Document:

EXHIBIT 10.1

 

RUSH ENTERPRISES, INC.

2006 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

 

1.             Purpose. This 2006 Non-Employee Director Stock
Option Plan (the “Plan”) of Rush Enterprises, Inc., a Texas corporation
(the “Company”), is adopted for the benefit of the directors of the Company who
at the time of their service are not employees of the Company or any of its
subsidiaries (“Non-Employee Directors”), and is intended to advance the
interests of the Company by providing the Non-Employee Directors with additional
incentive to serve the Company by increasing their proprietary interest in the
success of the Company.

 

2.             Administration. The Plan shall be administered by the Board
of Directors of the Company (the “Board”) or a committee of the Board which
shall consist solely of two or more directors appointed by the Board who are
not employees of the Company (the Board acting in such capacity or such
committee being referred to as the “Committee”). For the purposes of the Plan,
a majority of the members of the Committee shall constitute a quorum for the
transaction of business, and the vote of a majority of those members present at
any meeting shall decide any question brought before that meeting. In addition,
the Committee may take any action otherwise proper under the Plan by the
affirmative vote, taken without a meeting, of a majority of its members. No
member of the Committee shall be liable for any act or omission of any other
member of the Committee or for any act or omission on his own part, including
but not limited to the exercise of any power or discretion given to him under
the Plan, except those resulting from his own gross negligence or willful
misconduct. Except as otherwise expressly provided for herein, all questions of
interpretation and application of the Plan, or as to options granted hereunder
(the “Options”), shall be subject to the determination, which shall be final
and binding, of a majority of the whole Committee. Notwithstanding the above,
the selection of Non-Employee Directors to whom Options are to be granted, the
exercise price of any Option and the term of any Option shall be as hereinafter
provided and the Committee shall have no discretion as to such matters. The
Committee may not amend or replace outstanding Options in a transaction that constitutes
a repricing without the approval of the shareholders of the Company. For these
purposes, a cancellation, exchange or other modification to an outstanding
Option that occurs in connection with a merger, acquisition, spin-off or other
corporate transaction, including under Paragraph 12 will not be deemed a
repricing.

 

3.             Option Shares. The aggregate number of shares of the
Company’s Class A Common Stock, $.01 par value (or such other par value as
may be designated by act of the Company’s shareholders) (the “Common Stock”)
with respect to which Options may be granted under the Plan shall not exceed
1,000,000 shares; provided, that the class and aggregate number of shares which
may be subject to the Options granted hereunder shall be subject to adjustment
in accordance with the provisions of Paragraph 12 hereof. Such shares may
be treasury shares or authorized but unissued shares. In the event that any
outstanding Option for any reason shall expire or terminate by reason of the
death of the optionee or the fact that the optionee ceases to be a director,
the surrender of any such Option, or any other cause, the shares of Common
Stock allocable to the unexercised portion of such Option may again be subject
to an Option under the Plan.

 

4.             Grant of Options. Subject to the provisions of
Paragraphs 13 and 16, there shall be granted the following Options:

 

(a)           To each Non-Employee Director who is
appointed by the Board to serve as a director, an Option to purchase 20,000
shares of Common Stock at a purchase price per share of Common Stock equal to
the fair market value of a share of the Common Stock as defined in
Paragraph 7 hereof (the “Option Price”) on the date of such appointment by
the Board; and

 

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(b)           To each Non-Employee Director who is elected
or reelected as a director of the Company at an Annual Meeting of Shareholders
of the Company, an Option to purchase 20,000 shares of Common Stock at the
Option Price on the date of each such Annual Meeting of Shareholders of the
Company.

 

5.             Duration of Options. Each Option granted under the Plan shall be
exercisable for a term of ten years from the date of grant, subject to earlier
termination as provided in Paragraph 9 hereof.

 

6.             Amount Exercisable. Each Option granted pursuant to the Plan
shall be fully exercisable on the date of grant.

 

7.             Exercise of Options. Payment of the purchase price of the shares
of Common Stock subject to an Option granted hereunder may be made (i) in any
combination of cash or whole shares of Common Stock already owned by the
optionee, and/or (ii) in shares of Common Stock withheld by the Company from
the shares of Common Stock otherwise issuable to the optionee as a result of
the exercise of the Option. Subject to the terms and conditions of this Plan,
an Option may be exercised by written notice to the Company at its principal
office, attention of the Secretary. Such notice shall (a) state the
election to exercise such Option, the number of shares in respect of which it
is being exercised and the manner of payment for such shares and (b) be
signed by the person or persons so exercising such Option and, in the event
such Option is being exercised pursuant to Paragraph 9 by any person or
persons other than the optionee, accompanied by appropriate proof of the right
of such person or persons to exercise such Option. If payment of the purchase
price of the shares is being paid in cash or with whole shares of Common Stock
already owned by the optionee, such notice shall be accompanied by payment of
the full purchase price of such shares. Cash payments of such purchase price
shall be made by cash or check payable to the order of the Company. Common
Stock payments (valued at fair market value on the date of exercise, as
determined by the Committee), shall be made by delivery of stock certificates
in negotiable form. All cash and Common Stock payments shall, in either case,
be delivered to the Company at its principal office, attention of the
Secretary. If certificates representing Common Stock are used to pay all or
part of the purchase price of an Option granted hereunder, a replacement
certificate shall be delivered by the Company representing the number of shares
delivered but not so used, and an additional certificate shall be delivered representing
the additional shares to which the holder of such Option is entitled as a
result of the exercise of such Option. The certificate or certificates for the
shares as to which such Option shall have been so exercised shall be registered
in the name of the person or persons so exercising the Option and shall be
delivered to or upon the written order of the person or persons exercising such
Option. All shares issued as provided herein will be fully paid and
nonassessable.

 

For purposes of this
Paragraph 7, the “fair market value” of a share of Common Stock as of any
particular date shall mean the closing sale price of a share of Common Stock on
that date as reported by the principal national securities exchange on which
the Common Stock is listed if the Common Stock is then listed on a national
securities exchange, or if the Common Stock is not so listed, the average of
the bid and asked price of a share of Common Stock on that date and reported in
the National Association of Securities Dealers Automated Quotation system (the “Nasdaq
System”); provided that if no such closing price or quotes are so reported on
that date or if in the discretion of the Committee another means of determining
the fair market value of a share of stock at such date shall be necessary or
advisable, the Committee may provide for another means for determining such
fair market value.

 

8.             Transferability of Options. Options shall not be transferable by the
optionee other than by will or under the laws of descent and distribution, and shall
be exercisable, during his lifetime, only by the optionee.

 

9.             Termination. Except as may be otherwise expressly
provided herein, each Option, to the extent it shall not previously have been
exercised, shall terminate on the earliest of the following:

 

(a)           On the last day of the thirty day period
commencing on the date on which the optionee ceases to be a member of the
Board, for any reason other than the death or disability of the optionee or his
resignation after five years of service;

 

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(b)           On the last day of the one year period
commencing on the date on which the optionee ceases to be a member of the Board
because of permanent disability;

 

(c)           On the last day of the one year period
commencing on the date of the optionee’s death while serving as a member of the
Board (during which period the executor or administrator of the optionee’s
estate or the person or persons to whom the optionee’s Option shall have been
transferred by will or the laws of descent or distribution, shall be entitled
to exercise the Option in respect of the number of shares that the optionee
would have been entitled to purchase had the optionee exercised the Option on
the date of his death);

 

(d)           On the last day of the one year period
commencing on the date an optionee who has had at least five years of service
on the Board resigns from the Board; and

 

(e)           Ten years after the date of grant of such
Option.

 

10.           Requirements of Law. The Company shall not be required to sell
or issue any shares under any Option if the issuance of such shares shall
constitute a violation by the optionee or the Company of any provisions of any
law or regulation of any governmental authority. Each Option granted under the
Plan shall be subject to the requirements that, if at any time the Board or the
Committee shall determine that the listing, registration or qualification of
the shares subject thereto upon any securities exchange or under any state or
federal law of the United States or of any other country or governmental
subdivision thereof, or the consent or approval of any governmental regulatory
body, or investment or other representations, are necessary or desirable in
connection with the issue or purchase of shares subject thereto, no such Option
may be exercised in whole or in part unless such listing, registration,
qualification, consent, approval or representation shall have been effected or
obtained free of any conditions not acceptable to the Board. If required at any
time by the Board or the Committee, an Option may not be exercised until the
optionee has delivered an investment letter to the Company. In addition,
specifically in connection with the Securities Act of 1933 (as now in effect or
hereafter amended), upon exercise of any Option, the Company shall not be
required to issue the underlying shares unless the Committee has received
evidence satisfactory to it to the effect that the holder of such Option will
not transfer such shares except pursuant to a registration statement in effect
under such Act or unless an opinion of counsel satisfactory to the Company has
been received by the Committee to the effect that such registration is not
required. Any determination in this connection by the Committee shall be final,
binding and conclusive. In the event the shares issuable on exercise of an
Option are not registered under the Securities Act of 1933, the Company may
imprint on the certificate for such shares the following legend or any other
legend which counsel for the Company considers necessary or advisable to comply
with the Securities Act of 1933:

 

“The shares of stock
represented by this certificate have not been registered under the Securities
Act of 1933 or under the securities laws of any state and may not be sold or
transferred except upon such registration or upon receipt by Rush
Enterprises, Inc., a Texas corporation (the “Corporation”) of an opinion
of counsel satisfactory, in form and substance to the Corporation, that
registration is not required for such sale or transfer.”

 

The Company may, but shall
in no event be obligated to, register any securities covered hereby pursuant to
the Securities Act of 1933 (as now in effect or as hereafter amended) and, in
the event any shares are so registered, the Company may remove any legend on certificates
representing such shares. The Company shall not be obligated to take any other
affirmative action in order to cause the exercise of an Option or the issuance
of shares pursuant thereto to comply with any law or regulation of any
governmental authority.

 

11.           No Rights as Shareholder. No optionee shall have rights as a
shareholder with respect to shares covered by his Option until the date of
issuance of a stock certificate for such shares; and, except as otherwise
provided in Paragraph 12 hereof, no adjustment for dividends, or
otherwise, shall be made if the record date therefor is prior to the date of
issuance of such certificate.

 

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12.           Changes in the Company’s
Capital Structure. In the
event of any stock dividends, stock splits, recapitalizations, combinations,
exchanges of shares, mergers, consolidation, liquidations, split-ups,
split-offs, spin-offs, or other similar changes in capitalization, or any
distribution to shareholders, including a rights offering, other than regular
cash dividends, changes in the outstanding stock of the Company by reason of
any increase or decrease in the number of issued shares of Common Stock
resulting from a split-up or consolidation of shares or any similar capital
adjustment or the payment of any stock dividend, any share repurchase at a
price in excess of the market price of the Common Stock at the time such
repurchase is announced or other increase or decrease in the number of such
shares, the Committee shall make appropriate adjustment in the aggregate number
and kind of shares authorized by the Plan, in the number and kind of shares
covered by Options subsequently granted under Paragraph 4 and in the number,
kind and price of any outstanding Options granted under the Plan (or, if deemed
appropriate, the Committee may make provision for a payment of cash or property
to the holder in cancellation of an outstanding Option with respect to which
Common Stock has not been previously issued); provided, however, that no such
adjustment shall increase the aggregate value of any outstanding Option.

 

In the event of any
adjustment in the number of shares covered by any Option, any fractional shares
resulting from such adjustment shall be disregarded and each such Option shall
cover only the number of full shares resulting from such adjustment.

 

13.           Amendment or Termination of
Plan. The Board may at any
time and from time to time modify, revise or amend the Plan in such respects as
the Board may deem advisable in order that the Options granted hereunder may
conform to any changes in the law or in any other respect that the Board may
deem to be in the best interests of the Company; provided, however, that
without approval by the shareholders of the Company, no such amendment shall
make any change in the Plan for which shareholder approval is required in order
to comply with any rules for listed companies promulgated by any national
securities exchange on which the Common Stock is traded or any other applicable
rule or law. Without limiting the foregoing, the Board may, in its sole
discretion and without further approval by the shareholders of the Company,
amend the Plan to increase or decrease the number of shares of Common Stock
covered by Options subsequently granted under Paragraph 4. All Options granted
under the Plan shall be subject to the terms and provisions of the Plan and any
amendment, modification or revision of the Plan shall be deemed to amend,
modify or revise all Options outstanding under the Plan at the time of the
amendment, modification or revision. The Board may terminate the Plan at any
time. The rights of any optionee with respect to any Option granted under the
Plan that is outstanding at the time of the termination of the Plan shall not
be affected solely by reason of the termination of the Plan and shall continue
in accordance with the terms of the Option and of the Plan.

 

14.           Written Agreement. Each Option granted hereunder shall be
embodied in a written option agreement, which shall be subject to the terms and
conditions prescribed above, and shall be signed by the optionee and by the
appropriate officer of the Company for and in the name and on behalf of the
Company. Such an option agreement shall contain such other provisions as the
Committee in its discretion shall deem advisable.

 

15.           Indemnification of
Committee. The Company shall
indemnify each present and future member of the Committee against, and each
member of the Committee shall be entitled without further act on his part to
indemnity from the Company for, all expenses (including the amount of judgments
and the amount of approved settlements made with a view to the curtailment of
costs of litigation, other than amounts paid to the Company itself) reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his being or having been a
member of the Committee, whether or not he continues to be such member of the
Committee at the time of incurring such expenses; provided, however, that such
indemnity shall not include any expenses incurred by any such member of the
Committee (a) in respect of matters as to which he shall be finally
adjudged in any such action, suit or proceeding to have been guilty of gross
negligence or willful misconduct in the performance of his duty as such member
of the Committee, or (b) in respect of any matter in which any settlement
is effected, to an amount in excess of the amount approved by the Company on
the advice of

 

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its legal counsel; and
provided further, that no right of indemnification under the provisions set
forth herein shall be available to or enforceable by any such member of the
Committee unless, within sixty (60) days after institution of any such
action, suit or proceeding, he shall have offered the Company, in writing, the
opportunity to handle and defend same at its own expense. The foregoing right
of indemnification shall inure to the benefit of the heirs, executors or
administrators of each such member of the Committee and shall be in addition to
all other rights to which such member of the Committee may be entitled to as a
matter of law, contract, or otherwise. Nothing in this Paragraph 15 shall
be construed to limit or otherwise affect any right to indemnification, or
payment of expense, or any provisions limiting the liability of any officer or
director of the Company or any member of the Committee, provided by law, the
Articles of Incorporation of the Company or otherwise.

 

16.           Effective Date of Plan. The Plan shall become effective the first
business day following its approval by the shareholders of the Company.

 

5Exhibit 10.1

AGREEMENT
AND PLAN OF MERGER

This AGREEMENT AND
PLAN OF MERGER, dated as of May 11, 2006 (this “Agreement”),
is entered into by and between C&T
Enterprises, Inc., a corporation organized and existing under
the laws of the Commonwealth of Pennsylvania (“C&T”), C&T Acquisition, Inc., a
newly-formed New York corporation and wholly owned subsidiary of C&T (“Merger
Sub”), and Corning Natural Gas
Corporation, a corporation organized and existing under the laws of
the State of New York (the “Company”). Capitalized terms used herein
have the meanings ascribed to them in the sections cross-referenced in Article XI
below.

W I T N E S S E T H

WHEREAS, C&T,
Merger Sub and the Company have deemed it advisable and fair to and in their
respective best interests and the best interests of their respective
shareholder groups for C&T to acquire all of the shares of capital stock of
the Company issued and outstanding as of the Effective Time (all of the shares
of capital stock of the Company issued and outstanding as of Effective Time
being hereinafter referred to as the “Outstanding Shares”) by the merger
of Merger Sub with and into the Company (the “Merger”) upon the terms
and subject to the conditions set forth herein;

WHEREAS, in
furtherance of the foregoing, each of C&T, Merger Sub and the Company
intend to seek resolutions from their respective boards of directors approving
this Agreement, declaring its advisability and approving the Merger in
accordance with, in the case of C&T, the Pennsylvania Business Corporation
Law (the “PBCL”) and, in the case of Merger Sub and the Company, the New
York Business Corporation Law (the “NYBCL”), each upon the terms and
subject to the conditions set forth herein;

WHEREAS, this
Agreement is intended to constitute the plan of merger required by Section 902
of the NYBCL; and

WHEREAS, C&T,
Merger Sub and the Company desire to make certain representations, warranties,
covenants and agreements in connection with, and establish various conditions
precedent to, the Merger.

NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants and agreements herein
contained, and intending to be legally bound hereby, C&T, Merger Sub and
the Company hereby agree as follows:

ARTICLE
I.

THE MERGER

1.01.        The Merger. On the terms and subject
to the conditions set forth in this Agreement, and in accordance with the NYBCL
and PBCL, at the Effective Time, the Company shall be merged with Merger Sub,
and as a result of the Merger, the separate corporate existence of the Merger
Sub shall cease, and the Company shall continue as the surviving corporation of
the Merger (the “Surviving Corporation”).

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1.02.        Closing; Effective Time.

(a)           The closing of the transactions
contemplated by this Agreement (the “Closing”) shall take place at the
offices of McNees Wallace & Nurick, 
LLC, 100 Pine Street, Harrisburg, Pennsylvania or at such other place as
is mutually agreeable to the parties, at 10:00 a.m. local time no later
than the third business day following satisfaction or waiver of all of the
conditions to the Closing set forth in Article VIII, other than the
requirement that certain documents be delivered at or prior to the Closing (“Closing
Date”).

(b)           On the Closing Date, the parties
hereto shall cause the Merger to be consummated by executing and filing a
Certificate of Merger with the Secretary of State of the State of New York in
accordance with the terms of the NYBCL and making all other filings or
recordings required by applicable Laws in connection with the Merger (such
filing documents being hereinafter collectively referred to as the “Merger
Documents”). The Merger shall become effective at such time as the
appropriate Merger Documents are duly filed with the Secretary of State of the
State New York or at such later time as is specified in the Merger Documents in
accordance with the NYBCL (the “Effective Time”).

1.03.        Effect of the Merger. At the
Effective Time, the effect of the Merger shall be as provided in this
Agreement, the Merger Documents and the applicable provisions of the NYBCL. Without
limiting the generality of the foregoing, and subject thereto, at and as of the
Effective Time, by virtue of the Merger, all the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger
Sub shall become the debts, liabilities and duties of the Surviving
Corporation.

1.04.        Certificate of Incorporation; Bylaws.
At and as of the Effective Time and until thereafter amended as provided by
Law, by virtue of the Merger: (a) the Certificate of Incorporation of the
Company shall be the Certificate of Incorporation of the Surviving Corporation,
except that Article I may be amended, in the sole discretion of C&T
and Surviving Corporation, to change the name of Surviving Corporation, and (b) the
Bylaws of the Company shall be the Bylaws of the Surviving Corporation, except
that the Bylaws of the Company shall be amended to reflect any change of name
of Surviving Corporation.

1.05.        Directors and Officers. The
directors of Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation, and the officers of Merger Sub immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified
or until their earlier death, resignation or removal.

1.06.        Taking
of Necessary Action; Further Action. Each of C&T, Merger Sub and
the Company shall use commercially reasonable efforts to effectuate the Merger
under the NYBCL at the time specified in Section 1.02(a) hereof. If,
at any time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest 

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the Surviving Corporation with full right, title and
possession to all properties, rights, privileges, powers and franchises of
either of Merger Sub or the Company, the officers of the Surviving Corporation
are fully authorized in the name of each of Merger Sub and the Company or
otherwise to take, and shall take, all such lawful and necessary action.

ARTICLE
II.

CONVERSION OF SECURITIES; MERGER CONSIDERATION; OTHER PAYMENTS

2.01.        Conversion of Securities. At the
Effective Time, by virtue of the Merger and without any further action on the
part of C&T, Merger Sub or the Company, pursuant to this Agreement, the
Merger Documents and the NYBCL:

(a)           Subject to the terms and conditions
of this Article II, each of the Outstanding Shares shall be converted into
the right to receive the applicable per-share portion of the Merger
Consideration upon the surrender of same pursuant to Section 2.03; provided,
however, that (i) any Outstanding Shares that are owned by the
Company as treasury stock or by any direct or indirect wholly owned subsidiary
of the Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof into the right to receive the
Merger Consideration and (ii) any Dissenting Shares shall be canceled and
extinguished and converted into the right to receive from C&T an amount per
Dissenting Share determined pursuant to Section 2.04. The Outstanding
Shares so converted are hereinafter collectively referred to as the “Transferred
Shares.”

(b)           Except as provided in Section 2.01(a) above,
all Outstanding Shares of the Company shall be cancelled at the Effective Time
and shall have no further force and effect, and each Shareholder shall
thereafter cease to have any rights with respect to such Outstanding Shares,
except for the right to receive, without interest thereon, the Merger
Consideration upon the surrender of same pursuant to Section 2.03.

(c)           Each share of common stock, $5.00 par
value, of Merger Sub (“Merger Sub Common Stock”) issued and outstanding
immediately prior to the Effective Time shall be converted into one validly
issued, fully paid and nonassessable share of common stock, $5.00 par value, of
the Surviving Corporation (the “Surviving Corporation Common Stock”). C&T
shall cause the number of shares of Merger Sub Common Stock outstanding
immediately prior to the Effective Time to equal the number of Transferred
Shares. Each certificate evidencing ownership of shares of Merger Sub Common
Stock immediately prior to the Effective Time shall evidence ownership of an
equal number of shares of Surviving Corporation Common Stock immediately
following the Effective Time.

2.02.        Merger Consideration.

(a)           Subject to the terms
and conditions of this Agreement, the per-share consideration for each
Transferred Share shall be $13.71, in cash, as adjusted pursuant to Section 2.02(f).
The aggregate merger consideration for all Transferred Shares shall be
$6,949,846, as adjusted pursuant to Section 2.02(e) (the “Merger
Consideration”).

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(b)           The Merger Consideration shall be
deposited with the Paying Agent (as defined in Section 2.03(a) below)
in such increments and at such times as specified pursuant to Section 2.03(a),
which deposit(s) shall be in full satisfaction of C&T’s consideration
payment obligation under this Agreement.

(c)           From and after the Effective Time,
the share transfer books of the Company shall be closed and no registration of
any transfers of any shares of the Company thereafter be made in the records of
the Company. If, after the Effective Time, certificates are presented to the
Surviving Corporation, they shall be cancelled and exchanged for the Merger
Consideration.

(d)           After the Effective Time, no
dividends, interest or other distributions shall be paid with respect to the
Transferred Shares. At all times after the Effective Time and until surrendered
as contemplated by Section 2.03, each Transferred Share shall be deemed to
represent only the right to receive upon such surrender the applicable portion
of the Merger Consideration, and the Shareholders shall have no other rights as
shareholders of the Company or the Surviving Corporation with respect to the
Transferred Shares.

