Document:

CHI Systems Inc. Share Purchase Agreement

 

 Exhibit 4.11

SHARE PURCHASE AGREEMENT

THIS AGREEMENT made as of the 2nd day of November, 2005.

AMONG:

OFFSHORE SYSTEMS INTERNATIONAL LTD., a British Columbia
corporation having its head office in North Vancouver, British
Columbia (“OSIL”)

OF THE FIRST PART

AND:

OSI HOLDINGS INC., a Delaware corporation having its
registered office in Wilmington, Delaware (“Newco”)

OF THE SECOND PART

AND:

THE UNDERSIGNED SHAREHOLDERS OF CHI SYSTEMS INC.
(individually a “Seller” and collectively the “Sellers”)

OF THE THIRD PART

AND:

CHI SYSTEMS INC., a Pennsylvania corporation having its head
office in Fort Washington, PA (“CHI”)

WITNESSES THAT WHEREAS:

A. The Sellers are, and on Closing will be, the registered and beneficial owners of all of the CHI
Shares;

B. OSIL wishes to purchase all of the CHI Shares;

C. Newco is a wholly owned subsidiary of OSIL, has no assets or operations and has been organized
by OSIL for the purpose of acquiring all of the CHI Shares;

D. The Sellers have agreed to sell their CHI Shares and OSIL has agreed to purchase the CHI Shares
upon the terms and conditions set forth herein; and

E. This Agreement, upon execution, will replace the Letter of Intent.

NOW THEREFORE the parties agree as follows:

PART 1

INTERPRETATION

 

 

Definitions

1.1 In this Agreement, including the recitals:

“Adjustment Time” means 11:59 p.m., Eastern Time, on the Closing Date;

“Affiliate” of a particular Person means another Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, the particular Person, and for the
purposes of this definition, “control”, “controlling” and “controlled” import the power to direct
management and policies, directly or indirectly, whether through ownership of voting securities, by
contract or otherwise;

“Applicable Securities Laws” means the securities legislation having application and the rules,
policies, notices and orders issued by applicable securities regulatory authorities, including the
TSX and the United States Securities and Exchange Commission (“SEC”), having application to OSIL;

“Business Day” means a day which is not a Saturday, Sunday or a statutory holiday in British
Columbia or Pennsylvania;

“CHI Financial Statements” means collectively the unaudited financial statements of CHI for the
financial years ended September 30, 2004, 2003 and 2002, true copies of which are attached as
Schedule 2.1.9;

“CHI Financial Statement Date” means September 30, 2004;

“CHI Options” means the outstanding options granted to certain Sellers to acquire Class B
non-voting shares in the capital stock of CHI as described in the Schedule 2.1.5;

“CHI Shares” means all of the issued and outstanding shares and other securities of any class of
CHI owned by the Sellers as at the Adjustment Time;

“Closing” means the completion of the sale and purchase of CHI Shares provided for herein;

“Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations
thereunder;

“Disposal,” “Storage,” and “Treatment” shall have the meanings assigned them at 42 U.S.C. §
6903(3), (33) and (34), respectively;

“DSS” means the Defense Security Service of the United States Department of Defense;

“Encumbrance” means a security interest, mortgage, pledge, hypothecation, lien, lease, license,
assignment, option, claim or other title defect, encumbrance or charge whatsoever, whether or not
perfected or unperfected, filed or unfiled;

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“Environmental Laws” means any Law pertaining to the environment or the health or safety of the
public and the Release or threatened Release of Hazardous Materials or otherwise regulating the
manufacture, processing, distribution, use, Treatment, Storage, transport or handling of Hazardous
Materials, including, without limitation: the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. § 9601, et seq.; the Solid Waste Disposal Act, 42 U.S.C. § 6901, et
seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001, et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. § 5101, et seq. ; the Clean Air Act, 42 U.S.C. §
7401, et seq.; the Clean Water Act, 33 U.S.C. § 1251, et seq.; the Toxic Substances Control Act, 15
U.S.C. § 2601, et seq.; and the Oil Pollution Act of 1990, 33 U.S.C. § 2701, et seq.; each as
amended; any state or local Law similar to the foregoing; and all regulations issued pursuant to
the foregoing;

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations
thereunder;

“Facility Security Clearance” means an administrative determination that, from a security
viewpoint, a facility is eligible for access to classified information of a certain category and
all lower categories that has been determined pursuant to Executive Order 12958 or any predecessor
order to require protection against unauthorized disclosure and is so designated. The
classifications Top Secret, Secret and Confidential are used to designate such information;

“GAAP” means generally accepted accounting principles as in effect in the United States on the
Closing Date, applied on a basis consistent with CHI’s past practices;

“Governmental Authority” means a federal, state, regional, municipal or local government and any
agency or subdivision thereof, (including without limitation the US Department of Defense)
including an entity or person exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government or subdivision, and including
without limitation DSS;

“Hazardous Material” means any waste, chemical or other substance that is listed, defined,
designated, identified or classified as hazardous, radioactive, reactive, toxic, ignitable or
corrosive, or a pollutant or a contaminant, under or pursuant to any Environmental Law, and
specifically including petroleum and all derivatives thereof, asbestos or asbestos-containing
materials and polychlorinated biphenyls;

“Law” means any common law decision and any federal, state, regional, local or foreign law,
statute, ordinance, code, rule, regulation, order or treaty;

“Letter of Intent” means the letter of intent respecting the transactions contemplated hereby dated
July 8, 2005 among OSIL, CHI, Wayne W. Zachary and Floyd A. Glenn III, as amended;

“Majority Shareholders” means Wayne W. Zachary and Floyd A. Glenn III;

“Minority Shareholders” means the Sellers other than the Majority Shareholders;

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“NASD” means the National Association of Securities Dealers.

“Option Plan” means the CHI Systems, Inc. 1998 Stock Option Plan;

“Party” means a party to this Agreement, and “Parties” means two or more of such parties;

“Person” includes an individual, corporation, body corporate, partnership, joint venture,
association, trust or unincorporated organization or any trustee, executor, administrator or other
legal representative thereof;

“Personnel Security Clearance” means an administrative determination that an individual is
eligible, from a security point of view, for access to classified information of the same or lower
category as the level of personnel clearance granted;

“Public Record” means information which has been publicly filed at www.sedar.com or
www.sec.gov/edgar/searchedgar/webusers.htm by OSIL under Applicable Securities Laws;

“Release” shall have the meaning assigned it at 42 U.S.C. § 9601(22);

“Retained Earnings Threshold” means $1,476,321, which is the amount of CHI’s retained earnings as
shown on CHI’s balance sheet for its financial year ended September 30, 2004.

“Schedule” means a schedule to this Agreement;

“Settlement Date” means the date that is 90 days after the Closing Date;

“Shareholders’ Agreement” means that certain shareholders’ agreement among CHI and certain of the
Sellers dated June 30, 1991 as amended by amending agreements dated August 23, 1995 and September
24, 2003; and

“TSX” means the Toronto Stock Exchange.

Each term in the following table has the meaning set forth in the Section number across from such
term.

	 	 	 	 	 	 	 	 	 
	TERM	 	—	 	§
	1933 Act
	 	 	—	 	 	 	2.2.7	 
	Accounts Receivable
	 	 	—	 	 	 	4.3.2	(b)
	AR Deficiency
	 	 	—	 	 	 	4.3.2	(b)
	AR Report
	 	 	—	 	 	 	4.3.2	(b)
	Bid
	 	 	—	 	 	 	2.1.25	(f)
	Business of CHI
	 	 	—	 	 	 	2.1.68	 
	Cash Purchase Price
Reduction
	 	 	—	 	 	 	9.7	 
	CFIUS
	 	 	—	 	 	 	6.1.10	 
	Leases
	 	 	—	 	 	 	2.1.22	 
	Material Contracts
	 	 	—	 	 	 	2.1.24	 
	Mindbuzz
	 	 	—	 	 	 	6.1.12	(a)
	NIDs
	 	 	—	 	 	 	9.4	(b)
	NISPOM
	 	 	—	 	 	 	9.4	(b)
	Objections
	 	 	—	 	 	4.3.2	(a)(ii)
	OSIL Intellectual Property
	 	 	—	 	 	 	3.1.16	(a)
	OSIL’s Losses
	 	 	—	 	 	 	10.2	 

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	TERM	 	—	 	§
	CHI Intellectual Property
	 	 	—	 	 	 	2.1.12	 
	CHI Terrain
	 	 	—	 	 	 	6.1.12	(b)
	Closing Balance Sheet
	 	 	—	 	 	 	4.3.2	(a)
	Closing Date
	 	 	—	 	 	 	5.1	 
	Confidentiality Agreement
	 	 	—	 	 	 	2.1.76	 
	DDTC
	 	 	—	 	 	 	6.1.10	 
	DoE
	 	 	—	 	 	 	6.1.10	 
	Domain Name
	 	 	—	 	 	 	2.1.19	 
	Exon-Florio
	 	 	—	 	 	 	6.1.10	 
	FCPA
	 	 	—	 	 	 	2.1.25	(d)
	FOCI
	 	 	—	 	 	 	6.1.10	 
	Government Contract
	 	 	—	 	 	 	2.1.25	(f)
	Holdback
	 	 	—	 	 	 	4.3.2	 
	Holder
	 	 	—	 	 	 	9.7	 
	ITAR
	 	 	—	 	 	 	6.1.10	 
	OSIL Shares
	 	 	—	 	 	 	4.3.4	(a)
	Plans
	 	 	—	 	 	 	2.1.30	 
	Purchase Price
	 	 	—	 	 	 	4.2	 
	Real Property
	 	 	—	 	 	 	2.1.22	 
	Registered Shares
	 	 	—	 	 	 	9.11	 
	Retained Earnings
	 	 	—	 	 	 	4.3.2	(a)
	Retained Earnings Deficiency
	 	 	—	 	 	 	4.3.2	(a)
	Retained Earnings Surplus
	 	 	—	 	 	 	4.3.2	(a)
	Sellers’ Losses
	 	 	—	 	 	 	10.4	 
	Selling Investor
	 	 	—	 	 	 	9.11	 
	Stock Purchase Price Reduction
	 	 	—	 	 	 	9.7	 
	
Strike Price Amount
	 	 	—	 	 	 	9.7	 
	Tax, Taxes
	 	 	—	 	 	 	2.1.54	 
	Tax Return, Tax Returns
	 	 	—	 	 	 	2.1.54	 

Other terms defined within the body of this Agreement will have the meanings so ascribed to them
throughout this Agreement.

1.2 The Schedules to this Agreement include the following:

CHI SCHEDULES

	 	 	 	 	 
	Schedule 2.1.5
	 	—	 	Authorized and Issued Capital of CHI
	Schedule 2.1.5-1
	 	—	 	Form of CHI Option
	Schedule 2.1.9
	 	—	 	CHI Financial Statements
	Schedule 2.1.10
	 	—	 	No Material Adverse Changes
	Schedule 2.1.11
	 	—	 	Unusual Transactions
	Schedule 2.1.12
	 	—	 	CHI Intellectual Property
	Schedule 2.1.20
	 	—	 	Title to Properties
	Schedule 2.1.21
	 	—	 	List of Leased Equipment
	Schedule 2.1.22
	 	—	 	List of Leases of Real Property
	Schedule 2.1.23
	 	—	 	Material Contracts
	Schedule 2.1.24
	 	—	 	Material Contract Exceptions
	Schedule 2.1.25
	 	—	 	Defaults and Notices of Non-Compliance under Material Contracts
	Schedule 2.1.26
	 	 	 	Information respecting CHI Employees
	Schedule 2.1.30
	 	—	 	Employee Benefit Plans
	Schedule 2.1.32
	 	—	 	Employment Claims
	Schedule 2.1.33
	 	—	 	Employment Obligations
	Schedule 2.1.39
	 	—	 	Guarantees or Indemnities
	Schedule 2.1.40
	 	—	 	Conflicting Agreements
	Schedule 2.1.41
	 	—	 	Litigation

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	Schedule 2.1.43
	 	—	 	CHI Insurance Policies
	Schedule 2.1.53
	 	—	 	Approvals Required
	Schedule 2.1.60
	 	—	 	Inventory
	Schedule 2.1.67
	 	—	 	Loss Carryforwards and Credit Carryforwards
	Schedule 2.1.68
	 	—	 	Transactions with Related Parties
	Schedule 2.1.73
	 	—	 	CHI Bank Accounts and Business Numbers
	Schedule 2.1.74
	 	—	 	Environmental Matters
	Schedule 2.1.76
	 	—	 	Confidentiality Agreements
	Schedule 2.1.77
	 	—	 	Restrictions on Business
	Schedule 2.1.78
	 	—	 	Undisclosed Liabilities
	Schedule 4.3.1
	 	—	 	Allocation of $7,250,000 Cash Portion of Purchase Price Among Sellers
	Schedule 4.3.2(b)
	 	—	 	Accounts Receivable and Government Contract Holdbacks
	Schedule 4.3.3
	 	—	 	Form of Escrow Agreement re Portion of Purchase Price
	Schedule 4.3.4(a)
	 	—	 	Allocation of OSIL Share Portion of Purchase Price Among Sellers
	Schedule 4.3.4(b)
	 	—	 	Allocation of Cash In Lieu of OSIL Shares Portion of Purchase Price Among Sellers
	Schedule 6.1.7
	 	—	 	Forms of Employment Agreements between CHI and Wayne W. Zachary, Floyd A. Glenn III and Geraldine Burke
	Schedule 6.1.9
	 	—	 	Form of Non-Competition Agreement
	Schedule 6.1.10
	 	—	 	Governmental Consents
	Schedule 6.1.12
	 	—	 	Capital Contribution Agreement
	Schedule 6.1.13(e)
	 	—	 	Form of Release
	Schedule 6.1.13(l)
	 	—	 	Form of Legal Opinion of Counsel to CHI and Sellers
	Schedule 8.1
	 	—	 	Conduct of CHI Business
	Schedule 10.3.1
	 	—	 	Majority Shareholder Purchase Price Received
	Schedule 10.3.2
	 	—	 	Minority Shareholder Purchase Price Received

OSIL SCHEDULES

	 	 	 	 	 
	Schedule 3.1.5

	 	—
	 	Exceptions respecting OSIL Financial Statements
	Schedule 3.1.13

	 	—
	 	OSIL Authorized Capital
	Schedule 3.1.15

	 	—
	 	Preemptive Rights and Rights of First Refusal
	Schedule 7.1.9(g)

	 	—
	 	Form of Legal Opinion of Counsel to OSIL and Newco
	Schedule 9.8

	 	—
	 	Re-domiciling Memorandum

Interpretation

1.3 For the purposes of this Agreement, except as otherwise expressly provided herein:

     1.3.1 “this Agreement” means this Agreement, including the Schedules, as it may from time to
time be supplemented or amended and in effect;

     1.3.2 the words “herein”, “hereof” and “hereunder” and other words of similar import

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refer to this Agreement as a whole and not to any particular section, paragraph, subparagraph or
other subdivision or Schedule;

     1.3.3 a reference to a Part of this Agreement refers to the section, paragraph, subparagraph,
clause or subclause of this Agreement so designated;

     1.3.4 the singular of any term includes the plural and vice versa;

     1.3.5 the word “or” is not exclusive and the word “including” is not limiting (whether or not
non-limiting language such as “without limitation” or “but not limited to” or other words of
similar import is used with reference thereto);

     1.3.6 a reference to a statute or regulation includes and is a reference to such statute and
to the regulations made pursuant thereto with all amendments made thereto and in force as of the
date of execution of this Agreement, and to any statute or regulations that have been passed prior
to the date of execution of this Agreement that have the effect of supplementing or superseding
such statute or such regulations;

     1.3.7 where the phrase “to the best of the knowledge of” or “to the knowledge of” or a phrase
of similar import is used, it will mean to the best of the knowledge, information and belief, after
having made reasonable inquiry, of the Party or Parties giving such covenant, representation and
warranty;

     1.3.8 the headings to the sections and subsections of this Agreement are inserted for
convenience only and do not form a part of this Agreement and are not intended to interpret, define
or limit the scope, extent or intent of this Agreement or any provision hereof;

     1.3.9 a reference to a corporate entity includes and is also a reference to any corporate
entity that is a successor to such entity;

     1.3.10 the language in all parts of this Agreement will in all cases be construed as a whole
and neither strictly for nor strictly against any party;

     1.3.11 every covenant, representation or warranty of each Seller contained herein will be such
Seller’s several, and not joint and several, covenant, representation or warranty unless otherwise
stipulated;

     1.3.12 every reference to “$” or money in this Agreement is to lawful money of the United
States of America unless otherwise stipulated; and

     1.3.13 nothing in any Schedule hereto shall be deemed adequate to disclose an exception to a
representation or warranty made by CHI herein unless such Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable detail. Notwithstanding
the foregoing, an item disclosed on any Schedule shall be deemed to be disclosed on any other
Schedule to which such item is relevant whether or not specifically disclosed on any other
Schedule.

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PART 2

REPRESENTATIONS AND WARRANTIES OF SELLERS

Representations and Warranties of Majority Shareholders

2.1 In order to induce OSIL and Newco to enter into and consummate the transactions contemplated by
this Agreement, the Majority Shareholders severally, and not jointly and severally, represent and
warrant to OSIL and Newco that as of the date hereof, except as otherwise specified herein or in
specified in the relevant Schedule:

     Organization and Good Standing of CHI

     2.1.1 CHI is duly incorporated and is validly existing under the laws of Pennsylvania and is
subsisting in the Commonwealth of Pennsylvania and has all necessary corporate power, authority and
capacity to own its assets and to carry on its business as presently conducted and to enter into
this Agreement;

     2.1.2 CHI’s head office is located in Fort Washington, Pennsylvania, and CHI has branch
offices in Orlando, Florida and San Diego, California. Neither the nature of the business of CHI
nor the location or character of the property owned or leased by it requires that CHI be
registered, licensed or otherwise qualified, or to be in good standing, in any other jurisdiction
other than the States of Pennsylvania, California and Florida, and it is subsisting or in good
standing in each of these States;

     Corporate Records and Proceedings

     2.1.3 CHI has made available to OSIL the following documents which are currently and shall be
on the Closing Date, true, current, complete and correct in all material respects, and any
signatures contained in such documents are the true signatures of the Persons who are purported to
have signed same:

          (a) its Articles of Incorporation and Bylaws and all amendments thereto;

          (b) the minute books containing minutes of all meetings of its directors and shareholders or
resolutions in lieu thereof;

          (c) a list of all of its officers and directors; and

          (d) CHI’s stock ledger;

     Permits and Licences

     2.1.4 CHI holds all permits, licenses, consents, registrations and authorizations issued by
any Governmental Authority, that are necessary in connection with the conduct and operation of its
business, and the ownership or leasing of its assets as they are now owned, leased,

8

 

conducted or operated, except for such permits, licenses, consents, registrations and
authorizations the failure of which to hold would not have a material adverse effect on CHI’s
business, properties, assets or future prospects, and CHI is not, in any material respect, in
breach of or in default under any term or condition of any thereof;

     Authorized and Issued Capital

     2.1.5 The authorized capital of CHI consists of 150,000 Class A voting shares of common stock
with no par value and 100,000 Class B non-voting shares of common stock, of which 17,100 Class A
shares, 1,042 Class B shares and 2,009 CHI Options are issued and outstanding and are held by the
Sellers in the amounts set forth opposite their respective names in Schedule 2.1.5, and after
giving effect to the exercise of CHI Options pursuant to Section 9.7, the authorized capital of CHI
will consist of 150,000 Class A voting shares of common stock with no par value and 100,000 Class B
non-voting shares of common stock, of which 17,100 Class A shares, 3,051 Class B shares and no CHI
Options will be issued and outstanding and will held by the Sellers in the amounts and in the
percentages set forth opposite their respective names in Schedule 2.1.5. The exercise prices of
the CHI Options are set out in Schedule 2.1.5. The CHI Options conform in all material respects to
the form of option attached hereto as Schedule 2.1.5-1. Subject to the issuance of CHI Shares to
the Optionees in accordance with their exercise of CHI Options, as set forth in Section 9.7, all of
the CHI Shares have been duly and validly issued and are outstanding as fully paid and
non-assessable shares;

     Options, etc. in CHI

     2.1.6 Except as set forth on Schedule 2.1.5, no Person has any agreement or option, present or
future, contingent, absolute or capable of becoming an agreement or option or which with the
passage of time or the occurrence of any event could become an agreement or option:

          (a) to require CHI to:

               (i) allot or issue any further or other share in its capital or any other security convertible
or exchangeable into any share in its capital, or

               (ii) convert or exchange any security into or for any share its capital, or

          (b) to require CHI to purchase, redeem or otherwise acquire any issued and outstanding shares
in its capital, other than those Sellers who hold CHI Options;

     No Violation of Charter Documents

     2.1.7 The execution, delivery and performance of this Agreement by Sellers and CHI will not
(with or without notice or lapse of time) violate any provision of the Articles of Incorporation or
Bylaws of CHI;

     Business and Assets of CHI

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     2.1.8 CHI does not own any shares in or other securities of, or have any interest in the
assets or business of, any other Person;

     CHI Financial Statements

     2.1.9 The CHI Financial Statements (which are attached hereto as Schedule 2.1.9):

          (a) reflect accurately the transactions entered into the books and accounts of CHI as at the
dates thereof;

          (b) are true, complete and correct in all material respects and present fairly the balance
sheet, profit and loss and financial condition of CHI as at the dates thereof; and

          (c) have been prepared in accordance with GAAP;

     No Material Adverse Changes

     2.1.10 Except as set forth on Schedule 2.1.10, since the CHI Financial Statement Date:

          (a) CHI has carried on its business in the ordinary and normal course;

          (b) there has not been any change in the condition or operations of the business, assets or
financial affairs of CHI which are, individually or in the aggregate, adverse in any material
respect to the properties, assets, business, future prospects or financial conditions of CHI;

          (c) there has not been any damage, destruction or loss, labour trouble or other event,
development or condition, of any character (whether or not covered by insurance) which has or may,
in any material respect, adversely affect the business, properties, assets or future prospects of
CHI; and

          (d) no capital expenditures (which, for greater certainty does not include repair and
maintenance expenditures in the ordinary course of the routine daily affairs of CHI) that, in the
aggregate, exceed $100,000.00, have been authorized, committed or made by CHI;

     No Unusual Transactions

     2.1.11 Except as provided for in the CHI Financial Statements or except as otherwise set forth
on Schedule 2.1.11, CHI has not, since the CHI Financial Statement Date:

          (a) transferred, assigned, sold or otherwise disposed of any asset reflected in the CHI
Financial Statements or cancelled any debt or claim except in each case in the ordinary and normal
course of its business, or except where any such transfers, assignments, dispositions or
cancellations would not individually or collectively have a material adverse effect on CHI;

          (b) incurred or assumed any obligation or liability (fixed or contingent),

10

 

except unsecured current obligations and liabilities incurred in the ordinary and normal
course of its business;

          (c) authorized, issued or sold any share in its capital or any warrant, bond, debenture or
other corporate security or issued, granted or delivered any right, option or other commitment for
the issuance of any such or other security;

          (d) declared or made, or committed itself to make, any payment of any dividend or other
distribution on or in respect of any share in its capital or purchased or redeemed or split,
consolidated or reclassified any such share;

          (e) suffered an operating loss or any extraordinary loss or entered into any commitment or
transaction other than in the ordinary and normal course of its business;

          (f) waived or surrendered any right of material value;

          (g) made any gift of money or of any property or asset to any Person;

          (h) purchased any material asset, other than in the ordinary course of business;

          (i) amended or changed or taken any action to amend or change the Articles of Incorporation or
Bylaws of CHI;

          (j) increased or agreed to increase the remuneration of, or paid or agreed to pay any pension,
bonus, share of profits or other similar benefit to, any current or former employee, consultant,
director or officer of CHI or any Seller;

          (k) made any payment of any kind to or on behalf of any current or former employee,
consultant, director or officer of CHI or any Seller or any affiliate or associate of any or all of
the Sellers or under any management agreement with CHI other than business-related expenses and
salaries in the ordinary and normal course of its business and at the regular rates payable to them
as at the date such payments were made;

          (l) mortgaged, pledged, subjected to lien, granted a security interest in or otherwise
encumbered any of its assets or property, whether tangible or intangible; or

          (m) authorized or agreed or otherwise become committed to do any of the foregoing;

     CHI Intellectual Property

     2.1.12 Schedule 2.1.12 annexed hereto is a complete and accurate list of all material
registered and unregistered, issued and pending, trademarks, service marks, trade names, patents,
inventions, trade secrets, Domain Names (as defined in Section 2.1.19), copyrights, service marks,
industrial designs, proprietary hardware, proprietary software, applications for the registration
thereof and other industrial and intellectual property (collectively the “CHI

11

 

Intellectual Property”) owned or licensed by CHI;

     2.1.13 Except as set forth on Schedule 2.1.12, CHI has the right to use all such CHI
Intellectual Property without restriction of any nature whatsoever and the consummation of the
transactions contemplated herein will not adversely affect the right of CHI to use such CHI
Intellectual Property without restriction;

