Document:

Exhibit
10.1

AGREEMENT
FOR TERMINATION OF LEASE 

AND VOLUNTARY SURRENDER OF PREMISES

This Agreement for Termination of Lease and Voluntary
Surrender of Premises (this “Agreement”) is
made and entered into as of October 30, 2006, by and between ARE-819/863 MITTEN ROAD, LLC, a Delaware limited liability
company (“Landlord”), and VALENTIS,
INC., a Delaware corporation (“Tenant”), with
reference to the following:

RECITALS

A.            Pursuant
to that certain Lease dated as of December 21, 1993, as amended by that
certain First Amendment to Lease dated March 18, 1997, as further amended
by that certain Second Amendment to Leases dated April 10, 2001, as
further amended by that Third Amendment to Lease dated July 2, 2003, and
as further amended by that certain Fourth Amendment to Lease dated
March 31, 2004 (as amended, the “Mitten Lease”),
Tenant leases certain premises at the improved real property located at 863
Mitten Road, Burlingame, California, and which premises are more particularly
described in the Lease (“Mitten Premises”).

B.            Pursuant
to that certain Lease dated March 18, 1997, as amended by that certain
Second Amendment to Lease dated August 24, 2000, as further amended by
that certain Second Amendment to Leases dated April 10, 2001, and as
further amended by that certain Amendment to Leases dated July 2, 2003 (as
amended, the “Malcolm Lease”).  Tenant leases certain premises at the
improved real property located at 866 Malcolm Road, Burlingame, California (“Malcolm Premises”). 
The Mitten Lease and the Malcolm Lease are collectively referred to
herein as the “Leases,” and the Mitten Premises
and the Malcolm Premises are collectively referred to herein as the “Premises.”

C.            The
term of the Leases expires on October 31, 2007.

D.            Tenant
now desires to terminate the Leases and surrender the Premises to Landlord, and
Landlord is willing to accept such surrender of the Premises and termination of
the Leases pursuant to the terms of this Agreement.

E.             Capitalized
terms used herein without definition shall have the meanings defined for such
terms in the Mitten Lease.

NOW, THEREFORE, in consideration of the foregoing and
of the mutual promises made herein, and for other good and valuable
consideration the receipt of which is hereby acknowledged, Landlord and Tenant
agree as follows:

1.             Termination Date.  Landlord and Tenant hereby terminate the
Leases, subject to Tenant’s satisfaction or Landlord’s waiver of all of the
terms and conditions set forth herein, effective as of the January 15,
2007 (“Termination Date”).  Notwithstanding the foregoing, nothing
contained in this Agreement shall be deemed to limit Landlord’s right to
terminate Tenant’s occupancy of the Premises prior to the Termination Date in
the event that Tenant is in default or deemed to be in default under either the
Mitten Lease or the Malcolm Lease.

 

2.             Basic Rent and Operating Expenses.

(a)           Subject to the last
sentence of this Section 2(a) and Section 3, Tenant shall continue
paying all rent and other charges which Tenant is required to pay under the
Leases including, without limitation, (i) Basic Rent for the Mitten
Premises as required under the Mitten Lease (“Mitten
Base Rent”), (ii) base rent for the Malcolm Premises as
required under the Malcolm Lease (“Malcolm
Base Rent”), (iii) Tenant’s Percentage Share of the Project as
provided for in the Mitten Lease (“Mitten
Operating Expenses”), and (iv) Tenant’s Share of Taxes and
Operating Expenses for the Complex (as defined in the Malcolm Lease) as
provided for in the Malcolm Lease (“Malcolm
Operating Expenses”).  Commencing on November 1, 2006, the HVAC
maintenance charges attributable to the Premises shall be included, as
applicable, in Mitten Operating Expenses and Malcolm Operating Expenses.  Provided that Tenant is not in default under
either of the Leases and complies with all of the provisions of this Agreement,
Tenant shall not be required to pay Mitten Base Rent, Malcolm Base Rent, Mitten
Operating Expenses and/or Malcolm Operating Expenses for the period between
January 1, 2007, and the Termination Date.

(b)           Tenant acknowledges
and agrees that Landlord shall be entitled to all rent and other payments
payable to and received by Tenant from subtenants occupying any portion of the
Premises attributable to any time period after December 31, 2006, and
Tenant shall immediately pay to Landlord any such rent and/or other payments
received by Tenant from any subtenants.

3.             Security Deposit.  Landlord acknowledges that Landlord currently
holds security deposits from Tenant under the Leases in the amount of
$38,618.00.  Tenant hereby irrevocably
and unconditionally directs Landlord and, so long as Tenant is not in default
or deemed to be in default under the Leases, Landlord agrees to apply the full
amount of the security deposit toward the payment of Mitten Base Rent and
Malcolm Base Rent due on December 1, 2006. 
Tenant further acknowledges and agrees that it shall have no right to
receive and Landlord shall have no obligation to return to Tenant any portion
of the security deposits under the Leases.

4.             Termination and Surrender.  Tenant shall voluntarily surrender the
Premises on or before the Termination Date. 
Tenant agrees to cooperate reasonably with Landlord in all matters, as
applicable, relating to (i) surrendering the Premises in accordance with
the surrender requirements and in the condition required pursuant to applicable
Lease, and (ii) all other matters related to restoring the Premises to the
condition required under the applicable Lease. 
Landlord hereby agrees that no removal or demolition of alterations,
additions or improvements to the Premises will be required at the expiration of
the Leases.  After the Termination Date,
Tenant shall have no further rights of any kind with respect to the Premises.  Notwithstanding the foregoing, as provided in
Section 5 hereof, those provisions of the Leases which, by their terms,
survive the termination of the Leases shall survive the surrender of the
Premises and termination of the Leases provided for herein.

5.             No Further Obligations.  Landlord and Tenant each agree that the other
is excused as of the Termination Date from any further obligations with respect
to the Leases, excepting only such obligations under the Leases which are, by
their terms, intended to survive termination of the Leases, and as otherwise
provided herein.  In addition, nothing
herein shall be deemed to limit or terminate any common law or statutory rights
Landlord may have with respect to Tenant in connection with any Hazardous
Materials or for violations of any governmental requirements or requirements of
applicable law.  Nothing herein shall
excuse Tenant from its obligations under the Leases prior to the Termination
Date.

 2
 

 

6.             Removal of Personal Property.  Tenant agrees that the Premises shall be
surrendered free of all personal property of Tenant.  Any personal property of Tenant remaining in
the Premises after the Termination Date is hereby agreed to be abandoned by
Tenant and may be disposed of by Landlord, in Landlord’s sole discretion,
without obligation or liability of any kind to Tenant.  Tenant specifically acknowledges and agrees
that, notwithstanding anything to the contrary that may be contained in the
Leases, in addition to all of the other items that are the property of Landlord
and are required to remain at the Premises following the Termination Date, the
following items are the property of Landlord and shall remain at the Premises
following the Termination Date: all plumbing, electrical wiring, boilers, HVAC,
chillers and back-up generators.

7.             Release of Liability.  As of the Termination Date, Tenant releases
and exculpates Landlord from any liability arising from the Leases, and from
the termination of the Leases.  The
foregoing release extends to all rights of Tenant under Section 1542 of
the California Civil Code and any similar law of any state or territory of the
United States, which are hereby expressly waived and relinquished by
Tenant.  Section 1542 reads:

A general release does
not extend to claims which the creditor does not know or suspect to exist in
his favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor.

Tenant
acknowledges that this release and waiver are an essential and material term of
this Agreement, without which Landlord would not become a party to this
Agreement.

8.             Acknowledgment.  Tenant acknowledges that it has read the
provisions of this Agreement, understands them, and is bound by them.  Time is of the essence in this Agreement.

9.             No Assignment.  Except for any subleases which Landlord has
consented to in writing, Tenant represents and warrants that Tenant has not
assigned, mortgaged, subleased, pledged, encumbered or otherwise transferred
any interest in the Leases and that Tenant holds the interests in the Premises
as set forth in the Leases as of the date of this Agreement.

10.          No Modification.  This Agreement may not be modified or
terminated except in writing signed by all parties.  This Agreement may be signed in counterparts
which taken together shall constitute one agreement binding upon the parties.

11.          Successors and Assigns.  The covenants and agreements herein contained
shall inure to the benefit and be binding upon the parties and their respective
successors and assigns.

12.          Attorneys’ Fees.  In the event of a dispute between the
parties, the prevailing party shall be entitled to have its reasonable
attorneys’ fees and costs paid by the other party.

13.          Conflict of Laws.  This Agreement shall be governed by the laws
of the state in which the Premises are located.

[Signatures are on
the next page]

 3
 

 

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

	
  

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  VALENTIS, INC.,

  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Benjamin F. McGraw, III

  
	
   

  	
  Its:

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  

 

	
  

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  ARE-819/863 MITTEN ROAD, LLC,

  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  ALEXANDRIA REAL ESTATE EQUITIES, L.P.,

  a Delaware limited partnership,

  managing member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  ARE-QRS CORP.,

  a Maryland corporation,

  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Gary Dean

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Gary Dean

  
	
   

  	
   

  	
   

  	
  Title:

  	
  A.V.P Real Estate Legal

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 4Exhibit 10.1

 

 

 

 

 

AGREEMENT
AND PLAN OF MERGER

BY AND AMONG

DSC SERVICES INC.,

BRAM ACQUISITION CORP.,

UNITED INDUSTRIAL
CORPORATION

AND

DETROIT STOKER COMPANY

November 21, 2006

 

 

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
  SECTION 1

  	
   

  	
  DEFINITIONS

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2

  	
   

  	
  THE MERGER

  	
   

  	
  2

  
	
  2.1

  	
   

  	
  The Merger

  	
   

  	
  2

  
	
  2.2

  	
   

  	
  Filing; Effective Time

  	
   

  	
  2

  
	
  2.3

  	
   

  	
  Effect of the Merger

  	
   

  	
  3

  
	
  2.4

  	
   

  	
  Articles of Incorporation; Bylaws.

  	
   

  	
  3

  
	
  2.5

  	
   

  	
  Directors and Officers

  	
   

  	
  3

  
	
  2.6

  	
   

  	
  Effect on Capital Stock of the Constituent
  Corporations.

  	
   

  	
  4

  
	
  2.7

  	
   

  	
  Appraisal Rights

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3

  	
   

  	
  MERGER CONSIDERATION

  	
   

  	
  5

  
	
  3.1

  	
   

  	
  Merger Consideration

  	
   

  	
  5

  
	
  3.2

  	
   

  	
  [Intentionally Omitted]

  	
   

  	
  5

  
	
  3.3

  	
   

  	
  [Intentionally Omitted]

  	
   

  	
  5

  
	
  3.4

  	
   

  	
  Escrow Deposits

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4

  	
   

  	
  CLOSING

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5

  	
   

  	
  REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER

  	
   

  	
  15

  
	
  5.1

  	
   

  	
  Organization and Good Standing

  	
   

  	
  15

  
	
  5.2

  	
   

  	
  Capitalization

  	
   

  	
  16

  
	
  5.3

  	
   

  	
  Ownership of Stock

  	
   

  	
  17

  
	
  5.4

  	
   

  	
  Execution and Effect of Agreement

  	
   

  	
  17

  
	
  5.5

  	
   

  	
  No Conflicts

  	
   

  	
  17

  
	
  5.6

  	
   

  	
  Real Property.

  	
   

  	
  18

  
	
  5.7

  	
   

  	
  Personal Property

  	
   

  	
  20

  
	
  5.8

  	
   

  	
  Financial Statements

  	
   

  	
  21

  
	
  5.9

  	
   

  	
  Absence of Certain Changes or Events

  	
   

  	
  21

  
	
  5.10

  	
   

  	
  Insurance

  	
   

  	
  24

  
	
  5.11

  	
   

  	
  Litigation

  	
   

  	
  24

  
	
  5.12

  	
   

  	
  No Brokers

  	
   

  	
  25

  
	
  5.13

  	
   

  	
  Tax Matters

  	
   

  	
  25

  
	
  5.14

  	
   

  	
  Intellectual Property.

  	
   

  	
  26

  
	
  5.15

  	
   

  	
  Material Contracts

  	
   

  	
  28

  
	
  5.16

  	
   

  	
  Compliance with Laws

  	
   

  	
  29

  
	
  5.17

  	
   

  	
  Environmental

  	
   

  	
  29

  
	
  5.18

  	
   

  	
  Employee Benefit Plans.

  	
   

  	
  31

  
	
  5.19

  	
   

  	
  Employee Relations.

  	
   

  	
  34

  
	
  5.20

  	
   

  	
  Customers and Suppliers

  	
   

  	
  36

  
	
  5.21

  	
   

  	
  Inventories

  	
   

  	
  37

  
	
  5.22

  	
   

  	
  Product Warranties

  	
   

  	
  37

  

 

 i
 

 

 

	
  5.23

  	
   

  	
  Accounts Receivable; Accounts Payable

  	
   

  	
  37

  
	
  5.24

  	
   

  	
  Bank Accounts

  	
   

  	
  38

  
	
  5.25

  	
   

  	
  Certain Payments

  	
   

  	
  38

  
	
  5.26

  	
   

  	
  Books and Records

  	
   

  	
  38

  
	
  5.27

  	
   

  	
  Cash Balance

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6

  	
   

  	
  REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

  	
   

  	
  39

  
	
  6.1

  	
   

  	
  Organization and Good Standing

  	
   

  	
  39

  
	
  6.2

  	
   

  	
  Execution and Effect of Agreement

  	
   

  	
  39

  
	
  6.3

  	
   

  	
  No Conflicts

  	
   

  	
  40

  
	
  6.4

  	
   

  	
  Availability of Funds

  	
   

  	
  40

  
	
  6.5

  	
   

  	
  Litigation

  	
   

  	
  41

  
	
  6.6

  	
   

  	
  No Brokers

  	
   

  	
  41

  
	
  6.7

  	
   

  	
  Investment

  	
   

  	
  41

  
	
  6.8

  	
   

  	
  No Liabilities

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7

  	
   

  	
  ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND
  WARRANTIES

  	
   

  	
  42

  
	
  7.1

  	
   

  	
  Limitation; Survival

  	
   

  	
  42

  
	
  7.2

  	
   

  	
  Right to Update Schedules

  	
   

  	
  43

  
	
  7.3

  	
   

  	
  Schedules

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8

  	
   

  	
  ADDITIONAL COVENANTS AND UNDERTAKINGS

  	
   

  	
  44

  
	
  8.1

  	
   

  	
  Efforts to Consummate; Further Assurances and
  Assistance

  	
   

  	
  44

  
	
  8.2

  	
   

  	
  Access to Information.

  	
   

  	
  44

  
	
  8.3

  	
   

  	
  Conduct of Business Prior to Closing

  	
   

  	
  45

  
	
  8.4

  	
   

  	
  Confidentiality

  	
   

  	
  48

  
	
  8.5

  	
   

  	
  Books and Records

  	
   

  	
  49

  
	
  8.6

  	
   

  	
  Employees and Employee Benefits.

  	
   

  	
  50

  
	
  8.7

  	
   

  	
  Insurance

  	
   

  	
  57

  
	
  8.8

  	
   

  	
  Taxes.

  	
   

  	
  58

  
	
  8.9

  	
   

  	
  Cooperation and Exchange of Information

  	
   

  	
  58

  
	
  8.10

  	
   

  	
  Transfer Taxes; Real Property Taxes; Sales Taxes

  	
   

  	
  59

  
	
  8.11

  	
   

  	
  Undertakings with Respect to Asbestos-Related
  Litigation.

  	
   

  	
  59

  
	
  8.12

  	
   

  	
  Additional Post-Closing Covenants

  	
   

  	
  60

  
	
  8.13

  	
   

  	
  Covenant Not to Compete

  	
   

  	
  61

  
	
  8.14

  	
   

  	
  Transitional Services

  	
   

  	
  63

  
	
  8.15

  	
   

  	
  Replacement of Existing Letters of Credit and Surety
  Bonds

  	
   

  	
  63

  
	
  8.16

  	
   

  	
  Labor Agreement

  	
   

  	
  63

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9

  	
   

  	
  INDEMNIFICATION

  	
   

  	
  64

  
	
  9.1

  	
   

  	
  Indemnification of Parent by the Stockholder

  	
   

  	
  64

  
	
  9.2

  	
   

  	
  Indemnification of the Stockholder by Parent and the
  Surviving Corporation

  	
   

  	
  64

  
	
  9.3

  	
   

  	
  Other Provisions Regarding Indemnification
  Obligations.

  	
   

  	
  65

  
	
  9.4

  	
   

  	
  Notice of Claim; Defense of Action

  	
   

  	
  68

  
	
  9.5

  	
   

  	
  Exclusivity of Indemnity

  	
   

  	
  69

  

 

 ii
 

 

 

	
  SECTION 10

  	
   

  	
  CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES
  TO CLOSE

  	
   

  	
  70

  
	
  10.1

  	
   

  	
  Conditions Precedent to the Obligation of Parent and
  Merger Sub

  	
   

  	
  70

  
	
  10.2

  	
   

  	
  Conditions Precedent to the Obligation of the
  Stockholder and the Company

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11

  	
   

  	
  DELIVERIES AT THE CLOSING

  	
   

  	
  72

  
	
  11.1

  	
   

  	
  Deliveries by the Stockholder

  	
   

  	
  72

  
	
  11.2

  	
   

  	
  Deliveries by Parent

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12

  	
   

  	
  EXPENSES

  	
   

  	
  75

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13

  	
   

  	
  TERMINATION

  	
   

  	
  75

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 14

  	
   

  	
  NOTICES

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 15

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  79

  
	
  15.1

  	
   

  	
  Headings

  	
   

  	
  79

  
	
  15.2

  	
   

  	
  Schedules, etc

  	
   

  	
  79

  
	
  15.3

  	
   

  	
  Execution in Counterparts

  	
   

  	
  79

  
	
  15.4

  	
   

  	
  Entire Agreement

  	
   

  	
  79

  
	
  15.5

  	
   

  	
  Governing Law

  	
   

  	
  79

  
	
  15.6

  	
   

  	
  Submission to Jurisdiction

  	
   

  	
  80

  
	
  15.7

  	
   

  	
  Modification

  	
   

  	
  80

  
	
  15.8

  	
   

  	
  Binding Effect; Agreement

  	
   

  	
  80

  
	
  15.9

  	
   

  	
  Waivers and Amendments

  	
   

  	
  80

  
	
  15.10

  	
   

  	
  Severability

  	
   

  	
  80

  
	
  15.11

  	
   

  	
  Announcements

  	
   

  	
  81

  
	
  15.12

  	
   

  	
  No Third Party Beneficiaries

  	
   

  	
  81

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANNEX 1 — Definitions

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Form of Promissory Note

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Post-Closing Covenants of Parent and the Company

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Form of Joinder Agreement

  	
   

  	
   

  
	
  Exhibit D

  	
   

  	
  Form of Escrow Agreement

  	
   

  	
   

  
	
  Exhibit E

  	
   

  	
  Stockholder Press Release

  	
   

  	
   

  
	
  Exhibit F

  	
   

  	
  Form of Investor Guaranty

  	
   

  	
   

  
	
  Exhibit F-1

  	
   

  	
  Form of Termination Fee Guaranty

  	
   

  	
   

  

 

 iii
 

 

 

	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule I

  	
   

  	
  Restructuring

  
	
  Schedule II

  	
   

  	
  Permitted Affiliate

  
	
  Schedule III

  	
   

  	
  Stockholder Affiliates

  
	
  Schedule 5.1

  	
   

  	
  Jurisdictions in which Foreign Qualified

  
	
  Schedule 5.2

  	
   

  	
  Capitalization

  
	
  Schedule 5.6

  	
   

  	
  Real Property

  
	
  Schedule 5.7

  	
   

  	
  Personal Property

  
	
  Schedule 5.8

  	
   

  	
  Financial Statements

  
	
  Schedule 5.9

  	
   

  	
  Absence of Certain Changes or Events

  
	
  Schedule 5.10

  	
   

  	
  Insurance

  
	
  Schedule 5.11

  	
   

  	
  Litigation

  
	
  Schedule 5.12

  	
   

  	
  Brokers

  
	
  Schedule 5.13

  	
   

  	
  Tax Matters

  
	
  Schedule 5.14(a)

  	
   

  	
  Registered Intellectual Property

  
	
  Schedule 5.14(b)

  	
   

  	
  Intellectual Property License Agreements

  
	
  Schedule 5.15

  	
   

  	
  Material Contracts

  
	
  Schedule 5.16

  	
   

  	
  Compliance with Laws

  
	
  Schedule 5.17

  	
   

  	
  Environmental

  
	
  Schedule 5.18(a)

  	
   

  	
  Employee Benefit Plans

  
	
  Schedule 5.18(b)

  	
   

  	
  Single Employer Designation & 280G

  
	
  Schedule 5.18(c)

  	
   

  	
  Costs, Contributions and Accrual

  
	
  Schedule 5.18(d)

  	
   

  	
  Compliance with ERISA and Code

  
	
  Schedule 5.18(e)

  	
   

  	
  Employee Benefit Plan Liability

  
	
  Schedule 5.18(f)

  	
   

  	
  Prohibited Transactions

  
	
  Schedule 5.18(h)

  	
   

  	
  Health and Life Insurance Benefits

  
	
  Schedule 5.19(a)

  	
   

  	
  Employee Relations

  
	
  Schedule 5.19(b)

  	
   

  	
  Other Employee Matters

  
	
  Schedule 5.20

  	
   

  	
  Customers and Suppliers

  
	
  Schedule 5.22

  	
   

  	
  Product Warranty Claims

  
	
  Schedule 5.23(a)

  	
   

  	
  Disputed Accounts Receivable

  
	
  Schedule 5.23(b)

  	
   

  	
  Aging List

  
	
  Schedule 5.24

  	
   

  	
  Bank Accounts

  
	
  Schedule 6.6

  	
   

  	
  Parent Brokers

  
	
  Schedule 8.3

  	
   

  	
  Conduct of Business Prior to Closing

  
	
  Schedule 8.3(r)

  	
   

  	
  Actions Requiring Consent

  
	
  Schedule 8.6(b)

  	
   

  	
  Actuarial Methods and Assumptions

  
	
  Schedule 8.11(a)

  	
   

  	
  Asbestos-Related Litigation Matters

  
	
  Schedule 8.14

  	
   

  	
  Transitional Services

  
	
  Schedule 8.16

  	
   

  	
  Labor Agreement

  

 

 iv

 

AGREEMENT AND PLAN OF
MERGER

THIS
AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of the 21 day of
November, 2006, is entered into by DSC SERVICES INC., a newly formed Delaware
corporation (“Parent”), BRAM ACQUISITION
CORP., a newly formed Michigan corporation (“Merger
Sub”), UNITED INDUSTRIAL CORPORATION, a Delaware corporation
(the “Stockholder”) and
DETROIT STOKER COMPANY, a Michigan corporation (the “Company”).