(e)           The $6,949,846 aggregate figure
specified in Section 2.02(a) shall be (i) INCREASED dollar for
dollar, for each dollar of cash reflected on the financial statements of  Corning Natural Gas Appliance Corporation as
of the Effective Time subject to reduction pursuant to this Section; and (ii) INCREASED
by the total amount, if any, of excise tax payments under Internal Revenue Code
Section 280G that the Surviving Corporation would be able to avoid by
reason of amendment to existing compensation (including severance) arrangements
with any Company officers as set forth in Section 3.16(d) of the
Company Disclosure Schedule (as hereinafter defined) and the total amount, if
any, of savings in payments under compensation arrangements with any company
officers that the Surviving Corporation realizes by virtue of such amendment to
the compensation arrangements referenced in the immediately preceding clause;
and (iii) DECREASED by the sum of (A) one-half (1/2) of the aggregate
fees and expenses of, or payable by, the Company and incurred and/or accrued
after February 13, 2006 and before the Closing in connection with the
Merger (including, without limitation, the costs of obtaining Shareholder
approval for the Merger, fees and expenses of Company legal counsel, fees and
expenses of financial advisors including brokerage fees and commissions, any
accountants’ and auditors’ fees and expenses and fees and expenses of any other
advisors engaged by the Company in connection with the Merger, including
without limitation costs of producing the compliance statement referenced in Section 8.01(s))
(the “Company Transaction Costs”) up to the aggregate of $800,000 of
Company Transaction Costs, and (B) an amount equal to the excess of such
Company Transaction Costs over $800,000. The Company shall provide at Closing
C&T a full, complete and  correct
itemized list of Company Transaction Costs, which list shall be attached hereto
as Exhibit 2.02(e).

(f)            The $13.71 per-share figure
specified in Section 2.02(a) shall be adjusted by taking net the
amount by which the $6,949,846 figure is adjusted pursuant to the adjusting
calculation specified in Section 2.02(e), above, and dividing same by
506,918.

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2.03.        Surrender and Exchange of Transferred
Shares.

(a)           C&T shall deposit or cause to be
deposited with a bank or trust company mutually agreeable to C&T and the
Company and pursuant to an agreement in form and substance reasonably
acceptable to C&T and the Company (the “Paying Agent”), on the
Effective Time, or thereafter, as and when needed, for exchange in accordance
with this Article II, an amount in cash sufficient to make the payments
of  the Merger Consideration (less (i) any
amounts withheld pursuant to Section 2.04 in the event there are any
Dissenting Shares and (ii) any amounts withheld pursuant to Section 2.05
in the event there is required withholding under applicable tax Laws) in
exchange for certificates representing Transferred Shares (the fund created by
such deposits from time to time being hereinafter referred to as the “Exchange
Fund”) and uncertificated Transferred Shares held in book-entry form (the “Uncertificated
Shares”), as evidenced on the Company’s stock ledger as of the Effective
Time. The Paying Agent shall invest the Exchange Fund as C&T directs. Any
net profit resulting from, or interest or income produced by, such investments
shall be payable to C&T. The Exchange Fund shall not be used for any other
purpose except as provided in this Agreement.

(b)           The Company shall furnish promptly to
C&T mailing labels or electronic files containing the names and addresses
of Persons indicated as record holders of Outstanding Shares (the “Shareholders”)
as of a recent date (same to be attached hereto as Exhibit  2.03(c)) and
of those persons becoming record holders of Outstanding Shares subsequent to
such date, together with copies of all lists of Shareholders, security position
listings and computer files and all other information in the Company’s
possession or control regarding the beneficial owners of shares of Outstanding
Shares (collectively, “Shareholder List”), and shall furnish to both the
Paying Agent and C&T such information and assistance (including updated
lists of Shareholders, security position listings and computer files) as either
may reasonably request for use in communicating to the Shareholders, including
without limitation, updates of the Shareholder List (pursuant to the Company’s
general obligation under Section 5.07) immediately prior to the Company’s
dissemination of the Company Proxy Statement and immediately prior to the
Closing Date. The Company acknowledges and agrees that the Paying Agent,
C&T, Merger Sub, and the Surviving Corporation shall be entitled to rely
solely on Shareholder List prepared from the stock ledger of the Company as of
the Effective Time for purposes of determining the record holders of
Outstanding Shares. Subject to the requirements of applicable Laws, and except
for such steps as are necessary to disseminate any documents necessary to
consummate the Merger, C&T shall treat any information contained in any
such labels, listings and files as Confidential Information pursuant to Section 12.01(b).

(c)           Promptly after the Effective Time,
C&T shall cause the Paying Agent to mail to each holder of Transferred
Shares appearing on the updated Shareholder List: (i) a notice of
effectiveness of the Merger, (ii) a letter of transmittal, which shall
specify that delivery shall be effected, and risk of loss and title to such
Transferred Shares shall pass, only upon proper delivery of the transferor’s stock
certificate to the Paying Agent and shall be in such form and shall have such
other provisions as the Paying Agent may reasonably specify including, without
limitation, a warranty of the holder’s title to the 

 5
 

 

Transferred Shares (the “Letter of Transmittal”),
and (iii) such other materials and instructions as C&T deems
appropriate for use in effecting the surrender of the certificates and the
exchange of Transferred Shares for payment of the Merger Consideration.
pursuant to Section 2.02 hereof. Upon the receipt by the Paying Agent of
the certificate(s) representing Transferred Shares, free and clear of all
Liens, together with a Letter of Transmittal, duly completed and validly
executed in accordance with the instructions thereto, and other appropriate
materials and instructions for use in effecting the exchange of Transferred
Shares for payment of the Merger Consideration, the Paying Agent shall cause to
be delivered to the Person(s) in whose name such certificate(s) shall
have been issued, or to such Person(s) as such Person(s) shall direct
in writing in the Letter of Transmittal, a check representing the amount of
cash which such holder has the right to receive in respect of the Transferred
Shares surrendered pursuant to the provisions of this Section 2.03, after
giving effect to any required withholding Taxes pursuant to Section 2.05,
and the Transferred Shares represented by the certificate(s) so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of Transferred Shares which are not registered in the transfer
records of the Company, the consideration to be paid to such holder of
Transferred Shares pursuant to Section 2.02 hereof may be issued to such a
transferee if the certificate(s) representing such Transferred Shares is
presented to the Paying Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer Taxes have been paid or, alternatively, payments of such transfer Tax
to the Payment Agent.

(d)           If any certificate representing
Transferred Shares shall have been lost, stolen or destroyed, upon the making
of an affidavit of that fact, in form and substance acceptable to C&T, by
the Person claiming such certificate to be lost, stolen or destroyed, and
complying with such other conditions as C&T may reasonably impose
(including the execution of an indemnification undertaking or the posting of an
indemnity bond or other surety in favor of C&T with respect to the
certificate alleged to be lost, stolen or destroyed), C&T will deliver to
such Person, or will cause the Paying Agent to deliver to such Person, in
accordance with this Article II, the portion of the Merger Consideration
to which the Person is entitled with respect to the Transferred Shares represented
by such lost, stolen or destroyed certificate.

(e)           Any Uncertificated Shares (other than
Uncertificated Shares held by C&T, Merger Sub, any wholly-owned subsidiary
of C&T or Merger Sub, in the treasury of the Company or by any wholly-owned
Subsidiary of the Company or which are Dissenting Shares) shall be deemed
surrendered to the Paying Agent at the Effective Time and each record holder
thereof shall be entitled to receive the per-share Merger Consideration
multiplied by the number of Uncertificated Shares formerly represented by the
associated book-entries for the record holder, without any action on the part
of such holder. The Company acknowledges and agrees that C&T, Merger Sub
and the Surviving Corporation shall rely solely on the stock ledger of the
Company as of the Effective Time for purposes of determining the record holders
of Uncertificated Shares. If the Merger Consideration (or any portion thereof)
is to be delivered to any Person other than the Person in whose name the
book-entry formerly representing Uncertificated Shares surrendered therefor is
recorded, it shall be a condition to such right to receive such 

 6
 

 

Merger Consideration that the Uncertificated
Share(s) so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the Person whose Transferred Shares have been
surrendered shall pay to the Paying Agent any transfer or other similar Taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Uncertified Share(s) surrendered as
indicated by the book-entry, or shall establish to the satisfaction of the
Paying Agent that such transfer Tax has been paid or is not applicable.

(f)            All funds held by the Paying Agent
in the Exchange Fund for payment to the holders of unsurrendered certificates
(or Uncertificated Shares not presented for payment) at the end of six (6) months
from the Effective Time shall be returned to C&T, after which time any
holder of unsurrendered certificates (or Uncertificated Shares not presented
for payment) shall look as a general creditor only to the Surviving Corporation
for payment of such funds to which such holder may be due, subject to
applicable Laws.

(g)           C&T shall not be liable to any
former holder of Transferred Shares for any amount of Merger Consideration
delivered to a public official pursuant to applicable abandoned property,
escheat or similar Laws. If any certificates representing Transferred Shares
shall not have been surrendered (or in the case of Uncertificated Shares have
not presented for payment) prior to two (2) years after the Effective Time
(or such earlier date as shall be immediately prior to the date that such
unclaimed funds would otherwise become subject to any abandoned property,
escheat or similar Laws) unclaimed funds payable with respect to such
certificates (or Uncertificated Shares) shall, to the extent permitted by
applicable Laws, become the property of the Surviving Corporation, free and
clear of all claims or interest of any Person previously entitled thereto.

2.04.        Dissenting Shares.

(a)           For purposes of this Agreement, the
term “Dissenting Shares” means any Outstanding Shares with respect to
which dissenters’ rights apply under Section 910 of the NYBCL and held by
a Shareholder who (i) has not voted in favor of the Merger or consented
thereto in writing, (ii) has demanded properly in writing fair value for
such Outstanding Shares in accordance with Section 623 of the NYBCL, and (iii) has
not withdrawn such demand or otherwise lost such Shareholder’s right to receive
the fair value of such Shareholder’s Dissenting Shares in accordance with Section 623
of the NYBCL.

(b)           Notwithstanding any provision of this
Agreement to the contrary, holders of Dissenting Shares shall be entitled to
receive payment of the fair value of such Dissenting Shares in accordance with
the provisions of Sections 623 and 910 of the NYBCL unless and until such
holders fail to perfect or effectively withdraw or otherwise lose their rights
to payment of fair value under the NYBCL. If, after the Effective Time, any
such holder fails to perfect or effectively withdraws or otherwise loses such
right, such Dissenting Shares shall thereupon be treated as if they had been
canceled, extinguished and converted into, as of the Effective Time, and
represent, the right to receive payment of the portion of the Merger
Consideration to be paid therefor pursuant to Section 2.01(a), and such
shares shall not be deemed to be Dissenting Shares. None of 

 7
 

 

C&T, the Merger Sub, the Company or the
Surviving Corporation shall be liable for any failure of any holder of
Outstanding Shares to comply with such holder’s duties under this Section 2.04.

(c)           Notwithstanding anything to the
contrary contained in this Section 2.04, if (i) the Merger is rescinded
or abandoned or (ii) the Shareholders revoke the authority to effect the
Merger, then the right of any Shareholder to be paid the fair value of such
Shareholder’s Dissenting Shares pursuant to Sections 623 and 910 of the NYBCL
shall cease.

(d)           The Company shall give C&T prompt
notice of any demands received by the Company for dissenters’ rights. The
Company shall not, except with the prior written consent of C&T, make any
payment (including, without limitation, any payment under Section 623 of
the NYBCL) with respect to any demands for valuation or offer to settle or
settle any such demands.

(e)           The Merger Consideration to be
deposited with the Paying Agent pursuant to Section 2.03(a) shall be
reduced by the amount of Merger Consideration attributable to holders of
Dissenting Shares.

2.05.        Withholding. C&T
shall be entitled to withhold from the portion of the Merger Consideration
otherwise payable pursuant to this Agreement to those Shareholders for whom
withholding, as discussed below, is appropriate, such amounts, if any, as it is
required to deduct and withhold under the Internal Revenue Code of 1986, as
amended, and the Treasury Regulations promulgated thereunder (the “Code”)
or any other provision of applicable tax Laws. To the extent that amounts are
so withheld by C&T, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the Transferred Shares
in respect of which such deduction and withholding was made.

ARTICLE
III.

REPRESENTATIONS
AND WARRANTIES OF

THE COMPANY, ROBINSON AND BARRY

As a material inducement to C&T and Merger Sub to
enter into this Agreement, with the understanding that C&T and Merger Sub
will be relying thereon in consummating the transactions contemplated hereby,
the Company and Thomas K. Barry (“Barry”) and Kenneth J. Robinson (“Robinson”),
each an adult individual, hereby jointly and severally represent and warrant to
C&T and Merger Sub that, except as set forth in the disclosure schedule
delivered by the Company to C&T on the date hereof (the “Company
Disclosure Schedule”) (which Company Disclosure Schedule sets forth the
exceptions to the representations and warranties contained in this Article III
under captions referencing the Sections of this Agreement to which such exceptions
apply):

3.01.        Incorporation and Corporate Power;
Qualification to Do Business; Governing Documents. The Company is a
corporation duly organized, validly existing and in good standing under the
Laws of the State of New York and has the corporate power and authority and all

 8
 

 

authorizations, licenses,
permits and certifications necessary to own and operate its properties and to
carry on its business as now conducted and presently proposed to be conducted. The
Company is not qualified to do business as a foreign corporation in any
jurisdiction, and neither the nature of its properties nor the conduct of its
business requires it to be so qualified. The Company has the requisite power
and authority (corporate or otherwise) to enter into and, subject to obtaining
the Shareholder Approval pursuant to Section 5.06, perform its obligations
under this Agreement and the other documents and agreements contemplated by
this Agreement (collectively, the “Transaction Documents”) to which the
Company is a party. The copies of the Certificate of Incorporation, Bylaws and
similar governing documents for the Company (collectively, “Governing
Documents”) furnished by the Company to C&T prior to the date hereof
reflect all amendments made thereto as of the date hereof and are correct and
complete. The Company is not in violation of any of the provisions of its
Governing Documents.

3.02.        Execution, Delivery; Valid and
Binding Agreements. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which the Company is a party
by the Company, and, subject to obtaining the Shareholder Approval pursuant to Section 5.06,
the consummation of the transactions contemplated hereby and thereby, have been
duly and validly authorized by all requisite action (corporate or otherwise),
and no other proceedings on the part of the Company are necessary to authorize
the execution, delivery or performance of this Agreement and such other
Transaction Documents. Each of this Agreement and each of the other Transaction
Documents to which the Company is a party has been duly executed and delivered
by the Company and, assuming due execution by C&T and Merger Sub,
constitutes the valid and binding obligation of the Company, enforceable in
accordance with its respective terms, except to the extent that enforceability
thereof may be limited by bankruptcy, insolvency, reorganization and other
similar Laws affecting the enforcement of creditors’ rights generally and by
general principles of equity.

3.03.        No Breach. The execution,
delivery and performance by the Company of this Agreement and the other
Transaction Documents to which the Company is a party, and the consummation by
the Company of the transactions contemplated hereby and thereby, do not
conflict with or result in any breach of any of the provisions of, constitute a
default (with notice or lapse of time or both) under, result in a violation of,
or result in the creation of a right of termination or acceleration or any Lien
or other encumbrance upon any assets or any of the Outstanding Securities of
the Company either under the provisions of (a) any note, bond, mortgage,
indenture, deed of trust or any license, franchise, permit, lease, agreement or
other instrument, commitment or obligation to which the Company or any of its
Subsidiaries is a party, or by which the Company or any of its Subsidiaries or
any of their respective properties is bound or affected, (b) the Governing
Documents or any duly adopted shareholder or director resolution of the Company
or (c) any foreign, federal, state or local law, statute, rule,
regulation, interpretation, position, ordinance, order, judgment, injunction or
decree of any Governmental Entity (collectively, “Laws”) to which the
Company, or any of the property held by the Company is subject, or otherwise. The
execution, delivery and performance by the Company of this Agreement and the
other Transaction Documents to which the Company is a party, and the
consummation by the Company of the transactions contemplated hereby and
thereby, does not give any Governmental Entity or other Person the right to
challenge any of the transactions contemplated hereby. “Lien” means a
mortgage, pledge, hypothecation, lien (statutory or otherwise), preference,
priority, security interest, security agreement, easement, covenant, 

 9
 

 

restriction, charge, claim, option, right of first
refusal, voting trust, proxy or other encumbrance of any kind or nature
whatsoever (including any conditional sale or other title retention agreement
and any lease having substantially the same effect as any of the foregoing and
any assignment or deposit arrangement in the nature of a security device). “Person”
means an individual, corporation, partnership, association, limited liability
company, trust, unincorporated organization, Governmental Entity, or other
entity or group, as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).

3.04.        Governmental Entities; Consents. Except
as set forth in Section 3.04 of the Company Disclosure Schedule, no filing
or registration with, observation of any waiting period with respect to, the
requirements of, or notification to, and no permit, authorization, consent,
approval or exemption of, or other action by, any court, arbitrator or other
foreign, federal, state or local governmental, regulatory or other
administrative body, authority, department, commission, board, bureau, agency
or instrumentality (each a “Governmental Entity”) or any other Person is
required to be obtained, made or given by the Company in connection with its
execution, delivery and performance of this Agreement, the other Transaction
Documents or the transactions contemplated hereby or thereby, other than the
obtaining the Shareholder Approval pursuant to Section 5.06.

3.05.        Subsidiaries. Each Subsidiary of
the Company is a corporation or limited liability company duly incorporated or
formed or an entity duly organized, and is validly existing and in good
standing under the law of its jurisdiction of incorporation or organization.
Each Subsidiary of the Company (a) has all powers and authority and all
governmental licenses, authorizations, consents and approvals required to own,
lease and operate its assets and to carry on its business as now conducted and (b) is
duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction where the character of the property owned,
leased or operated by it or the nature of its activities makes such
qualification or license necessary, except where the failure to have such power
or authority, or the failure to be so qualified or licensed would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. The Company is not subject to any material (for
these purposes “materiality” being defined as a financial commitment in excess
of $5,000) obligation or requirement to provide funds to or make any investment
(in the form of a loan, capital contribution or otherwise) in any Subsidiary. The
Company owns, directly or indirectly, each of the outstanding shares of capital
stock (or other ownership interests having by their terms ordinary voting power
to elect a majority of directors or others performing similar functions with
respect to such Subsidiary) of each of the Company’s Subsidiaries. Each of the
outstanding shares of capital stock of each of the Company’s Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and is owned,
directly or indirectly, by the Company free and clear of all Liens. There are
no outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale, purchase, repurchase or transfer of any securities of any
of the Company’s Subsidiaries, nor are there outstanding any securities that
are convertible into or exchangeable for any shares of capital stock of any of
the Company’s Subsidiaries, and neither the Company nor any of its Subsidiaries
has any obligation of any kind to issue any additional securities of any of the
Company’s Subsidiaries. Except for interests in the Subsidiaries, neither the
Company nor any of its Subsidiaries has any ownership interest in any entity.
For purposes of this Agreement, the word “Subsidiary” means, with
respect to any Person, any corporation, partnership, joint venture, 

 10
 

 

limited liability company or other legal entity of
which such Person (either alone or through or together with any other
Subsidiary) owns, directly or indirectly, 50% or more of the ownership
interests or voting rights with respect to the election of the board of
directors or other governing body of, such corporation or other legal entity.

3.06.        Capital Stock.

(a)           The authorized capital stock of the
Company consists solely of 1,000,000 shares of voting common stock, par value
$5.00, of which 506,918 shares are issued and outstanding as of the date of
this Agreement (“Common Stock”) and constitute the Outstanding Shares.
There are no shares of capital stock of the Company of any other class
authorized, issued or outstanding. No shares of capital stock of the Company
are owned by any Subsidiary of the Company. No shares of capital stock of the
Company are owned by the Company or held in treasury. Notwithstanding anything
contained in this Agreement to the contrary, the representations contained in
this Section 3.06 shall not be qualified, limited or modified in any
respect by any disclosure contained in the Company Disclosure Schedule or the
Company SEC Documents. All of the issued and outstanding shares of the Common
Stock are owned of record as set forth in the Company’s share ledger (and as
reflected in the Shareholder List).

(b)           All of the issued and outstanding
shares of Common Stock (i) are duly authorized, validly issued, fully paid
and nonassessable, (ii) were offered, sold, issued and delivered in
compliance with applicable federal and state securities Laws and (iii) are
not subject to, and were not issued in violation of, any preemptive rights or
any other third party rights created by statute, the Governing Documents or any
agreement to which the Company is a party or by which the Company is bound.

(c)           Other than the Common Stock, the
Company has no equity securities, securities containing any equity features,
bonds, debentures, notes or other indebtedness of any type of the Company
having the right to vote (or convertible into or exercisable for securities
having the right to vote) on any matters on which holders of capital stock of
the Company may vote, or any other instruments convertible into such equity
securities authorized, issued or outstanding, and there are no:

(i)            agreements or other rights or
arrangements existing which provide for the sale or issuance by the Company of
the capital stock of the Company;

(ii)           rights, subscriptions, warrants,
options, conversion rights, agreements or arrangements of any kind outstanding
to purchase, exchange, transfer, sell, register or otherwise acquire from the
Company any shares of capital stock or other securities of any kind of the
Company;

(iii)          voting trusts, proxies or other
agreements or understandings to which the Company or any of its Subsidiaries is
a party or is bound with respect to the voting of any shares of capital stock
of the Company; or

 11

 

(iv)          agreements or other obligations
(contingent or otherwise) which may require the Company to register, under the
Securities Act of 1933, as amended (together with the rules and
regulations thereunder, the “Securities Act”) or applicable state blue
sky Laws, repurchase, redeem or otherwise acquire any shares of the capital
stock of the Company;

and there are no agreements or other
obligations (contingent or otherwise) that may prohibit or restrict the Company’s
ability to do any of the foregoing.

(d)           The Company has registered all Outstanding Shares,
and all other Company securities currently issued and outstanding, under the
Securities Act, applicable state blue sky Laws, and the Exchange Act and has
registered itself under the Exchange Act. The Outstanding Securities are not, and have never been, listed on the Nasdaq
Stock Market, Inc.’s National Market
or a registered national or regional securities exchange in the United States
or elsewhere.

3.07.        Financial Statements; Reports.

(a)           The Company has delivered to C&T
true, correct and complete copies of (i) the unaudited, consolidating
balance sheet, as of March 31, 2006, of the Company (as updated pursuant
to Section 5.07 the “Latest Balance Sheet”) and the unaudited,
consolidating statement of income and cash flows of the Company for the
five-month period then ended (such statement of income and cash flows and the
Latest Balance Sheet, all as updated pursuant to Section 5.07 being
hereinafter referred to as the “Latest Financial Statements”) and (ii) the
audited balance sheets, as of September 30, 2003, 2004 and 2005,
respectively, of the Company and the audited statements of income and cash
flows of the Company for each of the year ended September 30, 2003, 2004
and 2005 (collectively, the “Annual Financial Statements”). The Latest
Financial Statements and the Annual Financial Statements are based upon the
information contained in the books and records of the Company and fairly and
correctly present the financial position of the Company, including without limitation,
Company income, expenses, assets and liabilities, as of the dates thereof and
results of operations for the periods referred to therein. The Annual Financial
Statements have been prepared in accordance with United States generally
accepted accounting principles (“GAAP”), consistently applied in accordance
with the Company’s historical practices insofar as such practices are
consistent with GAAP. The Latest Financial Statements have been prepared in
accordance with GAAP applicable to unaudited interim financial statements (and
thus may not contain all notes and may not contain prior period comparative
data which are required for compliance with GAAP), consistent with the Annual
Financial Statements, and reflect all adjustments necessary to a fair statement
of the financial condition and results of operations for the interim periods
presented.

(b)           All accounts, books and ledgers
related to the business of the Company are properly and accurately kept, are
complete in all material respects, and there are no material inaccuracies or
discrepancies of any kind contained or reflected therein (for these purposes “materiality”
being defined as omissions or inaccuracies having individual financial impact
of $5,000 or more). The Company does not have any of its records, 

 12
 

 

systems, controls, data, or information
recorded, stored, maintained, operated or otherwise wholly or partly dependent
on or held by any means (including any electronic, mechanical or photographic
process, whether computerized or not) which (including all means of access
thereto and therefrom) are not under the exclusive ownership (excluding
licensed software programs) and direct control of the Company.

