 

vii

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Exhibit 10.1

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated as of February 23, 2007 (this
“Agreement”), among Dundee Holding, Inc., a Delaware corporation (“Parent”),
Dundee MergerCo, Inc., a Delaware corporation and a direct wholly-owned
subsidiary of Parent (“Merger Sub”), Doncasters Group Ltd., a company
incorporated in England and Wales, as guarantor solely for the purpose and to
the extent set forth in Section 9.16 (the “Guarantor”), and FasTech, Inc., a
Delaware corporation (the “Company”) and, Charles E. Corpening II, solely in its
capacity as Stockholder Representative and for purposes of Sections 2.8 and 2.9,
Article VIII and Article IX hereof (the “Stockholder Representative”) sets forth
the binding agreement of the parties.

W I T N E S S E T H:

WHEREAS, the Board of Directors of the Company has determined that it is fair to
and advisable and in the best interests of the Company and its stockholders, and
consistent with and in furtherance of its business strategies and goals, for
Parent to acquire all of the outstanding shares of the Company through the
merger of Merger Sub with and into the Company (the “Merger”) in accordance with
the applicable provisions of the Delaware General Corporation Law (the “DGCL”)
and upon the terms and subject to the conditions set forth herein;

WHEREAS, the Board of Directors of Parent and Merger Sub have each approved and
declared advisable this Agreement and the transactions contemplated hereby;

WHEREAS, in furtherance of such combination, the Boards of Directors of Parent,
Merger Sub and the Company have each adopted this Agreement providing for the
Merger and the Board of Directors of the Company has resolved to recommend that
the holders of the Company Class A Common Stock vote to adopt this Agreement
providing for the Merger upon the terms and subject to the conditions set forth
herein;

WHEREAS, (i) holders of a majority of the outstanding Company Class A Common
Stock (as defined below), have executed and delivered to the Company on the date
hereof a valid written consent approving the Merger, (ii) the holders of a
majority of voting capital stock of Parent have executed and delivered to Parent
on the date hereof a valid written consent approving the Merger, (iii) holders
of a majority of 12% Series B Cumulative Preferred Stock, par value $0.01 per
share, of the Company (the “Company Series B Preferred Stock”) and a majority of
12% Series C Cumulative Preferred Stock, par value $0.01 per share, of the
Company (the “Company Series C Preferred Stock” and, collectively with the
Company Series B Preferred Stock, the “Company Preferred Stock”) have executed
and delivered to the Company on the date hereof a valid written consent
approving the Merger and (iv) Parent, as the holder of all of the outstanding
shares of common stock of Merger Sub, has executed and delivered to Merger Sub
on the date hereof a valid written consent approving the Merger;

WHEREAS, pursuant to the Merger, each outstanding share of (i) Class A Common
Stock, par value $0.01 per share, of the Company (the “Company Class A Common
Stock”) and (ii) Class B Common Stock, par value $0.01 per share, of the Company
(the

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“Company Class B Common Stock” and, collectively with the Company Class A Common
Stock, the “Company Common Stock” and, the Company Common Stock collectively
with the Company Preferred Stock, the “Company Stock”), issued and outstanding
immediately prior to the Effective Time (as defined in Section 1.3), other than
shares owned or held directly or indirectly by Parent, Merger Sub or their
respective Subsidiaries or the Company or its Subsidiaries, will be converted
into the right to receive (i) the Per Share Closing Common Merger Consideration,
(ii) the Per Share Holdback Consideration and (iii) the Per Share Stockholder
Representative Expense Amount, in each case, without interest (except interest
on any escrowed funds) and subject to adjustment as contemplated hereby;

WHEREAS, pursuant to the Merger, each outstanding share of (i) Company Series B
Preferred Stock, and (ii) Company Series C Preferred Stock, issued and
outstanding immediately prior to the Effective Time, other than shares owned or
held directly or indirectly by Parent, Merger Sub or their respective
Subsidiaries or the Company or its Subsidiaries, will be converted into the
right to receive an amount in cash, without interest (except interest on any
escrowed funds), equal to the Preferred Per Share Merger Consideration;

WHEREAS, the Holdback Consideration shall be placed in escrow for purposes of
(i) satisfying damages, losses, expenses and other similar charges which result
from breaches of the representations, warranties, covenants and agreements of
the Company and (ii) the adjustment, if any, to the Common Stock Merger
Consideration; and

WHEREAS, the Stockholder Representative Expense Amount shall be deposited with
the Stockholder Representative for the purpose of funding the Stockholder
Representative’s expenses in connection with its performance of its duties as
Stockholder Representative; and

WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby and also to prescribe various conditions to the
transactions contemplated hereby.

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I

THE MERGER

1.1. The Merger. Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the DGCL, Merger Sub shall be merged with and
into the Company at the Effective Time, and the separate corporate existence of
Merger Sub shall thereupon cease in accordance with the provisions of the DGCL.
The Company shall be the surviving corporation in the Merger and shall continue
to exist as said surviving corporation under its present name pursuant to the
provisions of the DGCL. The separate corporate existence of the Company with all
its rights, privileges, powers and franchises shall continue unaffected by the
Merger. The Merger shall have the effects specified in the DGCL. From and

 

2

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after the Effective Time, the Company is sometimes referred to herein as the
“Surviving Corporation.”

1.2. Closing. The closing of the Merger (the “Closing”) will take place at 10:00
a.m. (New York City time) as expeditiously as possible but no later than the
fifth Business Day after the satisfaction or waiver of the conditions (excluding
conditions that, by their terms, cannot be satisfied until the Closing Date) set
forth in Article VI (the “Closing Date”), unless another time or date is agreed
to in writing by the parties hereto. The Closing shall be held at the offices of
Morrison & Foerster LLP, 1290 Avenue of the Americas, New York, New York 10104,
unless another place is agreed to in writing by the parties hereto.

1.3. Effective Time. As part of the Closing, the parties hereto shall (a) file a
certificate of merger (the “Certificate of Merger”) in such form as is required
by and executed in accordance with the relevant provisions of the DGCL and
(b) make all other filings or recordings required under the DGCL. The Merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Secretary of State of the State of Delaware or at such subsequent time
as Parent and the Company shall agree and be specified in the Certificate of
Merger (the date and time the Merger becomes effective being the “Effective
Time”).

1.4. Effects of the Merger. At and after the Effective Time, the Merger will
have the effects set forth in the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all property, rights,
privileges, powers and franchises of the Company and Merger Sub shall be vested
in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.

1.5. Certificate of Incorporation. The certificate of incorporation of Merger
Sub as in effect at the Effective Time shall be the certificate of incorporation
of the Surviving Corporation (the “Certificate of Incorporation”) until
thereafter changed or amended as provided therein and under applicable law.

1.6. Bylaws. The bylaws of Merger Sub as in effect at the Effective Time shall
be the bylaws of the Surviving Corporation until thereafter changed or amended
as provided therein and under applicable law.

1.7. Officers and Directors of Surviving Corporation. The officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, until the earlier of their death, resignation or removal
or otherwise ceasing to be an officer or until their respective successors are
duly elected or appointed and qualified. The parties hereto shall take all
requisite action so that the directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their death, resignation or removal or otherwise ceasing to be a
director or until their respective successors are duly elected and qualified.

1.8. Effect on Capital Stock. At the Effective Time, by virtue of the Merger and
without any action on the part of Parent, Merger Sub, the Company or the holders
of any of the following securities:

 

3

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(a) Conversion of Company Common Stock. Each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares canceled pursuant to Section 1.8(d)) shall be converted into the right to
receive, upon surrender of a Certificate formerly representing such share in the
manner provided in Section 2.2, the Per Share Closing Common Merger
Consideration, the Per Share Holdback Consideration as contemplated by
Section 8.3 and the Per Share Stockholder Representative Expense Amount, in each
case, without interest (except interest on any escrowed funds) and subject to
adjustment as contemplated hereby, including Sections 2.1(c), 2.9(d) and 8.3.

(b) Conversion of Company Preferred Stock. Each share of Company Preferred Stock
issued and outstanding immediately prior to the Effective Time (other than
shares cancelled pursuant to Section 1.8(d)) shall be converted into the right
to receive, upon surrender of a Certificate formerly representing such share in
the manner provided in Section 2.2, the Preferred Per Share Merger
Consideration, without interest.

(c) Cancellation of Company Stock. As of the Effective Time, all shares of
Company Stock issued and outstanding immediately prior to the Effective Time
(other than shares canceled pursuant to Section 1.8(d)) shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and
each holder of a certificate which immediately prior to the Effective Time
represented any such shares of Company Stock (a “Certificate”) shall, to the
extent such Certificate represents such shares, upon surrender of such
Certificate in accordance with Article II, cease to have any rights with respect
thereto, except the right to receive the applicable Per Share Merger
Consideration, without interest (except interest on any escrowed funds).

(d) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of Company
Stock held in the treasury of the Company and each share of Company Stock owned
or held, directly or indirectly, by the Company or its Subsidiaries or Parent,
Merger Sub or their respective Subsidiaries, in each case, immediately prior to
the Effective Time, shall be canceled and retired without any conversion thereof
and no payment of cash or any other distribution or consideration shall be made
with respect thereto.

(e) Capital Stock of Merger Sub. Each share of common stock, par value $0.001
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger, be converted into and exchanged
for one fully paid and non-assessable share of common stock, par value $0.001
per share, of the Surviving Corporation.

(f) Treatment of Outstanding Options. (i) As of the Effective Time, each
outstanding and unexercised Company Option (whether vested or unvested) shall be
canceled, and, in consideration for the cancellation of such Company Option, the
holder of such Company Option shall be entitled to receive (A) at the Effective
Time or as soon as practicable thereafter (but in no event later than three
Business Days after the Effective Time) an amount in cash from the Company or
the Surviving Corporation, as applicable, equal to the product of (x) the number
of shares of Company Class A Common Stock subject to such Company Option held by
the holder of such Company Option and (y) the excess of the Per Share Closing
Common Merger Consideration over the exercise price per share required to be
paid to acquire the corresponding share of Company Class A Common Stock (it
being understood and agreed that such exercise

 

4

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price shall not actually be paid by a holder of a Company Option), less any
required employment and income withholding taxes, (B) distributions in
accordance with Section 8.3 in an amount equal to the product of (xx) the number
of shares of Company Class A Common Stock subject to such Company Option held by
the holder of such Company Option and (yy) the portion of the Per Share Holdback
Consideration so distributed, less any required withholding taxes and
(C) distributions in accordance with Section 2.1(c) in an amount equal to the
product of (xxx) the number of shares of Company Class A Common Stock subject to
such Company Option held by the holder of the Company Option and (yyy) the
portion of the distributed amount of the Per Share Stockholder Representative
Expense Amount attributable to such shares. Payment of each of the Per-Share
Holdback Consideration and the Per-Share Stockholder Representative Expense
Amount to the holders of Company Options shall be made no later than five
(5) years after the Effective Time in accordance with Proposed Regulation
Section 1.409A-3(g)(5)(iv).

(ii) Prior to the Effective Time, the Company’s Board of Directors shall adopt
any resolutions and take any actions which are necessary to effectuate this
Section 1.8(f), the Company shall (A) take all appropriate or necessary steps to
effect the termination of the Company Option Plans as of the Effective Time, and
(B) take all actions necessary so that following the Effective Time, there shall
be no outstanding Company Options as of the Effective Time and each such Company
Option have then been converted to the right to receive the payment described in
Section 1.8(f)(i) above. In addition, prior to the Effective Time, the Company
shall provide notice (subject to prior reasonable review by Parent) to each
holder of Company Options describing the treatment of such Company Options in
accordance with this Section 1.8(f).

1.9. Dissenting Shares. Notwithstanding anything to the contrary contained
herein, each share of Company Stock issued and outstanding immediately prior to
the Effective Time held by holders who shall have properly exercised their
appraisal rights with respect thereto under Section 262 of the DGCL (“Dissenting
Shares”) shall not be converted into the right to receive the Per Share Merger
Consideration, but shall be entitled only to such rights as may be granted to
them in accordance with the provisions of Section 262 of the DGCL, except that
each Dissenting Share held by a holder who shall thereafter withdraw his or her
demand for appraisal or shall fail to perfect or otherwise waive or lose his or
her right to such payment as provided in such Section 262 shall be deemed to be
converted, as of the Effective Time, into the right to receive the applicable
Per Share Merger Consideration, without interest (except interest on any
escrowed funds), in the form such holder otherwise would have been entitled to
receive as a result of the Merger. The Company will enforce any contractual
waivers that holders of Company Common Stock have granted regarding appraisal
rights that would apply to the Merger. The Company shall give Parent (i) prompt
notice of any demands for appraisal of any shares of Company Stock, the
withdrawals of such demands, any other instrument served on the Company under
the provisions of Section 262 of the DGCL and any other matters relating to such
demands, and (ii) the right to direct all negotiations and proceedings with
respect to demands for appraisal under the DGCL; provided that the Company shall
be entitled to participate in any such negotiations and proceedings. Prior to
the Effective Time, the Company shall not settle, offer to settle or make any
payment with respect to any demands for appraisal without the prior written
consent of Parent (which consent shall not be unreasonably conditioned, delayed
or withheld).

 

5

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1.10. Further Assurances. At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company or Merger Sub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of the Company or Merger Sub, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.

ARTICLE II

EXCHANGE AND PAYMENT

2.1. Exchange Agent; Payment Funds.

(a) Prior to the Effective Time, Parent shall appoint a bank or trust company,
as may be approved by the Company (which approval shall not be unreasonably
delayed, conditioned or withheld) as exchange and paying agent (the “Exchange
Agent”), for the exchange and payment of the Merger Consideration.

(b) At or prior to the Effective Time, Parent shall deposit with the Exchange
Agent in trust for the benefit of holders of shares of Company Stock and Company
Options, an amount in cash sufficient to make all payments pursuant to
Section 2.2 (other than the Holdback Consideration, which shall be deposited by
Parent with the Escrow Agent at or prior to the Effective Time, and the
Stockholder Representative Expense Amount, which shall be deposited by Parent
with the Stockholder Representative at or prior to the Effective Time). Any cash
deposited with the Exchange Agent pursuant to this Section 2.1(b) shall
hereinafter be referred to as the “Exchange Fund.”

(c) At or prior to the Effective Time, Parent shall deposit with the Stockholder
Representative for the benefit of the Stockholder Representative, the holders of
shares of Company Common Stock and Company Options, as their interests may
appear, an amount equal to the Stockholder Representative Expense Amount. The
Stockholder Representative Expense Amount shall be used by the Stockholder
Representative to fund the Stockholder Representative’s expenses in the
performance of its duties as the Stockholder Representative. To the extent any
portion of the Stockholder Representative Expense Amount is not so utilized on
or prior to the three year anniversary of the Closing Date or is not expected to
be so utilized, within ten (10) Business Days after the forty-second month
anniversary of the Closing Date, the Stockholder Representative shall deliver
any remaining portion of the Stockholder Representative Expense Amount to the
holders of shares Company Common Stock and Company Options in proportion to
their respective holdings of shares of Company Common Stock and Company Options,
as the case may be, at the Effective Time. Notwithstanding the foregoing, the
Stockholder Representative may in its sole discretion, deliver at any time any
portion of the Stockholder Representative Expense Amount to the holders of
shares Company Common Stock and Company Options in proportion to their
respective holdings of shares of Company Common Stock and Company Options, as
the case may be, at the Effective Time.

2.2. Exchange Procedures.

 

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(a) Promptly following the Effective Time, Parent shall, or shall cause the
Exchange Agent to, deliver to each record holder of a Certificate (a) a letter
of transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent, and which letter shall be substantially in
the form attached as Exhibit A hereto (the “Letter of Transmittal”) and have
such other provisions as Parent and the Company may reasonably agree, and
(b) instructions for effecting the surrender of such Certificates in exchange
for the Per Share Closing Common Merger Consideration, Preferred Per Share
Merger Consideration and the right to the Per Share Holdback Consideration and
the Per Share Stockholder Representative Expense Amount, as applicable. Upon
surrender of a Certificate to the Exchange Agent together with such Letter of
Transmittal, duly executed and completed in accordance with the instructions
thereto, the holder of such Certificate shall be entitled to receive promptly in
exchange therefor the Per Share Closing Common Merger Consideration or the
Preferred Per Share Merger Consideration, as applicable (less any required
withholding of Taxes in accordance with Section 2.2(b)) for each share of
Company Common Stock or Company Preferred Stock, as applicable, formerly
represented by such Certificate, and such Certificate shall then be canceled.
Any Person entitled to a portion of the Closing Merger Consideration who has
provided wire instructions to the Exchange Agent no later than one (1) Business
Day prior to the Effective Time shall be entitled to payments of the Closing
Merger Consideration by wire transfer on the Closing Date in accordance with the
instructions specified in such Person’s Letter of Transmittal. No interest will
be paid or will accrue for the benefit of holders of the Certificates on the
Closing Merger Consideration payable upon the surrender of the Certificates. In
the event of a transfer of ownership of Company Common Stock or Company
Preferred Stock which is not registered in the transfer records of the Company,
payment of the Per Share Merger Consideration may be made with respect to such
Company Common Stock or Company Preferred Stock to such a transferee if the
Certificate formerly representing such shares of Company Common Stock or Company
Preferred Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid or are not applicable.

(b) Parent, the Surviving Corporation and the Exchange Agent shall be entitled
to deduct and withhold from any Merger Consideration payable under this
Agreement such amounts as may be required to be deducted or withheld therefrom
under (i) the Code or (ii) any applicable state, local or foreign Tax laws and
shall thereafter pay all such amounts so deducted or withheld to the proper
taxing authorities. To the extent that amounts are so deducted and withheld,
such amounts shall be treated for all purposes under this Agreement as having
been paid to the Person in respect of which such deduction and withholding was
made.

2.3. No Further Ownership Rights in Company Stock. The Closing Merger
Consideration paid upon conversion of shares of Company Stock in accordance with
the terms of Article I and this Article II and the right to the Holdback
Consideration as contemplated by Section 8.3 and the Stockholder Representative
Expense Amount as contemplated by Section 2.1(c) shall be deemed to have been
paid and given in full satisfaction of all rights pertaining to the shares of
Company Stock. If any Certificates shall not have been surrendered prior to one
hundred eighty (180) days after the Effective Time (or immediately prior to such
earlier date on which any Per Share Merger Consideration in respect to such
Certificate would otherwise escheat to or become the property or any
Governmental Authority), any such cash shall, to the

 

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extent permitted by applicable law, be delivered to and become property of the
Surviving Corporation. If, no later than eighteen (18) months after the
Effective Time, subject to the terms and conditions of this Agreement,
Certificates formerly representing shares of Company Stock are presented to the
Surviving Corporation, they shall be canceled and exchanged for the applicable
Per Share Merger Consideration in accordance with this Article II. If any
Certificates shall not have been surrendered immediately prior to the date on
which any Merger Consideration would otherwise become subject to any abandoned
property, escheat or similar law, the Merger Consideration payable in respect of
such Certificates shall, to the extent permitted by applicable law, on the
Business Day immediately prior to such date become the property of Surviving
Corporation, free and clear of any claim or interest of any Person previously
entitled thereto.

2.4. Termination of Exchange Fund. Any portion of the Exchange Fund constituting
the Merger Consideration that remains undistributed to the holders of
Certificates after one hundred eighty (180) days after the Effective Time
(including any interest thereon) shall be delivered to the Surviving Corporation
or otherwise on the instruction of the Surviving Corporation, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation and Parent for the applicable
Per Share Merger Consideration with respect to the shares of Company Stock
formerly represented thereby to which such holders are entitled pursuant to
Sections 1.8 and 2.2 (other than any distribution of the remainder of the
Stockholder Representative Expense Amount for which such holder shall look only
to the Stockholder Representative).

2.5. No Liability. None of Parent, Merger Sub, the Company, the Surviving
Corporation or the Exchange Agent shall be liable to any Person in respect of
any Merger Consideration from the Exchange Fund properly paid from the Exchange
Fund or delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.

2.6. Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed in form and substance
reasonably acceptable to Parent and Merger Sub (if such affidavit is accepted
before the Effective Time) or the Surviving Corporation (if such affidavit is
accepted after the Effective Time), and, if required by the Surviving
Corporation, the posting by such Person of a bond in such form and reasonable
amount as the Surviving Corporation may reasonably require as indemnity against
any claim that may be made against the Surviving Corporation with respect to the
alleged loss, theft or destruction of such Certificate, the Exchange Agent will
deliver in exchange for such lost, stolen or destroyed Certificate the
applicable Per Share Merger Consideration with respect to the shares of Company
Stock formerly represented thereby in the manner set forth in Sections 1.8 and
2.2.

2.7. Stock Transfer Books. Upon and after the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers of shares of Company Stock thereafter on the records of the
Company. From and after the Effective Time, the holders of Certificates shall
cease to have any rights with respect to such shares of Company Stock formerly
represented thereby, except as otherwise provided herein or by law. On or after
the Effective Time, any Certificates presented to the Exchange Agent or Parent
for any reason shall be canceled and exchanged for the applicable Per Share
Merger

 

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Consideration with respect to the shares of Company Stock formerly represented
thereby in accordance with the provisions of this Agreement.

2.8. Debt and Working Capital Estimate. No later than six (6) Business Days
prior to the anticipated Closing Date, the Company shall deliver to Parent a
good faith estimate of (x) Debt as of the close of business on the Closing Date
(“Estimated Debt”) and (y) Working Capital as of the close of business on the
Closing Date (“Estimated Working Capital”), together with (i) a statement of the
calculation of Estimated Debt and Estimated Working Capital and (ii) a
certificate signed by the Company to the effect that Estimated Debt and
Estimated Working Capital were determined in good faith in accordance with the
provisions of this Agreement (the “Estimated Closing Statement”). The parties
agree that Estimated Debt shall be adjusted as necessary on or prior to the
Closing Date to reflect the actual payoff amounts with respect to those
components of Estimated Debt for which payoff information has been received by
the Company from the applicable creditors as of the Closing Date. Parent shall
have five (5) Business Days to review the Estimated Closing Statement and the
calculations set forth therein and during such time the Company shall make its
senior financial officers reasonably available to answer any questions of Parent
regarding the preparation of the Estimated Closing Statement. Parent shall have
the right to reasonably object to the Estimated Closing Statement within such
five (5) Business Day period, by delivering to the Company (i) a statement
describing its objections and setting forth Parent’s estimate of the Estimated
Working Capital and the Estimated Debt and (ii) a certificate signed by the
Parent to the effect that the Parent’s calculations of Estimated Working Capital
and the Estimated Debt were determined in good faith, in light of the
information available to it, in accordance with the provisions of this
Agreement. Parent and the Stockholder Representative will use good faith efforts
to resolve any dispute regarding the determination of the Estimated Working
Capital and/or the Estimated Debt on or prior to the Closing Date; provided,
that in the event that the parties are not able to resolve the computation of
the Estimated Working Capital and/or the Estimated Debt on or prior to such time
and the aggregate amount of Parent’s objections to the Estimated Closing
Statement is Two Million Dollars ($2,000,000) or less, then the Estimated
Working Capital and/or the Estimated Debt will be deemed to be equal to the
average of Parent’s and the Stockholder Representative’s determinations thereof
as provided hereunder, as applicable; provided, further, that if the aggregate
amount of Parent’s objections to the Estimated Closing Statement exceeds Two
Million Dollars ($2,000,000), then the Estimated Working Capital and/or the
Estimated Debt will be deemed to be equal to the average of Parent’s and the
Stockholder Representative’s determinations thereof as provided hereunder, as
applicable, and notwithstanding anything to the contrary in Section 2.9(c),
when, in connection with the adjustment provisions set forth in Section 2.9, the
Estimated Closing Statement and Parent’s objections are submitted to the Arbiter
for review and resolution, fees, costs and expenses of the Arbiter shall be
borne completely by the party whose estimated amounts had the greater deviation
(whether positive or negative) from the final resolution of such amounts by the
Arbiter.

2.9. Closing Statement; Adjustment to Merger Consideration.

(a) Within ninety (90) days after the Closing Date, the Surviving Corporation
shall cause to be prepared and shall deliver to the Stockholder Representative a
statement (the “Closing Statement”), setting forth in reasonable detail
(i) Working Capital as of the close of

 

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business on the Closing Date (“Closing Date Working Capital”) and (ii) Debt as
of the close of business on the Closing Date (“Closing Date Debt”), in each
case, of the Surviving Corporation and its Subsidiaries, which shall have been
prepared in accordance with GAAP Consistently Applied. The Closing Statement
shall be accompanied by an accountant’s report issued by PriceWaterhouseCoopers
LLP or another internationally recognized third party accounting firm selected
by Parent, in its sole discretion, to the effect that the Closing Statement has
been reviewed by it and that the Closing Statement has been prepared in
accordance with GAAP Consistently Applied.

(b) Each of the Surviving Corporation, the Stockholder Representative and Parent
agrees that it will, and it will use reasonable efforts to cause its respective
agents and representatives to, cooperate and assist in the preparation of the
Closing Statement and the calculation of the Closing Date Working Capital and
the Closing Date Debt and in the conduct of the reviews and dispute resolution
process referred to in this Section 2.9.

(c) During the twenty (20)-day period following the Stockholder Representative’s
receipt of the Closing Statement, the Stockholder Representative and its
independent accountants shall, at the Stockholder Representative’s expense, be
permitted to review, and the Surviving Corporation shall make available to the
Stockholder Representative, the supporting schedules, analyses, working papers
and other documentation of the Surviving Corporation and its independent
accountant (with respect to working papers, subject to the execution and
delivery by the Stockholder Representative and its independent accountants and
other agents of customary confidentiality undertakings, waivers, releases and
indemnification in favor of such independent accountant) relating to the Closing
Statement and to ask questions, receive answers and request such other data and
information from its senior financial officers and its independent accountants
as shall be reasonably related to the adjustment to the Merger Consideration
contemplated by this Section 2.9. The Closing Statement shall become final and
binding upon the parties at 5:00 p.m. (New York City time) on the Business Day
following the 20th day following delivery thereof (and the Working Capital
amount reflected therein shall be deemed to be Final Working Capital and the
Debt amount reflected therein shall be deemed to be Final Debt), unless the
Stockholder Representative gives written notice of its disagreement with the
Closing Statement (a “Notice of Disagreement”) to the Surviving Corporation
prior to such time. Any Notice of Disagreement shall specify in reasonable
detail the nature of any disagreement so asserted. Parent, at its expense, shall
be permitted to review the supporting schedules, analyses, working papers and
other documentation with respect to such Notice of Disagreement (with respect to
working papers, subject to the execution and delivery by Parent and its
independent accountants and other agents of customary confidentiality
undertakings, waivers, releases and indemnification in favor of such independent
accountant). Except for such items that are specifically disputed in the Notice
of Disagreement, the amounts set forth on the Closing Statement shall be final.