W I T N E S S E T H:

WHEREAS,
the Stockholder owns 100,000 shares of common stock, par value $1.00 per share
(the “Shares”), of the
Company, which Shares constitute all of the issued and outstanding capital
stock of the Company;

WHEREAS,
the Company is engaged in the manufacture and supply of stokers and related
combustion equipment for the production of steam used in heating, industrial
processing and electric power generation (the “Business”);

WHEREAS,
Parent owns all of the issued and outstanding shares of stock of Merger Sub;

WHEREAS,
Parent, Merger Sub, the Stockholder and the Company desire that Parent shall
acquire the Company and that such acquisition should be accomplished by a
merger of Merger Sub with and into the Company (the “Merger”);

WHEREAS,
in furtherance of the Merger, each of the boards of directors of Merger Sub and
the Company has approved the Merger in accordance with the applicable
provisions of the Michigan Business Corporation Act (the “BCA”)
and upon the terms and subject to the conditions set forth in this Agreement;
and

 

WHEREAS,
each of the boards of directors of Stockholder and Parent, as sole stockholder
of the Company and Merger Sub, respectively, has approved and adopted the
Merger in accordance with the applicable provisions of the BCA and upon the
terms and subject to the conditions set forth herein, as evidenced by its
execution of this Agreement.

NOW,
THEREFORE, for the purpose of consummating the above
transaction and in consideration of the promises and mutual covenants herein
contained, the parties hereby agree as follows:

SECTION 1

DEFINITIONS

As used in this
Agreement, capitalized terms shall have the meanings specified in the text
hereof or on Annex 1 hereto (which is incorporated herein by reference),
which meanings shall be applicable to both the singular and plural forms of the
term defined.

SECTION 2

THE
MERGER

2.1           The
Merger.  Upon the terms and subject
to the conditions set forth in this Agreement and the Certificate of Merger,
and in reliance upon the representations, warranties, covenants and agreements
contained herein and in accordance with the BCA, at the Effective Time, Merger
Sub shall be merged with and into the Company. 
As a result of the Merger, the separate corporate existence of Merger
Sub shall cease and the Company shall continue as the surviving corporation of
the Merger (the “Surviving Corporation”)
and shall succeed to and assume all the rights and obligations of Merger Sub in
accordance with the BCA.  The name of the
Surviving Corporation shall continue to be “Detroit Stoker Company.”

2.2           Filing;
Effective Time.  Not later than the
close of business on the Closing Date, the parties shall cause a properly
executed certificate of merger (the “Certificate
of

 2
 

 

Merger”), in the
form required by and executed in accordance with the BCA, and specifying an
effective time therefor not later than the close of business on the Closing
Date, to be filed with the Secretary of State of the State of Michigan in
accordance with the provisions of the BCA. 
The Merger shall become effective at the time of filing of, or at such
later time specified in the Certificate of Merger.  When used in this Agreement, the term “Effective Time” shall mean the date and
time at which the Merger shall become effective.

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

2.4           Articles
of Incorporation; Bylaws.

(a)           At
the Effective Time, the articles of incorporation of the Surviving Corporation
shall be amended in accordance with applicable law in such form as Parent, in
its sole discretion, shall determine and specify in the Certificate of Merger.

(b)           The
bylaws of the Merger Sub, as in effect immediately prior to the Effective Time,
shall be the bylaws of the Surviving Corporation.

2.5           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 articles of incorporation and bylaws of the Surviving Corporation, and the
persons who Parent shall determine shall be the initial officers of the Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualified.

 3
 

 

2.6           Effect
on Capital Stock of the Constituent Corporations.

(a)           At
the Effective Time, by virtue of the Merger, each share of capital stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into one share of common stock of the Surviving Corporation (“Surviving Corporation Common Stock”),
with the same rights, powers and privileges as the shares so converted and
shall constitute the only outstanding shares of capital stock of the Surviving
Corporation.  Each stock certificate of
Merger Sub evidencing ownership of any such shares shall remain outstanding and
evidence ownership of shares of Surviving Corporation Common Stock.

(b)           At
the Effective Time, by virtue of the Merger, each of the Shares (upon the
surrender of such Shares by the Stockholder to Parent) shall automatically be
cancelled and extinguished and converted, in the aggregate, into the right to
receive the Merger Consideration, which shall be payable to the Stockholder as
set forth in SECTION 3.  After the
Effective Time, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of Shares that
were outstanding prior to the Effective Time.

2.7           Appraisal
Rights.  Stockholder hereby
irrevocably waives any appraisal rights that it has with respect to the Shares
owned (of record or beneficially) by Stockholder in connection with the Merger.

 4
 

 

SECTION 3

MERGER
CONSIDERATION

3.1           Merger
Consideration.  The merger
consideration (the “Merger Consideration”)
shall consist of $22,400,000 payable as follows:  (a) by payment at the Closing of the
aggregate amount of $17,400,000 in cash, by wire transfer of same day federal
funds to the bank account or accounts designated by the Stockholder in writing
at least two (2) Business Days prior to the Closing; and (b) by delivery to the
Stockholder on the Closing Date of a promissory note of Parent in the aggregate
principal amount of $5,000,000 in the form attached hereto as Exhibit A
(the “Note”); provided,
however, that if the Closing occurs on or prior to December 31, 2006 the
Merger Consideration shall be reduced by $200,000 to $22.2 million with a
corresponding reduction in the cash portion thereof.  The Note shall bear interest at the Interest
Rate, compounded quarterly, and such interest shall be payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year until payment
in full of the Note, commencing on June 30, 2007, The principal amount of the
Note shall be repaid in equal quarterly installments and the unpaid principal
amount of the Note together with all accrued but unpaid interest thereon shall
be due and payable on June 30, 2013, subject to acceleration as provided in the
Note.  Parent’s obligations under the
Note shall be guaranteed to the extent provided in the Investor Guaranty.  The Merger Consideration shall be subject to
adjustment after the Closing as provided in Section 3.4(e) hereof.

3.2           [Intentionally
Omitted]

3.3           [Intentionally
Omitted]

3.4           Escrow
Deposits.

(a)           Concurrently
with the Closing, the Surviving Corporation shall deposit (and Parent shall
cause to be deposited by the Surviving Corporation) in an escrow account (the “Escrow Account”) to be held in
accordance with the Escrow Agreement the aggregate amount of $3,000,000 in cash
(the “Closing Escrow Deposit”).

 5
 

 

(b)           Within
forty-five (45) days following the end of each calendar quarter, commencing on
June 30, 2007 and continuing until the tenth (10th) anniversary of the Closing
Date (the “Additional Escrow Deposit Period”),
the Surviving Corporation shall deposit (and Parent shall deposit if the
Surviving Corporation fails to deposit) in the Escrow Account the greater of
(A) forty percent (40%) of the Available Cash Flow achieved by the Surviving
Corporation for such calendar quarter or (B) $125,000 (each
such deposit, an “Additional Escrow Deposit,”
such $125,000 amount to be prorated for any partial calendar quarter during the
Additional Escrow Deposit Period.  The
Annual Catch-Up Escrow Deposit, the Sale of the Company Escrow Deposit, the
Additional Escrow Deposits and the Closing Escrow Deposit are referred to
collectively as the “Escrow Deposits”),
to be held in accordance with the Escrow Agreement; provided that the maximum
amount of Escrow Deposits that Parent and the Surviving Corporation shall be
required to deposit in the Escrow Account shall not exceed in the aggregate
$20,000,000.

(c)           Within forty-five (45)
days following the end of each calendar quarter during the Additional Escrow
Deposit Period, Parent shall cause the Surviving Corporation to deliver to the
Stockholder a statement certified by the chief financial officer of the Company
setting forth in reasonable detail the calculation of the Additional Escrow
Deposits for such calendar quarter and the calendar year to-date.  Within (x) sixty (60) days following the end
of each calendar year during the Additional Escrow Deposit Period, Parent shall
cause the Surviving Corporation to deliver to the Stockholder a balance sheet,
statement of income and statement of cash flow of the Company as of and for
such calendar year, audited by Surviving

 6
 

 

Corporation’s independent accountants and
accompanied by a certification of such accountants as to the amount of
Available Cash Flow for such calendar year and (y) forty-five (45) days
following the end of each calendar quarter and calendar year during the
Additional Escrow Deposit Period, Parent shall cause the Surviving Corporation
to deliver to the Stockholder an unaudited balance sheet, statement of income
and statement of cash flow of the Surviving Corporation as of and for such
calendar year certified by the chief financial officer of Parent.  The Surviving Corporation shall deposit (and
Parent shall deposit if the Company fails to deposit) in the Escrow Account the
amount of any underpayment in Escrow Deposits revealed by such accountant’s
certification within five (5) days following the delivery to the Stockholder of
such accountant’s certification (each an “Annual Catch-Up
Escrow Deposit”).  Parent
shall give the Stockholder and its employees, accountants, legal counsel and
other advisors reasonable access upon reasonable notice during normal business
hours, to all officers, employees, offices, properties, agreements, books,
records and affairs of the Surviving Corporation and shall otherwise cause its
employees to provide such documentation, certificates and the like as the
Stockholder or its employees, accountants, legal counsel and other advisors may
reasonably request so that the Stockholder can review and approve the
calculation of each Additional Escrow Deposit.

(d)           For
a period of five (5) years following the Closing Date, Parent shall not (and
shall not permit the Surviving Corporation to) enter into, engage in or
consummate a Sale of the Company, provided that Parent may consummate the
Permitted Affiliate Sale.  Parent
acknowledges and confirms that if at any time it consummates a Sale of the
Company following such five (5) year period or consummates the Permitted
Affiliate Sale, then concurrently with, and as a condition to the consummation
of such Sale of the Company or

 7
 

 

Permitted Affiliate Sale, the following
conditions precedent shall have been satisfied in full (provided that no such
sale shall relieve Parent of any of its obligations under this Agreement or any
other Transaction Document):  (i) the
purchaser thereunder shall execute and deliver to the Stockholder and Parent a
joinder agreement substantially in the form attached hereto as Exhibit C,
whereby such purchaser shall expressly agree to be bound by this Agreement and
to assume all obligations of Parent under this Agreement and each other
Transaction Document, as if such purchaser were Parent hereunder and
thereunder, including, without limitation, under this Section 3.4, SECTION 8
(Additional Covenants and Undertakings), including, without limitation, the
undertakings, covenants and agreements set forth in (x) Section 8.11, including,
without limitation, Schedule 8.11(a) and Exhibit B and (y)
Section 8.12 including, without limitation, the agreement not to conduct
invasive environmental testing, and Section 9 hereto; and (ii) Parent shall, or
shall cause the Surviving Corporation to, deposit in the Escrow Account prior
to the consummation of such Sale of the Company sufficient funds to ensure that
the Escrow Account has the amount of funds it would have had if (A) Parent had
timely deposited into the Escrow Account all of the Escrow Deposits due under
this Agreement for the period on or prior to the consummation of such Sale of
the Company and (B) no disbursements were at any time made under Section 3.4(i)
hereof (the “Sale of the Company Escrow
Deposit”).  Notwithstanding the foregoing, if the
Asbestos Legislation is passed at any time during the five (5) year period
following the Closing Date and in connection therewith the Additional Escrow
Period has terminated, the provisions of this Section 3.4(d) prohibiting a Sale
of the Company shall not apply to any Sale of the Company occurring thereafter
to the extent (1) at least twelve (12) months have elapsed since the passage of
the Asbestos Legislation, (2) there is then pending no reasonable challenge to
the Asbestos Legislation and (3) as a condition precedent to the

 8
 

 

consummation of such Sale of the Company, the
outstanding principal amount of the Note, together with all accrued but unpaid
interest thereon, shall be paid in full, provided, however, that the
requirements set forth in clauses (i) and (ii) of the preceding sentence are
satisfied in connection with any such Sale of the Company.

(e)           (i)  If, at any time during the three (3) year
period immediately following the Closing Date, there is passage of the Fairness
In Asbestos Injury Resolution Act of 2005 (Fair Act) or a similar federal law
or regulation (having the force of law) that creates a national trust fund (or
comparable entity) for the purpose of administering (including making any
payments to claimants on) asbestos-related personal injury claims (the “Asbestos Legislation”), and, as a
result of the passage of the Asbestos Legislation, the aggregate amount of
Parent’s and the Surviving Corporation’s funding obligations under such trust
fund in respect of the Asbestos-Related Litigation (such obligations the “Fair Act Obligations”) will be less
than $5,000,000 (as determined by and documented in a written assessment issued
by an independent consulting firm of national standing and expertise mutually
acceptable to the Stockholder and Parent (“Consultant”)),
then following the delivery of the written assessment issued by Consultant
(which assessment shall be delivered to the parties no later than 30 days
following the date of the passage of the Asbestos Legislation), the Escrow
Agent shall (and the parties shall instruct the Escrow Agent to) disburse, on
the 180th day following the passage of the Asbestos
Legislation (the “Additional Merger
Consideration Payment Date”) (x) first, to the Stockholder, as
additional Merger Consideration, the amount of $5,000,000 minus an amount equal
to the Asbestos Legislation Expense Amount, if any, and (y) second, to Parent
an amount equal to the remaining balance, if any, of the Escrow Account less
the sum of (A) the amount of any claims for indemnification under Section
9.2(c) and (d) of this Agreement which remain unresolved

 9
 

 

between the Stockholder and Parent, and (B)
the amount of any claims for indemnification under Section 9.2(c) and (d) of
this Agreement to which the parties have agreed as to the payment to be made
from the Escrow Account but with respect to which payment has not yet been made
((A) and (B) collectively, “Unresolved/Unpaid
Claims”).  To the extent
the amount held in the Escrow Account (less any Unresolved/Unpaid Claims) immediately
prior to the Additional Merger Consideration Payment Date is less than
$5,000,000, the outstanding principal amount of the Note shall be increased by
the amount of such shortfall, and Parent shall on the Additional Merger
Consideration Payment Date deliver to the Stockholder an amended and restated
Note reflecting such increased principal amount.  The Additional Escrow Deposit Period shall
terminate on the Additional Merger Consideration Payment Date subject to the
Stockholder’s receipt of the amount set forth in clause (y) above and/or, if
applicable, the amended and restated Note, provided that Parent shall not be
required to make (or cause to be made) any Escrow Deposits during the 180-day
period referred to above.

(ii)           If
Asbestos Legislation is passed (x) at any time during the three-year period
immediately following the Closing Date and in connection with such passage the
Fair Act Obligations will be greater than $5,000,000 or (y) at any time
following the third anniversary of the Closing but prior to the expiration of
the Additional Escrow Period, and in each case the Fair Act Obligations (as
determined by and documented in a written assessment issued by Consultant), are
less than the amount then held in the Escrow Account (net of the amount of any
Unresolved/Unpaid Claims), then following the delivery of such written
assessment  (which assessment shall be
delivered to the parties no later than 30 days following the date of the
passage of the Asbestos Legislation), the Escrow Agent shall (and the parties
shall instruct the Escrow Agent to) disburse to Parent the difference between
the Fair Act Obligations

 10
 

 

and the amount then on deposit in the Escrow
Account (net of the amount of any Unresolved/Unpaid Claims) and thereafter
Parent shall not be required to deposit any Escrow Deposits and the balance of
the Escrow Account shall be held in accordance with the Escrow Agreement until
such time that the Surviving Corporation is required to fund its obligations
under the Asbestos Legislation.  If the
Fair Act Obligations are equal to or greater than the amount then held in the
Escrow Account, or if the amount of all Unresolved/Unpaid Claims exceeds the
amount by which the Fair Act Obligations are less than the amount then held in
the Escrow Account, then no amount of the Escrow Account shall be disbursed to
Parent and Parent shall continue to make Escrow Deposits until the amount held
in the Escrow Account equals the Fair Act Obligations.  At such time as the Surviving Corporation is
required to fund its obligations under the Asbestos Legislation, the Escrow
Agent shall (and the parties shall instruct the Escrow Agent to) disburse to
Parent all amounts then held in the Escrow Account less the amount of all
Unresolved/Unpaid Claims.  The Additional
Escrow Deposit Period shall terminate on the date the Company funds all of its
Fair Act Obligations.

(f)            Following
the expiration or termination of the Additional Escrow Deposit Period (other
than in accordance with Section 3.4(e)), the Escrow Agent shall (and the
parties shall instruct the Escrow Agent to) disburse to Parent the remaining
balance, if any, of the Escrow Account in three (3) installments, subject to
the proviso in the next sentence.  The
first installment shall be disbursed within one (1) Business Day following the
expiration or termination of the Additional Escrow Deposit Period and each of
the next two (2) installments shall be disbursed within one (1) Business Day
following each of the first and second anniversaries of the expiration or
termination of the Additional Deposit Period; provided, however,
that (i) in no event shall the Escrow

 11
 

 

Agent (and the parties shall instruct the
Escrow Agent not to) disburse to Parent the amount of any Unresolved/Unpaid
Claims, and the amount of all Unresolved/Unpaid Claims shall be retained by the
Escrow Agent in accordance with the Escrow Agreement and (ii) it is understood
that on or prior to the second anniversary of the expiration or termination of
the Additional Escrow Deposit Period the Stockholder shall be entitled to make
claims against the amounts on deposit in the Escrow Account for (A)
indemnification under Section 9.2(c) of this Agreement which remain unresolved
between the Stockholder and Parent, and (B) the amount of any claims for
indemnification under Section 9.2(c) of this Agreement to which the parties
have agreed as to the payment to be made from the Escrow Account but with
respect to which payment has not yet been made.

(g)           Following
the Closing Date until the expiration or termination of the Additional Escrow
Deposit Period, Parent shall cause the Surviving Corporation to engage a
Consultant, at no cost to the Stockholder, to perform on an annual basis (i) an
asbestos liability projection and (ii) an insurance recovery study, in each
case in respect of the Asbestos-Related Litigation, covering the period from
January 1 to October 31 of such year, and substantially in the form of and
utilizing the same assumptions (including, without limitation, the acceptance
rates utilized as of the Closing Date) and scope (including projection periods)
as such projections and studies conducted by Consultant on behalf of the
Stockholder and the Surviving Corporation prior to the Closing Date, provided
that, following the fifth anniversary of the Closing Date, such annual
projections and studies may utilize different assumptions (including acceptance
rates) relative to those utilized in the projections and studies conducted
prior to the Closing Date if the Consultant in its good faith independent
professional judgment reasonably determines that an applicable change in
assumptions is necessary and appropriate (given prevailing circumstances
regarding the Asbestos-Related Litigation) to the extent that such different
assumptions result in

 12
 

 

a projected liability outcome deemed by
Consultant not less than the “most likely” outcome (each such annual projection
and study, a “Report”).  Parent shall cause Consultant to deliver to
the Company and the Stockholder each Report at any time following October 31 of
such year but in no event later than January 31 of the immediately succeeding
year.

(h)           The
aggregate amount of estimated liability of the Stockholder and the Surviving
Corporation in respect of the Asbestos-Related Litigation determined with
reference to any such Report, net of the aggregate amount of the
asbestos-related insurance receivable in respect of such liability, in both
cases as determined by the Consultant over the total expected life of liability
in respect of the Asbestos-Related Litigation, shall be referred to as the “Asbestos-Related Litigation Amount.”  If a Report is timely delivered to the
Surviving Corporation and the Stockholder commencing with the fifth anniversary
of the Closing Date and such Report provides (or, to the extent such Report
does not so provide, otherwise provides the applicable calculations to
conclude) that the Asbestos-Related Litigation Amount is less than the amount
then held in the Escrow Account, then (i) the Escrow Agent shall (and the
parties shall instruct the Escrow Agent to) disburse to Parent the amount of
such difference less the amount of all Unresolved/Unpaid Claims, (ii) until
such time as the Asbestos-Related Litigation Amount is greater than the amount
held in the Escrow Account, Parent shall not be required to deposit Additional
Escrow Deposits, and (iii) the balance of the Escrow Account shall be held in
accordance with the Escrow Agreement.  If
such assessment specifies that the Asbestos-Related Litigation Amount is equal
to or greater than the amount then held in the Escrow Account, or if the amount
of all Unresolved/Unpaid Claims exceeds the amount by which the
Asbestos-Related Litigation Amount is less than the amount then held in the
Escrow Account, then no amount of the Escrow Account shall be disbursed to
Parent.  For clarity, (A) the procedure
under this

 13
 

 

Section 3.4(h) shall be conducted annually,
and (B) any amounts remaining in the Escrow Account at the end of the
Additional Escrow Deposit Period shall be disbursed in accordance with Section
3.4(f).

(i)            If
at any time during the Additional Escrow Deposit Period Parent shall fail to
timely deposit into the Escrow Account required Escrow Deposits aggregating
$250,000 or more at any one time, and such Escrow Deposits (each an “Outstanding Escrow Deposit”) have
not been made within forty-five (45) days following notice from the Stockholder
of such defaults (a “Notice of Default”),
then the Escrow Agent shall (upon instruction from the Stockholder, and without
any notice or further action from Parent), regardless of whether or not any
Stockholder Indemnified Party has incurred any Losses for which they are
entitled to indemnification under Section 9.2(c) or (d), disburse to the
Stockholder, as additional Merger Consideration from the Escrow Account an
amount equal to $125,000.  If following
such disbursement the Outstanding Escrow Deposits remain unmade (in whole or in
part), the Escrow Agent shall (upon instruction from the Stockholder, and
without any notice or further action from Parent), regardless of whether or not
any Stockholder Indemnified Party has incurred any Losses for which they are
entitled to indemnification under Section 9.2(c) or (d), disburse to the
Stockholder, as additional Merger Consideration from the Escrow Account, for
each calendar quarter that the Outstanding Escrow Deposits remain unmade, an
amount equal to $125,000.  To the extent
the amount held in the Escrow Account at such time is less than the amount to
be disbursed as provided above, then the Escrow Agent shall disburse to the
Stockholder, as additional Merger Consideration, the remaining funds on deposit
in the Escrow Account.  The foregoing
shall be in addition to, and not in lieu of, any other right or remedy
available to the

 14
 

 

Stockholder at law or in equity, including,
without limitation, acceleration under the Note and the Stockholder’s right to
indemnity or otherwise under this Agreement.

(j)            The
Escrow Account (and each other escrow account or sub-account established under
the Escrow Agreement) shall be established as security for Parent’s indemnity
and other obligations under Section 9.2(c) and (d) hereof.  Nothing herein or in the Escrow Agreement,
including without limitation, any termination of the Escrow Agreement or
insufficiency of the funds held in the Escrow Account, shall in any manner
limit or restrict the Stockholder’s rights to take action directly against
Parent or the Surviving Corporation instead of or at the same time as asserting
its rights in any other manner hereunder or under applicable law.