     2.1.14 Except for CHI Intellectual Property that is licensed by CHI and identified as such in
Schedule 2.1.12, CHI is the registered and beneficial owner of all CHI Intellectual Property with
good and marketable title, unencumbered, and subject to no pending challenge, revocation, expiry or
termination;

     2.1.15 Except as set forth on Schedule 2.1.12, to the Majority Shareholders’ knowledge, there
are no judgments, decrees or orders restricting or limiting the use by CHI of any of the CHI
Intellectual Property and the operation of the business of CHI does not violate, breach or infringe
any patents, copyrights, trade names, trademarks, industrial designs or licenses held by others and
the Sellers have no knowledge of any alleged breach or violation thereof;

     2.1.16 Except as disclosed in Schedule 2.1.12, CHI has not granted any other party rights with
respect to the CHI Intellectual Property or disclosed any source codes for its proprietary software
(if any) to any third party, and the patents, trademarks, service marks, industrial designs and
copyrights set forth in Schedule 2.1.12 are valid and all applications for registration or issuance
in respect thereof set forth on Schedule 2.1.12 have been duly filed;

     2.1.17 The use of the material CHI Intellectual Property by CHI has not infringed upon the
rights of any other party and CHI has not received any notice of the revocation, withdrawal,
expiration, abandonment or breach of any right to use the CHI Intellectual Property;

     2.1.18 To the Majority Shareholders’ knowledge no party is (i) infringing upon CHI’s rights to
the CHI Intellectual Property; (ii) in breach of any license or other agreement respecting the CHI
Intellectual Property; or (iii) otherwise engaged in any unlawful license, sale or use of the CHI
Intellectual Property;

     2.1.19 All Domain Names of CHI are duly registered with the authority charged with maintaining
same and such domain names do not violate or exist in breach of the intellectual property rights of
any other Person; CHI has the right to own and use the domain names listed in Schedule 2.1.12. The
term “Domain Name” as used herein is a name or address used to identify or locate a particular
U.R.L. on the Internet;

     Title to Properties

     2.1.20 Except as set forth on Schedule 2.1.20, CHI has good and marketable title to all of its
assets, properties, interests in properties, real and personal, including those reflected in the
CHI Financial Statements or that have been acquired since the CHI Financial Statement Date (except
for those which have been transferred, sold or otherwise disposed of in the ordinary and normal
course of business), free and clear of all Encumbrances, and none of CHI’s properties or

12

 

assets is in the possession of or under the control of any other Person except for its lease
of the Real Property;

     Leased Equipment

     2.1.21 CHI has no equipment that, as of Closing Date, is leased or is held under license or
similar arrangement except as set forth in Schedule 2.1.21;

     Leases of Real Property

     2.1.22 CHI does not own any real property. Schedule 2.1.22 identifies all real property
presently leased, subleased to, or otherwise occupied by CHI (collectively, the “Real Property”).
The leases relating to the Real Property are referred to as the “Leases”. The Leases are each
valid and in full force and effect against CHI, and against the other parties thereto, and CHI
holds valid and existing leasehold interests thereunder for the respective terms set forth in the
Leases. CHI is not in default under the material terms of any of the Leases. Since September 30,
2004, neither CHI nor any of its Affiliates has received written notice of any pending or
threatened condemnations, planned public improvements, annexation, special assessments, zoning or
subdivision changes, or other adverse claims affecting the Real Property;

     Material Contracts

     2.1.23 Schedule 2.1.23 contains a complete and accurate list and description of any and all
contracts material to CHI, including:

          (a) contracts that involve commitments to make capital expenditures or that provide for the
purchase of goods or services by CHI from any one Person under which the undelivered balance of
such goods or services has a purchase price in excess of $25,000;

          (b) contracts that provide for the sale of goods or services by CHI and under which the
undelivered balance of such goods or services has a sale price in excess of $75,000;

          (c) each contract relating to the borrowing of money by CHI, to the granting by CHI of an
Encumbrance on any of its assets, or any guaranty or similar undertaking by CHI of any obligation
in respect of borrowed money or otherwise;

          (d) each contract with dealers, distributors or sales representatives;

          (e) each contract and any other agreement with any employee, officer, consultant, shareholder,
management advisor or Affiliate of CHI;

          (f) each contract commitment or arrangement that, by its terms, limits the freedom of CHI to
engage in any business or compete with any Person;

          (g) each contract pursuant to which CHI is a lessor or a lessee of any personal property or
any real property, or holds or operates any tangible personal property owned by

13

 

another Person;

          (h) each power of attorney executed on behalf of CHI or any officer of CHI or any Seller that
is currently effective and outstanding;

          (i) each contract entered into other than in the ordinary course of business that contains or
provides for an express undertaking by CHI to be responsible for consequential damages;

          (j) each contract providing for payments to or by any Person based on sales, purchases or
profits, other than direct payment for goods;

          (k) other contracts material to CHI’s business; and

          (l) any commitments to enter into any of the foregoing.

     2.1.24 All of the contracts required to be identified in Schedule 2.1.23, including
amendments, supplements and modifications thereto are referred to collectively as the “Material
Contracts”. All of the Material Contracts are in full force and effect in all material respects
and are enforceable in accordance with their respective terms, except as enforceability may be
restricted, limited or delayed by applicable bankruptcy or other laws affecting creditors’ rights
generally and except as enforceability may be subject to general principles of equity. Except as
set forth on Schedule 2.1.24, CHI has performed in all material respects all obligations required
to be performed by it pursuant to such contracts, and there is no existing or, to the knowledge of
the Majority Shareholders, threatened default under or violation of any of such contracts by any
other party thereto.

     2.1.25 In addition to the representations set forth in Section 2.1.24, or except as set forth
on Schedule 2.1.25:

          (a) With respect to each Government Contract or Bid (as defined below) to which CHI is a
party, since September 30, 2004, (A) CHI has complied with all material terms and conditions
thereof and in all material respects with all applicable Laws; (B) no written notice has been
received alleging that CHI is in breach or violation of any statutory, regulatory or contractual
requirement; (C) no written notice of termination for convenience, termination for default, cure
notice or show-cause notice has been received by CHI; (D) no cost incurred by CHI pertaining to
such Government Contract for which CHI have sought reimbursement from any Governmental Authority
directly or indirectly has been formally questioned or challenged by written notice to CHI, or has
been disallowed by such Governmental Authority; and (E) no money due to CHI has been (or, to the
knowledge of the Majority Shareholders, has been threatened to be) withheld or set off;

          (b) Since September 30, 2004, (A) CHI has not received any written notice of, and neither CHI
nor, to the knowledge of the Majority Shareholders, any of CHI’s employees, agents or consultants
is under, any administrative, civil or criminal investigation by any Governmental Authority
relating to, any alleged material irregularity, misstatement or omission

14

 

arising under or relating to any Government Contract or Bid; and (B) CHI has not made any
voluntary disclosure to any Governmental Authority with respect to any irregularity, misstatement
or omission arising under or relating to a Government Contract;

          (c) (i) neither CHI nor, to the knowledge of the Majority Shareholders, any of CHI’s
employees, agents or consultants is (or since September 30, 2004 has been) suspended or debarred
from doing business by any Governmental Authority or declared nonresponsible or ineligible for
government contracting, (ii) as of the date hereof, no suspension or debarment action is pending,
or to the knowledge of the Majority Shareholders threatened, against CHI or any of CHI’s employees,
agents or consultants for which CHI has received written notice thereof, and (iii) as of the date
hereof, to the knowledge of the Majority Shareholders, there are no facts or circumstances which
would reasonably be likely to result in a suspension or debarment proceeding or a finding of
non-responsibility or ineligibility against CHI or any of CHI’s employees, agents or consultants;

          (d) Since September 30, 2004, CHI has complied in all material respects with all applicable
U.S. federal and state procurement laws, rules and regulations, including all applicable provisions
of the U.S. Truth in Negotiations Act, the U.S. Procurement Integrity Act, the U.S. Cost Accounting
Standards and the U.S. Foreign Corrupt Practices Act (“FCPA”);

          (e) To the knowledge of the Majority Shareholders, no Governmental Authority or any prime
contractor, subcontractor or vendor is asserting (or since September 30, 2004 has asserted) any
claim or is initiating any dispute proceeding against CHI relating to Government Contracts or Bids,
nor is CHI asserting (or since September 30, 2004 has CHI asserted) any claim or initiating (or
since September 30, 2004 has CHI initiated) any dispute proceeding directly or indirectly against
any such party concerning any Government Contract or Bid;

          (f) For purposes of this Section 2.1.25, the following terms shall have the following meaning:
(i) “Government Contract” means any prime contract, subcontract, teaming agreement or arrangement,
joint venture, basic ordering agreement, letter contract, purchase order, delivery order, Bid,
change order, arrangement or other commitment of any kind between CHI and (a) any Governmental
Authority, (b) any prime contractor to any Governmental Authority or (c) any subcontractor with
respect to any contract described in clause (a) or (b), and (ii) “Bid” means any quotation, bid or
proposal by CHI which, if accepted or awarded, would lead to a contract with any Governmental
Authority or any other entity, including a prime contractor or a higher tier subcontractor to any
Governmental Authority, for the design, manufacture or sale of products or the provision of
services by CHI.

     Employees, Etc.

     2.1.26 Schedule 2.1.26 sets forth the names, titles and places of work of all of the
employees, associates and consultants of CHI, together with particulars of the material terms and
conditions of employment or engagement of such Persons, including rates of remuneration, benefits,
positions and Personnel Security Clearances held;

15

 

     2.1.27 Each employee, associate or consultant of CHI has been paid all wages, income,
remuneration and other amounts due and owing to him or her by CHI as at the end of the most recent
completed pay period;

     2.1.28 None of the Majority Shareholders is aware of any labour dispute with any of CHI’s
employees, associates or consultants;

     2.1.29 No individual who provides services to CHI and is not treated as an employee for
federal income tax purposes is an employee for such purposes;

     Benefit Plans

     2.1.30 Set forth in Schedule 2.1.30 is a list of all material employee benefit plans (as
defined in Section 3(3) of ERISA), with respect to which CHI currently is the sponsor or obligated
to make contributions under the plan terms in connection with its employees (the “Plans”). Except
as set forth on Schedule 2.1.30:

          (a) none of the Plans is a “multiemployer plan” (as defined in Title I or Title IV of ERISA)
or is subject to Title IV of ERISA, and CHI has not maintained or contributed to any such Plan for
the five years prior to September 30, 2005;

          (b) each of the Plans that is intended to be tax-qualified under Section 401(a) of the Code
has received a favorable determination letter or opinion letter from the Internal Revenue Service
and is so qualified, except that no representation is made with respect to any formal qualification
requirement with respect to which the remedial amendment period under Section 401(b) of the Code
has not yet expired;

          (c) all of the Plans have been operated in substantial compliance with their respective terms
and all Laws, and all contributions required under the terms of the Plans or applicable Law have
been timely made;

          (d) there are no pending or, to the knowledge of Majority Shareholders, threatened, actions,
suits or claims by or on behalf of any of the Plans, by any employee or beneficiary covered under
any Plan or otherwise involving any Plan (other than routine claims for benefits);

          (e) none of the Plans provide medical benefits to any retired Person, or any current employee
of CHI following such employee’s retirement or other termination of employment, except as required
by applicable Law (including Section 4980B of the Code), and CHI has complied in all material
respects with the requirements of Section 4980B of the Code and any applicable similar state laws;

          (f) CHI does not maintain any Plan under which it would be obligated to pay benefits solely
because of the consummation of the transactions contemplated by this Agreement, disregarding any
termination of employment that may occur on or after the Closing;

16

 

          (g) neither CHI, nor any other “disqualified person” or “party in interest,” as defined in
Section 4975 of the Code and Section 3(14)of ERISA, respectively, has engaged in any “prohibited
transaction,” as defined in Section 4975 of the Code or Section 406 of ERISA that is not covered by
a prohibited transaction exemption pursuant to Section 408(a) of ERISA, with respect to any Plan,
nor have there been any fiduciary violations under ERISA, which could subject CHI (or any officer,
director or employee thereof) to any material penalty or tax under Section 502(i)of ERISA or
Section 4975 of the Code;

          (h) all reports and disclosures relating to the Plans required to be filed or furnished to
governmental agencies or plan participants or beneficiaries have been filed or furnished in a
timely manner; and

          (i) as of the date hereof there is no litigation, audit, claim or, to the knowledge of the
Majority Shareholders, investigation pending with respect to any Plan before the Internal Revenue
Service, the Department of Labor or the Pension Benefit Guaranty Corporation.

     Unions and Labour Practices

     2.1.31 No labor union, counsel of labor unions, employee bargaining representative or
affiliated bargaining representative:

          (a) holds bargaining rights with respect to any of CHI’s employees by way of certification,
interim certification, voluntary recognition, designation or successor rights; or

          (b) has filed any petition seeking to be certified as the bargaining representative of any of
CHI’s employees.

     2.1.32 Except as set forth on Schedule 2.1.32, during the two years immediately preceding the
date of execution of this Agreement there has been no complaint, grievance, claim, work order or
investigation filed, made or commenced against CHI in respect of or affecting CHI or its business
pursuant to any applicable employee or employment legislation and there are no outstanding
decisions or settlements or pending settlements under any such legislation that place any
obligation upon CHI to do or refrain from doing any act or that place a financial obligation upon
CHI;

     2.1.33 Except as set forth on Schedule 2.1.33: CHI has paid or accrued all current obligations
under all employment legislation in relation to CHI; CHI has not been subject to any special or
penalty assessment under any employment legislation that has not been paid and CHI’s workers’
compensation claims experience has not resulted in any surcharge or additional premium being
imposed on CHI under any workers’ compensation legislation, and there are not currently pending any
claims or investigations with respect to any of the foregoing;

     2.1.34 There is no labour strike, picketing, work slow-down, work stoppage or lock-out
actually pending or threatened against or directly or indirectly affecting CHI or any of its
operations, and CHI has not experienced any strike, slowdown or work stoppage, lock-out or other
collective labour action by or with respect to its employees;

17

 

     2.1.35 There are no charges with respect to or relating to CHI before any commission, agency
or body responsible for the prevention of unlawful employment practices. CHI has no notice from
any federal, state, local or other agency responsible for the enforcement of labour or employment
laws of an intention to conduct an investigation of CHI or any of its business or employment
practices and no such investigation is in progress;

     2.1.36 CHI has complied in all material respects with all applicable laws relating to
employment and employment practices, wages, hours and terms and conditions of employment with
respect to employees, including part-time employees (if any) and has not engaged in any unfair
labour practice;

     2.1.37 No agreement that is binding on CHI restricts it from relocating or closing any of its
operations;

     Withholdings

     2.1.38 All amounts required to be withheld for Taxes (as defined in Section 2.1.54 below) by
CHI from payments made to any Person has been withheld and paid on a timely basis to the proper
governmental body pursuant to applicable legislation;

     No Guarantees or Indemnities

     2.1.39 Except as set forth on Schedule 2.1.39, CHI is not a party to or bound to any agreement
of guarantee, indemnification (other than an indemnification of directors and officers in
accordance with the bylaws of CHI, as the case may be, and applicable laws and other standard
indemnities in favour of CHI’s bankers to support any letter of credit obligations entered into in
the ordinary course of business) or any other like commitments in respect of the obligations,
liabilities (contingent or otherwise) or indebtedness of any other Person;

     Conflicting Agreements

     2.1.40 Except as set forth on Schedule 2.1.40, CHI is not a party to, bound by or subject to
any indenture, mortgage, lease, agreement, instrument, judgement or decree which would be violated
or breached, or under which default would occur or which could be terminated, cancelled or
accelerated, in whole or in part, as a result of the execution and delivery of this Agreement or
the consummation of any of the transactions provided for herein;

     Litigation

     2.1.41 Except as set forth on Schedule 2.1.41, there is no suit, action, litigation,
arbitration proceeding or governmental proceeding, including any appeal or application for review,
in progress, to the knowledge of the Sellers, pending or threatened against, or relating to CHI or
affecting any of its properties or assets or its business;

     2.1.42 There is not presently outstanding against the Sellers or CHI any judgement, decree,
injunction, rule or order of any court, governmental department, commission, agency,
instrumentality or arbitrator;

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     Insurance

     2.1.43 Schedule 2.1.43 sets forth a list and brief description of all policies of fire,
liability and other forms of insurance currently held by CHI, including the aggregate coverage
amount and type of insurance (including whether such coverage is on a per occurrence or claims-made
basis, where applicable) generally applicable deductibles and the expiry dates thereof;

     2.1.44 Except as set forth on Schedule 2.1.43, all premiums for such policies have been paid;

     2.1.45 All insurance policies held by CHI:

          (a) are valid, outstanding and in full force and effect;

          (b) are in such amounts and provide insurance against such losses and risks as are adequate
and consistent with the requirements of CHI’s business as currently conducted;

          (c) are sufficient for compliance with all requirements of law and all agreements to which CHI
is a party;

          (d) will not in any way be affected by or terminated or lapsed by reason of the consummation
of the transactions contemplated by this Agreement;

     2.1.46 CHI is not in default under any provision of any policy of insurance and has not
received notice of cancellation, non-renewal, termination or reduction of coverage of or under any
such insurance, and no misstatement or misrepresentation has been made by CHI in any application
for any policy of insurance;

     2.1.47 There is no claim by CHI pending under any policies as to which coverage has been
questioned, denied or disputed by the underwriters or carriers of such policies;

     2.1.48 CHI has not received any notice from or on behalf of any insurance carrier issuing such
policies that insurance rates will hereafter be substantially increased, that there will hereafter
be a cancellation, a change in the type of coverage provided, or an increase in a deductible (or an
increase in premiums in order to maintain an existing deductible) or non-renewal of existing
policies, or that alteration of any equipment or any improvements to real estate occupied by or
leased to or by CHI, the purchase of any additional equipment, or the modification of any of the
methods of doing business of CHI, will be required or suggested;

     2.1.49 Except as set forth on Schedule 2.1.43, the Majority Shareholders have no knowledge of
any state of facts, or of the occurrence of any event, that the Majority Shareholders know or have
reason to believe might reasonably (i) form the basis for any claim against CHI not fully covered
by insurance or for any liability on account of any express or implied warranty or omission or
commission, or (ii) result in a material increase in insurance premiums of CHI;

     2.1.50 CHI has not been refused any insurance with respect to its assets or operations,

19

 

nor has its coverage been limited by any insurance carrier to which it has applied for any
such insurance or with which it has carried insurance during the last three (3) years;

     2.1.51 Schedule 2.1.43 sets forth (i) CHI’s premiums and losses by year and by type of
coverage for the past three (3) years, (ii) all outstanding insurance claims by CHI for damage to
or loss of property or income that have been referred to insurers or that the Majority Shareholders
believes to be covered by commercial insurance and (iii) any agreements, arrangements or
commitments by or relating to CHI under which CHI indemnifies any other Person or is required to
carry insurance for the benefit of any other Person;

     Copies of Agreements and other Documents

     2.1.52 True, correct and complete copies of all CHI Material Contracts, agreements,
instruments and other documents listed in the Schedules have been delivered or made available to
OSIL prior to the date of execution of this Agreement;

     Approvals Required

     2.1.53 Other than as contemplated by Section 6.1.10 and except as otherwise set forth on
Schedule 2.1.53, no authorization, approval, order, license, permit or consent of any Governmental
Authority, regulatory body or court, and no registration, declaration or filing by any of the
Majority Shareholders with any such Governmental Authority, regulatory body or court is required in
order:

          (a) for the Majority Shareholders to incur the obligations expressed to be incurred by each of
them pursuant to this Agreement;

          (b) for the Majority Shareholders to execute and deliver all of the documents and instruments
to be delivered by each of them pursuant to this Agreement;

          (c) for the Majority Shareholders to duly perform and observe the terms and provisions of this
Agreement; or

          (d) to render this Agreement legal, valid, binding and enforceable in accordance with its
terms.

     Tax Returns

     2.1.54 Other than CHI’s federal tax return and Pennsylvania state tax return for the fiscal
year ended September 30, 2005, all returns (including, without limitation, income tax, corporation
tax, commodity tax, capital tax, transfer business tax, import duties, goods and services tax,
value added tax, franchise tax, sales and use tax, unemployment compensation, customs duty, excise
tax, severance, property tax, gross receipts tax, profits tax, payroll and withholding tax returns
and information returns) and reports of or relating to any federal, municipal, state, foreign or
local tax, assessment or charge of any nature whatsoever (all, together with any penalties,
additions to tax, fines and interest thereon or related thereto, herein

20

 

referred to collectively as “Taxes” or singularly as a “Tax”) that are required to be filed
(taking into account all extensions) on or before the Closing Date for, by, on behalf of or with
respect to CHI (all such returns and reports herein referred to collectively as “Tax Returns” or
singularly as a “Tax Return”), have been or will be timely filed with the appropriate taxation
authority on or before the Closing Date, and all Taxes shown to be due and payable on such Tax
Returns or related to such Tax Returns have been paid in full when due; and CHI has delivered to
OSIL true copies of income Tax Returns and all other material Tax Returns of CHI (i) in respect of
the financial years ended September 30, 2004, 2003, 2002, (ii) in respect of any other period filed
within four calendar years prior to the date hereof and (iii) for any other reporting periods
during such financial years for which CHI was required to file Tax Returns;

     2.1.55 All Tax Returns and the information and data contained therein have been properly and
accurately compiled and completed in all respects, fairly present in all respects the information
purported to be shown therein, and reflect or will reflect all liabilities for Taxes for the
periods covered by such Tax Returns, unless such liability is otherwise adequately provided for in
the CHI Financial Statements;

     2.1.56 No Tax Returns are now under audit or examination by any taxation or other authority
and there are no agreements, waivers or other arrangements providing for an extension of time with
respect to the assessment or collection of any Tax or Tax deficiency of any nature against CHI, or
with respect to any Tax Return and there are no suits or similar proceedings now pending or, to the
best of the knowledge of the Majority Shareholders, threatened against any of them with respect to
any Tax, and there are no matters under discussion with any taxation or other authority relating to
any Tax, or any claims for any additional Tax asserted by any such authority;

     Tax Liabilities

     2.1.57 CHI does not have any liability, obligation or commitment for the payment of Taxes,
except those disclosed in the CHI Financial Statements and such Taxes known to the Sellers not yet
due as have arisen since the CHI Financial Statement Date in the usual and ordinary course of
business and for which adequate provision in the accounts of CHI has been made;

     2.1.58 CHI has properly and timely paid all Taxes required to be withheld and paid in any
taxing or other authority;

     2.1.59 There are no currently outstanding assessments, reassessments or written inquiries that
have been raised by any governmental authority relating to Taxes or which may lead to the
imposition of Taxes or the assessment or reassessment of any Taxes;

     2.1.60 Except as set forth on Schedule 2.1.60, CHI has no inventory;

     2.1.61 Since the CHI Financial Statement Date to the Closing Date, CHI has not acquired or had
the use of any material property from a Person with whom it was not dealing at arm’s length;

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     2.1.62 Since the CHI Financial Statement Date to the Closing Date, CHI has not disposed of
anything material to a Person with whom it was not dealing at arm’s length for proceeds less than
the fair market value thereof;

     2.1.63 Since the CHI Financial Statement Date to the Closing Date, CHI has not discontinued
carrying on any business in respect of which any material non-capital losses were incurred;

     2.1.64 No monies are owing by CHI on account of sales tax or similar tax other than monies
which are accruing for current filing periods for which Tax Returns respecting such Taxes are not
yet due;

     2.1.65 CHI has no obligation, pursuant to any Tax sharing agreement, indemnity agreement, tax
allocation agreement or any other agreement, or any statute or regulation, to pay the Tax liability
of any other person or to reimburse any other person for Taxes. CHI has not been a member of an
affiliated group of corporations filing consolidated Tax Returns for U.S. federal income tax
purposes or of any analogous group of corporation, or combined, consolidated or unitary group of
taxpayers, under the rules of any other taxing jurisdiction; and

     2.1.66 No taxing jurisdiction in which CHI has not filed Tax Returns has asserted that CHI is
required either to file such Tax Returns or to pay Taxes.

     2.1.67 Schedule 2.1.67 sets forth the balance of CHI’s net operating loss carryforwards,
capital loss carryforwards, and credit carryforwards, and the last date on which each such tax
attribute may be used, as of the close of the last taxable year ending prior to the date hereof.

     Relationships with Related Parties

     2.1.68 Except as set forth on Schedule 2.1.68, no Majority Shareholder nor any Affiliate of a
Majority Shareholder or of CHI has, or since September 30, 2004 has had, any interest in any
property (whether real, personal, or mixed and whether tangible or intangible), used in or
pertaining to CHI’s business; no Majority Shareholder nor any Affiliate of a Majority Shareholder
or of CHI is, or since September 30, 2004 has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has engaged in any work or
activity for or with, or have any financial interest in, any business materially in competition
with, or which may materially compete with the Business of CHI within any country, state, region,
or locality in which CHI or such affiliate is or was at that time then doing business or marketing
its products. For purposes of this Agreement, the “Business of CHI”, (includes any affiliate)
means the provision of research and development services and tools to Federal Government agencies
responsible for national defense, homeland defense, and healthcare clinical information management
– specifically, in areas relating to training systems, cognitive engineering, decision support
systems, and command, control, communications, computing, intelligence, surveillance, and
reconnaissance (C4ISR) systems business dealings, and a material financial interest in any
transaction with CHI, but shall not include ownership for investment purposes of less than two
percent of any class of securities of a publicly held corporation.

