AGREEMENT AND PLAN OF MERGER

Agreement and Plan of Merger

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NWJ ACQUISITION CORP | NWJ APARTMENT HOLDINGS CORP | WILSHIRE ENTERPRISES, INC

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Title: AGREEMENT AND PLAN OF MERGER
Governing Law: Delaware Date: 6/16/2008
Industry: Real Estate Operations Law Firm: Blank Rome;Lowenstein Sandler Sector: Services

AGREEMENT AND PLAN OF MERGER

Among

WILSHIRE ENTERPRISES, INC.,

NWJ APARTMENT HOLDINGS CORP.

and

NWJ ACQUISITION CORP.

Dated as of June 13, 2008

TABLE OF CONTENTS

		Page

ARTICLE I	THE MERGER	1

Section 1.1	The Merger	1
Section 1.2	Closing; Effective Time.	1
Section 1.3	Effects of the Merger	2
Section 1.4	Certificate of Incorporation; By-laws.	2
Section 1.5	Directors and Officers	2

ARTICLE II	EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS	2

Section 2.1	Effect on Capital Stock	2
Section 2.2	Treatment of Options and Restricted Shares.	4
Section 2.3	Surrender of Shares.	5

ARTICLE III	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	6

Section 3.1	Organization and Qualification	7
Section 3.2	Certificate of Incorporation and By-Laws; Minute Books	7
Section 3.3	Subsidiaries	7
Section 3.4	Capitalization; Face Amount of Auction Rate Securities	7
Section 3.5	Authority Relative to this Agreement	8
Section 3.6	No Conflicts	8
Section 3.7	Commission Filings	9
Section 3.8	Absence of Certain Changes or Events	10
Section 3.9	Litigation and Liabilities	13
Section 3.10	Employee Benefits.	13
Section 3.11	Taxes	15
Section 3.12	Information Supplied	18
Section 3.13	Licenses and Permits; Governmental Notices	19
Section 3.14	Compliance with Laws	19
Section 3.15	Insurance	19
Section 3.16	Contracts	20
Section 3.17	Title to Properties; Real Property.	20
Section 3.18	Labor Matters	23
Section 3.19	Environmental Matters	23
Section 3.20	Rights Agreement	26
Section 3.21	Intellectual Property	26
Section 3.22	Accounts and Notes Receivable	26
Section 3.23	Liabilities	26

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Section 3.24	Employees	27
Section 3.25	Non-competition	27
Section 3.26	Brokers	27
Section 3.27	No Other Representations or Warranties	27

ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB	27

Section 4.1	Organization	27
Section 4.2	Authority	28
Section 4.3	No Conflict; Required Filings and Consents.	28
Section 4.4	Absence of Litigation	29
Section 4.5	Proxy Statement	29
Section 4.6	Brokers	29
Section 4.7	Financing	29
Section 4.8	Operations and Ownership of Parent and Merger Sub.	29
Section 4.9	Ownership of Shares	30
Section 4.10	Certain Agreements	30
Section 4.11	Vote/Approval Required	30
Section 4.12	No Other Information	30
Section 4.13	Access to Information; Disclaimer	30

ARTICLE V	CONDUCT OF BUSINESS PENDING THE MERGER	31

Section 5.1	Conduct of Business of the Company Pending the Merger.	31
Section 5.2	Conduct of Business of Parent and Merger Sub Pending the Merger	33
Section 5.3	No Control of Other Party’s Business	34
Section 5.4	Accountant’s Work Papers	34
Section 5.5	Tax Returns	34

ARTICLE VI	ADDITIONAL AGREEMENTS	34

Section 6.1	Stockholders Meeting	34
Section 6.2	Proxy Statement	35
Section 6.3	Resignation of Directors	35
Section 6.4	Access to Information; Confidentiality.	35
Section 6.5	Acquisition Proposals.	36
Section 6.6	Voting Agreements	38
Section 6.7	Directors’ and Officers’ Indemnification and Insurance.	38
Section 6.8	Further Action; Efforts.	39
Section 6.9	Public Announcements	40
Section 6.10	Parent Financing.	40
Section 6.11	Certain Transfer Taxes	41
Section 6.12	Obligations of Merger Sub	41
Section 6.13	Takeover Statute	41
Section 6.14	Rule 16b-3	42

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Section 6.15	Advice of Changes	42
Section 6.16	Estoppel Certificates	42
Section 6.17	2007 Tax Returns	43
Section 6.18	Tamarac	43
Section 6.19	Non-Imputation Affidavits	43
Section 6.20	Guaranty	43
Section 6.21	Title Commitments	43
Section 6.22	Earnings and Profits Report	44

ARTICLE VII	CONDITIONS OF MERGER	44

Section 7.1	Conditions to Obligation of Each Party to Effect the Merger	44
Section 7.2	Conditions to Obligations of Parent and Merger Sub	44
Section 7.3	Conditions to Obligations of the Company	46
Section 7.4	Frustration of Closing Conditions	46

ARTICLE VIII	TERMINATION, AMENDMENT AND WAIVER	46

Section 8.1	Termination	46
Section 8.2	Effect of Termination.	48
Section 8.3	Expenses	49
Section 8.4	Amendment	49
Section 8.5	Waiver	49

ARTICLE IX	GENERAL PROVISIONS	50

Section 9.1	Non-Survival of Representations, Warranties, Covenants and Agreements	50
Section 9.2	Notices	50
Section 9.3	Certain Definitions	51
Section 9.4	Severability	52
Section 9.5	Entire Agreement; Assignment	52
Section 9.6	Parties in Interest	53
Section 9.7	Governing Law	53
Section 9.8	Headings	53
Section 9.9	Counterparts	53
Section 9.10	Specific Performance	53
Section 9.11	Jurisdiction	53
Section 9.12	Waiver of Jury Trial	54
Section 9.13	Interpretation	54

Exhibits:

Exhibit A	Certificate of Incorporation of the Surviving Corporation
Exhibit B	By-Laws of the Surviving Corporation
Exhibit C	Voting Agreement
Exhibit D	Form of Opinion of Company Counsel

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INDEX OF DEFINED TERMS

10-K	9	generally accepted accounting principles	51
Acquisition Proposal	38	Ground Lease	22
affiliate	51	Ground Leases	22
Agreement	1	Guarantors	43
beneficial owner	51	Guaranty	43
beneficially owned	51	Hazardous Materials	25
Book-Entry Shares	5	HSR Act	9
business day	51	Indemnified Party	39
Cancelled Shares	3	Intellectual Property	26
Certificate of Merger	2	IRS	13
Certificates	5	knowledge	52
Closing	1	Leases	22
Closing Date	1	Lenders	9
Code	13	Liabilities	27
Common Share	3	Liens	21
Common Stock	7	Material Adverse Effect	52
Company	1	Merger	1
Company Balance Sheet	26	Merger Sub	1
Company Disclosure Schedule	6	Non-Imputation Affidavits	43
Company Requisite Vote	34	Option	4
Company Stock Option Plans	8	Parent	1
Company Termination Fee	48	Parent Disclosure Schedule	27
Company’s Employee Benefit Plan	13	Parent Termination Fee	49
Company’s Employee Benefit Plans	13	Paying Agent	5
Confidentiality Agreement	36	Permits	19
Contracts	20	person	52
control	51	Preferred Stock	7
D&O Tail Policy	38	Proceeding	39
DGCL	1	Property Restrictions	21
Dissenting Shares	3	Proxy Statement	35
Dissenting Stockholder	3	Real Property	25
DOJ	39	Recommendation	34
Effective Time	2	Reportable Transaction	16
Employee Benefit Plan	13	Representatives	36
Environmental Damages	25	Restricted Shares	4
Environmental Requirements	25	Rights Agreement	8
ERISA	14	SEC Reports	9
ERISA Affiliate	14	Section 203	9
Estoppel Certificates	43	Solicitation Period End-Date	36
Exchange Act	9	Stockholders Meeting	34
Financing	40	subsidiaries	52
Financing Commitment	29	subsidiary	52
Former Real Property	25	Superior Proposal	38
FTC	39	Surviving Corporation	1

