Agreement and Plan of Merger among Collins Industries, Inc., CS Acquisition Corp., and Steel Partners II, L.P. (September 26, 2006)

 Exhibit 2.1 EXECUTION COPY AGREEMENT AND PLAN OF MERGER by and among COLLINS INDUSTRIES, INC., CS ACQUISITION CORP., and STEEL PARTNERS II, L.P. dated as of September 26, 2006  TABLE OF CONTENTS PAGE ARTICLE I THE MERGER...........................................................1 SECTION 1.1 THE MERGER.................................................1 SECTION 1.2 EFFECTIVE TIME.............................................1 SECTION 1.3 EFFECTS OF THE MERGER......................................2 SECTION 1.4 CONVERSION OF COMMON SHARES................................2 SECTION 1.5 INTENTIONALLY DELETED......................................2 SECTION 1.6 OPTIONS; STOCK PLANS.......................................2 SECTION 1.7 SHAREHOLDERS' MEETING......................................3 SECTION 1.8 CLOSING....................................................3 ARTICLE II THE SURVIVING CORPORATION...........................................4 SECTION 2.1 ARTICLES OF INCORPORATION..................................4 SECTION 2.2 BYLAWS.....................................................4 SECTION 2.3 DIRECTORS..................................................4 SECTION 2.4 OFFICERS...................................................4 ARTICLE III DISSENTING SHARES; PAYMENT FOR SHARES..............................4 SECTION 3.1 DISSENTING SHARES..........................................4 SECTION 3.2 PAYMENT FOR COMMON SHARES..................................5 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................7 SECTION 4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES...............7 SECTION 4.2 CHARTER; BYLAWS AND RIGHTS AGREEMENT.......................7 SECTION 4.3 CAPITALIZATION.............................................7 SECTION 4.4 AUTHORITY..................................................9 SECTION 4.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS................10 SECTION 4.6 SEC REPORTS AND FINANCIAL STATEMENTS......................11 SECTION 4.7 ENVIRONMENTAL MATTERS.....................................12 SECTION 4.8 COMPLIANCE WITH APPLICABLE LAWS...........................13 SECTION 4.9 LITIGATION................................................14 SECTION 4.10 INFORMATION...............................................14 SECTION 4.11 CERTAIN APPROVALS.........................................14 SECTION 4.12 EMPLOYEE BENEFIT PLANS....................................14 SECTION 4.13 INTELLECTUAL PROPERTY.....................................16 SECTION 4.14 TAXES.....................................................17 SECTION 4.15 ABSENCE OF CERTAIN CHANGES................................19 SECTION 4.16 LABOR AND EMPLOYMENT MATTERS..............................20 SECTION 4.17 RIGHTS AGREEMENT..........................................22 SECTION 4.18 BROKERS...................................................22 SECTION 4.19 OPINION OF FINANCIAL ADVISOR..............................23 SECTION 4.20 MATERIAL CONTRACTS........................................23 SECTION 4.21 TITLE TO PROPERTIES.......................................23 i  SECTION 4.22 ACCOUNTS RECEIVABLE.......................................24 SECTION 4.23 RESTRICTIONS ON BUSINESS ACTIVITIES.......................24 SECTION 4.24 REPRESENTATIONS COMPLETE..................................24 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER..........24 SECTION 5.1 ORGANIZATION AND QUALIFICATION............................24 SECTION 5.2 AUTHORITY.................................................25 SECTION 5.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS................25 SECTION 5.4 INFORMATION...............................................26 SECTION 5.5 FINANCING.................................................26 SECTION 5.6 STOCK OWNERSHIP...........................................26 SECTION 5.7 PURCHASER'S OPERATIONS....................................26 SECTION 5.8 REPRESENTATIONS COMPLETE..................................26 SECTION 5.9 SOLVENCY..................................................27 ARTICLE VI COVENANTS..........................................................27 SECTION 6.1 CONDUCT OF BUSINESS OF THE COMPANY........................27 SECTION 6.2 ACCESS TO INFORMATION.....................................30 SECTION 6.3 EFFORTS...................................................31 SECTION 6.4 PUBLIC ANNOUNCEMENTS......................................32 SECTION 6.5 EMPLOYEE BENEFIT ARRANGEMENTS.............................32 SECTION 6.6 INDEMNIFICATION...........................................33 SECTION 6.7 NOTIFICATION OF CERTAIN MATTERS...........................34 SECTION 6.8 RIGHTS AGREEMENT..........................................34 SECTION 6.9 STATE TAKEOVER LAWS.......................................34 SECTION 6.10 NO SOLICITATION...........................................34 SECTION 6.11 SHAREHOLDER LITIGATION....................................36 SECTION 6.12 RESIGNATIONS..............................................36 SECTION 6.13 TERMINATION OF CERTAIN INSURANCE POLICIES.................36 SECTION 6.14 SEVERANCE PAYMENTS........................................36 SECTION 6.15 DISMISSAL OF LAWSUIT......................................36 ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER..........................36 SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS....................36 SECTION 7.2 CONDITIONS TO OBLIGATIONS OF THE PARENT...................37 SECTION 7.3 CONDITION TO OBLIGATIONS OF THE COMPANY...................38 SECTION 7.4 FRUSTRATION OF CONDITIONS.................................38 ARTICLE VIII TERMINATION; AMENDMENTS; WAIVER..................................38 SECTION 8.1 TERMINATION...............................................38 SECTION 8.2 EFFECT OF TERMINATION.....................................39 SECTION 8.3 FEES AND EXPENSES.........................................40 SECTION 8.4 AMENDMENT.................................................40 SECTION 8.5 EXTENSION; WAIVER.........................................41 ii  ARTICLE IX MISCELLANEOUS......................................................41 SECTION 9.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.41 SECTION 9.2 ENTIRE AGREEMENT; ASSIGNMENT..............................41 SECTION 9.3 VALIDITY..................................................42 SECTION 9.4 NOTICES...................................................42 SECTION 9.5 GOVERNING LAW.............................................43 SECTION 9.6 DESCRIPTIVE HEADINGS......................................43 SECTION 9.7 COUNTERPARTS..............................................43 SECTION 9.8 PARTIES IN INTEREST.......................................43 SECTION 9.9 DEFINITIONS...............................................43 SECTION 9.10 SPECIFIC PERFORMANCE......................................46 EXHIBITS Exhibit A Voting Agreement SCHEDULES SCHEDULE 4.1 ORGANIZATION AND QUALIFICATION OF SUBSIDIARIES SCHEDULE 4.3(b) OUTSTANDING OPTIONS SCHEDULE 4.3(d) RESTRICTED STOCK SCHEDULE 4.3(h) INDEBTEDNESS SCHEDULE 4.3(j) LIST OF SUBSIDIARIES; JOINT VENTURES; INDEMNITY AGREEMENTS SCHEDULE 4.5(a) COMPANY'S REQUIRED FILINGS AND CONSENTS SCHEDULE 4.6(a) SEC REPORTS SCHEDULE 4.6(b) BALANCE SHEET INFORMATION SCHEDULE 4.6(c) MATERIAL LIABILITIES SCHEDULE 4.7 ENVIRONMENTAL MATTERS SCHEDULE 4.9 LITIGATION SCHEDULE 4.12(a) EMPLOYEE BENEFIT PLANS SCHEDULE 4.12(c) QUALIFIED PLANS SCHEDULE 4.12(e) MULTIEMPLOYER PLANS SCHEDULE 4.12(f) RETIREE HEALTH AND WELFARE BENEFITS SCHEDULE 4.12(h) PAYMENTS OR BENEFITS TO COMPANY EMPLOYEES SCHEDULE 4.12(i) AMENDMENTS TO EMPLOYMENT AGREEMENTS OR STOCK OPTION AGREEMENTS SCHEDULE 4.14(a) TAXES SCHEDULE 4.15(f) ABSENCE OF CERTAIN CHANGES SCHEDULE 4.16(a) LABOR AND EMPLOYMENT CLAIMS SCHEDULE 4.16(d) OFFICER AND DIRECTOR INFORMATION SCHEDULE 4.18 FEES AND EXPENSES SCHEDULE 4.20 MATERIAL CONTRACTS SCHEDULE 4.21 REAL PROPERTY SCHEDULE 4.23 RESTRICTIONS ON BUSINESS ACTIVITIES SCHEDULE 6.1 CONDUCT OF BUSINESS OF THE COMPANY SCHEDULE 6.13 INSURANCE POLICIES SCHEDULE 6.14 SEVERANCE EXPENSES SCHEDULE 7.2(d) CONSENTS iii  AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of September 26, 2006, by and among STEEL PARTNERS II, L.P., a Delaware limited partnership (the "PARENT"), CS ACQUISITION CORP., a Missouri corporation and a subsidiary of the Parent (the "PURCHASER"), and COLLINS INDUSTRIES, INC., a Missouri corporation (the "COMPANY"). WHEREAS, the general partner of the Parent and the respective Boards of Directors of the Purchaser and the Company have approved and adopted, and deem it advisable and in the best interests of their respective limited partners and shareholders to consummate, the merger of the Purchaser with and into the Company, as set forth herein (the "MERGER"), in accordance with The General and Business Corporation Law of Missouri (the "GBCL") and upon the terms and subject to the conditions set forth in this Agreement; WHEREAS, contemporaneously with the execution and delivery of this Agreement, and as a condition and inducement to the Parent's and the Purchaser's willingness to enter into this Agreement, certain shareholders of the Company (each, a "SHAREHOLDER") are each entering into a Voting Agreement (the "VOTING AGREEMENT") in the form attached hereto as EXHIBIT A, pursuant to which each such Shareholder has agreed, among other things, to grant the Parent a proxy with respect to the voting of such Shares in favor of the Merger upon the terms and subject to the conditions set forth therein; WHEREAS, the Parent, the Purchaser and the Company desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe various conditions to the Merger. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties and agreements set forth herein, the Parent, the Purchaser and the Company agree as follows: ARTICLE I THE MERGER SECTION 1.1 THE MERGER. Upon the terms and subject to the satisfaction or waiver of the conditions hereof, and in accordance with the applicable provisions of the GBCL, at the Effective Time the Purchaser will be merged with and into the Company. Following the Merger, the separate corporate existence of the Purchaser will cease and the Company will continue as the surviving corporation (the "SURVIVING CORPORATION"). SECTION 1.2 EFFECTIVE TIME. Subject to the provisions of this Agreement, on the Closing Date, the parties hereto will consummate the Merger, in the manner required by the GBCL, by delivering articles of merger to the Secretary of State of the State of Missouri, and take such other and further actions as may be required by law to cause the Merger to become effective. The time the Merger becomes effective is referred to herein as the "EFFECTIVE TIME." 1  SECTION 1.3 EFFECTS OF THE MERGER. The Merger will have the effects set forth in the GBCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and the Purchaser will vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and the Purchaser will become the debts, liabilities and duties of the Surviving Corporation. SECTION 1.4 CONVERSION OF COMMON SHARES. At the Effective Time, by virtue of the Merger and without any action on the part of the Parent, the Purchaser, the Company or any holders thereof, each share of the Company's common stock, par value $.10 per share (the "COMMON SHARES") and the one share of Non-Redeemable Common Stock, issued and outstanding immediately prior to the Effective Time (other than (i) Dissenting Shares and (ii) any Common Shares in the treasury of the Company or by any wholly owned subsidiary of the Company, which Common Shares, by virtue of the Merger and without any action on the part of the holder thereof, will be cancelled and retired and will cease to exist with no payment being made with respect thereto) will be cancelled and retired and will be converted into the right to receive $12.50 in cash (the "MERGER PRICE"), payable to the holder thereof, without interest thereon, upon surrender of the certificate formerly representing such Common Share. SECTION 1.5 INTENTIONALLY DELETED. SECTION 1.6 OPTIONS; STOCK PLANS. Prior to the Effective Time, the Board of Directors of the Company (the "COMPANY BOARD") (or, if appropriate, any committee thereof) will adopt appropriate resolutions and take all other actions necessary or desirable (including effecting all necessary amendments to the Stock Plans and Options and obtaining all applicable consents from optionees) to provide for the cancellation, effective at the Effective Time, of all of the outstanding stock options (the "OPTIONS") heretofore granted under any stock option or similar plan of the Company (the "STOCK PLANS") or under any agreement, without any payment therefor except as otherwise provided in this Section 1.6. (a) Immediately prior to the Effective Time, each of the Options (whether vested or unvested) which are listed in SCHEDULE 4.3(B) of the disclosure schedule delivered to the Parent by the Company prior to the date hereof (the "COMPANY DISCLOSURE SCHEDULE"), which list includes all outstanding Options, will be vested and canceled, to the extent such Option remains outstanding as of immediately prior to the Effective Time (and to the extent exercisable will no longer be exercisable) and will entitle the holder thereof, in cancellation and settlement therefor, to a payment, if any, in cash by 2  the Company (less any applicable withholding taxes) equal to the product of (i) the total number of Common Shares subject to such Option (without regard to whether such Option was vested or unvested) and (ii) the excess, if any, of the Merger Price over the exercise price per Common Share subject to such Option (the "CASH ----- Payment"); provided that no such payment will be due until following such time that the Company has delivered to the Parent a true and complete list of the Options which remain outstanding as of immediately prior to the Effective Time. If the exercise price per share of any Option equals or exceeds the Merger Price, the Cash Payment therefor shall be zero. Notwithstanding the foregoing, payment of the Cash Payment is subject to written acknowledgment, in a form acceptable to the Surviving Corporation, delivered within five (5) days after the date hereof and conditioned on Closing, that no further payment is due to such holder on account of any Option and all of such holder's rights under such Options have terminated. (b) The Company represents, warrants and covenants that, prior to the Effective Time, the Company Board will take all necessary action to terminate the 1995 Stock Option Plan and the 1997 Omnibus Incentive Plan, and all other Stock Plans and any other plan, program or arrangement, including under employment agreements, providing for the issuance or grant of Options or any other interest in respect of the Capital Stock of the Company or any subsidiary in each case effective prior to the Effective Time. (c) The Company and the Parent agree that the Cash Payments are the sole payments that will be made with respect to or in relation to the Options. SECTION 1.7 SHAREHOLDERS' MEETING. The Company, acting through the Company Board, will, in accordance with applicable law: (a) duly call, give notice of, convene and hold a special meeting of its shareholders (the "SPECIAL Meeting") as soon as practicable following the execution of this Agreement for the purpose of considering and taking action upon this Agreement; (b) prepare, in consultation with the Parent, a proxy statement (the "PROXY STATEMENT") to be mailed to its shareholders to obtain the necessary approvals of the Merger and adoption of this Agreement by its shareholders; and (c) subject to Section 6.3(c), include in the Proxy Statement the recommendation of the Company Board that shareholders of the Company vote in favor of the approval of the Merger and adoption of this Agreement. SECTION 1.8 CLOSING. The closing of the Merger (the "CLOSING") will take place at 10:00 a.m., on a date to be specified by the parties, which will be as soon as practicable, but in no event later than the third business day, after satisfaction or waiver of all of the conditions set forth in Article VII hereof 3  (the "CLOSING DATE"), at the offices of Olshan Grundman Frome Rosenzweig & Wolosky LLP, or at such other time, date or place as the parties may agree. The parties will use commercially reasonable efforts to cause the Closing to occur on or before October 31, 2006. ARTICLE II THE SURVIVING CORPORATION SECTION 2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of the Purchaser, as in effect immediately prior to the Effective Time, will be the Articles of Incorporation of the Surviving Corporation until