SECTION 4

CLOSING

Unless
this Agreement shall have been terminated in accordance with SECTION 13, the
consummation of the Merger and the transactions contemplated by this Agreement
(the “Closing”) shall be
held at the offices of Proskauer Rose LLP, 1585 Broadway, New York, New York,
at 11:00 A.M., New York time (but shall be deemed to have occurred at the close
of business), on the Business Day the conditions to Closing set forth in
Sections 10.1 and 10.2 have been satisfied, or such other time or date as the
parties may mutually agree upon in writing (the time and date of the Closing
being the “Closing Date”).

SECTION 5

REPRESENTATIONS
AND WARRANTIES OF THE STOCKHOLDER

The Stockholder
represents and warrants to Parent as follows:

5.1           Organization and
Good Standing.  The Company is a
corporation duly organized, validly existing and in good standing under the
laws of Michigan, and has the requisite corporate power and authority to own
its properties and assets and to carry on its

 15
 

 

business as it is now being conducted. 
The Company is qualified as a foreign corporation and is in good
standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification, except
where the failure to be so qualified would not have a Material Adverse
Effect.  Schedule 5.1 contains a
correct and complete list of the jurisdictions in which the Company is so
qualified.  Complete and correct copies
of the articles of incorporation and bylaws of the Company and all amendments
thereto to the Closing Date, certified by the Secretary of the Company have
been delivered to Parent by the Stockholder as of the Closing Date.  The Company is in compliance with its
articles of incorporation and in compliance in all material respects with its
bylaws.  The Company has no Subsidiaries.

5.2           Capitalization.  The designations of each class of the capital
stock of the Company and the number of authorized and issued and outstanding
shares thereof is as described on Schedule 5.2.  All the Shares have been validly issued and
are fully paid and nonassessable.  Except
as described in Schedule 5.2, (a) there is no issued or outstanding
preferred stock of the Company, (b) no shares of capital stock of the Company
are held in treasury, (c) there are no other issued or outstanding equity
securities of the Company, and (d) there are no other issued or
outstanding securities of the Company convertible or exercisable at any time
into, or exchangeable for, equity securities of the Company.  Neither the Stockholder nor the Company is
subject to any commitment or obligation that would require the issuance or sale
of additional shares of capital stock of the Company at any time under options,
subscriptions, warrants, rights or any other obligations.  Except as set forth on Schedule 5.2,
the Company does not have any equity interest in any corporation, partnership,
joint venture or other entity.

 16

 

 

5.3           Ownership of
Stock.  The Stockholder is the record
and beneficial owner of all of the Shares, all of which are free and clear of
any Liens.

5.4           Execution and
Effect of Agreement.  Each of the
Stockholder and the Company has all requisite corporate power and authority to
(i) enter into and perform its obligations under this Agreement and each other
Transaction Document to which it is a party and (ii) consummate the Merger and
the transactions contemplated hereby and thereby.  The consummation of the Merger and the
transactions contemplated hereby and in each other Transaction Document to
which the Stockholder and the Company is a party has been duly authorized by
all necessary corporate action on the part of the Stockholder and the Company.  This Agreement and each other Transaction
Documents to which the Stockholder and the Company is a party has been duly
executed and delivered by the Stockholder and the Company and constitutes a
legal, valid and binding obligation of the Stockholder and the Company, enforceable
against the Stockholder and the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and to the exercise of judicial
discretion in accordance with general principles of equity (whether applied by
a court of law or equity).

5.5           No Conflicts.  The execution and delivery of this Agreement
and each other Transaction Document to which the Stockholder is a party, the
consummation of the Merger and transactions contemplated hereby and thereby and
the performance by the Stockholder of this Agreement and each other Transaction
Document to which it is a party in accordance with its respective terms will
not (a) violate or conflict with in any material respect any of the provisions
of the certificate of incorporation or bylaws of the Stockholder or articles of
incorporation or bylaws of the Company, (b) violate or conflict with in
any material respect

 17
 

 

any applicable law, rule or regulation binding on the Stockholder or
the Company, (c) conflict in any material respect with or result in a material
breach of, or give rise to a right of termination of, or accelerate the
performance required by the terms of any judgment, court order or consent decree,
or any material agreement, indenture, mortgage or instrument to which the
Stockholder or the Company is a party or to which the property of the
Stockholder or the Company is subject, or constitute a material default
thereunder or (d) result in the creation or imposition of any Lien upon any of
the assets or property of the Company; provided, however, that no
representation or warranty is being made as to whether any consents, approvals
or notices are required under any agreement or instrument (including, without
limitation, the Material Contracts or any Permit) of the Company or as to the
impact that a failure to obtain any such consent or give such notice might
have.

5.6           Real Property.

(a)           The
Company is the sole owner of legal and beneficial fee title to the Fee Property
as set forth on Schedule 5.6, and the Fee Property is owned free and
clear of all Liens, except for Permitted Exceptions.

(b)           The
Company is not a tenant under any leases or similar occupancy agreements.  None of the Fee Property is subject to any
lease or similar occupancy or use agreement or right.

(c)           Except
as set forth on Schedule 5.6, all of the land, buildings, structures and
other improvements and all other real property used by the Company or otherwise
reflected in the Financial Statements are included in the Fee Property.

(d)           Except
as set forth on Schedule 5.6, the Company does not own or hold, and is
not obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell or dispose of the Real Property or
any portion thereof or interest therein.

 18
 

 

(e)           The
Company has not received written notice of, nor is there now pending or, to the
Stockholder’s Knowledge, threatened or contemplated, (i) any condemnation
proceeding affecting the Real Property or any part thereof or of any sale or
other disposition of the Real Property or any part thereof in lieu of
condemnation or (ii) any other material claim or proceeding
adversely affecting the current use, occupancy or value of the Real Property,
other than any Asbestos-Related Litigation.

(f)            As
of the date of this Agreement, no portion of the Real Property has suffered any
material damage by fire or other casualty which has not heretofore been
repaired and restored to comply with applicable building, zoning and land use
laws.

(g)           Parent
acknowledges and agrees that Parent has heretofore made an examination of the
Real Property and that, except for the express representations and warranties
of the Stockholder set forth herein or in any document delivered by the
Stockholder at the Closing, Parent accepts the Real Property on an “As-Is,
Where-Is” basis, “With All Faults” and without any representations or
warranties, express, implied or statutory, of any kind whatsoever, whether by
the Stockholder, the Company or anyone acting on their behalf.  With respect to the condition of title to the
Fee Property, Parent shall rely solely on any title insurance commitment or
policy procured by Parent and shall have no recourse against the Stockholder
with respect to any defect or claim relating thereto.  Parent agrees that except for the express
representations and warranties of the Stockholder set forth herein, neither the
Stockholder, the Company, nor their respective Affiliates, employees, agents,
attorneys, partners, officers, directors or advisors, have made to Parent or
its representatives any verbal or written

 19
 

 

representations, warranties or statements of
any nature or kind whatsoever with respect to any Real Property whether
expressed or implied, and, in particular, that no representations or warranties
have been made with respect to (i) the zoning and other such laws, ordinances,
regulations and rules applicable to any of the Real Property or the use of the
Real Property or the compliance of such Real Property therewith, or (ii) the
quantity, quality or condition of any fixtures located on any of the Real
Property.  Copies of all title insurance
policies and title reports in the possession or control of the Stockholder or
the Company which relate to the Real Property have been delivered or made
available to Parent.

5.7           Personal Property.  Except (a) as set forth in Schedule 5.7
or any other Schedule hereto, (b) for Taxes not yet past due, and (c) for
workmen, repairmen, warehousemen, customer, employee and carriers and similar
Liens arising in the ordinary course of business (collectively, “Permitted Liens”), the Company has
good and marketable title to all of its material tangible personal property,
free and clear of all Liens and has the right under valid and subsisting leases
to possess as lessee all of the material items of tangible personal property
leased by the Company.  Except as set
forth on Schedule 5.7, all tangible personal property of the Company
which is material to the Business and has been maintained in accordance with
reasonable maintenance standards in the ordinary course of business and is
physically located at or about the places of business of the Company.  The tangible personal property owned or
leased by the Company and located at the Fee Property is sufficient in all
material respects to conduct the Business as it is presently conducted by the
Company.  Other than as expressly
provided above, no representation or warranty is made with respect to the
operating condition of any item of tangible personal property of the Company,
and Parent accepts such property on an “As-Is, Where-Is” basis, “With All Faults” and without any representations
or warranties, express, implied or statutory, of any kind whatsoever, whether
by the Stockholder, the Company or anyone acting on their behalf.

 20
 

 

5.8           Financial
Statements.  The Stockholder has
provided to Parent copies of the Financial Statements.  The Audited Financial Statements present
fairly, in all material respects, the financial position of the Company as of
December 31, 2004 and December 31, 2005, and the results of operations of the
Company for the twelve-month periods then ended.  The Interim Financial Statements present
fairly, in all material respects, the financial position of the Company as of
September 30, 2006 and the results of operations for the nine (9) month period
ended September 30, 2006, subject to audit, tax and other customary year-end
adjustments and accruals and the absence of notes and subject to the
exceptions, if any, set forth on Schedule 5.8.  The Audited Financial Statements and the
Interim Financial Statements were prepared in accordance with the books and
records of the Company and in accordance with GAAP, applied on a consistent
basis, subject to, in the case of the Interim Financial Statements, the absence
of notes, audit, tax and other customary year-end adjustments and accruals, and
subject to the exceptions, if any, set forth on Schedule 5.8.

5.9           Absence of
Certain Changes or Events.  Except as
set forth on Schedule 5.9, since December 31, 2005, the Company has
conducted the Business only in the ordinary course of business consistent with
past practice and there has not been:

(a)           any
making of any loan, advance or capital contribution to or investment in any
Person by the Company, except loans or advances to employees in the ordinary
course of business consistent with past practice, the aggregate amount of which
shall not exceed $25,000 at any one time;

 21
 

 

(b)           except
for the purchase and sale of Inventory in the ordinary course of business
consistent with past practice, or sales or dispositions of obsolete or
immaterial assets or assets not material to the operation of the Business as
presently conducted after giving effect to the Restructuring (such asset sales
or dispositions hereinafter referred to as “Permitted
Asset Sales”), any contract or
agreement entered into by the Company on or prior to the date hereof relating
to any material acquisition or disposition of any assets used in the Business;

(c)           any
adoption, entering into, amendment, alteration or termination of (partially or
completely) any Employee Benefit Plan, except as contemplated by this Agreement
or to the extent required by applicable law;

(d)           any
capital expenditures in excess of $100,000 in the aggregate;

(e)           any strike, slowdown or demand for recognition by a
labor organization by or with respect to any of the employees of the Company or
any material labor dispute (other than routine individual grievances) involving
employees of the Company covered by the Labor Agreement;

(f)            any resignation or termination of employment of any
officer or key employee of the Company;

(g)           any
sale, exchange, license or other disposition of any of the assets of the
Company other than Permitted Asset Sales;

(h)           any
incurrence or assumption by, or guarantee by, the Company of any Liabilities,
including indebtedness for borrowed money (or any renewals, replacements, or
extensions that increase the aggregate commitments thereunder), except
Liabilities (other than Indebtedness) incurred in the ordinary course of
business of the Company consistent with past practice or as set forth in the
Interim Financial Statements;

 22
 

 

(i)            any
material write up or write down of the value of any Inventory, other than in
the ordinary course of business consistent with past practice;

(j)            any
incurrence or imposition of any Lien upon the assets of the Company, other than
Permitted Liens or any other Lien that is to be released and discharged on or
prior to the Closing Date;

(k)           any
termination of or receipt of written notice of termination of, or default
under, any Material Contract to which the Company is a party (other than any
termination or expiration of a Material Contract in accordance with its terms);

(l)            any
(i) grant of severance or termination pay to any director, officer,
employee or consultant of the Company; (ii) grant of any new stay bonuses
or deal bonuses relating to the transactions contemplated by this Agreement;
(iii) entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer, employee or consultant of the Company; (iv) increase in
benefits payable under any existing severance or termination pay policies or
employment agreements; or (v) increase in compensation, bonus or other
benefits payable to directors, officers, employees or consultants of the
Company other than, in the case of clause (v) only, increases in salaries or
bonuses of employees, consultants or contractors at regularly scheduled times
in customary amounts consistent with past practices of the Company;

(m)          any
(i) making or revoking of any election relating to Taxes (other than any
federal income Taxes), (ii) settlement or compromise of any material
claim, action, suit, litigation, proceeding, arbitration, investigation, audit
or controversy relating to Taxes (other than any federal income Taxes), or
(iii) changes in the accounting methods used by the Company;

 23
 

 

(n)           any
amendments to the Company’s articles of incorporation or bylaws;

(o)           any
merger or consolidation with, or purchase of all or substantially all of the
assets of or otherwise acquire, any other business entity;

(p)           any
agreement by the Company to do any of the foregoing;

(q)           to
the Stockholder’s Knowledge, any Material Adverse Effect, other than in
connection with any Asbestos-Related Litigation;

5.10         Insurance.  The Form 10-K Annual Report filed by the
Stockholder for the fiscal year ended December 31, 2005 generally describes the
general insurance coverage potentially applicable to the Asbestos-Related
Litigation.  The Stockholder has provided
Parent with a list of the Stockholder’s policies of liability, fire, casualty,
business interruption, workers’ compensation and other forms of insurance
insuring the Company and its assets, properties and operations, together with
any “self-insurance” programs (other than insurance covering or related to the
Asbestos-Related Litigation), at their request. 
Except as set forth on Schedule 5.10, all such policies are in
full force and effect and no notice of cancellation or termination, or any
material increase in premiums, has been received by the Stockholder or the
Company.  All premiums and other payments
due from the Company under or on account of any policy have been paid. Except as set forth on Schedule 5.10
or in connection with any Asbestos-Related Litigation, there are no material outstanding and pending claims under such policies
relating to the Company.

5.11         Litigation.  Set forth on Schedule 5.11 is a list
of all material suits, claims, actions, proceedings or arbitrations pending or
to the Stockholder’s Knowledge threatened in writing against the Company or,
with respect to the Business, the Stockholder, other than for

 24
 

 

such suits, claims, actions, proceedings or arbitrations in respect of
any Asbestos-Related Litigation.  Except
as set forth on Schedule 5.11 or any Asbestos-Related Litigation, there
is no suit, claim, action, proceeding or arbitration pending or to the
Stockholder’s Knowledge threatened against the Company or the Stockholder which
if resolved against the Company or the Stockholder would reasonably be expected
to have a Material Adverse Effect on the Company or which seeks to enjoin or
obtain damages in respect of the transactions contemplated hereby.  There is no outstanding citation, order,
judgment, writ, injunction, or decree of any court, government, or governmental
or administrative agency against the Company or the Stockholder which would
have a Material Adverse Effect on the Company, except as disclosed on Schedule
5.11.

5.12         No Brokers.  Except as set forth on Schedule 5.12,
neither the Stockholder, the Company nor anyone acting on their behalf has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finder’s fees in connection with the Merger and the transactions
contemplated by this Agreement.

5.13         Tax Matters.  Except as set forth on Schedule 5.13:

(a)           All
material Tax Returns required to be filed by or on behalf of the Company
through the date of this Agreement have been filed in a timely manner (within
any applicable extensions of time).  All
such Tax Returns filed by the Company and the portion of the consolidated
federal income Tax Returns relating to the Company were true, complete and
correct in all material respects.

(b)           All
material Taxes (whether or not shown on any Tax Return) owed by the Company
have been timely paid, except for Taxes that are being contested in good faith
and for payment of which adequate reserves are reflected on the Financial Statements.

 25

 

(c)           With
respect to any period for which Tax Returns have not yet been filed, or with
respect to which Taxes are not yet due, the Company has made sufficient current
accruals for such Taxes in accordance with GAAP.

(d)           No
audit or other proceeding with respect to the Company by any court,
governmental or regulatory authority is pending, and the Company has not
received any written notification that such an audit or proceeding may be
commenced, with respect to any Tax arising from the operation of the Business.

(e)           There
are no material Tax Liens upon any of the assets of the Company except Liens
for current Taxes not yet past due.

(f)            The
Company is not a party to any Tax sharing agreement.

(g)           There
has been no waiver or extension of any applicable statute of limitations for
the assessment or collection of any Taxes of the Company.

(h)           The
Company is not a party to any agreement, contract, arrangement or plan that has
resulted or could result, separately or in the aggregate, in the payment of any
“excess parachute payments” within the meaning of Section 280G of the Code or
any similar provision of foreign, state or local law.

(i)            The
Company is not is a party to any joint venture, partnership, or other
arrangement or contract which would be treated as a partnership for federal
income tax purposes.

5.14         Intellectual
Property.

(a)           Attached
as Schedule 5.14(a) is a complete list of all material registered
Intellectual Property owned by the Company as of the date hereof.  To the Stockholder’s Knowledge, except as otherwise
indicated in Schedule 5.14(a), the Company owns

 26
 

 

its Intellectual Property free and clear of
any royalty, lien, encumbrance or charge. 
Neither the Stockholder nor any Stockholder Affiliate owns any of the
material Intellectual Property used in, or necessary to, the operation of the
Business as presently conducted.  Except
as set forth in Schedule 5.14(a), during the two (2) year period
immediately preceding the date of this Agreement, the Company has not received
any written notice or written claim that any material Intellectual Property
owned by the Company is not valid or enforceable, or of any material
infringement upon or material conflict with any patent, trademark, service
mark, copyright or trade name of any third party by the Company and to the
Stockholder’s Knowledge no such claim of infringement exists.  Except as set forth in Schedule 5.14(a),
during the two (2) year period immediately preceding the date of this
Agreement, the Company has not given any written notice of infringement to any
third party with respect to any of the Intellectual Property owned by the
Company.  To the Stockholder’s Knowledge,
no third party is infringing upon any of the material Intellectual Property.

(b)           Schedule 5.14(b)
sets forth a complete and accurate list of all material Intellectual Property
Licenses (other than commercially available, non-custom, off-the-shelf
software application programs used by the Company) (collectively, “Intellectual Property License Agreements”).  To the Stockholder’s Knowledge, all of such
Intellectual Property License Agreements are valid and binding.  The Company has not received written notice
of the existence of any material default under an Intellectual Property License
Agreement, and has not given any third party notice of material default.  No party to any Intellectual Property License
Agreement has given the Company written notice of its intention to cancel,
terminate or fail to renew such Intellectual Property License Agreement.

 27
 

 

5.15         Material
Contracts.  Schedule 5.15 is a
list of all Material Contracts as of the date hereof, and true and complete
copies of such agreements, including any amendments thereto, have been
furnished to Parent or have been made available to Parent.  To the Stockholder’s Knowledge, there exists
no default by the Company or to the Stockholder’s Knowledge by any other party
under any Material Contract or event which, with notice or lapse of time, or
both, would constitute a material default by the Company or to the Stockholder’s
Knowledge any other party to any such Material Contract, in either case which
would be reasonably expected to have a Material Adverse Effect.  The Company has not received written notice
that any party to any Material Contract intends to cancel or terminate any such
agreement or to exercise or not to exercise any option to renew
thereunder.  Except as otherwise set
forth on Schedule 5.15, to the Stockholder’s Knowledge, (i) all Material
Contracts are in full force and effect and constitute legal, valid and binding
obligations of the respective parties thereto; and (b) the Company (and to the
Stockholder’s Knowledge, each other party to the Material Contracts) has
performed all material obligations required to be performed by it and no
default, or event which with notice or lapse of time or both would constitute a
material default, exists in respect thereof on the part of the Company.  The Material Contracts which the Stockholder
believes may contain a change in control provision applicable to the
transactions contemplated by this Agreement are denoted with an asterisk on Schedule
5.15; provided, that Parent acknowledges that Parent is making an
independent determination, and the Stockholder makes no representation or
warranty as to the accuracy of such Schedule with respect to such change in
control provisions or as to whether any consent of or notice to any party to
any Material Contract is required in connection with the Merger and the
transactions contemplated by this Agreement.

 28
 

 

5.16         Compliance
with Laws.  Other than with respect
to Tax matters which are covered exclusively by Section 5.13, environmental,
health and safety matters which are covered exclusively by Section 5.17, and
employee benefit plan and ERISA matters which are covered exclusively by
Section 5.18 and except as set forth on Schedule 5.16 or on any other
Schedule hereto, the Company is in compliance in all material respects with all
federal, state and local laws, rules and regulations, orders, judgments, writs,
injunctions or decrees applicable to the Company, its assets or
properties.  The Company has all material
federal, state and local licenses, permits, approvals, authorizations and
consents (“Permits”)
necessary in the conduct of the Business, and such Permits are in full force
and effect, and no material violations are or have been recorded in respect of
any thereof, and no proceeding is pending or, to the Stockholder’s Knowledge,
threatened to revoke or limit any thereof.

5.17         Environmental.  This section is the exclusive provision
herein containing representations and warranties applicable to environmental,
health and safety matters.  Except as set
forth on Schedule 5.17:

(a)           The
Company is in compliance with applicable Environmental Laws except for such
non-compliance as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. 
The Company has not engaged in or knowingly permitted any operations or
activities upon any of the Real Property for the purpose of or involving the
treatment, storage, use, generation, release, discharge, emission, or disposal
of any Hazardous Substances at the Real Property, except in compliance with
applicable Environmental Laws and, as applicable, the terms and conditions of
any Permit issued pursuant thereto, except for such non-compliances as would
not, individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.

 29
 

 

(b)           The
Company has not received any written notice that any of the Real Property (or
any other property upon which the Company is alleged to have treated, stored,
used, generated, released, discharged, emitted or disposed of any Hazardous
Substances) is listed or, to the Stockholder’s Knowledge, proposed for listing
on the National Priorities List pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et seq.,
or any similar inventory of sites requiring investigation or remediation
maintained by any state or locality.

(c)           The
Company has not received any written notice from any governmental authority
with jurisdiction over Environmental Laws or third party that remains
outstanding or unresolved, alleging any actual or threatened Liabilities
arising under applicable Environmental Laws with respect to the Real Property
or the conduct of the Business, which would reasonably be expected to have a
Material Adverse Effect.  The Company has
not received written notice that it is the subject of any material
investigation or inquiry under Environmental Law or in connection with any
Permit under Environmental Law.

(d)           The
Company possesses all of the material Permits required under applicable
Environmental Laws for the operation of the Business and the occupation of the
Real Property.  The Company is in
compliance with the terms and conditions of all such Permits except for such
non-compliance as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

(e)           The
Company has provided or made available to Parent copies of all material
environmental reports, assessments, audits and data in the Company’s possession
relating to the Company’s Real Property or to any material environmental
non-compliance concerning the Company’s operations.

