AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

by and among

K & F INDUSTRIES HOLDINGS, INC.,

FERNDOWN ACQUISITION CORP.,

MEGGITT-USA, INC.

Dated as of March 5, 2007

TABLE OF CONTENTS

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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (hereinafter called this " Agreement "), dated as of March 5, 2007, among K & F Industries Holdings, Inc., a Delaware corporation (the " Company "), Meggitt-USA, Inc., a Delaware corporation (" Purchaser "), and Ferndown Acquisition Corp., a Delaware corporation (" Merger Sub "), the Company and Merger Sub sometimes being hereinafter collectively referred to as the " Constituent Corporations ."

RECITALS

WHEREAS, the Company desires that Merger Sub merge with and into the Company, all upon the terms and subject to the conditions of this Agreement;

WHEREAS, the Company, Purchaser and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with the merger of the Company and Merger Sub;

WHEREAS, the Board of Directors of the Company has determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable and fair to, and in the best interests of, the stockholders of the Company;

WHEREAS, the Board of Directors of the Company has unanimously adopted resolutions approving the acquisition of the Company by Purchaser, the execution of this Agreement and the consummation of the transactions contemplated hereby and recommending that the Company’s stockholders adopt this Agreement and approve the transactions contemplated hereby;

WHEREAS, the respective boards of directors of each of Purchaser, Merger Sub and the Company have approved and declared advisable this Agreement and the merger of Merger Sub with and into the Company (the " Merger ") upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, simultaneously with the execution and delivery of this Agreement and as a condition and inducement to the willingness of Purchaser and Merger Sub to enter into this Agreement, certain holders (the " Principal Stockholders "), of the Company’s outstanding common stock, par value $0.01 per share (the " Common Stock "), the Company and the Purchaser are entering into one or more agreements (collectively, the " Stockholders’ Agreements ") pursuant to which each of the Principal Stockholders agrees, among other things, to take certain actions in furtherance of the Merger;

WHEREAS, simultaneously with the execution and delivery of this Agreement and as a condition and inducement to the willingness of the Company to enter into this Agreement, Meggitt PLC, a public limited company organized under the laws of England and Wales (" Parent ") has agreed pursuant to a Guaranty and Undertakings Agreement, dated as of the date hereof (the " Guaranty "), to fully and unconditionally guaranty the performance by Purchaser and Merger Sub of their respective obligations under this Agreement and to take certain actions relating to the Merger, as more fully described and set forth in the Guaranty; and

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WHEREAS, simultaneously with the execution and delivery of this Agreement and as a condition and inducement to the willingness of the Company to enter into this Agreement, Parent is entering into the Facility Agreement and the Underwriting Agreement (as defined below), the net proceeds of which will be used, among other things, to pay the Per Share Consideration and to consummate the Merger.

NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants, agreements and conditions herein contained, the parties hereto agree as follows:

ARTICLE I.
THE MERGER

Section 1.1            The Merger.       Subject to the terms and conditions of this Agreement, at the Effective Time (as defined in Section 1.3 ), Merger Sub shall be merged with and into the Company and the separate corporate existence of Merger Sub shall thereupon cease.  The Company shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the " Surviving Corporation ") and shall continue to be governed by the laws of the State of Delaware, and the separate corporate existence of the Company with all its rights, privileges, immunities and franchises shall continue unaffected by the Merger.  The Merger shall have the effects specified in the Delaware General Corporation Law (the " DGCL ").

Section 1.2            Closing .      The closing of the Merger (the " Closing ") shall take place at the offices of Kaye Scholer LLP, 1999 Avenue of the Stars, Los Angeles, California 90067.  The Closing shall take place as soon as practicable but in no event later than the third Business Day after the satisfaction or waiver (to the extent the same may be waived) of the conditions set forth in ARTICLE VII (excluding conditions that cannot be satisfied until the Closing but subject to the satisfaction or waiver of such conditions at the Closing) (the " Closing Date ").

Section 1.3            Effective Time.       As soon as practicable following fulfillment or waiver of the conditions specified in ARTICLE VI hereof, and provided that this Agreement has not been terminated or abandoned pursuant to ARTICLE VII hereof, the Company and the Purchaser will cause a certificate of merger conforming to the requirements of Section 251 of the DGCL (the " Certificate of Merger ") to be duly prepared, executed and acknowledged by the Company and to be filed with the Secretary of State of Delaware, as provided in the DGCL.  The Merger shall become effective at the time of such filing or at such later time as may be agreed by the parties hereto and specified in the Certificate of Merger, and such time is hereinafter referred to as the " Effective Time ."

Section 1.4            Subsequent Actions.       If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Constituent Corporations acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of each of the Constituent Corporations or

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otherwise, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of the Constituent Corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement.

Section 1.5            Charter.       The Charter of the Company in effect at the Effective Time shall be amended in the Merger to read as set forth on Exhibit A and, as so amended, shall be the Charter of the Surviving Corporation.

Section 1.6            The Bylaws.       The Bylaws of the Merger Sub in effect at the Effective Time shall be the bylaws of the Surviving Corporation.

Section 1.7            Officers and Directors.       The parties shall take all actions that may be required so that the directors of Merger Sub and the officers of the Company at the Effective Time shall, from and after the Effective Time, continue as the directors and officers, respectively, of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s Charter and Bylaws.

ARTICLE II.
CONVERSION OR CANCELLATION OF SHARES IN THE MERGER

Section 2.1            Conversion or Cancellation of Shares.       The manner of converting or canceling shares of the Company and Merger Sub in the Merger shall be as follows:

• • (a)           At the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof, each share (a " Share ") of the Common Stock issued and outstanding immediately prior to the Effective Time (other than (i) Shares owned by Parent, Purchaser, Merger Sub or any other direct or indirect subsidiary of Parent or Purchaser (collectively, the " Purchaser Companies ") or in the treasury of the Company, and (ii) Shares which are held by stockholders properly demanding and perfecting (and not having effectively withdrawn) appraisal rights with respect to such Shares pursuant to Section 262 of the DGCL (" Dissenting Shares ")) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive, without interest, $27.00 (the " Per Share Consideration ").  Each such Share, by virtue of the Merger and without any action on the part of the holder thereof, shall no longer be outstanding and shall be canceled and retired and shall cease to exist, and each holder of a certificate representing any such Share shall thereafter cease to have any rights with respect to such Share, except the right to receive the Per Share Consideration for such Share upon the surrender of such certificate in accordance with Section 2.3 or the right, if any, in the case of holders of Dissenting Shares, to receive payment from the Surviving Corporation of such amount as may be determined in accordance with the applicable provisions of the DGCL.

    (b)           At the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof, each Share issued and outstanding at the Effective Time and

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• • owned by any of the Purchaser Companies, and each Share issued and held in the Company’s treasury at the Effective Time, shall, by virtue of the Merger and without any action on the part of the holder thereof, cease to be outstanding, be canceled and be retired without payment of any consideration therefor and cease to exist.

    (c)           At the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof, each share of common stock, par value $.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall  be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation.

Section 2.2            Dissenting Shares.       Notwithstanding anything in this Agreement to the contrary, the Dissenting Shares shall not be converted into or be exchangeable for the right to receive the Per Share Consideration, unless and until such holders shall have failed to perfect or shall have effectively withdrawn or lost their rights to appraisal under the DGCL.  Dissenting Shares shall be treated in accordance with Section 262 of the DGCL.  If any such holder shall have failed to perfect or shall have effectively withdrawn or lost such right to appraisal, such holder’s Shares shall thereupon be converted into and become exchangeable only for the right to receive, as of the later of the Effective Time and the time that such right to appraisal shall have been irrevocably lost, withdrawn or expired, the Per Share Consideration without any interest thereon.  The Company shall give Purchaser and Merger Sub (a) prompt written notice of any demands for appraisal of any Shares, attempted withdrawals of such demands and any other instruments served pursuant to the DGCL and received by the Company relating to rights to be paid the "fair value" of Dissenting Shares, as provided in Section 262 of the DGCL and (b) the opportunity to participate in and direct all negotiations and proceedings with respect to demands for appraisal under the DGCL.  The Company shall not, except with the prior written consent of Purchaser, voluntarily make or agree to make any payment with respect to any demands for appraisals of capital stock of the Company, offer to settle or settle any such demands or approve any withdrawal of any such demands.

Section 2.3            Payment for Shares in the Merger.       The manner of making payment for Shares in the Merger shall be as follows:

• • (a)           At or prior to the Effective Time, Purchaser or Merger Sub shall deposit in trust for the benefit of the holders of Shares with a bank or trust company designated by Purchaser and approved by the Company (the " Paying Agent "), cash in United States dollars in an aggregate amount equal to the sum of the product of (A) the number of Shares issued and outstanding at the Effective Time (other than Shares owned by the Purchaser Companies, Shares held by the Company in treasury and Dissenting Shares) and (B) the Per Share Consideration (such amount being hereinafter referred to as the " Payment Fund ").  The Paying Agent shall make the payments provided for in Section 2.1 of this Agreement out of the Payment Fund.