During the 15-day period following the delivery of a Notice of Disagreement or
such longer period as the Stockholder Representative and Parent shall mutually
agree, the Stockholder Representative and Parent shall seek in good faith to
resolve in writing any differences that they may have with respect to the
matters specified in the Notice of Disagreement, and in the event that the
Stockholder Representative and Parent are able to reach such resolution, then
the amount so agreed by them in writing shall be deemed to be Final

 

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Working Capital and/or Final Debt, as the case may be. If, at the end of such
15-day period (or such longer period as mutually agreed between the Stockholder
Representative and Parent), the Stockholder Representative and Parent have not
so resolved such differences, the Stockholder Representative and Parent shall
submit the dispute for resolution to an independent accounting firm (the
“Arbiter”) for review and resolution of any and all matters which remain in
dispute and which were included in the Notice of Disagreement in accordance with
this Section 2.9. The Arbiter shall be a mutually acceptable internationally
recognized independent public accounting firm agreed upon by the Stockholder
Representative and Parent in writing; provided, however, that in the event the
parties are not able to mutually agree on an accounting firm, the Arbiter shall
be Deloitte & Touche LLP. The Stockholder Representative and Parent shall use
reasonable efforts to cause the Arbiter to render a decision resolving the
matters in dispute within thirty (30) days following the submission of such
matters to the Arbiter, or such longer period as the Stockholder Representative
and Parent shall mutually agree. The Stockholder Representative and Parent agree
that the determination of the Arbiter shall be final and binding upon the
parties and that judgment may be entered upon the determination of the Arbiter
in any court having jurisdiction over the party against which such determination
is to be enforced. The Arbiter shall determine, based solely on presentations by
the Surviving Corporation, Parent and the Stockholder Representative and their
respective representatives, and not by independent review, only those issues in
dispute specifically set forth on the Notice of Disagreement and shall prepare
the Final Closing Statement and render a written report as to the dispute and
the resulting calculation of Closing Date Working Capital and/or Closing Date
Debt, as appropriate, which shall be conclusive and binding upon the parties as
Final Working Capital and Final Debt, respectively. In resolving any disputed
item, the Arbiter: (i) shall be bound by the principles set forth in this
Section 2.9 (including that Closing Date Working Capital and Closing Date Debt
be determined in accordance with GAAP Consistently Applied), (ii) shall limit
its review to matters specifically set forth in the Notice of Disagreement and
(iii) shall not assign a value to any item greater than the greatest value for
such item claimed by either party or less than the smallest value for such item
claimed by either party. Except as provided in the second proviso of the last
sentence of Section 2.8, with regard to the payment of the Arbiter’s fees for
resolving differences with regard to the Estimated Closing Statement, the fees,
costs and expenses of the Arbiter (x) shall be borne by the Surviving
Corporation in the proportion that the aggregate dollar amount of such disputed
items so submitted that are successfully disputed by the Stockholder
Representative (as finally determined by the Arbiter) bears to the aggregate
dollar amount of such items so submitted and (y) shall be borne by holders of
Company Common Stock and Company Options in the proportion that the aggregate
dollar amount of such disputed items so submitted that are unsuccessfully
disputed by the Stockholder Representative (as finally determined by the
Arbiter) bears to the aggregate dollar amount of such items so submitted. The
fees and expenses of the Surviving Corporation and Parent incurred in connection
with the preparation of the Closing Statement and the review of any Notice of
Disagreement shall be borne by the Surviving Corporation, and the fees and
expenses of the Stockholder Representative’s independent accountants incurred in
connection with their review of the Closing Statement shall be borne by the
holders of Company Common Stock and Company Options.

(d) Upon determination of Final Working Capital and Final Debt, the Common Stock
Merger Consideration shall be further adjusted as follows:

 

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(i) If Final Working Capital is greater than the High Reference Amount, then the
Common Stock Merger Consideration shall be increased (if the amount calculated
under this clause (i) is positive) or decreased (if the amount calculated under
this clause (i) is negative), dollar-for-dollar by the amount equal to (x) the
amount by which Final Working Capital exceeds the High Reference Amount, minus
(y) the Positive EWC Adjustment, plus (z) the Negative EWC Adjustment;

(ii) If Final Working Capital is less than the Low Reference Amount, then the
Common Stock Merger Consideration shall be increased (if the amount calculated
under this clause (ii) is positive) or decreased (if the amount calculated under
this clause (ii) is negative), dollar-for-dollar by the amount equal to (xx) the
Negative EWC Adjustment, minus (yy) the Positive EWC Adjustment, minus (zz) the
amount by which the Low Reference Amount exceeds Final Working Capital;

(iii) If Final Working Capital is equal to or less than the High Reference
Amount and equal to or greater than the Low Reference Amount, then the Common
Stock Merger Consideration shall be increased (if the amount calculated under
this clause (iii) is positive) or decreased (if the amount calculated under this
clause (iii) is negative), dollar-for-dollar by the amount equal to the Negative
EWC Adjustment, minus the Positive EWC Adjustment;

(iv) The Common Stock Merger Consideration shall be increased dollar-for-dollar
by the amount, if any, by which Estimated Debt exceeds Final Debt; and

(v) The Common Stock Merger Consideration shall be reduced dollar-for-dollar by
the amount, if any, by which Final Debt exceeds Estimated Debt.

(e) The cumulative net adjustment to the Common Stock Merger Consideration
pursuant to Section 2.9(d) above, whether a net increase or reduction, is the
“Final Adjustment Amount.” Within ten (10) Business Days after the Closing
Statement becomes final and binding upon the parties, (i) if the net effect
pursuant to this Section 2.9 is an increase in the Common Stock Merger
Consideration, Parent shall make a cash payment equal to the Final Adjustment
Amount to the Exchange Agent, to be distributed pro rata to each holder of
Company Common Stock or Company Options held by such holder immediately prior to
the Effective Time, such further cash payments to be made to (A) each holder of
Company Common Stock in an amount equal to the product of (x) the number of
shares of Company Common Stock held by such holder immediately prior to the
Effective Time and (y) the Per Share Adjustment Consideration and (B) each
holder of Company Option in an amount equal to the product of (x) the number of
shares of Company Class A Common Stock subject to such Company Option held by
such holder immediately prior to the Effective Time and (y) the Per Share
Adjustment Consideration, and (ii) if the net effect pursuant hereto is a
reduction in the Common Stock Merger Consideration, each holder of Company
Common Stock and each holder of Company Options, shall, by virtue of payments by
the Escrow Agent from the Escrow Fund in accordance with this Agreement and the
Escrow Agreement, be deemed to have made a payment to the Surviving Corporation
to an account designated in writing by the Surviving Corporation, by wire
transfer in immediately available funds, of the amount of such Final Adjustment
Amount, in either case under clause (i) or (ii) of this Section 2.9(e), together
with interest thereon from the

 

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Closing Date to the date of actual payment at a variable rate equal to the prime
rate (as reported in the Wall Street Journal (National Edition) “Money Rates”)
from and including the Closing Date to, but not including, the date of payment.
For the avoidance of doubt, each of the parties hereto herby confirms that each
of the Exchange Agent and the Escrow Agent is authorized and instructed to make
any of the payments provided for in this Section 2.9(e), in the case of the
Exchange Agent, upon receipt of funds so designated from Parent, and, in the
case of the Escrow Agent, upon written instructions from Parent and the
Stockholder Representative in accordance with this Agreement and the Escrow
Agreement.

2.10. Withholding Taxes. Parent shall be entitled to deduct and withhold from
any consideration payable or otherwise deliverable pursuant to this Agreement
such amounts, if any, as may be required to be deducted or withheld therefrom
under any provision of federal, state, local or foreign tax law or under any
applicable law and shall thereafter pay all such amounts so deducted or withheld
to the proper taxing or other Governmental Authorities. Any such amounts shall
be withheld or deducted from the purchase price payable pursuant to this
Agreement, and such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the relevant Person.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1. Representations and Warranties of the Company. Except as specifically set
forth in the corresponding section of the Company Disclosure Schedule (and
giving effect to Section 9.10 hereto) and except as set forth in the SEC Reports
filed at least three (3) Business Days prior to the date of this Agreement, the
Company represents and warrants to Parent as follows:

(a) Organization, Standing and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, has all requisite power and authority to own, lease and operate its
properties and to carry on the business of the Company as now being conducted
and is duly qualified and in good standing to do business in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary, other than in such jurisdictions
where the failure to so qualify or be in good standing would not have a Material
Adverse Effect. The Company has made available to Parent true, correct and
complete copies of (i) the certificate of incorporation and bylaws of the
Company, in each case, as in effect on the date of this Agreement and (ii) the
minutes of all meetings of the stockholders, board of directors and each
committee of the board of directors of the Company since January 1, 2004.

(b) Subsidiaries. Each of the Company’s Subsidiaries is a corporation duly
incorporated or otherwise organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization, has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary, other
than in such jurisdictions where the failure to so qualify or be in good
standing would not have a Material Adverse Effect. The Company has made
available to Parent true, correct and complete

 

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copies of (i) the certificate of incorporation and bylaws (or the equivalent
organizational documents) of each of the Company’s Subsidiaries, in each case,
as in effect on the date of this Agreement (collectively, together with the
certificate of incorporation and bylaws of the Company, the “Company
Organizational Documents”) and (ii) the minutes of all meetings of the
stockholders, boards of directors and each committee of the boards of directors
of each of the Company’s Subsidiaries since January 1, 2004. A true, correct and
complete list of all Subsidiaries of the Company and their respective
jurisdictions of organization is set forth in Section 3.1(b) of the Company
Disclosure Schedule. Except as set forth in Section 3.1(b) of the Company
Disclosure Schedule, the Company does not own, directly or indirectly, any
capital stock of, or any other securities convertible or exchangeable into or
exercisable for capital stock of, any Person other than the Subsidiaries of the
Company.

(c) Capital Structure.

(i) As of the date of this Agreement, the authorized capital stock of the
Company consisted solely of (A) 2,500,000 shares of Company Class A Common
Stock, of which 366,925.6 shares are issued and outstanding, (B) 2,500,000
shares of Company Class B Common Stock, of which 1,655,364 shares are issued and
outstanding, (C) 900,000 shares of Company Series B Preferred Stock, of which
613,265.8 shares are issued and outstanding and (D) 950,000 shares of Company
Series C Preferred Stock, of which 483,604 shares are issued and outstanding.
The Company is current, as of the date of this Agreement, and shall be current,
as of the Closing Date, with respect to all dividend payments due and payable to
holders of Company Preferred Stock. Since September 30, 2006, there have been no
issuances of shares of the capital stock of the Company or securities
convertible into or exercisable for capital stock of the Company except shares
of Company Common Stock issued upon exercise of Company Options. All issued and
outstanding shares of the capital stock of the Company are duly authorized,
validly issued, fully paid and nonassessable, and, except as provided in the
Company Stockholders Agreement, no class of capital stock is entitled to
preemptive rights. As of the date of this Agreement, 16,593.5 shares of Company
Class A Common Stock were issuable upon exercise of the Company Options. Except
as provided in the Company’s certificate of incorporation and Section 3.1(c)(i)
of the Company Disclosure Schedule and except for the Company Options, there are
no options, warrants, calls, conversion rights, stock appreciation rights,
redemption rights, repurchase rights or other rights, agreements, arrangements
or commitments to which the Company or any of its Subsidiaries is a party
(A) relating to the issued or unissued capital stock or other securities of the
Company or any of its Subsidiaries or (B) obligating the Company or any of its
Subsidiaries to issue or sell any shares of their capital stock or other
securities. The Company has made available to Parent true, correct and complete
copies of all Company Option Plans and all forms of options outstanding under
those Company Option Plans. Section 3.1(c)(i) of the Company Disclosure Schedule
sets forth a true, correct and complete list of the capitalization of the
Company, as of the date of this Agreement, including, (A) with respect to the
Company Common Stock, all of the issued and outstanding shares and the names of
the holders thereof, (B) with respect to the Company Preferred Stock, all of the
issued and outstanding shares and the names of the holders thereof and the
Preferred Per Share Merger Consideration payable to each such holder of Company
Preferred Stock calculated as of February 15, 2007 and (C) with respect to each
Company Option: (i) the name of the holder of that option; (ii) the exercise
price for that option; (iii) the number and class of shares of

 

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Company Stock subject to that option; (iv) the Company Option Plan under which
that option was granted; and (v) the dates on which that option was granted,
will vest and will expire.

(ii) Except as disclosed in Section 3.1(c)(ii) of the Company Disclosure
Schedule and Liens granted in connection with the Credit Agreement, all of the
outstanding shares of capital stock of each of the Company’s Subsidiaries are
beneficially owned by the Company, directly or indirectly, and all such shares
have been validly issued and are fully paid and nonassessable and are owned by
either the Company or one or more of its Subsidiaries, free and clear of all
liens, charges, mortgages, pledges, security interests, easements, claims,
options, rights of first offer or refusal, voting trusts, restrictions on
transfer (except pursuant to federal and state securities laws), hypothecation,
preference, priority or other encumbrances (collectively, “Liens”).

(iii) As of the date of this Agreement, no bonds, debentures, notes or other
indebtedness of the Company having the right to vote on any matters on which
stockholders may vote are issued or outstanding.

(d) Authority; No Violations.

(i) The Company has all requisite corporate power and corporate authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditors
rights generally, or by general equity principles.

(ii) Except as set forth in Section 3.1(d)(ii) of the Company Disclosure
Schedule, the execution, delivery and performance by the Company of this
Agreement do not, and the consummation by the Company of the Merger and the
other transactions contemplated hereby will not result in any violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to the creation of a Lien on any assets (any such conflict,
violation, default or creation, a “Violation”) pursuant to: (A) any provision of
the Company Organizational Documents (B) subject to obtaining or making the
consents, approvals, orders, permits, authorizations, registrations,
declarations, notices and filings referred to in Section 3.1(d)(iii) below,
other than the Credit Agreement and the Indenture or as would not have a
Material Adverse Effect, any loan or credit agreement, note, mortgage, bond,
indenture, lease, benefit plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or their respective properties or assets; or (C) any Company
Material Contract (or require the consent, approval or other authorization of,
or filing with or notification to, any Person under any Company Material
Contract, other than as set forth in Section 3.1(d)(ii) of the Company
Disclosure Schedule).

 

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(iii) Except as would not reasonably be expected to have a Material Adverse
Effect on the Company, no consent, approval, order, permit or authorization of,
or registration, declaration, notice or filing with, any federal, state,
municipal or other governmental body, department, commission, board, bureau,
agency, court or instrumentality thereof, domestic or foreign (a “Governmental
Authority”), is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the Merger and the other
transactions contemplated hereby, except for those required under or in relation
to (A) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
“HSR Act”); (B) filings required under any applicable federal, state, foreign or
supranational law, regulation, legislation or decree of any other jurisdiction
designed to prohibit, restrict or regulate actions for the purpose or effect of
monopolization, restraint of trade or merger control (collectively, “Foreign
Antitrust Laws”); (C) the applicable requirements of the Committee on Foreign
Investment in the United States (“CFIUS”) under the Exon-Florio Amendment to the
Defense Production Act of 1950 (“Exon-Florio”); and (D) the DGCL with respect to
the filing of the Certificate of Merger.

(e) Compliance; Permits.

(i) Except as would not have a Material Adverse Effect:

(1) each of the Company and its Subsidiaries owns or possesses all Licenses and
Permits;

(2) no loss, suspension or cancellation of any Licenses and Permits is pending
in any Proceeding or, to the Knowledge of the Company, has been threatened by a
Governmental Authority, except for normal expirations in accordance with the
terms thereof; and

(3) each of the Company and its Subsidiaries has complied in all material
respects with (A) all terms and conditions of all material Licenses and Permits
and (B) all laws and regulations of all Governmental Authorities applicable to
the business of the Company and its Subsidiaries, and the Company or any of its
Subsidiaries have not received any written notice of any pending Proceeding
alleging a failure to comply with either (A) or (B) of this
Section 3.1(e)(i)(3).

(ii) The Company, its Subsidiaries and their business have, within the past
three (3) years, been and are currently in compliance with all applicable laws,
regulations, rules, orders, permits, judgments, decrees and other requirements
and policies imposed by any Governmental Authority, including the False Claims
Act, the anti-fraud provisions of the Contract Disputes Act, the Anti-Kickback
Act, the Federal Election Campaign Act, the Sherman Act, the Clayton Act, the
Truth in Negotiations Act, the Services Contract Act, the Procurement Integrity
Act, the Byrd Amendment (31 U.S.C. § 1352), the Arms Export Control Act, the
Export Administration Act of 1979, as amended, and each act’s respective
regulations, except where the failure to comply would not have a Material
Adverse Effect. To the Knowledge of the Company, neither the Company, its
Subsidiaries nor their business has, nor any of their employees, partners,
principals, agents or assignees have committed (or taken any action to promote
or conceal) any violation of the Foreign Corrupt Practices Act, 15 U.S.C.
sections 78dd-

 

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1, -2, or any equivalent foreign law or otherwise paid or made any bribe,
illegal rebate, payoff, influence payment, kickback or other unlawful payment.
Section 3.1(e)(ii) of the Company Disclosure Schedule sets forth all Licenses
and Permits which terminate or become renewable at any time prior to the first
anniversary of the date of this Agreement.

(iii) Notwithstanding the foregoing, no representation or warranty is made under
this Section 3.1(e) in respect of any (A) matters relating to Taxes which are
addressed in Sections 3.1(n) and 3.1(o) (as to which no representation or
warranty is made except as set forth in Sections 3.1(n) and 3.1(o)), (B) matters
relating to Environmental Laws which are addressed in Section 3.1(r) (as to
which no representation or warranty is made except as set forth in
Section 3.1(r)) and (C) benefit plans and labor matters which are addressed in
Sections 3.1(m), 3.1(o) and 3.1(p) (as to which no representation or warranty is
made except as set forth in Sections 3.1(m), 3.1(o) and 3.1(p)).

(f) Reports and Financial Statements. None of the reports, schedules and forms
filed or required to be filed by FastenTech with the Securities and Exchange
Commission (the “SEC”) since December 31, 2004 (collectively, including all
exhibits thereto and any reports incorporated by reference therein, the “SEC
Reports”), as of their respective dates (and, if amended or superseded by a
filing three (3) Business Days prior to the date hereof, then on the date of
such filing) contained or will contain any untrue statement of a material fact
or omitted or will omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each of the financial statements of
FastenTech (including the related notes) included in the SEC Reports, including
the consolidated balance sheet of the Company and its Subsidiaries as of
September 30, 2006 (the “Balance Sheet”) and the related statement of income and
cash flow for the period ended September 30, 2006 presents fairly, in all
material respects, the consolidated financial position and consolidated results
of operations and cash flows of the Company and its consolidated Subsidiaries as
of the respective dates or for the respective periods set forth therein, all in
conformity with GAAP consistently applied during the periods involved, except as
otherwise noted therein, and subject, in the case of the unaudited interim
financial statements, to the absence of footnotes and to normal year-end
adjustments that are not material in amount, and has been derived from the Books
and Records (which are true, correct and complete in all material respects). All
of such SEC Reports, as of their respective dates (and as of the date of any
amendment to the respective SEC Report), complied as to form in all material
respects with the applicable requirements of the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder and the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the “Exchange Act”). No Subsidiary of the Company is required to
file any form, report or other document with the SEC, any foreign Governmental
Authority that performs a similar function to that of the SEC or any securities
exchange or quotation service.

(g) Board Approval. The Board of Directors of the Company, by resolutions duly
adopted at a meeting duly called and held (the “Company Board Approval”), has
approved this Agreement and (i) determined that this Agreement and the Merger
are advisable, (ii) approved the transactions contemplated by this Agreement,
including the Merger, and (iii) recommended that the holders of the Company
Class A Common Stock adopt this Agreement

 

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and the Merger. No other corporate proceedings on the part of the Company are
necessary to authorize the Merger other than as described in Section 3.1(h).

(h) Vote Required. The affirmative vote of the holders of a majority of the
total number of outstanding shares of the Company Class A Common Stock to adopt
and approve this Agreement (the “Required Company Vote”) is the only vote of the
holders of any class or series of Company Stock necessary to adopt this
Agreement and approve the transactions contemplated hereby. The Required Company
Vote was obtained by written consent, dated as of a date not later than the date
hereof.

(i) Absence of Certain Changes or Events. Since September 30, 2006, the business
of the Company and its Subsidiaries has been conducted in the Ordinary Course of
Business and (A) there has been no Material Adverse Effect and (B) neither the
Company nor any of its Subsidiaries has taken any action which, if taken after
the date of this Agreement, would be prohibited by clauses (a), (b), (d), (f),
(g), (h) and (k) of Section 4.1, other than as set forth in Section 3.1(i) of
the Company Disclosure Schedule.

(j) Absence of Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any material liabilities or obligations of any kind, whether
accrued, contingent, absolute, inchoate or otherwise (collectively,
“Liabilities”) which are required to be recorded or reflected on a consolidated
balance sheet, including the footnotes thereto, under GAAP, except
(A) Liabilities recorded or reflected in the consolidated balance sheet of
FastenTech and its consolidated Subsidiaries as of September 30, 2006 and the
footnotes thereto set forth in FastenTech’s Annual Report on Form 10-K for the
fiscal year ended September 30, 2006; (B) Liabilities incurred since
September 30, 2006 in the Ordinary Course of Business that would not have a
Material Adverse Effect; (C) Liabilities disclosed in the Company Disclosure
Schedule; (D) Liabilities that constitute Debt under this Agreement;
(E) Liabilities in connection with the Holdco Financing; (F) Liabilities in
connection with the Tender of the Senior Subordinated Notes and (G) Liabilities
that would not have a Material Adverse Effect.

(k) Real Property; Assets.

(i) Section 3.1(k)(i) of the Company Disclosure Schedule contains a true,
correct and complete list and street addresses of all the real property owned by
the Company and its Subsidiaries (the “Owned Real Property”), and a true,
correct and complete list and street addresses of all the real property leased
by the Company and its Subsidiaries (the “Leased Real Property” and together
with the Owned Real Property, the “Real Property”). Except as set forth in
Section 3.1(k)(i) of the Company Disclosure Schedule, the Company or its
Subsidiaries has valid and legal fee title to the Owned Real Property, including
any rights of way or easements running to the benefit of such Owned Real
Property, free and clear of all Liens (except Permitted Liens). The Company has
provided to Parent true, correct and complete copies of all deeds and other
title documents set forth in Section 3.1(k)(i)(A) of the Company Disclosure
Schedule pertaining to such Owned Real Property. Except as set forth in
Section 3.1(k)(i) of the Company Disclosure Schedule, the Company or its
Subsidiaries has a valid leasehold interest in all Leased Real Property. Each
Contract relating to such Leased Real Property is in full force and effect on
the date hereof and will be in full force and effect on the Closing Date. There
does not exist under any Contract governing the Leased Real Property any

 

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default or condition or event that, after notice or lapse of time or both, would
constitute a default on the part of the Company or such Subsidiary or, to the
Knowledge of the Company, on the part of any other parties to such lease
governing the Leased Real Property. The consummation of the transactions
contemplated hereby shall not under the terms of any Contract governing the
Leased Real Property, (i) impose any material penalty or additional fee upon
Parent, Merger Sub or the Company, (ii) cause the provisions of any such lease
to be altered in any material and adverse respect, or (iii) cause a material
breach or default with respect to any existing Contract governing Leased Real
Property. With respect to the Real Property, except as disclosed in
Section 3.1(k)(i) of the Company Disclosure Schedule: (A) neither the Company
nor any of its Subsidiaries has entered into any written sublease, license,
option, right, concession or other agreement or arrangement granting to any
Person the right to use or occupy such parcel of Real Property or any portion
thereof or interest therein, except for Permitted Liens; (B) within the last 12
months, neither the Company nor any of its Subsidiaries has received written
notice of any pending or threatened condemnation or eminent domain proceedings
or their local equivalent affecting or relating to such Real Property;
(C) within the last 12 months, neither the Company nor any of its Subsidiaries
has received written notice from any Governmental Authority or other Person that
the use and occupancy of any of the Real Property, as currently used and
occupied, and the conduct of the business thereon, as currently conducted,
violates in any material respect any deed restrictions or applicable law,
consisting of building codes, zoning, subdivision or other land use or similar
laws; (D) all improvements on the Real Property (i) substantially conform to all
applicable state and local laws, including zoning and building ordinances and
health and safety ordinances, and such Real Property is zoned for the various
purposes for which the Real Property and improvements thereon are presently
being used, (ii) are in good repair (ordinary wear and tear excepted) and are
reasonably suitable for the use presently being made of such improvements and
(iii) are adequate and sufficient to the operation of the business of the
Company and its Subsidiaries as presently conducted. Except as disclosed in
Section 3.1(k)(i) of the Company Disclosure Schedule, all improvements on Owned
Real Property are wholly within the boundaries of such property, are owned by
the Company or one of its Subsidiaries and do not encroach upon the property or
otherwise conflict with the property rights of any Person; (E) no claim or right
of adverse possession has been claimed or threatened in writing to the Company
or its Subsidiaries; and (F) any and all rights and easements (including ingress
to and egress from the Real Property) necessary for the Company and its
Subsidiaries to conduct the business as presently conducted on such Real
Property are vested in the Company and its Subsidiaries.

(ii) Except as set forth in Section 3.1(k)(ii) of the Company Disclosure
Schedule, the Company and its Subsidiaries have valid and legal title to, a
valid leasehold interest in, or rights to the, tangible personal property and
assets which are shown on the Balance Sheet or acquired thereafter or used by
the Company and its Subsidiaries in their business as presently conducted. The
tangible assets and properties (whether real or personal) owned or leased by the
Company and its Subsidiaries constitute all of the material tangible assets and
properties necessary to operate the business of the Company and its Subsidiaries
in the Ordinary Course of Business. Except for normal wear and tear, the
machinery and equipment of the Company and its Subsidiaries necessary for the
continued conduct of their respective businesses in accordance with current
practices are in good operating condition and in a state of reasonable
maintenance and repair.

(l) Intellectual Property.

