AGREEMENT AND PLAN OF MERGER AMONG STRATOS LIGHTWAVE, INC., SLEEPING BEAR MERGER CORP. AND STERLING HOLDING COMPANY Dated as of July 2, 20031

      SECTION 1.2     Effective Time. The Merger shall become effective when a Certificate of Merger (the “Certificate of Merger”), executed in accordance with the relevant provisions of the DGCL, is duly filed with the Secretary of State of the State of Delaware; provided, however, that, upon mutual consent of the Constituent Corporations, the Certificate of Merger may provide for a later date of effectiveness of the Merger not more than 30 days after the date the Certificate of Merger is duly filed. When used in this Agreement, the term “Effective Time” shall mean the date and time at which the Certificate of Merger is accepted for recording or such later time established by the Certificate of Merger. The filing of the Certificate of Merger shall be made on the date of the Closing (as hereinafter defined).

      SECTION 1.3     Effects of the Merger. The Merger shall have the effects set forth in Section 259 of the DGCL.

      SECTION 1.4     Plan of Reorganization. The parties hereto intend that this Agreement shall constitute a “plan of reorganization” for United States federal income tax purposes pursuant to which, for such purposes, the merger of Sub directly with and into the Company (in which each Company Stockholder (as hereinafter defined) is to receive solely the Per Share Merger Consideration (as hereinafter defined) provided for hereunder) is to be treated as a “reorganization” under Section 368(a) of the Code (to which each of Parent and the Company are to be parties under Section 368(b) of the Code).

      SECTION 1.5     Charter and Bylaws; Directors and Officers.

      (a) At the Effective Time, the Amended and Restated Certificate of Incorporation, as amended, of the Company (the “Company Charter”), as in effect immediately prior to the Effective Time, shall be amended so that Article IV reads in its entirety as follows: “The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 1,000 shares of Common Stock, $0.01 par value.” As so amended, the Company Charter shall be the Certificate of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. At the Effective Time, the Bylaws of Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or in the Certificate of Incorporation of the Surviving Corporation.

      (b) The directors of Sub at the Effective Time shall be the directors of the Surviving Corporation and the officers of the Company at the Effective Time shall be the officers of the Surviving Corporation, in each case until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.

      (c) Effective at the Effective Time, Parent’s Board of Directors shall consist of the eight individuals listed on Exhibit C and a ninth director to the extent designated by the Company prior to the filing of the Registration Statement (as hereinafter defined), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall continue as Parent’s Chief Executive Officer, in each case, until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be. Parent shall use its best reasonable efforts to effect the provision of this Section 1.5(c). Parent’s obligations with respect to the election of the Company’s designees to Parent’s Board of Directors shall be subject to Section 14(f) of the Exchange Act (as hereinafter defined) and Rule 14f-1 promulgated thereunder. The Company shall supply to Parent in writing and be solely responsible for any information specifically provided by it with respect to its director nominees required by Section 14(f) and Rule 14f-1 for use in the Proxy Statement (as hereinafter defined), and Parent agrees to include such information in the Proxy Statement.

      (d) The parties currently intend that following the Merger, Parent shall continue to maintain its headquarters and principal operations in the Chicago, Illinois metropolitan area.

      (f) In calculating the Per Share Merger Consideration payable under this Section 1.6, Parent shall be entitled to rely on the representations and warranties contained in Section 3.2(a) and the certificate delivered pursuant to Section 6.3(f). If such representations, warranties and certificate are not correct, Parent shall have the right to adjust the Per Share Merger Consideration accordingly, and notwithstanding anything else to the contrary contained in this Agreement, in no event shall the aggregate merger consideration payable by Parent, Sub or the Surviving Corporation to the holders of equity interests in the Company in connection with the Merger or the transactions contemplated hereby be other than 6,082,000 shares of Parent Common Stock and 50,000 shares of Parent Preferred Stock.

      (g) If the Target Working Capital (as hereinafter defined) exceeds the Working Capital (as hereinafter defined) as finally determined pursuant to Section 1.17(b), Parent shall be entitled, within 10 business days after such final determination, to receive from the Indemnity Fund an amount equal to such excess plus interest on such excess from the Closing Date to the date of payment thereof at the Agreed Rate. For purposes of this Agreement, “Agreed Rate” means the London Inter-Bank Offer Rate for six month deposits in United States dollars as quoted on Telerate Page 3750 on the Closing Date plus 25 basis points.

      SECTION 1.7     Delivery of Certificates and Payment of Cash. At or after the Effective Time, each holder of record of a certificate or certificates (collectively, the “Certificates”) representing shares of Company Common Stock or Company Preferred Stock issued and outstanding immediately prior to the Effective Time (collectively, the “Company Stockholders”) may surrender such Certificate or Certificates to Parent’s designee as the exchange agent (the “Exchange Agent”), together with a letter of transmittal in customary form prepared by Parent (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon actual delivery thereof to the Exchange Agent and shall contain instructions for use in effecting the surrender of such Certificates in exchange for the property described in the next sentence and which, if Parent elects, may include a stock power to be executed in blank with respect to any shares of Parent Common Stock to be deposited with the Indemnity Agent) (the “Transmittal Letter”). Parent shall promptly deliver or cause to be delivered upon surrender for cancellation to the Exchange Agent of all Certificates held by any Company Stockholder, together with the Transmittal Letter, duly executed, in exchange therefor (i) to such Company Stockholder, (x) one or more certificates representing ninety percent (90%) of the aggregate number of whole shares of Parent Common Stock (rounded up to the nearest whole share) and one hundred percent (100%) of the aggregate number of whole shares of Parent Preferred Stock into which the Company Common Stock or the Company Preferred Stock represented by the Certificate or Certificates so surrendered shall have been converted pursuant to Section 1.6(c), (y) one hundred percent (100%) of the cash in lieu of any fractional share of Parent Common Stock and one hundred percent (100%) of the cash in lieu of any fractional share of Parent Preferred Stock in accordance with Section 1.9, and (z) one hundred percent (100%) of certain dividends and other distributions in accordance with Section 1.8; and (ii) in accordance with Section 8.1, to the Indemnity Agent (as hereinafter defined), for deposit in the Indemnity Fund (as defined in the Indemnity Agreement), (x) one or more certificates representing the remaining ten percent (10%) of such number of whole shares of Parent Common Stock (rounded down to the nearest whole share) (all such shares held by the Indemnity Agent being collectively referred to as the “Indemnity Shares”) and (y) one hundred percent (100%) of certain dividends and other distributions in accordance with Section 1.8, and any Certificate so surrendered shall forthwith be cancelled.

      SECTION 1.8     Dividends; Transfer Taxes; Withholding. No dividends or other distributions that are declared on or after the Effective Time on Parent Common Stock or Parent Preferred Stock, or are payable to the holders of record thereof on or after the Effective Time, will be paid to any Person (as hereinafter defined) entitled by reason of the Merger to receive a certificate representing Parent Common Stock or Parent Preferred Stock until such Person surrenders the related Certificate or Certificates, as provided in Section 1.7, and no cash payment in lieu of fractional shares will be paid to any such Person pursuant to Section 1.9 until such Person shall so surrender the related Certificate or Certificates. Subject to the effect of applicable law, there shall be paid to each record holder of a new certificate representing such Parent Common Stock or Parent Preferred Stock: (i) at the time of such surrender or as promptly as practicable thereafter, one hundred

      SECTION 1.9     No Fractional Securities. No certificates or scrip representing fractional shares of Parent Common Stock or Parent Preferred Stock, as the case may be, shall be issued upon the surrender for exchange of Certificates pursuant to this Article I, and no Parent dividend or other distribution or stock split shall relate to any fractional share, and no fractional share shall entitle the owner thereof to vote or to any other rights of a securityholder of Parent. In lieu of any such fractional share of Parent Common Stock, each holder of Company Common Stock or Company Preferred Stock who would otherwise have been entitled to a fraction of a share of Parent Common Stock upon surrender of Certificates for exchange pursuant to this Article I will be paid one hundred percent (100%) of an amount in cash (without interest), rounded down to the nearest cent, determined by multiplying (i) the last reported sale price per share of Parent Common Stock on The Nasdaq National Market (“Nasdaq”) on the date immediately before the date of the Effective Time (or, if the shares of Parent Common Stock do not trade on Nasdaq on such date, the first date of trading of shares of Parent Common Stock on Nasdaq immediately before such date) by (ii) the fractional interest of a share of Parent Common Stock to which such holder would otherwise be entitled. In lieu of any such fractional share of Parent Preferred Stock, each holder of Company Common Stock or Company Preferred Stock who would otherwise have been entitled to a fraction of Parent Preferred Stock upon surrender of Certificates for exchange pursuant to this Article I will be paid an amount of cash (without interest), rounded down to the nearest cent, determined by multiplying (i) $100 by (ii) the fractional interest of a share of Parent Preferred Stock to which such holder would otherwise be entitled.

      SECTION 1.10     Return of Exchange Fund. Any portion of the Parent Common Stock, Parent Preferred Stock or cash in lieu of fractional shares which remains undistributed by the Exchange Agent to the Company Stockholders for 60 days after the Effective Time shall be delivered to Parent, upon demand of Parent, and any such Company Stockholders who have not theretofore complied with this Article I shall thereafter look only to Parent for payment of their claim for Parent Common Stock, Parent Preferred Stock, any cash in lieu of fractional shares of Parent Common Stock or Parent Preferred Stock and any dividends or distributions with respect to Parent Common Stock or Parent Preferred Stock. Neither Parent nor the Surviving

      SECTION 1.11     Adjustment of Per Share Merger Consideration. In the event of any reclassification, stock split or stock dividend with respect to Parent Common Stock, Company Common Stock or Company Preferred Stock, or any change or conversion of Parent Common Stock, Company Common Stock or Company Preferred Stock into other securities (or if a record date with respect to any of the foregoing should occur), or any issuance of securities by Parent pursuant to the Rights Agreement, in each case prior to the Effective Time, appropriate and proportionate adjustments, if any, shall be made to the Per Share Merger Consideration, and all references to the Per Share Merger Consideration in this Agreement shall be deemed to be to the Per Share Merger Consideration, as so adjusted.

      SECTION 1.12     No Further Ownership Rights in Company Common Stock or Company Preferred Stock. All shares of Parent Common Stock and Parent Preferred Stock issued, and all cash paid upon the surrender for exchange of Certificates in accordance with the terms hereof (including any cash paid pursuant to Section 1.9), shall be deemed to have been issued and paid in full satisfaction of all rights pertaining to the shares of Company Common Stock or Company Preferred Stock represented by such Certificates.

      SECTION 1.13     Closing of Company Transfer Books. At the Effective Time, the stock transfer books of the Company shall be closed, and no transfer of shares of Company Common Stock or Company Preferred Stock shall thereafter be made on the records of the Company. If, after the Effective Time, Certificates are presented to the Surviving Corporation or Parent, such Certificates shall be cancelled and exchanged as provided in this Article I.