 30
 

 

5.18         Employee
Benefit Plans.

(a)           Schedule
5.18(a) hereto lists each Employee Benefit Plan (as hereinafter defined)
(i) that is currently maintained, contributed (or required to be
contributed) to, or sponsored by the Stockholder or the Company or (ii) to
which the Stockholder or the Company is currently a party or (iii) with
respect to which the Stockholder or the Company has any liability, including
any contingent liability, for the payment or delivery of any premiums,
compensation or benefits relating to the Business (collectively, the “Plans”).  For purposes of the preceding sentence, an “Employee Benefit Plan” is any of
the following that benefits or is intended to benefit any current or former
employee or director (whether or not an employee) of, or consultant or other
service provider (whether or not an employee) with respect to, the Company, or
the beneficiaries of any of them: 
(A) a “plan” described in Section 3(3) of ERISA; (B) a stock
bonus, stock option, stock purchase, restricted stock, stock appreciation
right, or other equity-based plan, policy, program, agreement or arrangement;
or (C) an incentive, bonus, stay bonus, deferred compensation, retiree
medical or life insurance, supplemental retirement, termination, salary
continuation, severance, change in control, fringe benefit or other benefit
plan, policy, program, agreement or arrangement, of whatever description.  With respect to each Employee Benefit Plan,
the Company has provided or made available to Parent a true and complete copy
of each of the following, together with all amendments:  (i) the Employee Benefit Plan,
(ii) for each Employee Benefit Plan subject to the requirement that annual
reports be filed on a Form 5500, the three (3) most recently filed such annual
reports, (iii) in the case of each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code, the most recent IRS determination
letter for the Employer Benefit Plan, (iv) to the extent applicable, all
related custodial agreements, insurance policies, administrative services and
similar agreements, and (v) the most recent summary plan description or
similar summary and any employee handbook referencing the Employee Benefit
Plan.

 31
 

 

(b)           Except
as set forth on Schedule 5.18(b), none of the Stockholder, the Company
or any other person (including an entity) that together with the Stockholder or
the Company is or at any relevant time was treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code (each, as well as Stockholder and
the Company, an “ERISA Affiliate”)
has ever contributed or been required to contribute to within the last six (6)
years, has ever sponsored or maintained or has any liability with respect to,
nor has any event occurred within the last six (6) years that is reasonably
likely to give rise to any liability with respect to, (i) a pension plan
(within the meaning of Section 3(2) of ERISA) subject to Section 412 of
the Code or Title IV of ERISA, (ii) a multiemployer plan (within the
meaning of Section 3(37) or 4001(a)(3) of ERISA (a “Multiemployer
Plan”), (iii) a single employer pension plan (within the meaning
of Section 4001(a)(15) of ERISA) for which an ERISA Affiliate would reasonably
be expected to incur liability under Section 4063 or 4064 of ERISA, or
(iv) a voluntary employees’ beneficiary association within the meaning of
Section 501(c)(9) of the Code.  Except as
provided in Schedule 5.18(b), the transactions contemplated by this
Agreement will not, by themselves or together with a termination of employment
or service, cause or result in the payment, acceleration or vesting of any
payment, right or benefit under any Employee Benefit Plan, nor is there any
contract, plan or arrangement covering any present or former employee or
director of, or consultant or other service provider with respect to, the
Stockholder that would give rise to any “excess parachute payment” as that term
is defined in Section 280G of the Code.

(c)           Except as set forth in Schedule 5.18(c) with
respect to the current plan year of each Employee Benefit Plan, all
costs of administering and contributions with

 32
 

 

respect to the employees of the Company
(including all employer contributions and employee contributions) required to
have been made under the Employee Benefit Plans by law, including but not
limited to, pursuant to any applicable legal minimum funding requirement, to
any funds or trusts established thereunder or in connection therewith have been
made by the due date thereof (including any valid extension) and all benefit
liabilities have been properly accrued to the extent required by GAAP.

(d)           Except
as set forth in Schedule 5.18(d), each Employee Benefit Plan, including
any associated trust or fund, has been established and administered in all
material respects in accordance with the applicable provisions of ERISA, the
Code and other applicable law, and, to the Stockholder’s Knowledge, nothing has
occurred with respect to any Employee Benefit Plan that has subjected or could
reasonably be expected to subject the Company to any material liability or
penalty under Section 502 of ERISA or to any tax under Chapter 43 of the Code.

(e)           Except
as set forth on Schedule 5.18(e), to the Stockholder’s Knowledge, there
will be no material Liability of the Company with respect to any Employee
Benefit Plan that is funded through an insurance policy (or similar
arrangement) procured in connection with any Employee Benefit Plan in the
nature or a retroactive rate adjustment, loss sharing arrangement, or other
liability arising wholly or partially out of events occurring before the
closing.

(f)            Except
as set forth in Schedule 5.18(f), each Employee Benefit Plan has been
administered and maintained, in all material respects, in accordance with its
express terms and applicable provisions of ERISA, including its recording and
disclosure provisions, the Code (including rules and regulations thereunder)
and other applicable federal

 33
 

 

and state laws and regulations, and neither
the Company nor, to the Stockholder’s Knowledge, any “party in interest” or “disqualified
person” with respect to each Employee Benefit Plan has engaged in a non-exempt “prohibited
transaction,” as defined in Section 4975 of the Code or Section 406 of ERISA,
or taken any actions, or failed to take any actions, which would result in any
material Liability to the Company under ERISA or the Code.

(g)           There
are no pending material actions, claims or lawsuits which have been asserted,
instituted or, to the Stockholder’s Knowledge, threatened, against the Employee
Benefit Plans, the assets of any of the trusts under the Employee Benefit
Plans, or the sponsor or the administrator of the Employee Benefit Plans, or,
to the Stockholder’s Knowledge, against any fiduciary of the Employee Benefit
Plans with respect to the operation of the Employee Benefit Plans (other than
routine benefit claims and appeals).

(h)           Except as set forth on Schedule 5.18(h), no
Employee Benefit Plan provides health or life insurance benefits, and the
Stockholder has no obligation to provide any such benefits, except for benefit
continuation coverage to the extent required under Part 6 of Subtitle B of
Title I of ERISA, following retirement or other termination of employment.

5.19         Employee
Relations.

(a)           Except
as set forth on Schedule 5.19(a), the employees of the Company are not
covered by any collective bargaining agreement.  Schedule 5.19(a) sets
forth a complete and accurate list as of November 1, 2006, of (i) the general
title and current compensation levels of all salaried employees of the Company
and (ii) any employment agreement (not terminable at will), severance, bonus or
similar agreement not set forth in Schedule 5.15, to which the Company
and any employee is a party.  True and
complete copies of such agreements have been furnished to Parent.  Except with respect to employees with

 34
 

 

employment agreements or any severance
agreement set forth on Schedules 5.15 or 5.19(a) or employees
covered by the Labor Agreement, the employment of each employee of the Company
is terminable at will.  To the
Stockholder’s Knowledge, no executive, key employee of the Company or
significant group of employees of the Company has announced an intention to
terminate employment with the Company in connection with the Merger and the
transactions contemplated in this Agreement, and no executive or key employee
of the Company has delivered written notice of his or her intention to terminate
employment with the Company otherwise. 
The Company is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours pertaining to the employees of the
Company, and the Company is not engaged in any unfair labor practice within the
meaning of Section 8 of the National Labor Relations Act.  Except as set forth on Schedule 5.19(a),
there is, and has been since January 1, 2004, no unfair labor practice, charge
or complaint or any other matter against or involving the Company pending or,
to the Stockholder’s Knowledge, threatened before the National Labor Relations
Board or any court or other governmental agency.  There is no labor strike, dispute, slowdown or
stoppage pending or, to the Stockholder’s Knowledge, threatened against the
Company or any Subsidiary of the Company. 
To the Stockholder’s Knowledge, no certification question or
organizational drive exists or has existed within the past two (2) years with
respect to the unionizing of the employees of the Company.  Except as set forth in Schedule 5.19(a),
there are no charges, investigations, administrative proceedings or formal
complaints of employment discrimination (including discrimination based upon
sex, age, marital status, race, national origin, sexual preference, handicap or
veteran status) pending or, to the Stockholder’s Knowledge, threatened before
the Equal Employment Opportunity Commission or any federal,

 35
 

 

state or local agency or court against the
Company or any Subsidiary of the Company pertaining to any employee of the
Company or any of its Subsidiaries.  To
the Stockholder’s Knowledge, there is no basis for any such charge,
investigation, administrative proceeding or complaint.  None of the persons performing services for
the Company or any Subsidiary of the Company has been improperly classified
prior to the Closing Date as being independent contractors or leased employees
rather than employees, except to the extent that such misclassification will
not result in a material Liability of the Company or any Subsidiary of the
Company.

(b)           Except
as disclosed on Schedule 5.19(b), no employee of the Company will be
entitled to any severance pay, bonus compensation or other payment as a result
of or in connection with the Merger and the transactions contemplated by this
Agreement.  The Company will provide upon
request, copies of its severance policy to Parent.

5.20         Customers
and Suppliers.  Schedule 5.20
is a true and complete list of the twenty (20) largest customers and ten (10)
largest suppliers of the Company during the last fiscal year of the Company
(collectively, “Material Customers or
Suppliers”), showing, with respect to each the name and address,
dollar volume involved and nature of the relationship (including the principal
categories of products bought and sold). 
To the Stockholder’s Knowledge, no
Material Customer or Supplier has notified the Company in writing that such
Material Customer or Supplier intends to cancel, reduce or otherwise terminate
its relationship with the Company or the usage or purchase of the products of
the Company.  Except as set forth on Schedule
5.20, to the Stockholder’s Knowledge there are no material disputes with
any Material Customer or Supplier that if resolved against the Company would
have a Material Adverse Effect.  Except
as set forth on Schedule 5.20 (which sets forth the aggregate amount of
all such bonding or other financial arrangements as of October 31, 2006), the
Company is not required to provide any bonding or other financial security
arrangements in connection with any transactions with any of its customers or
suppliers in the ordinary course of its business.

 36
 

 

5.21         Inventories.  The values at which the Inventory is carried
on the books and records of the Company reflect the Company’s historical
inventory policy of stating such Inventory at the lower of cost or market
(determined using the last-in, first-out method).

5.22         Product
Warranties.  The Company has not paid
any claims with respect to fulfillment of product warranty claims for the
calendar year ending December 31, 2004 in the aggregate in excess of $525,000
(which includes a discontinued product line) or for the calendar year ending
December 31, 2005 in the aggregate in excess of $250,000.  Set forth as Annex C of Schedule
5.15 is a list of all customer agreements with open warranty terms as of
November 1, 2006.  Except as set forth on
Schedule 5.22, in the last two (2) years the Company has not given
written notice to any customer of any defect or deficiency with respect to
products designed, manufactured, assembled, repaired, maintained, delivered or
installed or services rendered by the Company other than correspondence with
customers relating to their product warranty claims in the ordinary course of
business nor has the Company received, during such period, any written notice
from any governmental agency of any such defect or deficiency.

5.23         Accounts Receivable; Accounts
Payable.  To the Stockholder’s
Knowledge, the accounts receivables of the Company have arisen only from bona
fide transactions entered into in the ordinary course of business and have been
recorded in accordance with GAAP.  Other
than as set forth on Schedule 5.23(a), since December 31,
2004, no customer has notified the Company in writing that they intend to
assert any material right to a discount, allowance or chargeback with respect
to any products or services.  Set forth
on Schedule 5.23(b) is a complete and accurate aging list of all Company
accounts receivable as of November 1,

 37
 

 

2006.  To the
Stockholder’s Knowledge, (a) the accounts payables of the Company have
arisen only from bona fide transactions entered into in the ordinary course of
business and (b) all payment terms in connection therewith are in the
ordinary course of business and consistent with past practices of the Company.

5.24         Bank Accounts.  Schedule 5.24 lists all bank accounts
and safe deposit boxes in the name of or controlled by the Company.

5.25         Certain Payments.  To the Stockholder’s Knowledge, since
December 31, 2004, none of the Stockholder or the Company nor has any other
person or entity, directly or indirectly, on behalf of or with respect to the
Company or its businesses (i) made or received any payment which was not legal
to make or receive, including without limitation, payments prohibited under
applicable federal and state “fraud and abuse” or anti-kickback statutes, (ii)
made an illegal political contribution or (iii) engaged in any conduct
constituting a violation of the Foreign Corrupt Practices Act of 1977.

5.26         Books
and Records.  The Company has made
and kept the books and records of account related to its business in reasonable
detail, and such books and records of account accurately and fairly reflect in
all material respects the transactions of the Company’s business.  To the Stockholder’s Knowledge, the
Asbestos-Related Litigation Records reflect in all material respects the
locations of the Company’s former customers and installed products.

5.27         Cash Balance.  The cash and cash equivalents of the Company
as of the close of business on November 20, 2006 equaled $19,633,310, which
amount is net of all intercompany receivables (in the amount of $1,228,548)
outstanding as of October 31, 2006; provided that this representation shall be deemed
accurate if the actual amount of such cash balance is within $75,000 of such
cash balance.  From November 20, 2006
through the date of

 38
 

 

this Agreement, the Company has not made or
declared any dividends on or distributions with respect to its
capital stock (whether in cash, assets, shares or other securities of the
Company or any Subsidiary of the Company).

SECTION 6

REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB

Parent and Merger
Sub jointly and severally represent and warrant to the Stockholder as follows:

6.1           Organization
and Good Standing.  Each of Parent
and Merger Sub is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and Michigan,
respectively.  Each of Parent and Merger
Sub has the requisite corporate power and authority to own its properties and
assets and to carry on its business as it is now being conducted.  Complete and correct copies of the
certificate of incorporation and bylaws of Parent and the articles of
incorporation and bylaws of Merger Sub, and in each case all amendments thereto
to the Closing Date, certified by the Secretary of Parent and Merger Sub,
respectively, have been delivered to the Stockholder by Parent as of the
Closing Date.

6.2           Execution
and Effect of Agreement.  Each of
Parent and Merger Sub has the requisite corporate power and authority to (i)
enter into and perform its obligations under this Agreement and each other
Transaction Document to which it is a party and (ii) consummate the Merger and
the transactions contemplated hereby and thereby.  The consummation of the Merger and the
transactions contemplated in this Agreement and in each other Transaction
Document to which Parent and Merger Sub is a party has been duly authorized by
all necessary action on the part of Parent and Merger Sub, as the case may
be.  This Agreement and each other
Transaction Document to which Parent and Merger Sub is a party has been duly
executed and delivered by Parent and Merger Sub, as the case may be, and
constitutes a legal, valid and binding obligation of

 39
 

 

Parent and Merger Sub, enforceable against
Parent and Merger Sub, as the case may be, in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the rights of creditors generally and to the exercise of
judicial discretion in accordance with general principles of equity (whether
applied by a court of law or equity).

6.3           No
Conflicts.  The execution and
delivery of this Agreement and each other Transaction Document to which Parent
and Merger Sub is a party, the consummation of the Merger and the transactions
contemplated hereby and thereby and the performance by Parent and Merger Sub of
this Agreement and each other Transaction Document to which it is a party in
accordance with its respective terms and conditions will not (a) violate any of
the provisions of the certificate of corporation or bylaws of Parent or the
articles of incorporation or bylaws of Merger Sub, (b) violate in any material
respect any provision of any applicable law, rule or regulation, or (c)
conflict in any material respect with or result in a breach of, or give rise to
a right of termination of, or accelerate the performance required by the terms
of any judgment, court order or consent decree, or any material agreement,
indenture, mortgage or instrument to which either Parent or Merger Sub is a
party or to which its property is subject, or constitute a material default
thereunder, except where such conflict, breach, right of termination,
acceleration or default would not have a material adverse effect on the
business or financial condition of Parent or Merger Sub, as the case may be, or
prevent Parent or Merger Sub from performing its obligations hereunder.

6.4           Availability
of Funds.  Parent will have (or will
have access to) at Closing all funds or financing in place necessary to pay and
deliver to the Stockholder the Merger Consideration.

 40

 

6.5           Litigation.  There is no suit, claim, action, proceeding
or arbitration pending or, to Parent’s Knowledge, threatened against Parent or
Merger Sub which (a) if adversely determined, would reasonably be expected to
adversely affect Parent’s or Merger Sub’s ability to perform hereunder, or (b)
seeks to enjoin or obtain damages in respect of the Merger and the transactions
contemplated hereby.

6.6           No
Brokers.  Except as set forth in Schedule
6.6, neither Parent, Merger Sub nor anyone acting on behalf of either of
them has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finder’s fees in connection with the Merger and
the transactions contemplated by this Agreement.

6.7           Investment.  At the Effective Time, by virtue of the
Merger, Parent will be acquiring Surviving Corporation Common Stock for its own
account with the present intention of holding the Surviving Corporation Common
Stock for investment purposes and not with a view to or for sale in connection
with any distribution of the Surviving Corporation Common Stock in violation of
any applicable securities law.  Parent
has (a) made its own inquiry of and investigation into, and has completed its
own analysis and evaluation of, the Company and based thereon has formed an
independent judgment concerning the Company, (b) made all such reviews and
inspections of the financial condition, business, results of operations,
properties, assets and prospects of the Company as it has deemed necessary or
appropriate, (c) been furnished with or given adequate access to such
information about the Company as it has requested and has received responses it
deems adequate and sufficient to all such requests for information, and (d) in
making the decision to enter into this Agreement and consummate the Merger and
the transactions contemplated hereby, relied solely on Parent’s own
investigation, analysis and evaluation of the Company and the representations
and warranties of the

 41
 

 

Stockholder contained in SECTION 5 of this
Agreement.  In connection with Parent’s
investigation of the Company, Parent has received from the Company certain
projections and other forecasts for the Company, including certain estimates
and plan and budget information.  Parent
acknowledges that there are uncertainties inherent in attempting to make such
projections, forecasts, estimates, plans and budgets, that Parent is familiar
with such uncertainties and that Parent is taking full responsibility for
making its own evaluation of the adequacy and accuracy of all projections,
forecasts, estimates, plans and budgets so furnished to it (including the
reasonableness of the assumptions underlying such projections, forecasts,
estimates, plans and budgets).  Parent
acknowledges that the Stockholder makes no representation or warranty with
respect to such projections, forecasts, estimates, plans and budgets (including
the reasonableness of such assumptions as provided above) and that Parent will
not assert any claim against either the Company, the Stockholder or any of their
respective directors, officers, employees, agents, Affiliates, consultants,
counsel, accountants, investment bankers or representatives, or hold any such
persons liable, with respect thereto, except, in accordance with the terms of
this Agreement, with respect to the representations expressly made in this
Agreement.

6.8           No
Liabilities.  Each of Parent and
Merger Sub were formed solely for the purpose of consummating the transactions
contemplated by this Agreement.  Neither
Parent nor Merger Sub have, as of the date hereof or as of the Closing Date,
any assets or liabilities.

SECTION 7

ADDITIONAL
PROVISIONS REGARDING

REPRESENTATIONS AND WARRANTIES

7.1           Limitation;
Survival.  Except as specifically set
forth herein, no party has made any representation or warranty, express or
implied, with respect to the consummation of the Merger and the transactions
contemplated hereby and all implied warranties, whether arising

 42
 

 

by law or by implication from the provisions
of this Agreement, are hereby expressly disclaimed.  The representations and warranties herein and
the obligations of the parties with respect to the representations and
warranties herein shall survive the Effective Time for a period of two (2)
years; provided, however, that the representations and warranties
set forth in Section 5.2 (Capitalization), Section 5.3 (Ownership of Stock),
Section 5.4 (Execution and Effect of Agreement), Section 5.12 (No Brokers) and
Section 5.13 (Tax Matters) shall survive the Effective Time until the
expiration of the applicable statute of limitations.

7.2           Right
to Update Schedules.  The Stockholder
shall have the right, without being deemed to be in breach of its
representations and warranties, to supplement or amend the Schedules to this
Agreement with respect to any matter arising after the date hereof.  If Parent receives any such amended or
supplemented disclosures, Parent shall have the right to review such items for
a period of ten (10) Business Days from receipt thereof and shall have the
right to object to any such amended or supplemented item on the basis that such
item and the facts underlying such amended or supplemented disclosure
materially and adversely affects the value of the Business.  If Parent so objects, then Parent shall have
the option to terminate this Agreement (on ten (10) Business Days prior written
notice during which period the Stockholder may cure such misrepresentation or
breach of warranty), which termination, if elected, shall be Parent’s sole
remedy in respect of such misrepresentation. 
In addition, no disclosure amendment or supplement made hereunder by
Stockholder shall be taken into account for purposes of determining
satisfaction of the condition set forth in Section 10.1(a); provided that, if
Parent proceeds with the Closing, Parent shall be conclusively deemed to have
waived all claims hereunder relating to the specific facts underlying any such
amended or supplemented disclosure (and any corresponding misrepresentation or
breach of warranty).

 43
 

 

7.3           Schedules.  Disclosure of any fact or item in any
Schedule hereto shall be deemed disclosure of such fact or item in all other
Schedules requiring such disclosure and for purposes of all other
representations and warranties made by the Stockholder herein, provided that it
is reasonably evident that such fact or item relates to such other Schedule or
Schedules.  Matters reflected in the
Schedules hereto are not necessarily material or limited to matters required by
this Agreement to be disclosed herein or therein, and may be provided for
informational purposes only.

SECTION 8

ADDITIONAL
COVENANTS AND UNDERTAKINGS

8.1           Efforts
to Consummate; Further Assurances and Assistance.  Between the date of this Agreement and the
Closing Date, Stockholder and Parent will use their respective commercially
reasonable efforts to cause the conditions specified in Sections 10.1 and 10.2
respectively to be satisfied; provided that Parent shall be under no obligation
to enter into the Working Capital Facility if the terms (including available
amounts) of such facility are not acceptable to Parent (subject to the
Stockholder’s right under Section 13 hereof). 
Each of Parent and Merger Sub, on the one hand, and the Stockholder and
the Company, on the other hand, agree that it will execute and deliver to the
other parties any and all documents, in addition to those expressly provided
for herein, that may be necessary or appropriate to consummate the Merger and
implement the provisions and contemplated transactions of this Agreement,
whether before, at or after the Effective Time. 
The parties agree to cooperate with each other to any extent reasonably
required in order to accomplish fully the transactions herein contemplated.

8.2           Access
to Information.

(a)           The
Stockholder shall (and shall cause the Surviving Corporation to) from and after
the date of this Agreement and until the Closing Date, give Parent and Parent’s

 44
 

 

employees, agents, accountants and counsel
reasonable access upon reasonable notice during normal business hours, to all
officers, management level employees, offices, properties, agreements, records
and affairs of the Company, and will, at Parent’s expense, provide copies of
such information concerning the Company as Parent may reasonably request; provided,
however, that the foregoing shall not permit Parent or any agent thereof to
unreasonably interfere with or disrupt the Business, and access for the
purposes of conducting an environmental assessment or investigation of the
properties shall be limited to the performance of a Phase I environmental
assessment by a nationally recognized environmental consultant retained by
Parent, at its sole cost and expense, in accordance with the protocol
established by the American Society for Testing and Materials (ASTM), Standard
Practice for Environmental Site Assessments: Phase I Environmental Site
Assessment Process, E 1527 05.  A copy of
such Phase I environmental report shall be provided to the Company promptly
upon completion.  Access under this Section
8.2 shall be subject to each such party’s agreement to maintain the confidentiality
of all non-public information obtained.