(c)           The Company has filed with the SEC
all forms, reports, schedules, statements and other documents required to be
filed under the Exchange Act or the Securities Act (such documents, as
supplemented and amended since the time of filing, collectively, the “Company
SEC Documents”). The Company SEC Documents, including any financial
statements or schedules included in the Company SEC Documents, at the time
filed (and, in the case of registration statements and proxy statements, on the
dates of effectiveness and the dates of mailing, respectively, and, in the case
of any Company SEC Document amended or superseded by a filing prior to the date
of this Agreement, then on the date of such amending or superseding filing) (i) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (ii) complied, in all material respects, with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be. The consolidated financial statements of the Company included in the
Company’s SEC Documents at the time filed (and, in the case of registration
statements, on the dates of effectiveness and, in the case of any Company SEC
Document amended or superseded by a filing prior to the date of this Agreement,
then on the date of such amending or superseding filing) complied, in all
material respects, with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, were
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC),
and fairly present in all material respects (subject, in the case of unaudited
statements, to normal adjustments) the consolidated financial position (in the
case of statements of financial position) of the Company and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows (in the case of statements of income and cash flows,
respectively) for the periods then ended. None of the Company’s Subsidiaries is
subject to the periodic reporting requirements of the Exchange Act or required
to file any form, report or other document with the SEC, the Nasdaq Stock
Market, Inc.’s National Market, any stock exchange or any other comparable
Governmental Entity. Except as specifically provided in Section 3.07(b), “materiality,”
as used in this Section 3.07 means as defined in the Exchange Act and/or
the Securities Act.

3.08.        Absence of Undisclosed Liabilities.
The Company does not have any liabilities or obligations (whether accrued,
absolute, contingent, unliquidated or otherwise, whether due or to become due,
whether known or unknown, and regardless of when asserted) that are not
reflected on the Latest Balance Sheet or disclosed in the Annual Financial
Statements, other than (a) liabilities or obligations which have arisen
after the date of the Latest Balance Sheet in the ordinary course of business
of the Company exclusive of the
business of any Subsidiary or Affiliate of the Company, consistent with its
past custom and practice (“Ordinary Course of 

 13
 

 

Business”),
including in this instance the Company’s past custom and practice of estimating
liabilities or (b) executory obligations under Contracts heretofore
entered into. Without limiting the generality of the foregoing, the Latest
Balance Sheet contains, as of the dates thereof, all reserves required to be
established for compliance with GAAP or other appropriate provisions for
accrued income and other taxes, depreciation and the costs of all pension,
retirement, incentive, bonus, profit-sharing, vacation, holiday or other
plans or policies for the benefit of Company’s employees. There is no
reasonable basis for the assertion against the Company of any liability or
obligation of any nature or in any amount not fully disclosed , reflected or
reserved against in the Latest Balance Sheet other than (c) liabilities or
obligations which have arisen after the date of the Latest Balance Sheet in the
Ordinary Course of Business or are subject to change in the Ordinary Course of
Business and are listed in Section 3.08 of the Company Disclosure Schedule
or (d) executory obligations under Contracts heretofore entered into.

3.09.        No Material Adverse Effect. Except
as set forth in Section 3.09 of the Company Disclosure Schedule, since September 30,
2005, the Company has conducted its business in the Ordinary Course of
Business, and there has been no change, effect, fact, event or circumstance,
including, without limitation, any change affecting the business, customer,
employee, supplier, lender or Governmental Entity relations of the Company,
which individually or in the aggregate: (a) has had or may reasonably be
expected to have a material adverse effect on, or a material adverse change in,
as the case may be, the assets, liabilities, financial position, results of
operations, pricing or operating margins, business condition or prospects of
the Company; (b) impose on Company operations any term, condition,
restriction, imposed liability or other provision as referenced in Section 8.01(d);
(c) impose a Lien on any material Company asset or assets; or (d) would
prevent or materially delay the Company’s ability to consummate the
transactions contemplated hereby or hinder the Company’s ability to operate as
a going concern (any such change, effect, fact, event or circumstance, a “Material
Adverse Effect”). “Materiality,” as used in this Section 3.09 means,
in terms of financial issues, $100,000 and in terms of time, three (3) months.

3.10.        Absence of Certain Developments. Except
as set forth in Section 3.10 of the Company Disclosure Schedule, since September 30,
2005 and except for the transactions required under Section 5.11, the
Company has not:

(a)           borrowed any amount or incurred or
become subject to any liability in excess of $50,000, except (i) current
liabilities incurred in the Ordinary Course of Business and (ii) liabilities
under Contracts entered into in the Ordinary Course of Business;

(b)           subjected any of its assets with a
fair market value in excess of $50,000 to any Lien, except (i) liens for
current property taxes not yet due and payable, (ii) liens imposed by Law
and incurred in the Ordinary Course of Business for obligations not yet due to
carriers, warehousemen, laborers, materialmen and the like, (iii) liens in
respect of pledges or deposits under workers’ compensation Laws, (all of which
liens described in clauses (ii) and (iii) above in the aggregate are
less than $50,000) or (iv) liens set forth in Section 3.10(b) of
the Company Disclosure Schedule (all of which liens described in clauses (i)-(iv) being
hereinafter referred to collectively as “Permitted Liens”);

 14
 

 

(c)           discharged or satisfied any Lien or
paid any liability, in each case with a value in excess of $50,000, other than
current liabilities paid in the Ordinary Course of Business;

(d)           sold, assigned or transferred
(including, without limitation, transfers to any employee, Affiliate or
Shareholder) any tangible assets with a fair market value in excess of $50,000,
or canceled any debts or claims, in each case, except in the Ordinary Course of
Business. “Affiliate” with respect to any Person means a Person that
directly or indirectly, through one or more intermediaries, Controls, is
controlled by, or is under common control with, the first mentioned Person. “Control”
(including the terms “controlled by” and “under common control with”) means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of stock or other equity interest or as trustee or executor, by
Contract or credit arrangement or otherwise;

(e)           sold, assigned, pledged or
transferred (including, without limitation, transfers to any employee,
Affiliate or Shareholder) any Company Intellectual Property, Internal Use
Software or Databases;

(f)            waived any rights of material value
or suffered any material losses or material adverse changes in collection loss
experience, whether or not in the Ordinary Course of Business (for these
purposes “materiality” being defined as an amount in excess of $5,000);

(g)           declared, set aside or paid any
dividends or other distributions with respect to any shares of the capital
stock or other securities of the Company, or redeemed or purchased, directly or
indirectly, any shares of the capital stock, options or other securities of the
Company;

(h)           issued, sold or transferred any of
its equity securities, securities convertible into or exchangeable for its
equity securities or warrants, options or other rights to acquire its equity
securities, or any bonds or debt securities;

(i)            taken any other action or entered
into any other transaction other than in the Ordinary Course of Business, or
entered into any transaction with any Insider, other than employment
arrangements otherwise disclosed in this Agreement and the Company Disclosure
Schedule;

(j)            suffered any material theft, damage,
destruction or loss of or to any property or properties owned or used by it,
whether or not covered by insurance (for these purposes “materiality” being
defined as an amount in excess of $5,000);

(k)           made or granted any bonus or any
wage, salary or compensation increase  to any director, officer, employee,
or consultant, or made or granted any increase in any employee benefit plan or
other arrangement (including, but not limited to, the granting of contingent
stock awards, restricted stock and employee stock options, restricted stock, or
contingent stock awards, stock-appreciation rights, security-based performance
units, “phantom” stock or other security rights or other agreements,
arrangements or 

 15
 

 

commitments of any character - contingent or
otherwise - pursuant to which any Person may be entitled to receive any payment
or other value based on the revenues, earnings or financial performance, stock
price performance or other attribute of the Company or any of its Subsidiaries
or assets or calculated in accordance therewith, other than payments or
commissions to sales representatives of the Company in the Ordinary Course of
Business, collectively such programs being hereinafter referred to as “Equity
Arrangements”), or amended or terminated any existing employee benefit plan
or arrangement, or adopted any new employee benefit plan or arrangement or made
any commitment or incurred any liability to any labor organization;

(l)            made any single capital expenditure
or commitment therefor in excess of $50,000;

(m)          made any loans for borrowed money or
advances to, or guarantees for the benefit of, any officer, director,
shareholder or Affiliate of the Company (except for ordinary travel and
business expense payments) or other Person;

(n)           made charitable contributions or
pledges which in the aggregate exceed $10,000;

(o)           made any change in any tax or
financial accounting methods, principles, practices or elections from those
utilized in the preparation of the latest Tax Returns or Annual Financial
Statements except as required by GAAP; or

(p)           entered into any commitment (written
or oral, contingent or otherwise) to do any of the foregoing.

3.11.        No Disclosure of Confidential
Information. Since September 30, 2005, the Company has not disclosed
any Confidential Information to any Person (other than employees or advisors of
the Company and/or C&T and authorized representatives of C&T), other
than pursuant to confidentiality agreements restricting the use or further
disclosure of such information, which agreements are in full force and effect
and will be made available to C&T at Closing and are identified in Section 3.11
of the Company Disclosure Schedule. Neither the Company nor any broker or agent
of the Company has, since September 30, 2005, distributed any offering
memorandum or similar materials in connection with a possible sale of the
Company to any Person (outside of the Company or its agents or representatives
bound by obligations of confidentiality), other than C&T and authorized
representatives of C&T, except as identified in Section 3.11 of the
Company Disclosure Schedule.

3.12.        Title to, and Condition of,  Properties.

(a)           Te Company has good and marketable
title to the machinery, vehicles, equipment, merchandise, materials, inventory,
supplies, fixtures, underground installations and other tangible and intangible
personal property of every kind used in its businesses and not expressly
excluded from the Merger under Section 5.11 (“Personal Property”),  free and clear of all Liens except for Permitted
Liens; and no item of Personal Property is subject to any lease, sublease,
option, conditional sale agreement, 

 16
 

 

franchise, license or Contract pursuant to
which a third party may hold, use or claim any right or interest in or to such
Personal Property. Upon consummation of the Merger, the Surviving Corporation
will acquire good and marketable title to the Personal Property, free and clear
of all Liens except for Permitted Liens. Other than as to pipe scheduled for
replacement as previously disclosed to C&T or as projected by C&T (in a
projection heretofore provided to Company) as needing replacement (a
description of which is attached in Section 3.12 of the Company Disclosure
Schedule), all Personal Property of the Company used or usable in the Ordinary
Course of  Business is in operating
condition and repair, subject only to normal maintenance requirements. All
Personal Property is in the custody or control of the Company. No use of any
Tangible Property is in violation of any existing Laws.

(b)           Section 3.12 of the Company
Disclosure Schedule lists all of the real property owned, demised by leases,
subleases or other occupancy agreements (the “Leases”), currently
leased, used, managed or occupied by the Company (collectively the “Real
Property”), with annotation as to the nature of the rights (owned, leased,
managed, etc.) for each property so listed. The Real Property has access,
sufficient for the conduct of the business of the Company as now conducted or
as presently proposed by the Company to be conducted, to public roads and to
all utilities, including electricity, sanitary and storm sewer, potable water,
natural gas and other utilities, used in the operation of the business at that
location.

(c)           Except as set forth in Section 3.12
of the Company Disclosure Schedule, there are no management, service,
equipment, supply, maintenance, security, alarm, or concession agreements or
Contracts with respect to or affecting the Real Property.

(d)           All buildings and other improvements
on the Real Property (including all roads, parking areas, curbs, sidewalks,
sewers and other utilities) have been completed and installed in accordance
with the plans and specifications approved, to the extent required, by the
Governmental Entities having jurisdiction over such matters. Certificates of
occupancy and all other licenses, permits, authorizations and approvals
required by all Governmental Entities having jurisdiction and the requisite
certificates of the local board of fire underwriters (or other body exercising
similar functions) have been issued for the buildings and other improvements on
the Real Property, have been paid for, and are in full force and effect.

(e)           The past and continued maintenance,
operation and use of the buildings and other improvements on the Real Property
do not violate any use, zoning, building, health, fire or other law, ordinance,
order or regulation or any statement of occupancy issued for the Real Property.
There are no violations of any Federal, state, county or municipal law,
ordinance, order, regulation or requirement affecting any portion of the Real
Property, and no written notice of any such violation has been issued by any
Governmental Entity.

(f)            The Real Property was last
reassessed as set forth in Section 3.12 of the Company Disclosure
Schedule, and to the Knowledge of Company no assessments for public
improvements have been made or are proposed to be made, against the Real 

 17
 

 

Property which remain unpaid and all public
improvements ordered, commenced or completed prior to the Closing Date shall be
paid for in full by Company prior to the Closing Date.

(g)           Each parcel of the Real Property
constitutes one single parcel of ground adjacent to and with direct access to
each abutting street. All streets adjoining or traversing the Real Property
have been dedicated and accepted by the local municipal authorities.

(h)           All public utilities required for the
operation of the Real Property either enter the Real Property through adjoining
public streets, or if they pass through adjoining private land, do so in
accordance with valid public or private easements.

(i)            The Leases are in full force and
effect, and the Company holds a valid and existing leasehold interest under
each of the Leases. The Company has delivered to C&T complete and accurate
copies of each of the Leases (including all notices exercising renewal,
expansion, termination or other rights under the Leases), and none of the
Leases has been modified in any respect, except to the extent that the copies
delivered to C&T disclose such modifications. The Company has not leased or
sublet, as lessor, sublessor, licensor or the like, any of the Real Property. No
Lease is subject to any prime, ground or master lease, mortgage, deed of trust
or other Lien or interest which would entitle the interest holder to interfere
with or disturb the Company’s rights under the Lease while the Company is not
in default under the Lease (other than a Permitted Lien). The Company is not in
default, and no circumstances exist which, if unremedied, would, either with or
without notice or the passage of time or both, result in such default by the
Company under any of the Leases; nor, to the Knowledge of the Company, is any
other party to any of the Leases in default. “Knowledge” as it relates
to any Person means the actual knowledge of such Person if the Person is an
individual, or the knowledge of any officer of such Person if such Person is a
corporation, partnership, association, limited liability company, trust,
unincorporated organization, other entity or group, in each case, as such
knowledge has been obtained in the normal conduct of the business after the
exercise of reasonable diligence, including such knowledge as a reasonably
prudent person in similar business or ownership positions would have obtained
upon the exercise of reasonable diligence.

(j)            All of the buildings, fixtures,
leasehold improvements and other items of Personal Property necessary for the
conduct of the business of the Company as now conducted and presently proposed
to be conducted  are, except as disclosed
on Section 3.12 of the Company Disclosure Schedule, in operating
condition, taking into account normal wear and tear, free from any known
defects except such minor defects as are not substantial in character, amount
or extent and are usable in the Ordinary Course of Business. The Company owns,
or leases under valid leases, all buildings, fixtures, leasehold improvements
and other items of Personal Property necessary for the conduct of their
business as now conducted or presently proposed to be conducted.

(k)           Other than described in Section 3.12
of the Company Disclosure Schedule, the zoning for each parcel of Real Property
permits the presently existing improvements 

 18
 

 

and the continuation for the business
presently being conducted thereon as a conforming use. Other than described in Section 3.12
of the Company Disclosure Schedule, the Company has not received any notice of
any violation of any applicable zoning ordinance or other Law relating to the
operation of the Real Property, and the Company has not received any notice of
any such violation, or the operation thereof, or the existence of any
condemnation or eminent domain proceeding with respect to any of the Real
Property. The Real Property complies in all material respects with the American
with Disabilities Act (for these purposes “materiality” being defined as
violations that would require changes resulting in expenditures in excess of
$5,000).

(l)            Except for leased or licensed
property, the Company owns good and marketable title to each parcel of Real
Property, free and clear of all Liens, except for Permitted Liens.

3.13.        Bank Accounts. Section 3.13
of the Company Disclosure Schedule contains a complete and accurate list
setting forth (a) the name and location of each bank, trust company,
securities or brokerage firm, or other institution in or with which the Company
maintains any account, lock box arrangement or safe deposit box or vault or
otherwise maintains relations; (b) the names of all persons authorized by
the Company to draw thereon, have access thereto, or effect any transactions
with respect thereto; and (c) all proxies and powers of attorney or other
instruments granting the right to act on behalf of the Company with respect
thereto.

3.14.        Accounts
Receivable.

(a)           The accounts receivable and other
receivables reflected on the Latest Balance Sheet, and those arising in the
Ordinary Course of Business after the date thereof, are valid receivables that
have arisen from bona fide transactions in the Ordinary Course of Business, are
not subject to valid counterclaims or setoffs and, except as and to the extent
of the bad debt reserve reflected on the Latest Balance Sheet or as otherwise
set forth in Section 3.14 of the Company Disclosure Schedule, are
collectible in full in accordance with their terms.

(b)           All accounts receivable, to the
extent uncollected on the date hereof or on the Closing Date, have, and will
have, arisen in the Ordinary Course of Business; represent, and will represent,
valid and enforceable obligations of the debtor to the Company.

(c)           All payments received on account of
such receivables shall be applied first against the obligor’s oldest
outstanding undisputed invoices and obligations, unless otherwise designated in
writing by the obligor in which event its designation shall control as to the
application.

(d)           There are no reductions, rebates,
refunds, discounts, other customer right or claim, or other adjustments payable
or assessable in respect of any accounts receivable of the Company or amounts
previously collected by the Company and reflected as Company revenue
(regardless of when and how reflected as revenue), nor any defenses, right of
set-off, assignments, restrictions, liens or other encumbrances
enforceable by 

 19
 

 

third parties with respect to any of such accounts
receivable or amounts collected, except as described in Section 3.14 of
the Company Disclosure Schedule.

3.15.        Inventories.

(a)           All material items contained in the
inventories of the Company reflected in the Latest Balance Sheet, is or will be
on the Closing Date, in all material respects, of a quality and quantity
saleable in the Ordinary Course of Business at prevailing market price and are
valued on the Company’s books at cost (determined on a FIFO basis) (for these
purposes “materiality” being defined as an item of value in excess of $500).

(b)           The values of the merchandise
contained in the aforementioned inventories will reflect normal and consistent
inventory valuation policies of the Company.

(c)           Except as described in Section 3.15
of the Company Disclosure Schedule, purchase commitments for merchandise are
consistent with past practices, and purchase prices will not be in excess of
prevailing market prices at the time the purchase commitment was entered into
and sales commitments and commitments for services to be provided by the
Company are and will be at prices in excess of the prices used in valuing
inventory items or in providing such services, after allowing for all costs,
whether direct or indirect, and for a margin consistent with prior practice,
allowing for good faith and arm’s length promotions and discounts in the
Ordinary Course of Business.

(d)           Since September 30, 2005, no
inventory items or services have been sold or provided by the Company, except
through sales made in the Ordinary Course of Business, at prices which in the
aggregate are not less than prevailing market prices.

3.16.        Tax Matters.

(a)           Each of the Company (on its own
account and as a result of being a transferee or successor by Contract or
otherwise), any affiliated, combined or unitary group of which the Company is
or was a member, and any Plan, as the case may be (each, a “Tax Affiliate”
and, collectively, the “Tax Affiliates”), has:  (i) timely filed (or has had timely
filed on its behalf) all returns, declarations, reports, estimates, information
returns, and statements (“Returns”) required to be filed or sent by it
in respect of any Taxes or required to be filed or sent by it by any taxing
authority or Governmental Entity having jurisdiction, and all such Returns are
true, correct, and complete; (ii) timely and properly paid (or has had
paid on its behalf) all Taxes due and payable, whether or not shown on such
Returns; (iii) established on its Latest Balance Sheet, in accordance with
GAAP, consistently applied in accordance with the Company’s historical
practices insofar as such practices are consistent with GAAP, reserves that are
adequate for the payment of any Taxes not yet due and payable, whether or not
shown on any Return; (iv) complied with all applicable Laws relating to
the withholding of Taxes and the payment thereof (including, without
limitation, withholding of Taxes under Sections 1441 and 1442 of the Code,
or similar provisions under any foreign Laws); and (v) timely and properly
withheld from individual employee wages and paid over to the 

 20
 

 

proper Governmental Entity all amounts
required to be so withheld and paid over under all applicable Laws.

(b)           There are no Liens for Taxes upon any
assets of the Company or of any Tax Affiliate, except Liens for Taxes not yet
due.

(c)           No deficiency for any Taxes has been
proposed, asserted or assessed against the Company or the Tax Affiliates that
has not been resolved and paid in full. No waiver, extension or comparable
consent given by the Company or the Tax Affiliates regarding the application of
the statute of limitations with respect to any Taxes or Returns is outstanding,
nor is any request for any such waiver or consent pending. Since January 1,
2003, there has been no Tax audit or other administrative proceeding or court
proceeding with regard to any Taxes or Returns of the Company or the Tax
Affiliates, nor is any such Tax audit or other proceeding pending, nor has
there been any notice to the Company or any Tax Affiliate by any taxing
authority regarding any such audit or other proceeding, nor, to the Knowledge
of the Company, is any such Tax audit or other proceeding threatened with
regard to any Taxes or Returns. The Company does not expect the assessment of
any additional Taxes of the Company or the Tax Affiliates and is not aware of
any unresolved questions, claims or disputes concerning the liability for Taxes
of the Company or the Tax Affiliates which would exceed the estimated reserves
therefor established on its books and records.

(d)           Except as listed in Section 3.16(d) of
the Company Disclosure Schedule, neither the Company nor any Tax Affiliate is a
party to any Contract that would result, separately or in the aggregate, in the
payment of any “excess parachute payments” within the meaning of Section 280G
of the Code, and the consummation of the transactions contemplated by this
Agreement will not be a factor causing payments to be made by the Company or
any Tax Affiliate that are not deductible (in whole or in part) under Section 280G
of the Code.

(e)           Neither the Company nor any Tax
Affiliate has requested any extension of time within which to file any Return;
however, if an extension has been requested for any Return, such Return has
been or will be filed by the extended due date.

(f)            No property of the Company or any
Tax Affiliate is property that the Company or any Tax Affiliates is or will be
required to treat as being owned by another person under the provisions of Section 168(f)(8) of
the Code (as in effect prior to amendment by the Tax Reform Act of 1986) or is “tax-exempt
use property” within the meaning of Section 168 of the Code.

(g)           Neither the Company nor any Tax
Affiliate is required to include in income any adjustment under Section 481(a) of
the Code by reason of a voluntary change in accounting method initiated by the
Company or any Tax Affiliate and neither the Company nor any Tax Affiliate has
Knowledge that the United States Internal Revenue Service (the “IRS”)
has proposed any such adjustment or change in accounting method.

 21

 

(h)           All transactions that could give rise
to an understatement of federal income tax (within the meaning of Section 6661
of the Code as it applied prior to repeal) or an underpayment of tax (within
the meaning of Section 6662 of the Code) were reported in a manner for
which there is substantial authority or were adequately disclosed (or, with
respect to Returns filed before the Closing Date, will be reported in such a
manner or adequately disclosed) on the Returns required in accordance with
Sections 6661(b)(2)(B) and 6662(d)(2)(B) of the Code.

(i)            The Company and the Tax Affiliates
are, and at all times have been, corporations or associations taxable as
corporations for United States income tax purposes.

(j)            All deductions claimed or reported
on all Returns of the Company and any Tax Affiliate on account of royalties or
similar fees payable with respect to any Intellectual Property of the Company
or any other party are allowable in full.

(k)           To the Knowledge of the Company, no
claim has ever been made by an authority in a jurisdiction where any of the
Company or the Tax Affiliates do not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.

(l)            The Company has not been part of a
consolidated group for Tax purposes with any person.

