EXHIBIT 10.2

EXECUTION

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

XALOY SUPERIOR HOLDINGS, INC.

NORDSON CORPORATION

BUCKEYE MERGER CORP.

AND

SELLERS’ REPRESENTATIVE

DATED AS OF JUNE 2, 2012

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TABLE OF CONTENTS

 

         Page  

LIST OF EXHIBITS AND SCHEDULES

     IV   

ARTICLE 1 DEFINITIONS

     2   

1.1

  DEFINITIONS      2   

1.2

  CROSS REFERENCES      8   

ARTICLE 2 THE MERGER

     10   

2.1

  THE MERGER      10   

2.2

  THE CLOSING AND THE EFFECTIVE TIME      10   

2.3

  EFFECT OF THE MERGER      11   

2.4

  CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF SURVIVING CORPORATION     
11   

2.5

  EFFECT OF THE MERGER ON THE COMPANY CAPITAL STOCK AND THE CAPITAL STOCK OF
MERGER SUB      11   

2.6

  MECHANISM OF PAYMENT AND DELIVERY OF CERTIFICATES      12   

2.7

  SPECIAL OPTION REPLICATION BONUS PAYMENTS; WARRANTS      14   

2.8

  NO FURTHER OWNERSHIP RIGHTS IN THE COMPANY CAPITAL STOCK      14   

2.9

  REPAID INDEBTEDNESS; COMPANY TRANSACTION EXPENSES      14   

2.10

  DISSENTING SHARES      15   

2.11

  WORKING CAPITAL AND CASH ADJUSTMENT      15   

ARTICLE 3 CONDITIONS TO CLOSING; CLOSING DELIVERIES

     18   

3.1

  GENERAL CONDITIONS      18   

3.2

  CONDITIONS TO THE OBLIGATIONS OF THE COMPANY      18   

3.3

  CONDITIONS TO PURCHASER’S OBLIGATIONS      18   

3.4

  CLOSING DELIVERIES      19   

ARTICLE 4 COVENANTS PRIOR TO CLOSING

     21   

4.1

  AFFIRMATIVE COVENANTS      21   

4.2

  NEGATIVE COVENANTS      21   

4.3

  EXCLUSIVITY      23   

4.4

  REASONABLE BEST EFFORTS      24   

4.5

  REGULATORY APPROVAL      24   

4.6

  280G COVENANT      25   

ARTICLE 5 REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY GROUP

     25   

5.1

  ORGANIZATION AND POWER      25   

5.2

  AUTHORIZATION      26   

5.3

  CAPITALIZATION; SUBSIDIARIES      26   

5.4

  ABSENCE OF CONFLICTS      27   

 

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5.5

  FINANCIAL STATEMENTS      28   

5.6

  ABSENCE OF CERTAIN DEVELOPMENTS      28   

5.7

  REAL PROPERTY      29   

5.8

  TITLE TO TANGIBLE ASSETS      30   

5.9

  CONTRACTS AND COMMITMENTS      30   

5.10

  PROPRIETARY RIGHTS      32   

5.11

  GOVERNMENTAL LICENSES AND PERMITS      33   

5.12

  LITIGATION; PROCEEDINGS      33   

5.13

  COMPLIANCE WITH LAWS      33   

5.14

  EMPLOYEES      33   

5.15

  EMPLOYEE BENEFIT PLANS      34   

5.16

  TAX MATTERS      37   

5.17

  BROKERAGE      38   

5.18

  AFFILIATE TRANSACTIONS      39   

5.19

  ENVIRONMENTAL MATTERS      39   

5.20

  BANK ACCOUNTS      40   

5.21

  ACCOUNTS RECEIVABLE      40   

5.22

  CERTAIN PAYMENTS      40   

5.23

  INSURANCE      40   

5.24

  CUSTOMERS AND SUPPLIERS      41   

5.25

  STOCKHOLDER APPROVAL      41   

5.26

  DISCLAIMER      41   

ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB

     42   

6.1

  ORGANIZATION AND POWER      42   

6.2

  AUTHORIZATION      42   

6.3

  ABSENCE OF CONFLICTS      42   

6.4

  GOVERNMENTAL AUTHORITIES AND CONSENTS      43   

6.5

  LITIGATION      43   

6.6

  OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES      43   

6.7

  BROKERAGE      43   

6.8

  FINANCING      43   

6.9

  DUE DILIGENCE REVIEW      44   

6.10

  RESTRICTED SECURITIES      44   

ARTICLE 7 TERMINATION

     44   

7.1

  TERMINATION      44   

7.2

  EFFECT OF TERMINATION      45   

ARTICLE 8 ADDITIONAL AGREEMENTS; COVENANTS AFTER CLOSING

     46   

8.1

  RECOVERY FROM ESCROW; INDEMNIFICATION      46   

8.2

  MUTUAL ASSISTANCE      52   

8.3

  PRESS RELEASE AND ANNOUNCEMENTS; CONFIDENTIALITY      52   

 

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8.4

  EXPENSES      52   

8.5

  FURTHER ASSURANCES      53   

8.6

  TRANSFER TAXES; RECORDING CHARGES      53   

8.7

  DIRECTORS AND OFFICERS INSURANCE      53   

8.8

  TAX MATTERS      54   

8.9

  DISPUTES; ARBITRATION PROCEDURE      56   

8.10

  SELLERS’ REPRESENTATIVE      57   

ARTICLE 9 MISCELLANEOUS

     57   

9.1

  Amendment and Waiver      58   

9.2

  NOTICES      58   

9.3

  ASSIGNMENT      58   

9.4

  SEVERABILITY      59   

9.5

  NO STRICT CONSTRUCTION      59   

9.6

  CAPTIONS      59   

9.7

  THIRD-PARTY BENEFICIARIES      59   

9.8

  COMPLETE AGREEMENT      59   

9.9

  COUNTERPARTS      60   

9.10

  GOVERNING LAW AND JURISDICTION      60   

9.11

  ATTORNEY-CLIENT PRIVILEGE AND CONFLICT WAIVER      60   

9.12

  WAIVER OF JURY TRIAL      60   

9.13

  SPECIFIC PERFORMANCE      61   

 

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LIST OF EXHIBITS AND SCHEDULES

 

Exhibits

    Exhibit A   Form of Escrow Agreement

Exhibit B

Exhibit C

Exhibit D

Exhibit E

Exhibit F

 

Form of Certificate of Merger

Form of Distribution Waterfall Schedule

Form of Letter of Transmittal

Form of Purchaser Closing Certificate

Form of Company Closing Certificate

Exhibit G   List of Resigning Directors, Managers, and Officers Exhibit H   Form
of Letter of Resignation

Exhibit I

Exhibit J

 

Form of Special Option Replication Bonus Payments Release

Form of Non-Solicitation Agreement

 

Schedules

  

Referenced in:

Distribution Waterfall Schedule    Section 1.1 Governmental Licenses Schedule   
Sections 1.1 and 5.11 Permitted Liens Schedule    Section 1.1 Proprietary Rights
Schedule    Section 1.1 and 5.10 Special Option Replication Bonus Payments
Schedule    Sections 1.1, 2.7(a) and 3.4(b) Tax Benefit Schedule    Section 1.1
Working Capital Schedule    Sections 1.1 and 2.11(b) Repaid Indebtedness
Schedule    Section 2.5(a), 2.9 and 3.4(a) Transaction Expense Schedule   
Section 2.5(a), 2.9 and 3.4(a) Estimated Working Capital Statement Schedule   
Section 2.11(a) Key Employees Schedule    Section 4.1(b) Negative Covenants
Schedule    Section 4.2 Contracts Schedule    Section 4.2(n), 5.9(a) and 5.9(b)
Corporate Organization Schedule    Sections 5.1 and 5.3(b) Capitalization
Schedule    Section 5.3(a) Subsidiaries Schedule    Section 5.3(b) Material
Restrictions Schedule    Sections 5.4 Financial Statements Schedule    Section
5.5 Developments Schedule    Section 5.6 Leased Real Property Schedule   
Sections 5.7(a) and 5.7(c) Owned Real Property Schedule    Sections 5.7(b) and
5.7(c) Governmental Licenses Schedule    Section 5.11(a) Litigation Schedule   
Section 5.12

 

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Compliance Schedule    Section 5.13 Employees Schedule    Section 5.14 Employee
Benefits Schedule    Sections 5.15(a), 5.15(d), 5.15(g) and 5.9(a) Taxes
Schedule    Sections 5.16(a) and 5.16(b) Brokerage Schedule    Section 5.17
Affiliate Transactions Schedule    Section 5.18 Environmental Schedule   
Section 5.19 Bank Accounts Schedule    Section 5.20 Insurance Schedule   
Section 5.25 Customers and Suppliers Schedule    Section 5.24 Purchaser Material
Restrictions Schedule    Section 6.3 Purchaser Brokerage Schedule    Section 6.7
Sellers Schedule    Section 8.1(a)(i)

 

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as
of June 2, 2012, by and among Xaloy Superior Holdings, Inc., a Delaware
corporation (the “Company”), Nordson Corporation, an Ohio corporation
(“Purchaser”), Buckeye Merger Corp., a Delaware corporation (“Merger Sub”), and
the Sellers’ Representative (as defined herein). Capitalized terms used in this
Agreement without definition shall have the respective meanings given to such
terms in Article 1 hereof.

WHEREAS, the board of directors of the Company (the “Company Board”), subject to
the terms and conditions set forth herein, has (i) declared the advisability of
this Agreement and approved and adopted this Agreement, and (ii) resolved to
recommend approval and adoption of this Agreement by all of the holders of
Company Capital Stock (as defined below);

WHEREAS, the board of directors of Merger Sub have (i) declared the advisability
of this Agreement and (ii) approved and adopted this Agreement;

WHEREAS, Purchaser has adopted this Agreement in its capacity as the sole
stockholder of Merger Sub;

WHEREAS, the Company Board and the board of directors of Merger Sub have
approved the merger of Merger Sub with and into the Company, with the Company as
the surviving corporation (the “Surviving Corporation”), upon the terms and
subject to the conditions set forth in this Agreement and the applicable
provisions of the Delaware General Corporation Law (“DGCL”), whereby (i) each
issued and outstanding share of Preferred Stock, par value $0.001 (the
“Preferred Stock”), and (ii) each issued and outstanding share of Common Stock,
par value $0.001 per share (the “Common Stock” and together with the Preferred
Stock, the “Company Capital Stock”) of the Company (other than the Company
Capital Stock to be canceled pursuant to Section 2.5(c) and the Dissenting
Shares (as defined in Section 2.10(a))) shall be converted into the right to
receive a portion of the Merger Consideration (as defined herein) upon the terms
and subject to the conditions set forth herein and based upon the applicable
liquidation preferences and other rights, preferences and privileges of such
class of the Company Capital Stock as set forth in the Company Charter;

WHEREAS, following the execution of this Agreement, the Company shall obtain, in
accordance with Section 228 of the DGCL and its certificate of incorporation and
bylaws, a written consent of Stockholders holding at least 90 percent of the
outstanding voting Company Capital Stock approving this Agreement, the Merger
and the other transactions contemplated hereby in accordance with Section 251 of
the DGCL (the “Written Consent”);

WHEREAS, the Company, Merger Sub and Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger, and also to prescribe various conditions to the Merger, as set forth in,
and subject to the provisions of, this Agreement; and

 

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NOW THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the Parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

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

“Affiliate” of any particular Person means any other Person controlling,
controlled by or under common control with such Person, where “control” means
the possession, directly or indirectly, of the power to direct the management
and policies of a Person whether through the ownership of voting securities, by
Contract or otherwise.

“Business” means the Company Group’s businesses of developing, manufacturing,
servicing, repairing and marketing barrels, screws, melt pumps, screen changers,
heat transfer rolls, valves and front end components, jet cleaners, and
pelletizers for plastics injection molding and extrusion manufacturing
equipment.

“Business Day” shall mean any day on which commercial banks are open for
business in San Francisco, California.

“Cash” means (i) cash, cash equivalents and marketable securities, plus
(ii) deposits in transit to the extent there has been a reduction of receivables
on account thereof, plus (iii) petty cash, minus (iv) issued but uncashed checks
issued by the Company or its Subsidiaries (provided, that if the sum of clauses
(i) through (iii) is less than the amount in clause (iv), “Cash” shall be deemed
to be $0 and the amount of such shortfall shall be deemed to be Indebtedness
(without duplication of any amount included therein) for all purposes
hereunder).

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

“Company Charter” means the amended and restated certificate of incorporation of
the Company as currently in effect.

“Company Group” means the Company and its Subsidiaries.

“Contract” means any legally binding written or oral contract, agreement,
indenture, note, bond, mortgage, loan, instrument, lease, license, commitment,
guarantee or arrangement.

“Controlled Group” means any trade or business (whether or not incorporated)
(i) under common control within the meaning of Section 4001(b)(1) of ERISA with
the Company or (ii) which together with the Company is treated as a single
employer under Section 414(t) of the Code.

 

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“Distribution Waterfall” is defined in, and shall be calculated in accordance
with, the “Distribution Waterfall Schedule” attached hereto as Exhibit C, which
shall be updated as necessary by the Company prior to the Closing.

“Dollars” or “$”, when used in this Agreement or any other agreement or document
contemplated hereby, means United States dollars unless otherwise stated.

“Environment” means soil, surface waters, groundwater, land, stream sediments,
surface or subsurface strata, ambient air, indoor air or indoor air quality,
including any material or substance used in the physical structure of any
building or improvement.

“Environmental Laws” means all applicable federal, state, local and foreign
statutes, regulations, laws, common law, ordinances, codes, rules, requirements
and legally binding judicial and administrative orders and determinations
concerning pollution or protection of the Environment or protection of human
health and safety with respect to Hazardous Materials, as the foregoing are
enacted and in effect, on or prior to the Closing Date.

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

“Escrow Agreement” means the escrow agreement entered into on the Closing Date
and attached hereto as Exhibit A.

“Escrow Amount” means a cash amount equal to $10,000,000.

“GAAP” means generally accepted accounting principles, consistently applied, in
the United States and consistent with the Company Group’s and its Subsidiaries’
past practices.

“Governmental Authority” means any government, governmental agency, department,
bureau, office, commission, authority, or instrumentality, or court of competent
jurisdiction, in each case whether foreign, federal, state, or local.

“Governmental Licenses” means all permits, licenses, franchises, registrations,
certificates, approvals, and other authorizations issued by or obtained from any
Governmental Authority, including those listed on the “Governmental Licenses
Schedule” attached hereto.

“Hazardous Materials” means any pollutant, toxic substance, including asbestos
and asbestos-containing materials, hazardous waste, hazardous material,
hazardous substance, contaminant, petroleum or petroleum-containing materials,
radiation and radioactive materials, other harmful biological agents, and
polychlorinated biphenyls as defined in, the subject of, or that give rise to
liability under any Environmental Law.

“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, together with all rules and regulations promulgated thereunder.

“Indebtedness” means, with respect to any Person at any date, without
duplication: (a) any liability of such Person (i) for borrowed money (excluding
any inter-company obligations,

 

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any trade payables, accrued expenses, accounts payable and any other current
liabilities), (ii) in respect of letters of credit, to the extent drawn,
(iii) evidenced by a bond, note, debenture or similar instrument, (iv) for the
payment of money relating to leases that are required to be classified as a
capitalized lease obligation in accordance with GAAP, (v) for deferred purchase
price obligations or earn-out obligations entered into in connection with any
acquisition undertaken by such Person, or (vi) for dividends payable on
preferred stock; (b) any liability of others (other than members of the Company
Group) described in the preceding clause (a) that such Person has guaranteed,
that is recourse to such Person or any of its assets or that is secured in whole
or in part by the assets of such Person; and (c) any and all accrued interest,
prepayment premiums, make whole premiums or penalties and fees associated with
any of the foregoing. For the avoidance of doubt, none of the obligations under
the retirement plans of the Company and its Subsidiaries shall be considered
Indebtedness.

“Initial Cash Merger Consideration” means the Initial Merger Consideration,
minus the Warrant Payments.

“Initial Merger Consideration” means (i) $200,000,000, plus (ii) the aggregate
amount of all Estimated Cash held by the Company Group as of the close of
business on the day prior to the Closing Date, minus (iii) the Transaction
Expenses (to the extent not paid by the Company Group prior to the Closing),
minus (iv) the Escrow Amount, minus (v) the Repaid Indebtedness (to the extent
not paid by the Company Group prior to the Closing), (vi) plus the Tax Benefit,
minus (vii) the amount, if any, by which Estimated Working Capital as of the
close of business on the day prior to the Closing Date, as determined pursuant
to Section 2.11(a), is less than Target Working Capital (a “Downward Closing
Working Capital Adjustment”), plus (viii) the amount, if any, by which Estimated
Working Capital as of the close of business on the day prior to the Closing
Date, as determined pursuant to Section 2.11(a), is greater than Target Working
Capital (an “Upward Closing Working Capital Adjustment”), minus (ix) the
Sellers’ Representative Expense Fund, minus (x) the amount of Net Special Option
Replication Bonus Payments.

“Knowledge” means in the case of Purchaser, the actual knowledge of the chief
executive officer and president or chief financial officer (or persons serving
in similar capacities) of such Person, without independent investigation, and
means in the case of the Company, the actual knowledge of Ronald Auletta, Robert
Kordenbrock, Bernd Hoehn and Teong Hiang Kong without independent investigation.

“Law” means any foreign, federal, state or local law (including common law),
statute, code, or governmental ordinance, rule, or regulation, in each case, as
promulgated by a Governmental Authority.

“Legal Proceeding” means any judicial, administrative or arbitral actions,
suits, proceedings or claims (including counterclaims) by or before a
Governmental Authority.

“Letter of Transmittal” shall mean that certain Letter of Transmittal attached
hereto as Exhibit D.

 

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“Liens” means any mortgage, pledge, security interest, encumbrance, lien,
easement, or charge or similar restrictions or limitations.

“Material Adverse Effect” means any event, circumstance, change, occurrence or
effect (collectively, “Events”) that, individually, has a material and adverse
effect upon the assets, liabilities, financial condition or operating results of
the Company Group, taken as a whole; provided, however, that none of the
following shall be deemed to constitute, and none of the following shall be
taken into account in determining whether there has been, a Material Adverse
Effect: any adverse Event arising from or relating to (i) general business or
economic conditions, including such conditions related to the Business which do
not have a disproportionate impact on the Company Group when compared to other
similarly situated businesses, (ii) the effect of any change that generally
affects any industry in which any member of the Company Group operates which
does not have a disproportionate impact on the Company Group when compared to
other similarly situated businesses, (iii) any failure by any member of the
Company Group to meet its internal financial projections (it being understood
that the underlying cause of such failure to meet projections shall not be
excluded by reason of this clause (iii)), (iv) national or international
political or social conditions, including the engagement by the United States or
any other country or group in hostilities, whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of any military or
terrorist attack upon the United States or any other country, or any of their
respective territories, possessions, or diplomatic or consular offices or upon
any military installation, equipment or personnel of the United States or any
other country or group, (v) changes in GAAP, (vi) the financial, banking or
securities markets (including any disruption thereof and any decline in the
price of any security or any market index), (vii) changes in Law which do not
have a disproportionate impact on the Company Group when compared to other
similarly situated businesses, (viii) any “act of God,” including, but not
limited to, weather, natural disasters and earthquakes or (ix) changes resulting
from the announcement or pendency of this Agreement or the transactions
contemplated hereunder.

“Merger Consideration” means an amount equal to (i) the Initial Merger
Consideration, plus (ii) any payments required to be made to the Sellers’
Representative (for the benefit of the Sellers) pursuant to Section 2.11(d),
minus (iii) any payments to Purchaser pursuant to Section 2.11(d).

“Order” means any order, injunction, judgment, decree, ruling, writ, assessment
or arbitration award of a Governmental Authority having competent jurisdiction.

“Permitted Liens” means (i) mechanics’, materialmens’, carriers’, workmens’,
repairmens’, contractors’ and warehousemens’ Liens arising or incurred in the
ordinary course of business consistent with past practice and for amounts which
are not delinquent and which would not, individually or in the aggregate, be
material, and which do not result from a breach, default or violation of a
Company Group entity of any Contract or Law, (ii) Liens for Taxes not yet due
and payable or for Taxes that the taxpayer is diligently contesting in good
faith by appropriate proceedings and for which adequate reserves according to
GAAP, if required, have been established, (iii) purchase money Liens securing
rental payments under capital lease arrangements, (iv) applicable Law or Orders,
(v) Liens granted to any lender at the Closing in connection with any

 

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financing by Purchaser of the transactions contemplated hereby; and (vi) any
other Liens set forth on the “Permitted Liens Schedule”.