thereafter amended in accordance with the provisions thereof and hereof and applicable law; provided that the name of the Surviving Corporation will be "Collins Industries, Inc." SECTION 2.2 BYLAWS. Subject to the provisions of Section 6.6 of this Agreement, the Bylaws of the Purchaser in effect at the Effective Time will be the Bylaws of the Surviving Corporation until amended in accordance with the provisions thereof and applicable law. SECTION 2.3 DIRECTORS. Subject to applicable law, the directors of the Purchaser immediately prior to the Effective Time will be the initial directors of the Surviving Corporation and will hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal. SECTION 2.4 OFFICERS. The officers of the Company immediately prior to the Effective Time will be the initial officers of the Surviving Corporation. ARTICLE III DISSENTING SHARES; PAYMENT FOR SHARES SECTION 3.1 DISSENTING SHARES. Notwithstanding Section 1.4, Common Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Common Shares in accordance with the GBCL ("DISSENTING SHARES") will not be converted into a right to receive the Merger Price and the holder thereof will be entitled only to such rights as are granted by the GBCL, unless such holder fails to perfect or withdraws or otherwise loses such holder's right to appraisal. If after the Effective Time such holder fails to perfect or withdraws or loses such holder's right to appraisal, such Common Shares will be treated as if they had been converted as of the Effective Time into a right to receive the Merger Price, and such Common Shares will not then be deemed to be Dissenting Shares under this Agreement. The Company will give the Parent prompt notice of any demands received by the Company for appraisal of Common Shares and any 4  objections to the Merger, and the Parent will have the right to conduct all negotiations and proceedings with respect to such demands. The Company will not, except with the prior written consent of the Parent, make any payment with respect to, or settle or offer to settle, or otherwise negotiate, any such demands. SECTION 3.2 PAYMENT FOR COMMON SHARES. (a) At Closing, the Parent or the Purchaser will deposit, or cause to be deposited, in trust with such bank or trust company as is mutually acceptable to the Parent and the Company (the "PAYING AGENT") the aggregate Merger Price to which holders of Common Shares will be entitled at the Effective Time pursuant to Section 1.4. On the Closing Date, the Paying Agent will invest the funds deposited with it pursuant to this Section in money market securities or similar type investments as the Parent may direct. From and after the Effective Time, the Paying Agent will effect the payment of the Merger Price in respect of certificates (the "CERTIFICATES") that, prior to the Effective Time, represented Common Shares entitled to payment of the Merger Price pursuant to Section 1.4. (b) Promptly after the Effective Time, the Paying Agent will mail to each record holder of Certificates as of the Effective Time, a form of letter of transmittal approved by the Parent which will specify that delivery will be effected, and risk of loss and title to the Certificates will pass, only upon proper delivery of the Certificates to the Paying Agent and instructions for use in surrendering such Certificates and receiving the Merger Price in respect thereof. Upon the surrender of each such Certificate together with a properly completed and executed letter of transmittal, the Paying Agent will pay to the holder of such Certificate the Merger Price multiplied by the number of Common Shares formerly represented by such Certificate, in consideration therefor, and such Certificate will forthwith be cancelled. Until so surrendered, each such Certificate (other than Dissenting Shares or Certificates representing Common Shares held by the Parent or the Purchaser, any wholly owned subsidiary of the Parent or the Purchaser, in the treasury of the Company or by any wholly owned subsidiary of the Company) will represent solely the right to receive the aggregate Merger Price relating thereto. No interest or dividends will be paid or accrued on the Merger Price. If the Merger Price (or any portion thereof) is to be delivered to any person other than the person in whose name the Certificate surrendered is registered, it will be a condition to such right to receive such Merger Price that the Certificate so surrendered be properly endorsed or otherwise be in proper form for transfer and that the person surrendering such Certificate will pay to the Paying Agent any transfer or other taxes required by reason of the payment of the Merger Price to a person other than the registered holder of the Certificate surrendered, or establish to the satisfaction of the Paying Agent that such taxes have been paid or are not applicable. (c) Promptly after the Surviving Corporation's request therefor made at any time following the date which is 180 days after the Effective Time, the Paying Agent will deliver to the Surviving Corporation all cash, Certificates and other documents in its 5  possession relating to the transactions described in this Agreement, and upon such delivery the Paying Agent's duties will terminate. Thereafter, each holder of a Certificate may surrender such Certificate to the Surviving Corporation and (subject to applicable abandoned property, escheat and similar laws) receive in consideration therefor the aggregate Merger Price relating thereto, without any interest or dividends thereon. Notwithstanding the foregoing, none of the Parent, the Purchaser, the Company or the Paying Agent will be liable to any person in respect of any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (d) After the Effective Time, there will be no transfers on the stock transfer books of the Surviving Corporation of any Common Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent, they will be surrendered and cancelled in return for the payment of the aggregate Merger Price relating thereto, as provided in this Article III. (e) In the event any Certificates 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, the Paying Agent will disburse the Merger Price payable in respect of the Common Shares represented by such lost, stolen or destroyed Certificates. (f) The Purchaser shall be entitled to deduct and withhold, or cause the Paying Agent to deduct and withhold, from the Merger Price payable to a holder of Common Shares pursuant to the Merger 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 the Purchaser or Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Common Shares in respect of which such deduction and withholding was made by the Purchaser. (g) 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 the Purchaser 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 the Purchaser or the Company, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of the Purchaser 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. 6  ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company makes these representations and warranties set forth in this Article IV, except as set forth in the Company Disclosure Schedules, to the Parent and the Purchaser. Items disclosed in one particular section of the Company Disclosure Schedules shall be deemed to be constructively disclosed or listed in other sections of the Company Disclosure Schedules to the extent that it is reasonably apparent that the disclosure relates to such other sections. The fact that any item of information is contained in the Company Disclosure Schedules shall not be construed as an admission of liability under any applicable law, or to mean that such information is material. SECTION 4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Missouri. Except as set forth in SCHEDULE 4.1 of the COMPANY DISCLOSURE SCHEDULE, each of the Company's subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Company and each of its subsidiaries has the requisite corporate power and authority to own, operate or lease its properties and to carry on its business as it is now being conducted, and is duly qualified or licensed to do business, and is in good standing, in each jurisdiction in which the nature of its business or the properties owned, operated or leased by it makes such qualification, licensing or good standing necessary, except where the failure to have such power or authority, or the failure to be so qualified, licensed or in good standing, would not have a Material Adverse Effect on the Company. The term "MATERIAL ADVERSE EFFECT ON THE COMPANY," as used in this Agreement, means any change in or effect on the business, financial condition, results of operation or prospects of the Company or any of its subsidiaries that could reasonably be expected to have a material adverse effect on the Company and its subsidiaries taken as a whole or could reasonably be expected to prevent or materially delay consummation of the Merger; provided that the foregoing shall not include any change or effect that results or arises from or relates to changes in (A) general economic or market conditions, except to the extent they have a disproportionate impact on the Company, or prevailing interest rates, (B) conditions generally affecting the industry in which the Company or any of its subsidiaries operates, or (C) laws, regulations or accounting standards, principles or interpretations. SECTION 4.2 CHARTER; BYLAWS AND RIGHTS AGREEMENT. The Company has heretofore made available to the Parent and the Purchaser a complete and correct copy of the articles of incorporation and the bylaws or comparable organizational documents, each as amended as of the date of this Agreement, of the Company and each of its subsidiaries and has made available a complete and correct copy of the Rights Agreement, dated as of May 25, 2006 between the Company and Mellon Investor Services LLC, as Rights Agent (as amended through the date hereof, the "RIGHTS AGREEMENT"). 7  SECTION 4.3 CAPITALIZATION. (a) The authorized capital stock of the Company consists of Seventeen Million (17,000,000) Common Shares, One (1) share of Non-Redeemable Common Stock and Two Million Nine Hundred Ninety-Nine Thousand Nine Hundred Ninety-Nine (2,999,999) shares of Capital Stock, par value $.10 per share (the "CAPITAL STOCK"), of which Seven Hundred Fifty Thousand (750,000) shares are designated as Series A Junior Participating Preferred Stock, par value $.10 per share (the "PREFERRED STOCK"). As of the close of business on the date of this Agreement, 6,343,375 Common Shares were issued and outstanding, all of which are entitled to vote on this Agreement, and no Common Shares were held in treasury. As of the close of business on the date of this Agreement there were no shares of Capital Stock issued and outstanding. As of the close of business on the date of this Agreement there were no shares of Preferred Stock issued and outstanding. The Company has no shares reserved for issuance, except that, as of the date of this Agreement, there were 113,300 Common Shares reserved for issuance pursuant to outstanding Options granted under the Stock Plans and there were Seven Hundred Fifty Thousand shares of Preferred Stock reserved for issuance upon exercise of the rights issued pursuant to the Rights Agreement (the "Rights"). (b) SCHEDULE 4.3(B) of the COMPANY DISCLOSURE SCHEDULE sets forth the holder of each outstanding Option and the number of shares, exercise price and expiration date of each grant to such holder. Except as set forth in SCHEDULE 4.3(B) of the COMPANY DISCLOSURE SCHEDULE, since June 30, 2006, the Company has not granted any Options or issued any shares of Capital Stock except pursuant to the exercise of Options outstanding as of such date. All the outstanding Common Shares are, and all Common Shares which may be issued pursuant to the exercise of outstanding Options will be, when issued and paid for in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and nonassessable and are not subject to, nor were they issued in violation of, any preemptive rights. (c) There are no bonds, debentures, notes or other indebtedness having general voting rights (or convertible into securities having such rights) ("VOTING DEBT") of the Company or any of its subsidiaries issued and outstanding. (d) Except as set forth above or in SCHEDULE 4.3(D) of the COMPANY DISCLOSURE SCHEDULES or for the Rights and except for the transactions contemplated by this Agreement, there are no existing options, warrants, calls, subscriptions or other rights, agreements, arrangements or commitments of any character, relating to the issued or unissued capital stock of 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 or sold, or providing for the vesting of, any 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 and neither the Company nor any of its subsidiaries is obligated to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment. (e) Except as contemplated by this Agreement or the Rights Agreement, there are no outstanding contractual obligations of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any Common Shares or the capital stock of the Company or any of its subsidiaries. 8  (f) Except as contemplated by this Agreement or the Voting Agreements, 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's Common Shares. (g) At and after the Effective Time, no holder of Options will have any right to receive shares of capital stock of the Surviving Corporation upon exercise of Options. (h) Except as disclosed in SCHEDULE 4.3(H) of the COMPANY DISCLOSURE SCHEDULE, no Indebtedness of the Company or its subsidiaries contains any prohibition of, or prepayment penalty upon, the prepayment of any of such Indebtedness. As used in this Section 4.3(h), "Indebtedness" means (A) all indebtedness for borrowed money or for the deferred purchase price of property or services including unpaid installments of the purchase price for fixed assets purchased under installment arrangements (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 under financing leases, (D) all obligations in respect of acceptances issues or created, and (E) all liabilities secured by any lien on any property. (i) Except for the right of first refusal granted to the Company with respect to the redeemable Common Shares pursuant to the articles of incorporation of the Company, each of the outstanding shares of capital stock of the Company and of each of the Company's subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and 100% of such shares of the Company's subsidiaries are owned by the Company or by a subsidiary of the Company in each case free and clear of any lien, claim, option, charge, security interest, limitation, encumbrance and restriction of any kind (any of the foregoing being a "LIEN"). (j) Set forth in SCHEDULE 4.3(J) of the COMPANY DISCLOSURE SCHEDULE is a complete and correct list of each subsidiary of the Company and each joint venture or partnership in which the Company or any of its subsidiaries has an interest (and the amounts and percentages of any such interests) and each such subsidiary, joint venture and partnership that has been closed or sold (i) in the five-year period preceding the date hereof or (ii) to the actual knowledge of the Company, in respect of which the Company or any of its subsidiaries provided indemnities, for representations and warranties (including as to environmental matters) or otherwise for which liabilities remain outstanding as of the date of this Agreement. SECTION 4.4 AUTHORITY. The Company has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized and approved by the Company Board and no other 9  corporate proceedings on the part of the Company are necessary to authorize or approve this Agreement or to consummate the transactions contemplated hereby and thereby, other than the approval of this Agreement and the Merger by the affirmative vote of the holders of two-thirds of the then outstanding Common Shares entitled to vote thereon (the "REQUISITE VOTE"). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due and valid authorization, execution and delivery of this Agreement by the Parent and the Purchaser, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms. SECTION 4.