      SECTION 1.14     Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent or the Exchange Agent, the posting by such Person of a bond, in such amount as Parent or the Exchange Agent may direct as indemnity against any claim that may be made against Parent, the Surviving Corporation or the Exchange Agent with respect to such Certificate, Parent or the Exchange Agent will issue or cause to be issued in exchange for such lost, stolen or destroyed Certificate the shares of Parent Common Stock, the shares of Parent Preferred Stock, any cash in lieu of fractional shares of Parent Common Stock or Parent Preferred Stock to which the holders thereof are entitled pursuant to Section 1.9 and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 1.8.

      SECTION 1.15     Further Assurances. If at any time after the Effective Time the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper (a) 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, privileges, powers, franchises, properties or assets of either of the Constituent Corporations, or (b) otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its proper officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of either of the Constituent Corporations, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of either Constituent Corporation, all such other acts and things as may be necessary, desirable or proper to vest, perfect or confirm the Surviving Corporation’s right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of such Constituent Corporation and otherwise to carry out the purposes of this Agreement.

      SECTION 1.16     Affiliates. Notwithstanding anything herein to the contrary, to the fullest extent permitted by law, Certificates surrendered for exchange by any Person who may be deemed a Rule 145 Affiliate of the Company (as determined pursuant to Section 5.4) for purposes of Rule 145 under the

      SECTION 1.17     Excess Working Capital Adjustment.

      SECTION 1.18     Associated Rights. References in Article I of this Agreement to Parent Common Stock shall include, unless the context otherwise requires, the associated Parent Rights.

      SECTION 1.19     Closing; Closing Deliveries.

      (a) The closing of the transactions contemplated by this Agreement (the “Closing”) and all actions specified in this Agreement to occur at the Closing shall take place at the offices of Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇, Bank One Plaza, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, at 10:00 a.m., local time, no later than the second business day following the day on which the last of the conditions set forth in Article VI shall have been fulfilled or waived (if permissible) or at such other time and place as Parent and the Company shall agree (the date and time on which the Closing actually occurs is referred to herein as the “Closing Date”).

      (b) Subject to fulfillment or waiver of the conditions set forth in Article VI, at the Closing Parent shall deliver to the Company all of the following:

      (c) Subject to fulfillment or waiver of the conditions set forth in Article VI, at the Closing Sub shall deliver to the Company all of the following:

      (d) Subject to fulfillment or waiver of the conditions set forth in Article VI, at the Closing the Company shall deliver to Parent all of the following:

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB

      Parent and Sub represent and warrant to the Company as follows:

      SECTION 2.1     Organization, Standing and Power. Each of Parent and Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to carry on its business as now being conducted. Each Subsidiary (as hereinafter defined) of Parent is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has the requisite corporate (in the case of a Subsidiary that is a corporation) or other power and authority to carry on its business as now being conducted, except where the failure to be so organized, existing or in good standing or to have such power or authority would not, individually or in the aggregate, have a Material Adverse Effect (as hereinafter defined) on Parent. Parent and each of its Subsidiaries are duly qualified to do business, and are in good standing, in each jurisdiction where the character of their properties owned or held under lease or the nature of their activities makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect on Parent. For purposes of this Agreement, “Material Adverse Change” or “Material Adverse Effect” means, when used with respect to Parent or the Company, as the case may be, any event, change or effect that individually or when taken together with all other such events, changes or effects is or could reasonably be expected (as far as can be foreseen at the time) to be materially adverse to the business, assets, liabilities, financial condition or results of operations of Parent and its Subsidiaries, taken as a whole, or the Company and its Subsidiaries, taken as a whole, as the case may be. None of the following shall be deemed, by itself or by themselves, to constitute a Material Adverse Change or Material Adverse Effect: (i) conditions affecting the industry in which the Company and its Subsidiaries or Parent and its Subsidiaries, as the case may be, operate, (ii) conditions affecting the U.S. economy as a whole, or (iii) in the case of Parent, any change in the market price of Parent Common Stock.

      SECTION 2.4     Consents and Approvals; No Violation. Assuming that all consents, approvals, authorizations and other actions described in this Section 2.4 have been obtained and all filings and obligations described in this Section 2.4 have been made, except as set forth in Section 2.4 of the letter dated the date hereof and delivered on the date hereof by Parent to the Company, which letter relates to this Agreement and is designated therein as the Parent Letter (the “Parent Letter”), the execution and delivery of this Agreement by Parent and Sub, and the Parent Ancillary Agreements by Parent, do not, and the consummation of the transactions contemplated hereby and thereby and compliance with the provisions hereof and thereof will not, result in any violation of, or default (with or without notice or lapse of time, or both) under, or give to others a right of termination, cancellation or acceleration of any obligation or the loss of benefit under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of Parent or any of its Subsidiaries under, any provision of (a) the Parent Charter or the Bylaws of Parent (the “Parent Bylaws”) or the Certificate of Incorporation or Bylaws of Sub, (b) the comparable charter or organizational documents of any of Parent’s Subsidiaries, (c) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to Parent or any of its Subsidiaries or any of their respective properties or assets or (d) any judgment, order, decree, injunction, statute, law, ordinance, rule or regulation applicable to Parent or any of its Subsidiaries or any of their respective properties or assets, other than, in the case of clause (c) or (d), any such violations, defaults, rights, liens, security interests, charges or encumbrances that, individually or in the aggregate, would not have a Material Adverse Effect on Parent, materially impair the ability of Parent or Sub to perform their respective obligations hereunder or, in the case of Parent, under the Parent Ancillary Agreements, or prevent the consummation of any of the transactions contemplated hereby or thereby by Parent or Sub. No filing or registration with, or authorization, consent or approval of, any domestic (federal and state), foreign or supranational court, commission, governmental body, regulatory agency, authority or tribunal (a “Governmental Entity”) is required by or with respect to Parent or any of its Subsidiaries in connection with the execution and delivery of this Agreement by Parent or Sub or the Parent Ancillary Agreements by Parent or is necessary for the consummation by Parent or Sub of the Merger and the other transactions contemplated by this Agreement or the Parent Ancillary Agreements, except for (i) compliance with the provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (together with the rules and regulations promulgated thereunder, the “HSR Act”), the Securities Act and the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the “Exchange Act”), (ii) the filing of the Certificate of Merger and Certificate of Designation with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company or any of its Subsidiaries is qualified to do business, (iii) such filings, authorizations, orders and approvals as may be required by state takeover laws (the “State Takeover Approvals”), (iv) such filings as may be required in connection with the taxes described in Section 5.9; (v) applicable requirements, if any, of state securities or “blue sky” laws (“Blue Sky Laws”) and Nasdaq, (vi) applicable requirements, if any, under foreign laws and (vii) such other consents, orders, authorizations, registrations, declarations and filings the failure of which to be obtained or made would not, individually or in the aggregate, have a Material Adverse Effect on Parent, materially impair the ability of Parent or Sub to perform its obligations hereunder or, in the case of Parent, under the Parent Ancillary Agreements, or prevent the consummation of any of the transactions contemplated hereby or thereby by Parent or Sub.

      SECTION 2.5     SEC Documents and Other Reports. Parent has filed all required documents with the SEC between May 1, 2002 and the date hereof (the “Parent SEC Documents”). As of their respective dates or, if amended, as of the date of the last amendment, the Parent SEC Documents complied in all material

      SECTION 2.6     Absence of Certain Changes or Events. (a) Except as disclosed in the Parent SEC Documents filed with the SEC prior to the date of this Agreement or as disclosed in Section 2.6(a) of the Parent Letter, since February 1, 2003 there has been:

      (b) Except as set forth in Section 2.6(b) of the Parent Letter or as disclosed in the Parent SEC Documents, since February 1, 2003 through the date hereof, Parent and its Subsidiaries have conducted their respective businesses in all material respects only in the ordinary course and in conformity with past practice. Without limiting the generality of the foregoing, since February 1, 2003 through the date hereof, except as set forth in Section 2.6(b) of the Parent Letter or as disclosed in the Parent SEC Documents, neither Parent nor any of its Subsidiaries has:

      (c) Except as set forth in Section 2.6(c) of the Parent Letter or as disclosed in the Parent SEC Documents, neither Parent nor any of its Subsidiaries is subject to any liability (including unasserted claims, whether known or unknown), whether absolute, contingent, accrued or otherwise, which is not shown or which is in excess of amounts shown or reserved for in the most recent audited balance sheet set forth in the Parent SEC Documents, other than liabilities of the same nature as those set forth in such balance sheet and the notes thereto and reasonably incurred in the ordinary course of its business consistent with past practice after the date of such balance sheet and other than liabilities as would not have a Material Adverse Effect on Parent.

      SECTION 2.7     Permits and Compliance. Each of Parent and its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, charters, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Entity necessary for Parent or any of its Subsidiaries to own, lease and operate its properties or to carry on its business as it is now being conducted (the “Parent Permits”), except where the failure to have any of the Parent Permits would not, individually or in the aggregate, have a Material Adverse Effect on Parent, and, as of the date of this Agreement, no suspension or cancellation of any of the Parent Permits is pending or, to the Knowledge of Parent (as hereinafter defined), threatened, except where the suspension or cancellation of any of the Parent Permits would not, individually or in the aggregate, have a Material Adverse Effect on Parent. Neither Parent nor any of its Subsidiaries is in violation of (a) charter, bylaws or other organizational documents, (b) any applicable law, ordinance, administrative or governmental rule or regulation or (c) any order, decree or judgment of any Governmental Entity having jurisdiction over Parent or any of its Subsidiaries, except, in the case of clauses (a), (b) and (c), for any violations that, individually or in the aggregate, would not have a Material Adverse Effect on Parent. For purposes of this Agreement, “Knowledge of Parent” means the actual knowledge of the individuals identified in Section 2.7 of the Parent Letter.

      SECTION 2.8     Registration Statement and Proxy Statement. None of the information to be supplied by Parent or Sub for inclusion or incorporation by reference in the Registration Statement or the joint proxy statement/prospectus included therein relating to the Stockholder Meetings (as hereinafter defined) (together

      SECTION 2.9     Tax Matters. (a) Except as otherwise set forth in Section 2.9(a) of the Parent Letter, (i) each of Parent and each Subsidiary of Parent has filed all Tax Returns (as hereinafter defined) required to be filed, except to the extent that any failure to file would not, individually or in the aggregate, have a Material Adverse Effect on Parent; (ii) all such Tax Returns are complete and accurate and disclose all Taxes (as hereinafter defined) required to be paid by Parent and each Subsidiary of Parent for the periods covered thereby, except to the extent that any failure to be complete and accurate would not, individually or in the aggregate, have a Material Adverse Effect on Parent, and all Taxes shown to be due on such Tax Returns have been timely paid or extensions for payment have been properly obtained, except to the extent that any failure to so pay or so obtain such an extension would not, individually or in the aggregate, have a Material Adverse Effect on Parent; (iii) all Taxes (whether or not shown on any Tax Return) owed by Parent or any Subsidiary of Parent have been timely paid, except to the extent that any failure to timely pay such Taxes would not, individually or in the aggregate, have a Material Adverse Effect on Parent; (iv) the Tax Returns referred to in clause (i), to the extent related to federal income Taxes, have been examined by the appropriate taxing authority or the period for assessment of the Taxes in respect of which each such Tax Return was required to be filed (taking into account all applicable extensions and waivers) has expired; (v) to the Knowledge of Parent, there is no claim or assessment pending or proposed with respect to Taxes of Parent or any Subsidiary of Parent, which, if determined in a manner adverse to Parent or such Subsidiary, would have a Material Adverse Effect on Parent; (vi) all deficiencies asserted in writing or assessments made in writing as a result of any examination of the Tax Returns referred to in clause (i) have been paid in full or are being timely and properly contested; (vii) there are no material liens for Taxes upon the assets of Parent or any Subsidiary of Parent except liens relating to current Taxes not yet due; (viii) all Taxes which Parent or any Subsidiary of Parent are required by law to withhold or to collect for payment have been duly withheld and collected and have been paid to the appropriate Governmental Entity, except to the extent that any failure to withhold, collect or pay would not, individually or in the aggregate, have a Material Adverse Effect on Parent; and (ix) neither Parent nor any Subsidiary of Parent has been a party to any distribution occurring during the last 3 years in which the parties to such distribution treated the distributions as one to which Section 355 of the Code (or any similar provision of state, local or foreign law) applied.

