Exhibit (d)(iii) EXECUTION VERSION AGREEMENT AND PLAN OF MERGER BY AND AMONG STEEL PARTNERS II, L.P., BZ ACQUISITION CORP. AND BAIRNCO CORPORATION DATED AS OF FEBRUARY 23, 2007TABLE OF CONTENTS Page ARTICLE I TERMS OF THE MERGER................................................2 1.1. The Offer............................................................2 1.2. Company Actions......................................................4 1.3. Directors of the Company.............................................5 1.4. The Merger...........................................................6 1.5. The Closing; Effective Time..........................................6 1.6. Conversion of Securities.............................................7 1.7. Tender of and Payment for Certificates...............................7 1.8. Options and Restricted Stock.........................................9 1.9. Dissenting Shares...................................................10 1.10. Certificate of Incorporation and Bylaws.............................10 1.11. Directors and Officers..............................................10 1.12. Other Effects of Merger.............................................11 1.13. Additional Actions..................................................11 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................11 2.1. Due Organization and Good Standing..................................12 2.2. Capitalization......................................................12 2.3. Authorization; Binding Agreement....................................14 2.4. Governmental Approvals..............................................14 2.5. No Violations.......................................................14 2.6. SEC Filings; Company Financial Statements...........................15 2.7. Absence of Certain Changes..........................................16 2.8. Absence of Undisclosed Liabilities..................................17 2.9. Permits.............................................................18 2.10. Litigation..........................................................18 2.11. Material Contracts..................................................18 2.12. Intellectual Property...............................................18 2.13. Employee Benefit Plans..............................................19 2.14. Taxes and Returns...................................................21 2.15. Finders and Investment Bankers......................................21 2.16. Fairness Opinion....................................................22 2.17. Vote Required; DGCL Section 203.....................................22 2.18. Environmental Matters...............................................22 2.19. Schedule 14D-9; Offer Documents; and Proxy Statement................23 2.20. Rights Plan.........................................................23 ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................23 3.1. Due Organization and Good Standing..................................23 3.2. Authorization; Binding Agreement....................................24 3.3. Governmental Approvals..............................................24 3.4. No Violations.......................................................24 3.5. Finders and Investment Bankers......................................25 3.6. Disclosures.........................................................25 i 3.7. Financing...........................................................26 3.8. Litigation..........................................................26 3.9. No Prior Activities.................................................26 ARTICLE IV ADDITIONAL COVENANTS OF THE COMPANY..............................26 4.1. Conduct of Business of the Company..................................26 4.2. Notification of Certain Matters.....................................29 4.3. Access and Information..............................................29 4.4. Special Meeting; Proxy Statement....................................30 4.5. Reasonable Efforts..................................................31 4.6. Public Announcements................................................31 4.7. Compliance..........................................................31 4.8. No Solicitation.....................................................32 4.9. SEC and Stockholder Filings.........................................34 4.10. State Takeover Laws.................................................34 ARTICLE V ADDITIONAL COVENANTS OF PURCHASER.................................34 5.1. Notification of Certain Matters.....................................34 5.2. Reasonable Efforts..................................................35 5.3. Compliance..........................................................35 5.4. Indemnification.....................................................35 5.5. Public Announcements................................................37 5.6. Employee Matters....................................................37 ARTICLE VI CONDITIONS.......................................................37 6.1. Conditions to Each Party's Obligations..............................37 6.2. Condition to Obligations of Purchaser...............................38 6.3. Frustration of Conditions...........................................38 ARTICLE VII TERMINATION AND ABANDONMENT.....................................38 7.1. Termination.........................................................38 7.2. Effect of Termination...............................................39 7.3. Fees and Expenses...................................................39 ARTICLE VIII MISCELLANEOUS..................................................41 8.1. Confidentiality.....................................................41 8.2. Amendment and Modification..........................................42 8.3. Waiver of Compliance; Consents......................................42 8.4. Survival............................................................42 8.5. Notices.............................................................42 8.6. Binding Effect; Assignment..........................................43 8.7. Governing Law.......................................................43 8.8. Counterparts........................................................44 8.9. Interpretation......................................................44 8.10. Entire Agreement....................................................44 8.11. Severability........................................................45 8.12. Specific Performance................................................45 8.13. Attorneys' Fees.....................................................45 8.14. Third Parties.......................................................45 ii AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger (this "AGREEMENT") is made and entered into as of February 23, 2007, by and among Steel Partners II, L.P., a Delaware limited partnership ("PURCHASER"), BZ Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Purchaser ("MERGER SUB"), and Bairnco Corporation, a Delaware corporation (the "COMPANY"). WITNESSETH: A. The respective Boards of Directors or other governing body or entity of Merger Sub, Purchaser and the Company deem it advisable that Purchaser acquire the Company upon the terms and subject to the conditions provided for in this Agreement. B. Merger Sub has outstanding a cash tender offer (the "EXISTING OFFER", and, as amended from time to time in accordance with this Agreement, the "OFFER") to purchase and acquire all shares of the issued and outstanding common stock, par value $0.01 per share (the "COMMON STOCK"), and the associated preferred stock purchase rights (the "RIGHTS", and, together with the shares of Common Stock, the "SHARES"), of the Company, on the terms and subject to the conditions set forth in the Offer to Purchase, dated June 22, 2006 (together with all amendments and supplements thereto, the "OFFER TO PURCHASE"). C. The Board of Directors of the Company (the "BOARD") has unanimously approved the Agreement, the Offer and the Merger (as defined below), and the Board has determined that such approval is sufficient to render inapplicable to this Agreement, the Offer, the Merger and the other transactions contemplated by this Agreement the restriction against the parties hereto, or any of their affiliates, engaging in any business combination as set forth in Section 203 of the Delaware General Corporation Law ("DGCL") and has determined that this Agreement, the Offer and the Merger and the other transactions contemplated hereby and thereby are advisable to the Company and its stockholders, and has resolved to recommend that holders of Shares accept the Offer, tender their Shares to Merger Sub pursuant to the Offer and adopt this Agreement. D. The Board of Directors or other governing body or entity of each of Purchaser (on its own behalf and as the sole stockholder of Merger Sub), Merger Sub and the Company have each approved this Agreement and the merger of Merger Sub with and into the Company (the "MERGER"), with the Company continuing as the surviving corporation in the Merger in accordance with the DGCL and, in each such case, upon the terms and conditions set forth in this Agreement. E. The Board has declared a quarterly cash dividend of $.10 per Share (the "DIVIDEND") which will be payable to the stockholders of the Company of record on the close of business on March 5, 2007 (the "DIVIDEND RECORD DATE"), and has approved the payment of one-time bonuses to each officer, director or employee of the Company who owns any unexercised options to purchase stock of the Company as of the close of business on the Dividend Record Date, whether or not such options are currently exercisable or vested, to account for the Dividend which would not otherwise be payable to such optionholders. 1 F. Concurrently with the execution and delivery of this Agreement and as a condition and inducement to Purchaser's willingness to enter into this Agreement, Purchaser and certain executive officers and directors of the Company (the "STOCKHOLDERS") are entering into a Tender and Support Agreement in the form attached hereto as EXHIBIT A (the "TENDER AND SUPPORT AGREEMENT") pursuant to which such Stockholders are agreeing to take certain actions to support the transactions contemplated by this Agreement. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I TERMS OF THE MERGER 1.1. THE OFFER. (a) Promptly following the execution and delivery of this Agreement, Purchaser shall amend, and Purchaser shall cause Merger Sub to amend, the Existing Offer to increase the purchase price for the Offer to $13.50 per Share (such amount or any greater amount per Share paid pursuant to the Offer being hereinafter referred to as the "OFFER PRICE"), subject to any applicable withholding for Taxes (as such term is defined in Section 2.14(d)), net to the seller in cash. For the avoidance of doubt, the parties hereto agree that restricted stock of the Company ("RESTRICTED STOCK") may be tendered in the Offer and be acquired by Merger Sub pursuant to the Offer. (b) Provided that this Agreement shall not have been terminated in accordance with Section 7.1, Purchaser shall amend, and Purchaser shall cause Merger Sub to amend, the Offer to Purchase as soon as practicable after the date hereof, but in no event later than five (5) business days (as defined in Rule 14d-1(g)(3) of the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the "EXCHANGE ACT")) from the date of this Agreement, to reflect the terms set forth in this Agreement, the Minimum Condition and the other conditions set forth in Annex A hereto and other related terms and Purchaser and Merger Sub shall cause the Offer to remain open for a period through March 16, 2007 (the "EXPIRATION DATE"), unless extended pursuant to the terms of this Agreement. The obligation of Merger Sub to accept for payment and to pay for any Shares validly tendered and not withdrawn prior to the expiration of the Offer (as it may be extended in accordance with the requirements of this Section 1.1(b)) shall be subject only to the satisfaction (or, in the case of clause (ii) below, the satisfaction or waiver by Purchaser or Merger Sub) of the following conditions: (i) there being validly tendered and not withdrawn prior to the expiration of the Offer that number of shares of Common Stock which, together with any shares of Common Stock then owned by Purchaser, Merger Sub or any affiliates thereof, represents at least a majority of the total number of shares of Common Stock outstanding on a fully-diluted basis (the "MINIMUM CONDITION"); and (ii) the other conditions set forth in Annex A hereto. Subject to the prior satisfaction of the Minimum Condition and the satisfaction or waiver by Purchaser or Merger Sub of the other conditions of the Offer set forth in Annex A hereto, Merger Sub shall consummate the Offer in accordance with its terms and accept for payment and pay for all Shares tendered and not withdrawn promptly following the acceptance of Shares for payment pursuant to the Offer. The Offer shall be made by means of the Offer to 2 Purchase. Merger Sub expressly reserves the right to waive any of the conditions set forth in Annex A (other than the Minimum Condition), to increase the Offer Price and to make any other changes in the terms of the Offer; PROVIDED, HOWEVER, that Merger Sub shall not, and Purchaser shall cause Merger Sub not to, decrease the Offer Price, change the form of consideration payable in the Offer, decrease the number of Shares sought in the Offer, impose additional conditions to the Offer, extend the Offer beyond the Expiration Date, purchase any Shares pursuant to the Offer that when added to Shares owned by Purchaser and its affiliates would represent less than the Minimum Condition or amend any other term or condition of the Offer in any manner adverse to the holders of the Shares, in each case without the prior written consent of the Company (such consent to be authorized by the Board or a duly authorized committee thereof). Notwithstanding the foregoing, Merger Sub may, without the consent of the Company, prior to the termination of this Agreement, (i) if, at any scheduled expiration of the Offer any of the conditions to Merger Sub's obligation to accept Shares for payment (including, without limitation, the Minimum Condition) shall not be satisfied or waived, extend the Offer beyond the then applicable expiration date thereof for a time period reasonably necessary to permit such condition to be satisfied in increments of not more than five business days each, but in no event shall such extensions exceed an aggregate of 20 business days, or (ii) extend the Offer for any period required by any rule, regulation or interpretation of the United States Securities and Exchange Commission ("SEC"), or the staff thereof, applicable to the Offer, or (iii) if, at any scheduled expiration of the Offer, the number of shares of Common Stock that shall have been validly tendered and not withdrawn pursuant to the Offer, together with any shares of Common Stock then owned by Purchaser, Merger Sub or any affiliates thereof, satisfies the Minimum Condition but represents less than 90% of the shares of Common Stock outstanding, extend the Offer (one or more times) for an aggregate additional period of not more than twenty (20) business days. Merger Sub may also, without the consent of the Company, in lieu of extending the Offer pursuant to clause (iii) above, make available a subsequent offering period in accordance with Rule 14d-11 under the Exchange Act of not less than ten business days nor more than 20 business days. (c) As promptly as practicable following the date of this Agreement, Purchaser and Merger Sub shall file with the SEC an amendment to their existing Tender Offer Statement on Schedule TO (together with all amendments and supplements thereto, the "SCHEDULE TO") with respect to the Offer. The Schedule TO shall contain or incorporate by reference the Offer to Purchase and forms of the related letter of transmittal and all other ancillary Offer documents (collectively, together with all amendments and supplements thereto, the "OFFER DOCUMENTS"). Purchaser and Merger Sub shall cause the Offer Documents to be disseminated to the holders of the Shares as and to the extent required by applicable federal securities laws. Purchaser and Merger Sub, on the one hand, and the Company, on the other hand, will promptly correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect, and Merger Sub will cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given a reasonable opportunity to review and comment upon the amendment to the Schedule TO and the Offer to Purchase before they are filed with the SEC. In addition, Purchaser and Merger Sub agree to provide the Company and its counsel with any comments, whether written or oral, that Purchaser or Merger Sub or their counsel may receive from time to time from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments and to consult with the Company and its counsel prior to responding to any such comments. 3 (d) As promptly as practicable after the date of this Agreement, Purchaser and Merger Sub shall terminate their solicitation of written consents from the Company's stockholders in connection with the Existing Offer and amend their Consent Statement filed with the SEC on January 12, 2007 (the "CONSENT STATEMENT") to provide for such termination, and in no event shall Purchaser, Merger Sub or any of their affiliates take any action to replace the members of the Board, by stockholder meeting, consent solicitation or otherwise, other than pursuant to the terms of this Agreement; provided, however, that nothing contained in this Agreement shall prevent Purchaser, Merger Sub or any of their affiliates from taking any such action to replace the members of the Board at any time following the earlier of the termination of this Agreement and the First Acceptance Time (as defined in Section 7.1 below). The Company agrees to take all required action to postpone its 2007 annual meeting of stockholders until no earlier than May 10, 2007. 