MERGER AGREEMENT

Exhibit 10.1

Execution Copy

MERGER AGREEMENT

by and among

ZURN INDUSTRIES, LLC,

ZURN ACQUISITION SUB INC.,

GA INDUSTRIES, INC.

and

CERTAIN SHAREHOLDERS

Dated as of December 20, 2007

TABLE OF CONTENTS

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MERGER AGREEMENT

THIS MERGER AGREEMENT is made and entered into as of December 20, 2007 (the “Merger Agreement”), by and among Zurn Industries, LLC, a Delaware limited liability company (“Buyer”), Zurn Acquisition Sub Inc., a Pennsylvania corporation and a wholly-owned subsidiary of Buyer (“Merger Sub”), GA Industries, Inc., a Pennsylvania corporation (“Seller”), and the Shareholders (as defined below) of Seller.

WITNESSETH:

WHEREAS, Seller and its Subsidiaries (as defined below) are engaged in the design, development, manufacture and sale of valves and related products primarily used in the water and sewage industry (the “Business”);

WHEREAS, Buyer is interested in acquiring Seller; and

WHEREAS, the respective boards of directors of Buyer, Merger Sub and Seller (i) have approved the acquisition of Seller by Buyer through a merger of Merger Sub with and into Seller with Seller being the surviving corporation (the “Merger”); and (ii) deem it advisable and in the best interests of their respective shareholders to consummate the Merger on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants, conditions and actions hereinafter set forth, the parties hereto, each intending to be legally bound hereby, agree as follows:

ARTICLE I

DEFINITIONS

1.01 Definitions . The terms defined in this Section 1.01 shall have the meanings set forth below.

“ Affiliate ” of a Party means a Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Party. For the purpose of this definition, the term “control” means the power to direct the management or policies of such Person, directly or indirectly, through the ownership of fifty-one percent (51%) or more of a class of voting securities, by contract or otherwise.

“ Benefit Plan ” means all “employee benefit plans” (as defined in Section 3(3) of ERISA), bonus, incentive, deferred compensation, stock or stock option plans or arrangements and other employee fringe benefit plans or arrangements, under which any employee or former employee of Seller or any Subsidiaries has any present or future right to benefits or under which Seller or any Subsidiaries has any liability for present or future payment of benefits.

“ Business ” has the meaning set forth in the Preamble.

“ Buyer ” has the meaning set forth in the Preamble.

“ Buyer Indemnities ” shall have the meaning set forth in Section 8.02(a).

“ Buyer Loss ” shall have the meaning set forth in Section 8.02(a).

“ Claiming Party ” shall have the meaning set forth in Section 8.05.

“ Closing ” shall have the meaning set forth in Section 2.03.

“ Closing Date ” shall have the meaning set forth in Section 2.03.

“ Closing Statement ” shall have the meaning set forth in Section 2.06(a).

“ Closing Working Capital ” shall have the meaning set forth in Section 2.06(a).

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

“ Contract ” means, with respect to any Person, any contract, arrangement, agreement, indenture, undertaking, debt instrument, loan, mortgage, letter of credit, instrument, lease, understanding or other commitment, to which such Person or any of its Subsidiaries is a party or by which any of them is bound or to which any of their properties is subject.

“ Deductible ” shall have the meaning set forth in Section 8.02(b).

“ Dissenting Shares ” means any shares of Seller Common Stock for which the shareholder has asserted dissenters rights under the provisions of Section 1574 of the PaBCL and who has performed every act required up to the time involved for the assertion of those rights.

“ Effective Time ” means 12:01 a.m. on the date the Merger becomes effective.

“ Environmental Condition ” shall have the meaning set forth in Section 4.01(m)(1).

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

“ Escrow Agent ” shall have the meaning set forth in Section 8.06.

“ Escrow Amount ” shall have the meaning set forth in Section 2.02.

“ Expiration Date ” shall have the meaning set forth in Section 8.06.

“ Financial Statements ” shall have the meaning set forth in Section 4.01(g).

“ Governmental Authority ” means any court, commission, regulatory agency, administrative agency, self-regulatory organization or any other federal, state or local governmental authority or instrumentality.

“ Hart-Scott-Rodino Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

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“ Hazardous Substances ” shall have the meaning set forth in Section 4.01(m)(1).

“ Indemnification Cap ” shall have the meaning set forth in Section 8.02(b).

“ Independent Expert ” shall have the meaning set forth in Section 2.06(e)(2).

“ Initial Consideration ” shall have the meaning set forth in Section 2.02(a).

“ Intellectual Property ” means (i) all registered patents, trademarks, trade names, service marks and copyrights and applications for any of the foregoing and (ii) all material unregistered trademarks, trade names, service marks or computer software (other than those relating to generally commercially available “off the shelf” computer software owned by Seller and/or used in the operation of the Business.