      (b) Except as set forth in Section 2.9(b) of the Parent Letter, as a direct or indirect result of the transactions contemplated by this Agreement, no payment or other benefit, and no acceleration of the vesting of any options, payments or other benefits, will be, an “excess parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code and the Treasury Regulations thereunder. Except as set forth in Section 2.9(b) of the Parent Letter, as a direct or indirect result of the transactions contemplated by this Agreement, no payment or other benefit, and no acceleration of the vesting of any options, payments or other benefits will be (or under Section 280G of the Code and the Treasury Regulations thereunder be presumed to be) a “parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code and the Treasury Regulations thereunder, without regard to whether such payment or acceleration is reasonable compensation for personal services performed or to be performed in the future.

      (b) With respect to the Parent Plans, no event has occurred and there exists no condition or set of circumstances in connection with which Parent or any ERISA Affiliate or Parent Plan fiduciary could be subject to any liability (other than any liability for benefits payable in the normal course) under the terms of such Parent Plans, ERISA, the Code or any other applicable law, which would have a Material Adverse Effect on Parent. All Parent Plans that are intended by their terms to be, or are otherwise treated by Parent as, qualified under Section 401(a) of the Code have been determined by the Internal Revenue Service (“IRS”) to be so qualified, or a timely application for such determination is now pending and Parent is not aware of any reason why any such Parent Plan is not so qualified in operation. Except as set forth in Section 2.12(b) of the Parent Letter, neither Parent nor any of its ERISA Affiliates has any liability or obligation under any welfare plan or agreement to provide benefits after termination of employment to any employee or dependent other than as required by Section 4980B of the Code.

      (c) As used herein, (i) “Parent Plan” means (w) a “pension plan” (as defined in Section 3(2) of ERISA), (x) a “welfare plan” (as defined in Section 3(1) of ERISA), (y) any other profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, restricted stock, stock appreciation right, vacation, retention, severance, medical, dental, vision, disability, death benefit, sick leave or insurance plan, arrangement or understanding, or (z) any material bonus, holiday pay or fringe benefit plan, arrangement or understanding, in each case established or maintained by Parent or any of its ERISA Affiliates or as to which Parent or any of its ERISA Affiliates has contributed or otherwise may have any liability, and (ii) with respect to any person, “ERISA Affiliate” means any trade or business (whether or not incorporated) which is under common control or would be considered a single employer with such person pursuant to Section 414(b), (c), (m) or (o) of the Code and the regulations promulgated under those sections or pursuant to Section 4001(b) of ERISA and the regulations promulgated thereunder.

      SECTION 2.13     Compliance with Worker Safety and Environmental Laws. Except as set forth in Section 2.13 of the Parent Letter or as disclosed in the Parent SEC Documents, the properties, assets and operations of Parent and its Subsidiaries are in compliance with all applicable federal, state, local and foreign laws, rules and regulations, orders, decrees, judgments, permits and licenses relating to public and worker health and safety (collectively, “Worker Safety Laws”) and the protection and clean-up of the environment and activities or conditions related thereto, including, without limitation, those relating to the generation, handling, disposal, transportation or release of hazardous materials (collectively, “Environmental Laws”), except for any violations that, individually or in the aggregate, would not have a Material Adverse Effect on Parent. With respect to such properties, assets and operations, including any previously owned, leased or operated properties, assets or operations, there are no events, conditions, circumstances, activities, practices, incidents, actions or plans of Parent or any of its Subsidiaries that may interfere with or prevent compliance or continued compliance with applicable Worker Safety Laws and Environmental Laws, other than any such interference or prevention as would not, individually or in the aggregate with any such other interference or prevention, have a Material Adverse Effect on Parent.

      SECTION 2.14     Labor Matters. Except as set forth in Section 2.14 of the Parent Letter, Parent and each of its Subsidiaries have complied with all applicable laws, rules and regulations which relate to prices, wages, hours, discrimination in employment and collective bargaining and to the operation of its business and are not liable for any arrears of wages or any withholding taxes or penalties for failure to comply with any of the foregoing, except for any possible noncompliance or liability that would not have a Material Adverse Effect on Parent. Neither Parent nor any of its Subsidiaries is a party to any collective bargaining agreement. Neither Parent nor any of its Subsidiaries has engaged in any unfair labor practice with respect to any Persons employed by or otherwise performing services primarily for Parent or any of its Subsidiaries (the “Parent Business Personnel”), and there is no unfair labor practice complaint or grievance against Parent or any of its Subsidiaries by the National Labor Relations Board or any comparable state agency pending or threatened in writing with respect to the Parent Business Personnel, except where such unfair labor practice, complaint or grievance would not, individually or in the aggregate, have a Material Adverse Effect on Parent. There is no labor strike, dispute, slowdown or stoppage pending or, to the Knowledge of Parent, threatened against or

      SECTION 2.15     Intellectual Property. (a) Except as set forth in Section 2.15 of the Parent Letter, Parent and its Subsidiaries have through ownership or licensing all patents, trademarks, trade names, service marks, trade secrets, copyrights and other proprietary intellectual property rights (collectively, “Intellectual Property Rights”) as are necessary to conduct the business of Parent and its Subsidiaries as currently conducted or planned to be conducted by Parent and its Subsidiaries, taken as a whole, except where the failure to have such Intellectual Property Rights would not have a Material Adverse Effect on Parent. Except as set forth in Section 2.15 of the Parent Letter, neither Parent nor any of its Subsidiaries has infringed any Intellectual Property Rights of any third party other than any infringements that, individually or in the aggregate, would not have a Material Adverse Effect on Parent.

      (b) Except as set forth in the Parent SEC Documents filed prior to the date of this Agreement or in Section 2.15 of the Parent Letter, there are no actions, suits or claims or administrative proceedings or investigations pending or, to the Knowledge of Parent, threatened that challenge or question Parent’s Intellectual Property Rights and that, individually or in the aggregate, would have a Material Adverse Effect on Parent.

      (c) Except as set forth in Section 2.15 of the Parent Letter, all patents, registered trademarks, service marks and copyrights which are held by Parent or any of its Subsidiaries and which are material to the business of Parent and its Subsidiaries, taken as a whole, are to the Knowledge of Parent valid and subsisting.

      SECTION 2.16     Contracts. Except as disclosed in the Parent SEC Documents filed prior to the date of this Agreement or as disclosed in Section 2.16 of the Parent Letter, all contracts and agreements required to be filed by Parent between May 1, 2002 and the date hereof as material contracts pursuant to Item 601 of Regulation S-K under the Securities Act have been filed. Except as disclosed in the Parent SEC Documents filed prior to the date of this Agreement or as disclosed in Section 2.16 of the Parent Letter, no event of default or event that, but for the giving of notice or the lapse of time or both, would constitute an event of default exists or, upon the consummation by Parent or Sub of the transactions contemplated by this Agreement, will exist under any indenture, mortgage, loan agreement, note or other agreement or instrument for borrowed money, any guarantee of any agreement or instrument for borrowed money or any lease, contractual license or other agreement or instrument to which Parent or any of its Subsidiaries is a party or by which Parent or any such Subsidiary is bound or to which any of the properties, assets or operations of Parent or any such Subsidiary is subject, other than any defaults that, individually or in the aggregate, would not have a Material Adverse Effect on Parent.

      SECTION 2.17     Takeover Statutes and Charter Provisions. The action of the Board of Directors of Parent in approving this Agreement and the transactions contemplated hereby is sufficient to render inapplicable to Parent, Sub, the Merger and this Agreement the provisions of Section 203 of the DGCL. To the Knowledge of Parent, no other state takeover statutes or charter or bylaw provisions are applicable to the Merger, this Agreement, the Voting Agreements, the Parent Ancillary Agreements and the Company Ancillary Agreements, and the transactions contemplated hereby and thereby.

      SECTION 2.18     Required Vote of Parent Stockholders. The affirmative vote of the holders of a majority of the outstanding shares of Parent Common Stock is required to approve the Share Issuance. No other vote of the securityholders of Parent is required by law, the Parent Charter, the Parent Bylaws or otherwise in order for Parent to consummate the Merger and the transactions contemplated hereby.

      SECTION 2.19     Brokers. Other than CIBC World Markets Corp., with respect to which the fees due by Parent shall be paid by Parent, no broker, investment banker or other Person is entitled to any broker’s, finder’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent.

      (b) Upon the execution and delivery by the Stockholder Representatives of the Indemnity Agreement, the Indemnity Agreement will constitute the valid and binding obligation of the Stockholder Representatives, enforceable against the Stockholder Representatives in accordance with its terms. The Stockholder Representatives have the requisite power and authority to enter into the Indemnity Agreement and to fulfill the terms thereof contemplated thereby.