(b)           Following
the Closing Date, Parent shall give the Stockholder and its employees,
accountants, legal counsel and other advisors similar access thereafter to the
extent reasonably requested by the Stockholder for their legitimate business
purposes, including, without limitation, Tax and accounting matters (including
preparation of Tax Returns), to review and approve the calculation of the
Additional Escrow Deposits, and to investigate and defend against any
litigation or other claims.

8.3           Conduct
of Business Prior to Closing.  Except
as contemplated by this Agreement or as set forth on Schedule 8.3, from
the date hereof through the Closing Date, the Stockholder shall use its
reasonable efforts (without requiring the Stockholder or the Company to

 45
 

 

incur costs or expenses outside the ordinary
course of the Business) to cause the Company to preserve the Business and to
conduct the Business in the ordinary course of business consistent with past
practice.  Except as contemplated by this
Agreement or the Schedules hereto or as otherwise consented to by the Parent
(which consent shall not unreasonably be withheld, delayed or conditioned),
from and after the date hereof, the Stockholder shall not and shall not permit
the Company to:

(a)           declare,
set aside, make, authorize or pay any dividends on or distributions with
respect to the Company’s capital stock (whether in cash, assets, shares or
other securities of the Company or any Subsidiary of the Company), or redeem or
otherwise repurchase any shares of capital stock of the Company, other than (i)
to pay management fees to the Stockholder as consistent with the Company’s
ordinary course business practices or (ii) reimburse Stockholder for expenses
paid by Stockholder on behalf of the Company as consistent with the Company’s
ordinary course business practices;

(b)           cash
collateralize letters of credit or restrict the use of cash in a manner other
as consistent with the Company’s ordinary course business practices;

(c)           enter
into any transaction with respect to a sale of the Company;

(d)           change
in any material respect the Company’s working capital management practices or
intercompany billing and payment practices, in each instance as in effect on
the date hereof;

(e)           make
any loan, advance or capital contribution to or investment in any Person by the
Company, except loans or advance to employees as consistent with the Company’s
ordinary course business practices the aggregate amount of which shall not
exceed $25,000 at any one time;

 46
 

 

(f)            adopt
any change in any method of accounting or accounting practice, except as
contemplated or required by GAAP;

(g)           amend
the Company’s articles of incorporation or by-laws;

(h)           except
(i) in the ordinary course of business consistent with past practice,
(ii) as required by law, by any governmental agency or authority or by
existing Employee Benefit Plans, (iii) as required to maintain the
qualification of any Employee Benefit Plan under applicable Tax law or
(iv) as otherwise contemplated by this Agreement or the Schedules hereto,
enter into or amend any Employee Benefit Plan relating to the Business;

(i)            except
Permitted Asset Sales, sell, exchange, license, mortgage, pledge or otherwise
dispose of any assets used in the Business;

(j)            merge
or consolidate with, or purchase all or substantially all of the assets of, or
otherwise acquire, any other business entity;

(k)           make
any capital expenditures in excess of $100,000 in the aggregate;

(l)            incur
or assume by, or guarantee by, the Company of any Liabilities, including
indebtedness for borrowed money (or any renewals, replacements, or extensions
that increase the aggregate commitments thereunder), except Liabilities (other
than Indebtedness) incurred as consistent with the Company’s ordinary
course business practices;

(m)  make any material write up or write down of
the value of any Inventory, other than in the ordinary course of business
consistent with past practice;

(n)   incur any Lien upon the assets of the
Company, other than Permitted Liens or any other Lien that is to be released
and discharged on or prior to the Closing Date;

(o)   (i) grant severance or termination pay to any
director, officer, employee or consultant of the Company other than under
severance arrangements in effect as of the date

 47
 

 

hereof; (ii) grant new stay
bonuses or deal bonuses relating to the transactions contemplated by this
Agreement; (iii) enter into any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer, employee or consultant of the Company; (iv) increase in
benefits payable under any existing severance or termination pay policies or
employment agreements; or (v) increase in compensation, bonus or other
benefits payable to directors, officers, employees or consultants of the
Company, other than, in the case of clause (v) only, increases in salaries or
bonuses of employees, consultants or contractors at regularly scheduled times
in customary amounts consistent with past practices of the Company;

(p)           (i) make or revoke any election
relating to Taxes (other than any federal income Taxes) or (ii) settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes (other than
any federal income Taxes);

(q)           terminate any Material Contract to
which the Company is a party (other than any termination or expiration of a
Material Contract in accordance with its terms);

(r)            take any of the actions specified on
Schedule 8.3(r); or

(s)           enter any agreement to do any of the
foregoing.

8.4           Confidentiality.  Neither Parent nor the Stockholder shall (and
following the Closing Parent shall cause the Surviving Corporation not to)
divulge any information (except to their respective employees, agents or legal
representatives who have a need to know such information for purposes of
consummating the transactions contemplated by this Agreement) or make any
public announcement regarding the transactions contemplated hereby (except for
the issuance of the press releases attached hereto as Exhibit E or such
substantially similar press

 48
 

 

releases to be issued at Closing announcing
the consummation of the transactions contemplated herein) without the prior
written consent of the other parties hereto except to the extent required by
law, including, without limitation, the rules and regulations of any securities
exchange or similar regulatory agency, or upon advice of the parties’
respective securities counsel (and subject to the other applicable requirements
of Section 15.11).  Parent shall not
utilize any non-public information concerning the Stockholder, the Company or
any of their respective Affiliates (other than the Surviving Corporation)
obtained in connection with the Merger and the transactions contemplated hereby
except for purposes of consummating the transactions contemplated hereby.  Following the Closing, the Stockholder shall
not utilize any non-public information concerning the Surviving Corporation,
except (i) as otherwise provided for in this Agreement, (ii) in connection with
any claims arising under this Agreement, (iii) in connection with any
Asbestos-Related Litigation or (iv) to the extent required by law or legal
process.  In the event that this
Agreement terminates without the consummation of the Merger and the
transactions contemplated by this Agreement, Parent and its Affiliates and
agents (i) shall hold in strict confidence and refrain from using all
non-public information received in connection with the Merger and the transactions
contemplated by this Agreement and (ii) shall return promptly upon the
Stockholder’s request all such non-public information to the party to which
such information relates.  Each of the
Stockholder and Parent shall be liable for any breach of its respective
obligations and restrictions set forth in this Section by any of its respective
employees, agents or representatives.

8.5           Books and Records.  Following the Closing, Parent and the
Surviving Corporation (a) shall permit the Stockholder to have reasonable
access to the books and records (including, without limitation, the
Asbestos-Related Litigation Records) of the Surviving

 49
 

 

Corporation to the extent the Stockholder has
legitimate need therefor related to transactions or events occurring prior to
the Closing, (b) shall permit the Stockholder to have reasonable access to
employees of the Surviving Corporation to obtain information relating to such
matters, and (c) agree to provide the Stockholder with such assistance as from
time to time the Stockholder may reasonably request, and shall use their
reasonable efforts to cooperate with the Stockholder in connection with the
preparation or filing of any materials relating to Tax, accounting, workers’
compensation and other matters and the Stockholder’s review and approval of the
Additional Escrow Deposits.  Parent shall
maintain such books and records for a period of ten (10) years following the
Closing utilizing the same standard of care as is used to maintain its books
and records; provided, however, that Parent shall maintain the
Asbestos-Related Litigation Records indefinitely utilizing the same standard of
care consistent with the current practices of the Stockholder and the Company
prior to the Closing; provided  further that, following the passage
of any Asbestos Legislation, the foregoing proviso shall not apply following
ten (10) years following such passage. 
If after the ten-year period following the Closing, Parent determines to
destroy any such books and records relating to events occurring on or prior to
the Closing Date (other than the Asbestos-Related Litigation Records, which
shall be maintained by Parent indefinitely subject to the foregoing proviso),
prior to such destruction Parent shall notify the Stockholder in writing.  The Stockholder will have the right, at its
sole cost and expense, to retrieve and retain such books and records.

8.6           Employees
and Employee Benefits.

(a)           Parent
shall, or shall cause the Surviving Corporation to, continue the employment as
of the Closing Date of each Person who, as of the Closing Date, is an employee
or officer of the Company, whether actively employed or an approved leave of

 50
 

 

absence (including long and short term
disability and military leave) but not in the collective bargaining unit
covered by the Labor Agreement (the “Non-Union
Employees”).  Parent shall
also, or shall also cause the Surviving Corporation to continue the employment
as of the Closing Date of each Person who is as of the Closing Date an employee
of the Company, whether actively employed or an approved leave of absence
(including long and short term disability and military leave) and in the
collective bargaining unit covered by the Labor Agreement (the “Union Employees”).  With respect to each such Non-Union Employee
who remains employed by the Surviving Corporation after the Closing Date (each,
a “Retained Non-Union Employee”),
Parent shall, or shall cause the Surviving Corporation to employ the Retained
Non-Union Employee on terms and conditions of employment substantially
equivalent, in the aggregate, to the terms and conditions of employment
including without limitation, wages, compensation and employee benefits,
provided by the Company immediately prior to the Closing Date and Parent agrees
to maintain such substantially similar wages, compensation and employee
benefits, in the aggregate, for each such Retained Non-Union Employee for a
period of one year commencing on the Closing Date; provided that,
notwithstanding anything to the contrary, nothing herein shall prevent Parent
or the Surviving Corporation from amending, terminating or otherwise modifying
an employee benefit plan or require Parent or the Surviving Corporation
maintain the employment of any particular Retained Non-Union Employee(s) for
any period of time following the Closing. 
With respect to each Union Employee who remains employed by the Company
after the Closing Date (each, a “Retained Union Employee”),
Parent shall, or shall cause the Surviving Corporation to employ the Retained
Union Employee on the terms and conditions of employment prescribed by the
Labor Agreement in effect as of the Closing Date (so long as it remains in
effect).  Parent shall ensure that any
employee benefit plan

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or arrangement continued, established,
maintained or contributed to by Parent, the Surviving Corporation or any of its
Affiliates for the Retained Non-Union Employees and the Retained Union
Employees (together, the “Retained
Employees”) shall grant full credit for all service or
employment with, or recognized by, the Company, the Stockholder or its
Affiliates prior to the Closing Date for purposes of eligibility and vesting
(but not for the accrual of benefits) with respect to any employee pension
benefit plan, as defined in Section 3(2) of ERISA, and, for purposes of
eligibility and determining the amount of any benefit with respect to any
employee welfare benefit plan as defined in Section 3(1) of ERISA (“Parent’s Welfare Plans”),
including, without limitation, any severance plan or sick pay plan, and any
vacation program.  Following the Closing
Date, to the extent that any Retained Employees are covered by Parent’s Welfare
Plans, Parent shall use commercially reasonable efforts during the one year
period following Closing to cause Parent’s Welfare Plans to waive any
pre-existing condition exclusions, evidence of insurability provisions or
waiting periods (except to the extent that such exclusions would have then
applied or waiting periods were not satisfied under the Stockholder’s health
plans) or any similar provisions with respect to Retained Employees (and their
dependents or other beneficiaries) after the Closing Date.  For purposes of computing deductible amounts,
co-pays or other maximums under Parent’s Welfare Plans, expenses and claims
recognized prior to the Closing Date for similar purposes under the applicable
welfare plan of the Company or any Affiliate for the year in which the Closing
occurs shall be credited or recognized under Parent’s Welfare Plans.  Stockholder shall be responsible for and pay
any and all transaction related bonuses or single trigger severance payments
owing to any employees of the Company.

(b)           (i)            As of the Closing Date, but subject
to the successful completion of the assets transfers described below, Parent
shall assume (or cause the Surviving

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Corporation to assume) sponsorship of, and
all obligations and liabilities with respect to, the portion of the UIC
Retirement Plan (“UIC Plan”)
that covers the Non-Union Employees who have vested benefits in the UIC Plan
immediately prior to the Closing Date (the “Covered
Participants”).  Parent shall (or shall cause the Surviving
Corporation to) continue the plan that has been spun off in accordance with the
provisions of this Section 8.6(b) (the “Parent Pension Plan”).  The names of all of the Covered Participants
shall be set forth on a schedule to be furnished by the Stockholder to Parent
within thirty (30) days after the Closing Date.

(ii)           As
soon as practicable after the Closing, but no later than the later of:  (i) one hundred twenty (120) days after
the Closing Date or (ii) thirty (30) days following the date any
disagreement with respect to the Present Value of Accrued Benefits (as defined
in paragraph (iii) of this Section 8.6(b)) or the Transferred Assets (as
defined below) is finally resolved pursuant to paragraph (vi) of this
Section 8.6(b), the Stockholder shall cause the trustee of the UIC Plan to
transfer to the designated funding agent or trustee of the Parent Pension Plan
for the benefit of the Covered Participants cash in good funds (the “Transferred Assets”) in an amount
equal to the Present Value of Accrued Benefits for the Covered
Participants.  Such Present Value of
Accrued Benefits shall initially be calculated and certified as correct and
complete within thirty (30) days after the Closing Date by an independent
actuary selected by the Stockholder (“Stockholder’s Actuary”).  The Transferred Assets shall be increased for
the period from the Closing Date to the actual date of transfer to the Parent
Pension Plan at an annual rate of increase equal to the interest rate used for
purposes of calculating the rate of return on assets for funding purposes set
forth in the most recent actuarial valuation for the UIC Plan (8.0%) and it
shall be adjusted to reflect any benefit payments made in accordance with
paragraph (v) of this Section 8.6(b). 
Notwithstanding anything herein to the contrary, in no event shall the
Transferred Assets be less than the amount required to be transferred under
Section 414(l) of the Code and regulations thereunder.

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(iii)          The
“Present Value of Accrued
Benefits” shall be an amount, determined as of the Closing Date,
which represents the actuarial present value of the vested accrued benefits of
the Covered Participants that were frozen effective as of November 30,
1994.  Such amount shall be based upon
the actuarial method and assumptions set forth in Schedule 8.6(b).

(iv)          The
Stockholder will, as soon as practicable after the Closing Date, amend, if
necessary, the UIC Plan to provide for the spin-off and transfer of the
Transferred Assets in respect of the Covered Participants as contemplated by
this Section 8.6(b).

(v)           While
the transfer of the Transferred Assets is pending, the Stockholder agrees to
cause the trustee of the UIC Plan to timely pay any benefits to Covered
Participants retiring after the Closing Date as they become due and in
accordance with the terms of such plan. 
The Transferred Assets shall be adjusted to reflect any benefit payments
made in accordance with this paragraph (v) of Section 8.6(b).

(vi)          Parent
shall have the right to appoint an independent actuary (“Parent’s Actuary”) for the purpose
of verifying whether the calculation of the Stockholder’s Actuary under
paragraph (ii) of this Section 8.6(b) and of the amount of
Transferred Assets is correct (based on the method and assumptions set forth in
this Section 8.6 and in Schedule 8.6(b)).  Parent shall notify the Stockholder in
writing within thirty (30) days after receipt of certification if Parent
engages Parent’s Actuary, which notice shall include the name of, and contact
information for, Parent’s Actuary.  Such
amount as certified by Stockholder’s Actuary shall be final, conclusive and
binding on the Stockholder and Parent (or

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Parent’s Actuary, if any) unless, within
thirty (30) days after the delivery of such certification by Stockholder’s
Actuary to Parent (or Parent’s Actuary, if any) together with such supporting
information as Parent may reasonably request, Parent’s Actuary shall notify
Stockholder’s Actuary of its disagreement with such amount.  If any such disagreement is not resolved to
the satisfaction of the Stockholder and Parent within sixty (60) days of
Stockholder’s receipt of such notification (or within such longer period as the
Stockholder and Parent shall mutually agree), either the Stockholder or Parent
may elect to have the calculation submitted for resolution to a third
independent actuary appointed mutually by the Stockholder and Parent, whose
determination shall be made in thirty (30) days and shall be conclusive, final
and binding.  The expenses of Parent’s
Actuary shall be borne by Parent and the expenses of Stockholder’s Actuary
shall be borne by the Stockholder.  The
expenses of any third independent actuary shall be borne equally by Parent on
the one hand and the Stockholder on the other.

(vii)         For
purposes of this Section 8.6, the term “Applicable Benefits” in respect of
a Covered Employee shall mean his or her accrued benefit under the UIC Plan (as
defined in Section 411 of the Code and the regulations thereunder) as of the
Closing Date.

(viii)        Parent
agrees that, upon the transfer of the Transferred Assets from the UIC Plan to
the Parent Pension Plan, the Parent Pension Plan shall assume responsibility
for the Applicable Benefits of Covered Participants (except for any benefit payments
made by the UIC Plan on or after the Closing Date and prior to the transfer of
the Transferred Assets to the Parent Pension Plan), and that such transfer
shall be in full discharge of all obligations of the UIC Plan for the
Applicable Benefits with respect to such Covered Participants.  The Stockholder agrees to indemnify and hold
harmless the Parent Pension Plan,

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Parent, their trustees and other fiduciaries
and affiliates related to the Parent Pension Plan and each other Parent
Indemnified Party against any and all Losses (including any and all expenses
incurred in investigating, preparing and defending against litigation commenced
or threatened or in settlement of any such claim), relating to or incurred in
defending against (A) a claim that the transactions contemplated by this
Section 8.6(b) as they affect the benefits of Covered Participants under the
UIC Plan, violate the rights of such Covered Participants or result in a
violation of the fiduciary duties of any fiduciary of the UIC Plan or the Parent
Pension Plan, (B) a claim by the PBGC relating to the transfer pursuant to this
Section 8.6(b), (C) any error in the benefit data concerning any Covered
Participant disclosed pursuant to this Section 8.6 or (D) any
inaccuracy in the certification furnished pursuant to
Section 8.6(b)(ii).  The indemnity
set forth in this Section 8.6(b)(viii) shall be subject to the qualifications,
limitations and procedures set forth in Section 9 hereof.

(ix)           The
Stockholder and Parent agree to provide each other with such records and
information as they may reasonably request including any such information
necessary to carry out their respective obligations under this Section 8.6 or
the administration of the Parent Pension Plan.

(x)            No
Covered Participant, nor his spouse, former spouse or other beneficiary under
the UIC Plan or the Parent Pension Plan shall be entitled to assert any claim
based on any of the provisions of this Agreement (including but not limited to
this Section 8.6).  The Stockholder
and Parent shall cooperate with each other (and cause the trustees of the UIC
Plan and the Parent Pension Plan to cooperate with each other) with respect to
the transfer pursuant to this Section 8.6(b).

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(c)           Effective
as of the Closing Date, the Retained Employees who have an account balances in
the UIC 401(k) Retirement Savings Plan for Employees of Detroit Stoker Company
and Midwest Metallurgical Laboratory, Inc. (the “UIC 401(k) Plan”) shall be entitled
to receive distributions of their account balances in accordance with the terms
of the UIC 401(k) Plan and shall be permitted to roll over their eligible
rollover distributions, which may include promissory notes evidencing
outstanding participant loans (“Loans”)
under the UIC 401(k) Plan, to any 401(k) plan established by Parent (or an
Affiliate thereof) (the “Parent 401(k) Plan”)
for their behalf provided that such plan accepts rollover contributions and is
amended, as necessary, to provide for the assumption and continuation of the
rolled over Loans on the same terms and conditions as in effect under the UIC
401(k) Plan immediately prior to the rollover. 
The UIC 401(k) Plan shall not place any Retained Employee’s Loan into
default so long as such employee transfers his or her accounts balance under
the UIC 401(k) Plan, together with the Loan, to the Parent 401(k) Plan through
a direct rollover within one hundred and twenty (120) days following the
Closing Date.  The Stockholder shall
cause the UIC 401(k) Plan to be amended, as necessary, to facilitate the
implementation of the foregoing provisions.

8.7           Insurance.  For a period of five (5) years after the
Closing Date, Parent shall cause the Company to maintain products liability
insurance and all other risks and liabilities of the Business with financially
sound and reputable insurance companies or associations, and with such coverage
and against such loss or damage to the full insurable value of the property
covered thereby, to the extent insured against by comparable companies engaged
in a comparable businesses.  The
Stockholder agrees to reasonably cooperate and assist Parent in obtaining any
insurance policies required to replace any existing Stockholder policies
covering the Business, other than insurance policies covering Asbestos-Related
Litigation or covering any Employee Benefit Plan, provided that in connection
with such cooperation and assistance, the Stockholder shall not be required to
make any expenditures or incur any other expenses or liabilities in connection
therewith.

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8.8           Taxes.

(a)           Parent
shall be required to prepare, or cause to be prepared, and to file, or cause to
be filed, all Tax Returns, other than Tax Returns for the consolidated group of
which the Stockholder is the common parent, that are due after the Closing Date
for tax periods or portions thereof ending on or before the Closing Date (“Pre-Closing Periods”).  Such Tax Returns shall be prepared in a
manner consistent with past practices and Parent shall not file, or cause to be
filed, an amended Tax Return or claim for refund for a Pre-Closing Period
without the Stockholder’s consent, which may be withheld in its sole
discretion.  The Surviving Corporation
shall not carry back, and Parent shall cause the Surviving Corporation not to
carry back, any net operating loss, capital loss or Tax credit from a Tax
Return that is for or includes a period beginning after the Closing Date to a
Tax Return for the consolidated group of which the Stockholder is the common
parent.  Ernst & Young LLP has been
engaged to prepare the Company’s state income and franchise Tax Returns for the
year ending December 31, 2005.

(b)           The
parties agree and acknowledge that the Stockholder shall be entitled to the tax
refund (including interest) attributable to the carryback of the capital loss,
estimated to be $2,607,511, arising from the sale of the stock of Midwest
Metallurgical by the Company.

8.9           Cooperation and
Exchange of Information.  As soon as
practicable after the Closing Date, but no later than seventy-five (75) days
thereafter, the Stockholder will cause to be delivered to Parent all of the
original books and records of the Company relating to Taxes

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which are in its possession.  The
Stockholder and Parent agree to furnish or to cause to be furnished to each
other, upon request, as promptly as practicable, such information (including
access to books and records) and such other cooperation and assistance relating
to the Company and/or the Surviving Corporation as is reasonably necessary to
complete and to file any Tax Returns, respond to audits, obtain refunds, verify
issues and negotiate settlements with Tax Authorities, or defend or prosecute
any claims.