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Assuming (i) the filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR ACT") are made and the waiting periods thereunder have been terminated or have expired, (ii) the filing of the articles of merger and other appropriate merger documents, if any, as required by the GBCL, is made, and (iii) approval of this Agreement by the Requisite Vote of the shareholders, none of the execution and delivery of this Agreement by the Company, the consummation by the Company of the transactions contemplated hereby or compliance by the Company with any of the provisions hereof will (A) conflict with or violate the articles of incorporation or bylaws of the Company or the comparable organizational documents of any of its subsidiaries, (B) except as set forth in SCHEDULE 4.5(A) of the COMPANY DISCLOSURE SCHEDULE, result in a breach or violation of, a default under or the triggering of any payment or the increase in any other obligations pursuant to, any of the Company's existing Employee Benefit Arrangements (as hereinafter defined) or any grant or award made under any of the Employee Benefit Arrangements, (C) to the actual knowledge of the Company, conflict with or violate any statute, ordinance, rule, regulation, order, judgment, decree, permit or license applicable to the Company or any of its subsidiaries, or by which any of them or any of their respective properties or assets may be bound or affected, or (D) except as set forth in SCHEDULE 4.5(A) of the COMPANY DISCLOSURE SCHEDULE, require the consent from or the giving of notice to a third party pursuant to, result in a violation or breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in any loss of any benefit, the triggering of any payment by, or the increase in any other obligation of, the Company or any of its subsidiaries or the creation of any Lien on any of the property or assets of the Company or any of its subsidiaries (any of the foregoing referred to in clause (B), (C) or this clause (D) being a "VIOLATION") pursuant to any Material Contract. (b) To the actual knowledge of the Company, none of the execution and delivery of this Agreement by the Company, the consummation by the Company of the transactions contemplated hereby or compliance by the Company with any of the provisions hereof will require any consent, waiver, approval, authorization or permit of, or registration or filing with or notification to (any of the foregoing with respect to any Governmental Entity (as hereinafter defined) or any other third party being a "CONSENT"), any government or subdivision thereof, or any administrative, governmental, legislative or regulatory authority, agency, commission, tribunal, court or body, (a 10  "GOVERNMENTAL ENTITY"), except for (i) the filing of the articles of merger pursuant to the GBCL, (ii) compliance with the HSR Act, or (iii) those situations in which the failure to obtain such Consent, or to make such filing or notification, would not, individually or in the aggregate, be material to the operations of the Company or its subsidiaries. SECTION 4.6 SEC REPORTS AND FINANCIAL STATEMENTS. (a) The Company has filed with the Securities and Exchange Commission (the "SEC") all forms, reports, schedules, registration statements and definitive proxy statements required to be filed by it with the SEC since January 1, 2003 (as amended, restated or superseded since the time of their filing and prior to the date hereof, collectively, the "SEC REPORTS"). Except as set forth in SCHEDULE 4.6(A) of the COMPANY DISCLOSURE SCHEDULE, the SEC Reports (including, but not limited to, any financial statements or schedules included or incorporated by reference therein), complied in all material respects with the requirements of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or the Securities Act of 1933, as amended, including the rules and regulations promulgated thereunder (the "SECURITIES Act") applicable, as the case may be, to such SEC Reports and the Sarbanes-Oxley Act of 2002, and none of the SEC Reports, including those filed after January 19, 2006, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. (b) Except as set forth in SCHEDULE 4.6(B) of the COMPANY DISCLOSURE SCHEDULE the (i) audited consolidated balance sheets as of October 31, 2005 (the "BALANCE SHEET DATE" and the balance sheet as of such date, the "BALANCE SHEET") and October 31, 2004 and the audited consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended October 31, 2005 (including the related notes and schedules thereto) of the Company and (ii) the unaudited consolidated balance sheet as of August 31, 2006 and the unaudited consolidated statements of operations, shareholders' equity and cash flows for the ten-month period ended August 31, 2006 of the Company delivered to the Parent were prepared from, are in accordance with and accurately reflect in all material respects, the Company's books and records as of the times and for the periods referred to therein, present fairly in all material respects the consolidated financial position and the consolidated results of operations and cash flows of the Company and its subsidiaries as of the dates or for the periods presented therein and were prepared in accordance with United States generally accepted accounting principles ("GAAP") consistently applied during the periods involved (except as set forth in the notes contained therein and subject, in the case of unaudited statements, to recurring audit adjustments normal in nature and amount). The financial statements referred to in clauses (i) and (ii) hereof are referred to herein as the "COMPANY FINANCIALS." (c) Except as reserved against in the unaudited consolidated balance sheet as of August 31, 2006 or as set forth in SCHEDULE 4.6(C) of the COMPANY DISCLOSURE SCHEDULE, as of the date hereof, neither the 11  Company nor any of its subsidiaries have any material liabilities or obligations (absolute, accrued, fixed, contingent or otherwise), other than liabilities incurred in the ordinary course of business consistent with past practice since August 31, 2006. SECTION 4.7 ENVIRONMENTAL MATTERS. To the actual knowledge of the senior officers and directors of the Company, except as set forth in SCHEDULE 4.7 of the COMPANY DISCLOSURE SCHEDULE: (a) The Company and its subsidiaries have complied and currently comply with all Environmental Laws; (b) Neither the Company nor any of its subsidiaries is the subject of any federal, state, local or foreign investigation, decree, order or judgment 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 compliance with or to any liability, investigation or remedial action under any Environmental Laws; (c) Neither the Company nor any of its subsidiaries has manufactured, treated, stored, disposed of, arranged for or permitted the disposal of, generated, handled or released any Hazardous Substance in a manner that is in violation of any Environmental Law or owned or operated any property or facility in a manner in violation of any Environmental Law that has given or would reasonably be expected to give rise to any liability, including any liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees pursuant to any Environmental Laws; (d) No Hazardous Substances or other conditions have been released or otherwise come to be located at any property or facility owned, operated or used by on behalf of the Company or any of its subsidiaries in a manner that is in violation of any Environmental Law or has given or will give rise to liability under Environmental Laws or against any person whose liability the Company or any of its subsidiaries retained or assumed either contractually or by operation of law; (e) The Company and each of its subsidiaries holds and is in compliance with all permits required to conduct its business and operations under all applicable Environmental Laws; (f) Neither the Company nor any of its subsidiaries has received any written Environmental Claim against it, nor has any such Environmental Claim been threatened in writing; (g) Neither the Company nor any of its subsidiaries has failed to timely file all reports and notifications required to be filed with respect to all of its property and facilities or has failed to generate and maintain all required records and data under all applicable Environmental Laws; and 12  (h) Neither the Company nor any of its subsidiaries has entered into any contract wherein it has continuing liability or responsibility relating to environmental matters with respect to any real property that is no longer owned or leased by any of them. "ENVIRONMENTAL CLAIM" means any claim, demand, action, suit, complaint, proceeding, directive, investigation, lien, demand letter or notice of noncompliance, violation or liability by any person asserting liability or potential liability (including liability or potential liability for enforcement, investigatory costs, cleanup costs, governmental response costs, natural resource damages, property damage, personal injury, fines or penalties) arising out of, based on or resulting from (x) the presence, discharge, emission, release or threatened release of any Hazardous Substance at any location; (y) circumstances forming the basis of any violation or alleged violation of any Environmental Law or any permit issued under any Environmental Law; or (z) otherwise relating to obligations or liabilities under any Environmental Law. "ENVIRONMENTAL LAWS" means any and all applicable federal, state or local statutes, regulations, ordinances, guidelines, codes, decrees, permits or other legally enforceable requirement of any foreign government, the United States, or any state, local, municipal or other governmental entity, regulating, relating to or imposing liability or standards of conduct concerning protection of the environment (including indoor air, ambient air, surface water, groundwater, land surface, subsurface strata, or plant or animal species) or human health as affected by the environment or Hazardous Substances (including employee health and safety). "HAZARDOUS SUBSTANCE" means all explosive or radioactive substances, materials or wastes, hazardous or toxic substances, materials or wastes, asbestos, asbestos-containing materials, mold, pollutants and contaminants (including petroleum or any fraction thereof) and all other substances, materials or wastes, whether or not defined as such, that are regulated pursuant to or that could result in liability under any applicable Environmental Law. Notwithstanding any of the representations and warranties contained elsewhere in this Agreement, all environmental matters are governed exclusively by this Section 4.7. SECTION 4.8 COMPLIANCE WITH APPLICABLE LAWS. (a) The Company and its subsidiaries hold all material permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities (the "Company Permits") required in order to own their assets and to conduct their respective businesses as currently conducted, except where the failure to hold such Company Permits would not, individually or in the aggregate, be material to the operations of the Company or its subsidiaries, and are in compliance with all Company Permits, except where the failure to comply would not, individually or in the aggregate, be material to the operations of the Company or its subsidiaries. The operations of the Company and its subsidiaries have been conducted in compliance with all material applicable laws, ordinances and regulations of any Governmental Entity, except violations which are not, individually or in the aggregate, material to the operations of the Company or its subsidiaries. 13  (b) This Section 4.8 does not relate to (i) environmental matters, which are instead the subject of Section 4.7, (ii) employee benefits matters, which are instead the subject of Section 4.12, or (iii) tax matters, which are instead the subject of Section 4.14. SECTION 4.9 LITIGATION. Except as set forth in SCHEDULE 4.9 of the COMPANY DISCLOSURE SCHEDULE, there is no suit, claim, action, proceeding or investigation ("LITIGATION") pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries which, if adversely determined, would be reasonably expected to result in a liability to the Company in excess of Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate. Except as set forth in SCHEDULE 4.9 of the COMPANY DISCLOSURE SCHEDULE, neither the Company nor any of its subsidiaries is subject to any material outstanding order, writ, injunction or decree. Except as disclosed in SCHEDULE 4.9 of the COMPANY DISCLOSURE SCHEDULE, there is no litigation that the Company or its subsidiaries have pending against other parties. SECTION 4.10 INFORMATION. None of the information supplied or to be supplied by the Company for inclusion in (i) the Proxy Statement or (ii) any other document to be filed with any Governmental Entity in connection with the transactions contemplated by this Agreement (the "OTHER FILINGS") will, at the respective times filed with any Governmental Entity and, in addition, in the case of the Proxy Statement, at the date it or any amendment or supplement is mailed to shareholders, at the time of the Special Meeting and at Closing, 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 light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to statements made therein based on information supplied by the Parent or the Purchaser specifically for inclusion in the Proxy Statement. SECTION 4.11 CERTAIN APPROVALS. The Company Board has taken any and all necessary and appropriate action to render the provisions of Sections 351.407 and 351.459 of the GBCL inapplicable to the Merger and the transactions contemplated by this Agreement. No other state takeover statute or similar domestic or foreign statute or regulation applies or purports to apply to the Merger or the transactions contemplated by this Agreement. SECTION 4.12 EMPLOYEE BENEFIT PLANS. (a) SCHEDULE 4.12(A) of the COMPANY DISCLOSURE SCHEDULE includes a complete list of all material employee benefit plans, programs, agreements and other arrangements providing benefits to any former or current employee, officer or director of the Company or any of its subsidiaries or any beneficiary or dependent thereof, whether covering one person or more than one person, sponsored or maintained by the Company or any of its subsidiaries or to which the Company or any of its subsidiaries contributes or is obligated to contribute for the benefit of U.S. employees of the Company and its subsidiaries ("LISTED 14  PLANS"). Without limiting the generality of the foregoing, the term "Listed Plans" includes all employee welfare benefit plans within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder ("ERISA") and all employee pension benefit plans within the meaning of Section 3(2) of ERISA and all other material employee benefit, employment, bonus, incentive, profit sharing, thrift, compensation, restricted stock, retirement, savings, deferred compensation, stock purchase, stock option, termination, severance, change in control, fringe benefit and other similar plans, programs, agreements or arrangements. (b) With respect to each Listed Plan, the Company has made available to the Parent a true, correct and complete copy of: (i) each writing constituting a part of such Listed Plan, including, without limitation, all plan documents, benefit schedules, trust agreements, and insurance contracts and other funding vehicles; (ii) the most recent Annual Report (Form 5500 Series) and accompanying schedule, if any; (iii) the current summary plan description (and any material modification to such description), if any; (iv) the most recent annual financial report, if any; (v) the most recent actuarial report, if any; and (vi) the most recent determination letter from the Internal Revenue Service (the "IRS"), if any. (c) SCHEDULE 4.12(C) of the COMPANY DISCLOSURE SCHEDULE identifies each Listed Plan that is intended to be a "qualified plan" within the meaning of Section 401(a) of the Code, and the Treasury Regulations thereunder ("QUALIFIED PLANS"). The IRS has issued a favorable determination letter (or, with respect to standardized prototype plans, an opinion letter) with respect to each Qualified Plan that has not been revoked, and, to the Company's knowledge, there are no existing circumstances nor any events that have occurred that could reasonably be expected to adversely affect the qualified status of any Qualified Plan or the related trust. No Listed Plan is intended to meet the requirements of Section 501(c)(9) of the Code. No Listed Plan is subject to Title IV or Section 302 of ERISA. (d) Each Listed Plan has been operated and administered in all material respects in accordance with its terms and applicable law, including but not limited to ERISA and the Code. With respect to each Listed Plan, no event has occurred and there exists no condition or set of circumstances in connection with which the Company could be subject to any liability that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company. (e) Except as set forth in SCHEDULE 4.12(E) of the COMPANY DISCLOSURE SCHEDULE, neither the Company nor any of its subsidiaries contributes to or has ever contributed to any multiemployer plan within the meaning of Section 4001(a)(3) of ERISA ("MULTIEMPLOYER