      SECTION 3.4     Consents and Approvals; No Violation. Assuming that all consents, approvals, authorizations and other actions described in this Section 3.4 have been obtained and all filings and obligations described in this Section 3.4 have been made, except as set forth in Section 3.4 of the Company Letter, the execution and delivery of this Agreement and the Company Ancillary Agreements by the Company do not, and the consummation of the transactions contemplated hereby and thereby (including, without limitation, the transactions contemplated by Section 5.15) and compliance with the provisions hereof and thereof will not, result in any violation of, or default (with or without notice or lapse of time, or both) under, or give to others a right of termination, cancellation or acceleration of any obligation or the loss of a material benefit under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company or any of its Subsidiaries under, any provision of (a) the Company Charter or the Company Bylaws, (b) the comparable charter or organizational documents of any of the Company’s Subsidiaries, (c) any loan or credit agreement, note, bond, mortgage, indenture, guaranty, lease or other agreement, instrument, permit, concession, franchise or license material to the Company or any of its Subsidiaries or any of their respective properties or assets, other than, in the case of clause (c), any such violations, defaults, rights, liens, security interests, charges or encumbrances that are immaterial, or (d) any judgment, order, decree, injunction, statute, law, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, other than, in the case of clause (d), any such violations, defaults, rights, liens, security interests, charges or encumbrances that, individually or in the aggregate, would not have a Material Adverse Effect on the Company, materially impair the ability of the Company to perform its obligations hereunder or under the Company Ancillary Agreements, or prevent the consummation of any of the transactions contemplated hereby or thereby by the Company. No filing or registration with, or authorization, consent or approval of, any Governmental Entity is required by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement or the Company Ancillary Agreements by the Company or is necessary for the consummation of the Merger and the other transactions contemplated by this Agreement or the Company Ancillary Agreements, except for (i) compliance with the HSR Act, (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company or any of its Subsidiaries is qualified to do business, (iii) State Takeover Approvals, (iv) such filings as may be required in connection with the taxes described in Section 5.9, (v) applicable requirements, if any, of Blue Sky Laws, (vi) applicable requirements, if any, under foreign laws and (vii) such other consents, orders, authorizations, registrations, declarations and filings the failure of which to be obtained or made would not, individually or in the aggregate, have a Material Adverse Effect on the Company, materially impair the ability of the Company to perform its obligations hereunder or under the

      SECTION 3.5     Financial Statements. The Company has delivered to Parent (a) the balance sheet (the “Balance Sheet”) of the Company and its subsidiaries as of December 31, 2002 (the “Balance Sheet Date”) and the related statements of income, stockholders’ equity and cash flows for the year then ended, together with the appropriate notes to such financial statements, accompanied by the report thereon of KPMG LLP, independent public accountants (the “Audited Financial Statements”) and (b) the unaudited balance sheet of the Company and its subsidiaries as of May 31, 2003 and the related unaudited statements of income, stockholders’ equity and cash flows for the five-month period ended May 31, 2003 (the “Unaudited Financial Statements” and together with the Audited Financial Statements, the “Financial Statements”). Except as disclosed in the notes thereto, the Financial Statements have been prepared in conformity with GAAP consistently applied and fairly present in all material respects the financial position of the Company and its subsidiaries at the dates of such balance sheets and the results of its operations and cash flows for the respective periods indicated (subject, in the case of the Unaudited Financial Statements, to normal year end adjustments and any other adjustments described therein, to the absence of footnotes, and to the fact that the Company’s investment in Corona is not reflected in the Unaudited Financial Statements, which investment should have been accounted for under the equity method).

      SECTION 3.6     No Dividends; Absence of Certain Changes or Events.

      (a) Except as set forth in Section 3.6(a) of the Company Letter, since January 1, 2000, neither the Company nor any of its partially-owned Subsidiaries has ever declared or made, or agreed to declare or make, any payment of dividends or distributions to its stockholders (and no record date with respect to any of the foregoing has occurred) or purchased or redeemed, or agreed to purchase or redeem, any of its capital stock or other equity interest.

      (b) Except as set forth in Section 3.6(b) of the Company Letter, since the Balance Sheet Date there has been:

      (c) Except as set forth in Section 3.6(c) of the Company Letter, since the Balance Sheet Date through the date hereof, the Company and its Subsidiaries have conducted their respective businesses in all material respects only in the ordinary course and in conformity with past practice. Without limiting the generality of the foregoing, since the Balance Sheet Date through the date hereof, except as set forth in Section 3.6(c) of the Company Letter, neither the Company nor any of its Subsidiaries has:

      (d) Except as set forth in Section 3.6(d) of the Company Letter, neither the Company nor any of its Subsidiaries is subject to any liability (including unasserted claims, whether known or unknown), whether absolute, contingent, accrued or otherwise, which is not shown or which is in excess of amounts shown or reserved for in the Balance Sheet, other than liabilities of the same nature as those set forth in the Balance Sheet and the notes thereto and reasonably incurred in the ordinary course of its business consistent with past practice after the Balance Sheet Date and liabilities as would not have a Material Adverse Effect on the Company.

      SECTION 3.7     Permits and Compliance. Each of the Company and its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, charters, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Entity necessary for the Company or any of its Subsidiaries to own, lease and operate its properties or to carry on its business as it is now being conducted (the “Company Permits”), except where the failure to have any of the Company Permits would not, individually or in the aggregate, have a Material Adverse Effect on the Company, and, as of the date of this

      SECTION 3.8     Registration Statement and Proxy Statement. None of the information to be supplied by the Company for inclusion in the Registration Statement or the Proxy Statement will (i) in the case of the Registration Statement, at the time it becomes effective, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading or (ii) in the case of the Proxy Statement, at the time of the mailing of the Proxy Statement or at the time of the Stockholder Meetings, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. If, at any time prior to the Stockholder Meetings, any event with respect to the Company, its officers and directors or any of its Subsidiaries shall occur which is required at that time to be described in the Proxy Statement or the Registration Statement, the Company shall deliver to Parent a description of such event in order to permit Parent promptly to file an appropriate amendment or supplement with the SEC and, as required by law, disseminate an appropriate amendment or supplement to the Company Stockholders. The Proxy Statement will comply (with respect to the Company) as to form in all material respects with the provisions of the DGCL.

      SECTION 3.9     Tax Matters.

      (a) Except as set forth in Section 3.9(a) of the Company Letter, (i) each of the Company, each Subsidiary of the Company and each Company Group (as hereinafter defined) has filed all material Tax Returns required to be filed; (ii) all such Tax Returns are complete and accurate in all material respects and disclose all material Taxes required to be paid by the Company, each Subsidiary of the Company and each Company Group for the periods covered thereby; (iii) to the Knowledge of Company, neither the Company, any Subsidiary of the Company nor any Company Group is currently the beneficiary of any extension of time within which to file any Tax Return; (iv) all material Taxes (whether or not shown on any Tax Return) owed by the Company, any Subsidiary of the Company or any Company Group have been timely paid or extensions for payment have been properly obtained; (v) to the Knowledge of the Company, none of the Company, any Subsidiary of the Company or any member of any Company Group has waived or been requested to waive any statute of limitations in respect of Taxes which waiver is currently in effect; (vi) to the Knowledge of the Company, the Tax Returns referred to in clause (i), to the extent related to income Taxes, have not been examined by the appropriate taxing authority; (vii) to the Knowledge of the Company, there is no action, suit, investigation, audit, claim or assessment pending or proposed or threatened with respect to Taxes of the Company, any Subsidiary of the Company or any Company Group which, if determined in a manner adverse to the Company, would be material; (viii) all deficiencies asserted in writing or assessments made in writing as a result of any examination of the Tax Returns referred to in clause (i) have been paid in full or are being timely and properly contested; (ix) to the Knowledge of the Company, there are no Tax rulings, requests for rulings, or closing agreements relating to the Company, any Subsidiary of the Company or any Company Group which could affect the liability for Taxes of the Company or any Subsidiary of the Company for any period after the Closing Date; (x) there are no material liens for Taxes upon the assets of the Company or any Subsidiary of the Company except liens relating to current Taxes not yet due; (xi) all material Taxes which the Company, any Subsidiary of the Company or any Company Group are required by law to withhold or to collect for payment have been duly withheld and collected and either have been paid to the appropriate Governmental Entity or accrued, reserved against and entered upon the books of the Company; (xii) neither the Company nor any Subsidiary of the Company has been a party to any distribution occurring during the last 3 years in which the parties to such distribution treated the distributions as one to which Section 355 of the Code (or any similar provision of state, local or foreign law) applied; (xiii) neither the Company nor any

      (b) No transaction contemplated by this Agreement is subject to withholding under Section 1445 of the Code, and no stock transfer Taxes, sales Taxes, use Taxes, real estate transfer Taxes or other similar Taxes will be imposed on the transactions contemplated by this Agreement.

      (c) As a direct or indirect result of the transactions contemplated by this Agreement, no payment or other benefit, and no acceleration of the vesting of any options, payments or other benefits, will be, an “excess parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code and the Treasury Regulations thereunder. Except as set forth in Section 3.9(c) of the Company Letter, as a direct or indirect result of the transactions contemplated by this Agreement, no payment or other benefit, and no acceleration of the vesting of any options, payments or other benefits will be (or under Section 280G of the Code and the Treasury Regulations thereunder be presumed to be) a “parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code and the Treasury Regulations thereunder, without regard to whether such payment or acceleration is reasonable compensation for personal services performed or to be performed in the future.

      (d) None of the Company, any predecessor of the Company or any Subsidiary of the Company is (and none thereof has ever been) a member of (i) any “affiliated group” (as defined in Section 1504(a) of the Code without regard to the limitations contained in Section 1504(b) of the Code) other than the Company Group or (ii) any other group of corporations or entities which files or has filed Tax Returns on a combined, consolidated or unitary basis. No income or gain of the Company or any Subsidiary of the Company has been deferred pursuant to current or former Treasury Regulation §§ 1.1502-13 or 14, or current or former Temporary Treasury Regulation §§ 1.1502-13T or -14T, or Proposed Treasury Regulations § 1.1502-13. No excess loss account (as described in Treasury Regulation §§ 1.1502-19 and -32) exists with respect to any Subsidiary of the Company.

      (e) The tax basis in each LLC Asset is set forth in Section 3.9(e) of the Company Letter.

      (f) For purposes of this Agreement, “Company Group” means any “affiliated group” (as defined in Section 1504(a) of the Code without regard to the limitations contained in Section 1504(b) of the Code) that, at any time on or before the Effective Time, includes or has included the Company or any Subsidiary of the Company, or any predecessor of the Company or any Subsidiary of the Company (or another such predecessor), or any other group of corporations which, at any time on or before the Effective Time, files or has filed Tax Returns on a combined, consolidated or unitary basis with the Company or any Subsidiary of the Company, or any predecessor of the Company or any Subsidiary of the Company (or another such predecessor).

      SECTION 3.10     Actions and Proceedings. Except as set forth in Section 3.10 of the Company Letter, there are no outstanding orders, judgments, injunctions, awards or decrees of any Governmental Entity against or involving the Company or any of its Subsidiaries or against or involving any of the present or former directors, officers, employees or, to the Knowledge of the Company, consultants, agents or stockholders of the Company or any of its Subsidiaries, as such, or any of its or their properties, assets or business or any Company Plan (as hereinafter defined) that, individually or in the aggregate, would have a Material Adverse Effect on the Company or materially impair the ability of the Company to perform its obligations hereunder. Except as set forth Section 3.10 of the Company Letter, there are no actions, suits or claims or legal, administrative or arbitration proceedings or investigations pending or, to the Knowledge of the Company, threatened against or involving the Company or any of its Subsidiaries or any of its or their present or former directors, officers, employees or, to the Knowledge of the Company, consultants, agents or stockholders, as such, or any of its or their properties, assets or business or any Company Plan that, individually or in the aggregate, would have a Material Adverse Effect on the Company or materially impair the ability of the Company to perform its obligations hereunder. There are no actions, suits, labor disputes or other litigation, legal or administrative proceedings or governmental investigations pending or, to the Knowledge of the Company, threatened against

      SECTION 3.11     Certain Agreements. Except as set forth in Section 3.11 of the Company Letter, neither the Company nor any of its Subsidiaries is a party to any oral or written agreement or plan, including any employment agreement, severance agreement, stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. No holder of any option or other right to purchase shares of Company Common Stock, or shares of Company Common Stock granted in connection with the performance of services for the Company or its Subsidiaries, is or will be entitled to receive cash from the Company or any Subsidiary in lieu of or in exchange for such option, other right or shares.