(m)          Neither the Company nor any Tax
Affiliate has participated in any reportable or listed transaction as defined
under Code Section 6011. If the Company or any Tax Affiliate has
participated in a reportable or listed transaction, such entity has properly disclosed
such transaction in accordance with the Tax applicable regulations.

(n)           All Taxes of the Company and the Tax
Affiliates which will be due and payable, whether now or hereafter, for any
period ending on, ending on and including or ending prior to the Closing Date,
shall have been paid by or on behalf of the Company or shall be reflected on
the Company’s books as an accrued Tax liability, either current or deferred,
the amount of which as of the date of the Latest Financial Statements is set
forth in Section 3.16(n) of the Company Disclosure Schedule.

(o)           For purposes of this Agreement, the
term “Tax” or “Taxes” means all taxes, charges, fees, levies, or
other assessments or impositions of any kind payable to any Governmental
Entity, including, without limitation, all net income, profits, gross income,
gross receipts, minimum, alternative minimum, sales, use, service, occupation,
ad valorem, net worth, value added, transfer, franchise, license, payroll,
employment, social security, Medicare, unemployment, withholding, disability,
workers’ compensation, excise, estimated, severance, stamp, occupation,
property, premium or other taxes or customs duties, fees, assessments, or
charges of any kind whatsoever, including, without limitation, all interest and
penalties thereon, and additions to tax or additional amounts imposed by any
taxing authority, domestic or foreign, upon the Company or any Tax Affiliate.

 22
 

 

3.17.        Contracts and Commitments.

(a)           Section 3.17 of the Company
Disclosure Schedule lists the following contracts, agreements, insurance
policies, certificates, riders, applications, enrollment forms, memoranda of
understanding or other understandings, whether oral or written (each, a “Contract”),
to which the Company is a party, which are currently in effect:

(i)            any joint venture or partnership
Contract;

(ii)           any Contract for the employment or
engagement of any officer, individual employee or other Person on a regular
full-time, regular part-time or consulting basis or relating to severance pay
for any such Person;

(iii)          any confidentiality Contract with any
employee, contractor or agent;

(iv)          any Contract relating to the voting or
control of the Outstanding Shares or the election of directors of the Company;

(v)           any Contract (including any
indenture) relating to the borrowing of money or placing a Lien on any of the
assets of the Company;

(vi)          any guaranty of any obligation for
borrowed money or otherwise;

(vii)         any lease Contract under which it is
lessor or lessee of any property, real or personal;

(viii)        any Contract or group of related
Contracts with the same party for the purchase of products or services under
which the undelivered balance of such products or services is in excess of
$50,000 over the remaining term of the Contract;

(ix)           any Contract having
regulatory implications with respect to any Governmental Entity;

(x)            any Contract or group of related
Contracts with the same party for the sale by the Company of products or
services under which the undelivered balance of such products or services has a
sales price in excess of $50,000 over the remaining term of the Contract;

(xi)           any Contract or
group of related Contracts with the same party not otherwise disclosed in Section 3.17(a) of
the Company Disclosure Schedule (other than any Contract or group of related
Contracts for the purchase or sale of products or services) continuing over a
period of more than six months from the date or dates thereof, not terminable
by it on 30 days’ or less notice without penalty and involving more than
$50,000 over the remaining term of the Contract;

 23
 

 

 

(xii)          any Contract which prohibits the
Company, or any Affiliate or any of their employees from freely engaging in any
business, or which prohibits the Company or any Affiliate from soliciting
customers, alternative suppliers or any other business, anywhere in the world,
including any Contract containing exclusivity provisions;

(xiii)         any Contract for the distribution of
the products or services of the Company (including any distributor, broker and
sales Contract);

(xiv)        any franchise Contract, marketing
Contract, or royalty Contract;

(xv)         any Contract or commitment for capital
expenditures in excess of $50,000;

(xvi)        any Contract for the sale of any capital
asset;

(xvii)       any Contract not otherwise disclosed in Section 3.17(a) of
the Company Disclosure Schedule involving material non-contingent payment
obligations by the Company (for these purposes “materiality” being defined as
an amount in excess of $5,000);

(xviii)      any Contract under which the rights of the
Company may be adversely affected as a result of transactions contemplated by
this Agreement;

(xix)         any power of attorney granted by the
Company to any regulatory authority or other Person;

(xx)          any Contract which provides a rate guaranty extending more
than one year after the date hereof;

(xxi)         any Contract terminable by any other party
thereto, by the giving of notice or otherwise, as a result of or following the
Merger; and

(xxii)        any Contract not otherwise disclosed in Section 3.17
of the Company Disclosure Schedule which has not been referenced as a Contract
elsewhere herein, is material to the business of the Company, taken as a whole,
or was not entered into in the Ordinary Course of Business (for these purposes “materiality”
being defined as a Contract, the loss of which or default with respect thereto
could reasonably be expected to have an adverse financial impact of the company
in excess of $50,000).

(b)           The Company has performed all
obligations required to be performed by it (other than obligations of an inconsequential
nature which would not individually or cumulatively give the other party
thereto the right to terminate, claim money damages in excess of  $10,000, obtain injunctive or other equitable
relief or declare a default) in connection with the Contracts required to be
disclosed in the Company Disclosure Schedule (whether or not under the caption
referencing this Section 3.17) and is not in receipt of any claim of
default, and no event has occurred which, but for the passage of 

 24
 

 

time or the giving of notice or both, would
constitute a default, under any such Contract. The Company has no present
expectation or intention of not fully performing any obligation (other than
obligations of an inconsequential nature which would not individually or
cumulatively give the other party thereto the right to terminate, claim money
damages in excess of  $10,000, obtain
injunctive or other equitable relief or declare a default) pursuant to any such
Contract or commitment required to be disclosed in the Company Disclosure
Schedule. To the Knowledge of the Company, there is no current breach or
anticipated breach by any other party to any such Contract.

(c)           Except as indicated in Section 3.17
to the Company Disclosure Schedule, each Contract is terminable by the Company,
at the Company’s sole and absolute discretion, on no more than thirty (30) days
notice without liability or penalty, other than payment of accrued but unpaid
Contract money obligations through the effective date of termination or (in the
case of Contracts related to Company indebtedness) payment of the principal
balance and accrued but unpaid interest through the effective date of
termination.

(d)           Prior to the date of this Agreement,
C&T has been supplied with a true and correct copy of each written Contract,
and a written description of each oral Contract, referred to in the Company
Disclosure Schedule (whether or not under the caption referencing this Section 3.17),
together with all amendments, waivers or other changes thereto.

(e)           To the Knowledge of Company, with
respect to any Contract whose loss, premature termination, default or
non-renewal would constitute a Material Adverse Effect, there is no indication
from the other party or parties thereto of a present intent to cause to happen,
or set of facts or circumstances, that could reasonably be expected to result
in, a loss, premature termination, default or non-renewal thereof. With respect
to any such Contract currently up for renewal, same shall be renewed without (i) additional
financial outlay or reduction in anticipated revenues (or increase in
anticipated costs) by Company, Surviving Corporation or C&T or (ii) any
material commitment of non-financial resources to accomplish same.

3.18.        Intellectual Property Rights.

(a)           Section 3.18 of
the Company Disclosure Schedule is a full and complete listing and description
of (i) all rights in patents, patent applications and patentable subject
matter, whether or not the subject of any application; trademarks, service
marks, trade names, trade dress, material logos, material slogans, material tag
lines, and other material designators of origin (all whether registered or
not); material software, whether in object code, source code or other form
(other than off-the-shelf computer programs or commercially available computer
programs licensed for a one-time fee or that have annual fees of $5,000 or
less); uniform resource locators, Internet domain name registrations and
Internet domain name applications; copyright applications, registered
copyrighted works and material unregistered copyrightable works (including
without limitation, proprietary software, books, written materials, prerecorded
video or audio tapes, and other copyrightable works); material trade secrets;
material know-how; and all 

 25
 

 

other material
intellectual and industrial property rights of every kind and nature and
however designated, whether arising by operation of Law, Contract, license or
otherwise currently owned by, licensed to or otherwise controlled by the
Company or used in, or developed for use in, their business as now conducted or
proposed by the Company to be conducted, without taking into account the
transactions contemplated hereby (collectively, the “Company Intellectual
Property”), and (ii) all Contracts that cover Company Intellectual Property
owned by a third party that, by third party permission, are used or held for
use by the Company in its business as presently conducted or proposed by the
Company to be conducted (without taking into account the transactions
contemplated hereby), and to the extent there is no written document covering
such licensed-in Company Intellectual Property, details of such Company
Intellectual Property and the licensor thereof. The Company Intellectual
Property listed in Section 3.18 of the Company Disclosure Schedule
constitutes all of the material intellectual property necessary for the
business of the Company now conducted or presently proposed to be conducted
(without taking into account the transactions contemplated hereby). “Materiality,”
as used in this section 3.18(a) means in the case of the value of an item,
the loss whereof could reasonably be expected to result in a Material Adverse
Effect or in the case of an infringement, where damages could reasonably be
claimed in excess of $5,000.

(b)           The Company owns and possesses all
right, title and interest, or holds a valid license, in and to all Company
Intellectual Property free and clear of any Lien (except for Permitted Liens),
without any conflict with the rights of others and has taken all action necessary
to protect the Company Intellectual Property. The Company is the official and
sole owner of record for all of the Company Intellectual Property owned by the
Company that is the subject of a pending application or an issued patent,
trademark, copyright, design right or other similar registration formalizing
exclusive rights (“Registered Intellectual Property”). There are no
royalties, fees, honoraria or other payments payable by the Company to any
Person by reason of the ownership, development, modification, use, license,
sublicense, sale, distribution or other disposition of the Company Intellectual
Property other than salaries and sales commissions paid to employees and sales
agents in the Ordinary Course of Business.

(c)           The Company is the sole legal and
beneficial owner of the registrations for the Internet domain names listed in Section 3.18
of the Company Disclosure Schedule (“Domain Names”), and such
registrations are free and clear of all Liens (except for Permitted Liens). The
Company is the official and sole owner of record of the registered trademarks
underlying each of the Domain Names. The Company has operated the websites
identified in Section 3.18 of the Company Disclosure Schedule (“Websites”).

(d)           All personnel, including employees,
agents, consultants and contractors, who have contributed to or participated in
the conception or development, or both, of the Company Intellectual Property on
behalf of the Company and all officers and technical employees of the Company
either (i) have been a party to “work-for-hire” arrangements or agreements
with the Company in accordance with applicable national and state law that has
accorded the Company full, effective, exclusive and original ownership of all
tangible and intangible property thereby arising, or (ii) have executed
appropriate instruments of assignment in favor of the Company as assignee that
have conveyed to the 

 26
 

 

Company effective and exclusive ownership of
all tangible and intangible property arising thereby, except for immaterial
failures of clause (i) or (ii) above.

(e)           Other than described in Section 3.18
of the Company Disclosure Schedule, the Company owns or has a valid and
enforceable right to use all computer software and systems used by the Company
in the operation of their business as presently conducted or proposed to be
conducted, without taking into account the transactions contemplated hereby (“Internal
Use Software”), without any conflict with the rights of others. The Company
does not use, rely on or contract with any Person to provide services bureau,
outsourcing or other computer processing services to the Company, in lieu of or
in addition to their use of the Internal Use Software.

(f)            The Company has the right to use all
databases the Company uses (the “Databases”), and the Company has not
received any written notice alleging that the Company’s use, reproduction or
distribution of the Databases infringes any third party’s rights. The Company
does not sell or license the Databases to third parties.

(g)           All of the Company Intellectual
Property rights are valid and enforceable and the Company has no Knowledge of
facts showing, and has received no written notice of any party asserting, that
any of the Company Intellectual Property rights are invalid or not enforceable.
To the Knowledge of the Company, the Company Intellectual Property has not been
infringed, misappropriated or conflicted by other Persons. No claim by any
third party contesting the validity of any such Company Intellectual Property
has been made, received, is currently outstanding or, to the Knowledge of the
Company, is threatened or reasonably expected to arise. Without limiting the
generality of the foregoing, all of the Company Intellectual Property rights
that are Registered Intellectual Property rights are in full force and effect
and all actions required to keep such rights pending or in effect or to provide
full available protection, including the payment of filing, examination,
annuity, and maintenance fees and the filing of renewals, statements of use or
working, affidavits of incontestability and other similar actions, have been
taken. No Registered Intellectual Property rights are the subject of any
interference, opposition, cancellation, nullity, re-examination or other
proceeding placing in question the validity or scope of such rights.

(h)           To the Knowledge of the Company, the
conduct of the Company’s businesses has not infringed, misappropriated or
conflicted with and does not infringe, misappropriate or conflict with
any:  rights in patents, patent applications
and patentable subject matter, whether or not the subject of an application;
trademarks, service marks, trade names, trade dress, and other designators of
origin, registered or unregistered; trade secrets; Internet domain names,
registrations or applications, uniform resource locators; copyright
applications, registered copyrighted works and material unregistered
copyrightable works (including without limitation, proprietary software, books,
written materials, prerecorded video or audio tapes and other copyrightable
work); know-how; or any other intellectual and industrial property rights of
every kind and nature and however designate owned by any third party (the “Third
Party Intellectual Property”). The Company has not received any written
notice of any infringement, misappropriation or violation by the Company of any
Third Party Intellectual Property.

 27
 

 

(i)            To the Knowledge of the Company, the
Company has not done anything to compromise the secrecy, confidentiality,
ownership, rights in or to, or value of any of the Company Intellectual
Property. The Company has taken all reasonable security measures to protect the
secrecy, confidentiality and value of the Company Intellectual Property.

3.19.        Litigation; Disputes over
Relationships.

(a)           There are no actions, claims, suits,
proceedings, mediations, orders, arbitrations or investigations pending or, to
the Knowledge of the Company, threatened against or directly affecting the
Company, at law or in equity, or before or by any Governmental Entity. There are
no actions, claims, suits, proceedings, mediations, orders, arbitrations or
investigations pending or, to the Knowledge of the Company, threatened or
reasonably expected to arise against the Company, seeking to enjoin or restrain
any of the transactions contemplated by this Agreement.

(b)           The Company is not subject to any
order of, consent decree, judgment, writ, injunction, decree, award,
conciliation agreement, settlement agreement or other similar written agreement
with, or pending or, to the Knowledge of the Company, threatened investigation
by, any Governmental Entity, or any judgment, order, writ, injunction, decree
or award of any Governmental Entity, including, without limitation,
cease-and-desist or other orders. To the Knowledge of Company there are no set
of facts existing or that reasonably could be expected to develop that could
give rise to and investigation by any Governmental Entity, or the issuance of
any judgment, order, writ, injunction, decree or award of any Governmental
Entity, including, without limitation, cease-and-desist or other orders, or the
assessment against the Company of any fine excise tax or monetary penalty of
any sort by any Governmental Entity.

(c)           There is no material dispute or
controversy existing between the Company and any of its customers with respect
to any product or service sold or furnished by the Company; and there is no
material dispute or controversy existing between the Company and any supplier
or other contractor with respect to any product or service purchased by the
Company from such person. “Materiality,” as used in this section 3.19(c) means
a dispute or controversy that reasonably could be expected to give rise to a
claim in excess of $10,000. The Company has no Knowledge that any existing
customer of the Company accounting for more than $50,000 in sales during the
last twelve months intends to terminate or materially reduce its purchases from
the Company.

(d)           None of the matters, if any, set
forth in Section 3.19 of the Company Disclosure Schedule, individually or
in the aggregate, will have or could reasonably be expected to have a Material
Adverse Effect.

3.20.        Employees.

(a)           Section 3.20 of the Company
Disclosure Schedule sets forth a true, correct and complete listing of all
Company employees, as well as independent contractors and leased employees (as
defined in Section 414(n) of the Code), as of the date hereof, 

 28
 

 

including their respective name, job title or
function, and job location, as well as a true, correct and complete listing of
the current salary or wage, incentive pay and bonuses, accrued vacation, and
the current status (as to leave or disability pay status, leave eligibility
status, full time or part time, exempt or nonexempt, temporary or permanent
status) of such employees. Other than as fully reflected or specifically
reserved against in accordance with GAAP in the Annual Financial Statements or
the Latest Financial Statements, the Company has not paid or promised to pay
any bonuses, commissions or incentives to any of its employees, including any
officer or director, except as set forth in Section 3.20 of the Company
Disclosure Schedule. Each Person who provides services to the Company or any
ERISA Affiliate is properly classified with respect to employment status for
all purposes, including, without limitation, employment, labor and Tax purposes.
The Company has delivered to C&T a true and complete copy of the employee
handbook, if any, applicable to the employees of the Company.

(b)           Except with respect to those Company
employees listed in Section 8.01(i)(ix), no officer or, to the Knowledge
of the Company, significant employee (whose departure would significantly
disrupt the provision of services by a department or function) of the Company
and no group of the Company’s employees has any plans to terminate his, her or
its employment.

(c)           The Company has complied in all
material respects with all Laws relating to the employment of labor, including
provisions thereof relating to wages, hours, equal opportunity, workers’
compensation, unemployment compensation, collective bargaining and the payment
of social security and other taxes (for these purposes “materiality” being
defined as violations that could reasonably result in a fine monetary penalty
or judgment in excess of $10,000).

(d)           The Company has no labor relations
problems or employment-related complaints or charges pending or, to the
Knowledge of the Company, threatened or reasonably expected to arise against
the Company with the Equal Employment Opportunity Commission, the United States
Department of Labor (the “DOL”), or any other comparable state or local
agency, and the Company’s labor relations are satisfactory.

(e)           Except as listed in Section 3.20
of the Company Disclosure Schedule, the Company is not a party to any
collective bargaining agreement or other labor union Contract applicable to
persons employed by the Company. The Company and its Subsidiaries are in
material compliance with the terms of all collective bargaining agreements to
which they are a party and all applicable Laws to which the Company, its
Subsidiaries and the employees or other Persons providing services to or on
behalf of the Company or any of its Subsidiaries, as the case may be, is
subject relating to the employment of labor or engagement of other service providers,
including all such applicable Laws relating to wages, hours, employment
standards, WARN Act, collective bargaining, immigration, discrimination, civil
rights, safety and health, and workers’ compensation.

 29

 

(f)            Except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company, (i) there are no controversies, strikes, work stoppages,
slowdowns, lockouts, arbitrations or other labor disputes pending or, to the
knowledge of the Company, threatened between the Company or any of its
Subsidiaries and any representatives (including unions and any bargaining unit)
of any of their employees, (ii) to the knowledge of the Company, there are
no organizational efforts presently being made involving any of the presently
unorganized employees of the Company or any of its Subsidiaries and (iii) there
are no pending or, to the knowledge of the Company, threatened complaints,
charges or claims against the Company or any of its Subsidiaries brought or
filed with any Governmental Authority, arbitrator or court based on, arising
out of, in connection with or otherwise relating to the employment or
termination of employment by the Company or any of its Subsidiaries of employees
or other Persons providing services to or on behalf of the Company or any of
its Subsidiaries.

(g)           There are no workers’ compensation
claims pending against the Company nor, to the Knowledge of the Company, are
there any facts that would give rise to such a claim or claims not covered by
workers’ compensation insurance.

(h)           To the Knowledge of the Company, no
employee, independent contractor or leased employee (as defined in Section 414(n) of
the Code) of the Company is subject to any secrecy or noncompetition agreement
or any other agreement or restriction of any kind that would impede the ability
of such employee to carry out fully the activities currently performed by such
employee in furtherance of the business of the Company.

(i)            No employee or former employee of
the Company has any claim with respect to any proprietary software used by the
Company or, to the Knowledge of the Company, any claim with respect to any
other Intellectual Property of the Company set forth in Section 3.18 of
the Company Disclosure Schedule.

3.21.        Employee Benefit Plans.

(a)           The term “Plan” means every
plan, fund, Contract, program and arrangement (formal or informal, whether
written or not) that the Company or any other ERISA Affiliate sponsors,
maintains or contributes to, is required to contribute to, or has or could
reasonably be expected to have any liability of any nature with respect to,
whether known or unknown, direct or indirect, fixed or contingent, for the
benefit of present or former employees of the Company and/or its ERISA
Affiliates (the “Employees”) including, without limitation, those
intended to provide:  (i) medical,
surgical, health care, hospitalization, dental, vision, life insurance, death,
disability, legal services, severance, sickness, accident or other welfare
benefits (whether or not defined in Section 3(1) of ERISA), (ii) pension,
profit sharing, stock bonus, retirement, supplemental retirement or deferred
compensation benefits (whether or not tax qualified and whether or not defined
in Section 3(2) of ERISA), (iii) bonus, incentive compensation
or Equity Arrangement (iv) salary continuation, paid time off,
supplemental unemployment, current or deferred compensation (other than current
salary or wages paid in the form of cash), termination pay, vacation or holiday
benefits (whether 

 30
 

 

or not defined in Section 3(3) of
ERISA). “ERISA” means the Employee Retirement Income Security Act of
1974, as amended. “ERISA Affiliates” means any trade or business
(whether or not incorporated) that is part of the same controlled group under,
common control with, or part of an affiliated service group that includes, the
Company, within the meaning of Code Section 414(b), (c), (m) or (o).

(b)           Section 3.21 of the Company
Disclosure Schedule sets forth each ERISA Affiliate and Plan by name.

(c)           Except as listed in Section 3.21 of the Company Disclosure Schedule, there are no Plans
subject to Title IV of ERISA or Code Section 412.

(d)           No employer other than the Company or
an ERISA Affiliate is permitted to participate or participates in the Plans. No
leased employees (as defined in Section 414(n) of the Code) or
independent contractors are eligible for, or participate in, any Plan.

(e)           There are no ERISA Affiliates, other
than the Company. Neither the Company nor any ERISA Affiliate has any liability
resulting from past membership in a Code Section 414 controlled group of
corporations. No Plan is a multiple employer plan or multiemployer plan under
Code Section 413(c) or 414(f).

(f)            Except as set forth in Section 3.21
of the Company Disclosure Schedule, there are no Plans which promise or provide
health, life or other welfare benefits to retirees or former employees of the
Company and/or its ERISA Affiliates, or which provide severance benefits to
Employees, except as otherwise required by Code Section 4980B or
comparable state statute which provides for continuing health care coverage. With
respect to any Plan so scheduled, Company has attached to Section 3.21 of
the Company Disclosure Schedule the most recent actuarial valuation report
which contains a true, correct and complete estimate of the Plan’s accrued
liability  based upon the facts existing
at the time of the valuation and professionally reasonable assumptions, where
assumptions are necessary.

(g)           No Plan that is intended to be
qualified under Section 401(a) of the Code has received or committed
to receive a transfer of assets and/or liabilities or spin-off from another
plan, except transfers which qualify as transfers from eligible rollover
distributions within the meaning of Code Section 402(c)(4).

(h)           With respect to all Plans, to the
extent that the following documents exist, the Company has furnished C&T
with true and complete copies of:  (i) the
most recent determination letter, if any, received by the Company and/or its
ERISA Affiliates from the IRS, (ii) all pending applications for rulings,
determinations, opinions, no action letters and the like filed with any
governmental agency (including the DOL and the IRS), (iii) the Annual
Report/Return (Form Series 5500) with financial statements, if any,
and attachments for the three most recent plan years, (iv) Plan documents,
summary plan descriptions, trust agreements, Insurance Contracts, service
agreements and all related Contracts and documents (including any employee
summaries and material employee 

 31
 

 

communications) and (v) all closing
letters, audit finding letters, revenue agent findings and similar documents.

