AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

 

EXECUTION VERSION

AGREEMENT AND PLAN OF MERGER

AMONG

ACTUANT CORPORATION,

CHC ACQUISITION, INC.,

THE CORTLAND COMPANIES, INC.

AND

THE STOCKHOLDERS’ REPRESENTATIVE

(as defined herein)

September 17, 2008

 

TABLE OF CONTENTS

 

 

i

TABLE OF CONTENTS

(continued)

 

 

ii

TABLE OF CONTENTS

(continued)

 

 

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EXHIBITS

 

SCHEDULES

 

AGREEMENT AND PLAN OF MERGER dated as of September 17, 2008 (this “ Agreement ”), among Actuant Corporation, a Wisconsin corporation (the “ Buyer ”), CHC Acquisition, Inc., a Delaware corporation (“ Acquisition Sub ”), and The Cortland Companies, Inc., a Delaware corporation (the “ Company ”, and together with the Buyer, Acquisition Sub, and the Stockholders’ Representative (as defined below) (both in its individual capacity (solely with respect to Section 6.6 ) and as a representative of the Stockholders, including, for the avoidance of doubt, in its own capacity as a Stockholder), the “ Parties ”). Capitalized terms used but not otherwise defined herein have the meanings set forth in Annex I hereto.

WHEREAS , the Company, together with each of Cortland Holding Company, a Delaware corporation (“ Cortland Holding ”), Cortland Cable Company, Inc., a New York corporation (“ Cortland Cable ”), Viking Rope Corporation d/b/a Puget Sound Rope Corporation, a Washington corporation (“ Viking Rope ”), Cortland U.K. Holdings Limited, a company incorporated under the laws of England and Wales (“ UK Holdings ”), Cortland Fibron BX Limited, a company incorporated under the laws of England and Wales (“ Fibron ”), Sanlo, Inc., a Delaware corporation (“ Sanlo ”), and Sanlo Cable Mfg. (Changshu) Inc., a Wholly Foreign-owned Enterprise organized under the laws of the People’s Republic of China (“ Sanlo China ”, together with each of Cortland Holding, Cortland Cable, Viking Rope, UK Holdings, Fibron and Sanlo, the “ Subsidiaries ” and each a “ Subsidiary ”), is engaged in the business of designing, manufacturing and distributing custom-engineered electro-mechanical cables and umbilicals, high performance synthetic ropes, and value-added steel cables and assemblies.

WHEREAS , the respective boards of directors of each of Acquisition Sub and the Company have duly approved and adopted this Agreement, the Certificate of Merger in substantially the form of Exhibit A attached hereto (the “ Certificate of Merger ”), and the proposed merger (the “ Merger ”) of Acquisition Sub with and into the Company in accordance with, and subject to, the terms and conditions of this Agreement, the Certificate of Merger and the Delaware General Corporation Law (the “ DGCL ”), whereby, among other things, one-hundred percent (100%) of the issued and outstanding shares of common stock, par value $0.01 per share (the “ Company Common Stock ”), of the Company not owned of record by the Company will be converted into the right to receive cash and/or certain securities of the Company in the manner set forth in ARTICLE II of this Agreement and the Certificate of Merger.

WHEREAS , on the date hereof, the Buyer, the Company, the Stockholders’ Representative and each of the Stockholders have entered into a certain Stockholders’ Representative and Contribution Agreement in the form attached hereto as Exhibit B (the “ Stockholders’ Transaction Agreement ”).

WHEREAS , on the date hereof, each of John Stidd, Stephen A. Breen, Randy Longerich, Neil W. McAdam, Philip Bull and Dennis C. Wolf have entered into Noncompete Agreements in substantially the forms attached hereto as Exhibits C-1 and C-2 (the “ Noncompete Agreements ”).

WHEREAS , on the date hereof, each of John Stidd, Stephen A. Breen, Randy Longerich, Neil W. McAdam, Philip Bull and Dennis C. Wolf have entered into Employment Agreements in substantially the forms attached hereto as Exhibits D-1 and D-2 (the “ Employment Agreements ”).

NOW, THEREFORE , in consideration of the premises and the mutual benefits to be derived from this Agreement and the Certificate of Merger and the representations, warranties, covenants, agreements and conditions contained herein and in the Certificate of Merger, the Parties hereby agree as follows:

ARTICLE I

GENERAL

1.1 The Merger . In accordance with, and subject to, the provisions of this Agreement, the Certificate of Merger and the DGCL, at the Effective Time, Acquisition Sub shall be merged with and into the Company, which, at and after the Effective Time, shall be and is hereinafter sometimes referred to as the “ Surviving Corporation .” Acquisition Sub and the Company are hereinafter sometimes collectively referred to as the “ Constituent Corporations .”

1.2 Effective Time of the Merger . The Merger shall become effective upon the filing by Acquisition Sub of the Certificate of Merger with the Secretary of State of the State of Delaware. The Certificate of Merger shall be executed and delivered in the manner provided under the DGCL. The date and time when the Merger shall become effective is referred to herein as the “ Effective Time .”

1.3 Effect of the Merger . Except as specifically set forth herein or in the Certificate of Merger, at the Effective Time, the identity, existence, corporate organization, purposes, powers, objects, franchises, privileges, rights, immunities, restrictions, debts, liabilities and duties (collectively, the “ Corporate Rights ”) of the Company shall continue in effect and be unimpaired by the Merger, and the Corporate Rights of Acquisition Sub shall be merged with and into the Company, which shall, as the Surviving Corporation, be fully vested therewith. At the Effective Time, the separate existence and corporate organization of Acquisition Sub shall cease, and Acquisition Sub shall be merged with and into the Surviving Corporation. From and after the Effective Time, the Surviving Corporation shall be a direct or indirect wholly-owned subsidiary of Buyer.

1.4 Charter, By-Laws, Officers and Directors of Surviving Corporation . From and after the Effective Time, (a) the certificate of incorporation of the Company shall be the certificate of incorporation of the Surviving Corporation until altered, amended or repealed as provided in the DGCL, (b) the By-laws of Acquisition Sub shall become the By-laws of the Surviving Corporation, unless and until altered, amended or repealed as provided in the DGCL, the Surviving Corporation’s certificate of incorporation or such By-laws; and (c) the officers and directors of Acquisition Sub shall become the officers and directors of the Surviving Corporation, respectively, unless and until removed or until their respective terms of office shall have expired in accordance with the DGCL or the Surviving Corporation’s certificate of incorporation or By-laws, as applicable.

 

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1.5 Authorization of the Merger, this Agreement and the Certificate of Merger . Simultaneously with the execution and delivery of this Agreement, Stockholders holding 100% of the issued and outstanding Company Common Stock shall execute a written consent in lieu of a meeting, and the Buyer, as the sole stockholder of Acquisition Sub, shall execute a written consent in lieu of a meeting, each of which written consents shall include resolutions approving and adopting the Merger, this Agreement, the Certificate of Merger and the consummation of the Transactions, including any actions necessary to approve and effect the actions contemplated by Section 1.4 , in each case as required by the DGCL. The Company, Acquisition Sub and Buyer shall each take, as promptly as practicable, all such other actions as may be necessary or advisable under the DGCL and any other applicable Law in connection with this Agreement, the Merger or the Certificate of Merger.

1.6 Closing; Closing Deliveries .

(a) The closing (the “ Closing ”) of the consummation of the Transactions, unless another date or place is agreed to by the Parties, shall take place at the offices of DLA Piper US LLP, 1251 Avenue of the Americas, New York, New York 10020, three (3) Business Days after the satisfaction or waiver (to the extent the same may be waived) of the conditions set forth in ARTICLE VII or such other date as Buyer and the Stockholders’ Representative may mutually determine (such date on which the Closing is consummated being referred to herein as the “ Closing Date ”).