      SECTION 3.12     Employee Benefits.

      (a) Each Company Plan is listed in Section 3.12(a) of the Company Letter. With respect to each Company Plan, the Company has delivered to Parent a true and correct copy of (i) the three (3) most recent annual reports (Form 5500) filed with the IRS, (ii) each such Company Plan that has been reduced to writing and all amendments thereto, (iii) each trust agreement, insurance contract or administration agreement relating to each such Company Plan, (iv) a written summary of each unwritten material Company Plan, (v) the most recent summary plan description or other written explanation of each Company Plan, if any, provided to participants, (vi) the most recent determination letter and request therefor, if any, issued by the IRS with respect to any Company Plan intended to be qualified under Section 401(a) of the Code, (vii) any request for a determination currently pending before the IRS and (viii) all correspondence with the IRS or the Department of Labor relating to any outstanding controversy or audit. Each Company Plan complies in all respects with ERISA, the Code and all other applicable statutes and governmental rules and regulations, except where noncompliance would not, individually or in the aggregate, have a Material Adverse Effect on the Company. Neither the Company nor any of its ERISA Affiliates currently maintains, contributes to or has any liability under or, at any time during the past six (6) years has maintained, contributed to or had any liability under, (x) any pension plan which is subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA or (y) any multiemployer plan (as defined in Section 4001(a)(3) of ERISA).

      (b) Except as listed in Section 3.12(b) of the Company Letter, with respect to the Company Plans, no event has occurred and there exists no condition or set of circumstances in connection with which the Company, its ERISA Affiliates or any Company Plan fiduciary could be subject to any liability, other than any liability for benefits payable in the normal course, under the terms of such Company Plans, ERISA, the Code or any other applicable law, which would have a Material Adverse Effect on the Company. All Company Plans that are intended by their terms to be, or are otherwise treated by the Company as, qualified under Section 401(a) of the Code have been determined by the IRS to be so qualified, or a timely application for such determination is now pending and the Company is not aware of any reason why any such Company Plan is not so qualified in operation. Except as set forth in Section 3.12(b) of the Company Letter, neither the Company nor any of its ERISA Affiliates has any liability or obligation under any welfare plan or agreement to provide benefits after termination of employment to any employee or dependent other than as required by Section 4980B of the Code.

      (c) As used herein, “Company Plan” means (i) a “pension plan” (as defined in Section 3(2) of ERISA), (ii) a “welfare plan” (as defined in Section 3(1) of ERISA), (iii) any other written or oral profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, restricted stock, stock appreciation right, vacation, retention, severance, medical, dental, vision, disability, death benefit, sick leave or insurance plan, arrangement or understanding, or (iv) any written or oral material bonus, holiday pay or fringe benefit plan, arrangement or understanding, in each case

      (d) Section 3.12(d) of the Company Letter contains a list of all (i) employment, compensation and other material agreements with current and former employees, consultants and independent contractors providing services to the Company or any ERISA Affiliate, and (ii) plans, programs, agreements and other arrangements of the Company and each ERISA Affiliate with or relating to its current and former employees, consultants and independent contractors containing change of control or similar provisions (collectively, “Company Employment Agreements”). Except as set forth in Section 3.12(d) of the Company Letter, the Company has delivered to Parent a true and correct copy of each Company Employment Agreement and any amendments thereto.

      SECTION 3.13     Compliance with Worker Safety and Environmental Laws. The properties, assets and operations of the Company and its Subsidiaries are in compliance with all applicable Worker Safety Laws and Environmental Laws, except for any violations that, individually or in the aggregate, would not have a Material Adverse Effect on the Company. With respect to such properties, assets and operations, including any previously owned, leased or operated properties, assets or operations, there are no events, conditions, circumstances, activities, practices, incidents, actions or plans of the Company or any of its Subsidiaries that may interfere with or prevent compliance or continued compliance with applicable Worker Safety Laws and Environmental Laws, other than any such interference or prevention as would not, individually or in the aggregate with any such other interference or prevention, have a Material Adverse Effect on the Company.

      SECTION 3.14     Labor Matters. The Company and each of its Subsidiaries have complied with all applicable laws, rules and regulations which relate to prices, wages, hours, discrimination in employment and collective bargaining and to the operation of its business and are not liable for any arrears of wages or any withholding taxes or penalties for failure to comply with any of the foregoing, except for any possible noncompliance or liability that would not, individually or in the aggregate, have a Material Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or labor contract. Neither the Company nor any of its Subsidiaries has engaged in any unfair labor practice with respect to any Persons employed by or otherwise performing services primarily for the Company or any of its Subsidiaries (the “Company Business Personnel”), and except as set forth in Section 3.14 of the Company Letter there is no unfair labor practice complaint or grievance pending or threatened in writing against the Company or any of its Subsidiaries by the National Labor Relations Board or any comparable state agency with respect to the Company Business Personnel, except any complaint or grievance that would not, individually or in the aggregate, have a Material Adverse Effect on the Company. There is no labor strike, dispute, slowdown or stoppage pending or, to the Knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries which may interfere with the respective business activities of the Company or any of its Subsidiaries, except any strike, dispute, slowdown or stoppage that would not, individually or in the aggregate, have a Material Adverse Effect on the Company.

      SECTION 3.15     Intellectual Property.

      (a) Except as set forth in Section 3.15(a) of the Company Letter, the Company and its Subsidiaries have through ownership or licensing all Intellectual Property Rights as are necessary to conduct the business of the Company and its Subsidiaries as currently conducted or planned to be conducted by the Company and its Subsidiaries, taken as a whole, except where the failure to have such Intellectual Property Rights would not have a Material Adverse Effect on the Company. Except as set forth in Section 3.15(a) of the Company Letter, neither the Company nor any of its Subsidiaries has infringed any Intellectual Property Rights of any third party other than any infringements that, individually or in the aggregate, would not have a Material Adverse Effect on the Company.

      (b) Except as set forth in Section 3.15(b) of the Company Letter, there are no actions, suits or claims or administrative proceedings or investigations pending or, to the Knowledge of the Company, threatened that challenge or question the Company’s Intellectual Property Rights and that, individually or in the aggregate, would have a Material Adverse Effect on the Company.

      SECTION 3.19     Title to Assets. Each of the Company and its Subsidiaries has good title to all of its assets reflected on the Balance Sheet as being owned by it and all of the assets thereafter acquired by it (except to the extent that such assets have been disposed of after the Balance Sheet Date in the ordinary course of business consistent with past practice), free and clear of all Encumbrances, except for Permitted Encumbrances and except as set forth in Section 3.19 of the Company Letter.

      SECTION 3.20     Contracts. Except as set forth in Section 3.20 of the Company Letter, neither the Company nor any Subsidiary of the Company is a party to or bound by:

      SECTION 3.21     Status of Contracts. Except as set forth in Section 3.21 of the Company Letter and except as would not, individually or in the aggregate, have a Material Adverse Effect on the Company, each of the leases, contracts and other agreements listed in Sections 3.12, 3.18 and 3.20 of the Company Letter (collectively, the “Company Agreements”) constitutes a valid and binding obligation of the Company and, to

      SECTION 3.22     Insurance. Each of the Company and its Subsidiaries maintains policies of fire and casualty, liability (general, products and other liability), workers’ compensation and other forms of insurance and bonds in such amounts and against such risks and losses as are insured against by companies engaged in the same or a similar business. The Company and its Subsidiaries shall keep or cause such insurance or comparable insurance in full force and effect through the Effective Time. Each of the Company and its Subsidiaries has complied with each such insurance policy and has not failed to give any notice or to present any claim thereunder in a due and timely manner, except where any noncompliance or failure would not, individually or in the aggregate, have a Material Adverse Effect on the Company.

      SECTION 3.23     Takeover Statutes and Charter Provisions. To the Knowledge of the Company, no state takeover statutes or charter or bylaw provisions are applicable to the Merger, this Agreement, the Voting Agreements, the Parent Ancillary Agreements and the Company Ancillary Agreements, and the transactions contemplated hereby and thereby.

      SECTION 3.24     Required Vote of Company Stockholders. The affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock and the outstanding shares of Company Preferred Stock, voting together as one class, is required to adopt this Agreement. No other vote of the securityholders of the Company is required by law, the Company Charter, the Company Bylaws or otherwise in order for the Company to consummate the Merger and the transactions contemplated hereby and by the Parent Ancillary Agreements and the Company Ancillary Agreements.

      SECTION 3.25     Brokers. No broker, investment banker or other Person is entitled to any broker’s, finder’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company.

      SECTION 3.26     Ownership of Company Stock. No stockholder or group (as defined in Section 13(d)(3) of the Exchange Act) of stockholders of the Company will own 30% or more of the issued and outstanding shares of Parent Common Stock as a result of the Merger.

ARTICLE IV

COVENANTS

      SECTION 4.1     Conduct of Business of the Company Pending the Merger. Except as expressly permitted by this Section 4.1, during the period from the date of this Agreement through the Effective Time, the Company shall, and shall cause each of its Subsidiaries to, in all material respects carry on its business in the ordinary course of its business as currently conducted and, to the extent consistent therewith, use commercially reasonable efforts to preserve intact its current business organizations, keep available the services of its current officers and employees and preserve its relationships with customers, suppliers and others having

      SECTION 4.2     Conduct of Business of Parent Pending the Merger. Except as expressly permitted by this Section 4.2 or as set forth in Section 4.2 of the Parent Letter, during the period from the date of this Agreement through the Effective Time, Parent shall, and shall cause each of its Subsidiaries to, in all material respects carry on its business in the ordinary course of its business as currently conducted and, to the extent consistent therewith, use commercially reasonable efforts to preserve intact its current business organizations, keep available the services of its current officers and employees and preserve its relationships with customers, suppliers and others having business dealings with it to the end that its goodwill and ongoing business shall be unimpaired at the Effective Time. Without limiting the generality of the foregoing, and except as otherwise expressly contemplated by this Agreement or as set forth in Section 4.2 of the Parent Letter, Parent shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of the Company:

      SECTION 4.3     No Solicitation by the Company.