1.2. COMPANY ACTIONS. (a) The Company hereby approves of and consents to the Offer and represents and warrants that the Board, at a meeting duly called and held, has (i) determined that the terms of the Offer and the Merger are advisable to the stockholders of the Company, (ii) approved this Agreement and the transactions contemplated hereby, including the Offer and the Merger, and (iii) subject to Section 4.8, resolved to recommend that the stockholders of the Company accept the Offer, tender their Shares to Merger Sub thereunder and adopt this Agreement. The Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Board described in the immediately preceding sentence, and the Company shall not permit the recommendation of the Board to be modified in any manner adverse to Purchaser, Merger Sub or any of their respective affiliates or to be withdrawn by the Board, except as specifically provided in Section 4.8 hereof. (b) As promptly as practicable following the filing of the amendment to the Schedule TO pursuant to Section 1.1(c), the Company shall file with the SEC, an amendment to its Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "SCHEDULE 14D-9") with respect to the Offer, which shall contain the recommendation referred to in clause (iii) of Section 1.2(a) hereof, subject to Section 4.8. The Company further agrees to take all steps necessary to cause the amendment to the Schedule 14D-9 to be disseminated to holders of the Shares as and to the extent required by applicable federal securities laws. The Company, on the one hand, and each of Purchaser and Merger Sub, on the other hand, will promptly correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect, and the Company will cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. Purchaser and its counsel shall be given a reasonable opportunity to review and comment upon the amendment to the Schedule 14D-9 before it is filed with the SEC. In addition, the Company agrees to provide Purchaser, Merger Sub and their counsel with any comments, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments and to consult with Purchaser, Merger Sub and their counsel prior to responding to any such comments. 4 (c) The Company shall promptly furnish Merger Sub with mailing labels containing the names and addresses of all record holders of Shares and with security position listings of Shares held in stock depositories, each as of a recent date, together with all other available listings and computer files containing names, addresses and security position listings of record holders and non-objecting beneficial owners of Shares. The Company shall furnish Merger Sub with such additional information, including, without limitation, updated listings and computer files of holders of Shares, mailing labels and security position listings, and such other assistance as Purchaser, Merger Sub or their agents may reasonably require in communicating the Offer to the record and beneficial holders of Shares. 1.3. DIRECTORS OF THE COMPANY. (a) Immediately upon the purchase of and payment for Shares by Merger Sub or any of its affiliates pursuant to the Offer following satisfaction of the Minimum Condition, Purchaser shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board as is equal to the product obtained by multiplying the total number of directors on such Board by the percentage that the number of Shares so purchased and paid for bears to the total number of Shares then outstanding, but in no event less than a majority of the number of directors. In furtherance thereof, the Company and its Board shall, after the purchase of and payment for Shares by Merger Sub or any of its affiliates pursuant to the Offer, upon request of Merger Sub, immediately increase the size of its Board of Directors, secure the resignations of such number of directors or remove such number of directors, or any combination of the foregoing, as is necessary to enable Purchaser's designees to be so elected to the Company's Board and shall cause Purchaser's designees to be so elected and shall comply with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in connection therewith. In the event that Merger Sub requests the resignation of directors of the Company pursuant to the immediately preceding sentence, the Company shall cause such directors of the Company to resign as may be designated by Merger Sub in a writing delivered to the Company. Immediately upon the first purchase of and payment for Shares by Merger Sub or any of its affiliates pursuant to the Offer, the Company shall, if requested by Purchaser, also cause directors designated by Purchaser to constitute at least the same percentage (rounded up to the next whole number) of each committee of the Board as is on the Board. Notwithstanding the foregoing, if Shares are purchased pursuant to the Offer, the Company shall use its reasonable efforts to assure that there shall be until the Effective Time (as hereinafter defined) at least two of the members of the Board who are directors on the date hereof and are not employees of the Company (each a "CONTINUING Director"). In addition to any indemnification rights pursuant to this Agreement or the Company's Certificate of Incorporation, as amended (the "CERTIFICATE OF INCORPORATION"), and Amended and Restated Bylaws (the "Bylaws"), the Continuing Directors as a group shall be entitled to retain independent legal counsel at Company expense if and to the extent that issues are presented to them that involve a conflict of interest for Company counsel. The Company and its Board shall promptly take all actions as may be necessary to comply with their obligations under this Section 1.3(a). If at any time prior to the Effective Time there shall be in office only one Continuing Director for any reason, the Board shall be entitled to appoint a person who is not an officer or employee of the Company or any subsidiary designated by the remaining Continuing Director to fill such vacancy 5 (and such person shall be deemed to be a Continuing Director for all purposes of this Agreement), and if at any time prior to the Effective Time no Continuing Directors then remain, the other directors of the Company then in office shall use their reasonable efforts to designate two persons to fill such vacancies who are not officers or employees or affiliates of the Company, its subsidiaries, Purchaser or Merger Sub or any of their respective affiliates (and such persons shall be deemed to be Continuing Directors for all purposes of this Agreement). (b) The Company shall promptly take all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under Section 1.3(a), including mailing to stockholders together with the amendment to the Schedule 14D-9 the information required by such Section 14(f) and Rule 14f-1 as is necessary to enable Purchaser's designees to be elected to the Board. Purchaser and Merger Sub will supply the Company and be solely responsible for any information with respect to them and their nominees, officers, directors and affiliates required by such Section 14(f) and Rule 14f-1. (c) Following the election of Purchaser's designees to the Board pursuant to this Section 1.3 and prior to the Effective Time, (i) any amendment or termination of this Agreement by the Company, (ii) any extension or waiver by the Company of the time for the performance of any of the obligations or other acts of Purchaser or Merger Sub under this Agreement, or (iii) any waiver of any of the Company's rights hereunder or any other action that could adversely effect in any material respect the rights of the Company's stockholders hereunder shall, in any such case, require the concurrence of a majority of the directors of the Company then in office who neither were designated by Purchaser nor are employees of the Company (the "INDEPENDENT DIRECTOR APPROVAL"). 1.4. THE MERGER. Upon the terms and subject to the conditions of this Agreement, the Merger shall be consummated in accordance with the DGCL. At the Effective Time, upon the terms and subject to the conditions of this Agreement, Merger Sub shall be merged with and into the Company in accordance with the DGCL and the separate existence of Merger Sub shall thereupon cease and the Company, as the surviving corporation in the Merger (the "SURVIVING CORPORATION"), shall continue its corporate existence under the laws of the State of Delaware as a wholly-owned subsidiary of the direct parent of Merger Sub immediately prior to the Effective Time. It is intended that the Merger shall constitute a taxable purchase of the Shares for federal, state and local tax purposes. 1.5. THE CLOSING; EFFECTIVE TIME. (a) Unless this Agreement shall have been terminated previously, the closing of the Merger (the "CLOSING") shall take place at the offices of Olshan Grundman Frome Rosenzweig & Wolosky LLP, Park Avenue Tower, 65 East 55th Street, New York, New York 10022, at 10:00 a.m. local time on a date to be specified by the parties which shall be no later than the third business day after the date that all of the closing conditions set forth in Article VI have been satisfied or waived (if waivable), unless another time, date or place is agreed upon in writing by the parties hereto. 6 (b) Subject to the provisions of this Agreement, on the Closing Date the parties shall file with the Secretary of State of the State of Delaware a certificate of merger in accordance with the DGCL (the "CERTIFICATE OF Merger") executed in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the DGCL in order to effect the Merger. The Merger shall become effective upon the filing of the Certificate of Merger or at such other time as is agreed by the parties hereto and specified in the Certificate of Merger. The time when the Merger shall become effective is herein referred to as the "EFFECTIVE TIME" and the date on which the Effective Time occurs is herein referred to as the "CLOSING DATE." 1.6. CONVERSION OF SECURITIES. At the Effective Time, by virtue of the Merger and without any action on the part of the holders of any securities of Merger Sub or the Company: (a) Each Share that is owned by Merger Sub or the direct parent of Merger Sub, or that is owned by the Company as treasury stock, shall automatically be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. (b) Each issued and outstanding Share (other than Shares to be cancelled in accordance with Section 1.6(a) hereof and Dissenting Shares (as defined in Section 1.9 below)) shall automatically be converted into the right to receive the Offer Price in cash (the "MERGER CONSIDERATION"), payable, without interest, to the holder of such Share upon surrender, in the manner provided in Section 1.7 hereof, of the certificate that formerly evidenced such Share. All such Shares, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration therefor upon the surrender of such certificate in accordance with Section 1.7 hereof. (c) Each issued and outstanding share of common stock of Merger Sub shall be converted into one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation. 1.7. TENDER OF AND PAYMENT FOR CERTIFICATES. (a) PAYING AGENT. Prior to the Effective Time, Purchaser shall designate a bank or trust company reasonably acceptable to the Company to act as agent for the holders of the Shares (other than Shares to be cancelled in accordance with Section 1.6(a) hereof and Dissenting Shares) in connection with the Merger (the "PAYING AGENT") to receive in trust the aggregate Merger Consideration to which holders of Shares shall become entitled pursuant to Section 1.6(b) hereof. Purchaser shall deposit such aggregate Merger Consideration with the Paying Agent promptly following the Effective Time. Such aggregate Merger Consideration shall be invested by the Paying Agent as directed by Purchaser. (b) EXCHANGE PROCEDURES. Promptly after the Effective Time, Purchaser and the Surviving Corporation shall cause to be mailed to each holder of record, as of the Effective Time, of a certificate or certificates, which immediately prior to the Effective Time represented outstanding Shares (the "CERTIFICATES"), whose 7 Shares were converted pursuant to Section 1.6(b) hereof into the right to receive the Merger Consideration, a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as Purchaser may reasonably specify) and instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Purchaser, together with such letter of transmittal, properly completed and duly executed in accordance with the instructions thereto, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly represented by such Certificate, and the Certificate so surrendered shall forthwith be cancelled. No interest will be paid or accrued on the cash payable upon the surrender of the Certificates. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the person requesting such payment shall have paid all transfer and other Taxes required by reason of the issuance to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such Tax either has been paid or is not applicable. Until surrendered as contemplated by this Section 1.7, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration for each Share in cash as contemplated by Section 1.6(b) hereof. (c) TRANSFER BOOKS; NO FURTHER OWNERSHIP RIGHTS IN THE SHARES. At the Effective Time, the stock transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers of the Shares on the records of the Company. From and after the Effective Time, the holders of Certificates evidencing ownership of the Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares, except as otherwise provided for herein or by applicable law. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be cancelled and exchanged as provided in this Article I. (d) TERMINATION OF FUND; NO LIABILITY. At any time following the six-month anniversary of the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) which had been made available to the Paying Agent, and holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates without any interest thereon. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent nor any party hereto shall be liable to any holder of a Certificate for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (e) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificate(s) shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate(s) to be lost, stolen or destroyed and, if required by Purchaser, the posting by such person of a bond in such sum as Purchaser may reasonably direct as indemnity against any 8 claim that may be made against any party hereto or the Surviving Corporation with respect to such Certificate(s), the Paying Agent will disburse the Merger Consideration pursuant to Section 1.6(b) payable in respect of the Shares represented by such lost, stolen or destroyed Certificate(s). (f) WITHHOLDING TAXES. Purchaser, Merger Sub and the Surviving Corporation shall be entitled to deduct and withhold, or cause the Paying Agent to deduct and withhold, from the Offer Price, the Merger Consideration or the Cash Amount (as defined below) payable to a holder of Shares (including, for the avoidance of doubt, Restricted Stock) or Company Options (as defined below) pursuant to the Offer or the Merger, as the case may be, any such amounts as are required under the Internal Revenue Code of 1986, as amended (the "CODE"), or any applicable provision of state, local or foreign Tax law. To the extent that amounts are so withheld by Purchaser or Merger Sub, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by Purchaser or Merger Sub. 1.8. OPTIONS AND RESTRICTED STOCK. (a) With respect to all outstanding options to purchase Shares (the "COMPANY OPTIONS") granted under the Company's 1990 Stock Plan and 2000 Stock Incentive Plan (the "COMPANY OPTION PLANS") or otherwise, whether or not then vested, immediately prior to the consummation of the Offer, subject to the terms and conditions set forth below in this Section 1.8(a), each holder of a Company Option will be entitled to receive from the Company, and shall receive, in settlement of each Company Option a Cash Amount. The "CASH Amount" shall be equal to the net amount of (A) the product of (i) the excess, if any, of the Offer Price over the exercise price per share of such Company Option immediately prior to the consummation of the Offer, multiplied by (ii) the number of shares subject to such Company Option, less (B) any applicable withholdings for Taxes. If the exercise price per share of any Company Option equals or exceeds the Offer Price, the Cash Amount therefor shall be zero. Notwithstanding the foregoing, payment of the Cash Amount is subject to written acknowledgement, in a form reasonably acceptable to Purchaser, consenting to the foregoing arrangement and that no further payment is due to such holder on account of any Company Option and all of such holder's rights under such Company Options have terminated. (b) Immediately prior to the consummation of the Offer, except as provided in this Section 1.8, all rights under any Company Option and any provision of the Company Option Plans and any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company shall be cancelled. The Company shall use reasonable efforts to ensure that, immediately prior to, as of and after the consummation of the Offer, except as provided in this Section 1.8, no person shall have any right under the Company Option Plans or any other plan, program or arrangement with respect to securities of the Company, the Surviving Corporation or any subsidiary thereof. (c) Prior to the consummation of the Offer, the Company shall use reasonable efforts to cause to be effected any necessary amendments to the Company Option Plans and any other resolutions, consents or notices, in such form reasonably acceptable to Purchaser, required under any of the Company Option Plans or any Company Options to give effect to the foregoing provisions of this Section 1.8. 9 (d) The Company shall take all actions necessary to cause all shares of Restricted Stock of the Company to become fully vested immediately prior to the consummation of the Offer and shall make all required withholdings in connection therewith under applicable Tax Laws. 1.9. DISSENTING SHARES. Notwithstanding any provision of this Agreement to the contrary, each outstanding Share, the holder of which has demanded and perfected such holder's right to dissent from the Merger and to be paid the fair value of such Shares in accordance with the DGCL and, as of the Effective Time, has not effectively withdrawn or lost such dissenters' rights ("DISSENTING Shares"), shall not be converted into or represent a right to receive the Merger Consideration into which Shares are converted pursuant to Section 1.6(b) hereof, but the holder thereof shall be entitled only to such rights as are granted by the DGCL. Notwithstanding the immediately preceding sentence, if any holder of Shares who demands dissenters' rights with respect to its Shares under the DGCL effectively withdraws or loses (through failure to perfect or otherwise) its dissenters' rights, then as of the Effective Time or the occurrence of such event, whichever later occurs, such holder's Shares will automatically be converted into and represent only the right to receive the Merger Consideration as provided in Section 1.6(b) hereof, without interest thereon, upon surrender of the certificate or certificates formerly representing such Shares. After the Effective Time, Purchaser shall cause the Company to make all payments to holders of Shares with respect to such demands in accordance with the DGCL. The Company shall give Purchaser (i) prompt written notice of any notice of intent to demand fair value for any Shares, withdrawals of such notices, and any other instruments served pursuant to the DGCL and received by the Company, and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for fair value for Shares under the DGCL. The Company shall not, except with the prior written consent of Purchaser, voluntarily make any payment with respect to any demands for fair value for Shares or offer to settle or settle any such demands. 