“Permitted Real Property Liens” means with respect to each parcel of Owned Real
Property (i) real estate taxes, assessments and other governmental levies, fees
or charges imposed with respect to such parcel which are not yet due and payable
as of the Closing Date or that are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves according to GAAP, if
required, have been established; (ii) mechanics’, landlord’s, carriers’,
workmens’, repairmens’ or contractors’ Liens with respect to such parcel
incurred in the ordinary course of business for amounts which are not delinquent
and would not, individually or in the aggregate, be material (or any other Liens
against which the Company Group’s title insurer shall be prepared to insure over
at no cost to Purchaser and without reliance on any affidavits, indemnities or
other undertakings from the Company Group); (iii) zoning, building and other
land use laws imposed by any Governmental Authority having jurisdiction over
such parcel (but not the violation of any such laws); (iv) easements, covenants,
conditions, restrictions and other similar matters of record affecting title to
such parcel which, individually or in the aggregate, do not interfere with the
operation of the Business and do not materially impair the use, occupancy or
value of such parcel; and (v) matters which would be disclosed on an accurate
survey which, individually or in the aggregate, do not interfere with the
operation of the Business and do not materially impair the use, occupancy or
value of such parcel.

“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated association, corporation, limited liability company, other
entity or Governmental Authority.

“Pre-Closing Tax Period” means any taxable period ending on or before the
Closing Date.

“Proprietary Rights” means (i) patents and patent applications; (ii) trademarks,
service marks, trade names and trade dress, together with all goodwill
associated therewith, and internet domain names; (iii) copyrights; (iv) trade
secrets, know-how and confidential information; and (v) registrations and
applications for any of the foregoing.

“Purchased Proprietary Rights” means all Proprietary Rights owned by the Company
Group, together with all income, royalties, damages and payments due or payable
as of the Closing or thereafter (including damages and payments for past,
present or future infringements, misappropriations or other violations thereof)
and the rights to sue and collect damages for past, present or future
infringements, misappropriations or other violations thereof, and any
corresponding, equivalent or counterpart rights, title or interest that now
exist or may be secured hereafter anywhere in the world, and all copies and
tangible embodiments of the foregoing, including the Proprietary Rights listed
in the “Proprietary Rights Schedule.”

“Release” means any releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, migrating, disposing or
dumping of a

 

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Hazardous Material into the Environment (including the abandonment or discarding
of barrels, containers and other closed receptacles containing any Hazardous
Materials).

“Sellers” means the Stockholders, Special Option Replication Bonus Payment
recipients, and holders of Warrants.

“Sellers’ Representative” means Industrial Growth Partners III, L.P.

“Special Option Replication Bonus Payments” shall mean those special bonus
arrangements established by the Company to replicate option-like payments to
certain employees of the Company Group as described on the “Special Option
Replication Bonus Payments Schedule”.

“Stockholder” means a holder of Company Capital Stock.

“Subsidiary” means, with respect to any Person, any partnership, limited
liability company, corporation or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of capital stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a partnership,
limited liability company or other business entity, a majority of the
partnership or other similar ownership interests thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more Subsidiaries
of that Person or a combination thereof.

“Target Working Capital” means $18,876,000.

“Tax” means (i) any foreign, federal, state or local income, gross receipts,
franchise, estimated, alternative minimum, add on minimum, sales, use, transfer,
ad valorem, real property gains, registration, value added, escheat, unclaimed
or abandoned property, excise, natural resources, severance, stamp, occupation,
profits, premium, windfall profit, environmental, real property, personal
property, capital stock, social security, employment, unemployment, disability,
payroll, withholding, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any law or taxing
authority, whether disputed or not, (ii) any liability for the payment of any
amounts of any of the foregoing types as a result of being a member of an
affiliated, consolidated, combined or unitary group, (iii) any liability for the
payment of any amounts as a result of being a party to any tax sharing or
allocation agreements or arrangements or with respect to the payment of any
amounts of any of the foregoing types as a result of any express or implied
obligation to indemnify any other Person, excluding, in each case, any liability
imposed under any contract executed in the ordinary course of business and not
primarily related to Taxes, and (iv) any liability for the payment of any of the
foregoing types as a successor, transferee or otherwise.

“Tax Benefit” is defined in, and shall be calculated in accordance with, the
“Tax Benefit Schedule” attached hereto.

 

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“Tax Return” means any return, declaration, statement, election, schedule, form,
report, claim for refund, information return or other document (including any
related or supporting schedule, supplement, attachment, statement or
information) in each case related to Taxes of any member of the Company Group,
including any amendment thereof.

“Transaction Expenses” means, collectively, the amount of (i) all unpaid fees,
commissions, or expenses that have been incurred on or prior to the Closing Date
on behalf of the Company Group in connection with the preparation, negotiation
and execution of this Agreement and/or the consummation or performance of any of
the transactions contemplated by this Agreement and the agreements contemplated
hereby, including the fees and expenses of any broker, investment banker or
financial advisor, and any legal, accounting and consulting fees and expenses,
(ii) all fees payable by any member of the Company Group to any Seller or any
Affiliates of a Seller in connection with this Agreement or the transactions
contemplated hereby (other than the Special Option Replication Bonus Payments),
and (iii) any change-in-control bonuses, retention or similar payments to
directors, officers, employees and consultants of the Company Group payable as a
result of or in connection with the consummation of the transactions
contemplated hereby (other than the Special Option Replication Bonus Payments).

“Warrant” means each outstanding unexercised warrant to purchase shares of
Company Capital Stock.

“Working Capital” is defined in, and shall be calculated in accordance with the
formula, policies and procedures set forth on, the “Working Capital Schedule”.

1.2 Cross References. Each of the following terms shall have the meaning
specified in the Section of this Agreement set forth opposite such term:

 

Term

  

Section

1933 Act

   6.9

Accounting Arbitrator

   2.11(c)(ii)

Actual Cash

   2.11(b)

Actual Working Capital

   2.11(b)

Agreement

   Recitals

Antitrust Law

   4.5(a)

Audited Financial Statements

   5.5(a)

Business Customers

   5.26

Business Suppliers

   5.26

Certificates

   2.6(b)

Certificate of Merger

   2.2

Claim Notice

   8.1(c)(i)

Closing

   2.2

Closing Date

   2.2

Common Stock

   Recitals

Company

   Recitals

Company Board

   Recitals

 

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Term

  

Section

Company Capital Stock

   Recitals

Company Documents

   5.2

Confidentiality Agreement

   8.3

D&O Beneficiary

   8.7

D&O Claim

   8.7

D&O Insurance

   8.7

DGCL

   Recitals

Dispute Notice

   2.11(c)(ii)

Dissenting Shares

   2.10(a)

Downward Closing Working Capital Adjustment

   1.1

Effective Time

   2.2

Employee Plans

   5.15(a)

Escrow Agent

   2.5(a)(iv)

Estimated Cash

   2.11(a)

Estimated Working Capital

   2.11(a)

Events

   1.1

Final Cash

   2.11(c)(i), 2.11(c)(ii) and 2.11(c)(iii)

Final Initial Merger Consideration

   2.11(d)

Final Working Capital

   2.11(c)(i), 2.11(c)(ii) and 2.11(c)(iii)

Financial Statements

   5.5

Fundamental Representations

   8.1(a)(ii)

Fundamental Representations Cap

   8.1(a)(iii)(A)

Indemnification Basket

   8.1(a)(iii)(B)

Indemnification Cap

   8.1(a)(iii)(A)

Indemnified Party

   8.1(c)(i)

Indemnifying Party

   8.1(c)(i)

Interim Financial Statements

   5.5(b)

Lease

   5.7(a)

Leased Real Property

   5.7(a)

Litigation Conditions

   8.1(c)(ii)

Loss

   8.1(a)(i)

Merger

   2.1

Merger Sub

   Recitals

Outside Date

   7.1(d)

Owned Real Property

   5.7(b)

PBGC

   8.11

Post-Closing Straddle Period

   8.8(d)

Pre-Closing Straddle Period

   8.8(d)

Preferred Stock

   Recitals

Privilege Period

   8.8(d)

Pro Rata Share

   8.1(a)(i)

Purchaser

   Recitals

Purchaser Indemnitees

   8.1(a)(i)

 

9

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Term

  

Section

Related Persons

   5.18

Repaid Indebtedness

   2.9

Seller Indemnitees

   8.1(b)(i)

Sellers’ Representative Expense Fund

   8.10

Stockholder Vote

   4.6

Straddle Period

   8.8(d)

Survival Date

   8.1(a)(ii)

Surviving Corporation

   Recitals

Stub Period Balance Sheet

   5.5(b)

Third Party Claim

   8.1(c)(i)

Upward Closing Working Capital Adjustment

   1.1

WARN

   5.14(b)

Warrant Payments

   2.7(b)

ARTICLE 2

THE MERGER

2.1 The Merger. At the Effective Time and subject to and upon the terms and
conditions of this Agreement and the applicable provisions of the DGCL, Merger
Sub shall be merged with and into the Company, the separate corporate existence
of Merger Sub shall cease, and the Company shall continue as the Surviving
Corporation and as a direct, wholly owned Subsidiary of Purchaser (the
“Merger”).

2.2 The Closing and the Effective Time. The closing of the Merger (the
“Closing”), will take place at the offices of Kirkland & Ellis LLP, 555
California Street, Suite 2700, San Francisco, California 94104, three
(3) Business Days following the satisfaction or waiver of the conditions to
Closing set forth in Sections 3.1, 3.2 and 3.3 (other than the conditions that
must be satisfied at the Closing) unless another time or place is mutually
agreed upon in writing by Purchaser and the Company. The date upon which the
Closing occurs shall be referred to herein as the “Closing Date.” On the Closing
Date, and upon the terms and subject to the conditions of this Agreement, the
parties hereto shall cause the Merger to be consummated by filing the
Certificate of Merger (the “Certificate of Merger”) in substantially the form
attached hereto as Exhibit B, with the Secretary of State of the State of
Delaware, as required by, and executed in accordance with, the applicable
provisions of the DGCL (the time of such filing with the Secretary of State of
the State of Delaware, or such later time as may be agreed upon in writing by
Purchaser and the Company and specified in the Certificate of Merger, shall be
referred to herein as the “Effective Time”).

 

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2.3 Effect of the Merger. From and after the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, from and after
the Effective Time, except as otherwise agreed to pursuant to the terms of this
Agreement and the Company Documents, all of the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest 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.

2.4 Certificate of Incorporation, Bylaws and Board of Surviving Corporation. As
of the Effective Time, by virtue of the Merger and without any action on the
part of Merger Sub or the Company, the certificate of incorporation and the
bylaws of the Surviving Corporation shall be the certificate of incorporation
and the bylaws of Merger Sub, as in effect immediately prior to the Effective
Time, until duly amended as provided therein or in accordance with applicable
Laws. The board of directors of Merger Sub immediately prior to the Effective
Time shall be the board of directors of the Surviving Corporation immediately
after the Effective Time, each to hold such office in accordance with the
provisions of the bylaws of the Surviving Corporation.

2.5 Effect of the Merger on the Company Capital Stock and the Capital Stock of
Merger Sub.

(a) Effect on the Company Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of Company Capital Stock, each share of Company Capital Stock issued and
outstanding immediately prior to the Effective Time, upon the terms and subject
to the conditions set forth in this Section 2.5 and throughout this Agreement,
will be canceled and extinguished and be converted automatically into the right
to receive that portion of the Merger Consideration as set forth herein.

(i) Each share of Company Capital Stock that is issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive a portion of the Merger Consideration in accordance with the
Distribution Waterfall.

(ii) For purposes of calculating the amount to be paid to each holder of Company
Capital Stock at the Effective Time, the amounts described in this
Section 2.5(a) shall be calculated assuming that the Merger Consideration is
equal to the Initial Cash Merger Consideration, and shall be adjusted following
the Closing as set forth herein. The amount to be paid to each holder of Company
Capital Stock for each share of Company Capital Stock held shall be rounded down
to the nearest whole cent.

(iii) All shares of Company Capital Stock, when canceled, extinguished and
converted pursuant to this Section 2.5(a), shall no longer be outstanding and
shall automatically be canceled and retired, and each former holder of Company
Capital Stock shall cease to have any rights with respect thereto, except the
right to receive the consideration provided for in this Section 2.5(a).

 

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(iv) At the Effective Time, Purchaser shall pay or cause to be paid by wire
transfer of immediately available funds the following:

(A) all Repaid Indebtedness (to the extent not paid by the Company Group prior
to the Closing), as set forth on “Repaid Indebtedness Schedule”, which schedule
shall be delivered by the Company to Purchaser no later than two Business Days
prior to the Effective Time and all Transaction Expenses (to the extent not paid
by the Company Group prior to the Closing), as set forth on the “Transaction
Expense Schedule”, which shall be updated as necessary by the Company to
Purchaser no later than two Business Days prior to the Closing;

(B) the Escrow Amount to JPMorgan Chase Bank N.A., as escrow agent (the “Escrow
Agent”), to an account designated by the Escrow Agent in writing not less than
one (1) Business Day prior to the Closing Date;

(C) the Net Special Option Replication Bonus Payments to the Company for further
payment to the persons entitled thereto pursuant to Section 2.7(a);

(D) on behalf of the Company, the Warrant Payments to the holders of Warrants
entitled to receive Warrant Payments pursuant to Section 2.7(b);

(E) the Initial Cash Merger Consideration to the holders of Certificates
pursuant to the terms of Section 2.6; provided, that to the extent that a
Stockholder delivers a Letter of Transmittal and Certificate or a lost stock
affidavit (as described in Section 2.6(d)) to the Company prior to the Closing,
that portion of the Initial Cash Merger Consideration payable to such
Stockholder shall be paid to such Stockholder at the Closing pursuant to wire
instructions provided by such Stockholder; and

(F) the Sellers’ Representative Expense Fund to the Sellers’ Representative
pursuant to Section 8.10.

(b) Capital Stock of Merger Sub. Each share of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one share of the capital stock of the Surviving Corporation. Each share
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of the Surviving Corporation.

(c) Cancellation of Treasury Stock. Any Company Capital Stock that is owned by
the Company and not issued and outstanding as of the Effective Time shall be
automatically canceled and shall cease to exist and no consideration shall be
delivered in exchange therefor.

2.6 Mechanism of Payment and Delivery of Certificates.

(a) At the Effective Time, Purchaser shall make the payments provided for in
Section 2.5 of this Agreement.

 

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(b) Except as otherwise set forth in Section 2.5(a)(iv)(E), upon surrender to
Purchaser of a certificate representing, immediately prior to the Effective
Time, Company Capital Stock (“Certificates”), together with a Letter of
Transmittal duly executed and completed in accordance with the instructions
thereto, the holder of such Certificate shall be entitled to receive, within
five (5) Business Days after such surrender, in exchange therefor, cash in an
amount set forth in the Distribution Waterfall, which amounts shall be paid by
Purchaser by check or wire transfer in accordance with the instructions provided
by such holder. No interest or dividends will be paid or accrued on the
consideration payable upon the surrender or transfer of any Certificate. If the
consideration provided for herein is to be delivered in the name of a person
other than the person in whose name the Certificate was surrendered, it shall be
a condition of such delivery that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer. Until surrendered
and exchanged in accordance with the provisions of this Section 2.6(b), each
Certificate (other than those representing Dissenting Shares or Company Capital
Stock to be canceled pursuant to Section 2.5(c)) shall represent, for all
purposes, only the right to receive an amount in cash equal to the portion of
the Merger Consideration payable in respect thereof pursuant to Section 2.5(a)
in respect of the Company Capital Stock formerly evidenced by such Certificate,
without any interest or dividends thereon.

(c) Neither Purchaser nor the Surviving Corporation shall be liable to a holder
of Certificates or any other person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar Law.
If any Certificates shall not have been surrendered or transferred by the date
on which any Merger Consideration, dividends (whether in cash, stock or
property) or other distributions with respect to Company Capital Stock in
respect of such Certificate would otherwise escheat to or become the property of
any foreign, federal, state or local governments or governmental agency, any
such shares, cash, dividends or distributions in respect of such Certificate
shall, to the extent permitted by applicable Law, become the property of the
Surviving Corporation, free and clear of all claims or interests of any person
previously entitled thereto.

(d) In the event any Certificate shall have been lost, stolen or destroyed,
then, upon the making of an affidavit (in form and substance reasonably
acceptable to Purchaser) of that fact by the Person (who shall be the record
owner of such Certificate) claiming such Certificate to be lost, stolen or
destroyed and the providing of a customary indemnity by such Person, the Company
will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof pursuant to this Agreement.

(e) Each of the Surviving Corporation and Purchaser shall be entitled to deduct
and withhold from the consideration otherwise payable to any holder of Company
Capital Stock or Warrants or to any recipients of the Special Option Replication
Bonus Payments, or otherwise pursuant to this Agreement such amounts as may be
required to be deducted or withheld with respect to the making of such payment
under the Code, or any applicable provision of state, local or foreign tax Law.
To the extent that amounts are so deducted or withheld and paid over to the
appropriate taxing authority by the Company, the Surviving Corporation or
Purchaser, such amounts shall be treated for all purposes of this Agreement as
having been paid to the person to whom such amounts would otherwise have been
paid.

 

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2.7 Special Option Replication Bonus Payments; Warrants.

(a) On the Closing Date, Purchaser shall deliver to the Company, by wire
transfer of immediately available funds to an account designated by the Company
at least two (2) business days prior to the Closing Date, an amount equal to the
Special Option Replication Bonus Payments, less the portion of such payments
which will be placed in escrow (the “Net Special Option Replication Bonus
Payments”), as set forth in the Distribution Waterfall. The Company shall cause
payment of the Net Special Option Replication Bonus Payments to be issued to
each Special Option Replication Bonus Payment recipient as described on the
“Special Option Replication Bonus Payments Schedule”, within two (2) business
days after the Closing Date, subject to the withholding described below. The
Company shall be entitled to deduct and withhold from the consideration
otherwise payable or deliverable to any Special Option Replication Bonus Payment
recipient pursuant to this Section 2.7(a) such amounts as it is required to
deduct and withhold with respect to the making of such payment under any
provision of federal, state, local or foreign tax Law. If the Company so
withholds such amounts, such amounts shall be treated for all purposes of this
Agreement as having been paid to the Special Option Replication Bonus Payment
recipients in respect of which the Company made such deduction and withholding.

(b) At the Closing, each outstanding Warrant will, by virtue of the Closing and
without further action on the part of the holder thereof, be cancelled and each
outstanding Warrant will be converted into the right to receive an amount in
cash (collectively, the “Warrant Payments”) equal to the amount attributable
thereto, as set forth in the Distribution Waterfall. At the Effective Time and
after the payment of the Warrant Payments, all Warrants shall terminate. In
accordance with the provisions of this Agreement, at the Effective Time,
Purchaser will pay or cause to be paid, on behalf of the Company, the Warrant
Payments to the holders of Warrants entitled to receive Warrant Payments
pursuant to this Section 2.7(b).

2.8 No Further Ownership Rights in the Company Capital Stock. The portion of the
Merger Consideration paid in respect of the surrender for exchange of the
Company Capital Stock in accordance with the terms hereof shall be deemed to be
full satisfaction of all rights pertaining to such Company Capital Stock, and
there shall be no further registration of transfers on the records of the
Surviving Corporation of the Company Capital Stock which were outstanding
immediately prior to the Effective Time.

2.9 Repaid Indebtedness; Company Transaction Expenses. It is contemplated by the
parties that, upon the Closing, the Indebtedness of the Company Group set forth
on the attached “Repaid Indebtedness Schedule” (to the extent not paid by the
Company Group prior to the Closing) (the “Repaid Indebtedness”) will be fully
repaid, and that such repayment will be paid by Purchaser pursuant to
Section 2.5(a)(iv)(A). In order to facilitate such repayment, no less than two
(2) Business Days prior to the Closing, the Company Group shall obtain payoff
letters for the Repaid Indebtedness, which payoff letters will be in a form
reasonably satisfactory to Purchaser, Merger Sub and their financing sources.
Subject to the satisfaction or waiver of the Company Group’s conditions,
covenants and obligations to be satisfied prior to the Closing, in connection
with the Closing, Purchaser shall make the payments referenced in such payoff
letters on the Closing Date in order to discharge the Repaid Indebtedness
covered thereby. In addition, it is contemplated by the

 

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parties hereto that, upon the Closing, all of the Transaction Expenses set forth
on the “Transaction Expense Schedule” (to the extent not paid by the Company
Group prior to the Closing) will be fully paid, and that such payment will be
paid by Purchaser pursuant to Section 2.5(a)(iv)(A). Subject to the satisfaction
or waiver of the Company Group’s conditions, covenants and obligations to be
satisfied prior to the Closing, in connection with the Closing, Purchaser shall
make payment of the Transaction Expenses on the Closing Date in order to
discharge the amounts payable thereunder.