 

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(i) Section 3.1(l)(i) of the Company Disclosure Schedule sets forth a true,
correct and complete list of all of the patents and patent applications
(including all provisionals, continuations, continuations in part, divisionals,
extensions, patents of addition, reissues, substitutions, confirmations,
registrations, revalidations, reexamination certificates, and renewals and
additions of or to any of the foregoing), trademark registrations and
applications for registration of trademarks, copyright registrations and
applications for registration of copyrights, and domain name registrations and
applications for registrations of domain names, in each case, owned or held by
the Company or any of its Subsidiaries (collectively, the “Company Registered
Intellectual Property”), and all Intellectual Property that is licensed to the
Company or any of its Subsidiaries and that is material to the business of the
Company and its Subsidiaries, as currently conducted (the “Third Party Licensed
Intellectual Property”).

(ii) Except as set forth in Section 3.1(l)(ii) of the Company Disclosure
Schedule: (A) the Company and/or its Subsidiaries own, control, license,
sublicense or otherwise possess sufficient rights to use all Intellectual
Property that is utilized in the business of, respectively, the Company or such
Subsidiaries as currently conducted; (B) all Intellectual Property owned by the
Company and/or its Subsidiaries (the “Company Intellectual Property”) is free
and clear of all Liens, except Permitted Liens; (C) no Proceedings have been
asserted in writing, are pending, or, to the Knowledge of the Company, have been
threatened against Company or its Subsidiaries challenging any of the foregoing
entities’ ownership of or right to use any of the Company Intellectual Property
or any of the Third Party Licensed Intellectual Property; (D) to the Knowledge
of the Company, the Company Intellectual Property is enforceable, subsisting and
valid, and has not been adjudicated invalid or unenforceable in whole or in
part; (E) to the Knowledge of the Company, the operation of the business of the
Company and its Subsidiaries as currently conducted, the use of any Company
Intellectual Property in connection therewith, or the use of any Third Party
Licensed Intellectual Property, in connection therewith, do not infringe,
dilute, or misappropriate or otherwise violate any Intellectual Property owned
by third parties; (F) to the Knowledge of the Company, no third party is
engaging in any activity that infringes, dilutes, or misappropriates the Company
Intellectual Property, and neither Company nor any of its Subsidiaries have any
pending Proceeding that any third party is engaging in any activity that
infringes, dilutes, or misappropriates or otherwise violates the Company
Intellectual Property; (G) each of the Company and its Subsidiaries has taken
reasonable measures to maintain and protect its Company Intellectual Property
(including the Company Registered Intellectual Property), and has maintained the
confidentiality of its trade secrets and other confidential Company Intellectual
Property, and (1) to the Knowledge of the Company, there has been no
misappropriation of any trade secrets or other confidential Company Intellectual
Property, (2) no employee, independent contractor, or agent of the Company or
its Subsidiaries has misappropriated any trade secrets or other confidential
Intellectual Property of any Person and (3) to the Knowledge of the Company, no
employee, independent contractor, or agent of the Company or its Subsidiaries is
in default or breach of any term of any employment agreement, nondisclosure
agreement, assignment of invention agreement or similar agreements; (H) the
Company and its Subsidiaries have sufficient rights to access and use the
computer systems, networks, hardware, software, databases, and related equipment
used in connection with the operation of the business (the “Business IT
Systems”), and the Company and its Subsidiaries have taken commercially
reasonable steps to secure the Business IT Systems from unauthorized access or
use; (I) neither Company nor any of its Subsidiaries has granted any material
license or other right to any Person with respect to the Company Intellectual
Property; and (J) the

 

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consummation of the transactions contemplated by this Agreement will not result
in the termination or impairment of any Company Intellectual Property.

Notwithstanding any other representations and warranties in this Agreement, the
representations and warranties in this Section 3.1(l) and those relating to IP
Contracts in Section 3.1(m) shall be deemed the only representations and
warranties in this Agreement with respect to matters relating to Intellectual
Property.

(m) Contracts. Section 3.1(m) of the Company Disclosure Schedule sets forth a
complete and correct list as of the date of this Agreement of all of the
following Contracts to which the Company or any of its Subsidiaries is a party
or under which the Company or any of its Subsidiaries may be liable: (i) any
Contract with any current director or shareholder, any Contract executed within
in the last three years with any former director or shareholder, and any
material Contract with any consultant, agent or other representative, of the
Company or any of its Subsidiaries or with an entity in which any of the
foregoing is a controlling person or has an interest; (ii) any Contract for any
joint venture, partnership or similar arrangement; (iii) mortgages, indentures,
loan or credit agreements, security agreements and other agreements and
instruments relating to the borrowing of money or extension of credit in excess
of $300,000; (iv) any Contract (including, with respect to purchase orders, a
list of purchase orders) for the sale or purchase of goods or performance of
services by or with any customer or vendor (or any group of related customers or
vendors) that had or is reasonably expected to have annual aggregate payments
exceeding $300,000; (v) lease agreements for machinery and equipment, motor
vehicles, or furniture and office equipment or other personal property by or
with any vendor (or any group of related vendors) that had or is reasonably
expected to have annual aggregate payments exceeding $300,000; (vi) any
performance guaranties, performance, bid or completion bonds, surety and appeal
bonds, return of money bonds, and surety or indemnification agreements;
(vii) any custom bonds and standby letters of credit; (viii) any IP Contracts;
(ix) any employment agreement that has a future liability (A) in any one year
greater than $100,000, or (B) during the term of such agreement in excess of
$200,000, and is not terminable by the Company or any of its Subsidiaries by
notice of not more than thirty (30) days for a cost of less than $50,000;
(x) all recruiter, distributor, dealer, agency, sales promotion, market
research, marketing consulting and advertising Contracts that had or is
reasonably expected to have annual aggregate payments exceeding $300,000;
(xi) any purchase or sale Contract entered into by the Company or any of its
Subsidiaries relating to the acquisition or divestiture of a business during the
past five (5) years; (xii) any Contract (including any so-called take-or-pay or
keepwell agreements) under which (A) any Person other than the Company or a
Subsidiary, has directly or indirectly guaranteed indebtedness, Liabilities or
obligations of the Company or a Subsidiary or (B) the Company or its Subsidiary
has directly or indirectly guaranteed indebtedness, Liabilities or obligations
of any Person, other than the Company or any Subsidiary (in each case other than
endorsements for the purpose of collection in the Ordinary Course of Business
and any Contract that had or is reasonably expected to have annual aggregate
payments less than $300,000); (xiii) any Contract granting a Lien upon any
assets owned by the Company or any of its Subsidiaries other than Liens
described in clauses (iv), (vi) and (ix) of the definition of Permitted Liens;
(xiv) any Contract outside the Ordinary Course of Business to which the Company
or any Subsidiary is a party which cannot be terminated by the Company or any of
its Subsidiaries on notice of thirty (30) days or less and without payment by
the Company or any of its Subsidiaries of less than $20,000 upon such
termination; (xv) any Contract

 

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containing covenants of the Company or any of its Subsidiaries not to compete in
any line of business or with any Person in any geographical area; and (xvi) any
Contract which includes or constitutes a power of attorney.

All of the foregoing are collectively referred to in this Agreement as the
“Company Material Contracts.” Each Company Material Contract is enforceable
against the Company or its Subsidiary and, to the Knowledge of the Company, each
other Person that is a party thereto in accordance with its terms. Except as set
forth in Section 3.1(m) of the Company Disclosure Schedule, there does not exist
under any Company Material Contract any default or condition or event that,
after notice or lapse of time or both, would constitute a default on the part of
the Company or such Subsidiary or, to the Knowledge of the Company, on the part
of any other parties to such Company Material Contract, except for such
defaults, conditions or events that would not result in a Material Adverse
Effect. Section 3.1(m) of the Company Disclosure Schedule lists each Company
Material Contracts required to be described in, or filed as an exhibit to, any
SEC Report. The Company has made available to Parent true, correct and complete
copies of all Company Material Contracts.

(n) Tax Matters. Except as set forth in Section 3.1(n)(i) of the Company
Disclosure Schedule, (i) the Company and each of its Subsidiaries, and any
consolidated, combined, unitary or aggregate group for tax purposes of which the
Company or any of its Subsidiaries is or has been a member has timely filed all
material Tax Returns required to be filed by it in the manner provided by law
(taking into account all applicable extensions) and such Tax Returns are true,
complete, and correct in all material respects, and all Taxes shown to be due
and payable on the Tax Returns or on subsequent assessments with respect thereto
have been paid in full on a timely basis. No material amount of other Taxes are
payable by the Company or any of its Subsidiaries with respect to items or
periods covered by such Tax Returns (whether or not shown on or reportable on
such Tax Returns) or with respect to any period prior to the date of the Balance
Sheet, except for Taxes that have been adequately provided for on the Balance
Sheet. Neither the Company nor any of its Subsidiaries has incurred any
liability for Taxes since the date of the Balance Sheet other than as a result
of operations in the Ordinary Course of Business. The Company and each of its
Subsidiaries has withheld and paid over all material Taxes required to have been
withheld and paid over, and complied in all material respects with all
information reporting and backup withholding requirements, including maintenance
of required records with respect thereto, in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other third party.
There are no liens on any of the assets of the Company or any of its
Subsidiaries with respect to Taxes, other than liens for Taxes not yet due and
payable or for Taxes that the Company or any of its Subsidiaries is contesting
in good faith through appropriate proceedings and for which appropriate reserves
have been established.

(ii) Except as set forth in Section 3.1(n)(ii) of the Company Disclosure
Schedule, Parent has been furnished by the Company and each of its Subsidiaries
true, complete and correct copies of (i) relevant portions of income tax audit
reports, statements of deficiencies, closing or other agreements received by the
Company and each of its Subsidiaries relating to Taxes received since
December 31, 2001, and (ii) all federal and state income or franchise tax
returns for the Company and each of its Subsidiaries for all periods ending on
and after December 31, 2001. Except as set forth in Section 3.1(n)(ii) of the
Company Disclosure

 

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Schedule, neither the Company nor any of its Subsidiaries has ever been a member
of an affiliated group filing consolidated returns other than a group for which
the Company or FastenTech was the common parent. Neither the Company nor any of
its Subsidiaries has taxable nexus with any state, local, territorial or foreign
taxing jurisdiction prior to the Closing other than those for which all Tax
Returns have been furnished or made available to Parent.

(iii) Except as set forth in Section 3.1(n)(iii) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is the subject of any
audit or examination with respect to Taxes, nor has any such audit been
threatened (either in writing or orally). No deficiencies exist or have been
asserted (either in writing or orally) with respect to Taxes of the Company or
any of its Subsidiaries, and neither the Company nor any of its Subsidiaries has
received notice (either in writing or orally) that it has not filed a Tax Return
or paid Taxes required to be filed or paid by it. Neither the Company nor any of
its Subsidiaries is a party to any action or proceeding for assessment or
collection of Taxes, nor has such event been asserted or threatened (either in
writing or orally) against any of its Subsidiaries or any of their assets. No
material issues were raised by the relevant taxing authority during any prior
period audit or examination that might reasonably be expected to recur and
result in a deficiency in a taxable period other than the taxable period to
which such audit or examination related. Neither the Company nor any of its
Subsidiaries has waived any statute of limitations with respect to Taxes. The
Company and each of its Subsidiaries has never participated in a “listed
transaction” within the meaning of Treasury Regulations Section 1.6011-4T(b)(2)
(determined without regard to whether such transaction is a “reportable
transaction” under such regulation).

(iv) Except as set forth in Section 3.1(n)(iv) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to any tax
sharing agreement or Tax indemnity agreement and neither the Company nor any of
its Subsidiaries has assumed the Tax liability of any other person under
contract. Neither the Company nor any of its Subsidiaries will be required to
recognize for income tax purposes in a taxable period ending after Closing any
amount of income or gain that economically accrued in a Pre-Closing Tax Period,
whether as a result of the installment method of accounting, the completed
contract method of accounting, the cash method of accounting, or otherwise.
Neither the Company nor any of its Subsidiaries will be required in a taxable
period ending after Closing to include any amount in income pursuant to
Section 481 of the Code (or any comparable provision of state, local or foreign
law), by reason of a change in accounting method or otherwise, as a result of
actions taken prior to Closing.

(v) Neither the Company nor any of its Subsidiaries is a party to any safe
harbor lease within the meaning of Section 168(f)(8) of the Code, as in effect
prior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982.
Neither the Company nor any of its Subsidiaries is, and has ever been, a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code. Neither the Company nor any of its Subsidiaries has entered into
any compensatory agreements with respect to the performance of services which
payment thereunder would result in a nondeductible expense to the Company or any
of its Subsidiaries pursuant to Section 280G of the Code or an excise tax to the
recipient of such payment pursuant to Section 4999 of the Code. Neither the
Company nor any of its Subsidiaries has been the “distributing corporation”
(within the meaning of Section 355(c)(2) of the Code)

 

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with respect to a transaction described in Section 355 of the Code within the
3-year period ending as of the date of this Agreement. Neither the Company nor
any of its Subsidiaries has participated in an international boycott as defined
in Code Section 999. Neither the Company nor any of its Subsidiaries has agreed,
or is required to make, any adjustment under Code Section 481(a) by reason of a
change in accounting method or otherwise. Except as set forth in
Section 3.1(n)(v) of the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries has a permanent establishment in any foreign country, as
defined in any applicable Tax treaty or convention between the United States of
America and such foreign country. The Company and its Subsidiaries have complied
in all material respects with all applicable reporting and record maintenance
requirements of Section 6038A of the Code. Neither the Company nor any of its
Subsidiaries is a party to any joint venture, partnership or other agreement,
contract or arrangement (either in writing or orally, formally or informally)
which could be treated as a partnership for federal income tax purposes. The
Company and each of its Subsidiaries is in compliance with the terms and
conditions of any applicable Tax exemptions, Tax agreements or Tax orders of any
government to which it may be subject or which it may have claimed.

(vi) Neither the Company nor any of its Subsidiaries has any net operating
losses or other tax attributes presently subject to limitation under Code
Sections 382, 383, or 384, without regard to the transactions contemplated by
this Agreement.

Notwithstanding any other representations and warranties in this Agreement, the
representations and warranties in Sections 3.1(n) and 3.1(o) shall be deemed the
only representations and warranties in this Agreement with respect to matters
relating to Taxes.

(o) Benefit Plans. (i) The only Benefit Plans presently in effect, or pursuant
to which the Company, any of its Subsidiaries or any ERISA Affiliate may have
any actual or contingent liability in excess of $50,000 in the aggregate, that
are or were maintained by, or contributed to by, or required to be maintained by
or contributed to by the Company, any Subsidiary or any ERISA Affiliate for the
benefit of employees or former employees of the Company or any Subsidiary,
including any multiemployer plan as defined in Section 3(37) of ERISA, are those
listed in Section 3.1(o)(i) of the Company Disclosure Schedule. A true, correct
and complete copy of each Benefit Plan with respect to which the Company or any
Subsidiary has or could reasonable be expected to have an annual continuing
liability in excess of $50,000, and, where applicable, a summary plan
description, a copy of the most recent IRS determination or opinion letter
received, any related trust agreements, insurance contracts, insurance policies
or other documents of any funding arrangements, any notices to or from the IRS
or any office or representative of the DOL or any similar Governmental Authority
relating to any material compliance issues in respect of any such Benefit Plan,
the most recent IRS Forms 5500 and PBGC Forms 1 filed, and all material
amendments, modifications or supplements to any such document with respect to
each such Benefit Plan, has been made available to Parent.

(ii) Except as set forth in Section 3.1(o)(ii) of the Company Disclosure
Schedule, each Benefit Plan is in compliance in all material respects with the
applicable requirements of applicable law, including ERISA and the Code and has
been administered in accordance with its terms.

 

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(iii) Section 3.1(o)(iii) of the Company Disclosure Schedule contains a true,
correct and complete list of (A) each Contract maintained or entered into by the
Company or any of its Subsidiaries and relating to the Company Employees or
other persons providing services to the Company or any of its Subsidiaries which
provides for severance payments or benefits, and (B) each Contract maintained or
entered into by the Company or any of its Subsidiaries with or relating to
Company Employees which provides for acceleration of benefits or payments upon a
change in control. Copies of each such Contract have been made available to
Parent.

(iv) Each Benefit Plan that is intended to be qualified under Section 401(a) of
the Code either is a prototype plan with respect to which the IRS has issued an
opinion letter approving the form of such plan upon which the Company or the
relevant ERISA Affiliate is entitled to rely, or has received a determination
letter from the IRS that it is so qualified, and, to the Knowledge of the
Company, no fact or event has occurred since the date of such opinion letter or
determination letter that could reasonably be expected to adversely affect the
qualified status of any such Benefit Plan.

(v) Except as disclosed in Section 3.1(o)(v) of the Company Disclosure Schedule,
neither the Company nor any ERISA Affiliate contributes to, or has within the
past six (6) years contributed to, or has within the past six (6) years been
required to contribute to, any multiemployer plan, as defined in Section 3(37)
of ERISA. With respect to each multiemployer plan listed in Section 3.1(o)(i) of
the Company Disclosure Schedule, neither the Company nor any ERISA Affiliate has
incurred any material withdrawal liability, within the meaning of Section 4201
of ERISA, which has not been satisfied, nor does the Company or any ERISA
Affiliate have any potential material withdrawal liability arising from a
transaction described in Section 4204 of ERISA. Except as would not have a
Material Adverse Effect, all required contributions, withdrawal liability
payments or other payments of any type that the Company or any ERISA Affiliate
has been obligated to make to any such multiemployer plan have been duly and
timely made. Neither the Company nor, to the Knowledge of the Company, any ERISA
Affiliate presently expects to withdraw in a complete or partial withdrawal
(within the meaning of Section 4203 and 4205 of ERISA) from any multiemployer
plan. Neither the Company nor, to the Knowledge of the Company, any ERISA
Affiliate has received notice from the PBGC or from any such multiemployer plan
to the effect that any such plan is in reorganization within the meaning of
Section 4241 of ERISA so as to result in any material increase in contributions
by the Company or any ERISA Affiliate under Section 4243 of ERISA or in material
liability to the Company or any ERISA Affiliate.

(vi) Except as set forth in Section 3.1(o)(vi) of the Company Disclosure
Schedule, all contributions to, and payments from, the Benefit Plans which may
have been required to be made in accordance with the Benefit Plans and, when
applicable, Section 302 of ERISA or Section 412 of the Code, or any other
provision of ERISA or the Code, have been in all material respects timely made.
All such contributions with respect to the period ending on the date of this
Agreement either have been paid or properly accrued on the Balance Sheet.

(vii) Except as set forth in Section 3.1(o)(vii) of the Company Disclosure
Schedule all Forms 5500, Benefit Plan financial statements, summary plan
descriptions and summaries of material modifications with respect to the Benefit
Plans required

 

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to be filed with any government agency or distributed to any Benefit Plan
participant have been duly and timely filed or distributed and are accurate and
complete in all material respects.

(viii) The Company and each ERISA Affiliate have complied with the notice and
continuation coverage requirements of Section 4980B of the Code and the
regulations thereunder, including with respect to any “M&A qualified
beneficiaries” as defined by Treasury Regulation Section 54.4980B-9, with
respect to each Benefit Plan that is, or was during any taxable year of the
Company or any ERISA Affiliate for which the statute of limitations on the
assessment of federal income taxes remains open, by consent or otherwise, a
group health plan within the meaning of Section 5000(b)(1) of the Code.

(ix) Except as set forth in Section 3.1(o)(ix) of the Company Disclosure
Schedule, there are no pending investigations by any Governmental Authority
involving the Benefit Plans, no termination proceedings involving the Benefit
Plans, and no pending, or to the Knowledge of the Company threatened, claims
(except for claims for benefits payable in the normal operation of the Benefit
Plans), suits or Proceedings against any Benefit Plan or asserting any rights or
claims to benefits under any Benefit Plan which could give rise to any material
liability of the Company or any Subsidiary nor, to the Knowledge of the Company,
are there any facts which could give rise to any such material liability in the
event of any such investigation, claim, suit or Proceeding.

(x) Except as set forth in Section 3.1(o)(x) of the Company Disclosure Schedule,
as of the Effective Time, unpaid or unreimbursed claims for benefits under any
self-funded Benefit Plan which is a “welfare plan” under Section 3(1) of ERISA
do not exceed an amount reasonably expected to have a Material Adverse Effect
and an excess loss insurance policy with a terminal liability rider is in effect
with respect to the liability under each such Benefit Plan.

(xi) (A) Neither the Benefit Plans, the Company, any Subsidiary of the Company
nor, to the Knowledge of the Company, any employee of the Company or any of its
Subsidiaries, any trusts created thereunder, nor any trustee, administrator or
other fiduciary thereof, has engaged in a “prohibited transaction” (as such term
is defined in Section 4975 of the Code or Section 406 of ERISA) which could
subject any thereof to the tax or penalty on prohibited transactions imposed by
such Section 4975 or the sanctions imposed under Title I of ERISA; and (B) none
of the Benefit Plans listed in Section 3.1(o)(i) of the Company Disclosure
Schedule has been terminated nor have there been any “reportable events” (as
defined in Section 4043 of ERISA and the regulations thereunder), other than
events with respect to which the notice requirement has been waived, with
respect to any such Benefit Plans.

(xii) Except as set forth in Section 3.1(o)(xii) of the Company Disclosure
Schedule, or as would not have a Material Adverse Effect, neither the Company
nor any ERISA Affiliate has incurred any material liability to the Pension
Benefit Guaranty Corporation (“PBGC”) with respect to any Benefit Plan subject
to Title IV of ERISA, other than for the payment of premiums, which have been
paid when due. No Benefit Plan has applied for or received a waiver of the
minimum funding standards imposed by Section 412 of the Code. The Company has
made available to Parent the most recent actuarial report with respect to each
Benefit Plan that is a defined benefit pension plan, as defined by Section 3(35)
of ERISA. To the

 

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Knowledge of the Company, no event has occurred since the date of any such
actuarial report that had, or is likely to have, a Materially Adverse Effect on
the ratio of plan assets to the actuarial present value of plan obligations for
accumulated benefits shown in such report.

(xiii) Except as set forth in Section 3.1(o)(xiii) of the Company Disclosure
Schedule, no Benefit Plan that is a “welfare benefit plan” within the meaning of
Section 3(1) of ERISA provides benefits to former employees of the Company or
its ERISA Affiliates, other than pursuant to Section 4980B of the Code or any
similar state, local or foreign law.

(xiv) Except as set forth in Section 3.1(o)(xiv) of the Company Disclosure
Schedule, each Benefit Plan that is subject to Section 409A of the Code has been
in all material respects operated and administered in good faith compliance with
Section 409A of the Code from the period beginning December 31, 2004 through the
date hereof.

(xv) Non-U.S. Benefit Plans.

(1) German Benefit Plans.

(A) Except for (A) employee benefits referenced in this Section 3.1(o),
(B) employer’s contributions to mandatory benefit schemes under applicable law,
(C) sick pay for a period to which any employee is entitled under mandatory law
or under applicable collective agreements as listed on Section 3.1(p)(i) of the
Company Disclosure Schedule or under any individual agreement the terms of which
have been disclosed to Parent prior to signing of this Agreement, (D) the
individual commitments and Benefit Plans set forth in the Company Disclosure
Schedule together with their relevant conditions (for each beneficiary: amount
of the granted benefits, amount of the granted contributions to pension funds,
to insurance companies or to any other external provider, date of grant,
indication of any agreed non-forfeitable rights or expectancies, indication of
any agreed indexation or adjustment of pension payments), the Subsidiaries of
the Company located in Germany (the “German Subsidiaries”) are under no
obligation to pay, and have not agreed to pay or are not paying on a customary
or voluntary basis (A) any pension (including retirement and early-retirement
payments, disability pensions and pensions for surviving spouses or dependants,
whether forfeitable or non-forfeitable and irrespective whether on the basis of
current pension payments or on the basis of a one time capital payment) or any
other retirement, death, sickness, disability or medical benefit or (B) any
contributions to any pension fund, insurance company or other entity with
respect to any such pension or benefit to any current or former employees or
managing directors.

(B) True, correct and complete copies of any such pension plans, old-age and
other benefit programs and of any other pension commitments have been made
available to Parent prior to the date of this Agreement.

(C) Any such pension or other obligations of the German Subsidiaries under such
commitments and plans are fully reflected on the respective Balance Sheets for
the year as of September 30, 2006 in accordance with the relevant accounting
principles in the highest amount possible under the applicable law. Attached to
the Company

 

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Disclosure Schedule is a copy of the latest actuarial report with respect to all
pension obligations of the German Subsidiaries for the year as of September 30,
2006, which sets forth a true, correct and complete evaluation of all pension
obligations of the German Subsidiaries.

(2) Other Non-U.S. Benefit Plans. Except as set forth in the Company Disclosure
Schedule and exclusive of any employee benefit plans, programs, or arrangements
described in Section 3.1(o)(xv)(1) above, there are no material pension,
welfare, bonus, stock purchase, stock ownership, stock option, deferred
compensation, incentive, severance, termination or other compensation plan or
arrangement, or other employee fringe benefit plan presently maintained by, or
contributed to by the Company or any of its Subsidiaries for the benefit of any
employee of the Company or any of its Subsidiaries, including any such plan
required to be maintained or contributed to by the law of the relevant
jurisdiction, which would be described in Section 3.1(o)(i) above, but for the
fact that such plans are maintained outside the jurisdiction of the United
States (the “Non-U.S. Benefit Plans”). The Company has furnished or made
available to Parent copies, summaries or written descriptions of each Non-U.S.
Benefit Plan. Each Non-U.S. Benefit Plan has been administered and is in
compliance with its terms and applicable law in all material respects. With
respect to all Non-U.S. Benefit Plans, all employer and employee contributions
to each Non-U.S. Benefit Plan required by law or by the terms of such Non-U.S.
Benefit Plan have been timely made (except for any instances of noncompliance
that would not have a Material Adverse Effect), or, if applicable, accrued in
accordance with normal accounting practices, and a pro rata contribution for the
period prior to and including the date of this Agreement has made or accrued;
each Non-U.S. Benefit Plan required to be registered has been registered and
maintained in good standing with applicable Governmental Authorities and is
approved by any applicable tax authorities to the extent such approval is
available. There are no actions, suits or claims (other than routine claims for
benefits) pending or, to the Knowledge of the Company, threatened with respect
to any of its Non-U.S. Benefit Plan that could result in any material liability
for Company or any of its Subsidiaries or, from and after the Closing Date, any
material liability for Parent.

Notwithstanding any other representations and warranties in this Agreement, the
representations and warranties in this Section 3.1(o) shall be deemed the only
representations and warranties in this Agreement with respect to matters
relating to Benefit Plans.