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Except as set forth on Schedule 2.1.68, no Affiliate of a Majority Shareholder or of CHI is a
party to any contract with, or has any claim or right against, CHI;

     Condition of Assets

     2.1.69 All material assets and all other material plant, machinery, facilities, computer
hardware, computer software, and equipment used by CHI in connection with its business are in good
operating condition and in a good state of maintenance and repair for equipment of similar age
relative to the standards of maintenance and repair maintained by those carrying on similar
businesses in the jurisdictions in which such assets are located;

     Undisclosed Information

     2.1.70 None of the Majority Shareholders has any specific information relating to CHI that is
not generally known or that has not been disclosed to OSIL which would have any material adverse
effect on the value of the CHI Shares or CHI’s business;

     Warranty Claims

     2.1.71 There are no material existing or threatened claims or, to the best of the knowledge of
Sellers, any facts or state of affairs, upon which any claim could be based against CHI for breach
of any express or implied warranty or contract requirement or negligence with respect to any work,
services or products partially or wholly performed, produced or sold by CHI prior to the Closing
Date;

     Bid and Performance Bonds and Guarantees

     2.1.72 There are no specific outstanding bid and performance bonds, letters of credit,
agreements of guarantee and agreements of indemnification made in favour of any Person with respect
to any work, services or products performed, produced or sold by CHI;

     Bank Accounts and Business Numbers

     2.1.73 Schedule 2.1.73 is a true and complete list showing the name of each bank, trust
company or similar institution in which CHI has accounts or safe deposit boxes, the identification
numbers of each such account or safe deposit box, the names of all Persons authorized to draw
thereon or to have access thereto and the number of signatories required on each account, and all
credit cards numbers, non-bank account numbers, codes, and business numbers used by CHI for
purposes of remitting Taxes, dues, assessments or other fees;

     Environmental Matters

     2.1.74 Except as set forth in Schedule 2.1.74, to the knowledge of each Majority Shareholder:

          (a) CHI’s operation of the business and the Real Property comply in all

23

 

material respects with applicable Environmental Laws;

          (b) there has been no Treatment, Storage or Disposal by CHI or any of its Affiliates of any
Hazardous Material at, on, under or from any of the Real Property or any real property that was
owned, leased or operated by CHI prior to the date hereof which could reasonably be expected to
result in liability under applicable Environmental Laws;

          (c) there has been no Release by CHI or any of its Affiliates of any Hazardous Material at,
on, under or from any of the Real Property or any real property that was owned, leased or operated
by CHI prior to the date hereof in an amount or concentration that could reasonably be expected to
give rise to any legal requirement to perform any investigation, clean-up, removal, response or
other remedial action, pursuant to any Environmental Law;

          (d) there has been no arrangement by CHI or any of its Affiliates for Disposal or Treatment or
transport for Disposal or Treatment of any Hazardous Material at or to any off-site facility which
could reasonably be expected to result in liability under applicable Environmental Laws;

          (e) neither CHI nor any of its Affiliates has been named in any suit or proceeding concerning,
and has not received any written or, to the knowledge of the Majority Shareholders, oral, notice or
request for information from any third party with respect to, a Release or threatened Release of
any Hazardous Material or of a violation or alleged violation of any Environmental Law;

          (f) there are no underground storage tanks or related piping, or surface impoundments located
on, under or at any of the Real Property. Neither Majority Shareholders nor CHI or any of its
Affiliates has removed or caused any such tank or piping to be removed from any Real Property;

          (g) Majority Shareholders have made available to OSIL any documents, reports, assessments or
correspondence in the possession or control of the Majority Shareholders or CHI or any of its
Affiliates concerning CHI’s liabilities under or compliance with the Environmental Laws.

     Security Clearances

     2.1.75 CHI holds all Facility Security Clearances and its employees hold all Personnel
Security Clearances necessary to provide its services to its customers under the Material
Contracts;

     Confidentiality Agreements

     2.1.76 Except as disclosed in Section 2.1.77 or except as set forth on Schedule 2.1.76, CHI is
not a party to any confidentiality agreement with any Person (other than OSIL under that certain
Confidentiality Agreement dated as of June 29, 2005 (the “Confidentiality Agreement”)) respecting
the confidentiality of information provided to such Persons or

24

 

reviewed by such Persons;

     Restrictions on Business

     2.1.77 Except as set forth on Schedule 2.1.77, there is no non-competition, exclusivity or
other similar agreement, commitment or understanding in place to which CHI is a party or to which
it is otherwise bound that would now or hereafter in anyway limit its business or operations in a
particular manner or to a particular locality or geographic region or for a specified period of
time, and the execution, delivery and performance of this Agreement does not and will not result in
any restriction of CHI from engaging in its business or from competing with any Person or in any
geographic area;

     Undisclosed Liabilities

     2.1.78 Except as set forth on Schedule 2.1.78, since October 1, 2004, CHI has not, incurred
any liabilities that are of a nature that would be required to be disclosed on a balance sheet of
CHI prepared in conformity with GAAP, including the footnotes thereto, other than (a) liabilities
under this Agreement relating to or in connection with the transactions contemplated hereby, or (b)
liabilities incurred in the ordinary course of business; and

     Certain Payments

     2.1.79 The Majority Shareholders have not, and to the best of the Majority Shareholders’
knowledge, since its inception, neither CHI nor any director, officer, agent, representative or
employee of CHI, or any other Person associated with or acting for or on behalf of CHI, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favourable treatment in securing business, (ii) to pay for
favourable treatment for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of CHI or any Affiliate of CHI, or (iv) in
violation of any Law, or (b) established or maintained any fund or asset that has not been recorded
in the books and records of CHI.

Representations and Warranties of All Sellers

2.2 In order to induce OSIL and Newco to enter into and consummate the transactions contemplated by
this Agreement, each Seller severally, and not jointly and severally, represents and warrants to
OSIL and Newco that, except as otherwise specified herein or in specified in the relevant Schedule:

     Title to Shares

     2.2.1 Such Seller is the registered and beneficial owner of and has good and marketable title
to all of the CHI Shares and, if applicable, the CHI Options held by him or her as set forth
opposite his or her name in Schedule 2.1.5 and holds such CHI Shares and CHI Options free and clear
of any and all Encumbrances whatsoever;

25

 

     Voting Trust

     2.2.2 None of such Seller’s CHI Shares is subject to any voting trust agreement or other
contract, agreement, arrangement, commitment or understanding, including any such agreement,
arrangement, commitment or understanding restricting or otherwise relating to the voting, dividend
rates or disposition of the CHI Shares other than the Shareholders’ Agreement;

     Authority

     2.2.3 Such Seller has due and sufficient right and authority to enter into this Agreement on
the terms and conditions set forth herein and to transfer the registered, legal and beneficial
title and ownership of his or her CHI Shares to OSIL free and clear of any and all Encumbrances;

     Residency of the Sellers

     2.2.4 Such Seller is a resident of the State set out under his or her name in Schedule 2.1.5;

     Agreement Valid

     2.2.5 This Agreement has been duly executed by such Seller and constitutes a legal, valid and
binding obligation of such Seller enforceable against each Seller in accordance with its terms,
except as enforceability may be restricted, limited or delayed by applicable bankruptcy or other
laws affecting creditors’ rights generally and except as enforceability may be subject to general
principles of equity; and

     No Conflicts

     2.2.6 Such Seller is not a party to, bound by or subject to any indenture, mortgage, lease,
agreement, instrument, statute, regulation, order, judgement, decree or law which would be
violated, contravened or breached by or under which any default would occur as a result of the
execution and delivery by such Seller of this Agreement or the performance by such Seller of any of
the terms hereof.

     Investment Representation

     2.2.7 Each Seller who is acquiring OSIL Shares is acquiring the OSIL Shares solely for his or
her own account, for investment purposes only, and not with a view to, or with any present
intention of, reselling or otherwise distributing the OSIL Shares or dividing his or her
participation herein with others. Such Seller has sufficient experience in business, financial and
investment matters to be able to evaluate the purchase of the OSIL Shares and to make an informed
investment decision with respect to such purchase. Such Seller is an “accredited investor” within
the meaning of Rule 501 promulgated under the Securities Act of 1933, as amended (the “1933 Act”).
Such Seller understands and acknowledges that (a) none of the OSIL

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Shares have been registered or qualified under 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 OSIL Shares
constitute “restricted securities” as defined in Rule 144 under the 1933 Act; and (c) none of the
OSIL Shares may be sold, transferred or otherwise disposed of unless a registration statement under
the 1933 Act with respect to such OSIL Shares 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. Such Seller will refrain from transferring or
otherwise disposing of any of the OSIL Shares 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. Notwithstanding the foregoing, the parties agree and acknowledge that the
representations contained in this Section 2.2.7 shall in no way affect the liability of Majority
Shareholders for breaches of their representations and warranties.

Correct on Closing Date

2.3 Each of the Sellers severally, and not jointly and severally, covenants, represents and
warrants to and in favour of and with OSIL and Newco that all of the representations and warranties
of such Seller set forth in Sections 2.1 and 2.2, in each case those that are qualified as to
materiality shall be true and correct and those that are not qualified as to materiality shall be
true and correct in all material respects at the Closing Date as if made on that date.

Survival of the Sellers’ Warranties

2.4 The representations, warranties and covenants of the Sellers contained in this Agreement or
contained in any document or certificate given pursuant hereto will survive the Closing and,
notwithstanding the Closing, will continue in full force and effect for the benefit of OSIL and
Newco, provided that:

     2.4.1 Except as provided in Sections 2.4.2 and 2.4.3, no claim based upon or with respect to
the inaccuracy or non-performance or non-fulfilment or breach of any representation or warranty of
the Sellers contained herein may be made or brought by OSIL and Newco or either of them after the
expiration of twenty-four months after the Closing Date unless OSIL has given written notice to the
Sellers of particulars of the basis of such claim within such period;

     2.4.2 Any claims based upon or with respect to the inaccuracy or non-performance or
non-fulfilment or breach of any representation or warranty of the Majority Shareholders contained
herein may, if such claim is based upon or relates to the liability of CHI for Taxes for a
particular taxation year, be made or brought by OSIL and Newco or either of them at any time up to
the date which is six months following the expiry date, if any, of any period during which an
assessment, reassessment or other form of recognized document assessing liability for Taxes,
interest and/or penalties in respect of such taxation year under the applicable tax legislation
could be issued; and

     2.4.3 Any claims based upon or with respect to the inaccuracy or non-performance or
non-fulfilment or breach of any representation or warranty of any Seller contained herein may, if

27

 

such claim is based upon or relates to the right, title and ownership of such Seller to such
Seller’s CHI Shares, the authorized and issued capital of CHI and the entitlement of any other
Person to acquire any of the CHI Shares or acquire any shares from the treasury of CHI, or is based
on fraud or fraudulent misrepresentation, be made or brought by OSIL and Newco or either of them at
any time subject only to any limitation periods as may be imposed by applicable laws.

Reliance

2.5 The Sellers and CHI acknowledge and agree that OSIL and Newco have entered into this Agreement
in reliance on the warranties and representations and other terms and conditions of this Agreement,
notwithstanding any independent searches or investigations that may be undertaken by or on behalf
of OSIL and Newco and that no information known to OSIL and or their respective officers, directors
or professional advisers will limit or extinguish OSIL’s right to indemnification hereunder.

PART 3

REPRESENTATIONS AND WARRANTIES OF OSIL

Representations and Warranties

3.1 In order to induce the Sellers to enter into and to consummate the transactions contemplated by
this Agreement, each of OSIL and Newco hereby severally, and not jointly and severally, represents
and warrants to the Sellers that as of the date hereof:

     Organization and Good Standing of OSIL and Newco

     3.1.1 OSIL is duly organized and validly existing under the laws of the Province of British
Columbia and is in good standing with respect to its filings required by the Business Corporations
Act (British Columbia) and has all necessary corporate power, authority and capacity to own its
assets and to carry on its business as presently conducted; and OSIL has all necessary corporate
power, authority and capacity to enter into this Agreement; Newco is duly incorporated and validly
existing under the laws of the state of Delaware and is in good standing in the State of Delaware;
Newco has not previously carried on any business and has no assets and no liabilities; and Newco
has all necessary corporate power, authority and capacity to enter into this Agreement;

     Agreement Valid

     3.1.2 This Agreement constitutes a valid and binding obligation of OSIL and Newco;

     No Conflicting Agreements

     3.1.3 Upon the execution of this Agreement and at the Closing, neither OSIL nor Newco will be
a party to, be bound by or be subject to any indenture, mortgage, lease, agreement, instrument,
statute, regulation, order, judgement, decree or law which would be

28

 

violated, contravened or breached by or under which any default would occur as a result of the
execution and delivery by OSIL and Newco of this Agreement or the performance by OSIL and Newco of
any of the terms hereof;

     Approvals Required

     3.1.4 Except as otherwise provided herein no authorization, approval, order, license, permit
or consent of any Governmental Authority, regulatory body or court, and no registration,
declaration or filing by OSIL or Newco with any such Governmental Authority, regulatory body or
court is required in order:

          (a) For OSIL and Newco to incur the obligations expressed to be incurred by OSIL and Newco
pursuant to this Agreement;

          (b) for OSIL and Newco to execute and deliver all of the documents and instruments to be
delivered by OSIL and Newco pursuant to this Agreement;

          (c) for OSIL and Newco to duly perform and observe the terms and provisions of this Agreement;
or

          (d) to render this Agreement legal, valid, binding and enforceable in accordance with its
terms;

     OSIL Financial Statements

     3.1.5 The financial statements of OSIL contained in the Public Record accurately reflect the
financial position of OSIL as at their respective dates, and since the date of OSIL’s last
financial statements contained in the Public Record, except as set forth in the Public Record or on
Schedule 3.1.5 hereto, (i) no material adverse changes in the financial position of OSIL have taken
place, (ii) OSIL has not incurred any liabilities (contingent or otherwise) other than (X)
liabilities incurred in the ordinary course of business consistent with past practice and (Y)
liabilities not required to be reflected in OSIL’s financial statements pursuant to GAAP or
otherwise required to be disclosed in Public Record, (iii) OSIL has not altered its method of
accounting or the identity of its auditors, and (iv) OSIL has not declared or made any payment or
distribution of cash or other property to its stockholders or officers or directors (other than in
compliance with existing OSIL stock option or stock purchase plans or the terms of any convertible
or derivative securities of OSIL) with respect to its capital stock, or purchased or redeemed (or
made any agreements to purchase or redeem) any shares of its capital stock;

     Filings

     3.1.6 OSIL has timely filed all documents that it is required to file pursuant to the
Applicable Securities Laws and all of the documents so filed as part of the Public Record comply in
all material respects with the requirements of the Applicable Securities Laws and contain no untrue
statements of a material fact and do not omit to state a material fact that is required to be
stated or that is necessary to prevent a statement that is made from being false or misleading in

29

 

the circumstances in which it was made;

     Listing and Maintenance Requirements Compliance

     3.1.7 Except as set forth in the Public Record, OSIL has not, in the twelve (12) months
preceding the date hereof, received notice (written or oral) from any securities market, quotation
system or exchange on which OSIL’s common stock is trading to the effect that OSIL is not in
compliance with the listing or maintenance requirements of such exchange or market;

     Registration Rights; Rights of Participation

     3.1.8 Except as set forth in Section 9.11 and the Public Record, OSIL has not granted or
agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any
securities of OSIL registered with any Governmental Authority which would grant any Person any
right of first refusal, preemptive right, right of participation, or any similar right to
participate in the issuance, and/or registration of the sale of, the OSIL Shares contemplated by
this Agreement.

     OSIL Shares

     3.1.9 The OSIL Shares to be issued to the Sellers on Closing under this Agreement will, at
Closing, be issued as fully paid and non-assessable shares, free of any Encumbrance.

     No Violation of Charter Documents

     3.1.10 The execution, delivery and performance of this Agreement by either OSIL or Newco will
not (with or without notice or lapse of time) violate any provision of their respective articles of
incorporation or bylaws;

     Undisclosed Information

     3.1.11 Neither OSIL nor Newco has any specific information relating to OSIL or Newco that is
not generally known or that has not been disclosed or made available to the Majority Shareholders
which would have any material adverse effect on the value of the OSIL Shares or OSIL’s business;

     Private Offering

     3.1.12 Assuming that each Seller receiving OSIL Shares is an “accredited investor” as such
term is defined in Regulation D under the 1933 Act and that the offer and sale of the OSIL Shares
has been completed, the offer, issuance and sale of the OSIL Shares to the Sellers as contemplated
hereby are exempt from the registration requirements of the 1933 Act. Neither OSIL nor any Person
acting on its behalf has taken or is, to the knowledge of OSIL, contemplating taking any action
which could subject the offering, issuance or sale of the OSIL Shares to the Sellers to the
registration requirements of the 1933 Act, including soliciting any offer to buy or sell the OSIL
Shares by means of any form of general solicitation or advertising.

30

 

     Authorized and Issued Capital

     3.1.13 The authorized capital of OSIL and Newco are set forth on Schedule 3.1.13;

     Certain Payments; FCPA

     3.1.14 To the best of knowledge of OSIL and Newco, since their inception, neither OSIL, Newco,
any subsidiary thereof nor any director, officer, agent, representative or employee of OSIL, Newco
or any subsidiary thereof, or any other Person associated with or acting for or on behalf of OSIL,
Newco or any subsidiary thereof, has directly or indirectly (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain favourable treatment in
securing business, (ii) to pay for favourable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in respect of OSIL, Newco,
any subsidiary thereof or any Affiliate of any of the foregoing, or (iv) in violation of any Law,
(b) established or maintained any fund or asset that has not been recorded in the books and records
of OSIL or Newco, or (c) violated the FCPA;

     Right of First Refusal; Stockholders’ Agreement; Voting and Registration Rights

     3.1.15 Except as set forth in the Public Record or on Schedule 3.1.15, no party has any right
of first refusal, right of first offer, right of co-sale, preemptive right or other similar right
regarding OSIL’s securities. The issuance of the OSIL Shares is not subject to any of the rights
set forth on Schedule 3.1.15. There are no provisions of OSIL’s notice of articles or articles, no
agreements to which OSIL is a party and no agreements by which OSIL no any subsidiary or the OSIL
Shares are bound, which (a) may affect or restrict the voting rights of any Seller with respect to
the OSIL Shares in its capacity as a stockholder of OSIL, (b) restrict the ability of the Seller,
or any successor thereto or assignee or transferee thereof, to transfer the OSIL Shares, (c) would
adversely affect any Seller’s right or ability to consummate this Agreement or comply with the
transactions contemplated hereby, (d) require the vote of more than a majority of OSIL’s issued and
outstanding common stock, voting together as a single class, to take or prevent any corporate
action, other than those matters requiring a class vote under applicable Law, or (e) entitle any
party to nominate or elect any director of OSIL or require any of OSIL’s stockholders to vote for
any such nominee or other person as a director of OSIL;

     Patents and Trademarks

     3.1.16 (a) OSIL, Newco and each subsidiary thereof have, or have rights to use, all patents,
patent applications, trademarks, trademark applications, service marks, trade names, copyrights,
licenses and rights which are necessary or material for use in connection with their respective
business and which the failure to so have would have a material adverse effect (collectively, the
“OSIL Intellectual Property”); and (b) there are no judgments, decrees or orders restricting or
limiting the use by OSIL, Newco or any subsidiary thereof of OSIL Intellectual Property and the
operation of the business of OSIL, Newco and any subsidiary thereof does not violate, breach or
infringe any patents, copyrights, trade names, trademarks,

31

 

industrial designs or licenses held by others;

      Certain Fees

      3.1.17 No fees or commissions will be payable by OSIL or Newco to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other Person with
respect to the transactions contemplated by this Agreement;

      Employees

      3.1.19 The total number of employees of OSIL, Newco and any subsidiary thereof in the
aggregate is less than 200;

      Permits and Licences

      3.1.20 To best of the knowledge of OSIL and Newco, OSIL and Newco hold all permits, licenses,
consents, registrations and authorizations issued by any Governmental Authority, that are necessary
in connection with the conduct and operation of their business, and the ownership or leasing of
their assets as they are now owned, leased, conducted or operated and are not, in any material
respect, in breach of or in default under any term or condition of any thereof;

      Correct on Closing

      3.2 Each of OSIL and Newco severally, and not jointly and severally, covenants, represents and
warrants with and in favour of each of the Sellers that all of the representations and warranties
set forth in Section 3.1 will be true and correct at the Closing Date as if made on that date.

      Survival of OSIL’s and Newco’s Warranties

      3.3 The representations, warranties and covenants of OSIL and Newco contained in this Agreement or
in any document or certificate given pursuant hereto will survive the Closing and, notwithstanding
the Closing and any investigation made by or on behalf of the Majority Shareholders, will continue
in full force and effect for the benefit of the Sellers, provided that no claim based upon or with
respect to the inaccuracy or non-performance or non-fulfilment or breach of any representation or
warranty of OSIL contained herein may be made or brought by the Majority Shareholders after the
expiration of twenty-four months from the Closing Date unless the Sellers have given written notice
to OSIL of particulars of the basis of such claim within such period.

      Reliance

      3.4 OSIL and Newco acknowledge and agree that the Sellers have entered into this Agreement in
reliance on the warranties and representations and other terms and conditions of this Agreement
notwithstanding any independent searches or investigations that may be undertaken by or on behalf
of the Sellers and that no information which is known to any of the Sellers and CHI or their
professional advisers will limit or extinguish the right to indemnification

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hereunder.

PART 4

PURCHASE AND SALE OF CHI SHARES

Purchase and Sale

4.1 Subject to the conditions, representations and warranties contained in this Agreement, the
Sellers shall sell and OSIL and Newco shall purchase the CHI Shares free and clear of all
Encumbrances.

Purchase Price

4.2 The aggregate purchase price payable to the Sellers for the CHI Shares shall be the sum of
$9,000,000 subject to payment and adjustment as set forth in this Part 4 (as adjusted from time to
time, the “Purchase Price”).

Manner and Terms of Payment

4.3 The Purchase Price will be paid as follows:

     4.3.1 $7,250,000 on account of the Purchase Price be paid on Closing by Newco to the Sellers
by way of certified trust cheque, bank draft, or such other method as may be acceptable to Sellers
and OSIL, acting reasonably, in the proportions set forth on Schedule 4.3.1;

     4.3.2 $750,000 on account of the Purchase Price (the “Holdback”) will be delivered on Closing
to an escrow agent mutually acceptable to OSIL and Sellers’ Representative, acting reasonably, and
will be held in escrow for a period of 90 days following Closing pending the making of final
adjustments to the Purchase Price as follows:

          (a) OSIL and Newco will engage OSIL’s auditors to prepare an audited balance sheet of CHI
(“Closing Balance Sheet”) in accordance with GAAP consistent with CHI’s past practices as of the
Closing Date setting forth CHI’s retained earnings as of the Closing Date (“Retained Earnings”) and
the amount by which such Retained Earnings exceed the Retained Earnings Threshold (the “Retained
Earnings Surplus”) or the amount by which such Retained Earnings are less than the Retained
Earnings Threshold (the “Retained Earnings Deficiency”). Funds paid to CHI pursuant to the
exercise of the CHI Options pursuant to Section 9.7 shall be excluded from, and shall not be
included in, the calculation of Retained Earnings, Retained Earnings Surplus or Retained Earnings
Deficiency. OSIL and Newco will deliver to Sellers’ Representative the Closing Balance Sheet not
later than the Settlement Date;

               (i) If Sellers’ Representative does not object to the Closing Balance Sheet, then the Closing
Balance Sheet shall be treated as the final Closing Balance Sheet.

               (ii) If Sellers’ Representative objects to the Closing Balance Sheet, he shall deliver a
detailed statement (“Objections”) describing his objections to OSIL within 30

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days after receiving the Closing Balance Sheet and setting forth the Sellers’ calculations and
amounts for the Retained Earnings. OSIL and Sellers’ Representative will use reasonable efforts to
resolve any such Objections themselves, and if the parties obtain a final resolution, OSIL will
revise the Closing Balance Sheet as appropriate to reflect the resolution of any Objections thereto
pursuant to this Section 4.3.2(a)(ii), and such revised balance sheet shall be treated as the final
Closing Balance Sheet.