“ Knowledge ” shall mean (i) with respect to an individual, the actual knowledge of the individual; and (ii) with respect to Seller or its Subsidiaries, the actual knowledge, after reasonable inquiry, of Grant A. Colton, Sr., Grant A. Colton, Jr., Michael L. Colton, or, with respect to the Subsidiaries, David F. Waskiewicz.

“ Leased Property ” means the real and personal property listed in Schedule 4.01(n)(2).

“ Lien ” means any charge, mortgage, pledge, security interest, restriction, claim, lien, or encumbrance, provided, however, that the term “Lien” shall not include: (i) statutory liens for taxes to the extent that the payment thereof is not in arrears or otherwise due; (ii) encumbrances in the nature of zoning restrictions, easements, rights or restrictions of record on the uses of real property if the same do not detract from the value of the property encumbered thereby or impair the use of such property; (iii) statutory or common law liens to secure landlords, lessors or renters under leases or rental agreements confined to the premises rented to the extent that no payment or performance under any such lease or rental agreement is in arrears or is otherwise due; (iv) deposits or pledges made in connection with, or to secure payment of, worker’s compensation, unemployment insurance, old age pension programs mandated under applicable laws or other social security regulations; and (v) statutory or common law liens in favor of carriers, warehousemen, mechanics and materialmen, statutory or common law liens to secure claims for labor, materials or supplies and other like liens, which secure obligations to the extent that payment thereof is not in arrears or otherwise due, and which have been incurred in the ordinary course of business.

“ Life Insurance Policies ” means those certain life insurance policies set forth on Schedule 1.01.

“ Litigation ” shall have the meaning set forth in Section 4.01(j).

“ Material Adverse Effect ” means (i) with respect to Buyer or Seller, any effect that, individually or in the aggregate, is both material and adverse to the financial condition, results of operations, assets or business of Buyer, or Seller and its Subsidiaries taken as a whole, respectively, or (ii) a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Merger Agreement, other than any such event, change or effect caused by or resulting from (a) changes in general economic or political conditions or (b) competition or other changes in any of the industries in which the Business operates.

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“ Material Contract ” shall mean the following Contracts to which Seller or any of its Subsidiaries is a party or otherwise bound or to which its assets may be affected:

(i) each Contract which involves the performance of services or delivery of goods or materials by Seller or its Subsidiaries of an amount or value in excess of $250,000;

(ii) each Contract which involves the performance of services or delivery of goods or materials to Seller or its Subsidiaries of an amount or value in excess of $250,000;

(iii) each Contract not entered into in the ordinary course of business and that involves expenditures or receipts of Seller or its Subsidiaries in excess of $100,000;

(iv) each lease, rental or occupancy agreement, license, installment and conditional sale agreement, and other Contract affecting the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any real or personal property (except personal property leases and installment and conditional sales agreements having a value per item or aggregate payments of less than $100,000);

(v) each Contract with respect to Intellectual Property;

(vi) each collective bargaining agreement and other Contract to or with any labor union or other employee representative of a group of employees;

(vii) each joint venture, partnership, and other Contract (however named) involving a sharing of profits, losses, costs, or liabilities by Seller or its Subsidiaries with any other Person;

(viii) each Contract containing covenants that in any way purport to restrict the business activity of Seller or its Subsidiaries to engage in any line of business or to compete with any Person;

(ix) each power of attorney of Seller or its Subsidiaries that is currently effective and outstanding;

(x) each written warranty, guaranty, and or other similar undertaking with respect to contractual performance extended by Seller or its Subsidiaries other than in the ordinary course of business; and

(xi) each amendment, supplement, and modification (whether oral or written) in respect of any of the foregoing.

“ Merger ” has the meaning set forth in the Recitals.

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“ Merger Consideration ” shall have the meaning set forth in Section 2.02(a).

“ Merger Sub ” has the meaning set forth in the Preamble.

“ Net Initial Consideration ” shall have the meaning set forth in Section 2.02(b)(2).

“ Notice of Objection ” shall have the meaning set forth in Section 2.06(e)(1).

“ Old Certificates ” shall have the meaning set forth in Section 2.05.

“ Option Period ” shall have the meaning set forth in Section 5.09.

“ Owned Real Property ” shall have the meaning set forth in Section 4.01(l).

“ PaBCL ” means the Pennsylvania Business Corporation Law.

“ Parties ” means Buyer, Merger Sub, Seller and Shareholders.

“ Pennsylvania Articles of Merger ” means the Articles of Merger delivered to the Secretary of State of the Commonwealth of Pennsylvania for filing pursuant to Section 1926 of the PaBCL.

“ Permitted Liens ” shall mean those Liens as specifically set forth on Schedule 4.01(o).