(b) At the Closing, the Company and the Stockholders’ Representative shall deliver to the Buyer:

(i) counterparts of the Certificate of Merger, duly executed by the Company;

(ii) counterparts of the Escrow Agreement, duly executed by the Stockholders’ Representative and the Company;

(iii) a copy of each Organizational Document of each Acquired Entity certified as complete and correct by the secretary of the Company;

(iv) a certificate of incorporation, or its equivalent, and certificate(s) of good standing and/or existence of each Acquired Entity, as applicable, certified by an appropriate authority of the Governmental Authority issuing such certificate in the jurisdiction of such Acquired Entity’s creation, formation, or organization and in any other jurisdiction where such Acquired Entity is qualified to do business;

(v) a certificate of the Company, executed by the secretary of the Company, certifying as true and correct the following with respect to the Company: the certificate of incorporation; by-laws; and resolutions authorizing the Transactions and the execution, delivery and performance of this Agreement and the other documents contemplated hereby by the Company;

(vi) a counterpart of each General Release, duly executed by each Stockholder;

 

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(vii) a certificate, duly completed and executed by the Company, certifying that the Company is not a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code;

(viii) an executed letter agreement among Sanlo, Cortland Holding and Cortec Management III, L.L.C. terminating, other than with respect to indemnification provisions that by their terms survive termination of, the Management Advisory Agreements as of the Closing Date and confirming that no amounts or obligations are due or owed from the Company and the Subsidiaries to Cortec Management III, L.L.C. or any of its Affiliates, in form and substance satisfactory to the Buyer;

(ix) a W-9 (or UK equivalent thereof) for each Stockholder who is an employee of the Company or any Subsidiary and a Federal Employer Identification Number for each Stockholder that is an entity;

(x) one or more payoff letters, drafts of which shall have been delivered to the Buyer at least two (2) Business Days prior to the Closing Date, executed by the lenders, capital lease lessors (but not operating lease lessors), or other financing sources of the Acquired Entity Indebtedness (A) setting forth all amounts (including principal and accrued but unpaid interest) necessary to be paid to repay in full any such indebtedness through the Closing Date (in the aggregate, the “ Funded Indebtedness ”) and (B) providing that, upon payment in full of such amounts, all obligations with respect to the Acquired Entity Indebtedness owed to such lender, lessor, or other financing source will be satisfied and released, each in form and substance reasonably satisfactory to the Buyer; and

(xi) a written statement of the Stockholders’ Representative setting forth all amounts to be paid to pay in full the Transaction Costs incurred by the Acquired Entities and the Persons to whom such amounts are payable.

(c) At the Closing, the Buyer and Acquisition Sub:

(i) shall deliver, after confirmation from the Delaware Secretary of State of the effectiveness of the Certificate of Merger:

(A) the Estimated Closing Consideration, payable in accordance with Sections 2.1, 2.2 and 2.4 ;

(B) on behalf of the Acquired Entities, an aggregate amount equal to the Funded Indebtedness to the Persons named in the payoff letters delivered pursuant to Section 1.6(b)(x) ; provided, that, in the case of any Funded Indebtedness relating to Capital Lease Obligations, only to the extent the Buyer elects to pay off such Funded Indebtedness;

(C) on behalf of the Acquired Entities, an aggregate amount equal to the Transaction Costs to the Persons named in the written statement of the Stockholders’ Representative delivered pursuant to Section 1.6(b)(xi) ;

 

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(D) on behalf of the Acquired Entities, an aggregate amount equal to the Sale Bonus Obligations to the persons named in Schedule 1.6(c)(i)(D) , subject to reduction for any required withholding Taxes; and

(E) the Escrow Amount to the Escrow Agent;

(ii) a counterpart of the Escrow Agreement, duly executed by the Buyer;

(iii) certificate(s) of good standing and/or existence of each of Buyer and Acquisition Sub, as applicable, certified by an appropriate authority of the Governmental Authority issuing such certificate in their respective jurisdiction(s) of creation, formation, or organization and in any other jurisdiction where Buyer or Acquisition Sub, as applicable, is qualified to do business;

(iv) a certificate of Buyer, duly executed by the secretary of Buyer, certifying as true and correct the following with respect to Buyer: the certificate or articles of incorporation (or its equivalent); by-laws; and resolutions of the board of directors of the Buyer authorizing the Transactions and the execution, delivery and performance of this Agreement and the other documents contemplated hereby by the Buyer, as applicable;

(v) a certificate of Acquisition Sub, duly executed by the secretary of Acquisition Sub, certifying as true and correct the following with respect to Acquisition Sub: the certificate or articles of incorporation (or its equivalent); by-laws; and resolutions of the sole stockholder and board of directors of Acquisition Sub authorizing the Transactions and the execution, delivery and performance of this Agreement and the other documents contemplated hereby by Acquisition Sub, as applicable; and

(vi) a counterpart of each General Release, delivered pursuant to Section 1.6(b)(vi) duly executed by the Buyer.

1.7 Stockholders’ Representative . The Buyer shall be entitled to rely on the full power and authority of the Stockholders’ Representative to act hereunder and under any Annex, Exhibit or Schedule attached hereto on behalf of the Stockholders, and the Buyer shall not be liable to any Stockholder for any action the Buyer takes or omits to take in reliance upon such power and authority.

ARTICLE II

PAYMENT OF PURCHASE PRICE;

EFFECT OF MERGER ON CAPITAL STOCK

OF CONSTITUENT CORPORATIONS

2.1 Effect on Capital Stock . The manner and basis of converting, exchanging or canceling the shares of capital stock of, and Equity Interests in, each of the Constituent Corporations into or for cash or securities (or the contingent right to receive cash or such securities) of the Surviving Corporation shall be as follows:

(a) each share of common stock, par value $0.01 per share, of Acquisition Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock, par value $0.01 per share, of the Surviving Corporation (“ Surviving Corporation Common Stock ”);

 

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(b) each share of Company Common Stock issued and outstanding immediately prior to the Effective Time and owned directly or indirectly by the Acquired Entities (whether as treasury stock or otherwise) shall, by virtue of the Merger and without any action on the part of the holder thereof, be canceled and no consideration shall be delivered in exchange therefor;

(c) each Merger Share shall, by virtue of the Merger and without any action on the part of the holder thereof, cease to be outstanding and be converted into the right for such holder to receive, (A) at the Effective Time, an amount equal to the Per Share Closing Amount, plus (B) subject to the terms of Section 2.4 , the Per Share Additional Amount, if any, plus (C) subject to the terms of the Escrow Agreement, a conditional amount of cash equal to the Per Share Escrow Amount of any amounts payable to the Stockholders from the Escrow Fund pursuant to the terms of the Escrow Agreement;

(d) each Merger Option shall, by virtue of the Merger and without any action on the part of the holder thereof, cease to be outstanding and be converted into the right for such holder to receive, (A) at the Effective Time (except in the case of the UK Merger Options, which shall be exercised immediately after the Effective Time), an amount equal to the Per Share Closing Amount, minus (B) the Merger Option Exercise Amount with respect to such Merger Option, plus (C) subject to the terms of Section 2.4 , the Per Share Additional Amount, if any, plus (D) subject to the terms of the Escrow Agreement, a conditional amount of cash equal to the Per Share Escrow Amount of any amounts payable to the Stockholders from the Escrow Fund pursuant to the terms of the Escrow Agreement; and

(e) each authorized but unissued share of Company Common Stock immediately prior to the Effective Time shall be canceled.

2.2 Delivery of Funds; Surrender of Certificates .

(a) At the Effective Time, upon surrender by each Stockholder to the Surviving Corporation of (A) the certificate(s) which, immediately prior to the Effective Time, represented Merger Shares (each a “ Certificate ”) or (B) the Merger Options, as applicable, Buyer shall cause the Surviving Corporation to, promptly (i) pay out to an account designated by the Stockholders’ Representative, for the account of the Stockholders, at or after the Effective Time by wire transfer of immediately available funds an amount representing the Stockholder Closing Consideration and (ii) pay to the Company the portion of Closing Consideration payable to Option Holders less the Option Holdback Amount, which amount shall be paid to the Option Holders through the Company’s or its Subsidiary’s internal or third-party payroll processing system subject to applicable withholding (in accordance with Section 2.2(c) ) on the entire amount of the Closing Consideration (including the Option Holdback Amount) payable to the Option Holders. Shares of Company Common Stock represented by the Certificate or any Merger Options so surrendered shall forthwith be cancelled. No interest will be paid or accrued

 

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on any amount due pursuant to this Section 2.2(a) except as specifically provided in the Escrow Agreement. Until surrendered as contemplated by this Section 2.2 and the Certificate of Merger, each Certificate and each Merger Option shall be deemed, at and after the Effective Time, to represent only the right to receive upon such surrender cash and/or securities as contemplated by this ARTICLE II , the Certificate of Merger and the DGCL.

(b) At the Effective Time, Buyer shall deliver the Escrow Amount by wire transfer of immediately available funds to the Escrow Agent to an account designated by the Escrow Agent (the “ Escrow Fund ”).