    (b)           Promptly after the Effective Time, but no later than three (3) Business Days after the Effective Time, the Paying Agent shall mail or otherwise make available to each record holder (other than the Purchaser Companies, the Company and holders of Dissenting Shares), as of the Effective Time, of an outstanding certificate or certificates,

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• • which immediately prior to the Effective Time, represented Shares (the " Certificates ") a form letter of transmittal, which shall be in customary form, and instructions for use in effecting the surrender of the Certificates for payments therefor.  Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal duly executed and completed in accordance with the instructions thereon, the holder of such Certificate shall be entitled to receive in exchange therefor cash in an amount equal to the product of (i) the number of Shares represented by such Certificate and (ii) the Per Share Consideration, and such Certificate shall forthwith be canceled.  No interest will be paid or accrued on the cash payable upon the surrender of the Certificates.  If payment is to be made to a person other than the person in whose name the Certificate surrendered is registered, it may be a condition of payment that the Certificate so surrendered shall be properly endorsed or accompanied by appropriate stock powers or otherwise in proper form for transfer and that the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered, or that such person shall establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable.  Until surrendered in accordance with the provisions of this Section 2.3 , each Certificate (other than Certificates representing Dissenting Shares or Shares owned by any of the Purchaser Companies or the Company ) shall represent, for all purposes, only the right to receive the Per Share Consideration in cash multiplied by the number of Shares evidenced by such Certificate, without any interest thereon. Notwithstanding anything to the contrary in this Section 2.3 , (x) Purchaser shall, as promptly as is reasonably practicable after the date hereof (and in no event later than ten (10) Business Days prior to the Closing), deliver to the Principal Stockholders such letter of transmittal and instructions for use as would be required of holders of Certificates pursuant to the first sentence of this Section 2.3(b) and (y) so long as the Principal Stockholders complete such transmittal materials and deliver them to Purchaser at or prior to the Closing (it being understood and agreed that if Purchaser shall fail to deliver such transmittal materials to the Principal Stockholders no later than ten (10) Business Days prior to the Closing then in such event such letter of transmittal shall not be required to be completed by the Principal Stockholders), Purchaser shall pay and deduct from the Payment Fund, or cause the Paying Agent to pay, to the Principal Stockholders immediately after the Effective Time by wire transfer of immediately available funds, the Per Share Consideration payable with respect to the Shares owned beneficially and of record by the Principal Stockholders upon surrender of the Certificates representing such Shares.

    (c)           Any portion of the Payment Fund which remains unclaimed by the stockholders of the Company following the date which is two hundred seventy (270) days after the Effective Time shall be repaid to the Surviving Corporation, upon demand, and any stockholders of the Company who have not theretofore complied with Section 2.3(b) shall thereafter look only to the Surviving Corporation (subject to abandoned property, escheat or other similar Laws) but only as general creditors thereof, for payment of their claim for the Per Share Consideration for Shares, without any interest thereon.  Neither Purchaser nor the Surviving Corporation shall be liable to any holder of Shares for any monies delivered from the Payment Fund or otherwise to a public official pursuant to any applicable abandoned property, escheat or similar Law.  If any Certificates shall not have been surrendered prior to two years after the Effective Time (or such earlier date as shall

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• • be immediately prior to the date that such unclaimed funds would otherwise become subject to any abandoned property, escheat or similar Law), any unclaimed funds payable with respect to such Certificates shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any Person previously entitled thereto.  The Paying Agent shall retain the right to invest and reinvest the Payment Fund on behalf of the Surviving Corporation (or the Purchaser, if applicable) in securities issued or guaranteed by the United States government or certificates of deposit of commercial banks that have, or are members of a group of commercial banks that has, consolidated total assets of not less than $500,000,000 and the Surviving Corporation (or the Purchaser, if applicable) shall receive the interest earned thereon or money market funds which are invested in the foregoing; provided , however , that no such investment, or any loss realized with respect to any such investment, will relieve Purchaser or Surviving Corporation, as applicable, from paying in full the Per Share Consideration, in accordance with the terms hereof, to each holder of Shares who complies with the terms hereof.

    (d)                Purchaser or the Surviving Corporation, if applicable, shall be entitled to deduct and withhold, or cause to be deducted or withheld, from (i) the consideration otherwise payable pursuant to this Agreement to any holder of Shares or (ii) any other payment made pursuant to this ARTICLE II , such amounts as are required to be deducted and withheld with respect to the making of such payment under the Code, or any provision of applicable state, local or foreign tax law.  To the extent that amounts are so deducted and withheld, such deducted and withheld amounts shall be (i) paid by the Surviving Corporation to the applicable tax authorities when due and (ii) treated for all purposes of this Agreement as having been paid to such Persons in respect of which such deduction and withholding was made.

Section 2.4            Treatment of Equity-Based Awards.

• • (a)           The Company shall provide that, immediately prior to the Effective Time, each option to purchase Shares (an " Option ") granted under the Company Compensation and Benefit Plans set forth on Schedule 2.4(a) that is outstanding and unexercised as of the Effective Time (whether vested or unvested) shall be canceled, and the holder of such Options (to the extent listed on Schedule 2.4(a)   and then outstanding and unexercised, whether vested or becoming vested prior to or upon the Effective Time) shall receive, at the Effective Time or as soon as practicable after (but in no event later than five (5) days after the Effective Time) from the Surviving Corporation, in consideration for such cancellation, an amount in cash equal to the product of (A) the number of Shares previously subject to such Option and (B) the excess, if any, of the Per Share Consideration over the exercise price per Share previously subject to such Option, less any required withholding taxes.  To the extent that amounts are so deducted and withheld, such deducted and withheld amounts shall be (i) paid by the Surviving Corporation to the applicable tax authorities when due and (ii) treated for all purposes of this Agreement as having been paid to such Persons in respect of which such deduction and withholding was made.

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• • (b)           The Company shall take any actions reasonably necessary to effectuate the cancellation of the Options to be effective as of the Effective Time (but without derogation of the rights of the holders of Options to receive the amounts specified in Section 2.4(a) ); it being understood that the intention of the parties is that following the Effective Time no holder of an Option or any participant in any Company Compensation and Benefit Plan or other employee benefit arrangement of the Company shall have any right thereunder to acquire any capital stock (including any "phantom" stock or stock appreciation rights) or derivative securities of the Company, any Company Subsidiary or the Surviving Corporation.  Prior to the Effective Time, the Company, to the extent required under the Company Compensation and Benefit Plans, shall deliver to the holders of the Options appropriate notices, in form and substance reasonably acceptable to Purchaser, setting forth such holders’ rights pursuant to this Agreement

Section 2.5            Lost Certificates.       If any Certificate is claimed to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will, subject to the applicable terms and conditions of this Agreement, issue in exchange for such lost, stolen or destroyed Certificate the Per Share Consideration deliverable in respect thereof pursuant to this Agreement.

Section 2.6            No Further Rights of Transfer.       At and after the Effective Time, each holder of Shares shall cease to have any rights as a stockholder of the Company, except as otherwise required by applicable Law and except for, in the case of a holder of a Certificate (other than Shares to be canceled pursuant to Section 2.1 hereof or Dissenting Shares), the right to surrender his or her Certificate in exchange for payment of the Per Share Consideration, and no transfer of Shares shall be made on the stock transfer books of the Surviving Corporation.  Certificates presented to the Surviving Corporation after the Effective Time shall be canceled and exchanged for cash as provided in this ARTICLE II , subject to applicable Law in the case of Dissenting Shares.  At the close of business on the day of the Effective Time the stock ledger of the Company with respect to Shares shall be closed.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except (a) as disclosed in the Company Reports filed or furnished with the SEC prior to the date hereof (other than with respect to Section 3.4 and Section 3.6 , and excluding any disclosures set forth in any risk factor section thereof, or in any section relating to forward looking statements, and any other disclosures therein, in each case, to the extent that they are cautionary, predictive or forward looking in nature, and excluding any generic disclosures), and (b) as set forth in the Disclosure Schedules delivered by the Company to Parent, Purchaser and Merger Sub concurrently with the execution of this Agreement (the " Company Disclosure Schedules ") that specifically relate to, or are reasonably apparent on their face to relate to, such corresponding Section of ARTICLE III below, the Company hereby represents and warrants to Purchaser and Merger Sub as of the date hereof as follows:

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Section 3.1            Organization, Power, Authority and Good Standing.

• • (a)           Each of the Company and each of its Subsidiaries is duly organized and validly existing and in good standing under the laws of its jurisdiction of organization and has all requisite power and authority to own, lease and operate its assets and properties and to carry on its business as currently conducted, except where it would not have a Material Adverse Effect on the Company.

    (b)           Each of the Company and each of its Subsidiaries is duly qualified and in good standing to transact business as a foreign Person in those jurisdictions set forth opposite its name on Schedule 3.1(b) , which constitute all the jurisdictions in which it owns, leases, or operates property or the nature of the business or activities currently conducted by it makes such qualification necessary, except where the failure to be so qualified would not have a Material Adverse Effect on the Company.

    (c)           Purchaser has been furnished with true, correct and complete copies of each Organizational Document of the Company and each of its Subsidiaries.

Section 3.2            Authorization, Execution and Enforceability.

• • (a)           The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and the other instruments and agreements to be executed and delivered by the Company as expressly contemplated hereby and to consummate the transactions expressly contemplated hereby and thereby, but in the case of the completion of the Merger and the transactions subject thereto, subject to the adoption of this Agreement by the Requisite Stockholder Vote prior to the consummation of the Merger.  The execution and delivery by the Company of this Agreement and the other instruments and agreements to be executed and delivered by the Company as expressly contemplated hereby and the performance by the Company of its obligations hereunder and thereunder have been duly and validly authorized by all requisite action on the part of the Company, other than, with respect to completion of the Merger, the adoption of this Agreement by the Requisite Stockholder Vote prior to the consummation of the Merger.  This Agreement has been, and the other instruments and agreements to be executed and delivered by the Company as expressly contemplated hereby, and when delivered in accordance with the terms hereof, shall have been, duly and validly executed and delivered by the Company, and this Agreement constitutes, and the other instruments and agreements to be executed and delivered by the Company as expressly contemplated hereby, when delivered in accordance with the terms hereof, shall constitute, in each case, assuming the due and valid execution and delivery hereof and thereof by the other parties hereto and thereto, valid and binding obligations of the Company enforceable against the Company in accordance with their terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors rights and to general principles of equity.  Except as set forth on Schedule 3.2 , none of the execution and delivery by the Company of this Agreement and the other instruments and agreements to be executed and delivered by the Company as expressly contemplated hereby and the performance by the Company of its obligations under this Agreement and the other instruments and

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• • agreements to be executed and delivered by the Company as expressly contemplated hereby, or the consummation of the transactions expressly contemplated hereby, does or will (i) conflict with, or result in any violation of, or cause a default (with or without notice or lapse of time, or both) under, or give rise to any right of termination, amendment, cancellation or acceleration of any obligations contained in, or result in the creation of any Encumbrance upon any of the properties or assets of the Company or the loss of any benefit under (A) any term, condition or provision of any Contract to which the Company is a party, or by which the Company or its assets or properties may be bound, (B) any provision of any Organizational Document of the Company or (ii) violate any Law applicable to the Company, except, in the case of (i)(A) or (ii) only, where it would not have a Material Adverse Effect on the Company.