               (iii) If OSIL and Sellers’ Representative do not obtain a final resolution within thirty (30)
days after OSIL has received the Objections, OSIL and Sellers’ Representative will select an
accounting firm mutually acceptable to them to resolve any remaining Objections. If OSIL and
Sellers’ Representative are unable to agree on the choice of an accounting firm, they will select a
nationally recognized accounting firm by lot (after excluding their respective regular outside
accounting firms). The determination of any accounting firm so selected will be set forth in
writing, will set forth the accounting firm’s calculations and amounts for Retained Earnings and
will be conclusive and binding upon the Parties. OSIL will revise the Closing Balance Sheet as
appropriate to reflect the resolution of any Objections thereto pursuant to this Section
4.3.2(a)(iii), and such revised balance sheet shall be treated as the final Closing Balance Sheet.

               (iv) In the event the Purchaser and Sellers’ Representative submit any unresolved Objections
to an accounting firm for resolution as provided in Section 4.3.2(a)(iii) above, if the accounting
firm’s calculation of Retained Earnings is closer in value to:

                    (Y) the Sellers’ calculation of Retained Earnings as set forth in the Objections than to
OSIL’s calculation of Retained Earnings as set forth in the Closing Balance Sheet delivered by OSIL
to Sellers’ Representative under Section 4.3.2(a), then OSIL will be responsible for all of the
fees and expenses of the accounting firm; or

                    (Z) OSIL’s calculation of Retained Earnings as set forth in the Closing Balance Sheet
delivered by OSIL to Sellers’ Representative under Section 4.3.2(a) than to Sellers’
Representative’s calculation as set forth in the Objections, then Sellers will be responsible for
all of the fees and expenses of the accounting firm.

               (v) OSIL and Newco will make the work papers and back up materials used in preparing the
Closing Balance Sheet available to Sellers’ Representative and Sellers’ accountants and other
representatives at reasonable times and upon reasonable notice at any time during the review and
preparation by OSIL of the Closing Balance Sheet; and

          (b) Within fourteen days after Closing, CHI shall deliver a listing of each of CHI’s accounts
receivable as of the Closing Date (the “Accounts Receivable”) which shall be attached hereto as
Schedule 4.3.2(b). For the avoidance of doubt, “Accounts Receivable” shall not include the amount
of holdbacks under government contracts identified as “Government Contract Holdbacks” on Schedule
4.3.2(b), and the Purchase Price shall not be adjusted for the non-collection of such Government
Contract Holdbacks. Following the Closing Date, OSIL and Newco shall cause CHI to use commercially
reasonable efforts to collect the Accounts Receivable. On the Settlement Date, OSIL and Newco
shall deliver to the Sellers’ Representative a report (the “AR Report”) setting forth the amount of
each Account Receivable that has not been collected (the aggregate total of such amounts, the “AR
Deficiency”). Following delivery of the AR Report, the Sellers’ Representative shall have a period
of ten (10) Business Days from his receipt thereof in which to review the same. For the purpose of
such

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review, OSIL and Newco agree to permit or to cause their accountants to permit the Sellers’
Representative and his accountants to examine all invoices, records, working papers, schedules and
other documentation related to the Accounts Receivable. In the event of any discrepancy between
amounts paid by such payors with respect to the Accounts Receivable and amounts reflected in the AR
Report, the Sellers’ Representative may dispute such discrepancy and OSIL and Sellers’
Representative agree to work diligently to resolve such discrepancy within ten (10) Business Days.
OSIL agrees to promptly revise and prepare a final AR Report to reflect the agreement of OSIL and
Sellers’ Representative with respect to the collected Accounts Receivable. If Sellers’
Representative does not dispute the initial AR Report, then such report shall be treated as the
final AR Report.

          (c) If there is a Retained Earnings Surplus which exceeds the AR Deficiency, if any, the
Purchase Price shall not be adjusted, and the escrow agent shall be directed to pay to the Sellers’
Representative for the benefit of the Sellers on the Settlement Date the entire Holdback.

          (d) If there is a Retained Earnings Surplus which is less than the AR Deficiency, the escrow
agent shall be directed to pay to the Sellers’ Representative for the benefit of the Sellers on the
Settlement Date the Holdback minus the difference between the AR Deficiency minus the Retained
Earnings Surplus, and the Purchase Price shall be deemed adjusted accordingly. The parties shall
then resolve any disputes pursuant to the dispute resolution proceedings set forth in Section
4.3.2(a)-(b) to determine the final Retained Earnings Surplus and AR Deficiency. Upon completing
the dispute resolution proceedings, the escrow agent shall pay to OSIL and Newco an amount equal to
the difference of the final AR Deficiency minus the final Retained Earnings Surplus and shall pay
the remaining Holdback amount, if any, to the Sellers’ Representative for the benefit of the
Sellers. Thereafter, OSIL and Newco will continue to cause CHI to use its commercially reasonable
efforts to collect the remaining Accounts Receivable and will pay to Sellers’ Representative for
the benefit of the Sellers, as and when collected, an amount equal to the difference of the final
AR Deficiency minus the final Retained Earnings Surplus.

          (e) If there is a Retained Earnings Deficiency, then the escrow agent shall be directed to pay
to the Sellers’ Representative for the benefit of the Sellers on the Settlement Date the Holdback
minus any AR Deficiency and minus any Retained Earnings Deficiency, and the Purchase Price shall be
deemed adjusted accordingly. Thereafter, the parties shall resolve any disputes pursuant to the
dispute resolution proceedings set forth in Section 4.3.2(a)-(b) to determine the final Retained
Earnings Deficiency or Retained Earnings Surplus, as the case may be, and AR Deficiency. Upon
completing the dispute resolution proceedings, the escrow agent shall pay to OSIL and Newco an
amount equal to the final AR Deficiency plus the final Retained Earnings Deficiency and shall pay
the remaining Holdback amount, if any, to the Sellers’ Representative for the benefit of the
Sellers. Thereafter, OSIL and Newco will cause CHI to continue to use its commercially reasonable
efforts to collect the remaining Accounts Receivable and will cause CHI to pay the same to Sellers’
Representative for the benefit of the Sellers, as and when collected.

          (f) If, after completing the dispute resolution proceedings set forth in Section 4.3.2(a)-(b),
the final Retained Earnings Deficiency and AR Deficiency exceed the Holdback,

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the Sellers shall remit such amount to OSIL promptly upon receipt of notice from OSIL requesting
payment therefor, and the Purchase Price shall be deemed adjusted accordingly. Thereafter, OSIL
and Newco will continue to cause CHI to use its commercially reasonable efforts to collect the
remaining Accounts Receivable and will cause CHI to pay the same to Sellers’ Representative for the
benefit of the Sellers, as and when collected, but only if and to the extent that the amounts so
collected exceed the amount by which the final AR Deficiency plus the final Retained Earnings
Deficiency exceed the Holdback;.

          (g) All cash payments to the Sellers pursuant to this Section 4.3.2 shall be paid in
proportion to their percentage ownership of CHI Shares on Closing, as set forth on Schedule 4.3.1.

     4.3.3 The provisions of Sections 4.3.2 shall be embodied in a formal escrow agreement
substantially in the form of Schedule 4.3.3, which shall be executed and delivered on Closing.

     4.3.4 (a) The sum of $898,220 will be paid and satisfied by the issue on Closing by OSIL to
those Sellers identified on Schedule 4.3.4(a) of 1,067,975 fully paid and non-assessable common
voting shares without par value in the capital stock of OSIL (the “OSIL Shares”), in the amounts
set forth on Schedule 4.3.4(a) hereto.

          (b) The Sellers identified on Schedule 4.3.4(b) hereto either do not meet the definition of
“accredited investor” or have elected to receive cash in lieu of OSIL Shares to which they would
otherwise be entitled under Section 4.3.4(a). The sum of $101,780 will be paid and satisfied by
the issue on Closing by OSIL to those Sellers identified on Schedule 4.3.4(b) in the amounts set
forth on Schedule 4.3.4(b) hereto.

     4.3.5 OSIL covenants with the Sellers that OSIL will provide the necessary funds to Newco to
enable Newco to pay and satisfy the cash portion of the Purchase Price on Closing.

     4.3.6 The Sellers acknowledge and agree that OSIL and Newco shall have the right to adjust the
proportion of the consideration paid by each of them to the Sellers for the CHI Shares as OSIL may
determine, acting reasonably, in its discretion.

     4.3.7 OSIL and Newco agree that CHI may pay costs incurred by the Sellers in connection with
this Agreement and the transactions evidenced hereby in the amount of up to $75,000. Such payment
shall be included in the calculation of Retained Earnings.

TSX Acceptance

4.4 The Parties acknowledge that the transactions contemplated hereby shall be subject to the
acceptance of the TSX and all other regulatory authorities having jurisdiction. Without limiting
the generality of the foregoing, the Parties acknowledge that the number and deemed price of the
OSIL Shares to be issued to the Sellers is subject to TSX approval. OSIL agrees that promptly upon
execution of this Agreement, it shall make application to the TSX and use its reasonable efforts to
obtain such approval as soon as reasonably practicable. The Majority Shareholders and CHI agree to
cooperate with OSIL and provide all such information and documentation as the TSX may reasonably
request in support of OSIL application for approval.

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Securities Laws

4.5 The Sellers and CHI acknowledge that OSIL intends to deliver the OSIL Shares to the Sellers in
reliance upon exemptions from the registration and prospectus requirements of Applicable Securities
Laws, and that accordingly the OSIL Shares will be issued subject to such trading restrictions,
escrow arrangements and hold periods as may be imposed under Applicable Securities Laws. The
Sellers and CHI further acknowledge that, except as otherwise set forth herein, OSIL has no
obligation to qualify the distribution of the OSIL Shares by way of prospectus or a registration
statement in any jurisdiction.

PART 5

CLOSING

Closing Time and Location

5.1 The Closing will take place on November 30, 2005 at 10:00 a.m. Eastern Time (the “Closing
Date”) at the offices of Schnader Harrison Segal & Lewis LLP at 1600 Market Street, Suite 3600,
Philadelphia, Pennsylvania, or such other date, time and place as is agreed upon in writing by OSIL
and the Sellers’ Representative, subject to satisfaction or waiver of all of the conditions
precedent to closing set forth herein. Notwithstanding the Closing Date, all adjustments shall be
made as of the Adjustment Time.

Sellers’ Closing Documents

5.3 At the Closing, the Sellers (through the Seller’s Representative), and CHI will deliver, or
cause to be delivered, to OSIL the closing documents set forth in Section 6.1.

OSIL’s and Newco’s Closing Documents

5.4 At the Closing, OSIL and Newco will deliver to the Sellers the documents set forth in Section
7.1.

PART 6

CONDITIONS PRECEDENT TO PERFORMANCE BY OSIL AND NEWCO

OF THEIR OBLIGATIONS UNDER THIS AGREEMENT

Conditions of OSIL and Newco

6.1 The obligations of OSIL and Newco to complete the purchase of the CHI Shares at the Closing
will be subject to the satisfaction of, or compliance with, each of the following conditions
precedent:

     Truth and Accuracy of Representations of the Sellers and CHI at Closing

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     6.1.1 The representations and warranties of the Sellers and CHI made in Part 2 shall be true
and correct in all material respects at and as of the Closing as though then made;

     Performance of Obligations

     6.1.2 The Sellers and CHI have performed and complied in all material respects with all the
obligations to be performed and complied with by them hereunder;

     No Claim Regarding Stock Ownership or Sale Proceeds

     6.1.3 There must not have been made or threatened by any Person any claim asserting that such
Person (a) is the holder or the beneficial owner of, or has the right to acquire or to obtain
beneficial ownership of, any stock of, or any other voting, equity, or ownership interest in, any
of the CHI Shares, or (b) is entitled to all or any portion of the Purchase Price payable for the
CHI Shares.

     Absence of Injunctions, Etc.

     6.1.4 No injunction or restraining order of any Court or administrative tribunal of competent
jurisdiction shall be in effect prohibiting the transactions contemplated hereby and no action or
proceeding shall have been instituted or shall be pending before any Court or administrative
tribunal to restrain or prohibit the transactions between the parties contemplated hereby;

     Absence of Change of Conditions

     6.1.5 No event shall have occurred or condition or state of facts of any character shall have
arisen or legislation (whether by statute, rule, regulation, by-law or otherwise) been introduced
which might reasonably be expected to have a materially adverse effect upon the financial
condition, results of operations or business prospects of CHI and OSIL is satisfied, acting
reasonably, that the major clients and suppliers of consulting services to CHI are prepared to
continue their business relationships with OSIL after the Closing and that the execution and
delivery of this Agreement and the consummation of the transactions contemplated herein will not
constitute defaults under any Material Contracts or any contract with any governmental authority;

     Absence of Damages, Etc.

     6.1.6 No material damage, destruction or loss to any property of CHI shall have occurred that
is not adequately covered by insurance (less amounts which are “deductibles” under such insurance
where such “deductibles” do not exceed those set out in Schedule 2.1.43, and the Parties
acknowledge that all risks respecting such damage, destruction or loss shall remain with the
Sellers and CHI until the Closing.

     Employment Agreements

     6.1.7 On the Closing Date Wayne W. Zachary, Floyd A. Glenn III and Geraldine Burke

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will enter into employment agreements with CHI substantially in the forms set out in Schedule
6.1.7;

     TSX Approval

     6.1.8 The TSX shall have accepted this Agreement for filing and approved the listing of the
OSIL Shares for trading on the TSX;

     Non-Competition Agreements

     6.1.9 On the Closing Date Wayne W. Zachary, Floyd A. Glenn III and Geraldine Burke will enter
into non-competition agreements substantially in the form of Schedule 6.1.9;

     Governmental Consents, Authorizations, Etc.

     6.1.10 Except as set forth on Schedule 6.1.10, all U.S. governmental notices, confirmations,
consents and approvals required in order to effect the purchase of the CHI Shares under this
Agreement, and in order for CHI to carry on its business in substantially the same manner as such
business was transacted prior to Closing, shall have been given and/or obtained as applicable,
including, without limitation: (i) written confirmation by the Committee on Foreign Investment in
the United States (“CFIUS”) of the successful completion of the review process under the
Exon-Florio amendment to the Defense Production Act of 1950, as amended (“Exon-Florio”), with
respect to the acquisition, and (ii) written approval of DSS and, to the extent applicable, the
U.S. Department of Energy (“DoE”), to operate the business of CHI pursuant to a foreign ownership,
control or influence (“FOCI”) mitigation proposal proposed by, and acceptable to, OSIL in its sole
discretion, and (iii) any approvals required by the Directorate of Defense Trade Controls (“DDTC”)
pursuant to the International Traffic in Arms Regulations (“ITAR”).

     Termination of Shareholders’ Agreement and Stock Option Plan

     6.1.11 The Shareholders’ Agreement and any stock option plans established by CHI or stock
option agreements between CHI and any person shall be terminated without any liability, payment or
continuing obligations;

     Termination of License Agreements

     6.1.12 (a) The license agreement between CHI and Mindbuzz Technologies Inc. (“Mindbuzz”) shall
be terminated in accordance with its terms, and OSIL and Newco consent to CHI’s payment to Mindbuzz
shareholders to repay their capital contributions and loans to Mindbuzz in an aggregate amount not
to exceed $10,000 and agree that that such payment shall be deemed to have no impact on the
calculation of Retained Earnings;

               (b) CHI and the shareholders of CHI Systems Terrain Products, Inc. (“CHI Terrain”) shall have
entered into an agreement with CHI, effective as of the Closing Date, pursuant to which all of the
shareholders of CHI Terrain agree to contribute their shares of CHI

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Terrain to the capital of CHI, and such agreement shall be substantially in the form of
Schedule 6.1.12.

     Closing Documentation

     6.1.13 OSIL and Newco shall have received from the Sellers and, where applicable, CHI or third
parties as noted, the following closing documentation which shall be in form and substance
satisfactory to OSIL, acting reasonably:

          (a) the share certificates representing the CHI Shares, duly endorsed for transfer to Newco;

          (b) certified copies of resolutions of the directors of CHI authorizing the execution and
delivery of this Agreement and the completion of the transactions contemplated hereby including,
without limitation, the transfer of the CHI Shares to Newco, the registration of the CHI Shares in
the name of Newco and the issuance of share certificates representing the CHI Shares registered in
the name of Newco;

          (c) a certificate of each of the Majority Shareholders certifying that the conditions set
forth in this Part 6 have been satisfied, if that is the case;

          (d) the resignations of such directors of CHI as OSIL may determine;

          (e) releases substantially in the form set forth as Schedule 6.1.13(e) executed by each Seller
in favour of CHI releasing CHI from any and all manner of actions, causes of action, suits,
proceedings, debts, dues, profits, expenses, contracts, damages, claims, demands and liabilities
whatsoever, in law or equity, that the Sellers or any of them, ever had or now has against CHI for
or by reason of any matter, cause or thing whatsoever related to such Seller’s ownership interest
in such Seller’s CHI Shares done or omitted to be done by CHI up to the Closing;

          (f) any other consents, waivers, including waivers of pre-emptive rights, and authorizations
reasonably required to enable the transfer of the CHI Shares to OSIL and the issuance of OSIL
shares by OSIL as provided for in this Agreement;

          (g) any such instruments of transfer, duly executed, which in the opinion of OSIL, acting
reasonably, are necessary or desirable to effect and evidence the transfer of the CHI Shares to
Newco free and clear of all Encumbrances;

          (h) the Escrow Agreement substantially in the form of Schedule 4.3.3, duly executed by the
Sellers;

          (i) true copies of agreements terminating the Shareholders Agreement and cancelling any CHI
Options which have not been exercised prior to Closing, duly executed by the Parties to the
Shareholders Agreement, the holders of the CHI Options and CHI as required;

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          (j) the agreements referred to in Sections 6.1.7 and 6.1.9;

          (k) a certificate, duly completed and executed by each Seller pursuant to Section
1.1445-2(b)(2) of the Treasury Regulations, certifying that such Seller is not a “foreign person”
within the meaning of Section 1445 of the Code;

          (l) legal opinions from the respective legal counsel of CHI and the Sellers substantially in
the form attached hereto as Schedule 6.1.13(l);

          (m) the termination agreement referred to in Section 6.1.12(a); and

          (n) such other instruments and documents, including third party consents, as are contemplated
hereby or as OSIL and Newco may reasonably require to be delivered at Closing by or on behalf of
the Majority Shareholders pursuant to the terms hereof or as are reasonably required to evidence
compliance with the representations, warranties and covenants of the Majority Shareholders
contained herein.

Right of Waiver

6.2 The conditions set forth in Section 6.1 are for the exclusive benefit of OSIL and Newco and may
be waived by OSIL and Newco in writing in whole or in part on or before the Closing by notice in
writing to the Sellers and CHI.

Merger of Conditions

6.3 The conditions set out in Section 6.1 shall be conclusively deemed to have been satisfied,
waived or released on Closing except as otherwise agreed in writing by OSIL, Newco, the Majority
Shareholders and CHI at the time of Closing.

PART 7

CONDITIONS PRECEDENT TO PERFORMANCE BY THE SELLERS

AND CHI OF THEIR OBLIGATIONS UNDER THIS AGREEMENT

Conditions of Sellers and CHI

7.1 The obligations of the Sellers and CHI to complete the sale of the CHI Shares and the other
transactions contemplated hereby at the Closing will be subject to the satisfaction of, or
compliance with, each of the following conditions precedent:

     Truth and Accuracy of Representations of OSIL and Newco at Closing Time

     7.1.1 The representations and warranties of OSIL and Newco made in Part 3 that are not
qualified by materiality shall be true and correct in all material respects at and as of the
Closing as though then made, and the representations and warranties of OSIL and Newco contained in
Part 3 that are qualified by materiality shall be true and correct at and as of the

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Closing as though then made;

     Performance of Agreements

     7.1.2 OSIL and Newco shall have performed and complied in all material respects with all the
obligations to be performed by them hereunder;

     Governmental Consents, Authorizations, Etc.

     7.1.3 All U.S. governmental notices, confirmations, consents and approvals required in order
to effect the purchase of the CHI Shares under this Agreement, and in order for CHI to carry on its
business in substantially the same manner as such business was transacted prior to Closing, shall
have been given and/or obtained as applicable, including, without limitation: (i) written
confirmation by CFIUS of the successful completion of the review process under the Exon-Florio
amendment to the Defense Production Act of 1950, as amended Exon-Florio, with respect to the
acquisition, and (ii) written approval of DSS and, to the extent applicable, the U.S. Department of
Energy DoE, to operate the business of CHI pursuant to a foreign ownership, control or influence
FOCI mitigation proposal proposed by, and acceptable to, OSIL in its sole discretion, and (iii) any
approvals required by the Directorate of Defense Trade Controls DDTC pursuant to the International
Traffic in Arms Regulations ITAR.

     TSX Approval

     7.1.5 The TSX shall have accepted this Agreement for filing and approved the listing of the
OSIL Shares for trading on the TSX;

     Absence of Injunctions, Etc.

     7.1.6 No injunction or restraining order of any Court or administrative tribunal of competent
jurisdiction shall be in effect prohibiting the transactions contemplated hereby and no action or
proceeding shall have been instituted or shall be pending before any Court or administrative
tribunal to restrain or prohibit the transactions between the parties contemplated hereby;

     Absence of Change of Conditions

     7.1.7 No event shall have occurred or condition or state of facts of any character shall have
arisen or legislation (whether by statute, rule, regulation, by-law or otherwise) been introduced
which might reasonably be expected to have a materially adverse effect upon the financial
condition, results of operations or business prospects of OSIL;

     Absence of Damages, Etc.

     7.1.8 No material damage, destruction or loss to any property of OSIL shall have occurred that
is not adequately covered by insurance;

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     Closing Documentation and Payment

     7.1.9 The Sellers shall have received from OSIL and Newco, as applicable, the following in
form and substance satisfactory to the Sellers, acting reasonably:

          (a) the Purchase Price in the manner set out in Section 4.3;

          (b) certified copies of resolutions of the directors of OSIL and Newco authorizing the
creation, execution and delivery of this Agreement and the completion of the transactions
contemplated hereby;

          (c) a copy of the notice of acceptance issued by the TSX;

          (d) a certificate of OSIL and Newco certifying that the conditions set forth in this Part 7
have been satisfied, if that is the case;

          (e) the Escrow Agreement substantially in the form of Schedule 4.3.3, duly executed by OSIL;

          (f) the agreements referred to in Section 6.1.7;

          (g) a legal opinion from the legal counsel of OSIL and Newco substantially in the form
attached hereto as Schedule 7.1.9(g); and

          (h) such other instruments and documents as are contemplated hereby or as the Sellers and CHI
may reasonably require to be delivered to Closing by or on behalf of OSIL and Newco pursuant to the
terms hereof or as are reasonably required to evidence compliance with the representations,
warranties and covenants of OSIL contained herein.

     Employees

     7.1.10 The number of employees of OSIL, Newco and any Subsidiary thereof (excluding any CHI
employees) shall be less than 500 as of the Closing Date;

     SBIR Qualification

     7.1.11 OSIL shall have delivered to Sellers’ Representative a report, reasonably acceptable to
Sellers’ Representative setting out the basis for OSIL’s position under the Small Business
Innovative Research funding program, and Sellers’ Representative shall be satisfied with the same,
acting reasonably.

Right of Waiver

7.2 The conditions set forth in Section 7.1 are for the exclusive benefit of the Sellers and CHI
and may be waived by the Majority Shareholders and CHI in writing in whole or in part on or before
the Closing by notice in writing to OSIL.

Merger of Conditions

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7.3 The conditions set out in Section 7.1 shall be conclusively deemed to have been satisfied,
waived or released on Closing except as otherwise stipulated in writing by OSIL, Newco, the
Majority Shareholders and CHI at the time of Closing.

PART 8

INTERIM MATTERS

Conduct of CHI Business

8.1 From the date of this Agreement until the Closing, except as otherwise expressly provided for
in this Agreement or except to the extent OSIL otherwise consents, (i) Majority Shareholders shall
cause CHI to be operated in the ordinary course of business and (ii) Majority Shareholders shall
cause CHI to use commercially reasonable efforts to preserve intact its business organizations and
relationships with Persons doing business with CHI. Without limiting the generality of the
foregoing, except as expressly provided by this Agreement or as set forth on Schedule 8.1, during
the period from the date of this Agreement to the Closing Date, Majority Shareholders will

     8.1.1 cause CHI to:

          (a) operate CHI’s cash management practices in accordance with past practices, including the
payment of indebtedness, collection of receivables, purchase of inventory, provision of services,
payment of payables and incurrence, payment or financing of capital expenditures;

          (b) maintain and protect all CHI Intellectual Property rights of CHI so as not to materially
or adversely affect the validity or enforceability thereof;

          (c) maintain the material assets of CHI in good repair, order and condition (normal wear and
tear excepted) consistent with current needs;

          (d) maintain the books, accounts and records of CHI in accordance with past practice and
custom as used in the preparation of the CHI Financial Statements;

          (e) file on a timely basis all Tax Returns (which shall be true, complete and correct)
required to be filed on or before the Closing Date; and

          (f) seek to maintain relationships with employees, customers and suppliers; and

     8.1.2 not permit CHI, without the prior written consent of OSIL, to:

          (a) accelerate the collection of accounts receivable, defer or delay the purchase of
inventories or the payment of accounts payable or otherwise conducting any pricing,

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sales, receivables and payables other than in the ordinary course of business;

          (b) settle or compromise any litigation or settle, pay or compromise any claims, except where
such settlement, compromise or payment would not have a material adverse effect on CHI; effect any
recapitalization, redemption or repurchase of the capital stock of CHI;

          (c) terminate, or permit the lapse by reason of inaction of, one or more insurance policies,
unless such policy or policies is replaced by a policy or policies with the same or substantially
similar coverage;

          (d) enter into any transaction with Sellers or an Affiliate of any Seller or CHI;

          (e) modify any Material Contract in any respect other than in the ordinary course of business;

          (f) change any tax election, tax filing, tax accounting period or accounting methodology; or

          (g) take any action that would result in the occurrence of any of the transactions or events
set forth in Section 2.1.11.