2.10 Dissenting Shares.

(a) Notwithstanding any provision of this Agreement to the contrary, shares of
Company Capital Stock that are outstanding immediately prior to the Effective
Time and that are held by the holders of Company Capital Stock who shall have
not voted in favor of the Merger and who shall have demanded properly in writing
appraisal for such shares in accordance with Section 262 of the DGCL
(collectively, the “Dissenting Shares”) shall not be converted into, or
represent the right to receive, any portion of the Merger Consideration payable
pursuant to the terms of this Agreement. Such holders of Company Capital Stock
shall be entitled to receive payment of the appraised value of such shares of
Company Capital Stock held by them in accordance with the provisions of such
Section 262, except that all Dissenting Shares held by the holders of Company
Capital Stock who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such shares under such
Section 262 shall thereupon be deemed to have been converted into, and to have
become exchangeable for, as of the Effective Time, the right to receive any
portion of the Merger Consideration payable pursuant to the terms of this
Agreement, without any interest thereon, upon surrender, in the manner provided
herein, of the Certificate or Certificates that formerly evidenced such shares
or the execution and delivery of a lost stock affidavit to the Company as set
forth in Section 2.6(d).

(b) The Company shall give (i) Purchaser and the Sellers’ Representative prompt
written notice of any demands for appraisal received by the Company, withdrawals
of such demands, and any other instruments served pursuant to the DGCL and
received by the Company and (ii) Purchaser the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Purchaser,
make any payment with respect to any demands for appraisal or offer to settle or
settle any such demands.

2.11 Working Capital and Cash Adjustment.

(a) Determination of Closing Adjustment. No later than three days prior to the
Closing, the Company shall provide Purchaser with a statement of its good faith
estimate of Working Capital (calculated consistently with the Target Working
Capital, using the same accounting methods, policies, practices, procedures or
estimation methods as those used for the purpose of determining the Target
Working Capital) as of the close of business on the day prior to the Closing
Date (“Estimated Working Capital”), its good faith estimate of the aggregate
amount of all Cash of the Company Group as of the close of business on the day
prior to the Closing Date (“Estimated Cash”) and the amount, if any, by which
the Initial Merger Consideration is to be adjusted as a result thereof. A sample
statement is set forth on the attached “Estimated Working Capital Statement

 

15

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Schedule.”

(b) Determination of Post-Closing Adjustment. As promptly as practicable after
the Closing, but in no event later than forty-five (45) days following the
Closing, Purchaser shall deliver to the Sellers’ Representative a statement of
the actual Working Capital as of the close of business on the day prior to the
Closing Date (“Actual Working Capital”) (prepared in accordance with the
“Working Capital Schedule”) and a statement of the actual Cash of the Company
Group as of the close of business on the day prior to the Closing Date (“Actual
Cash”).

(c) Disputed Final Adjustment.

(i) No later than thirty (30) days following the delivery by Purchaser of the
statements of Actual Working Capital and Actual Cash, the Sellers’
Representative shall notify Purchaser in writing whether it accepts or disputes
the accuracy of the calculation of Actual Working Capital and Actual Cash.
During such thirty (30) day period, the Sellers’ Representative and its agents
shall be provided with such access to the financial books and records of the
Company and its Subsidiaries pertaining to or used in connection with the
calculation, determination, and preparation of the statements of Actual Working
Capital and Actual Cash as is reasonably requested by the Sellers’
Representative to enable it to evaluate the calculations of Actual Working
Capital and Actual Cash prepared by Purchaser. If the Sellers’ Representative
accepts the calculation of Actual Working Capital and Actual Cash determined
pursuant to Section 2.11(b), or if the Sellers’ Representative fails within such
thirty (30) day period to notify Purchaser of any dispute with respect thereto,
then the calculation of Actual Working Capital determined pursuant to
Section 2.11(b), shall be the “Final Working Capital” and the calculation of
Actual Cash determined pursuant to Section 2.11(b), shall be the “Final Cash”
which, in each case, shall deemed final and conclusive and binding upon all
parties in all respects.

(ii) If the Sellers’ Representative disputes the accuracy of the calculation of
Actual Working Capital or Actual Cash, the Sellers’ Representative shall provide
written notice to Purchaser no later than thirty (30) days following the
delivery by Purchaser to the Sellers’ Representative of the calculation of
Actual Working Capital and Actual Cash (the “Dispute Notice”), setting forth in
reasonable detail those items that the Sellers’ Representative disputes. During
the thirty (30) day period following delivery of a Dispute Notice, Purchaser and
the Sellers’ Representative shall negotiate in good faith to resolve their
disagreements over the disputed items. During such thirty (30) day period and
until the final determination of Final Working Capital and/or Final Cash in
accordance with this Section 2.11(c)(ii), the Sellers’ Representative and its
agents shall be provided with such access to the financial books and records of
the Company and its Subsidiaries pertaining to or used in connection with the
calculation, determination, and preparation of the statement of Actual Working
Capital or Actual Cash as it may reasonably request to enable it to address all
matters set forth in any Dispute Notice. If the parties resolve their
differences over the disputed items in accordance with the foregoing procedure,
“Final Working Capital” and/or “Final Cash” shall be the amounts agreed upon by
them. If the parties fail to resolve their differences over the disputed items
within such thirty (30) day period, then Purchaser and the

 

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Sellers’ Representative shall forthwith jointly request that a nationally
recognized independent public accounting firm as shall be mutually agreed by the
Purchaser and the Sellers’ Representative (the “Accounting Arbitrator”) make a
binding determination as to the disputed items in accordance with this
Agreement.

(iii) The Accounting Arbitrator will under the terms of its engagement have no
more than thirty (30) days from the date of referral and no more than ten
(10) Business Days from the final submission of information and testimony by
Purchaser and the Sellers’ Representative within which to render its written
decision with respect to the disputed items (and only with respect to any
unresolved disputed items set forth in the Dispute Notice) and the final
calculation of Actual Working Capital and/or Actual Cash shall be based solely
on the resolution of such disputed items. The Accounting Arbitrator shall review
such submissions and base its determination solely on such submissions. In
resolving any disputed item, the Accounting Arbitrator may not assign a value to
any item greater than the maximum value for such item claimed by either party or
less than the minimum value for such item claimed by either party. The decision
of the Accounting Arbitrator shall be deemed final and binding upon the parties
and enforceable by any court of competent jurisdiction and the Accounting
Arbitrator’s final calculation of Actual Working Capital shall be deemed the
“Final Working Capital” and/or the Accounting Arbitrator’s final calculation of
Actual Cash shall be deemed the “Final Cash.” The fees and expenses of the
Accounting Arbitrator shall be allocated to be paid by Purchaser, on the one
hand, and the Sellers’ Representative (on behalf of the Sellers and the
Company), on the other, based upon the percentage that the portion of the
contested amount not awarded to each party bears to the amount actually
contested by such party, as determined by the Accounting Arbitrator.

(d) Payment following Calculation of Final Working Capital and Final Cash.
Following the determination of the Final Working Capital and the Final Cash
pursuant to Section 2.11(c), the Initial Merger Consideration shall be
recalculated substituting the Final Working Capital for the Estimated Working
Capital in Section 1.1 and the Final Cash for the Estimated Cash in Section 1.1
(the “Final Initial Merger Consideration”) and if (after taking into account any
Upward Closing Working Capital Adjustment or Downward Closing Working Capital
Adjustment at the Closing) (A) the Final Initial Merger Consideration is greater
than the Initial Merger Consideration on the Closing Date, then the Company
shall pay to the Sellers’ Representative (for the benefit of the Sellers
pursuant to the Distribution Waterfall) the amount of such difference by wire
transfer of immediately available funds within five (5) Business Days after such
determination; and (B) the Initial Merger Consideration on the Closing Date is
greater than the Final Initial Merger Consideration, then the Merger
Consideration shall be reduced by such deficiency and such amount shall be paid
to Purchaser (in accordance with the immediately following sentence) within five
(5) Business Days after such determination. Any payment to be made to Purchaser
pursuant to this Section 2.11 shall be paid first from the then-available
portion of the Sellers’ Representative Expense Fund (if any) and then any
remaining balance shall be paid directly by the Sellers (in accordance with each
Seller’s Pro Rata Share).

 

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ARTICLE 3

CONDITIONS TO CLOSING; CLOSING DELIVERIES

3.1 General Conditions. The respective obligations of Purchaser, Merger Sub and
the Company to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions on or before the Closing
Date, any of which may, to the extent permitted by applicable Law, be waived in
writing by any party in its sole discretion (provided, that such waiver shall
only be effective as to the obligations of such party):

(a) no Law or Order shall have been enacted or entered into after the date
hereof that would prevent the consummation of the Merger; and

(b) the applicable waiting periods under the HSR Act relating to the
transactions contemplated by this Agreement shall have expired or been
terminated.

3.2 Conditions to the Obligations of the Company. The obligations of the Company
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction or waiver of the following conditions on or before the Closing
Date:

(a) each of the representations and warranties set forth in Article 6 shall be
true and correct as of the date of this Agreement and as of the Closing Date as
though made as of the Closing Date (except that such representations and
warranties that are made as of a specific date need only be true and correct as
of such date), except where the failure of any such representations and
warranties to be true and correct has not had, individually or in the aggregate,
a material adverse effect on the ability of Purchaser or Merger Sub to
consummate the transactions contemplated hereby; and

(b) Purchaser and Merger Sub shall have performed and complied with in all
material respects all the covenants and agreements required to be performed and
complied with by each of them under this Agreement prior to the Closing.

Any condition specified in this Section 3.2 may be waived by the Sellers’
Representative on behalf of the Company; provided, however, that no such waiver
will be effective against the Company unless it is set forth in a writing
executed by the Sellers’ Representative.

3.3 Conditions to Purchaser’s Obligations. The obligations of Purchaser and
Merger Sub to consummate the transactions contemplated by this Agreement are
subject to the satisfaction or waiver of the following conditions on or before
the Closing Date:

(a) each of the representations and warranties set forth in Article 5 shall be
true and correct as of the date of this Agreement and as of the Closing Date as
though made as of the Closing Date (except that such representations and
warranties that are made as of a specific date need only be true and correct as
of such date), except where the failure of any such representations and
warranties to be true and correct has not had, individually or in the aggregate,
a Material Adverse Effect; provided, however, that the representations and
warranties contained in (i) the first

 

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sentence of Section 5.1 (Organization and Corporate Power), (ii) Section 5.3
(Capitalization; Subsidiaries), (iii) Section 5.17 (Brokerage) and
(iv) Section 5.18 (Affiliate Transactions) shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date as
though made as of the Closing Date (except that such representations and
warranties that are made as of a specific date need only be true and correct as
of such date);

(b) each member of the Company Group shall have performed and complied with in
all material respects all of the covenants and agreements required to be
performed and complied with by it under this Agreement prior to the Closing
Date; and

(c) since the date of the Interim Financial Statements through and including the
Closing Date, there has been no Event that, individually or in the aggregate,
has had or would reasonably be expected to have a Material Adverse Effect.

Any condition specified in this Section 3.3 may be waived by Purchaser on behalf
of Purchaser and Merger Sub; provided, however, that no such waiver shall be
effective unless it is set forth in a writing executed by Purchaser.

3.4 Closing Deliveries.

(a) Deliveries by Purchaser and Merger Sub. On the Closing Date, Purchaser shall
deliver, or cause to be delivered, to the Sellers’ Representative (or such other
Person as set forth below) the following items:

(i) a certificate from an officer of each of Purchaser and Merger Sub in the
form set forth as Exhibit E attached hereto, dated as of the Closing Date,
certifying that the conditions specified in Sections 3.2(a) and 3.2(b) hereof
have been satisfied;

(ii) a copy of the Escrow Agreement, duly executed by Purchaser;

(iii) the Initial Cash Merger Consideration to the Stockholders pursuant to
Section 2.5(a)(iv)(E);

(iv) the Escrow Amount to the Escrow Agent;

(v) the Net Special Option Replication Bonus Payments to the Company;

(vi) the Warrant Payments to the holders of Warrants pursuant to Section 2.7(b);

(vii) Purchaser shall have paid, or caused to be paid, the Transaction Expenses
set forth on the “Transaction Expense Schedule”;

(viii) Purchaser shall have delivered the Sellers’ Representative Expense Fund
to the Sellers’ Representative;

(ix) Purchaser shall have paid, or caused to be repaid, the Repaid Indebtedness
set forth on the “Repaid Indebtedness Schedule”;

 

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(x) a copy of the non-solicitation agreement in the form attached hereto as
Exhibit J (the “Non-Solicitation Agreement”), duly executed by Purchaser; and

(xi) a certificate signed by an officer of each of Purchaser and Merger Sub,
respectively, certifying as to the minutes of the board of directors (or
equivalent governing bodies) of each of Purchaser and Merger Sub authorizing the
execution, delivery and performance of this Agreement, the other agreements
contemplated hereby and the consummation of all transactions contemplated hereby
and thereby.

(b) Deliveries by the Company. On the Closing Date, the Company shall deliver,
or cause to be delivered, to Purchaser the following items:

(i) a certificate signed by an officer of the Company in the form set forth as
Exhibit F attached hereto, dated as of the Closing Date, certifying that the
conditions specified in Section 3.3(a) and 3.3(b) hereof have been satisfied;

(ii) certified copies of the resolutions duly adopted by the Company Board
authorizing the execution, delivery and performance of this Agreement, the other
agreements contemplated hereby and the consummation of all transactions
contemplated hereby and thereby;

(iii) a duly executed copy of the Written Consent;

(iv) an affidavit issued to Purchaser by an officer of the Company as required
by Treasury Regulation Section 1.1445-2(c)(3) certifying that the Company has
not been a United States real property holding corporation (as the term is
defined in the Code and the Treasury Regulations promulgated in connection
therewith) at any time during the five year period ending on the Closing Date in
form and substance reasonably satisfactory to Purchaser;

(v) a copy of the Escrow Agreement, duly executed by the Sellers’ Representative
and the Escrow Agent;

(vi) written resignations of each director (or manager, as applicable) and
officer of the Company and its Subsidiaries listed in Exhibit G, in their
capacity as such, in the form attached hereto as Exhibit H;

(vii) a release in the form attached hereto as Exhibit I, duly executed by each
person entitled to a Special Option Replication Bonus Payment in accordance with
the “Special Option Replication Bonus Payments Schedule”;

(viii) a copy of the Non-Solicitation Agreement, duly executed by Sellers’
Representative;

(ix) evidence of termination of the Management Services Agreement, dated
September 8, 2008, by and between Xaloy Incorporated, Xaloy Holdings, Inc. and
IGP

 

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Industries, LLC, without further liabilities or obligations of the Company
Group; and

(x) evidence that the Stockholder Vote described in Section 4.6 has occurred.

ARTICLE 4

COVENANTS PRIOR TO CLOSING

4.1 Affirmative Covenants. From the date hereof and prior to the earlier to
occur of the Effective Time or the date that this Agreement is terminated in
accordance with Article 7, except as otherwise provided herein or as required by
Law, the Company shall, and shall cause its Subsidiaries to:

(a) conduct its and their respective business only in the ordinary course of
business consistent in all material respects with past practice;

(b) (i) cooperate with Purchaser in Purchaser’s investigation of the Business
and its properties, and (ii) permit Purchaser and its authorized
representatives, at the sole cost of Purchaser, to (A) have reasonable access to
its and its Subsidiaries’ offices, premises (including the Leased Real Property
and Owned Real Property), and books and records during normal business hours and
with reasonable prior notice, (B) visit and visually inspect any of its and its
Subsidiaries’ properties (including the Leased Real Property and Owned Real
Property) during normal business hours and with reasonable prior notice, and
(C) discuss its affairs, finances and accounts with the Company Group’s key
employees identified on the “Key Employees Schedule”; provided, however, that
Purchaser shall coordinate all contact with any of the key employees through the
Company or its designee; provided, further, notwithstanding anything to the
contrary in this Agreement, the Company Group shall not be required to disclose
any information if such disclosure would (A) result in the waiver of any
attorney-client or other legal privilege or (B) contravene any applicable Laws;
and

(c) reasonably cooperate with Purchaser (with no out-of-pocket costs or expenses
incurred by the Company or its Subsidiaries) in its undertakings to obtain
estoppel certificates, nondisturbance agreements, collateral access agreements
and lien waivers from the applicable landlords of the Leased Real Property,
provide to Purchaser’s title insurer customary title affidavits, indemnities and
other documentation from the Company or its Subsidiaries (as applicable) as is
necessary for Purchaser to obtain title insurance with respect to the Owned Real
Property and material Leased Real Property, subject only to Permitted Real
Property Liens, and otherwise reasonably cooperate with Purchaser (with no
out-of-pocket costs or expenses incurred by the Company or its Subsidiaries)
with respect to any other real property related deliveries as may be reasonably
required by Purchaser, its lender or title insurance company.

4.2 Negative Covenants. From the date hereof and prior to the earlier to occur
of the Effective Time or the date that this Agreement is terminated in
accordance with Article 7, except as set forth on the “Negative Covenants
Schedule,” as otherwise provided herein, or as required by

 

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Law or Order, the Company shall not, and shall cause its Subsidiaries not to,
without the consent of Purchaser (such consent not to be unreasonably withheld,
conditioned or delayed):

(a) acquire any material properties or assets or sell, lease, assign, license,
transfer, convey, or otherwise dispose of any of the material properties or
assets (or any portion thereof) of the Company Group, other than (i) sales of
inventory or obsolete assets or assets with no book value, or (ii) in the
ordinary course of business consistent with past practice;

(b) (i) increase the coverage or benefits available under any (or create any
new) Employee Plan or otherwise modify or amend or terminate any Employee Plan,
(ii) make, grant or promise any bonus or any material wage or salary increase to
any employee, officer or director, or (iii) make, grant or promise any other
change in employment terms for any employee, officer or director, in each case
other than (A) routine or annual wage increases and benefit plan adjustments in
the ordinary course of business consistent with past practice, (B) pursuant to
the terms of any Employee Plan or any collective bargaining agreement in effect
prior to the date of this Agreement as required by Law, or (C) the hiring of a
replacement employee in the ordinary course of business consistent with past
practice to the extent that the compensation of such employee does not exceed
125% of the compensation previously paid for such position;

(c) issue, sell or deliver any of its or any of its Subsidiaries’ securities,
securities convertible into equity securities or any options, warrants or other
rights to purchase its or its Subsidiaries’ equity securities;

(d) other than Cash dividends, declare, set aside, make, pay or effect any
recapitalization, reclassification, stock dividend (or other distribution or
payment), stock split, combination or like change in its capitalization or amend
the terms of any outstanding securities of the Company or any of its
Subsidiaries;

(e) enter into or agree to enter into any merger or consolidation with any
Person, invest in any Person, make a loan or advance to any Person (other than
advances to employees with respect to business expenses in the ordinary course
of business), or make a capital contribution to, or otherwise acquire the
securities or a substantial portion of the assets of, any other Person;

(f) issue, create, incur, assume, endorse, guarantee or otherwise become liable
or responsible with respect to any Indebtedness either involving more than
$1,000,000 or outside the ordinary course of business consistent with past
practice;

(g) cancel or compromise any material debt or claim or waive or release any
material right of the Company or any of its Subsidiaries for consideration or
requirement of payment in excess of $100,000, except in the ordinary course of
business consistent with past practice;

(h) (i) make any change in the Tax reporting or accounting principles, practices
or policies, including with respect to (A) depreciation or amortization policies
or rates or (B) the payment of accounts payable or the collection of accounts
receivable; (ii) settle or compromise any Tax liability; (iii) make, change or
rescind any Tax election; (iv) consent to any extension or waiver

 

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of the limitation period applicable to any claim or assessment in respect of
income Taxes; or (v) amend any Tax Return;

(i) amend or authorize the amendment of its certificate of incorporation or
bylaws (or equivalent organizational documents);

(j) authorize capital expenditures in excess of $250,000, other than amounts set
forth in the Company Group’s capital expenditures budget in effect as of the
date hereof;

(k) enter into any new lease, sublease, or other occupancy agreement in respect
of real property;

(l) enter into, modify or terminate any Contract with any labor union or other
labor or collective bargaining agreement of the Company or any of its
Subsidiaries or, through negotiation or otherwise, make any commitment or incur
any liability to any labor organization with respect to the Company or any of
its Subsidiaries;

(m) enter into any Contract that contains a “non-competition”, “exclusivity” or
other similar provision that restrains, restricts, limits or impedes the ability
of the Company or any of its Subsidiaries to compete with or conduct any
business or line of business in any geographic area, or that prohibits or
restricts the solicitation for employment of any persons (other than
prohibitions and restrictions set forth in non-disclosure agreements entered
into by the Company or any of its Subsidiaries in the ordinary course of
business consistent with past practice);

(n) terminate, amend, restate, supplement or waive any rights under any
(A) Contract set forth or required to be set forth on the “Contracts Schedule”
other than in the ordinary course of business consistent with past practice, or
(B) Governmental License;

(o) adopt a plan of complete or partial liquidation, dissolution, restructuring,
recapitalization or other reorganization; or

(p) institute or settle any Legal Proceeding (other than matters involving the
payment with respect to such matter of $250,000 or less by the Company Group) or
waive or release any right or claim against a third Person.