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Tamarac	43	Taxing Authority	18
Tax	18	Termination Date	47
Tax Affiliate	15	VDR	52
Tax Return	18	Voting Agreement	38

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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of June 13, 2008 (this “ Agreement ”), among NWJ APARTMENT HOLDINGS CORP., a Maryland corporation (“ Parent ”), NWJ ACQUISITION CORP., a Delaware corporation and a direct wholly-owned subsidiary of Parent (“ Merger Sub ”), and WILSHIRE ENTERPRISES, INC., a Delaware corporation (the “ Company ”).

WHEREAS, the parties intend that Merger Sub be merged with and into the Company (the “ Merger ”) with the Company surviving the Merger on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, the Board of Directors of the Company has (i) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, to enter into this Agreement, (ii) approved this Agreement in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”), and (iii) resolved to recommend the adoption of this Agreement by the stockholders of the Company; and

WHEREAS, the Board of Directors of Parent and the Board of Directors of Merger Sub have each approved, and the Board of Directors of Merger Sub has declared it advisable for Merger Sub to enter into, this Agreement,

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows:

ARTICLE I

THE MERGER

Section 1.1 The Merger . Upon the terms and subject to the conditions of this Agreement and in accordance with the DGCL, at the Effective Time (as defined herein), Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the “ Surviving Corporation ”) and a wholly owned subsidiary of Parent.

Section 1.2 Closing; Effective Time .

(a) The closing of the Merger (the “ Closing ”) shall take place at the offices of Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068, or at such other place as shall be mutually agreed by the parties hereto, as soon as practicable, but in no event later than the second business day after the satisfaction or waiver of the conditions set forth in ARTICLE VII (excluding conditions that, by their terms, cannot be satisfied until the Closing). The date on which the Closing actually occurs is hereinafter referred to as the “ Closing Date ”.

(b) At the Closing, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the “ Certificate of Merger ”) with the Secretary of State of the State of Delaware, in such form as required by, and executed and filed in accordance with, the relevant provisions of the DGCL (the date and time of the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, or such later time as is specified in the Certificate of Merger and as is agreed to by the parties hereto, being hereinafter referred to as the “ Effective Time ”) and shall make all other filings or recordings required under the DGCL in connection with the Merger.

Section 1.3 Effects of the Merger . The Merger shall have the effects set forth in this Agreement and the applicable provisions of the DGCL. Without limiting the generality of the foregoing and subject thereto, at the Effective Time, all the property, rights, privileges, immunities, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

Section 1.4 Certificate of Incorporation; By-laws .

(a) At the Effective Time, the certificate of incorporation of the Company shall be amended so as to read in its entirety as is set forth on Exhibit A annexed hereto, and, as so amended, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with its terms and as provided by law.

(b) At the Effective Time, and without any further action on the part of the Company and Merger Sub, the by-laws of the Company shall be amended so as to read in their entirety in the form as is set forth in Exhibit B annexed hereto, and, as so amended, shall be the by-laws of the Surviving Corporation until thereafter amended in accordance with their terms, the certificate of incorporation of the Surviving Corporation and as provided by law.

Section 1.5 Directors and Officers . The Company shall use its best efforts to cause the directors of the Company immediately prior to the Effective Time to submit their resignations to be effective as of the Effective Time. Immediately after the Effective Time, the directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and by-laws of the Surviving Corporation. The officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office until the earlier of their resignation or removal.

ARTICLE II

EFFECT OF THE MERGER ON THE CAPITAL STOCK

OF THE CONSTITUENT CORPORATIONS

Section 2.1 Effect on Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub or the holders of any of the following securities:

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(a) Conversion of Common Stock . Each share of Common Stock of the Company issued and outstanding immediately prior to the Effective Time (each, a “ Common Share ”), other than (A) any Cancelled Shares (as defined herein) and (B) any Dissenting Shares (as defined herein), shall be converted into the right to receive the Merger Consideration (as defined below) in cash, without interest, payable to the holder thereof upon surrender of such Common Shares in the manner provided in Section 2.3 , less any required withholding taxes. The parties intend that to the extent the Merger Consideration is financed using cash of the Company or the proceeds from borrowings by Merger Sub or the Company or its subsidiaries, the Merger be treated for tax purposes as if the Company had redeemed its stock to the extent that the Merger Consideration is attributable to such cash or proceeds. "Merger Consideration" means $3.88.

(b) Parent, Merger Sub and Company-Owned Shares . Each Common Share that is owned, directly or indirectly, by Parent or Merger Sub immediately prior to the Effective Time, if any, or that is held in treasury by the Company immediately prior to the Effective Time (collectively, the “ Cancelled Shares ”) shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor.

(c) Conversion of Merger Sub Common Stock . Each share of capital stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.

(d) Shares of Dissenting Stockholders . Notwithstanding anything in this Agreement to the contrary, any Common Shares which are issued and outstanding immediately prior to the Effective Time and are held by a person (a “ Dissenting Stockholder ”) who has not voted in favor of or consented to the adoption of this Agreement and has complied with all the provisions of Section 262 of the DGCL concerning the right of holders of Common Shares to require appraisal of their Common Shares (“ Dissenting Shares ”) shall not be converted into the right to receive the applicable Merger Consideration, and the holders of such Dissenting Shares shall be entitled to receive payment of the fair value of such Dissenting Shares in accordance with the provisions of Section 262 of the DGCL; provided , however , that if such Dissenting Stockholder withdraws its demand for appraisal or fails to perfect or otherwise loses its right of appraisal in respect of its Common Shares, in any case pursuant to Section 262 of the DGCL, such Common Shares shall be deemed to be converted as of the Effective Time into the right to receive the applicable Merger Consideration for each such Common Share in accordance with the provisions of this Agreement. At the Effective Time, any holder of Dissenting Shares shall cease to have any rights with respect thereto, except the rights set forth in Section 262 of the DGCL and as provided in the previous sentence. The Company shall give Parent prompt notice of any demands for appraisal of Common Shares received by the Company, withdrawals of such demands and any other instruments served pursuant to Section 262 of the DGCL and shall give Parent the opportunity to participate in all negotiations and proceedings with respect thereto. The Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to any demands for appraisal or settle or compromise, or offer to settle or compromise, any such demands.

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Section 2.2 Treatment of Options and Restricted Shares .