    (b)           The Company’s Board of Directors (at a meeting or meetings duly called and held) has unanimously (i) determined that this Agreement and the transactions expressly contemplated hereby, including the Merger and the Guaranty, are advisable and fair to and in the best interests of, the stockholders of the Company, (ii) approved this Agreement, the Guaranty and the Stockholders’ Agreements, and the transactions expressly contemplated hereby and thereby, (iii) directed that this Agreement be submitted to the stockholders of the Company for their adoption and resolved to recommend the approval and adoption of this Agreement and the transactions expressly contemplated hereby, including the Merger, by the stockholders of the Company (the " Company Board Recommendation "), (iv) irrevocably taken all necessary steps to render Section 203 of the DGCL inapplicable to the execution and delivery of this Agreement and the transactions expressly contemplated hereby, including the Merger and the Stockholders’ Agreements, and (v) irrevocably resolved to elect, to the extent permitted by applicable Law, for the Company not to be subject to any "moratorium," "control share acquisition," "business combination," "fair price" or other form of anti-takeover Laws or regulations (collectively, " Takeover Laws ") of any jurisdiction that may purport to be applicable to this Agreement or the transactions expressly contemplated hereby.

Section 3.3            Consents.       The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions expressly contemplated hereby do not and will not require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity or any other Person except (i) the pre-merger notification requirements under the HSR Act or applicable foreign antitrust or competition Laws (" International Competition Laws "), (ii) compliance with the applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder, (iii) the filing of the Certificate of Merger with the Delaware Secretary of State, (iv) compliance with the notification provisions of Exon-Florio, (v) compliance with the Export Control Laws or NISPOM, (vi) the consents and approvals set forth on Schedule 3.3 and (vii) any such additional consents, approvals, authorizations, permits, filings or notifications, the failure of which to make or obtain, under this clause (vii) (A) would not prevent or materially delay the Company from performing its obligations under this Agreement or (B) would not have a Material Adverse Effect on the Company.

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Section 3.4            Capitalization.

• • (a)           The authorized capital stock of the Company consists of 250,000,000 Shares and 20,000 shares of preferred stock of the Company, par value $0.01 per share (the " Preferred Shares ").  As of the close of business on the day immediately preceding the date of this Agreement, 39,642,911 Shares and no Preferred Shares were issued and outstanding, no Shares and no Preferred Shares were held in the Company’s treasury, and 2,442,956 Shares and no Preferred Shares were reserved for issuance under the Company Compensation and Benefit Plans.  In addition, as of such date, there were outstanding Options to purchase an aggregate of 1,671,441 Shares and no Preferred Shares.  Since such date, the Company has not issued any Shares or Preferred Shares other than the issuance of Shares upon the exercise of Options outstanding on such date, has not granted any options, restricted stock, warrants or rights or entered into any other agreements or commitments to issue any Shares or Preferred Shares, and has not split, combined or reclassified any of its shares of capital stock.  All of the outstanding Shares have been duly authorized and validly issued and are fully paid and nonassessable and are free of preemptive rights.  Schedule 3.4(a) contains a true, correct and complete list, as of the date of this Agreement, of each Option, the number of Shares issuable thereunder, the expiration date and exercise price related thereto and, if applicable, the Company Compensation and Benefit Plan pursuant to which each such Option was granted.  Except for the Options set forth on Schedule 3.4(a) and the outstanding Shares listed above, there are no outstanding (i) securities of the Company or any other Person convertible into or exchangeable for Equity Interests in the Company, (ii) options, warrants, rights or other agreements or commitments to acquire from the Company, or obligations of the Company to issue, any Equity Interests in the Company, (iii) obligations of the Company to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment relating to any Equity Interests in the Company (the items in clauses (i), (ii) and (iii), together with the capital stock of the Company, being referred to collectively as " Company Securities ") or (iv) obligations of the Company or any of its Subsidiaries to make any payments directly or indirectly based (in whole or in part) on the price or value of the Shares or Preferred Shares.  Neither the Company nor any of its Subsidiaries has any outstanding stock appreciation rights, phantom stock, performance based rights or similar rights or obligations.  There are no outstanding obligations or commitments, contingent or otherwise, of the Company or any of its Subsidiaries to purchase, redeem or otherwise acquire any Company Securities.  Except as set forth in the Securityholders Agreement and the Stockholders’ Agreements, there are no voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a party with respect to the voting of capital stock of the Company.  There are no Contracts to which the Company is a party or by which it is bound to (i) repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity or voting interest in, the Company or (ii) other than the Securityholders Agreement, vote or dispose of any shares of capital stock of, or other equity or voting interest in, the Company.

    (b)           There are no restrictions of any kind that prevent or restrict the payment of dividends or other distributions by the Company or its Subsidiaries other than those

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• • imposed by applicable Law or the Indenture or the credit facilities listed on Schedule 3.4(b).

Section 3.5            Subsidiaries; Investments .   Schedule 3.5 contains a true, correct and complete list of all of the Company’s Subsidiaries.  The Company or one or more of its Subsidiaries is the record and beneficial owner of all the Equity Interests of each Subsidiary of the Company, free and clear of any Encumbrance (other than Permitted Encumbrances), including any limitation or restriction on the right to vote, pledge or sell or otherwise dispose of such equity interests.  There are no outstanding (i) securities of the Company or any of its Subsidiaries convertible into or exchangeable for Equity Interests in any Subsidiary of the Company, (ii) options, restricted stock, warrants, rights or other agreements or commitments to acquire from the Company or any of its Subsidiaries, or obligations of the Company or any of its Subsidiaries to issue, any Equity Interests in (or securities convertible into or exchangeable for Equity Interests in) any Subsidiary of the Company, (iii) obligations of the Company or any of its Subsidiaries to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment relating to any capital stock, voting securities or other ownership interests in any Subsidiary of the Company (the items in clauses (i), (ii) and (iii), together with the capital stock of such Subsidiaries, being referred to collectively as " Subsidiary Securities ") or (iv) obligations of the Company or any of its Subsidiaries to make any payment directly or indirectly based (in whole or in part) on the value of any shares of capital stock of any Subsidiary of the Company.  There are no outstanding obligations of the Company or any of its Subsidiaries to purchase, redeem or otherwise acquire any outstanding Subsidiary Securities.  There are no voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a party with respect to the voting of capital stock of any Subsidiary of the Company.

Section 3.6            Company Reports; Financial Statements.

• • (a)           The Company has filed or furnished all reports, schedules, certifications, forms and statements required to be filed or furnished by the Company (since August 4, 2005) or any of its Subsidiaries of the Company (since December 31, 2004) with the SEC.  As of their respective dates (or, if amended, as of the date of such amendment prior to the date hereof), the Company Reports complied (and any Company Reports filed or furnished with or to the SEC subsequent to the date hereof will comply) in all material respects with the requirements of the Exchange Act or the Securities Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder and did not, and any Company Reports filed with or furnished to the SEC subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.  Each of the consolidated balance sheets included in or incorporated by reference into the Company Reports (including the related notes and schedules), as amended or supplemented prior to the date hereof, fairly presents, in all material respects the consolidated financial position of the Company and its Subsidiaries as of its date, and each of the consolidated statements of income, of cash flow and of changes in financial position included in or incorporated by reference into the Company Reports (including any related notes and schedules), as amended or supplemented prior to the date hereof, fairly presents, or will fairly present,

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• • in all material respects, the results of operations, cash flows, retained earnings and changes in financial position, as the case may be, of the Company and its Subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to notes and normal year-end audit adjustments), in each case in accordance with GAAP consistently applied during the periods involved and the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto.

    (b)           K & F Subsidiary is not required to file periodic reports with the SEC pursuant to the Exchange Act, but voluntarily files periodic reports pursuant to a covenant in the Indenture.

    (c)           Other than K & F Subsidiary, none of the Subsidiaries is, or has at any time, since December 31, 2001, been, subject to (whether or not on a voluntary basis) the reporting requirements of Sections 13(a) and 15(d) of the Exchange Act.

    (d)           The Company and its Subsidiaries have implemented and maintain a system of internal accounting controls designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.  The Company (i) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the Chief Executive Officer and the Chief Financial Officer of the Company by others within those entities, and (ii) has delivered to the Company’s outside auditors and the audit committee of the Company’s Board of Directors the results of its most recent evaluation prior to the date of this Agreement, including (A) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as defined in Rule 13a 15(f) of the Exchange Act) that would be reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material (unless clearly inconsequential), that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.  A true, correct and complete copy of such report has been provided to Purchaser.  Since December 31, 2004, any material change in internal control over financial reporting or failure or inadequacy of disclosure controls required to be disclosed in any Company SEC Report has been so disclosed.

    (e)           As of the date of this Agreement, the Company has not received written or oral notice from the SEC staff indicating that the SEC staff has identified any outstanding or unresolved comments in comment letters received by the Company from the SEC staff with respect to the Company Reports.  To the Knowledge of the Company, as of the date of this Agreement none of the Company Reports is the subject of pending SEC review or outstanding SEC comment.

    (f)            The Company has delivered or made available to Purchaser true, correct and complete copies or transcriptions of each written notification or report received since December 31, 2004 of a "material weakness" or "significant deficiency" in the Company’s internal controls over financial reporting.  For purposes of this Agreement,

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• • the terms "material weakness" and "significant deficiency" shall have the meanings assigned to them in the Public Company Accounting Oversight Board’s Auditing Standard 2, as in effect on the date hereof.

    (g)           Since August 4, 2005, the Company has not received written or oral notice, from the New York Stock Exchange, that it is not in compliance with the applicable listing standards and corporate governance rules of the New York Stock Exchange.

    (h)           Neither the Company nor, to the Company’s Knowledge, any of the Company’s Subsidiaries has outstanding, or has arranged any outstanding, "extensions of credit" to directors or executive officers prohibited by Section 402 of SOX as applicable to the Company.