4.3 Exclusivity. During the period from the date of this Agreement through the
earlier to occur of the Closing Date or the termination of this Agreement
pursuant to Article 7, the Company will not, and will not permit any of its
Affiliates, directors, officers, employees, representatives or agents to,
directly or indirectly, (i) solicit, initiate, or encourage the submission of
any proposal or offer from any Person relating to the acquisition of all or
substantially all of the capital stock or assets of the Company Group taken as a
whole (including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) enter into, maintain, or continue discussions or negotiations
regarding, or furnish or disclose to any Person any information in connection
with any acquisition of all or substantially all of the capital stock or assets
of the Company Group taken as a whole (including any acquisition structured as a
merger, consolidation, or share exchange), and the Company shall not enter into
any letter of intent or purchase agreement, merger agreement or other

 

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similar agreement with any Person other than Purchaser with respect to
acquisition of all or substantially all of the capital stock or assets of the
Company Group taken as a whole (including any acquisition structured as a
merger, consolidation, or share exchange).

4.4 Reasonable Best Efforts. Upon the terms and subject to the conditions set
forth in this Agreement, each of the parties shall use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable to satisfy the conditions to
Closing set forth herein and to consummate the transactions contemplated hereby.

4.5 Regulatory Approval. Without limiting the generality of Section 4.4:

(a) Subject to the terms and conditions of this Agreement, each party shall, and
shall cause its Affiliates to, use its reasonable best efforts to (i) file (x) a
Premerger Notification and Report Form pursuant to the HSR Act with respect to
the transactions contemplated hereby within two (2) Business Days after the date
hereof and (y) any other filing or notification required pursuant to any other
competition or anti-trust related legal or regulatory requirements of foreign
jurisdiction, commissions or governing bodies (“Antitrust Law”) with respect to
the transactions contemplated hereby within five (5) Business Days after the
date hereof; (ii) supply as promptly as practicable any additional information
and documentary material that may be requested or required pursuant to any
Antitrust Law, including the HSR Act; and (iii) request early termination of the
initial waiting period under the HSR Act, and otherwise cause the expiration or
termination of the applicable waiting periods under the HSR Act or any other
Antitrust Law as soon as practicable. Purchaser shall pay all filing fees
required under the HSR Act or any other Antitrust Law.

(b) In connection with the efforts referenced in Section 4.4 and this
Section 4.5 to obtain all requisite approvals and authorizations for the
transactions contemplated by this Agreement under the HSR Act and any other
Antitrust Law each of the parties shall use reasonable best efforts to
(i) cooperate with each other in connection with any filing or submission and in
connection with any investigation or other inquiry by a Governmental Authority;
(ii) keep the other parties informed in all material respects of any material
communication received by such party from, or given by such party to, any
Governmental Authority regarding any of the transactions contemplated hereby;
and (iii) to the extent permitted by Law, permit the other party to review any
material communication given to it by, and consult with each other in advance of
any meeting or conference with, any Governmental Authority. The foregoing
obligations in this Section 4.5(b) shall be subject to the Confidentiality
Agreement and any attorney-client, work product or other privilege.

(c) Without limiting the generality of Section 4.5(b), if any objections are
asserted with respect to the transactions contemplated hereby under any
Antitrust Law or if any Legal Proceeding is instituted or threatened by any
Governmental Authority challenging any of the transactions contemplated hereby
as violative of any Antitrust Law or if a filing pursuant to Section 4.5(a) is
reasonably likely to be rejected or conditioned by a Governmental Authority,
then each of the parties shall use reasonable best efforts to resolve such
objections or challenges as such Governmental Authority may have to such
transactions, including to vacate, lift, reverse or overturn any order, whether
temporary, preliminary or permanent, so as to permit consummation of the
transactions contemplated by this Agreement as soon as practicable and in any
event on or prior to

 

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the Outside Date. Without limiting the generality of the foregoing, Purchaser
shall promptly take and use reasonable best efforts to diligently pursue all
actions necessary to eliminate any concerns on the part of, or to satisfy any
conditions imposed by, any Governmental Authority with jurisdiction over the
enforcement of any applicable Law, including any Antitrust Law, regarding the
legality of the Merger.

4.6 280G Covenant. Prior to the Closing Date, the Company shall submit to a
stockholder vote, in a manner that satisfies the stockholder approval
requirements under Section 280G(b)(5)(B) of the Code and regulations promulgated
thereunder (a “Stockholder Vote”), the right of any “disqualified individual”
(as defined in Section 280G(c) of the Code) to receive any and all payments (or
other benefits) contingent on the consummation of the transactions contemplated
by this Agreement (within the meaning of Section 280G(b)(2)(A)(i) of the Code)
to the extent necessary so that no payment or benefit received by such
“disqualified individual” shall be a “parachute payment” under Section 280G(b)
of the Code. The Company shall use reasonable best efforts to obtain any
required waivers, consents or agreements from the disqualified individual prior
to the Stockholder Vote such that the vote shall establish the “disqualified
individual’s” right to the payment or other benefit. At least two (2) Business
Days before the Company provides the stockholders with any material necessary to
comply with the Stockholder Vote, Purchaser and its counsel shall be given the
right to review and comment on all documents related to the Stockholder Vote,
including any disclosure documents and “disqualified individual” waivers. The
Company shall incorporate into such documents any reasonable comments that are
timely provided by Purchaser. Purchaser and its counsel shall be provided copies
of all documents executed by the stockholders and disqualified individuals in
connection with the vote.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY GROUP

As a material inducement to Purchaser and Merger Sub to enter into this
Agreement and consummate the transactions contemplated hereby, the Company
hereby represents and warrants to Purchaser and Merger Sub as of the date hereof
as follows:

5.1 Organization and Power. The Company is a Delaware corporation duly
organized, validly existing and in good standing under the DGCL. Except as set
forth on the attached “Corporate Organization Schedule,” the Company is duly
qualified to do business as a foreign entity and is in good standing under the
Laws of each jurisdiction listed on the attached “Corporate Organization
Schedule,” which jurisdictions constitute all of the material jurisdictions in
which the ownership or operation of properties or the proper conduct of the
Business requires the Company to be so qualified. The Company has all requisite
power and authority to carry on the Business as now conducted. The Company has
provided to Purchaser a complete and correct copy of the certificate of
incorporation and bylaws (or equivalent organizational documents) of the Company
and each of its Subsidiaries. Such organizational documents are in full force
and effect.

 

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5.2 Authorization. The Company has all requisite corporate power and authority
to execute and deliver this Agreement, the other agreements contemplated hereby,
and the certificate contemplated by Section 3.4(b)(i) (the “Company Documents”),
to perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by the Company of this Agreement and each of the Company Documents,
the consummation of the Merger, and each of the transactions contemplated hereby
or thereby have been duly and validly authorized and approved by the Company and
no other act or proceeding on the part of the Company, the Company Board or the
Stockholders is necessary to authorize or approve the execution, delivery or
performance by the Company of this Agreement or any other agreement contemplated
hereby or the consummation of any of the transactions contemplated hereby or
thereby, other than obtaining the Written Consent. This Agreement has been, and
each of the Company Documents will be at or prior to the Closing, duly and
validly authorized, executed and delivered by the Company and (assuming the due
authorization, execution and delivery of this Agreement and the other agreements
contemplated hereby by the other parties hereto and thereto) this Agreement
constitutes, and each of the Company Documents upon authorization, execution and
delivery by the Company will constitute, legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with its respective
terms, except as the enforceability hereof or thereof may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws affecting the enforcement of creditor’s rights generally and as limited by
the availability of specific performance and other equitable remedies or
applicable equitable principles (whether considered in a proceeding at law or in
equity). On or prior to the date of this Agreement, the Company Board has, at a
meeting duly called and held in which all directors were present, unanimously
determined that this Agreement and the transactions provided for herein,
including the Merger, are fair to and in the best interest of the Company and
the Stockholders, and adopted resolutions by a unanimous vote (a) approving this
Agreement, and (b) declaring this Agreement and the Merger advisable and
directed that this Agreement be submitted to the Stockholders for their
adoption, which resolutions have not been subsequently withdrawn or modified in
any manner adverse to Purchaser.

5.3 Capitalization; Subsidiaries.

(a) The attached “Capitalization Schedule” accurately sets forth the authorized
and outstanding capital stock of the Company and the name and number of shares
of capital stock held by each Stockholder. All of the issued and outstanding
shares of capital stock of the Company have been duly authorized, are validly
issued, fully paid and nonassessable, are owned of record and beneficially by
the Stockholders and were not issued in violation of any purchase or call
option, right of first refusal, subscription right, preemptive right or any
similar rights. Except for this Agreement and as may be set forth on the
attached “Capitalization Schedule,” there are no outstanding options, warrants,
rights, contracts, pledges, calls, puts, rights to subscribe, conversion rights
or other agreements or commitments to which the Company is a party or which is
binding upon the Company providing for the issuance, disposition or acquisition
of any of its equity or any rights or interests exercisable therefor. There are
no outstanding or authorized equity appreciation, phantom stock or similar
rights with respect to the Company.

 

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(b) The attached “Subsidiaries Schedule” sets forth a list of each of the
Company’s Subsidiaries and, with respect to each of the Company’s Subsidiaries,
the jurisdiction in which it is incorporated or organized, the jurisdictions, if
any, in which it is qualified to do business, the number of shares of its
authorized capital stock and other equity interests, the number and class of
shares and other equity interests thereof duly issued and outstanding, the names
of all stockholders and other equity owners and the number of shares of stock
and other equity interests owned by each stockholder and the amount of equity
owned by each equity holder. Each of the Company’s Subsidiaries is a duly
organized and validly existing corporation or other entity in good standing
under the Laws of its respective jurisdiction of incorporation or formation as
set forth on the “Corporate Organization Schedule”, and is duly qualified or
authorized to do business as a foreign entity and is in good standing under the
Laws of each jurisdiction listed on the attached “Corporate Organization
Schedule”, which jurisdictions constitute all of the material jurisdictions in
which the ownership or operation of properties or the proper conduct of the
Business requires the Company’s Subsidiaries to be so qualified. Each of the
Company’s Subsidiaries has all requisite power and authority necessary to own
and operate its properties and assets and to carry on its businesses as
presently conducted. The outstanding shares of capital stock or equity interests
of each Subsidiary of the Company are validly issued, fully paid and
non-assessable and were not issued in violation of any purchase or call option,
right of first refusal, subscription right, preemptive right or any similar
right. All such shares or other equity interests represented as being owned by
the Company or any of its Subsidiaries are owned by them free and clear of all
Liens other than the Permitted Liens set forth and specifically identified on
the “Permitted Liens Schedule”, except as set forth on the attached
“Subsidiaries Schedule.” There is no existing option, warrant, call, right or
Contract to which any Subsidiary of the Company is a party requiring, and there
are no convertible securities of any Subsidiary of the Company outstanding which
upon conversion would require, the issuance of any shares of capital stock or
other equity interests of any Subsidiary of the Company or other securities
convertible into shares of capital stock or other equity interests of any
Subsidiary of the Company. The Company does not own or hold, directly or
indirectly, any capital stock, partnership interest, joint venture interest or
equity interest or securities of, or the right to acquire any capital stock,
partnership interest, joint venture interest or other equity interest in, any
Person other than the Subsidiaries of the Company listed in the attached
“Subsidiaries Schedule.”

5.4 Absence of Conflicts.

(a) Except as set forth on the attached “MATERIAL Restrictions Schedule” the
execution, delivery and performance by the Company of this Agreement and the
Company Documents, the consummation of the Merger, and the consummation of each
of the transactions contemplated hereby or thereby will not, assuming that the
Written Consent is obtained, violate, conflict with, result in any material
breach of, constitute or result in a material default under (with or without
notice or lapse of time or both), result in any violation of, result in the
creation of any material Lien (other than a Permitted Lien or any Lien related
to Purchaser’s or Merger Sub’s credit facilities) upon any properties or assets
of any member of the Company Group, result in the termination, cancellation or
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, result in loss of a material benefit under, give rise to any
obligation of the Company or its Subsidiaries to make any payment under, or to
the increased, additional, accelerated or guaranteed rights or entitlements of
any Person under, or require any notice under, any provision

 

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of (i) the Company Charter, the Company’s by-laws or any of the Company’s
Subsidiaries’ articles of incorporation, by-laws or other organizational
documents, (ii) any Contract required to be listed on the “Contracts Schedule”
attached hereto or any Governmental License required to be listed on the
“Governmental Licenses Schedule” to which the Company or any of its Subsidiaries
is party or by which any of the properties or assets of the Company or any of
its Subsidiaries are bound; (iii) any Order applicable to the Company or any of
its Subsidiaries or any of the properties or assets of the Company or its
Subsidiaries; or (iv) any applicable Law.

(b) Except as set forth on the attached “MATERIAL Restrictions Schedule”, no
material authorization, consent, approval, exemption, waiver, Order,
Governmental License or other material action by, authorization of, declaration
or filing with, or notification to any Governmental Authority is required on the
part of the Company or its Subsidiaries in connection with the execution,
delivery and performance of this Agreement or the Company Documents, the
consummation of the Merger or the consummation of the transactions contemplated
hereby or thereby (except for the filing and recordation of the Certificate of
Merger as required by the DGCL and any such actions required by any Antitrust
Law).

5.5 Financial Statements. The attached “Financial Statements Schedule” contains
the following financial statements (the “Financial Statements”):

(a) the audited consolidated balance sheets of the Company Group as of
December 31, 2010 and December 31, 2011, and the related audited consolidated
statements of income, consolidated changes in stockholders’ equity and
consolidated cash flows for the annual period then ended (the “Audited Financial
Statements”); and

(b) the unaudited consolidated balance sheet of the Company Group as of
April 30, 2012 (the “Stub Period Balance Sheet”) and the related consolidated
unaudited statement of income and cash flows for the four (4) month period then
ended (the “Interim Financial Statements”).

(c) The attached copies of the Financial Statements are accurate and complete in
all material respects and the Financial Statements present fairly in all
MATERIAL respects the financial condition, results of operations and cash flows
of the Company Group (taken as a whole) throughout the periods covered thereby.
The Audited Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods indicated, and the Interim Financial
Statements have been prepared in accordance with GAAP (except that the Interim
Financial Statements lack footnote disclosure and other presentation items and
are subject to year-end adjustments).

5.6 Absence of Certain Developments. Except as set forth on the “Developments
Schedule,” since December 31, 2011, no member of the Company Group has:

(a) suffered any Event that, individually or in the aggregate, has had or would
reasonably be expected to have a MATERIAL ADVERSE EFFECT;

 

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(b) sold, leased, assigned, licensed or transferred any of its MATERIAL assets
or portion thereof (other than sales of inventory in the ordinary course of
business, or sales of obsolete assets) or mortgaged, pledged or subjected them
to any additional Lien, except for Permitted Liens;

(c) made any MATERIAL capital expenditures or commitments therefor, other than
in a manner materially consistent with the Company Group’s existing budget for
capital expenditures or in the ordinary course of business consistent with past
practice;

(d) suffered any extraordinary casualty loss, except for any such casualty loss
covered by insurance;

(e) created, incurred, assumed or guaranteed any Indebtedness either involving
more than $1,000,000 or outside the ordinary course of business consistent with
past practice, except, in any case, for borrowings from banks (or similar
financial institutions) necessary to fund capital expenditures in a manner
consistent with the Company Group’s existing budget for capital expenditures and
ordinary working capital requirements;

(f) amended or authorized the amendment of its articles of incorporation,
certificate of formation or similar governing documents;

(g) made any material change in the accounting methods or practices of the
Company Group, except in so far as was required by a change in GAAP;

(h) acquired by merging or consolidating with, or by purchasing a substantial
portion of the assets of, any Person or division thereof (other than inventory)
or otherwise acquired or licensed any assets or properties (other than inventory
or Proprietary Rights in the ordinary course of business consistent with past
practice) that were MATERIAL to the Company Group taken as a whole; or

(i) committed or agreed to any of the foregoing.

5.7 Real Property.

(a) Leased Real Property. The attached “Leased Real Property Schedule” sets
forth a true and complete list, including addresses, of all real property
leased, subleased, licensed or operated through a use agreement by the Company
or any of its Subsidiaries (the “Leased Real Property”). The Company has
delivered to Purchaser a true and complete copy of the underlying lease or
respective agreement with respect to each parcel of Leased Real Property (each,
a “Lease”). Except as set forth in the attached “Leased Real Property Schedule”,
with respect to each of the Leases: (i) such Lease is legal, valid, binding and
enforceable against the Company or one of its Subsidiaries, as applicable, and
is in full force and effect and has not been modified, (ii) the transactions
contemplated hereby do not require the consent of any other party to such Lease
and will not result in a breach of or default under such Lease, and (iii) the
Company or its applicable Subsidiary is not, and to the Company’s Knowledge, no
other party to a Lease is, in material breach or material default under any such
Lease, and no event has occurred or circumstance exists which,

 

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with the delivery of notice, passage of time or both, would constitute such a
breach or default or permit the termination, modification or acceleration of
rent under such Lease.

(b) Owned Real Property. The “Owned Real Property Schedule” attached hereto sets
forth the address of each parcel of real property owned, in whole or in part, by
any member of the Company Group (collectively, the “Owned Real Property”). With
respect to each parcel of Owned Real Property:

(i) a member of the Company Group owns good and marketable fee simple title to
such parcel of real property, free and clear of all Liens, except Permitted Real
Property Liens;

(ii) except as set forth in the “Owned Real Property Schedule,” no member of the
Company Group has leased, licensed or otherwise granted to any Person the right
to use or occupy such Owned Real Property or any portion thereof; and

(iii) there are no outstanding options, rights of first offer or rights of first
refusal to purchase such Owned Real Property or any portion thereof or interest
therein.

(c) Real Property Used in the Business. The Leased Real Property identified on
the attached “Leased Real Property Schedule” and the Owned Real Property
identified on the attached “Owned Real Property Schedule” comprise all of the
real property used in the operation of the Business.

5.8 Title to Tangible Assets. The Company Group owns good and valid title, free
and clear of all Liens, other than Permitted Liens, to all of the material
personal, tangible and intangible personal property and assets reflected on the
Stub Period Balance Sheet.