1.10. CERTIFICATE OF INCORPORATION AND BYLAWS. Subject to Section 5.4 hereof, at and after the Effective Time until the same have been duly amended, (i) the Certificate of Incorporation of the Surviving Corporation shall be identical to the Certificate of Incorporation of Merger Sub in effect at the Effective Time and (ii) the Bylaws of the Surviving Corporation shall be identical to the Bylaws of Merger Sub in effect at the Effective Time. 1.11. DIRECTORS AND OFFICERS. At and after the Effective Time, the directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, and the officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation, except as Merger Sub shall otherwise provide in writing, in each case until their successors are elected or appointed and qualified. If, at the Effective Time, a vacancy shall exist on the Board of Directors or in any office of the Surviving Corporation, such vacancy may thereafter be filled in the manner provided by law. 10 1.12. OTHER EFFECTS OF MERGER. The Merger shall have all further effects as specified in the applicable provisions of the DGCL. 1.13. ADDITIONAL ACTIONS. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of Merger Sub or the Company or otherwise carry out this Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of Merger Sub or the Company, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of Merger Sub or the Company, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The following representations and warranties by the Company to Purchaser and Merger Sub are qualified by the Company Disclosure Schedule, which sets forth certain disclosures concerning the Company, its subsidiaries and its business (the "COMPANY DISCLOSURE SCHEDULE"). The Company hereby represents and warrants to Purchaser and Merger Sub as follows: 11 2.1. DUE ORGANIZATION AND GOOD STANDING. Each of the Company and its subsidiaries is a corporation or other form of entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of the Company and its subsidiaries is duly qualified or licensed and in good standing to do business in each jurisdiction in which the character of the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. For purposes of this Agreement, the term "COMPANY MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the business, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, or the ability of the Company to consummate the transactions contemplated by this Agreement, except in each case for any such effects resulting from, arising out of or relating to (a) the taking of any action or incurring of any expense pursuant to this Agreement or the transactions contemplated hereby, (b) the entry into or announcement of this Agreement and the other transactions contemplated hereby, (c) any change in or interpretations of (i) U.S. generally accepted accounting principles ("GAAP") or (ii) any Law, (d) any change in interest rates or general economic conditions in the industries or markets in which the Company or any of its subsidiaries operates (which changes do not affect the Company or any of its subsidiaries to a materially disproportionate degree related to the entities operating in such markets or industries or serving such markets) or affecting the United States or foreign economies in general or in the United States or foreign financial, banking or securities markets, or (e) any natural disaster or act of God. Company Material Adverse Effect does not include any adverse change in the stock price of the Company in and of itself or any changes, events, conditions or effects relating solely to Purchaser or any of its affiliates' financial condition, results of operation or business. The Company has heretofore made available to Purchaser accurate and complete copies of the Certificate of Incorporation and Bylaws or other organizational documents, as currently in effect, of the Company and each of its subsidiaries. 2.2. CAPITALIZATION. (a) The authorized capital stock of the Company consists of 30,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, par value $.01 per share (the "PREFERRED STOCK" and, together with the Common Stock, the "COMPANY CAPITAL STOCK"). As of the close of business on the date hereof, (i) 7,293,978 shares of Common Stock were issued and outstanding, (ii) no shares of Preferred Stock were issued and outstanding, and (iii) 348,061 shares of Common Stock were reserved for issuance pursuant to outstanding Company Options. All of the outstanding shares of Company Capital Stock are, and all shares of Company Capital Stock which may be issued pursuant to the exercise of outstanding Company Options will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and non-assessable. None of the outstanding securities of the Company has been issued in violation of any federal or state securities laws. (b) Except as set forth above and on SECTION 2.2(B) of the Company Disclosure Schedule, as of the date hereof, (i) the Company directly or indirectly owns all of the capital stock of, or other equity interests in, its 12 subsidiaries, free and clear of all Encumbrances (as defined below), and all such capital stock of, and other equity interests in, the Company' subsidiaries are duly authorized, validly issued, fully paid and nonassessable and were issued free of preemptive rights and in compliance with applicable Laws, (ii) there are no existing options, warrants, puts, calls, preemptive or similar rights, bonds, debentures, notes or other indebtedness having general voting rights or debt convertible into securities having such rights ("VOTING DEBT") or subscriptions or other rights, agreements, arrangements or commitments of any character, relating to the issued or unissued capital stock of, or other equity interests in, the Company or any of its subsidiaries obligating the Company or any of its subsidiaries to issue, transfer or sell or cause to be issued, transferred, sold or repurchased any options or shares of capital stock or Voting Debt of, or other equity interest in, the Company or any of its subsidiaries or securities convertible into or exchangeable for such shares or equity interests, or obligating the Company or any of its subsidiaries to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment and (iii) there are no outstanding contractual obligations of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any Company Capital Stock, or other capital stock of, or equity interests in, the Company or any of its subsidiaries or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in any other entity. (c) There are no voting trusts or other agreements or understandings to which the Company is a party with respect to the voting of the Company Capital Stock. (d) Following the Effective Time, no holder of Company Options will have any right to receive shares of common stock of the Surviving Corporation upon exercise of Company Options. (e) Except as set forth in the Company SEC Reports (as defined below) and as set forth on SECTION 2.2(E) of the Company Disclosure Schedule, no Indebtedness of the Company or any of its subsidiaries contains any restriction upon (i) the prepayment of any of such Indebtedness, (ii) the incurrence of Indebtedness by the Company or any of its subsidiaries, or (iii) the ability of the Company or any of its subsidiaries to grant any lien on its properties or assets. As used in this Agreement, "INDEBTEDNESS" means (A) all indebtedness for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (B) any other indebtedness that is evidenced by a note, bond, debenture or similar instrument, (C) all obligations in respect of acceptances issued or created and (D) all guarantee obligations. (f) SECTION 2.2(F) of the Company Disclosure Schedule lists (i) all Company Options outstanding as of the date hereof, the name of the holder of each Company Option, the date of grant and the exercise price of such Company Option, the number of shares of Common Stock as to which such Company Option has vested and the vesting schedule for such Company Option and (ii) all shares of Restricted Stock outstanding as of the date hereof, the names of the holders of the Restricted Stock and the vesting schedule for the Restricted Stock. 13 2.3. AUTHORIZATION; BINDING AGREEMENT. The Company has all requisite corporate power and authority to execute and deliver this Agreement, the Tender and Support Agreement and the Rights Amendment (as defined below) (collectively, the "COMPANY TRANSACTION Documents") and to consummate the transactions contemplated hereby and thereby. The execution and delivery of the Company Transaction Documents and the consummation of the transactions contemplated hereby and thereby, including, but not limited to, the Offer and the Merger, have been duly and validly authorized and approved by the Board, such approval is sufficient to render inapplicable to this Agreement, the Offer, the Merger and the other transactions contemplated by this Agreement the provisions of Section 203 of the DGCL such that said provision will not apply to this Agreement, the Offer, the Merger and the other transactions contemplated by this Agreement, and no other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of the Company Transaction Documents or to consummate the transactions contemplated hereby or thereby (other than the requisite approval of the Merger by the stockholders of the Company in accordance with the DGCL). Each of the Company Transaction Documents has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by principles of equity regarding the availability of remedies ("ENFORCEABILITY EXCEPTIONS"). 2.4. GOVERNMENTAL APPROVALS. No consent, approval, waiver or authorization of, notice to or declaration or filing with ("CONSENT"), any nation or government, any state or other political subdivision thereof, any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including, without limitation, any governmental or regulatory authority, agency, department, board, commission, administration or instrumentality, any court, tribunal or arbitrator or any self-regulatory organization ("GOVERNMENTAL AUTHORITY") on the part of the Company or any of its subsidiaries is required to be obtained or made in connection with the execution or delivery by the Company of any of the Company Transaction Documents, the Offer, the Merger or the consummation by the Company of the other transactions contemplated hereby or thereby other than (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the DGCL, (ii) filings with the SEC and state securities laws administrators, (iii) such filings as may be required in any jurisdiction where the Company is qualified or authorized to do business as a foreign corporation in order to maintain such qualification or authorization, (iv) pursuant to applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (v) those Consents that, if they were not obtained or made, would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. 2.5. NO VIOLATIONS. Except as set forth on SECTION 2.5 of the Company Disclosure Schedule, the execution and delivery of each of the Company Transaction Documents, the Offer, the Merger, the consummation of the other transactions contemplated hereby and 14 thereby and compliance by the Company with any of the provisions hereof and thereof will not (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws or other governing instruments of the Company or any of its subsidiaries, (ii) require any Consent under or result in a material violation or material breach of, or constitute (with or without due notice or lapse of time or both) a material default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any Company Material Contract (as defined below), (iii) result in the creation or imposition of any liens, charges, security interests, options, claims, mortgages, pledges, assessments, adverse claims, rights of others or restrictions (whether on voting, sale, transfer, disposition or otherwise) or other encumbrances or restrictions of any nature whatsoever, whether imposed by agreement, understanding, law or equity, or any conditional sale contract, title retention contract or other contract to give or refrain from giving any of the foregoing ("ENCUMBRANCES") of any kind upon any of the material assets of the Company or any of its subsidiaries or (iv) subject to obtaining the Consents from Governmental Authorities referred to in Section 2.4 hereof, contravene in any material respect any applicable provision of any statute, law, rule or regulation or any legally binding order, decision, injunction, judgment, award or decree ("LAW" or "LAWS") to which the Company or any of its subsidiaries any of their respective assets or properties is subject. 2.6. SEC FILINGS; COMPANY FINANCIAL STATEMENTS. (a) The Company has filed all forms, reports, schedules, statements and other documents required to be filed by the Company with the SEC since December 31, 2004 under the Exchange Act or the Securities Act of 1933, as amended (the "SECURITIES ACT"). All such required forms, reports and documents (including those that the Company may file subsequent to the date hereof) are referred to herein as the "COMPANY SEC REPORTS." At the time when filed (or if amended or superseded by a subsequent filing prior to the date hereof then on the date of such later filing), the Company SEC Reports (i) as amended to date complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act, as the case may be, the Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC thereunder applicable to such Company SEC Reports and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Between the date of this Agreement and the Closing Date, the Company will timely file with the SEC all documents required to be filed by it under the Exchange Act. (b) Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Company SEC Reports as amended to date (the "COMPANY FINANCIALS"), including each Company SEC Report filed after the date hereof until the Closing, (i) was prepared from, in accordance with and accurately reflects in all material respects the Company's books and records as of the times and for the periods referred to therein, (ii) complied in all material respects with the published rules and regulations of the SEC with respect thereto, (iii) was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act), and (iv) fairly presented the consolidated financial position of the Company as at the 15 respective dates thereof and the consolidated results of the Company's operations and cash flows for the periods indicated, except that the unaudited interim financial statements may not contain footnotes and were or are subject to normal and recurring year-end adjustments. The balance sheet of the Company contained in the Company SEC Report as of September 30, 2006 (the "BALANCE SHEET DATE") as filed with the SEC before the date hereof is hereinafter referred to as the "COMPANY BALANCE SHEET." (c) The Company has heretofore made available to Purchaser a complete and correct copy of any amendments or modifications, which have not yet been filed with the SEC but which are required to be filed, to agreements, documents or other instruments which previously had been filed by the Company with the SEC pursuant to the Securities Act or the Exchange Act. (d) Except as set forth on SECTION 2.6(D) of the Company Disclosure Schedule, the Company has established and maintains disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 promulgated under the Exchange Act) designed to ensure that material information relating to the Company is made known to the Chief Executive Officer and Chief Financial Officer. To the Company's knowledge, there is no fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls. 2.7. ABSENCE OF CERTAIN CHANGES. Except as set forth in SECTION 2.7 of the Company Disclosure Schedule, from the Balance Sheet Date to the date hereof, neither the Company nor any of its subsidiaries has: (a) suffered any Company Material Adverse Effect or any event or change which is reasonably expected to have or constitute, individually or in the aggregate, a Company Material Adverse Effect; (b) paid, discharged or satisfied any claims, liabilities or obligations (absolute, accrued, contingent or otherwise) other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of claims, liabilities and obligations reflected or reserved against in the Company Balance Sheet or incurred in the ordinary course of business and consistent with past practice since the Balance Sheet Date; (c) permitted or allowed any of its properties or assets (real, personal or mixed, tangible or intangible) to be subjected to any Encumbrances, except for liens for current Taxes not yet due or liens the incurrence of which would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect; (d) sold, transferred or otherwise disposed of any of its material properties or assets (real, personal or mixed, tangible or intangible), except in the ordinary course of business, consistent with past practice; (e) granted any material increase in the compensation or benefits payable or to become payable to any director, officer or employee, except in the case of employees other than officers for such increases in compensation or benefits made in the ordinary course of business, consistent with past practice, or made any material change in severance policy or practices; 16 (f) other than capital expenditures in accordance with the Company's capital expenditure budget for the 2007 fiscal year (the "CAPEX BUDGETS"), made any capital expenditure or acquired any property, plant or equipment for a cost in excess of $250,000 in the aggregate; (g) declared, paid or set aside for payment any dividend or other distribution (whether in cash, stock or property) in respect of their respective capital stock or other equity interests or redeemed, purchased or otherwise acquired, directly or indirectly, any shares of capital stock or other securities or equity interests, other than dividends and distributions to the Company or one if its wholly-owned subsidiaries or the Company's quarterly cash dividend payments to stockholders; (h) (i) made any changes in any of the accounting methods used by it materially affecting its assets, liabilities or business, except for such changes required by GAAP; or (ii) made or changed any election relating to Taxes to the extent inconsistent with past practice, adopted or changed any accounting method relating to Taxes, entered into any closing agreement relating to Taxes, filed any amended Tax Return, settled or consented to any claim or assessment relating to Taxes, but in each case in clauses (i) and (ii), only to the extent such action could reasonably be expected to have a Company Material Adverse Effect, and in each case in clause (ii), except as required by applicable Law; (i) paid, loaned, modified or advanced any amount to, or sold, transferred or leased any properties or assets (real, personal or mixed, tangible or intangible) to, or entered into any agreement or arrangement with, any of their respective officers, directors or stockholders or any affiliate or associate of any of their respective officers, directors or stockholders, except for directors' fees, expense reimbursements in the ordinary course of business consistent with past practice and compensation and benefits to officers at rates not inconsistent with past practice; (j) granted, issued, accelerated, paid, accrued or agreed to pay or make any accrual or arrangement for payments or benefits pursuant to any Company Employee Plans (as defined in Section 2.13(a) below) except in accordance with the terms of the respective Company Employee Plans, or adopted any Company Employee Plan, or amended any Company Employee Plan, except in the ordinary course of business consistent with past practice and except as permitted or contemplated by this Agreement; or (k) authorized or agreed, whether in writing or otherwise, to take any action described in this Section 2.7. 