PLAN"). With respect to each Multiemployer Plan in which the Company, any subsidiary or any ERISA Affiliate participates or has participated, (i) none of the Company, any of its subsidiaries or any ERISA Affiliate has withdrawn, partially withdrawn, or received any notice of any claim or demand for withdrawal liability or partial withdrawal liability; (ii) none of the Company nor any of its subsidiaries or any ERISA Affiliate has received any notice that any such plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of any excise tax, or that any such plan is or may become insolvent; (iii) none of the Company, any of its subsidiaries or any ERISA Affiliate has failed to make any required 15  contributions; (iv) to the Company's knowledge, no such plan is a party to any pending merger or asset or liability transfer; (v) to the Company's knowledge, there are no PBGC proceedings against or affecting any such plan; and (vi) none of the Company, any of its subsidiaries or any ERISA Affiliate has any withdrawal liability by reason of a sale of assets pursuant to Section 4204 of ERISA. With respect to each Multiemployer Plan, as of its last valuation date, the amount of potential withdrawal liability of the Company, any of its subsidiaries and any ERISA Affiliates would not reasonably be expected to have a Material Adverse Effect on the Company. To the best knowledge of the Company, nothing has occurred or is expected to occur that would materially increase the amount of the total potential withdrawal liability for any such plan over the amount shown in the Company Disclosure Schedule. (f) Except as set forth in SCHEDULE 4.12(F) of the COMPANY'S DISCLOSURE SCHEDULE, neither the Company nor any of its subsidiaries has any liability for life, health, medical or other welfare benefits to former employees or beneficiaries or dependents thereof, except for health continuation coverage as required by Section 4980B of the Code or Part 6 of Title I of ERISA or applicable state law at no expense to the Company and its subsidiaries. (g) There are no pending or, to the knowledge of the Company, threatened claims (other than claims for benefits in the ordinary course), lawsuits, arbitrations or other alternate dispute resolution proceedings which have been asserted or instituted against the Listed Plans, any fiduciaries thereof with respect to their duties to the Listed Plans or the assets of any of the trusts under any of the Listed Plans which could reasonably be expected to result in any liability of the Company or any of its subsidiaries to any Listed Plan participant or beneficiary, the PBGC, the Department of Treasury, the Department of Labor or any Multiemployer Plan. (h) Other than as disclosed in SCHEDULE 4.12(H) of the COMPANY DISCLOSURE SCHEDULE, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other act required to be taken in connection with the transactions contemplated hereby) result in, cause the accelerated vesting or delivery of, or increase the amount or value of, any payment or benefit to any employee of the Company or any of its subsidiaries, or to fund any "rabbi" trust or similar trust. (i) Except as set forth in SCHEDULE 4.12(I) of the COMPANY DISCLOSURE SCHEDULE, no employment agreement or stock option agreement between the Company and any of its executive officers has been amended subsequent to January 1, 2006. 16  SECTION 4.13 INTELLECTUAL PROPERTY. (a) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, the Company owns or possesses adequate licenses or other valid rights to use all Intellectual Property used in connection with the business of the Company as it has been or is currently conducted. As used herein "INTELLECTUAL PROPERTY" means all patents, patent applications, patent disclosures, assumed names, trade names, trademarks, trademark registrations and trademark applications, service marks, service mark registrations and service mark applications, certification marks, certification mark registrations and certification mark applications, copyrights, copyright registrations and copyright registration applications, databases and database rights, internet websites and domain names and applications pertaining thereto, computer software (and related documentation), trade secrets ("TRADE SECRETS"), know-how, industrial property, technology and other proprietary rights, both domestic and foreign, which are owned by, used or held for use by the Company and its subsidiaries. (b) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, none of the licenses which are part of the Intellectual Property is subject to termination or cancellation or change in its terms or provisions as a result of this Agreement or the transactions provided for in this Agreement. (c) To the knowledge of the Company, no Person or entity is infringing, or has misappropriated, any Intellectual Property owned by the Company or any of its subsidiaries. (d) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, no claims with respect to the Intellectual Property have been asserted or, to the best knowledge of the Company, are threatened by any Person nor does the Company know of any valid grounds for any claims (i) to the effect that the manufacture, sale or use of any product or process or the furnishing of any service as previously used, now used or offered or proposed for use or sale by the Company infringes on any copyright, trade secret, patent, trade name or other intellectual property right of any Person, (ii) against the use by the Company or any of its subsidiaries of any Intellectual Property, or (iii) challenging the ownership, validity or effectiveness of any Intellectual Property owned by the Company or any of its subsidiaries. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, all granted and issued patents and all registered trademarks and service marks and all copyrights held by the Company or any of its subsidiaries are valid, enforceable and subsisting. The Company has taken all actions reasonably necessary to protect and enforce its rights in the Intellectual Property. SECTION 4.14 TAXES. (a) The Company and each of its subsidiaries has duly filed (or has had duly filed on its behalf) or will duly file or cause to be duly filed all material federal, state, local and foreign income and 17  other Tax Returns (as hereinafter defined) required to be filed by it (including, but not limited to, Tax Returns relating to estimated Taxes), and has duly paid or caused to be paid all Taxes (as hereinafter defined) shown to be due on such Tax Returns in respect of the periods covered by such Tax Returns and has paid or made adequate provision according to GAAP in the Company's financial statements for payment of all Taxes in respect of all taxable periods or portions thereof ending on or before the date hereof. All such Tax Returns were correct and complete in all material respects and were prepared in substantial compliance with all applicable laws and regulations. SCHEDULE 4.14(A) of the COMPANY DISCLOSURE Schedule lists (i) all estimated Tax payments made by the Company and each of its subsidiaries for federal, state and local tax purposes with respect to the current tax year, (ii) the periods through which the Tax Returns required to be filed by the Company or its subsidiaries have been examined by the IRS or other appropriate taxing authority, or the periods during which the opportunity for any assessments to be made by the IRS or, to the Company's knowledge, other appropriate taxing authority has expired, and (iii) all notices indicating an intent to open an audit or review, or notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any taxing authority against the Company or its subsidiaries. All material deficiencies and assessments asserted in writing as a result of such examinations or other audits by federal, state, local or foreign taxing authorities have been paid, fully settled or adequately provided for according to GAAP in the Company's financial statements, and no issue or claim has been asserted or threatened in writing for Taxes by any taxing authority for any prior period, other than those heretofore paid or adequately provided for according to GAAP in the Company's financial statements. Except as set forth in SCHEDULE 4.14(A) of the COMPANY DISCLOSURE SCHEDULE, there are no outstanding agreements or waivers or requests for agreements or waivers, extending the statutory period of limitation applicable to any material Tax Return of the Company or any of its subsidiaries. There are no liens for amounts of Taxes on the assets of the Company nor any of its subsidiaries except for statutory liens for current Taxes not yet due and payable. Except as set forth in SCHEDULE 4.14(A) of the COMPANY DISCLOSURE SCHEDULE, neither the Company nor any of its subsidiaries is a party to any agreement, contract or arrangement that could result, separately or in the aggregate, in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code or that would not be deductible pursuant to the terms of Section 162(a)(l), 162(m) or 162(n) of the Code. Except as set forth in SCHEDULE 4.14(A) of the COMPANY DISCLOSURE SCHEDULE, neither the Company nor any of its subsidiaries is a party to a Tax sharing or Tax indemnity agreement or any other agreement of a similar nature that remains in effect. Each of the Company and its subsidiaries have withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. (b) For purposes of this Agreement, the term "TAX" or "TAXES" means all taxes, charges, fees, levies or other assessments, including, without limitation, income, gross receipts, excise, property, sales, use, value-added, transfer, license, payroll, withholding, export, import, and customs duties, capital stock and franchise taxes, imposed by the United States or any state, local or foreign government or subdivision or agency thereof, including any interest, penalties or additions thereto. For purposes of this Agreement, the term "TAX RETURN" means any report, return or other information or document required to be supplied to a taxing authority in connection with Taxes. 18  SECTION 4.15 ABSENCE OF CERTAIN CHANGES. Since August 31, 2006 through the date hereof (i) there has not been any Material Adverse Effect on the Company or any event, development or circumstance which could reasonably be expected to have a Material Adverse Effect on the Company; (ii) the businesses of the Company and its subsidiaries have been conducted in the ordinary course and in a manner consistent with past practice, and (iii) without limiting the generality of the foregoing, the Company and its subsidiaries have not: (a) incurred any liabilities or obligations (absolute, accrued, contingent or otherwise) which exceed $250,000 in the aggregate, except in the ordinary course of business, consistent with past practice; (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 liabilities and obligations reflected or reserved against in the 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 their properties or assets (real, personal or mixed, tangible or intangible) to be subjected to any Lien, except for liens for current taxes not yet due; (d) cancelled any debts or waived any claims or rights of material value; (e) sold, transferred, or otherwise disposed of any of their material properties or assets (real, personal or mixed, tangible or intangible), except in the ordinary course of business, consistent with past practice; (f) except as disclosed in SCHEDULE 4.15(F) of the COMPANY DISCLOSURE SCHEDULE, granted any increase in the compensation or benefits of any director, officer, employee or consultant of the Company (including any such increase pursuant to any bonus, pension, profit sharing or other plan or commitment) or any increase in the compensation or benefits payable or to become payable to any director, officer, employee or consultant of the Company or hired or terminated any salaried employee with an annual salary in excess of $100,000; provided, however, that with respect to any increase in compensation or benefits of any non-officer employee or any increase in the compensation or benefits payable or to become payable to any non-officer employee, the Company may grant such increases as are in the ordinary course of business, consistent with past practice; (g) made any change in severance policy or practices; 19  (h) declared, paid or set aside for payment any dividend (other than the dividend paid on September 15, 2006 in the amount of $315,000) or other distribution (whether in cash, stock or property) in respect of their respective capital stock or redeemed, purchased or otherwise acquired, directly or indirectly, any shares of capital stock or other securities of the Company; (i) (i) made any changes in any of the accounting methods used by it materially affecting its assets, liabilities, provisions or business, except for such changes required by GAAP; or (ii) made or changed any election relating to Taxes, 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, incurred any obligation to make any payment of, or in respect of, any Taxes, except in the ordinary course of business, or agreed to extend or waive the statutory period of limitations for the assessment or collection of Taxes; or (iii) made any changes in its reserve policies, collect and hold policy, billing and cash receipts practices or purchasing and payment practices; (j) paid, loaned, modified or advanced any amount to, or sold, transferred or leased any material 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 shareholders or any affiliate or associate of any of their officers, directors or shareholders except for directors' fees, expense reimbursements in the ordinary course and compensation to officers at rates not inconsistent with the Company's past practice; (k) suffered any impairment of any material Intellectual Property or any material adverse change in any material Intellectual Property licensed from a third party, in each case, other than in the ordinary course of business consistent with past practice, or disposed of or disclosed (except as necessary in the conduct of its business) to a third party any Trade Secrets owned by the Company; (l) granted, issued, accelerated, paid, accrued or agreed to pay or make any accrual or arrangement for payments or benefits pursuant to, or adopted or amended, any Company Employee Plans except those made in the ordinary course of business consistent with past practice; or (m) agreed, whether in writing or otherwise, to take any action described in this Section 4.15. SECTION 4.16 LABOR AND EMPLOYMENT MATTERS. (a) Except as set forth in SCHEDULE 4.16(A) of the COMPANY DISCLOSURE SCHEDULE, there are no actions, suits, claims, charges, labor disputes, grievances or controversies pending, or to the Company's knowledge, threatened involving the Company or any of its subsidiaries and any of their employees or former employees. To the Company's knowledge, no Governmental Entity responsible for the enforcement of labor or employment laws intends to conduct an 20  investigation with respect to or relating to the Company or any of its subsidiaries and no such investigation is in progress. To the Company's knowledge, no employee of the Company or any of its subsidiaries has violated any employment contract, nondisclosure agreement or noncompetition agreement by which such employee is bound due to such employee being employed by the Company or any of its subsidiaries and disclosing to the Company or any of its subsidiaries or using Trade Secrets of any other person. To the Company's knowledge, there has been: (i) no labor union organizing or attempting to organize any employee of the Company or any of its subsidiaries into one or more collective bargaining units; and (ii) no labor dispute, strike, work slowdown, work stoppage or lock out or other collective labor action by or with respect to any employees of the Company or any of its subsidiaries pending, or, to the Company's knowledge, threatened against or affecting the Company or any of its subsidiaries. Neither the Company nor any of its subsidiaries is a party to, or bound by, any collective bargaining agreement or other agreement with any labor organization applicable to the employees of the Company or any of its subsidiaries and no such agreement is currently being negotiated. (b) To the Company's knowledge, the Company and its subsidiaries (i) are in compliance in all material respects with all applicable Laws respecting employment and employment practices, terms and conditions of employment, health and safety and wages and hours, and is not engaged in any unfair labor practice, (ii) have withheld all amounts required by Law or by agreement to be withheld from the wages, salaries and other payments to employees, (iii) are