PART 9

ADDITIONAL COVENANTS

Consents

9.1 If the sale and transfer of the CHI Shares hereunder requires any consent under or assignment
of any contract, licence, permit, lease or agreement, the Sellers and CHI will promptly apply for
or otherwise seek, and use their respective reasonable commercial efforts to obtain, such consent
or assignment. This Agreement will not constitute an agreement to assign or transfer any contract,
licence, permit, lease or agreement if an attempted assignment thereof without the consent of a
third party would constitute a breach thereof. If such consent or assignment is not obtained, or
if an attempted assignment or transfer would be ineffective, the Sellers and CHI will use their
respective reasonable best efforts and cooperate with OSIL and Newco in any commercially reasonable
lawful arrangement designed to provide for OSIL and Newco the maximum benefits under such contract,
licence, permit, lease or agreement.

Non-Disclosure of Information

9.2 Until the Closing and thereafter, the Parties will comply with the terms of the Confidentiality
Agreement.

Return of Information

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9.3 If this Agreement is terminated, promptly after such termination all documents, work papers and
other written material obtained from a Party in connection with this Agreement and not theretofore
made public (including all copies and photocopies thereof), will be returned to the Party which
provided such material.

U.S. Government Applications

9.4 (a) As soon as practicable after the date of execution of this Agreement, OSIL and CHI (if they
have not done so prior to such execution) shall prepare and file with CFIUS a joint voluntary
notice under Exon-Florio with respect to the transaction contemplated by this Agreement. OSIL and
CHI shall provide CFIUS with any additional or supplemental information reasonably requested by
CFIUS or its member agencies during the Exon-Florio review process. In cooperation with OSIL, CHI
shall take all commercially reasonable steps advisable, necessary or desirable to finally and
successfully complete the Exon-Florio review process as promptly as practicable.

     (b) As soon as practicable after the date of execution of this Agreement, OSIL (if it has not
done so prior to execution) shall prepare and submit to DSS and, to the extent applicable, DoE a
notification under the National Industrial Security Program Operating Manual (“NISPOM”) and any
applicable DoE security regulations, and fully cooperate with OSIL in requesting from DSS and to
the extent applicable, DoE, approval to operate the business of CHI pursuant to a FOCI mitigation
proposal submitted in relation to the transaction contemplated by this Agreement, which mitigation
proposal shall be jointly prepared by and acceptable to both OSIL and CHI, in accordance with the
NISPOM and any applicable DoE security regulations. If applicable, at the request of OSIL, CHI
shall take all commercially reasonable steps necessary or desirable to obtain favorable National
Interest Determinations (“NIDs”) in accordance with the NISPOM or any applicable DoE security
regulations for continued performance of CHI’s existing government contracts, and, at the request
of CHI, OSIL shall take all commercially reasonable steps advisable, necessary or desirable to
assist CHI in obtaining such NIDs.

     (c) As soon as reasonably practicable, CHI (if it has not previously done so) shall prepare
and file with DDTC any pre-closing notifications required under the ITAR. The notifications
required under 22 C.F.R. Section 122.4(b) shall be filed by each of OSIL and CHI with DDTC within
five Business Days after the date of this Agreement.

Access

9.5 From the date of this Agreement until the Closing, subject to applicable Law, Majority
Shareholders shall cause CHI to (a) provide to OSIL and its representatives reasonable access to
the personnel, facilities and records of CHI, (b) continue to deliver to OSIL and OSIL’s
representatives copies of all such contracts, books and records, and other existing documents and
data as OSIL may reasonably request, (c) furnish OSIL and OSIL’s representatives with such
additional financial, operating, and other data and information as OSIL may reasonably request, and
(d) permit OSIL and its representatives to conduct such necessary inspections as OSIL may
reasonably request.

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Exercise of CHI Options

9.7 At the Adjustment Time, each Seller who is a holder (“Holder”) of CHI Options by execution of
this Agreement acknowledges and agrees that such Holder shall be deemed to have exercised such
Holder’s right to purchase Class B non-voting shares of CHI’s capital stock and to have received
such number of Class B non-voting shares of common stock of CHI as set forth opposite such Holder’s
name in Table 1 on Schedule 2.1.5. The portion of the Purchase Price payable to such Holder shall
be reduced by the aggregate strike price of the Options such Holder is deemed to have exercised
pursuant to this Section 9.7, as set forth in Table 1 on Schedule 2.1.5 (the “Strike Price Amount”)
as follows: (i) the amount of cash payable to such Holder pursuant to Section 4.3.1 shall be
reduced by an amount equal to the product of the Strike Price Amount multiplied by .88% (such
product, the “Cash Purchase Price Reduction”); and (ii)(Y) for each Holder receiving OSIL Shares
pursuant to Section 4.3.4(a), the number of OSIL Shares payable to such Holder pursuant to Section
4.3.4(a) shall be reduced by the number of OSIL Shares equal in value to the product of the Strike
Price Amount multiplied by .12% and (Z) for each Holder receiving cash in lieu of OSIL Shares
pursuant to Section 4.3.4(b), the amount of cash payable to such Holder pursuant to Section
4.3.4(b) shall be reduced by an amount equal to the product of the Strike Price Amount multiplied
by .12% (the value of OSIL Shares or cash equal to such product, the “Stock Purchase Price
Reduction”). OSIL shall contribute to the capital of CHI cash equal in value to the aggregate Cash
Purchase Price Reductions and Stock Purchase Price Reductions of all Holders.

Re-Domiciling of OSIL

9.8 OSIL shall: (a) use its reasonable commercial efforts after Closing to re-domicile as a United
States corporation or to otherwise become or to cause its successor corporation to become a United
States corporation pursuant to the procedures and within the time limits set forth in the
memorandum attached hereto as Schedule 9.8 or otherwise as OSIL may reasonably determine in
consultation with its legal counsel; and (b) cause any successor to OSIL as a result of
re-domiciling to be bound to the terms and conditions of this Agreement in the same manner as OSIL.

Furnishing of Information

9.9 As long as Sellers own OSIL Shares, OSIL covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports required to be filed OSIL
under Applicable Securities Laws by OSIL after the date hereof. OSIL further covenants that it will
take such further action as Sellers may reasonably request, to the extent required from time to
time to enable Sellers to sell OSIL Shares without registration under the Applicable Securities
Laws within the limitation of the exemptions available under the Applicable Securities Laws,
including the limitation provided by Rule 144 promulgated under the 1933 Act. The Sellers
acknowledge that it is their responsibility to obtain any legal opinions required to remove any
legends on any certificates representing the OSIL Shares. If requested by the Sellers, OSIL shall
request that its legal counsel provide such legal opinions. The cost of such legal opinions, shall
be borne by the Sellers.

Listing of Shares

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9.10 OSIL shall (i) in the time and manner required by the NASD, TSX and such other securities
market, quotation system or exchange on which OSIL’s common stock is then, if required, trading,
prepare and file with such securities market, quotation system or exchange on which Buyer’s common
stock is then trading an additional shares listing application covering all of the OSIL Shares and,
(ii) take all steps necessary to cause such OSIL Shares to be approved for listing on such
securities market, quotation system or exchange on which OSIL’s common stock is then listed as soon
as possible thereafter.

Piggyback Registration

     9.11 If at any time OSIL proposes for any reason to register any of its shares (“Registered
Shares”) under any Applicable Securities Laws including, without limitation, any registration
pursuant to the exercise of the demand registration rights of any Person other than the Sellers, on
any form that would also permit the registration of OSIL Shares, OSIL shall promptly give written
notice to the Sellers’ Representative of its intention to so register the Registered Shares and,
upon the written request, given within 5 business days after delivery of any such notice by OSIL,
of Sellers’ Representative to include in such registration OSIL Shares held by any Seller (a
“Selling Investor”) (which request shall specify the number of OSIL Shares proposed to be included
in such registration), OSIL shall use its reasonable commercial efforts to cause all such OSIL
Shares to be included in such registration on the same terms and conditions as the securities
otherwise being qualified for sale in such registration, provided, however, that if at any time
after giving written notice of its intention to register any securities, and prior to the effective
date of the registration statement filed in connection with such registration, OSIL shall determine
for any reason not to proceed with the proposed registration of the securities to be sold by it,
OSIL may, at its election, give written notice of such determination to the Sellers’ Representative
and, thereupon, shall be relieved of its obligation to register any OSIL Shares in connection with
such registration; and provided further that if any agent or underwriter engaged by OSIL in
connection with an offering of securities which are qualified for sale under a registration
statement directs that OSIL exclude all or a portion of the OSIL Shares from registration under
such registration statement, OSIL shall have no obligation to the Sellers to include the OSIL
Shares in the registration statement to the extent that the exclusion thereof is directed by such
underwriter or agent. In connection with any underwritten offering under this Section 9.11, OSIL
shall not be required to include OSIL Shares in such underwritten offering unless the Sellers’
Representative, on behalf of the Sellers of such OSIL Shares, accepts the terms of the underwriting
of such offering that have been agreed upon between OSIL and the underwriters selected by OSIL,
including without limitation, the underwriting agreement and the fees and expenses in connection
therewith. Notwithstanding the foregoing, OSIL agrees that each Selling Investor shall be entitled
to share in, on a pro rata basis, the same rights and benefits afforded to any other third party
security holder whose securities are being qualified for sale under a registration statement
pursuant to the exercise of piggyback registration rights, subject to any applicable obligation
relating thereto, including, without limitation, where there is a determination that the number of
shares to be included in a registration exceeds the number of shares which can be sold under such
registration without jeopardizing or delaying the success of the related offering (including the
price per share) and their number of shares included in such registration is therefore reduced,.
OSIL agrees to provide copies of the pertinent registration rights agreements and underwriting
agreements to the Sellers’ Representative together with the aforementioned notice to be given by
OSIL to the Sellers’ Representative. OSIL’s obligations

48

 

under this Section 9.11 shall terminate with respect to a particular Selling Investor at such time
as such Selling Investor’s shares are eligible for sale without volume restrictions pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended.

Release of Guarantees

9.12 Prior to Closing, CHI shall use its reasonable commercial efforts (which includes the
substitution of a guarantee by OSIL for the guarantee by any Seller) to release each Seller from
any guaranty by such Seller of obligations of CHI, and OSIL and Newco shall cooperate with CHI in
obtaining such releases.

PART 10

INDEMNITIES

Indemnification of OSIL and Newco by the Majority Shareholders

10.1 Subject to the limitations set out in Section 10.3, the Majority Shareholders shall severally,
and not jointly and severally, indemnify and save harmless OSIL and Newco against all liabilities,
claims, demands, actions, causes of action, damages, losses, costs or expenses (including all
reasonable legal fees and disbursements) suffered or incurred by OSIL, directly or indirectly, by
reason of or arising out of:

     10.1.1 The untruth of any warranty or representation on the part of the Majority Shareholders
set forth in Section 2.1;

     10.1.2 a breach of any agreement, term or covenant on the part of any of the Majority
Shareholders made or to be observed or performed pursuant hereto; and

     10.1.3 without limiting the generality of the foregoing, any liability for Taxes for any
matter or thing arising at any time prior to the Closing Date, whether currently known or unknown
and disclosed herein or in any Schedule hereto including any Taxes relating to a pre-closing period
that arises in connection with a Tax audit.

Indemnification of OSIL and Newco by the Sellers

10.2 Subject to the limitations set out in Section 10.3, each of the Sellers shall severally, and
not jointly and severally, indemnify and save harmless OSIL and Newco against all liabilities,
claims, demands, actions, causes of action, damages, losses, costs or expenses (including all
reasonable legal fees and disbursements) suffered or incurred by OSIL, directly or indirectly, by
reason of or arising out of:

     10.2.1 The untruth of any warranty or representation on the part of such Seller set forth in
Section 2.2; and

     10.2.2 a breach of any agreement, term or covenant on the part of any of such Seller made or
to be observed or performed pursuant hereto.

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The liabilities, claims, demands, actions, causes of action, damages, losses, costs and expenses of
OSIL and Newco referred to in this Section 10.2 and in Section 10.1 are collectively referred to as
“OSIL’s Losses”.

Limitations

10.3 The Sellers will be liable only for OSIL’s Losses in respect of which a claim for indemnity is
made by OSIL and Newco or either of them on or before the applicable expiry dates for the survival
of the Sellers’ representations and warranties as set out in Section 2.4; provided further that in
no event shall Sellers be liable for OSIL’s Losses until such time as OSIL’s Losses exceed $75,000,
in which event Sellers shall be liable for all of OSIL’s Losses in excess of $50,000, subject to a
maximum of:

     10.3.1 In the case of each Majority Shareholder, sixty percent (60%) of the portion of the
Purchase Price actually paid to such Majority Shareholder, as set forth on Schedule 10.3.1; and

     10.3.2 in the case of each Minority Shareholder, sixty percent (60%) of the portion of the
Purchase Price actually paid to such Minority Shareholder, as set forth on Schedule 10.3.2. For
the purposes of calculating the Purchase Price actually paid to any Minority Shareholder who is a
Holder, the Purchase Price shall include the Strike Price Amount of such Minority Shareholder’s
options.

Indemnification of the Sellers by OSIL and Newco

10.4 Subject to the limitations set out in Section 10.5, OSIL and Newco will severally, and not
jointly and severally, indemnify the Sellers from and after Closing against all liabilities,
claims, demands, actions, causes of action, damages, losses, costs or expenses (including all
reasonable legal fees and disbursements) suffered or incurred by the Sellers, directly or
indirectly, by reason of or arising out of:

     10.4.1 The untruth of any warranty or representation on the part of OSIL and Newco set forth
in Part 3;

     10.4.2 a breach of any agreement, term or covenant on the part of OSIL and Newco made or to be
observed or performed pursuant hereto,

which liabilities, claims, demands, actions, causes of action, damages, losses, costs and expenses
are collectively referred to as the “Sellers’ Losses”.

Limitation

10.5 OSIL and Newco will be liable only for the Sellers’ Losses in respect of which a claim for
indemnity is made by a Seller on or before the expiry date for the survival of OSIL’s and Newco’s
representations and warranties as set out in Section 3.3, provided however, that in no event shall
OSIL or Newco be liable for any Sellers’ Losses until such time as such Sellers’ Losses exceed
$75,000, in which event OSIL and Newco shall be liable for all of Sellers’ Losses

50

 

in excess of $50,000, subject to a maximum of 60% of the portion of the Purchase Price paid to such
Seller.

Claims Under Indemnity

10.6 (a) If any claim is made by any Person against OSIL and Newco or either of them in respect of
which OSIL and Newco or either of them may incur or suffer damages, losses, costs or expenses that
might reasonably be considered to be subject to the indemnity obligation of the Sellers or any of
them as provided in Section 10.1, or if any project of assessment by any taxation authority is
presented to OSIL and Newco or either of them in respect of CHI for any matter having its origin
prior to the Effective Date, OSIL will notify the Sellers’ Representative in writing as soon as
reasonably practicable, of the nature of such claim or project of assessment and the Sellers will
be entitled but not required to assume the defence of any suit brought to enforce such claim, and
to sign any waivers respecting time limits for payment of Taxes to any taxing authority (unless a
Seller is also a party to such proceeding and OSIL determines in good faith that joint
representation would be inappropriate).

        (b) If any claim is made by any Person against Sellers or any of them in respect of which
Sellers or any of them may incur or suffer damages, losses, costs or expenses that might reasonably
be considered to be subject to the indemnity obligation of OSIL or Newco or either of them as
provided in Section 10.3, such Seller will notify OSIL as soon as reasonably practicable, of the
nature of such claim or project of assessment and OSIL and Newco will be entitled but not required
to assume the defence of any suit brought to enforce such claim.

10.7 The defence of any indemnified claim (whether or not assumed by the Sellers or OSIL and Newco,
as the case may be) will be through legal counsel or, in the case of a dispute respecting Taxes,
their tax lawyers or tax accountants, and will be conducted in a manner acceptable to OSIL and the
Sellers’ Representative, acting reasonably, and no settlement may be made by the Sellers’
Representative, OSIL or Newco without the written consent of the others; provided, however, that
Sellers, at their own cost and expense, shall have the right to settle any claim for Taxes for
which Sellers have agreed to indemnify OSIL and Newco pursuant to Section 10.1.3 without the
consent of OSIL or Newco, provided that such settlement includes full and final releases from any
liability for such Taxes in favour of CHI, OSIL, Newco and their respective directors and senior
officers.

10.8 (a) If the Sellers assume the defence of any claim and OSIL and Newco retain separate legal
counsel, then OSIL, Newco and their counsel will cooperate with the Sellers’ Representative and his
counsel in the course of the defence, such cooperation to include using reasonable best efforts to
provide or make available to the Sellers’ Representative and his counsel documents and information
and witnesses for attendance at examinations for discovery and trials.

        (b) If OSIL and Newco assume the defence of any claim and Sellers retain separate legal
counsel, then Sellers and their counsel will cooperate with OSIL and Newco and their counsel in the
course of the defence, such cooperation to include using reasonable best efforts to provide or make
available to OSIL and Newco and their counsel documents and information and

51

 

witnesses for attendance at examinations for discovery and trials.

10.9 (a) All reasonable legal fees and disbursements and other costs of such defence from any claim
assumed by Sellers will, from and after such assumption, be borne by the Sellers, provided that if
the Sellers assume the defence of the claim and OSIL and Newco elect to retain separate legal
counsel, the costs of such legal counsel will be borne by OSIL and Newco.

        (b) All reasonable legal fees and disbursements and other costs of such defence from any claim
assumed by OSIL and Newco will, from and after such assumption, be borne by the OSIL and Newco,
provided that if OSIL and Newco assume the defence of the claim and Sellers elect to retain
separate legal counsel, the costs of such legal counsel will be borne by Sellers.

PART 11

AMENDMENT AND TERMINATION

Amendment

11.1 This Agreement may not be amended except by mutual written agreement of the Parties.

Termination

11.2 This Agreement may be terminated at any time prior to the Closing:

     11.2.1 By mutual written agreement of the Parties;

     11.2.2 By OSIL and Newco by written notice to the Sellers’ Representative, if any of the
conditions precedent set out in Section 6.1 have not been complied with or waived on or before the
date required for performance thereof; provided, however, that OSIL and Newco may not rely on the
failure to satisfy any of the conditions set out in Section 6.1 if the condition would have been
satisfied but for a material failure by OSIL or Newco in complying with their obligations
hereunder;

     11.2.3 By the Sellers by written notice from the Sellers’ Representative to OSIL and Newco, if
any of the conditions precedent set out in Section 7.1 have not been complied with or waived on or
before the date required for performance thereof; provided, however, that the Sellers’
Representative may not rely on the failure to satisfy any of the conditions set out in Section 7.1
if the condition would have been satisfied but for a material failure by any Seller in complying
with his or her obligations hereunder;

     11.2.4 By OSIL and Newco if any Seller’s representations, warranties, agreements or
obligations herein have been breached, which breach would result in the failure to satisfy one or
more conditions set forth in Section 6.1 and such breach is not curable or, if curable, is not
cured within 20 days after notice thereof has been delivered to the Sellers’ Representative;

     11.2.5 By the Sellers’ Representative if OSIL and Newco have breached any of their

52

 

representations, warranties, agreements or obligations herein, which breach would result in
the failure to satisfy one or more conditions set forth in Section 7.1 and such breach is not
curable or, if curable, is not cared with in 20 days after notice thereof has been delivered to
OSIL and Newco;

     11.2.6 By either OSIL and Newco or by the Sellers’ Representative if there shall be in effect
any law or regulation that prohibits the consummation of the Closing or if consummation of the
Closing would violate any non-appealable final order, decree or judgement of any court or
governmental body having competent jurisdiction;

     11.2.7 By the Sellers’ Representative if the Closing shall not have occurred on or before
December 31, 2005; or

     11.2.8 By OSIL and Newco if the Closing shall not have occurred on or before December 31,
2005.

Effect of Termination

11.3 If this Agreement is terminated in accordance with Section 11.2 hereof, this Agreement shall
thereafter become void and have no effect, and no Party hereto shall have any liability to the
other Party hereto or their respective Affiliates, directors, officers or employees, except for the
obligations of the Parties hereto contained in Sections 9.2, 9.3, 12.5, 12.6, 12.7 and this Section
11.3; provided that neither the termination of this Agreement nor anything contained in this
Section 11.3 shall relieve any Party from any liability for any breach by it of this Agreement,
including liability arising from any inaccuracy in its representations and warranties and any
non-performance by it of its covenants and agreements made herein. If it shall be judicially
determined that termination of this Agreement was caused by breach of this Agreement, then in
addition to any other remedies at law or equity for breach of this Agreement, the Party so found to
have breached this Agreement shall indemnify and hold harmless the other Parties who are not in
breach for their out of pocket costs, including fees and expenses of their legal counsel,
accountants, financial advisors and other experts and advisors, incidental to the negotiation,
preparation and execution of this Agreement and related documentation.

PART 12

GENERAL

Investigation

12.1 Any investigation by a Party and its advisors shall not mitigate, diminish or effect the
representations and warranties of any other Party to this Agreement.

News Releases and Public Notices

12.2 All news releases, notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement will be jointly planned and co-ordinated by OSIL

53

 

and CHI. Neither OSIL nor CHI will act unilaterally in this regard without the approval of the
other Party, such approval not to be unreasonably withheld. CHI acknowledges that OSIL is a
reporting issuer and that, as such, has an obligation to disclose to the public by way of a news
release, material change report and Form 8-K any material change in its affairs promptly upon the
occurrence thereof.

Expenses

12.3 Each of the parties to this Agreement shall be responsible for his, her or its own legal,
consulting and other costs and expenses incurred by it with respect to this Agreement.

Time

12.4 Time will be of the essence hereof.

Notices

12.5 Any notice or other writing required or permitted to be given hereunder or for the purposes
hereof will be sufficiently given if delivered in person or mailed, by commercially reputable
overnight courier, addressed to such party at:

          (a) If to OSIL and/or Newco:

Offshore Systems International Ltd.

Suite 107 — 930 West 1st Street

North Vancouver, B.C.

V7P 3N4

Attention: Ken Kirkpatrick

          with a copy to OSIL’s Solicitors at:

Clark Wilson LLP

800-885 West Georgia Street

Vancouver, British Columbia

V6C 3H1

Attention: Gerald J. Shields

          (b) If to CHI or the Sellers:

c/o CHI Systems Inc.

Suite 300 — 1035 Virginia Drive

Fort Washington, Pennsylvania

USA, 19034

54

 

Attention: Wayne Zachary

          with a copy to CHI’s lawyers at:

Schnader Harrison Segal & Lewis LLP

1600 Market Street, Suite 3600

Philadelphia, Pennsylvania 19103

Attention: Arthur Brandolph, Esq.

or at such other address as the party to whom such writing is to be given will have last notified
to the party giving it in the manner provided in this Section 12.5.

12.6 A notice so mailed will be deemed to have been given and received on the 5th Business Day
after the date of mailing unless at the time of mailing or within 5 Business Days thereafter there
occurs a postal interruption which could have the effect of delaying the mail in the ordinary
course, in which case a notice will be effectively given only if actually delivered or sent by
telecopy.

12.7 A notice delivered to the party to whom it is addressed will be deemed to have been given and
received on the day it is delivered or transmitted providing this is during normal business hours
at the place of the recipient, except that if that day is not a Business Day then the notice will
be deemed to have been given and received on the next Business Day after that day.

Governing Law

12.8 This Agreement will be governed by and construed in accordance with the laws of the State of
Delaware, notwithstanding any conflict of laws doctrines to the contrary. The parties irrevocably
attorn to the exclusive jurisdiction of the Courts of the State of Delaware with respect to any
legal proceedings arising herefrom.

Severability

12.9 If any one or more of the provisions contained in this Agreement is invalid, illegal or
unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such
provision or provisions will not in any way be affected or impaired thereby in any other
jurisdiction and the validity, legality and enforceability of the remaining provisions contained
herein will not in any way be affected or impaired thereby, unless in either case as a result of
such determination this Agreement would fail in its essential purpose.

Entire Agreement

12.10 This Agreement, together with the Confidentiality Agreement and the Schedules hereto,
constitutes the entire agreement between the parties and supersedes all previous agreements and
understandings, oral or written, by and between any of the parties with respect to the subject

55

 

matter hereof, including, but not limited to, the Letter of Intent.