8.10         Transfer Taxes;
Real Property Taxes; Sales Taxes. 
Each of Parent and the Stockholder shall pay an equal portion of all
transfer, real property, gains, excise, sales, value added, use, goods and
services, registration, recording, conveyance and any other similar Taxes or
fees and all documentary or other stamp Taxes, arising out of or related to the
transactions contemplated by this Agreement.

8.11         Undertakings with
Respect to Asbestos-Related Litigation.

(a)           Following
the Closing Date, Parent shall, and shall cause the Surviving Corporation to,
(i) manage the Asbestos-Related Litigation in a manner consistent with the
Company’s current practices prior to the Closing, (ii) mitigate and defend
against all claims, causes of actions and demands alleged or asserted against
the Stockholder or the Company in any Asbestos-Related Litigation in a manner
consistent with the current practices of the Company prior to the Closing, and
(iii) keep the Stockholder fully apprised from time to time of all material
developments with respect to the Asbestos-Related Litigation, including,
without limitation, by delivery to the Stockholder of quarterly reports in
reasonable detail.  In this regard, Parent shall (and
shall cause the Surviving Corporation to), in a manner consistent with the
current practices of the Company prior to the Closing, take the steps set forth
on Schedule 8.11(a) until the expiration or termination of the
Additional Escrow Deposit Period. 
Because an

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award of money damages would be inadequate for any breach of this
Section 8.11(a), including, without limitation, a failure to comply with any of
the provisions of Schedule 8.11(a) hereof, and such breach would cause
the Stockholder irreparable harm, Parent agrees that, in the event of a breach
of this Section 8.11(a) including, without limitation, failure to comply with
the provisions of Schedule 8.11(a) hereof, the Stockholder will be
entitled, without the requirement of posting a bond or other security, to
equitable relief, including, without limitation, specific performance, provided
that such remedies will not be the exclusive remedy for any breach but will be
in addition to any other remedies available under this Agreement.

(b)           From
and after the Closing until the expiration or termination of the Additional
Escrow Deposit Period, Parent shall pay and discharge all of its material
obligations under this Agreement and the other Transaction Documents as they
become due and payable before the same shall become delinquent and shall cause
the Surviving Corporation to pay the Company’s Liabilities, payables or other
Indebtedness in accordance with the Company’s usual and customary practices and
Parent shall not (and shall cause its Subsidiaries not to) take any of the
actions set forth on Exhibit B.

8.12         Additional
Post-Closing Covenants.  From and
after the Closing, Parent shall not (and shall cause the Surviving Corporation
not to) (i) enter into, engage in or consummate a Sale of the Company, except
as provided in Section 3.4(d) or (ii) conduct, or permit any Person to conduct,
any invasive testing, Phase II sampling, investigation or evaluation of the groundwater,
soil or other environmental media at or relating to the Real Property following
the Closing, unless and to the extent such sampling, investigation or
evaluation is required pursuant to applicable Environmental Law.

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8.13         Covenant Not to
Compete.  (a)  In consideration of the promises contained
herein and the Merger Consideration to be received hereunder, the Stockholder
shall not, during the Non-Competition Period (as defined herein):  (i) directly or indirectly engage,
whether or not such engagement shall be as a member, partner, stockholder,
affiliate or other participant, in any Competitive Business (as defined
herein), or represent in any way any Competitive Business, whether or not such
engagement or representation shall be for profit, (ii) knowingly or
intentionally interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Surviving Corporation and any customer,
supplier, employee or consultant of the Surviving Corporation with respect to
the Business, (iii) induce any employee of the Surviving Corporation to
terminate his or her employment with the Surviving Corporation or to engage in
any Competitive Business in any manner described in the foregoing
clause (i), or (iv) affirmatively assist any other person or entity
to engage in any Competitive Business in any manner described in the foregoing
clause (i).  Notwithstanding the
provisions of this Section 8.13 or any other provision of this Agreement,
nothing contained herein shall be deemed to prohibit, limit or otherwise
restrict the Stockholder (A) from being acquired by any Person (in which
event, the provisions of this Section 8.13 shall continue to apply to the
Stockholder only for so long as either maintains its respective separate
corporate existence, but shall not apply directly to the Person acquiring the
Stockholder or any Affiliate of such Person or to any Person resulting from a
merger or other consolidation of the Stockholder); (B) from acquiring any
Person or its business if less than ten percent (10%) of the consolidated
revenue of such Person or business for its most recent fiscal year preceding
such acquisition is derived from a Competitive Business, or (C) from
owning, purchasing or otherwise acquiring an aggregate of up to five percent
(5%) of the outstanding capital stock of any Person that engages in a
Competitive Business, the securities

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of which are listed on a national securities exchange or included in
the national list of over-the-counter securities.  Notwithstanding anything to the contrary
contained in this Section 8.13, the provisions of this Section 8.13 shall not
be binding on any Person who is a shareholder of the Stockholder.  The parties agree that all of the
consideration paid by Parent to the Stockholder shall be allocated to the
purchase of the stock of the Company by Parent, except that $25,000 of such
consideration shall be allocated to the covenant not to compete described
herein, and such allocations shall be followed by the parties for all tax
reporting purposes.

(b)           As
used herein, “Non Competition Period”
shall mean the period commencing on the Closing Date hereof and terminating
five (5) years from the Closing Date.

(c)           “Competitive Business” shall mean
any business engaged in the manufacture and supply of stokers and combustion
equipment related to stokers or that is substantially similar to the stoker
related services and products offered by the Company as of the date hereof.

(d)           The
Stockholder and Parent recognize and acknowledge that the restrictions set forth
herein are reasonable as to form and scope. 
Notwithstanding the foregoing, it is the desire and intent of the
parties that the provisions of this Section 8.13 shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. 
Accordingly, if any particular provision in this Section 8.13 shall be
adjudicated to be invalid or unenforceable, such provision shall be deemed
amended to (i) delete therefrom the portion thus adjudicated to be invalid
or unenforceable, such deletion to apply only with respect to the operation of
such provision in the particular jurisdiction in which such adjudication is
made or (ii) otherwise to render it enforceable in such jurisdiction.

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(e)           Each
of Parent and the Stockholder acknowledges and understands that the provisions
of this Section 8.13 are of a special and unique nature, the loss of which
cannot be adequately compensated for in damages by an action at law, and that
the breach or threatened breach of the provisions of this Section 8.13
would cause Parent irreparable harm.  As
a result, the parties agree that in the event of a breach of this Section 8.13
Parent would be entitled, without the requirement of posting a bond or other
security, to equitable relief, including, without limitation, specific
performance, provided that such remedies will not be the exclusive remedy for
any breach but will be in addition to any other remedies available under the
terms of this Agreement.

8.14         Transitional Services.  The Stockholder agrees to provide at Parent’s
request, by written notice to the Stockholder no later than 10 days following
the Closing Date, for a period of ninety (90) days following the Closing Date,
transitional corporate services (including, but not limited to, legal, risk
management and human resources) with respect to the Business in substantially
the same manner such services were provided to the Company by the Stockholder
prior to the Closing, and such services shall be billed to the Surviving
Corporation at the rates set forth in Schedule 8.14.

8.15         Replacement of
Existing Letters of Credit and Surety Bonds.  On the Closing Date, the Parent shall replace
all letters of credit and/or surety bonds of the Stockholder outstanding as of
the Closing Date relating to the Business (“the Existing LC’s”), and shall cause all such Existing LC’s
to be returned to the Stockholder for cancellation.

8.16         Labor Agreement.  The Stockholder shall use its commercially
reasonable efforts (and Parent shall cooperate with such efforts) to amend the
Labor Agreement as provided in Schedule 8.16; provided that nothing
herein shall require or otherwise obligate the Stockholder to incur any costs
or expenses in connection with such amendment.

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SECTION 9

INDEMNIFICATION

9.1           Indemnification
of Parent by the Stockholder. 
Subject to Section 9.3, the Stockholder shall indemnify and hold Parent
(and its officers, directors and Affiliates) (collectively, the “Parent Indemnified Parties”)
harmless from and against any and all Losses, howsoever incurred, which arise
out of or result from:

(a)           any
breach by the Stockholder of, or any inaccuracy in, any representation or
warranty of the Stockholder set forth in this Agreement;

(b)           the
failure by the Stockholder to perform any covenant, agreement or obligation of
the Stockholder contained herein; or

(c)           all
Tax liabilities of another corporation imposed on the Company pursuant to
Treasury Regulation Section 1.1502-6 (or any comparable provision under,
foreign, state or local law) by reason of the Company having been a member of
the affiliated group of corporations the common parent of which is the
Stockholder at any time on or prior to the Closing Date.

(d)           any
Losses arising solely out of the Stockholder’s failure, prior to the Effective
Time, to administer any Employee Benefit Plan of Stockholder in accordance with
applicable law; or

(e)           any
Losses under any Employee Benefit Plan of Stockholder that it continues to
sponsor, maintain or contribute to on or after the Closing Date.

9.2           Indemnification
of the Stockholder by Parent and the Surviving Corporation.  Subject to Section 9.3, Parent and the
Surviving Corporation shall jointly

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and severally indemnify and hold the Stockholder (and its officers,
directors and Affiliates) (collectively, the “Stockholder Indemnified Parties”)
harmless from and against any and all Losses, howsoever incurred, which arise
out of or result from:

(a)           any
breach by Parent of, or any inaccuracy in, any representation or warranty of
Parent set forth in this Agreement;

(b)           the
failure by Parent to perform any covenant, agreement or obligation of Parent
contained herein;

(c)           any
Asbestos-Related Litigation; or

(d)           except
with respect to any Losses described in Section 9.1(d), Section 9.1(e) or
clause (viii) of Section 8.6(b) (which Losses shall be the Stockholder’s
responsibility) any Employee Benefit Plan, including, without limitation, any
pension or post-retirement medical plan benefit or funding Liabilities arising
out of or resulting from any Employee Benefit Plan or the assertion against the
Stockholder or any of its Affiliates of any claim, cause of action or demand
relating to any Employee Benefit Plan.

9.3           Other Provisions
Regarding Indemnification Obligations.

(a)           Notwithstanding
the provisions of Section 9.1 or otherwise, the Parent Indemnified Parties
shall not be entitled to make any claim for Losses or to receive
indemnification payments with respect to any such Loss under Section 9.1 or
otherwise (other than any Loss in respect of a breach of the representations
and warranties set forth in Section 5.2 (Capitalization), Section 5.3
(Ownership of Shares), Section 5.12 (Brokers) or Section 5.13 (Taxes), unless,
until and only to the extent that the aggregate amount of Losses incurred by
the Parent Indemnified Parties to which it would otherwise be entitled to
indemnification under Section 9.1 or otherwise exceeds an amount equal to
$500,000 (the “Minimum”),
at which point the Parent Indemnified Parties shall be entitled to recover the
full amount of such Losses in excess of the Minimum but in no event in excess
of the Maximum.

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(b)           The
maximum indemnification liability of the Stockholder to the Parent Indemnified
Parties pursuant to the Stockholder’s indemnification obligations under Section
9.1(a) hereof shall not exceed in the aggregate $7,500,000 (the “Maximum”).

(c)           The
maximum indemnification liability of Parent to the Stockholder Indemnified
Parties pursuant to Parent’s indemnification obligations under Section 9.2(a)
hereof (other than in respect of Losses arising under or relating to Section
9.2(c) or 9.2(d) hereof) shall not exceed in the aggregate $5,000,000.  For avoidance of doubt, at all times the
Stockholder Indemnified Parties shall be entitled to recover the full amount of
any and all Losses arising under or relating to Section 9.2(c) or 9.2(d)
hereof.

(d)           In
no event shall the Stockholder or Parent be liable for any punitive, special,
consequential, exemplary, incidental, lost profits, business interruption or
similar damages, whether or not foreseeable, incurred by the other party in
connection with any Loss, except for any such damages asserted against an
indemnified party by a third party claimant.

(e)           In
case any event shall occur which would otherwise entitle the Parent Indemnified
Parties or the Stockholder Indemnified Parties to assert a claim for
indemnification hereunder, no Loss shall be deemed to have been sustained by
the Parent Indemnified Parties or the Stockholder Indemnified Parties to the
extent of any proceeds received by the Parent Indemnified Parties or the
Stockholder Indemnified Parties from any third party in respect of such Loss,
including but not limited to any insurance carrier.

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(f)            No
claim for indemnification for a Loss arising under Section 9.1(a) or 9.2(a) may
be brought after expiration of the applicable period set forth in Section
7.1.  If written notice of a claim has
been given prior to the expiration of the applicable survival period set forth
in Section 7.1, then the relevant representations and warranties shall survive
solely as to such claim until the claim has been finally resolved (including
for any period during which a party is seeking an insurance recovery under Section
9.3(e).

(g)           Any
payments made by any party hereto pursuant to this SECTION 9 shall be treated
as an adjustment to the Merger Consideration.

(h)           If
any party hereto has actual knowledge by virtue of written evidence (other than
written evidence not otherwise expressly related to such breach and included in
the general due diligence materials supplied to potential buyers, including
Parent, as part of the sale process for the Company) that any other party
hereto is in breach of any representation, warranty or covenant made in this
Agreement by or on behalf of such other party at any time prior to the Closing
and, notwithstanding such actual knowledge, such party elects to close the
transactions contemplated by this Agreement, then such non-breaching party
shall be deemed to have waived its rights and remedies (including
indemnification pursuant to this Section 9) with respect to such breach.

(i)            Subject
to and in accordance with the terms of this Agreement and the Escrow Agreement,
a Stockholder Indemnified Party shall have the right to recover Losses for
which such Stockholder Indemnified Party is entitled to indemnification under
Section 9.2(c) and/or (d) from the amounts held by the Escrow Agent in the
Escrow Account; provided, however, that the Stockholder
Indemnified Parties shall not be limited to the Escrow Amount in respect of any
Losses for which they are entitled to indemnification hereunder.

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9.4           Notice
of Claim; Defense of Action.  An
indemnified party shall promptly give the indemnifying party notice of any
matter which an indemnified party has determined has given or would reasonably
be likely to give rise to a right of indemnification under this Agreement,
stating the nature and, if known, the amount of the Loss, and method of
computation thereof, all with reasonable particularity and containing a
reference to the provisions of this Agreement in respect of which such right of
indemnification is claimed or arises. 
The indemnified party shall give continuing notice promptly thereafter
of all developments coming to the indemnified party’s attention materially
affecting any matter relating to any indemnification claims.  The obligations and liabilities of an
indemnifying party under this SECTION 9 with respect to Losses arising from
claims of any third party that are subject to indemnification provided for in
this SECTION 9, shall be governed by and contingent upon the following
additional terms and conditions:  With
respect to third party claims, promptly after receipt by an indemnified party
of notice of the commencement of any action or the presentation or other
assertion of any claim which could result in any indemnification claim pursuant
to Section 9.1 or Section 9.2 hereof, such indemnified party shall give prompt
notice thereof to the indemnifying party (although failure or delay to give
such notice shall not mitigate the indemnification obligation unless the
indemnifying party is prejudiced by such failure or delay), and the
indemnifying party shall be entitled to participate therein or, to the extent
that it shall wish, assume the defense thereof with its own counsel.  If the indemnifying party elects to assume
the defense of any such action or claim, the indemnifying party shall not be
liable to the indemnified party for any fees of other counsel or any other
expenses, in each case incurred by such indemnified party in connection with
the defense thereof, unless representation of both parties by the same counsel
would constitute a conflict under the applicable code or rules of professional

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responsibility.  The indemnifying party shall be authorized,
without consent of the indemnified party being required, to settle or
compromise any such action or claim, provided that (a) the sole relief provided
is monetary damages that are paid in full by the indemnifying party, (b) there
is no finding or admission of any violation of law and no effect on the
business of the indemnified party and (c) such settlement or compromise
includes an unconditional release of the indemnified party from all liability arising
out of such action or claim.  Whether or
not an indemnifying party elects to assume the defense of any action or claim,
the indemnifying party shall not be liable for any compromise or settlement of
any such action or claim effected without its consent (which consent shall not
be unreasonably withheld, delayed or conditioned).  The parties agree to cooperate to the fullest
extent possible in connection with any claim for which indemnification is or
may be sought under this Agreement, including, without limitation, making
available all witnesses, pertinent records, materials and information in its
possession or under its control relating thereto as is reasonably requested by
the other party.

9.5           Exclusivity
of Indemnity.  Except as otherwise
expressly noted in this Agreement, the indemnification provided in this SECTION
9 shall be the sole and exclusive remedy after the Closing Date available to
the parties to this Agreement for breach of any of the representations,
warranties, covenants and agreements contained herein or any right, claim or
action arising from the transactions contemplated hereby.  To the maximum extent permitted by law,
Parent hereby waives all other rights, claims, remedies or actions with respect
to any matter in any way relating to this Agreement or arising in connection
herewith, including, without limitation, the condition of the Real Property,
whether under any foreign, federal, state or local laws, statutes, ordinances,
rules, regulations, requirements or orders (including any right or remedy under
any Environmental Law), at common law or otherwise.  The foregoing provisions shall not apply in
the event of intentional fraud.

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SECTION
10

CONDITIONS
PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE

10.1         Conditions
Precedent to the Obligation of Parent and Merger Sub.  The obligation of Parent and Merger Sub to
consummate the Closing is subject to the fulfillment or waiver, on or prior to
the Closing Date, of each of the following conditions precedent:

(a)           The
Stockholder shall have complied in all material respects with all of the
agreements and covenants contained herein to be performed by it at or prior to
the Closing, and all the representations and warranties of the Stockholder
contained herein shall be true and accurate in all respects (in the case of any
representation or warranty containing any qualification as to materiality or
Material Adverse Effect) or in all material respects (in the case of any
representation or warranty without any qualification as to materiality or Material
Adverse Effect) on and as of the Closing Date with the same effect as though
made on and as of the Closing Date, except that representations and warranties
that were made as of a specified date shall continue on the Closing Date to
have been true as of the specified date, and Parent shall have received a
certificate from the Stockholder, dated as of the Closing Date and signed by an
officer of each of the Stockholder, certifying as to the fulfillment of the
condition set forth in this Section 10.1(a) (together “Stockholder’s Bring-Down Certificate”).

(b)           No
statute, rule or regulation, or order of any court or administrative agency
shall be in effect which restrains or prohibits Parent or Merger Sub from
consummating the transactions contemplated hereby.

(c)           The
Stockholder shall have delivered to Parent at the Closing each document
required by Section 11.1 of this Agreement.

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(d)           Since
the date hereof, no event, occurrence or development shall have occurred which
shall have had a Material Adverse Effect.

(e)           Parent
shall have obtained the Working Capital Facility covering available amounts and
on terms in each case acceptable to Parent.

10.2         Conditions
Precedent to the Obligation of the Stockholder and the Company.  The obligation of the Stockholder and the
Company to consummate the Closing is subject to the fulfillment or waiver, on
or prior to the Closing Date, of each of the following conditions precedent:

(a)           Parent
and Merger Sub shall have complied in all material respects with all of the
agreements and covenants contained herein to be performed by it at or prior to
the Closing, and all the representations and warranties of Parent and Merger
Sub contained herein shall be true and accurate in all respects (in the case of
any representation or warranty containing any qualification as to materiality
or material adverse effect) or in all material respects (in the case of any
representation or warranty without any qualification as to materiality or
material adverse effect) on and as of the Closing Date with the same effect as
though made on and as of the Closing Date, except that representations and
warranties that were made as of a specified date shall continue on the Closing
Date to have been true as of the specified date, and the Stockholder shall have
received a certificate of each of Parent and Merger Sub, dated as of the
Closing Date and signed by an officer of Parent and Merger Sub, respectively,
certifying as to the fulfillment of the condition set forth in this Section
10.2(a) (the “Parent’s/Merger Sub’s
Bring-Down Certificate”).

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(b)           No
statute, rule, or regulation or order of any court or administrative agency
shall be in effect which restrains or prohibits the Stockholder from
consummating the transactions contemplated hereby.

(c)           Parent
shall have delivered to the Stockholder at the Closing the Merger Consideration
and each document required by Section 11.2 of this Agreement.

(d)           An
investment bank of national standing shall have rendered a fairness opinion
with respect to the Merger and the transactions contemplated hereby on or prior
to the execution of this Agreement, and such fairness opinion shall not have
been withdrawn as of the Closing.

SECTION
11

DELIVERIES
AT THE CLOSING

11.1         Deliveries
by the Stockholder.  At the Closing,
the Stockholder will deliver or cause to be delivered to Parent:

(a)           resolutions
adopted by the board of directors of Stockholder, as sole stockholder of the
Company, approving the consummation of the Merger and the transactions
contemplated by this Agreement, certified by the Secretary of the Stockholder
as of the Closing Date;

(b)           resolutions
adopted by the Company’s board of directors approving the consummation of the
Merger and the transactions contemplated by this Agreement, certified by the
Secretary of the Company as of the Closing Date;

(c)           a
copy of the Company’s articles of incorporation, with all amendments thereto,
certified by the Secretary of State of Michigan as of a date not later than
thirty (30) Business Days before the Closing Date;

 72
 

 

(d)           a
copy of the Company’s good standing certificate certified by the Secretary of
State of Michigan as of a date not later than fifteen (15) Business Days before
the Closing Date;

(e)           a
certificate from each of the Stockholder and the Company, signed by the
Secretary of the Stockholder and the Company, respectively, dated as of the
Closing Date, attesting to the authority and verifying the signature of each
Person who signed this Agreement, or any other agreement, instrument or
certificate delivered in connection with the Merger and the transactions
contemplated hereby on behalf of the Stockholder and the Company;

(f)            a
non-foreign person affidavit under Section 1445 of the Internal Revenue Code;

(g)           the
Escrow Agreement, duly executed by the Stockholder;

(h)           certificates
representing the Shares, duly endorsed in blank (or accompanied by duly
executed stock powers);

(i)            resignations
of such officers and directors of the Company as Parent designates in writing
at least ten (10) Business Days prior to the Closing, which resignations shall
be effective as of the Closing Date;

(j)            the
existing minute books, stock register books and stock record books of the
Company; and

(k)           such
other instruments as shall be reasonably requested by Parent to consummate the
Merger and effect the transactions contemplated by this Agreement, including,
without limitation, a duly executed Certificate of Merger to be filed with the
Secretary of State of the State of Michigan in accordance with the provisions
of the BCA.

 73

 

 

11.2         Deliveries by
Parent.  At the Closing, Parent will
deliver or cause to be delivered to the Stockholder or the Escrow Agent on
behalf of the Stockholder:

(a)           resolutions
adopted by the board of directors of Parent, as sole stockholder of Merger Sub,
approving the consummation of the Merger and the transactions contemplated by
this Agreement, certified by the Secretary of Parent as of the Closing Date;

(b)           resolutions
adopted by Merger Sub’s board of directors approving the consummation of the
Merger and the transactions contemplated by this Agreement, certified by the
Secretary of Merger Sub as of the Closing Date;

(c)           a
copy of the certificate of incorporation of Parent and articles of
incorporation of Merger Sub, with all amendments thereto, certified by the
Secretary of State of the States of Delaware and Michigan, respectively, as of
a date not later than thirty (30) Business Days before the Closing Date;

(d)           a
copy of Parent’s and Merger Sub’s good standing certificate certified by the
Secretary of State of the States of Delaware and Michigan, respectively, as of
a date not later than fifteen (15) Business Days before the Closing Date.