“ Person ” means a corporation, an association, a partnership, a limited liability company, an organization, a business, an individual, a government or a subdivision thereof or a governmental agency.

“ Pre-Closing Period ” shall have the meaning set forth in Section 5.08.

“ Purchased Inventory ” shall have the meaning set forth in Section 2.06(a)(4).

“ Post-Closing Adjustment Amount ” shall have the meaning set forth in Section 2.06(b).

“ Reference Statement ” means the reference statement set forth as Exhibit “A”.

“ Regulatory Approvals ” means all approvals and authorizations of, filings and registrations with, and notifications to, any Governmental Authority required for the consummation of the Merger.

“ Rights ” means, with respect to any Person, securities or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, or any options, calls or commitments relating to, shares of capital stock of such Person.

“ Schedules ” means the disclosure schedules attached hereto and made a part hereof.

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“ Seller ” has the meaning set forth in the Preamble.

“ Seller Common Stock ” means the common stock, $10.00 par value per share, of Seller.

“ Selling Parties Representative ” shall have the meaning set forth in Section 8.08.

“ Seller’s Transaction Expenses ” shall have the meaning set forth in Section 2.02(b)(1).

“ Service ” means the United States Internal Revenue Service.

“ Shareholders ” means Grant A. Colton Sr., Grant A. Colton Jr. and Michael L. Colton.

“ Shareholders’ Loss ” shall have the meaning set forth in Section 8.03(a).

“ Subsidiaries ” means any corporation or other entity, the securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions of such corporation or other entity are at the time directly or indirectly owned or controlled by a Party.

“ Surviving Corporation ” means Seller after consummation of the Merger.

“ Target Working Capital ” shall have the meaning set forth in Section 2.06(b).

“ Tax ” (and, with correlative meaning, “Taxes”, “Taxable” and “Taxing”) means any federal, state, local or foreign income, gross receipts, franchise, estimated, sales, use, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profits, customs, duties, real property, real property gains, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other tax of any kind whatsoever, including any interest, penalties or additions to tax or additional amounts in respect of the foregoing.

“Working Capital Excess” means the amount by which Closing Working Capital exceeds $21.8 million, as calculated pursuant to Section 2.06 hereof.

“ Tax Return ” means any return, declaration, report, claim for refund or credit, information return or other document (including any related or supporting schedules, statements or information filed or required to be filed in connection with the determination, assessment or collection of Taxes.

1.02 Interpretation . When a reference is made in this Merger Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section of, or Exhibit or Schedule to, this Merger Agreement unless otherwise indicated. The table of contents and headings contained in this Merger Agreement are for reference purposes only and are not part of this Merger Agreement. Whenever the words “include,” “includes” or “including” are used in this Merger Agreement, they shall be deemed to be followed by the words “without limitation.” No rule of construction against the draftsperson shall be applied in connection with the interpretation or enforcement of this Merger Agreement.

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ARTICLE II

THE MERGER; CONSIDERATION

2.01 Merger . Upon satisfaction of the conditions set forth herein, at the Effective Time, Merger Sub shall merge with and into Seller in accordance with the provisions and procedures set forth herein, with Seller being the Surviving Corporation. At the Effective Time, the separate existence of Merger Sub shall cease. The Merger shall have the effects set forth in this Merger Agreement and in the applicable provisions of the PaBCL.

2.02 Merger Consideration . Subject to Sections 2.02(b) and 2.06, the aggregate consideration payable pursuant to the Merger shall be Seventy Six Million and No/100 Dollars ($76,000,000.00) (the “Merger Consideration”), of which Five Million and No/100 Dollars ($5,000,000.00) shall be deposited into escrow on the Closing Date pursuant to Section 8.06 of this Agreement (the “Escrow Amount”). Subject to the terms and conditions of this Merger Agreement, at the Effective Time:

(a) Each share of Seller Common Stock issued and outstanding immediately prior to the Effective Time (other than treasury shares and the Dissenting Shares, if any) shall become and be converted into the right to receive the Merger Consideration as follows: (i) at the Closing and subject to Section 2.02(b)(1), Five Hundred Eighty Two and 9324/10,000 Dollars ($582.9324) (the “Initial Consideration”); and (ii) at the time and subject to the terms and conditions set forth in Section 8.06 hereto, a pro rata share of the Escrow Amount (based upon the total number of shares entitled to receive Merger Consideration pursuant to Section 2.02(a)); provided , that each share of Seller Common Stock held as treasury stock immediately prior to the Effective Time shall be canceled and retired at the Effective Time and no consideration shall be issued in exchange thereof.