(i)            Each Plan has at all times been
operated in compliance with ERISA, the Code, any other applicable Law
(including all reporting and disclosure requirements thereunder) and the terms
of such Plan. With respect to each Plan that is intended to be qualified under Section 401(a) and/or
4975(e)(7) of the Code, each such Plan has been determined by the IRS to be
so qualified, and each trust forming a part thereof has been determined by the
IRS to be exempt from tax pursuant to Section 501(a) of the Code. No
reason exists which would cause such qualified status to be revoked. No
non-exempt prohibited transactions under Section 406 or 407 of ERISA or Section 4975
of the Code have occurred with respect to any Plan.

(j)            No state of facts or conditions
exist which could be expected to subject the Company and/or any ERISA Affiliate
to any material liability (other than routine claims for benefits) with respect
to any Plan.

(k)           All contributions, premiums, fees or
charges due and owing to or in respect of any Plan for periods on or before the
Closing have been paid in full by the Company and its ERISA Affiliates prior to
the Closing in accordance with the terms of such Plan and all applicable Laws,
and no Taxes are owing as a result of any Plan.

(l)            The Company and its ERISA Affiliates
have not made or committed to make any material increase in contributions or
benefits under any Plan that would become effective either on or after the
Closing Date.

(m)          No Plan is currently under audit or
examination by the IRS or the DOL. There are no pending or, to the Knowledge of
the Company, threatened, audits, investigations, claims, suits, grievances or
other proceedings, and there are no facts that could reasonably give rise
thereto, involving, directly or indirectly, any Plan, or any rights or benefits
thereunder, other than the ordinary and usual claims for benefits by participants,
dependents or beneficiaries.

(n)           Except as set forth in Section 3.21
of the Company Disclosure Schedule, the events contemplated in this Agreement
will not trigger, or entitle any current or former employee of the Company to,
severance, termination, change in control payments or accelerated vesting under
any Plan and will not result in any Tax or other liability payable by any Plan
or, with respect to any Plan, by the Company or any ERISA Affiliate.

(o)           Benefits provided to participants
under each Plan (other than a tax qualified plan under Code Section 401(a) or
a plan established under Code Section 408(p)) are provided exclusively
from Insurance Contracts or the general assets of the Company and/or its ERISA
Affiliates. The value of all assets associated with each Plan funded other than
through such general assets of insurance policies is readily determinable on an
established market.

 32
 

 

(p)           Except as Section 3.21 of the
Company Disclosure Schedule, the Company and/or its ERISA Affiliates can
terminate each Plan without further liability to the Company and/or its ERISA
Affiliates. With respect to any Plan so scheduled, Company has attached to Section 3.21
of the Company Disclosure Schedule the most recent Actuarial Valuation Report
which contains a true, correct and complete estimate of the Plan’s accumulated
funding deficiency based upon the facts existing at the time of the valuation
and professionally reasonable assumptions, where assumptions are necessary. All
minimum funding payments required to amortize any such accumulated funding
deficiency were timely made in the amounts required. No action or omission of
the Company, any ERISA Affiliate or any director, officer, employee, or agent
thereof in any way restricts, impairs or prohibits C&T, Merger Sub or the
Company, any ERISA Affiliate or any successor from amending, merging, or
terminating any Plan in accordance with the express terms of any such Plan and
applicable Law, without further liability of the Company, except for liability
for accrued but unpaid participant claims.

(q)           Neither the Company nor any other
ERISA Affiliate has ever contributed to a “multiemployer plan” (as such term is
defined in Sections 3(37) or 4001(a)(3) of ERISA).

(r)            There are no facts or circumstances
that could reasonably be expected to, directly or indirectly, subject the
Company, any ERISA Affiliate to any (i) excise tax or other liability
under Chapters 43, 46 or 47 of Subtitle D of the Code, (ii) penalty
tax or other liability under Chapter 68 of Subtitle F of the Code or (iii) civil
penalty, damages or other liabilities arising under Section 502 of ERISA.

(s)           Neither the Company nor any ERISA
Affiliate has established or contributed to, is required to contribute to or
has or could reasonably be expected to have any liability of any nature,
whether known or unknown, direct or indirect, fixed or contingent, with respect
to any “voluntary employees’ beneficiary association” within the meaning of Section 501(c)(9) of
the Code, “welfare benefit fund” within the meaning of Section 419 of the
Code, “qualified asset account” within the meaning of Section 419A of the
Code, or “multiple employer welfare arrangement” within the meaning of Section 3(40)
of ERISA.

3.22.        Insurance. Section 3.22 of
the Company Disclosure Schedule lists and briefly describes each insurance
policy maintained by the Company for professional liability, errors and
omissions, directors and officers liability, property, general liability,
automobile liability, workers’ compensation, life insurance, fidelity, fiduciary
and other customary matters (collectively, the “Insurance Policies”),
correct and complete copies of which have been delivered to C&T. All of the
Insurance Policies are in full force and effect. The Insurance Policies are,
and all similar insurance policies maintained by the Company in the past five
years were, placed with insurers that were at the time of the placement
financially sound and reputable, and the Company has no knowledge that such
condition has changed, and are and were in amounts and had coverages that are
and were reasonable and customary for Persons engaged in businesses similar to
that engaged in by the Company. The Company (i) is not in default with
respect to its obligations under any of the Insurance Policies, (ii) has
not failed to give any notice of any claim under any Insurance Policy in due
and timely fashion, nor has any coverage for 

 33
 

 

current claims been denied, (iii) has no current
claims outstanding, and (iv) has made no claims for coverage since January 1,
2003, under any Insurance Policy.

3.23.        Affiliate Transactions. Other
than pursuant to this Agreement, no officer, director, employee, Affiliate or
to the Knowledge of the Company Shareholder, or any member of the immediate
family of any such officer, director, employee, Affiliate or to the Knowledge
of the Company Shareholder, of any of such person, or any entity in which any
of such persons owns any beneficial interest (other than any publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by any of such persons) (collectively “Insiders”), has any
Contract with the Company (other than any employment arrangements with
customary terms) or any interest in any property, real, personal or mixed,
tangible or intangible, used in or pertaining to the business of the Company
(other than ownership of Outstanding Securities). None of the Insiders has, or
holds a right to acquire, any direct or indirect equity interest in excess of
5% in any competitor, supplier or customer of the Company or in any Person from
whom or to whom the Company leases any property, or in any other Person with
whom the Company transacts business of any nature. For purposes of this Section 3.23,
the members of the immediate family of an officer, director, shareholder,
employee or Affiliate shall consist of the spouse, parents, children, siblings,
mothers- and fathers-in-law, sons- and daughters-in-law, and brothers- and
sisters-in-law of such officer, director, shareholder, employee or Affiliate.

3.24.        Customers and Suppliers.

(a)           Section 3.24 of the Company
Disclosure Schedule lists the ten largest customers and ten largest suppliers
of the Company for the 12-month period ended March 31, 2006 and sets
forth opposite the name of each such customer and supplier the approximate
percentage and dollar amount of net sales or purchases by the Company
attributable to such customer or supplier for each such period. Since March 31,
2006, no customer or supplier required to be listed in Section 3.24 of the
Company Disclosure Schedule has indicated that it will stop or decrease the
rate of business done with the Company, except for changes in the Ordinary
Course of Business.

(b)           Except as listed in Section 3.24
of the Company Disclosure Schedule, no amounts previously collected from
customers are subject to set-off, counterclaim, reduction, rebate, refund or
other customer right or claim that would impair the value thereof, as
collected.

(c)           The Company has entered into an oral
understanding with Virginia Power Energy Marketing, Inc. that waives the
requirement of  Section 9.1 of its
Asset Management Agreement with the Company that the Company obtain an
irrevocable stand-by letter of credit by May 25, 2006. The understanding
provides that the Company must pre-purchase natural gas provided by Virginia
Power Energy Marketing, Inc. during June and July and defers the
requirement that the Company obtain the letter of credit prior to the start of
the winter heating season.

3.25.        Officers and Directors.
Section 3.25 of the Company Disclosure Schedule lists all officers and
directors of the Company.

 34
 

 

3.26.        Compliance with Laws; Permits.

(a)           All activities of the Company and
their respective officers, directors, agents and employees have been, and are
currently being, conducted in compliance in all material respects with all
applicable Laws (and including, without limitation, all energy, safety, health,
zoning, environmental, antidiscrimination, antitrust, wage and hour and price
and wage control laws, ordinances, orders, rules or regulations), permits,
licenses, certificates, governmental requirements, orders and other similar
items of any Governmental Entity to which the Company may be subject. No claims
have been filed against the Company alleging a violation of any such Laws. There
is no action before any Governmental Entity pending to change the zoning or
building ordinances or any other Laws affecting the Real Property. The Company
is not relying on any exemption from or deferral of any Law that would not be
available to the Surviving Corporation after the Effective Time.

(b)           The Company has, in full force and
effect, all licenses, permits, registrations, franchises, grants,
authorizations, consents, approvals, orders and certificates from Governmental
Entities (including Governmental Entities regulating occupational health and
safety) necessary to conduct its business and owns, leases and operates its
properties other than environmental permits (collectively, the “Permits”).
A true, correct and complete list of all Permits is set forth in Section 3.26(b) of
the Company Disclosure Schedule. The Company has conducted its business in
compliance with all terms and conditions of the Permits. No suspension,
revocation or cancellation of any Permit is pending, or to the Knowledge of the
Company, threatened.

(c)           The Company and each of its officers
and directors are in compliance with, and have complied, in all material
respects, with the applicable provisions of the Sarbanes-Oxley Act of 2002 and
the related rules and regulations promulgated under such act (the “Sarbanes-Oxley
Act”). There are no outstanding loans made by the Company or any of its
Subsidiaries to any executive officer (as defined under Rule 3b-7
under the Exchange Act) or director of the Company. Since the enactment of the
Sarbanes-Oxley Act, neither the Company nor any of its Subsidiaries has made
any loans to any executive officer or director of the Company or any of its
Subsidiaries. Each Company SEC Document prepared since August 14, 2003 was
accompanied by the certifications required to be filed or submitted by the
Company’s principal executive officer and principal financial officer pursuant
to the Sarbanes-Oxley Act, and, at the time of filing or submission of each
such certification, to the Knowledge of the Company, such certification was
true and accurate and complied with the Sarbanes-Oxley Act.

(d)           The Company has not (i) offered,
authorized, promised, made or agreed to make gifts of money, other property or
similar benefits or contributions (other than incidental gifts or articles of
nominal value) to any actual or potential customer, supplier, governmental
employee or other Person in a position to assist or hinder the Company in
connection with any actual or proposed transaction or to any political party,
political party official or candidate for federal, state or local public office
in violation of any Law or (ii) maintained any unrecorded fund or asset of
the Company for any improper purpose or made any false entries on its books and
records for any reason.

 35
 

 

(e)           Without limiting the generality of
the foregoing, the Company has not violated or does not have any liability, or
received a notice or charge asserting any such violation or liability, under the
federal Occupational Safety and Health Act of 1970 or any other regulating or
otherwise affecting employee health and safety.

3.27.        Environmental Matters.

(a)           As used in this Section 3.27,
the following terms shall have the following meanings:

(i)            “Environmental Laws” means
all applicable federal, state, local and foreign Laws, rules, regulations,
codes, ordinances, orders, decrees, directives, permits, licenses and judgments
relating to pollution, contamination or protection of the environment,
occupational, health and safety or similar Laws, rules, regulations, codes,
ordinances, orders, decrees directives, permits, licenses  and restrictions (including all applicable
federal, state, local and foreign Laws, rules, regulations, codes, ordinances,
orders, decrees, directives, permits, licenses and judgments relating to
Hazardous Materials). “Environmental Laws” includes but is not limited to the
Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.),
Resource Conservation & Recovery Act (42 U.S.C. § 6901 et
seq.), Safe Drinking Water Act (42 U.S.C. § 3000(f) et seq.),
Toxic Substances Control Act (15 U.S.C. § 261 et seq.), Clean Air Act
(42 U.S.C. § 7401 et seq.), Comprehensive Environmental Response of
Compensation and Liability Act (42 U.S.C. § 6901 et seq.) (“CERCLA”),
and similar state laws, ordinances, restrictions, licenses and regulations.

(ii)           “Hazardous Materials” means
any dangerous, toxic or hazardous, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, or other substance, pollutant, contaminant,
chemical, or waste, as defined in or regulated by any Law relating to such
substance or otherwise relating to the environment or human health or safety,
including such material, that might cause any injury to human health or safety
or to the environment or might subject the Company to any imposition of costs
or liability under any Environmental Laws, including without limitation any
asbestos or asbestos containing materials, PCBs, urea formaldehyde, radon and
petroleum and petroleum by-products.

(iii)          “Current and Prior Real Property”
means all real property (i) currently owned, demised by the Leases, used,
managed or occupied by the Company and listed in Section 3.12 of the
Company Disclosure Schedule and/or (ii) previously owned, demised by
leases, used, managed or occupied by the Company. The Current and Prior Real
Property previously owned or, within the last six years, demised by leases
(other than leases relating to retail locations), used or occupied by the
Company is listed in Section 3.27(a)(iii) of the Company Disclosure
Schedule.

(b)           All of the Current and Prior Real
Property owned or used by the Company has been maintained in compliance in all
material respects with all federal, state and local 

 36
 

 

environmental protection, occupational,
health and safety or similar Laws, ordinances, restrictions, licenses and
regulations, including but not limited to the Federal Water Pollution Control
Act (33 U.S.C. § 1251 et seq.), Resource Conservation &
Recovery Act (42 U.S.C. § 6901 et seq.), Safe Drinking Water Act
(42 U.S.C. § 3000(f) et seq.), Toxic Substances Control Act (15
U.S.C. § 261 et seq.), Clean Air Act (42 U.S.C. § 7401 et seq.),
CERCLA (42 U.S.C. § 6901 et seq.), and similar state laws,
ordinances, restrictions, licenses and regulations.

(c)           The Company has not received any
written notification from any Governmental Entity with respect to current,
existing violations, or past violations which are not yet fully resolved, of
any Environmental Laws.

(d)           To the Knowledge of the Company,
there has not been, at any location owned or used by the Company, any “Release”
of any “Hazardous Substance,” in each case as defined in CERCLA (without giving
effect to the exclusion of any petroleum products from the definition of
Hazardous Substance).

(e)           The Company has not sent or arranged
for the transportation or disposal of Hazardous Substances or wastes to a site
which, pursuant to CERCLA or any similar state Law (A) has been placed or
is proposed (by the Environmental Protection Agency or relevant state
authority) to be placed, on the “National Priorities List” of hazardous waste
sites or its state equivalent, or (B) is subject to a claim, an
administrative order or other request to take “removal” or “remedial” action
(in each case as defined in CERCLA) by any person.

(f)            Other than as set forth in Section 3.27
of the Company Disclosure Schedule, the Company has not used and does not use
underground storage tanks located on any parcel of Current and Prior Real
Property.

3.28.        Brokerage. Other than as set
forth in Section 3.28 of the Company Disclosure Schedule, no broker,
finder, investment banker or other third party shall be entitled to receive any
brokerage commissions, finder’s fees, fees for financial advisory services or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the
Company.

3.29.        Indemnification Obligations. There
is no event, circumstance or other basis that could give rise to any
indemnification obligation of the Company to its officers and directors under
its Governing Documents or any Contract between the Company and any of its
officers or directors or to any other Person under any Contract.

3.30.        Disclosure. None of the Transaction
Documents, taken as a whole (a) contains any untrue statement of a
material fact regarding the Company or its business or any of the other matters
dealt with in this Article III relating to the Company or the transactions
contemplated by this Agreement, or (b) omits any material fact necessary
to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading. There is no fact which
has not been disclosed to C&T or Merger Sub of which any officer or
director of the 

 37
 

 

Company or is aware which has or could reasonably be
expected to have a Material Adverse Effect.

3.31.        Investigation by C&T and Merger
Sub. Notwithstanding anything to the contrary in this Agreement, (a) no
investigation by C&T or Merger Sub shall affect the representations and
warranties of the Company under this Agreement or contained in any other
writing to be furnished to C&T or Merger Sub in connection with the
transactions contemplated hereby and (b) such representations and warranties
shall not be affected or deemed waived by reason of the fact that C&T or
Merger Sub knew or should have known that any of the same is or might be
inaccurate in any respect.

ARTICLE
IV.

REPRESENTATIONS AND WARRANTIES

OF C&T AND MERGER SUB

As a material inducement to the Company to enter into
this Agreement, with the understanding that the Company will be relying thereon
in consummating the transactions contemplated hereby, C&T and Merger Sub
hereby represent and warrant to the Company that:

4.01.        Incorporation and Corporate Power.
C&T a corporation duly incorporated, validly existing and in good standing
under the Laws of the Commonwealth of Pennsylvania. Merger Sub a corporation
duly incorporated validly existing and in good standing under the Laws of the
State of New York. Each of C&T and Merger Sub has the requisite corporate
power and authority to enter into this Agreement and the other Transaction
Documents to which it is a party and perform its obligations hereby and
thereunder.

4.02.        Execution, Delivery; Valid and
Binding Agreements. The execution, delivery and performance by C&T and
Merger Sub of this Agreement and the other Transaction Documents to which
C&T and Merger Sub are parties, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
requisite corporate action, and no other corporate proceedings on the part of
C&T and Merger Sub are necessary to authorize the execution, delivery or
performance of this Agreement and such other Transaction Documents by C&T
or Merger Sub. Each of this Agreement and each of the other Transaction
Documents to which C&T or Merger Sub is a party has been duly executed and
delivered by C&T and Merger Sub and, assuming due execution by the Company,
constitutes the valid and binding obligation of C&T and Merger Sub,
enforceable in accordance with its respective terms, except to the extent that
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
and other similar Laws affecting the enforcement of creditors’ rights generally
and by general principles of equity.

4.03.        No Breach. The execution,
delivery and performance by C&T and Merger Sub of this Agreement and the
other Transaction Documents to which C&T and Merger Sub are parties and the
consummation by C&T and Merger Sub of the transactions contemplated hereby
and thereby do not conflict with or result in any breach of any of the
provisions of, constitute a default under, result in a violation of, or result
in the creation of a right of termination or acceleration or any Lien upon any
assets of C&T or Merger Sub, under the provisions of (a) any 

 38
 

 

material Contract by which C&T or Merger Sub is
bound or affected, (b) the Governing Documents of C&T or Merger Sub,
or (c) any Law to which C&T or Merger Sub is subject.

4.04.        Governmental Entities; Consents. Except
as specified in Sections 5.03 and 6.01, no filing or registration with, or
notification to, and no permit, authorization, consent, approval or exemption
of, or other action by, any Governmental Entity or any other Person is required
to be obtained, made or given by C&T or Merger Sub in connection with its
execution, delivery and performance of this Agreement, the other Transaction
Documents or the transactions contemplated hereby or thereby.

4.05.        Litigation. There is no action
pending or, to the Knowledge of C&T, threatened or reasonably expected to
arise against C&T or Merger Sub seeking to enjoin or restrain any of the
transactions contemplated by this Agreement.

4.06.        Disclosure. None of the
Transaction Documents, taken as a whole (a) contains any untrue statement
of a material fact regarding C&T or Merger Sub or their business or any of
the other matters dealt with in this Article IV relating to C&T or
Merger Sub or the transactions contemplated by this Agreement, or (b) omits
any material fact necessary to make the statements contained herein or therein,
in light of the circumstances in which they were made, not misleading.

4.07.        Financial
Capability. Attached hereto as Exhibit 4.07 is a commitment letter
dated May 4, 2006 issued to C&T by National Cooperative Services
Corporation with respect to the extension of credit requested by C&T for
purposes of consummating the Merger. Between the date hereof and Closing
C&T reserves the right to replace the credit facility described therein
with a comparable arrangement from a comparable financial institution.

4.08.        Investigation by the Company. Notwithstanding
anything to the contrary in this Agreement, (a) no investigation by the Company
shall affect the representations and warranties of C&T or Merger Sub under
this Agreement or contained in any other writing to be furnished to the Company
in connection with the transactions contemplated hereby and (b) such
representations and warranties shall not be affected or deemed waived by reason
of the fact that the Company knew or should have known that any of the same is
or might be inaccurate in any respect.

ARTICLE
V.

COVENANTS OF THE COMPANY

5.01.        Conduct of the Business. The
Company agrees that, from the date hereof until the Closing Date, unless
otherwise expressly contemplated herein or disclosed in Section 5.01 of
the Company Disclosure Schedule as of the date hereof or consented to by
C&T in writing:

(a)           The business of the Company shall be
conducted only in, and the Company shall not take any action except in, the
Ordinary Course of Business, on an arm’s-length basis and in compliance with
all applicable Laws.

 39

 

(b)           The Company shall not, directly or
indirectly, do or permit to occur any of the following:

(i)            issue or sell, or take any action in
furtherance of the registration of the issuance and sale of, any additional
shares of, or any options, warrants, conversion privileges or rights of any
kind to acquire any shares of, any of its capital stock;

(ii)           suffer or request any change in its
current rates or tariffs other than as specifically referenced in Section 8.01(m);

(iii)          sell, lease, license, pledge, encumber
or dispose of any of its assets or properties or subject any of such assets or
properties to any Liens (other than Permitted Liens), except in the Ordinary
Course of Business;

(iv)          amend or propose to amend its
Governing Documents;

(v)           split, combine or reclassify any
outstanding shares of capital stock, or declare, set aside or pay any dividend
or other distribution payable in cash, stock, property or otherwise with
respect to shares of capital stock;

(vi)          redeem, purchase or acquire or offer
to acquire any shares of common stock or other securities;

(vii)         acquire (by merger, exchange,
consolidation, acquisition of stock or assets or otherwise) any corporation,
partnership, joint venture, limited liability company or other business
organization or division or material assets thereof;

(viii)        create any subsidiary;

(ix)           incur any indebtedness or guarantees
of indebtedness for borrowed money or issue any debt securities, except the
borrowing of working capital in the Ordinary Course of Business;

(x)            permit any accounts payable owed to
trade creditors to remain outstanding more than forty five (45) days;

(xi)           accelerate, beyond the normal
collection cycle, collection of accounts receivable;

(xii)          enter into or propose to enter into,
or modify or propose to modify, any Contract with respect to any of the matters
set forth in this Section 5.01(b);

(xiii)         accelerate or defer the construction of
improvements at any of the locations of its business;

(xiv)        accelerate or defer the purchase of
fixtures, equipment, leasehold improvements, or other capital expenditures; or

 40
 

 

(xv)         change any accounting methodology which
would cause such methodology to deviate materially from industry standards, the
historical methodology used by the Company.

(c)           The Company shall not, directly or
indirectly:

(i)            enter into or modify any employment,
severance or similar Contract with, or grant any bonuses, salary increases,
severance or termination pay or other material increase in benefits to any
employee, consultant, officer or director of the Company;

(ii)           hire any new employee or re-hire any
former employee or replace any employee position lost (due to firing,
resignation, layoff, attrition or any other reason) without C&T’s prior
written consent which consent shall not be unreasonably withheld; or

(iii)          intentionally take any action which
would render, or which reasonably may be expected to render, any representation
or warranty made by it in this Agreement untrue or inaccurate at the Closing.

(d)           The Company shall not adopt or amend
any bonus, profit sharing, compensation, Equity Arrangement, pension,
retirement, deferred compensation, employment or other employee benefit plan,
trust, fund or group arrangement for the benefit or welfare of any employees or
any director, other than any amendment necessary to maintain favorable Tax
status or comply with any applicable Law.

(e)           The Company shall not cancel or
terminate any Insurance Policies or cause any of the coverage thereunder to
lapse, unless simultaneously with such termination, cancellation or lapse,
replacement policies providing coverage equal to or greater than the coverage
under the canceled, terminated or lapsed policies with an insurer having
ratings at least as good (based upon the most recent edition of Best’s
Insurance Reports) and the insurer whose policy terminated, was cancelled or
lapsed.