Independent Advice

12.11 Each Party acknowledges that such Party has been advised to obtain independent legal,
accounting and tax advice with respect to this Agreement and the transactions contemplated hereby
and that such Party has done so.

Further Assurances

12.12 The Parties will with reasonable diligence do all such things and provide all such reasonable
assurances as may be required to consummate the transactions contemplated hereby, and each Party
will provide such further documents, instruments and assurances as any other Party may reasonably
require to give effect to the terms and intention of this Agreement whether before or after the
Closing.

Enurement

12.13 This Agreement and each of the terms and provisions hereof will enure to the benefit of and
be binding upon the Parties and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns. No Party may assign this Agreement without the
prior written consent of the other Parties, which consent may be arbitrarily withheld.

Counterparts

12.14 This Agreement may be executed in as many counterparts as may be necessary or by facsimile
and each such agreement or facsimile so executed will be deemed to be an original and such
counterparts together will constitute one and the same document.

Appointment of Sellers’ Representative.

12.15 Sellers hereby designate (and OSIL and Newco hereby consent to such designation) Wayne W.
Zachary as the Sellers’ Representative and authorizes Sellers’ Representative to execute any and
all instruments or other documents on behalf of Sellers, and to do any and all other acts or things
on behalf of Sellers, that the Sellers’ Representative may deem necessary or advisable, or that may
be required pursuant to this Agreement or otherwise, in connection with the consummation of the
transactions contemplated hereby and the performance of all obligations hereunder before, at or
following the Closing. Without limiting the generality of the foregoing, Sellers’ Representative
shall have the full and exclusive authority to (i) agree with OSIL and Newco with respect to any
matter or thing required or deemed necessary by Sellers’ Representative in connection with the
provisions of this Agreement calling for the agreement of Sellers, give and receive notices on
behalf of all Sellers, and act on behalf of Sellers in connection with any matter as to which
Sellers are or may be obligated under this Agreement or the Escrow Agreement, all in the absolute
discretion of Sellers’ Representative, (ii) in general, do all things and perform all acts,
including without limitation executing and delivering all agreements, certificates, receipts,
consents, elections, instructions, instruments of transfer and

56

 

other instruments or documents contemplated by, or deemed by Sellers’ Representative to be
necessary or advisable in connection with, this Agreement, and (iii) take all actions necessary or
desirable in connection with the defense or settlement of any indemnification claims pursuant to
Part 10 and performance of obligations under Part 5, including to withhold funds for satisfaction
of expenses or other liabilities or obligations or to withhold funds for potential indemnification
claims made hereunder. Sellers shall cooperate with Sellers’ Representative and any accountants,
attorneys or other agents whom he may retain to assist in carrying out his duties hereunder. All
decisions by Sellers’ Representative shall be binding upon all Sellers, and no Seller shall have
the right to object, dissent, protest or otherwise contest the same. Sellers’ Representative may
communicate with any Seller or any other Person concerning his responsibilities hereunder, but he
is not required to do so. Sellers’ Representative has a duty to serve in good faith the interests
of Sellers and to perform his designated role under this Agreement, but Sellers’ Representative
shall have no financial liability whatsoever to any Person relating to his service hereunder
(including any action taken or omitted to be taken), except that he shall be liable for harm that
he directly causes by an act of willful misconduct. Sellers shall jointly and severally indemnify
and hold harmless Sellers’ Representative against any loss, expense (including reasonable
attorney’s fees) or other liability arising out of his service as Sellers’ Representative under
this Agreement, other than for harm directly caused by an act of willful misconduct.

Confidentiality Agreement.

12.16 Prior to, or contemporaneous with the execution of this Agreement, Newco shall have signed a
joinder to become a party to the Confidentiality Agreement.

[signature pages follow]

57

 

IN WITNESS WHEREOF the parties have executed this Share Purchase Agreement as of the day and
year first above written.

	 	 	 	 	 
	 	 	OFFSHORE SYSTEMS INTERNATIONAL LTD.
	 
	 	 	 	 
	 

	 	Per:
	 	/s/ Ken Kirkpatrick
	 

	 	 	 	 
	 

	 	 	 	Authorized Signatory
	 
	 	 	 	 
	 	 	OSI HOLDINGS INC.
	 
	 	 	 	 
	 

	 	Per:
	 	/s/ Ken Kirkpatrick
	 

	 	 	 	 
	 

	 	 	 	Authorized Signatory
	 
	 	 	 	 
	 	 	CHI SYSTEMS INC.
	 
	 	 	 	 
	 

	 	Per:
	 	/s/ Wayne W. Zachary
	 

	 	 	 	 
	 

	 	 	 	Wayne W. Zachary
	 
	 	 	 	 
	 

	 	Per:
	 	/s/ Floyd A. Glenn III
	 

	 	 	 	 
	 

	 	 	 	Floyd A. Glenn III

	 	 	 
	/s/ Christine Volk

	 	/s/ Wayne W. Zachary
	 

	 	 
	Signature of Witness

	 	Wayne W. Zachary
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Christine Volk

	 	/s/ Floyd A. Glenn III
	 

	 	 
	Signature of Witness

	 	Floyd A. Glenn III
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 

58

 

	 	 	 
	/s/ Christine Volk

	 	/s/ Joan Ryder
	 

	 	 
	Signature of Witness

	 	Joan Ryder
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Christine Volk

	 	/s/ Geraldine Burke
	 

	 	 
	Signature of Witness

	 	Geraldine Burke
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Christine Volk

	 	/s/ Phillip Rollhauser
	 

	 	 
	Signature of Witness

	 	Phillip Rollhauser
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Romi Toyloy

	 	/s/ Kelly Neville
	 

	 	 
	Signature of Witness

	 	Kelly Neville
	 
	 	 
	Romi Toyloy
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Christine Volk

	 	/s/KevinBracken
	 

	 	 
	Signature of Witness

	 	Kevin Bracken
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Darius Miller

	 	/s/ Kenneth P. Graves
	 

	 	 
	Signature of Witness

	 	Ken Graves
	 
	 	 
	Darius Miller
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 

59

 

	 	 	 
	/s/ Kenneth P. Graves

	 	/s/ Darius Miller
	 

	 	 
	Signature of Witness

	 	Darius Miller
	 
	 	 
	Kenneth P. Graves
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Christine Volk

	 	/s/ Brian Convery
	 

	 	 
	Signature of Witness

	 	Brian Convery
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Christine Volk

	 	/s/ Donna Reynolds
	 

	 	 
	Signature of Witness

	 	Donna Reynolds
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Christine Volk

	 	/s/ Michael Szczepkowski
	 

	 	 
	Signature of Witness

	 	Michael Szczepkowski
	 
	 	 
	Christine Volk
	 	 
	 	 	 
	Name of Witness (Please Print)
	 	 
	 
	 	 
	/s/ Clint Bowers

	 	/s/ Janis Cannon-Bowers
	 

	 	 
	Signature of Witness

	 	Janis Cannon-Bowers
	 
	 	 
	Clint Bowers
	 	 
	 	 	 
	Name of Witness (Please Print
	 	 

60

 

Schedule 2.1.5

Authorized and Issued Capital of CHI Systems

<redacted>

 

 

Schedule 2.1.5-1

Form of CHI Option

CHI SYSTEMS, INC.

STOCK OPTION

     This STOCK OPTION (the “Option”) is granted as of the                      day of                     , 200___ by CHI
SYSTEMS, INC., a Pennsylvania corporation (the “Company”), to                                                                                  (“Optionee”).

BACKGROUND

     A. Optionee is an employee of the Company.

     B. In consideration of services to be performed, Company desires to afford Optionee an
opportunity to purchase shares of its Class B Common Stock in accordance with the Company’s 1998
Stock Option Plan (the “Plan”) as hereinafter provided.

     C. Any capitalized terms not otherwise defined herein shall have the meaning accorded them
under the Plan.

     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other
good and valuable consideration, the parties, hereto, intending to be legally bound, agree as
follows:

     1. Grant of Option. Company hereby irrevocably grants to Optionee the right and
option (the “Option”) to purchase, all or any part of an aggregate of                                          (___) shares
of the Class B Common Stock of Company (“Common Stock”), par value $1.00 per share (the “Option
Share”) which option shall constitute an “incentive stock option” under the Plan, at those purchase
prices listed in Paragraphs 4 and 5 hereof (the “Option Prices”), during the period and subject to
the conditions hereinafter set forth.

     2. Option Period. The Option may be exercised in accordance with the provisions of
Paragraphs 4 and 5 hereof during the Option Period, which shall begin on the date hereof and shall
end on the Option Expiration Date defined in Paragraph 3 hereof. All rights to exercise the Option
shall terminate on the Option Expiration Date if not sooner terminated pursuant to the terms of
Paragraph 6 hereof.

     3. Option Expiration Date. The Option Expiration Date shall be                     , or the
termination date of the Plan, whichever is earlier.

     4. Exercise of Option.

          (a) This Option shall not be exercisable prior to the first anniversary of the date of grant
of the Option, except as provided in subparagraph 4(b), and thereafter shall be exercisable at the
rate of up to 25% per year of the total number of shares for which this Option

 

 

is granted, at an exercise price of $                     per Option Share, provided that any portion of this
Option which is exercisable in any year, but not exercised, may be carried forward and exercised in
any future year during the term hereof.

               The exercise of this Option is conditioned upon the Optionee executing and delivering to the
Company a binding instrument agreeing to be bound by the terms and conditions of the Shareholders’
Agreement.

          (b) Notwithstanding the foregoing, subject to the terms of any employment agreement between
Company and Optionee, Optionee may purchase all or any portion of the unexercised balance of this
Option upon the effective date of a change in the control of the Company, including, without
limitation, a (i) sale, exchange, transfer or other disposition of substantially all of the assets
of Company to another entity, except to an entity controlled directly or indirectly by Company;
(ii) merger, consolidation or other reorganization of Company, unless (A) the shareholders of
Company immediately before such merger, consolidation or reorganization, own, directly or
indirectly immediately following such merger, consolidation or reorganization at least ___% of the
combined voting power of the outstanding voting securities of the Company resulting from such
merger, consolidation or reorganization in substantially the same proportion as their ownership of
the voting securities immediately before such merger, consolidation or reorganization, or (B) the
individuals who were members of the Board immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization constitute at least ___% of the members
of the Board of Directors of the surviving corporation; (iii) plan of liquidation or dissolution of
Company, other than pursuant to bankruptcy or insolvency laws is adopted; or (iv) during any period
of two consecutive fiscal years of Company those individuals, who at the beginning of such period
constituted the Board, cease for any reason to constitute at least a majority of the Board, unless
the election, or the nomination for election by Company’s shareholders, of each new director was
approved by a vote of at least two-thirds (2/3) of the directors then still in office who were
directors at the beginning of such period. There shall be excluded from the foregoing any
transaction otherwise commonly referred to as a “management leveraged buy-out.”

     5. Manner of Exercise. Exercise of the Option shall be by written notice to Company
pursuant to Paragraph 12 hereof. The notice shall be accompanied by payment in full in cash or, at
the sole discretion of the Committee determined at or prior to exercise, Class B Common Stock of
the Company, or a combination thereof, in the amount of the Option Price. Notwithstanding the
foregoing, Class B Common Stock acquired pursuant to the exercise of an incentive stock option may
not be tendered as payment unless the holding period requirements of Code Section 422(a)(1) have
been met. Upon receipt of such notice and payment, Company shall deliver a certificate or
certificates representing the Option Shares purchased. The certificate or certificates
representing the Option Shares shall be registered in the name of the Optionee, or if the Optionee
so requests, shall be issued in or transferred into the name of the Optionee and another person
jointly with the right of survivorship. The certificate or certificates shall be delivered to or
upon the written order of the Optionee. No Optionee or his legal representative, legatees or
distributees, as the case may be, shall be or shall be deemed to be a holder of any shares subject
to this Option unless and until certificates for such shares are issued to him or them upon the
exercise of this Option. The Option Shares that shall be purchased upon the exercise of the Option
as provided herein shall be fully paid and nonassessable.

     6. Rights in the Event of Termination of Employment After Vesting.

 

 

          (a) Upon the voluntary termination of employment, termination of employment for cause,
termination of employment due to disability or the death of Optionee, vested Options will survive
or terminate, as the case may be, in accordance with the provisions of Article 8 of the Plan, the
terms of which are herein incorporated by reference.

          (b) Any Option Shares acquired pursuant to the exercise of an Option on or prior to Optionee’s
date of termination of employment are entitled to be reacquired by the Company from Optionee in
accordance with the provisions of Article 8 of the Plan, the terms of which are herein incorporated
by reference.

     7. Transferability of Option. The Option is not transferable by Optionee other than
by will or by the laws of descent and distribution in the event of the Optionee’s death, in which
event the Option may be exercised by the heirs or legal representatives of the Optionee as
provided in Paragraph 6 hereof. The Option may be exercised during the lifetime of the Optionee
only by the Optionee. Any attempt at assignment, transfer, pledge or disposition of the Option
contrary to the provisions hereof or the levy of any execution, attachment or similar process upon
the Option shall be null and void and without effect. Any exercise of the Option by a person other
than the Optionee shall be accompanied by appropriate proofs of the right of such person to
exercise the Option.

     8. Option Shares to be Purchased for Investment. Unless Company has notified Optionee
pursuant to Paragraph 12 hereof that a registration statement covering the Option Shares has become
effective under the Securities Act of 1933 (the “Act”), it shall be a condition to the exercise of
the Option that the Option Shares acquired upon such exercise be acquired for investment and not
with a view to distribution. If requested by the Company upon advice of its counsel that the same
is necessary or desirable, the Optionee shall, at the time of purchase of the Option Shares,
deliver to the Company Optionee’s written representation that Optionee (a) is purchasing the Option
Shares for his own account for investment, and not with a view to public distribution or with any
present intention of reselling any of the Option Shares (other than a distribution or resale which,
in the opinion of counsel satisfactory to the Company, may be made without violating the
registration provisions of the Act; (b) has been advised and understands that (i) the Option Shares
have not been registered under the Act and are subject to restrictions on transfer and (ii) the
Company is under no obligation to register the Option Shares under the Act or to take any action
which would make available to the Optionee any exemption from such registration; and (c) has been
advised and understands that such Option Shares may not be transferred without compliance with all
applicable federal and state securities laws.

     9. Changes in Capital Structure. Notwithstanding any other provision of this Option,
in the event of any change in the outstanding capital stock of the Company by reason of a stock
dividend, merger, consolidation, recapitalization, reclassification, split-up, combination of
shares or otherwise, the number and class of shares subject to the Option and the Option Price will
be proportionately adjusted by the Company, as more particularly described in Article 9 of the
Plan, the terms of which are herein incorporated by reference.

     10. Legal Requirements. If the listing, registration or qualification of the Option
Shares upon any securities exchange or under any federal or state law, or the consent or approval
of any governmental regulatory body is necessary as a condition of or in connection with the
purchase of the Option Shares, the Company shall not be obligated to issue or deliver the certificates

 

 

representing the Option Shares as to which the Option has been exercised unless and until
such listing, registration, qualification, consent or approval shall have been effected or
obtained. This Option does not hereby impose on the Company a duty to so list, register, qualify,
or effect or obtain consent or approval. If registration is considered unnecessary by the Company
or its counsel, the Company may cause a legend to be placed on the certificates for the Option
Shares being issued calling attention to the fact that they have been acquired for investment and
have not been registered, such legend to read as follows:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS THERE IS A REGISTRATION
STATEMENT IN EFFECT COVERING SUCH SECURITIES OR THERE IS AVAILABLE AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS.”

     11. No Obligation to Exercise Option. The Optionee shall be under no obligation to
exercise the Option.

     12. Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed to be properly given when personally delivered to the party entitled to receive the
notice or when sent by certified or registered mail, postage prepaid, properly addressed to the
party entitled to receive such notice at the address stated below:

	 	 	 	 	 
	 

	 	If to Company:
	 	CHI Systems, Inc.
	 

	 	 	 	Gwynedd Office Park
	 

	 	 	 	716 N. Bethlehem Pike, Suite 300
	 

	 	 	 	Lower Gwynedd, PA 19002
	 
	 	 	 	 
	 

	 	If to Optionee:	 	 

     13. Administration. This Option has been granted pursuant to the 1998 Stock Option
Plan adopted by the Board of Directors of the Company and accepted by the Shareholders of the
Company, and is subject to the terms and provisions thereof. By acceptance hereof, the Optionee
acknowledges receipt of a copy of the Plan. All questions of interpretation and application of the
Plan and this Option shall be determined by the Committee, and such determination shall be final,
binding and conclusive.

     14. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.

     15. Governing Law. This Agreement shall be governed by and construed under the laws
of the Commonwealth of Pennsylvania without regard to conflicts of laws principles.

     16. Counterparts. This Agreement may be executed in two or more counterparts,

 

 

each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument.

     17. Amendment. This Agreement may not be amended except by an instrument in writing
signed by the parties.

     18. Inconsistent Provisions. In the event there is a conflict or inconsistency
between the terms and conditions of this Option and the terms and conditions of the Plan, the terms
and conditions of the Plan shall control.

     IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the date first above
written.

	 	 	 	 	 
	 	 	CHI SYSTEMS, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Wayne W. Zachary, President & CEO
	 
	 	 	 	 
	 	 	 
	 

	 	 	 	          , Optionee

 

 

Schedule 2.1.9

CHI Financial Statements

<redacted>

 

 

Schedule 2.1.10

No Material Adverse Changes

<redacted>

 

 

Schedule 2.1.11

Unusual Transactions

<redacted>

 

 

Schedule 2.1.12

CHI Intellectual Property

<redacted>

 

 

Schedule 2.1.20

Title to Properties

<redacted>

 

 

Schedule 2.1.21

List of Leased Equipment

<redacted>

 

 

Schedule 2.1.22

List of Leases of Real Property

<redacted>

 

 

Schedule 2.1.23

Material Contracts

<redacted>

 

 

Schedule 2.1.24

Material Contracts Exceptions

None

 

 

Schedule 2.1.25

Defaults and Notices of Non-Compliance under Material Contracts

None

 

 

Schedule 2.1.26

Information Respecting CHI Employees

<redacted>

 

 

Schedule 2.1.30

Employee Benefit Plans

<redacted>

 

 

Schedule 2.1.32

Employment Claims

None

 

 

Schedule 2.1.33

Employment Obligations

None

 

 

Schedule 2.1.39

Guarantees or Indemnities

<redacted>

 

 

Schedule 2.1.40

Conflicting Agreements

<redacted>

 

 

Schedule 2.1.41

Litigation

None

 

 

Schedule 2.1.43

CHI Insurance Policies

<redacted>

 

 

Schedule 2.1.53

Approvals Required

Each of CHI’s government contracts contains a provision requiring CHI to give 30 days written

notice of a change in ownership to CHI’s Administrative Contracting Officer.

 

 

Schedule 2.1.60

Inventory

None

 

 

Schedule 2.1.67

Loss Carryforwards and Credit Carryforwards

<redacted>

 

 

Schedule 2.1.68

Transactions with Related Parties

<redacted>

 

 

Schedule 2.1.73

CHI Bank Accounts and Business Numbers

<redacted>

 

 

Schedule 2.1.74

Environmental Matters

None

 

 

Schedule 2.1.76

Confidentiality Agreements

Each Material Contract and all CHI’s other contracts, subcontracts, teaming agreements, licenses
and proposals submitted contain confidentiality obligations. In addition, each current employee of
CHI and each former CHI employee with a start date after May 2003 has entered into a
confidentiality agreement in favor of CHI.

 

 

Schedule 2.1.77

Restrictions on Business

<redacted>

 

 

Schedule 2.1.78

Undisclosed Liabilities

<redacted>

 

 

  Schedule 4.3.1

Allocation of  $7,250,000   Cash Portion of Purchase Price Among Sellers

<redacted>

 

 

Schedule 4.3.2(b)

Accounts Receivable and Government Contract Holdbacks

<redacted>

 

 

Schedule 4.3.3

Form of Escrow Agreement re Portion of Purchase Price

<redacted>

 

 

Schedule 4.3.4(a)

Allocation of OSIL Share Portion of Purchase Price Among Sellers

<redacted>

 

 

Schedule 4.3.4(b)

Allocation of Cash In Lieu of OSIL Shares Portion of Purchase Price Among Sellers

<redacted>

 

 

Schedule 6.1.7

Forms of Employment Agreements between CHI and Wayne W. Zachary, Floyd A. Glenn III and Geraldine Burke

<redacted>

 

 

Schedule 6.1.9

Form of Non-Competition Agreement

<redacted>

 

 

Schedule 6.1.10

Governmental Consents

<redacted>

 

 

Schedule 6.1.12

Capital Contribution Agreement

<redacted>

 

 

Schedule 6.1.13(e)

Form of Release

<redacted>

 

 

Schedule 6.1.13(l)

Form of Legal Opinion of Counsel to CHI and Sellers

<redacted>

 

 

Schedule 8.1

Conduct of CHI Business

As a result of this transaction, CHI systems will experience a modified fiscal year and modified

accounting cycle in order to accommodate the closing of the books on December 15, 2005. CHI

Systems’ normal fiscal year is October 1 – September 30 and normal accounting periods run monthly.

The December 15th closing will cause a premature close of the books for the fiscal year

and a modified accounting period cycle for the month of December.

 

 

Schedule 10.3.1

Majority Shareholder Purchase Price Received

<redacted>

 

 

Schedule 10.3.2

Minority Shareholder Purchase Price Received

<redacted>

 

 

Schedule 3.1.5

Exceptions respecting OSIL Financial Statements

Nil

 

 

Schedule 3.1.13

OSIL Authorized Capital

OSIL has the following authorized capital stock:

	 	(1)	 	An unlimited number of Common Voting Shares without par value;
	 
	 	(2)	 	100,000,000 Class A Preference Shares without par value issuable in series of
which one series of shares has been created, being 10,000,000 shares designated as
Class A Preference Shares Series A Convertible without par value;
	 
	 	(3)	 	100,000,000 Class B Preference Shares with a par value of $50 each issuable in
series, of which two series of shares have been created, namely;

	 	(a)	 	10,000,000 shares designated as Class B Series One Preference
Shares with a par value of $50 each, and
	 
	 	(b)	 	10,000,000 shares designated as Class B Series Two Preference
Shares with a pare value of $50 each.

	 	(4)	 	An unlimited number of Class C Preference Shares without par value issuable in
series, of which no series have been created.

Authorized Share Capital of Newco

Newco’s authorized capital consists of 1000 shares of common stock with a par value of $0.01 per
share.

 

 

Schedule 3.1.15

Preemptive Rights and Rights of First Refusal

The holders of Class B Series Two Preference Shares of OSIL have a right of first offer to purchase
all or part of any equity, equity linked or debt financing which OSIL intends to proceed with
within a period of twenty four months from the date of issuance of those shares. Those shares were
issued on April 11, 2005, and therefore the right of first offer expires on April 10, 2007.

 

 

Schedule 7.1.9(g)

Form of Legal Opinion of Counsel to OSIL and Newco

<redacted>

 

 

Schedule 9.8

Re-domiciling Memorandum

<redacted><PAGE>

================================================================================

                               CAMBREX CORPORATION

                                       and

            AMERICAN STOCK TRANSFER & TRUST COMPANY, as Rights Agent

                                RIGHTS AGREEMENT

                            Dated as of June 5, 2006

================================================================================

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                      Page
                                                                                      ----
<S>                                                                                   <C>
Section 1.  Certain Definitions....................................................     1
Section 2.  Appointment of Rights Agent............................................     7
Section 3.  Issue of Right Certificates............................................     7
Section 4.  Form of Right Certificates.............................................    10
Section 5.  Countersignature and Registration......................................    10
Section 6.  Transfer, Split Up, Combination and Exchange of Right Certificates;
            Mutilated, Destroyed, Lost or Stolen Right Certificates................    11
Section 7.  Exercise of Rights; Purchase Price; Expiration Date of Rights..........    12
Section 8.  Cancellation and Destruction of Right Certificates.....................    14
Section 9.  Availability of Preferred Shares.......................................    14
Section 10. Preferred Shares Record Date...........................................    15
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights.....    16
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.............    29
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power...    29
Section 14. Fractional Rights and Fractional Shares................................    31
Section 15. Rights of Action.......................................................    33
Section 16. Agreement of Right Holders.............................................    34
Section 17. Right Certificate Holder Not Deemed a Stockholder......................    34
Section 18. Concerning the Rights Agent............................................    35
Section 19. Merger or Consolidation or Change of Name of Rights Agent..............    36
Section 20. Duties of Rights Agent.................................................    37
Section 21. Change of Rights Agent.................................................    40
Section 22. Issuance of New Right Certificates.....................................    42
Section 23. Redemption.............................................................    42
Section 24. Exchange...............................................................    43
Section 25. Notice of Certain Events...............................................    45
Section 26. Notices................................................................    47
Section 27. Supplements and Amendments.............................................    48
Section 28. Successors.............................................................    48
Section 29. Benefits of this Agreement.............................................    48
Section 30. Severability...........................................................    49
Section 31. Governing Law..........................................................    49
Section 32. Counterparts...........................................................    49
Section 33. Descriptive Headings...................................................    49
Section 34. Administration.........................................................    50
</TABLE>

<PAGE>

Exhibit A - Form of Certificate of Designations of Series F Junior Participating
            Cumulative Preferred Stock

Exhibit B - Form of Rights Certificate

Exhibit C - Summary of Rights to Purchase Preferred Shares

                                       ii
<PAGE>

                                RIGHTS AGREEMENT

          Rights Agreement, dated as of June 5, 2006, between Cambrex
Corporation, a Delaware corporation (the "Company"), and American Stock Transfer
& Trust Company, Inc., as Rights Agent (the "Rights Agent").