(a) The Company shall provide that, immediately prior to the Effective Time, each option to purchase Common Shares (an “ Option ”) granted under any Company Stock Option Plan that, in each case, is outstanding and unexercised as of the Effective Time (whether vested or unvested) shall be canceled, and the holder thereof shall be entitled to receive a payment in cash, without interest, equal to the product of (A) the number of Common Shares previously subject to such Option and (B) the excess, if any, of the Merger Consideration over the exercise price per Common Share previously subject to such Option, less any required withholding taxes. The Common Shares subject to Options having an exercise price less than the Merger Consideration shall be referred to as the “Cashed-Out Options”. At the Closing the Company shall deliver to Parent agreements executed by each holder of an outstanding Option cancelling such option and otherwise agreeing to receive the payments, if any, provided for in this Section 2.2(a) . The Surviving Corporation shall pay the holders of Options the cash payments described in this Section 2.2(a) on or as soon as reasonably practicable after the Closing Date, but in any event within two (2) business days thereafter.

(b) Each Common Share granted subject to vesting or other lapse restrictions pursuant to any Company Stock Option Plan (collectively, “ Restricted Shares ”) which is outstanding immediately prior to the Effective Time shall vest and become free of such restrictions immediately prior to the Effective Time and at the Effective Time each such Restricted Share shall be converted as if it were a Common Share into the right to receive the Merger Consideration in accordance with Section 2.1 , less any required withholding taxes which withholding taxes shall be paid by the Paying Agent to the Company.

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Section 2.3 Surrender of Shares .

(a) At or prior to the Effective Time, Parent or Merger Sub shall enter into an agreement with the Company’s transfer agent or such other person selected by Parent and who is reasonably acceptable to Company to act as agent for the stockholders of the Company in connection with the Merger (the “ Paying Agent ”) to receive payment of the Merger Consideration to which the stockholders of the Company shall become entitled pursuant to this ARTICLE II . At or immediately prior to the Effective Time, Merger Sub shall deposit with the Paying Agent in trust for the benefit of holders of Common Shares, sufficient funds to immediately pay the aggregate Merger Consideration. Such funds may be invested by the Paying Agent as directed by Merger Sub or, after the Effective Time, the Surviving Corporation; provided that (i) no such investment or losses thereon shall affect the Merger Consideration payable to the holders of Common Shares and following any losses Parent shall promptly provide additional funds to the Paying Agent for the benefit of the stockholders of the Company in the amount of any such losses and (ii) such investments shall be in short-term obligations of the United States of America with maturities of no more than 30 days or guaranteed by the United States of America and backed by the full faith and credit of the United States of America or in commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation, respectively. Any interest or income produced by such investments will be payable to the Surviving Corporation or Parent, as Parent directs.

(b) Promptly after the Effective Time (and in any event within two (2) business days thereafter), the Surviving Corporation shall cause to be mailed to each record holder, as of the Effective Time, of (i) an outstanding certificate or certificates which immediately prior to the Effective Time represented Common Shares (the “ Certificates ”) or (ii) Common Shares represented by book-entry (“ Book-Entry Shares ”), a form of letter of transmittal (which shall be in customary form and shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent or, in the case of Book-Entry Shares, upon adherence to the procedures set forth in the letter of transmittal) and instructions for use in effecting the surrender of the Certificates, or in the case of Book-Entry Shares the surrender of such Book-Entry Shares, for payment of the applicable Merger Consideration therefor. Upon surrender to the Paying Agent of a Certificate or of Book-Entry Shares, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate or Book-Entry Shares shall be entitled to receive in exchange therefor the applicable Merger Consideration for each Common Share formerly represented by such Certificate or Book-Entry Shares and such Certificate or Book-Entry Share shall then be canceled. No interest shall be paid or accrued for the benefit of holders of the Certificates or Book-Entry Shares on the Merger Consideration payable in respect of the Certificates or Book-Entry Shares. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the person requesting such payment shall have paid any transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such tax either has been paid or is not applicable. Until surrendered as contemplated by this Section 2.3(b) , each Certificate and each Book-Entry Share shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the applicable Merger Consideration as contemplated by this ARTICLE II .

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(c) At any time following the date that is twelve months after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) which have been made available to the Paying Agent and which have not been disbursed to holders of Certificates or Book-Entry Shares and thereafter such holders shall be entitled to look to Parent and the Surviving Corporation (subject to abandoned property, escheat or other similar laws) with respect to the Merger Consideration payable upon due surrender of their Certificates or Book-Entry Shares. The Surviving Corporation shall pay all charges and expenses, including those of the Paying Agent, in connection with the exchange of Common Shares for the Merger Consideration.

(d) After the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of Common Shares that were outstanding prior to the Effective Time. After the Effective Time, Certificates or Book-Entry Shares presented to the Surviving Corporation for transfer shall be canceled and exchanged for the consideration provided for, and in accordance with the procedures set forth in, this ARTICLE II .

(e) Notwithstanding anything in this Agreement to the contrary, Parent and the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable to any former holder of Common Shares pursuant to this Agreement any amount as may be required to be deducted and withheld with respect to the making of such payment under applicable Tax (as defined herein) laws.

(f) In the event that any Certificate shall have been lost, stolen or destroyed, upon the holder’s compliance with the reasonable replacement requirements established by the Paying Agent, including, if necessary, the posting by the holder of a bond in customary amount as indemnity against any claim that may be made against it with respect to the Certificate, the Paying Agent will deliver in exchange for the lost, stolen or destroyed Certificate the applicable Merger Consideration payable in respect of the Common Shares represented by such Certificate pursuant to this ARTICLE II .

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Contemporaneously with the execution and delivery of this Agreement, the Company shall deliver to Parent and Merger Sub a disclosure schedule (the “ Company Disclosure Schedule ”) with numbered sections corresponding to the relevant sections in this Agreement. Any exceptions or qualifications set forth in the Company Disclosure Schedule with respect to a particular representation, warranty or covenant contained herein shall be deemed to be an exception or qualification with respect to other applicable representations, warranties and covenants contained in this Agreement if the applicability of such exceptions or qualifications to any other applicable representation, warranty or covenant would be readily apparent to a person reviewing the Company Disclosure Schedule, regardless of whether an explicit reference to such representation, warranty or covenant is made. The Company hereby represents and warrants to Parent and Merger Sub that except as set forth on the Company Disclosure Schedule:

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Section 3.1 Organization and Qualification . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power to carry on its business as it is now being conducted. The Company is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification necessary, each of which is listed in Section 3.1 of the Company Disclosure Schedule.

Section 3.2 Certificate of Incorporation and By-Laws; Minute Books . The Certificate of Incorporation and By-Laws in the form attached to Section 3.2 of the Company Disclosure Schedule are the Certificate of Incorporation and By-Laws of the Company as in effect on the date of this Agreement. The minute books of the Company and each of its subsidiaries contain true, complete and accurate records of all meetings and consents in lieu of meetings of their respective Boards of Directors, and any committees thereof (or persons performing similar functions), since the time of their respective organizations. The stock books of the subsidiaries are true, complete and accurate.