(c) With respect to all payments or distributions to be made hereunder, Buyer and the Surviving Corporation each reserves the right to make any withholdings required by applicable Laws and to appropriately reduce the Closing Consideration payable to any Stockholders by the amount of any withholdings or payments that are required to be made by Buyer or the Surviving Corporation on behalf of such Stockholders (including, without limitation, withholding obligations of the Company arising with respect to any Merger Options). To the extent that amounts are so withheld, such withheld amounts shall be paid over to the appropriate taxing authority and treated for all purposes of this Agreement as having been paid to the Stockholder in respect of which such deduction and withholding was made.

(d) Notwithstanding the provisions of Sections 2.1(c) and 2.1(d) above, the Buyer, the Company and the Stockholders’ Representative hereby acknowledge and agree that the portion of the Closing Consideration to be received by Dennis C. Wolf pursuant to Sections 2.1(c) and 2.1(d) shall be reduced by the Wolf Indebtedness Amount and as of the Effective Time the Wolf Note shall be deemed to be satisfied and cancelled and Mr. Wolf shall have no further obligations with respect thereto. Such amount shall be treated for all purposes under this Agreement as having been paid in full to Mr. Wolf as a portion of the aggregate Per Share Closing Amount he would otherwise be entitled to.

2.3 No Further Ownership Rights in Company Common Stock .

(a) The consideration paid in respect of the surrender of Certificates in accordance with the provisions of this ARTICLE II and the Certificate of Merger shall be deemed to have been paid in full satisfaction of all rights pertaining to such shares of Company Common Stock. At and after the Effective Time, the stock transfer books of the Surviving Corporation shall be closed with respect to the capital stock of the Company, and there shall be no further registration of transfers of the Company Common Stock thereafter on the records of the Surviving Corporation. If, after the Effective Time, certificates representing shares of Company Common Stock are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this ARTICLE II and the Certificate of Merger.

(b) None of the Buyer or the Surviving Corporation or any party hereto shall be liable to any Person in respect of any amount properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.

 

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2.4 Purchase Price Adjustment .

(a) Three (3) Business Days prior to the Closing, the Stockholders’ Representative shall deliver to the Buyer a certificate signed by the Stockholders’ Representative setting forth the Company’s best estimate of the (i) Transaction Costs (“ Estimated Transaction Costs ”), (ii) Funded Indebtedness (“ Estimated Funded Indebtedness ”), (iii) Closing Cash (“ Estimated Closing Cash ”), (iv) Closing Date Working Capital, which shall be prepared in accordance with Schedule 2.4(a) (the “Estimated Closing Date Working Capital”), (v) the amount, if any, by which Estimated Closing Date Working Capital is greater than $21,300,000 (the amount of such excess shall be referred to herein as the “ Estimated Underpayment Amount ”), and (vi) the amount, if any, by which Estimated Closing Date Working Capital is less than $20,300,000 (the amount of such shortfall shall be referred to herein as the “ Estimated Overpayment Amount ”). The Buyer and the Stockholders’ Representative shall discuss the items set forth in such certificate including such calculation of the Estimated Closing Date Working Capital and the Stockholders’ Representative shall incorporate reasonable input from the Buyer into the determination of the Estimated Closing Consideration.

(b) Preparation of Closing Balance Sheet . As promptly as practicable following the Closing Date (but in no event later than sixty (60) days after the Closing Date), the Buyer shall, or shall cause the Surviving Corporation to, prepare a consolidated balance sheet (the “ Closing Balance Sheet ”) of the Company reflecting the financial position of the Acquired Entities immediately prior to the Closing Date and a statement (the “ Final Closing Date Working Capital Statement ”) setting forth the computation of the Final Closing Date Working Capital derived therefrom, which shall be prepared in accordance with Schedule 2.4(a) , the Transaction Costs, the Closing Cash and the Funded Indebtedness, each as of on the Closing Date, and shall set forth the Buyer’s proposed adjustment, if any, of the Closing Consideration as contemplated by Section 2.4(d) (the “ Notice of Adjustment ”).

(c) Review by the Stockholders’ Representative .

(i) The Buyer shall (A) provide the Stockholders’ Representative and its advisors with reasonable access to the personnel, work papers, trial balances, relevant books and records and similar materials used, and (B) give the Stockholders’ Representative reasonable advance notice of, and permit the Stockholders’ Representative and its advisors to observe, any physical inventory conducted, in connection with the preparation of the Final Closing Date Working Capital Statement.

(ii) Following receipt of the Notice of Adjustment, the Stockholders’ Representative (and its advisors) will be afforded a period of twenty (20) Business Days (the “ 20-Day Period ”) to review the Notice of Adjustment. At the end of the 20-Day Period, the Stockholders’ Representative will be deemed to have accepted the Final Closing Date Working Capital, Funded Indebtedness, Closing Cash and Transaction Costs (as set forth in the Notice of Adjustment) in its entirety, in which case such amounts will be as set forth in the Notice of Adjustment unless prior to the end of the 20-Day Period the Stockholders’ Representative delivers to the Buyer a written notice (the “ Objection Notice ”) containing a written explanation of those items set forth in the Notice of Adjustment which the Stockholders’ Representative disputes and the proposed

 

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dollar amount for each item in dispute, in which case the items identified by the Stockholders’ Representative shall be deemed to be in dispute. If the Stockholders’ Representative delivers the Objection Notice in a timely manner, then (i) to the extent that any amounts contained in the Notice of Adjustment are not disputed by the Stockholders’ Representative, the Parties shall make a determination of the Final Closing Date Working Capital, Funded Indebtedness, Closing Cash and Transaction Costs without taking into account any such dispute (the “ Undisputed Working Capital ”), and the Company or the Stockholders’ Representative (on behalf of the Stockholders), as the case may be, shall make a payment in accordance with Section 2.4(d) as if the Undisputed Working Capital, Funded Indebtedness, Closing Cash and Transaction Costs were as finally determined, and (ii) within a further period of twenty (20) Business Days commencing on the date following the termination of the 20-Day Period, the Parties and, if agreed to by the Buyer and the Stockholders’ Representative, their accountants will attempt to resolve in good faith any disputed amounts, and only such disputed amounts, and reach a written agreement (the “ Settlement Agreement ”) with respect thereto, in which case, the Final Closing Date Working Capital, Funded Indebtedness, Closing Cash and Transaction Costs shall be as set forth in the Settlement Agreement. Failing such resolution, the unresolved disputed amounts will be referred for final binding resolution to Deloitte LLP (or, in the event Deloitte LLP is unable or unwilling to serve, or, prior to the engagement thereof, if it is reasonably determined by a Party that Deloitte LLP has a conflict of interest, then an independent United States accounting or dispute resolution firm of recognized national standing, as may be mutually selected by Buyer and the Stockholders’ Representative) (the “ Arbitrating Accountants ”), the fees and expenses of which shall be borne as provided below. In such case, the Final Closing Date Working Capital, Funded Indebtedness, Closing Cash and Transaction Costs will be deemed to be as determined by the Arbitrating Accountants. Such determination (the “ Accountants’ Determination ”) shall be (A) made solely in reliance upon supporting documentation provided to the Arbitrating Accountants by the Buyer or the Stockholders’ Representative within twenty (20) days of submission of the unresolved disputed amounts to the Arbitrating Accountants, (B) in writing, (C) furnished to the Stockholders’ Representative and Buyer as soon as practicable after the items in dispute have been referred to the Arbitrating Accountants, (D) made in accordance with Schedule 2.4(b) , (E) no more favorable to Buyer than is set forth in the Notice of Adjustment and no more favorable to the Stockholders than is set forth in the Objection Notice, and (F) absent manifest error, nonappealable and incontestable by the Stockholders’ Representative, the Stockholders, the Company, the Buyer and each of their respective Affiliates and successors and not subject to collateral attack for any reason. The fees and expenses of the Arbitrating Accountants shall be paid 50% by the Buyer and 50% by the Stockholders’ Representative.

 

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(d) Adjustment .

(i) If the Final Closing Date Working Capital is greater than $21,300,000, the amount of such excess shall be referred to herein as the “ Underpayment Amount ”). If the Final Closing Date Working Capital is less than $20,300,000, the amount of such shortfall shall be referred to herein as the “ Overpayment Amount ”).

(ii) Within five (5) Business Days following the Final Determination Date, the Parties shall recalculate the Closing Consideration using (A) the Funded Indebtedness, Closing Cash and Transaction Costs as finally determined in accordance with this ARTICLE II and (B) the Final Closing Date Working Capital, the Underpayment Amount (if any) or the Overpayment Amount (if any), as the case may be (the “ Final Closing Consideration ”).