(e)           a
certificate from each of Parent and Merger Sub, signed by the Secretary of
Parent and Merger Sub, respectively, dated as of the Closing Date, attesting to
the authority and verifying the signature of each Person who signed this
Agreement or any other agreement, instrument or certificate delivered in
connection with the Merger and the transactions contemplated hereby on behalf
of Parent and Merger Sub;

(f)            the
Escrow Agreement, duly executed by Parent;

(g)           the
Note, duly executed by Parent;

(h)           the
Merger Consideration;

 74
 

 

(i)            the
Investor Guaranty, duly executed by Mark Schwarz;

(j)            the
Closing Escrow Deposit;

(k)           the
Existing LC’s shall be delivered to the Stockholder for cancellation; and

(l)            such
other instruments as shall be reasonably requested by the Stockholder to
consummate the Merger and effect the transactions contemplated by this
Agreement, including, without limitation, a duly executed Certificate of Merger
to be filed with the Secretary of State of the State of Michigan in accordance
with the provisions of the BCA.

SECTION
12

EXPENSES

Each party will
pay its own fees, expenses, and disbursements and those of its counsel,
accountants and other professional advisors in connection with the consummation
of the Merger and the transactions contemplated by this Agreement (including
the negotiations with respect hereto and the preparation of any documents) and
all other costs and expenses incurred by it in the performance and compliance
with all conditions and obligations to be performed by it pursuant to this
Agreement or as contemplated hereby except as provided in Section 8.10;
provided that the foregoing shall be subject to the provisions of Section 4 of
Exhibit B with respect to reimbursement.

SECTION
13

TERMINATION

This Agreement may
be terminated and the Merger may be abandoned at any time prior to
Closing:  (a) by mutual written consent
of Parent and the Stockholder; (b) by Parent as provided in Section 7.2 hereof,
(c) by the Stockholder, on the one hand, or by Parent, on the other hand, upon
written notice to the other, at any time after March 31, 2007, except that the

 75
 

 

right to terminate this Agreement pursuant to this Section 13 shall not
be available to (i) the Stockholder if the failure to consummate the Merger on
or before such date was caused by or resulted from the Stockholder’s failure to
fulfill any of their obligations under this Agreement or (ii) Parent if the
failure to consummate the Merger on or before such date was caused by or
resulted from Parent or Merger Sub’s failure to fulfill any of its obligations
under this Agreement or (d) by the Stockholder, upon written notice to the
Parent, at any time on or after March 31, 2007 if the failure to consummate the
Merger on or before such date was caused by or resulted solely from Parent’s or
Merger Sub’s failure to fulfill any of their obligations under SECTIONS 10 or
11 hereof, provided the conditions precedent set forth in Section 10.1(a),
10.1(b), 10.1(c) and 10.1(d) shall have been satisfied as of such date.  Upon such termination all further obligations
of the parties hereto shall become null and void and no party (including such
party’s officers, directors, shareholders or Affiliates) shall have any
liability to any other party, unless (a) such termination was by a party
pursuant to either clauses (b) or (c) above and the basis for such termination
was the willful failure by the other party to fulfill its covenants and
agreements set forth herein or (b) such termination was by the Stockholder
pursuant to clause (d) above, in which event within one (1) Business Day
following termination of this Agreement, Parent shall pay to the Stockholder as
the Stockholder’s sole remedy for any breach giving rise to a termination under
such clause (or any other breach under this Agreement) the Termination Fee,
which Termination Fee shall be payable in immediately available funds by wire
transfer to the account specified in the termination notice. Parent’s
obligation to pay the Termination Fee shall be guarantied as provided in the
Termination Fee Guaranty. 
Notwithstanding the foregoing, the provisions of the Non-Disclosure
Agreement dated as of September 5, 2006 between Newcastle Capital Group, LLC
and the Stockholder shall remain in effect either until the consummation of the
Merger, if it occurs, or for the stated term thereof, if the Merger is not
consummated.

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SECTION
14

NOTICES

All notices,
requests, consents, payments, demands, and other communications required or
contemplated under this Agreement shall be in writing and (a) personally
delivered or sent via telecopy (receipt confirmed), (b) transmitted by
electronic or digital transmission (other than where original payment or other
documents must be delivered), (c) sent by FedEx, DHL Worldwide Express, or
Airborne Courier (for next Business Day delivery), shipping prepaid or (d) sent
by certified or registered mail, as follows:

If to Parent, Merger Sub or (following the Closing)
the Company, addressed to it:

c/o
DSC Services Inc.

200
Crescent Court, Suite 1400

Dallas,
Texas 75201

Attention:     Mark Schwarz

Telephone:   214-661-7474

Facsimile:    214-661-7475

and

c/o DSC Services Inc.

200 Crescent Court, Suite 1400

Dallas, Texas 75201

Attention:   
John Murray

               Evan Stone, Esq.

Telephone: 
214-661-7474

Facsimile:  214-661-7475

With a copy to
(which shall not constitute notice):

c/o DSC Services Inc.

200 Crescent Court, Suite 1400

Dallas, Texas 75201

Attention:     
Evan Stone, Esq.

Telephone:   
214-661-7474

Facsimile:      214-661-7475

 77
 

 

If to the Stockholder or (prior to the Closing) the
Company, addressed to it:

c/o United
Industrial Corporation

124 Industry Lane

Hunt Valley,
Maryland  21030

Attention:   
Jonathan Greenberg, Esq.

Telephone:  
(410) 628-3244

Facsimile:    (410) 683-6498

and

c/o United
Industrial Corporation

124 Industry Lane

Hunt Valley,
Maryland  21030

Attention:   
James Perry

Telephone:  
(410) 628-8786

Facsimile:    (410) 683-6498

With a copy to
(which shall not constitute notice):

Proskauer
Rose LLP

1585
Broadway

New
York, New York  10036

Attention:  Steven L. Kirshenbaum, Esq.

Telephone:  (212) 969-3000

Facsimile:   (212) 969-2900

or to such other Persons or addresses as any Person
may request by notice given as aforesaid. 
Notices shall be deemed given and received at the time of personal
delivery or completed telecopying, or, if by electronic or digital
transmission, when transmitted, or, if sent by FedEx, DHL Worldwide Express, or
Airborne Courier, one Business Day after such sending, or, if by certified or
registered mail, upon receipt; it being understood that receipt of any notice
after 5:00 p.m. (in the recipient’s time zone) on any day shall be deemed to be
received on the next Business Day.

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SECTION
15

MISCELLANEOUS

15.1         Headings.  The headings contained in this Agreement
(including but not limited to the titles of the Schedules hereto) have been
inserted for the convenience of reference only, and neither such headings nor the
placement of any term hereof under any particular heading shall in any way
restrict or modify any of the terms or provisions hereof.  Terms used in the singular shall be read in
the plural, and vice versa, and terms used in the masculine gender shall be
read in the feminine or neuter gender when the context so requires.

15.2         Schedules, etc.  All Schedules, Exhibits and Annexes attached
to this Agreement constitute an integral part of this Agreement as if fully
rewritten herein.

15.3         Execution in
Counterparts.  This Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same document.

15.4         Entire Agreement.  This Agreement, the other Transaction
Documents, the Related Agreements and the documents to be delivered hereunder
and thereunder constitute the entire understanding and agreement between the
parties hereto concerning the subject matter hereof.  All negotiations and writings between the
parties hereto are merged into this Agreement, and there are no
representations, warranties, covenants, understandings, or agreements, oral or
otherwise, in relation thereto between the parties other than those
incorporated herein or to be delivered hereunder.

15.5         Governing Law.  This Agreement and each other Transaction
Document is to be delivered in and should be construed in accordance with and
governed by the laws of the State of New York without giving effect to conflict
of laws principles.

 79
 

 

15.6         Submission to
Jurisdiction.  The parties agree that
any legal action or proceeding with respect to this Agreement, or any other
Transaction Document or any document relating hereto may be brought only in
either (a) the United States District Court for the District of Delaware, or
(b) a state court of the State of Delaware.  Each party hereby irrevocably waives any
objection including without limitation any objection to the laying of venue or
based on the grounds of forum non conveniens, which it may now or hereafter
have to the bringing of any such action or proceeding in any such respective
court.

15.7         Modification.  This Agreement cannot be modified or amended
except in writing signed by each of the parties hereto.

15.8         Binding Effect;
Agreement.  This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns.  This Agreement
is not assignable by any party without the prior written consent of the other
parties, except in the case of a Sale of the Company solely in accordance with
Section 3.4(d).

15.9         Waivers and
Amendments.  This Agreement may be
amended, superseded, canceled, renewed or extended, and the terms hereof may be
waived, only by a written instrument signed by Parent and the Stockholder or,
in the case of a waiver, by the party waiving compliance.  No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.

15.10       Severability.  The provisions of this Agreement shall be
deemed severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding or

 80
 

 

unenforceable in its entirety or partially or as to any party, for any
reason, such provision may be changed, consistent with the intent of the
parties hereto, to the extent reasonably necessary to make the provision, as so
changed, legal, valid, binding, and enforceable.  If any provision of this Agreement is held to
be illegal, void, voidable, invalid, nonbinding or unenforceable in its
entirety or partially or as to any party, for any reason, and if such provision
cannot be changed consistent with the intent of the parties hereto to make it
fully legal, valid, binding and enforceable, then such provisions shall be
stricken from this Agreement, and the remaining provisions of this Agreement
shall not in any way be affected or impaired, but shall remain in full force
and effect.

15.11       Announcements.  Except for the press releases attached as Exhibit
E or as may be required by law or applicable stock exchange rules or
regulations, from the date of this Agreement, all public announcements relating
to this Agreement or the transactions contemplated hereby will be made only as
agreed upon jointly by the parties hereto. 
If any public announcement is required by law to be made by any party
hereto or by an Affiliate of any party hereto, prior to making such
announcement, such party will deliver a draft of such announcement to the other
parties and shall give the other parties reasonable opportunity to comment
thereon.

15.12       No Third Party
Beneficiaries.  No provision of this
Agreement is intended to, or shall, confer any third party beneficiary or other
rights or remedies upon any Person other than the parties hereto except to the
extent provided in SECTION 9.  Without
limiting the generality of the foregoing, no provision of this Agreement shall
create any third party beneficiary rights in any employee or former employee of
the Stockholder (including any beneficiary or dependent thereof) in respect of
continued employment by the Stockholder or otherwise.

[END OF TEXT]

 81

 

 

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

	
  

  	
   

  	
  DSC SERVICES INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Mark Schwarz

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BRAM ACQUISITION CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Mark Schwarz

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  UNITED INDUSTRIAL
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ James Perry

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President &
  CFO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DETROIT STOKER COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ James Perry

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President &
  CFO

  
							

 

[Signature Page to
Agreement and Plan of Merger]

 

 

ANNEX 1

DEFINITIONS

As used in the attached
Merger Agreement (and in the Schedules and Exhibits attached thereto), the
following terms shall have the corresponding meaning set forth below:

a.            “Additional
Escrow Deposit” has the meaning set forth in Section 3.4(b) of the Agreement.

b.            “Additional
Escrow Deposit Period” has the meaning set forth in Section 3.4(b) of the
Agreement.

c.            “Additional
Merger Consideration Payment Date” has the meaning set forth in Section 3.4(e)
of the Agreement.

d.            “Affiliate”
of, or a Person “Affiliated” with, a specified Person, means a Person who
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the Person specified.

e.            “Agreement”
has the meaning set forth in the preamble to the Agreement.

f.             “Annual
Catch-Up Escrow Deposit” has the meaning set forth in Section 3.4(c) of the
Agreement.

g.            “Asbestos
Legislation” has the meaning set forth in Section 3.4(e) of the Agreement.

h.            “Asbestos
Legislation Expense Amount” means the sum of (i) the out-of-pocket expenses
actually paid or incurred by Parent or the Company in connection with the
passage of the Asbestos Legislation during the six-month period following
passage of the Asbestos Legislation, which expenses shall include Consultant,
accountant and attorney fees and expenses in an amount not in excess of
$100,000 in the aggregate and (ii) the actual out-of-pocket amounts paid or
required to be paid, if any, by the Company to a trust or a fund established
pursuant to the Asbestos Legislation.

i.             “Asbestos-Related
Litigation” means any action, arbitration, hearing, investigation, litigation
or suit arising out of any third-party asbestos-related personal injury or
product liability claims naming the Company and/or the Stockholder or any of
the Stockholder Affiliates relating to the products manufactured and/or sold by
the Company (or its predecessors) or, in respect of Business products, by
Stockholder or any Stockholder Affiliate, including, without limitation, claims
related to mixed dust or silica, and which specifically relate to any product
manufactured by the Company, or, in respect of Business products, by the
Stockholder or the Stockholder Affiliates, that are initiated against (i) on or
prior to the Closing, the Company, the Stockholder or any of the Stockholder
Affiliates, or (ii) after the Closing, the Stockholder or any Stockholder
Affiliate, in respect of any product manufactured or sold by the Company, or,
in respect of Business products, by the Stockholder or any of the Stockholder
Affiliates prior to the Closing. 
Asbestos-Related Litigation shall also include any action,

 1
 

 

arbitration, hearing, investigation, litigation or suit arising out of
any claim that the Company or the Stockholder or any Stockholder Affiliate is
required to make any payments to a trust or fund established by law for the
payment of claims for injuries arising out of exposure to asbestos in respect
of any product manufactured or sold by the Company or, in respect of Business
products by, the Stockholder or any of the Stockholder Affiliates prior to the
Closing.

j.             “Asbestos-Related
Litigation Amount” has the meaning set forth in Section 3.4(h) of the
Agreement.

k.            “Asbestos-Related
Litigation Records”  means all documents
and information  of the Business related
to any actual or potential Asbestos-Related Litigation including, without
limitation, all relevant product and other databases and spreadsheets,
corporate history files, engineering 
diagrams and files and drawings, acquisition and disposition of asset
files, insurance policies and files, non current advertising files, renewal
parts microfilm and files and manufacturers’ safety data sheets and files
wherever located and in whatever form.

l.             “Audited
Financial Statements” means, collectively, (i) the balance sheet,
statement of income and statement of cash flow of the Company as of and for the
fiscal year ended, December 31, 2004, which have been audited by KPMG and
(ii) the balance sheet, statement of income and statement of cash flow of
the Company as of and for the fiscal year ended, December 31, 2005, which have
been audited by Mahoney Cohen.

m.           “Available
Cash Flow” means, without duplication, with respect to any fiscal period of the
Company, consolidated net income plus non-cash expenses or minus non-cash
income items, including, without limitation, depreciation, amortization,
interest and asbestos and pension-related income/expense for such period in
accordance with GAAP to the extent deducted or added in determining consolidated
net income for such fiscal period minus (i) interest and principal payments
paid in respect of the Note during such fiscal period, (ii) the amount of all
management fees permitted to be paid by the terms of the Agreement during such
fiscal period, (iii) the Federal Tax Net Amount for such fiscal period, (iv)
principal payments paid in respect of the Working Capital Facility for such
fiscal period, provided that if any such prepayment is not a regularly
scheduled amortization payment, the proceeds of the borrowings so prepaid shall
have been used exclusively in the Surviving Corporation’s operations during
such fiscal period, and (v) without duplication for any dividends or
distributions made in respect of the items set forth in clauses (i), (ii),
(iii), or (iv), any other amount dividended or distributed to the Company’s
equityholders during such fiscal period in accordance with Section 4 of Exhibit
B.  For the avoidance of doubt, (1) the
noncash addbacks for purposes of the foregoing definition shall be net of all
cash payments for the applicable items, including but not limited to (i) cash
interest and principal payments in respect of the Note, (ii) cash pension
contributions, (iii) cash post retirement medical plan contributions and (iv)
cash Asbestos-Related Litigation payments (in respect of indemnity payments and
defense costs) and (2) the Company’s net income shall include cash expenses
incurred pursuant to the Agreement in connection with the consummation of the
transactions on the Closing Date not to exceed $250,000 in the aggregate.

n.            “BCA”
has the meaning set forth in the recitals to the Agreement.

 2
 

 

o.            “Business
Day” means any day on which banks in New York City are open for business.

p.            “Business”
has the meaning set forth in the recitals to the Agreement.

q.            “CERCLA”
has the meaning set forth in Section 5.17(b) of the Agreement.

r.             “Certificate
of Merger” has the meaning set forth in Section 2.2 of the Agreement.

s.            “Closing”
has the meaning set forth in SECTION 4 of the Agreement.

t.             “Closing
Date” has the meaning set forth in SECTION 4 of the Agreement.

u.            “Closing
Escrow Deposit” has the meaning set forth in Section 3.4(a) of the Agreement.

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

w.           “Company”
has the meaning set forth in the preamble to the Agreement.

x.             “Competitive
Business” has the meaning set forth in Section 8.13(c) of the Agreement.

y.            “Consultant”
has the meaning set forth in Section 3.4(e) of the Agreement.

z.             “Covered
Participants” has the meaning set forth in Section 8.6(b)(i) of the Agreement.

aa.          “Effective
Time” has the meaning set forth in Section 2.2 of the Agreement.

bb.          “Employee
Benefit Plan” has the meaning set forth in Section 5.18(a) of the Agreement.

cc.          “Environmental
Laws” means all federal, state, foreign or local laws, rules, regulations,
ordinance, final judgment orders and written directives relating to pollution
or protection of human health and safety or the environment or otherwise
relating to the manufacturing, processing, use, storage, disposal, transport or
handling of Hazardous Substances.

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

ee.          “ERISA
Affiliate” has the meaning set forth in Section 5.18(b) of the Agreement.

ff.            “Escrow
Account” has the meaning set forth in Section 3.4(a) of the Agreement.

gg.          “Escrow
Agent” means The Bank of New York, a New York banking corporation.

 3
 

 

hh.          “Escrow
Agreement” means the Escrow Agreement to be executed on the Closing Date among
Parent, the Stockholder and the Escrow Agent, substantially in the form of Exhibit
D attached hereto.

ii.            “Escrow
Deposits” has the meaning set forth in Section 3.4(b) of the Agreement.

jj.            “Event
of Default” means an Event of Default under the Note.

kk.          “Exception”
means any exception, lien, mortgage, security interest, encumbrance, claim,
charge, reservation, lease, tenancy, occupancy, easement, right of way,
encroachment, restrictive covenant, condition or limitation affecting the Real
Property.

ll.            “Existing
LC’s” has the meaning set forth in Section 8.15 of the Agreement.

mm.        “Fair
Act Obligations” has the meaning set forth in Section 3.4(e) of the Agreement.

nn.          “Federal
Tax Net Amount” means, with respect to any fiscal period, an amount equal to
(i) the product of (x) .35 (or, if different, the current applicable federal
corporate tax rate) and (y) the Company’s pretax income (determined on a tax
basis) for the applicable period, less available net operating losses of the
Surviving Corporation and its Subsidiaries utilized during such fiscal period,
minus (ii) any federal taxes paid by the Company for the applicable
period.  For avoidance of doubt, the
Federal Tax Net Amount shall be zero (0) if either (1) the foregoing
calculation results in zero (0) or a negative number or (2) if during any
fiscal period, the Surviving Corporation is unable to utilize the net operating
losses and other loss carryforwards of the Parent and/or the Permitted
Affiliate.

oo.          “Fee
Property” has the meaning set forth in the definition of “Real Property”
herein.

pp.          “Financial
Statements” means, collectively, the Audited Financial Statements and the
Interim Financial Statements.

qq.          “Fixed
Charge Coverage Ratio” shall mean with respect to Parent and its consolidated
Subsidiaries, for any period, the ratio of (a) the sum of the Surviving
Corporation’s and its consolidated Subsidiaries’ earnings before interest,
taxes, depreciation and amortization, minus capital expenditures, divided by
(b) the sum of cash taxes, dividends, stock repurchases permitted hereunder,
scheduled principal payments on the Note, principal payments on capital leases
permitted hereunder and interest, as determined in accordance with GAAP.

rr.            “GAAP”
means United States generally accepted accounting principles consistently
applied with prior periods.

ss.          “Hazardous
Substances” means any chemical, material or substance regulated under any
applicable Environmental Laws, including a hazardous substance, hazardous
waste, hazardous material, toxic substance, petroleum in any form, pollutant or
contaminant or any similar denomination intended to classify substances by
reason of toxicity, carcinogenicity, ignitability, corrosivity or reactivity.

 4
 

 

tt.            “Indebtedness”
shall mean, with respect to any Person and its Subsidiaries, without
duplication, (i) any indebtedness for borrowed money or issued in substitution
for or exchange of indebtedness for borrowed money (or any renewals,
replacements or extension that increase the aggregate commitments thereunder),
(ii) any indebtedness evidenced by any note, bond, debenture or other debt
instrument, (iii) any indebtedness for the deferred purchase price of property
or services for which such payment is deferred six (6) months or more, with
respect to which such Person is liable, contingently or otherwise, as obligor
or otherwise (other than trade payables and other current Liabilities incurred
in the ordinary course of business that are not overdue by more than three (3)
months unless being contested in good faith), (iv) any commitment by which such
Person assures a creditor against loss (including contingent reimbursement
obligations with respect to letters of credit), (v) any capital lease
obligations with respect to which such Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or with respect to which
obligations such Person assures a creditor against loss, (vi) any obligations
under commodity purchase or option agreements or other commodity price hedging
arrangements whether contingent or matured, (vii) all obligations of such Person
under any foreign exchange contract, currency swap agreement, interest rate
swap, cap or collar agreement or other similar agreement or arrangement
designed to alter the risks of that Person arising from fluctuations in
currency values or interest rates, in each case whether contingent or matured,
(viii) all Indebtedness referred to above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property or other assets (including accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness, (ix) any
guaranty of the foregoing, and (x) any indebtedness secured by an encumbrance
on such Person’s assets.

uu.          “Intellectual
Property” means the patents, patent applications, trademark registrations and
applications therefor, service mark registrations and applications therefor,
copyrights, including registrations and applications therefor, and trade names.

vv.          “Intellectual
Property License Agreements” has the meaning set forth in Section 5.14(b)
of the Agreement.

ww.        “Intellectual
Property Licenses” means all licenses, sublicenses or agreements that relate to
the rights of the Company to use any intellectual property owned by third
parties.

xx.           “Interest
Rate” has the meaning set forth in the Note.

yy.          “Interim
Financial Statements” means the unaudited balance sheet, statement of income
and statement of cash flow of the Company as of September 30, 2006.

zz.           “Inventory”
means all inventory of the Company (including finished goods, work in progress,
raw materials, spare parts and business supplies).

aaa.        “Investor
Guaranty” means the guaranty duly executed and delivered by Mark Schwarz,
substantially in the form attached hereto as Exhibit F, as such guaranty
may be amended, supplemented, or otherwise modified from time to time.

bbb.       “IRS”
means the Internal Revenue Service.