(f)            The Company shall:

(i)            use its commercially reasonable best
efforts to preserve intact its business organization and goodwill, keep
available the services of its officers, consultants, and employees as a group
and maintain satisfactory relationships with its suppliers, customers and
vendors;

(ii)           use its commercially reasonable best
efforts to encourage employees of the Company to remain with the Company after
the Closing;

(iii)          confer periodically, at times
established by agreement between the parties, with representatives of C&T
to report operational matters and the general status of ongoing operations of
the business of the Company (including, without limitation, provision of periodic,
written reports on gas procurement);

 41
 

 

(iv)          promptly notify C&T of (A) any
emergency regarding the Company, (B) any other change in the Ordinary
Course of Business or in the operation of the properties of the Company and (C) any
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) of any Governmental Entity regarding the Company;

(v)           fulfill all commitments previously
made, or made from the date of this Agreement to Closing, to Governmental
Entities relating to the conduct of the Company’s business including, without
limitation, commitments designated as resulting on “Potential Management
Deficiencies” in Appendix A of the Joint Proposal submitted to the New York
State Public Service Commission in Case Nos. 05-G-1359, 05-G-1268,
04-G-1032, and other Public Service Commission requirements
regarding gas procurement actions;

(vi)

(A)          conduct a search of the real estate
records of the local governmental authorities having jurisdiction over the
properties listed in Section 3.12(b)(A)(viii-x) of the Company Disclosure
Schedule to determine the prior owners of said properties; and

(B)           obtain from such owners, and record
in the real estate records of the local governmental authorities having
jurisdiction over the properties, corrective deeds to establish ownership by
the Company of the properties in fee simple; and

(vii)         take
all such action, as promptly as possible, as may be necessary or appropriate to
effectuate the Merger.

(g)           The Company shall not perform any act
referenced by (or omit to perform any act which omission is referenced by) the
terms of Section 3.10.

(h)           The Company shall discontinue the
collection of its (current) One Dollar and Fifty Cent ($1.50) market volatility
adjustment (the “Market Volatility Adjustment”) on the earlier of August 31,
2006 or the month prior to the commencement of new rates as authorized in Case
Number 05-G-1359 currently before the New York State Public Service Commission
on motion of the Company, and shall thereafter refrain from further collection
of any amounts having the characteristics of the Market Volatility Adjustment,
regardless of the economic value, purpose or terminology thereof.

5.02.        Access to and Delivery of Books and
Records.

(a)           Between the date hereof and the Closing
Date, the Company shall afford to C&T and its authorized representatives
full access at all reasonable times and upon reasonable notice to the offices,
properties, books, records, officers, employees and other items of the Company,
and the work papers of its independent accountants, relating to work done by
such accountants with respect to the Company for each of the fiscal years ended
2003, 2004 and 2005 (and prior years if requested), and otherwise provide such 

 42
 

 

assistance as is reasonably requested by
C&T in order that C&T may have a full opportunity to make such
investigation and evaluation as it shall reasonably desire to make of the
business and affairs of the Company. In addition, the Company shall cooperate
fully (including providing introductions where necessary) with C&T to
enable C&T to contact upon reasonable prior notice to the Company such
third parties, including customers, prospective customers, specifying agencies,
vendors or suppliers of the Company, as C&T deems reasonably necessary to
complete its due diligence. C&T shall use its best efforts to allow the
Company to be present (in person or by telephone in the case of telephonic
contact) when C&T makes contact with the Company’s customers, prospective
customers, specifying agencies, vendors or suppliers.

(b)           Between the date hereof and the
Closing Date, the Company shall promptly deliver to C&T monthly unaudited,
consolidating balance sheets and unaudited, consolidating statement of income
and cash flows the Company, prepared in a manner consistent with prior monthly
periods and reflect all adjusting entries necessary to present fairly the
financial condition of the Company as of the dates thereof and results of
operations for the periods referred to therein.

5.03.        Conditions; Filings; Consents. The
Company shall use its commercially reasonable best efforts to (a) cause
the conditions set forth in Section 8.01 to be satisfied and to consummate
the transactions contemplated herein as soon as reasonably possible after the
satisfaction thereof (but in any event within three business days after such
date), (b) pursuant to Section 6.01, obtain from any Governmental
Entities any consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by the Company in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and (c) give any required notices to
third parties and use its commercially reasonable best efforts to obtain any
required third party consents (i) disclosed in the Company Disclosure
Schedule or (ii) which are otherwise identified by C&T or required to
consummate the transactions contemplated herein. The Company shall furnish to
C&T all information required for any application or other filing to be made
pursuant to the rules and regulations of any applicable Law in connection
with the transactions contemplated by this Agreement. The Company shall keep
C&T apprised of the status of any communications with, and any inquiries or
requests for additional information from, any Governmental Entity with respect
to the transactions contemplated hereby.

5.04.        No Negotiations, Etc. The Company
shall not, directly or indirectly, through any officer, director, agent or
otherwise, solicit, initiate or conduct any discussions or negotiations with,
or provide any information to or otherwise cooperate in any other way with, or
facilitate or encourage any effort to attempt to, or enter into any agreement
or understanding with, any Person or group of Persons regarding any Competing
Transaction. The Company shall promptly (and in any event within 5 days) notify
C&T of (a) the receipt by the Company or any of its officers or
directors of any inquiries, or proposals or requests for information concerning
a Competing Transaction and the terms of any such Competing Transaction, or (b) the
Company becoming aware that any such inquiries or proposals have been received
by the Company’s investment bankers, financial advisors, attorneys, accountants,
other representatives or shareholders. A “Competing Transaction” means
any of the following (other than any transaction contemplated by this
Agreement): (c) any purchase or sale of stock or other equity 

 43
 

 

interests in the Company (at a volume or value in
excess of the average trading volume of the Company’s common stock over the
thirty-day period preceding the date of this Agreement) including without
limitation in any tender offer (whether recommended by the Company’s board or
not) for, or initial public offering of, any such securities, (d) a
merger, consolidation, share exchange, business combination, or other similar
transaction involving the Company, (e) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 10% or more of the total
assets of the Company in a single transaction or a series of related
transactions or (f) any agreement, or public announcement by the Company
of a proposal, plan or intention, to do any of the foregoing.

5.05.        Resignation of Officers and Directors.
The Company shall take commercially reasonable
best efforts to cause each of the officers and directors of the Company to
issue a written, signed resignation from all officer and director positions
with the Company effective at the Closing, each of such resignations to include
(a) a waiver and release by such officer or director of any and all rights
and claims against the Company, and (b) a termination by such officer or
director of any agreement related to such position between such individual and
the Company that C&T requests be terminated.

5.06.        Shareholder Approval.

(a)           The Company shall, promptly after the
date hereof, take all commercially reasonable action necessary in accordance
with Section 903 of the NYBCL and its Certificate of Incorporation and Bylaws
to obtain approval of the Merger and this Agreement by convening a meeting of
the Shareholders (“Shareholder Meeting”) within ninety (90) days of the
date hereof.

(b)           As part of the process for securing
approval of the Company’s shareholders, a proxy statement (including the form
of proxies) prepared by the Company in conformity with the requirements of the
NYBCL, the Exchange Act and the rules an regulations promulgated
thereunder by the Securities and Exchange Commission (“SEC”) is to be
sent to the Shareholders of the Company in connection with the Shareholder
Meeting (as amended, supplemented or modified, the “Company Proxy Statement”).
The Company shall cause the Company Proxy Statement to comply, in all material
respects, with the applicable provisions of the Exchange Act and the rules and
regulations promulgated thereunder. The Company agrees that, except as to
information provided to it by C&T, on the date filed with the SEC and on
the date first disseminated to the Shareholders, the Company Proxy Statement
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company agrees promptly to correct any information provided
by it for use in the Company Proxy Statement if and to the extent that such
information shall have become false or misleading in any material respect, and
the Company further agrees to take all steps necessary to cause the Company
Proxy Statement, as so corrected, to be filed with the SEC and to be
disseminated to the Shareholders, in each case as and to the extent required by
applicable federal securities Laws. Prior to filing with the SEC or
dissemination to the Shareholders, the Company shall afford C&T and its
counsel reasonable opportunity to review and comment upon the 

 44
 

 

proposed form of the Company Proxy Statement
and give due consideration to any C&T comments. The Company will notify
Buyer promptly upon the receipt of any comments from the SEC or its staff or
any other government officials and of any request by the SEC or its staff or
any other government officials for amendments or supplements to the Company
Proxy Statement or for additional information and will supply the Buyer with
copies of all correspondence between the Company or any of its representatives,
on the one hand, and the SEC, or its staff or any other government officials,
on the other hand, with respect to the Company Proxy Statement or the Merger.
Prior to responding to same, the Company shall afford C&T and its counsel
reasonable opportunity to review and comment upon such correspondence and give
due consideration to any C&T comments. The Company will respond promptly to
any comments of the SEC and will cause the Company Proxy Statement to be mailed
to the Company Shareholders at the earliest practicable time. Whenever any
event occurs that is required to be set forth in an amendment or supplement to
the Company Proxy Statement, the Company will promptly inform the Buyer of such
occurrence and cooperate in filing with the SEC or its staff or any other
Governmental Authority, and/or mailing to the Company Shareholders, such
amendment or supplement. The Company Board recommendation shall be included in
the Company Proxy Statement, except that the Board of Directors of the Company
may withdraw or modify in a manner adverse to Buyer such recommendation only if
the Board of Directors of the Company determines, in good faith, after
consultation with outside legal counsel, that such action is necessary in order
for the directors of the Company to comply with their fiduciary duties to those
Persons to whom the Board owes fiduciary duties under Applicable Laws.

(c)           The Company shall, in accordance with
Section 623 of the NYBCL, provide prompt notice of the Shareholder
Approval to those Shareholders who gave notice of their intent to demand
payment of the fair value of the Outstanding Shares held by them in accordance
with Section 623 of the NYBCL and who did not vote in favor of the Merger.

5.07.        Update Disclosure; Breaches. From
and after the date of this Agreement until the Closing, the Company shall
promptly notify C&T by written
update to the Company Disclosure Schedule (a) if any representation or
warranty made by the Company in this Agreement was when made, or has
subsequently become, untrue in any respect, (b) of the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which has
caused or may reasonably be expected to cause any condition to the obligations
of any party hereto to effect the transactions contemplated by this Agreement
not to be satisfied or (c) of the failure of the Company to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by them pursuant to this Agreement which may reasonably be expected to result
in any condition to the obligations of any party hereto to effect the
transactions contemplated hereby not to be satisfied. The delivery of any
notice pursuant to this Section 5.07 shall not cure any breach of any
representation or warranty requiring disclosure of such matter prior to the
date of this Agreement or otherwise limit or affect the rights of, or the
remedies available to, C&T; provided,
however, that the Company shall be entitled to update the Company
Disclosure Schedule for Contracts required to be disclosed pursuant to Section 3.17
that are entered into between the date hereof and the Closing Date, to the
extent such Contracts are entered into in accordance with Section 5.01,
and the Company Disclosure Schedule shall be deemed to be amended by any such 

 45
 

 

updates as of the Closing Date. Within thirty (30)
days of the close of any month up to and including the Closing date, and as of
the Closing Date, the Company shall prepare and submit to C&T a revised,
unaudited, consolidating balance sheet of the Company and a revised, unaudited,
consolidating statement of income and cash flows of the Company for the period
from the close of the most recent fiscal year end to the date then ended which
shall become, for purposes of this Agreement, the Latest Balance Sheet and
(together with such Latest Balance Sheet) the Latest Financial Statement,
respectively.

5.08.        Waivers. Prior to the Closing,
and except with respect to the Persons listed in Section 8.01(i)(ix), the
Company shall obtain a waiver of any provision of any employment or other
Contract to which it is a party with respect to which a waiver was not obtained
pursuant to Section 5.05 above and which, as a result of the transactions
contemplated by this Agreement, gives rise to any right to receive severance or
other payments upon termination of employment. with respect to the Persons
listed in Section 8.01(i)(ix), the Company shall obtain a waiver of any
provision of any existing agreement with the Company that would create or
impose a Lien on Company assets as a result of the consummation of the Merger
or the other transactions contemplated by this Agreement.

5.09.        Life Insurance Policies. Prior to
the Closing, the Company shall make commercially reasonable efforts to sell all
life insurance policies owned by the Company to the insured Persons thereunder
for the cash surrender values of such life insurance policies, as may be required by contract or
applicable law, unless some different treatment is required by contract in
which case the Company shall comply with such contract, same being specifically
reflected on Exhibit 5.09 hereto.

5.10.        Subsidiary Transactions. Prior to
the Effective Time, the Company shall dispose of all of the assets and
liabilities of its Subsidiaries and any Affiliate(s) thereof, as currently
reflected on Exhibit 5.10 hereto, and any net cash proceeds after deduction for all
Subsidiary/Affiliate liabilities, including without limitation taxes assessed
as a result of the transaction of
such disposition (along with any other cash held by such entity and reflected
on the balance sheet referenced below) shall be reflected as an addition to the
cash portion of the Merger Consideration pursuant to Section 2.02(e). At
Closing, the Company shall (consistent with its obligations under Section 3.07(a) and
subject to the representations and warranties set forth therein) provide a
true, correct and complete consolidating balance sheet of the entities
referenced in Exhibit 5.10 reflecting only cash as an asset, and no
liabilities.

5.11.        Continued Liability Insurance
Coverage. The Company agrees to use commercially reasonable efforts to
extend, prior to the Closing, the coverage period for each Insurance Policy
maintained by the Company for errors and omissions and directors and officers
liability (the “Extended Insurance Policies”) until at least May 31,
2007.

 46

 

ARTICLE
VI.

COVENANTS OF C&T AND MERGER SUB

C&T and Merger Sub
covenant and agree with the Company as follows:

6.01.        Regulatory Filings. As promptly
as practicable after the execution of this Agreement, C&T and Merger Sub
shall make or cause to be made all filings and submissions under any Laws
applicable to C&T and Merger Sub for the consummation of the transactions
contemplated herein, including, without limitation, submissions relating to
approvals specified in Section 3.04 to the Company Disclosure Schedule. C&T
and Merger Sub shall coordinate and cooperate with the Company in exchanging
all information necessary in order to prepare such filings, shall not make any
such filing without providing to the Company a final copy thereof for its
review and consent at least two full business days in advance of the proposed
filing and shall provide such reasonable assistance as the Company may request
in connection with all of the foregoing.

6.02.        Conditions. C&T and Merger
Sub shall use their commercially reasonable best efforts to (a) cause the
conditions set forth in Section 8.02 to be satisfied and to consummate the
transactions contemplated herein as soon as reasonably possible after the
satisfaction thereof (but in any event within three business days after such
date) and (b) obtain from any Governmental Entities any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by C&T or Merger Sub in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. C&T shall furnish to the Company all
information required for any application or other filing to be made pursuant to
the rules and regulations of any applicable Law in connection with the
transactions contemplated hereby. C&T shall keep the Company apprised of
the status of any communications with, and any inquiries or requests for
additional information from, any Governmental Entity with respect to the
transactions contemplated hereby.

6.03.        Moratorium on
Trading. C & T will refrain (and will cause its officers,
directors, employees, representatives, agents, attorneys and advisors to
refrain) from purchasing or selling securities of the Company during the term
of this Agreement and for a period of two (2) years from the termination
hereof, if the Merger is not consummated.

6.04.        Provision of
Information. C&T will cooperate with the Company and provide such
information as the Company may be reasonably request in connection with the
preparation of the Company’s proxy materials to be used in connection with
solicitation of shareholder approval of this transaction.

6.05.        Update; Breaches.
From and after the date of this Agreement, C&T shall promptly notify the
Company in writing of the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which has caused or may reasonably be expected
to cause any condition to the obligations of any party hereto to effect the
transactions contemplated by this Agreement not to be satisfied or of the
failure of C&T to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it pursuant to this Agreement
which may reasonably be expected to result in any condition to the obligations
of any party hereto to effect the transactions contemplated hereby not to be
satisfied.

 47
 

 

ARTICLE
VII.

ADDITIONAL AGREEMENTS

7.01.        Company Employee Benefit Plans.

(a)           C&T reserves the right to request
in writing that the Company cease contributions to and/or terminate one or more
of the Plans immediately prior to the Closing.

(b)           C&T shall make available to
current employees of the Company access to employee benefits on terms (in
C&T’s sole and absolute discretion, and on a plan by plan basis) no less
favorable than the lesser of (i) they are receiving currently under a
particular Company’s Plan or (ii) as are offered currently to other
employees of the C&T control group, and will provide current Company
employees past service credit for vesting and eligibility purposes in such programs
with respect to such employees actual service with the Company prior to the
Effective Time.

(c)           The foregoing provisions of this Section 7.01
are not, and shall not be deemed to be, a representation or warranty regarding
continuing the employment of any current employee of the Company after the
Effective Time, nor are they in derogation of C&T’s and Surviving
Corporation’s rights, consistent with their obligations under the Code and/or
ERISA, to amend or terminate any Plan at any time, or from time to time.

7.02.        Tax Matters.

(a)           The Company shall, at the Company’s
expense, prepare or cause to be prepared and file or cause to be filed all
Returns for the Company for all periods ending on or prior to the Closing Date,
and the Company shall pay all Taxes with respect to such periods. All such Tax
Returns shall be prepared in accordance with past practices of the Company. The
Company shall permit C&T to review and comment on each such Tax Return
prior to filing.

(b)           C&T shall prepare or cause to be
prepared and file or cause to be filed any Tax Returns of the Company for Tax
periods which end after the Closing Date, and C&T shall cause the Company,
at the Company’s expense, to pay all Taxes with respect to such periods.

(c)           After the Closing Date, C&T or an
appropriate Affiliate, to the extent permitted by Law, shall have the right to
amend, modify or otherwise change all Returns of the Company for all Tax
periods.

(d)           The Company and C&T shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the preparation and filing of Tax Returns pursuant to this Section 7.02
and any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include signing any Tax Returns, amended Tax Returns, claims
or other documents necessary to settle any Tax controversy, the retention and
(upon the other party’s request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other proceeding and 

 48
 

 

making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereby.

(e)           C&T or an appropriate Affiliate
shall have the right to participate in any Tax proceeding related to
pre-Closing tax year of the Company which may have the effect of increasing
C&T’s or the Company’s Tax liability for any Tax period ending after the
Closing.

(f)            C&T and the Company further
agree, upon request from the other party, to use their commercially reasonable
best efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).

(g)           Without the prior written consent
(which shall not be unreasonably withheld) of C&T, the Company shall not
make or change any election, change an annual accounting period, file any
amended Tax Return, enter into any closing agreement, settle any Tax claim or
assessment relating to the Company, surrender any right to claim a refund of
Taxes, or take any other similar action, or omit to take any action relating to
the filing of any Tax Return or the payment of any Tax, if such action or omission
would have the effect of increasing the present or future Tax liability or
decreasing any present or future Tax asset of the Company, C&T or any
Affiliate of C&T.

(h)           All transfer, documentary, sales,
use, stamp, registration and other such Taxes and fees (including any penalties
and interest) incurred in connection with this Agreement shall be paid by the
Company when due, and the Company shall, at its own expense, file all necessary
Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees.

ARTICLE
VIII.

CONDITIONS TO CLOSING

8.01.        Conditions to the Obligations of
C&T and Merger Sub. The obligation of C&T and Merger Sub to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction or waiver, in whole or in part, in the sole discretion of C&T
and Merger Sub (it being understood that no such waiver shall waive any rights
or remedies otherwise available to C&T or Merger Sub), of the following conditions
on or before the Closing Date:

(a)           The representations
and warranties set forth in Article III hereof (the “Company
Representations”) which are not subject to materiality or Material Adverse
Effect qualifications shall be true and correct in all material respects at and
as of the Closing Date as though then made and as though the Closing Date had
been substituted for the date of this Agreement throughout such representations
and warranties, except that any such representation or warranty expressly made
as of a specified date shall only need to have been true on and as of such
date, and the Company Representations which are subject to materiality or
Material Adverse Effect qualifications shall be true and correct in all
respects at and as of the Closing Date as though 

 49
 

 

then made and
as though the Closing Date had been substituted for the date of this Agreement
throughout such representations and warranties, except that any such
representation or warranty expressly made as of a specified date shall only
need to have been true on and as of such date. In determining the accuracy of
Company Representations for purposes of this Section 8.01(a), any
disclosure made pursuant to Section 5.07, and any discovery of information
by C&T or Merger Sub from the date of this Agreement until Closing, shall
be disregarded if C&T has provided the Company written notice within twenty
(20) days of receipt of such knowledge or updated disclosure that C&T deems
the new information to constitute a Material Adverse Effect;

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

(c)           The Company shall have obtained, or
caused to be obtained, each consent and approval necessary in order that the
transactions contemplated herein not constitute a breach or violation of, or
result in a right of termination or acceleration of, or creation of any Lien on
any of the assets of the Company pursuant to the provisions of, any Contract
required to be disclosed in the Company Disclosure Schedule, and no
Governmental Entity shall have indicated its opposition to the transactions
contemplated hereby or that it does not intend to accredit the Surviving
Corporation;

(d)           All consents, approvals or exemptions
of, or other action by, and all notices, declarations, filings and registration
with, Governmental Entities required or advisable for the consummation of the
transactions contemplated herein or for C&T’s attainment of its anticipated
economic benefits thereof (including, without limitation, approvals specified
in Section 3.04 to the Company Disclosure Schedule), shall have been
obtained and made in form and manner reasonably acceptable to both parties
hereto, and made, free of any term, condition, restriction, imposed liability
or other provision that would, or would reasonably be expected to, require any (i) additional
financial outlay or reduction in anticipated revenues by the Company, Surviving
Corporation or C&T or (ii) material commitment of non-financial
resources to accomplish or satisfy same;

(e)           There shall not be threatened,
instituted or pending any order, action or proceeding, before any Governmental
Entity (i) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii) imposing or seeking to impose material
limitations on the ability of C&T or any of its Affiliates to acquire or
hold or to exercise full rights of ownership of any securities of the Company, (iii) seeking
to prohibit direct or indirect ownership or operation by C&T or any of its
Affiliates of all or any portion of the business or assets of the Company, or
to compel C&T or any of its Affiliates or the Company to dispose of or to
hold separately all or a material portion of the business or assets of C&T
and its Affiliates or of the Company, as a result of the transactions
contemplated hereby, (iv) seeking to invalidate or render unenforceable
any material provision of this Agreement or any of the other Transaction
Documents or (v) otherwise relating to and materially adversely affecting
the transactions contemplated hereby;

 50
 

 

(f)            The Company shall have obtained  approval of the Merger and this Agreement
from its Shareholders, as may be required by Section 903 of the NYBCL and
its Certificate of Incorporation and bylaws;

(g)           There shall not be any action taken,
or any Law enacted, entered, enforced, promulgated, issued or deemed applicable
to the transactions contemplated hereby by any Governmental Entity which would
reasonably be expected to result, directly or indirectly, in any of the consequences
referred to in Section 8.01(e);

(h)           Since the date hereof, no fact,
event, occurrence or circumstance shall have occurred that, individually or in
aggregate, with or without the passage of time, has had or could reasonably be
expected to have, a Material Adverse Effect, other than a change in general
economic or industry conditions not specific to the Company;

(i)            On
the Closing Date, the Company shall have delivered to C&T all of the
following:

(i)            certificates of the appropriate
officers of the Company or other Persons satisfactory to C&T, dated the
Closing Date, stating that the conditions precedent set forth in
Sections 8.01(a) and (b) have been satisfied;

(ii)           copies of the third party and
Governmental Entity consents and approvals referred to in Sections 8.01(c) and
(d) above;

(iii)          all corporate books and records,
including the minute books, stock ledgers and transfer records, the corporate
seal and other materials related to the corporate administration of the
Company;

(iv)          an executed resignation (effective as
of the Closing Date) from each of the officers and directors of the Company
from whom a resignation is required to be obtained pursuant to Section 5.05
above, which resignation shall include (A) a waiver and release by such
officer or director of any and all claims against the Company, and (B) a
termination by such officer or director of any agreement related to such
position between such individual and the Company that C&T requests be
terminated;

(v)           copies of (A) the Certificate of
Incorporation, or similar governing document of the Company, certified by the
Secretary of State of the State of New York, and (B) Certificates of Good
Standing from the Secretary of State of the State of New York;

(vi)          a copy of each of (A) the text of
the resolutions adopted by the board of directors of the Company and the
Shareholders authorizing the execution, delivery and performance of this
Agreement, the other Transaction Documents and the consummation of all of the
transactions contemplated hereby and thereby and (B) the bylaws of the
Company, along with certificates, dated as of the Closing Date, executed on
behalf of the Company by the corporate secretary of the Company certifying to
C&T (C) that such copies are true, correct 

 51
 

 

and complete copies of such resolutions and
bylaws, respectively, (D) that such resolutions and bylaws were duly
adopted and have not been amended or rescinded, and (E) as to the
incumbency and authority of the officer(s) of the Company who executed
this Agreement and the other Transaction Documents;

(vii)         an executed waiver from each of the
individuals from whom the Company was required to obtain a waiver pursuant to Section 5.08;

(viii)        evidence reasonably satisfactory to
C&T that the covenant set forth in Section 5.10 has been satisfied;

(ix)           written resignations (as employees)
of the following officers of the Company: Thomas K. Barry and Kenneth J.
Robinson;

(x)            the written agreement of Barry
terminating his “employment and consulting” Contract with the Company dated September 18,
1984;

(xi)           recorded originals of the corrective
deeds referenced in Section 501(f)(vi);

(xii)          in 
the event of the amendment to existing compensation arrangements
referenced in Section 2.02(e)(ii), an opinion of Rich May, or other
reputable federal income tax counsel to the Company reasonably acceptable to
C&T, that the favorable excise tax treatment and financial result to the
Company referenced in Section 2.02(e)(ii) and resulting from the
amendments referenced in Section 8.01(r) has been obtained; and

(xiii)         such other certificates, documents and
instruments as
C&T may reasonably request related to the transactions contemplated hereby.