not liable in any material respect for any arrears of wages or any Taxes or any penalty for failure to comply with any of the foregoing and (iv) are not liable for any material payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees (other than routine payments to be made in the ordinary course of business and consistent with past practice). (c) To the Company's knowledge, no employee of the Company or any of its subsidiaries has provided or is providing information to any law enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any applicable Law involving the Company or any of its subsidiaries. To the Company's knowledge, neither the Company, nor any of its subsidiaries nor any officer, employee, contractor, subcontractor or agent of the Company or any of its subsidiaries has discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against an employee of the Company or any of its subsidiaries in the terms and conditions of employment because of any act of such employee described in 18 U.S.C. Section 1514A(a). (d) SCHEDULE 4.16(D) of the COMPANY DISCLOSURE SCHEDULE contains a true and complete list of (i) the names of all elected and appointed officers of the Company and its subsidiaries, together with such person's position or function, annual base salary and incentives or bonus arrangement and (ii) the number of Common Shares owned beneficially or of record, or both, by each such person and the family relationships, if any, among such persons. As of the date hereof, no 21  key employee, director or officer of the Company or any of its subsidiaries has given notice to the Company, nor, is the Company otherwise aware of any information that would lead it to reasonably believe, that any such person will or may cease to be engaged by the Company or its subsidiaries for any reason prior to the Effective Time. Except as set forth in SCHEDULE 4.16(D) of the COMPANY DISCLOSURE SCHEDULE, no key employee, director or officer of the Company or any of its subsidiaries will have a right of termination or payment under any employment or other agreement as a result of consummation of the transactions contemplated by this Agreement. (e) Since October 31, 2005, neither the Company nor any of its subsidiaries has effectuated (i) a "plant closing" as defined in the Worker Adjustment and Retraining Notification Act ("WARN ACT"), affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Company or (ii) a "mass layoff" (as defined in the WARN Act) affecting any site of employment or facility of the Company; nor has the Company been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any state, local or foreign law or regulation similar to the WARN Act. To the Company's knowledge, none of the Company's or its subsidiaries' employees has suffered an "employment loss" (as defined in the WARN Act) in the ninety (90) days prior to the date of this Agreement. SECTION 4.17 RIGHTS AGREEMENT. The Company and the Company Board have taken all necessary action to amend the Rights Agreement (without redeeming the Rights) so that (a) neither the execution or delivery of this Agreement or the Voting Agreements nor the consummation of the Merger will (i) cause any Rights issued pursuant to the Rights Agreement to become exercisable or to separate from the stock certificates to which they are attached, (ii) cause the Parent, the Purchaser or any of their Affiliates or Associates to be an Acquiring Person (as each such term is defined in the Rights Agreement) or (iii) trigger other provisions of the Rights Agreement, including giving rise to a Distribution Date or a Triggering Event (as each such term is defined in the Rights Agreement), and (b) the Rights Agreement will expire immediately prior to the Effective Time. Copies of all such amendments to the Rights Agreement have been previously provided to the Parent. SECTION 4.18 BROKERS. Except for the engagement of George K. Baum Advisors LLC, none of the Company, any of its subsidiaries, or any of their respective officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finder's fees in connection with the transactions contemplated by this Agreement. The Company has previously delivered to the Parent a copy of the Company's engagement letter with George K. Baum Advisors LLC. SCHEDULE 4.18 of the COMPANY DISCLOSURE SCHEDULE sets forth a good faith estimate of the amount of any brokerage fees, commissions or finders' fees, investment banking fees, legal fees, accounting fees, tax consultant fees, transfer agent and paying agent fees and proxy costs payable in connection with the transactions contemplated hereby, including expenses related to the Company's sale process, as of August 31, 2006 and an estimate of such additional fees and costs to be payable at the Closing. 22  SECTION 4.19 OPINION OF FINANCIAL ADVISOR. The Company has received the written opinion of George K. Baum Advisors LLC, its financial advisor, to the effect that, as of the date hereof, the consideration to be received in the Merger by the Company's shareholders is fair to the Company's shareholders from a financial point of view. SECTION 4.20 MATERIAL CONTRACTS. Except as set forth in SCHEDULE 4.20 of the COMPANY DISCLOSURE SCHEDULE, neither the Company nor any of its subsidiaries is party to, nor is the Company or any of its subsidiaries (or their respective assets) bound by, any contract, indenture, lease or other agreement which, individually or in the aggregate, is material to the Company and the subsidiaries taken as a whole. Except as set forth in SCHEDULE 4.20 of the COMPANY DISCLOSURE SCHEDULE, there are no (i) contracts, indentures, leases or other agreements between the Company or any subsidiary, on the one hand, and any current or former director, officer, employee or 5% or greater shareholder of the Company or any of their affiliates or family members, on the other, or (ii) any material non-competition agreement or any other agreement or obligation which purports to limit in any respect the manner in which, or the localities in which, the business of the Company and its subsidiaries, is or would be conducted. All contracts, indentures, leases and agreements listed on SCHEDULE 4.20 of the COMPANY DISCLOSURE SCHEDULE (the "MATERIAL CONTRACTS") are valid and binding, in full force and effect in accordance with their terms and enforceable against the Company, and to the Company's knowledge against the other parties thereto, in accordance with their respective terms. There is not under any Material Contract any existing default, or event, which after notice or lapse of time, or both, would constitute a default, by the Company or any of its subsidiaries, or to the Company's knowledge, any other party. SECTION 4.21 TITLE TO PROPERTIES. SCHEDULE 4.21 of the COMPANY DISCLOSURE SCHEDULE sets forth a complete list of all real property owned in fee by the Company and its subsidiaries and sets forth all real property leased by the Company and its subsidiaries as lessee as of the date hereof (such owned and leased real property, including all improvements thereon, referred to collectively as the "COMPANY REAL PROPERTY"). The Company has heretofore furnished to the Parent true and correct copies of all leases, subleases and other agreements concerning the real property leased by the Company or any of its subsidiaries (the "COMPANY LEASES"). All such material Company Leases are valid and binding and are in full force and effect and enforceable by the Company or its subsidiaries in accordance with their respective terms. Neither the Company, nor any of its subsidiaries nor, to the knowledge of the Company, any other party to any Company Lease is in any material respect in breach of or in default under any of the Company Leases. The Company Real Property set forth in SCHEDULE 4.21 of the COMPANY DISCLOSURE SCHEDULE comprises all of the real property currently necessary for and/or used in the operations of the business of the Company and its subsidiaries. The Company and its subsidiaries have good and valid title to all of the owned Company Real Property. The Company Real Property is free of Liens, except for: (a) liens with respect to Taxes either not due or being diligently contested in 23  appropriate proceedings; (b) mechanics', materialmen's or similar statutory liens for amounts not yet due or being diligently contested in appropriate proceedings; and (c) other exceptions with respect to title to Company Real Property (including easements of public record) that do not and would not interfere with the current and intended use of such Company Real Property except as would not otherwise, individually or in the aggregate, be material to the operations of the Company or its subsidiaries (clauses, (a), (b), and (c) being referred to herein as "Permitted Liens"); and the consummation of the transactions contemplated hereby will not create any Lien (other than Permitted Liens) on any of the Company Real Property. SECTION 4.22 ACCOUNTS RECEIVABLE. Subject to any reserves set forth in the Company Financials, the accounts receivable shown in the Company Financials represent bona fide claims against debtors for sales and other charges, and are not subject to discount except for normal cash and immaterial trade discounts. SECTION 4.23 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth in SCHEDULE 4.23 of the COMPANY DISCLOSURE SCHEDULE, there is no, judgment, injunction, order or decree binding upon the Company or its subsidiaries which has or could reasonably be expected to have the effect of prohibiting or impairing any current business practice of the Company or its subsidiaries, any acquisition of property by the Company or its subsidiaries or the conduct of business by the Company or its subsidiaries as currently conducted. Except as set forth in SCHEDULE 4.23 of the COMPANY DISCLOSURE SCHEDULE or except as would not, individually or in the aggregate, be material to the operations of the Company or its subsidiaries, there is no agreement binding upon the Company or its subsidiaries which has or could reasonably be expected to have the effect of prohibiting or impairing any current business practice of the Company or its subsidiaries, any acquisition of property by the Company or its subsidiaries or the conduct of business by the Company or its subsidiaries as currently conducted. SECTION 4.24 REPRESENTATIONS COMPLETE. None of the representations or warranties made by the Company herein or in any Schedule hereto, including the Company Disclosure Schedule, or in any certificate furnished by the Company pursuant to this Agreement, when all such documents are read together in their entirety, contains any untrue statement of a material fact, or omits to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which made, not misleading. ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER The Parent and the Purchaser hereby represent and warrant to the Company as follows: 24  SECTION 5.1 ORGANIZATION AND QUALIFICATION. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the state of Missouri. The Parent is a limited partnership duly organized, validly existing and in good standing under the laws of Delaware. Each of the Parent and the Purchaser has the requisite limited partnership and corporate power, respectively, and authority to own, operate or lease its properties and to carry on its business as it is now being conducted, and is duly qualified or licensed to do business, and is in good standing, in each jurisdiction in which the nature of its business or the properties owned, operated or leased by it makes such qualification, licensing or good standing necessary, except where the failure to have such power or authority, or the failure to be so qualified, licensed or in good standing, would not have a Material Adverse Effect on the Parent. The term "MATERIAL ADVERSE EFFECT ON THE Parent", as used in this Agreement, means any change in or effect on the business, financial condition, results of operation or prospects of the Parent or any of its subsidiaries that would reasonably be expected to have a material adverse effect on the Parent and its subsidiaries taken as a whole or could reasonably be expected to prevent or materially delay consummation of the Merger; provided that the foregoing shall not include any change or effect that results or arises from or relates to changes in (A) general economic or market conditions, except to the extent they have a disproportionate impact on the Parent, or prevailing interest rates, (B) conditions generally affecting the industry in which the Parent operates, or (C) laws, regulations or accounting standards, principles or interpretations. SECTION 5.2 AUTHORITY. Each of the Parent and the Purchaser has all necessary limited partnership and corporate power, respectively, and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Parent and the Purchaser and the consummation by the Parent and the Purchaser, to the extent the Parent or the Purchaser is a party thereto, of the transactions contemplated hereby have been duly and validly authorized and approved by the Board of Directors of the Purchaser and by the Parent as sole shareholder of the Purchaser, and no other corporate proceedings on the part of the Parent or the Purchaser are necessary to authorize or approve this Agreement or to consummate the transactions contemplated hereby or thereby (to the extent the Parent or the Purchaser is a party thereto). This Agreement has been duly executed and delivered by each of the Parent and the Purchaser and, assuming the due and valid authorization, execution and delivery by the Company, constitutes a valid and binding obligation of each of the Parent and the Purchaser enforceable against each of them in accordance with its terms. SECTION 5.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Assuming (i) the filings required under the HSR Act are made and the waiting periods thereunder have terminated or have expired and (ii) the filing of the articles of merger and other appropriate merger documents, if any, as required by the GBCL, is made, none of the execution and delivery of this Agreement by the Parent or the Purchaser, the consummation by the Parent or the Purchaser of the transactions contemplated hereby or compliance by the Parent or the Purchaser with any of the provisions hereof will (i) conflict with or violate the organizational documents of the Parent or the Purchaser, (ii) conflict with or violate any statute, ordinance, rule, regulation, 25  order, judgment, decree, permit or license applicable to the Parent or the Purchaser or any of their subsidiaries, or by which any of them or any of their respective properties or assets may be bound or affected, or (iii) result in a violation pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Parent or the Purchaser or any of their subsidiaries is a party or by which the Parent or the Purchaser or any of their subsidiaries or any of their respective properties or assets may be bound or affected. (b) None of the execution and delivery of this Agreement by the Parent and the Purchaser, the consummation by the Parent and the Purchaser of the transactions contemplated hereby or compliance by the Parent and the Purchaser with any of the provisions hereof will require any Consent of any Governmental Entity, except for (i) the filing of articles of merger pursuant to the GBCL and (ii) compliance with the HSR Act. SECTION 5.4 INFORMATION. None of the information supplied or to be supplied by the Parent and the Purchaser for inclusion in (i) the Proxy Statement or (ii) the Other Filings will, at the respective times filed with any Governmental Entity and, in addition, in the case of the Proxy Statement, at the date it or any amendment or supplement is mailed to shareholders, at the time of the Special Meeting and at Closing, 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 light of the circumstances under which they were made, not misleading. SECTION 5.5 FINANCING. The Parent and the Purchaser collectively will have at Closing and the Parent will make available to the Purchaser sufficient funds to enable the Purchaser to pay (i) the aggregate Merger Price for all Common Shares pursuant to Section 1.4, on a fully diluted basis, and (ii) the aggregate Cash Payments for all Options pursuant to Section 1.6(b), and to pay all fees and expenses related to the transactions contemplated by this Agreement payable by them. SECTION 5.6 STOCK OWNERSHIP. As of the date hereof, none of the Parent, the Purchaser or American Industrial Partners or any of their respective "affiliates" or "associates" (as those terms are defined under Rule 12b-2 under the Exchange Act) beneficially own any Common Shares. SECTION 5.7 PURCHASER'S OPERATIONS. The Purchaser was formed solely for the purpose of engaging in the transactions contemplated by this Agreement and has not engaged in any business activities or conducted any operations other than in connection with such transactions. 