(p) Labor Matters. (i) Except as set forth in Section 3.1(p)(i) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to or bound by any collective bargaining agreement, collective agreement or
other labor-related agreement with any labor union or labor organization with
respect to Company Employees. The Company and each of its Subsidiaries are in
material compliance with the terms, conditions and obligations contained in each
such agreement set forth in Section 3.1(p)(i) of the Company Disclosure
Schedule.

(ii) The German Subsidiaries are neither currently member of any employer’s
association nor were a member of any employer’s association in the past five
(5) years except as set forth in Section 3.1(p)(ii) of the Company Disclosure
Schedule. Section 3.1(p)(ii) of the Company Disclosure Schedule contains a
complete and correct list of all bodies of employee representatives (including
supervisory boards) of the German Subsidiaries. There are no agreements
stipulating a composition of these bodies which differs from the composition

 

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required by law. Except as set forth in Section 3.1(p)(ii) of the Company
Disclosure Schedule, no works agreements, general works agreements, group works
agreements or other agreements with bodies of employee representation apply to
the German Subsidiaries and/or employees of the German Subsidiaries. True,
complete and correct copies of these works agreements, general works agreements,
group works agreements or other agreements with bodies of employee
representation have been made available to Parent prior to the date of this
Agreement. The German Subsidiaries have complied with all provisions of such
applicable works agreements, general works agreements, group works agreements or
other agreements with bodies of employee representation except as would not have
a Material Adverse Effect. Except as set forth in Section 3.1(p)(ii) of the
Company Disclosure Schedule, no company exercises (betriebliche Übungen),
general agreements and/or other general labor law agreements apply to the German
Subsidiaries and or employees of the German Subsidiaries.

(iii) There is no labor strike, work stoppage, work slowdown, or labor
disturbance pending or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries. The Company has not experienced a labor
strike, work stoppage or work slowdown at any time during the five (5) years
immediately preceding the date of this Agreement.

(iv) There are no grievances, unfair labor practice complaints, or other
Proceedings pending or, to the Knowledge of the Company, threatened relating to
any labor, safety or discrimination matters involving any Company Employee
which, if adversely determined, would, individually or in the aggregate, result
in material liability to the Company or any of its Subsidiaries. Except as set
forth in Section 3.1(p)(iv) of the Company Disclosure Schedule, during the five
(5) years immediately preceding the date of this Agreement, the Company has not
received notice of any grievance, unfair labor practice complaint, or other
Proceeding pending or threatened in any forum with respect to any Company
Employee. Neither the Company nor any of its Subsidiaries has received written
or, to the Knowledge of the Company, oral notice that any Governmental Authority
responsible for the enforcement of labor or employment laws is presently
conducting an investigation of or relating to the Company or any of its
Subsidiaries.

(v) The Company and its Subsidiaries are in compliance in all material respects
with all applicable laws, rules and regulations relating to labor and employment
practices, immigration, wages, hours, occupational health and safety, and terms
and conditions of employment, and are not liable for any arrears of wages or any
tax or penalty for failure to comply with any of the foregoing. Except as set
forth in Section 3.1(p)(v) of the Company Disclosure Schedule, the employment of
each Company Employee is terminable at will without cost or liability to the
Company or its Subsidiary, except for amounts earned prior to the time of
termination and other amounts not exceeding $2,000 per employee.

(vi) Section 3.1(p)(vi) of the Company Disclosure Schedule sets forth a true,
complete and correct list of all current Company Employees whose total annual
compensation (including any bonus) during the twelve months ended September 30,
2006 exceeded $70,000, including name, job title, credited service, hourly rate
or annual base salary, annual variable compensation (listing separately target
bonuses, incentive pay, or other forms of compensation), accrued vacation, and
potential severance pay entitlement.

 

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(q) Legal Proceedings. Except as set forth in Section 3.1(q) of the Company
Disclosure Schedule, as set forth in the SEC Reports filed at least three
(3) Business Days prior to the date hereof or as would not result in a Material
Adverse Effect, there are no Proceedings pending against or, to the Knowledge of
the Company, threatened against the Company or any of its Subsidiaries and,
there are no Proceedings pending against or, to the Knowledge of the Company,
threatened against any director, officer or employee of the Company or any of
its Subsidiaries or other Person in their capacity as such for whom the Company
or any of its Subsidiaries is likely to be liable. The Company is not subject to
any adverse order, writ, judgment, injunction, decree or award of any court or
any Governmental Authority.

(r) Environmental Matters. Except as set forth in Section 3.1(r) of the Company
Disclosure Schedule or as would not result in a Material Adverse Effect on the
Company:

(i) All operations of the Company, its Subsidiaries and, to the Knowledge of the
Company, each of their predecessors have since the date five (5) years prior to
the date hereof, been and are in full compliance with all Environmental Laws
applicable to them.

(ii) The Company and its Subsidiaries have obtained and are in compliance with
all Licenses and Permits required under applicable Environmental Laws with
respect to the operation or conduct of the business or operation of the Real
Property (the “Environmental Approvals”). Each such Environmental Approval is in
full force and effect, and to the Knowledge of the Company each such
Environmental Approval will remain in full force and effect after the execution,
delivery and performance of this Agreement.

(iii) Neither the Company nor its Subsidiaries has caused or, to the Knowledge
of the Company, arranged for any third person to cause any Release of Materials
of Environmental Concern at any of the properties it currently or formerly
owned, operated or leased, or at any location to which it has sent or arranged
to send Materials of Environmental Concern for treatment, storage or disposal.

(iv) To the Knowledge of the Company, no Release of any Materials of
Environmental Concern has occurred, or is occurring, at, on, under, from or to
any property or facility currently or formerly owned, operated or leased (during
the time of such ownership, operation or lease) by the Company or its
Subsidiaries, or from any property or facility to which the Company or its
Subsidiaries has transported or arranged for transport of Materials of
Environmental Concern, and, to the Knowledge of the Company, no Materials of
Environmental Concern are present in, on, under or about, or migrating to or
from any such property or facility that could reasonably be expected to give
rise to any liability under Environmental Law.

(v) The Company and its Subsidiaries have not received any written notice of any
judicial, administrative or arbitral Proceeding pending or threatened against it
under any applicable Environmental Laws, which Proceeding has not been resolved.

(vi) Neither the Company, its Subsidiaries, nor any property or facilities
currently or, to the Knowledge of the Company, formerly owned, operated or
leased by the Company or its Subsidiaries (during the time of such ownership,
operation or lease), is

 

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subject to any judgment, order or, to the Knowledge of the Company, any proposed
order as a result of activities of the Company or any of its Subsidiaries under
any Environmental Law.

(vii) The Company and its Subsidiaries have not received any notice or written
claim from any person, including a Governmental Authority, regarding or alleging
a violation or failure to comply with any term or requirement of any
Environmental Law.

(viii) The Company and its Subsidiaries have not entered into any consent decree
or other agreement in settlement of any alleged violation of or liability under
any applicable Environmental Law, under which decree or agreement the Company or
any of its Subsidiaries has any material unfulfilled obligations.

(ix) To the Knowledge of the Company, no formal action of any Governmental
Authority has been taken or is in process which could subject any of such Real
Property to Liens, declarations or deed restrictions pursuant to any
Environmental Law on the Real Property.

(x) Neither the Company nor any of its Subsidiaries have received any written
notice that it is a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601
et seq., or state or foreign analog statute, arising out of events, including a
Release, occurring on or prior to the date hereof.

(xi) The Company and its Subsidiaries have provided Parent with copies of or
access to all non-privileged material studies, reports, surveys, assessments,
audits, correspondence, investigations, analysis, tests, and other documents
(whether in hard copy or electronic form) prepared by or on behalf of the
Company or any of its Subsidiaries within the last five (5) years in its
possession or reasonable control relating to the presence or alleged presence of
Materials of Environmental Concern at, on or affecting any Real Property
currently or formerly owned, leased or operated by the Company or its
Subsidiaries, or regarding the Company’s and its Subsidiaries’ compliance with
any applicable Environmental Law. None of the privileged material studies,
reports, surveys, assessments, audits, correspondence, investigations, analysis,
tests, and other documents that have not been provided relates to the material
presence or alleged presence of Materials of Environmental Concern at, on or
affecting any Real Property currently or formerly owned, leased or operated by
the Company or its Subsidiaries, or regarding the Company’s and its
Subsidiaries’ compliance with any applicable Environmental Law which, in either
case, has not been otherwise disclosed to Parent.

Notwithstanding any other representations and warranties in this Agreement, the
representations and warranties in this Section 3.1(r) shall be deemed the only
representations and warranties in this Agreement with respect to matters
relating to Environmental Laws or to Materials of Environmental Concern.

(s) Financial Advisors. Except as set forth in Section 3.1(s) of the Company
Disclosure Schedule, no agent, broker, investment banker, financial advisor or
other firm or Person is or will be entitled to any broker’s or finder’s fee or
any other similar commission or fee payable by the Company or any of its
Subsidiaries in connection with any of the transactions

 

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contemplated by this Agreement based on arrangements made by or on behalf of the
Company or any of its Subsidiaries.

(t) Insurance. Set forth in Section 3.1(t) of the Company Disclosure Schedule is
a list of all policies of insurance held by, or maintained on behalf of, the
Company or the Subsidiaries as of the date hereof in effect for policy periods
beginning on or after January 1, 2005, indicating for each policy the carrier,
the insured, the type of insurance, the amounts of coverage and the expiration
date. Except as set forth in Section 3.1(t) of the Company Disclosure Schedule,
all such policies are in full force and effect, all premiums due and payable
thereon have been paid in full and the Company and the Subsidiaries have not
received any written notice of cancellation, amendment or dispute as to coverage
with respect to any such policies and such policies will not terminate as a
result of the consummation of the transactions contemplated by this Agreement.

(u) Product Warranty, Product Recall.

(i) All products sold by the Company or its Subsidiaries during the past three
(3) years have been in conformity in all material respects with all applicable
contractual commitments and all express and implied warranties, and none of the
Company or its Subsidiaries has any Liability (and has not received written
notice of any Proceeding against it giving rise to any such Liability) for
replacement thereof or other damages in connection therewith, other than
nonconformities, replacements or damages occurring in the Ordinary Course of
Business and other than to the extent reserved on the Balance Sheet. Except as
set forth in Section 3.1(u)(i) of the Company Disclosure Schedule, no products
sold by the Company or its Subsidiaries and no services rendered by the Company
or its Subsidiaries during the past twelve (12) months are subject to any
guarantee, warranty or other indemnity beyond the applicable industry standard
terms and conditions of such sale or service.

(ii) Except as set forth in Section 3.1(u)(ii) of the Company Disclosure
Schedule, since December 31, 2004, no products marketed, distributed, sold or
delivered by the Company or its Subsidiaries have been subject to a recall
initiated by the Company or its Subsidiaries and/or as a result of a request,
directive or other action by any Governmental Authority.

(v) Products Liability. There are no asserted claims or, to the Knowledge of the
Company, threatened claims against the Company or any of its Subsidiaries with
respect to injuries resulting from the ownership, possession, or use of any
product manufactured or sold by the Company or any of its Subsidiaries during
the past five (5) years that would reasonably be expected to result in any
present or future Liability in excess of $250,000 in the aggregate in any
calendar year arising out of any injury to individuals or property as a result
of the ownership, possession, or use of any such product.

(w) Affiliate Transactions. Except as set forth in Section 3.1(w) of the Company
Disclosure Schedule, no officer or director or, to the Knowledge of the Company,
any stockholder or Affiliate of the Company or its Subsidiaries, or individual
related by blood, marriage or adoption to any such Person, is a party to any
agreement, contract, commitment or transaction with the Company or its
Subsidiaries, or has any ownership interest in any property

 

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used by the Company, other than transactions with Citigroup, Inc. or its
subsidiaries on arms length terms (collectively, the “Company Affiliate
Transactions”).

(x) Suppliers and Customers. Section 3.1(x) of the Company Disclosure Schedule
completely and correctly sets forth a list of the top ten customers (each a
“Significant Customer”) and suppliers (each a “Significant Supplier”) of the
Company and its Subsidiaries by dollar volume of sales and purchases,
respectively, for the fiscal year ended September 30, 2006. Since September 30,
2006, none of the Company or its Subsidiaries has received any notice from any
Significant Supplier to the effect that such supplier will stop, materially
decrease the rate of, or materially and adversely change the terms (whether
related to payment, price or otherwise) with respect to, supplying materials,
products or services to the Company or its Subsidiaries (whether as a result of
the consummation of the transactions contemplated hereby or otherwise). Except
as set forth in Section 3.1(x) of the Company Disclosure Schedule, none of the
Company or its Subsidiaries has received any notice from any Significant
Customer of the Company or its Subsidiaries to the effect that such customer
will stop, or materially decrease the rate of, buying products of the Company or
its Subsidiaries (whether as a result of the consummation of the transactions
contemplated hereby or otherwise).

(y) Government Contracts and Subcontracts. (i) Section 3.1(y)(i)(a) of the
Company Disclosure Schedule lists as of the date hereof all active Contracts
with Governmental Authorities (collectively, the “Government Contracts”), active
subcontracts in connection with government Contracts that had or is reasonably
expected to have annual aggregate payments in excess of $500,000 (collectively,
the “Subcontracts”) and pending Government-related bids that had or is
reasonably expected to have annual aggregate payments in excess of $500,000
(collectively, the “Government Bids”), including the name and number of the
Government Contract or Subcontract and the applicable solicitation name and
number for the Government Bid; the name of the other contracting party; the name
of the Governmental Authority that is the customer (if different from the
contracting party); for task orders and delivery orders, the name and number of
the Government Contract or Subcontract (including any blanket purchase
agreement) under which the order was issued or the Government Bid was submitted;
the date the Government Contract or Subcontract was awarded; and the scheduled
end date of the Government Contract or Subcontract, as applicable. True,
accurate and complete copies of all Government Contracts, Subcontracts and
Government Bids have been made available to Parent prior to the date hereof.
Section 3.1(y)(i)(b) of the Company Disclosure Schedule sets forth, as of the
date of this Agreement, for each Government Contract and Subcontract, each
project with a firm order whereby the contractual value of work not yet
performed (funded or unfunded) exceeds $100,000; the contractual value of such
work not yet performed thereunder as of such date; and any dollar amounts
included that are not yet funded.

(ii) With respect to each Government Contract, Subcontract, or Government Bid,
(A) to the Knowledge of the Company, neither the Company nor any of its
Subsidiaries has submitted any inaccurate, untruthful or misleading cost or
pricing data, certification, bid, proposal, report, invoice, claim, or other
information to a Governmental Authority, prime contractor, subcontractor, vendor
or any other Person relating to any Government Contract, Subcontract, or
Government Bid in violation of applicable law and (B) to the Knowledge of the
Company, no cost claimed or proposed by the Company or any of its Subsidiaries
pertaining to any Government Contract, Subcontract, or Government Bid is the

 

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subject of any audit or investigation nor has any such audit or investigation
been threatened. To the Knowledge of the Company, the Company and its
Subsidiaries have not misused or disclosed any classified information or any
records subject to the Privacy Act (5 U.S.C. § 552a).

(iii) Neither the Company nor any of its Subsidiaries nor, to the actual (and
not constructive) Knowledge of the Company, any of their directors, officers,
employees, consultants or agents is or has, during the past five (5) years, been
under administrative, civil or criminal investigation, indictment or information
by any Governmental Authority or subject to any audit or investigation by the
Company or any of its Subsidiaries with respect to any alleged act or omission
constituting a violation of existing law arising under or relating to any
Contract with any Governmental Authority, subcontract, or government-related
bid. During the past five (5) years, neither the Company nor any of its
Subsidiaries has conducted or initiated any internal investigation or made a
voluntary disclosure to any Government Authority with respect to any alleged act
or omission constituting a violation of existing law arising under or relating
to a Contract with any Governmental Authority, subcontract, or
government-related bid.

(iv) Section 3.1(y)(iv) of the Company Disclosure Schedule lists each draft and
final audit report received by the Seller Parties during the past five (5) years
with respect to an accounting audit by any Governmental Authority of any
Contract with any Governmental Authority or subcontract, or of any indirect
cost, other cost or cost accounting practice of the Company or any of its
Subsidiaries. The Company has made available to Parent true, correct and
complete copies of each such report.

(v) The Company and each of its Subsidiaries has not been suspended or debarred
from bidding on contracts or subcontracts for any Governmental Authority, nor,
to the Company’s Knowledge, has any suspension or debarment action been
commenced during the past three (3) years.

(vi) Except for such matters disclosed in Section 3.1(y)(vi) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries has not, with
respect to any Government Contracts or Subcontracts for any Governmental
Authority, and within the preceding three (3) years, received a cure notice or
show cause notice advising the Company or any of its Subsidiaries that it was in
default or would, if it failed to take remedial action, be in default under such
Contract.

(vii) Except for such matters disclosed in Section 3.1(y)(vii) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries have no Contract
or subcontract disputes pending before a contracting office, any agency or
instrumentality of any Governmental Authority.

Notwithstanding any other representations and warranties in this Agreement, the
representations and warranties in this Section 3.1(y) shall be deemed the only
representations and warranties in this Agreement with respect to matters
relating to Contracts with any Governmental Authority, subcontracts in
connection with any government Contracts and government-related bids.

(z) Public Grants and Allowances. Except as set forth in Section 3.1(z) of the
Company Disclosure Schedule, the German Subsidiaries have not received any
grants,

 

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allowances, aid or subsidy during the last three (3) years which is repayable or
which would be repayable as a result of (i) any act or failure to act by the
Company or any of its Subsidiaries or (ii) the Merger.

(aa) Disclaimer of Other Representations and Warranties. The Company
acknowledges and agrees that (i) Parent does not make, and has not made, any
representations or warranties relating to Parent or in connection with the
transactions contemplated hereby other than those expressly set forth in this
Agreement and (ii) no Person has been authorized by Parent to make any
representation or warranty relating to Parent or any of its Subsidiaries, the
businesses of Parent or otherwise in connection with the transactions
contemplated hereby except as set forth in this Agreement and, if made, any such
representation or warranty must not be relied upon as having been authorized by
Parent.

3.2. Representations and Warranties of Parent and Merger Sub. Each of Parent and
Merger Sub represents and warrants, jointly and severally, to the Company as
follows:

(a) Organization, Standing and Power. Each of Parent and Merger Sub is a
corporation duly incorporated or otherwise organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization.

(b) Merger Sub. Merger Sub is a direct wholly-owned subsidiary of Parent and was
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement. Except for liabilities incurred by Merger Sub in connection with
its incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement, Merger Sub has not incurred, directly
or indirectly, through any of its Affiliates, any liability or engaged in any
business activities of any type or kind whatsoever or entered into any agreement
or arrangements with any Person. Merger Sub has no Subsidiaries.

(c) Authority; No Violations.

(i) Each of Parent and Merger Sub has all requisite corporate power and
corporate authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
on the part of Parent and Merger Sub. This Agreement has been duly executed and
delivered by each of Parent and Merger Sub and constitutes a valid and binding
agreement of each of Parent and Merger Sub, enforceable against each of them in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws relating to
or affecting creditors rights generally, or by general equity principles.

(ii) Except as would not reasonably be expected to impede, interfere with,
prevent or materially delay the transactions contemplated by this Agreement, the
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the consummation by Parent and Merger Sub of the Merger and the other
transactions contemplated hereby will not, result in a Violation pursuant to:
(A) any provision of the certificate of incorporation or bylaws of Parent or
Merger Sub or (B) subject to obtaining or making the consents, approvals,
orders,

 

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permits, authorizations, registrations, declarations, notices and filings
referred to in Section 3.2(c)(iii) below, any loan or credit agreement, note,
mortgage, bond, indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or any
Subsidiary of Parent or their respective properties or assets.

(iii) Except as would not reasonably be expected to impede, interfere with,
prevent or materially delay the transactions contemplated by this Agreement, no
consent, approval, order, permit or authorization of, or registration,
declaration, notice or filing with, any Governmental Authority is required by or
with respect to Parent or any Subsidiary of Parent in connection with the
execution and delivery of this Agreement by Parent or Merger Sub or the
consummation by Parent and Merger Sub of the Merger and the other transactions
contemplated hereby, except for those required under or in relation to (A) the
HSR Act; (B) filings required under any applicable federal, state or Foreign
Antitrust Laws; (C) the applicable requirements of CFIUS under Exon-Florio; and
(D) the DGCL with respect to the filing of the Certificate of Merger.

(d) Legal Proceedings. There are no Proceedings pending, or to Knowledge of
Parent, threatened against or affecting Parent or any of its Subsidiaries, and
neither Parent nor any of its Subsidiaries is subject to any order, writ,
injunction, judgment or decree of any court or any Governmental Authority, in
each case, which would or seeks to, enjoin, rescind or materially delay the
transactions contemplated by this Agreement or otherwise hinder Parent from
timely complying with the terms and provisions of this Agreement.

(e) Investigation. Parent acknowledges that, except for the matters that are
expressly covered by the provisions of this Agreement, Parent is relying on its
own investigation and analysis in entering into the transactions contemplated
hereby. Parent is knowledgeable about the industries in which the Company and
its Subsidiaries operate and is capable of evaluating the merits and risks of
the Merger as contemplated by this Agreement and is able to bear the substantial
economic risk of such investment for an indefinite period of time. Parent has
been afforded access to the Books and Records, facilities and personnel of the
Company and its Subsidiaries as requested by Parent for purposes of conducting a
due diligence investigation and has conducted a full due diligence investigation
of the Company and its Subsidiaries.

(f) Disclaimer Regarding Projections. In connection with Parent’s investigation
of the Company and its Subsidiaries and their business, Parent has received from
the Company and its Affiliates and agents certain projections and other
forecasts, including projected financial statements, cash flow items, certain
business plan information and other data of the business of the Company and its
Subsidiaries. Parent acknowledges that (i) there are uncertainties inherent in
attempting to make such projections, forecasts and plans and, accordingly, is
not relying on them, (ii) Parent is familiar with such uncertainties and is
taking full responsibility for making its own evaluation of the adequacy and
accuracy of all projections, forecasts and plans so furnished to it and
(iii) Parent shall have no claim against anyone with respect to any of the
foregoing. Accordingly, Parent acknowledges that neither the Company nor any of
its Subsidiaries has made any representation or warranty with respect to such
projections and other forecasts and plans.

 

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(g) Board Approvals.

(i) The Board of Directors of Parent, by resolutions duly adopted, has approved
the transactions contemplated by this Agreement, including the Merger. No other
corporate proceedings on the part of Parent are necessary to authorize the
transaction contemplated by this Agreement.

(ii) The Board of Directors of Merger Sub has duly (A) determined that this
Agreement and the Merger are advisable and (B) approved this Agreement and the
Merger. No other corporate proceedings on the part of Merger Sub are necessary
to authorize the transactions contemplated by this Agreement other than as
described in Section 3.2(h).

(h) Vote Required. Parent, as the sole stockholder of Merger Sub, has approved
and adopted this Agreement. No other vote of the holders of any class or series
of capital stock of Parent or Merger Sub is required to adopt this Agreement and
approve the transactions contemplated hereby.

(i) Available Funds. Subject to the satisfaction by the Company of the
conditions contained in Sections 6.2(a), (b), (c), (d) and (i) of this
Agreement, immediately prior to the Closing, Parent and Merger Sub will have,
immediately available funds necessary to consummate the Merger and the
transactions contemplated by this Agreement and to pay all related fees and
expenses.

(j) Financial Advisors. No agent, broker, investment banker, financial advisor
or other firm or Person is or will be entitled to any broker’s or finder’s fee
or any other similar commission or fee in connection with any of the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent, other than any agent, broker, investment banker, financial
advisor or other firm or Person the fees and expenses of which shall be paid by
Parent or the Surviving Corporation.

(k) Disclaimer of Other Representations and Warranties. Parent and Merger Sub
each acknowledges and agrees that (i) the Company does not make, and has not
made, any representations or warranties relating to the Company, its
Subsidiaries, the business of the Company or any of its Subsidiaries or
otherwise in connection with the transactions contemplated hereby other than
those expressly set forth in this Agreement and, (ii) no Person has been
authorized by the Company to make any representation or warranty relating to the
Company, its Subsidiaries, the business of the Company or its Subsidiaries or
otherwise in connection with the transactions contemplated hereby except as set
forth in this Agreement and, if made, such representation or warranty must not
be relied upon as having been authorized by the Company.