2.8. ABSENCE OF UNDISCLOSED LIABILITIES. As of the date hereof, except (a) as disclosed in the Company Balance Sheet or the Company SEC Reports or (b) for liabilities and obligations incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date, neither the Company nor any of its subsidiaries has incurred any material liabilities or obligations of any nature, required by GAAP to be recognized or disclosed on a consolidated balance sheet of the Company or in the notes thereto. 17 2.9. PERMITS. To the knowledge of the Company, each of the Company and its subsidiaries has all material permits, certificates, licenses, approvals and other authorizations required in connection with the operation of its business, including those required under regulatory Laws (collectively, "COMPANY PERMITS"). To the knowledge of the Company, neither the Company nor any of its subsidiaries is in violation of any Company Permit. No proceedings are pending or, to the knowledge of the Company, threatened to revoke or limit any Company Permit, except, in each case, those the absence or violation of which would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. 2.10. LITIGATION. Except as disclosed in the Company SEC Reports and as of the date hereof, there is no private or governmental action, suit, proceeding, claim, arbitration or, to the Company's knowledge, investigation ("LITIGATION") pending before any agency, court or tribunal, foreign or domestic, or, to the knowledge of the Company, threatened, against the Company, any of its subsidiaries, any of their respective properties or any of their respective officers or directors (in their capacities as such) that would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. As of the date hereof, there is no judgment, decree or order against the Company, any of its subsidiaries or any of their respective directors or officers (in their capacities as such) that would prevent, enjoin or materially alter or delay any of the transactions contemplated by any of the Company Transaction Documents, or that would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Except as disclosed in the Company SEC Reports, as of the date hereof there is no material litigation that the Company or any of its subsidiaries have pending against other parties. 2.11. MATERIAL CONTRACTS. Neither the Company nor any of its subsidiaries is a party or is subject to any material note, bond, mortgage, indenture, contract, lease, license, agreement or instrument required to be filed with the SEC under the applicable Exchange Act rules ("COMPANY MATERIAL CONTRACT") that is not filed as an exhibit to the Company SEC Reports. All such Company Material Contracts are valid and binding and are in full force and effect and enforceable by the Company or its applicable subsidiaries in accordance with their respective terms, subject to the Enforceability Exceptions. Neither the Company or any of its subsidiaries nor, to the knowledge of the Company, any other party thereto is in violation or breach of or default under any such Company Material Contract where such violation, breach or default would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. 2.12. INTELLECTUAL PROPERTY. To the knowledge of the Company, each of the Company and its subsidiaries owns, or holds adequate licenses or other rights to use, all material patents, trade names, trademarks, service marks, copyrights, technology, know-how and processes necessary for their respective businesses as now conducted by them (the "COMPANY INTELLECTUAL PROPERTY"), and, to the knowledge of the Company, neither the Company nor any of its subsidiaries has received any notice of 18 infringement of or conflict with, and, to the Company's knowledge, there are no infringements of or conflicts with, the rights of others with respect to the use of any of the Company Intellectual Property that, in either such case, has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. 2.13. EMPLOYEE BENEFIT PLANS. (a) Each employee benefit plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all stock purchase, stock option, severance, employment, change-in-control, fringe benefit, bonus, incentive, deferred compensation and other material benefit plans, agreements, policies and other arrangements, whether or not subject to ERISA, whether written or oral, under which any employee of the Company or any of its subsidiaries has any present or future right to benefits, maintained or contributed to by the Company (or any subsidiary thereof), or under which the Company or any subsidiary has any present or future liability (together, the "COMPANY EMPLOYEE PLANS") has been funded, operated and administered in compliance with its terms, the terms of any applicable collective bargaining agreement, and with all applicable requirements of Law, including ERISA and the Code, except as would not subject the Company or any of its subsidiaries to any liability that has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (b) There has been no "prohibited transaction," as such term is defined in Section 406 of ERISA and Section 4975 of the Code, by the Company or, to the knowledge of the Company, by any trusts created thereunder or any trustee or administrator thereof, with respect to any Company Employee Plan. To the Company's knowledge, neither the Company nor any of its subsidiaries is subject to any liability or penalty under Sections 4976 through 4980 of the Code or ERISA with respect to any of the Company Employee Plans. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, no suit, administrative proceeding, action or other litigation is pending, or to the knowledge of the Company is threatened, against or with respect to any such Company Employee Plan, including any audit or inquiry by the Internal Revenue Service (the "IRS") or United States Department of Labor, other than routine claims for benefits. (c) With respect to any applicable Company Employee Plan, each of the Company and its subsidiaries has complied with (i) the applicable health care continuation and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the regulations thereunder, (ii) the applicable requirements of the Family Medical and Leave Act of 1993 and the regulations thereunder and (iii) the applicable requirements of the Health Insurance Portability and Accountability Act of 1996 and the regulations thereunder, except where the failure to comply with the applicable requirements of such laws and regulations would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (d) Except as disclosed in SECTION 2.13(D) of the Company Disclosure Schedule or as provided in Section 1.8 (it being understood that the consummation of the transactions contemplated hereby will constitute a change in control), the consummation of the transactions contemplated by this Agreement will not (i) entitle any current or former employee, director or consultant of 19 the Company or any of its subsidiaries to any payment (whether of severance pay, unemployment compensation, golden parachute, bonus or otherwise), (ii) accelerate, forgive indebtedness, vest, distribute, or increase benefits or obligation to fund benefits with respect to any employee or director of the Company or any of its subsidiaries, or (iii) accelerate the time of payment or increase the amount of compensation due any such employee, director or consultant. (e) SECTION 2.13(E) of the Company Disclosure Schedule, which assumes termination of the Company's Chief Executive Officer as of the consummation of the Offer, sets forth (a)(i) all amounts that are required to be paid, contractually or otherwise (other than any gross-up on such payments or any other payment derived therefrom), to the Company's Chief Executive Officer as a result of the Offer and the Merger and the other transactions contemplated hereby under any of the Company Employee Plans or any other compensation arrangements between the Company's Chief Executive Officer and the Company (or any subsidiary thereof), and (ii) the Chief Executive Officer's W-2 gross compensation for the years 2002 through 2006, which shall be used to calculate the "base amount" (as defined in Section 280G(b)(3) of the Code) for the Company's Chief Executive Officer as of the date hereto, and his current annual salary and his annual bonus for the years 2004 through 2006, and (b) designates each such amount that is (by contractual agreement or otherwise with the Company) subject to the gross-up as set forth in Section 9 of the Employment Agreement between the Company and the Company's Chief Executive Officer dated January 22, 1990, as amended. (f) No Company Employee Plan maintained by the Company or any of its subsidiaries provides material health and welfare benefits with respect to current or former employees of the Company or any of its subsidiaries after retirement or other termination of service (other than (i) coverage mandated by applicable Laws, (ii) benefits accrued in accordance with GAAP on the most recent Company Financials, (iii) benefits, the full direct cost of which is borne by the current or former employee (or beneficiary thereof), or (iv) benefits described in the Company SEC Reports, including the exhibits thereto). (g) There has been no amendment to, written or oral interpretation or announcement by the Company, any subsidiary or any trade or business (whether or not incorporated) which is treated as a single employer with the Company and its subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code (an "ERISA AFFILIATE") relating to, or change in participation or coverage under, any Company Employee Plan which would materially increase the expense of maintaining such Company Employee Plan above the level of expense incurred with respect to that Company Employee Plan for the most recent fiscal quarter included in the Company Financials. (h) To the Company's knowledge, neither the Company nor any ERISA Affiliate has any liability with respect to any "multiemployer plan" as defined in Section 3(37) of ERISA. (i) Each "nonqualified deferred compensation plan" (as defined in Section 409A(d)(1) of the Code) of the Company and its subsidiaries has been operated since January 1, 2005 in good faith compliance with Section 409A of the Code, the proposed regulations thereunder, IRS Notice 2005 1, Notice 2005 91, Notice 2006 33, Notice 2006 79 and Notice 2006 100. 20 2.14. TAXES AND RETURNS. (a) The Company has timely filed, or caused to be timely filed, all material Tax Returns (as defined in Section 2.14(d) below) required to be filed by it and its subsidiaries taking into account applicable extensions, and has paid, collected or withheld, or caused to be paid, collected or withheld, all material Taxes (as defined in Section 2.14(d) below) required to be paid, collected or withheld, other than such Taxes for which adequate reserves in the Company Financials have been established. As of the date hereof, there are no written claims or assessments pending against the Company or any of its subsidiaries for any alleged deficiency in any Tax, and neither the Company nor any of its subsidiaries has been notified in writing of any proposed Tax claims or assessments against the Company or any of its subsidiaries (other than, in each case, claims or assessments for which adequate reserves in the Company Financials have been established or which are being contested in good faith and other than claims or assessments that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect). There are no liens for Taxes on the assets of the Company or any of its subsidiaries, except for statutory liens for current Taxes not yet due and payable and liens that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (b) The Company has not constituted either a "distributing corporation" or a "controlled corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock (to any person or entity that is not a member of the consolidated group of which the Company is the common parent corporation) qualifying for tax-free treatment under Section 355 of the Code (i) within the two-year period ending on the date hereof or (ii) in a distribution which could otherwise constitute part of a "plan" or "series of related transactions" (within the meaning of Section 355(e) of the Code) in conjunction with the Merger. (c) As of the date hereof, neither the Company nor any of its subsidiaries is being audited by any foreign, federal or state taxing authority or, to the knowledge of the Company, has been notified by any foreign, federal or state tax authority that any such audit is contemplated or pending. (d) For purposes of this Agreement, the term "TAX" or "TAXES" shall mean any tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, imposed by any Governmental Authority (including, but not limited to, any federal, state, local, foreign or provincial income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, alternative or added minimum, ad valorem, transfer or excise tax) together with any interest, addition or penalty imposed thereon. The term "TAX RETURN" shall mean a report, return or other information statement (including any attached schedules or any amendments to such report, return or other information statement) required to be supplied to or filed with a Governmental Authority with respect to any Tax, including an information return, claim for refund, amended return or declaration of estimated Tax. 2.15. FINDERS AND INVESTMENT BANKERS. Except for Lazard Freres & Co. LLC ("LAZARD"), the Company has not employed any broker or finder or otherwise incurred any liability for any brokerage fees, commissions or finders' fees in connection with the transactions 21 contemplated hereby. SECTION 2.15 of the Company Disclosure Schedule sets forth the amount of any brokerage fees, commissions or finders' fees payable in connection with the transactions contemplated hereby. 2.16. FAIRNESS OPINION. The Company has received from Lazard, its financial advisor, a written opinion addressed to it for inclusion in the Schedule 14D-9 and the Proxy Statement (as defined in Section 4.4(a)) to the effect that the consideration to be received in the Offer and the Merger by the Company's stockholders is fair to the Company's stockholders (other than Purchaser, Merger Sub and their respective affiliates) from a financial point of view. 2.17. VOTE REQUIRED; DGCL SECTION 203. (a) The affirmative vote of the holders (including Merger Sub and its affiliates following Merger Sub's acceptance of Shares for payment under the Offer) of a majority of the outstanding shares of Common Stock (the "COMPANY STOCKHOLDER APPROVAL"), if necessary to approve the Merger, is the only vote of the holders of any class or series of the Company's capital stock necessary to approve the Merger. (b) Other than any actions described in Section 2.17(a), the Company has taken all actions necessary under the DGCL to approve the Offer, the Merger and the other transactions contemplated by this Agreement. The Board, at a meeting duly called and held, has approved the Offer, the Merger, this Agreement and the transactions contemplated by this Agreement. 2.18. ENVIRONMENTAL MATTERS. (a) Neither the Company nor any of its subsidiaries is the subject of any federal, state, local or foreign investigation, and neither the Company nor any of its subsidiaries has received any written notice or claim, or entered into any negotiations or agreements with any person, relating to any material liability or material remedial action under any applicable Environmental Laws. (b) The Company and its subsidiaries have for the past three years complied in all material respects and currently comply in all material respects with all Environmental Laws. (c) Neither the Company nor any of its subsidiaries has manufactured, treated, stored, disposed of, generated, handled or released any pollutants, contaminants, wastes, hazardous substances, noise or odor in a manner that has given rise to material liability under Environmental Laws. (d) No pollutants, contaminants, wastes, hazardous substances, noise or odor have been released or otherwise come to be located at any property or facility owned or operated by or on behalf of the Company or any of its subsidiaries in a manner that has given rise to material liability under Environmental Laws. 22 For purposes of this Agreement, "ENVIRONMENTAL LAWS" shall mean all federal, state, local and foreign statutes, laws, rules, ordinances and similar legally binding authority, including all common law, relating to pollution or protection of the environment or natural resources. 