(b) The payment of the aggregate Initial Consideration by Buyer shall be made as follows:

(1) to the extent not paid by the Seller prior to the Closing, the amount of all obligations of Seller in connection with the negotiation and delivery of this Merger Agreement and the consummation of the transactions contemplated herein, together with a reasonable estimate of such expenses through the Closing Date and post-Closing periods, shall be paid to the provider of such services (the “Seller’s Transaction Expenses”); and

(2) the balance of the aggregate Initial Consideration (on a per share basis, the “Net Initial Consideration”) shall be paid in cash to the holders of the shares of Seller Common Stock entitled to the Merger Consideration pursuant to Section 2.02(a), subject to the terms and conditions of Section 2.05.

(c) Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be unchanged and shall remain issued and outstanding as one share of common stock of the Surviving Corporation.

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2.03 Closing . The closing hereunder (“Closing”) shall take place at the offices of Sherrard, German & Kelly, P.C. located in Pittsburgh, Pennsylvania, or such other place agreed upon by Buyer and Seller, on the closing date (the “Closing Date”) selected by Buyer and Seller which shall be the latest of:

(a) January 31, 2008;

(b) The fifth business day following receipt of the last Regulatory Approval and the expiration of any required waiting period, if all other conditions set forth in Article VI have been satisfied or waived; or

(c) Such other date as shall be mutually agreed to in writing by Buyer and Seller on which all other conditions set forth in Article VI shall have been satisfied or waived.

2.04 Rights as Shareholders; Stock Transfers . At the Effective Time, holders of Seller Common Stock shall cease to be, and shall have no rights as, shareholders of Seller, other than the right to receive (a) any dividend or other distribution permitted to be paid under Section 3.01(c) with respect to such Seller Common Stock with a record date occurring prior to the Effective Time and (b) the Merger Consideration. After the Effective Time, there shall be no transfers on the stock transfer books of Seller or the Surviving Corporation of shares of Seller Common Stock.

2.05 Exchange Procedures . After the Effective Time, each holder of an outstanding certificate or certificates theretofore representing outstanding shares of Seller Common Stock (the “Old Certificates”) shall surrender such certificate or certificates to Buyer, duly endorsed in blank or otherwise in proper form for transfer, together with a properly completed and duly executed transmittal letter in a form mutually agreed to by Buyer and Seller (collectively with the Old Certificate, the “Stock Transfer Documents”) and shall receive in exchange therefor the Net Initial Consideration for each share of Seller Common Stock. Until so surrendered and exchanged, each Old Certificate shall be deemed to represent only the right to receive for each share of Seller Common Stock the Merger Consideration without interest thereon, upon delivery of the Stock Transfer Documents.

2.06 Post-Closing Adjustment .

(a) The Statement . No later than twenty (20) days after the Closing Date, Buyer shall prepare and deliver to the Selling Parties Representative a statement (the “Closing Statement”), setting forth the “Closing Working Capital” of Seller and its Subsidiaries. For purposes of this Agreement, “Closing Working Capital” shall mean (i) the total current assets of Seller and its Subsidiaries and the cash surrender value of the Life Insurance Policies as of the Closing Date; minus (ii) the total current liabilities of Seller and its Subsidiaries and the long-term debt for borrowed money or capital lease obligations of Seller and its Subsidiaries as of the Closing Date; each calculated in the same way, using the same accounting principles, practices, methodologies and policies, as the line items comprising total current assets and total current liabilities, respectively, on the Reference Statement attached hereto as Exhibit “A”, except as follows:

(1) The fair market value of the marketable securities as of the Closing Date shall be calculated using the average of the market value of the securities on the Closing Date and the twenty-nine (29) days preceding the Closing Date;

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(2) The cash of Seller shall be increased by the amount, if any, paid by Seller or its Subsidiaries from October 1, 2007 to the Closing Date towards the purchase of any capital expenditures approved in advance by Buyer, not to exceed Two Hundred Fifty Thousand Dollars ($250,000.00);

(3) The cash of Seller shall be increased by the amount, if any, paid by Seller for any in-transit inventory not received by Seller on the Closing Date, not to exceed Two Hundred Thousand Dollars ($200,000.00);

(4) The inventory of Seller on the Closing Date shall be Two Million Five Hundred Ninety Thousand Eight Hundred Five and No/100 Dollars ($2,590,805.00). The inventory of any Subsidiaries shall be determined as of the Closing Date;

(5) The Closing Working Capital shall not include deferred income taxes or intercompany receivables of Seller and its Subsidiaries; and

(6) The Closing Working Capital shall be adjusted to the extent necessary so as to exclude any reserves, expenses and adjustments, if any, resulting from any post closing transition, restructuring, shutdown or relocation costs to be incurred by the Business solely due to management decisions of Buyer or Surviving Corporation; and any purchase accounting adjustments to the accounting books and records for financial reporting purposes which may be recorded by Seller and its Subsidiaries as a result of the transactions contemplated by this Merger Agreement.