ARTICLE IV

COVENANTS RELATING TO CONDUCT OF BUSINESS

4.1. Covenants of the Company. During the period from the date of this Agreement
and continuing until the Effective Time, the Company agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement, including those actions

 

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(a) expressly identified in Section 4.1 of the Company Disclosure Schedule,
(b) in this Article IV, (d) actions with respect to the Holdco Financing
identified in Section 4.1(d) of the Company Disclosure Schedule, (e) actions
with respect to the Tender of the Senior Subordinated Notes identified in
Section 4.1(e) of the Company Disclosure Schedule or (f) as required by a
Governmental Authority or by applicable law, rule or regulation, or to the
extent that Parent shall otherwise consent in writing (which consent shall not
be unreasonably delayed or withheld)), the Company shall, and shall cause its
Subsidiaries to, conduct their respective businesses in the Ordinary Course of
Business and shall not do any of the following:

(a)(i) declare or pay any dividends on or make other distributions in respect of
any of their capital stock other than (A) by a wholly-owned Subsidiary
(provided, that the Company or one of its Subsidiaries receives such dividend or
distribution) or (B) dividends required to be paid on any preferred stock of the
Company’s Subsidiaries in accordance with their terms and set forth in
Section 4.1 of the Company Disclosure Schedule; (ii) adjust, split, combine or
reclassify any of their capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of, or in substitution
for, shares of its capital stock; (iii) redeem, repurchase or otherwise acquire,
directly or indirectly, any shares of their capital stock (except pursuant to
existing agreements as disclosed in Section 3.1(m) of the Company Disclosure
Schedule); (iv) grant any Person any right or option to acquire any shares of
its capital stock or issue, deliver or sell any additional shares of its capital
stock or any securities convertible or exchangeable into or exercisable for any
shares of its capital stock or such securities (other than pursuant to any
Benefit Plan in effect on the date hereof or pursuant to the exercise of the
Company Options that are outstanding as of the date of this Agreement) or
(v) enter into any Contract, understanding or arrangement with respect to the
sale, voting, registration or repurchase of its capital stock that is binding on
the Company or any Subsidiary after the Merger;

(b)(i) acquire any assets for a value in excess of $300,000 other than pursuant
to the current capital expenditure budget provided to Parent; (ii) sell, lease,
license or dispose of any assets or property (including any shares or other
equity interests in or securities of any Subsidiaries of the Company), with a
value in excess of $300,000 other than the Merger and dispositions disclosed in
the SEC Reports filed at least three (3) Business Days prior to the date hereof
or publicly announced at least three (3) Business Days prior to the date hereof;
or (iii) create, incur or assume any indebtedness for borrowed money or issue
any debt securities or assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other Person or make any loans, advances or capital contributions to, or
investments in, any other Person, in excess of $300,000, except for indebtedness
for money borrowed, guarantees, loans and advances in the Ordinary Course of
Business, including borrowings under the Credit Agreement;

(c) amend, modify or waive any provision of the Company Organizational
Documents;

(d)(i) increase the compensation or benefits payable or to become payable to any
of its directors, officers or employees except in accordance with regularly
scheduled periodic increases in the Ordinary Course of Business, (ii) pay any
compensation or benefits not required by any existing plan or arrangement
(including the granting of stock options, stock appreciation

 

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rights, shares of restricted stock or performance units) to its directors,
officers or employees, (iii) grant any severance or termination pay to any of
its directors, officers or employees (except pursuant to existing agreements,
plans or policies as disclosed in Section 3.1(m) of the Company Disclosure
Schedule), (iv) enter into any new employment or severance agreement with any of
its directors, officers or employees or (v) establish, adopt, enter into, amend
or take any action to accelerate rights under any Benefit Plans, except in each
case (A) to the extent required by applicable laws, (B) for increases in salary,
wages and benefits of officers or employees in the Ordinary Course of Business,
(C) in conjunction with new hires, promotions or other changes in job status
consistent with past practice or (D) pursuant to existing collective bargaining
agreements;

(e)(i) enter into any Contract that if entered into prior to the date hereof
would have been a Company Material Contract, other than in the Ordinary Course
of Business, (ii) enter into any Contract that would limit or otherwise restrict
the Company or any of its Subsidiaries or any of their successors, or that
would, after the Effective Time, limit or otherwise restrict Parent or any of
its Subsidiaries or any of their successors, from engaging or competing in any
line of business or in any geographic area or (iii) terminate, cancel or make
any material and adverse change in any Company Material Contract;

(f) enter into, modify, terminate or renew any Contract with a labor union
(including any collective bargaining agreement);

(g) mortgage or pledge any of its property or assets or subject any such
property or assets to any Lien, except for Permitted Liens and Liens to be
released at or prior to Closing;

(h) make any changes in accounting methods, policies, practices and procedures,
other than as required by GAAP or law;

(i) institute (without the prior consent of Parent, not to be unreasonably
withheld or delayed), waive, release, assign, settle or compromise any material
legal Proceedings (including any Proceeding arising out of or related to this
Agreement or the transactions contemplated hereby);

(j) take any action or knowingly omit to take any action that causes any Company
Registered Intellectual Property or any Licenses and Permits to become
invalidated, abandoned or dedicated to the public domain;

(k) sell, assign, transfer, license or sublicense any Company Intellectual
Property, other than pursuant to licenses entered into in the Ordinary Course of
Business;

(l) other than in the Ordinary Course of Business, enter into any Company
Affiliate Transactions (without the prior consent of Parent, not to be
unreasonably withheld or delayed);

(m) make, change or revoke any material election relating to Taxes; or settle or
compromise any Proceeding relating to Taxes, consent to any waiver or extension
of any statute of limitations with respect to Taxes or Tax Returns, or fail to
pay and discharge all Taxes,

 

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assessments, and governmental charges upon or against the Company or any of its
Subsidiaries or any of their properties or assets, before the same shall become
delinquent and before penalties accrue thereon; or

(n) commit or agree to do any of the foregoing.

4.2. Control of Other Party’s Business. Nothing contained in this Agreement
shall be deemed to give Parent, directly or indirectly, the right to control or
direct the Company’s operations prior to the Effective Time. Nothing contained
in this Agreement shall be deemed to give the Company, directly or indirectly,
the right to control or direct Parent’s operations prior to the Effective Time.
Prior to the Effective Time, each of the Company and Parent shall exercise and
be fully responsible for, consistent with the terms and conditions of this
Agreement, complete control and supervision over its respective operations.

ARTICLE V

ADDITIONAL AGREEMENTS

5.1. Access; Information and Records; Confidentiality.

(a) During the period commencing on the date hereof and ending on the Closing
Date, the Company shall, upon reasonable request and notice of Parent, and at
Parent’s expense, afford to Parent, its counsel, accountants and other
authorized representatives and advisors reasonable access during normal business
hours to its properties, senior management and Books and Records, including with
respect to Taxes or any applications for insurance; provided, however, that any
such access shall be approved in advance by the persons identified in
Section 5.1(a) of the Company Disclosure Schedule.

(b) During the period commencing on the date hereof and ending on the Closing
Date, without the prior written consent of the Company (which consent shall not
be unreasonably conditioned, delayed or withheld), Parent shall not contact any
suppliers to, employees (except pursuant to Section 5.1(a)) or customers of, or
Governmental Authorities with jurisdiction over, the Company or any of its
Subsidiaries in connection with or pertaining to any subject matter of this
Agreement; provided, however, Parent shall be permitted to engage in discussions
with and to procure conditional, pre-closing, employment commitment letters from
executives or other key employees of the Company or any of its Subsidiaries
designated in advance by Parent to the Company from time to time. Parent agrees
and acknowledges that the Company is entitled to participate in any such
contacts.

(c) During the period commencing on the date hereof and ending on the Closing
Date, without the prior written consent of the Company, Parent shall not, nor
will it permit any of its counsel, financial advisors and other representatives
or Affiliates to, conduct any invasive environmental sampling or testing,
including of soil, sediment, groundwater or surface water or ambient air or
initiate contact with any Governmental Authorities with jurisdiction over the
Company in connection with or pertaining to the environmental condition or
compliance of the Company.

 

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(d) Parent and the Company will hold, and will cause their respective directors,
officers, employees, accountants, counsel, financial advisors and other
representatives and Affiliates to hold, any nonpublic information in confidence
in accordance with the provisions of the letter dated June 21, 2006 between the
Company and Parent, the terms of which are incorporated herein by reference.

5.2. Regulatory Approvals.

(a) Each party hereto shall (i) make the filings required of it or any of its
Affiliates under the HSR Act in connection with this Agreement and the
transactions contemplated hereby, as soon as practicable, but in any event no
later than ten (10) Business Days following the date hereof, (ii) make the
pre-merger filings (if any) required of it or any of its Affiliates under the
applicable Foreign Antitrust Laws in connection with this Agreement and the
transactions contemplated hereby as soon as practicable, but in any event no
later than ten (10) Business Days following the date hereof, and (iii) submit a
joint Exon-Florio notification to CFIUS in connection with this Agreement and
the transactions contemplated hereby as soon as practicable, but in any event no
later than twenty (20) days following the date hereof. The Company, Parent and
Merger Sub shall cooperate with one another (A) in promptly determining whether
any filings are required to be or should be made or consents, approvals, permits
or authorizations are required to be or should be obtained under any other
supranational, national, federal, state or local law or regulation in connection
with the consummation of the transactions contemplated by this Agreement and
(B) in promptly making any such filings, furnishing information required in
connection therewith and seeking to obtain timely any consents, permits,
authorizations, approvals or waivers required to be made or which the Company
and Parent mutually agree should be made.

(b) Each party hereto shall use commercially reasonable efforts to comply with
any request from a Governmental Authority in connection with any regulatory
filing and seek termination of the waiting period under the HSR Act and any
Foreign Antitrust Laws requiring pre-closing approval of the transaction, and
completion of the CFIUS review.

(c) Each party hereto shall promptly, on a priority basis, furnish to each other
all information and assistance and to consult with each other with respect to
the terms of any registration, undertaking, application or other filing to be
made pursuant to any applicable law in connection with the transactions
contemplated by this Agreement reasonably requested in connection with the
foregoing. Subject to applicable law, each party hereto shall promptly inform
the other party of any oral communication with, and provide copies of written
communications with, any Governmental Authority regarding any regulatory filings
or any such transaction. Subject to applicable law, no party hereto shall
independently participate in any formal meeting with any Governmental Authority
in respect of any such filings, investigation or other inquiry without giving
the other party reasonable prior notice of the meeting and, to the extent
permitted by such Governmental Authority, the opportunity to attend and
participate. Subject to applicable law and subject to all applicable privileges
(including the attorney-client privilege), the parties hereto will, promptly, on
a priority basis, consult and cooperate with one another in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto relating to
proceedings under the HSR Act, any other applicable Foreign Antitrust Law and

 

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Exon-Florio. Any party may, as it deems advisable and necessary, reasonably
designate any competitively or business sensitive material provided to the other
parties under this Section 5.2 as “outside counsel only.” Such materials and the
information contained therein shall be given only to the outside legal counsel
of the recipient and will not be disclosed by such outside counsel to employees,
officers or directors of the recipient, unless express written permission is
obtained in advance from the source of the materials.

(d) Notwithstanding any other provision of this Agreement to the contrary,
Parent shall not be required to agree to any divestiture by Parent or the
Company or any of their respective Subsidiaries or Affiliates of shares of
capital stock or of any Material Business of Parent or its Subsidiaries or
Affiliates or of the Company or any of its Subsidiaries or Affiliates, or the
imposition of any material limitation on the ability of any of them to conduct
their businesses or to own or exercise control of such assets, properties and
stock (assuming for purposes of determining materiality in this Section 5.2 that
the transactions contemplated by this Agreement shall have been effected);
provided, however, that the required actions by Parent shall include acceptance
by Parent of (i) any and all divestitures of any non-Material Business and
acceptance of any agreement with any Governmental Authority to hold any assets
in respect of any non-Material Business of Parent or its Subsidiaries or its
Affiliates or of the Company or its Subsidiaries separate and (ii) such
reasonable restrictions on the conduct or structure of any business or
operations of the Company required by any Governmental Authority for national
security reasons to the extent that such reasonable restrictions relate
exclusively to the manufacture and/or export of defense articles or defense
services, which shall include any space-related articles or services controlled
under the ITAR, in each case, as may be required by any applicable Governmental
Authority in connection with the transactions contemplated by this Agreement and
in each case to the extent that such restrictions would not reasonably be
expected to have a Material Adverse Effect; provided, that Parent and Merger Sub
shall have complied with their obligations under this Section 5.2. Further, in
the event any Governmental Authority initiates a Proceeding before a court,
agency or other tribunal of a Governmental Authority asserting jurisdiction
seeking (i) to enjoin all or any material portion of the transactions
contemplated by this Agreement, (ii) relief that would prevent the parties from
consummating any material portion of the transaction contemplated by this
Agreement or (iii) relief that would have any material impact on the terms of
this Agreement, in each case, Parent shall not be required to litigate or defend
any such Proceeding. For purposes of this section, “Material Business“ shall
mean any business or operations of Parent or its Subsidiaries or of the Company
or any of its Subsidiaries that during the latest twelve-month period generated
earnings before interest, taxes, depreciation and amortization in excess of Two
Million Dollars ($2,000,000), in the aggregate for all such businesses or
operations.

(e) Each of the Company and Parent shall pay one-half of the applicable HSR Act
filing fee and one half of any antitrust notification filing fee required in any
other Foreign Antitrust Law.

(f) Subject to the terms and conditions of this Agreement, each of the parties
hereto agrees to use commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement, including, (i) to obtain, in addition to the approvals discussed
in Section 5.2(a), any other consents or approvals as are necessary in

 

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connection with the consummation of the transactions contemplated hereby and
(ii) to effect, in addition to filings discussed in Section 5.2(a), all
registrations and filings as are necessary or desirable in connection with the
consummation of the transactions contemplated hereby.

(g) Notwithstanding the foregoing or any other provision of this Agreement to
the contrary, nothing in this Section 5.2 shall limit a party’s right to
terminate this Agreement pursuant to Section 7.1(b) or 7.1(c) so long as such
party has, up to the date of such termination, complied in all respects with its
obligations under this Section 5.2.

5.3. Employee Benefits Matters.

(a) Employment-Related Agreements. Parent shall cause the Surviving Corporation
to assume the Company’s obligations under the collective bargaining agreements
set forth in Section 3.1(p)(i) of the Company Disclosure Schedule (including
(i) recognizing and, as required by law, bargaining with, or continuing to
recognize and, as required by law, bargain with, the current exclusive
collective bargaining representatives and (ii) honoring, or continuing to honor,
all current collective bargaining agreements), which obligations and agreements
shall be performed in accordance with their terms.

(b) Salary and Benefits. Notwithstanding anything to the contrary herein, but
subject to any modifications in the composition of the workforce of the Company
or any of its Subsidiaries by reason of any restructuring or reorganization
undertaken by Parent following the Effective Time, for a period of at least one
year following the Closing Date or such longer term as may be required by any
applicable collective bargaining agreement, Parent shall, or shall cause the
Surviving Corporation and its Subsidiaries to, (i) compensate the then Company
Employees at an hourly rate or annual base salary, as applicable, that is at
least equal to their hourly rate or annual base salary on the date of this
Agreement and (ii) provide benefits and benefit plans, programs and policies to
the then Company Employees which are, in the aggregate, no less favorable than
those provided by the Benefit Plans on the date hereof.

(c) Pre-Existing Limitations; Deductible; Service Credit. With respect to any
Benefit Plans of Parent, the Surviving Corporation or their Affiliates in which
Company Employees participate after the Effective Time and subject to any
applicable collective bargaining agreements, Parent shall, or shall cause the
Surviving Corporation or such Affiliates to: (i) waive all limitations as to
pre-existing conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to Company Employees,
(ii) provide each Company Employee with credit for any co-payments and
deductibles paid prior to participation in such Benefit Plan of Parent or its
Affiliates in satisfying any applicable deductible or out-of-pocket requirements
under any welfare Benefit Plan and (iii) recognize all service of Company
Employees with the Company and its current and former Affiliates for all
purposes (including for purposes of eligibility to participate, vesting credit,
form of payment and entitlement for benefits, but not benefit accrual) in any
Benefit Plan, to the same extent taken into account under a comparable Benefit
Plan of the Company immediately prior to the Effective Time.

(d) No Restrictions. Nothing contained in this Agreement shall limit or restrict
in any way the rights of Parent or the Surviving Corporation following the
Effective

 

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Time, or impose any liability on either of them or their officers, directors or
agents, in the event they determine to undertake any merger, consolidation,
reorganization or restructuring of the Surviving Corporation, including any
redeployment or termination of any employees.

5.4. Fees and Expenses. Whether or not the Merger is consummated, except as
otherwise provided herein, all Expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such Expenses, except (a) that if the Merger is consummated, the
holders of the Company Common Stock and Company Options shall, by virtue of
payments by the Escrow Agent from the Escrow Fund, pay, or cause to be paid, any
and all property or transfer taxes imposed on the Company or its Subsidiaries
and any real property transfer tax imposed on any holder of shares of capital
stock of the Company resulting from the Merger or arising out of or incurred in
connection with the Closing and the transactions contemplated hereby other than
those imposed upon Parent or Merger Sub or caused by either of them to be
imposed upon the Company or any of its Subsidiaries and (b) as provided in
Section 5.2(e). As used in this Agreement, “Expenses“ includes all out-of-pocket
expenses (including all fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and its Affiliates) incurred
by a party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and the
transactions contemplated hereby, including the preparation of any filing
required by the HSR Act and all matters related to the transactions contemplated
hereby.

5.5. Directors’ and Officers’ Indemnification and Insurance.

(a) After the Effective Time through the sixth anniversary of the Effective
Time, Parent and the Surviving Corporation shall, jointly and severally,
indemnify and hold harmless each present (as of the Effective Time) or former
officer, director or employee of the Company and its Subsidiaries (the “D&O
Indemnified Persons“), from and against all claims, losses, liabilities,
damages, judgments, fines and reasonable fees, costs and expenses (including
attorneys’ fees and expenses) incurred in connection with any claim, action,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to the fact that the D&O Indemnified
Person is or was an officer, director or employee of the Company or any of its
Subsidiaries with respect to matters existing at or occurring prior to the
Effective Time (including this Agreement and the transactions and actions
contemplated hereby), whether asserted or claimed prior to, at or after the
Effective Time, to the fullest extent permitted under applicable law; provided,
however, that no D&O Indemnified Person may settle any such claim without the
prior approval of Parent, such approval not to be unreasonably withheld or
delayed. Each D&O Indemnified Person will be entitled to advancement of
reasonable expenses incurred in the defense of any claim, action, proceeding or
investigation from Parent or the Surviving Corporation within thirty
(30) Business Days of receipt by Parent or the Surviving Corporation from the
D&O Indemnified Person of a of a statement providing reasonable detail on
(i) the nature and amount (to the extent known) of the claim which such D&O
Indemnified Person believes is subject to indemnification, (ii) the known
defenses available to such person against such claim and (iii) counsel proposed
to be engaged by such D&O indemnified Person (which counsel is subject to
approval (not to be unreasonably withheld or delayed) by the Surviving
Corporation); subject to Parent’s receipt of an undertaking by or on behalf of
such D&O Indemnified Person to repay such legal fees, costs and expenses if it
is ultimately

 

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determined under applicable laws that such D&O Indemnified Person is not
entitled to be indemnified.

(b) Parent shall cause the Surviving Corporation to maintain in effect (i) in
its certificate of incorporation and bylaws or the comparable documents of any
successor corporation for a period of six (6) years after the Effective Time,
the current provisions regarding elimination of liability of directors and
indemnification of, and advancement of expenses to, officers, directors and
employees contained in the certificate of incorporation and bylaws of the
Company and (ii) for a period of six (6) years after the Effective Time, the
current policies of directors’ and officers’ liability insurance and fiduciary
liability insurance maintained by the Company and its Subsidiaries (provided,
that the Surviving Corporation may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured) with respect to claims arising
from facts or events that occurred on or before the Effective Time; provided,
however, that in no event shall the Surviving Corporation be required to expend
in any one year an amount in excess of 200% of the annual premiums currently
paid by the Company for such insurance; provided, further, that if the annual
premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount. The Company represents that
annual premiums currently paid by the Company and its Subsidiaries for such
insurance are approximately $177,153.

(c) The Surviving Corporation shall honor and fulfill in all respects the
indemnification obligations of the Company pursuant to indemnification
agreements and employment agreements (the parties under such agreements being
referred to as the “Covered Persons“) with the Company’s directors and officers
existing at or before the Effective Time and identified in Section 5.5(c) of the
Company Disclosure Schedule.

(d) Notwithstanding any time limit herein to the contrary, if any claim, action,
proceeding or investigation (whether arising before, at or after the Effective
Time) is made against any D&O Indemnified Person on or prior to the sixth
anniversary of the Effective Time, the provisions of this Section 5.5 (without
regard to any such time limit) shall continue in effect until the final
disposition of such claim, action, proceeding or investigation.

(e) In the event that Parent or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any Person, then, and in each such case,
proper provision shall be made so that the successors or assigns of Parent or
the Surviving Corporation, as the case may be, shall succeed to the obligations
set forth in this Section 5.5.

(f) This Section 5.5 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation,
the D&O Indemnified Persons and the Covered Persons, shall be binding on all
successors and assigns of the Surviving Corporation and shall be enforceable by
the D&O Indemnified Persons and the Covered Persons.

 

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5.6. Public Announcements. The Company and Parent shall use all reasonable
efforts to develop a joint communications plan and each party shall use all
reasonable efforts (a) to ensure that all press releases (or portions thereof)
and other public statements with respect to the transactions contemplated hereby
shall be consistent with such joint communications plan and (b) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.

5.7. Notices of Certain Events.

(a) The Company shall notify Parent promptly of (i) any written communication
from any Person alleging that the consent of such Person (or another Person) is
or may be required in connection with the transactions contemplated hereby,
(ii) any written communication from any Governmental Authority in connection
with the transactions contemplated hereby, (iii) any Proceedings known to be
threatened or commenced against the Company or any of its Subsidiaries seeking
equitable relief or damages in an amount equal to $200,000 or greater or
(iv) any event, change, occurrence, circumstance or development between the date
of this Agreement and the Effective Time which (A) makes any of the
representations or warranties of the Company contained in this Agreement untrue
or inaccurate in any material respect or (B) causes or is reasonably likely to
cause any breach of its obligations under this Agreement in any material
respect.

(b) Parent shall notify the Company promptly of (i) any written communication
from any Person alleging that the consent of such Person (or other Person) is or
may be required in connection with the transactions contemplated hereby,
(ii) any written communication from any Governmental Authority in connection
with the transactions contemplated hereby or (iii) any event, change,
occurrence, circumstance or development between the date of this Agreement and
the Effective Time which (A) makes any of the representations or warranties of
Parent or Merger Sub contained in this Agreement untrue or inaccurate in any
material respect or (B) causes or is reasonably likely to cause any breach of
the obligations of Parent or Merger Sub under this Agreement in any material
respect.

5.8. Tax Matters.

(a) The Company and each of its Subsidiaries shall prepare and timely file all
Tax Returns and amendments thereto required to be filed by them on or before the
Closing Date. All income, franchise and other material Tax Returns required to
be filed on or before the Closing Date or within thirty (30) days thereafter
shall be provided to Parent at least thirty (30) days in advance of filing for
Parent’s review and approval (which shall not be unreasonably delayed or
withheld). The Company and each of its Subsidiaries shall pay and discharge all
Taxes, assessments and governmental charges upon or against the Company and each
of its Subsidiaries or any of their properties or assets, and all liabilities at
any time existing, before the same shall become delinquent and before penalties
accrue thereon.

(b) Following the Closing, Parent shall prepare and timely file or cause to be
prepared and timely filed all Tax Returns of the Company and the Subsidiaries
required to be

 

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filed by them after the Closing Date. All such Tax Returns that relate entirely
to the Pre-Closing Tax Period, and relevant excerpts of any such Tax Returns
that relate only partially to a Pre-Closing Tax Period, shall be provided to the
Stockholder Representative, no later than thirty (30) days prior to the
applicable filing deadline, for review and approval (which shall not be
unreasonably conditioned, delayed or withheld). No later than the filing
deadline for any such Tax Returns (or, if later, two (2) Business Days following
the final resolution of any dispute with respect to such Tax Returns), the
holders of Company Common Stock and Company Options immediately prior to the
Effective Time, shall, by virtue of payments by the Escrow Agent from the Escrow
Fund, pay or cause to be paid to the Company the amount necessary to reimburse
the Company for the portion of the Taxes allocable to a Pre-Closing Tax Period
to the extent the amount so allocable exceeds the amount of any cash reserve
therefor reflected in the final determination of the Closing Date Working
Capital. In the event that Parent and Stockholder Representative are unable to
resolve any dispute with respect to such Tax Returns, such dispute shall be
submitted to the Arbiter for final determination, which shall be binding upon
the parties.

(c) For purposes of this Agreement, (i) any Taxes relating to a Straddle Period
that are levied on a per diem basis (“Per Diem Taxes“), shall be allocable to
the Pre-Closing Tax Period in an amount equal to the amount of such Per Diem
Taxes for the entire Straddle Period multiplied by a fraction, the numerator of
which is the number of days during the Straddle Period that are in the
Pre-Closing Tax Period and the denominator of which is the total number of days
in the Straddle Period; and (ii) any Taxes, other than Per Diem Taxes, relating
to a Straddle Period shall be allocable to the Pre-Closing Tax Period as if such
taxable period ended as of the close of business on the Closing Date.

(d) The Company and each of its Subsidiaries shall, as of the Closing Date,
terminate all tax allocation agreements or tax sharing agreements with respect
to them and shall ensure that such agreements are of no further force or effect
as to the Company or any of its Subsidiaries on and after the Closing Date and
there shall be no further liability of the Company or any of its Subsidiaries
under any such agreement.

(e) All transfer, documentary, sales, use, excise, stamp, registration and other
such Taxes (including all applicable real estate transfer or gains Taxes) and
related fees (including any penalties, interest and additions to Tax) incurred
in connection with the transactions contemplated by this Agreement, shall be
paid by the Stockholder Representative when due, and the Stockholder
Representative will, at its own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and related fees, and, if required by
applicable law, Parent or the Surviving Corporation will join in the execution
of any such Tax Returns and other documentation.

(f) Any and all refunds of Taxes received by, or credited against the Tax
liability of, the Company and its Subsidiaries (to the extent in excess of any
amount reflected therefor in the final determination of Closing Date Working
Capital) that relate to a Pre-Closing Tax Period shall be for the account of the
holders of Company Common Stock and Company Options, and Parent shall cause the
Company or its Subsidiary, as applicable, to pay over to the such holders of
Company Common Stock and Company Options the amount of any refund so received or
credited no later than thirty (30) days following the receipt or crediting of
such

 

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refund, net of any Tax liability incurred by Parent (or, for taxable periods
following the Closing, by the Company or any of its Subsidiaries) by virtue of
the receipt or crediting of such refund. Following the Closing, Parent shall
cause the Company and its Subsidiaries to carry back to a Pre-Closing Tax
Period, to the maximum extent allowed by law, all federal, state and local net
operating losses of the Company and its Subsidiaries arising in a Pre-Closing
Tax Period. To the extent that the carryback results in an overpayment of Taxes
in a Pre-Closing Tax Period by the Company and its Subsidiaries and to the
extent permissible by applicable law, Parent shall use its commercially
reasonable efforts to cause the Company and its Subsidiaries to reasonably
promptly apply for, obtain and pay over to the Stockholder Representative the
net amount of the refund, if any, of such overpaid Taxes, including, if
requested by the Stockholder Representative, refunds that may be obtained
through the filing of applications for tentative carryback adjustment pursuant
to Section 6411 of the Code, provided that the Stockholder Representative (with
funds from sources other than the Escrow Fund) shall pay any and all fees and
expenses incurred in connection with the preparation and application for such
refund.

(g) Any and all refunds of Taxes received by, or credited against the Tax
liability of, the Company and its Subsidiaries that relate to a Post-Closing Tax
Period shall be for the account of the Parent, the Company or any of its
Subsidiaries, as applicable.

(h) Following the Closing, Parent shall not, and shall cause the Company and its
Subsidiaries not to, file any amended Tax Return for the Company or any of its
Subsidiaries or change any tax election of the Company or any of its
Subsidiaries, in each case, that relates to any Pre-Closing Tax Period of the
Company or any of its Subsidiaries, that would cause an increase in the Taxes of
the Company or its Subsidiaries for which the holders of Company Common Stock or
Company Options or both are required to indemnify a Buyer Indemnified Person for
any Pre-Closing Tax Period, without the prior written consent of the Stockholder
Representative, which shall not be unreasonably delayed, conditioned or
withheld.