          WHEREAS, on April 27, 2006 the Board of Directors of the Company
authorized and declared a dividend payable on June 5, 2006 of one preferred
share purchase right (a "Right") for each Common Share (as hereinafter defined)
of the Company outstanding at the Close of Business (as hereinafter defined) on
June 5, 2006 (the "Record Date"), each Right representing the right to purchase
one one-hundredth of a Preferred Share (as hereinafter defined), upon the terms
and subject to the conditions herein set forth, and has further authorized and
directed the issuance of one Right with respect to each Common Share that shall
become outstanding between the Record Date and the earliest of the Distribution
Date, the Redemption Date and the Expiration Date (as such terms are hereinafter
defined).

          NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:

          SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:

          (a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 10% or more of the Common Shares
of the Company then outstanding, but shall not include the

<PAGE>

Company, any Subsidiary (as such term is hereinafter defined) of the Company,
any employee benefit plan of the Company or any Subsidiary of the Company, or
any entity holding Common Shares of the Company for or pursuant to the terms of
any such plan. Notwithstanding the foregoing, (i) no Person shall be or become
an "Acquiring Person" as the result of an acquisition of Common Shares of the
Company by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such Person
to 10% or more of the Common Shares of the Company then outstanding; provided,
however, that if a Person shall be or become the Beneficial Owner of 10% or more
of the Common Shares of the Company then outstanding by reason of share
purchases by the Company and shall thereafter become the Beneficial Owner of any
additional Common Shares of the Company, then such Person shall be deemed to be
an "Acquiring Person"; and (ii) if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person", as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares of the Company so that such
Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be an "Acquiring Person" for any purposes of this Agreement.

          (b) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) hereof.

          (c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement.

                                       2

<PAGE>

          (d) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:

          (i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;

          (ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than these Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or exchange;
or (B) the right to vote pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the applicable
rules and regulations promulgated under the Exchange Act and (2) is not also
then reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or

          (iii) which are beneficially owned, directly or indirectly, by any
other Person with whom such Person or any of such Person's Affiliates or
Associates has any agreement,

                                       3

<PAGE>

arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities) for the purpose of acquiring, holding, voting (except to
the extent contemplated by the proviso to Section 1(d)(ii)(B)) or disposing of
any securities of the Company.

          Notwithstanding anything in this definition of Beneficial Owner to the
contrary, the phrase "then outstanding," when used with reference to a Person's
beneficial ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.

          Notwithstanding the foregoing, none of the Company's directors or
officers shall be deemed to be the Beneficial Owner of, or to beneficially own,
any Common Shares of the Company owned by any other director or officer of the
Company solely by virtue of such persons acting in their capacities as such,
including, without limitation, in connection with any formulation and
publication of the recommendation of the Board of Directors of the Company of a
position, and any actions taken in furtherance thereof, with respect to any
acquisition proposal relating to the Company, a tender or exchange offer for any
Common Shares of the Company or any solicitation of proxies with respect to any
Common Shares of the Company.

          (e) "Business Day" shall mean any day other than a Saturday, a Sunday
or a day on which banking institutions in either New York, New York or the State
of New Jersey are authorized or obligated by law or executive order to close.

                                       4

<PAGE>

          (f) "Close of Business" on any given date shall mean 5:00 P.M. New
York time, on such date; provided, however, that if such date is not a Business
Day it shall mean 5:00 P.M. New York time, on the next succeeding Business Day.

          (g) "Common Share Equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.

          (h) "Common Shares" when used with reference to the Company shall mean
the shares of common stock, par value $.10 per share, of the Company. "Common
Shares" when used with reference to any Person other than the Company shall mean
the capital stock (or equity interest) with the greatest voting power of such
other Person or, if such other Person is a Subsidiary of another Person, the
Person or Persons which ultimately control such first-mentioned Person.

          (i) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.

          (j) "Distribution Date" shall have the meaning set forth in Section
3(a) hereof.

          (k) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.

          (l) "NASDAQ" shall have the meaning set forth in Section 11(d)(i).

          (m) "NYSE" shall have the meaning set forth in Section 11(d)(i).

          (n) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.

                                       5

<PAGE>

          (o) "Preferred Shares" shall mean shares of Series F Junior
Participating Cumulative Preferred Stock, par value $.10 per share, of the
Company having the rights and preferences set forth in the Form of Certificate
of Designations of Series F Junior Participating Cumulative Preferred Stock, a
copy of which is attached to this Agreement as Exhibit A.

          (p) "Purchase Price" shall have the meaning set forth in Section 7(b)
hereof.

          (q) "Redemption Date" shall have the meaning set forth in Section 7(a)
hereof.

          (r) "Section 11(a)(ii) Event" shall have the meaning set forth in
Section 11(a)(ii) hereof.

          (s) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth
in Section 11(a)(iii) hereof.

          (t) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.

          (u) "Stock Acquisition Time" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.

          (v) "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.

          (w) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.

                                       6

<PAGE>

          (x) "Trading Day" shall have the meaning set forth in Section
11(d)(i).

          SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.

          SECTION 3. ISSUE OF RIGHT CERTIFICATES. (a) Until the earlier of (i)
the tenth day after the Stock Acquisition Time or (ii) the tenth Business Day
(or such later date as may be determined by action of the Board of Directors of
the Company prior to such time as any Person becomes an Acquiring Person) after
the date of the commencement by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding Common Shares of the Company for
or pursuant to the terms of any such plan) of, or of the first public
announcement of the intention of any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding Common Shares of the Company for
or pursuant to the terms of any such plan) to commence a tender or exchange
offer the consummation of which would result in any Person becoming an Acquiring
Person (including in the case of either clause (i) or (ii) any such date which
is after the date of this Agreement and prior to the issuance of the Rights; the
earlier of such dates being herein referred to as the "Distribution Date"), (x)
the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the certificates for Common Shares of the Company registered in the names of
the holders thereof (which certificates shall also be deemed to be Right
Certificates) and not by separate Right Certificates (as hereinafter defined),
and

                                       7

<PAGE>

(y) the right to receive Right Certificates will be transferable only in
connection with the transfer of Common Shares of the Company. As soon as
practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will countersign, and the Company will send or cause to be sent
(and the Rights Agent will, if requested, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Shares of the Company as
of the Close of Business on the Distribution Date, at the address of such holder
shown on the records of the Company, a Right Certificate, in substantially the
form of Exhibit B hereto (a "Right Certificate"), evidencing one Right for each
Common Share of the Company so held (subject to adjustment as provided in this
Agreement). As of the Distribution Date, the Rights will be evidenced solely by
such Right Certificates.

          (b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares of the
Company as of the Close of Business on the Record Date, at the address of such
holder shown on the records of the Company. With respect to certificates for
Common Shares of the Company outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced by such certificates registered
in the names of the holders thereof together with a copy of the Summary of
Rights attached thereto. Until the Distribution Date (or the earlier of the
Redemption Date or the Expiration Date), the surrender for transfer of any
certificate for Common Shares of the Company outstanding on the Record Date,
with or without a copy of the Summary of Rights attached thereto, shall also
constitute the transfer of the Rights associated with the Common Shares of the
Company represented thereby.

                                       8

<PAGE>

          (c) Certificates for Common Shares of the Company which become
outstanding (including, without limitation, reacquired Common Shares of the
Company referred to in the last sentence of this paragraph (c)) after the Record
Date but prior to the earliest of the Distribution Date, the Redemption Date or
the Expiration Date shall have impressed on, printed on, written on or otherwise
affixed to them the following legend:

     This certificate also evidences and entitles the holder hereof to certain
rights as set forth in a Rights Agreement between Cambrex Corporation (the
"Company") and American Stock Transfer & Trust Company, Inc. (the "Rights
Agent") dated as of June 5, 2006 (the "Rights Agreement"), the terms of which
are hereby incorporated herein by reference and a copy of which is on file at
the principal executive offices of the Company. Under certain circumstances, as
set forth in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The Company
will mail to the holder of this certificate a copy of the Rights Agreement
without charge after receipt of a written request therefor. Under certain
circumstances, as set forth in the Rights Agreement, Rights issued to any Person
who becomes an Acquiring Person (as defined in the Rights Agreement) may become
null and void.

With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares of the Company
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares of the Company
represented thereby. In the event that the Company purchases or acquires any
Common Shares of the Company after the Record Date but prior to the Distribution
Date, any Rights associated with such Common Shares of the Company shall be
deemed cancelled and retired so that the Company shall not be entitled to
exercise any Rights associated with the Common Shares of the Company which are
no longer outstanding.

                                       9

<PAGE>

          SECTION 4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of one one-hundredths of a Preferred
Share as shall be set forth therein at the Purchase Price, but the number of
such one one-hundredths of a Preferred Share and the Purchase Price shall be
subject to adjustment as provided herein.

          SECTION 5. COUNTERSIGNATURE AND REGISTRATION. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, its
President, any of its Vice Presidents or its Treasurer, either manually or by
facsimile signature, shall have affixed thereto the Company's seal or a
facsimile thereof, and shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Right
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless countersigned. In case any officer of the
Company who shall have signed any of the Right Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates, nevertheless, may
be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Right

                                       10

<PAGE>

Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.

          Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its principal office, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the date of
each of the Right Certificates.

          SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. Subject
to the provisions of Section 14 hereof, at any time after the Close of Business
on the Distribution Date, and at or prior to the Close of Business on the
earlier of the Redemption Date or the Expiration Date, any Right Certificate or
Right Certificates (other than Right Certificates representing Rights that have
become void pursuant to Section 11(a)(ii) hereof or that have been exchanged
pursuant to Section 24 hereof) may be transferred, split up, combined or
exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of one one-hundredths of a Preferred
Share as the Right Certificate or Right Certificates surrendered then entitled
such holder to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Right Certificate or Right Certificates shall make such
request in writing delivered to the Rights Agent, and shall

                                       11

<PAGE>

surrender the Right Certificate or Right Certificates to be transferred, split
up, combined or exchanged at the principal office of the Rights Agent. Thereupon
the Rights Agent shall countersign and deliver to the Person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates.

          Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.

          SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS. (a) The registered holder of any Right Certificate may, subject to the
second paragraph of Section 11(a)(ii), exercise the Rights evidenced thereby
(except as otherwise provided herein) in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the Rights
Agent at the principal office of the Rights Agent, together with payment of the
Purchase Price for each one one-hundredth of a Preferred Share as to which the
Rights are exercised, at or prior to the earliest of (i) the Close of Business
on December 31,

                                       12

<PAGE>

2007 (the "Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at
which such Rights are exchanged as provided in Section 24 hereof.

          (b) The Purchase Price for each one one-hundredth of a Preferred Share
purchasable pursuant to the exercise of a Right shall initially be a price of
$80.00, and shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) below (subject to adjustment
as provided in Section 11(a)(iii) hereof, the "Purchase Price").

          (c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by wire transfer, certified
check, cashier's check, official bank check or money order payable to the order
of the Company, the Rights Agent shall thereupon promptly (i)(A) requisition
from any transfer agent of the Preferred Shares certificates for the number of
Preferred Shares to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) requisition from the
depositary agent depositary receipts representing such number of one
one-hundredths of a Preferred Share as are to be purchased (in which case
certificates for the Preferred Shares represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14 hereof, (iii)
after receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the

                                       13

<PAGE>

registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder and (iv) when appropriate, after receipt,
deliver such cash to or upon the order of the registered holder of such Right
Certificate.

          (d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to
such holder's duly authorized assigns, subject to the provisions of Section 14
hereof.

          SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Right Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.

          SECTION 9. AVAILABILITY OF PREFERRED SHARES. The Company covenants and
agrees that it will cause to be reserved and kept available out of its
authorized and

                                       14

<PAGE>

unissued Preferred Shares or any Preferred Shares held in its treasury, the
number of Preferred Shares that will be sufficient to permit the exercise in
full of all outstanding Rights in accordance with Section 7. The Company
covenants and agrees that it will take all such action as may be necessary to
ensure that all Preferred Shares delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such Preferred Shares (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable shares.

          The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a Person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depositary receipts for Preferred Shares upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's reasonable satisfaction that no
such tax is due.

          SECTION 10. PREFERRED SHARES RECORD DATE. Each Person in whose name
any certificate for Preferred Shares is issued upon the exercise of Rights shall
for all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any

                                       15

<PAGE>

applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Preferred Shares transfer books
of the Company are closed, such Person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Shares transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate shall not be entitled to any rights of a holder of
Preferred Shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.

          SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER
OF RIGHTS. The Purchase Price, the number of Preferred Shares or other
securities covered by each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 11.

          (a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase Price in effect
at the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be

                                       16

<PAGE>

proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Shares transfer books of the Company were
open, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one Right.

     (ii) Subject to Section 24 of this Agreement, in the event any Person
becomes an Acquiring Person (a "Section 11(a)(ii) Event"), unless the event
causing such Person to become an Acquiring Person is an acquisition of Common
Shares of the Company pursuant to a tender or exchange offer for all outstanding
Common Shares of the Company at a price and on terms determined by at least a
majority of the members of the Board of Directors of the Company who are not
Acquiring Persons or representatives, nominees, Affiliates or Associates of an
Acquiring Person, after receiving advice from one or more investment banking
firms, to be (A) at a price which is fair to stockholders (taking into account
all factors which such directors deem relevant, including, without limitation,
prices which could reasonably be achieved if the Company or its assets were to
be sold on an orderly basis designed to realize maximum value) and (B) otherwise
in the best interests of the Company and its stockholders, each holder of a
Right shall thereafter have a right to receive, upon exercise thereof at a price
equal to the then current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of Common Shares of the Company as shall equal the result obtained
by (x) multiplying

                                       17

<PAGE>

the then current Purchase Price by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable (which product, following
such first occurrence, shall thereafter be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement), and dividing that
product by (y) 50% of the then current per share market price of the Company's
Common Shares (determined pursuant to Section 11(d) hereof) on the date of the
occurrence of such Section 11(a)(ii) Event (such number of shares being referred
to as the "Adjustment Shares"); provided, however, that if the transaction that
would otherwise give rise to the foregoing adjustment is also subject to the
provisions of Section 13 hereof, then only the provisions of Section 13 hereof
shall apply and no adjustment shall be made pursuant to this Section 11(a)(ii).
In the event that any Person shall become an Acquiring Person and the Rights
shall then be outstanding, the Company shall not take any action which would
eliminate or diminish the benefits intended to be afforded by the Rights.

          From and after the occurrence of such event, any Rights that are or
were acquired or beneficially owned by any Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall be void and any holder of such Rights
shall thereafter have no right to exercise such Rights under any provision of
this Agreement. No Right Certificate shall be issued pursuant to Section 3 that
represents Rights beneficially owned by an Acquiring Person whose Rights would
be void pursuant to the preceding sentence or any Associate or Affiliate
thereof; no Right Certificate shall be issued at any time upon the transfer of
any Rights to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof or to any nominee of
such Acquiring Person, Associate or Affiliate; and any Right Certificate
delivered to the Rights Agent for transfer to an Acquiring Person whose Rights
would be void pursuant to the preceding sentence shall be cancelled.

                                       18
<PAGE>

     (iii) In lieu of issuing Common Shares of the Company in accordance with
Section 11(a)(ii) hereof, the Company, acting by resolution of its Board of
Directors, may (and, in the event that the number of Common Shares of the
Company which are authorized by the Company's Restated Certificate of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights are not sufficient to permit the exercise in
full of the Rights in accordance with Section 11(a)(ii) hereof, the Company,
acting by resolution of its Board of Directors, shall): (A) determine the excess
of (1) the value of the Adjustment Shares issuable upon the exercise of a Right
(the "Current Value"), over (2) the Purchase Price attributable to each Right
(such excess, the "Spread") and (B) with respect to each Right (subject to the
second paragraph of Section 11(a)(ii) hereof), make adequate provision to
substitute for the Adjustment Shares, upon payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Shares or
other equity securities of the Company (including, without limitation, shares,
or units of shares, of preferred stock which the Board of Directors of the
Company has deemed to have the same value as Common Shares of the Company (such
shares or units of preferred stock hereinafter called "Common Share
Equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any
combination of the foregoing having an aggregate value equal to the Current
Value, where such aggregate value has been determined by action of the Board of
Directors of the Company based upon the advice of a nationally recognized
investment banking firm selected by the Board of Directors of the Company which
has theretofore performed no services for the Company or any Subsidiary of the
Company in the past five (5) years; provided, however, if the Company shall not
have made adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the later of (x) the first occurrence of a
Section 11(a)(ii) Event and (y) the first date that the right to redeem the

                                       19

<PAGE>

Rights pursuant to Section 23 hereof, as such date may be amended pursuant to
Section 27 hereof, shall expire (the later of (x) and (y) being referred to
herein as the "Section 11(a)(ii) Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, Common Shares of the Company (to the
extent available) and then, if necessary, cash, securities and/or assets that in
the aggregate have a value equal to the Spread. If, after the occurrence of a
Section 11(a)(ii) Event, the number of Common Shares that are authorized by the
Company's Restated Certificate of Incorporation but not outstanding or reserved
for issuance for purposes other than upon exercise of the Rights are not
sufficient to permit exercise in full of the Rights in accordance with Section
11(a)(ii) hereof and the Board of Directors of the Company shall determine in
good faith that it is likely that sufficient additional Common Shares could be
authorized for issuance upon exercise in full of the Rights, the thirty (30) day
period set forth above may be extended to the extent necessary, but not more
than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that
the Company may seek stockholder approval for the authorization of such
additional shares (such period as it may be extended, the "Substitution
Period"). To the extent that the Company determines that some action is to be
taken pursuant to the terms of this Section 11(a)(iii), the Company (x) shall
provide, subject to the second paragraph of Section 11(a)(ii) hereof, that such
action shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek such stockholder approval for the authorization of additional
shares and/or to decide the appropriate form of distribution to be made pursuant
to the first sentence of this Section 11(a)(iii) and to determine the value
thereof. In the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as

                                       20

<PAGE>

well as a public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii), the value of the Common Shares
of the Company shall be their current per share market price (as determined
pursuant to Section 11(d) hereof) on the date of the first occurrence of the
Section 11(a)(ii) Event, and the per share or per unit value of any Common Share
Equivalents shall be deemed to equal the current per share market price of the
Common Shares of the Company on such date.

          (b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares (as defined in Section 11(d) hereof)
on such record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of Preferred Shares outstanding on such record date plus the number of
Preferred Shares which the aggregate offering price of the total number of
Preferred Shares and/or equivalent preferred shares so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price and the denominator of
which shall be the number of Preferred Shares outstanding on such record date
plus the number of additional Preferred Shares and/or equivalent preferred
shares to be offered for subscription or purchase (or into which the convertible
securities so to be

                                       21

<PAGE>

offered are initially convertible); provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Preferred Shares owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.

          (c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the

                                       22

<PAGE>

denominator of which shall be such current per share market price of the
Preferred Shares; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company to be issued upon exercise of one
Right. Such adjustments shall be made successively whenever such a record date
is fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.

          (d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) which fall within the
one-year period ending on such date and have the lowest such average; provided,
however, that in the event that the current per share market price of the
Security is determined during a period following the announcement by the issuer
of such Security of (A) a dividend or distribution on such Security payable in
shares of such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security and prior to the
expiration of thirty (30) Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock

                                       23

<PAGE>

Exchange (the "NYSE") or, if the Security is not listed or admitted to trading
on the NYSE, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Security is listed or admitted to trading or, if the
Security is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors of the Company. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to trading
on any national securities exchange, a Business Day.

     (ii) For the purpose of any computation hereunder, the "current per share
market price" of the Preferred Shares shall be determined in accordance with the
method set forth in Section 11(d)(i). If the Preferred Shares are not publicly
traded, the "current per share market price" of the Preferred Shares shall be
conclusively deemed to be the current per share market price of the Common
Shares of the Company as determined pursuant to Section 11(d)(i) (appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof), multiplied by one hundred. If neither the
Common Shares of the Company nor the Preferred Shares are publicly held or so
listed or traded, "current per share market price" shall mean the fair value per
share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent.

                                       24

<PAGE>

          (e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one one-millionth of a
Preferred Share or one ten-thousandth of any other share or security as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which requires such adjustment or (ii)
the date of the expiration of the right to exercise any Rights.

          (f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c), inclusive, and the
provisions of Sections 7, 9, 10 and 13 with respect to the Preferred Shares
shall apply on like terms to any such other shares.

          (g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.

                                       25

<PAGE>

          (h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
Preferred Share (calculated to the nearest one one-millionth of a Preferred
Share) obtained by (i) multiplying (x) the number of one one-hundredths of a
share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.

          (i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been

                                       26

<PAGE>

issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
and shall be registered in the names of the holders of record of Right
Certificates on the record date specified in the public announcement.

          (j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a Preferred Share issuable upon the exercise
of the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-hundredths of a
Preferred Share which were expressed in the initial Right Certificates issued
hereunder.

          (k) Before taking any action that would cause an adjustment reducing
the Purchase Price below one one-hundredth of the then par value, if any, of the
Preferred Shares issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.

                                       27

<PAGE>

          (l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.

          (m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to hereinabove in Section 11(b), hereafter made by the Company
to holders of its Preferred Shares shall not be taxable to such stockholders.

          (n) In the event that at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares of the Company payable in Common Shares of the
Company or (ii) effect a subdivision, combination or consolidation of the Common
Shares of the Company (by reclassification or otherwise than by payment of
dividends in Common Shares of the Company) into a greater or

                                       28

<PAGE>

lesser number of Common Shares of the Company, then in any such case (A) the
number of one one-hundredths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the number
of one one-hundredths of a Preferred Share so purchasable immediately prior to
such event by a fraction, the numerator of which is the number of Common Shares
of the Company outstanding immediately before such event and the denominator of
which is the number of Common Shares of the Company outstanding immediately
after such event, and (B) each Common Share of the Company outstanding
immediately after such event shall have issued with respect to it that number of
Rights which each Common Share of the Company outstanding immediately prior to
such event had issued with respect to it. The adjustments provided for in this
Section 11(n) shall be made successively whenever such a dividend is declared or
paid or such a subdivision, combination or consolidation is effected.

          SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Section 11 or 13 hereof,
the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares of the Company or the Preferred Shares a copy of such certificate and (c)
mail a brief summary thereof to each holder of a Right Certificate in accordance
with Section 25 hereof.

          SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER. In the event, directly or indirectly, at any time after a Person
has become an Acquiring Person, (a) the Company shall consolidate with, or merge
with

                                       29

<PAGE>

and into, any other Person, (b) any Person shall consolidate with the Company,
or merge with and into the Company and the Company shall be the continuing or
surviving corporation of such merger and, in connection with such merger, all or
part of the Common Shares of the Company shall be changed into or exchanged for
stock or other securities of any other Person (or the Company) or cash or any
other property, or (c) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person other than the Company or one or more of its wholly-owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that (i) each holder of a Right (other than Rights which have become void
pursuant to Section 11(a)(ii) hereof) shall thereafter have the right to
receive, upon the exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of Common Shares of such
other Person (including the Company as successor thereto or as the surviving
corporation) as shall equal the result obtained by (A) multiplying the then
current Purchase Price by the number of one one-hundredths of a Preferred Share
for which a Right is then exercisable and dividing that product by (B) 50% of
the then current per share market price of the Common Shares of such other
Person (determined pursuant to Section 11(d) hereof) on the date of consummation
of such consolidation, merger, sale or transfer; (ii) the issuer of such Common
Shares shall thereafter be liable for, and shall assume, by virtue of such
consolidation, merger, sale or transfer, all the obligations and duties of the
Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be
deemed to refer to such issuer; and (iv) such issuer shall take such steps

                                       30

<PAGE>

(including, but not limited to, the reservation of a sufficient number of its
Common Shares to permit the exercise in full of all outstanding Rights in
accordance with this Agreement) in connection with such consummation as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to the Common Shares thereafter
deliverable upon the exercise of the Rights. The Company shall not consummate
any such consolidation, merger, sale or transfer unless prior thereto the
Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement so providing. The Company shall not enter into any
transaction of the kind referred to in this Section 13 if at the time of such
transaction there are any rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially diminish the
benefits intended to be afforded by the Rights. The provisions of this Section
13 shall similarly apply to successive mergers or consolidations or sales or
other transfers.

          SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the

                                       31

<PAGE>

principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the NYSE or, if the Rights are not listed or
admitted to trading on the NYSE, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or admitted to
trading or, if the Rights are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use or, if on any such date the Rights are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.

          (b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred Share
may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided, that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts. In lieu of fractional Preferred Shares
that are not integral multiples of one one-hundredth of a Preferred Share, the
Company shall pay to the

                                       32

<PAGE>

registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one Preferred Share. For the purposes of this Section 14(b), the
current market value of a Preferred Share shall be the closing price of a
Preferred Share (as determined pursuant to the second sentence of Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.

          (c) The holder of a Right by the acceptance of the Right expressly
waives such holder's right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).

          SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares of the Company); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Shares of the
Company), without the consent of the Rights Agent or of the holder of any other
Right Certificate (or, prior to the Distribution Date, of the Common Shares of
the Company), may, in such holder's own behalf and for such holder's own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, such holder's
right to exercise the Rights evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive

                                       33

<PAGE>

relief against actual or threatened violations of the obligations of any Person
subject to, this Agreement.

          SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:

          (a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares of the Company;

          (b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and

          (c) the Company and the Rights Agent may deem and treat the Person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.

          SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities

                                       34

<PAGE>

of the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Right
Certificate be construed to confer upon the holder of any Right Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Right Certificate
shall have been exercised in accordance with the provisions hereof.

          SECTION 18. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to pay
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.

          (b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Right Certificate
or certificate for the Preferred Shares or

                                       35

<PAGE>

Common Shares or for other securities of the Company, instrument of assignment
or transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement, or other paper or document believed
by it to be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper person or persons.

          SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party, or any corporation succeeding to the stock
transfer or corporate trust business of the Rights Agent or any successor Rights
Agent, shall be the successor to the Rights Agent under this Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties hereto; provided, however, that such corporation would be eligible
for appointment as a successor Rights Agent under the provisions of Section 21
hereof. The purchase of all or substantially all of the Rights Agent's assets
employed in the performance of transfer agent activities shall be deemed a
merger or consolidation for purposes of this Section 19. In case at the time
such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.

                                       36
<PAGE>

          (b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.

          SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:

          (a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with or in reliance on such
opinion.

          (b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of an Acquiring Person and the
determination of the current per share market price of any Preferred Shares and
Common Shares) be proved or established by the Company prior to taking,
suffering or omitting any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established by a certificate in form reasonably
satisfactory to the Rights Agent signed by any one

                                       37

<PAGE>

of the Chairman of the Board, the President, any Vice President, the Treasurer
or the Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action
taken, suffered or omitted to be taken in good faith by it under the provisions
of this Agreement in reliance upon such certificate.

          (c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.

          (d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except as to its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.

          (e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11 or
13 hereof or responsible for the manner, method or amount of any such adjustment
or the ascertaining of the existence of facts that would require any such change
or adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after actual notice that such change or adjustment is required);
nor shall it be responsible for any determination by the Board of Directors of
the Company of the market value of the Rights or any Preferred Shares or Common
Shares, nor shall it by any act hereunder be deemed to make any representation
or warranty as to

                                       38

<PAGE>

the authorization or reservation of any Common Shares or Preferred Shares or
other securities to be issued pursuant to this Agreement or any Right
Certificate or as to whether any Preferred Shares or Common Shares or other
securities will, when issued, be validly authorized and issued, fully paid and
nonassessable.

          (f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.

          (g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, any Vice President, the
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken, or suffered or omitted by it in good faith in accordance
with instructions of any such officer or for any delay in acting while waiting
for those instructions.

          (h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity, except it
may not act for an Acquiring Person in an investment banking capacity, or
otherwise assist an Acquiring Person in ways hostile to the Company, without the
consent of the Company.

                                       39

<PAGE>

          (i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, omission, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any such act,
omission, default, neglect or misconduct, provided reasonable care was exercised
in the selection and continued employment thereof.

          (j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.

          (k) If, with respect to any Right Certificate surrender to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

          SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares of the Company and Preferred Shares by
registered, certified or express mail, and to the holders of the Right
Certificates by first-class mail. The Company may remove the Rights Agent or any
successor Rights Agent upon thirty (30) days' notice in writing, mailed to

                                       40

<PAGE>

the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Shares of the Company and Preferred Shares by
registered, certified or express mail, and to the holders of the Right
Certificates by first-class mail. If the Rights Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or by
such a court, shall be a corporation organized and doing business under the laws
of the United States or of any state of the United States so long as such
corporation is authorized to do business as a banking institution under such
laws, in good standing, which is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authorities and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $100
million. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Shares
of the Company or

                                       41

<PAGE>

Preferred Shares, and mail a notice thereof in writing to the registered holders
of the Right Certificates. Failure to appoint a successor Rights Agent or to
give any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.

          SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement.

          SECTION 23. REDEMPTION. (a) The Board of Directors of the Company may,
at its option, at any time prior to such time as any Person becomes an Acquiring
Person, redeem all but not less than all the then outstanding Rights at a
redemption price of $.01 per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
The redemption of the Rights by the Board of Directors may be made effective at
such time, on such basis and with such conditions as the Board of Directors in
its sole discretion may establish.

          (b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without

                                       42

<PAGE>

any further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price. The Company shall promptly give public notice of
any such redemption; provided, however, that the failure to give, or any defect
in, any such notice shall not affect the validity of such redemption. Within ten
(10) days after such action of the Board of Directors ordering the redemption of
the Rights, the Company shall mail a notice of redemption to all the holders of
the then outstanding Rights at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares of the Company. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be made.
Neither the Company nor any of its Affiliates or Associates may redeem, acquire
or purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 24 hereof, and other
than in connection with the purchase of Common Shares of the Company prior to
the Distribution Date.

          SECTION 24. EXCHANGE. (a) The Board of Directors of the Company may,
at its option, at any time after any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for Common Shares of the Company at an exchange ratio of one
Common Share per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding
the foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person

                                       43

<PAGE>

(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or any such Subsidiary or any entity holding Common Shares
of the Company for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Shares of the Company then outstanding.

          (b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares of the Company
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the Common Shares of the Company for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.

          (c) In the event that there shall not be sufficient Common Shares of
the Company issued but not outstanding or authorized but unissued to permit any
exchange of Rights as

                                       44

<PAGE>

contemplated in accordance with this Section 24, the Company shall take all such
action as may be necessary to authorize additional Common Shares of the Company
for issuance upon exchange of the Rights. In the event the Company shall, after
good faith effort, be unable to take all such action as may be necessary to
authorize such additional Common Shares of the Company, the Company shall
substitute, for each Common Share of the Company that would otherwise be
issuable upon exchange of a Right, a number of Preferred Shares or fraction
thereof such that the current per share market price of one Preferred Share
multiplied by such number or fraction is equal to the current per share market
price of one Common Share of the Company as of the date of issuance of such
Preferred Shares or fraction thereof.

          (d) The Company shall not be required to issue fractions of Common
Shares of the Company or to distribute certificates which evidence fractional
Common Shares of the Company. In lieu of such fractional Common Shares, the
Company shall pay to the registered holders of the Right Certificates with
regard to which such fractional Common Shares of the Company would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of a whole Common Share of the Company. For the purposes of this paragraph
(d), the current market value of a whole Common Share shall be the closing price
of a Common Share of the Company (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.

          SECTION 25. NOTICE OF CERTAIN EVENTS. (a) In case the Company shall
propose (i) to pay any dividend payable in stock of any class to the holders of
its Preferred Shares or to make any other distribution to the holders of its
Preferred Shares (other than a

                                       45

<PAGE>

regular quarterly cash dividend), (ii) to offer to the holders of its Preferred
Shares rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions, of 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person, (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any dividend on the Common
Shares of the Company payable in Common Shares of the Company or to effect a
subdivision, combination or consolidation of the Common Shares of the Company
(by reclassification or otherwise than by payment of dividends in Common Shares
of the Company), then, in each such case, the Company shall give to each holder
of a Right Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares of the Company and/or Preferred
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (i) or (ii) above at least ten (10)
days prior to the record date for determining holders of the Preferred Shares
for purposes of such action, and in the case of any such other action, at least
ten (10) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Shares of the Company
and/or Preferred Shares, whichever shall be the earlier.

                                       46

<PAGE>

          (b) In case the event set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.

          SECTION 26. NOTICES. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:

               Cambrex Corporation
               One Meadowlands Plaza
               East Rutherford, New Jersey 07073
               Attention: General Counsel and Secretary

Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:

               American Stock Transfer & Trust Company, Inc.
               59 Maiden Lane
               Plaza Level
               New York, NY 10038
               Attention: Corporate Trust Department

Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by

                                       47

<PAGE>

first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.

          SECTION 27. SUPPLEMENTS AND AMENDMENTS. The Company may from time to
time and the Rights Agent shall, if the Company so directs, supplement or amend
this Agreement without the approval of any holders of Right Certificates in
order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
or to make any other provisions with respect to the Rights which the Company may
deem necessary or desirable (including reducing the Redemption Price or
increasing the Purchase Price), any such supplement or amendment to be evidenced
by a writing signed by the Company and the Rights Agent; provided, however, that
from and after such time as any Person becomes an Acquiring Person, this
Agreement shall not be amended in any manner which would adversely affect the
interests of the holders of Rights (other than any Acquiring Person and its
Affiliates and Associates). Notwithstanding the foregoing, the Company may not
at any time amend this Agreement to fix an Expiration Date later than the date
set forth in Section 7 hereof.

          SECTION 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

          SECTION 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the

                                       48

<PAGE>

Common Shares of the Company) any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares of the
Company).

          SECTION 30. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.

          SECTION 31. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.

          SECTION 32. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.

          SECTION 33. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

                                       49

<PAGE>

          SECTION 34. ADMINISTRATION. The Board of Directors of the Company
shall have the exclusive power and authority to administer and interpret the
provisions of this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors of the Company or to the Company or as may be
necessary or advisable in the administration of this Agreement. All such
actions, calculations, determinations and interpretations which are done or made
by the Board of Directors of the Company in good faith shall be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties and shall not subject the Board of Directors of the
Company to any liability to the holders of the Rights.

                                       50

<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested, all as of the day and year first above written.

Attest:                                 CAMBREX CORPORATION

By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
                                        Title:
                                               ---------------------------------

Attest:                                 AMERICAN STOCK TRANSFER & TRUST
                                        COMPANY, INC.

By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
                                        Title:
                                               ---------------------------------

<PAGE>

                                                                       EXHIBIT A

                                      FORM

                                       of

                           CERTIFICATE OF DESIGNATIONS

                                       of

                    SERIES F JUNIOR PARTICIPATING CUMULATIVE
                                 PREFERRED STOCK

                                       of

                               CAMBREX CORPORATION

                         (Pursuant to Section 151 of the
                General Corporation Law of the State of Delaware)

                                   ----------

          Cambrex Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation at a meeting held on April 27, 2006,
in accordance with the provisions of Section 151 of the General Corporation Law
of the State of Delaware:

          RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Restated
Certificate of Incorporation of the Corporation, the Board of Directors hereby
creates a series of Series Preferred Stock, par value $.10 per share (the
"Preferred Stock"), of the Corporation and hereby states the designation and
number of shares, and fixes the relative rights, preferences, and limitations
thereof as follows:

          "Series F Junior Participating Cumulative Preferred Stock:

          Section 1. Designation and Amount. The shares of this series shall be
designated as "Series F Junior Participating Cumulative Preferred Stock" (the
"Series F Junior Preferred Stock") and the number of shares constituting the
Series F Junior Preferred Stock shall be three hundred thousand (300,000)
shares. Such number of shares may be increased or decreased by resolution of the
Board of Directors; provided that no decrease shall reduce the number of shares
of Series F Junior Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Series F
Junior Preferred Stock.

<PAGE>

          Section 2. Dividends and Distributions.

          (A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any other stock) ranking prior and superior to the Series
F Junior Preferred Stock with respect to dividends, the holders of shares of
Series F Junior Preferred Stock, in preference to the holders of Common Stock,
par value $.10 per share (the "Common Stock"), of the Corporation, and of any
other class of stock ranking junior to the Series F Junior Preferred Stock with
respect to the payment of dividends, shall be entitled to receive, when, as and
if declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of January, April,
July and October in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series F Junior Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $1 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share amount of
all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series F Junior Preferred Stock. In the event
the Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series F Junior Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

          (B) The Corporation shall declare a dividend or distribution on the
Series F Junior Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the
Series F Junior Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.

          (C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series F Junior Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Series F Junior Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly

                                       A-2

<PAGE>

Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of Series
F Junior Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders of
shares of Series F Junior Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.

          Section 3. Voting Rights. The holders of shares of Series F Junior
Preferred Stock shall have the following voting rights:

          (A) Subject to the provision for adjustment hereinafter set forth,
each share of Series F Junior Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the number of votes per share to which holders of shares of
Series F Junior Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

          (B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, in the
Restated Certificate of Incorporation of the Corporation or by law, the holders
of shares of Series F Junior Preferred Stock and the holders of shares of Common
Stock and any other capital stock of the Corporation having general voting
rights shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.

          (C) Except as set forth herein, or as otherwise provided by law,
holders of Series F Junior Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.

          Section 4. Certain Restrictions.

          (A) Whenever quarterly dividends or other dividends or distributions
payable on the Series F Junior Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series F Junior Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:

               (i) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series F Junior Preferred Stock;

                                      A-3

<PAGE>

               (ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series F Junior Preferred
Stock, except dividends paid ratably on the Series F Junior Preferred Stock and
all such parity stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are then entitled;

               (iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series F Junior Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire shares of
any such junior stock in exchange for shares of any stock of the Corporation
ranking junior (as to dividends and upon dissolution, liquidation or winding up)
to the Series F Junior Preferred Stock; or

               (iv) redeem or purchase or otherwise acquire for consideration
any shares of Series F Junior Preferred Stock, or any shares of stock ranking on
a parity with the Series F Junior Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.

          (B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

          Section 5. Reacquired Shares. Any shares of Series F Junior Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock subject to the conditions and restrictions on issuance set
forth herein, in the Restated Certificate of Incorporation, or in any other
Certificate of Designations creating a series of Preferred Stock or any similar
stock or as otherwise required by law.

          Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (upon liquidation,
dissolution or winding up) to the Series F Junior Preferred Stock unless, prior
thereto, the holders of shares of Series F Junior Preferred Stock shall have
received $100 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series F Junior Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (upon liquidation, dissolution or
winding up) with the Series F Junior Preferred Stock, except distributions made
ratably on the Series F Junior

                                      A-4

<PAGE>

Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series F Junior Preferred Stock were entitled immediately
prior to such event under the proviso in clause (1) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

          Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series F Junior Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series F Junior Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

          Section 8. No Redemption. The shares of Series F Junior Preferred
Stock shall not be redeemable.

          Section 9. Rank. The Series F Junior Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all series of any other class of Preferred Stock.

          Section 10. Amendment. The Restated Certificate of Incorporation of
the Corporation, as amended, shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series F Junior Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Series F Junior Preferred Stock, voting together as a single class."

                                      A-5

<PAGE>

          IN WITNESS WHEREOF, Cambrex Corporation has caused this Certificate of
Designations of Series F Junior Participating Cumulative Preferred Stock to be
duly executed by its Senior Vice President, General Counsel and Secretary this
5th day of June, 2006.

                                        CAMBREX CORPORATION

                                        ----------------------------------------
                                        Name: Peter E. Thauer
                                        Title: Senior Vice President, General
                                               Counsel and Secretary

                                      A-6
<PAGE>

                                                                       EXHIBIT B

                            FORM OF RIGHT CERTIFICATE

Certificate No. R- ___________                               ____________ Rights

     NOT EXERCISABLE AFTER DECEMBER 31, 2007 OR EARLIER IF REDEMPTION OR
     EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND
     TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
     CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY ANY
     PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS
     AGREEMENT) SHALL BECOME NULL AND VOID.

                                Right Certificate

                               CAMBREX CORPORATION

          This certifies that _________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of June 5, 2006 (the "Rights Agreement"), between Cambrex
Corporation, a Delaware corporation (the "Company"), and American Stock Transfer
& Trust Company, Inc., as Rights Agent (the "Rights Agent"), to purchase from
the Company at any time after the Distribution Date (as such term is defined in
the Rights Agreement) and prior to 5:00 P.M., Eastern time, on December 31, 2007
at the principal office of the Rights Agent, or at the office of its successor
as Rights Agent, one one-hundredth of a fully paid non-assessable share of
Series F Junior Participating Cumulative Preferred Stock, par value $.10 per
share (the "Preferred Shares"), of the Company, at a purchase price of $80.00
per one one-hundredth of a Preferred Share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-hundredths of a Preferred Share which may
be purchased upon exercise hereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of June 5, 2006, based on the
Preferred Shares as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number of one one-hundredths of a
Preferred Share which may be purchased upon the exercise of the Rights evidenced
by this Right Certificate are subject to modification and adjustment upon the
happening of certain events.

          This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder

<PAGE>

of the Rights Agent, the Company and the holders of the Right Certificates.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and the above-mentioned offices of the Rights Agent.

          This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.

          Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a redemption
price of $.01 per Right or (ii) may be exchanged in whole or in part for
Preferred Shares or shares of the Company's Common Stock, par value $.10 per
share.

          No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.

          No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.

          This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.

                                       B-2

<PAGE>

          WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of ___________________, ____.

ATTEST:                                 CAMBREX CORPORATION

By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
                                        Title:
                                               ---------------------------------

Countersigned:

AMERICAN STOCK TRANSFER &
TRUST COMPANY, INC.

By:
    ---------------------------------
    Authorized Signature

                                       B-3

<PAGE>

                    Form of Reverse Side of Right Certificate

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such
               holder desires to transfer the Right Certificate.)

          FOR VALUE RECEIVED __________________________________ hereby sells,
assigns and transfers unto ____________________

       ------------------------------------------------------------------
                  (Please print name and address of transferee)

_____________________________________________________________________ this Right
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint _________________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.

Dated:                  ,
       -----------------  ----

                                        ----------------------------------------
                                        Signature

Signature Guaranteed:

          Signatures must be guaranteed by an eligible institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the
Securities Exchange Act of 1934.

          The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).

                                        ----------------------------------------
                                        Signature

                                       B-4
<PAGE>

             Form of Reverse Side of Right Certificate -- continued

                          FORM OF ELECTION TO PURCHASE

                  (To be executed if holder desires to exercise
                  Rights represented by the Right Certificate.)

To: CAMBREX CORPORATION

          The undersigned hereby irrevocably elects to exercise
_________________ Rights represented by this Right Certificate to purchase the
Preferred Shares issuable upon the exercise of such Rights and requests that
certificates for such Preferred Shares be issued in the name of:

Please insert social security
or other identifying number

________________________________________________________________________________
                         (Please print name and address)

________________________________________________________________________________

If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:

Please insert social security
or other identifying number

________________________________________________________________________________
                         (Please print name and address)

________________________________________________________________________________

Dated: _________________, ____

                                        ----------------------------------------
                                        Signature

Signature Guaranteed:

          Signatures must be guaranteed by an eligible institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the
Securities Exchange Act of 1934.

                                      B-5

<PAGE>

             Form of Reverse Side of Right Certificate -- continued

------------------------------------------------------------

          The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).

                                        ----------------------------------------
                                        Signature

------------------------------------------------------------

                                     NOTICE

          The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.

          In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.

                                      B-6

<PAGE>

                                                                       EXHIBIT C

                UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
                RIGHTS AGREEMENT, RIGHTS OWNED BY ANY PERSON WHO
                IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN
                THE RIGHTS AGREEMENT) SHALL BECOME NULL AND VOID

                         SUMMARY OF RIGHTS TO PURCHASE
                                PREFERRED SHARES

          On April 27, 2006, the Board of Directors of Cambrex Corporation (the
"Company") adopted a resolution declaring a dividend of one preferred share
purchase right (a "Right") for each outstanding share of common stock, par value
$.10 per share (the "Common Shares"), of the Company. The dividend is payable on
June 5, 2006 to the stockholders of record at the close of business on that date
(the "Record Date"). Each Right entitles the registered holder to purchase from
the Company one one-hundredth of a share of Series F Junior Participating
Cumulative Preferred Stock, par value $.10 per share (the "Preferred Shares"),
of the Company at a price of $80.00 per one one-hundredth of a Preferred Share
(the "Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement dated as of June 5, 2006 (the "Rights
Agreement") between the Company and American Stock Transfer & Trust Company,
Inc., as Rights Agent (the "Rights Agent").

          Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons have
acquired beneficial ownership of 10% or more of the outstanding Common Shares of
the Company (an "Acquiring Person") or (ii) 10 business days (or such later date
as may be determined by action of the Board of Directors prior to such time as
any person or group of affiliated persons becomes an Acquiring Person) following
the commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 10% or more of the outstanding Common Shares
(the earlier of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the Common Share certificates
outstanding as of the Record Date, by such Common Share certificate with a copy
of this Summary of Rights attached thereto.

          The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with the Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share certificates issued
after the Record Date upon transfer or new issuance of Common Shares will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares outstanding as of
the Record Date, even without such notation or a copy of this Summary of Rights
being attached thereto, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holders of record of the
Common Shares as of the close

<PAGE>

of business on the Distribution Date and such separate Right Certificates alone
will evidence the Rights.

          The Rights are not exercisable until the Distribution Date. The Rights
will expire on December 31, 2007 (the "Expiration Date"), unless the Rights are
earlier redeemed or exchanged by the Company, in each case, as described below.

          The Purchase Price payable, and the number of Preferred Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then-current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).

          The number of outstanding Rights and the number of one one-hundredths
of a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.

          Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 100 times the dividend declared per Common Share. In the event of
liquidation, the holders of the Preferred Shares will be entitled to a minimum
preferential liquidation payment of $100 per share but will be entitled to an
aggregate payment of 100 times the payment made per Common Share. Each Preferred
Share will have 100 votes, voting together with the Common Shares. Finally, in
the event of any merger, consolidation or other transaction in which Common
Shares are exchanged, each Preferred Share will be entitled to receive 100 times
the amount received per Common Share. These rights are protected by customary
antidilution provisions.

          Because of the nature of the Preferred Shares' dividend, liquidation
and voting rights, the value of the one one-hundredth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one Common Share.

          In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person (except pursuant to a tender offer for all
outstanding Common Shares determined to be at a fair price and otherwise in the
best interests of the Company and its stockholders by a majority of the members
of the Board of Directors who are not Acquiring Persons or representatives,
nominees, associates or affiliates of an Acquiring Person), the Rights Agreement
provides that proper provision shall be made so that each holder of a Right,
other than Rights beneficially owned by the Acquiring Person (which will
thereafter be void), will

                                      C-2

<PAGE>

thereafter have the right to receive (subject to adjustment) upon exercise that
number of Common Shares (or, in certain circumstances, cash, a reduction in the
Purchase Price, Common Shares, other equity securities of the Company, debt
securities of the Company, other property or a combination thereof) having a
market value of two times the Purchase Price. At any time after any person or
group becomes an Acquiring Person and prior to the acquisition by such person or
group of 50% or more of the outstanding Common Shares, the Board of Directors of
the Company may exchange the Rights (other than Rights owned by such person or
group, which will have become void), in whole or in part, at an exchange ratio
of one Common Share, or one one-hundredth of a Preferred Share (or of a share of
a class or series of the Company's preferred stock having equivalent rights,
preferences and privileges), per Right (subject to adjustment).

          The Rights Agreement provides that none of the Company's directors or
officers shall be deemed to beneficially own any Common Shares owned by any
other director or officer by virtue of such persons acting in their capacities
as such, including in connection with the formulation and publication of the
Board of Directors' recommendation of its position, and actions taken in
furtherance thereof, with respect to an acquisition proposal relating to the
Company or a tender or exchange offer for the Common Shares.

          In the event that the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power are sold after a person or group has become an Acquiring Person,
proper provision will be made so that each holder of a Right will thereafter
have the right to receive, upon the exercise thereof at the then current
exercise price of the Right, that number of shares of common stock of the
acquiring company which at the time of such transaction will have a market value
of two times the Purchase Price.

          With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.

          At any time prior to the acquisition by a person or group of
affiliated or associated persons of beneficial ownership of 10% or more of the
outstanding Common Shares, the Board of Directors of the Company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption
Price"). The redemption of the Rights may be made effective at such time on such
basis with such conditions as the Board of Directors in its sole discretion may
establish.

          The terms of the Rights may be amended by the Board of Directors of
the Company without the consent of the holders of the Rights, including an
amendment to reduce the Redemption Price or increase the Purchase Price, except
that (a) from and after such time as any person or group of affiliated or
associated persons becomes an Acquiring Person, no such amendment may adversely
affect the interests of the holders of the Rights (other than the Acquiring
Person and its affiliates and associates) and (b) at no time may the Board of
Directors

                                      C-3

<PAGE>

of the Company amend the Rights Agreement to fix an Expiration Date
later than December 31, 2007.

          Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.

          A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
June [__], 2006. A copy of the Rights Agreement is available free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.

                                      C-4

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