26  SECTION 5.8 REPRESENTATIONS COMPLETE. None of the representations or warranties made by the Parent or the Purchaser herein or in any certificate furnished by the Parent or the Purchaser pursuant to this Agreement, when all such documents are read together in their entirety, contains any untrue statement of a material fact, or omits to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which made, not misleading. SECTION 5.9 SOLVENCY. Immediately after the Closing, the Parent will not (i) be insolvent (either because its financial condition is such that the sum of its debts is greater than the fair value of its assets or because the fair salable value of its assets is less than the amount required to pay its probable liability on its existing debts as they mature and a reasonable amount of all contingent liabilities), (ii) have unreasonably small capital with which to engage in its business, or (iii) have incurred debts beyond its ability to pay as they become due. ARTICLE VI COVENANTS SECTION 6.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as permitted or required by this Agreement or otherwise with the prior written consent of the Parent, during the period from the date of this Agreement to the Effective Time, the Company will, and will cause each of its subsidiaries to, conduct its operations only in the ordinary and usual course of business consistent with past practice and will use all reasonable efforts, and will cause each of its subsidiaries to use all reasonable efforts, to preserve intact the business organization of the Company and each of its subsidiaries, to keep available the services of its and their present officers and employees, and to preserve the good will of those having business relationships with it. Without limiting the generality of the foregoing, and except as otherwise permitted or required by this Agreement or as set forth in SCHEDULE 6.1 of the COMPANY DISCLOSURE SCHEDULE, the Company will not, and will not permit any of its subsidiaries to, prior to the Effective Time, without the prior written consent of the Parent, which will not be unreasonably withheld, conditioned or delayed: (a) adopt any amendment to its articles of incorporation or bylaws or comparable organizational documents or the Rights Agreement or adopt a plan of merger, consolidation, reorganization, dissolution or liquidation; (b) sell, pledge or encumber any stock owned by it in any of its subsidiaries; (c) (i) issue, reissue or sell, or authorize the issuance, reissuance or sale of (A) additional shares of capital stock of any class or Voting Debt, or securities convertible into capital stock of any class or Voting Debt, or any rights, warrants or options to acquire any convertible securities or capital stock, other than the issuance of Common Shares, in accordance with the terms of the instruments governing such issuance on the date hereof, pursuant to the exercise of Options outstanding on the date hereof, or (B) any other securities in respect of, in lieu of, or in substitution for, Common Shares or any other capital stock of any class or Voting Debt outstanding on the date 27  hereof or (ii) make any other changes in its capital structure (other than incurrence of indebtedness in the amount of up to Five Million Dollars ($5,000,000) in the aggregate under existing revolving credit facilities); (d) declare, set aside or pay any dividend or other distribution (whether in cash, securities or property or any combination thereof) in respect of any class or series of its capital stock other than between any of the Company and its subsidiaries; (e) split, combine, subdivide, reclassify or redeem, purchase or otherwise acquire, or propose to redeem or purchase or otherwise acquire, any shares of its capital stock, or any of its other securities; (f) except as set forth in SCHEDULE 6.1 of the COMPANY DISCLOSURE SCHEDULE, 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 arrangement with, for or in respect of, any shareholder, officer, director, other employee, agent, consultant or affiliate other than as required pursuant to the terms of agreements in effect on the date of this Agreement, or enter into or engage in any agreement, arrangement or transaction with any of its directors, officers, employees or affiliates except current compensation and benefits in the ordinary course of business, consistent with past practice; (g) acquire, mortgage, encumber, sell, pledge, lease, license or dispose of any assets (including Intellectual Property or resource rights), except in the ordinary course of business consistent with past practice; (h) (i) incur, assume or prepay any long-term debt or incur or assume any short-term debt, except that the Company and its subsidiaries may incur or prepay debt, without prepayment penalty, in the ordinary course of business in amounts and for purposes consistent with past practice under existing lines of credit, but in any event such incurrences, assumptions or prepayments may not exceed Five Million Dollars ($5,000,000) in the aggregate, (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any third party except in the ordinary course of business consistent with past practice, (iii) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, contingent or otherwise), except in the ordinary course of business consistent with past practice and in accordance with their terms, (iv) make any loans, advances or capital contributions to, or investments in, any other person or entity, except for loans, advances, capital contributions or investments in the ordinary course, consistent with past practice (in an amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate), or between any wholly owned subsidiary of the Company and the Company or another wholly owned subsidiary of the Company, (v) authorize or make capital expenditures in excess of Five Hundred Thousand Dollars ($500,000), (vi) accelerate or delay collection of notes or accounts 28  receivable in advance of or beyond their regular due dates or the dates when the same would have been collected in the ordinary course of business consistent with past practice, or (vii) change any method or principle of accounting in a manner that is inconsistent with past practice except to the extent required by GAAP as advised by the Company's regular independent accountants; (i) commence, settle or compromise any suit or claim or threatened suit or claim where the amount involved is greater than Two Hundred Fifty Thousand Dollars ($250,000); (j) other than in the ordinary course of business consistent with past practice, (i) modify, amend or terminate any material contract, (ii) waive, release, relinquish or assign any material contract (or any of the rights of the Company or any of its subsidiaries thereunder), right or claim, or (iii) cancel, forgive or make any changes to the terms or collateral of any indebtedness owed to the Company or any of its subsidiaries; provided, however, that neither the Company nor any of its subsidiaries may under any circumstance waive or release any of its rights under any confidentiality or non-competition agreement to which it is a party; (k) file any income Tax Return (other than in the ordinary course in a manner consistent with past practice), make any Tax election not required by law, settle or compromise any Tax liability or file any amended Tax Return or claim for refund; (l) permit any insurance policy naming it as a beneficiary or a loss payable payee to be canceled or terminated, except in the ordinary course of business consistent with past practice; (m) acquire (by merger, consolidation, acquisition of stock or assets, combination or other similar transaction) any corporation, partnership or other business organization or division or assets thereof; (n) enter into any material contract or agreement other than in the ordinary course of business consistent with past practice; (o) except as may be required as a result of a change in law or in GAAP, make any change in its methods of accounting, including Tax accounting policies and procedures; (p) adopt or amend any resolution or agreement concerning indemnification of its directors, officers, employees or agents; (q) transfer or license to any person or entity or otherwise extend, amend, modify, permit to lapse or fail to preserve any of the Intellectual Property material to the Company's or its subsidiaries' business as presently conducted or proposed to be conducted, other than nonexclusive licenses in the ordinary course of business consistent with past practice, or disclose to any person who has not entered into a confidentiality agreement any Trade Secrets; 29  (r) fail to maintain its books, accounts and records in the usual manner on a basis consistent with that heretofore employed; (s) establish any subsidiary or enter into any new line of business; (t) make any changes to its current investment strategy, policy or practices; (u) discharge any obligations (including accounts payable) other than in the ordinary course of business consistent with past practice, or delay the making of any capital expenditures from the Company's current capital expenditure schedule; (v) close or materially reduce the Company's or any subsidiary's activities, or other in the ordinary course of business consistent with past practices, effect any layoff or other Company-initiated personnel reduction or change, at any of the Company's or any subsidiary's facilities; (w) except as specifically permitted pursuant to Section 6.10, take, or agree to commit to take, or fail to take any action that would result or is reasonably likely to result in any of the conditions to the Merger set forth in Article VII not being satisfied, or would make any representation or warranty of the Company contained herein inaccurate in any material respect at, or as of any time prior to, the Effective Time, or that would impair the ability of the Company to consummate the Merger in accordance with the terms hereof or materially delay such consummation; or (x) authorize, or agree in writing or otherwise to take any of the foregoing actions prohibited under this Section 6.1. SECTION 6.2 ACCESS TO INFORMATION. (a) From the date of this Agreement until the Effective Time, the Company will, and will cause its subsidiaries, and each of their respective officers, directors, employees, counsel, advisors and representatives (collectively, the "COMPANY REPRESENTATIVES") to, give the Parent and the Purchaser and their respective officers, employees, counsel, advisors and representatives (collectively, the "PARENT REPRESENTATIVES") access during normal business hours, to the offices and other facilities and to the books and records of the Company and its subsidiaries and will cause the Company Representatives and the Company's subsidiaries to furnish the Parent, the Purchaser and the Parent Representatives to the extent available with such financial and operating data and such other information (with sensitivity to competitive information and customer relationships) with respect to the business and operations of the Company and its subsidiaries as the Parent and the Purchaser may from time to time reasonably request provided that the foregoing will not require the Company to permit any inspection, or to disclose any information, which would result in the disclosure of any trade secrets of third parties or violate any obligation of the Company with respect to confidentiality if such disclosure would reasonably be expected to result in liability to the Company, and provided that the Company shall use its reasonable best efforts to obtain the consent of any such third party to such inspection or disclosure. The Company will furnish promptly to the 30  Parent and the Purchaser a copy of each report, schedule, registration statement and other document released publicly to the Company's shareholders by it or its subsidiaries during such period. The Company will cause its independent auditors to allow the Parent, the Purchaser and the Parent Representatives to review the work papers of such auditors relating to the Company and its subsidiaries. No review pursuant to this Section 6.2 will affect any representation or warranty given by the Company. (b) Nothing in Section 6.2(a) shall require the Company or any of its subsidiaries to provide such access or to disclose such information where such access or disclosure would violate the rights of the Company's customers, jeopardize the attorney-client privilege of the institution in possession or control of such information or contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this Agreement. The Company will make appropriate disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. (c) Notwithstanding anything to the contrary in Section 6.2(a) or elsewhere in this Agreement, neither the Parent, the Purchaser nor their representatives shall be entitled to conduct any additional environmental testing, sampling or investigation of soils, waters, sediments or discharges. (d) Each of the Parent and the Purchaser will hold and will cause its consultants and advisors to hold in strict confidence pursuant to the terms of that certain Confidentiality Agreement dated June 20, 2006 between Steel Partners Ltd. and the Company (the "CONFIDENTIALITY AGREEMENT") all documents and information concerning the Company furnished to the Parent or the Purchaser in connection with the transactions contemplated by this Agreement. SECTION 6.3 EFFORTS. (a) Subject to the terms and conditions provided herein, each of the Company, the Parent and the Purchaser will, and the Company will cause each of its subsidiaries to, cooperate and use their respective reasonable best efforts to take, or cause to be made, all filings necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including but not limited to cooperation in the preparation and filing of the Proxy Statement, any required filings or requests for additional information under the HSR Act, and any amendments to any thereof. In addition, if at any time prior to the Effective Time any event or circumstance relating to either the Company or the Parent or the Purchaser or any of their respective subsidiaries should be discovered by the Company or the Parent, as the case may be, which should be set forth in an amendment to, the discovering party will promptly inform the other party of such event or circumstance. (b) Each of the parties will use its reasonable best efforts to obtain as promptly as practicable all Consents of any Governmental Entity or any other person required in connection with, and waivers of any Violations that may be caused by, the consummation of the transactions contemplated by this Agreement. 