2.19. SCHEDULE 14D-9; OFFER DOCUMENTS; AND PROXY STATEMENT. Neither the Schedule 14D-9 nor any information supplied by the Company for inclusion in the Schedule TO or the Offer Documents will, at the respective times the Schedule 14D-9, the Schedule TO, the Offer Documents or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to stockholders of the Company, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. The Proxy Statement, if filed, will not, on the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to stockholders of the Company, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading or, at the time of the Special Meeting (as defined in Section 4.4(a)), omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Special Meeting which shall have become false or misleading in any material respect. The Schedule 14D-9 and the Proxy Statement will, when filed by the Company with the SEC, comply as to form in all material respects with the applicable provisions of the Exchange Act and the rules and regulations thereunder. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to information supplied by or on behalf of Purchaser or Merger Sub which is contained in any of the foregoing documents. 2.20. RIGHTS PLAN. The Board has approved, and the Company and Computershare Investor Services, LLC (the "RIGHTS AGENT") have entered into, an amendment to the Rights Agreement, dated as of June 22, 2006 (the "RIGHTS AGREEMENT"), between the Company and the Rights Agent, in the form of EXHIBIT B hereto (the "RIGHTS AMENDMENT"). Pursuant to the Rights Amendment, neither the execution and delivery of this Agreement or the Tender and Support Agreement nor the consummation of the Offer, the Merger or any of the other transactions contemplated hereby or thereby will result in (i) Purchaser, Merger Sub or any of their respective affiliates becoming an Acquiring Person or (ii) the occurrence of (A) a Distribution Date, (B) the Stock Acquisition Time, (C) a Section 11(a)(ii) Event or (D) a Section 13 Event, in each case as such terms are defined in the Rights Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants to the Company as follows: 3.1. DUE ORGANIZATION AND GOOD STANDING. Purchaser is a limited partnership and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite partnership or corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. 23 3.2. AUTHORIZATION; BINDING AGREEMENT. Purchaser and Merger Sub have all requisite partnership or corporate power and authority to execute and deliver this Agreement and the Tender and Support Agreement (collectively, the "PURCHASER TRANSACTION DOCUMENTS") and to consummate the transactions contemplated hereby and thereby. The execution and delivery of the Purchaser Transaction Documents and the consummation of the transactions contemplated hereby and thereby, including, but not limited to, the Offer and the Merger, have been duly and validly authorized by the Board of Directors or other governing body or entity of Purchaser and Merger Sub, as appropriate, and no other partnership or corporate proceedings on the part of Purchaser or Merger Sub are necessary to authorize the execution and delivery of the Purchaser Transaction Documents or to consummate the transactions contemplated hereby or thereby (other than the requisite approval by the sole stockholder of Merger Sub of this Agreement and the Merger). Each of the Purchaser Transaction Documents has been duly and validly executed and delivered by each of Purchaser and Merger Sub and constitutes the legal, valid and binding agreement of each of Purchaser and Merger Sub, enforceable against each of Purchaser and Merger Sub in accordance with its terms, subject to the Enforceability Exceptions. 3.3. GOVERNMENTAL APPROVALS. No Consent from or with any Governmental Authority on the part of Purchaser or Merger Sub is required to be obtained or made in connection with the execution or delivery by Purchaser or Merger Sub of any of the Purchaser Transaction Documents, the Offer, the Merger or the consummation by Purchaser or Merger Sub of the other transactions contemplated hereby or thereby other than (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the DGCL, (ii) filings with the SEC, state securities laws administrators and the National Association of Securities Dealers, Inc. (the "NASD"), (iii) pursuant to applicable requirements of the HSR Act and (iv) those Consents that, if they were not obtained or made, would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of Purchaser or Merger Sub to consummate the transactions contemplated by this Agreement, except in each case for any such effects resulting from, arising out of or relating to the taking of any action or incurring of any expense pursuant to this Agreement or the transactions contemplated hereby or the entry into or announcement of this Agreement and the other transactions contemplated hereby ("PURCHASER MATERIAL ADVERSE EFFECT"). 3.4. NO VIOLATIONS. The execution and delivery of each of the Purchaser Transaction Documents, the Offer, the Merger, the consummation of the other transactions contemplated hereby and thereby and compliance by Purchaser and Merger Sub with any of the provisions hereof and thereof will not (i) conflict with or result in any breach of any provision of the certificate of incorporation or bylaws or other governing instruments of Purchaser or Merger Sub, (ii) require any Consent under or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, 24 cancellation or acceleration) under, any of the terms, conditions or provisions of any agreement or other instrument to which Purchaser or Merger Sub is a party or by which any of their respective assets are bound, (iii) result in the creation or imposition of any Encumbrance of any kind upon any of the assets of Purchaser or Merger Sub or (iv) subject to obtaining the Consents from Governmental Authorities referred to in Section 3.3 hereof, contravene any Law to which Purchaser or Merger Sub or any of their respective assets or properties is subject, except, in the case of clauses (ii), (iii) and (iv) above, for any deviations from the foregoing which would not reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect. 3.5. FINDERS AND INVESTMENT BANKERS. Neither Purchaser nor Merger Sub has employed any broker or finder or otherwise incurred any liability for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated hereby. 3.6. DISCLOSURES. Neither the Schedule TO or the Offer Documents nor any information supplied by Purchaser or Merger Sub for inclusion in the Schedule 14D-9 will, at the respective times the Schedule TO, the Offer Documents, the Schedule 14D-9 or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to stockholders of the Company, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. The information supplied by Purchaser or Merger Sub for inclusion in the Proxy Statement will not, on the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to stockholders of the Company, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading or, at the time of the Special Meeting, omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Special Meeting which shall have become false or misleading in any material respect. The Schedule TO will, when filed by Purchaser and Merger Sub with the SEC, comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder. Notwithstanding the foregoing, Purchaser and Merger Sub make no representation or warranty with respect to any information supplied by or on behalf of the Company which is contained in any of the foregoing documents. 25 3.7. FINANCING. At the date that Merger Sub becomes obligated to accept for payment and pay for Shares pursuant to the Offer, and at the Effective Time, Purchaser and Merger Sub will have sufficient cash and cash equivalents resources available to pay for the Shares that the Merger Sub becomes so obligated to accept for payment and pay for pursuant to the Offer and to pay the aggregate Merger Consideration pursuant to the Merger. 3.8. LITIGATION. There is no Litigation pending before any agency, court or tribunal, foreign or domestic, or, to the knowledge of Purchaser, threatened, against Purchaser, Merger Sub, any of their respective properties or any of their respective officers or directors (in their capacities as such) that would prevent, enjoin or materially alter or delay any of the transactions contemplated by any of the Purchaser Transaction Documents. There is no judgment, decree or order against Purchaser, Merger Sub or any of their respective directors or officers (in their capacities as such) that would prevent, enjoin or materially alter or delay any of the transactions contemplated by any of the Purchaser Transaction Documents. 3.9. NO PRIOR ACTIVITIES. Except for obligations or liabilities incurred in connection with its incorporation or the negotiation and consummation of the Purchaser Transaction Documents, the Offer, the Merger and the other transactions contemplated hereby and thereby, and the Consent Statement, Merger Sub has not incurred any obligations or liabilities, engaged in any business or activities of any type or kind whatsoever or entered into any agreements or arrangements with any person or entity. ARTICLE IV ADDITIONAL COVENANTS OF THE COMPANY 4.1. CONDUCT OF BUSINESS OF THE COMPANY. (a) Unless Purchaser shall otherwise agree in writing or except as expressly provided by this Agreement or as set forth in SECTION 4.1 of the Company Disclosure Schedule (the inclusion of any item thereon having been consented to by Purchaser), during the period from the date of this Agreement to the Effective Time, (i) the Company and its subsidiaries shall conduct their respective businesses in the ordinary course and consistent with past practice and (ii) the Company shall use its reasonable efforts to preserve intact its business organization, to keep available the services of its and its subsidiaries' officers and employees, to maintain satisfactory relationships with all persons with whom it and its subsidiaries do business, and to preserve the possession, control and condition of all of its and its subsidiaries' assets. (b) Without limiting the generality of the foregoing clause (a) and except as expressly provided by this Agreement or as set forth in SECTION 4.1 of the Company Disclosure Schedule, during the period from the date of this Agreement to the Effective Time, neither the Company nor any of its subsidiaries will, without the prior written consent of Purchaser: 26 (A) amend or propose to amend its Certificate of Incorporation or Bylaws (or comparable governing instruments); (B) authorize for issuance, issue, grant, sell, pledge or dispose of any shares of, or any options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any shares of, its capital stock or other securities or equity interests or any Voting Debt, including, but not limited to, any securities convertible into or exchangeable for shares of stock of any class, except for the issuance of Shares pursuant to the exercise of stock options outstanding on the date of this Agreement in accordance with their present terms; (C) split, combine or reclassify any shares of its capital stock or equity interests or declare, pay or set aside any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock or equity interests, or directly or indirectly redeem, purchase or otherwise acquire or offer to acquire any shares of its capital stock or other securities or equity interests, other than dividends and distributions to the Company or one of its wholly-owned subsidiaries and the Company's quarterly cash dividend of $0.10 per Share payable on March 30, 2007 to stockholders of record on the close of business on March 5, 2007; (D) (a) create, incur, assume, forgive or make any changes to the terms or collateral of any debt or receivables, or any employee or officer loans or advances, except in the ordinary course of business consistent with past practice or incurrences that constitute a refinancing of existing obligations on terms that are no less favorable to the Company than the existing terms; (b) except in the ordinary course of business consistent with past practice, assume, guarantee, endorse or otherwise become liable or responsible (whether directly, indirectly, contingently or otherwise) for the obligations of any person; (c) except in accordance with the Capex Budgets, make any capital expenditures in excess of $250,000; (d) make any loans, advances or capital contributions to, or investments in, any other person (other than customary travel, relocation or business advances to employees); (e) acquire the stock or assets of, or merge or consolidate with, any other person; (f) voluntarily incur any material liability or obligation (absolute, accrued, contingent or otherwise) other than in the ordinary course of business consistent with past practice; or (g) sell, transfer, mortgage, pledge, encumber or otherwise dispose of, or agree to sell, transfer, mortgage, pledge, encumber or otherwise dispose of, any material assets or properties (real, personal or mixed, tangible or intangible) other than to secure debt permitted under subclause (a) of this clause (D) or other than in the ordinary course of business consistent with past practice; (E) increase in any manner the wages, salaries, bonus, compensation or other benefits of any of its officers or employees or enter into, establish, amend or terminate any employment, consulting, retention, change in control, collective bargaining, bonus or other incentive compensation, profit sharing, health or other welfare, stock option or other equity, pension, retirement, vacation, severance, termination, deferred compensation or other compensation or benefit plan, policy, agreement, trust, fund or other arrangement with, for or in respect of any officer, director, employee, agent, consultant or affiliate other than as required by applicable Law or pursuant to the terms of agreements in effect on the date of this Agreement or in the ordinary course of business consistent with past practice with employees (other than officers) of the Company or any of its subsidiaries or enter into or engage in any agreement, 27 arrangement or transaction with any of its directors, officers, employees or affiliates, except for expense reimbursements, and current compensation and benefits, in the ordinary course of business consistent with past practice or as permitted under the terms of this Agreement; (F) (i) commence any litigation or other proceedings with any Governmental Authority or other person or (ii) make or rescind any election relating to Taxes except to the extent consistent with prior practice, settle any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, file any amended Tax Return or claim for refund, change any method of accounting or make any other material change in its accounting or Tax policies, but in each case only if such action could reasonably be expected to have a Company Material Adverse Effect, and in each case except as required by applicable Law or GAAP; (G) adopt or amend any resolution or agreement concerning indemnification of its directors, officers, employees or agents; (H) materially modify or amend, or terminate, any Company Material Contract, or waive, release or assign any material rights or claims thereunder, except, in each case, in the ordinary course of business consistent with past practice; (I) modify, amend or terminate, or waive, release or assign any material rights or claims with respect to, any confidentiality agreement or non-competition agreement to which the Company or any of its subsidiaries is a party; (J) establish any subsidiary or enter into any new line of business; (K) enter into any lease, contract or agreement pursuant to which the Company or any of its subsidiaries is obligated to pay or incur obligations of more than $250,000 per year, other than leases contemplated in connection with the Capex Budgets or other leases, contracts or agreements in the ordinary course of business consistent with past practice; (L) permit any material insurance policy naming the Company or any of its subsidiaries as a beneficiary or a loss payee to be cancelled or terminated without notice to and consent by Purchaser, unless the Company uses reasonable efforts to maintain substantially similar insurance coverage as is currently in place; (M) revalue any of its assets or make any change in accounting methods, principles or practices, except as required by GAAP; (N) fail to make in a timely manner any filings with the SEC required under the Securities Act or the Exchange Act or the rules and regulations promulgated thereunder; (O) discharge any obligations (including accounts payable) other than intercompany obligations or other obligations discharged on a timely basis in the ordinary course of business consistent with past practice; (P) close or materially reduce the Company's or any subsidiary's activities, or effect any material layoff at any of the Company's or any subsidiary's facilities; or 28 (Q) authorize any of, or agree to commit to do any of, the foregoing actions. (c) The Company shall use its reasonable efforts to comply in all material respects with all Laws applicable to it or any of its properties, assets or business and maintain in full force and effect all the Company Permits necessary for, or otherwise material to, such business. 