(iii) If the Final Closing Consideration is greater than the Estimated Closing Consideration, then within five (5) days of the Final Determination Date, the Surviving Corporation shall pay the difference, minus (A) any payments of Undisputed Working Capital and interest accrued thereon, if any, made by the Surviving Corporation pursuant to Section 2.4(c) , or plus (B) any payments of Undisputed Working Capital and interest accrued thereon, if any, made by the Stockholders’ Representative pursuant to Section 2.4(c) to the Stockholders’ Representative other than the portion of such payment to Option Holders, which amount shall be paid to such Option Holders (subject to Section 2.2(c) ) through the Company’s or its Subsidiary’s internal or third-party payroll processing system.

(iv) If the Final Closing Consideration is less than the Estimated Closing Consideration, then within five (5) days of the Final Determination Date, the Stockholders’ Representative shall pay the difference, minus (A) any payments of Undisputed Working Capital and interest accrued thereon, if any, made by the Stockholders’ Representative pursuant to Section 2.4(c) , or plus (B) any payments of Undisputed Working Capital and interest accrued thereon, if any, made by the Surviving Corporation pursuant to Section 2.4(c) , to the Buyer.

In the event that any Party owes or is obligated to pay any amounts pursuant to this Section 2.4 , and such Party fails to pay such amounts when due as provided in Section 2.4(d) , interest shall accrue on any and all such amounts from the date such payment is due at a rate of ten percent (10%) per annum, compounded daily, until fully paid (or at the maximum amount then permitted by applicable Law, if less).

(e) Accounting Books and Records . The Buyer agrees that, following the Closing through the Final Determination Date, it will not, and will cause the Acquired Entities not to, take any actions with respect to any accounting books or records (such as the storage or destruction thereof) on which the Final Closing Date Working Capital is to be based or derived from that would impede or delay the determination of the Final Closing Date Working Capital in the manner and utilizing the methods required by this Agreement.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Buyer that the statements contained in this ARTICLE III are correct and complete as of the date of this Agreement and as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this ARTICLE III , except as set forth in the disclosure schedule delivered by the Company to Buyer on the date hereof (the “ Schedules ”).

3.1 Corporate Status . Each of the Acquired Entities is an entity duly created, formed, or organized, validly existing, and in good standing under the Laws of the jurisdiction of its creation, formation, or organization, as the case may be. Each of the Acquired Entities is duly qualified to conduct its business as a foreign entity and is in good standing under the Laws of each jurisdiction where such qualification is required (except for any jurisdiction where the failure to be so qualified would not, individually or in the aggregate, result in a Material Adverse Effect). Each of the Acquired Entities has the requisite power and authority necessary to own, lease, or operate its properties and to carry on its businesses as presently conducted. The Stockholders’ Representative has delivered to Buyer correct and complete copies of the Organizational Documents of the Acquired Entities, as presently in full force and effect. None of the Acquired Entities is in Breach of any provision of its Organizational Documents. There is no pending or, to the Knowledge of the Company, Threatened, Action for the dissolution, liquidation, winding up, insolvency, or rehabilitation of any Acquired Entity.

3.2 No Violation. Except as set forth on Schedule 3.2 , the consummation of the Transactions will not (a) Breach in any respect or require any Consent pursuant to any Material Contract or any Permit, Law, or Order to which such Acquired Entity’s assets are subject or bound, (b) Breach in any material respect any provision of the Organizational Documents of the Acquired Entities, or (c) require any Consent of or to any Governmental Authority or any other material Consent.

3.3 Capitalization; Subsidiaries .

(a) The authorized Equity Interests of the Acquired Entities are as set forth on Schedule 3.3(a) . All of the issued and outstanding Equity Interests of the Company are held of record and beneficially owned, free and clear of any Encumbrances (other than restrictions under the Securities Act and state securities Laws and the Current Stockholders Agreement), in such amount and by such holder as set forth on Schedule 3.3(a) . All of the issued and outstanding Equity Interests of the Acquired Entities (i) have been duly authorized and are validly issued, fully paid, and nonassessable, (ii) were issued in compliance with, or pursuant to an exemption from, all applicable state, federal and other applicable securities Laws and (iii) were not issued in violation of any preemptive rights or rights of first refusal. Except as set forth on Schedule 3.3(a) , as of the date hereof, (x) no outstanding Commitments exist with respect to the Equity Interests of the Acquired Entities, (y) there are no Contracts with respect to the voting, transfer, disposition or registration of the Equity Interests of the Acquired Entities, and (z) there are no outstanding obligations of any of the Acquired Entities to redeem, repurchase, or otherwise acquire any of its Equity Interests. Schedule 3.3(a) lists the exercise price and holder of each

 

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Merger Option. The Company has delivered to the Buyer true and complete copies of all awards, warrants and other Contracts relating to any Merger Options. Except as set forth on Schedule 3.3(a), either the consummation of the Transaction or the actions described in ARTICLE II hereof Breach the terms of any award, warrant or other Contract relating to any Merger Option.

(b) The Company owns, directly or indirectly, all of the issued and outstanding Equity Interests of the Subsidiaries, free and clear of any Encumbrances (other than restrictions under the Securities Act and state securities Laws). No Acquired Company is a party to any Contract that could require an Acquired Company to sell, issue, transfer, or otherwise dispose of any Equity Interest of a Subsidiary (other than this Agreement) or otherwise restricts any such sale, transfer or disposition by the Company (as the case may be). Other than the Subsidiaries, the Company does not own or hold any Equity Interests in any Person.

3.4 Financial Statements .

(a) Set forth on Schedule 3.4(a) are true, complete and correct copies of the following financial statements (collectively, the “ Financial Statements ”):

(i) the audited consolidated balance sheets and statements of income and cash flow of the Company as of and for the fiscal years ended June 30, 2007 and June 30, 2008 (the “ Consolidated Year End Financial Statements ”); and

(ii) the unaudited consolidated balance sheet and statement of income and cash flow of the Company (the “ Interim Financial Statements ”) as of and for the one (1) month period ended July 31, 2008 (the “ Balance Sheet Date ”).

(b) The Financial Statements (i) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, except as set forth on Schedule 3.4(b) , (ii) present fairly the consolidated and consolidating financial position of the Acquired Entities at their respective dates and the consolidated and consolidating results of operations and cash flow of the Acquired Entities for the periods covered thereby, and (iii) are consistent with the books and records of the Acquired Entities, in each case except as may be indicated in the notes thereto (except with respect to the Interim Financial Statements which do not contain any notes and shall be subject to normal year-end adjustments).

(c) All of the Receivables reflected on the Interim Balance Sheet are Enforceable, represented bona fide transactions for sales actually made or services actually performed by the respective Acquired Entity, arose in the Ordinary Course of Business of the respective Acquired Entity and not out of consignment sales or sales on approval, and there are no pending or, to the Knowledge of the Company, asserted Actions, refusals to pay or other rights of setoff against any of such Receivables. To the Company’s Knowledge, all Receivables are good and collectible, not subject to set off or counterclaim other than as reserved for on the Financial Statements. Nothing contained in this Section 3.4(c) shall constitute a guarantee by the Acquired Entities of the collectibility of any Receivable.

(d) The Inventory of the Acquired Entities is of good and merchantable material, of a quality and quantity usable or saleable in the Ordinary Course of Business, subject

 

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to reserves for slow-moving and obsolete Inventory reflected on the face of the Interim Balance Sheet. Such Inventory is carried on the books and records of the Acquired Entities in accordance with GAAP applied consistent with past practice.

3.5 Subsequent Events . Except as set forth on Schedule 3.5 or on any other Schedule, as delivered on the date hereof, to this Agreement, since June 30, 2008, (i) the Acquired Entities have conducted their respective businesses only in, and have not engaged in any transaction other than in accordance with, the Ordinary Course of Business, (ii) no Acquired Entity has suffered a Material Adverse Effect and (iii) no Acquired Entity has taken any action that, if taken after the date hereof without the consent of Buyer, would constitute a violation of Section 5.4.

3.6 Liabilities. No Acquired Entity has any Liability required to be set forth on a balance sheet or in the footnotes to a financial statement or, to the Company’s Knowledge (with respect to the existence of such items and not with respect to GAAP relating to an income statement), an income statement prepared in accordance with GAAP, except for (a) Liabilities disclosed in the Schedules, (b) Liabilities reflected in the Interim Financial Statements, (c) Liabilities incurred in the Ordinary Course of Business since the Balance Sheet Date and (d) Liabilities under the executory portion of Contracts (none of which (i) relates to breach of contract or warranty, tort, infringement or violation of Law or (ii) arose out of any action, suit, claim, governmental investigation or arbitration proceeding).