5.9 Contracts and Commitments.

(a) The “Contracts Schedule” attached hereto lists all of the following
Contracts to which any member of the Company Group is a party, which are
currently in effect, and by which any of them or their respective assets or
properties are bound:

(i) Contracts (or a group of related Contracts with the same party) which
provide for the purchase of goods or services by any member of the Company
Group, under which the undelivered balance of such products or services has a
purchase price in excess of $250,000;

(ii) Contracts (or a group of related Contracts with the same party) which
provide for the sale of products or services by any member of the Company Group,
under which the undelivered balance of such products or services has a sale
price in excess of $250,000 other than purchase orders for the purchase of
inventory in the ordinary course of business;

(iii) Contracts relating to Indebtedness of any member of the Company Group, or
under which any member of the Company Group has made advances or loans to any
other

 

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Person other than advances made to employees with respect to business expenses
in the ordinary course of business consistent with past practice;

(iv) Contracts with dealers, distributors or sales representatives that cannot
be terminated by a member of the Company Group on no more than 90 days’ notice
without material expense;

(v) (A) Contracts relating to joint ventures, strategic alliances or
partnerships; (B) Contracts for the sale of any of the MATERIAL assets of any
member of the Company Group other than in the ordinary course of business
consistent with past practice or for the grant to any Person of any preferential
rights to purchase any of the assets of any member of the Company Group; and
(C) Contracts for the acquisition (by merger, purchase of stock or assets or
otherwise) by any member of the Company Group of any operating business or
MATERIAL assets or the capital stock of any other Person, in each case, pursuant
to which a member of the Company Group has any ongoing MATERIAL obligations or
MATERIAL liabilities;

(vi) Contracts containing any “non-competition”, “exclusivity” or other similar
provision that restrains, restricts, limits or impedes the ability of any member
of the Company Group to compete in any line of business or with any Person in
any geographical area or that prohibits or restricts the solicitation for
employment of any persons (other than prohibitions and restrictions set forth in
non-disclosure agreements entered into by the Company or any of its Subsidiaries
in the ordinary course of business consistent with past practice);

(vii) Contracts relating to the licensing of Proprietary Rights by any member of
the Company Group to a third party or by a third party to a member of the
Company Group (excluding non-exclusive licenses entered into in the ordinary
course of business);

(viii) (A) employment, consulting and non-competition Contracts with any
employee, officer or consultant whose base annual compensation is equal to or
greater than $100,000; (B) collective bargaining agreements or Contracts with
any labor union or association representing any employee of any member of the
Company Group; and (C) bonus, pension, profit sharing, retirement or other form
of deferred compensation plan, other than as set forth on the “Employee Benefits
Schedule”; and

(ix) Contracts pursuant to which any member of the Company Group is a lessor of
or permits any third party to hold or operate any property, personal or real, or
is a lessee of, or holds or operates any personal property owned by another
Person, for which the annual rental exceeds $250,000.

(b) Except as disclosed on the attached “Contracts Schedule”, (i) no Contract
set forth or required to be set forth on the attached “Contracts Schedule” has
been breached in any material respect by the member of the Company Group party
thereto or, to the Company’s Knowledge, by the other party thereto (which has
not been duly cured), or canceled by the other

 

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party; (ii) no member of the Company Group is in receipt of any written claim of
default dated less than three months prior to the date of this Agreement under
any Contract listed or required to be listed on the “Contracts Schedule”; and
(iii) each Contract listed or required to be listed on the attached “Contracts
Schedule” is in full force and effect and is valid, binding and enforceable
against the Company or one or more members of the Company Group, as applicable,
except as such enforceability may be limited by (A) applicable insolvency,
bankruptcy, reorganization, moratorium or other similar Laws affecting
creditors’ rights generally, and (B) applicable equitable principles (whether
considered in a proceeding at law or in equity). The Company has made available
to Purchaser correct and complete copies of each Contract listed or required to
be listed on the “Contracts Schedule”, together with all amendments,
modifications or supplements thereto;

5.10 Proprietary Rights.

(a) The attached “Proprietary Rights Schedule” sets forth, with owner,
countries, registration and application numbers and dates indicated, as
applicable, and in the case of unregistered trademarks, country of use and date
of first use, a complete and correct list of all the following owned by the
Company: (1) patents and applications therefor; (2) registered copyrights and
applications therefor; (3) registered trademarks, MATERIAL unregistered
trademarks, and applications for registration of Trademarks; (4) software; and
(5) Domain Name registrations and applications therefor. All fees associated
with maintaining any Proprietary Rights required to have been set forth on the
Proprietary Rights Schedule have been paid in full in a timely manner to the
proper Governmental Authority.

(b) Except pursuant to a Contract set forth on the Contracts Schedule or as
otherwise set forth on the attached “Proprietary Rights Schedule” and except for
Contracts not to be disclosed under any of the foregoing schedules, all of the
Proprietary Rights used by the Company Group in the conduct of its business or
otherwise in its possession are owned by the Company Group and the Company Group
has the right to use and possess such Proprietary Rights for the life thereof
for any purpose, free from (1) any Liens (except for Permitted Liens) and
(2) any requirement of any past, present or future royalty payments, license
fees, charges or other payments or conditions. Except pursuant to a Contract set
forth on the Contracts Schedule, the Company Group has not licensed or otherwise
granted any right to any Person under any Proprietary Rights (excluding
non-exclusive licenses to customers entered into in the ordinary course of
business) or has otherwise agreed not to assert any such Proprietary Rights
against any Person.

(c) Since June 1, 2009, all newly hired employees of the Company Group involved
in the development of Proprietary Rights have executed and delivered valid
written instruments that assign to the Company Group all rights to any
Proprietary Rights developed by them in the course of their performing services
for the Company Group.

(d) The Company Group has entered into confidentiality and nondisclosure
agreements with all of its directors, officers, employees, consultants,
contractors and agents and any other Person with access to the trade secrets of
the Company Group to protect the confidentiality and value of such trade
secrets. To the Company Group’s Knowledge, there has not been any breach by any
of the foregoing of any such agreement. The Company Group uses commercially
reasonable

 

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measures to maintain the secrecy of all trade secrets of the Company Group.

(e) The operation of the Company Group’s business as currently conducted or any
part thereof, including the manufacture, use, sale and importation of products
of the Company Group and the possession, use, disclosure, copying or
distribution of any information, data, products or other tangible or intangible
in the possession of the Company Group, and the possession or use of the
Proprietary Rights does not infringe, misappropriate, dilute, violate or
otherwise conflict with any Proprietary Rights right of any other Person in any
material respect. To the Company’s Knowledge the operation of the Company
Group’s business does not constitute unfair competition or deceptive or unfair
trade practice. To the Company’s Knowledge, none of the Purchased Proprietary
Rights are being infringed.

5.11 Governmental Licenses and Permits. The attached “Governmental Licenses
Schedule” contains a correct and complete listing of all MATERIAL Governmental
Licenses which are used by the Company Group in the conduct of the Business.
Except as indicated on the attached “Governmental Licenses Schedule,” the
Company Group own or possess all right, title and interest in and to all of the
material Governmental Licenses that are necessary to own and operate the
Business as presently conducted. Each member of the Company Group is in
compliance with the material terms and conditions of such Governmental Licenses.
Neither the Company nor any of its Subsidiaries is in material default or
material violation of any Governmental License required to be listed on the
“Governmental Licenses Schedule.” There are no Legal Proceedings pending or, to
the Company’s Knowledge, threatened, relating to the suspension, revocation or
modification of any Governmental License required to be listed on the
“Governmental Licenses Schedule.”

5.12 Litigation; Proceedings. Except as set forth on the attached “Litigation
Schedule,” there are no Legal Proceedings pending or, to the Company’s
Knowledge, threatened against, the Company or any of its Subsidiaries and, to
the Company’s Knowledge, there are no active investigations by a Governmental
Authority of the Company or any of its Subsidiaries; and no member of the
Company Group is subject to any currently effective material Order of any court
or other Governmental Authority.

5.13 Compliance with Laws. Except as set forth on the attached “Compliance
Schedule,” each member of the Company Group is in compliance in all material
respects with all applicable material Laws and requirements of any Governmental
Authority, in each case as currently enforced by the applicable Governmental
Authority, except where the failure to comply would not have a Material Adverse
Effect. To the Knowledge of the Company, no written notice has been received by
the Company Group alleging a material violation of or material liability or
material potential responsibility under any such Law, rule or regulation which
is pending or remains unresolved.

5.14 Employees.

(a) Except as set forth on the attached “Employees Schedule,” since January 1,
2011, no member of the Company Group has experienced any union organization
attempts, material labor disputes or material work stoppage or material
slowdowns due to labor disagreements. To the

 

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Company’s Knowledge, there is no labor strike, material dispute, material work
stoppage or material slowdown pending or threatened against any member of the
Company Group. Except as set forth on the attached “Employees Schedule,” no
member of the Company Group is a party to any labor or union agreement.

(b) In the past three years, no member of the Company Group has taken any action
which would constitute a “plant closing” or “mass layoff” within the meaning of
the Worker Adjustment and Retraining Notification Act or any similar state law
(collectively “WARN”), or issued any notification of a plant closing or mass
layoff required by WARN, except as required by WARN, with respect to which the
Company Group continues to have any material obligation.

5.15 Employee Benefit Plans.

(a) Except as set forth in Section 5.15(a) on the attached “Employee Benefits
Schedule,” with respect to current or former employees, directors, officers,
shareholders, consultants, or independent contractors of the Company Group, no
member of the Company Group maintains, contributes to, has any obligation to
contribute to, or has any liability with respect to, any (i) qualified defined
contribution or defined benefit plans (whether or not terminated) which are
employee pension benefit plans (as defined in Section 3(2) of ERISA);
(ii) ongoing or terminated funded or unfunded employee welfare benefit plans (as
defined in Section 3(1) of ERISA); (iii) any other deferred compensation,
severance pay, salary continuation, bonus, incentive, stock option, equity-based
award, retirement, pension, or profit sharing, health, life, disability,
accident, vacation, tuition reimbursement plan, policy, program, contract, fund
or arrangement of any kind; or (iv) any other material employment, consulting,
fringe or employee benefit plan, policy, program, contract, fund or arrangement
or any voluntary employees’ beneficiary association under Section 501(c)(9) of
the Code (all of the above which any member of the Company Group maintains,
contributes to, has any obligation to contribute to, or has any liability with
respect to are referred to herein individually as an “Employee Plan” and
collectively as “Employee Plans”). Neither the Company nor any member of the
Controlled Group participates in, contributes to, or has any liability with
respect to any “multiemployer plan” (as defined in Section 3(37) of ERISA and
Section 414(f) of the Code) or “multiple employer plan” within the meaning of
Section 210(a) of ERISA or Section 413(c) of the Code. Neither the Company nor
any member of the Controlled Group has any liability with respect to any
“defined benefit plan” as defined in Section 3(35) of ERISA or any pension plan
subject to the funding standards of Section 302 of ERISA or Section 412 of the
Code other than the Retirement Plan of Xaloy Incorporated and the Xaloy
Incorporated Retirement Plan. No members of the Controlled Group exist other
than the Company and its Subsidiaries. No member of the Company Group maintains
or has any obligation to contribute to any funded or unfunded Employee Plan
which provides post-retirement health, accident or life insurance benefits to
current or former employees, current or former independent contractors, current
or future retirees, their spouses, dependents or beneficiaries, other than
health benefits required to be provided to former employees, their spouses and
other dependents under Code Section 4980B or other similar laws.

(b) The Company has made available to Purchaser with respect to each Employee
Plan correct and complete copies of: (i) all plan documents (or, if not written,
a written summary of its MATERIAL terms), summary plan descriptions, summaries
of material modifications and

 

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amendments related to such plans; (ii) the most recent determination letters
received from the Internal Revenue Service, where applicable; (iii) the most
recent Form 5500 Annual Reports, along with all schedules and attachments;
(iv) the most recent audited financial statements and actuarial valuations;
(v) all material correspondence relating to any Employee Plan between any member
of the Company Group or their representatives and any government agency or
regulatory body with respect to any issue that remains unresolved or with
respect to which the Company has or is reasonably expected to incur ongoing
obligations; and (vi) all related collective bargaining agreements, insurance
contracts, trust agreements and fiduciary bonds and any other documents relating
to the funding under any Employee Plan.

(c) Each Employee Plan intended to be qualified under Section 401(a) of the Code
has received a favorable Internal Revenue Service determination or prototype
opinion letter, and nothing has occurred since the date of any such
determination or opinion letter that would reasonably be expected to give the
Internal Revenue Service grounds to revoke such determination or opinion letter
and to result in material liability to the Company Group.

(d) Neither the Company nor any member of the Controlled Group has incurred any
liability under Title IV of ERISA (other than for premiums pursuant to
Section 4007 of ERISA which have been timely paid) or Section 4971 of the Code,
and no condition exists that presents a risk to the Company or any member of the
Controlled Group of incurring any such liability. Each Employee Plan to which
Section 412 of the Code or Section 302 of ERISA applies has satisfied the
requirements of Sections 412, 430 and 436 of the Code and Sections 302 and 303
of ERISA in all material respects. No waiver of the minimum funding standards of
Section 302 of ERISA and Section 412 of the Code been requested of or granted by
the Internal Revenue Service with respect to any Employee Plan, nor has any lien
in favor of any Employee Plan arisen under Section 412(n) or 430(k) of the Code
or Section 302(f) or 303(k) of ERISA.

(e) The notice requirements of Section 204(h) of ERISA and Section 4980 of the
Code, and the regulations thereunder, have been timely satisfied in all material
respects with respect to each amendment providing for a significant reduction in
the rate of future benefit accrual under any Employee Plan that is an
“applicable pension plan” (as defined in Section 204(h) of ERISA or
Section 4980F of the Code) so that each such amendment has become effective in
accordance with its terms.

(f) With respect to each group health plan benefiting any current or former
employee of the Company or any member of the Controlled Group that is subject to
Section 4980B of the Code, the Company and each member of the Controlled Group
has materially complied with the continuation coverage requirements of
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA.

(g) To the Knowledge of the Company, there are no pending or threatened claims,
assessments, complaints, or proceedings of any kind (other than routine claims
for benefits) in any court or governmental agency with respect to any Employee
Plan or any trusts which are associated with such Employee Plans. To the
Company’s Knowledge, none of the Employee Plans are under

 

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audit or investigation by the Internal Revenue Service, the Department of Labor,
the Pension Benefit Guaranty Corporation or any other governmental agency.

(h) Except as set forth in Section 5.15(h) on the attached “Employee Benefits
Schedule”, the Employee Plans have been maintained, funded, operated, and
administered in accordance in all material respects with their terms and any
related documents or agreements and comply in form and in operation in all
material respects with the applicable requirements of ERISA, the Code, and all
other applicable law. There have been no prohibited transactions or breaches of
any of the duties imposed on “fiduciaries” (within the meaning of Section 3(21)
of ERISA) by ERISA with respect to the Employee Plans that could result in any
material liability or excise tax under ERISA or the Code being imposed on any
member of the Company Group.

(i) The execution and performance of this Agreement will not (alone or in
conjunction with any other event) (i) constitute a stated triggering event under
any Employee Plan that will result in any payment (whether of severance pay or
otherwise) becoming due from the Company or its Subsidiary to any current or
former officer, employee, director or consultant (or dependents of such
Persons), or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due to any current or former officer, employee, director
or consultant (or dependents of such Persons) of the Company or its
Subsidiaries.

(j) No member of the Company Group has agreed or committed to institute any
material plan, program, arrangement or agreement for the benefit of employees or
former employees of the Company other than the Employee Plans, or to make any
amendments to any of the Employee Plans other than as required under Law or to
comply with any applicable collective bargaining agreement.

(k) No amount that could be received (whether in cash or property or the vesting
of property) as a result of any of the transactions contemplated by this
Agreement by any employee, officer or director of the Company or any of its
affiliates who is a “disqualified individual” (as such term is defined in
Treasury Regulation Section 1.280G-1) under any employment, severance or
termination agreement, other compensation arrangement or Employee Plan currently
in effect would be characterized as an “excess parachute payment” (as such term
is defined in Section 280G(b)(1) of the Code).

(l) Each Employee Plan and any other payment or arrangement for which any member
of the Company Group has liability that is subject to Section 409A of the Code
is in all material respects in documentary compliance with and has been operated
in all material respects in compliance with Section 409A of the Code, and no
Person has a right to any gross up or indemnification from any member of the
Company Group with respect to any such Employee Plan, payment or arrangement
subject to Section 409A of the Code.

(m) There have not occurred, nor are there continuing, any transactions or
breaches of fiduciary duty under applicable Law with respect to any Employee
Plan that is maintained outside of the United States which could have a material
adverse effect on (i) such Employee Plan or (ii) the condition of any member of
the Company Group.

 

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5.16 Tax Matters.

(a) Except as set forth in the attached “Taxes Schedule,” the Company Group has
timely filed all Tax Returns required to be filed by it in accordance with all
Laws, and all such Tax Returns are true and accurate in all respects. All Taxes
(whether or not shown as due and payable on any Tax Return) owed by the Company
Group have been timely paid to the appropriate taxing authority. The Company has
made available to Purchaser copies of all United States federal income Tax
Returns filed with respect to the Company Group for taxable periods ending on or
after December 31, 2009 and all examination reports, and statements of
deficiencies assessed against or agreed to by any member of the Company Group
with respect to such taxable periods.

(b) Except as set forth in the attached “Taxes Schedule”:

(i) no member of the Company Group has consented to extend the time in which any
Tax may be assessed or collected by any taxing authority, which extension is in
effect as of the date hereof;

(ii) no member of the Company Group has requested or been granted an extension
of the time for filing any Tax Return to a date later than the Closing Date;

(iii) there is no action, suit, taxing authority proceeding or audit now in
progress or pending against or with respect to any member of the Company Group
with respect to any Tax and, to the Company’s Knowledge, no such action, suit,
taxing authority proceeding or audit is threatened;

(iv) no member of the Company Group has been a member of an affiliated,
consolidated, combined or unitary group or participated in any other arrangement
whereby any income, revenues, receipts, gain or loss was determined or taken
into account for Tax purposes with reference to or in conjunction with any
income, revenues, receipts, gain, loss, asset or liability of any other Person
other than a group of which the Company was the parent. No member of the Company
Group has any liability for the Taxes of any Person (other than the Company or
such member of the Company Group) under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise;

(v) each member of the Company Group has withheld and timely remitted to the
appropriate taxing authority all Taxes required to have been withheld and
remitted in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other Person;

(vi) there are no Liens for Taxes upon the assets or properties of any member of
the Company Group, except for Permitted Liens or Permitted Real Property Liens;

(vii) no member of the Company Group has received written notice of any claim by
a Governmental Authority in a jurisdiction where any member of the Company Group

 

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does not file Tax Returns that it is or may be subject to taxation by that
Governmental Authority;

(viii) no member of the Company Group will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any period
or portion thereof ending after the Closing Date (i) under Section 481 of the
Code (or any similar provision of state, local or foreign law) as a result of
change in method of accounting for a Pre-Closing Tax Period, (ii) pursuant to
the provisions of any agreement entered into with any taxing authority or
pursuant to a “closing agreement” as defined in Section 7121 of the Code (or any
similar provision of state, local or foreign law) executed on or prior to the
Closing Date, (iii) as a result of any intercompany transactions or any excess
loss account described in Section 1.1502-19 of the Treasury Regulations (or any
similar provision of state, local or foreign law), (iv) as a result of the
installment method of accounting, the completed contract method of accounting or
the cash method of accounting with respect to a transaction that occurred prior
to the Closing Date, (v) as a result of any prepaid amount received on or prior
to the Closing Date or (vi) as a result of any election under Section 108(i) of
the Code with respect to the discharge of any indebtedness on or prior to the
Closing Date;

(ix) no member of the Company Group is a party to any Tax sharing, allocation or
indemnity agreement, arrangement or similar Contract other than any such
Contract executed in the ordinary course of business not primarily related to
Taxes;

(x) within the past two (2) years, no member of the Company Group distributed
the stock of another Person, or has not had its stock distributed by another
Person, in a transaction that was purported or intended to be governed in whole
or in part by Sections 355 or 361 of the Code;

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

(xii) no member of the Company Group has participated in any “reportable
transaction” as defined in Section 6707A of the Code or Treasury Regulation
Section 1.6011-4 (or any predecessor provision); and

(xiii) the Company has disclosed on its federal income Tax Returns all positions
taken in such Tax Returns that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662 of the Code.

5.17 Brokerage. Except as disclosed on the attached “Brokerage Schedule”, there
are no claims for brokerage commissions, finder’s fees or similar compensation
or payments in connection with the transactions contemplated by this Agreement
based on any arrangement or Contract made by any member of the Company Group.