4.2. NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice to Purchaser if any of the following occur after the date of this Agreement: (i) there has been a material failure of the Company to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; (ii) receipt of any notice or other communication in writing from any third party alleging that the Consent of such third party is or may be required in connection with the transactions contemplated by this Agreement, provided that such Consent would have been required to have been disclosed in this Agreement; (iii) receipt of any material notice or other communication from any Governmental Authority (including, but not limited to, the NASD or any securities exchange) in connection with the transactions contemplated by this Agreement; (iv) the occurrence of an event which would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or that would otherwise reasonably be expected to cause a condition in Article VI or Annex A not to be satisfied; or (v) the commencement or, to the Company's knowledge, threat of any Litigation against the Company, any of its subsidiaries, any of their respective properties or assets or any employee, agent, director or officer, in his or her capacity as such, of the Company or any of its subsidiaries which, if pending on the date hereof, would have been required to have been disclosed in this Agreement or which relates to the consummation of the Offer or the Merger. No such notice to Purchaser shall have any effect on the determination of whether or not any of the conditions to Closing or to the consummation of the Offer have been satisfied or in determining whether or not any of the representations, warranties or covenants contained in this Agreement have been breached. The Company shall deliver to Purchaser promptly following the close of business on the then-scheduled expiration date of the Offer a certificate as to whether the conditions to the Offer described in paragraphs (c), (e)(ii), (f), (g), (i) and (k) on Annex A hereto have been satisfied. 4.3. ACCESS AND INFORMATION. (a) Between the date of this Agreement and the Effective Time, the Company will give, and shall direct its accountants and legal counsel to give, Purchaser, its affiliates and their respective authorized representatives (including, without limitation, accountants, legal counsel and consultants), at all reasonable times, access as reasonably requested to all offices and other facilities and to all contracts, agreements, commitments, books and records of or pertaining to the Company and its subsidiaries, will permit the foregoing to make such reasonable inspections as they may require and will cause its officers, with reasonable promptness, to furnish Purchaser with (i) such financial and operating data and other information with respect to the respective businesses and properties of the Company and its subsidiaries as Purchaser may from time to time reasonably request, and (ii) a copy of each material report, schedule and other document filed or received by the Company pursuant to the requirements of applicable securities laws or the NASD; PROVIDED, HOWEVER, that, between the date hereof and the time of first acceptance of Shares for payment under the Offer, Purchaser, its affiliates and their respective authorized representatives may, upon the prior approval (which 29 shall not be unreasonably withheld or delayed) of the Company's Chief Executive Officer, (i) contact any employee of the Company or any of its subsidiaries directly, provided that such contact is for informational purposes only and does not unreasonably interfere with such employee's ongoing responsibilities to the Company or any of its subsidiaries, and (ii) have access to the Company's or any of its subsidiaries' offices and facilities, and, following the time of first acceptance of Shares for payment under the Offer, Purchaser, its affiliates and their respective authorized representatives shall not be restricted in any manner in contacting employees of the Company or any of its subsidiaries or in accessing the Company's or any of its subsidiaries' offices and facilities. No such access, inspections or furnishing of information shall have any adverse effect on Purchaser or Merger Sub's ability to assert that conditions to Closing or to the consummation of the Offer have not been satisfied. (b) Prior to the execution and delivery of this Agreement, the Company shall have delivered to Purchaser a copy of duly adopted resolutions of the Board approving the execution, delivery and performance of the Company Transaction Documents, the Offer, the Merger and the other transactions contemplated hereby and thereby, certified by the Secretary of the Company. 4.4. SPECIAL MEETING; PROXY STATEMENT. (a) As promptly as practicable after Purchaser and Merger Sub have purchased sufficient Shares pursuant to the Offer to satisfy the Minimum Condition, if required by applicable Law in order to consummate the Merger, the Company, acting through its Board, shall, in accordance with applicable Law: (i) (A) duly call, give notice of, convene and hold a special meeting of its stockholders (the "SPECIAL MEETING") for the purposes of considering and taking action upon the approval and adoption of the Merger and this Agreement; (B) subject to Section 4.8, declare advisable and recommend to its stockholders that they approve the Merger and adopt this Agreement, and shall include disclosure regarding the approval of the Company's Board; (C) without limiting the generality of the foregoing, the Company agrees that its obligations under clause (A) of this Section 4.4(a)(i) shall not be affected by the commencement, public proposal, public disclosure or communication to the Company or any other person of any Company Takeover Proposal (as such term is defined in Section 4.8(a)) or the withdrawal or modification by the Board of its approval or recommendation of the Offer, the Merger or this Agreement; and (ii) prepare and file with the SEC a preliminary proxy or information statement relating to the Merger and this Agreement and obtain and furnish the information required to be included by the SEC therein and, after consultation with Purchaser, respond promptly to any comments made by the SEC with respect to the preliminary proxy or information statement and cause a definitive proxy or information statement, including any amendments or supplements thereto (the "PROXY STATEMENT"), to be mailed to its stockholders at the earliest practicable date, provided that no amendments or supplements to the Proxy Statement will be made by the Company without prior consultation with Purchaser and its counsel. 30 (b) Purchaser shall vote, or cause to be voted, all of the Shares acquired in the Offer or otherwise then owned by it or Merger Sub in favor of the approval and adoption of the Merger and this Agreement. (c) Notwithstanding the provisions of paragraphs (a) and (b) above, in the event that Purchaser and Merger Sub shall acquire that number of Shares which, together with the Shares they already own, constitute in the aggregate at least 90% of the outstanding Shares, pursuant to the Offer or otherwise, the parties hereto shall, subject to Article VI hereof, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of stockholders of the Company, in accordance with Section 253 of the DGCL. 4.5. REASONABLE EFFORTS. Subject to the terms and conditions herein provided, including Section 4.8 of this Agreement, the Company agrees to use its reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the Offer and the Merger and the other transactions contemplated by this Agreement, including, but not limited to, (i) obtaining all Consents from Governmental Authorities and other third parties required for the consummation of the Offer and the Merger and the other transactions contemplated hereby (provided that the Company shall not make any payment or amend the terms of any agreement in connection with obtaining any such Consent without the prior written approval of Purchaser) and (ii) consulting and cooperating with, providing assistance to and furnishing information requested by Purchaser and Merger Sub in the preparation and filing with the SEC of the Schedule TO, the Offer Documents and all necessary amendments and supplements thereto. Upon the terms and subject to the conditions hereof, the Company agrees to use reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary to satisfy the conditions to the consummation of the Offer and the Closing set forth herein. 4.6. PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, the Company shall not (a) issue or cause the publication of any press release or any other announcement or communication with respect to this Agreement, the Offer or the Merger or the other transactions contemplated hereby without the prior written consent of Purchaser, or (b) discuss with the press or the media this Agreement, the Offer, the Merger or the other transactions contemplated hereby (and will refer any and all questions and inquiries concerning Purchaser or its affiliates to Purchaser), except in any case under (a) or (b) where such release, announcement, communication or discussion is required by applicable Law, Governmental Authority, court process or by obligations pursuant to any listing agreement with any national securities exchange, in which case the Company shall consult with Purchaser prior to making any such disclosure. 4.7. COMPLIANCE. In consummating the Offer, the Merger and the other transactions contemplated hereby, the Company shall comply in all material respects with the provisions of the Exchange Act and the Securities Act and shall comply in all 31 material respects with all other applicable Laws. The Company shall use its reasonable efforts to prepare, and shall cause the Company's independent public accountants to audit and issue its report with respect to the Company's financial statements to be included in, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006. 4.8. NO SOLICITATION. (a) For purposes of this Agreement, "COMPANY TAKEOVER PROPOSAL" means (other than the transactions contemplated by this Agreement) any inquiry, proposal or offer from any person relating to (1) any direct or indirect acquisition or purchase of assets representing 10% or more of the assets of the Company or any of its subsidiaries, (2) any issuance, sale or other disposition of (including by way of merger, consolidation, business combination, share exchange, joint venture or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into or exchangeable for, such securities) representing 10% or more of the voting power of the Company, (3) any tender offer, exchange offer or other transaction in which, if consummated, any person or "group" (as such term is defined under the Exchange Act) shall acquire beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange Act), or the right to acquire beneficial ownership, of 10% or more of the outstanding voting capital stock of the Company, or (4) any merger, consolidation, share exchange, business combination, recapitalization, liquidation or dissolution involving the Company or any of its subsidiaries. For purposes of this Agreement, a "COMPANY SUPERIOR OFFER" means a Company Takeover Proposal on terms that the Board determines, in good faith, based upon consultations with its outside legal counsel and its financial advisor, if consummated, are more favorable to the Company's stockholders than this Agreement, the Offer and the Merger and is reasonably likely to be consummated, taking into account all legal, financial (including, without limitation, any financing contingencies) and regulatory aspects of the offer and the person making the offer. (b) Except as set forth in this Section 4.8, the Company shall not, directly or indirectly, and shall not, directly or indirectly, authorize or permit any officer, director, employee, agent or representative of the Company to, (i) solicit, encourage, initiate or facilitate the making, submission or announcement of any Company Takeover Proposal, (ii) furnish any non-public information regarding the Company to any person (other than Purchaser, Merger Sub, any of their respective affiliates or any of their respective representatives) in connection with or in response to a Company Takeover Proposal or an inquiry that the Company believes in good faith could reasonably be expected to lead to a Company Takeover Proposal, (iii) engage in discussions or negotiations with any person with respect to any Company Takeover Proposal, except as to the existence of these provisions, (iv) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Purchaser, Merger Sub or any of their respective affiliates, the approval or recommendation by the Board of the Offer, this Agreement or the Merger, (v) approve or recommend, or propose publicly to approve or recommend, any Company Takeover Proposal or (vi) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each, a "COMPANY ACQUISITION AGREEMENT") related to any Company Takeover Proposal. 32 (c) Notwithstanding the provisions of Section 4.8(b), nothing in this Agreement shall prohibit or limit (A) the Company, or the Board, prior to the time of the first acceptance of Shares for payment pursuant to the Offer, from furnishing non-public information regarding the Company to, or entering into discussions or negotiations with, any person in response to an unsolicited, bona fide written Company Takeover Proposal that the Board concludes in good faith (after consultation with its financial advisor) could reasonably be expected to constitute a Company Superior Offer if (1) the Company has not violated any of the provisions in Section 4.8(b) in connection with such Company Takeover Proposal, (2) the Board determines in good faith, after consultation with its outside legal counsel, that such action with respect to such Company Takeover Proposal is consistent with its fiduciary duties to the stockholders of the Company under applicable Law, (3) the Company receives from such person an executed confidentiality agreement with provisions not substantially more favorable to such person than those contained in the Confidentiality Agreement (as defined below) (but not including a provision similar to the seventh paragraph thereof), and (4) the Company furnishes such non-public information to such person and to Purchaser at substantially the same time (to the extent such non-public information has not been previously furnished by the Company to Purchaser); or (B) the Company from complying with Rules l4d-9 and 14e-2 promulgated under the Exchange Act with regard to any Company Takeover Proposal. (d) The Company shall notify Purchaser as promptly as practicable (and in any event within two business days) of the receipt by the Company, or any of its representatives, of any bona fide inquiries, proposals or offers, requests for information or requests for discussions or negotiations relating to any Company Takeover Proposal (including providing the identity of the person making or submitting such Company Takeover Proposal or request, and a summary of the material terms and conditions thereof, if the Company Takeover Proposal or request is not in writing, or a copy of the Company Takeover Proposal or request and any related draft Company Acquisition Agreements if it is in writing). The Company shall keep Purchaser informed on a current basis of the status of any such discussions or negotiations and of any modifications to such inquiries, proposals or offers. The Company agrees that it shall not terminate, waive, amend or modify, or release any person from, any provision of any standstill or confidentiality agreement to which it is a party and that relates to a Company Takeover Proposal, and the Company shall use reasonable efforts to enforce the provisions of any such agreement. The Company shall immediately cease and cause to be terminated any discussions or negotiations with any parties with respect to any Company Takeover Proposal and shall take reasonable steps to inform its representatives of the obligations undertaken in this Section 4.8. (e) Notwithstanding anything in this Agreement to the contrary, including Section 4.8(b), the Board may, at any time prior to the first acceptance of Shares for payment pursuant to the Offer (subject to the Company's compliance with the provisions of this Section 4.8): (i) withdraw or modify its approval or recommendation of the Offer, this Agreement or the Merger or (ii) approve or recommend a Company Superior Offer if, in the case of both clause (i) and (ii) above: (A) an unsolicited, bona fide written offer is made to the Company (and not withdrawn) by a third party for a Company Takeover Proposal; (B) the Board determines in good faith, after consultation with its financial advisor, that such offer constitutes a Company Superior Offer; and (C) following consultation with outside legal counsel, the Board determines in good faith that the withdrawal or modification of its approval or recommendation of the Offer, this Agreement or the Merger is consistent with its fiduciary duties to the stockholders of the Company under applicable Law, but only, in the case of both 33 clause (i) and (ii) above, (x) after providing written notice to Purchaser (a "NOTICE OF SUPERIOR OFFER") advising Purchaser that the Board has received a Company Superior Offer, specifying the material terms and conditions of such Company Superior Offer (and including with such notice any draft Company Acquisition Agreement) and identifying the person or persons making such Company Superior Offer, and (y) if Purchaser, or an affiliate thereof, does not, within three (3) business days of Purchaser's receipt of the Notice of Superior Offer, make an offer that the Board determines in good faith, after consultation with its financial advisor, to be at least as favorable to the Company's stockholders as the Company Superior Offer; PROVIDED that during such three (3) business day period, the Company shall, and shall use reasonable efforts to cause its financial and legal advisors to, negotiate in good faith with Purchaser and its affiliates (to the extent Purchaser wishes to negotiate) to enable Purchaser or its affiliate to make such an offer. 4.9. SEC AND STOCKHOLDER FILINGS. The Company shall send to Purchaser a copy of all public reports and materials promptly after the time it sends the same to its stockholders, the SEC or any state or foreign securities commission. 