Section 3.3 Subsidiaries . Section 3.3 of the Company Disclosure Schedule sets forth each direct and indirect subsidiary of the Company. Each of the Company’s subsidiaries is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation as set forth in Section 3.3 of the Company Disclosure Schedule and has the requisite corporate or limited liability company power to carry on its business as it is now being conducted. Each such subsidiary of the Company is duly qualified as a foreign corporation or limited liability company to do business, and is in good standing, in each jurisdiction where the character of its properties, owned or leased, or the nature of its activities makes such qualification necessary, each as set forth in Section 3.3 of the Company Disclosure Schedule. All of the outstanding shares of capital stock or limited liability company interests, as applicable, of each of the Company’s subsidiaries are validly issued, fully paid and nonassessable and are owned by the Company or by a wholly owned subsidiary of the Company, free and clear of all liens, claims, or encumbrances, and there are no proxies outstanding with respect to such shares. Section 3.3 of the Company Disclosure Schedule sets forth a true and complete list of the ownership interests of the Company in its subsidiaries and in any other corporation, partnership, joint venture or other business association or entity and other than as set forth on such schedule, the Company does not, directly or indirectly, own or control or have any capital or other equity interest or participation, or any interest convertible, exchangeable or exercisable for, any capital or other equity interest or participation in, nor is the Company, directly or indirectly, subject to any obligation or requirement to provide funds to or invest in, any person.

Section 3.4 Capitalization; Face Amount of Auction Rate Securities . The authorized capital stock of the Company consists of 15,000,000 shares of common stock, par value $1.00 per share (the “ Common Stock ”), and 1,000,000 shares of preferred stock, par value $1.00 per share (the “Preferred Stock”). As of the date hereof, (i) 7,926,248 shares of Common Stock were outstanding, all of which were validly issued, fully paid and nonassessable, (ii) 2,087,296 shares of Common Stock were held in the treasury of the Company, (iii) no shares of Common Stock were reserved for issuance pursuant to the Company’s 1995 Stock Option and Incentive Plan and 1995 Non-Employee Director Stock Option Plan and a total of 459,525 shares of Common Stock were reserved for issuance pursuant to the 2004 Stock Option and Incentive Plan and 2004 Non-Employee Director Stock Option Plan (collectively, the “ Company Stock Option Plans ”), copies of which have heretofore been furnished to the Parent, (iv) 61,633 Restricted Shares have been granted under the Company Stock Option Plans and remain outstanding, of which 24,632 shares are unvested, and (v) Options to purchase 135,000 shares of Common Stock were outstanding, having been granted pursuant to the Company Stock Option Plans. As of the date hereof, no shares of Preferred Stock were issued or outstanding. Section 3.4 of the Company Disclosure Schedule sets forth a true and complete listing of all Options outstanding as of the date hereof, setting forth the names of the holders of such Options, the number of Common Shares subject to such Options and the exercise prices and vesting schedules of such Options. Pursuant to an Amended and Restated Stockholder Protection Rights Agreement, dated as of December 6, 2006, between the Company and Continental Stock Transfer & Trust Company, as Rights Agent (the “ Rights Agreement ”), the Company has issued to its stockholders rights to purchase shares of capital stock of the Company. Except as set forth above and except as set forth in Section 3.4 of the Company Disclosure Schedule, there are not now, and at the Effective Time there will not be, any shares of capital stock or other equity securities of the Company or of any subsidiary of the Company issued or outstanding or any options, warrants or other rights, agreements, arrangements or commitments obligating the Company or any of its subsidiaries to issue or sell any shares of capital stock of the Company or of any subsidiary of the Company. Except as set forth in Section 3.4 of the Company Disclosure Schedule, there are no outstanding contracts of the Company or any subsidiary of the Company to repurchase, redeem or otherwise acquire any capital stock or other equity securities of the Company or any subsidiary of the Company. No subsidiary of the Company owns any Common Stock of the Company. As of the date hereof, the aggregate face amount of the auction rate securities held by the Company is $3,000,000.

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Section 3.5 Authority Relative to this Agreement . The Company has the requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement, the Merger and the transactions contemplated hereby, except for adoption of this Agreement by the Company’s stockholders as described in this Agreement. This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms.

Section 3.6 No Conflicts . Except as set forth in Section 3.6 of the Company Disclosure Schedule and the Requisite Stockholder Vote, neither the Company nor any of its subsidiaries or any of their respective assets is subject to or obligated under any provision of (i) its respective certificate or articles of incorporation or by-laws, (ii) any Contract, including any mortgage, indenture or other document or instrument, (iii) any license, franchise or permit, or (iv) any law, regulation, order, judgment or decree, in each case which would be breached, violated or defaulted (with or without due notice or lapse of time or both) or in respect of which a right of termination or acceleration or a loss of a material benefit or any encumbrance on any of its assets would be created or suffered or which any consent is required to be obtained or notice required to be given by the Company’s execution and performance of this Agreement and consummation of the Merger. Except as set forth in Section 3.6 of the Company Disclosure Schedule, the consummation of the Merger by the Company will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any governmental entity, except for (i) the adoption of this Agreement by the requisite vote of the Company’s stockholders, (ii) the applicable requirements, if any, of the Securities Exchange Act of 1934 (the “ Exchange Act ”) and state securities, takeover and “blue sky” laws, (iii) the applicable requirements of the American Stock Exchange, and (iv) the filing with the Secretary of State of the State of Delaware of the Certificate of Merger as required by the DGCL. No filing or waiting period is required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the “ HSR Act ”). No state takeover statute or similar statute or regulation or any “fair price”, “moratorium”, “business combination”, “control share acquisition” or other form of anti-takeover statute or regulation applies or purports to apply to the Merger, this Agreement, the Voting Agreements or any of the transactions contemplated hereby, other than Section 203 of the DGCL (“ Section 203 ”). Subject to the accuracy of the representation set forth in Section 4.10, by virtue of resolutions heretofore approved by the Company’s Board of Directors, the Merger, this Agreement, the Voting Agreements and the transactions contemplated hereby will not be subject to the restrictions on business combinations with interested stockholders otherwise applicable to the Merger, this Agreement, the Voting Agreements or the transactions contemplated hereby under Section 203 or the Rights Agreement. The Board of Directors of Company has taken such actions and votes as are necessary on its part to render the provisions of Section 203, all other applicable takeover statutes of the DGCL and the Rights Agreement inapplicable to this Agreement, the Merger, the Voting Agreements and the transactions contemplated hereby and thereby. Set forth in Section 3.6 of the Company Disclosure Schedule is a list of all indebtedness of the Company or any subsidiary including the name of each lender (the “ Lenders ”), the principal amount outstanding as of a recent practical date, whether or not such debt is prepayable and upon what terms, whether there is any prepayment penalty which would become due on prepayment and if such indebtedness is not prepayable, whether such indebtedness can be defeased and the terms of such defeasance.