3.7 Legal Compliance . Except as set forth on Schedule 3.7 , each of the Acquired Entities is and has been in compliance in all material respects with all Laws applicable to its respective assets, properties, businesses and operations, and no Action is pending or, to the Knowledge of the Company, Threatened, against any of the Acquired Entities that challenges or may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the Transactions.

3.8 Tax Matters . Except as set forth on Schedule 3.8 :

(a) Each Acquired Entity has complied with all Laws relating to Taxes, (ii) each Acquired Entity has filed all Tax Returns that it was required to file, and (iii) all such Tax Returns were true, correct and complete in all material respects. Taxes due and payable by each Acquired Entity (whether or not shown on a Tax Return) have been paid or adequate reserves have been established on the books and records of such Acquired Entity. There are no Encumbrances for Taxes (other than Taxes not yet due and payable) on any asset of any Acquired Entity.

(b) Each Acquired Entity has (i) withheld all required amounts from its employees, agents, contractors, nonresidents, and other third persons and remitted such amounts to the proper Governmental Authorities in accordance with all applicable Laws; (ii) paid all employer contributions and premiums; and (iii) filed all Tax Returns with respect to employee income Tax withholding, social security Taxes and premiums, and unemployment Taxes and premiums, all in compliance with the Code and other applicable Laws as in effect for the applicable year.

 

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(c) The Company has delivered to the Buyer (i) true, correct and complete copies of all material Tax Returns filed by each Acquired Entity since January 1, 2005 and (ii) true, correct, and complete copies of all material notices of deficiencies, material notices of proposed adjustments, material notices of assessments, material revenue agent reports, material closing agreements and any other similar material document, notice, or correspondence, in each case, that each Acquired Entity (or its representative) has received from, sent to, or entered into with the IRS or other taxing authority since January 1, 2005. No Action is pending, or to the Knowledge of the Company, is Threatened, alleging that any Acquired Entity has not properly paid Taxes or filed Tax Returns in a jurisdiction in which such Acquired Entity does not file a Tax Return.

(d) The unpaid Taxes of the Acquired Entities did not, as of the Balance Sheet Date, exceed the reserve for Tax Liability (other than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth in the Consolidated Year End Financial Statements.

(e) No Acquired Entity has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency, which waiver or extension is currently in effect.

(f) None of the Acquired Entities has ever been a member of any consolidated, combined or unitary group for federal, state, local or foreign Tax purposes (other than the group for which the Company is the parent). No Acquired Entity is liable for Taxes of any other Person (other than the group for which the Company is the parent) as a result of successor Liability, transferee Liability, joint and several Liability, contractual Liability or otherwise.

(g) No Tax audits or other administrative or court proceedings are presently in progress, or to the Knowledge of the Company Threatened with regard to any Taxes or Tax Returns of the Acquired Entities.

(h) No Acquired Entity is a party to any Tax allocation or sharing Contract.

(i) No Acquired Entity has any “excess loss accounts” with respect to any Subsidiary. No Acquired Entity has any items of income, gain, loss, expense, or deduction deferred under the intercompany transaction rules of Treasury Regulation Section 1.1502-13 (or similar provision of foreign, state or local Laws).

(j) No Acquired Entity has been, nor will be, required to include any adjustment in Taxable income for any Tax period (or portion thereof) ending after the Closing Date as a result of or pursuant to (A) Section 481 of the Code (or any similar provision of foreign, state or local Laws), (B) any “closing agreement” with any taxing authority, (C) any installment sale or open transaction disposition, or (D) any prepaid amount received on or prior to the Closing Date.

(k) No Acquired Entity has ever been a party (either as a distributing corporation, a distributed corporation or otherwise) to any transaction intended to qualify under Section 355 of the Code (or any similar provision of foreign, state or local Laws).

 

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(l) All transactions in respect of which any clearance or consent was required from any taxation authority have been entered into by the relevant Acquired Entity after such consent or clearance has been properly obtained, any application for such clearance or consent has been made on the basis of full and accurate disclosure of all relevant material facts and considerations, and all such transactions have been carried into effect only in accordance with the terms of the relevant clearance or consent.

(m) The UK Acquired Entities have duly submitted all claims, disclaimers and elections, the making of which has been assumed for the purposes of the Consolidated Year End Financial Statements and none of such claims, disclaimers or elections have been, or to the Knowledge of the Company, are likely to be challenged by the relevant tax authority.

(n) Since September 1, 2002, all transactions or arrangements made by the UK Acquired Entities have been made on fully arm’s length terms and there are no circumstances in which Section 770A and Schedule 28AA of the Income and Corporation Taxes Act 1988 could apply, causing any taxing authority in the United Kingdom to make an adjustment to the terms on which such transaction or arrangement is treated as being made for taxation purposes.

(o) Fibron is a taxable person and is duly registered for the purposes of UK Value Added Tax (“ VAT ”).

(p) Since September 1, 2002, all supplies made by Fibron are taxable supplies and Fibron has not been (nor will be) denied full credit for all input Tax by reason of the operation of Sections 25 and 26 of the Value Added Tax Act 1994 (“ VATA ”) and regulations made thereunder or for any other reasons. No VAT paid (or payable) by Fibron is not input tax as defined in Section 24 of the VATA and regulations made thereunder.

(q) For the purposes of paragraph 3(7) of Schedule 10 of the VATA, the UK Acquired Entities have not exercised the election to waive exemption from VAT (pursuant to paragraph 2 of Schedule 10 of the VATA ) in respect of any of the Leases and have no intention or obligation to exercise such an election in respect of any of the Leases.

(r) Neither entering into this Agreement nor Closing will result in the withdrawal of any stamp duty or stamp duty land Tax relief granted on or before Closing which will affect the Acquired Entities.

(s) The UK Acquired Entities are and always have been resident for Tax purposes only in the United Kingdom, and do not and have never had a branch, agency or permanent establishment outside the United Kingdom.

(t) The UK Acquired Entities have not entered into or been party to any scheme or arrangement of which the main purpose, or one of the main purposes, was the avoidance of, or the reduction in, or the deferral of, a liability to Tax in circumstances which would permit the HM Revenue & Customs to cancel any perceived Tax advantage arising out of such scheme or arrangement, and the UK Acquired Entities have not, so far as the UK Acquired Entities are aware, been party to any notifiable arrangements under Part 7 of the Finance Act 2004.

 

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(u) To the Company’s Knowledge, no UK Acquired Entity is or so far as the UK Acquired Entities are aware, will become liable to pay, reimburse or indemnify in respect of any Tax which it is not primarily liable in consequence of the failure by any other person (other than another UK Acquired Entity) to discharge that tax within any specified period, where such tax relates to a profit, income or gain, transaction, event, omission, or other circumstance arising, occurring, or deemed to arise or occur (whether wholly or partly) prior to Closing.

(v) All stampable documents, executed before completion, wherever executed (other than those which have ceased to have legal effect) in the enforcement of which any UK Acquired Entity may be interested have been duly stamped, and no such document has not been stamped by reason of it being executed and retained outside the United Kingdom.

3.9 Title to Assets. Except as set forth on Schedule 3.9 , the Acquired Entities have good and marketable title to, or a valid leasehold or sub-leasehold interest in or license for, the respective properties and tangible assets (other than real property) (the “ Assets ”) used in the conduct of their businesses, shown on the Interim Financial Statements or acquired after the date thereof, free and clear of all Encumbrances, except for (a) properties and assets disposed of in the Ordinary Course of Business since the date of the Interim Financial Statements and (b) Encumbrances securing Funded Indebtedness to be repaid at the Closing pursuant to Section 1.6(c)(i)(B) . The Assets are in good condition and repair, subject to ordinary wear and tear. The Assets are sufficient, in the aggregate, for the conduct of the business of the Acquired Entities.

3.10 Intellectual Property .

(a) Schedule 3.10(a) lists all of the Intellectual Property that is the subject of a patent application, trademark application, service mark application or copyright application, or an issued patent, copyright registration or trademark registration for which all right, title and interest is owned by the Acquired Entities. The Acquired Entities own or, to the Knowledge of the Company, have the right to use all Intellectual Property used in the operation of their businesses as presently conducted, free and clear of all Encumbrances. All patent applications, trademark applications, service mark applications, and copyright applications that are Intellectual Property are presently pending. All issued patents, trademark registrations and copyright applications that are Intellectual Property are presently in force.