4.10. STATE TAKEOVER LAWS. Notwithstanding any other provision in this Agreement, if any state takeover statute may become applicable to the transactions contemplated by this Agreement, the Company and the members of its Board will grant such approvals and take such actions as are necessary so that the transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms and conditions contemplated hereby and otherwise act to eliminate the effect of any takeover statute on any of the transactions contemplated by this Agreement. ARTICLE V ADDITIONAL COVENANTS OF PURCHASER 5.1. NOTIFICATION OF CERTAIN MATTERS. Purchaser shall give prompt notice to the Company if any of the following occur after the date of this Agreement: (i) there has been a material failure of Purchaser or Merger Sub to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; (ii) receipt of any notice or other communication in writing from any third party alleging that the Consent of such third party is or may be required in connection with the transactions contemplated by this Agreement, provided that such Consent would have been required to have been disclosed in this Agreement; (iii) receipt of any material notice or other communication from any Governmental Authority (including, but not limited to, the NASD) in connection with the transactions contemplated by this Agreement; (iv) the occurrence of an event which would reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect; or (v) the commencement or, to the Purchaser's knowledge, threat of any Litigation against Purchaser, Merger Sub, any of their respective properties or assets, or any employee, agent, director or officer, in his or her capacity as such, of Purchaser or Merger Sub which, if pending on the date hereof, would have been required to have been disclosed in this Agreement 34 or which relates to the consummation of the Offer or the Merger. No such notice to the Company shall have any effect on the determination of whether or not any of the conditions to Closing or to the consummation of the Offer have been satisfied or in determining whether or not any of the representations, warranties or covenants contained in this Agreement have been breached 5.2. REASONABLE EFFORTS. Subject to the terms and conditions herein provided, Purchaser agrees to use its reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the Offer and the Merger and the other transactions contemplated by this Agreement, including, but not limited to: (i) obtaining all Consents from Governmental Authorities and other third parties required for the consummation of the Offer and the Merger and the other transactions contemplated hereby and (ii) consulting and cooperating with, providing assistance to and furnishing information requested by the Company in the preparation and filing with the SEC of the Schedule 14D-9 and the Proxy Statement, if applicable, and all necessary amendments and supplements thereto. Upon the terms and subject to the conditions hereof, Purchaser agrees to use reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary to satisfy the conditions to the consummation of the Offer and the Closing set forth herein. 5.3. COMPLIANCE. In consummating the Offer, the Merger and the other transactions contemplated hereby, Purchaser and Merger Sub shall comply in all material respects with the provisions of the Exchange Act and the Securities Act and shall comply in all material respects with all other applicable Laws. 5.4. INDEMNIFICATION. (a) The Certificate of Incorporation and Bylaws of the Surviving Corporation shall contain provisions no less favorable with respect to indemnification than are set forth in the Certificate of Incorporation and Bylaws, respectively, of the Company, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who, at or prior to the Effective Time, were directors, officers, employees, fiduciaries or agents of the Company or any of its subsidiaries. After the Effective Time, the Surviving Corporation shall, to the fullest extent permitted under applicable Law, indemnify and hold harmless each present and former director and officer of the Company and each of its subsidiaries (collectively, the "INDEMNIFIED PARTIES") against all costs and expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages, liabilities and settlement amounts paid in connection with any claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), whether civil, criminal, administrative or investigative, arising out of or pertaining to any action or omission, in his or her capacity as an officer, director, employee, fiduciary or agent of the Company or any of its subsidiaries, occurring at or before the Effective Time, to the same extent as provided in the Certificate of Incorporation or Bylaws of the Company. In the event of any such 35 claim, action, suit, proceeding or investigation, (i) the Surviving Corporation shall pay the reasonable fees and expenses of counsel selected by the Indemnified Parties, which counsel shall be reasonably satisfactory to the Surviving Corporation, promptly after statements therefor are received (provided the applicable Indemnified Party provides an undertaking to repay all advanced expenses if it is finally judicially determined that such Indemnified Party is not entitled to indemnification) and (ii) the Surviving Corporation shall cooperate in the defense of any such matter; provided, however, that the Surviving Corporation shall not be liable for any settlement effected without the Surviving Corporation's prior written consent (which consent shall not be unreasonably withheld or delayed); and provided, further, that the Surviving Corporation shall not be obligated pursuant to this Section 5.4(a) to pay the fees and expenses of more than one counsel (selected by a plurality of the applicable Indemnified Parties) for all Indemnified Parties in any jurisdiction with respect to any single action except to the extent that two or more of such Indemnified Parties shall have conflicting interests in the outcome of such action; and provided, further, that, in the event that any claim for indemnification is asserted or made within such six-year period, all rights to indemnification in respect of such claim shall continue until the disposition of such claim. (b) The Company shall purchase at or prior to the consummation of the Offer, and the Surviving Corporation shall maintain in effect, tail policies to the Company's current directors' and officers' liability insurance, which tail policies (i) shall be effective for a period of six years after the Effective Time with respect to claims arising from acts or omissions occurring prior to the Effective Time with respect to those persons who are currently covered by the Company's directors' and officers' liability insurance and (ii) shall contain terms with respect to coverage and amount no less favorable, in the aggregate, than those of such policy or policies as in effect on the date hereof. Notwithstanding the foregoing, if the tail policies described above cannot be obtained or can only be obtained by paying aggregate premiums in excess of 225% of the aggregate annual amount currently paid by the Company for such coverage, the Surviving Corporation shall only be required to provide as much coverage as can be obtained by paying aggregate premiums equal to 225% of the aggregate annual amount currently paid by the Company for such coverage, which amount is set forth on SECTION 5.4(B) of the Company Disclosure Schedule. (c) In the event the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of the Surviving Corporation shall succeed to the obligations set forth in this Section 5.4. (d) The provisions of this Section 5.4 (i) are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party, his or her heirs and representatives and (ii) are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise. 36 5.5. PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, each of Purchaser and Merger Sub shall not (a) issue or cause the publication of any press release or any other announcement or communication with respect to this Agreement, the Offer or the Merger or the other transactions contemplated hereby without the prior written consent of the Company, or (b) discuss with the press or the media this Agreement, the Offer, the Merger or the other transactions contemplated hereby (and will refer any and all questions and inquiries concerning the Company or its affiliates to the Company), except in any case under (a) or (b) where such release, announcement, communication or discussion is required by applicable Law, Governmental Authority, court process or by obligations pursuant to any listing agreement with any national securities exchange, in which case Purchaser shall consult with the Company prior to making any such disclosure. 5.6. EMPLOYEE MATTERS From and after the Effective Time, Purchaser shall, and shall cause the Surviving Corporation to, honor all Company Employee Plans in accordance with their terms as in effect immediately before the consummation of the Offer, provided that nothing herein shall prohibit Purchaser or the Surviving Corporation from amending or terminating any such Company Employee Plan in accordance with its terms at any time or from time to time thereafter. ARTICLE VI CONDITIONS 6.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of each party to effect the Merger shall be subject to the fulfillment or waiver at or prior to the Effective Time of the following conditions: (a) STOCKHOLDER APPROVAL. If required under the DGCL, the Company Stockholder Approval shall have been obtained. (b) NO INJUNCTION OR ACTION. No order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been enacted, entered, promulgated or enforced by any court or other Governmental Authority since the date of this Agreement, which prohibits or prevents the consummation of the Merger and which has not been vacated, dismissed or withdrawn prior to the Effective Time. The Company and Purchaser shall use their reasonable efforts to have any of the foregoing vacated, dismissed or withdrawn by the Effective Time. (c) PURCHASE OF SHARES. Purchaser or Merger Sub or any affiliate of either of them shall have purchased Shares pursuant to the Offer that together with shares otherwise owned by Purchaser and its affiliates represent at least the Minimum Condition. (d) EXPIRATION OF OFFERING. Any "subsequent offering period" shall have expired. 37 6.2. CONDITION TO OBLIGATIONS OF PURCHASER. The obligations of Purchaser and Merger Sub to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following additional condition, which may be waived by Purchaser: (a) CONSENTS. All material Consents required in connection with this Agreement or the transactions contemplated hereby shall have been obtained and shall be in full force and effect. 6.3. FRUSTRATION OF CONDITIONS. Neither Purchaser nor the Company may rely on the failure of any condition set forth in this Article VI to be satisfied if such failure was caused by such party's failure to comply with or perform any of its covenants or obligations set forth in this Agreement. ARTICLE VII TERMINATION AND ABANDONMENT 7.1. TERMINATION. This Agreement may be terminated and the Offer, the Merger and the other transactions contemplated hereby may be abandoned at any time prior to the time of the first acceptance of Shares for payment pursuant to the Offer ("FIRST ACCEPTANCE TIME") by action taken or authorized by the Board of Directors, or other governing body or entity, of the terminating party or parties, as follows (the date of any such termination, the "TERMINATION Date"): (a) by mutual written consent of Purchaser and the Company; (b) by either Purchaser or the Company, if the First Acceptance Time shall not have occurred on or before May 15, 2007; PROVIDED, HOWEVER, that the right to terminate this Agreement under this Section 7.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the First Acceptance Time to occur on or before such date; (c) by either Purchaser or the Company, if any Governmental Authority shall have enacted, issued, promulgated, enforced or entered any legally binding injunction, order, decree or ruling (whether temporary, preliminary or permanent) or taken any other action (including the failure to have taken an action) which has become final and non-appealable and has the effect of making consummation of the Offer or the Merger illegal or otherwise preventing or prohibiting consummation of the Offer or the Merger; (d) by Purchaser, if neither Purchaser nor Merger Sub is in material breach of any of its representations, warranties or covenants under this Agreement, and if (i) any of the representations or warranties of the Company herein become untrue or inaccurate such that the condition set forth in paragraph (f) of Annex A would not be satisfied, (ii) there has been a breach on the part of the Company of any of its covenants or agreements herein such that the condition set forth in paragraph (g) of Annex A would not be satisfied, and such breach (if curable) has not been cured within twenty (20) days after written notice to the Company or (iii) the Company has breached in any material respect any of the provisions of Section 4.8(b), (c), (d) or (e); 38 (e) by the Company, if the Company is not in material breach of any of its representations, warranties or covenants under this Agreement, and if (i) any of the representations or warranties of Purchaser or Merger Sub herein become untrue or inaccurate, except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality" or "Material Adverse Effect" set forth therein) would not be reasonably expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect on the date of this Agreement and as of the expiration of the Offer, as if made at and as of such date (except to the extent expressly made as of an earlier date, in which case as of such date), or (ii) either Purchaser or Merger Sub shall have failed to perform in any material respect its obligations or to comply in any material respect with its agreements or covenants to be performed or complied with by it under this Agreement, and such breach (if curable) has not been cured within twenty (20) days after written notice to Purchaser; (f) by Purchaser, if the Board shall have (i) withdrawn or modified, in a manner adverse to Purchaser, Merger Sub or any of their respective affiliates, its approval or recommendation of the Offer, this Agreement or the Merger or (ii) recommended or approved, or proposed publicly to recommend or approve, any Company Takeover Proposal or any Company Acquisition Agreement relating to any Company Takeover Proposal or (iii) resolved to do any of the foregoing; or (g) by the Company, if the Board shall have withdrawn or modified in a manner adverse to Purchaser, Merger Sub or any of their respective affiliates its approval or recommendation of the Offer, this Agreement or the Merger in compliance with Section 4.8(e) of this Agreement; PROVIDED, however, that any such purported termination pursuant to this Section 7.1(g) shall be void and of no force or effect unless the Company concurrently with such termination pays to Purchaser the Company Termination Fee and the Termination Expenses in accordance with Section 7.3. 7.2. EFFECT OF TERMINATION. In the event of the termination of this Agreement pursuant to Section 7.1, this Agreement shall forthwith become void, and there shall be no liability under this Agreement on the part of any party hereto (except that the provisions of this Section 7.2, Section 7.3 (Fees and Expenses) and Section 8.1 (Confidentiality) shall survive any such termination); PROVIDED, HOWEVER, that nothing herein shall relieve any party from liability for any breach of any of its representations, warranties, covenants or agreements set forth in this Agreement prior to such termination. 7.3. FEES AND EXPENSES. (a) Except as otherwise set forth in this Section 7.3, all Expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, whether or not the Offer, the Merger or any other related transaction is consummated. As used in this Agreement, "EXPENSES" shall include all documented reasonable out-of-pocket 39 expenses (including all fees and expenses of counsel, accountants, investment bankers, financing sources, experts and consultants to a party hereto and its affiliates) incurred by a party or any of its affiliates or on its or any of their behalf in connection with or related to the authorization, preparation, negotiation, execution or performance of this Agreement, the preparation, printing, filing or mailing of the Schedule TO, the Offer Documents, the Schedule 14D-9 or the Proxy Statement, if any, the solicitation of stockholder approvals and all other matters related to the consummation of the Offer, the Merger and the other transactions contemplated hereby. Purchaser and the Company shall each pay one-half of the filing fee in connection with any filings under the HSR Act. (b) The Company agrees that if this Agreement shall be terminated: (i) by Purchaser or the Company pursuant to Section 7.1(b) if (A) at any time prior to such termination a Company Takeover Proposal has been publicly announced or has been made or submitted to the Company and (B) concurrently with such termination or within twelve (12) months after the Termination Date the Company or any of its subsidiaries enters into a definitive agreement with respect to, or consummates, any Company Takeover Proposal, then the Company shall pay Purchaser the Company Termination Fee and the Termination Expenses, as such terms are defined below; (ii) by Purchaser pursuant to Section 7.1(d), then (A) the Company shall pay Purchaser the Termination Expenses and (B) if, concurrently with such termination or within twelve (12) months after the Termination Date the Company or any of its subsidiaries enters into a definitive agreement with respect to, or consummates, any Company Takeover Proposal, then the Company shall also pay Purchaser the Company Termination Fee; (iii) by Purchaser pursuant to Section 7.1(f), then the Company shall pay Purchaser the Company Termination Fee and the Termination Expenses; or (iv) by the Company pursuant to Section 7.1(g), then the Company shall pay Purchaser the Company Termination Fee and the Termination Expenses (which Company Termination Fee and Termination Expenses shall be paid concurrently with such termination). (c) The Company Termination Fee shall be paid to Purchaser or its designee by the Company in immediately available funds (i) concurrently with and as a condition to the effectiveness of a termination of this Agreement by the Company pursuant to Section 7.1(g) and (ii) otherwise, within two business days after the date of the event giving rise to the obligation to make such payment. The Termination Expenses shall be paid to Purchaser or its designee by the Company in immediately available funds (i) concurrently with and as a condition to the effectiveness of a termination of this Agreement by the Company pursuant to Section 7.1(g) and (ii) otherwise, within two business days after receipt by the Company of reasonable documentation with respect to such Termination Expenses. (d) For purposes of this Agreement, (i) "COMPANY TERMINATION FEE" means an amount equal to $3,500,000 and (ii) "TERMINATION EXPENSES" means an amount, not to exceed $1,000,000, equal to the reasonably documented Expenses