After the Closing Date, at Buyer’s request, the Selling Parties Representative shall assist Buyer and its representatives in the preparation of the Closing Statement and shall provide Buyer and its representatives any information reasonably requested.

(b) Adjustment . If the Closing Working Capital does not exceed Twenty One Million Eight Hundred Thousand and No/100 Dollars ($21,800,000.00) (the “Target Working Capital”), then the aggregate Merger Consideration shall be decreased by the difference between the Closing Working Capital and the Target Working Capital (the “Post-Closing Adjustment Amount”); provided, however, that if the Closing Working Capital is less than Twenty One Million Five Hundred Fifty Thousand and No/100 Dollars ($21,550,000.00) the Post-Closing Adjustment Amount shall be deemed to be Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00).

(c) Payment . Within 10 days after the Closing Working Capital has been finally determined in accordance with this Section 2.06, Buyer shall be paid from the Escrow Amount an amount equal to the Post-Closing Adjustment Amount. Any such payment hereunder shall be made by wire transfer of immediately available funds to an account or accounts designated in writing by Buyer.

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(d) Objection; Dispute Resolution .

(1) Unless the Selling Parties Representative notifies Buyer in writing within ten (10) days after Buyer’s delivery of the Closing Statement of any objection to any component of the computation of the Closing Working Capital set forth therein (the “Notice of Objection”), such computation shall be final and binding. During such 10-day period, the Selling Parties Representative shall be permitted to review during normal business hours as he shall reasonably request the books, records and working papers of Buyer and Surviving Corporation relating to the Closing Statement. Any Notice of Objection shall specify in reasonable detail the basis for the objections set forth therein.

(2) If the Selling Parties Representative provides the Notice of Objection to Buyer within such 10-day period, Buyer and the Selling Parties Representative shall, during the 30-day period following Buyer’s receipt of the Notice of Objection, attempt in good faith to resolve the shareholders’ objections. During the 30-day period following Buyer’s receipt of the Notice of Objection, Buyer and its representatives shall be permitted to review during normal business hours as they shall reasonably request the working papers of the Selling Parties Representative relating to the Notice of Objection and the basis therefore. If Buyer and the Selling Parties Representative are unable to resolve all such objections within such 30-day period, the matters remaining in dispute shall be submitted to a third party mutually agreeable to the Buyer and Seller (the “Independent Expert”) to resolve the disputed matters. Buyer and the Selling Parties Representative shall instruct the Independent Expert to render its reasoned written decision as promptly as practicable but in no event later than 60 days after its selection. The resolution of disputed items by the Independent Expert shall be final and binding, and the determination of the Independent Expert shall constitute an arbitral award that is final, binding and non-appealable and upon which a judgment may be entered by a court having jurisdiction thereover. The fees and expenses of the Independent Expert shall be borne 50% by Buyer and 50% by the shareholders with the Shareholders’ portion being paid out of the Escrow Fund.

2.07 Dissenting Shares . Notwithstanding anything in this Merger Agreement to the contrary, shares of Seller Common Stock which are issued and outstanding immediately prior to the Effective Time and which are Dissenting Shares shall not be converted into or be exchangeable for the right to receive the Merger Consideration unless and until the holder thereof shall fail to perfect his or her right to dissent or shall have effectively withdrawn or lost such right under the PaBCL, as the case may be. If such holder shall have failed to perfect his right to dissent or shall have effectively withdrawn or lost such right, each of his or her shares of Seller Common Stock shall thereupon be deemed to have been converted into, at the Effective Time, the right to receive the Merger Consideration in accordance with the terms and conditions of this Article II. Shares of Seller Common Stock with respect to which a holder has made a proper demand in accordance with Section 1574 of the PaBCL shall not be converted into any portion of the Merger Consideration provided for in Section 2.02 of this Merger Agreement, but rather shall be converted into a right to receive the fair cash value of such shares under Section 1577 of the PaBCL.

2.08 Articles of Incorporation; Bylaws . At the Effective Time, the articles of incorporation and bylaws of Merger Sub as in effect immediately prior to the Effective Time shall be the articles of incorporation and bylaws of the Surviving Corporation, except that Article I of the articles of incorporation will be amended to read “The name of the corporation is GA Industries, Inc.”

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2.09 Directors and Officers . The directors and principal officers of Merger Sub immediately prior to the Effective Time shall be the directors and principal officers of the Surviving Corporation from and after the Effective Time. The board of directors of the Surviving Corporation may, from time to time, appoint such other officers as permitted by the bylaws of the Surviving Corporation.