(b) (i) No Acquired Entity has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any other Person’s Intellectual Property rights, and (ii) no Acquired Entity has received any written notice alleging any such interference, infringement, misappropriation, or violation (including any claim that the Company or any Subsidiary must license or refrain from using any other Person’s Intellectual Property rights). To the Knowledge of the Company, no other Person has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of the Acquired Entities, except as noted on Schedule 3.10(b) . There are no pending or, to the Knowledge of the Company, Threatened claims against any Acquired Entity or its employees or independent contractors alleging that any of the Acquired Entities’ Intellectual Property infringes on or conflicts with the rights of any other Person. Other than as set forth on Schedule 3.10(b) , each employee of the Acquired Entities who (i) is an engineer, (ii) is otherwise involved in the development or use of, or has access to, proprietary information or assets of any Acquired Entity or (iii) is an officer, manager or other senior level employee, has executed a confidentiality or invention assignment agreement.

 

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3.11 Real Property .

(a) Schedule 3.11(a) sets forth a list of all real property used by any Acquired Entity in the operation of its business since the Applicable Date indicating whether such real property is owned or leased by the Acquired Entities. Such real property, including all buildings, structures and other improvements thereon, is in good condition and repair, subject to ordinary wear and tear, and is sufficient for the operation of the business of the Company and its Subsidiaries as currently conducted. Schedule 3.11(a) contains a correct legal description of each parcel of real property owned by any Acquired Entity. With respect to such owned real property, (i) one or more Acquired Entity is the sole titleholder of record and has good and marketable indefeasible fee simple title to such owned real property and to all buildings, structures and other improvements thereon, together with all privileges, rights, easements, hereditaments and appurtenances thereunto belonging, free and clear of all Encumbrances, (ii) the Acquired Entities have not leased or otherwise granted to any Person the right to use or occupy such owned real property and (iii) there are no outstanding options, rights of first offer or rights of first refusal to purchase such owned real property or any portion thereof or interest therein. There have been no changes to the improvements to the owned real property of the Company located in Michigan City, Indiana as shown on the ALTA Survey for such property prepared by Charles Hendricks and Associates P.C. signed July 23, 2004 which would make such survey inaccurate.

(b) Schedule 3.11(b) sets forth a list of all of the leases and subleases (the “ Leases ”) and each leased and subleased parcel of real property in which an Acquired Entity has a leasehold or subleasehold interest. Such Acquired Entity holds a valid and existing leasehold or subleasehold interest under each of the Leases, free and clear of all Encumbrances, except Encumbrances imposed under the terms of any such lease. The Company has delivered to the Buyer true, correct, complete and accurate copies of each of the Leases. With respect to each Lease, other than as set forth on Schedule 3.11(b) : (i) the Lease is legal, valid, binding and Enforceable against such Acquired Entity and to the Knowledge of the Company, against the other parties thereto, (ii) such Lease is in full force and effect; (iii) the Lease will continue to be legal, valid, binding and Enforceable against such Acquired Entity and to the Knowledge of the Company, against the other parties thereto, and will be in full force and effect immediately following the Effective Time in accordance with the terms thereof; (iv) none of the Acquired Entities nor, to the Knowledge of the Company, any other party to the Lease is in material Breach thereunder, and, to the Knowledge of the Company, no event has occurred which, with notice or lapse of time, would constitute such a material Breach thereunder; (v) to the Knowledge of the Company, no other party to the Lease has repudiated any provision thereof; and (vi) no Consent of the landlords under any of the Leases is required as a result of the consummation of the Transactions. All facilities leased or subleased under any Lease are supplied with utilities and other services reasonably necessary for such Acquired Entities’ activities thereat.

 

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3.12 Contracts .

(a) Schedule 3.12(a) lists, by applicable subparts set forth below, the following Contracts to which any Acquired Entities are a party or pursuant to which any Assets are bound (the “Material Contracts”):

(i) any Contract (or group of related Contracts) for the lease of personal property to or from any Person which is reasonably expected to involve aggregate annual consideration in excess of $100,000 after Closing;

(ii) any partnership agreement or joint venture agreement, or similar Contract;

(iii) any Contract (A) pursuant to which any Acquired Entity has granted exclusivity, (B) containing covenants that restrict any Acquired Entity’s ability to freely engage in any line of business or compete with any Person or (C) that otherwise restricts the activities of any Acquired Entity;

(iv) any collective bargaining Contract;

(v) any Contract for the employment or engagement as an independent contractor of any individual providing for aggregate annual compensation to such individual reasonably expected to be in excess of $100,000 or containing severance or other material post employment benefits;

(vi) any Contract under which an Acquired Entity has advanced, loaned or guaranteed any loan in any amount to any of its Affiliates, directors, officers, or employees (or any of their Affiliates) outside the Ordinary Course of Business;

(vii) any Contract under or pursuant to which an Acquired Entity has borrowed money, guaranteed or assumed indebtedness for borrowed money, mortgaged, pledged or otherwise placed an Encumbrance on any asset or group of assets or entered into any letter of credit arrangements or Capital Lease Obligations;

(viii) any Contract under or pursuant to which an Acquired Entity has agreed to acquire any assets or make any capital expenditures in connection with, or in any way affecting, the Acquired Entities which individually or in the aggregate represent more than $100,000 of unfunded commitments with respect thereto;

(ix) any (A) Contract (other than purchase orders) with any Top Customer or Top Supplier or (B) purchase order the performance of which by any Acquired Entity or other party thereto is reasonably expected to involve consideration in excess of $250,000 after Closing; or

(x) any license, service or distribution Contracts providing for payments in an amount in excess of $75,000 or otherwise granting any material right or benefit;

 

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(xi) all licenses, agreements or other arrangements with respect to any Intellectual Property to which any of the Acquired Entities is a party, whether as licensee, licensor or otherwise (other than non-exclusive end-user licenses for commercially available prepackaged computer software generally available to the public);

(xii) all agreements and contracts containing “take or pay” provisions;

(xiii) all powers of attorney executed on behalf of any Acquired Entity;

(xiv) all Contracts with any Governmental Authority;

(xv) all Contracts containing a provision to indemnify any party or assume any tax, environmental or other Liability (other than the Company’s standard terms of indemnification set forth on Schedule 3.24 and third party purchase orders entered into in the Ordinary Course of Business);

(xvi) any other Contract (or group of related Contracts) which is outside the Ordinary Course of Business and the performance of which is reasonably expected to involve consideration in excess of $50,000.

(b) The Company has delivered to the Buyer a true, correct and complete copy of each written Material Contract (as amended to date) and a written summary of each oral Material Contract. Except as set forth on Schedule 3.12(b) , with respect to each such Material Contract:

(i) the Contract is Enforceable against each Acquired Entity party thereto and, to the Knowledge of the Company, the other party thereto;

(ii) no Acquired Entity party thereto is in Breach thereof, and no event has occurred which, with notice or lapse of time, would constitute a Breach by any such Acquired Entity under the Contract and, to the Knowledge of the Company, no other party to any Material Contract is in breach thereof or with notice or lapse of time would be in Breach thereof; and

(iii) no Acquired Entity party thereto, or to the Knowledge of the Company, the other party thereto, has repudiated any provision of the Contract.

3.13 Insurance . Schedule 3.13 contains a true and complete list of each insurance policy Contract (including policies providing property, fire, burglary, casualty, liability, and workers’ compensation coverage and bond and surety arrangements, as applicable) held by each Acquired Entity or under which the Acquired Entities or any employees or assets thereof are covered (the “ Insurance Policies ”) and sets forth (other than with respect to any health insurance policy) a claims history since the date which is three years prior to the date hereof in respect of each such Insurance Policy. No Acquired Entity is, or since the Applicable Date has been, (i) in Breach or default (including with respect to the payment of premiums or the giving of notices) with respect to its obligations under any Insurance Policy Contract or (ii) since the Applicable Date, has been denied insurance coverage. No Acquired Entity has received any notice that such policy may be cancelled or terminated or will not be renewed on substantially the same terms as are now in

 

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effect. None of such Insurance Policies will lapse or terminate as a result of the Transactions. The Acquired Entities have complied in all material respects with all provisions of the Insurance Policies. Schedule 3.13 contains a description of each pending claim under any of the Insurance Policies and whether coverage with respect thereto is in dispute.