Section 3.7            Absence of Undisclosed Liabilities.   The Company does not have any Liabilities, except (i) Liabilities incurred in the ordinary course of business consistent with past practice since December 31, 2006, (ii) executory Liabilities required to be performed after the date hereof under any Contract described in Section 3.12 or arising under or contemplated to be incurred by reason of this Agreement, the Guaranty or the Stockholders’ Agreements or (iii) as would not have a Material Adverse Effect on the Company.

Section 3.8            Absence of Changes.

• • (a)           Since December 31, 2006, the Company and its Subsidiaries have conducted their respective businesses only in the ordinary course consistent with past practice in all material respects, except with respect to the transactions expressly contemplated hereby, and neither the Company nor any of its Subsidiaries has taken any action that, if taken after the date of this Agreement without the prior written consent of Purchaser, would constitute a breach of Section 5.2 .

    (b)           Since December 31, 2006, the Company has not suffered any Material Adverse Effect.

Section 3.9            Tax Matters.

• • (a)           Except as would not have a Material Adverse Effect, each of the Company and its Subsidiaries has timely filed all Tax Returns required to have been filed by it for all taxable periods ending on or prior to the Closing Date, either separately or as a combined, consolidated or unitary group.

    (b)           All Taxes of the Company and its Subsidiaries (whether payable by the Company or any of its Affiliates), whether asserted, unasserted, contingent or otherwise, for all taxable periods through the date of the most recent consolidated balance sheet contained in the Company Reports have been timely paid or have been adequately reserved for on the most recent balance sheet set forth in the Company Reports.  Except as may be noted therein, the most recent consolidated balance sheet contained in the Company Reports reflects reserves for all Taxes payable by the Company and each of its Subsidiaries (in addition to any reserve for deferred Taxes to reflect timing differences

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• • between book and Tax items) for all Taxable periods and portions thereof through the date of such balance sheet all in accordance with GAAP, consistently applied during the periods involved and the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto.  The Tax Returns filed were or will be true, complete and correct, in all material respects, when filed.  The Company has not requested any extensions of time within which to file Tax Returns that are pending as of the date hereof.

    (c)           No transaction has occurred or will occur prior to the Effective Time which required or will require a disclosure statement under Section 6662 of the Code (or any predecessor statute) or any similar provision of state, local or foreign law.

    (d)           Neither the Company nor any Subsidiary has received notice that the IRS or any other Tax Authority has asserted against the Company or any Subsidiary any deficiency or claim for a material amount of additional Taxes.

    (e)           The Company has made available in the data room to Purchaser or to Purchaser’s Representatives all Tax Returns, either separate, combined or consolidated, filed for the past three years.

    (f)            All Tax deficiencies asserted or assessed against the Company or any Subsidiary have been paid or finally settled or have been adequately reserved for on the most recent balance sheet set forth in the Company Reports.

    (g)           There is no pending action, audit or proceeding, or, to the Knowledge of the Company, threatened, action, audit, proceeding, or investigation with respect to (i) the assessment or collection of Taxes against the Company or any Subsidiary with respect to Taxes relating to the business or operations of the Company and its Subsidiaries or (ii) a claim for refund made by the Company or a Subsidiary with respect to Taxes previously paid relating to the business or operations of the Company and its Subsidiaries.  Schedule 3.9(g) contains a complete and accurate list of all completed Tax actions, examinations, audits, or proceedings or, to the Knowledge of the Company, investigations, with respect to taxable periods that are not closed as a result of the expiration of all statutes of limitation.  No material issues relating to Taxes were raised by any relevant Tax Authority in any such action, examination, audit, investigation or proceeding that can reasonably be expected to recur in a later Tax period.

    (h)           There is no pending, or, to the Knowledge of the Company, threatened, claim by any Tax Authority in any jurisdiction in which the Company currently does not pay Tax or file Tax Returns that the Company or a Subsidiary is required to pay Taxes or file Tax Returns.

    (i)            The Company and its Subsidiaries (i) have complied with all applicable legal requirements relating to information reporting and other applicable requirements with respect to payments made to third parties and the withholding of any payment of withheld Taxes (including, without limitation, withholding of Taxes pursuant to Sections 1441, 1442 and 1445 of the Code or similar provisions under any foreign Laws, and

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• • Federal Insurance Contribution Act and Federal Unemployment Tax Act) and timely paid over to the proper Tax Authorities all amounts required to be so withheld and paid over for all periods in the manner required by applicable Law, (ii) has timely withheld from employee wages and other payments and paid over to the proper Tax Authorities all amounts required to be so withheld and paid over for all periods pursuant to all applicable legal requirements, and (iii) has duly collected and remitted any sales, use, value-added and similar Taxes required to be collected and remitted except for any items described in (i), (ii) or (iii) that are not yet due to be paid or remitted in which case such amount has been accrued or reserved for, to the extent required by GAAP, on the most recent balance sheet contained in the Company Reports.

    (j)            Neither the Company nor any or its Subsidiaries has given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations in connection with Taxes relating to the business or operations of the Company and its Subsidiaries for which any of them may be liable.

    (k)           Neither the Company nor any of its Subsidiaries has taken any action not in accordance with past practice that would have the effect of deferring any material Tax liability of the Company or any of its Subsidiaries from any taxable period ending on or before the Closing Date to any taxable period ending after the Closing Date.

    (l)            No consent has been filed under Section 341(f) of the Code with respect to the Company or any of its Subsidiaries.

    (m)          There is no Encumbrance on the assets, income or operation of the Company or any of its Subsidiaries with respect to any Tax, except for Taxes not yet due and payable.

    (n)           Neither the Company nor any of its Subsidiaries is currently required to make any adjustments pursuant to Section 481(a) or Section 263A of the Code (or similar provisions of state, local or foreign law or regulations) nor, to the Knowledge of the Company, has the IRS (or other Taxing Authority) proposed, or is considering, any such change in accounting method.

    (o)           Neither the Company nor any of its Subsidiaries is a party to any agreement, contract, arrangement or plan that would result in the payment of any "excess parachute payment" within the meaning of Section 280G of the Code.

    (p)           Neither the Company nor any of its Subsidiaries is a party to any agreement, contract, arrangement or plan that is subject to the provisions of Section 162(m) of the Code.

    (q)           None of the assets of the Company nor any of its Subsidiaries is property that is required to be treated as owned by any other Person pursuant to the "safe harbor lease" provisions of former Section 168(f)(8) of the Internal Revenue Code of 1954 as amended and in effect immediately prior to the enactment of the Tax Reform Act of 1986

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• • and none of the assets of the Company or any of its Subsidiaries is "tax exempt use property" within the meaning of Section 168(h) of the Code.

    (r)            None of the assets of the Company or any of its Subsidiaries secures any debt the interest on which is tax exempt under Section 103 of the Code.

    (s)           The Company has never been an "S corporation", as that term is defined in Section 1361(a) of the Code, for federal or state income tax purposes.

    (t)            There is no Tax sharing agreement, Tax allocation agreement, Tax indemnity or assumption obligation or similar written or unwritten agreement, arrangement, understanding or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any Tax Authority) to which the Company is a party, subject, obligated or bound in any manner.

    (u)           Neither the Company nor any of its Subsidiaries is a United States real property holding corporation within the meaning of Code Section 897(c)(2).

    (v)           Neither the Company nor any of its Subsidiaries is a party to any joint venture, partnership or other agreement that is treated as a partnership for U.S. federal income tax purposes with any Person.

    (w)          Neither the Company nor any of its Subsidiaries has participated in any transactions described in Section 355 or Section 367 of the Code.

    (x)            Neither the Company nor any of its Subsidiaries will be required to include in a taxable period ending after the Closing Date taxable income attributable to income that economically accrued in a taxable period ending on or before the Closing Date as a result of the installment method of accounting, the completed contract method of accounting, the percentage of completion method of accounting or any other method of accounting.

Section 3.10         Real Property-Owned or Leased.

• • (a)           Schedule 3.10(a) contains a true, correct and complete list of all real property owned by the Company and each of its Subsidiaries and the full name of the title holder of such real property (the " Owned Real Property ").  Each of the Company and its Subsidiaries has good and marketable title to its Owned Real Property or a good and valid leasehold interest in each Leased Real Property (as defined below), in each case free and clear of all Encumbrances other than Permitted Encumbrances.  Schedule 3.10(a) contains a true, correct and complete list of all of the real property leased by the Company or any of its Subsidiaries pursuant to one or more leases (" Leased Real Property " and, together with the Owned Real Property, the " Real Property ").  The Real Property constitutes all real property currently leased, used or occupied by the Company.

    (b)           With respect to the Real Property: (i) to the Knowledge of the Company, no portion thereof is subject to any pending condemnation Proceeding or any Proceeding by any public or quasi-public authority and there is no threatened condemnation or

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• • Proceeding with respect thereto; (ii) the physical condition of the Real Property is sufficient in all material respects to permit the continued conduct of the Subject Business as currently conducted subject to the provision of normal, usual and customary maintenance and repair performed in the ordinary course with respect to similar properties of like age and construction; and (iii) there are no Contracts, written or oral, to which the Company or any of its Subsidiaries is a party, granting to any party or parties the right of use or occupancy of any portion of the parcels of the Real Property other than Permitted Encumbrances.

    (c)           With respect to the Leased Real Property, each of the Company and its Subsidiaries is the owner and holder of all the leasehold estates described and granted by each lease to which it is a party.  (i) To the Knowledge of the Company, each lease set forth on Schedule 3.10(a) (or required to be set forth on Schedule 3.10(a)) is in full force and effect; (ii) all rents and additional rents due to date on each such lease are not materially late; (iii) to the Knowledge of the Company, in each case, the lessee is in peaceable possession of the real property subject to such lease and is not in default thereunder and no waiver, indulgence or postponement of the lessee’s obligations thereunder has been granted by the lessor; and (iv) there exists no default or event, occurrence, condition or act, which, with the giving of notice, the lapse of time or the happening of any further event or condition, would become a default under such lease by the Company or such Subsidiary or, to the Knowledge of the Company, any other party thereto.  The Company and its Subsidiaries and, to the Company’s Knowledge, each of the other parties thereto in each case has performed in all respects all obligations required to be performed by it under each such lease, except where the failure to do so would not have a Material Adverse Effect on the Company.