 

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5.18 Affiliate Transactions. Except for employment Contracts with any employee
or officer of any member of the Company Group, any inter-company Contracts
between the Company and/or any of its Subsidiaries and those Contracts disclosed
on the “Affiliate Transactions Schedule”, none of the Seller’s Representative or
its Affiliates or any of the officers or directors set forth on the “Affiliate
Transactions Schedule” or, to the Company’s Knowledge, any other Stockholder or
Affiliate, employee or officer of the Company (i) is a party to any material
Contract or transaction with any member of the Company Group or has any material
interest in any material property used by any member of the Company Group,
(ii) owes any material amount to any member of the Company Group, or is owed any
material amount by any member of the Company Group, in any case, other than
amounts owed in the ordinary course of business consistent with past practice,
or (iii) owns any material property or right, tangible or intangible, that is
significant to the business of any member of the Company Group.

5.19 Environmental Matters. Except as set forth on the attached “Environmental
Schedule”:

(a) the Company Group is, and has been since the date that is three years prior
to the date hereof, in compliance in all material respects with all applicable
Environmental Laws, except where the failure to comply has been settled or
resolved without future obligation or liability;

(b) the Company Group possesses, and since the date that is three years prior to
the date hereof has possessed, all of the material Governmental Licenses that
are required by Environmental Laws to operate the Business, including its use
and occupancy of the Leased Real Property and Owned Real Property;

(c) the Company Group is, and has been since the date that is three years prior
to the date hereof, in compliance in all material respects with the terms and
conditions of such Governmental Licenses required by Environmental Laws, except
where the failure to comply has been settled or resolved without future
obligation or liability;

(d) the Company Group has not received any written notices that it is in
material violation of any of the terms or conditions of such Governmental
Licenses required by Environmental Laws, in material violation of any
Environmental Law or subject to material liability for fines, penalties,
damages, or investigation, cleanup, remedial, response, monitoring, operation
and maintenance or related obligations pursuant to applicable Environmental
Laws, in each case with respect to the operations, properties or facilities of
the Company Group, or any formerly owned, leased or operated real property or
any off-site treatment, storage, disposal or recycling location, except for such
matters that have been settled or resolved without future obligation or
liability;

(e) to the Company’s Knowledge, no member of the Company Group or any of their
predecessors sells or has sold any product containing asbestos;

(f) to the Company’s Knowledge, there has been no Release of any Hazardous
Material at or from the Leased Real Property or Owned Real Property or any
property formerly

 

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owned, leased or operated by any member of the Company Group or any of their
predecessors that requires reporting, investigation, assessment, cleanup,
removal, remediation or any other type of response or corrective action by any
member of the Company Group pursuant to any Environmental Law or any contractual
obligation (including any applicable lease agreements), except as has been
settled or resolved without future obligation or liability;

(g) except as may be contained in the Leases, no member of the Company Group has
contractually assumed, undertaken or otherwise become subject to any material
liability of any other Person relating to or arising from any Environmental Law;

(h) each member of the Company Group has provided to Purchaser copies of all
environmental compliance audits, environmental site assessments and MATERIAL
documents regarding any unpermitted Release to or conditions of contamination in
soil, groundwater or surface water at, upon or from the Leased Real Property,
Owned Real Property or any property formerly owned, leased or operated by any
member of the Company Group or any of their predecessors that are in the
possession of the Company Group; and

(i) the representations and warranties set forth in this Section 5.19 are the
sole and exclusive representations and warranties of the Company to Purchaser
and Merger Sub with respect to environmental matters, human health and safety
matters relating to Hazardous MATERIALS, matters arising under Environmental
Laws, and matters relating to Releases.

5.20 Bank Accounts. The attached “Bank Accounts Schedule” sets forth a true and
complete list of the names and locations of all banks and the numbers of all of
the bank accounts of the Company and its Subsidiaries, together with the names
of all authorized signatories for such accounts as reflected on authorized
signatory signature cards (if applicable).

5.21 Accounts Receivable. All of the accounts and notes receivable of the
Company and its Subsidiaries represent amounts receivable for merchandise
actually delivered, collection of progress payments on undelivered merchandise,
or services actually provided, have arisen from bona-fide transactions in the
ordinary course of business consistent with past practice and have reserves
which have been calculated in a manner consistent with past practice.

5.22 Certain Payments. Neither the Company, any member of the Company Group nor,
to the Company’s Knowledge, any Seller, director, officer, employee or
Affiliates has, since the date that is three years prior to the date hereof, in
violation of any Law, directly or indirectly made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback or other payment to any
representative of a Governmental Authority, regardless of form, whether in
money, property or services (a) to obtain favorable treatment in securing
business for any member of the Company Group, (b) to pay for favorable treatment
for business secured by a member of the Company Group, or (c) to obtain special
concessions or for special concessions already obtained, for or in respect of
any member of the Company Group.

5.23 Insurance. The attached “Insurance Schedule” sets forth a complete list of
each MATERIAL insurance policy to which any member of the Company Group is a
party, a named

 

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insured or otherwise the beneficiary of coverage. To the Company’s Knowledge,
all of such insurance policies are legal, valid, binding and enforceable and in
full force and effect and none of the Company nor any of the Company’s
Subsidiaries is in breach or default with respect to its obligations under such
insurance policies (including with respect to payment of premiums).

5.24 Customers and Suppliers. The attached “Customers and Suppliers Schedule”
contains a true and complete list of (a) the ten (10) largest customers of the
Company Group (on a consolidated basis) for the year ended December 31, 2011
(the “Business Customers”), showing the total sales of the Company Group to each
such customer during such period, and (b) the ten (10) largest suppliers or
vendors of the Company Group (on a consolidated basis) for the year ended
December 31, 2011 (the “Business Suppliers”), showing the total purchases by the
Company Group from each such supplier during such period. As of the date hereof,
except as set forth on the “Customers and Suppliers Schedule”, since
December 31, 2011, none of the Business Customers or Business Suppliers has
terminated its then-active Contract (other than pursuant to the expiration
thereof or in connection with establishing a new contract) with the applicable
member of the Company Group and, to the Company’s Knowledge, since January 1,
2012, the Company has not received any written indication from the Business
Customers or Business Suppliers that it intends to do so (other than in
connection with establishing a new contract).

5.25 Stockholder Approval. The only vote of the Company Capital Stock necessary
to approve and adopt this Agreement, the Merger and the transactions
contemplated by this Agreement is the approval and adoption of this Agreement by
the Stockholders holding a majority of the outstanding shares of the Common
Stock and Preferred Stock (on an as converted basis) voting together as a single
class.

5.26 Disclaimer. Except as expressly set forth in this Article 5 hereof and the
certificate contemplated by Section 3.4(b)(i), the Company makes no
representation or warranty, express or implied, at law or in equity and any such
other representations or warranties are hereby expressly disclaimed.
Notwithstanding anything to the contrary, (a) none of the Company Group shall be
deemed to make to Purchaser or Merger Sub any representation or warranty other
than as expressly made by such Person in this Agreement and the certificate
contemplated by Section 3.4(b)(i) and (b) the Company makes no representation or
warranty to Purchaser or Merger Sub (i) with respect to any projections,
estimates or budgets heretofore delivered to or made available to Purchaser or
its counsel, accountants or advisors of future revenues, expenses or
expenditures or future results of operations of any member of the Company Group,
or (ii) except as expressly covered by a representation and warranty contained
in this Article 5 and the certificate contemplated by Section 3.4(b)(i), with
respect to any other information or documents (financial or otherwise) made
available to Purchaser or its counsel, accountants or advisors with respect to
any member of the Company Group. Purchaser and Merger Sub hereby acknowledge and
agree to such disclaimer, and that, except to the extent specifically set forth
in this Article 5 and the certificate contemplated by Section 3.4(b)(i),
Purchaser is purchasing the Company Capital Stock on an “as is, where is” basis.

 

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ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB

As an inducement to the Company to enter into this Agreement and consummate the
transactions contemplated hereby, Purchaser and Merger Sub each represent and
warrant to the Company as of the date hereof as follows:

6.1 Organization and Power. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio, and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware.

6.2 Authorization. Each of Purchaser and Merger Sub has all requisite corporate
power and authority to execute and deliver this Agreement and the other
agreements contemplated hereby and to perform its obligations hereunder and
thereunder. The execution, delivery and performance by Purchaser and Merger Sub
of this Agreement, the consummation of the Merger, and the other agreements
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by all requisite corporate
action, and no other corporate act or proceeding on the part of Purchaser or
Merger Sub, or either of their respective boards of directors or stockholders is
necessary to authorize or approve the execution, delivery or performance of this
Agreement or the other agreements contemplated hereby and, assuming the due
execution and delivery of this Agreement and the other agreements contemplated
hereby by the other parties hereto and thereto, the consummation of the
transactions contemplated hereby or thereby. This Agreement, and each of the
other agreements contemplated hereby to be executed by Purchaser and Merger Sub,
has been duly executed and delivered by Purchaser and Merger Sub and this
Agreement constitutes, and the other agreements contemplated hereby upon
authorization, execution and delivery by Purchaser and Merger Sub will each
constitute, a valid and binding obligations of Purchaser and Merger Sub,
enforceable in accordance with their respective terms except as the
enforceability hereof and thereof may be limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar Laws affecting the
enforcement of creditor’s rights generally and as limited by the availability of
specific performance and other equitable remedies or applicable equitable
principles (whether considered in a proceeding at law or in equity).

6.3 Absence of Conflicts.

(a) Except as set forth on the attached “Purchaser Material Restrictions
Schedule,” the execution, delivery and performance by Purchaser and Merger Sub
of this Agreement and the other documents contemplated hereby to which the
Purchaser or Merger Sub is a party, the consummation of the Merger, and the
consummation of each of the transactions contemplated hereby or thereby will not
(a) violate, conflict with, result in any material breach of, constitute or
result in a material default under (with or without notice or lapse of time or
both), result in any violation of, result in the creation of any Lien upon any
properties or assets of Purchaser or Merger Sub under, result in the
termination, cancellation or acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, result in loss of a material benefit
under, give rise to any obligation of the Purchaser or Merger Sub to make any
payment under, or to the increased,

 

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additional, accelerated or guaranteed rights or entitlements of any Person
under, or require any notice under, any provision of (i) the articles of
incorporation or bylaws of Purchaser or Merger Sub, (ii) any Order applicable to
Purchaser or Merger Sub; or (iii) any applicable Law.

(b) Except as set forth on the attached “Purchaser Material Restrictions
Schedule” no authorization, consent, approval, exemption, waiver, Order,
Governmental License or other action by, authorization of, declaration or filing
with, or notification to any Person or Governmental Authority is required on the
part of the Purchaser, Merger Sub, or their Subsidiaries in connection with the
execution, delivery and performance of this Agreement, the consummation of the
Merger or the consummation of the transactions contemplated hereby or thereby
(except for the filing and recordation of the Certificate of Merger as required
by the DGCL and any such actions required by any Antitrust Law).

6.4 Governmental Authorities and Consents. No permit, consent, approval or
authorization of, or declaration to or filing with, any Governmental Authority
or any other Person (except for the filing and recordation of the Certificate of
Merger as required by the DGCL and any such actions required by any Antitrust
Law) is required in connection with the execution, delivery or performance of
this Agreement by Purchaser or Merger Sub or the consummation by Purchaser or
Merger Sub of the transactions contemplated hereby and thereby.

6.5 Litigation. There are no Legal Proceedings pending or, to Purchaser’s
Knowledge, threatened against Purchaser or Merger Sub before or by any
Governmental Authority, or to which Purchaser or Merger Sub is otherwise a
party, which would adversely affect Purchaser’s or Merger Sub’s performance
under this Agreement, the other agreements contemplated hereby or the
consummation of the transactions contemplated hereby or thereby.

6.6 Ownership of Merger Sub; No Prior Activities. Purchaser owns 100% of the
issued and outstanding shares of Merger Sub’s capital stock. Merger Sub was
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement. Except for obligations or liabilities incurred in connection
with its formation and the transactions contemplated by this Agreement, Merger
Sub has not and will not have incurred, directly or indirectly, through any
Subsidiary or Affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any Person.

6.7 Brokerage. There are no claims for brokerage commissions, finder’s fees or
similar compensation or payments in connection with the transactions
contemplated by this Agreement based on any arrangement or Contract made by or
on behalf of Purchaser or Merger Sub except as set forth on the attached
“Purchaser Brokerage Schedule.”

6.8 Financing. Purchaser has, and will on the Closing Date have, sufficient
unrestricted cash on hand and available credit facilities to pay all amounts
required to be paid by Purchaser and Merger Sub at the Closing pursuant to the
terms of this Agreement, and all of its and its representatives’ fees and
expenses incurred in connection with the transactions contemplated by this
Agreement. Purchaser has no reason to believe that such available cash shall not
be available or

 

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that the debt shall not be funded, and Purchaser has not made any
misrepresentation in connection with obtaining such debt financing commitments.

6.9 Due Diligence Review. Each of Purchaser and Merger Sub acknowledges that:
(a) it has completed to its satisfaction its own due diligence review with
respect to the Company Group and it is entering into the transactions
contemplated by this Agreement based on such investigation and, except for the
specific representations and warranties made by the Company in Article 5 hereof,
it is not relying upon any representation or warranty of the Company or any
Affiliate, officer, director, employee, agent or advisor thereof, nor upon the
accuracy of any record, projection or statement made available or given to
Purchaser or Merger Sub in the performance of such investigation, and (b) it has
had such opportunity to seek accounting, legal or other advice or information in
connection with its entry into this Agreement and the other documents referred
to herein relating to the consummation of the transactions contemplated hereby
and thereby as it has seen fit.

6.10 Restricted Securities. Purchaser understands and acknowledges that (a) none
of the Company Capital Stock has been registered or qualified under the
Securities Act of 1933, as amended (the “1933 Act”), or under any securities
Laws of any state of the United States or other jurisdiction, in reliance upon
specific exemptions thereunder for transactions not involving any public
offering; (b) all of the Company Capital Stock constitute “restricted
securities” as defined in Rule 144 under the 1933 Act; (c) none of the Company
Capital Stock is traded or tradable on any securities exchange or
over-the-counter; and (d) none of the Company Capital Stock may be sold,
transferred or otherwise disposed of unless a registration statement under the
1933 Act with respect to such Company Capital Stock and qualification in
accordance with any applicable state securities laws becomes effective or unless
such registration and qualification is inapplicable, or an exemption therefrom
is available. Purchaser will not transfer or otherwise dispose any of the
Company Capital Stock acquired hereunder or any interest therein in any manner
that may cause any Seller to be in violation of the 1933 Act or any applicable
state securities Laws. Purchaser is an “accredited investor” as defined in Rule
501(a) of the 1933 Act.

ARTICLE 7

TERMINATION

7.1 Termination. This Agreement may be terminated and the Merger abandoned at
any time prior to the Closing only as follows:

(a) by mutual consent of Purchaser and Merger Sub, on the one hand, and the
Sellers’ Representative and the Company, on the other hand;

(b) by Purchaser and Merger Sub providing written notice to the Sellers’
Representative if there has been a breach of any of the representations,
warranties or covenants by the Company set forth in this Agreement, which would
result in the conditions set forth in Section 3.3(a) or Section 3.3(b) to not be
satisfied (so long as Purchaser and Merger Sub have provided the

 

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Sellers’ Representative with written notice of such breach and the breach has
continued without cure for a period of twenty (20) days after the notice of such
breach or the earlier occurrence of the Outside Date);

(c) by the Sellers’ Representative, on behalf of the Company, providing written
notice to Purchaser and Merger Sub if there has been a breach of any of the
representations, warranties or covenants by Purchaser or Merger Sub set forth in
this Agreement, which would result in the conditions set forth in Section 3.2(a)
or Section 3.2(b) to not be satisfied (so long as the Sellers’ Representative
has provided Purchaser and Merger Sub with written notice of such breach and the
breach has continued without cure for a period of twenty (20) days after the
notice of such breach or the earlier occurrence of the Outside Date);

(d) by either Purchaser and Merger Sub, on the one hand, or the Sellers’
Representative on behalf of the Company, on the other hand, if the transactions
contemplated hereby have not been consummated by the date that is sixty
(60) days after the date hereof (the “Outside Date”); provided, however, that if
the only outstanding condition to the Closing set forth in Sections 3.1, 3.2 and
3.3 (other than the conditions that must be satisfied at the Closing) is the
condition set forth in Section 3.1(b), then the Outside Date shall automatically
be extended to the date that is seventy-five (75) days after the date hereof;
provided, further, that a party shall not be entitled to terminate this
Agreement pursuant to this subsection (d) if (i) that party’s breach of this
Agreement has prevented the consummation of the transactions contemplated hereby
at or prior to such time or (ii) that party has failed to satisfy any conditions
set forth in Article 3 hereof that such party was required to satisfy (other
than those conditions to be satisfied at the Closing); or

(e) by Purchaser or Merger Sub if the Company does not deliver the Written
Consent within one (1) Business Day following the date of this Agreement.

7.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 7.1 hereof, this Agreement shall forthwith become void and
there shall be no liability or obligation hereunder on the part of any of the
Company, Purchaser or Merger Sub (other than pursuant to this Section 7.2,
Section 8.3, Section 8.4, Section 8.9 and Article 9 which shall survive any such
termination), except for any willful breaches of this Agreement prior to the
time of such termination. In the event of termination by Purchaser and Merger
Sub, on the one hand, or the Sellers’ Representative on the other hand, or both,
pursuant to Section 7.1, written notice thereof shall forthwith be given to the
other party or parties stating in reasonable detail the basis for such
termination. If the transactions contemplated by this Agreement are terminated
as provided in Section 7.1, each of Purchaser and Merger Sub acknowledges and
agrees that all documents, copies thereof, and all other materials received from
or on behalf of any member of the Company Group relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
shall continue to be subject to the Confidentiality Agreement, which shall
remain in full force and effect notwithstanding the termination of this
Agreement.

 

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ARTICLE 8

ADDITIONAL AGREEMENTS; COVENANTS AFTER CLOSING

8.1 Recovery from Escrow; Indemnification.

(a) Indemnification of Purchaser.

(i) Subject to the other limitations in this Article 8, from and after the
Closing, each of the Sellers, severally and not jointly, on a pro rata basis
based on the percentages set forth across from such Seller’s name on the
“Sellers Schedule” (“Pro Rata Share”), shall indemnify the Purchaser, its
Affiliates (including the Company) and any of their respective officers,
directors, employees, stockholders, successors and assigns (collectively, the
“Purchaser Indemnitees”) in respect of any loss, liability, claim, obligation,
demand, judgment, suit, action, cause of action, assessment, award, fine,
penalty, deficiency, interest, damage, cost or expense (including reasonable
legal expenses and costs), whether or not involving a third party claim
(individually, a “Loss” and collectively, “Losses”; provided, that (x) any
punitive, exemplary, special, indirect or consequential damages shall not be
deemed to be “Losses” hereunder except to the extent any such damages are paid
by an Indemnified Party to a third party (other than another Indemnified Party)
and (y) consequential, special and indirect damages means those damages that
arise solely from the special circumstances of the Indemnified Party that have
not been communicated to, or are not known by, the Indemnifying Party) which is
incurred or suffered by a Purchaser Indemnitee as a result of: (A) the breach of
any representation or warranty of the Company contained in this Agreement when
made as of the date of this Agreement or of any statement set forth in the
Certificate contemplated by Section 3.4(b)(i); (B) the breach by the Company of
any covenant or agreement contained in this Agreement which is required to be
performed prior to Closing or the breach by the Sellers’ Representative of any
covenant or agreement contained in this Agreement which is required to be
performed from and after the Closing; (C)(1) all Taxes (or the nonpayment
thereof) of any member of the Company Group for any Pre-Closing Tax Period and
any Pre-Closing Straddle Period; (2) all Taxes of any member of an affiliated,
combined or unitary group of which any member of the Company Group is or was a
member on or prior to the Closing Date, including pursuant to Treasury
Regulation Section 1.1502-6 or any analogous or similar state, local or foreign
Law; (3) any and all Taxes of any Person (other than a member of the Company
Group) imposed on such member of the Company Group as a transferee or successor,
by Contract or pursuant to any Law, which Taxes relate to an event or
transaction occurring on or before the Closing Date, and except, in the case of
any Taxes imposed as a result of any Contract, to the extent such Taxes relate
to a Contract executed in the ordinary course of business and not primarily
related to Taxes; and (D) any Indebtedness of the Company Group existing as of
the Effective Time or Transaction Expenses not fully paid on the Closing Date.