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Section 3.7 Commission Filings . The Company has heretofore delivered to the Parent (i) its Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC (the “ 10-K ”) and (ii) all other reports filed by the Company with the SEC under the Exchange Act since the initial filing of the 10-K (collectively, the “ SEC Reports ”). As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder and applicable to such SEC Reports, and none of the SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements of the Company and its subsidiaries included in the SEC Reports previously provided to the Parent comply as to form in all material respects with applicable accounting requirements and published rules of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto and except, in the case of unaudited statements, as permitted by Form 10-Q and Regulation S-X of the SEC) and fairly present the consolidated financial position of the Company and its subsidiaries as of the dates thereof and the consolidated results of their operations, changes in stockholders’ equity (to the extent applicable) and statements of cash flows for the periods then ended, subject, in the case of the unaudited consolidated interim financial statements, to normal year-end adjustments and any other adjustments described therein. Except as set forth in Section 3.7 of the Company Disclosure Schedule, the Company has timely filed all forms, statements and documents required to be filed by it with the SEC during the past three years. No subsidiary of the Company is required to make any filing with the SEC. Each of the Company’s Chief Executive Officer and Chief Financial Officer has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 with respect to the Company SEC Reports and the statements contained in such certifications are true and accurate. The Company has established and maintains disclosure controls and procedures for the purposes of Rules 13a-15 and 15d-15 of the Exchange Act in all material respects. Those disclosure controls and procedures are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company’s Chief Executive Officer and its Chief Financial Officer by others within those entities and such disclosure controls and procedures are effective to perform the functions for which they were established. The Company’s auditors and the Audit Committee of the Board of Directors have been advised of: (i) any significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data and (ii) any fraud, whether or not material, that involves management or other employees who have a role in the Company’s internal controls. Since the date of the most recent evaluation of such disclosure controls and procedures, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to sufficient deficiencies and material weaknesses. The above disclosure controls and procedures were evaluated at least one time prior to December 31, 2007.

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Section 3.8 Absence of Certain Changes or Events . Since December 31, 2007, except as set forth in Section 3.8 of the Company Disclosure Schedule or SEC Reports filed prior to the date hereof, neither the Company nor any of its subsidiaries has (i) suffered any Material Adverse Effect or any event, change or condition likely to cause or have any such Material Adverse Effect or (ii) conducted its business and operations other than in the ordinary course of business and consistent with past practices except, subsequent to the date hereof, as permitted by Section 5.1 hereof.

(a) Without limiting the foregoing, since December 31, 2007, except as set forth in Section 3.8 of the Company Disclosure Schedule, neither the Company nor any of its subsidiaries has:

(i) amended or otherwise changed its certificate of incorporation or by-laws or any similar governing instruments;

(ii) issued, delivered, sold, pledged, disposed of or encumbered any shares of capital stock, ownership interests or voting securities, or any options, warrants, convertible securities or other rights of any kind to acquire or receive any shares of capital stock, any other ownership interests or any voting securities (including but not limited to stock appreciation rights, phantom stock or similar instruments), of the Company or any of its subsidiaries (except for (A) the issuance of Common Shares upon the exercise of Options or in connection with other existing stock-based awards, in each case, in accordance with the terms of any Company Stock Option Plan, or (B) issuances in accordance with the Rights Plan);

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(iii) declared, set aside, made or paid any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock (except for any dividend or distribution by a subsidiary of the Company to the Company or another wholly owned subsidiary of the Company);

(iv) reclassified, combined, split, subdivided, redeemed, purchased or otherwise acquired any shares of capital stock of the Company (except for the acquisition of Common Shares tendered by optionees in connection with a cashless exercise of Options or in order to pay taxes in connection with the exercise of Options or the lapse of restrictions in respect of Restricted Shares pursuant to the terms of a Company Stock Option Plan), or reclassified, combined, split or subdivided any capital stock or other ownership interests of any of the Company’s subsidiaries;

(v) made any acquisition of (whether by merger, consolidation or acquisition of stock or substantially all of the assets), or made any investment in any interest in, any corporation, partnership or other business organization or division thereof;

(vi) sold or otherwise disposed of (whether by merger, consolidation or disposition of stock or assets or otherwise) any corporation, partnership or other business organization or division thereof or otherwise sold or disposed of any assets, other than sales or dispositions in the ordinary course of business or pursuant to existing Contracts;

(vii) other than in the ordinary course of business consistent with past practice, entered into or amended in any material respect or failed to renew any Contract;

(viii) authorized any material new capital expenditures which are, in the aggregate, in excess of the Company’s capital expenditure budget set forth on Section 3.8 of the Company Disclosure Schedule;

(ix) except for borrowings under the Company’s existing credit facilities, incurred or modified in any material respect in an manner adverse to the Company the terms of any indebtedness for borrowed money, or assumed, guaranteed or endorsed, or otherwise as an accommodation became responsible for, the obligations of any person, or made any loans, advances or capital contributions to any other person (other than a subsidiary of the Company), in each case, other than in the ordinary course of business consistent with past practice, pursuant to letters of credit or otherwise;

(x) except to the extent required under any Employee Benefit Plan or as required by applicable law, (A) increased the compensation or fringe benefits of any of its directors, officers or employees (except in the ordinary course of business with respect to employees who are not directors or officers), (B) granted any severance or termination pay not provided for under any Employee Benefit Plan, (C) entered into any employment, consulting or severance agreement or arrangement with any of its present or former directors, officers or other employees, except for offers of employment in the ordinary course of business and consistent with past practice with employees who are not directors or officers, (D) established, adopted, entered into or amended in any material respect or terminated any Employee Benefit Plan or (E) paid or become obligated to pay any bonus, severance or other amounts to any officer or employee;

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(xi) made any change in any accounting principles, except as were appropriate to conform to changes in statutory or regulatory accounting rules or generally accepted accounting principles or regulatory requirements with respect thereto;

(xii) other than in the ordinary course of business or as required by applicable law, (A) made any Tax election or change any method of accounting, (B) entered into any settlement or compromise of any Tax liability, (C) filed any amended Tax Return with respect to any Tax, (D) changed any annual Tax accounting period, (E) entered into any closing agreement relating to any material Tax or (F) surrendered any right to claim a Tax refund;

(xiii) settled or compromised any litigation, other than settlements or compromises of litigation where the amount paid did not exceed $25,000 or, if greater, the total incurred cash reserve amount for such matter, maintained by the Company on the Company Balance Sheet at December 31, 2007;

(xiv) waived any right of value material to the Company or any subsidiary of the Company;

(xv) adopted a plan of liquidation or resolutions providing for the liquidation, dissolution, merger, consolidation or other reorganization of the Company or any subsidiary of the Company;

(xvi) revalued any portion of its assets, properties or businesses including, without limitation, any write-down of the value of any assets or any write-off of notes or accounts receivable, other than in the ordinary course of business consistent with past practice;

(xvii) materially changed any of its business policies or practices;

(xviii) other than in the ordinary course of business consistent with past practice, entered into any Lease (as lessor or lessee); sold, abandoned or made any other disposition of any of its assets, properties or businesses; granted or suffered any Lien on any of its assets, properties or businesses; or added or modified any debt on properties or assets; or

(xix) failed to operate its business in the ordinary course, consistent with past practices ; or

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(b) agreed to take any of the actions described Section 3.8(a)(i) through Section 3.8(a)(xix) .

Section 3.9 Litigation and Liabilities . Except as disclosed in Section 3.9 of the Company Disclosure Schedule or SEC Reports filed prior to the date hereof, there are no actions, suits, proceedings or investigations pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries, properties or any former directors or officers of the Company, in their capacity as directors or officers of the Company.