Section 3.11         Intellectual Property.

• • (a)           Schedule 3.11(a) contains a complete and accurate list of all of the following that are owned by the Company and its Subsidiaries:  (i) issued patents and pending patent applications, (ii) registrations and applications for registration of any Marks, (iii) registered copyrights and applications therefor, and (iv) internet domain names (collectively, whether or not registration has issued with respect thereto, the " Company Intellectual Property ").  Schedule 3.11(a) also sets forth any material software that is incorporated into any material products marketed by Company that was authored by employees of Company or its Subsidiaries in the course and scope of their employment or commissioned by Company or its Subsidiaries from third parties.  All such third parties are subject to agreements providing that Company or such Subsidiary owns the Intellectual Property Rights in such software (collectively, " Company Software ").

    (b)           Except as specified on Schedule 3.11(b) , the Company and its Subsidiaries own the Company Intellectual Property and the Intellectual Property Rights in the Company Software (the " Software Rights ") free and clear of all Encumbrances (other than Permitted Encumbrances, and other than any licenses or similar rights granted by the Company or any Subsidiary in the ordinary course of business with respect to the Company Intellectual Property  or the Software Rights or under any licenses that are not

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• • material or that are listed on Schedule 3.11(d) ), except where it would not have a Material Adverse Effect on the Company.  To the Knowledge of the Company, (i) the conduct of the business of the Company and its Subsidiaries is not currently operated in a manner that infringes, misuses or misappropriates any Intellectual Property Rights of any third parties in any material respect and (ii) Company’s or its Subsidiaries’ manufacture and sale of material new products that the Company currently expects to commercially release within one hundred eighty (180) days after the date hereof (if any) will not infringe, misuse or misappropriate any Intellectual Property Right of any third parties in any material respect.

    (c)           Schedule 3.11(c) identifies each material agreement, other than "off-the-shelf" and "shrink wrap" licenses, pursuant to which the Company and its Subsidiaries obtained a material license to Intellectual Property Rights owned by any third party, used or contemplated to be used within one hundred eighty (180) days after the date hereof in the operation of the business of the Company and its Subsidiaries as it is currently conducted or as currently expected by the Company to be conducted within such one hundred eighty (180) day period.  The Company has delivered to Purchaser correct and complete copies of all such agreements.  To the Company’s Knowledge, all such agreements are in full force and effect and, except where it would not have a Material Adverse Effect on the Company, neither the Company and its Subsidiaries nor, to the Company’s Knowledge, the other party or parties thereto is in default of its obligations thereunder.

    (d)           Schedule 3.11(d) sets forth all material licenses from the Company or any Subsidiary thereof to any third party of Company Intellectual Property or Software Rights.  To the Company’s Knowledge, all licenses referred to in Schedule 3.11(d) are in full force and effect and neither the Company and its Subsidiaries nor, to the Company’s Knowledge, the other party or parties thereto is in default in any material respect of its obligations thereunder, except where it would not have a Material Adverse Effect on the Company.

    (e)           Except as set forth on Schedule 3.11(e) or where it would not have a Material Adverse Effect on the Company (i) there are no claims or actions against the Company or any of its Subsidiaries that are presently pending, and to the Company’s Knowledge, no claims or actions have been threatened, that contest the validity, right to use, ownership or enforceability of any Company Intellectual Property; and (ii) to the Company’s Knowledge, no third party is infringing or misappropriating any Company Intellectual Property.

    (f)            To the Company’s Knowledge, (i) all of the registrations of the Company Intellectual Property that is registered are valid, enforceable and subsisting in good standing and (ii) except as provided in Schedule 3.11(f) , all such registrations and all applications for registration are recorded or filed in the name of the Company or one of its Subsidiaries.

    (g)           To the Company’s Knowledge, no Open Source Software is incorporated into any Company Software.

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• • (h)           Except where it would not have a Material Adverse Effect on the Company: (i) the Company and its Subsidiaries have taken reasonable precautions to maintain the confidentiality of its trade secrets, including methods, techniques, processes and know how; and (ii) the Company has implemented and substantially follows the programs (if any) relating to invention disclosures and trademark usage that are specified on Schedule 3.11(h) .

Section 3.12         Agreements, No Defaults, Etc.

• • (a)           The Company has made available (x) to PricewaterhouseCoopers LLP (subject to and in accordance with a Nondisclosure Agreement dated February 24, 2007) true, correct and complete copies of certain commercially sensitive data requested by Purchaser and (y) (except with respect to such commercially sensitive data) true, correct and complete copies of, all contracts, agreements, commitments, arrangements, leases (including with respect to personal property) and other instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets is bound (in the case of this clause (y), such availability has been either (A) in the Company Reports filed prior to the date hereof, (B) in the electronic data room set up by the Company, or (C) in hard copy, provided that a schedule of such contracts, agreements, commitments, arrangements, leases and other instruments provided in hard copy has been included in the electronic data room set up by the Company), in each case, that:

    (i)       would be required to be filed by the Company as a "material contract" pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act or disclosed by the Company or K & F Subsidiary on a Current Report on Form 8-K;

    (ii)      contain covenants that limit the right of the Company or any of its Subsidiaries (or which, following the consummation of the transactions expressly contemplated hereby, could restrict the right of the Surviving Corporation or any of its Subsidiaries) to compete in any business or with any person or in any geographic area, or to purchase, sell, supply or distribute any service or product, except  any such contract, agreement, commitment, arrangement, lease (including with respect to personal property) and other instrument that may be cancelled without any material penalty or liability to the Company or any of its Subsidiaries upon notice of sixty (60) days or less;

    (iii)     relates to the formation, creation, operation, management or control of any partnership, limited liability company or joint venture that is material to the business of the Company and its Subsidiaries, taken as a whole;

    (iv)     represents or relates to any exchange traded, over-the-counter or other swap, cap, floor, collar, futures contract, forward contract, option or any other derivative financial instrument or contract, based on any commodity, security, instrument, asset, rate or index of any kind or nature whatsoever, whether tangible or intangible, including commodities, emissions allowances, renewable energy credits, currencies, interest rates, foreign currency and indices;

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• • (v)      relates to (A) indebtedness for borrowed money or the deferred purchase price of property and having an outstanding principal amount under any such contract in excess of $5,000,000 or (B) conditional sale arrangements or the sale, securitization or servicing of loans or loan portfolios, in each case in connection with which the aggregate actual or contingent obligations of the Company and its Subsidiaries under such contract are greater than $5,000,000;

    (vi)     were entered into after December 31, 2006 or are not yet consummated, and involve the acquisition or disposition, directly or indirectly (by merger or otherwise), of assets or capital stock or other equity interests of another Person for aggregate consideration under such contract in excess of $1,000,000 (other than acquisitions or dispositions of assets in the ordinary course of business, including acquisitions and dispositions of inventory);

    (vii)    by its terms (A) is reasonably expected to lead to the aggregate payment or receipt by the Company and its Subsidiaries under such contract of more than $10,000,000 over the remaining term of such contract, (B) contains scheduled price reductions in excess of 5% per annum or an aggregate decrease in excess of $1,000,000 in the Contract’s anticipated net profit over the term of such contract and has a remaining term of more than five years, (C) individually or as part of a series of related contracts requires the Company or any of its Subsidiaries to pay program participation costs exceeding $5,000,000, whether as free or discounted original equipment, cash contributions or otherwise over the remaining term of the contract, or (D) will give rise to any right of termination, acceleration, cancellation or amendment of such Contract as a result of the transactions expressly contemplated by this Agreement and involves future receipts exceeding $5,000,000;

    (viii)   with respect to any acquisition pursuant to which the Company or any of its Subsidiaries has continuing indemnification, "earn-out" or other contingent payment obligations, in each case that could reasonably be expected to result in payments by the Company and its Subsidiaries in excess of $1,000,000;

    (ix)     obligates the Company or any of its Subsidiaries to (A) provide a guarantee in excess of $2,500,000 or (B) make any capital commitment or expenditure (other than program participation costs, which are subject only to clause (vii) above, and including pursuant to any development project or joint venture) in excess of $2,500,000; and

    (x)      provide for any confidentiality or standstill arrangements in connection with any Acquisition Proposal.

Each contract of the type described in clauses (i) through (x) is referred to herein as a "Material Contract."

• • (b)           Except where it would not have a Material Adverse Effect on the Company: (i) each Material Contract is valid and binding on the Company and any of its Subsidiaries that is a party thereto and, to the Knowledge of the Company, each other

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• • party thereto and is in full force and effect; (ii) the Company and its Subsidiaries have performed and complied with all obligations required to be performed or complied with by them under each Material Contract; and (iii) there is no default under any Material Contract by the Company or any of its Subsidiaries or, to the Knowledge of the Company, by any other party, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a default thereunder by the Company or any of its Subsidiaries, or to the Knowledge of the Company, by any other party.

Section 3.13         Litigation, Etc.       Except as disclosed on Schedule 3.13(a) , there are no (i) material Proceedings pending or, to the Knowledge of the Company, threatened against or investigations into the Company or any of its Subsidiaries, whether at law or in equity, whether civil or criminal in nature or before or by any Governmental Entity or arbitrator, (ii) material Orders of any Governmental Entity or arbitrator with respect to, involving or against the Company or any of its Subsidiaries that remain in effect or (iii) to the Knowledge of the Company, outstanding material complaints filed against the Company or any of its Subsidiaries with any trade or industry organization of which the Company or any of its Subsidiaries is a member.

• • (b)           Schedule 3.13(b) contains a true and complete list of all claimants who have brought (i) Non-Employee Asbestos Proceedings, (ii) Employee Asbestos Proceedings and (iii) Nasco Asbestos Proceedings filed against the Company or any of its Subsidiaries.

    (c)           The Company or a Subsidiary of the Company has tendered all Non-Employee Asbestos Proceedings disclosed on Schedule 3.13(b) for defense and indemnity to The Goodyear Tire & Rubber Company (" Goodyear ").  Goodyear has paid all defense and indemnity costs, and the Company has not received written notice from Goodyear stating that it would not provide such defense and indemnity for Non-Employee Asbestos Proceedings;

    (d)           To the Knowledge of the Company, no Nasco Asbestos Proceeding is pending, as of the date hereof, alleging injury to any employee or former employee of Nasco Aviation Corporation, any of its Subsidiaries or any of their respective predecessors.