31  (c) Neither the Company nor the Company Board nor any committee thereof will withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to the Parent or the Purchaser, the recommendation of the Company Board of this Agreement or the Merger, or approve or recommend, or propose publicly to approve or recommend, an Acquisition Transaction (as defined in Section 6.10), except in connection with the Company's termination of this Agreement pursuant to Section 8.1(d). Nothing contained in this Section 6.3(c) prohibits the Company from making any required disclosure to the Company's shareholders if the Company Board determines in good faith by a vote of a majority of the members of the full Company Board, based on the advice of outside counsel, that a failure to so disclose would be inconsistent with its obligations under applicable law. Any withdrawal, modification or change of the recommendation of the Company Board of this Agreement or the Merger will not change the approval of the Company Board for purpose of causing any state takeover statute or other law or the Rights Agreement or the Rights to be inapplicable to this Agreement, the Merger and the transactions contemplated hereby. (d) Subject to the terms and conditions herein provided, each of the parties hereto agrees to use their respective reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. If at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the parties hereto will take or cause to be taken all such necessary action, including, without limitation, the execution and delivery of such further instruments and documents as may be reasonably requested by the other party for such purposes or otherwise to consummate and make effective the transactions contemplated hereby. SECTION 6.4 PUBLIC ANNOUNCEMENTS. The Company, on the one hand, and the Parent and the Purchaser, on the other hand, agree to consult promptly with each other prior to issuing any press release or otherwise making any public statement with respect to the Merger and the other transactions contemplated hereby, agree to provide to the other party for review a copy of any such press release or statement, and will not issue any such press release or make any such public statement prior to such consultation and review, unless required by applicable law or any listing agreement with a securities exchange. SECTION 6.5 EMPLOYEE BENEFIT ARRANGEMENTS. (a) The Parent shall to the extent practicable either maintain and provide to the Company's employees the employee benefits and programs of the Company as substantially in effect as of the date hereof or cause the Surviving Corporation to provide employee benefits and programs to the Company's employees that, in the aggregate, are substantially comparable to those of the Parent. The Company shall provide the Parent with such information as the Parent may reasonably 32  request regarding the Company's employee benefits and programs in order to assist Purchaser in complying with its obligations under this Section 6.5(a). Nothing in this Section 6.5(a) shall be construed to prohibit or restrict the Parent or the Surviving Corporation from amending, suspending or terminating any of its employee benefit plans or programs at any time. Nothing in this Section 6.5 or elsewhere in this Agreement shall be construed to create a right in any employee to employment with the Parent, the Surviving Company or any of their subsidiaries and the employment of each such employee shall be "at will" employment, except to the extent otherwise provided in a written employment agreement. The Parent shall use commercially reasonable efforts to maintain in effect through December 31, 2006 the existing health plans of the Company. (b) For purposes of determining eligibility to participate, vesting and accrual or entitlement to benefits where length of service is relevant under any employee benefit plan of the Parent or the Surviving Corporation ("PARENT PLAN"), the Employees will receive service credit for service with the Company and any of its subsidiaries to the same extent such service credit was granted under the Listed Plans, subject to offsets for previously accrued benefits and to no duplication of benefits (except that no such credit will be applied for benefit accrual or entitlement purposes under defined benefit pension plans). Such employees also will be given credit for any deductible or co-payment amounts paid in respect of the plan year in which the Effective Time occurs, to the extent that, following the Effective Time, they participate in any Parent Plan for which deductibles or co-payments are required. The Parent agrees that it also will cause each Parent Plan to waive (i) any pre-existing condition restriction which was waived under the terms of any analogous plan immediately prior to the Effective Time or (ii) waiting period limitation which would otherwise be applicable to an Employee on or after the Effective Time to the extent such Employee had satisfied any similar waiting period limitation under an analogous plan prior to the Effective Time. SECTION 6.6 INDEMNIFICATION. (a) The Parent agrees that, and agrees to cause the Surviving Corporation to honor, all rights to indemnification now existing in favor of any director, officer, or employee of the Company and its subsidiaries (the "INDEMNIFIED PARTIES") as provided in their respective charters or bylaws or by contract will survive the Merger and will continue in full force and effect for a period of not less than six years from the Effective Time. (b) The Company shall purchase prepaid insurance policies with a claims period of at least six years with respect to directors' and officers' liability insurance in amount and scope at least as favorable as the Company's existing policies for claims arising from facts or events that occurred on or prior to the Effective Time, provided that aggregate premium payments for such policies do not exceed $50,000. (c) In the event the Parent or the Purchaser or any of their successors or assigns, (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of 33  such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, to the extent necessary to effectuate the purposes of this Section 6.6, proper provision will be made so that the successors and assigns of the Parent and the Purchaser assume the obligations set forth in this Section 6.6. SECTION 6.7 NOTIFICATION OF CERTAIN MATTERS. The Parent and the Company (the one required to give notice hereunder being referred to herein as the "notifying party") will each promptly notify the other of (a) the occurrence or non-occurrence of any fact or event which would be reasonably likely (i) to cause any representation or warranty of the notifying party contained in this Agreement to be untrue or inaccurate in any material respect if made at any time from the date hereof to the Effective Time or (ii) to cause any covenant or agreement of the notifying party, or any condition to the obligations of the party to be notified, under this Agreement not to be complied with or satisfied in any material respect and (b) any failure of the notifying party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder in any material respect; provided, however, that no such notification will modify the representations or warranties of any party or the conditions to the obligations of any party hereunder. Each of the Company, the Parent and the Purchaser will give prompt notice to the other parties hereof of any notice or other communication (a) 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 and (b) from any Governmental Entity in connection with the transactions contemplated by this Agreement. SECTION 6.8 RIGHTS AGREEMENT. The Company covenants and agrees that it will not (a) redeem the Rights, (b) amend the Rights Agreement or (c) take any action which would allow any Person (as defined in the Rights Agreement) other than the Parent or the Purchaser to acquire beneficial ownership of 20% or more of the Common Shares without causing a "Distribution Date" or a "Triggering Event" to occur pursuant to the terms of the Rights Agreement. SECTION 6.9 STATE TAKEOVER LAWS. The Company will, upon the request of the Purchaser, take all reasonable steps to assist in any challenge by the Purchaser to the validity or applicability to the transactions contemplated by this Agreement, including the Merger, of any state takeover law. SECTION 6.10 NO SOLICITATION. (a) The Company, its affiliates and their respective officers, directors, employees, representatives and agents will immediately cease any existing discussions or negotiations, if any, with any parties conducted heretofore with respect to any acquisition or exchange of all or any material portion of the assets of, or any equity interest in, the Company or any of its subsidiaries or any business combination with the Company or any of its subsidiaries. Except as otherwise provided in Section 6.10(b), the Company agrees that, prior to the Effective Time, 34  it will not, and will not authorize or permit any of its subsidiaries or any of its or its subsidiaries' directors, officers, employees, agents or representatives, directly or indirectly, to solicit, initiate, encourage or facilitate, or furnish or disclose non-public information in furtherance of, any inquiries or the making of any proposal with respect to any merger, liquidation, recapitalization, consolidation or other business combination involving the Company or any of its subsidiaries or acquisition of any capital stock or any material portion of the assets of the Company or its subsidiaries, or any combination of the foregoing (an "ACQUISITION TRANSACTION"), or negotiate, explore or otherwise engage in discussions with any person (other than the Purchaser, the Parent or their respective directors, officers, employees, agents and representatives) with respect to any Acquisition Transaction or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by this Agreement. (b) Notwithstanding the provisions of Section 6.10(a), prior to the Effective Time, the Company may furnish information, pursuant to a customary confidentiality agreement with terms not more favorable to such third party than the Confidentiality Agreement, to, and negotiate or otherwise engage in discussions with, any party who delivers a bona fide written proposal for an Acquisition Transaction for which all necessary financing is then, in the judgment of the Company Board, readily obtainable, if (i) the Company Board determines in good faith by a vote of a majority of the members of the full Company Board that failing to take such action would create a reasonable likelihood of a breach of the fiduciary duties of the Company Board (after consultation and receipt of advice from its outside legal counsel to such effect) and such a proposal is (based on advice from George K. Baum Advisors LLC) more favorable to the Company's shareholders from a financial point of view than the transactions contemplated by this Agreement as the same has been proposed to be amended by the Parent pursuant to Section 6.10(b) and (ii) there has been no violation of any of the restrictions in Section 6.10(a) in connection with the Company's receipt of such proposal. An Acquisition Transaction meeting the requirements set forth in this Section 6.10(b), the proposal for which has been received by the Company without violation of any of the restrictions of Section 6.10(a), is referred to herein as a "Superior Transaction." (c) From and after the execution of this Agreement, the Company will promptly (and in any event within twenty-four (24) hours after receipt) advise the Parent in writing of the receipt, directly or indirectly, of any inquiries, discussions, negotiations or proposals relating to an Acquisition Transaction, identify the offeror and furnish to the Parent a copy of any such proposal or inquiry, if it is in writing, relating to an Acquisition Transaction. The Company will promptly advise the Parent of any material development relating to such proposal, including the results of any substantive discussions or negotiations with respect thereto. Notwithstanding anything in this Agreement to the contrary, prior to the approval of an Acquisition Transaction by the Company Board, the Company will give the Parent sufficient notice of the material terms and conditions of any such Acquisition Transaction, and negotiate in good faith with the Parent for a period of not less than five (5) business days after the Parent's receipt of a copy of a written proposal or a written summary of an oral proposal setting forth or describing such Acquisition Transaction to 35  make such adjustments in the terms and conditions of this Agreement as would enable the Company to proceed with the transactions contemplated herein, after taking into account any adjustment or modification of the terms of this Agreement proposed by the Parent (and any adjustment or modification of the terms of such proposed Acquisition Transaction), after which, notwithstanding Section 6.10(a), the Company may terminate this Agreement in accordance with Section 8.1(d) and enter into an agreement with another party relating to an Acquisition Transaction. SECTION 6.11 SHAREHOLDER LITIGATION. The Company will consult with the Parent and keep the Parent informed about the defense of any stockholder litigation against the Company and/or its officers or directors relating to the transactions contemplated by this Agreement. The Company will not settle any such litigation without the Parent's prior written consent. SECTION 6.12 RESIGNATIONS Each of the members of the Company Board will resign as of the Effective Time. SECTION 6.13 TERMINATION OF CERTAIN INSURANCE POLICIES. The Company shall arrange for the cancellation, on the Closing Date immediately prior to the Effective Time, of the four life insurance policies listed in SCHEDULE 6.13 of the Company Disclosure Schedule. SECTION 6.14 SEVERANCE PAYMENTS. On or before the Closing Date (but in any event no later than immediately prior to the Effective Time), the Company shall make all severance payments arising as a result of the transactions contemplated by this Agreement, a good faith estimate of which is set forth in SCHEDULE 6.14 of the COMPANY DISCLOSURE SCHEDULE. SECTION 6.15 DISMISSAL OF LAWSUIT. As a condition and inducement to the Company's willingness to enter into this Agreement upon the terms contained herein, within five (5) days after the execution of this Agreement, the Parent and the Purchaser will cause that certain action against the Company entitled AIP IV, LLC d/b/a American Industrial Partners against Collins Industries, Inc. now pending in the Supreme Court of the State of New York to be dismissed with prejudice. 36  ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of the Parent, the Purchaser and the Company to consummate the Merger are subject to the satisfaction, at or before the Closing, of each of the following conditions: (a) SHAREHOLDER APPROVAL. The Agreement has been approved by the Requisite Vote of the shareholders of the Company. (b) INJUNCTIONS; ILLEGALITY. The consummation of the Merger is not restrained, enjoined or prohibited by any order, judgment, decree, injunction or ruling of a court of competent jurisdiction or any Governmental Entity (provided that each of the parties has used reasonable best efforts to prevent the entry of any such injunction or other order and to appeal any injunction or other order that may be entered), and there has been no statute, rule or regulation enacted, promulgated or deemed applicable to the Merger by any Governmental Entity which prevents the consummation of the Merger. (c) HSR ACT. Any waiting period (and any extension thereof) under the HSR Act applicable to the Merger has expired or terminated. SECTION 7.2 CONDITIONS TO OBLIGATIONS OF THE PARENT. The obligations of the Parent to consummate the Merger are subject to the fulfillment at or before the Closing, of the following additional conditions: (a) COMPANY REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company set forth in this Agreement shall be true and correct in all material respects (except that where any statement in a representation or warranty expressly includes a "material adverse effect", "material" or other materiality qualifier, such representation or warranty shall be true and correct in all respects) as of the date hereof and as of the Closing Date as if made on and as of the Closing Date, except those representations and warranties that speak of an earlier date, which shall be true and correct as of such earlier 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 this Agreement shall be disregarded). (b) PERFORMANCE BY THE COMPANY. The Company shall have performed and complied with all the covenants and agreements in all material respects and satisfied in all material respects all the conditions required by this Agreement to be performed or complied with or satisfied by the Company at or prior to the Effective Time. (c) NO MATERIAL ADVERSE CHANGE. There shall have been no change, condition, event, or development that has or could reasonably be expected to have, a Material Adverse Effect on the Company since the date of this Agreement. (d) CONSENTS. The Consents set forth in SCHEDULE 7.2(D) of the COMPANY DISCLOSURE SCHEDULE shall have been obtained and shall be in full force and effect. 