      (a) The Company shall not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit any officer, director or employee of or any financial advisor, attorney or other advisor or representative of, the Company or any of its Subsidiaries to, (i) solicit, initiate or encourage the submission of, any Company Takeover Proposal (as hereinafter defined), (ii) enter into any agreement with respect to any Company Takeover Proposal or (iii) participate in any discussions or negotiations regarding, or furnish to any Person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Company Takeover Proposal; provided, however, that prior to the Company Stockholder Meeting, nothing contained in this Agreement shall prevent the Company or its Board of Directors from furnishing non-public information to, or entering into discussions or negotiations with, any Person in connection with an unsolicited bona fide written Company Takeover Proposal by such Person, if and only to the extent that (w) in the reasonable good faith judgment of the Board of Directors of the Company, such Company Takeover Proposal could, if consummated, result in a transaction more favorable to the Company’s stockholders from a financial point of view than the Merger (any such more favorable Company Takeover Proposal being referred to in this Agreement as a “Company Superior Proposal”), (x) the failure to take such action would, in the reasonable good faith judgment of the Board of Directors of the Company, after consultation with outside corporate counsel of the Company, be inconsistent with the fiduciary duties of the Board of Directors of the Company to the Company’s stockholders under applicable law, (y) prior to furnishing such non-public information to, or entering into discussions or negotiations with, such Person, such Board of Directors receives from such Person an executed confidentiality agreement with provisions not less favorable to the Company than those contained in the Nondisclosure Agreement (as hereinafter defined) and (z) the Company shall have fully complied with this Section 4.3. For purposes of this Agreement, “Company Takeover Proposal” means any proposal or offer, or any expression of interest, by any Person other than Parent or Sub relating to the Company’s willingness or ability to receive or discuss a proposal or offer for a merger, consolidation or other business combination involving the Company or any of its Subsidiaries or any proposal or offer to acquire in any manner, directly or indirectly, a substantial equity interest in, a substantial portion of the voting securities of, or a substantial portion of the assets of the Company or any of its Subsidiaries, other than the transactions contemplated by this Agreement.

      (b) The Company shall advise Parent orally (within one business day) and in writing (as promptly as practicable) of (i) any Company Takeover Proposal or any inquiry with respect to or which could lead to any Company Takeover Proposal, (ii) the material terms of such Company Takeover Proposal and (iii) the identity of the Person making any such Company Takeover Proposal or inquiry. The Company will keep Parent informed of the status of any such Company Takeover Proposal or inquiry.

      SECTION 4.4     No Solicitation by Parent.

      (a) Parent shall not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit any officer, director or employee of or any financial advisor, attorney or other advisor or representative of, Parent or any of its Subsidiaries to, (i) solicit, initiate or encourage the submission of, any Parent Takeover Proposal (as hereinafter defined), (ii) enter into any agreement with respect to any Parent Takeover Proposal or (iii) participate in any discussions or negotiations regarding, or furnish to any Person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Parent Takeover Proposal; provided, however, that nothing contained in this Agreement shall prevent Parent or its Board of Directors from furnishing non-public information to, or entering into discussions or negotiations with, any Person in connection with an unsolicited bona fide written Parent Takeover Proposal by such Person, if and only to the extent that (w) in the reasonable good faith judgment of the Board of Directors of Parent, such Parent Takeover Proposal could, if consummated, result in a transaction more favorable to Parent or Parent’s stockholders from a financial point of view than the Merger (any such more favorable Parent Takeover Proposal being referred to in this Agreement as a “Parent Superior Proposal”), (x) the failure to take such action would in the reasonable good

      (b) Parent shall advise the Company orally (within one business day) and in writing (as promptly as practicable) of (i) any Parent Takeover Proposal or any inquiry with respect to or which could lead to any Parent Takeover Proposal, (ii) the material terms of such Parent Takeover Proposal and (iii) the identity of the Person making any such Parent Takeover Proposal or inquiry. Parent will keep the Company informed of the status of any such Parent Takeover Proposal or inquiry.

      SECTION 4.5     Third Party Standstill Agreements. During the period from the date of this Agreement through the Effective Time, neither the Company nor Parent shall terminate, amend, modify or waive any provision of any confidentiality agreement relating to a Company Takeover Proposal or Parent Takeover Proposal, respectively, or standstill agreement to which the Company or any of its Subsidiaries or Parent or any of its Subsidiaries, respectively, is a party (other than any involving Parent or the Company, respectively). During such period, each of the Company and Parent agrees to enforce, to the fullest extent permitted under applicable law, the provisions of any such agreements, including injunctions to prevent any breaches of such agreements and to enforce specifically the terms and provisions thereof in any court of the United States or any state thereof having jurisdiction.

      SECTION 4.6     Reorganization. During the period from the date of this Agreement through the Effective Time, unless the other party shall otherwise agree in writing, none of Parent, the Company or any of their respective Subsidiaries shall take any action that, to the Knowledge of Parent or to the Knowledge of the Company, as the case may be, would jeopardize the qualification of the Merger as a reorganization within the meaning of Section 368(a) of the Code. Following the Effective Time, the parties will report the Merger as a reorganization within the meaning of Section 368(a) of the Code, and will not take any action inconsistent with such reporting.

ARTICLE V

ADDITIONAL AGREEMENTS

      SECTION 5.1     Stockholder Meetings.

      (a) As soon as practicable following the date of this Agreement, the Company will duly call, give notice of, convene and hold a meeting of its stockholders (including any adjournments or postponements thereof, the “Company Stockholder Meeting”) for the purpose of considering the approval of this Agreement. The Company will, through its Board of Directors, recommend to its stockholders and shall use all reasonable efforts to solicit such approval by its stockholders, and such Board of Directors shall not withdraw or modify, or propose to withdraw or modify in a manner adverse to Parent, such recommendation. The Company agrees to deliver to the holders of Company Preferred Stock all notices required to be delivered to them in connection with the Merger.

      (b) As soon as practicable following the date of this Agreement, Parent will duly call, give notice of, convene and hold a meeting of its stockholders (including any adjournments or postponements thereof, the “Parent Stockholder Meeting” and together with the Company Stockholder Meeting, the “Stockholder Meetings”) for the purpose of considering approval of the Share Issuance. Parent will, through its Board of

      SECTION 5.2     Preparation of the Registration Statement and the Proxy Statement. Parent shall promptly prepare and file with the SEC the Proxy Statement and the Registration Statement in which the Proxy Statement will be included as a prospectus. Each of Parent and the Company shall use its commercially reasonable efforts to have the Registration Statement declared effective under the Securities Act as promptly as practicable after such filing and shall use its commercially reasonable efforts to keep the Registration Statement effective as long as is necessary to consummate the Merger. As promptly as practicable after the Registration Statement shall have become effective, each of Parent and the Company shall mail the Proxy Statement to its stockholders. Parent shall also take any action reasonably required to be taken under any applicable state securities laws in connection with the issuance of Parent Common Stock and Parent Preferred Stock in the Merger, and the Company shall furnish all information concerning the Company and the holders of Company Common Stock and the holders of Company Preferred Stock as may be reasonably requested in connection with any such action and the preparation of the Registration Statement and Proxy Statement.

      SECTION 5.3     Access to Information. Subject to currently existing contractual and legal restrictions applicable to Parent or to the Company or any of their respective Subsidiaries, as the case may be, each of Parent and the Company shall, and shall cause each of its Subsidiaries to, afford to the accountants, counsel, financial advisors and other representatives of the other reasonable access to, and permit them to make such inspections as they may reasonably require of, during normal business hours during the period from the date of this Agreement through the Effective Time, all of its employees, customers, properties, books, contracts, commitments and records (including the work papers of independent accountants, if available and subject to the consent of such independent accountants), and, during such period, each of Parent and the Company shall, and shall cause each of its Subsidiaries to, furnish promptly to the other all information concerning its business, properties and personnel as the other may reasonably request. No investigation pursuant to this Section 5.3 shall affect any representation or warranty in this Agreement of any party hereto or any condition to the obligations of the parties hereto. All information obtained pursuant to this Section 5.3 shall be kept confidential in accordance with the Stratos Reciprocal Nondisclosure Agreement between Parent and the Company (the “Nondisclosure Agreement”).

      SECTION 5.4     Compliance with the Securities Act. Each of the directors of the Company, each trust that owns Shares the beneficiaries of which include a director of the Company, members of his family or a charitable organization designated by a director, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ and Citicorp Venture Capital Ltd. may be deemed to be “affiliates” of the Company as that term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act (the “Rule 145 Affiliates”). The Company shall cause each such Person to execute and deliver to Parent within 30 days of the date hereof a written agreement in substantially the form of Exhibit F hereto (the “Company Affiliate Letter”). The Company shall notify Parent as soon as reasonably practicable if any other Person is a Rule 145 Affiliate and, prior to the Effective Time, the Company shall cause each such additional Person who is a Rule 145 Affiliate of the Company to execute a Company Affiliate Letter. Parent shall be entitled to place appropriate legends on the certificates evidencing any Parent Common Stock or Parent Preferred Stock to be received by affiliates of the Company pursuant to this Agreement and to issue appropriate stop transfer instructions to the transfer agent for the Parent Common Stock and Parent Preferred Stock, consistent with the terms of the Company Affiliate Letter.

      SECTION 5.5     Fees and Expenses. (a) Except as provided in this Section 5.5 and Section 5.9, whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, including the fees and disbursements of counsel, financial advisors and accountants, shall be paid by the party incurring such costs and expenses, provided that all printing expenses and all filing fees (including filing fees under the HSR Act and Securities Act) shall be divided equally between Parent and the Company.

      (b) Notwithstanding any provision in this Agreement to the contrary, (i) if this Agreement is terminated by Parent pursuant to Section 7.1(e) or (ii) if this Agreement is terminated by the Company pursuant to

      (c) Notwithstanding any provision in this Agreement to the contrary, if (i) this Agreement is terminated by the Company or Parent pursuant to Section 7.1(f) and a Parent Takeover Proposal existed following the date hereof and before the date of the Parent Stockholder Meeting and, concurrently with or within twelve months after any such termination a Third Party Acquisition Event involving Parent (as hereinafter defined) occurs, or (ii) this Agreement is terminated by Parent pursuant to Section 7.1(h), then, in each case, Parent shall (without prejudice to any other rights that the Company may have against Parent for a breach of this Agreement) pay to the Company a fee of $750,000 in cash, plus, only if this Agreement is terminated pursuant to Section 7.1(h), all fees and expenses reasonably incurred by the Company (including the fees and expenses of its counsel) in connection with this Agreement and the transactions contemplated hereby up to a maximum of $500,000 in cash, such payment to be made, in the case of clause (i), on the date of the consummation of the Third Party Acquisition Event involving Parent or, in the case of clause (ii), simultaneously with such termination.

      (d) Notwithstanding any provision in this Agreement to the contrary, if this Agreement is terminated by Parent or the Company pursuant to Section 7.1(f), Parent shall (without prejudice to any other rights that the Company may have against Parent for a breach of this Agreement) pay to the Company all fees and expenses reasonably incurred by the Company (including the fees and expenses of its counsel) in connection with this Agreement and the transactions contemplated hereby up to a maximum of $500,000 in cash, such payment to be made one business day following such termination.