3.14 Litigation . Except as set forth on Schedule 3.14 since the date which is three years prior to the date hereof, there have been no Actions pending or, to the Knowledge of the Company, Threatened, against or by any Acquired Entity that (a) are by, against or affect any Acquired Entity or any of their facilities or Assets or (b) would prohibit the consummation of the Transactions. No Acquired Entity is subject to any outstanding Order of any Governmental Authority that is specific to or names any Acquired Entity. There is no Action pending or, to the Knowledge of the Company, Threatened, which questions the legality or propriety of the Transactions, this Agreement or the documents, instruments, and agreements to be executed, delivered, and performed in connection herewith.

3.15 Labor; Employees . No Acquired Entity is a party to or bound by any collective bargaining Contract or any other written agreement whether with a labor union, trade union, employee representative(s), staff associates, work council or any other employee body representing workers in an Acquired Entity, nor has any Acquired Entity experienced any strikes, grievances, claims of unfair labor practices, or other collective bargaining disputes since the Applicable Date. To the Knowledge of the Company, there is no organizational effort currently being made or Threatened by or on behalf of any labor union, trade union, employee representative(s), staff association, works council or any other employee body representing workers with respect to employees of any Acquired Entity.

3.16 Employment . Except as set forth on Schedule 3.16 , (a) each Acquired Entity is and has been in compliance in all material respects with all Laws pertaining to employment, including, but not limited to, Laws governing or regarding the payment of wages or other compensation, employee benefits, employment discrimination and harassment, occupational safety and health, and any and all other applicable Laws governing or pertaining to the terms and conditions of employment, and (b) there has been no Action pending nor, to the Knowledge of the Company, Threatened against any Acquired Entity alleging any failure to so comply. Since the Applicable Date, no Acquired Entity has been in material Breach of any Contract for the employment of any individual. No Acquired Entity operating in the UK has been served, issued or sent an equal pay or discrimination questionnaire.

3.17 Employee Benefits .

(a) Schedule 3.17(a) lists each Employee Benefit Plan.

(b) Each Employee Benefit Plan that is intended to qualify under Section 401(a) of the Code has an opinion letter or determination letter from the IRS as to its qualified status under Section 401(a) of the Code on which it can rely. No facts have occurred that if known by the IRS could cause disqualification of any of those plans. To the Knowledge of the Company, no non-exempt “prohibited transaction” (as defined in Section 4975 of the Code or Section 406 of ERISA) has occurred which involves the assets of any Employee Benefit Plan and in which the Acquired Entities, any of their employees or, to the Knowledge of the

 

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Company, any trustee, administrator or other fiduciary of any trusts created under any Employee Benefit Plan has engaged which would subject an Acquired Entity to the Tax or penalty on prohibited transactions imposed by Section 4975 of the Code or the sanctions imposed under Title I of ERISA.

(c) All premiums required to be paid, all benefits, expenses and other amounts due and payable, and all contributions, transfers or payments required to be made to or under the Employee Benefit Plans will have been paid, made, or accrued for all services on or prior to the Closing Date.

(d) Except as disclosed on Schedule 3.17(d) , (i) no Employee Benefit Plan is or has ever been covered by Title IV of ERISA or subject to Section 412 of the Code, and (ii) none of the Acquired Entities has contributed to or been obligated to contribute to any plan subject to Title IV of ERISA.

(e) No Acquired Entity has maintained or contributed, or been required to contribute, to any Employee Benefit Plan providing medical, health, or life insurance or other welfare type benefits for current or future retired or terminated employees, their spouses, or their dependents (other than in accordance with Code Section 4980B).

(f) Except as set forth on Schedule 3.17(f) , neither the execution and delivery of this Agreement, nor the consummation of the Transactions will:

(i) result in any payment to be made by any Acquired Entity, including without limitation, severance, golden parachute (as defined in Section 280G of the Code), or otherwise, becoming due to any employee, director, or consultant of the Acquired Entities ; or

(ii) increase any benefits or accelerate vesting otherwise provided under any Employee Benefit Plan.

(g) Except as set forth on Schedule 3.17(g) , there is no Contract or arrangement to which any of the Acquired Entities is a party that will, individually or collectively, result in the payment of any amount that would not be deductible by reason of Section 280G (as determined without regard to Section 280G(b)(4)), 162 or 404 of the Code. No Acquired Entity is a party to any Contract or has granted any compensation, equity or award that constitutes deferred compensation that would result in an additional Tax imposed by Section 409A(a)(1)(B)(i) of the Code.

(h) There are no Actions pending or instituted against the Employee Benefit Plans other than routine claims for benefits and, to the Knowledge of the Company, since the Applicable Date, no such Action has been Threatened.

(i) No UK Acquired Entity has entered into any scheme, agreement, arrangement, obligation or commitment (whether funded or unfunded and whether legally binding or otherwise) under which such UK Acquired Entity is required to make payment of a contribution towards or other provision of relevant benefits (as “relevant benefits” is defined immediately prior to April 6, 2006 in section 612 of the Taxes Act) (including on an ex gratia

 

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basis) for the benefit of a current or former employee, officer or director of any UK Employee or a UK Employees’ dependents, and since the Applicable Date, no undertaking or assurance (whether legally binding, written or oral) has been given by any UK Acquired Entity to any Person as to the continuance or introduction of any scheme or arrangements, or increase, augmentation or improvement of any relevant benefits.

(j) Other than under the UK Pension Arrangements, no UK Acquired Entity contributes or is a party to or participates in any scheme, agreement, arrangement, obligation or commitment for the payment of any pension or other relevant benefits (as “relevant benefits” is defined immediately prior to 6th April 2006 in section 612 of the Taxes Act) to any current or former employees, officers or directors or to the UK Employees or any of their dependants.

(k) Each Acquired Entity has complied with its obligations in relation to stakeholder pension schemes as required by the Welfare Reform and Pensions Act 1999 and the Stakeholder Pension Schemes Regulations 2000 and any other related legislation.

(l) Every UK Employee who has at any time had the right to join a UK Pension Arrangement has been properly advised of that right and allowed to join a UK Pension Arrangement when so entitled.

(m) A list of all current members of the UK Pension Arrangements including employer and member contributions payable has been set forth in Schedule 3.17(m) .

(n) All contributions and other amounts payable to or in respect of the UK Pension Arrangements which have fallen due for payment have been paid and no fee, charge or expense relating to or connected with the UK Pension Arrangements has been incurred but not paid.

(o) To the Knowledge of the Company, the UK Pension Arrangements are and have at all material times been registered pension schemes within the meaning of Part 4 of the Finance Act 2004.

(p) All benefits payable under the UK Pension Arrangements are money purchase benefits within the meaning of section 181 of the Pension Schemes Act 1993 and no UK Acquired Entity nor any person with which any UK Acquired Entity is connected or of which any UK Acquired Entity is an associate (as “connected” and “associate” are defined under sections 249 and 435 of the Insolvency Act 1986) participates or has participated in any scheme, agreement or arrangement in the UK which provides benefits other than money purchase benefits (within the meaning of section 181 of the Pension Schemes Act 1993).

(q) No UK Acquired Entity has any obligation to provide an early retirement or any other benefit to any current or former employee, officer or director or any UK Employee or any of their dependants as a result of the operation of the Transfer of Undertakings (Protection of Employment Regulations 1981 and/or the Transfer of Undertakings (Protection of Employment) Regulations 2006).

 

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(r) No UK Acquired Entity is engaged or involved in any Actions in connection with the UK Pension Arrangements and, to the Knowledge of the Company, no such Action is pending or threatened and there are no facts likely to give risk to any such Action.

3.18 Environmental . Except as set forth on Schedule 3.18 :

(a) Each Acquired Entity has operated its business in compliance in all material respects with all applicable limitations, restrictions, conditions, standards, prohibitions, requirements, and obligations of Environmental Laws.

(b) The Company does not have any Environmental Liabilities. There are no actions relating to Environmental Liabilities pending nor, to the Knowledge of the Company, Threatened against any Acquired Entity relating to the operation of its business.

(c) All material permits required under applicable Environmental Laws for the operation of the business of the Acquired Entities have been obtained and are in full force and effect and no Acquired Entity is aware of any basis for revocation or suspension of, or material change in, any such environmental permits.

(d) Except as in compliance with Environmental Laws, there has been no disposal or material Release by or at the direction of any Acquired Entity of any Hazardous Materials.