5.9. Senior Subordinated Notes. After the date hereof, the Company and
FastenTech shall use their commercially reasonable efforts to make and complete
a tender offer and consent solicitation (the “Tender“) in respect to the Senior
Subordinated Notes consistent with the applicable disclosure on Section 4.1 of
the Company Disclosure Schedule. Following the Closing Date, Parent and the
Surviving Corporation, shall commence the redemption of any and all of the
Senior Subordinated Notes outstanding immediately after the Closing and shall
use their commercially reasonable efforts to complete such redemption as
promptly thereafter as practicable, all in accordance with the Indenture (the
“Redemption“). Reasonable out-of-pocket costs and expenses up to $60,000 in the
aggregate incurred by the Company (or Parent) and FastenTech in respect of the
Redemption shall be for the account of the holders of the Company Common Stock
and Company Options immediately prior to the Effective Time and shall be
received by, and payable out of, the Escrow Fund.

5.10. Consents. The Company shall promptly request the consent of each Person
set forth in Section 6.2(d) of the Company Disclosure Schedule, and shall
thereafter use its commercially reasonable efforts to obtain such consents as
expeditiously as possible. Each such consent shall be in form and substance
reasonably satisfactory to Parent and, without Parent’s prior written consent,
no such consent shall (a) impose any material adverse restrictions or
obligations on the Company or any of its Subsidiaries, (b) provide for any

 

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payment to be made by the Company or any of its Subsidiaries following the
Effective Time or (c) include any material adverse change to the terms of any
underlying agreement or instrument with any such third party.

5.11. Cooperation; Further Assurances. The parties hereto shall cooperate fully
with each other and their respective lenders, attorneys, accountants,
representatives, agents, consultants and advisors in connection with any actions
requested to be taken as part of their respective obligations under this
Agreement and otherwise use their commercially reasonable efforts to consummate
the transactions contemplated hereby and to fulfill their respective obligations
hereunder. From and after the Closing Date, at the request of the other party,
the Stockholder Representative shall, and cause its Affiliates to, and Parent
and the Company shall, and shall cause the Company’s Affiliates to, without
further consideration, execute and deliver such further agreements, documents,
certificates and other instruments and take such other action as may be
reasonably necessary and desirable for the implementation and consummation of
the transactions contemplated by this Agreement, and otherwise use their
commercially reasonable efforts to consummate the transactions contemplated
hereby and to fulfill their respective obligations hereunder.

5.12. Textron; Acraline. Notwithstanding anything to the contrary contained
herein, without Parent’s prior written consent which shall not be unreasonably
withheld or delayed, the Company shall not, and shall cause its Subsidiaries not
to, (i) enter into any agreement with Textron, Inc. or any of its Subsidiaries
or Affiliates with respect to RFP # TM LS-HULL-06-004 or (ii) make any payment,
enter into any compromise or settlement with respect to the promissory note due
January 4, 2007, issued by Acraline Products, Inc. in the principal amount of $3
million.

5.13. Real Property.

(a) The Company shall use its commercially reasonable efforts to cause the
landlords from which the Company leases Real Property set forth in Section 5.13
of the Company Disclosure Schedule to execute and deliver an estoppel
certificate substantially in the form attached as Exhibit D hereto; provided,
Parent and Merger Sub agree that, to the extent a lease governing such Real
Property contains express provisions with respect to the matters to be set forth
in a landlord estoppel certificate, an estoppel certificate conforming to such
lease provisions shall be acceptable.

(b) At Parent’s request, the Company shall use its commercially reasonably
efforts to cooperate with Parent so that Parent can obtain a pro forma owner’s
title policy with respect to each parcel of Owned Real Property located in the
U.S. by a title insurance company, including executing and delivering, at
Parent’s request, customary title affidavits and any other documentation
reasonably required by such title insurer to issue title insurance policies to
Parent in respect of the pro forma policy, including resolutions authorizing the
transactions contemplated hereby.

 

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ARTICLE VI

CONDITIONS PRECEDENT

6.1. Conditions to Each Party’s Obligation to Effect the Merger. The obligations
of the Company, Parent and Merger Sub to effect the Merger are subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:

(a) No Injunctions or Restraints; Illegality. No federal, state, local or
foreign law, statute, regulation, code, ordinance or decree shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other Governmental
Authority of competent jurisdiction shall be in effect, having the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger;
provided, however, that the provisions of this Section 6.1(a) shall not be
available to any party whose failure to fulfill its obligations pursuant to
Section 5.2 shall have been the cause of, or shall have resulted in, such order
or injunction; provided, further, that the parties invoking this condition shall
have used their commercially reasonable efforts to have such injunction, order
or decree vacated or denied.

(b) Regulatory Clearances. Any required waiting period (including any extension
thereof) applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated. All other material filings, notifications,
consents or approvals from any other Governmental Authority required under any
Foreign Antitrust Law with respect to the transactions contemplated by this
Agreement shall have been made or obtained, as applicable. The period of time
for any applicable review process by CFIUS under Exon-Florio (including, if
applicable, any investigation commenced thereunder) shall have expired or been
terminated, CFIUS shall have provided a written notice to the effect that review
of the transactions contemplated by this Agreement has been concluded and that a
determination has been made that there are no issues of national security
sufficient to warrant investigation under Exon-Florio, or the President shall
have made a decision not to block the transaction.

6.2. Additional Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of, or waiver by Parent, on or prior to the Closing Date of the
following additional conditions:

(a) Representations and Warranties. The representations and warranties of the
Company contained in this Agreement which are not qualified as to materiality
shall be true and accurate in all material respects as of the Closing Date as if
made at and as of such date and the representations and warranties of the
Company contained in this Agreement which are qualified as to materiality shall
be true and accurate as of the Closing Date as if made at and as of such date
(except those representations and warranties that address matters only as of a
particular date or only with respect to a specific period of time, which need
only be true and accurate (or true and accurate in all material respects, as
applicable) as of such date or with respect to such period).

 

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(b) Performance of Obligations of the Company. The Company shall have performed
or complied in all material respects with all obligations, agreements and
covenants required to be performed by it under this Agreement at or prior to the
Closing Date.

(c) Company Officer Certificate. Parent shall have received a certificate,
executed by the chief executive officer or the chief financial officer of the
Company, on behalf of the Company, as to the satisfaction of the conditions set
forth in Sections 6.2(a) and 6.2(b) and certifying, with respect to the Company
Preferred Stock, all of the issued and outstanding shares and the names of the
holders thereof and the Preferred Per Share Merger Consideration payable to each
such holder of Company Preferred Stock.

(d) Consents Under Agreements. The Company shall have obtained the consent,
approval or other authorization of each Person set forth in Section 6.2(d) of
the Company Disclosure Schedule.

(e) Director Resignations. Parent shall have received written resignation
letters from each of the members of the Board of Directors of the Company
effective as of the Effective Time.

(f) Dissenting Shares. Appraisal rights shall not have been perfected pursuant
to Section 262(d) of the DGCL by stockholders of the Company with respect to
more than 10% of the number of shares of Company Common Stock outstanding prior
to the Effective Time.

(g) Opinion of Counsel. Parent shall have received from Dechert LLP, counsel to
the Company, an opinion addressed to Parent, dated the Closing Date and
substantially in the form of Exhibit B hereto.

(h) Escrow Agreement. The Escrow Agreement in the form attached hereto as
Exhibit C shall have been duly executed by Parent, the Escrow Agent and the
Stockholder Representative.

(i) Required Company Vote. Parent shall have received evidence that this
Agreement and the Merger have received the Required Company Vote.

(j) Good Standing. Parent shall have received certificates of good standing of
the Company and each of its Subsidiaries in their jurisdiction of organization,
certified charter documents and a certificate of the Secretary of the Company as
to the incumbency of officers, the adoption of authorizing resolutions, and the
Company Organizational Documents.

(k) FIRPTA Certificate. Parent shall have received a certificate of the Company,
in form and substance reasonably acceptable to Parent, certifying that interests
in the Company are not U.S. real property interests in compliance with Treasury
Regulation Sections 1.897-2(h) and 1.1445-5(b)(4)(iii).

(l) Stock Certificates. The Company shall have delivered to Parent original
evidence, such as stock certificates or similar documentation reasonably
satisfactory to Parent, evidencing ownership of the Company and each of its
Subsidiaries.

 

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(m) Payoff Letters. Parent shall have received payoff letters, UCC termination
statements and any other evidence of release of all Liens reasonably requested
by Parent (in each case, in form and substance reasonably acceptable to it) with
respect to the Credit Agreement.

(n) Tender Offer and Consent Solicitation. Parent shall have received evidence
(satisfactory to Parent, in its reasonable discretion) that, as a result of the
Tender, a supplemental indenture has been executed by the Company and the
trustee under the Indenture providing for the deletion of Sections 4.05, 4.06,
4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.18 and 4.19 of the Indenture
and that such sections of the Indenture will be rendered of no further force and
effect immediately upon the acceptance of such tenders in accordance with the
Tender.

6.3. Additional Conditions to Obligations of the Company. The obligations of the
Company to effect the Merger are subject to the satisfaction of, or waiver by
the Company, on or prior to the Closing Date of the following additional
conditions:

(a) Representations and Warranties. The representations and warranties of Parent
and Merger Sub contained in this Agreement which are not qualified as to
materiality shall be true and accurate in all material respects as of the
Closing Date as if made at and as of such date, and the representations and
warranties of Parent and Merger Sub contained in this Agreement which are
qualified as to materiality shall be true and accurate as of the Closing Date as
if made at and as of such date (except those representations and warranties that
address matters only as of a particular date or only with respect to a specific
period of time, which need only be true and accurate (or true and accurate in
all material respects, as applicable) as of such date or with respect to such
period).

(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger Sub
shall have performed or complied in all material respects with all obligations,
agreements and covenants required to be performed by it under this Agreement at
or prior to the Closing Date.

(c) Parent and Merger Sub Officer Certificates. The Company shall have received
a certificate executed by the chief executive officer or the chief financial
officer of each of Parent and Merger Sub, on behalf of such entities, as to the
satisfaction of the conditions set forth in Sections 6.3(a) and 6.3(b).

ARTICLE VII

TERMINATION AND AMENDMENT

7.1. Termination. This Agreement may only be terminated as provided in this
Section 7.1. This Agreement may be terminated at any time prior to the Effective
Time, by action taken or authorized by the Board of Directors of the terminating
party or parties as follows:

(a) By mutual written consent of Parent and the Company, by action of their
respective Boards of Directors;

 

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(b) By either the Company or Parent, if the Effective Time shall not have
occurred on or before June 15, 2007 (the “Termination Date“); provided, however,
that the right to terminate this Agreement under this Section 7.1(b) shall not
be available to any party who has failed to comply with any obligation under
this Agreement and such failure has been the primary cause of the failure of the
Effective Time to occur on or before the Termination Date;

(c) By either the Company or Parent, if any Governmental Authority shall have
issued an order, decree or ruling or taken or issued a public statement
threatening to take any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement; provided,
however, that the right to terminate this Agreement under this Section 7.1(c)
shall not be available to any party whose failure to comply with Section 5.2 has
been the primary cause of such action or inaction;

(d) By Parent, if neither Parent nor Merger Sub is in material breach of its
obligations under this Agreement, and if (i) at any time that any of the
representations and warranties of the Company herein become untrue or inaccurate
such that the conditions contained in Section 6.2(a) would not be satisfied or
(ii) there has been a breach on the part of the Company of any of its covenants
or agreements contained in this Agreement such that the conditions contained in
Section 6.2(b) would not be satisfied, and, in both case (i) and case (ii), such
breach (if curable) has not been cured within thirty (30) days after notice to
the Company;

(e) By the Company, if it is not in material breach of its obligations under
this Agreement, and if (i) at any time that any of the representations and
warranties of Parent or Merger Sub herein become untrue or inaccurate such that
the conditions contained in Section 6.3(a) would not be satisfied or (ii) there
has been a breach on the part of Parent or Merger Sub of any of their respective
covenants or agreements contained in this Agreement such that the conditions
contained in Section 6.3(b) would not be satisfied, and, in both case (i) and
case (ii), such breach (if curable) has not been cured within thirty (30) days
after notice to Parent; or

(f) By Parent, if

(i) either the chief executive officer or the chief financial officer of
FastenTech fails to provide the certifications required under Section 302 or
Section 906 of the Sarbanes-Oxley Act of 2002 with respect to any Annual Report
on Form 10-K or Quarterly Report on Form 10-Q of FastenTech at the time such
report is required to be filed under the Exchange Act.; or

(ii) if there is any restatement of FastenTech’s consolidated financial
statements or any material change in FastenTech’s previously announced financial
results after the date of this Agreement.

7.2. Effect of Termination. In the event of termination of this Agreement by
either the Company or Parent as provided in Section 7.1, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of Parent or the Company or their respective officers or directors; provided,
however, that nothing herein shall relieve any party from liability for the
willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement arising prior to such termination. The
provisions of

 

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Sections 5.2(e), 5.4 and 5.8 and this Section 7.2 and Article IX shall survive
any termination of this Agreement.

7.3. Extension; Waiver. At any time prior to the Effective Time, each party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained herein or in any document,
certificate or writing delivered pursuant hereto or (c) waive compliance by the
other party with any of the agreements or conditions contained herein. Any
agreement on the part of any party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of a party to assert any of its rights hereunder shall not
constitute a waiver of such rights, and no single or partial exercise of any
right, remedy, power or privilege shall preclude any other or further exercise
thereof by any party. The waiver by any party of any breach of this Agreement,
or the failure of any party to require the performance or satisfaction of any
term or obligation of this Agreement, shall not prevent subsequent enforcement
of such term or obligation or be deemed a waiver of any subsequent breach.

ARTICLE VIII

INDEMNIFICATION; ESCROW

8.1. Survival of Representations, Warranties and Agreements. The representations
and warranties and covenants (other than the covenants in this Article VIII and
Sections 5.5, 5.8 and 5.11, which shall survive in accordance with their
respective terms) made by the Company, Parent and Merger Sub in this Agreement
(including, the representations and warranties set forth in Article III hereof
and the representations and warranties set forth in any certificate delivered by
the Company, Parent or Merger Sub in connection with this Agreement) shall
survive the Closing and shall remain in full force and effect and shall survive
until the applicable Survival Period.

8.2. Claims.

(a) Claims Against Holders of Company Common Stock and Company Options. From and
after the Closing Date, Parent, Merger Sub, the Surviving Corporation, their
respective Subsidiaries and each of its respective directors, officers,
employees, shareholders, successors, permitted assigns, owners, agents and
Affiliates (collectively, the “Buyer Indemnified Persons“) will be entitled to
make a claim against the Escrow Fund, and only against the Escrow Fund, pursuant
to the terms of this Article VIII, for, any loss, liability, claim, damage,
fine, penalty, fee, cost or expense (including reasonable legal fees and
expenses, but excluding consequential damages (other than consequential damages
paid or payable to third parties), diminution in value or lost profits)
(“Damages“) which are suffered or incurred by any Buyer Indemnified Person or to
which any Buyer Indemnified Person may otherwise become subject (regardless of
whether or not such Damages relate to any third-party claim) and which arise
from or as a result of:

 

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(i) any inaccuracy in or breach of any representation or warranty of the Company
contained in this Agreement or in any certificate delivered by the Company in
connection with this Agreement;

(ii) any breach of any covenant or obligation of the Company contained in this
Agreement requiring performance prior to the Closing;

(iii) any and all Taxes which are imposed on the Company or any of its
Subsidiaries in respect of its income, business, property or operations or for
which the Company or any of its Subsidiaries may otherwise be liable (1) for the
Pre-Closing Tax Period or (2) resulting by reason of the several liability of
the Company or any of its Subsidiaries pursuant to Treasury Regulations section
1.1502-6 or any analogous state, local or foreign law or regulation or by reason
of the Company or any of its Subsidiaries having been a member of any
consolidated, combined or unitary group on or prior to the Closing Date; or

(iv) any decrease in the Common Stock Merger Consideration in accordance with
Section 2.9;

provided, however, that the maximum liability of the holders of Company Common
Stock and Company Options as a group for Damages in respect of any claim or
claims for indemnification under this Agreement shall not exceed the amount of
the Holdback Consideration (the “Maximum Amount“); provided, further, that in no
event will any Buyer Indemnified Person assert a claim pursuant to
Section 8.2(a)(i), unless (i) the monetary value of all Damages suffered by the
Buyer Indemnified Persons with respect to any individual matter or series of
related matters exceeds Ten Thousand Dollars ($10,000) (the “Mini-Basket“) and
(ii) the cumulative total of the Damages suffered by the Buyer Indemnified
Persons exceeds Two Million Five Hundred Thousand Dollars ($2,500,000) (the
“Basket“, whereupon such Buyer Indemnified Person shall be entitled to make a
claim for indemnity hereunder only for all Damages in excess of the Basket.
Notwithstanding anything to the contrary in this Section 8.2(a), the Basket
shall not apply to (A) any claims under Sections 8.2(a)(ii), 8.2 (a)(iii) and
8.2(a)(iv); (B) to the Extended Representations other than the representations
and warranties of the Company in Section 3.1(r); or (C) to the representations
and warranties of the Company in the second sentence of Section 3.1(k)(i).

In the case of any representation or warranty, except with respect to
representations and warranties of the Company in Sections 3.1(a), 3.1(b),
3.1(i)(A), 3.1(j) and 3.1(n), that is limited by “material,” “Material Adverse
Effect” or by any similar term or limitation, the occurrence of a breach or
inaccuracy of such representation or warranty, as the case may be, and the
amount of Damages subject to indemnification hereunder shall be determined as if
“material,” “Material Adverse Effect” or such similar term or limitation were
not included therein.

(b) Indemnification by Parent. From and after the Closing Date, Parent (the
“Seller Indemnifying Person“) shall hold harmless and indemnify the holders of
Company Common Stock and Company Options and, in the case of any entity, each of
its respective directors, officers, employees, shareholders, successors,
permitted assigns, owners, agents and Affiliates (collectively, the “Seller
Indemnified Persons“ and, together with the Buyer Indemnified Persons, the
“Indemnified Persons“) and shall hold each of them harmless from and

 

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against, and shall compensate and reimburse any Seller Indemnified Person for,
any Damages which are suffered or incurred by any Seller Indemnified Person or
to which any Seller Indemnified Person may otherwise become subject (regardless
of whether or not such Damages relate to any third-party claim) and which arise
from or as a result of:

(i) any inaccuracy in or breach of any representation or warranty of Parent or
Merger Sub contained in this Agreement or in any certificate delivered by Parent
or Merger Sub in connection with this Agreement;

(ii) any breach of any covenant or obligation of Parent or Merger Sub contained
in this Agreement or any covenant or obligation of the Company or the Surviving
Corporation requiring performance after the Closing; or

(iii) any increase in the Common Stock Merger Consideration in accordance with
Section 2.9;

provided, however, that in no event will any Seller Indemnified Person assert a
claim under Section 8.2(b)(i) unless the cumulative total of the Damages
suffered by the Seller Indemnified Persons exceeds the Basket, whereupon such
Seller Indemnified Person shall be entitled to make a claim for indemnity
hereunder for all such Damages in excess of the Mini-Basket.

(c) Third-Party Claims. The obligations and liabilities of any party hereto
against which indemnification is sought hereunder with respect to claims
resulting from the assertion of liability by third parties shall be subject to
this Section 8.2(c).

(i) Promptly after receipt by any Indemnified Person of notice of any demand or
claim or the commencement of any action, proceeding or investigation (an
“Asserted Liability“) that could reasonably be expected to result in Damages,
the Indemnified Person shall give notice thereof (a “Claim Notice“) to any other
party obligated to provide indemnification pursuant to Section 8.2(a) or
Section 8.2(b) (each such party, an “Indemnifying Person“); provided, however,
that with respect to a Buyer Indemnified Person’s right to indemnity under
Section 8.2(a), the Stockholder Representative shall act for the holders of
Company Common Stock and Company Options. Each Claim Notice shall describe the
Asserted Liability in reasonable detail and shall indicate the amount
(estimated, if necessary) of the Damages that have been or may be suffered by
the Indemnified Person. The rights of any Indemnified Person to be indemnified
hereunder shall not be adversely affected by its failure to give, or its failure
to timely give, a Claim Notice with respect thereto unless, and if so, only to
the extent that, the Indemnifying Person is prejudiced thereby.

(ii) The Indemnifying Person shall have the right, exercisable by written notice
to the Indemnified Person within thirty (30) days of receipt of a Claim Notice
from the Indemnified Person, to assume the defense of such Asserted Liability,
using counsel selected by the Indemnifying Person and reasonably acceptable to
the Indemnified Person (it being understood that the costs and expenses incurred
by the Stockholder Representative will be reimbursed in accordance with
Section 8.3). Prior to the time which the Indemnifying Party may assume the
defense of any Asserted Liability, the Indemnified Party may take such actions
as are reasonably necessary to preserve the ability to defend such Asserted
Liability and to preserve any

 

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counterclaims. In the event the Indemnifying Person elects to assume the defense
of the Asserted Liability, the Indemnifying Person shall only be liable to the
Indemnified Person for legal expenses incurred by the Indemnified Person in
connection with the defense thereof prior to such assumption of the defense by
the Indemnifying Person. Subject to the foregoing, if the Indemnifying Person
elects to compromise or defend such Asserted Liability, the Indemnified Person
shall cooperate, at the expense of the Indemnifying Person, in the compromise
of, or defense against, such Asserted Liability. If the Indemnifying Person
elects not to defend the Asserted Liability or fails to notify the Indemnified
Person of its election to defend within thirty (30) days as herein provided, the
Indemnified Person may defend such Asserted Liability until a notice of election
to defend is delivered. The Indemnified Person and the Indemnifying Person may
participate, at their own expense, in the defense of such Asserted Liability. If
the Indemnifying Person elects to defend any claim, the Indemnified Person shall
make available to the Indemnifying Person any documents within its control
reasonably requested by the Indemnifying Party and the reasonable assistance of
its employees, for which the Indemnifying Person shall be obliged to reimburse
the Indemnified Person the reasonable out-of-pocket expenses of making them
available. If the Indemnifying Person elects not to defend any claim, the
Indemnified Person shall provide to the Indemnifying Person such information
concerning the Asserted Liability, and the defense thereof, as the Indemnifying
Person shall reasonably request.

(iii) Notwithstanding anything contained herein to the contrary, the Indemnified
Person shall be entitled to assume control of such defense and the Indemnifying
Person shall pay the reasonable fees and expenses of counsel retained by the
Indemnified Person and reasonably acceptable to the Indemnifying Person, if
(A) the claim for indemnification relates to or arises in connection with any
criminal proceeding, action, indictment, allegation or investigation (provided,
that in such event (x) the Indemnifying Person shall be entitled to participate
in the defense of such claim and to employ counsel of its choice for such
purpose (provided, that the fees and expenses of such separate counsel shall be
borne by the Indemnifying Person) and (y) the Indemnifying Person shall be
entitled to review the files and records relating to such defense upon request);
(B) the Asserted Liability seeks and continues to seek an injunction or
equitable relief against the Indemnified Person; (C) the Indemnifying Person
failed or is failing to diligently defend such claim; (D) the settlement of, or
an adverse judgment with respect to, the Asserted Liability is, in the good
faith judgment of the Indemnified Person, reasonably likely to establish
judicial precedent materially adverse to the continuing business interests of
the Indemnified Person; or (E) the claim would reasonably give rise to Damages
which are more than the amount indemnifiable by such Indemnifying Person
hereunder.

(iv) Notwithstanding anything to the contrary in this Section 8.2(c), to the
extent any third-party claims relate to Taxes, the following additional
provisions shall apply. Any Proceeding with respect to Taxes for a period which
commences prior to and includes but does not end on the Closing Date shall be
controlled jointly by the Stockholder Representative, acting on behalf of the
holders of Company Common Stock and Company Options, and Parent. The Stockholder
Representative shall not have the right to control any Proceeding, to initiate
any claim for refund, to file any amended return or to take any other action
(including settling any Proceeding) if, as a result of such Proceeding, claim
for refund, amended return or other action, the Taxes payable by Parent or the
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Company Common Stock or Company Options are not obligated to indemnify the Buyer
Indemnified Persons pursuant to Section 8.2(a)(iii) would be likely to be
materially increased. By written notice to the Stockholder Representative,
Parent shall have the right to instruct the holders of Company Common Stock or
Company Options to forego a Proceeding with respect to one or more Tax items for
which the holders of Company Common Stock or Company Options may be liable to
indemnify the Buyer Indemnified Persons. Such notice shall constitute a waiver
of the right of Buyer Indemnified Persons to indemnification only for any Taxes
arising out of such item for the period or periods involved, but shall not
otherwise waive any rights of the Buyer Indemnified Persons under this
Article VIII.

(v) If any Indemnifying Person has assumed the defense of an Asserted Liability
in accordance with the terms hereof, such Indemnifying Person shall have the
right to consent to the entry of judgment with respect to or otherwise settle
such Asserted Liability without the consent of the Indemnified Party if (A) the
settlement involves solely monetary damages, (B) the Indemnifying Party
expressly agrees in writing to the Indemnified Party that, as between the two,
the Indemnifying Party is solely obligated to satisfy and discharge the Asserted
Liability and (C) such judgment or settlement expressly and unconditionally
releases the Indemnified Person of the Asserted Liability, without prejudice to
the Indemnified Person. If the foregoing conditions are not satisfied, the
Indemnifying Person shall have the right to consent to the entry of judgment
with respect to or otherwise settle such Asserted Liability only upon receipt of
the written consent of the Indemnified Person, which consent shall not be
unreasonably withheld. If the Indemnified Person does not give such consent, the
Indemnifying Party shall resume the diligent defense of the Asserted Liability.
Regardless of whether the Indemnifying Party elects to assume the defense of the
Asserted Liability in accordance with the terms hereof, the Indemnified Person
shall not admit any liability with respect to, consent to the entry of judgment
with respect to, or otherwise settle such Asserted Liability without the prior
written consent of the Indemnifying Person, which consent shall not be
unreasonably withheld.

(vi) Notwithstanding anything contained in this Agreement to the contrary, in
the case of fraud or intentional misrepresentation with the intent to deceive,
the limitations on indemnification (including as to duration and amount)
contained herein shall not apply to any claim for indemnification by an
Indemnified Person.

8.3. Escrow Arrangements.

(a) Escrow Fund. As security for the indemnity provided for in Section 8.2,
Parent shall deposit or cause to be deposited with the Escrow Agent the Holdback
Consideration. Immediately after the Effective Time, the Holdback Consideration
will be deposited with the Exchange Agent, or another institution acceptable to
Parent and the Shareholder Representative to act as escrow agent (the “Escrow
Agent“), which institution shall execute an escrow agreement containing
provisions substantially similar to this Section 8.3 and otherwise in form and
substance as set forth in Exhibit C attached hereto (the “Escrow Agreement“),
such deposit to constitute an escrow fund (the “Escrow Fund“) to be governed by
the terms set forth in the Escrow Agreement.