      (e) For purposes of this Agreement, a “Third Party Acquisition Event” involving Parent means (i) a transaction pursuant to which any person or group (as such term is defined under the Exchange Act), other than the Company or any affiliate thereof (a “Parent Third Party”), acquires more than fifty percent (50%) of the equity securities or voting power of Parent, pursuant to a tender offer or exchange offer or otherwise, (ii) a merger, consolidation, share exchange or other business combination involving Parent pursuant to which any person other than the Company or any affiliate thereof acquires ownership of more than fifty percent (50%) of the outstanding equity securities or voting power of Parent, or (iii) any other transaction pursuant to which any Parent Third Party acquires control of assets of Parent (including, for this purpose, outstanding equity securities of Subsidiaries of Parent) having a fair market value equal to more than fifty percent (50%) of the fair market value of all the consolidated assets of Parent and its Subsidiaries immediately prior to such transaction.

      SECTION 5.6     Company Stock Options. At the Effective Time, each Company Stock Option that is outstanding immediately prior to the Effective Time pursuant to the Company Stock Option Agreements shall be cancelled and pursuant to the terms thereof, the holders of the any such Company Stock Options shall not be entitled to receive any consideration in respect of such cancellation. The Company shall take all actions necessary to effect the foregoing provisions of this Section 5.6.

      SECTION 5.7     Commercially Reasonable Efforts.

      (a) Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated by this Agreement, including: (i) obtaining all necessary actions or non-actions, waivers, consents and approvals from all Governmental Entities and making of all necessary registrations and filings (including filings with Governmental Entities) and taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity (including those in connection with State Takeover Approvals), (ii) obtaining all necessary consents, approvals or

      (b) Each party shall use all commercially reasonable efforts to not take any action, or enter into any transaction, which would cause any of its representations or warranties contained in this Agreement to be untrue or result in a breach of any covenant made by it in this Agreement.

      (c) Notwithstanding anything to the contrary contained in this Agreement, in connection with any filing or submission required or action to be taken by either Parent or the Company relating to this Agreement or the transactions contemplated hereby, (i) neither Parent nor any of its Affiliates shall be required to divest or hold separate or otherwise take or commit to take any action that limits its freedom of action with respect to, or its ability to retain, the Company or any of the businesses, product lines or assets of Parent, the Company or any of their respective Subsidiaries or Affiliates, or that otherwise would have an adverse effect on Parent or the Company and (ii) the Company shall not, and shall not permit any of its Affiliates to, take or agree to take any such action without Parent’s prior written consent.

      SECTION 5.8     Public Announcements. Parent and the Company will not issue any press release with respect to the transactions contemplated by this Agreement or otherwise issue any written public statements with respect to such transactions without prior consultation with the other party, except as may be required by applicable law or by obligations pursuant to any listing agreement with any national securities exchange or Nasdaq.

      SECTION 5.9     Real Estate Transfer and Gains Tax. The Company or, after the Merger, the Surviving Corporation will pay any state or local tax which is attributable to the transfer of the beneficial ownership of the Company’s or its Subsidiaries’ real property, if any (collectively, the “Gains Taxes”), and any penalties or interest with respect to the Gains Taxes, payable in connection with the consummation of the Merger.

      SECTION 5.10     State Takeover Laws. If any “fair price,” “business combination” or “control share acquisition” statute or other similar statute or regulation shall become applicable to the transactions contemplated hereby or in the Parent Ancillary Agreements or the Company Ancillary Agreements, Parent and the Company and their respective Boards of Directors shall use their commercially reasonable efforts to grant such approvals and take such actions as are necessary so that the transactions contemplated hereby and thereby may be consummated as promptly as practicable on the terms contemplated hereby and thereby and otherwise act to minimize the effects of any such statute or regulation on the transactions contemplated hereby and thereby.

      SECTION 5.11     Indemnification of Directors and Officers. Subject to applicable law, for six years from and after the Effective Time, Parent shall cause the Surviving Corporation to indemnify and hold harmless all past and present officers and directors of the Company and of its Subsidiaries to the same extent such Persons are indemnified as of the date of this Agreement by the Company pursuant to (a) the Company Charter, (b) the Company Bylaws and (c) the Director Indemnification Agreements for acts or omissions occurring at or prior to the Effective Time. For purposes of this Agreement, “Director Indemnification Agreements” means (i) the Director Indemnification Agreement dated July 12, 2001 between the Company and ▇▇▇▇▇▇ ▇▇▇▇▇▇, (ii) the Director Indemnification Agreement dated July 12, 2001 between the Company and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, (iii) the Director Indemnification Agreement dated July 12, 2001 between the Company and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, (iv) the Director Indemnification Agreement dated July 12, 2001 between the Company and ▇▇▇▇▇ ▇▇▇▇, and (v) the Director Indemnification Agreement dated April 11, 2002 between the Company and ▇▇▇▇ ▇▇▇▇▇▇. The Company has delivered to Parent a true and correct copy of each Director Indemnification Agreement and any amendments thereto.

      SECTION 5.12     Notification of Certain Matters. Parent shall use its commercially reasonable efforts to give prompt notice to the Company, and the Company shall use its commercially reasonable efforts to give prompt notice to Parent, of: (a) occurrence, or non-occurrence, of any event the occurrence, or non-

      SECTION 5.13     Stock Exchange Listing. Parent shall use reasonable efforts to have authorized for quotation on Nasdaq, upon official notice of issuance, the shares of Parent Common Stock to be issued in connection with the Merger. Parent shall have no obligation to seek authorization for quotation on Nasdaq or listing on any stock exchange the shares of Parent Preferred Stock to be issued in connection with the Merger.

      SECTION 5.14     Indemnity Agreement. No later than immediately prior to the Effective Time, the Company will cause the Stockholder Representatives to execute and deliver the Indemnity Agreement to Parent and the Indemnity Agent, with such changes thereto as may be requested by the Indemnity Agent that are reasonably acceptable to Parent and the Company.

      SECTION 5.15     Pre-Closing Transfers.

      (a) Prior to the Closing, the Company shall take all necessary action to transfer to STT Properties, LLC, a Delaware limited liability company (the “LLC”), (i) all equity interests held by the Company in Corona and acquired pursuant to the Corona Stock Purchase Agreement, (ii) cash in the amount of $850,000, provided that such amount does not cause Working Capital to be less than the Target Working Capital, and (iii) the real property ownership rights the Company or its Subsidiaries have in the following premises located in ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇: (x) 31186 La Baya Drive, (y) ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇ and (z) ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇ (collectively, the “LLC Assets”), in each case on and subject to the following terms:

      (b) Subject to and only following completion of all transfers and actions (including, without limitation, obtaining the release or writing contemplated by clause (D) of Section 5.15(a)) contemplated by Section 5.15 in accordance with the terms thereof, no later than immediately prior to the Effective Time the Company may declare and pay to its stockholders a dividend, on a pro rata basis consistent with their then current holdings of

      (c) The Company shall not transfer or commit to transfer any interests it or any of its Subsidiaries has in the any of the LLC Assets until it shall have (i) delivered written notice to Parent of the proposed terms of such transfer and (ii) received written acknowledgement from Parent that such terms are reasonably acceptable.

      (d) Parent and the Company agree to appoint an appraiser (mutually agreeable to both parties) to value each of the LLC Assets as of a date within five business days of the distribution provided for in Section 5.15(b). Parent and the Company further agree to use the value determined by such appraiser for all purposes, including, without limitation, for U.S. federal income tax purposes, except to the extent that any LLC Asset is sold in an arm’s length transaction within six months of the distribution date (each, a “Post Closing Sale”), in which case the Company and Parent shall use the actual selling price of such LLC Asset, net of any selling costs attributable to such Post Closing Sale (the appraised value or the net sales price, as applicable, the “Agreed Value”). The Company shall not declare the dividend contemplated by Section 5.15(b) until such time as (i) the appraisal contemplated by this Section 5.15(d) is received and (ii) the Company has provided to Parent all information necessary, as reasonably requested by Parent (including, without limitation, the tax basis of each of the LLC Assets), to determine the Tax liability that will be paid or payable by the Company and its Subsidiaries in connection with the transfers and actions contemplated by Section 5.15(a) and the dividend contemplated by Section 5.15(b).

      SECTION 5.16     Working Capital Dividend.

      (a) Prior to the Effective Time, the Company may declare and pay to its stockholders a dividend, on a pro rata basis consistent with their then current holdings of the Company, consisting of the right to receive the Per Share Excess Working Capital when finally determined pursuant to Section 1.17 with respect to each then issued and outstanding share of Company Common Stock and Company Preferred Stock. Such dividend may provide that the Per Share Excess Working Capital will be paid on January 5, 2004; provided, however, that in the event the Per Share Excess Working Capital has not been finally determined by January 5, 2004, then such dividend may provide that the Company will pay the portion thereof equal to the Interim Per Share Excess Working Capital, subject to Section 5.16(b), on January 9, 2004 and pay any excess of the Per Share Excess Working Capital over the Interim Per Share Excess Working Capital as provided in Section 5.16(b) after the Per Share Excess Working Capital is finally determined pursuant to Section 1.17(b). The terms of such dividend shall be subject to the reasonable approval of Parent. The right of each stockholder of the Company to receive such dividend shall not be assigned or transferred in any manner whatsoever, other than by operation of law.

      (b) If the dividend contemplated by Section 5.16(a) is declared and if the Per Share Excess Working Capital as finally determined pursuant to Section 1.17(b) exceeds the Interim Per Share Excess Working Capital paid by the Company to any Company Stockholder pursuant to Section 5.16(a), the Company shall pay to each such Company Stockholder, within 10 business days after such final determination, an amount equal to such excess plus interest on such excess from the Closing Date to the date of payment thereof at the Agreed Rate.

      SECTION 5.17     Discharge of Indebtedness. At or prior to the Closing, (a) the Company shall discharge, pay and otherwise settle any indebtedness for borrowed money of the Company and its Subsidiaries on terms and conditions reasonably satisfactory to Parent, and (b) the Company shall obtain a pay-off letter or comparable evidence (in each case on terms reasonably satisfactory in substance and form to Parent) executed by the lenders under such indebtedness to the effect that all obligations of the Company and its Subsidiaries thereunder have been satisfied in full, together with appropriate evidence that (i) all Encumbrances on any asset or property constituting security therefor have been released and (ii) any letters of credit issued thereunder have been released and returned to the Company.

      SECTION 5.18     Continuity of Business Enterprise. Parent shall continue at least one significant historic business line of the Company, or use at least a significant portion of the Company’s historic business assets in

      SECTION 5.19     Post Closing Tax Returns. Parent and the Company shall cooperate and use reasonable best efforts to prepare and file, as soon as practicable after the Closing Date, all federal and state income Tax Returns of the Company.

ARTICLE VI

CONDITIONS PRECEDENT TO THE MERGER

      SECTION 6.1     Conditions to Each Party’s Obligation to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the fulfillment or waiver by Parent and the Company at or prior to the Effective Time of the following conditions:

      SECTION 6.2     Conditions to Obligation of the Company to Effect the Merger. The obligation of the Company to effect the Merger shall be subject to the fulfillment or waiver by the Company at or prior to the Effective Time of the following additional conditions:

      SECTION 6.3     Conditions to Obligations of Parent and Sub to Effect the Merger. The obligations of Parent and Sub to effect the Merger shall be subject to the fulfillment or waiver by Parent at or prior to the Effective Time of the following additional conditions:

ARTICLE VII

TERMINATION, AMENDMENT AND WAIVER

      SECTION 7.1     Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after any approval of the matters presented in connection with the Merger by the stockholders of the Company:

      The right of any party hereto to terminate this Agreement pursuant to this Section 7.1 shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any party hereto, any Person controlling any such party or any of their respective officers or directors, whether prior to or after the execution of this Agreement.