(j)            The Company shall not have or agree
to any consent actions or orders without C&T’s prior written consent, which
consent shall not be unreasonably withheld.

(k)           The Company shall have made
commercially reasonable best efforts to obtained the Extended Insurance
Policies;

(l)            C&T shall have obtained a Phase
I environmental audit report from an environmental consulting firm reasonably
acceptable to the Company on the Company’s Real Property indicating the
existence of no material contamination on, or breach of any Environmental Laws
with respect to, the ownership or lease and operation of such properties;

(m)          The New York State Public Service Commission
shall have issued a final order in Case Nos. 05-G-1359, 05-G-1268,
04-G-1032  heretofore filed
by Company (and requesting certain rate relief) granting Company rate relief no
less than as specified in the Gas Rates Joint Proposal (March 15, 2006)
and Amendment to Gas Rates Joint Proposal (April 14, 2006) heretofore
filed in said cases, without any additional contingencies, requirements or
stipulations whatsoever other than such as would require no (i) additional

 52
 

 

financial outlay or reduction in anticipated
revenues by Company, Surviving Corporation or C&T and (ii) no material
commitment of non-financial resources to accomplish or satisfy same. Notwithstanding
the foregoing, any final order that satisfies the request by Multiple
Intervenors dated April 21, 2006 for return of deferred additional
revenues in equal monthly increments amortized over no less than twelve (12)
months beginning on January 1, 2007, is deemed to satisfy conditions (i) and
(ii), above;

(n)           The Company shall have terminated the
dispute currently pending between it and Columbia Gas Transmission (“CGT”)
for an alleged gas imbalance of —6,660 dth by either obtaining CGT’s waiver of
its claim or by delivering to CGT gas and/or funds to satisfy CGT’s claims and
obtaining a release of same.

(o)           The Company shall have successfully
negotiated the renewal of its franchise Contracts with the cities of Addison
and Corning and its transportation Contract with Fortuna on terms reasonably
acceptable to C&T or have reported such progress in finalizing such
renewals that C&T, in exercise of its sole and absolute discretion, is
willing to proceed with this transaction;

(p)           Barry and Robinson each shall have
assigned their respective rights to receive the cash value on the Company’s
keyman life insurance policies in their names, which policies are identified in
Schedule 8.01(p) hereto, and are hereinafter referred to as the “Keyman
Policies.” Such assignment shall vest ownership of such Keyman Policies in
the Surviving Corporation with the Keyman Policies’ beneficiaries being
designated permanently as the heirs of Barry and Robinson, respectively;

(q)           Barry and Robinson shall have agreed
to a non-competition restriction for three (3) years after Closing.
Violation of their obligations thereunder shall result in the loss of rights of
Barry, or Robinson, and their respective heirs under the Keyman Policies;

(r)            Barry and Robinson shall have
amended their severance agreements with the Company prior to the date of this
Agreement to (i) extend the requisite payment date thereunder for a period
no less than thirty (30) days from the Effective Time and (ii) in the
event of the amendment to existing compensation arrangements referenced in Section 2.02(e)(ii),
produce the favorable excise tax treatment and financial result to the Company
referenced in Section 2.02(e)(ii);

(s)           The Company shall have received a “compliance
statement” from the Internal Revenue Service pursuant to its “voluntary
compliance program” indicating final resolution of the document defect
referenced in Section 3.21(i) of the Company Disclosure Schedule with
no further liability to the affected Plan or the Company.

8.02.        Conditions to the Obligations of the
Company. The obligation of the Company to consummate the transactions
contemplated by this Agreement is subject to the satisfaction or waiver, in
whole or in part, in the sole discretion of the Company (it being understood
that no such waiver shall waive any rights or remedies otherwise available to
the Company), of the following conditions on or before the Closing Date:

 53
 

 

(a)           The representations and warranties
set forth in Article III hereof (the “Buyer Representations”) which
are not subject to materiality qualifications shall be true and correct in all
material respects at and as of the Closing Date as though then made and as
though the Closing Date had been substituted for the date of this Agreement
throughout such representations and warranties, except that any such
representation or warranty expressly made as of a specified date shall only
need to have been true on and as of such date, and the Buyer Representations
which are subject to materiality qualifications shall be true and correct in
all respects at and as of the Closing Date as though then made and as though the
Closing Date had been substituted for the date of this Agreement throughout
such representations and warranties, except that any such representation or
warranty expressly made as of a specified date shall only need to have been
true on and as of such date (it being understood that, in determining the
accuracy of such representations and warranties for purposes of this Section 8.02(a),
any discovery of information by the Company shall be disregarded);

(b)           C&T and Merger Sub shall have
performed or complied with in all material respects of all the covenants and
agreements required to be performed or complied with by them under this
Agreement prior to the Closing;

(c)           There shall not be threatened,
instituted or pending any order, action or proceeding, before any Governmental
Entity, (i) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii) seeking to invalidate or render
unenforceable any material provision of this Agreement or any of the other
Transaction Documents or (iii) otherwise relating to and materially
adversely affecting the transactions contemplated hereby;

(d)           The Company shall have obtained  approval of the Merger and this Agreement
from its Shareholders, as may be required by Section 903 of the NYBCL and
its Certificate of Incorporation and bylaws (and in this connection the Company
shall have obtained a satisfactory “fairness opinion”);

(e)           There shall not be any action taken,
or any Law enacted, entered, enforced, promulgated, issued or deemed applicable
to the transactions contemplated hereby by any Governmental Entity which would
reasonably be expected to result, directly or indirectly, in any of the
consequences referred to in Section 8.02(c);

(f)            On the Closing Date, C&T shall
have delivered to the Company:

(i)            a certificate of the appropriate
officer of each of C&T and Merger Sub, dated the Closing Date, stating that
the conditions precedent set forth in Sections 8.02(a) and (b) have
been satisfied;

(ii)           a copy of the text of the resolutions
adopted by the board of directors of each of C&T and Merger Sub authorizing
the execution, delivery and performance of this Agreement, the other
Transaction Documents and the consummation of all of the transactions
contemplated hereby and thereby, along 

 54
 

 

with certificates, dated as of the Closing
Date, executed on behalf of C&T and Merger Sub by the corporate secretary
or assistant secretary of C&T and Merger Sub certifying to the Company (A) that
such copies are true, correct and complete copies of such resolutions,
respectively, (B) that such resolutions were duly adopted and have not
been amended or rescinded and (C) as to the incumbency and authority of
the officer(s) of C&T and Merger Sub who executed this Agreement and
the Transaction Documents; and

(iii)          such other certificates, documents and
instruments as the Company may reasonably request related to the transactions
contemplated hereby.

(g)           At the Effective Time, C&T shall
have delivered the Merger Consideration to the Paying Agent pursuant to the
terms of Section 2.03(a).

ARTICLE
IX.

TERMINATION

9.01.        Termination. This Agreement may
be terminated at any time prior to the Closing:

(a)           by the mutual consent of C&T and
the Company;

(b)           by C&T, upon written notice to
the Company, if a Competing Transaction has commenced (whether as a result of a
breach of Section 5.04 or otherwise, but other than as relating to the
Merger) but replacing (solely for purposes of this Section 9.01(b)) in the
definition of same as it relates to any purchase or sale of stock or other
equity interests in the Company the phrase “(at a volume or value in excess of
the average trading volume of the Company’s common stock over the thirty-day
period preceding the date of this Agreement)” with the phrase “(at an aggregate
volume of 10% or more of the stock or other equity interests in the Company
over a thirty-day period by a single entity or affiliated group)”;

(c)           by C&T upon written notice to the
Company if (A) as of any date prior to the Closing Date, the condition to
Closing set forth in Section 8.01(a) shall not have been satisfied
(it being understood that, for purposes of this Section 9.01(c)(A), such
date prior to the Closing Date shall be substituted for the Closing Date in
determining whether the condition contained in Section 8.01(a) has
been satisfied), (B) the Shareholder approval referenced in Section 8.01(f) is
not obtained or (C) the Company shall have breached or failed to perform
in any material respect any of its covenants or other agreements contained in
this Agreement;

(d)           by the Company upon written notice to
C&T if (A) as of any date prior to the Closing Date, the condition to
Closing set forth in Section 8.02(a) shall not have been satisfied
(it being understood that, for purposes of this Section 9.01(d)(A), such
date prior to the Closing Date shall be substituted for the Closing Date in
determining whether the condition contained in Section 8.02(a) has
been satisfied), or (B) C&T or Merger Sub shall have breached or
failed to perform in any material respect any of its respective covenants or
other agreements contained in this Agreement;

 55

 

(e)           by either C&T or the Company if
the transactions contemplated hereby have not been consummated by six (6) months
from date of signing; provided, however, that neither C&T nor
the Company shall be entitled to terminate this Agreement pursuant to this Section 9.01(e) if
such party’s or parties’ breach of this Agreement has prevented the
consummation of the transactions contemplated hereby;

(f)    by C&T if, after the date hereof, there
has been a fact, event, or circumstance that, individually or in the aggregate,
has had or may reasonably be expected to have a Material Adverse Effect; or

(g)            by C&T if dissenters’ rights
shall have been asserted by Shareholders in the aggregate representing more
than 10% of the Outstanding Shares.

9.02.        Effect of Termination.

(a)   The termination of this Agreement pursuant to
the terms of Section 9.01 hereof shall become effective upon delivery to
the other parties of written notice thereof. In the event this Agreement is
terminated by either C&T or the Company as provided in Section 9.01,
this Agreement shall become void and of no further force and effect and there
shall be no liability on the part of C&T, Merger Sub, the Company, or their
respective shareholders, officers, directors or agents, except that Sections 6.03, 9.02, 9.03, 12.01, 12.02, 12.10 and 12.14
shall survive indefinitely, and except as set forth in this Section 9.02.

(b)           With respect to any termination of
this Agreement pursuant to Section 9.01(c) or (d) or the
fraudulent or willful misconduct or intentional misrepresentation of any party
hereto, any and all remedies available to the other party or parties either in
law or equity (including specific performance) shall be preserved and survive
the termination of this Agreement, and if such party was engaging in fraudulent
or willful misconduct or intentional misrepresentation, it shall reimburse the
other party or parties for the aggregate fees and expenses of or payable by
such party in connection with the Merger, including, without limitation, the
fees and expenses of such party’s legal counsel, financial advisors,
accountants and auditors and any other advisors engaged by such party in
connection with the Merger (collectively, “Expenses”).

(c)           If all conditions to the obligations
of a party or parties at the Closing have been satisfied (or waived by the
party or parties entitled to waive such conditions), and the first party or
parties do not proceed with the Closing, all remedies available to the other
party or parties, either at law or in equity, on account of such failure to
close, including the right to pursue specific performance or a claim for
damages on account of a breach of this Agreement, shall be preserved and shall
survive any termination of this Agreement.

9.03.        Termination Fee.
Notwithstanding any provision hereof to the contrary, and in addition to any
other remedies available hereunder:

(a)           To induce C&T to incur the costs
and expenses relating to its due diligence investigation and related
negotiation of the Merger, the Company agrees that if 

 56
 

 

this Agreement terminates as the result of a
Competing Transaction (with the definitional changes described in Section 9.01(b) effective
for all purposes of this Section 9.03(a)) and within twelve (12) months of
such termination enters into a definitive agreement relating to such Competing
Transaction (and such Competing transaction is subsequently consummated), or if
the Company otherwise discontinues activities required of it to produce
consummation of the Merger and within twelve (12) months of such discontinuation
enters into a definitive agreement relating to a Competing Transaction (and
such Competing transaction is subsequently consummated), Company shall pay
C&T as a termination fee and not as a penalty, the lesser of Two Hundred
Fifty Thousand Dollars ($250,000) or C&T’s documented, third-party costs
relating to its due diligence investigation and related negotiation of the
Merger.

(b)  To induce
the Company to incur the costs and expenses relating to its negotiation of the
Merger, C&T agrees that if C&T discontinues activities required of it
to produce consummation of the Merger for any reason other than if any of the
events or conditions described in Section 9.01 occur or exist, C&T
shall pay to the Company as a termination fee and not as a penalty, the lesser
of Two Hundred Fifty Thousand Dollars ($250,000) or the Company’s documented,
third-party costs relating to negotiation of the Merger.

ARTICLE
X.

SURVIVAL; INDEMNIFICATION

10.01.      Survival of Representations and
Warranties. Notwithstanding any investigation made by or on behalf of
C&T or the results of any such investigation and notwithstanding the
participation of C&T in the Closing, the representations and warranties
contained in Article III hereof, and the indemnification obligation of
Barry and Robinson with respect thereto, shall survive the Closing for a period
of three (3) years following the Effective Time, subject to the terms and
conditions of this Article X. Notwithstanding the preceding sentence, the
representations and warranties contained in Sections 3.01, 3.02, 3.03,
3.05, 3.06, 3.12(a), 3.12(l) and 3.18(b), shall survive the Closing
indefinitely, and the representations and warranties contained in
Sections 3.16, 3.21, 3.26 and 3.28, shall survive the Closing for a period
of six (6) months after the expiration of all statutes of limitations
governing the respective matters set forth therein. Notwithstanding the
foregoing, any representation or warranty, and the indemnification obligations
with respect thereto, that would otherwise terminate in accordance with this Section 10.01
shall continue to survive, if notice of a claim shall have been timely given
under Section 10.03 on or prior to such termination date, until such claim
has been satisfied or otherwise resolved as provided in this Article X.

10.02.      Indemnification. Subject to the
terms and conditions of this Article X, from and after the Effective Time,
Barry and Robinson shall jointly and severally indemnify C&T, the Merger
Sub, the Surviving Corporation (subsequent to the Closing), and each of their
respective Affiliates, officers, directors, employees, agents and shareholders
(collectively, the “C&T Indemnified Parties”) and hold them harmless
against any claim, loss, liability, deficiency, damage, amount paid in
settlement, expense or cost (including, without limitation, reasonable costs of
investigation, defense and legal fees and expenses) (collectively, “Losses”),
without 

 57
 

 

giving effect to any written update to the Company
Disclosure Schedule required by Section 5.07, whether or not actually
incurred or paid prior to the expiration of the indemnification obligation of
Barry and Robinson hereby, which the C&T Indemnified Parties may suffer,
sustain or become subject to, as a result of any the following:

(a)           any misrepresentation in any of the
representations or any breach of the warranties of the Company and Barry and
Robinson contained in Article III of this Agreement, the Company
Disclosure Schedule or any closing certificate delivered by the Company
pursuant to this Agreement; and

(b)           any Claims or threatened Claims
against C&T or the Surviving Corporation arising directly from the actions
or inactions of the Company or the officers, directors, employees or agents of
the Company with respect to the business of the Company or the Real Property
prior to the Closing.

The
indemnification obligations of Barry and Robinson shall only arise in the event
that any such misrepresentation or Claim or threatened claim is finally
determined (with no right of appeal) by a court of competent jurisdiction to
have been the subject of fraud by Barry and/or Robinson which determination
shall have occurred within the three (3) year period following execution
of this Agreement. Anything in Article X to the contrary notwithstanding,
C&T and the Surviving Corporation shall jointly and
severally reimburse Barry and/or Robinson for all reasonable costs of
litigation incurred by Barry and/or Robinson (and as submitted in a
written itemization of same to C&T) as a result of any Claim not
finally determined (with no right of appeal) by a court of competent
jurisdiction to have been the subject of fraud by Barry and/or Robinson which
determination shall have occurred within the three (3) year period
following execution of this Agreement, within thirty (30) days of the date such
Claim discontinues, expires or is finally adjudicated.

10.03.      Method of Asserting Claims. As used
herein, an “Indemnified Party” shall refer to a C&T Indemnified
Party, the “Notifying Party” shall refer to and party hereto whose
Indemnified Parties are entitled to indemnification hereby, and the “Indemnifying
Party” shall refer to Barry from and after the Effective Time.

(a)           In the event that
any Indemnified Party is made a defendant in or party to any action or
proceeding (including, without limitation, any audit, action or proceeding
relating to Taxes), judicial or administrative, instituted by any third party
for which the liability or the costs or expenses are Losses (any such third
party action or proceeding being referred to as a “Claim”), the
Notifying Party shall give the Indemnifying Party prompt notice thereof. The
failure to give such notice shall not affect any Indemnified Party’s ability to
seek reimbursement unless, and only to the extent that, such failure has
materially and adversely affected the Indemnifying Party’s ability to defend
successfully a Claim. The Indemnifying Party shall be entitled to contest and
defend such Claim, provided that the Indemnifying Party (i) has a
reasonable basis for concluding that such defense may be successful and (ii) diligently
contests and defends such Claim. Notice of the intention so to contest and
defend shall be given by the Indemnifying Party to the Notifying Party within
fifteen (15) business days after the Notifying Party’s notice of 

 58
 

 

such Claim
(but, in any event, at least five business days prior to the date that an
answer to such Claim is due to be filed). Reputable attorneys reasonably
acceptable to the Indemnified Party employed by the Indemnifying Party shall
conduct such contest and defense. The Notifying Party shall be entitled at any
time, at its own cost and expense (which expense shall not constitute a Loss
unless the Notifying Party reasonably determines that the Indemnifying Party is
not adequately representing or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties with respect to
a Claim, and only to the extent that such expenses are reasonable), to
participate in such contest and defense and to be represented by attorneys of
its or their own choosing. If the Notifying Party elects to participate in such
defense, the Notifying Party will cooperate with the Indemnifying Party in the
conduct of such defense. Neither the Notifying Party nor the Indemnifying Party
may concede, settle or compromise any Claim without the consent of the other
party, which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, if (x) a Claim seeks relief other than the payment of monetary
damages, (y) the subject matter of a Claim relates to the ongoing business
of the Indemnified Party, which Claim, if decided against the Indemnified
Party, would adversely affect the ongoing business or reputation of the
Indemnified Party or (z) the Indemnified Party would not be fully indemnified
with respect to such Claim, then, in each such case, the Indemnified Party
alone shall be entitled to contest, defend and settle such Claim in the first
instance and, if the Indemnified Party does not contest, defend or settle such
Claim, the Indemnifying Party shall then have the right to contest and defend
(but not settle) such Claim.

(b)           In the event any Indemnified Party
has a claim against any Indemnifying Party that does not involve a Claim, the
Notifying Party shall deliver a notice of such claim and an estimate of the
amount of the applicable Loss (if reasonably practicable) to the Indemnifying
Party prior to the expiration of the applicable survival period. If the
Indemnifying Party notifies the Notifying Party that it does not dispute the
claim described in such notice or fails to notify the Notifying Party within
thirty (30) days after delivery of such notice by the Notifying Party whether
the Indemnifying Party disputes the claim described in such notice, the Loss in
the amount specified in the Notifying Party’s notice will be conclusively
deemed a liability of the Indemnifying Party and the amount shall be paid in
accordance with the terms and conditions of this Article X. If the
Indemnifying Party has timely disputed its liability with respect to such
claim, the Indemnifying Party and the Indemnified Party will proceed in good
faith to negotiate a resolution of such dispute for a period of at least 30
days, and if such dispute is not resolved through such negotiation prior to the
expiration of such period, such dispute may be resolved in accordance with Section 12.14.

10.04.      Limitations on Indemnification.

(a)           Neither Barry nor Robinson shall be
liable to any of the C&T Indemnified Parties in respect of any claim for
indemnification pursuant to Section 10.02(a) made hereby until the
aggregate amount of Losses for which all C&T Indemnified Parties otherwise
would be entitled to indemnification under this Article X exceeds $50,000
(the “Basket”), in which case Barry and Robinson shall be liable to the
C&T Indemnified 

 59
 

 

Parties hereby for the aggregate amount of
all such Losses up to the cap described below (and not just the Losses in
excess of the Basket).

(b)           Except as specified in Section 10.04(c),
Barry and/or Robinson, as the case may be, shall pay any indemnification
liability to the C&T Indemnified Parties, or any of them, under this Article X
solely by means of the Surviving Corporation’s offset, against amounts
otherwise payable by the Surviving Corporation to Barry and/or Robinson, as the
case may be, from and after the Effective Time within thirty (30) days of the
Closing against the change of control severance payment due to Barry and/or
Robinson, as the case may be, and thereafter until the earlier of: (i) three
(3) years after the date hereof or (ii) the death of Barry and/or
Robinson, as the case may be, against the cash value of the Keyman Policies for
Barry and/or Robinson, as the case may be. Such time described in (i) and (ii) of
the preceding sentence shall be referred to as the “Indemnification
Termination Date” with respect to tie specific source of payment. After the
Indemnification Termination Date referenced in (ii), the indemnification
obligations of Barry and/or Robinson, as the case may be, hereunder shall
cease.

(c)           The indemnification obligations of
Barry and Robinson under this Section 10.04 shall only apply in the event
that the Losses to be indemnified arise or result directly from the fraudulent
misconduct or fraudulent misrepresentation of Barry and/or Robinson, as the
case may be, as determined by a court of competent jurisdiction, which decision
is not subject to appeal. For purposes of this Section 10.04(c), the
concept of “fraud” or “fraudulent” is identical to the concept of “employment
of manipulative and deceptive devices” as outlined in Rule 10b-5 of
the Exchange Act and the “federal common law” developed by the federal courts
pursuant thereto. Additionally, for purposes of producing the “decision”
referenced above by the Indemnification Termination Date, all parties agree to
expedite any related litigation, including without limitation to: (i) waive
their right(s) to jury trial; (ii) limit discovery to that actually
obtained within six (6) months of filing of the complaint instituting the
litigation; and (iii) refrain from requesting any extensions or
continuances.