Section 3.10 Employee Benefits .

(a) Section 3.10 of the Company Disclosure Schedule contains an accurate and complete list (and if not written, a description) of all of the Employee Benefit Plans which the Company, or any ERISA Affiliate, sponsors, maintains or contributes to, is required to contribute to, or has or could reasonably be expected to have any liability of any nature with respect to, whether known or unknown, direct or indirect, fixed or contingent, for the benefit of present or former employees of the Company and/or its ERISA Affiliates (referred to collectively as the “ Company’s Employee Benefit Plans ” and individually as a “ Company’s Employee Benefit Plan ”). Accurate and complete copies of all of the Company’s Employee Benefit Plans have been provided or made available to Buyer as well as the most recent determination letter issued, if any, or if none, Internal Revenue Service (“ IRS ”) opinion or advisory letter issued with respect to a Company’s Employee Benefit Plan that is intended to be a qualified plan within the meaning of Section 401(a) of the Internal Revenue Code of 1986, as amended (“ Code ”), all pending applications for rulings, determination letters, opinions and no action letters filed with the Department of Labor or the IRS, summary plan descriptions, service agreements, stop loss insurance policies, if any and all related contracts and material documents (including, but not limited to, all compliance reports and testing results for the past three years), all closing letters, audit finding letters and revenue agent findings. None of Company’s Employee Benefit Plans is subject to Title IV of ERISA or Code Section 412. None of Company’s Employee Benefit Plans is a Multiple Employer Plan or Multiemployer Plan under Code Section 413(c) or 414(f). None of Company’s Employee Benefit Plans provides a self-insured health or death benefit. No leased employees (as defined in Section 414(n) of the Code) are eligible for, or participate in, the Company’s Employee Benefit Plans. None of Company’s Employee Benefit Plans promises or provides health or life benefits to retirees or former employees, except as required by Code Section 4980B, Sections 601 through 609 of ERISA, or comparable state statutes which provide for continuing health care coverage.

(b) “ Employee Benefit Plan ” means any employee benefit plan as defined in Section 3(3) of ERISA, any “voluntary employees’ beneficiary association” within the meaning of Section 501(c)(9) of the Code, “welfare benefit fund” within the meaning of Section 419 of the Code, or “qualified asset account” within the meaning of Section 419A of the Code, and any other material plan, program, policy or arrangement for or regarding bonuses, commissions, incentive compensation, severance, vacation, deferred compensation, pensions, profit sharing, retirement, payroll savings, stock options, stock purchases, stock awards, stock ownership, phantom stock, stock appreciation rights, equity compensation, medical/dental expense payment or reimbursement, disability income or protection, sick pay, group insurance, self insurance, death benefits, employee welfare or fringe benefits of any nature, including those benefiting retirees or former employees.

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(c) “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and all rulings and regulations promulgated thereunder.

(d) “ ERISA Affiliate ” means any entity, trade or business (whether or not incorporated) that is part of the same controlled group with, common control with, part of an affiliated service group with, or part of another arrangement that includes, the Company or any ERISA Affiliate within the meaning of Code Section 414(b), (c), (m) or (o).

(e) Except as set forth in Section 3.10(e) of the Company Disclosure Schedule, neither the Company nor any ERISA Affiliate has (i) established, sponsored, maintained or contributed to (or has or had the obligation to contribute to) any Employee Benefit Plan, (ii) proposed any Employee Benefit Plan which it plans to establish, sponsor, maintain or to which it will be required to contribute, or (iii) proposed any changes to any of Company’s Employee Benefit Plans now in effect. Except as set forth in Section 3.10(e) of the Company Disclosure Schedule, each of Company’s Employee Benefit Plans that provides a self-insured health benefit is subject to a stop-loss insurance policy in which the Company is an insured party and no facts exist which could form the basis for any denial of coverage under such policy.

(f) With respect to the Company’s Employee Benefit Plans, the Company and each ERISA Affiliate will have made, on or before the Closing Date, all payments (including premium payments with respect to insurance policies) required to be made by them on or before the Closing Date and will have accrued (in accordance with generally accepted accounting principles) as of the Closing Date all payments (including premium payments with respect to insurance policies) due but not yet payable as of the Closing Date. There has not been, nor will there be, any Accumulated Funding Deficiencies (as defined in ERISA or the Code) or waivers of such deficiencies.

(g) The Company has delivered or made available to Parent an accurate and complete copy of the three most recent Annual Reports (Form 5500 series), accompanying schedules and any other material form or filing required to be submitted to any governmental agency with regard to each of Company’s Employee Benefit Plans and the most current actuarial report, if any, with regard to each of the Company’s Employee Benefit Plans.

(h) All of the Company’s Employee Benefit Plans are, and have been, operated in compliance in all material respects with their provisions and with all applicable laws including ERISA and the Code and the regulations and rulings thereunder. With respect to each of the Company’s Employee Benefit Plans that is intended to be qualified under Section 401(a), each such plan has been determined by the IRS to be so qualified as to form, and each trust forming a part thereof has been determined by the IRS to be exempt from tax pursuant to Section 501(a) of the Code, and with respect to each of the Company’s Employee Benefit Plans that is intended to be a “voluntary employees’ beneficiary association” within the meaning of Section 501(c)(9) of the Code, each such association has been determined by the IRS to have such status. To the knowledge of the Company, no reason exists that would cause such qualified or Section 501(c)(9) status to be revoked for any period. The Company, its ERISA Affiliates, and all fiduciaries of the Company’s Employee Benefit Plans have complied in all material respects with the provisions of the Company’s Employee Benefit Plans and in all material respects with all applicable Laws including ERISA and the Code and the regulations and rulings thereunder. None of the Company’s Employee Benefit Plans is a “MEWA” as defined in Section 3(40)(A) of ERISA. To the knowledge of the Company, no non-exempt prohibited transaction under Section 406 or 407 of ERISA or Section 4975 of the Code has occurred with respect to any of Company’s Employee Benefit Plans. Neither the Company nor any ERISA Affiliate has incurred any tax liability or civil penalty, damages, or other liabilities arising under Section 502 of ERISA, resulting from any of the Company’s Employee Benefit Plans.

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(i) Except as contemplated by Section 2.2 hereof, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including any severance, unemployment compensation or golden parachute payment) becoming due from the Company or any ERISA Affiliate under any of the Company’s Employee Benefit Plans, (ii) increase any benefits otherwise payable under any of the Company’s Employee Benefit Plans, or (iii) result in the acceleration of the time of payment or vesting of any such benefits to any extent.

(j) There are no pending actions, claims or lawsuits that have been asserted or instituted against any of the Company’s Employee Benefit Plans, the assets of any of the trusts under such plans, the plan sponsor, the plan administrator or any fiduciary of any such plan (other than routine benefit claims), and, to the knowledge of the Company, there are no facts which could form the basis for any such action, claim or lawsuit. There are no investigations or audits by any government agency of any of the Company’s Employee Benefit Plans, any trusts under such plans, the plan sponsor, the plan administrator or any fiduciary of any such plan that have been instituted or threatened and, to the knowledge of the Company, there are no facts which could form the basis for any such investigation or audit.