      SECTION 7.2     Effect of Termination. In the event of termination of this Agreement by either Parent or the Company, as provided in Section 7.1, this Agreement shall forthwith become void, and there shall be no liability hereunder on the part of the Company, Parent, Sub or their respective officers or directors (except for the last sentence of Section 5.3 and the entirety of Section 5.5, which shall survive the termination); provided, however, that nothing contained in this Section 7.2 shall relieve any party hereto from any liability for any willful breach of a representation or warranty or any covenant contained in this Agreement.

      SECTION 7.3     Amendment. This Agreement may be amended by the parties hereto, by or pursuant to action taken by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of the Company and Parent, but, after any such approval, no amendment shall be made which by law or in accordance with the rules of Nasdaq requires further approval by the stockholders of Parent without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

      SECTION 7.4     Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by or pursuant to action taken by their respective Boards of Directors, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and/or (c) waive compliance with any of the covenants, agreements or conditions contained herein which may legally be waived. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights.

ARTICLE VIII

INDEMNIFICATION

      SECTION 8.1     Indemnity Fund.

      (a) Promptly after the Effective Time, the Indemnity Shares shall be registered in the name of, and be deposited with LaSalle Bank National Association (or another institution selected by the parties) as Indemnity Fund and collateral agent (the “Indemnity Agent”). Such deposit shall constitute the initial Indemnity Fund and shall be governed by the terms set forth herein and in the Indemnity Agreement. All dividends and distributions in respect of the Indemnity Shares, whether in cash, additional Parent Common Stock or other property, received by the Indemnity Agent shall be distributed currently to the Company Stockholders in accordance with the Indemnity Agreement; provided, that stock dividends made to effect stock splits or similar events shall be retained by the Indemnity Agent as part of the Indemnity Fund. The

      (b) Nothing in this Agreement shall limit the liability of the parties for any breach of any representation, warranty or covenant contained in this Agreement if it shall be terminated, provided that resort to the Indemnity Fund shall be the exclusive remedy of the Parent Group Members for any such breaches and misrepresentations following the Effective Time other than for fraud.

      (c) For purposes of this Agreement, (i) “Expense” means any and all expenses incurred in connection with investigating, defending or asserting any claim, action, suit or proceeding incident to any matter indemnified against hereunder (including court filing fees, court costs, arbitration fees or costs, witness fees and reasonable fees and disbursements of legal counsel, investigators, expert witnesses, consultants, accountants and other professionals), (ii) “Loss” means any and all losses, costs, obligations, liabilities, settlement payments, awards, judgments, Taxes, fines, penalties, damages, expenses, deficiencies or other charges, and (iii) “Parent Group Members” means Parent and its Affiliates and their respective successors and assigns, including, after the Effective Time, the Surviving Corporation.

      SECTION 8.2     Indemnification from Indemnity Fund.

      (a) Subject to Section 8.1, from and after the Effective Time, each Parent Group Member shall be indemnified, held harmless and reimbursed from the Indemnity Fund from and against any and all Loss and Expense incurred by such Parent Group Member in connection with or arising from:

provided, however, that the Indemnity Fund shall be used to indemnify and hold harmless hereunder with respect to the matters set forth in clause (ii) of this Section 8.2(a) (other than Sections 3.1, 3.2, 3.3, 3.9, 3.12, 3.19 and 3.26, the certificate delivered pursuant to Section 6.3(a) to the extent it relates to such Sections, and the other certificates delivered pursuant to Section 6.3, as to which this proviso shall not apply) only to the extent that (i) any individual Loss or Expense borne by the Parent Group Members with respect thereto exceeds $25,000 and (ii) the aggregate amount (without duplication of Loss or Expense borne by the Parent Group Members with respect thereto) exceeds $500,000. Any payment pursuant to this Section 8.2 shall be made in the form of a transfer from the Indemnity Fund to Parent pursuant to the Indemnity Agreement. The Company Stockholders shall not have any right of contribution from the Company with respect to any Loss or Expense claimed by any Parent Group Member after the Effective Time.

      (b) The Company acknowledges that Parent and the Company have agreed that Parent will acquire all of the outstanding capital stock of the Company on a fully diluted basis in exchange for the merger consideration. The Company further acknowledges that the information set forth in the certificate delivered pursuant to Section 6.3(f) will be used as the basis for determining the Per Share Merger Consideration. In the event of any inaccuracy in the certificate delivered pursuant to Section 6.3(f), Parent will be entitled (but not obligated) to recalculate the Per Share Merger Consideration and receive a sufficient number of shares of Parent Common Stock and Parent Preferred Stock in order that the total merger consideration paid by virtue of this Agreement would be as would have resulted if such certificate had been true and correct in all respects at the Effective Time.

      SECTION 8.5     Resolution of Conflicts; Arbitration.

      (a) The Claiming Party shall deliver a written response to the Stockholder Representatives in respect of any Objection properly delivered by the Stockholder Representatives. If after twenty (20) days following delivery of such response there remains a dispute as to any claims, the Stockholder Representatives and the Claiming Party shall attempt in good faith for sixty (60) days to agree upon the rights of the respective parties with respect to each of such claims. If the Stockholder Representatives and the Claiming Party should so agree, a memorandum setting forth such agreement shall be prepared and signed by both and shall be furnished to the Indemnity Agent. The Indemnity Agent shall be entitled to rely on any such memorandum and shall distribute the Parent Common Stock or other property from the Indemnity Fund in accordance with the terms thereof.

      (b) If no such agreement can be reached after good faith negotiation, either the Claiming Party or the Stockholder Representatives may, by written notice to the other, demand arbitration of the matter unless the amount of the Loss or Expense is at issue in pending litigation with a third party, in which event arbitration shall not be commenced until such amount is ascertained or both parties agree to arbitration; and in either such event the matter shall be settled by arbitration conducted by three arbitrators. Within fifteen (15) days after such written notice is sent, Parent and the Stockholder Representatives shall each select one arbitrator, and the two arbitrators so selected shall select a third arbitrator. The decision of the arbitrators as to the validity and amount of any claim in the related Claim Notice shall be final, binding and conclusive, and notwithstanding anything in this Section 8.5, the Indemnity Agent shall be entitled to act in accordance with such decision and make or withhold payments out of the Indemnity Fund in accordance therewith.

      (c) Judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction. Any such arbitration shall be held in Chicago, Illinois under the commercial rules then in effect of the American Arbitration Association. Each party shall pay its own expenses, and the fees of each arbitrator and the administrative fee of the American Arbitration Association shall be paid fifty percent (50%) by Parent and fifty percent (50%) by the Stockholder Representatives, provided that the Stockholder Representatives may be reimbursed from the Indemnity Fund for such expenses and fees.

      SECTION 8.6     Stockholder Representatives.

      (a) The “Stockholder Representatives” shall be designated in writing by the Company by notice to Parent prior to the Effective Time. Each of the Stockholder Representatives shall be constituted and appointed as agent and attorney-in-fact for and on behalf of each of the Company Stockholders receiving consideration pursuant to Article I. The Stockholder Representatives shall have full power and authority to represent all of such Company Stockholders and their successors with respect to all matters arising under this Agreement and the Indemnity Agreement and all actions taken by the Stockholder Representatives hereunder and thereunder shall be binding upon all such Company Stockholders and their successors as if expressly confirmed and ratified in writing by each of them. The Stockholder Representatives shall take any and all actions which they believe are necessary or appropriate under this Agreement and the Indemnity Agreement for and on behalf of such Company Stockholders, as fully as if the Company Stockholders were acting on their own behalf, including, without limitation, defending all indemnity claims pursuant to Section 8.2, consenting to, compromising or settling all such indemnity claims, conducting negotiations with Parent and the Indemnity Agent under this Agreement and the Indemnity Agreement, taking any and all other actions specified in or contemplated by this Agreement and the Indemnity Agreement, and engaging counsel, accountants or other Stockholder Representatives in connection with the foregoing matters. Without limiting the generality of the

      (b) The Stockholder Representatives shall not be liable to the Company Stockholders for any act done or omitted hereunder or under the Indemnity Agreement as Stockholder Representatives while acting in good faith and in the exercise of reasonable judgment, and any act done or omitted pursuant to the written advice of counsel shall be conclusive evidence of such good faith. The Company Stockholders shall severally indemnify the Stockholders Representatives and hold them harmless from and against any loss, liability or expense incurred without gross negligence or bad faith on the part of the Stockholders Representatives and arising out of or in connection with the acceptance and administration of their duties hereunder.

      (c) The Stockholder Representatives shall treat confidentially and not disclose any nonpublic information from or about the Company or Parent or their respective Subsidiaries to anyone (except on a need to know basis to individuals who agree to treat such information confidentially).

      SECTION 8.7     Actions of the Stockholder Representatives. A decision, act, consent or instruction of the Stockholder Representatives shall constitute a decision of all Company Stockholders for whom shares of Parent Common Stock otherwise issuable to them are deposited in the Indemnity Fund and shall be final, binding and conclusive upon each such Company Stockholder, and the Indemnity Agent and Parent may rely upon any decision, act, consent or instruction of the Stockholder Representatives as being the decision, act, consent or instruction of each and every such Company Stockholder. The Indemnity Agent and each Parent Group Member are hereby relieved from any liability to any Person for any acts done by them in accordance with such decision, act, consent or instruction of the Stockholder Representatives. For purposes of this Agreement and the Indemnity Agreement any action by a majority of the then Stockholder Representatives shall be deemed to be the action of and binding upon all of the Stockholder Representatives.

      SECTION 8.8     Third-Party Claims. In the event Parent determines to make a demand against the Indemnity Fund with respect to a third party claim, Parent shall notify the Stockholder Representatives of such claim, and the Stockholder Representatives shall be entitled, at their expense, to participate in any defense of such claim. Parent shall have the right in its sole discretion to settle any such claim; provided, however, that Parent may not effect the settlement of any such claims without the consent of the Stockholder Representatives, which consent shall not be unreasonably withheld, conditioned or delayed. In the event that the Stockholder Representatives have consented to any such settlement, the Stockholder Representatives shall have no power or authority to object under Section 8.4 or any other provision of this Article VIII to the amount paid in such settlement.

ARTICLE IX

GENERAL PROVISIONS

      SECTION 9.1     Survival of Representations and Warranties. Subject to Section 8.2(c), the representations and warranties in this Agreement or in any certificates delivered pursuant to this Agreement shall terminate on the first anniversary of the Effective Time. Except as otherwise provided in this Agreement, no claim shall be made for the breach of any representation or warranty made in this Agreement or in any certificates delivered pursuant to this Agreement after the date on which such representations and warranties terminate as set forth in this Section 9.1.

SLEEPING BEAR MERGER CORP.

STERLING HOLDING COMPANY