(e) No Acquired Entity has received any notice of violations, non-compliance, potential responsibility or similar notifications relating to Environmental Liabilities currently pending or, to the Knowledge of the Company, Threatened, relating or pertaining to the business thereof, or any properties owned or operated by the Acquired Entities.

(f) There are no Environmental Liabilities pending nor, to the Knowledge of the Company, Threatened against any Person whose Environmental Liability any Acquired Entity has or may have assumed contractually or, to the Company’s Knowledge, by operation of Law.

3.19 Permits . Each Acquired Entity possesses all Permits that are required for the ownership of the Acquired Entities’ properties and the operation of their businesses as currently conducted, and all such Permits are in full force and effect. Schedule 3.19 sets forth a complete and accurate list of all such Permits. The Acquired Entities are in compliance in all material respects with all such Permits each of which is in full force and effect. Except as set forth on Schedule 3.19 , no Consent from any Governmental Authority is necessary for the continued validity of any Permit after the consummation of the Transactions and no such Permit will be impaired or affected by the Transaction.

3.20 Bank Accounts; Officers and Directors . Schedule 3.20 lists (a) the account numbers and names of each bank, broker, or other depository institution at which any of the Acquired Entities maintains a depository account and each Person authorized as a signatory with respect thereto and (b) each officer and director of each Acquired Entity.

 

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3.21 Affiliate Transactions . Except as set forth on Schedule 3.21 or with respect to holdings of a less than 5% interest in a publicly traded company, and except for compensation to regular employees of an Acquired Entity made in the Ordinary Course of Business, no current officer, director, stockholder or Affiliate of any of the Acquired Entities or such Affiliates’ directors, officers or stockholders (i) is now a party to any agreement, contract, commitment or transaction with any of the Acquired Entities (other than at-will employment arrangements) or has any interest in any property used by any of the Acquired Entities, (ii) is now the direct or indirect owner of an interest in any Person that is a competitor, lessor, lessee, supplier or customer of any Acquired Entity or (iii) receives income from any source which should properly accrue to an Acquired Entity.

3.22 Customers and Suppliers .

(a) Schedule 3.22(a) lists the Acquired Entities’ (a) ten (10) largest customers in terms of sales during the twelve (12) month period ended as of June 30, 2008 (“ Top Customers ”) and the total amount for which each Top Customer was invoiced by the Acquired Entities during such period, and (b) ten (10) largest suppliers during the twelve (12) month period ended as of June 30, 2008 (“ Top Suppliers ”) and the total amount for which each Top Supplier invoiced the Acquired Entities during such period, in each case on a consolidated basis.

(b) To the Knowledge of the Company, there does not exist any fact, condition or event (i) which would cause any Acquired Entity’s relationship with any Top Customer or Top Supplier to be materially and adversely different than the current relationship with such Top Customer or Top Supplier or on materially different terms, or (ii) which would materially and adversely effect any Top Customer’s ability to purchase products or services from the Acquired Entities or Top Supplier’s ability to supply products or services to the Acquired Entities. Except as set forth on Schedule 3.22(b) , the Acquired Entities do not obtain any raw materials, products, supplies or services from any supplier which cannot be readily replaced from another source.

(c) The Company has not received written notice of, nor does the Company have Knowledge of, termination or an intention to terminate the relationship with the Acquired Entities or materially decrease the rate or purchasing or supplying any products or services by a Top Customer or a Top Supplier (whether as a result of the consummation of the Transactions or otherwise).

3.23 Product Recalls . Except as set forth on Schedule 3.23 , since the date which is three years prior to the date hereof, there have been no claims asserted or, to the Knowledge of the Company, Threatened, with respect to any product recall or product liability related to any product manufactured by any Acquired Entity.

3.24 Product Warranty and Liability . Except to the extent reserved against on the Interim Financial Statements, no Acquired Entity is or will be responsible for any expressed or implied warranties or indemnities or have any Liability for replacement or damage in connection with the sale or distribution of any products or services sold by the Acquired Entities prior to the Closing Date. Except to the extent reserved against on the Interim Financial Statements, the Acquired Entities are not and will not be responsible for any Liabilities, arising from or alleged to arise

 

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from any actual or alleged injury to persons or property with respect to products or services sold or distributed by the Acquired Entities prior to the Closing Date not fully covered by insurance (other than any deductibles relating thereto). Schedule 3.24 sets forth the Acquired Entities standard terms and conditions of sale (including all warranty and indemnity provisions).

3.25 Brokers’ Fees . Except for payment to Harris Williams & Co. with respect to the consummation of the Transactions for which Buyer and Acquired Entities will not be liable, no Acquired Entity has any obligation to pay any fee, commission, or other compensation to any broker, finder, or agent retained by any Acquired Entity with respect to the Transactions.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF

THE BUYER AND ACQUISITION SUB

The Buyer and Acquisition Sub, jointly and severally, represent and warrant to the Acquired Entities that the statements contained in this ARTICLE IV are correct and complete as of the date of this Agreement and as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this ARTICLE IV , except to the extent such representations and warranties speak as of an earlier date).

4.1 Entity Status . Each of the Buyer and Acquisition Sub is an entity duly created, formed, or organized, validly existing, and in good standing under the Laws of the jurisdiction of its creation, formation, or organization, as the case may be. Each of the Buyer and Acquisition Sub is duly qualified to conduct its business as a foreign entity and is in good standing under the Laws of each jurisdiction where such qualification is required (except for any jurisdiction where the failure to be so qualified would not, individually or in the aggregate, result in a material adverse effect on the ability of the Buyer or Acquisition Sub to complete the Transactions). Each of the Buyer and Acquisition Sub has the requisite power and authority necessary to own, lease, or operate its properties and assets and to carry on its business as presently conducted.

4.2 Power and Authority; Enforceability . Each of the Buyer and Acquisition Sub has the relevant entity power and authority to execute and deliver this Agreement and to perform and consummate the Transactions. Each of the Buyer and Acquisition Sub has taken all actions necessary to authorize its execution and delivery of this Agreement, the performance of its obligations hereunder, and the consummation by it of the Transactions. This Agreement has been duly authorized, executed, and delivered by, and (assuming the due authorization, execution and delivery hereof by the other Parties hereto) is Enforceable against, each of the Buyer and Acquisition Sub.

4.3 No Violation . Except as contemplated pursuant to Section 5.3 hereof, the execution and delivery by the Buyer and Acquisition Sub of this Agreement and the performance and consummation of the Transactions by Buyer and Acquisition Sub will not (i) Breach in any material respect any Contract to which the Buyer and/or Acquisition Sub is a Party or any Permit, Law, or Order to which the Buyer and/or Acquisition Sub or any of their respective assets are subject or bound, (ii) Breach in any material respect any provision of the Organizational Documents of the Buyer or Acquisition Sub, or (iii) require any Consent.

 

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4.4 Financing . The Buyer and Acquisition Sub have sufficient currently-available cash on hand or committed financing, and will have at the Effective Time sufficient currently available cash on hand or committed financing, to consummate the Transactions and satisfy all of their payment obligations under this Agreement, including, without limitation, payment of the Closing Consideration, the Escrow Amount and the Funded Indebtedness and to provide for the working capital needs of the Surviving Corporation following the Merger.

4.5 Brokers’ Fees . None of the Buyer, Acquisition Sub or any of their respective officers, directors, stockholders or employees (or any Affiliate of any of the foregoing) has any obligation to pay any fee, commission, or other compensation to any broker, finder, or agent retained by such Person with respect to the Transactions that is a liability of the Acquired Entities prior to the Closing or any Stockholder.

4.6 Litigation . There is no Action pending or, to the knowledge of Buyer or Acquisition Sub, Threatened against Buyer or Acquisition Sub, which questions the legality or propriety of the Transactions, this Agreement or the documents, instruments, and agreements to be executed, delivered, and performed in connection herewith.

4.7 Solvency . Assuming each of the representations and warranties of the Company contained herein are true and correct and the Company complies with its covenants and other obligations set forth in this Agreement, the Surviving Corporation will be Solvent immediately following the Effective Time.

ARTICLE V

PRE CLOSING COVENANTS

The Parties agree as follows with respect to the period between the execution of this Agreement and the earlier to occur of the Closing or Termination Date:

5.1 General . Each Party agrees to take, or cause to be taken, all commercially reasonable actions and to do, or cause to be done, all things reasonably necessary or appropriate to consummate, make effective, and comply with all of the terms of this Agreement and the Transactions.

5.2 Notices and Consents . Without limitation of the provisions of Section 5.3 , as promptly as practicable following the date hereof, each Party will give any n