(k) To the knowledge of the Company, no action or omission of the Company, or any ERISA Affiliate, or any director, officer, or agent thereof in any way restricts, impairs or prohibits the Company or any ERISA Affiliate, or any successor, from amending, merging, or terminating any of the Company’s Employee Benefit Plans in accordance with the express terms of any such plan and applicable law.

(l) To the knowledge of the Company, each Company’s Employee Benefit Plan that is a “nonqualified deferred compensation plan” (as defined in Code Section 409A(d)(1)) has been operated since January 1, 2005 in good faith compliance with Code Section 409A and the rules and regulations issued thereunder.

Section 3.11 Taxes . The Company and each subsidiary of the Company has filed or caused to be filed timely (taking into account all available extensions) all material federal, state, local and foreign Tax Returns required to be filed by each of it and any member of its consolidated, combined, unitary or similar group (each such member, a “ Tax Affiliate ”). Such Tax Returns are accurate and complete in all material respects. Section 3.11 of the Company Disclosure Schedule contains an accurate and complete list of all Tax Returns actually filed by the Company or any subsidiary as of the date hereof with respect to the calendar years 2004, 2005, 2006 and 2007 of the Company and each subsidiary of the Company. Accurate and complete copies of all such federal, state, local and foreign income, sales and use Tax Returns filed by the Company and each of its subsidiaries have been delivered or made available to Parent. The Company and each of its subsidiaries has paid or caused to be paid or has made adequate provision or set up an adequate accrual or reserve for the payment of, all Taxes shown to be due in respect of the periods for which Tax Returns are due, and has established (or will establish at least quarterly) an adequate accrual or reserve for the payment of all Taxes payable in respect of the period subsequent to the last of said periods required to be so accrued or reserved. The financial statements filed with the SEC Reports fully accrue all actual and contingent liabilities for Taxes with respect to all periods through the dates thereof in accordance with generally accepted accounting principles. Neither the Company nor any of its Tax Affiliates nor any of its subsidiaries has any material liability for Taxes in excess of the amount so paid or accruals or reserves so established. Neither the Company nor any of its Tax Affiliates nor any of its subsidiaries is delinquent in the payment of any Tax in excess of the amount reserved or provided therefor, and, subject to completion of pending or scheduled audits, no deficiencies for any Tax, assessment or governmental charge in excess of the amount reserved or provided therefor have, to the knowledge of the Company, been threatened, claimed, proposed or assessed. With respect to each of the Company, its Tax Affiliates and its subsidiaries, (i) no waiver or extension of time to assess any Taxes has been given or requested and remains in effect on the date hereof, (ii) no audit by any taxing authority has ever been conducted, is currently pending or, to the knowledge of the Company, threatened, (iii) no notice of any proposed Tax audit, or of any Tax deficiency or adjustment, has been received, and (iv) to the knowledge of the Company there is no reasonable basis for any Tax deficiency or adjustment to be assessed.

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(a) The Company and each of its subsidiaries has disclosed to the Internal Revenue Service on the appropriate Tax Returns any Reportable Transaction in which it has participated and has retained all documents and other records pertaining to any Reportable Transaction in which it has participated, including documents and other records listed in Treasury Regulation Section 1.6011-4(g) and any other documents or other records which are related to any Reportable Transaction in which it has participated but which are not listed in Treasury Regulation Section 1.6011-4(g). A “ Reportable Transaction ” means any transaction listed in Treasury Regulation Section 1.6011-4(b).

(b) Neither the Company nor any subsidiary of the Company has a contract, agreement plan, or other similar type of arrangement currently in place covering any person that, individually or collectively, could give rise to the payment of any amount that would not be deductible by reason of Section 280G of the Code or similar provision of state or foreign law, or would constitute compensation that would not be deductible by reason of Section 162(m) of the Code or similar provision of state or foreign law. Neither the Company nor any subsidiary of the Company is obligated to make any “gross-up” or similar payment to any person on account of any Tax under Section 4999 of the Code or similar provision of state or foreign law.

(c) Neither the Company nor any subsidiary of the Company is a party to, is bound by nor has any obligation under any Tax sharing agreement or similar contract (whether or not written) or has liability for Taxes of any person under Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign law, as a transferee or successor, by contract or otherwise other than the Company or its subsidiaries.

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(d) Neither the Company nor any subsidiary of the Company has been the “distributing company” (within the meaning of Section 355(a)(1) of the Code) nor the “controlled corporation” (within the meaning of Section 355(a)(1) of the Code) (i) within the two-year period ending as of the date of this Agreement or (ii) in a distribution that otherwise constitutes part of a “plan” or “series of transactions” (within the meaning of Section 355(e) of the Code) in conjunction with this Agreement.

(e) The Company and each subsidiary of the Company has complied with the provisions of the Code relating to the withholding and payment of Taxes, including, without limitation, the withholding and reporting requirements under Code Sections 1441 through 1464, 3401 through 3406, and 6041 through 6049, as well as similar provisions under any other Laws, and has, within the time and in the manner prescribed by law, withheld from employee wages and paid over to the proper taxing authorities all amounts required. The Company and each of its subsidiaries has undertaken in good faith to appropriately classify all service providers as either employees or independent contractors for all Tax purposes. The Company and each of its subsidiaries has collected and remitted all applicable sales, use and VAT or other similar Taxes to the applicable taxing authority.

(f) Neither the Company nor any subsidiary of the Company has agreed to make, nor is the Company or any subsidiary of the Company required to make, any adjustment under Section 481(a) of the Code (or any similar provision of state, local or foreign law) by reason of a change in accounting method or otherwise, and, no Taxing Authority has proposed any such adjustment or change in accounting method. Neither the Company nor any subsidiary of the Company will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) “closing agreement” as described in Section 7121 of the Code (or any corresponding provision of state, local or foreign income Tax law); (ii) installment sale or open transaction disposition made on or prior to the Closing Date; (iii) prepaid amount received on or prior to the Closing Date or (iv) intercompany transactions or any excess loss accounts described in the Treasury Regulations promulgated under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law). Neither the Company nor any subsidiary of the Company is subject to any private letter ruling of any Taxing Authority or comparable rulings of other Taxing Authorities. No power of attorney currently in force has been granted by the Company or any subsidiary of the Company concerning any Tax matter.

(g) Neither the Company nor any subsidiary of the Company has taken any reporting position on a Tax Return, which reporting position (i) if not sustained would be reasonably likely, absent disclosure, to give rise to a penalty for substantial understatement of federal income Tax under Section 6662 of the Code (or any predecessor statute or any corresponding provision of any such predecessor statute, or state, local, or foreign Tax law), and (ii) has not adequately been disclosed on such Tax Return in accordance with Section 6662(d)(2)(B) of the Code (or corresponding provision of any such predecessor statute, or state, local, or foreign Tax law).