Section 3.14         Compliance with Laws.       Except as would not have a Material Adverse Effect on the Company, (a) each of the Company and each Subsidiary of the Company (i) has complied in all respects with, and is in compliance in all respects with, all Laws, Orders and Permits applicable to the Company or such Subsidiary and the Subject Business and (ii) has all Permits used or reasonably necessary in the conduct of the Subject Business, (b) all of such Permits are in full force and effect, (c) no violations with respect to any such Permit have occurred, and (d) no Proceeding is pending or, to the Knowledge of the Company, threatened to revoke or limit any such Permit.  To the Knowledge of the Company, no investigation or review by any Governmental Entity with respect to the Company or any Subsidiary is pending or threatened, nor has any Governmental Entity notified the Company or any Subsidiary of its intention to conduct the same.  Schedule 3.14 contains a true, correct and complete list of the material Permits of the Company and its Subsidiaries.

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Section 3.15         Insurance.

• • (a)           Schedule 3.15 contains a true and complete list of all material policies of liability, theft, fidelity, business interruption, life, fire, product liability, worker’s compensation, employees, health and other material forms of insurance held by the Company and its Subsidiaries currently in effect (specifying the insurer, amount of coverage and type of insurance).  The Company and its Subsidiaries have maintained such or similar types of insurance coverage at all times during the last three years.  The insurance policies in effect as of the date hereof with respect to the Company and its Subsidiaries are customary, in all material respects, in terms and coverage amounts, for Persons conducting similar businesses and operating similar properties in the localities where the Subject Business is currently conducted and the properties of the Company or any of its Subsidiaries are located.

    (b)           With respect to each policy of insurance listed on Schedule 3.15 , except as would not have a Material Adverse Effect on the Company:  (i) all premiums invoiced and due through the date of this Agreement with respect thereto have been paid, and neither the Company nor any of its Subsidiaries is in default with respect to its obligations under such policy; (ii) there are no outstanding claims currently pending under such policy as of the date of this Agreement that would be reasonably expected to cause an increase in the insurance rates of the Company and its Subsidiaries; and (iii)  neither the Company nor any of its Subsidiaries has received any notice that such policy has been or shall be canceled or terminated or will not be renewed on substantially the same terms as are now in effect or the premium on such policy shall be increased on the renewal thereof.

Section 3.16         Labor Relations; Employees.

• • (a)           Neither the Company nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement or any labor union contract, nor, to the Knowledge of the Company, are there any employees of the Company or any of its Subsidiaries represented by a works’ council or a labor organization in relation to their employment by the Company or any of its Subsidiaries, nor, to the Company’s Knowledge, are there any activities or proceedings of any labor union to organize any employees of the Company or any of its Subsidiaries or compel the Company or any of its Subsidiaries to bargain with any labor union or labor organization, in each case that is or could reasonably be material to the Company.  There is no pending or, to the Knowledge of the Company, threatened (i) labor strike or (ii) material dispute, walkout, work stoppage, slowdown, demonstration, leafleting, picketing, boycott, work-to-rule campaign, sit-in, sick-out, union election, governmental investigation or lockout with respect to employees of the Company or any of its Subsidiaries, and no such (i) labor strike or (ii) material dispute, walkout, slowdown, demonstration, leafleting, picketing, boycott, work-to-rule campaign, sit-in, sick-out, union election, governmental investigation, or lockout has occurred since December 31, 2004.  No material grievance or arbitration demand or proceeding, or unfair labor practice charge or proceeding, whether or not filed pursuant to a collective bargaining agreement, has been filed, is pending or has been threatened

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• • against the Company or its Subsidiaries that could reasonably be expected to result in any material liability to the Company or any of its Subsidiaries.

    (b)           Neither the Company nor any of its Subsidiaries is a party to, or otherwise bound by, any material consent decree with, or citation by, any Governmental Entity relating to its current or former employees, officers or directors or employment practices.

    (c)           Neither the Company nor any of its Subsidiaries has incurred any material liability or obligation which remains unsatisfied under the Worker Adjustment and Retraining Notification Act or any state or local Laws regarding the termination or layoff of employees or notice thereof.

    (d)           Schedule 3.16(d) contains a true and complete list of (i) any material written claim by any past or present employee of the Company or any of its Subsidiaries or any labor organization on behalf of any employee that such employee or union member was subject to any wrongful discharge or any employment discrimination by the Company or any of its Subsidiaries or its management; or (ii) any written notice of any material Proceeding by any Government Entity of any alleged wrongful employment or labor practice by the Company or any of its Subsidiaries, in each case under clause (i) or (ii), since January 1, 2004.

Section 3.17         ERISA Compliance

• • (a)           Each benefit and compensation plan, contract, policy or arrangement covering current or former employees of the Company and its Subsidiaries (for purposes of this Section 3.17 , the " Employees ") and current or former directors of the Company and its Subsidiaries, including "employee benefit plans" within the meaning of Section 3(3) of ERISA, and incentive and bonus, deferred compensation, stock purchase, restricted stock, stock option, stock appreciation rights or stock based plan (the " Company Compensation and Benefit Plans "), other than Company Compensation and Benefit Plans maintained outside of the United States primarily for the benefit of Employees working outside of the United States (such plans hereinafter being referred to as " Company Non U.S. Compensation and Benefit Plans "), are listed on Schedule 3.17(a) .  True and complete copies of all Company Compensation and Benefit Plans, including any trust agreement or insurance contract forming a part of any Company Compensation and Benefit Plans, all amendments thereto and the financial statements and summary plan descriptions related thereto have been made available to Purchaser.

    (b)           All Company Compensation and Benefit Plans other than Company Non-U.S. Compensation and Benefit Plans (collectively, " Company U.S. Compensation and Benefit Plans ") are in substantial compliance with their terms, ERISA, the Code, and other applicable Laws.  Each Company U.S. Compensation and Benefit Plan that is subject to ERISA (the " ERISA Plans ") that is an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA (a " Company Pension Plan ") and that is intended to be "qualified" under Section 401(a) of the Code has received a favorable determination letter from the IRS and the Company has no Knowledge of anything that is likely to result in the revocation of any such favorable determination letter.  As of the date hereof,

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• • there is no pending or, to the knowledge of the Company, material threatened suit, claim or other litigation relating to the Company U.S. Compensation and Benefit Plans (other than routine claims for benefits).  Neither the Company nor any of its ERISA Affiliates has engaged in a transaction with respect to any ERISA Plan that, assuming the taxable period of such transaction expired as of the date hereof, would reasonably be expected to subject the Company or any of its Subsidiaries to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA.

    (c)           Other than K & F Subsidiary Retirement Plan for Salaried Employees and the ABSC/EFC Retirement Plan for Bargaining Unit Employees, no Company Pension Plan is, or has in the five years preceding this year been, subject to Title IV of ERISA or Section 412 of the Code.  Neither the Company nor any ERISA Affiliate thereof has contributed or been obligated to contribute to a "multiemployer plan" within the meaning of Section 3(37) of ERISA (a " Multiemployer Plan ").

    (d)           All material contributions required to be made under the terms of any Company Compensation and Benefit Plan as of the date hereof have been made or have been reflected on the most recent consolidated balance sheet filed or incorporated by reference in the Company Reports filed or furnished prior to the date hereof.

    (e)           Except as set forth on Schedule 3.17(e) , neither the Company nor any entity required to be aggregated with the Company under Section 414(b), (c), (m) or (o) of the Code (an " ERISA Affiliate ") has any obligations to provide health or other non-pension benefits to retirees or other former employees under any ERISA Plan, except as required by Section 4980 of the Code or Part 6 of Title I of ERISA.

    (f)            All Company Non-U.S. Compensation and Benefit Plans comply in all material respects with applicable local Law (including any local regulatory or tax approval requirements).  All Company Non-U.S. Compensation and Benefit Plans are listed on Schedule 3.17(f) .  True and complete copies of all Company Non-U.S. Compensation and Benefit Plans listed on Schedule 3.17(f) , and all amendments thereto, have been made available to Purchaser.  As of the date hereof, there is no pending or, to the knowledge of the Company, threatened material litigation relating to the Company Non-U.S. Compensation and Benefit Plans.  None of the Company Non-U.S. Compensation and Benefit Plans is a defined benefit plan within the meaning of any applicable Law.  Each Company Non-U.S. Compensation and Benefit Plan required to be registered under the Laws of any jurisdiction has been registered and has been maintained in good standing with applicable regulatory authorities and has been approved by any applicable Taxing Authority to the extent such Approval is required.

    (g)           The execution of this Agreement and the consummation of the transactions expressly contemplated hereby do not constitute a triggering event under any Employee Plan, policy, arrangement, statement, commitment or agreement, whether or not legally enforceable, which (either alone or upon the occurrence of any additional or subsequent event) will or may result in any payment (whether of severance pay or otherwise), constituting a "parachute payment" (as such term is defined in Section 280G of the Code).

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• • (h)           Except as set forth on Schedule 3.17(h) , no employee or former employee or director of the Company or any Subsidiary of the Company will be entitled to any additional benefits or any acceleration of the time of payment or vesting of any benefit under any company U.S. Compensation and Benefit Plan as a result of the transactions expressly contemplated by this Agreement.

    (i)            No filing, application or other matter is pending with the IRS, the Pension Benefit Guaranty Corporation, the Department of Labor or any other Governmental Entity.

    (j)            All of the Company U.S. Compensation and Benefit Plans are in material compliance with the applicable terms of ERISA, the Code and any other applicable Laws.

    (k)           Each Company U.S. Compensation and Benefit Plan has been operated in all material respects in good faith compliance with the applicable requirements of Section 409A of the Code since January 1, 2005.

    (l)            As of January 1, 2006, the most recently completed actuarial valuation date, the "current liability" of the K & F Subsidiary Retirement Plan for Salaried Employees and the ABSC/EFC Retirement Plan for Bargaining Unit Employees did not exceed the fair market value of the assets of such plans (as defined in Section 302(a)(7) of ERISA) by more than $40,000,000 in the aggregate, and, to the Company’s Knowledge, no event has occurred since the date of such last valuation which would materially and adversely affect such funded status, other than changes to mortality tables to be used as defined in Treasury Regulation 1.412(1)(7)-1.