37  (e) RIGHTS AGREEMENT. The Rights Agreement has been terminated and has no further legal force or effect. SECTION 7.3 CONDITION TO OBLIGATIONS OF THE COMPANY. The obligations of the Company to consummate the Merger are subject to the satisfaction at or before Closing, of the following additional conditions: (a) REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER. The representations and warranties of the Parent and the Purchaser set forth in this Agreement shall be true and correct in all material respects (except that where any statement in a representation or warranty expressly includes a "material adverse effect", "material" or other materiality qualifier, such representation or warranty shall be true and correct in all respects) as of the date hereof and as of the Closing Date as if made on and as of the Closing Date, except those representations and warranties that speak of an earlier date, which shall be true and correct as of such earlier date. (b) PERFORMANCE BY THE PARENT AND THE PURCHASER. The Parent and the Purchaser shall have performed and complied with all the covenants and agreements in all material respects and satisfied in all material respects all the conditions required by this Agreement to be performed or complied with or satisfied by each such party at or prior to the Effective Time. SECTION 7.4 FRUSTRATION OF CONDITIONS. Neither the Parent nor the Company may rely on the failure of any condition set forth in this Article VII 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 VIII TERMINATION; AMENDMENTS; WAIVER SECTION 8.1 TERMINATION. This Agreement may be terminated and the Merger contemplated hereby may be abandoned at any time prior to the Closing, notwithstanding any approval thereof by the shareholders of the Company (with any termination by the Parent also being an effective termination by the Purchaser): (a) by the mutual written consent of the Company and the Parent; (b) by the Company, on the one hand, or the Parent, on the other hand, if the transactions contemplated by this Agreement have not been consummated on or before six months from the date of this Agreement, unless such date is extended by the mutual written consent of the Company and the Parent provided, however, that the right to terminate this Agreement pursuant to this Section 8.1(b) shall not be available to any party whose failure to perform any of its obligations under this Agreement results in the failure of the Merger to be consummated by such time; 38  (c) by the Parent or the Company if (i) any court or other Governmental Entity has issued an order, decree, judgment or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the Merger and such order, decree or ruling or other action has become final and nonappealable or (ii) the vote of the Company's shareholders shall have been taken at a meeting duly convened therefor or at any adjournment or postponement thereof, and such vote shall be insufficient to approve the Merger and this Agreement; (d) by the Company if the Company has complied with its obligations under Section 6.10 and the Company indicates its intention to enter into a definitive agreement with a third party for a Superior Transaction; (e) by the Parent, if the Company breaches any of its covenants in Sections 6.3(c), 6.8 or 6.10 or if the Company Board has (i) withdrawn or modified in a manner adverse to the Purchaser its approval or recommendation of this Agreement or the Merger, (ii) approved or recommended another Acquisition Transaction, or (iii) resolved to effect any of the foregoing (and such resolution is made public); (f) by the Parent, if the Company shall have breached in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement (except that where any statement in a representation or warranty expressly includes a "material adverse effect," "material" or other materiality qualifier, such representation or warranty shall be true and correct in all respects), which breach or failure to perform is incapable of being cured or has not been cured within 45 days after the giving of written notice to the Company; or (g) by the Company, if the Parent shall have breached in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement (except that where any statement in a representation or warranty expressly includes a "material adverse effect," "material" or other materiality qualifier, such representation or warranty shall be true and correct in all respects), which breach or failure to perform is incapable of being cured or has not been cured within 45 days after the giving of written notice to Purchaser. The party desiring to terminate this Agreement pursuant to the preceding paragraphs shall give written notice of such termination to the other party in accordance with Section 9.4 hereof. SECTION 8.2 EFFECT OF TERMINATION. In the event of the termination of this Agreement pursuant to Section 8.1, this Agreement will forthwith become void and have no effect, without any liability on the part of any party or its directors, officers, employees or shareholders, other than the provisions of this Section 8.2, Section 8.3 and Article IX, which will survive any such termination. Nothing contained in this Article VIII relieves any party from liability for any breach of this Agreement. 39  SECTION 8.3 FEES AND EXPENSES. (a) Whether or not the Merger is consummated, except as otherwise specifically provided herein, all costs and expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement will be paid by the party incurring such expenses; PROVIDED that the Parent shall be responsible for all filing fees in connection with (i) the filings required by the HSR Act and (ii) any other filings with Governmental Entities required to effect the Merger. (b) In the event that this Agreement is terminated pursuant to Sections 8.1(d) or 8.1(e), the Company shall promptly, but in no event later than, in the case of termination by the Company, upon delivery of the notice of termination, or in the case of termination by the Parent, two days after such termination, pay to the Parent Three Million Five Hundred Thousand Dollars ($3,500,000). In the event that this Agreement is terminated pursuant to Section 8.1(c)(ii) and the Company enters into and completes a Superior Transaction, within six (6) months of the date of termination of this Agreement, the Company shall promptly, upon the closing of the Superior Transaction, pay to the Parent Three Million Five Hundred Thousand Dollars ($3,500,000). In the event that this Agreement is terminated pursuant to Section 8.1(f), the Company shall promptly, but in no event later than, in the case of termination by the Company, upon delivery of the notice of termination, or in the case of termination by the Parent, two days after such termination, reimburse the Parent for reasonably documented out-of-pocket fees and expenses of the Parent and the Purchaser (including reasonable printing fees, filing fees and reasonable fees and expenses of its legal and financial advisors) related to this Agreement, the Voting Agreement, the transactions contemplated hereby and thereby and any related financing up to a maximum of One Million Dollars ($1,000,000). (c) In the event that this Agreement is terminated pursuant to Section 8.1(g), the Parent shall promptly, but in no event later than two days after such termination, reimburse the Company for reasonably documented out-of-pocket fees and expenses of the Company (including reasonable printing fees, filing fees and reasonable fees and expenses of its legal and financial advisors) related to this Agreement and the transactions contemplated hereby up to a maximum of One Million Dollars ($1,000,000). (d) Notwithstanding anything otherwise contained in this Agreement, the fees and reimbursement of expenses (as applicable) provided for in Section 8.3(b) and Section 8.3(c) will be the sole and exclusive remedy available to the Parent and the Purchaser, or the Company, respectively, upon termination of this Agreement pursuant to Section 8.1. (e) The prevailing party in any legal action undertaken to enforce this Agreement or any provision hereof will be entitled to recover from the other party the reasonable costs and expenses (including reasonable attorneys' and expert witness fees) incurred in connection with such action. 40  SECTION 8.4 AMENDMENT. This Agreement may be amended by the Company, the Parent and the Purchaser, provided that any amendment after approval of this Agreement by the shareholders of the Company may not decrease the Merger Price or adversely affect the rights of the Company's shareholders hereunder without the approval of such shareholders. This Agreement may not be amended except by an instrument in writing signed on behalf of all the parties. SECTION 8.5 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties hereto may (a) extend the time for the performance of any of the obligations or other acts of any other party hereto, (b) waive any inaccuracies in the representations and warranties contained herein by any other party or in any document, certificate or writing delivered pursuant hereto by any other party or (c) waive compliance with any of the agreements of any other party or with any conditions to its own obligations. Any agreement on the part of any party to any such extension or waiver will be valid only if set forth in an instrument in writing signed on behalf of such party. ARTICLE IX MISCELLANEOUS SECTION 9.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations, warranties and covenants made in this Agreement do not survive beyond the Effective Time. Notwithstanding the foregoing, the agreements set forth in Articles II and III and Sections 1.3, 6.3(d), 6.5, 6.6 and 9.8 will survive the Effective Time indefinitely (except to the extent a shorter period of time is explicitly specified therein). Any and all breaches of the non-surviving representations, warranties and covenants will be deemed waived as of the Effective Time. SECTION 9.2 ENTIRE AGREEMENT; ASSIGNMENT. (a) This Agreement (including the documents, schedules and instruments referred to herein) and the Confidentiality Agreement constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties, including without limitation that certain letter agreement dated September 18, 2006 among the Parent, the Company and American Industrial Partners and that certain letter agreement dated July 11, 2006 between the Company and American Industrial Partners. (b) Neither this Agreement nor any of the rights, interests or obligations hereunder will be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of each other party, except that the Parent may assign its rights and the Purchaser may assign its rights, interest and obligations to any affiliate or direct or indirect subsidiary of the Parent and the Parent may transfer the stock of the Purchaser without the consent of the Company provided that (i) no such assignment will relieve the Parent or the Company of any liability for any breach by such assignee, and (ii) neither the Parent nor the Purchaser may assign their rights, interest and obligations prior to the Effective Time (but the assignment may occur simultaneously at the Effective Time). Subject 41  to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. SECTION 9.3 VALIDITY. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction will not affect the validity or enforceability of any other provision of this Agreement, each of which will remain in full force and effect or the validity or enforceability of such provisions in any other jurisdiction. SECTION 9.4 NOTICES. All notices, requests, claims, demands and other communications hereunder must be in writing and will be deemed to have been duly given when delivered in person, by overnight courier or facsimile to the respective parties as follows: If to the Parent or the Purchaser: Parent Corp. Purchaser (c/o Parent Corp.) Steel Partners II, L.P. 590 Madison Avenue, 32nd Floor New York, New York 10022 Attention: Warren Lichtenstein Facsimile: 212 ###-###-#### with a copy (which shall not constitute notice) to: Olshan Grundman Frome Rosenzweig & Wolosky LLP Park Avenue Tower 65 East 55th Street New York, New York 10022 Attention: Adam W. Finerman, Esq. Facsimile: 212 ###-###-#### If to the Company: Collins Industries, Inc. 180 State Street, Suite 240 Southlake, Texas 76092 Attention: Cletus Glasener Facsimile: 817 ###-###-#### 42  with a copy (which shall not constitute notice) to: Blackwell Sanders Peper Martin LLP 4801 Main Street, Suite 1000 Kansas City, Missouri 64112 Facsimile: (816) 983-8080 Attention: Gary D. Gilson or to such other address as the person to whom notice is given may have previously furnished to the other in writing in the manner set forth above; provided that notice of any change of address will be effective only upon receipt thereof. SECTION 9.5 GOVERNING LAW. This Agreement will be governed by and construed in accordance with the laws of the State of Missouri, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. SECTION 9.6 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. SECTION 9.7 COUNTERPARTS. This Agreement may be executed in two or more counterparts, by facsimile, each of which will be deemed to be an original, but all of which will constitute one and the same agreement. SECTION 9.8 PARTIES IN INTEREST. This Agreement will be binding upon and inure solely to the benefit of each party hereto and their successors and permitted assigns, and, except with respect to Section 6.6, nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. SECTION 9.9 DEFINITIONS. (a) CERTAIN DEFINED TERMS. As used in this Agreement: (i) the term "affiliate", as applied to any Person, means any other person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise; 43  (ii) the term "Person" or "person" includes individuals, corporations, partnerships, trusts, other entities and groups (which term includes a "group" as such term is defined in Section 13(d)(3) of the Exchange Act); and (iii) the term "subsidiary" or "subsidiaries" means, with respect to the Parent, the Company or any other person, any corporation, partnership, joint venture or other legal entity of which the Parent, the Company or such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, stock or other equity interests the holders of which are generally entitled to 50% or more of the vote for the election of the board of directors or other governing body of such corporation or other entity or 50% or more of the profits of such corporation or other entity. (b) CROSS-REFERENCE TABLE. The following terms are defined in the corresponding Sections of this Agreement: Defined Term Section Reference - ------------ ----------------- Acquisition Transaction Section 6.10(a) Agreement Preamble Balance Sheet Section 4.6(b) Balance Sheet Date Section 4.6(b) Capital Stock Section 4.3(a) Cash Payment Section 1.6(a) Certificates Section 3.2(a) Closing Section 1.8 Closing Date Section 1.8 Code Section 3.2(f) Common Shares Section 1.4 Company Preamble Company Board Section 1.6 Company Disclosure Schedule Section 1.6(a) Company Financials Section 4.6(b) Company Leases Section 4.21 Company Permits Section 4.8(a) Company Real Property Section 4.21 Company Representatives Section 6.2(a) Confidentiality Agreement Section 6.2(d) Consent Section 4.5(b) 44  Dissenting Shares Section 3.1 Effective Time Section 1.2 Environmental Claim Section 4.7 Environmental Laws Section 4.7 ERISA Section 4.12(a) Exchange Act Section 4.6(a) GAAP Section 4.6(b) GBCL Preamble Governmental Entity Section 4.5(b) Hazardous Substance Section 4.7 HSR Act Section 4.5(a) Indebtedness Section 4.3(h) Indemnified Parties Section 6.6(a) Intellectual Property Section 4.13(a) IRS Section 4.12(b) Lien Section 4.3(i) Listed Plans Section 4.12(a) Litigation Section 4.9 Material Adverse Effect on the Company Section 4.1 Material Adverse Effect on the Parent Section 5.1 Material Contracts Section 4.20 Merger Preamble Merger Price Section 1.4 Multiemployer Plan Section 4.12(e) Notifying Party Section 6.7 Options Section 1.6 Other Filings Section 4.10 Parent Preamble Parent Plan Section 6.5(b) Parent Representatives Section 6.2(a) Paying Agent Section 3.2(a) Permitted Liens Section 4.21 Preferred Stock Section 4.3(a) Proxy Statement Section 1.7(b) Purchaser Preamble Qualified Plans Section 4.12(c) Requisite Vote Section 4.4 Rights Section 4.3(a) 45  Rights Agreement Section 4.2 SEC Section 4.6(a) SEC Reports Section 4.6(a) Securities Act Section 4.6(a) Shareholder Preamble Voting Agreement Preamble Special Meeting Section 1.7(a) Stock Plans Section 1.6 Superior Transaction Section 6.10(b) Surviving Corporation Section 1.1 Tax Section 4.14(b) Tax Return Section 4.14(b) Taxes Section 4.14(b) Trade Secrets Section 4.13(a) Violation Section 4.5(a) Voting Agreement Preamble Voting Debt Section 4.3(c) WARN Act Section 4.16(e) SECTION 9.10 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. It is accordingly agreed that the parties will be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at law or in equity. [SIGNATURE PAGES FOLLOW.] 46  IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its respective officer thereunto duly authorized, all as of the day and year 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 CS ACQUISITION CORP. By: /s/ Warren G. Lichtenstein ------------------------------------------- Name: Warren G. Lichtenstein ----------------------------------------- Title: President ---------------------------------------- [SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]  IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its respective officer thereunto duly authorized, all as of the day and year first above written. COLLINS INDUSTRIES, INC. By: /s/ Donald Lynn Collins ------------------------------------------- Name: Donald Lynn Collins ----------------------------------------- Title: President and Chief Executive Officer ---------------------------------------- [SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]