10.05.      Remedies. Prior to the Closing, the
parties shall have available to them all remedies available under Law,
including specific performance and other equitable remedies; it being
understood that if this Agreement is terminated prior to the Closing, the sole
remedies of the parties hereto shall be as set forth in Article IX. After
the Closing, the sole and exclusive remedies of the parties hereto with respect
to this Agreement shall be as provided for in this Article X, except with
respect to a claim brought on the basis of fraudulent or willful misconduct or
intentional misrepresentation.

ARTICLE
XI.

DEFINITIONS

When each of the
following terms is used in this Agreement, it shall have the meaning stated in
the Section indicated:

 60
 

 

 

	
  Term

  	
   

  	
  Section

  	
   

  	
  Page

  
	
  Affiliate

  	
   

  	
  3.10(d)

  	
   

  	
  15

  
	
  Agreement

  	
   

  	
  Preamble

  	
   

  	
  1

  
	
  Annual Financial
  Statements

  	
   

  	
  3.07(a)

  	
   

  	
  12

  
	
  Barry

  	
   

  	
  ARTICLE III

  	
   

  	
  8

  
	
  Basket

  	
   

  	
  10.04(a)

  	
   

  	
  59

  
	
  Buyer
  Representations

  	
   

  	
  8.02(a)

  	
   

  	
  54

  
	
  CGT

  	
   

  	
  8.01(n)

  	
   

  	
  53

  
	
  C&T

  	
   

  	
  Preamble

  	
   

  	
  1

  
	
  C&T
  Indemnified Parties

  	
   

  	
  10.02

  	
   

  	
  57

  
	
  CERCLA

  	
   

  	
  3.27(a)(i)

  	
   

  	
  36

  
	
  Claim

  	
   

  	
  10.03(a)

  	
   

  	
  58

  
	
  Closing

  	
   

  	
  1.02(a)

  	
   

  	
  2

  
	
  Closing Date

  	
   

  	
  1.02(a)

  	
   

  	
  2

  
	
  Code

  	
   

  	
  2.05

  	
   

  	
  8

  
	
  Common Stock

  	
   

  	
  3.06(a)

  	
   

  	
  11

  
	
  Company

  	
   

  	
  Preamble

  	
   

  	
  1

  
	
  Company
  Disclosure Schedule

  	
   

  	
  ARTICLE III

  	
   

  	
  8

  
	
  Company
  Intellectual Property

  	
   

  	
  3.18(a)

  	
   

  	
  26

  
	
  Company Proxy
  Statement

  	
   

  	
  5.06(b)

  	
   

  	
  44

  
	
  Company
  Representations

  	
   

  	
  8.01(a)

  	
   

  	
  49

  
	
  Company SEC
  Documents

  	
   

  	
  3.07(c)

  	
   

  	
  13

  
	
  Competing
  Transaction

  	
   

  	
  5.04

  	
   

  	
  43

  
	
  Confidential
  Information

  	
   

  	
  12.01(b)

  	
   

  	
  63

  
	
  Contract

  	
   

  	
  3.17(a)

  	
   

  	
  23

  
	
  Control

  	
   

  	
  3.10(d)

  	
   

  	
  15

  
	
  Current and
  Prior Real Property

  	
   

  	
  3.27(a)(iii)

  	
   

  	
  36

  
	
  Databases

  	
   

  	
  3.18(f)

  	
   

  	
  27

  
	
  Dissenting
  Shares

  	
   

  	
  2.04(a)

  	
   

  	
  7

  
	
  DOL

  	
   

  	
  3.20(d)

  	
   

  	
  29

  
	
  Domain Names

  	
   

  	
  3.18(c)

  	
   

  	
  26

  
	
  Effective Time

  	
   

  	
  1.02(b)

  	
   

  	
  2

  
	
  Employees

  	
   

  	
  3.21(a)

  	
   

  	
  30

  
	
  Environmental
  Laws

  	
   

  	
  3.27(a)(i)

  	
   

  	
  36

  
	
  Equity
  Arrangements

  	
   

  	
  3.10(k)

  	
   

  	
  16

  
	
  ERISA

  	
   

  	
  3.21(a)

  	
   

  	
  31

  
	
  ERISA Affiliates

  	
   

  	
  3.21(a)

  	
   

  	
  31

  
	
  Exchange Act

  	
   

  	
  3.03

  	
   

  	
  10

  
	
  Exchange Fund

  	
   

  	
  2.03(a)

  	
   

  	
  5

  
	
  Expenses

  	
   

  	
  9.02(b)

  	
   

  	
  56

  
	
  Extended
  Insurance Policies

  	
   

  	
  5.11

  	
   

  	
  46

  
	
  GAAP

  	
   

  	
  3.07(a)

  	
   

  	
  12

  
	
  Governing
  Documents

  	
   

  	
  3.01

  	
   

  	
  9

  
	
  Governmental
  Entity

  	
   

  	
  3.04

  	
   

  	
  10

  
	
  Hazardous
  Materials

  	
   

  	
  3.27(a)(ii)

  	
   

  	
  36

  

 

 61
 

 

 

	
  Term

  	
   

  	
  Section

  	
   

  	
  Page

  
	
  Indemnification
  Termination Date

  	
   

  	
  10.04(b)

  	
   

  	
  60

  
	
  Indemnified
  Party

  	
   

  	
  10.03

  	
   

  	
  58

  
	
  Indemnifying
  Party

  	
   

  	
  10.03

  	
   

  	
  58

  
	
  Insiders

  	
   

  	
  3.23

  	
   

  	
  34

  
	
  Insurance
  Policies

  	
   

  	
  3.22

  	
   

  	
  34

  
	
  Internal Use
  Software

  	
   

  	
  3.18(e)

  	
   

  	
  27

  
	
  IRS

  	
   

  	
  3.16(g)

  	
   

  	
  21

  
	
  Keyman Policies

  	
   

  	
  8.01(p)

  	
   

  	
  53

  
	
  Knowledge

  	
   

  	
  3.12(i)

  	
   

  	
  18

  
	
  Latest Balance
  Sheet

  	
   

  	
  3.07(a)

  	
   

  	
  12

  
	
  Latest Financial
  Statements

  	
   

  	
  3.07(a)

  	
   

  	
  12

  
	
  Laws

  	
   

  	
  3.03

  	
   

  	
  9

  
	
  Leases

  	
   

  	
  3.12(b)

  	
   

  	
  17

  
	
  Letter of Transmittal

  	
   

  	
  2.03(c)

  	
   

  	
  6

  
	
  Lien

  	
   

  	
  3.03

  	
   

  	
  9

  
	
  Losses

  	
   

  	
  10.02

  	
   

  	
  57

  
	
  Material Adverse
  Effect

  	
   

  	
  3.09

  	
   

  	
  14

  
	
  Market
  Volatility Adjustment

  	
   

  	
  5.01(h)

  	
   

  	
  42

  
	
  Merger

  	
   

  	
  Preamble

  	
   

  	
  1

  
	
  Merger
  Consideration

  	
   

  	
  2.02(a)

  	
   

  	
  3

  
	
  Merger Documents

  	
   

  	
  1.02(b)

  	
   

  	
  2

  
	
  Merger Sub

  	
   

  	
  Preamble

  	
   

  	
  1

  
	
  Merger Sub
  Common Stock

  	
   

  	
  2.01(c)

  	
   

  	
  3

  
	
  Notifying Party

  	
   

  	
  10.03

  	
   

  	
  58

  
	
  NYBCL

  	
   

  	
  Preamble

  	
   

  	
  1

  
	
  Ordinary Course
  of Business

  	
   

  	
  3.08

  	
   

  	
  13

  
	
  Outstanding
  Shares

  	
   

  	
  Preamble

  	
   

  	
  1

  
	
  Paying Agent

  	
   

  	
  2.03(a)

  	
   

  	
  5

  
	
  PBCL

  	
   

  	
  Preamble

  	
   

  	
  1

  
	
  Permits

  	
   

  	
  3.26(b)

  	
   

  	
  35

  
	
  Permitted Liens

  	
   

  	
  3.10(b)

  	
   

  	
  14

  
	
  Person

  	
   

  	
  3.03

  	
   

  	
  9

  
	
  Personal
  Property

  	
   

  	
  3.12(a)

  	
   

  	
  16

  
	
  Plan

  	
   

  	
  3.21(a)

  	
   

  	
  30

  
	
  Real Property

  	
   

  	
  3.12(b)

  	
   

  	
  17

  
	
  Registered
  Intellectual Property

  	
   

  	
  3.18(b)

  	
   

  	
  26

  
	
  Representatives

  	
   

  	
  12.01(b)

  	
   

  	
  63

  
	
  Returns

  	
   

  	
  3.16(a)

  	
   

  	
  20

  
	
  Robinson

  	
   

  	
  ARTICLE III

  	
   

  	
  8

  
	
  Sarbanes-Oxley
  Act

  	
   

  	
  3.26(c)

  	
   

  	
  35

  
	
  SEC

  	
   

  	
  5.06(b)

  	
   

  	
  44

  
	
  Securities Act

  	
   

  	
  3.06(c)(iv)

  	
   

  	
  12

  
	
  Shareholder List

  	
   

  	
  2.03(b)

  	
   

  	
  5

  
	
  Shareholder
  Meeting

  	
   

  	
  5.06(a)

  	
   

  	
  44

  

 

 62
 

 

 

	
  Term

  	
   

  	
  Section

  	
   

  	
  Page

  
	
  Shareholders

  	
   

  	
  2.03(b)

  	
   

  	
  5

  
	
  Subsidiary

  	
   

  	
  3.05

  	
   

  	
  10

  
	
  Surviving
  Corporation

  	
   

  	
  1.01

  	
   

  	
  1

  
	
  Surviving
  Corporation Common Stock

  	
   

  	
  2.01(c)

  	
   

  	
  3

  
	
  Tax

  	
   

  	
  3.16(o)

  	
   

  	
  22

  
	
  Tax Affiliate

  	
   

  	
  3.16(a)

  	
   

  	
  20

  
	
  Tax Affiliates

  	
   

  	
  3.16(a)

  	
   

  	
  20

  
	
  Taxes

  	
   

  	
  3.16(o)

  	
   

  	
  22

  
	
  Third Party
  Intellectual Property

  	
   

  	
  3.18(h)

  	
   

  	
  27

  
	
  Transaction
  Documents

  	
   

  	
  3.01

  	
   

  	
  9

  

 

ARTICLE
XII.

MISCELLANEOUS

12.01.      Press Releases and Announcements;
Confidentiality and Non-Solicitation.

(a)           Except as otherwise required by
applicable Laws or stock exchange rules, and except with respect to C&T and
the Company following the Closing, C&T, Merger Sub and the Company will
not, and will not permit any of their respective Affiliates, representatives or
advisors to, issue or cause the publication of any press release or make any
other public announcement, including, without limitation, any tombstone
advertisements, with respect to the transactions contemplated by this Agreement
without the consent of the other party, which consent shall not be unreasonably
withheld or delayed. C&T, Merger Sub and the Company shall cooperate with
each other in the development and distribution of all press releases and other
public announcements with respect to this Agreement and the transactions
contemplated hereby, and shall furnish the other with drafts of any such
releases and announcements as far in advance as possible.

(b)           Because both C&T and the Company
anticipate sharing non-public, confidential or proprietary information in the
course of negotiating the Merger, each of them agrees that it will not
disclose, and will cause its officers, directors, employees, representatives,
agents, attorneys and advisors (collectively, “Representatives,” all of
whom shall have previously agreed to be bound by the confidentiality terms of
this agreement) not to disclose, any such non-public, confidential and
proprietary information, together with analyses, compilations, studies, or
other documents prepared therefrom, whether such informa­tion is provided in
written, oral, graphic, pictorial or recorded form or stored on computer discs,
hard drives, magnetic tape or digital or any other electronic medium (the “Confidential
Information”), of the other party. Neither party will use (and will cause
its Representatives not to use) Confidential Information of the other party for
any commercial or competitive purpose whatsoever other than in connection with
the evaluation of the proposed Merger. If the Merger is not consummated for any
reason, each party will hold in confidence and will not use in any manner, any
Confidential Information of the other unless such information is or
subsequently becomes publicly available without the breach of any obligation
owed to supplying party or is obligated to be produced under order of a court
of competent 

 63
 

 

jurisdiction or a valid administrative,
congressional, or other subpoena, civil investigative demand or similar process.
Upon request, if the Merger is not consummated, Confidential Information
(except for that portion of the Confidential Information that consists of
analyses, compilations, studies, or other documents prepared by the
Representatives, which portion of the Confidential Information will be
destroyed) will be returned to the supplying party or destroyed. Such
destruction will be confirmed in writing to the supplying party upon request.  The retaining party will utilize its best
efforts to maintain reasonable security to safeguard the Confidential
Information, and will promptly notify the supplying party upon discovery of any
unauthorized access to the Confidential Information. The term “Confidential
Information” does not Include information that (i) is or becomes generally
available to the public other than as a result of a disclosure by the recipient
party or its Representatives, (ii) is or becomes available to the
recipient party or its Representatives on a non-confidential basis from a
source other than the supplying party which is not known by the recipient party
to be bound by a confidentiality agreement with supplying party, or (iii) is
independently developed by the recipient party. In the event that a recipient
party becomes legally compelled to disclose any of the Confidential Information
of the other party, it will provide the other party with prompt notice thereof
so that the other party may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this
Agreement. In the event that such protective order or other remedy is not
obtained, or that the supplying party waives compliance with the provisions of
this Agreement, the recipient party will furnish only that portion of the
Confidential Information which is legally required to be furnished. Each party
acknowledges and agrees that the other party and its Representatives are not
making any representation or warranty as to the accuracy or completeness of the
Confidential Information, except as may be made in a definitive purchase
agreement between the parties.

(c)           Each of C&T and the Company
agrees that for a period of three (3) years from the termination of this
Agreement without the Merger having occurred, it will not solicit any of the
employees of the other party with regard to employment; provided that this
provision shall not prohibit the hiring of an employee who initiates contact
solely in response to a general published solicitation or on his or her own
volition.

12.02.      Expenses. Each party shall bear all
of its own expenses in connection with the negotiation and consummation of the
Merger.

12.03.      Further Assurances. The parties
hereto agree that, on and after the Closing Date, they shall take all
appropriate action and execute any documents, instruments or conveyances of any
kind which may be reasonably necessary or advisable to carry out any of the
provisions hereof.

12.04.      Amendment and Waiver. This
Agreement may not be amended or waived except in a writing executed by the
party against which such amendment or waiver is sought to be enforced. No
course of dealing between or among any Persons having any interest in this
Agreement shall be deemed effective to modify or amend any part of this
Agreement or any rights or obligations of any Person under or by reason of this
Agreement.

 64
 

 

12.05.      Notices. All notices, demands and
other communications to be given or delivered under or by reason of the
provisions of this Agreement shall be in writing and will be deemed to have
been given (a) when personally delivered, (b) when receipt is
electronically confirmed, if sent by facsimile, telecopy or other electronic
transmission device; provided, however, that if receipt is
confirmed after normal business hours of the recipient, notice shall be deemed
to have been given on the next business day, (c) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery or
(d) three days after being sent by registered or certified mail. Notices,
demands and communications to C&T, Merger Sub and the Company shall, unless
another address is specified in writing, be sent to the address indicated
below:

	
  

  	
  Notices to C&T and Merger Sub:

  	
  C&T Enterprises, Inc.

  Attention: Mr. Robert Toombs, CEO
33 Austin Street

  Wellsboro, PA  16901
Phone: (570) 724-9466

  Facsimile No.: (570) 724-3996

  
	
   

  	
   

  	
   

  
	
   

  	
  with copies to:

  	
  Michael G. Jarman

  McNees Wallace & Nurick LLC

  100 Pine Street, P.O. Box 1166

  Harrisburg, Pennsylvania 17108-1166

  Phone:  (717) 232-8000

  Facsimile No.: (717) 237-530

  
	
   

  	
   

  	
   

  
	
   

  	
  Notices to the Company:

  	
  Corning Natural Gas Corporation.

  Attention:  Thomas K. Barry, President

  330 West William Street

  Corning, N.Y. 14830

  Phone:  (607) 936-3755

  Facsimile No.:  (607) 962-2844

  
	
   

  	
   

  	
   

  
	
   

  	
  with copies to:

  	
  Eric J. Krathwohl, Esq.

  Rich May, a Professional Corporation

  176 Federal Street

  Boston, MA 02110-2223

  Phone: (617) 556-3857

  Facsimile No.(617) 556-3890

  

 

12.06.      Assignment. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
this Agreement nor any of the rights, interests or obligations hereby may be
assigned by either party hereto without the prior written consent of the other
party hereto.

12.07.      Severability. Whenever possible,
each provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable Law, but if any provision 

 65
 

 

of this Agreement is held to be prohibited by or
invalid under applicable Law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.

12.08.      Complete Agreement. This Agreement
and the other Transaction Documents contain the complete agreement among the
parties hereto and supersede any prior understandings, agreements or
representations by or among the parties hereto, written or oral, which may have
related to the subject matter hereof in any way, including, without limitation,
that certain letter of intent between C&T and the Company dated February 14,
2006 and that certain Confidentiality, Exclusivity and Access Agreement intent
between C&T and the Company dated February 14, 2006.

12.09.      Counterparts. This Agreement may be
executed via facsimile in one or more counterparts, any one of which need not
contain the signatures of more than one party, but all such counterparts taken
together shall constitute one and the same instrument.

12.10.      Governing Law. The internal law,
without regard to conflicts of laws principles, of the State of New York shall
govern all questions concerning the construction, validity and interpretation
of this Agreement and the performance of the obligations imposed by this
Agreement.

12.11.      Parties in
Interest. This Agreement shall be binding upon and inure solely to the
benefit of each party, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.

12.12.      Construction of Terms. Whenever
used in this Agreement, a singular number shall include the plural and a plural
the singular. Pronouns of one gender shall include all genders. Accounting
terms used and not otherwise defined in this Agreement have the meanings
determined by, and all calculations with respect to accounting of financial
matters, unless otherwise provided for herein, shall be computed in accordance
with, GAAP, consistently applied in accordance with the historical practices of
the Company and C&T, as the case may be, insofar as such practices are in
accordance with GAAP. References herein to articles, sections, paragraphs,
subparagraphs or the like shall refer to the corresponding articles, sections,
paragraphs, subparagraphs or the like of this Agreement. The words “hereof,” “herein,”
and terms of similar import shall refer to this entire Agreement. Unless the
context clearly requires otherwise, the use of the terms “including,” “included,”
“such as,” or terms of similar meaning, shall not be construed to imply the
exclusion of any other particular elements.

12.13.      No Strict Construction. The
language used in this Agreement and the other agreements contemplated hereby
shall be deemed to be the language chosen by the parties to express their
mutual intent, and no rule of strict construction shall be applied against
any party.

12.14.      Consent to Jurisdiction; Waiver of Jury
Trial. Any legal action or proceeding with respect to this Agreement and
any action for enforcement of any judgment in respect thereof may be brought in
the courts of the State of New York or of the United States of America for the             
District of New York, and, by execution and delivery of this Agreement, the 

 66
 

 

parties hereby accept for themselves and in respect of
their property, generally and unconditionally, the jurisdiction of the
aforesaid courts and appellate courts. The parties waive the right to trial by
jury with respect to any claims hereby. The parties further irrevocably consent
to the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the parties at their addresses referred to
in Section 12.05. The parties hereby irrevocably waive any objection which
they may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement
brought in the courts referred to and hereby further irrevocably waive and
agree, to the extent permitted by applicable law, not to plead or claim in any
such court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum. Nothing herein shall affect the right of
any party hereto to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed in any other jurisdiction.

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

	
  

  	
   

  	
  C&T ENTERPRISES, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ Alfred S.
  Calkins

  	
   

  	
  By:

  	
  /s/ Robert O. Toombs

  
	
  /s/ Thomas J.
  Elliott

  	
   

  	
  Its:

  	
  President & CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C&T ACQUISITION, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert O. Toombs

  
	
   

  	
   

  	
  Its:

  	
  President & CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CORNING NATURAL GAS CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Thomas K. Barry

  
	
   

  	
   

  	
  Its:

  	
  President & CEO

  

 

Limited Joinder.  The undersigned, Barry,
hereby joins the foregoing Merger Agreement for the limited purpose of agreeing
to be bound by the provisions of Articles III and X therein, and Section 8.01(i)(ix),
(p), (q) and (r) thereof, and in connection with said limited
joinder, makes the following additional representations and warranties to
C&T and Merger Sub, as a material inducement to C&T and Merger Sub to
enter into this Agreement, with the understanding that 

 67
 

 

C&T and Merger Sub will be relying thereon in
consummating the transactions contemplated hereby:

(a)           Barry is, as of the date of this
Agreement, the President of the Company and an owner, of record and
beneficially, of  [           ]
shares of common stock of the Company and is executing this limited joinder to
this Agreement in consideration of the substantial financial and other benefits
that would accrue to him personally from a successful consummation of the
Merger.

(b)           Barry is an adult individual of legal
age and full capacity, has the full power and authority to execute and perform
those portions of this Agreement to which he joins in accordance with their
terms.

(c)           Those portions of this Agreement to
which he joins Agreement constitute a legal, valid and binding obligation of
Barry enforceable against Barry in accordance with their terms.

(d)           Neither the execution of this limited
joinder by Barry, nor the performance by Barry of his obligations pursuant
thereto, will conflict with or constitute a default under any agreement or
commitment that that is binding upon Barry.

WITNESS:

	
  /s/ Kenneth J.
  Robinson

  	
   

  	
  /s/ Thomas K. Barry

  
	
   

  	
   

  	
  Thomas K. Barry

  

 

Limited Joinder.  The undersigned, K. James
Robinson (“Robinson”), hereby joins the foregoing Merger Agreement for the
limited purpose of agreeing to be bound by the provisions of Articles III and X
therein, and Section 8.01(i)(ix), (p), (q) and (r) thereof, and
in connection with said limited joinder, makes the following additional
representations and warranties to C&T and Merger Sub, as a material
inducement to C&T and Merger Sub to enter into this Agreement, with the
understanding that C&T and Merger Sub will be relying thereon in
consummating the transactions contemplated hereby:

(a)           Robinson is, as of the date of this
Agreement, the Executive Vice President of the Company and an owner, of record
and beneficially, of 5,120 shares of common stock of the Company and is executing
this limited joinder to this Agreement in consideration of the substantial
financial and other benefits that would accrue to him personally from a
successful consummation of the Merger.

 68
 

 

(b)           Robinson is an adult individual of
legal age and full capacity, has the full power and authority to execute and
perform those portions of this Agreement to which he joins in accordance with
their terms.

(c)           Those portions of this Agreement to
which he joins Agreement constitute a legal, valid and binding obligation of
Robinson enforceable against Robinson in accordance with their terms.

(d)           Neither the execution of this limited
joinder by Robinson, nor the performance by Robinson of his obligations
pursuant thereto, will conflict with or constitute a default under any
agreement or commitment that that is binding upon Robinson.

WITNESS:

	
  /s/ Thomas K.
  Barry

  	
   

  	
  /s/ Kenneth J. Robinson

  
	
   

  	
   

  	
  K. James Robinson

  

 

 69

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