(ii) All claims by any Purchaser Indemnitee pursuant to this Section 8.1 must be
made in writing on or before the Survival Date, it being understood that so long
as such written notice is given on or prior to the Survival Date, the
representations and warranties

 

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and covenants or agreements which are required to be performed prior to the
Closing that are the subject of such claim shall continue to survive until such
matter is finally resolved. For purposes of this Agreement, the term “Survival
Date” shall mean the date that is twelve (12) months following the Closing Date;
provided, that the representations and warranties: (a) set forth in Sections 5.1
(Organization and Power), 5.2 (Authorization), 5.3 (Capitalization;
Subsidiaries), 5.16 (Tax Matters), 5.15 (Employee Benefit Plans), 5.17
(Brokerage), 6.1 (Organization and Power), and 6.2 (Authorization)
(collectively, the “Fundamental Representations”) shall survive until the third
anniversary of the Closing Date.

(iii) The indemnification provided for in Section 8.1(a)(i) above is subject to
each of the following limitations:

(A) The aggregate amount of all payments made by the Sellers (which shall
include all payments made from the Escrow Amount) in satisfaction of claims for
indemnification pursuant to Section 8.1(a)(i)(A) (except those related to
Fundamental Representations) shall not exceed $10,000,000 (the “Indemnification
Cap”); provided, however, that claims for indemnification pursuant to
Section 8.1(a)(i)(A) related to Fundamental Representations and all other claims
for indemnification pursuant to Section 8.1 shall not exceed $40,000,000 (the
“Fundamental Representations Cap”).

(B) The Purchaser Indemnitees shall not be entitled to make any claims against
any Seller or the then-available portion of the Escrow Amount pursuant to
Section 8.1(a)(i)(A) (except those related to the representations and warranties
set forth in Section 5.15(e)) unless and until the Purchaser Indemnitees have
suffered aggregate Losses as a result of breaches described in
Section 8.1(a)(i)(A) (except those related to the representations and warranties
set forth in Section 5.15(e)) in excess of $2,000,000 (the “Indemnification
Basket”) (the Sellers being obligated to indemnify the Purchaser Indemnitees
solely to the extent exceeding the Indemnification Basket); provided, however,
that notwithstanding the foregoing, the Sellers shall not be liable to indemnify
the Purchaser Indemnitees pursuant to Section 8.1(a)(i)(A): (i) unless and until
the Purchaser Indemnitees have suffered aggregate Losses arising out of a claim
in excess of $25,000 (provided that any claim not exceeding such amount shall
not be aggregated to count towards the Indemnification Basket) or (ii) for any
Losses claimed by the Purchaser Indemnitees for a breach of representation or
warranty set forth in Section 5.16, except to the extent such Losses are with
respect to taxable periods ending on or before the Closing Date and the portion
through the end of the Closing Date for any taxable period that includes (but
does not end on) the Closing Date. The Purchaser Indemnitees shall not be
entitled to make any claims against any Seller or the then-available portion of
the Escrow Amount pursuant to Section 8.1(a)(i)(A) in respect of the
representations and warranties set forth in Section 5.15(e) unless and until the
Purchaser Indemnitees have suffered aggregate Losses as a result of breaches

 

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described in Section 8.1(a)(i)(A) with respect to the representations and
warranties set forth in Section 5.15(e) in excess of $100,000.

(C) The aggregate liability of each Seller (which shall include all payments
made from the Escrow Amount) in satisfaction of (1) claims for indemnification
pursuant to Section 8.1(a)(i)(A) (except those related Fundamental
Representations) shall not exceed such Seller’s Pro Rata Share of the
Indemnification Cap and (2) claims for indemnification pursuant to
Section 8.1(a)(i)(A) related to Fundamental Representations and all other claims
for indemnification pursuant to Section 8.1 shall not exceed such Seller’s Pro
Rata Share of the Fundamental Representations Cap.

(D) For purposes of determining whether there has been a breach of any
representation or warranty under this Agreement and for purposes of determining
any Losses related thereto, for purposes of this Section 8.1 such
representations and warranties shall be interpreted without giving effect to any
limitations or qualifications such as “materiality,” “material,” “in all
material respects” or “Material Adverse Effect” set forth in any such
representation or warranty, except for references to “MATERIALITY,” “MATERIAL,”
“IN ALL MATERIAL RESPECTS” or “MATERIAL ADVERSE EFFECT” (in each case, to the
extent such phrase or term is in all capital letters).

(b) Purchaser’s Indemnification.

(i) From and after the Closing, Purchaser agrees to indemnify the Sellers, their
respective Affiliates and each of the foregoing’s respective officers,
directors, employees, shareholders, successors and assigns (collectively, the
“Seller Indemnitees”) and hold each Seller Indemnitee harmless against any Loss
which any Seller Indemnitee suffers, as a result of: (A) the breach of any
representation or warranty contained in Article 6 hereof; and (B) the breach by
Purchaser or Merger Sub of any covenant or agreement of Purchaser or Merger Sub
contained in this Agreement.

(ii) Purchaser shall not be liable with respect to any claim under
Section 8.1(b)(i) unless written notice of a possible claim for indemnification
is given by the claiming Seller Indemnitee to Purchaser on or before the
Survival Date, it being understood that so long as such written notice is given
on or prior to the Survival Date, such representations and warranties and
covenants or agreements which are required to be performed prior to the Closing
that are the subject of such claim shall continue to survive until such matter
is resolved.

(c) Procedures.

(i) Notice of Claim. Any indemnified party making a claim for indemnification
pursuant to Sections 8.1(a) or 8.1(b) (an “Indemnified Party”) in respect of
Legal

 

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Proceedings instituted or any claim or demand made by any Person against an
Indemnified Party (a “Third-Party Claim”) must give the Sellers’ Representative
or Purchaser, as the case may be, written notice of such Third-Party Claim
describing such Third-Party Claim and the nature and amount of such Loss, to the
extent that the nature and amount thereof are determinable at such time (a
“Claim Notice”) as promptly as reasonably practicable after the Indemnified
Party receives any written notice of any Third-Party Claim; provided, however,
that the failure to notify or delay in notifying the Sellers’ Representative or
Purchaser, as the case may be, will not relieve the indemnifying party (the
“Indemnifying Party”) of its obligations pursuant to Section 8.1(a) or 8.1(b)
(as applicable), except to the extent that such Indemnifying Party can
demonstrate actual material prejudice as a result of such failure.

(ii) Control of Defense. The Indemnifying Party shall have the right,
exercisable by written notice to the Indemnified Party within thirty (30) days
of receipt of a notice from the Indemnified Party of the commencement or
assertion of any Third-Party Claim, to assume and conduct the defense of such
Third-Party Claim (if such Third-Party Claim seeks only monetary damages) in
accordance with the limits set forth in this Agreement with legal counsel of
national standing selected by the Indemnifying Party; provided, however, that
the then-available Escrow Amount is sufficient to satisfy the amount of any
adverse monetary judgment or settlement that is reasonably likely to result. If
the Indemnifying Party does not assume the defense of a Third-Party Claim in
accordance with this Section 8.1(c)(ii), the Indemnified Party may continue to
defend the Third-Party Claim. If the Indemnifying Party has assumed the defense
of a Third-Party Claim as provided in this Section 8.1(c)(ii), the Indemnifying
Party will not be liable for any legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof; provided, however,
that if (A) the Indemnifying Party fails to take reasonable steps necessary to
defend diligently such Third-Party Claim, or (B) an unwaivable conflict of
interest exists between the Indemnified Party and the Indemnifying Party, the
Indemnified Party may assume the defense of such Third-Party Claim and retain
separate counsel at the expense of the Indemnifying Party. The Indemnifying
Party or the Indemnified Party, as the case may be, shall have the right to
participate in (but not control), at its own expense, the defense of any
Third-Party Claim which the other is defending as provided in this Agreement.
The Indemnifying Party, if it shall have assumed the defense of any Third-Party
Claim as provided in this Agreement, shall not, without the written consent of
the Indemnified Party (such consent not to be unreasonably withheld), consent to
a settlement of, or the entry of judgment arising from, any such Third-Party
Claim which (A) does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the Indemnified Party of a complete release from
all Losses in respect of such Third-Party Claim, or (B) grants any injunctive or
equitable relief. Subject to the written consent of the Indemnifying Party (such
consent not to be unreasonably withheld), the Indemnified Party shall have the
right to settle any Third-Party Claim, the defense of which has not been assumed
by the Indemnifying Party. If the Sellers’ Representative (in its capacity as
such) is the Indemnifying Party, the reasonable expenses of the Sellers’
Representative incurred in defending a Third-Party Claim (or any participation
in a Third-Party Claim that could result in Losses to the Sellers’
Representative (in its capacity

 

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as such)) shall be the responsibility of the Sellers’ Representative and shall
not be deducted from the Escrow Amount.

(iii) A claim for indemnification pursuant to Article 8 for any matter not
involving a Third-Party Claim may be asserted by delivery of a Claim Notice to
the Indemnifying Party as promptly as reasonably practicable after the
Indemnified Party receives any written notice of such claim; provided, however,
that the failure to notify or delay in notifying the Sellers’ Representative or
Purchaser, as the case may be, will not relieve the Indemnifying Party of its
obligations pursuant to Section 8.1(a) or 8.1(b) (as applicable), except to the
extent that such Indemnifying Party can demonstrate actual material prejudice as
a result of such failure.

(d) Net Recovery. The amount of any Loss shall be net of any amounts recoverable
by the Indemnified Party under insurance policies, indemnities, reimbursement
arrangements, or contracts (including with respect to any breaches thereof)
pursuant to which or under which such Person or such Person’s Affiliates is a
party or has rights with respect to such Loss. The amount of any Loss claimed by
any Indemnified Party hereunder shall be reduced to the extent of any Tax
savings or benefits actually realized by any Indemnified Party or its Affiliates
during the taxable year in which such Loss occurs that is attributable to any
deduction, loss, credit or other Tax benefit resulting from or arising out of
such Loss. In the event of any breach giving rise to an indemnification
obligation under Section 8.1(a) or the right to make a claim against the
then-available portion of the Escrow Amount, the Indemnified Party shall take,
and shall cause its respective Affiliates to take, all reasonable measures to
mitigate the consequences of the related breach (including taking reasonable
steps to prevent any contingent Loss from becoming an actual Loss).
Notwithstanding anything to the contrary contained in this Agreement, the
Purchaser Indemnitees shall have no right to make any claim against any Seller
or the then-available portion of the Escrow Amount with respect to any matter to
the extent the expense, loss or liability comprising the Loss (or a part
thereof) with respect to such matter (i) has been taken into account in the
determination of Final Working Capital, the Initial Merger Consideration and/or
the Merger Consideration or (ii) arises out of changes after the Closing Date in
applicable Laws, rules or regulations or interpretations or applicable thereof.

(e) Recoupment under the Escrow Agreement; Release of Escrow Amount. From and
after the Closing (but subject to the provisions of this Article 8), any
recovery for any Losses by a Purchaser Indemnitee (subject to the other
provisions of this Article 8 including the provisions of Section 8.1(a)(iii))
shall be satisfied first from the then-available portion of the Escrow Amount
(if any) in accordance with the terms of this Agreement and the Escrow Agreement
before the Purchaser Indemnitee may proceed to recover such Losses directly from
the Sellers. On the date which is twelve (12) months following the Closing Date,
the Escrow Agent shall release to the Sellers’ Representative (for the benefit
of the Sellers) the then-remaining Escrow Amount less the aggregate amount of
all Losses specified in any then-unresolved good faith claims for
indemnification, in accordance with the terms of the Escrow Agreement.

(f) Payments. Any payment pursuant to a claim for indemnification or a claim
against the then-available portion of the Escrow Amount shall be made not later
than thirty (30) days

 

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after receipt by the Indemnifying Party (or the Sellers’ Representative and the
Escrow Agent with respect to any claim against the then-available portion of the
Escrow Amount) of written notice from the Indemnified Party stating the amount
of the claim, unless the claim is subject to defense as provided in
Section 8.1(c) or is a dispute, claim or controversy which is the subject of an
unresolved arbitration proceeding pursuant to Section 8.9, in which case payment
shall be made not later than thirty (30) days after the amount of the claim is
finally determined or any such dispute is resolved.

(g) Exclusive Remedy. Each of the parties hereto acknowledges and agrees that
from and after the Closing, the indemnification provisions in this Article 8
shall be the exclusive remedy of the Purchaser Indemnitees with respect to the
transactions contemplated by this Agreement (except as provided in Section 9.13
and for claims of fraud and disputes under Section 2.11, which disputes will be
resolved in accordance with the dispute resolution mechanism set forth in
Section 2.11). After the Closing Date, no party or its Affiliates may seek the
rescission of the transactions contemplated by this Agreement. No Person shall
have any right to assert any claims for indemnification or make a claim against
the then available portion of the Escrow Amount pursuant to this Section 8.1
with respect to any Loss or other claim to the extent it is primarily a possible
or potential Loss or claim that such party believes may be asserted rather than
a Loss or claim that has, in fact, been asserted or filed of record against such
Person or paid or incurred by such Person.

(h) Subrogation. After any indemnification payment is made pursuant to this
Article 8 or payment is made from the then-available portion of the Escrow
Amount, the Indemnifying Party (or the Sellers’ Representative for the benefit
of the Sellers) shall, to the extent of such payment, be subrogated to all
rights (if any) of the Indemnified Party against any third party in connection
with the Losses to which such payment relates. Without limiting the generality
of the preceding sentence, any Indemnified Party receiving an indemnification
payment or payment from the then-available portion of the Escrow Amount pursuant
to the preceding sentence shall execute, upon the written request of the
Indemnifying Party (or the Sellers’s Representative with respect to payments
made from the then-available portion of the Escrow Agreement), any instrument
reasonably necessary to evidence such subrogation rights. The foregoing
subrogation rights shall not be available to the extent the third party against
whom the subrogated rights would be enforced is a party that has had a material
ongoing business relationship with a member of the Company Group, whether as a
supplier, customer, distributor, licensor or otherwise.

(i) Environmental. Each of Purchaser and Merger Sub understands and agrees that
its right to indemnification under Section 8.1(a)(i) for breach of the
representations and warranties contained in Section 5.19 shall constitute its
sole and exclusive remedy against the Sellers with respect to any environmental
matter or health or safety matter relating to Hazardous Materials, relating to
the past or current facilities, properties, or operations of the Company and all
of its predecessors or Affiliates, including any such matter arising under any
Environmental Laws or relating to a Release, except for claims for fraud. Aside
from such right to make a claim against the then available portion of the Escrow
Amount, each of Purchaser and Merger Sub hereby waives any right, whether
arising at law or in equity, to seek contribution, cost recovery, damages, or
any other recourse or remedy from the Sellers, and hereby releases the Sellers
from any claim, demand, or liability, with respect to any such environmental
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Comprehensive Environmental Response, Compensation, and Liability Act, any
analogous state law, or the common law) with respect to the past or current
facilities, properties or operations of the Company and its predecessors or
Affiliates, and with respect to the transactions contemplated by this Agreement
(except for claims for fraud). Sellers shall have no obligation to indemnify the
Purchaser Indemnitees with respect to Losses arising from any conditions of
contamination identified through any environmental sampling or testing after the
Closing Date that is not required by Environmental Laws. The Sellers’ obligation
to indemnify the Purchaser Indemnitees with respect to any Losses relating to or
arising from investigatory, corrective or remedial action at the Owned Real
Property or Leased Real Property shall be limited to such actions required by
Environmental Laws or applicable Leases, assuming continued industrial use of
the subject property and employing risk based standards and institutional
controls where available.

8.2 Mutual Assistance. Each of the parties hereto agrees that they will mutually
cooperate in the expeditious filing of all notices, reports and other filings
with any Governmental Authority required to be submitted jointly by any of the
parties hereto in connection with the execution and delivery of this Agreement,
the other agreements contemplated hereby and the consummation of the
transactions contemplated hereby or thereby. For three (3) years following the
Closing, each of the parties hereto at their own cost, will assist each other
(including by the retention of records and the provision of access to relevant
records) in the preparation of their respective Tax Returns, the filing and
execution of Tax elections or any Tax audits, if required, to the extent that
such assistance is reasonably requested.

8.3 Press Release and Announcements; Confidentiality. Unless required by Law (in
which case each of Purchaser and Sellers’ Representative shall consult with the
other party prior to any such disclosure as to the form and content of such
disclosure), from and after the date hereof through the Closing, no
announcements or communications to the employees, customers or suppliers of the
Company Group or other releases of information related to this Agreement or the
transactions contemplated hereby will be issued or released without the joint
approval of both Purchaser and the Sellers’ Representative. Sellers’
Representative, the Company, Merger Sub and Purchaser agree to keep the terms of
this Agreement confidential, except to the extent required by applicable Law or
for financial reporting purposes and except that the parties may disclose such
terms to their respective employees, accountants, advisors and other
representatives as necessary in connection with the ordinary conduct of their
respective businesses. Each of Purchaser and Merger Sub acknowledges that,
following the Closing or the termination of this Agreement pursuant to Article
7, that certain confidentiality agreement by and between Purchaser and the
Company, dated as of February 8, 2011 (the “Confidentiality Agreement”) shall
remain in full force and effect pursuant to its terms.

8.4 Expenses. Except as otherwise set forth in this Agreement, the Escrow
Agreement or the other Company Documents, each of the parties hereto shall be
solely responsible for and shall bear all of its own costs and expenses incident
to its obligations under and in respect of this Agreement, the Company Documents
and the transactions contemplated hereby, including any such costs and expenses
incurred by any party hereto in connection with the negotiation, preparation and
performance of and compliance with the terms of this Agreement, the Company
Documents and the other agreements contemplated hereby (including the fees and
expenses of legal counsel, accountants, investment bankers or other
representatives and consultants), regardless of whether the

 

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transactions contemplated hereby are consummated; provided, however, that
Purchaser shall be solely responsible for all filing fees under the HSR Act and
any other Antitrust Law and all costs associated with obtaining any third party
consents in connection with the transactions contemplated by this Agreement.

8.5 Further Assurances. Each of the parties hereto shall, and shall cause its
Affiliates to, execute and deliver such further instruments and take such
additional action as any other party hereto may reasonably request to effect or
consummate the transactions contemplated hereby.

8.6 Transfer Taxes; Recording Charges. Notwithstanding anything to the contrary
herein, all transfer, documentary, sales, use, stamp, registration and other
such Taxes, and all conveyance fees, recording charges and other fees and
charges (including any penalties and interest) incurred in connection with
consummation of the transactions contemplated by this Agreement shall be paid by
Purchaser when due, and Purchaser will, at its own expense, file all necessary
Tax Returns and other documentation with respect to all such Taxes, fees and
charges.

8.7 Directors and Officers Insurance. At or prior to the Closing, Purchaser
shall purchase for any Person who is on the date hereof or who becomes prior to
the Closing Date, an officer or director of any member of the Company Group
(each such Person, a “D&O Beneficiary”) a 6-year “tail” officers’ and directors’
liability insurance coverage (“D&O Insurance”) that is reasonably acceptable to
the Sellers’ Representative with respect to all losses, claims, damages,
liabilities, costs and expenses (including attorney’s fees and expenses),
judgments, fines, and amounts paid in settlement in connection with any actual
or threatened action, suit, claim, proceeding or investigation (each a “D&O
Claim”) to the extent that any such D&O Claim is based on, or arises out of,
(a) the fact that such D&O Beneficiary is or was a director or officer of any
member of the Company Group at any time prior to the Closing Date or is or was
serving at the request of any member of the Company Group as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise at any time prior to the Closing Date, or (b) this
Agreement or any of the transactions contemplated hereby or thereby, in each
case to the extent that any such D&O Claim pertains to any matter of fact
arising, existing, or occurring prior to or at the Closing Date, regardless of
whether such D&O Claim is asserted or claimed prior to, at or after the Closing
Date. The provisions of this Section 8.7 are intended to be for the benefit of,
and shall be enforceable by, each such D&O Beneficiary and are in addition to,
and not in substitution for, any other rights to contribution that any such
person may have by contract or otherwise. For a period of six (6) years after
the Closing, Purchaser shall not, and shall not permit any member of the Company
Group to, amend, repeal or modify (in a manner adverse to the beneficiary
thereof) any provision in any member of the Company Group’s articles of
incorporation or bylaws (or equivalents) relating to the exculpation or
indemnification of any officers or directors, it being the intent of the parties
hereto that the officers and directors of any member of the Company Group on the
date hereof shall continue to be entitled to such exculpation and
indemnification to the full extent of the Law.

 

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8.8 Tax Matters.