Section 3.18         Environmental Matters.

• • (a)           Except as set forth on Schedule 3.18(a) :

    (i)       Since January 1, 1997, the Company and its Subsidiaries have complied in all material respects, and, as of the date of this Agreement, are in compliance with all Environmental Laws, including filing all notifications and obtaining, maintaining and timely applying for renewal or amendment for all Permits required thereunder, except for any noncompliance that would not reasonably be expected to give rise to any Liabilities for the Company or its Subsidiaries under Environmental Laws in excess of $2,000,000 individually or $10,000,000 in the aggregate;

    (ii)      Neither the Company nor any of its Subsidiaries (A) has received as of the date hereof any written notice regarding any actual or alleged violation of any Environmental Laws, or any Liabilities or potential Liabilities, including any investigatory, remedial or corrective obligations, relating to the Subject Business or the Real Property or any real property formerly owned, leased or operated by the Company or any of its Subsidiaries, or at any other location; or (B) has entered into or assumed by Contract or operation of Law or otherwise any obligation, liability, order, settlement, judgment, injunction or decree relating to or arising under Environmental Law, except where the foregoing would not reasonably be expected to have any Liabilities for the

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• • Company or its Subsidiaries under Environmental Laws in excess of $2,000,000 individually or $10,000,000 in the aggregate.

    (iii)     There are not now nor, to the Knowledge of the Company, have there been any hazardous waste treatment, storage or disposal facilities that require a permit under the Environmental Laws, and  there are not now nor, to the Knowledge of the Company, have there been any underground storage tanks, landfills, waste piles or surface impoundments on or at the Real Property that require investigation or other response action under Environmental Law, except where any of the foregoing would not reasonably be expected to give rise to any Liabilities for the Company or its Subsidiaries under Environmental Laws in excess of $2,000,000 individually or $10,000,000 in the aggregate;;

    (iv)     Neither the Company nor any of its Subsidiaries has treated, stored, disposed of, arranged for the disposal of, transported, handled or released any hazardous substance on the Real Property or at any other location in a manner that has given or could reasonably be expected to give rise to Liabilities under any Environmental Laws (including any Liability for response costs, corrective action costs, personal injury, property, natural resources damage or attorney fees, or any investigative, corrective or remedial obligations pursuant to any Environmental Laws) that would reasonably be expected to give rise to Liabilities for the Company or its Subsidiaries under Environmental Laws in excess of $2,000,000 individually or $10,000,000 in the aggregate; and

    (v)      The Company and its Subsidiaries have been and are currently in material compliance with all applicable requirements of the State of California’s Proposition 65 (California Health & Safety Code sec. 125249.5, et seq.).

    (b)           The Company and its Subsidiaries have provided Purchaser with, or given Purchaser access to, copies of all material environmental assessments, reports and studies within the possession of the Company dated within 10 years of the date hereof with respect to past or present environmental conditions at any of the Real Properties or other real property formerly owned, leased or operated by the Company and its Subsidiaries.

    (c)           There are no facts, circumstances or conditions relating to the past or present business or operations of the Company or any Subsidiary, or to any past or present property owned, leased, licensed or occupied by the Company or any of its Subsidiaries or any of its predecessors that would give rise to Liability under Environmental Laws that would have, individually or in the aggregate, a Material Adverse Effect on the Company.

    (d)           To the Knowledge of the Company, the Indemnity Agreements and the Environmental Insurance Policy are in full force and effect as of the date hereof and are valid and enforceable by the Company or a Subsidiary of the Company against the other parties thereto.

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• • Section 3.19           Brokers.       Other than Goldman, Sachs & Co. (the " Company Financial Advisor "), whose fees and expenses will be paid at or prior to Closing, neither the Company nor any of its Subsidiaries has (a) employed or engaged any broker or finder or (b) incurred any Liability for any brokerage fees, commissions or finders’ fees or expenses, payable by the Company or any of its Subsidiaries in connection with the transactions expressly contemplated hereby which will not be paid or satisfied prior to the Closing.  A true, correct and complete copy of the Company Financial Advisor’s Contract has been provided to Purchaser.  Any fees under the Amended and Restated Management Services Agreement dated as of August 12, 2005 by and among the Company, K & F Subsidiary and Aurora Management Partners LLC that may arise or result from this Agreement, the Merger or the transactions contemplated in this Agreement have been waived.

Section 3.20         Related Transactions.       Except as set forth on Schedule 3.20 , there are no transactions, or series of related transactions, agreements, arrangements or understandings, between the Company or any of its Subsidiaries, on the one hand, and any director or officer of the Company or any of its Subsidiaries or any of the Affiliates of the foregoing, on the other hand, that would be required to be disclosed under Item 404 promulgated under the Securities Act that has not been disclosed.

Section 3.21         Government Contracts.

• • (a)           To the Knowledge of the Company, with respect to each executory Government Contract or outstanding Bid to which the Company or any of its Subsidiaries is a party:  (i) the Company and each of its Subsidiaries has complied in all material respects with all terms and conditions of such Government Contract or Bid; (ii) the Company and each of its Subsidiaries has complied in all material respects with all requirements of statute, rule, regulation, order or agreement with the U.S. Government pertaining to such Government Contract or Bid; (iii) all representations and certifications executed, acknowledged or set forth in or pertaining to such Government Contract or Bid were current, accurate and complete as of their effective date, and the Company and each of its Subsidiaries has complied in all material respects with all such representations and certifications; (iv) neither the U.S. Government, nor any prime contractor, subcontractor or other Person, has notified the Company or any of its Subsidiaries, in writing, that the Company or any of its Subsidiaries has breached or violated any statute, rule, regulation, certification, representation, clause, provision or requirement; and (v) no termination for default has been issued, and no cure notice or show cause notice has been issued and not resolved or cured.  For purposes of this Section 3.21 , "executory Government Contract" means a Government Contract that has not been closed by the U.S. Government, prime contractor or subcontractor, as appropriate.

    (b)           To the Knowledge of the Company:  (i) neither the Company nor any of its Subsidiaries nor any of the Company’s or its Subsidiaries’ directors, officers or employees is (or for the last three years has been) under administrative, civil or criminal investigation, indictment or information, or audit (other than routine contract audits) or internal investigation with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract or Bid of the Company or any of its Subsidiaries; or (ii) neither the Company nor any of its Subsidiaries nor any of the

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• • Company’s or its Subsidiaries’ directors, officers or employees has made a Voluntary Disclosure pursuant to the Department of Defense Fraud Voluntary Disclosure Program with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract or Bid of the Company or any of its Subsidiaries that has led or could reasonably be expected to lead, either before or after the Closing Date, to any of the consequences set forth in subsection (i) above or any other material damages, assessment of penalties, recoupment of payment or disallowance of cost.

    (c)           Neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any of their respective directors, officers or employees is (or at any time during the last five years has been) suspended or debarred from doing business with the U.S. Government or declared nonresponsible or ineligible for U.S. Government contracting.  To the Knowledge of the Company, there are no matters pending that are believed reasonably likely to lead to the institution of suspension or debarment proceedings against the Company or any of its Subsidiaries.  Neither the Company nor any Subsidiary has, within the past five years, been terminated for default under any Government Contract.

Section 3.22         Product Warranty and Liability.       To the Company’s Knowledge, the products designed, manufactured, sold or leased, and the services performed, by the Company and its Subsidiaries have been in conformity in all material respects with all applicable contractual commitments and all express and implied warranties, and the Company and its Subsidiaries have no material liability, and there is no basis for any present or future action, suit or other proceeding giving rise to any material liability not covered by insurance, (a) for replacement or repair of any such product or other damages in connection therewith, other than product warranty expenses of a type and amount consistent with the past custom and practice of the Company and its Subsidiaries, or (b) arising out of any injury to persons or property as a result of any such product or any services performed by the Company or any of its Subsidiaries.  To the Company’s Knowledge, since December 31, 2004, neither the Company nor any Subsidiary has received any written or oral notice that an action, suit or proceeding has been, or in the future may be, made alleging that products or services of the Company or any Subsidiary are or were defective in any material respect.

Section 3.23         International Trade and Export Controls.

(a)           (i) The Company is in material compliance with all Laws concerning the exportation of any products, technology, technical data and services (" Export Control Laws "), including those administered by, without limitation, the United States Department of Commerce, the United States Department of State, and the United States Department of the Treasury; (ii) the Company is in material compliance with United States and international economic and trade sanctions, including those administered by the Office of Foreign Assets Control (" OFAC ") within the United States Department of Treasury; and (iii) the Company is in material compliance with the antiboycott regulations administered by the United States Department of Commerce, the Foreign Corrupt Practices Act, and all laws and regulations administered by the Bureau of Customs and Border Protection in the United States Department of Homeland Security.

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• • (b)           To the Knowledge of the Company, no director, officer or employee of the Company or any of its Subsidiaries is identified on any of the following documents:  (i) the OFAC list of "Specially Designated Nationals and Blocked Persons" (" SDNs "); (ii) the Bureau of Industry and Security of the United States Department of Commerce "Denied Persons List," "Entity List" or "Unverified List"; (iii) the Office of Defense Trade Controls of the United States Department of State "List of Debarred Parties"; (iv) the Financial Sanctions Unit of the Bank of England "Consolidated List"; (v) the Solicitor General of Canada’s "Anti-Terrorism Act Listed Entities"; (vi) the Australian Department of Foreign Affairs and Trade "Charter of the United Nationals (Anti-terrorism - Persons and Entities) List"; (vii) the United Nations Security Council Counter-Terrorism Committee "Consolidated List"; or (viii) European Union Commission Regulation No. 1996/2001 of October 11, 2001.  To the Knowledge of the Company, neither the Company nor any of its Subsidiaries is involved in business arrangements or otherwise engages in transactions with or involving countries subject to economic or trade sanctions imposed by the United States Government, or with or involving SDNs, in violation of the regulations maintained by OFAC.