(h) No employee benefit plan or other agreement, policy or arrangement between the Company or any subsidiary of the Company and any “service provider” (as such term is defined in Section 409A of the Code and the Treasury Regulations and Internal Revenue Service guidance thereunder) would subject any person to Tax pursuant to Section 409A(1) of the Code, whether pursuant to the consummation of the transactions contemplated hereby or otherwise. Neither the Company nor any subsidiary of the Company is a party to, or otherwise obligated under, any contract, agreement, plan or arrangement that provides for the gross-up of the tax imposed by Section 409A(a)(1)(B) of the Code. The exercise price of any stock option issued by the Company and each subsidiary of the Company to any person was not less than the fair market value of the issuing company’s stock on the date that such stock option was granted.

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(i) Neither the Company nor any subsidiary of the Company has or has ever had a permanent establishment or other taxable presence in any country other than the United States and Canada. The completion of the transactions contemplated hereunder will not trigger the realization or recognition of intercompany gain or income to the Company or any subsidiary of the Company under the federal consolidated return regulations.

(j) For purposes of this Agreement, the following terms shall have the following meanings:

“ Tax ”, “ tax ”, “ Taxes ” or “ taxes ” means (i) all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including, all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any Taxing Authority in connection with any item described in clause (i), and (iii) any transferee liability in respect of any items described in clauses (i) and/or (ii) payable by reason of any contract, assumption, transferee liability, operation of law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof or any analogous or similar provision under law) or otherwise.

“ Taxing Authority ” means the Internal Revenue Service and any other governmental authority of any other jurisdiction responsible for the administration of any Tax.

“ Tax Return ” means any return, report or statement required to be filed with respect to any Tax (including any attachments thereto, and any amendment thereof) including any information return, claim for refund, amended return or declaration of estimated Tax, and including, where permitted or required, combined, consolidated or unitary returns for any group of entities that includes the Company or any of its Tax Affiliates.

Section 3.12 Information Supplied . Any SEC Report filed with the SEC or any proxy statement mailed by the Company to the holders of Common Shares after the date hereof and all amendments and supplements thereto will comply as to form in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder and will not, at the time of (a) the filing of the SEC Report or the first mailing of any proxy statement (and respective amendments thereto) or (b) the Stockholders Meeting contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to information supplied by the Parent or Merger Sub expressly for inclusion in such proxy statement.

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Section 3.13 Licenses and Permits; Governmental Notices . The Company and its subsidiaries have obtained all material licenses, registrations, approvals, certificates, authorizations, consents, franchises and permits (“ Permits ”) necessary to conduct their respective businesses and to own and operate their respective assets and such Permits are valid and in full force and effect. No defaults or violations exist or have been recorded in respect of any material Permit of the Company and its subsidiaries. No proceeding is pending or, to the knowledge of the Company, threatened which contemplates the revocation, limitation or non-renewal of any such material Permit.

(a) Since December 31, 2005, the Company and its subsidiaries have not received any written notice regarding, and have not been made a party to, any proceeding, investigation or arbitration brought by any governmental authority alleging that (a) the Company and its subsidiaries are in, or may be in, violation of any law, governmental regulation, order, judgment or decree (b) the Company and its subsidiaries must change any of their business practices to remain in compliance with any law, governmental regulation or order, (c) the Company and its subsidiaries have failed to obtain any license or permit required for the conduct of its business or the ownership of its assets, or (d) the Company and its subsidiaries are in default under or violation of any license or permit.

Section 3.14 Compliance with Laws . Except as set forth in Section 3.14 of the Company Disclosure Schedule, the Company and its subsidiaries have complied in a timely manner in all material respects with all federal, state, county, local or foreign statutes and laws, including common law, ordinances, orders, judgments, decrees or regulations, standards, enforceable guidelines or codes of any governmental authority, relating to any of the property owned, leased or used by them, or applicable to their business, including, but not limited to, the labor, equal employment opportunity, occupational safety and health, environmental waste disposal, zoning, building, environmental and antitrust laws.

Section 3.15 Insurance . During the past six years, the Company and each of its subsidiaries have been covered under insurance policies and programs which provide coverage to the Company and its subsidiaries by insurers reasonably believed by the Company to be of recognized financial responsibility and solvency. All material policies of insurance and fidelity or surety bonds insuring the Company or any of its subsidiaries or their respective businesses, assets, employees, officers and directors have previously been made available for inspection by the Parent and are in full force and effect and insure against risks and liabilities customary for the businesses in which the Company and its subsidiaries are engaged and those in effect on the date hereof are listed in Section 3.15 of the Company Disclosure Schedule. Except as otherwise set forth in Section 3.15 of the Company Disclosure Schedule or SEC Reports, as of the date hereof, there are no material claims by the Company or any subsidiary of the Company under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause other than a customary reservation of rights clause. All necessary notifications of claims have been made to insurance carriers other than those where the failure to so notify is not reasonably expected to have a Material Adverse Effect. Neither the Company nor any of its subsidiaries has any knowledge of any inaccuracy in any application for such policies, any failure to pay premiums when due or any similar state of facts that might form the basis for termination of any such insurance. Neither the Company nor any of its subsidiaries has been refused any insurance with respect to its assets, properties, or businesses, nor has any coverage been limited, by any insurance carrier to which the Company or any of its subsidiaries has applied for any such insurance or with which the Company or any of its subsidiaries has carried insurance during the last three years. Section 3.15 of the Company Disclosure Schedule sets forth the loss runs of the Company and each subsidiary of the Company for the last five years.

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Section 3.16 Contracts . All contracts, agreements, commitments and other documents to which the Company or any of its subsidiaries is a party or by which the Company, any subsidiary of the Company, or any of their assets is in any way affected or bound, including all amendments and supplements thereto and modifications thereof, excluding those that (a) are terminable without premium or penalty upon no more than sixty (60) days notice or (b) involve in their entirety less than $50,000 and in cases of (a) and (b) are not otherwise material to the business (collectively, except as otherwise set forth in this Section 3.16 , “ Contracts ”), are listed in Section 3.16 of the Company Disclosure Schedule, are legally valid and binding and in full force and effect, and the Company and each of its subsidiaries is in compliance in all material respects with all such Contracts and neither the Company nor any subsidiary of the Company has received any notice that it is in default or breach of any of the terms thereof. The Company has previously made available for inspection by the Parent through the VDR all written Contracts, except those that are identified in Section 3.16 of the Company Disclosure Schedule as available on the SEC's EDGAR website. A summary of the terms of each oral Contract is set forth on Section 3.16 of the Company Disclosure Schedule. The Company has previously provided the Parent with copies of, and Section 3.16 of the Company Disclosure Schedule identifies, any agreement with any executive officer or other key employee of the Company or any subsidiary of the Company (A) the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving the Company or any subsidiary of the Company of the nature of any of the transactions contemplated by this Agreement, (B) providing any compensation guarantee of more than $50,000 per year or (C) providing severance benefits or other benefits after the termination of employment of such executive officer or key employee not comparable to benefits available to employees generally. Except as set forth in the engagement letter dated January 20, 2006 between the Company and Friedman, Billings and Ramsey, as amended by Amendment 1 to Engagement Letter, dated June 15, 2006, Amendment 2 to Engagement Letter, dated October 9, 2006, Amendment 3 to Engagement Letter, dated May 24, 2007 and Amendment No. 4 to Engagement Letter effective January 18, 2008, all expenses of the Company incurred and to be incurred in connection with this Agreement and the transactions contemplated hereby, including but not limited to legal

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