of Purchaser, Merger Sub and their respective affiliates. For purposes of this Section 7.3, a "Company Takeover Proposal" shall have the meaning set forth in Section 4.8, 40 except that references to "10%" in such definition shall be replaced by "50%"; provided, however, that, notwithstanding anything to the contrary contained in the foregoing, the sale, in whatever form (whether by merger, consolidation, stock or asset sale, joint venture or otherwise), of all or a material part of any segment of the Company shall be deemed to constitute a "Company Takeover Proposal" for purposes of this Section 7.3. (e) Each of the Company and Purchaser acknowledges that the agreements contained in this Section 7.3 are an integral part of the transactions contemplated by this Agreement. In the event that the Company shall fail to pay the Company Termination Fee or any Termination Expenses when due, the Company shall reimburse Purchaser, in addition to the Termination Expenses and not subject to any cap or limit thereon, for all reasonable costs and expenses actually incurred or accrued by Purchaser (including reasonable fees and expenses of counsel) in connection with the collection under and enforcement of this Section 7.3. Notwithstanding anything to the contrary in this Agreement, if this Agreement is terminated under any of the circumstances set forth in Section 7.3(b) as a result of which Purchaser is entitled to receive payment of the Company Termination Fee and/or Termination Expenses, Purchaser's right to receive payment of the Company Termination Fee and/or Termination Expenses pursuant to this Section 7.3 shall be the exclusive remedy of Purchaser and Merger Sub for the loss suffered as a result of any such termination of this Agreement, and upon payment of the Company Termination Fee and/or Termination Expenses in accordance with this Section 7.3, the Company shall have no further liability or obligation relating to or arising out of this Agreement (except with respect to the second sentence of this Section 7.3(e) and with respect to Section 8.1) if this Agreement is terminated under any of the circumstances set forth in Section 7.3(b). ARTICLE VIII MISCELLANEOUS 8.1. CONFIDENTIALITY. Unless (i) otherwise expressly provided in this Agreement, (ii) required by applicable Law or Governmental Authority, (iii) necessary to secure any required Consent as to which the other party has been advised or (iv) consented to in writing by Purchaser or the Company, as applicable, any information or documents furnished in connection herewith shall be kept strictly confidential by the Company, Purchaser, Merger Sub and their respective officers, directors, employees, agents and representatives. Prior to any disclosure pursuant to the preceding sentence, the party intending to make such disclosure shall use its reasonable efforts to consult with the other party regarding the nature and extent of the disclosure. Nothing contained herein shall preclude disclosures to the extent necessary to comply with accounting, SEC and other disclosure obligations imposed by applicable Law. To the extent required by such disclosure obligations, Purchaser or the Company, after a party uses its reasonable efforts to consult with the other party, may file with the SEC a Report on Form 8-K pursuant to the Exchange Act with respect to the Offer and the Merger, which report may include, among other things, financial statements and pro forma financial information with respect to the other party. Purchaser and the Company shall cooperate with the other and provide such information and documents as may be required in connection with any filings with the SEC. In the event the Offer or the Merger is not consummated, each party shall return to the other any documents furnished by the other and all copies thereof any of them may have made and will hold in absolute confidence any information obtained from the 41 other party except to the extent (i) such party is required to disclose such information by applicable Law or such disclosure is necessary in connection with the pursuit or defense of a claim, (ii) such information was known by such party prior to such disclosure or was thereafter developed or obtained by such party independent of such disclosure or (iii) such information becomes generally available to the public other than by breach of this Section 8.1. Prior to any disclosure of information pursuant to the exception in clause (i) of the preceding sentence, the party intending to disclose the same shall so notify the party which provided the same in order that such party may seek a protective order or other appropriate remedy should it choose to do so. 8.2. AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or supplemented only by a written agreement among the Company, Purchaser and Merger Sub. 8.3. WAIVER OF COMPLIANCE; CONSENTS. Any failure of the Company, on the one hand, or Purchaser or Merger Sub, on the other hand, to comply with any obligation, covenant, agreement or condition herein may be waived by Purchaser, on the one hand, or the Company, on the other hand, only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 8.3. 8.4. SURVIVAL. The respective representations and warranties of the Company and Purchaser contained herein or in any certificates or other documents delivered prior to or at the Closing shall survive the execution and delivery of this Agreement, notwithstanding any investigation made or information obtained by the other party, but shall terminate at the Effective Time. 8.5. NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by facsimile, receipt confirmed, or on the next business day when sent by overnight courier or on the second succeeding business day when sent by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to the Company, to: Bairnco Corporation 300 Primera Blvd. Lake Mary, FL 32746 Attention: CEO Facsimile: 407-875-3398 42 with a copy to (but which shall not constitute notice to the Company): Debevoise & Plimpton LLP 919 Third Avenue New York, New York 10022 Attention: Andrew L. Bab, Esq. Facsimile: (212) 521-7323 (ii) if to Purchaser or Merger Sub, to: Steel Partners II, L.P. 590 Madison Avenue, 32nd Floor New York, New York 10022 Attention: Warren G. Lichtenstein Facsimile: 212-520-2321 with a copy to (but which shall not constitute notice to Purchaser or Merger Sub) Olshan Grundman Frome Rosenzweig & Wolosky LLP Park Avenue Tower 65 East 55th Street New York, New York 10022 Attention: Steven Wolosky, Esq. Facsimile: (212) 451-2222 8.6. BINDING EFFECT; ASSIGNMENT. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto prior to the Effective Time, without the prior written consent of the other parties hereto; provided, however, that Purchaser may assign any or all of its rights or delegate any or all of its obligations hereunder, and may transfer, sell or otherwise dispose of all or any part of its interest in Merger Sub, to any of its affiliates without such prior written consent. 8.7. GOVERNING LAW. This Agreement shall be deemed to be made in, and in all respects shall be interpreted, construed and governed by and in accordance with the internal laws of, the State of Delaware, without regard to the conflicts of law principles thereof. 43 8.8. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which together shall be deemed an original, but all of which together shall constitute one and the same instrument. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a ".pdf" format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or ".pdf" signature page were an original thereof. 8.9. INTERPRETATION. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. As used in this Agreement, (i) the term "PERSON" shall mean and include an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an association, an unincorporated organization, a Governmental Authority and any other entity, (ii) unless otherwise specified herein, the term "AFFILIATE," with respect to any person, shall mean and include any person controlling, controlled by or under common control with such person, (iii) the term "SUBSIDIARY" of any specified person shall mean any corporation a majority of the outstanding voting power of which, or any partnership, joint venture, limited liability company or other entity a majority of the total equity interest of which, is directly or indirectly owned by such specified person, (iv) the term "KNOWLEDGE," when used with respect to the Company, shall mean the knowledge of the executive officers of the Company (after reasonable investigation) and, when used with respect to Purchaser, shall mean the knowledge of the executive officers of Purchaser (after reasonable investigation), and (v) the term "INCLUDING" shall mean "including, without limitation." The parties have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. 8.10. ENTIRE AGREEMENT. This Agreement and the documents or instruments referred to herein, including, but not limited to, the Exhibit(s) attached hereto and the Disclosure Schedules referred to herein, which Exhibit(s) and Disclosure Schedules are incorporated herein by reference, any other written agreement entered into contemporaneously herewith, including the Tender and Support Agreement and the Rights Amendment, and the confidentiality agreement, dated October 31, 2006, as amended, between Purchaser and the Company (the "CONFIDENTIALITY AGREEMENT"), embody the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein. This Agreement and such other agreements supersede all prior agreements and the understandings among the parties with respect to such subject matter. 44 8.11. SEVERABILITY. In case any provision in this Agreement shall be held invalid, illegal or unenforceable in a jurisdiction, such provision shall be modified or deleted, as to the jurisdiction involved, only to the extent necessary to render the same valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby nor shall the validity, legality or enforceability of such provision be affected thereby in any other jurisdiction. 8.12. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, the parties further agree that each party shall be entitled to an injunction or restraining order to prevent breaches or threatened breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, without the need to post bond or other security, this being in addition to any other right or remedy to which such party may be entitled under this Agreement, at law or in equity. 8.13. ATTORNEYS' FEES. If any legal action or any arbitration is brought for the enforcement of this Agreement or because of an alleged dispute, controversy, breach or default in connection with this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and all other reasonable costs and expenses incurred in that action or proceeding, in addition to any other relief to which it may be entitled. 8.14. THIRD PARTIES. Nothing contained in this Agreement or in any instrument or document executed by any party in connection with the transactions contemplated hereby shall create any rights in, or be deemed to have been executed for the benefit of, any person or entity that is not a party hereto or thereto or a successor or permitted assign of such a party, except for Indemnified Parties pursuant to, as provided by and in accordance with the provisions of Section 5.4 hereof. [SIGNATURE PAGE FOLLOWS] 45 IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of Merger to be signed and delivered by their respective duly authorized officers as of the date first above written. STEEL PARTNERS II, L.P. By: Steel Partners, L.L.C., its general partner By: /s/ Warren G. Lichtenstein ------------------------------------ Name: Warren G. Lichtenstein Title: Managing Member BZ ACQUISITION CORP. By: /s/ Warren G. Lichtenstein ------------------------------------ Name: Warren G. Lichtenstein Title: President BAIRNCO CORPORATION By: /s/ Kenneth L. Bayne ------------------------------------ Name: Kenneth L. Bayne Title: Vice President and Chief Financial Officer [SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER] 46 ANNEX A Conditions to the Offer The capitalized terms used but not defined in this Annex A and which are defined in the attached Agreement and Plan of Merger shall have the meanings ascribed to such terms in such attached agreement. Notwithstanding any other provision of the Offer, Merger Sub shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange Act (relating to Merger Sub's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for any Shares tendered pursuant to the Offer if (i) the Minimum Condition shall not have been satisfied at any scheduled expiration date of the Offer or (ii) immediately prior to the expiration of the Offer, any of the following conditions shall exist: (a) there shall have been entered, enforced, instituted or issued by any Governmental Authority any legally binding judgment, order, temporary restraining order, temporary or permanent injunction, ruling, proceeding, action, suit, charge or decree which: (i) makes illegal, prevents, restrains or prohibits the making of the Offer, the acceptance for payment of, or payment for, any Shares by Purchaser, Merger Sub or any other affiliate of Purchaser, or the consummation of the Merger or any of the other transactions contemplated by the Agreement; (ii) prohibits or limits the ownership or operation by the Company, Purchaser or any of their respective subsidiaries or affiliates of all or a material portion of the business or assets of the Company, Purchaser or any of their respective subsidiaries or affiliates; (iii) imposes limitations on the ability of Purchaser, Merger Sub or any other affiliate of Purchaser to exercise full rights of ownership of any Shares, including, without limitation, the right to vote any Shares acquired pursuant to the Offer or otherwise on all matters presented to the Company's stockholders, including, without limitation, the approval and adoption of the Agreement and the Merger; (iv) would reasonably be expected to require divestiture by Purchaser, Merger Sub or any other affiliate of Purchaser of any Shares; or (v) otherwise would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or a Purchaser Material Adverse Effect; (b) there shall have been any Law enacted, enforced, promulgated or issued by any Governmental Authority, or deemed by any Governmental Authority applicable to (i) Purchaser, the Company or any subsidiary or affiliate of Purchaser or the Company or (ii) any transaction contemplated by the Agreement, which is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (c) there shall have occurred any changes, conditions, events or developments that would have, or be reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect; (d) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on the New York Stock Exchange, other than a shortening of trading hours or any coordinated trading halt triggered solely as a result of a specified increase or decrease in a market index, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, or (iii) any limitation (whether or not mandatory) on the extension of credit by banks or other lending institutions in the United States or a disruption of or material adverse change in either the syndication market for credit facilities or the financial, banking or capital markets; A-1 (e) the Board shall have (A) withdrawn or modified, in a manner adverse to Purchaser, Merger Sub or any of their respective affiliates, its approval or recommendation of the Offer, the Agreement or the Merger, (B) approved or recommended, or proposed publicly to approve or recommend, any Company Takeover Proposal or any Company Acquisition Agreement relating to any Company Takeover Proposal or (C) resolved to do any of the foregoing; (f) the representations and warranties of the Company (i) set forth in the Agreement (other than Section 2.2(a) and 2.3) shall not be true and correct, and the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality" or "Material Adverse Effect" set forth therein) would be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect and (ii) set forth in Sections 2.2(a) and 2.3 shall not be true and correct, in each case on the date of this Agreement and as of the expiration of the Offer, as if made at and as of such date (except to the extent expressly made as of an earlier date, in which case as of such date) (it being understood that, for purposes of determining the accuracy of such representations and warranties, any update of or modification to the Company Disclosure Schedule made or purported to have been made after the date of the Agreement shall be disregarded); (g) the Company shall have failed to perform in any material respect its obligations or to comply in any material respect with its agreements or covenants to be performed or complied with by it under the Agreement; (h) the Agreement shall have been terminated in accordance with its terms; (i) there shall have been instituted or pending any stockholder derivative litigation or stockholder class action litigation against the Company, any of its subsidiaries or its executive officers or directors, which, after taking into account any then existing director and officer insurance coverage, would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect; (j) the applicable waiting period, if any, under the HSR Act shall not have expired or been terminated; (k) all material Consents required in connection with the Agreement or the transactions contemplated thereby (other than any Consent related to the Loan and Security Agreement listed in SECTION 2.5 of the Company Disclosure Schedule) shall not have been obtained or shall not be in full force and effect, and the failure to so obtain or have in effect such Consents could reasonably be expected to have, in the aggregate, a Company Material Adverse Effect; or (l) the Company shall not have filed with the SEC its Annual Report on Form 10-K for the fiscal year ended December 31, 2006. A-2 The foregoing conditions are for the sole benefit of Purchaser and Merger Sub and may be asserted by Purchaser or Merger Sub regardless of the circumstances giving rise to any such condition or may be waived by Purchaser or Merger Sub in whole or in part at any time and from time to time in their reasonable discretion. The failure by Purchaser or Merger Sub at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. A-3
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SC TO-T/A Filing
Steel Partners Ii Inactive SC TO-T/AThird party tender offer statement (amended)
Filed: 23 Feb 07, 12:00am