 5
 

 

ccc.        “Labor
Agreement” means the Labor Agreement dated January 26, 2005, as amended
through the date hereof, between the Company and Local #2511 of the United
Steelworkers of America AFL-CIO.

ddd.       “Leases”
has the meaning set forth in the definition of “Real Property” herein.

eee.        “Liabilities”
means any and all debts, costs, liabilities and obligations, whether accrued or
fixed, known or unknown, absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured or determined or
undeterminable, whether arising before, on or after the Closing.

fff.          “Lien”
means any lien, pledge, mortgage, deed of trust, security interest, claim,
lease, license, charge, option, right of first refusal, easement, servitude,
restriction (including any voting agreements, restriction on voting rights or
restriction on transfer), encumbrance, defect in title, reservation, easement,
right of way or any other restriction or limitation whatsoever.

ggg.       “Loans”
has the meaning set forth in Section 8.6(c) of the Agreement.

hhh.       “Losses”
means any losses, liabilities, damages, penalties, interest, judgments, awards,
costs or expenses whatsoever (including, without limitation, reasonable
attorneys’ fees and expenses).

iii.           ““Material
Adverse Effect” means a material adverse impact on the business or financial
condition of the Company, or on the ability of the parties to consummate the
transactions contemplated hereby, but shall not include the effect of any
change, event or development occurring as a result of general economic or
financial conditions relating to the industry specifically or to the economy in
general not unique to the Company and shall not include the effect of the
failure to obtain any consents to the change in control of the Company, the
transfer of any contracts or Permits or the loss of any customer, supplier,
member of management or other employee after the date hereof.

jjj.           “Material
Contract” means all of the following types of agreements to which the Company
is a party or by or to which it or its assets or properties are bound:

(i)            any
employment and consulting agreement with any current or former officer,
director, employee or consultant of or to the Company requiring payments of
$150,000 or more in any one year;

(ii)           any
agreement with any labor union or association representing any employees of the
Company;

(iii)          any
agreement, or related series of agreements, of the Company involving annual
payments by or to the Company of $150,000 or more;

(iv)          any
pending stoker manufacture, installation or related agreement involving
payments to the Company of $150,000;

 6

 

(v)           any agreement
limiting or affecting the freedom of the Company to engage in any line of
business in any geographic area;

(vi)          any agreement
granting territorial or product line exclusivity to any third party;

(vii)         any agreement
relating to the borrowing by the Company of money, or the guaranteeing of any
such borrowing;

(viii)        any agreement
granting any Person any material Lien on all or part of any material assets of
the Company (other than Liens which will be released at Closing);

(ix)           (a) any management,
service, consulting or other similar type of contract or (b) any advertising
agreement or arrangement, in any such case of (a) or (b) which has an aggregate
annual future liability or receivable, as the case may be, in excess of
$100,000 or which has a remaining term of more than twelve (12) months;

(x)            any Lease;

(xi)           any lease of
personal property involving annual payments in excess of $100,000;

(xii)          any material
Intellectual Property License Agreements;

(xiii)         any agreement with
finders or brokers;

(xiv)        any agreement
covering the acquisition or disposal of assets or stock or any similar
transaction (other than the sale of Inventory in the ordinary course of
business) which contains material indemnity obligations currently in effect, or
any other similar agreement containing material indemnity obligations currently
in effect;

(xv)         any material
partnership or joint venture agreement of the Company;

(xvi)        any agreement between
the Company, on the one hand, and the Stockholder or any Stockholder Affiliate,
on the other hand;

(xvii)       any settlement
agreement (other than any such agreement relating to Asbestos Related
Litigation) with material payments remaining to be made, or which impose on the
Company any material ongoing restrictions on the Business; and

(xviii)      any agreement with a
term of more than one year and which is not terminable prior thereto involving
annual payments in excess of $100,000.

kkk.        “Material Customers or
Suppliers” has the meaning set forth in Section 5.20 of the Agreement.

lll.           “Maximum” has the
meaning set forth in Section 9.3(b) of the Agreement.

mmm.     “Merger” has the meaning
set forth in the preamble to the Agreement.

 7
 

 

nnn.       “Merger Consideration”
has the meaning set forth in Section 3.1 of the Agreement.

ooo.       “Merger Sub” has the
meaning set forth in the recitals to the Agreement.

ppp.       “Minimum” has the
meaning set forth in Section 9.3(a) of the Agreement.

qqq.       “Multiemployer Plan”
has the meaning set forth in Section 5.18(b) of the Agreement.

rrr.          “Non-Competition
Period” has the meaning set forth in Section 8.13(a) of the Agreement.

sss.        “Non-Union Employees”
has the meaning set forth in Section 8.6(a) of the Agreement.”

ttt.          “Note” has the
meaning set forth in Section 3.1 of the Agreement.

uuu.       “Notice of Default” has
the meaning set forth in Section 3.4(i) of the Agreement.

vvv.       “ordinary course of
business” or “ordinary course of business consistent with past practice” means
with respect to the Company, the ordinary course of business of the Company
prior to the Restructuring and after giving effect to the Restructuring, as
applicable.

www.     “Outstanding Escrow
Deposit”: has the meaning set forth in Section 3.4(i) of the Agreement.

xxx.         “Parent” has the
meaning set forth in the preamble to the Agreement.

yyy.       “Parent 401(k) Plan”
has the meaning set forth in Section 8.6(c) of the Agreement.

zzz.         “Parent Indemnified
Parties” has the meaning set forth in Section 9.1 of the Agreement.

aaaa.      “Parent Pension Plan”
has the meaning set forth in Section 8.6(b)(i) of the Agreement.

bbbb.     “Parent’s Actuary” has
the meaning set forth in Section 8.6(b)(vi) of the Agreement.

cccc.      “Parent’s/Merger Sub’s
Bring-Down Certificate” has the meaning set forth in Section 10.2(a) of the
Agreement.

dddd.     “Parent’s Knowledge”
means the actual knowledge of Mark Schwarz, John Murray or Evan Stone, with
respect to the matters at hand.

eeee.      “Parent’s Welfare Plans”
has the meaning set forth in Section 8.6(a) of the Agreement.

 8
 

 

ffff.         “PBGC” means the
Pension Benefit Guaranty Corporation.

gggg.     “Permits” has the
meaning set forth in Section 5.16 of the Agreement.

hhhh.     “Permitted Affiliate” means the entity specified in Schedule II to
the Agreement.

iiii.          “Permitted
Affiliate Sale” means the transfer of not less
than eighty percent (80%) of all of the economic and voting rights
associated with ownership of all outstanding
equity of the Company on a fully diluted basis to the Permitted Affiliate,
whether by way of a sale, assignment, merger, consolidation, share exchange,
business combination, recapitalization, liquidation, dissolution or similar
transaction effectuating such sale; provided that on the date of consummation
of the Permitted Affiliate Sale each of the Permitted Affiliate Sale Conditions
are satisfied.

jjjj.          “Permitted
Affiliate Sale Conditions” means as of the date of consummation of the
Permitted Affiliate Sale each of the following conditions shall be satisfied as
a condition precedent to the consummation of the Permitted Affiliate Sale: (1)
the Permitted Affiliate shall not have engaged, directly or indirectly, in a
trade or business since the Closing Date, (2) as of the date of consummation of
the Permitted Affiliate Sale, the Permitted Affiliate shall have no any
liabilities or other obligations, contingent or otherwise, whether or not
required by GAAP to be reflected on its financial statements, in excess of
$300,000, (3) as of the date of consummation of the Permitted Affiliate Sale,
the Permitted Affiliate shall have no Subsidiaries, (4) as of the date of the
Permitted Affiliate Sale no default under any Transaction Document or Event of
Default shall be existing, (5) as of the date of consummation of the Permitted
Affiliate Sale Mark Schwarz shall own and control all of the economic and
voting rights associated with ownership of at least fifty-one percent (51%) of
all outstanding equity of all classes of the Permitted Affiliate on a fully
diluted basis and (4) as of the date of consummation of the Permitted Affiliate
Sale, the net operating losses and other loss carryforwards of the Permitted Affiliate
available for federal income tax purposes are equal to not less than $20,000,00
and no portion of such net operating losses of the Permitted Affiliate shall be
subject to limitation under Section 382 of the Code, the “separate return
limitation year” rules of the consolidated return regulations or otherwise.

kkkk.      “Permitted Asset Sales”
has the meaning set forth in Section 5.9(b) of the Agreement.

llll.          “Permitted
Exceptions” means, with respect to any Fee Property:

(i)            liens for unpaid
general and special real property taxes and assessments that are not yet due
and payable;

(ii)           zoning resolutions
of any governmental authority having jurisdiction over the Real Property;

(iii)          utility and
telephone company rights and easements to maintain poles, wires, cables, pipes,
boxes and other facilities and equipment in, over and upon the Real Property to
the extent of record;

 9
 

 

(iv)          easements,
restrictive covenants and other exceptions to title, provided the same do not
(i) render title to the Real Property unmarketable or (ii) prohibit or
materially adversely affect the continued existence and/or continued use (as
presently used) or maintenance of the buildings, structures or improvements
presently located on the Real Property;

(v)           matters shown on any
new or updated title report or any survey that do not (i) render title to the
Real Property unmarketable or (ii) prohibit or materially adversely affect the
continued existence and/or continued use or maintenance of the buildings,
structures or improvements presently located on the Real Property;

(vi)          matters shown on any
survey of the Real Property that are (i) variations, if any, between record
lines and tax lot lines; (ii) variations, if any, between record lines and
location of fences and hedges; and (iii) encroachments of stoops, awnings,
cellar steps, trim and cornices, if any, provided the same do not (i) render
title to the Real Property unmarketable or (ii) prohibit or materially
adversely affect the continued existence and/or continued use (as presently used)
or maintenance of the buildings, structures or improvements presently located
on the Real Property; and

(vii)         violations of laws
or municipal ordinances, orders or requirements noted or issued by the
departments of buildings, fire, labor, health or other federal, state, county,
city or other departments having jurisdiction upon or affecting the Real
Property, provided the same do not (i) render title to the Real Property
unmarketable or (ii) prohibit or materially adversely affect the continued
existence and/or continued use (as presently used) or maintenance of the
buildings, structures or improvements presently located on the Real Property.

mmmm.  “Permitted Liens” has the
meaning set forth in Section 5.7 of the Agreement.

nnnn.     “Person” means a natural
person, a governmental entity, agency or representative (at any level of
government), a corporation, partnership, joint venture or other entity or
association, as the context requires.

oooo.     “Plan” has the meaning
set forth in Section 5.18(a) of the Agreement.

pppp.     “Pre-Closing Periods”
has the meaning set forth in Section 8.8(a) of the Agreement.

qqqq.     “Present Value of
Accrued Benefits” has the meaning set forth in Section 8.6(b)(iii) of the
Agreement.

rrrr.         “Real Property”
means (i) those certain parcels of real property set forth on Schedule 5.6
hereto, together with all appurtenant rights (including, without limitation,
rights in and to adjoining streets, rights-of-way and strips and gores, water
and riparian rights, rights to light and air and easements and all of the
buildings, other immovable structures and improvements and other fixtures
located therein or thereon (the “Fee
Property”); and (ii) the Company’s leasehold interests in any
real property, if any (the “Leases”)
and all of the buildings, other immovable structures and improvements and
fixtures located therein or thereon and owned by the Company;

 10
 

 

ssss.      “Related Agreement”
means any document delivered at the Closing and any contract which is to be
entered into at the Closing or otherwise pursuant to the Agreement, other than
a Transaction Document.

tttt.         “Report” has the
meaning set forth in Section 3.4(g) of the Agreement.

uuuu.     “Restructuring” means
the restructuring of certain operations of the Company as more fully described
in Schedule I to the Agreement.

vvvv.     “Retained Employees” has
the meaning set forth in Section 8.6(a) of the Agreement.

wwww.  “Retained Non-Union
Employee” has the meaning set forth in Section 8.6(a) of the Agreement.

xxxx.        “Retained Union
Employee” has the meaning set forth in Section 8.6(a) of the Agreement.

yyyy.     “Sale of the Company”
means any direct or indirect acquisition or purchase of at least fifty-one  percent (51%) of the assets of Parent, the
Surviving Corporation or any Subsidiary of the Surviving Corporation or at
least fifty-one  percent (51%)of any
class of equity securities of Parent, the Surviving Corporation or any
Subsidiary of the Surviving Corporation, any tender offer or exchange offer
that if consummated would result in any Person beneficially owning at least
fifty-one percent (51%) of any class of equity securities of Parent, the
Surviving Corporation or any Subsidiary of the Company in any case whether by
way of sale, assignment, merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar transaction
effectuating such a sale.

zzzz.        “Sale of the Company
Escrow Deposit” has the meaning set forth in Section 3.4(d) of the Agreement.

aaaaa.    “Senior Leverage Ratio”
shall mean, with respect to the Surviving Corporation and its consolidated
Subsidiaries, for any period, the ratio of (a) the sum of debt for borrowed
money outstanding as of the last day of such period less the amount of
cash reflected on the balance sheet of the Surviving Corporation as of the last
day of such period over (b) the Surviving Corporation and its consolidated
Subsidiaries, earnings before interest, taxes, depreciation and amortization,
as determined in accordance with GAAP.

bbbbb.   “Shares” has the meaning
set forth in the recitals to the Agreement.

ccccc.    “Stockholder” has the
meaning set forth in the preamble to the Agreement.

ddddd.   “Stockholder Affiliate”
means any Person set forth on Schedule III to the Agreement.

eeeee.    “Stockholder Indemnified
Parties” has the meaning set forth in Section 9.2 of the Agreement.

 11
 

 

fffff.        “Stockholder’s
Actuary” has the meaning set forth in Section 8.6(b)(ii) of the Agreement.

ggggg.   “Stockholder’s Bring-Down
Certificate” has the meaning set forth in Section 10.1(a) of the Agreement.

hhhhh.   “Stockholder’s Knowledge”
means the actual knowledge of Frederick Strader, Thomas R. Kubik, James Perry,
Jonathan Greenberg, Thomas Giaier and Gary Ludwig with respect to the matters
at hand.

iiiii.         “Subsidiaries” of
any Person means any corporation, partnership, joint venture, limited liability
company or other legal entity of which such Person owns, directly or
indirectly, a majority of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.

jjjjj.         “Surviving
Corporation” has the meaning set forth in Section 2.1 of the Agreement.

kkkkk.    “Surviving Corporation
Common Stock” has the meaning set forth in Section 2.6 of the Agreement.

lllll.         “Surviving
Corporation Lien” means any lien, pledge, mortgage, deed of trust, security
interest, or similar encumbrance.

mmmmm.    “Tax” or “Taxes” means all taxes,
charges, fees, imposts, levies or other assessments, including all income
(whether net or gross), franchise, profits, gross receipts, capital gains,
sales, use, ad valorem, value added, alternative minimum, transfer, transfer
gains, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, workers compensation, excise, severance, stamp,
windfall profits, environmental (including taxes under Code Section 59A),
occupation, real or personal property, and estimated taxes, customs duties,
fees, assessments and charges of any kind whatsoever, together with any
interest, penalties or additional amounts thereon, imposed by any Tax
Authority.

nnnnn.   “Tax Authority” means any
federal, national, foreign, provincial, state, municipal or other local
government, or any subdivision, agency, commission or authority thereof, or any
quasi-governmental body or other authority exercising any taxing or tax
regulatory authority.

ooooo.   “Tax Returns” means all
returns, declarations, reports, forms, estimates, claims for refund,
information returns and statements relating to Taxes, including any schedule or
attachment thereto and any amendment thereof.

ppppp.   “Termination Fee” means
$500,000.

qqqqq.   “Termination Fee Guaranty”
means the guaranty duly executed and delivered by Mark Schwarz on the date
hereof, substantially in the form attached hereto as Exhibit F-1, as
such guaranty may be amended, supplemented, or otherwise modified from time to
time.

 12
 

 

rrrrr.        “Transaction
Documents” means the Agreement, the Escrow Agreement, the Note, the Investor
Guaranty, the Termination Fee Guaranty and the Certificate of Merger.

sssss.    “Transferred Assets” has
the meaning set forth in Section 8.6(b)(ii) of the Agreement.

ttttt.        “UIC 401(k) Plan”
has the meaning set forth in Section 8.6(c) of the Agreement.

uuuuu.   “UIC Plan” has the
meaning set forth in Section 8.6(b)(i) of the Agreement.

vvvvv.   “Union Employees” has the
meaning set forth in Section 8.6(a) of the Agreement.

wwwww.     “Unresolved/Unpaid Claims” has the
meaning set forth in Section 3.4(e) of the Agreement.

xxxxx.      “Working Capital Facility” means the debt
financing (including but not limited to pursuant to a revolving credit facility
and/or a letter of credit facility) obtained by Parent from a third party
financing source, Parent or an Affiliate of Parent, all or a portion of the
proceeds of which are used to fund the working capital requirements of, and/or
provide letters of credit to, the Surviving Corporation and any refinancings
thereof.

 13

 

 

EXHIBIT B TO THE

AGREEMENT AND PLAN OF
MERGER

Negative Covenants
of Parent and the Surviving Corporation

Pursuant to
Section 8.11(b) of the Agreement, from and after the Closing Date until the
expiration or termination of the Additional Escrow Deposit Period, neither
Parent nor any of its Affiliates shall take nor permit the Surviving
Corporation or any of its Subsidiaries to take any of the following actions:

1.                       Investments;
Loans and Advances.

Make or permit to
exist any investment in, or make, accrue or permit to exist  loans or advances of money to, any Person,
through the direct or indirect lending of money, holding of securities or
otherwise, except (1) loans or advances (a) to employees of the Surviving
Corporation to the extent the amount of such loans or advances at any time
outstanding shall not exceed $100,000 in the aggregate at any one time, (b) in
the ordinary course of business involving advances to vendors of the Surviving
Corporation, (c) as permitted under Section 5 of this Exhibit B or (2)
acquisitions of marketable securities up to an aggregate of five percent (5%)
of the equity securities of an issuer or five percent (5%) of the debt
securities of an issuer.

2.                       Sale
of the Company.

Consummate a Sale
of the Company except as otherwise expressly permitted under the Agreement.

3.                       Indebtedness.

Incur directly or
indirectly any Indebtedness; provided, however, that Parent, the
Surviving Corporation or any of its Subsidiaries may incur Indebtedness if
after giving effect on a pro forma basis to the incurrence of such
Indebtedness,

 1
 

 

(i) the Fixed
Charge Coverage Ratio for the four full fiscal quarter period (taken as one
accounting) ended immediately preceding the date of the transaction giving rise
to the need to calculate the Fixed Charge Coverage Ratio would be equal to or
greater  than 1.25 to 1; and

(ii) the Senior
Leverage Ratio for the four full fiscal quarter period (taken as one
accounting) ended immediately preceding the date of the transaction giving rise
to the need to calculate the Senior Leverage Ratio would be equal to or less
than 3 to 1.

4.                       Restricted
Payments.

Declare, set aside
or pay, directly or indirectly, (i) any dividend or distribution (whether in
cash, stock or property or any combination thereof), except for dividends or
distributions to Parent during any full fiscal year commencing after the
Closing Date up to an amount equal to the Federal Tax Net Amount for such
fiscal year and (ii) any other
dividends, distributions or payments during such fiscal year by the
Company to Parent the proceeds of which are used by Parent (A) to pay fees and
expenses incurred in the ordinary course of business including, without
limitation, fees and expenses required to be paid for the maintenance of Parent’s
corporate existence, franchise taxes and similar costs, in an aggregate amount
not to exceed $50,000 in any calendar year, (B) to pay management fees or
similar distributions to Parent, in an aggregate amount not to exceed $500,000
in any fiscal year commencing after the Closing Date, (C) to reimburse Parent
for expenses incurred by Parent prior to or concurrently with the Closing in
connection with the negotiation and execution of the Transaction Documents and
the transactions contemplated thereby, in an aggregate amount not to exceed
$100,000, (D) to make principal and interest payments on the Note, (E) to make
principal and interest payments on the Working Capital Facility to the extent
that if any such prepayment is not a regularly scheduled amortization payment,
the proceeds of the borrowings so prepaid shall have been used

 2
 

 

exclusively in the
Surviving Corporation’s operations and (F) as otherwise provided or permitted
in the Agreement or this Exhibit B; provided that at the time of
declaration or payment of any such dividend or distribution, no default under
any Transaction Document or Event of Default shall have occurred and be
continuing or would result after giving effect to any payment pursuant to
clauses (i) and (ii) above.

5.             Affiliate Transactions.

Enter into or be a
party, directly or indirectly, to any transaction with any Affiliate thereof
except (i) transactions permitted in this Exhibit B or otherwise in the
Agreement; (ii) transactions in the ordinary course of and pursuant to the
reasonable requirements of the business of Parent, the Surviving Corporation or
any Subsidiary of the Surviving Corporation, as the case may be, and upon fair
and reasonable terms that are no less favorable to Parent, the Surviving
Corporation or such Subsidiary than would be obtained in a comparable arm’s
length transaction with a Person not an Affiliate of Parent the Surviving
Corporation or such Subsidiary; (iii) the Working Capital Facility to the
extent that the lender thereunder is the Parent or an Affiliate of Parent or
(iv) any other transactions which do not involve the payment of consideration,
either individually or in the aggregate in excess of $100,000 during any fiscal
year.  In addition, if any such
transaction or series of related transactions (other than permitted dividends
and distributions) involves payments in excess of $500,000 in the aggregate
during any fiscal year, the terms of these transactions must be disclosed in
advance to the Stockholder.

 3
 

 

6.             Liens.

Create, incur, assume or
permit to exist any Surviving Corporation Lien on or with respect to any of the
properties or assets of Parent, the Surviving Corporation or any of its
Subsidiaries (whether now owned or hereafter acquired) except for,

a)              Permitted
Liens

b)             Surviving
Corporation Liens in existence as of the Closing Date;

c)              liens
or similar encumbrances to secure taxes not yet due (or otherwise being
contested in good faith);

d)             mechanics
liens or other like encumbrances generally arising by operation of law;

e)              liens
or similar encumbrances securing Indebtedness permitted to be incurred under
Section 3 of this Exhibit B, other than Indebtedness owing to any
director, officer or Affiliate of Parent or the Surviving Corporation except as
otherwise provided or permitted in the Agreement or this Exhibit B; and

f)                Surviving
Corporation Liens securing the Working Capital Facility.

 4

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