ARTICLE III

FORBEARANCES

3.01 Forbearances of Seller . From the date hereof until the earlier of the termination of this Merger Agreement or the Effective Time, except as expressly contemplated by this Merger Agreement or the Schedules and except as set forth on Schedule 3.01, without the prior written consent of Buyer, Seller and its Subsidiaries will not:

(a) Ordinary Course . Except as otherwise required by any Governmental Authority, conduct the business of Seller and its Subsidiaries other than in the ordinary and usual course consistent with past practices.

(b) Capital Stock . (1) Issue, sell or otherwise permit to become outstanding, or authorize the creation of, any additional shares of Seller Common Stock or any Rights with respect to Seller Common Stock, (2) permit any additional shares of Seller Common Stock to become subject to new grants of employee or director stock options, other Rights or similar stock-based employee rights, or (3) effect any recapitalization, reclassification, stock split or like change in capitalization.

(c) Dividends, Etc . Make, declare, pay or set aside for payment any dividend, other than dividends from wholly owned Subsidiaries to Seller, or declare or make any distribution on any shares of its capital stock or split, combine, redeem or reclassify any shares of its capital stock.

(d) Compensation; Employment Contracts; Etc . Enter into, amend, modify, renew or terminate any material employment, consulting or severance Contract with any director, officer or employee of Seller or its Subsidiaries, to grant any salary, wage or other increase or increase any employee benefit (including incentive or bonus payments) or take any action that would entitle any employee to receive severance pay prior to the Effective Time, except (1) for normal general increases in salary or bonuses to individual employees in the ordinary course of business consistent with past practice, (2) for other changes that are required by applicable law or by any Governmental Authority, or (3) to satisfy Contracts existing on the date hereof and which are identified on Schedule 3.01.

(e) Benefit Plans . Enter into, modify or terminate any material Benefit Plan, including taking any action that accelerates the vesting or exercisability of or the payment or distribution with respect to compensation or benefits payable thereunder, except, in each such case, (1) as may be required by applicable law or by any Governmental Authority or (2) to satisfy Contracts listed on Schedule 3.01(e) existing on the date hereof.

(f) Dispositions . Sell, transfer, mortgage, lease, encumber or otherwise dispose of or discontinue any material portion of its assets or business except in the ordinary course of business or as may be required by applicable law or by any Governmental Authority.

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(g) Acquisitions . Except (1) pursuant to Contracts existing on the date hereof, (2) for short-term investments for cash management purposes, or (3) otherwise in satisfaction of debts previously contracted in good faith, neither Seller nor any of its Subsidiaries will acquire a material portion of the assets or properties of another Person in any one transaction or a series of related transactions.

(h) Governing Documents . Amend Seller’s articles of incorporation or bylaws or the articles of incorporation or bylaws of any of Seller’s Subsidiaries.

(i) Adverse Actions . Knowingly take any action that is intended or is reasonably likely to result in (A) any of the conditions to the Merger set forth in Article VI not being satisfied or (B) a material breach of any provision of this Merger Agreement; except, in each case, as may be required by applicable law or by any Governmental Authority.

(j) Capital Expenditures/Contracts . Make any capital expenditures in excess of $250,000 in the aggregate or enter into any multi-year Contracts in excess of $500,000 or which contain liquidated damage or penalty provisions.

(k) Indebtedness . Other than in the ordinary course of business consistent with past practice, (1) incur any indebtedness for borrowed money except under existing credit facilities, (2) assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other Person or (3) cancel, release, assign or modify any material amount of indebtedness of any other Person.

(l) Accounting Methods . Implement or adopt any change in the accounting principles, practices or methods used by Seller and its Subsidiaries.

(m) Commitments . Agree or commit to do, or enter into any Contract regarding, anything that would be precluded by clauses (a) through (i) without first obtaining Buyer’s consent.

(n) Working Capital . Notwithstanding any other provision herein, neither Seller nor its Subsidiaries shall make any expenditure, or commit to make any expenditure, between the date of this Agreement and the Closing which would reduce Closing Working Capital without the prior written consent of Buyer unless such action is (i) in the ordinary course of business for Seller or any of the Subsidiaries, as the case may be, and (ii) involves an expenditure, whether alone or in the aggregate with all other expenditures, of less than $100,000.

(o) Reports . From the date of this Agreement through the Closing, Seller shall promptly provide Buyer such information as Buyer shall request on a weekly basis with respect to the prior week’s business, operations, cash flows, changes in values and nature of assets and liabilities and related information. Seller expressly acknowledges that this provision is for the purpose of permitting Buyer to evaluate the information necessary to

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make any determinations applicable to its rights pursuant to Section 7.01(e) hereof, and shall not create any additional obligations or liabilities on the part of Buyer to Seller or its Subsidiaries.