 

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(b) Escrow Period; Distribution upon Termination of Escrow Period. Subject to
the following requirements, the Escrow Fund shall be in existence immediately
following the Effective Time and shall terminate on the date that is three
(3) years following the Closing Date (such period being the “Escrow Period“);
provided, however, that the remaining amount constituting the balance of the
Special Holdback Amount, after the application of such funds as provided for
herein, shall be released by the Escrow Agent and paid to the Exchange Agent, to
be distributed pro rata to each holder of Company Common Stock or Company
Options held by such holder immediately prior to the Effective Time, upon the
later of (x) the date Final Debt and Final Working Capital are determined or
(y) the date of the final payment of all amounts due to any party in respect of
the redemption of the Senior Subordinated Notes in accordance with Section 5.9;
provided, further, that if the Special Holdback Amount is less than the amount
of claims paid to or then asserted by Parent pursuant to Section 8.2(a)(iv), the
remainder of the Escrow Fund shall be used to cover such shortfall. In addition,
on April 30, 2008 (the “First Release Date“), Seven Million Five Hundred
Thousand Dollars ($7,500,000), less any amounts paid to Parent and the amount of
any Unsatisfied Claims asserted by Parent in accordance with this Article VIII
since the Closing Date for matters subject to indemnification in favor of a
Buyer Indemnified Person under this Article VIII, shall be delivered to the
Exchange Agent to be distributed to the holders of Company Common Stock and
Company Options. Thereafter, upon the two (2) year anniversary of the Closing
Date (the “Second Release Date“), Seven Million Five Hundred Thousand Dollars
($7,500,000), less any amounts paid to Parent and the amount of any Unsatisfied
Claims asserted by Parent in accordance with this Article VIII since the First
Release Date, shall be delivered to the Exchange Agent to be distributed to the
holders of Company Common Stock and Company Options, and upon the three (3) year
anniversary of the Closing Date, Ten Million Dollars ($10,000,000), less any
amounts paid to Parent and the amount of any Unsatisfied Claims asserted by
Parent in accordance with this Article VIII since the Second Release Date shall
be delivered to the Exchange Agent to be distributed to the holders of the
Company Common Stock and Common Options. Notwithstanding anything herein to the
contrary, the Escrow Period shall not terminate with respect to any amount of an
unsatisfied claim specified in a certificate signed by an officer of Parent
prior to the expiration of the applicable Survival Period (A) stating that a
Buyer Indemnified Person has incurred, paid or may incur or be required to make
a payment for Damages, (B) specifying in reasonable detail the individual items
of Damages included in the amount so stated (to the extent known or
determinable) and the nature of the misrepresentation, breach of warranty or
covenant to which such item is related and (C) that Parent has a good faith
belief that it is entitled to indemnification under Article VIII hereof, which
is delivered to the Escrow Agent prior to termination of the Escrow Period (any
such certificate including the requirements of clauses (A), (B) and (C) above,
being a “Claims Notice“ and the amount of any such claim specified in a Claims
Notice being an “Unsatisfied Claim“). Any amount of the Escrow Fund not subject
to Unsatisfied Claims as contemplated by this Section 8.3 (the “Remaining
Holdback Consideration“) shall be delivered to the Exchange Agent to be
distributed to the holders of Company Common Stock and Company Options upon the
termination of the Escrow Period. As soon as any such claims have been resolved,
the Escrow Agent shall deliver to the Exchange Agent to be distributed to the
holders of Company Common Stock and Company Options the remaining portion, if
any, of the Escrow Fund not required to satisfy any Unsatisfied Claims then
pending as additional Holdback Consideration. Deliveries of Holdback
Consideration to the holders of Company Common Stock and Company Options
pursuant to this Section 8.3(b) shall

 

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be made in proportion to their respective holdings of Company Common Stock
(calculated on a fully diluted basis) at the Effective Time. Notwithstanding the
foregoing, prior to any such distribution to the holders of Company Common Stock
and Company Options, the Stockholder Representative shall be entitled to receive
from the Escrow Fund an amount equal to any and all fees and expenses incurred
by the Stockholder Representative after the Closing in connection with the
performance of its duties hereunder (such fees and expenses to be evidenced by
written invoices delivered to the Escrow Agent by the Stockholder
Representative) that have not been previously reimbursed, and such amount shall
be deducted from the amount to be distributed to such holders.

(c) Sole and Exclusive Remedy. Except as contemplated by Section 8.2(c)(vi),
Parent and Merger Sub acknowledge and agree that their sole and exclusive remedy
for Damages with respect to any and all claims relating to the subject matter of
this Agreement shall be satisfied by distribution from the Escrow Fund in
accordance with the provisions of this Section 8.3 and the Escrow Agreement.

8.4. Other Limitations.

(a) Parent and Merger Sub acknowledge and agree that except with respect to
equitable remedies or in the case of fraud or intentional misrepresentation with
intent to deceive, their sole and exclusive remedy for damages with respect to
any and all claims relating to the subject matter of this Agreement shall be
pursuant to the indemnification provisions set forth in this Article VIII.

(b) The amount of any Damages for which relief is provided under any of Sections
8.2(a) and 8.2(b) shall be net of (i) any specific reserves (to the extent taken
into account as a liability in the calculation of Final Working Capital)
established on the Closing Statement with respect to the matters to which such
Damages relate and (ii) any amounts actually recovered by the Indemnified Person
from any unrelated third parties or under insurance policies with respect to
such Damages (less any out-of-pocket expenses or costs incurred to obtain such
recoveries and less any increase in premiums attributable to the incurrence of
such Damages). If requested in writing by an Indemnifying Person, an Indemnified
Person shall use its commercially reasonable efforts to seek recovery under
insurance policies for any claim for which the Indemnifying Person has made
payment in full within a reasonable amount of time after such payment by an
Indemnifying Person or alternatively, may, assuming such payment in full by an
Indemnifying Person and to the extent permitted under applicable law and the
relevant insurance policy, grant an assignment of the right of such Indemnified
Person to assert a claim under such insurance policies. In the event of such
assignment, the Indemnifying Person will pursue the claim at its own expense.
For the avoidance of doubt, the parties agree that the rights of an Indemnified
Person to seek and collect indemnification in full from any Indemnifying Person
shall not be qualified, tolled, delayed or impaired in any manner by reason of
any claims that may exist in favor of the Indemnified Person against third
parties or under insurance coverage. An Indemnified Person shall be under no
obligation to (x) pursue any claims which it may have against third parties or
(y) grant or assign any right or claim which it may have against any third party
to any Indemnifying Person except as provided in Section 8.5(d). To the extent
an Indemnified Person receives payments that constitute final and unconditional
double recovery in respect of the same claim or series of claims from an
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after first receiving payment in full by an Indemnifying Person, the Indemnified
Person shall refund to the Indemnifying Person an amount up to the amount
constituting the double recovery, net of all out-of-pocket costs and expenses
incurred by the Indemnified Person in connection with or arising out such claim.

8.5. Environmental Matters.

(a) Environmental Investigation. In the event any Buyer Indemnified Person (or
its agents, contractors, employees or others acting on its behalf) conducts
Environmental Sampling (as defined below) in violation of this Section 8.5(a),
they shall not be entitled to seek indemnification with respect to any
environmental condition discovered as a result thereof. At any time following
the Closing Date, any Buyer Indemnified Person may, after providing ten
(10) day’s prior written notice to the Stockholder Representative (or any
shorter period in circumstances where the Buyer Indemnified Person determines in
good faith it must conduct such Environmental Sampling expeditiously), conduct,
at its sole cost and expense, invasive environmental sampling or testing of
soil, sediment, groundwater, surface water or ambient air (“Environmental
Sampling“) under the following conditions:

(i) For the known contamination or recognized environmental conditions (as
defined in the American Society of Testing & Materials Standard E-1527-05
(hereinafter a “Recognized Environmental Condition“ or “REC“)) described on
Exhibit E at the Real Property listed on Exhibit E, Environmental Sampling may
be conducted if and only to the extent reasonably necessary to investigate such
known contamination or Recognized Environmental Condition listed on Exhibit E
(or any known or unknown contamination or Recognized Environmental Condition
identified in the course of Environmental Sampling permitted under this
Section 8.5(a)(i)) if it presents or is reasonably likely to present a
substantial endangerment to health or the environment, or otherwise result in
the payment of Damages by any Buyer Indemnified Party arising from the
existence, or a Release, of Materials of Environmental Concern.

(ii) For all Real Property (including the Real Property subject to
Section 8.5(a)(i) above), in addition to the Environmental Sampling allowed
under Section 8.5(a)(i) above, Environmental Sampling may also be conducted if:
(1) required by Environmental Law; (2) required by an enforceable order,
directive or demand of a Governmental Authority acting within its jurisdiction;
(3) reasonably necessary to investigate conditions that pose a substantial and
immediate or imminent endangerment to health or the environment; (4) reasonably
necessary to defend against or otherwise respond to a claim by any third
parties; (5) with respect to Leased Real Property, reasonably necessary to
comply in all material respects with the requirements of the applicable lease
agreement (as the environmental or other related provisions of such lease
agreement are in effect as of the date hereof); or (6) required in connection
with the bona fide repair of Improvements at any of the Real Property actually
undertaken to the extent such Environmental Sampling is required to accomplish
such repair, provided, that, for the avoidance of doubt, the indemnification of
any Buyer Indemnified Persons shall not be limited with respect to Damages for
environmental matters where the environmental conditions giving rise to such
Damages were discovered as a result of any Buyer Indemnified Person conducting
Environmental Sampling or analysis that is required by applicable Environmental
Laws of any production water wells that exist and are in use on the

 

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Closing Date at any Real Property, any wastewater discharges at any Real
Property or any indoor or outdoor air at any Real Property.

(b) Remediation Standard. “Remediation Standard“ shall mean, with respect to
environmental matters for which indemnity is provided herein and for which
Remedial Action is required in connection with the resolution of such matter,
the least stringent cleanup standard that: (i) is required under applicable
Environmental Laws; (ii) complies in all material respects with any order or
requirement of any applicable Governmental Authority consistent with the current
property use and zoning for the property; (iii) where applicable, settles and
resolves any related Asserted Liability for which the Seller Indemnifying Person
is responsible under this Agreement, the resolution of which requires Remedial
Action; (iv) reduces employee exposure to any Materials of Environmental Concern
below applicable permissible exposure limits established by applicable
Governmental Authorities; (v) with respect to Leased Real Property, satisfies
the requirements in all material respects under the applicable lease agreement
(as the environmental or other related provisions of such lease agreement are in
effect as of the date hereof); (vi) does not unreasonably and materially
interfere with continued commercial and business use, as the case may be, of the
facility and its corresponding property (as such facility or property was in use
on the Closing Date); and (vii) does not unreasonably expose Parent, the
Surviving Corporation or any of their Subsidiaries to a risk of material
liability to third parties as a result of the offsite migration of Materials of
Environmental Concern. With respect to environmental matters for which indemnity
is provided herein and for which Remedial Action is required in the resolution
of such matters, the Remedial Action undertaken shall be to the extent necessary
to achieve the Remediation Standard and each Remedial Action shall be performed
using the then prevailing industry practice method of achieving such Remediation
Standard. With respect to environmental matters for which indemnity is provided
herein as a result of an inaccuracy in, or breach of any representation or
warranty of the Company contained in Section 3.1(r) of this Agreement or in any
certificate delivered by the Company in connection with Section 3.1(r) of this
Agreement, in either case relating to a violation of any Environmental Law,
Damages shall not include the capital cost of a new item of additional equipment
or facility that is required by the applicable Governmental Authority after the
Closing Date to prevent reoccurrence of the violation, even if such requirement
resulted from violations prior to the Closing Date.

(c) Consultation Regarding Remedial Action. The Buyer Indemnified Persons shall
conduct and control any Remedial Action and shall manage such Remedial Action in
good faith and in a responsible manner. The Stockholder Representative (on
behalf of the holders of Company Common Stock and Company Options) shall be
entitled, at its sole cost and expense, to monitor (including observe and take
split samples with respect to) the Remedial Action. Such monitoring shall
include the right to receive copies of all non-confidential draft and final
reports, workplans and analytical data and other documents to be submitted to
Governmental Authorities (at least ten (10) days prior to such submittal) or
received from Governmental Authorities (no later than ten (10) days following
such receipt), the opportunity to comment on all such documents to be submitted
(and all such comments shall be given due consideration by the Buyer Indemnified
Persons) and, subject to any then applicable confidentiality restrictions, to
attend and participate in meetings with the applicable Governmental Authorities.
The Stockholder Representative, on behalf of the holders of

 

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Company Common Stock and Company Options, shall have an opportunity to consult
with the Buyer Indemnified Persons regarding the Remedial Action.

(d) Assignment. Concurrently with (i) the payment in full to a Buyer Indemnified
Person of any claim for indemnity for a breach of the representations and
warranties in Section 3.1(r) or (ii) delivery to a Buyer Indemnified Person of a
Fully Reserved Claim Notice (as defined below), upon written request from the
Stockholder Representative to the applicable Buyer Indemnified Person, such
Buyer Indemnified Person agrees to assign to the Stockholder Representative, on
behalf of the holders of Company Common Stock and Company Options, any and all
rights to indemnity, recovery, contribution or any other action against any
other Person pursuant to any agreement set forth on Exhibit F attached hereto.
Concurrently with any such assignment to the Stockholder Representative, on
behalf of the holders of Company Common Stock and Company Options, the holders
of Company Common Stock and Company Options, shall hold harmless and indemnify
the Buyer Indemnified Persons, from and against any and all Damages suffered or
incurred which arise from or as a result of such assignment and as a result of
cooperating as provided in the next sentence. Each Buyer Indemnified Person
agrees that if a claim is asserted as contemplated by this Section 8.5, for
which a Buyer Indemnified Person has provided a Claim Notice pursuant to
Section 8.2(c)(i) of this Agreement to the Stockholder Representative, then such
Buyer Indemnified Person shall reasonably cooperate with the Stockholder
Representative, on behalf of the holders of Company Common Stock and Company
Options, by providing copies of documents and access to employees in respect of
such claim for indemnity, recovery, contribution or any other action against any
other Person, and the applicable Buyer Indemnified Person agrees not to take or
fail to take any action, to the extent permitted under the agreement to be
assigned or under any law, rule, regulation, decree, written or other judicial
or administrative order or directive then applicable to it, that waives or
extinguishes such Buyer Indemnified Person’s right to indemnity, recovery,
contribution or any other action against any other Person or other remedy
available under the agreements set forth in Exhibit F prior to such assignment;
provided that in no event shall a Buyer Indemnified Person be required to spend
more than 100 man hours in the aggregate per calendar year toward such
cooperation. For purposes of this section, a “Fully Reserved Claim Notice” is a
written notice delivered by the Stockholder Representative to a Buyer
Indemnified Person, with a copy to the Escrow Agent certifying that it may rely
upon, and, if applicable, take action in accordance with, the Fully Reserved
Claim Notice, acknowledging that the Buyer Indemnified Person is entitled to
indemnification for Damages specified in a Claims Notice with respect to a
breach of the representations and warranties in Section 3.1(r) and certifying
that the remaining amount of the Escrow Fund is sufficient to satisfy such
Damages.

(e) Forbearance. Notwithstanding anything to the contrary contained herein, with
respect to an REC or Release of Materials of Environmental Concern for which a
Buyer Indemnified Person is or could reasonably be expected to be responsible
and for which a Buyer Indemnified Person is indemnified pursuant to this
Agreement, as long as a creditworthy third party or the applicable Indemnifying
Person is timely performing remediation of such REC or Release in compliance
with a remediation plan approved by the applicable Governmental Authority (with
respect to each factor, as determined by Parent in its reasonable discretion,
including with respect to the quality or scope of such remediation), Parent and
Merger Sub shall not undertake the remediation of such REC or Release for so
long as such timely remediation continues to be so performed.

 

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8.6. Stockholder Representative; Approval of Holders of Company Common Stock.

(a) The Stockholder Representative shall be constituted and appointed as agent
for and on behalf of the holders of Company Common Stock and Company Options to
give and receive notices and communications, to authorize distribution to Parent
or any Buyer Indemnified Person of all or a portion of the Escrow Fund in
satisfaction of claims by Parent or any Buyer Indemnified Person, to object to
such distribution to Parent of the Escrow Fund, to agree to, negotiate, enter
into settlements and compromises of, and commence and defend legal Proceedings
and comply with orders of courts and awards of any Arbiters or accountants with
respect to such claims, and to take all actions necessary or appropriate in the
judgment of the Stockholder Representative for the accomplishment of the
foregoing and for the purpose of effecting the transactions contemplated hereby,
and exercising, on behalf of all of the holders of Company Common Stock and
Company Options, their rights hereunder. Such agency may be changed by the
holders of the Company Common Stock and Company Options at the Effective Time,
with the vote (by the holders entitled to not less than seventy-five percent
(75%) of the Common Stock Merger Consideration) of the holders of Company Common
Stock and Company Options to be determined by their pro rata interests in the
Merger Consideration at the Effective Time upon not less than ten (10) Business
Days’ prior written notice to Parent. No bond shall be required of the
Stockholder Representative, and the Stockholder Representative shall receive no
compensation for its services. Notices or communications to or from the
Stockholder Representative shall constitute notice to or from each of the
holders of Company Common Stock and Company Options. The holders of Company
Common Stock and Company Options shall, by virtue of funds available to the
Stockholder Representative hereunder, reimburse the Stockholder Representative
for all costs and expenses incurred by the Stockholder Representative in its
capacity as the Stockholder Representative; provided, that such actions of the
Stockholder Representative were taken in good faith.

(b) The Stockholder Representative shall have no liability whatsoever to Parent,
Merger Sub, the Company or any Buyer Indemnified Person and shall have no
liability to any holder of Company Common Stock or Company Options for any act
done or omitted hereunder as Stockholder Representative while acting in good
faith and not in a manner constituting gross negligence, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of such
good faith.

(c) The approval by the holders of the Merger by the Required Company Vote shall
be deemed to be approval of the terms of the provisions of this Article VIII,
including the appointment of the Stockholder Representative.

(d) A decision, act, consent or instruction of the Stockholder Representative
shall constitute a decision of all holders of Company Common Stock and Company
Options and shall be final, binding and conclusive upon each such holder of
Company Common Stock and Company Options, and Parent, Merger Sub and the Buyer
Indemnified Persons may rely upon any such decision, act, consent or instruction
of the Stockholder Representative as being the decision, act, consent or
instruction of each and every such holder of Company Common Stock and Company
Options.

 

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8.7. Purchase Price Adjustment. All indemnification payments under this Article
VIII shall be treated for tax purposes as adjustments to the purchase price
payable under this Agreement.

ARTICLE IX

GENERAL PROVISIONS

9.1. Notices. All notices and other communications hereunder shall be in writing
and shall be deemed duly given (A) on the date of delivery if delivered
personally, (B) upon confirmation of transmission if delivered by facsimile,
(C) on the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, upon confirmation of receipt, or (D) on the
fifth Business Day following the date of mailing if delivered by registered or
certified first-class mail (airmail, if international), return receipt requested
and obtained, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:

 

(a)    if to Parent, Merger Sub or the Guarantor, to:    Doncasters Group Ltd.
   28-30 Derby Road    Melbourne, Derbyshire, DE73 8FF    United Kingdom    Fax:
+44 (0) 1332 864888    Attention: Eric J. Lewis    with a copy to (which shall
not constitute notice hereunder):    Morrison & Foerster LLP    1290 Avenue of
the Americas    New York, New York 10104-0050    Fax: +1 212 468 7900   
Attention: Michael J. Hagan, Esq. (b)    if to the Company to:    FasTech, Inc.
   World Headquarters    8500 Normandale Lake Blvd.    Suite 1230   
Minneapolis, MN 55437    Fax: +1 952 921 2099    Attention: Ronald B. Kalich   
with a copy to (which shall not constitute notice hereunder):

 

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   Court Square Capital Partners, L.P.    399 Park Avenue, 14th Floor    New
York, New York 10022    Fax: +1 212 888 2940    Attention: Charles E. Corpening
II    with a copy to (which shall not constitute notice hereunder):    Dechert
LLP    Cira Centre    2929 Arch Street    Philadelphia, PA 19104-2808    Fax: +1
215 994 2222    Attention: John D. LaRocca, Esq. (c)    If to the Stockholder
Representative to:    Charles E. Corpening II    c/o Court Square Capital
Partners, L.P.    399 Park Avenue    14th Floor, Zone 4    New York, NY 10022   
Fax: +1 212 888 2940    with a copy to (which shall not constitute notice
hereunder):    Dechert LLP Cira Centre    2929 Arch Street    Philadelphia, PA
19104-2808    Fax: +1 215 994 2222    Attention: John D. LaRocca, Esq.

9.2. Interpretation. References in this Agreement to any gender include
references to all genders, and references to the singular include references to
the plural and vice versa. The words “include,” “includes” and “including” when
used in this Agreement shall be deemed to be followed by the phrase “without
limitation.” Unless the context otherwise requires, references in this Agreement
to Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement. Unless
the context otherwise requires, the words “hereof”, “hereby” and “herein” and
words of similar meaning when used in this Agreement refer to this Agreement in
its entirety and not to any particular Article, Section or provision of this
Agreement. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

 

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9.3. Counterparts. This Agreement may be executed in any number of counterparts
(including by facsimile), each of which shall be deemed to be an original, and
all of which together shall be deemed to be one and the same instrument.

9.4. Entire Agreement. This Agreement (including any exhibits or annexes hereto,
the documents referred to herein and the Company Disclosure Schedule)
constitutes the entire agreement among all the parties hereto, except as
provided herein, and supersedes all prior agreements, understandings, oral and
written, among all the parties with respect to the subject matter hereof.

9.5. No Third-Party Beneficiaries. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns. Nothing in this Agreement, express or implied, is intended to or shall
confer upon any Person other than the parties hereto (and the Surviving
Corporation) or their respective successors and assigns, any rights, remedies or
liabilities under or by reason of this Agreement, other than Article VIII and
Sections 5.3 and 5.5 (each of which is intended to be for the benefit of the
Persons covered thereby and may be enforced by such Persons).

9.6. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other parties, and any attempt to make any such assignment
without such consent shall be null and void; provided, however, that Parent may
assign to any of its Affiliates as long as Parent remains liable for any
continuing obligations; provided, further, that Parent or any permitted assignee
may make a collateral assignment of its rights (but not obligations) under this
Agreement to any lender providing financing to Parent or any permitted assignee.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.

9.7. Amendment and Modification. This Agreement may be amended, modified and
supplemented by a written instrument authorized and executed (a) by and on
behalf of Parent, the Company and the Stockholder Representative at any time
prior to the Closing Date with respect to any of the terms contained herein and
(b) by and on behalf of Parent and the Stockholder Representative at any time
after the Closing Date with respect to any of the terms contained herein.

9.8. Enforcement; Jurisdiction. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York, this being in addition to any other remedy to
which they are entitled at law or in equity subject to the terms hereof. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of the federal courts of the United States located in the
City of New York, Borough of Manhattan, State of New York or any court of the
State of New York located in such district in the event any dispute arises out
of this Agreement or any of the transactions contemplated by this Agreement,

 

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(b) agrees that it will not attempt to deny or defeat such personal jurisdiction
or venue by motion or other request for leave from any such court and (c) agrees
that it will not bring any Proceeding relating to this Agreement or any of the
transactions contemplated by this Agreement in any court other than such courts
sitting in the State of New York.

9.9. Waiver of Jury Trial. THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY
IN ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE PARTIES AGREE THAT ANY OF
THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE
KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO
WAIVE TRIAL BY JURY AND THAT ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY SHALL INSTEAD BE TRIED IN
A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

9.10. Company Disclosure Schedule. Disclosures included in the Company
Disclosure Schedule shall be considered to be made solely with respect to the
specific corresponding Section in this Agreement and those other Sections where
its application is readily apparent from the express description of such item or
matter. Inclusion of any matter or item in any Section of the Company Disclosure
Schedule does not imply that such matter or item would, under the provisions of
this Agreement, have to be included in any other Section of the Company
Disclosure Schedule or that such matter or term is otherwise material.

9.11. No Recourse to Affiliates. No recourse shall be available to the assets of
any Person that is an Affiliate of a holder of Company Common Stock and Company
Options, or any officer, director, agent, employee thereof or of the Company or
its Subsidiaries for any obligations of the holders of Company Common Stock and
Company Options pursuant to this Agreement.

9.12. Governing Law. This Agreement shall be governed by, construed and
interpreted in accordance with the laws of the State of New York (without regard
to its principles of conflicts of law, other than New York General Obligations
Law Sections 5-1401 and 5-1402).

9.13. Severability. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. If any provision of
this Agreement, or the application thereof to any Person or any circumstance, is
found to be invalid or unenforceable in any jurisdiction, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid or enforceable, such provision and (b) the remainder of this
Agreement and the application of such provision to other persons or
circumstances shall not be affected by such invalidity or unenforceability, nor
shall such invalidity or unenforceability affect the validity or enforceability
of such provision, or the application thereof, in any other jurisdiction.

 

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9.14. Mutual Drafting. The parties hereto have been represented by counsel who
have carefully negotiated the provisions hereof. As a consequence, the parties
do not intend that the presumptions of any laws or rules relating to the
interpretation of contracts against the drafter of any particular clause should
be applied to this Agreement and therefore waive their effects.

9.15. Definitions. As used in this Agreement:

(a) “Affiliate” means, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person.

(b) “Aggregate Exercise Price” means, as of immediately prior to the Effective
Time, the total number of shares of Company Common Stock subject to the Company
Options (whether vested or unvested) times the sum of all exercise prices per
share of Company Common Stock under such Company Options.

(c) “Benefit Plans” means, with respect to the Company and its Subsidiaries,
each employee benefit plan, program, arrangement and contract (including any
“employee benefit plan”, as defined in Section 3(3) of ERISA, and any bonus,
deferred compensation, profit sharing, pension, stock bonus, stock purchase,
restricted stock, stock option, employment, termination, stay agreement or
bonus, fringe benefit, change in control and severance plan, program,
arrangement and contract), whether written or oral, whether or not subject to
ERISA, in effect on the date of this Agreement, to which the Company or any of
its Subsidiaries is a party, which is maintained or contributed to by the
Company or its Subsidiaries and as to which the Company or any of its
Subsidiaries has any current or future obligation with respect to any Company
Employee, or with respect to which the Company or its Subsidiaries could incur
material liability under Section 4069, 4201 or 4212(c) of ERISA.