(a) Purchaser shall prepare or cause to be prepared and file or cause to be
filed, at the expense of the Company Group, all Tax Returns for the Company
Group which are filed after the Closing Date for any Pre-Closing Tax Period and
for any Straddle Period. No later than forty-five (45) days prior to filing any
such Tax Return, Purchaser shall submit such Tax Return to the Sellers’
Representative for its review and consent. The Sellers’ Representative shall
provide written comments to Purchaser no later than fifteen (15) days after
receiving such Tax Return. The parties shall attempt in good faith to resolve
any dispute with respect to such Tax Return. If the parties are unable to
resolve any such dispute within fifteen (15) days, the parties shall refer such
dispute to the Accounting Arbitrator in accordance with the procedure set forth
in Section 2.11(c). To the extent that the Accounting Arbitrator is unable to
resolve any such dispute prior to the due date for any Tax Return, such Tax
Return shall be filed as prepared by Purchaser and shall be amended to reflect
the resolution by the Accounting Arbitrator if necessary. The parties hereto
agree that any Tax Return that includes the Closing Date shall reflect, unless
otherwise required by law, any deduction attributable to amounts paid or accrued
by the Company and/or any of its Subsidiaries on or before the Closing Date. The
Sellers’ Representative shall provide the Purchaser, the Company Group with any
reasonably requested assistance in preparing such Tax Returns, including any
requisite powers of attorney. The Sellers’ Representative shall pay any
Purchaser at least five (5) days before the due date for any Tax Return prepared
pursuant to this Section 8.8(a) all Taxes with respect to any Pre-Closing Tax
Period and all Taxes allocable to any Pre-Closing Straddle Period.

(b) Unless otherwise required by Law, Purchaser and its Affiliates (including on
or after the Closing Date, the Company Group) shall not file, or cause to be
filed, any restatement or amendment of, modification to, or claim for refund
relating to, any Tax Return of any member of the Company Group for any taxable
period that begins prior to the Closing Date (regardless of whether such taxable
period ends prior to the Closing Date) without the prior written consent of the
Sellers’ Representative, not to be unreasonably withheld.

(c) Cooperation; Procedures Relating to Tax Claims. Subject to the other
provisions of this Section 8.8, Purchaser and the Sellers’ Representative shall
cooperate fully, as and to the extent reasonably requested, in connection with
(i) the filing of Tax Returns, (ii) any audit, litigation or other proceeding
with respect to Taxes and Tax Returns and (iii) the preparation of any financial
statements to the extent related to Taxes. Such cooperation shall include the
retention, and (upon the other party’s request) the provision, of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis during
normal business hours to provide additional information and explanation of any
material provided hereunder; provided, that the party requesting assistance
shall pay the reasonable out-of-pocket expenses incurred by the party providing
such assistance; provided, further, no party shall be required to provide
assistance at times or in amounts that would interfere unreasonably with the
business and operations of such party. Furthermore, the Sellers’ Representative
shall have the right to control, at its sole expense, any audit, litigation or
other proceeding with respect to Taxes and Tax Returns of any member of the
Company Group that relates solely to any Pre-Closing Tax Period. If the Sellers’
Representative elects to control such matter, then (x) Purchaser shall have the
right to participate, at its sole expense, in any such matter, (y) the

 

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Sellers’ Representative shall keep Purchaser reasonably informed of the status
of such matter (including providing Purchaser with copies of all written
correspondence regarding such matter), and (z) the Sellers’ Representative shall
not settle any such proceedings without Purchaser’s written consent, not to be
unreasonably withheld, conditioned or delayed. The Purchaser shall provide the
Sellers’ Representative with notice of any written inquiries, audits,
examinations or proposed adjustments by the Internal Revenue Service or any
other taxing authority, which relate to any Pre-Closing Tax Period or Straddle
Period within ten (10) days of the receipt of such notice. If the Sellers’
Representative elects not to control any such audit, litigation, or other
proceeding that relates solely to any Pre-Closing Tax Period or such audit,
litigation, or other proceeding does not relate solely to any Pre-Closing Tax
Period, then Purchaser shall control such matter, provided, that (w) the
Sellers’ Representative shall have the right to participate in any such matter,
at its sole expense, (x) Purchaser shall keep the Sellers’ Representative
reasonably informed of the status of such matter (including providing the
Sellers’ Representative with copies of all written correspondence regarding such
matter), and (y) Purchaser shall not settle any such proceedings without the
Sellers’ Representative’s written consent, not to be unreasonably withheld,
conditioned or delayed. The provisions of this Section 8.8 and not
Section 8.1(c) shall govern any such audit, litigation, or other proceeding that
relates to any Pre-Closing Tax Period or Straddle Period of any member of the
Company Group.

(d) Straddle Period. In the case of any taxable period that includes (but does
not end on) the Closing Date (a “Straddle Period”), the Taxes with respect to
the income, property or operations of any member of the Company Group will be
apportioned between the period of the Straddle Period that extends before the
Closing Date through the Closing Date (the “Pre-Closing Straddle Period”) and
the period of the Straddle Period that extends from the day after the Closing
Date to the end of the Straddle Period (the “Post-Closing Straddle Period”) in
accordance with this Section 8.8(d). The portion of such Tax attributable to the
Pre-Closing Straddle Period will (i) in the case of any Taxes other than sales
or use taxes, value-added taxes, employment taxes, withholding taxes, and any
Tax based on or measured by income, receipts or profits earned during a Straddle
Period, be deemed to be the amount of such Tax for the entire taxable period
multiplied by a fraction, the numerator of which is the number of days in the
Pre-Closing Straddle Period and the denominator of which is the number of days
in the Straddle Period, and (ii) in the case of any sales or use taxes,
value-added taxes, employment taxes, withholding taxes, and any Tax based on or
measured by income, receipts or profits earned during a Straddle Period, be
deemed equal to the amount that would be payable if the Straddle Period ended on
and included the Closing Date. The portion of Tax attributable to a Post-Closing
Straddle Period shall be calculated in a corresponding manner. To the extent
that any Tax for a Straddle Period is based on the greater of a Tax on net
income, on the one hand, and a Tax measured by net worth or some other basis not
otherwise measured by income, on the other hand, the portion of such Tax related
to the Pre-Closing Straddle Period and the Post-Closing Straddle Period will be
determined based on the foregoing and based on the manner in which the actual
Tax liability for the entire Straddle Period is determined. In the case of a Tax
that is (i) paid for the privilege of doing business during a period (a
“Privilege Period”) and (ii) computed based on business activity occurring
during an accounting period ending prior to such Privilege Period, any reference
to a “Tax period,” a “tax period,” or a “taxable period” shall mean such
accounting period and not such Privilege Period.

 

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(e) No party hereto nor any Affiliate thereof shall make an election under
Section 338 of the Code or any similar provision of foreign, state or local Law
in respect of the transactions contemplated by this Agreement.

(f) The Purchaser shall not take any action or cause any action to be taken with
respect to the Company or the Surviving Corporation subsequent to the Closing
that would cause the transactions contemplated hereby to constitute part of a
transaction that is the same as, or substantially similar to, the “Intermediary
Transaction Tax Shelter” described in Internal Revenue Service Notice 2001-16,
2001-1 C.B. 730, and Internal Revenue Service Notice 2008-20 I.R.B. 2008-6
(January 17, 2008), and Internal Revenue Service Notice 2008-111 I.R.B. 1299
(December 1, 2008).

(g) Any payments under this Agreement shall be treated by all parties as
adjustments to the Merger Consideration, unless otherwise required by Law.

8.9 Disputes; Arbitration Procedure.

(a) Except for any dispute, claim or controversy pursuant to Section 2.11, each
of the parties hereto agrees that it will attempt to resolve any dispute, claim
or controversy arising out of this Agreement through good faith negotiations in
the spirit of mutual cooperation between senior business executives with
authority to resolve the controversy.

(b) Except for any dispute, claim or controversy pursuant to Section 2.11, any
dispute, claim or controversy that cannot be resolved by the parties hereto
through good faith negotiations within thirty (30) days of notification to the
counter-party of the commencement of the dispute resolution procedures of this
Section 8.9 will then, upon the written request of any party hereto, be resolved
by binding arbitration conducted in accordance with the then effective
Commercial Arbitration Rules of the American Arbitration Association by a panel
of three arbitrators mutually agreeable to the parties. If the parties cannot
mutually agree upon the selection, the arbitrators shall be selected in
accordance with the rules of the then effective Commercial Arbitration Rules of
the American Arbitration Association. To the extent not governed by such rules,
such arbitrator shall be directed by the parties to set a schedule for
determination of such dispute, claim or controversy that is reasonable under the
circumstances. Such arbitrator shall be directed by the parties to determine the
dispute in accordance with this Agreement and the substantive rules of Law (but
not the rules of procedure or evidence) that would be applied by a federal court
required to apply the internal Law (and not the law of conflicts) of the State
of Delaware. The arbitration will be conducted in the English language in
Chicago, Illinois. Judgment upon the award rendered by the arbitrator may be
entered by any court having jurisdiction.

(c) Nothing contained in this Section 8.9 shall prevent any party hereto from
resorting to judicial process if solely injunctive or equitable relief from a
court is necessary to prevent injury to such party or its Affiliates to the
extent permitted by this Agreement. The prevailing party in the final,
non-appealable determination of any dispute, claim or controversy brought in
arbitration, court or other judicial process in accordance with this Agreement
shall be reimbursed fully and promptly by the non-prevailing party for all
attorneys’ fees, court costs and

 

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other reasonable costs and expenses incurred by such prevailing party in
connection with the resolution of such dispute, claim or controversy.

8.10 Sellers’ Representative. The Sellers’ Representative is hereby approved
(and is to be approved pursuant to the Letter of Transmittal) to serve as the
representative of the Sellers with respect to the matters expressly set forth in
this Agreement to be performed by the Sellers’ Representative. Each of the
Sellers shall irrevocably appoint the Sellers’ Representative as the agent,
proxy and attorney-in-fact for each such Seller for all purposes of this
Agreement, including full power and authority on such Seller’s behalf (a) to
consummate the transactions contemplated herein, (b) to pay expenses (whether
incurred on or after the date hereof) incurred in connection with the
negotiation and performance of this Agreement, (c) to disburse any funds
received hereunder to such Seller and each other Seller, (d) to execute and
deliver any certificates representing the Company Group’s capital stock and
execution of such further instruments as Purchaser shall reasonably request,
(e) to execute and deliver on behalf of such Seller any amendment or waiver
hereto, (f) to take all other actions to be taken by or on behalf of such Seller
in connection herewith, (g) to negotiate, settle, compromise and otherwise
handle any claims for indemnification or any claims made against the
then-available portion of the Escrow Amount made by any indemnified party
pursuant this Agreement hereof and (h) to do each and every act and exercise any
and all rights which such Seller is, or Sellers collectively are, permitted or
required to do or exercise under this Agreement. Each of the Sellers shall agree
to reimburse the Sellers’ Representative for any fees and expenses incurred by
the Sellers’ Representative in its capacity as agent, proxy or attorney-in-fact
of the Sellers in connection with this Agreement or the transactions
contemplated herein. At the Effective Time, Purchaser shall deliver to the
Sellers’ Representative an amount equal to $1,000,000 (the “Sellers’
Representative Expense Fund”) to be held in trust to cover and reimburse the
fees and expenses incurred by the Sellers’ Representative for its obligations in
connection with this Agreement and the transactions contemplated herein. Any
balance of the Sellers’ Representative Expense Fund not incurred for such
purposes shall be returned by the Sellers’ Representative to the Sellers on a
pro rata basis as soon as reasonably practicable after payment of the Sellers’
Representative the amount due to it from the Sellers’ Representative Expense
Fund.

ARTICLE 9

MISCELLANEOUS

9.1 Amendment and Waiver. This Agreement may not be amended, altered or modified
except by a written instrument executed by the Sellers’ Representative (on
behalf of the Company), Purchaser and the Merger Sub. No course of dealing
between or among any Persons having any interest in this Agreement will be
deemed effective to modify, amend or discharge any part of this Agreement or any
rights or obligations of any Person under or by reason of this Agreement. No
waiver of any of the provisions of this Agreement or any breach or default
hereof shall be deemed or shall constitute, a waiver, breach or default of any
other provisions, whether or not similar.

 

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9.2 Notices. All notices, demands and other communications to be given or
delivered to Purchaser, the Company, or the Sellers’ Representative under or by
reason of the provisions of this Agreement or the Company Documents (except to
the extent a Company Document provides otherwise) will be in writing and will be
deemed to have been given (a) when personally delivered, (b) one (1) day after
being sent by reputable overnight courier, (c) when transmitted by facsimile or
telecopy (transmission confirmed), in each case to the respective parties hereto
at the addresses indicated below (unless another address is so specified by the
applicable party in writing):

If to the Sellers’ Representative or prior to the Closing, to the Company, then
to:

c/o Industrial Growth Partners

100 Spear Street, Suite 1500

San Francisco, CA 94105

Attention:        Eric D. Heglie

Facsimile No.: (415) 882-4551

with a copy to:

Kirkland & Ellis LLP

555 California Street, Suite 2700

San Francisco, CA 94104

Attention:  David A. Breach

                     Stuart E. Casillas

Facsimile No.: (415) 439-1500

If to Purchaser or Merger Sub, or after the Closing, to the Company, then to:

Nordson Corporation

28601 Clemens Road

Westlake, Ohio 44145

Attention:  Robert E. Veillette, Vice President,

                     General Counsel & Secretary

Facsimile No.: (440) 892-9253

With a copy to:

Jones Day

North Point

901 Lakeside Ave.

Cleveland, Ohio 44114

Attention:         James P. Dougherty

Facsimile No.: (216) 579-0212

9.3 Assignment. This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of each of the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor any rights,
benefits or obligations set forth herein

 

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may be assigned or delegated by any of the parties hereto without the prior
written consent of the other party.

9.4 Severability. Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable Law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable Law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement. Upon such determination
that any provision is prohibited or invalid, the parties hereto shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in accordance with applicable Law such that
the transactions contemplated hereby are consummated as originally contemplated
to the greatest extent possible.

9.5 No Strict Construction. The language used in this Agreement shall be deemed
to be the language chosen by the parties hereto to express their mutual intent,
and no rule of strict construction will be applied against any Person. The words
“hereof,” “herein,” “hereby,” “herewith” and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole and
not to any particular provision of this Agreement, and article, section,
paragraph and schedule references are to the articles, sections, paragraphs and
schedules of this Agreement unless otherwise specified. The words describing the
singular number shall include the plural and vice versa, words denoting either
gender shall include both genders and words denoting natural persons shall
include all persons and vice versa. The phrases “the date of this Agreement,”
“the date hereof,” “of even date herewith” and terms of similar import shall be
deemed to refer to the date set forth in the preamble to this Agreement. The
word “including” or any variation thereof means “including, without limitation”
and shall not be construed to limit any general statement that it follows to the
specific or similar items or matters immediately following it.

9.6 Captions. The captions used in this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and shall not be
deemed to limit, characterize or in any way modify or affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement.

9.7 Third-Party Beneficiaries. Except as expressly set forth in this Agreement,
no Person other than the parties hereto (and their permitted successors and
assigns) will have any rights, remedies, obligations or benefits under any
provision of this Agreement, and nothing in this Agreement shall create any
third party beneficiary rights in any Person or entity not a party to this
Agreement.

9.8 Complete Agreement. This Agreement, the Company Documents and the other
agreements, instruments and documents referred to herein and therein contain the
complete agreement between the parties and supersede any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way.

 

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9.9 Counterparts. This Agreement, the Company Documents and any signed agreement
or instrument entered into in connection with this Agreement, and any amendments
hereto or thereto, may be executed in one or more counterparts, any one of which
may be delivered by facsimile, and all of which taken together shall constitute
one and the same instrument (except to the extent a Company Document provides
otherwise).

9.10 Governing Law and Jurisdiction. This Agreement, the Company Documents and
the exhibits and schedules hereto and thereto, and all claims and disputes
arising hereunder or thereunder (except to the extent a Company Document
provides otherwise), shall be governed by and construed in accordance with the
domestic laws of the State of Delaware, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Delaware or
any other jurisdiction) that would cause the application of the Laws of any
jurisdiction other than the State of Delaware. Except as to matters subject to
arbitration (other than enforcement of awards therefrom or enforcement of any
party’s agreement to arbitrate) as described in Section 8.9, to the extent
permitted by Law, each of the parties hereto hereby irrevocably submits to the
exclusive jurisdiction of any state or federal court sitting in Chicago,
Illinois over any suit, action or other proceeding brought by any party arising
out of or relating to this Agreement and the Company Documents (except to the
extent a Company Document provides otherwise), and each of the parties hereto
hereby irrevocably agrees that all claims with respect to any such suit, action
or other proceeding shall be heard and determined in such courts. In the event
of any litigation regarding or arising from this Agreement and the Company
Documents (except to the extent a Company Document provides otherwise), the
prevailing party shall be entitled to recover its reasonable expenses,
attorneys’ fees and costs incurred therein or in enforcement or collection of
any judgment or award rendered therein.

9.11 Attorney-Client Privilege and Conflict Waiver. Kirkland & Ellis LLP has
represented the Company, its Subsidiaries, certain of the Sellers and the
Sellers’ Representative in connection with this Agreement and the transactions
contemplated hereby. All of the parties recognize the commonality of interest
that exists and will continue to exist until Closing, and the parties agree that
such commonality of interest should continue to be recognized after the Closing.
Specifically, the parties agree Purchaser shall not, and shall not cause any
member of the Company Group to, seek to have Kirkland & Ellis LLP disqualified
from representing the Sellers’ Representative, the Seller Indemnitees and their
respective Affiliates (other than the Company and its Subsidiaries) in
connection with any dispute that may arise between the Sellers’ Representative,
the Seller Indemnitees or their respective Affiliates, on the one hand, and the
Purchaser or the Company, on the other hand, in connection with this Agreement
or the transactions contemplated hereby. In connection with any such dispute
that may arise between the Sellers’ Representative, the Seller Indemnitees or
their respective Affiliates, on the one hand, and the Purchaser or the Company,
on the other hand, the Sellers’ Representative will have the right to decide, in
its sole discretion, whether or not to waive the attorney client privilege that
may apply to any communications between any of the Sellers and Kirkland & Ellis
LLP that occurred before the Closing.

9.12 Waiver of Jury Trial. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE COMPANY DOCUMENTS IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT

 

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ISSUES, AND THEREFORE (EXCEPT TO THE EXTENT A COMPANY DOCUMENT PROVIDES
OTHERWISE) IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION, ACTION, PROCEEDING,
CROSS-CLAIM OR COUNTERCLAIM IN ANY COURT DIRECTLY OR INDIRECTLY ARISING OUT OF,
RELATING TO OR IN CONNECTION WITH (I) THIS AGREEMENT AND THE COMPANY DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR (II) THE ACTIONS OF SUCH
PARTY IN THE NEGOTIATION, AUTHORIZATION, EXECUTION, DELIVERY, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF.

9.13 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or the
Company Documents were not performed by Purchaser, or the Company, as
applicable, in accordance with their specific terms or were otherwise breached
by Purchaser or the Company, as applicable. It is accordingly agreed that
(except to the extent a Company Document provides otherwise) the parties shall
be entitled to an injunction or injunctions, without any requirement to post or
provide any bond or other security in connection therewith, to prevent breaches
of this Agreement and the Company Documents by any of Purchaser or the Company,
as applicable, and to enforce specifically the terms and provisions hereof and
thereof against Purchaser or the Company, as applicable, in any court having
jurisdiction, this being in addition to any other remedy to which the parties
hereto are entitled at law or in equity.

*  *  *  *  *

 

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

 

COMPANY: XALOY SUPERIOR HOLDINGS, INC. By:     Name:   Title:  

 

PURCHASER: NORDSON CORPORATION By:     Name:   Title:  

 

MERGER SUB: BUCKEYE MERGER CORP. By:     Name:   Title:  

{Signature Page to Agreement and Plan of Merger}

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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date
first above-written solely for the purpose of accepting its appointment as the
Sellers’ Representative under, and agreeing to be bound as such by, the
provisions of this Agreement.

 

SELLERS’ REPRESENTATIVE: INDUSTRIAL GROWTH PARTNERS III, L.P. By:   IGP Capital
Partners III, LLC Its:   General Partner

 

By:     Name:   Gottfried P. Tittiger Title:   Managing Member

{Signature Page to Agreement and Plan of Merger}