3.02 Forbearances of Buyer and Merger Sub . From the date hereof until the earlier of the termination of this Merger Agreement or the Effective Time, except as expressly contemplated by this Merger Agreement or the Schedules, without the prior written consent of Seller, each of Buyer and Merger Sub will not knowingly take any action that is intended or is reasonably likely to result in (A) any of the conditions to the Merger set forth in Article VI not being satisfied or (B) a material breach of any provision of this Merger Agreement; except, in each case, as may be required by applicable law or by any Governmental Authority.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

4.01 Representations and Warranties of Seller and Shareholders . Each of Seller (prior to the Effective Time) and the Shareholders severally and not jointly, represents and warrants to Buyer and Merger Sub as follows:

(a) Organization . Seller is a corporation duly organized and validly subsisting under the laws of the Commonwealth of Pennsylvania, and is duly qualified to do business and is in good standing in all the jurisdictions where its ownership or leasing of property or assets or the conduct of its business requires it to be so qualified, except for such jurisdictions where the failure to be so qualified or in good standing would not reasonably be expected to have Material Adverse Effect on the business of Seller.

(b) Capitalization . As of the date hereof, the authorized capital stock of Seller consists solely of 500,000 shares of common stock having $10.00 par value per share, of which 121,798 shares are issued and outstanding and 35,802 shares are held in the treasury of Seller. Schedule 4.01(b) sets forth a true and correct list of current issued and outstanding shares of Seller Common Stock as of the date of this Agreement, including the name of the holder of Seller Common Stock and the number of shares held by such Person. All issued and outstanding shares of Seller Common Stock have been duly authorized and are validly issued, fully paid and nonassessable, and were not issued in violation of any preemptive rights. There are no shares of Seller Common Stock authorized and reserved for issuance and the Seller does not have any Rights issued or outstanding with respect to any of its capital stock, and Seller does not have any commitment to authorize, issue or sell any of its capital stock or Rights, except pursuant to this Merger Agreement.

(c) Subsidiaries . (1) (A) Seller has disclosed on Schedule 4.01(c) a list of all its Subsidiaries together with the jurisdiction of organization of each such Subsidiaries, (B) Seller owns, directly or indirectly, all the issued and outstanding equity securities of each of its Subsidiaries, (C) no equity securities of any of its Subsidiaries are or may become required to be issued by reason of any Rights, and (D) all the equity securities of each such Subsidiaries held by Seller or its Subsidiaries are fully paid and nonassessable and are owned by Seller or its Subsidiaries free and clear of any Liens except Permitted Liens.

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(2) Seller has disclosed on Schedule 4.01(c) a list of all equity securities or similar interests of any Person, or any interest in a partnership or joint venture of any kind owned beneficially, directly or indirectly by it, except marketable securities.

(3) Each of Seller’s Subsidiaries has been duly organized and is validly existing and in good standing under the laws of the jurisdiction of its organization, and is duly qualified to do business and in good standing in all the jurisdictions where its ownership or leasing of property or assets or the conduct of its business requires it to be so qualified except for such jurisdictions where the failure to be so qualified or in good standing would not reasonably be expected to have a Material Adverse Effect on the business of such Subsidiaries.

(4) Schedule 4.01(c) contains a list of the names of each entity or D/B/A under which the Seller, either directly or indirectly, has conducted any of the Business since 1995.

(d) Corporate Power . Each of Seller and its Subsidiaries has the requisite power and authority to carry on its business as it is now being conducted and to own all its properties and assets.

(e) Authority for Transactions .

(1) Seller has the requisite corporate power and authority, and has taken all corporate action necessary, in order (A) to authorize the execution and delivery of, and performance of its obligations under, this Merger Agreement and (B) subject only to receipt of the approval of this Merger Agreement by the requisite holders of the outstanding shares of Seller Common Stock, to consummate the Merger. This Merger Agreement is a valid and legally binding obligation of Seller, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and other laws affecting the enforceability of creditors’ rights generally and the discretion of courts in granting or denying equitable remedies.

(2) Each Shareholder has the requisite power and authority to execute, deliver and perform his, her or its obligations under this Merger Agreement. This Merger Agreement is a valid and legally binding obligation of each Shareholder, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and other laws affecting the enforceability of creditors’ rights generally and the discretion of courts in granting or denying equitable remedies.

(f) Consents or Approvals; No Defaults . Except as set forth in Schedule 4.01(f):

(1) No consents or approvals of, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by Seller or any of its Subsidiaries in connection with the execution, delivery or performance by Seller of this Merger Agreement, or to consummate the Merger and the other transactions contemplated hereby, except for (A) the filing of applications and notices pursuant to the Hart-Scott-Rodino Act with respect to the Merger and the expiration or termination of the waiting period related thereto and (B) the filing of the Pennsylvania Articles of Merger.