(d) “Board of Directors” means the Board of Directors of any specified Person
and any committees thereof.

(e) “Books and Records” means the collective reference to all agreements,
documents, books, records and files, including records and files stored on
computer disks or tapes or any other storage medium relating to the business of
the Company and its Subsidiaries.

(f) “Business Day” means any day other than (i) a Saturday or Sunday or (ii) a
day on which banks are authorized or required to close in the City of New York.

(g) “Closing Common Merger Consideration” means the Closing Merger Consideration
minus the Preferred Stock Merger Consideration.

(h) “Closing Merger Consideration” means the cash amount equal to Four Hundred
Ninety Two Million Dollars ($492,000,000), minus (v) Estimated Debt determined
pursuant to Section 2.8, plus (w) the Positive EWC Adjustment, minus (x) the
Negative EWC Adjustment, minus (y) the amount of the Holdback Consideration,
minus (z) the amount of the Stockholder Representative Expense Amount.

 

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(i) “Code” means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.

(j) “Common Stock Merger Consideration” means the Closing Common Merger
Consideration and the Holdback Consideration, the Stockholder Representative
Expense Amount, in each case, subject to adjustment as contemplated hereby.

(k) “Company Disclosure Schedule” means the disclosure schedule delivered by the
Company to Parent on the date hereof.

(l) “Company Employees” means any current or former employee or director of the
Company or any of its Subsidiaries.

(m) “Company Expenses” means Expenses of the Company and its Subsidiaries.

(n) “Company Option Plans” means collectively, the FastenTech, Inc. 2006 Stock
Incentive Plan, the FastenTech, Inc. 2004 Stock Incentive Plan and the
FastenTech, Inc. 2001 Stock Incentive Plan.

(o) “Company Options” means any options to purchase any shares of Company Stock.

(p) “Company Stockholders Agreement” means the Securities Holders Agreement,
dated as of August 7, 2006, by and among the Company and the parties listed on
the signature pages thereto.

(q) “Contract” means with respect to any Person, any agreement, indenture, debt
instrument, contract, guarantee, loan, note, mortgage, license, lease or other
binding commitment, to which such Person is a party or by which it is bound or
to which any of its assets or properties is subject.

(r) “Credit Agreement” means, collectively, (i) Second Amended and Restated
Credit Agreement dated as of May 1, 2003, and amended and restated as of
June 30, 2004 and June 10, 2005, among FastenTech, the Lenders and LC Issuing
Banks party thereto, JPMorgan Chase Bank, N.A. as the Administrative Agent, Key
Bank N.A. and National City Bank, as Co-Syndication Agents, Key Bank N.A. and
LaSalle Bank N.A. as Co-Documentation Agents, J.P. Morgan Securities Inc. and
National City Bank, as Joint Bookrunners and Lead Arrangers, and Key Bank N.A.
as Co-Arranger, and (ii) the Loan Documents (as such term is defined in the
Credit Agreement described in clause (i) above).

(s) “Debt” means (i) the sum of, without duplication, (A) all indebtedness of
the Company and its Subsidiaries for borrowed money, (B) all obligations of the
Company and its Subsidiaries evidenced by notes, bonds, debentures or other
similar instruments, (C) all obligations of the Company and its Subsidiaries as
lessee or lessees under leases that have been recorded as capital leases, in
accordance with GAAP, (D) all Debt of the type referred to in clauses
(A) through (C) above guaranteed directly or indirectly in any manner by the
Company or its Subsidiaries or in effect guaranteed directly or indirectly by
the Company or its

 

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Subsidiaries; provided, that such Debt referred under this clause (D) is of the
type that would be reflected as debt on a balance sheet prepared in accordance
with GAAP, (E) all indebtedness under the Senior Subordinated Notes; (F) any
consent fees and any other costs and expenses of the Company and/or any of its
Subsidiaries incurred in respect of the Tender to the extent unpaid at or
immediately prior to Closing; (G) any prepayment penalties or premium related to
the Senior Subordinated Notes, including any redemption premium, prepayment
obligation, or other provision requiring payment in excess of 100% of principal
and accrued interest outstanding under the Senior Subordinated Notes in respect
of the Redemption; (H) the earn out payment required under Exhibit A of the
Asset Purchase Agreement between Meco, Inc. (Delaware Corporation) and Meco,
Inc. (Indiana Corporation) dated August 13, 2004, (I) the additional contingent
consideration payment required under Exhibit A of the Asset Purchase Agreement
dated as of March 1, 2004 between Gear & Broach (DE), Inc. Gear & Broach, Inc.,
PNHB Gear, LLC and each of the Stockholders of Gear & Broach, Inc.; (J) any
sales commissions payable under the Termination Agreement dated October 11, 2005
between Acraline Products, Inc. and Mark Berube, (K) any and all non-compete
payments under the Non-Competition Agreement dated December 10, 2004 between
Spun Metals, Inc. and Brian L. Deakins, (L) any and all consulting fees payable
under the Consulting Agreement dated August 13, 2004 between FastenTech and
Russell L. Magers, (M) any and all non-compete payments under the
Non-Competition Agreement dated August 13, 2004 between FastenTech and William
P. Magers, (N) accrued liability on the Company’s balance sheet relating to
restructuring charges to close IET’s corporate office at 4241 Olympic Blvd,
Suite 200, Erlanger, Kentucky, which includes accruals for onerous leases and
unpaid severance to David Salkowki and Rebecca Wimsatt; provided that in no
event shall such accrued liability be in excess of $384,000, (O) any and all
transfer, documentary, sales, use, excise, stamp, registration and other such
Taxes (including all applicable real estate transfer or gains Taxes) and related
fees (including any penalties, interest and additions to Tax) incurred in
connection with the transactions contemplated by this Agreement and paid by
Parent, Merger Sub, the Surviving Corporation or any of their Subsidiaries,
(P) all accrued but unpaid interest (or interest equivalent) to the date of
determination, related to any items of Debt of the type referred to in clauses
(A) through (O) above, (Q) transaction fee payable to Court Square Capital
Partners, L.P. pursuant to the Advisory Fee Agreement dated February 12, 2007
and (R) Company Expenses and any employee stay or change of control bonuses
payable by the Company or any of its Subsidiaries in connection with the
consummation of the transactions contemplated hereby to the extent unpaid at or
immediately prior to Closing, minus (ii) all cash and cash equivalents of the
Company and its Subsidiaries; provided, that Debt shall not include any
borrowings to finance the transactions contemplated hereby and in no event shall
the penalties or premiums with respect to the Senior Subordinated Notes exceed
5.750% of the outstanding principal amount of Senior Subordinated Notes
outstanding immediately after the consummation of the Tender.

(t) “dollars” or “$” means United States dollars.

(u) “Environmental Laws” means any and all laws (including common law),
statutes, codes, rules, regulations, ordinances, enforceable policies, licenses,
permits, consents, approvals, judgments, notices, applicable decisions,
injunctions, decrees or orders of the United States, or any foreign, state,
local or municipal authority, regulating, relating to or imposing liability or
standards of conduct concerning (i) the condition, pollution or protection of
the environment, including surface water, groundwater, air, surface or
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habitat, natural resources or related aspects of the environment, (ii) the
protection of human health and safety (as it relates to exposure to Materials of
Environmental Concern) or (iii) the generation, treatment, manufacturing, use,
storage, handling, recycling, presence, Release, transportation or shipment of
any Materials of Environmental Concern.

(v) “ERISA” means the Employment Retirement Income Security Act of 1974, as
amended.

(w) “ERISA Affiliate” means a Person that is, or at any relevant time was,
together with the Company, treated as a “single employer” under Section 414(b),
414(c) or 414(m) of the Code.

(x) “Extended Representations” means the representations and warranties of the
Company in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(d)(i), 3.1(h), 3.1(n), 3.1(r)
and 3.1(s).

(y) “FastenTech” means FastenTech, Inc., a Delaware corporation and a
wholly-owned direct Subsidiary of the Company.

(z) “Final Closing Statement” means (x) the Closing Statement if no Notice of
Disagreement with respect thereto is duly and timely delivered pursuant to
Section 2.9 or (y) if such a Notice of Disagreement is so delivered, the Closing
Statement as agreed by the Stockholder Representative and Parent pursuant to
Section 2.9 or (z) if such Notice of Disagreement is so delivered and in the
absence of such agreement, the Final Closing Statement as prepared by the
Arbiter pursuant to Section 2.9.

(aa) “Final Working Capital” and “Final Debt” means Closing Date Working Capital
and Closing Date Debt, respectively, as shown in the Final Closing Statement.

(bb) “Fully Diluted Shares” means the total number of shares of Company Common
Stock issued and outstanding immediately prior to the Effective Time on a fully
diluted basis, including all shares of Company Common Stock subject to Company
Options (whether vested or unvested), after giving effect to the exercise of
Company Options.

(cc) “GAAP” means accounting principles that are generally accepted in the
United States of America, the sources of which, as of the date hereof, are
described in paragraph .05 of the American Institute of Certified Public
Accountant’s (“AICPA”) Statement of Auditing Standards No. 69, The Meaning of
Present Fairly in Conformity with Generally Accepted Accounting Principles, as
amended, which is contained in Volume 1, AU Section 411 of the AICPA
Professional Standards.

(dd) “GAAP Consistently Applied” means GAAP (A) using the same accounting
methods, policies, practices, and procedures, with consistent classification,
judgments, and estimation methodology, as were used by the Company in preparing
the Balance Sheet and (B) not taking into account any changes in circumstances
or events occurring after the close of business on the Closing Date. For the
avoidance of doubt, in the event of a conflict between (i) GAAP and (ii) the
accounting methods, policies, practices, and procedures, with consistent
classification, judgments, and estimation methodology used by the Company in
preparing the Balance Sheet, the latter shall prevail. Notwithstanding any of
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following accounting policies are deemed GAAP Consistently Applied for the
purposes of calculating Working Capital: (x) all intercompany balances are to be
reconciled and eliminated and (y) with respect to accrued bonuses, (a) accrued
bonuses are to be included in “current liabilities” for the calculation of
Working Capital only to the extent that these have accrued in respect of the
current financial year and are based on performance in the current financial
year and the applicable bonus scheme rules, (b) these bonuses are to be accrued
on a straight line pro rata time apportioned basis, less any related bonus
payments, (c) any unpaid bonuses accrued in respect of prior financial years are
not to be included in “current liabilities” and (d) these principles articulated
in this clause (y) shall be applied to any accrued bonus amounts under “accrued
bonus,” “other accrued liabilities” and under any other balance sheet captions.

(ee) “High Reference Amount” means $106,156,000.

(ff) “Holdback Consideration” means the cash amount equal to Twenty-Five Million
Dollars ($25,000,000) plus the Special Holdback Consideration.

(gg) “Holdco Financing” means the authorization, preparation, negotiation,
execution and performance of an agreement for borrowed money, notes, bonds,
debentures or other similar instruments by the Company, the net proceeds of
which will be used to finance dividends payable to the holders of Company Stock
and to finance payment of notes issued pursuant to dividends declared prior to
the date hereof, as expressly identified on Section 4.1 of the Company
Disclosure Schedule and under no circumstances to involve the incurrence of any
Debt in an amount in excess of $100,000,000.

(hh) “Indenture” means the Indenture for FastenTech’s 11 1/2% Senior
Subordinated Notes due 2011 (the “Senior Subordinated Notes“), dated as of
May 1, 2003, with BNY Midwest Trust Company, as Trustee.

(ii) “Intellectual Property” means any and all (i) patents, patent applications,
utility models and utility model applications (including all provisionals,
continuations, continuations in part, divisionals, extensions, patents of
addition, reissues, substitutions, confirmations, registrations, revalidations,
reexamination certificates, and renewals and additions of or to any of the
foregoing); (ii) copyrights, copyright registrations and applications for
registration of copyrights, and all renewals of the foregoing, and all rights
arising under works of authorship (including computer software, whether in
source or object code format, and electronic databases); (iii) trade secrets or
confidential or proprietary inventions (whether or not patentable and whether or
not reduced to practice), discoveries, improvements, processes, formulae,
designs, product specifications, data, methods, schematics, know-how, plans,
manuals and drawings, research, and other confidential or proprietary
information; (iv) trademarks, service marks, trade names, domain names, logos,
trade dress rights and other source indicators, and all applications and
registrations related thereto, and all goodwill in the foregoing; and (v) mask
works and industrial design registrations; and, in the case of each of
(i) through (v), all rights of enforcement wherever existing throughout the
world.

(jj) “IP Contracts” means all licenses, sublicenses, consents and other
agreements (whether oral or written) (i) by which Company or its Subsidiaries is
authorized by any third party to use any Intellectual Property (other than any
generally commercially available

 

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off-the-shelf computer software) or (ii) by which Company or its Subsidiaries
have licensed or otherwise authorized a third party to use any Intellectual
Property owned by Company or its Subsidiaries.

(kk) “Knowledge” means, with respect to any Person, the actual knowledge of that
Person or knowledge that would be held, or would be expected to be held, by a
Person similarly situated after diligent inquiry consistent with the duties and
authority of, and scope of information available to, such Person.

(ll) “Knowledge of Parent” means, with respect to any matter in question, the
knowledge of those individuals listed in Section 9.15(ll) of the Company
Disclosure Schedule.

(mm) “Knowledge of the Company” means, with respect to any matter in question,
the Knowledge of those individuals listed in Section 9.15(mm) of the Company
Disclosure Schedule.

(nn) “Licenses and Permits” means all licenses, permits, exemptions, orders,
consents, franchises, certificates, approvals and other authorizations that are
required by Governmental Authorities to conduct the business of the Company and
its Subsidiaries as it is presently conducted.

(oo) “Low Reference Amount” means $105,956,000.

(pp) “Material Adverse Effect” means, any change, effect, event, occurrence,
state of facts or development that, individually or in the aggregate, is or
would reasonably be expected to be materially adverse to (1) the business,
financial condition (whether on a balance sheet basis or with respect to
off-balance sheet items) or results of operations of the Company and its
Subsidiaries, taken as a whole; provided, however, that none of the following
shall be deemed in themselves, either alone or in combination, to constitute,
and none of the following shall be taken into account in determining whether
there has been or will be, a Material Adverse Effect: (a) any failure by the
Companies or its Subsidiaries to meet internal projections or forecasts or
revenue or earnings predictions for any period ending on or after the date of
this Agreement; or (b) any adverse change, effect, event, occurrence, state of
facts or development to the extent attributable to, resulting from or relating
to (i) the announcement or pendency of the transactions contemplated by this
Agreement (including any reduction in revenues or earnings, any disruption in
supplier, distributor, partner, customer or similar relationships or any loss of
employees); (ii) any adverse conditions affecting generally the industries in
which the Company and its Subsidiaries or their customers operate, declines in
any securities market or segment thereof, general national, international or
regional economic or financial conditions, or any outbreaks of hostilities or
terrorism or escalation thereof, in any jurisdiction in which the Company or its
Subsidiaries operate, in each case, which does not disproportionately affect the
Company and its Subsidiaries; (iii) earthquakes or similar catastrophes;
(iv) compliance with the terms of, or the taking of any action required by or
consented to by Parent or Merger Sub pursuant to, this Agreement; or (v) changes
in GAAP, or in the authoritative interpretations thereof or in regulatory or
interpretive guidance related thereto or (2) the ability of the Company to
consummate the transactions contemplated hereby or perform their respective
obligations hereunder.

 

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(qq) “Materials of Environmental Concern” means (i) any hazardous or dangerous
material, chemical, substance or waste, including those which are defined or
regulated as a “hazardous substance,” “pollutant,” “contaminant,” “hazardous
material,” “hazardous waste,” “extremely hazardous waste,” “restricted hazardous
waste,” “infectious waste,” “radioactive,” “toxic substance” or any other
formulation intended to define, list or classify substances by reason of
deleterious property, such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, or reproductive toxicity by any Governmental
Authority pursuant to any Environmental Laws; (ii) any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or fuel
additives, (iii) natural gas, synthetic gas, and any mixtures thereof; and
(iv) polychlorinated biphenyls, urea-formaldehyde insulation, and asbestos.

(rr) “Merger Consideration” means the Closing Merger Consideration, the Holdback
Consideration and the Stockholder Representative Expense Amount, subject to
adjustment as contemplated hereby.

(ss) “Negative EWC Adjustment” means the amount by which the Low Reference
Amount exceeds Estimated Working Capital as determined pursuant to Section 2.8.

(tt) “Ordinary Course of Business” means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency) of the Person in question.

(uu) “Per Share Adjustment Consideration” means the amount obtained by dividing
(i) the Final Adjustment Amount (to the extent of a net increase in the Merger
Consideration under Section 2.9(d)) by (ii) the Fully Diluted Shares.

(vv) “Per Share Closing Common Merger Consideration” means the amount obtained
by dividing (i) the Closing Common Merger Consideration plus the Aggregate
Exercise Price by (ii) the Fully Diluted Shares.

(ww) “Per Share Holdback Consideration” means the amount obtained by dividing
(i) the Holdback Consideration by (ii) the Fully Diluted Shares.

(xx) “Per Share Merger Consideration” means with respect to the Company Common
Stock and Company Options, the sum of the Per Share Closing Common Merger
Consideration, the Per Share Holdback Consideration and the Per Share
Stockholder Representative Expense Amount, in each case subject to adjustment as
contemplated hereby, and with respect to the Company Preferred Stock, the
Preferred Per Share Merger Consideration.

(yy) “Per Share Stockholder Expense Amount” means the amount obtained by
dividing (i) the Stockholder Representative Expense Amount by (ii) the Fully
Diluted Shares.

(zz) “Permitted Liens” means, collectively, (i) Liens for Taxes not yet due and
payable or the validity of which are being contested in good faith by
appropriate proceedings and for which adequate reserves are reflected in the SEC
Reports, (ii) mechanics’, workmen’s, repairmen’s, warehousemen’s, processor’s,
landlord’s, carrier’s, maritime, materialmen’s or other like Liens, including
all statutory Liens, in each case, arising or incurred in the Ordinary Course of
Business, (iii) Liens arising in connection with worker’s compensation,
unemployment

 

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insurance, old age pensions and social security benefits which are not overdue
or are being contested in good faith by appropriate proceedings and for which
provision for the payment of such Liens has been reflected in the SEC Reports,
(iv) Liens (A) incurred or deposits made in the Ordinary Course of Business to
secure the performance of bids, tenders, statutory obligations, fee and expense
arrangements with trustees and fiscal agents (exclusive of obligations incurred
in connection with the borrowing of money or the payment of the deferred
purchase price of property) and (B) securing surety, indemnity, performance,
appeal and release bonds, (v) any minor imperfection of title, easements,
encroachments, covenants, rights of way, defects, irregularities or encumbrances
on title or similar Lien which does not and would not reasonably be expected to
impair or interfere in any material respect the operations of the business of
the Company or its Subsidiaries, (vi) licenses, leases and subleases of property
and assets in the Ordinary Course of Business, (vii) customary rights of
set-off, revocation, refund or chargeback, (viii) Liens arising by operation of
law on insurance policies and proceeds thereof to secure premiums thereunder,
(ix) any Liens incurred pursuant to equipment leases in the Ordinary Course of
Business which do not, individually or in the aggregate, exceed $300,000 in
annual payments, (x) Liens incurred pursuant to actions of Parent or its
Affiliates; and (xiv) Liens disclosed in Section 9.15(zz) of the Company
Disclosure Schedule.

(aaa) “Person” means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group.

(bbb) “Positive EWC Adjustment” means the amount by which Estimated Working
Capital exceeds the High Reference Amount as determined pursuant to Section 2.8.

(ccc) “Post-Closing Tax Period” includes any Tax period beginning after the
Closing Date and that portion of any Straddle Period beginning after the Closing
Date.

(ddd) “Pre-Closing Tax Period” includes any Tax period ending on or before the
Closing Date and that portion of any Straddle Period ending on or before the
Closing Date.

(eee) “Preferred Per Share Merger Consideration” means, with respect to each
share of Company Preferred Stock, an amount equal to $10.00 per share plus the
aggregate accrued but unpaid dividends on such share.

(fff) “Preferred Stock Merger Consideration” means for all shares of Company
Preferred Stock outstanding as of immediately prior to the Effective Time, an
aggregate amount equal to the sum of (i) $10.00 multiplied by the number of
shares of Company Preferred Stock then outstanding, plus (ii) the aggregate
accrued but unpaid dividends on all shares of Company Preferred Stock then
outstanding as determined in accordance with the Company’s Certificate of
Incorporation.

(ggg) “Proceeding” means any action, suit, dispute, litigation, hearing, claim,
demand, arbitration, charge, complaint, investigation, audit, examination,
indictment or other civil, criminal, administrative or investigative proceeding
by or before any Governmental Authority in effect, at law or in equity.

(hhh) “Release” means any release, spill, or leak, pumping, pouring, placing,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping into the

 

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environment, whether intentional or unintentional, negligent or non-negligent,
sudden or non-sudden, accidental or non-accidental.

(iii) “Remedial Action” means any action reasonably necessary to
(i) investigate, contain, reduce exposure to, clean up, remove, treat or handle
in any other way Materials of Environmental Concern that have been Released;
(ii) assess, restore or reclaim the environment or natural resources with
respect to such Release(s) of Materials of Environmental Concern; or
(iii) perform remedial investigations, feasibility studies, response actions,
remedial actions, corrective actions, closures and post-remedial or post-closure
studies, investigations, operations and maintenance, or monitoring, required
with respect to such Release(s) of Materials of Environmental Concern.

(jjj) “Special Holdback Amount” means an amount equal to Five Million Dollars
($5,000,000).

(kkk) “Stockholder Representative Expense Amount” means the cash amount equal to
$1,500,000.

(lll) “Straddle Period” means any Tax period beginning on or before the Closing
Date and ending after the Closing Date.

(mmm) “Subsidiary” means any corporation, limited liability company,
partnership, joint venture, trust, association, organization or other entity in
which a Person directly or indirectly owns 50% or more of the aggregate voting
stock. For purposes of this definition, “voting stock” means stock or other
interests that ordinarily has voting power for the election of directors or
managers.

(nnn) “Survival Periods” means the survival periods described on Schedule B
hereof.

(ooo) “Tax” or “Taxes” means all taxes, however denominated, including any
interest, penalties or other additions to tax that may become payable in respect
thereof, imposed by any federal, territorial, state, local or foreign government
or any agency or political subdivision of any such government, which taxes shall
include all income or profits taxes (including, but not limited to, federal
income taxes, state income taxes and German trade taxes), payroll and employee
withholding taxes, unemployment insurance taxes and contributions, social
security taxes and contributions, sales and use taxes, value added taxes, ad
valorem taxes, excise taxes, franchise taxes, interest, royalty and dividend
withholding taxes, gross receipts taxes, business license taxes, occupation
taxes, real and personal property taxes, stamp taxes, environmental taxes,
transfer taxes, worker’s compensation, Pension Benefit Guaranty Corporation
premiums and other governmental charges, and other obligations of the same or of
a similar nature to any of the foregoing, which the Company is required to pay,
withhold or collect.

(ppp) “Tax Return” means all reports, estimates, declarations of estimated Tax,
claims for refund, information statements and returns relating to, or required
to be filed in connection with, any Taxes, including any schedule or attachment
thereto, any amendment

 

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thereof, and any information returns or reports with respect to backup
withholding and other payments to third parties.

(qqq) “the other party” means, (i) with respect to the Company, Parent and
(ii) with respect to Parent, the Company.

(rrr) “Working Capital” (a) means an amount equal to all “current assets” minus
all “current liabilities,” in each case as such “current assets” and “current
liabilities” are accrued and reflected on the books and records of the Company
and its Subsidiaries in accordance with GAAP Consistently Applied; provided,
however, that “current assets” shall not include cash and cash equivalents or
any deferred tax assets of the Company and its Subsidiaries and “current
liabilities” shall not include current maturities of Debt or interest accrued in
respect of Debt or income taxes payable or any deferred tax liabilities of the
Company and its Subsidiaries and (b) shall in any event be calculated consistent
with the formula set forth on Schedule A hereof.

9.16. Guarantee by the Guarantor. The Guarantor hereby guarantees the
performance in full by Parent and Merger Sub of all of Parent’s and Merger Sub’s
obligations, covenants, warranties and representations hereunder (subject to the
terms, conditions and limitations set forth herein) as fully as if made by the
Guarantor; and the Company or the Stockholder Representative may enforce the
Guarantor’s obligations without first (A) suing Parent or Merger Sub,
(B) joining Parent or Merger Sub in any suit against the Guarantor,
(C) enforcing any rights and remedies against Parent or Merger Sub or
(D) otherwise pursuing or asserting any claims or rights against Parent or
Merger Sub or any of their respective property, in the event of a breach of
Parent’s or Merger Sub’s obligations, covenants or warranties and
representations. The Guarantor’s responsibility shall not be discharged,
released, diminished, or impaired in whole or in part by (a) any setoff,
counterclaim, defense, act or occurrence which the Guarantor may have against
the Company or any of its Subsidiaries as a result or arising out of this or any
other transaction, (b) the amendment, modification, waiver or alteration of this
Agreement, with or without the knowledge or consent of the Guarantor, or (c) the
inaccuracy of any of the representations and warranties of the Company and its
Subsidiaries under the Agreement, other than in the case of fraud or intentional
misrepresentation with intent to deceive.

Each of the limitations, conditions and qualifications on and with respect to
the obligations of the Parent and Merger Sub hereunder shall apply with equal
force and effect to the obligations of the Guarantor in respect of this
Guarantee.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, Parent, Merger Sub, the Guarantor, the Company and the
Stockholder Representative have caused this Agreement and Plan of Merger to be
signed by their respective officers thereunto duly authorized, all as of the day
and year first above written.

 

DUNDEE HOLDING, INC. By:  

/s/ Charles R. Rountree

Name:   Charles R. Rountree Title:   Vice President & Secretary

 

DUNDEE MERGERCO, INC. By:  

/s/ Charles R. Rountree

Name:   Charles R. Rountree Title:   Treasurer & Secretary

 

DONCASTERS GROUP LTD.

(solely with respect to Section 9.16)

By:  

/s/ Michael J. Schurch

Name:   Michael J. Schurch Title:   Chief Financial Officer

 

FASTECH, INC. By:  

/s/ Ronald B. Kalich

Name:   Ronald B. Kalich Title:   President & CEO

 

CHARLES E. CORPENING II

/s/ Charles E. Corpening