Section 3.24         Questionable Payments .    To the Knowledge of the Company, neither the Company nor any of its Subsidiaries nor any of their respective directors, executives, representatives, agents or employees for or on behalf of the Company or any Subsidiary (a) has made, authorized or offered or is making any illegal contributions, gifts, entertainment or payments of other expenses relating to political activity, (b) has made, authorized or offered or is making any direct or indirect unlawful payments to any foreign or domestic government officials or employees, (c) has violated or is violating any provision of the Foreign Corrupt Practices Act of 1977 or any other similar Law of any non-U.S. jurisdiction, (d) has established or maintained, or is maintaining, any unlawful fund of corporate monies or other properties or (e) has made any bribe, unlawful rebate, payoff, influence payment, kickback or other unlawful payment of any nature.

Section 3.25         Proxy Statement; Other Filings .       The letter to stockholders, notice of meeting, proxy statement and form of proxy that will be provided in accordance with this Agreement to stockholders of the Company in connection with the Merger (including any amendments or supplements) and any schedules required to be filed with the SEC in connection therewith (collectively, the " Proxy Statement "), at the time the Proxy Statement is first mailed and at the time of the Special Meeting, and any Other Filings filed or furnished by the Company with the SEC in connection with the Merger, at the time of its filing with the SEC, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by the Company with respect to information supplied by or on behalf of Parent, Purchaser, Merger Sub or any Affiliate of Parent, Purchaser or Merger Sub expressly for inclusion therein.  The Proxy Statement and the Other Filings filed or furnished by the Company with the SEC will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations of the SEC promulgated thereunder.

Section 3.26         Opinion .    Prior to the execution of this Agreement, the Company Financial Advisor has delivered to the Board of Directors of the Company its opinion that, as of the date

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thereof and based upon and subject to the matters set forth therein, the Per Share Consideration was fair, from a financial point of view, to the holders of Common Stock.  The Company will promptly after receipt deliver to Purchaser a true, correct and complete copy of the written opinion for information purposes.

Section 3.27         Required Vote of Company Stockholders .     The only vote of the holders of outstanding securities of the Company required by its Organizational Documents, by Law or otherwise to complete the Merger is the affirmative vote of the holders of not less than a majority of the outstanding Shares.  The vote required by the previous sentence is referred to as the " Requisite Stockholder Vote ."

Section 3.28.        State Takeover Statutes; Certificate of Incorporation .     The Board of Directors of the Company has taken all actions necessary so that the restrictions contained in Section 203 of the DGCL shall be inapplicable to the execution, delivery or performance of this Agreement and the Stockholders’ Agreements and the consummation of the Merger and the other transactions expressly contemplated by this Agreement.  To the Knowledge of the Company, no other Takeover Law is applicable to the execution, delivery or performance of this Agreement or the Stockholders’ Agreements or the consummation of the Merger or the other transactions expressly contemplated by this Agreement.

Section 3.29         Parent Shareholders Circular, etc .    The information provided or to be provided, or confirmed or to be confirmed, by the Company or any Company Subsidiary expressly for inclusion in the Parent Shareholders Circular, the Financing Agreements or any other documents published by Parent in connection with the Financing (all of such information, as of the date hereof, being identified on Schedule 3.29 ) will not, in the case of the Parent Shareholders Circular, at the time the Parent Shareholders Circular is first mailed or posted or at the time of the EGM or, in the case of any such other document, at the time it is first published, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading.

Section 3.30         No Other Representations or Warranties .

• • (a)           Except for the representations and warranties contained in this Agreement or the Stockholders’ Agreements, each of Purchaser and Merger Sub acknowledges that neither the Company nor any other Person on behalf of the Company has made or is making any other express or implied representation or warranty with respect to the Company, any of its Subsidiaries or their respective businesses, or with respect to any other information provided to Parent, Purchaser or Merger Sub or any of their Representatives.  Except with respect to information provided or confirmed by the Company or any Company Subsidiary expressly for inclusion in the Parent Shareholders Circular in accordance with Section 3.29, neither the Company nor any other Person will have or be subject to any liability or indemnification obligation to Parent, Purchaser or Merger Sub or, insofar as the parties are concerned, any other Person resulting from the distribution to Parent, Purchaser or Merger Sub of, or use by Parent, Purchaser or Merger Sub of, any such information, including without limitation any information, documents, projections, forecasts or other material made available to Parent, Purchaser or Merger

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• • Sub or any of their Representatives in a "data room" or "virtual data room", confidential information memoranda or management presentations in expectation of the transactions contemplated by this Agreement or otherwise, unless and then only to the extent that any such information is expressly included in a representation or warranty contained in this Agreement, in the Company Disclosure Schedules or in a certificate delivered by the Company in connection with the Closing or in the Stockholders’ Agreements.

    (b)           In connection with the investigation by Purchaser and Merger Sub of the Company and its Subsidiaries, Parent, Purchaser and Merger Sub and their respective Representatives have received or may receive from the Company and/or its Subsidiaries or their respective Representatives certain projections, forward looking statements and other forecasts and certain business plan information.  Each of Purchaser and Merger Sub acknowledges that neither the Company nor any other Person is making any representation or warranty with respect to such estimates, projections, forecasts or plans.  Purchaser and Merger Sub acknowledge that there are uncertainties inherent in attempting to make such estimates, projections and other forecasts and plans, that each of Parent, Purchaser and Merger Sub is familiar with such uncertainties, that each of Parent, Purchaser and Merger Sub is taking full responsibility for making its own evaluation of the adequacy and accuracy of all estimates, projections and other forecasts and plans so furnished to it (including the reasonableness of the assumptions underlying such estimates, projections, forecasts or plans), that none of Parent, Purchaser or Merger Sub shall have any claim against any Person with respect thereto and that the Company has made available to Parent, Purchaser or Merger Sub or their respective Representatives the opportunity to ask questions and receive answers concerning the Company and its Subsidiaries and their respective businesses and to obtain additional information as may be necessary to verify the accuracy of information furnished to Parent, Purchaser and Merger Sub and their respective Representatives.  Nothing in this Section 3.30 shall be in derogation of or shall be deemed to modify the specific representations and warranties made by the Company in this Agreement.

ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND MERGER SUB

Except as set forth in the Disclosure Schedules delivered by Purchaser and Merger Sub to the Company concurrently with the execution of this Agreement (the " Purchaser Disclosure Schedules ") that specifically relate to, or are reasonably apparent on their face to relate to, such corresponding Section of ARTICLE IV below, Purchaser and Merger Sub, jointly and severally, hereby represent and warrant to the Company as of the date hereof as follows:

Section 4.1            Organization and Good Standing .  Each of Purchaser and Merger Sub is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation.  The Company has been furnished with true, correct and complete copies of each Organizational Document of Purchaser and Merger Sub.

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Section 4.2            Authorization; Execution; Enforceability .

• • (a)           Each of Purchaser and Merger Sub has all requisite power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions expressly contemplated hereby, subject to the approval, prior to the consummation of the Merger and the Rights Issue, of the resolutions set forth in the Parent Shareholders Circular by the holders of Parent’s ordinary shares, present in person or by proxy who are entitled to vote at the EGM to approve the Merger, to increase the authorized share capital of Parent and to authorize the Board of Directors of Parent to allot share capital of Parent (the " Parent Shareholder Approval ").  The only vote of the holders of outstanding securities of Parent required by its Organizational Documents, by Law or otherwise to complete the Merger, the Rights Issue or to consummate the transactions expressly contemplated hereby, is the approval of the resolutions set forth in the Parent Shareholders Circular by the affirmative vote of the holders of not less than a majority of the outstanding shares of Parent present in person or by proxy who are entitled to vote at the EGM.

    (b)           The execution and delivery by each of Purchaser and Merger Sub of this Agreement and the other instruments and agreements to be executed and delivered by such party as contemplated hereby, the consummation of the transactions expressly contemplated hereby and thereby to be consummated by Purchaser or Merger Sub (other than consummation of the Merger), and the performance by such party of its obligations hereunder and thereunder have been duly and validly authorized by all requisite action on the part of such party. The consummation of the Merger has been duly and validly authorized by all requisite corporate action on the part of Purchaser and Merger Sub, subject to obtaining Parent Shareholder Approval.  This Agreement and the other instruments and agreements to be executed and delivered by either Purchaser or Merger Sub as contemplated hereby have been duly and validly executed and delivered by each such party and constitute, assuming the due and valid execution and delivery thereof by the other parties thereto (other than Purchaser or Merger Sub or any of their respective Affiliates), valid and binding obligations of each such party enforceable against it in accordance with their terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors rights and to general principles of equity.

    (c)           The Rights Issue has been duly and validly authorized by all requisite corporate action on the part of Parent, except for the Parent Shareholder Approval.

    (d)           The Board of Directors of Parent has approved the Guaranty Agreement and the transactions contemplated by this Agreement in accordance with applicable Law and has unanimously resolved (subject to Section 5.10(d) ) to recommend approval of the Merger by its shareholders (such recommendation, the " Parent Board Recommendation ").

Section 4.3            Consents .              The execution, delivery and performance of this Agreement by Purchaser and Merger Sub and the consummation of the transactions expressly contemplated hereby by Purchaser and Merger Sub do not and will not require any consent, approval,

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authorization or permit of, or filing with or notification to, any Governmental Entity or any other Person except (i) compliance with the pre-merger notification requirements under the HSR Act or applicable International Competition Laws set forth on Schedule 4.3 of the Purchaser Disclosure Schedules, (ii) compliance with the applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder, (iii) the filing of the Certificate of Merger with the Delaware Secretary, (iv) the  notification provisions of Exon-Florio, (v) under any Export Control Laws or NISPOM, (vi) compliance with any applicable requirements of the U.K. Financial Services Authority after the date hereof and (vii) any such consents, approvals, authorizations, permits, filings or notifications, the failure of which to make or obtain under this clause (vii) would not prevent or materially delay Purchaser or Merger Sub from performing their respective obligations under this Agreement and the other instruments and agreements to be executed and delivered by such party as contemplated hereby or the consummation of the Merger or the other transactions expressly contemplated hereby.

Section