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(2) Subject to receipt of the Regulatory Approvals, and expiration or termination of the waiting period, referred to in the preceding paragraph, the execution, delivery and performance of this Merger Agreement and the consummation of the transactions contemplated hereby do not and will not (A) to our Knowledge, constitute a material breach or violation of, or a material default under, or give rise to any Lien, any acceleration of remedies or any right of termination under, any material law, regulation, permit, license or order, or any Material Contract, to which Seller or any of its Subsidiaries or properties is subject or bound; or (B) constitute a breach or violation of, or a default under, the Seller’s articles of incorporation or bylaws; or (C) cause any change in control payment to be due and payable.

(g) Financial Statements . (1) Copies of reviewed financial statements for Seller and its Subsidiaries for the fiscal years ended May 31, 2005, 2006 and 2007, and non-reviewed financial statements for and as of the periods ended September 30, 2007, have been previously provided to Buyer (collectively, the “Financial Statements”). Each of the balance sheets contained in the Financial Statements (including the related notes and schedules thereto) fairly presents in all material respects the financial position of Seller and its Subsidiaries as of its date, and each of the statements of operations and changes in stockholders’ investment and cash flows or equivalent statements in the Financial Statements (including any related notes and schedules thereto) fairly presents in all material respects the results of operations, changes in stockholders’ investment and changes in cash flows, as the case may be, of Seller and its Subsidiaries for the periods to which they relate, consistently applied during the periods involved, except in each case as may be noted therein. The Financial Statement have not been prepared in accordance with “generally accepted accounting principles.”

(2) Except as set forth on the Financial Statements, there is no outstanding indebtedness of Seller and its Subsidiaries for borrowed money and capital lease obligations, including, without limitation, the aggregate principal amount of borrowing under any credit arrangements or lines of credit or contingent liabilities relating to borrowed money and capital lease obligations. As of the date hereof, there is not, and as of the Closing Date there will not be, any new indebtedness of Seller or its Subsidiaries for borrowed money or capital lease obligations except as incurred with the written consent of Buyer except advances under existing lines of credit or contingent liabilities. Neither Seller nor any of its Subsidiaries guaranties any material indebtedness of any Person other than of Seller or any of its Subsidiaries.

(3) Except as set forth on Schedule 4.01(g), Seller and its Subsidiaries have no actual liabilities in excess of $100,000 other than liabilities (i) to the extent set forth in the September 30, 2007 Financial Statements; or (ii) incurred in the ordinary course of business since September 30, 2007.

(h) Absence of Certain Events . Except as set forth in Schedule 4.01(h) or other Schedules attached hereto, from May 31, 2007 through the date of this Agreement, Seller and its Subsidiaries have conducted the Business in the ordinary and usual course consistent with past practice and there has not been in any material respect:

(1) Any event, development or state of circumstance or fact that, individually or taken together with all other facts, events and circumstances (described in any paragraph of Section 4.01 or otherwise), has had or is reasonably likely to have a Material Adverse Effect with respect to Seller or relating to the Business.

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(2) Any change in the articles of incorporation or bylaws of Seller or any of its Subsidiaries or any declaration or payment of distributions with respect to the Seller Common Stock or the capital stock of any of its Subsidiaries or redemption or repurchase of any such shares.

(3) Any change in accounting policies or practices by Seller or any of its Subsidiaries.

(4) Any capital expenditures in excess of $250,000 in the aggregate.

(5) Any creation or incurrence of any Lien on any of the assets of Seller or any of its Subsidiaries except Permitted Liens.

(6) Any payment or increase by Seller or any of its Subsidiaries of any bonuses, salaries or other compensation to any shareholder, director, officer or, except in the ordinary course of business, employee, or the entry into any employment, severance, or similar agreement or arrangement with any director, officer or employee, except, in each such case, (a) as may be required by applicable law or by any Governmental Authority, (b) to satisfy Contracts existing on the date hereof, or (c) in the ordinary course of business.

(7) Any sale (other than sales of inventory and obsolete or equipment or machinery sold in the ordinary course of business), lease, or other disposition of any asset or property of Seller or any of its Subsidiaries, or damages to or destruction thereof, for which the aggregate proceeds thereof, or payments or repair or replacement cost therefore, exceeds $100,000.

(8) Any incurrence by Seller or any of its Subsidiaries of any indebtedness for borrowed money in excess of $100,000, in the aggregate, but not including any draws on existing lines of credit, or any assumption, guarantee, endorsement, or the cancellation or waiver of the right to receive by Seller or any of its Subsidiaries of any obligations of any other Person in excess of $100,000, other than trade debt and drawings under the existing lines of credit consistent with past practice.

(9) Any transactions or arrangements entered into, including modifications to existing transactions and arrangements, with employees, offic