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Agreement and Plan of Merger

Dated as of May 27, 2002

By and Among

United Defense Industries, Inc.,

UDII Torch Acquisition Corporation,

United States Marine Repair, Inc.,

and

TC Group, L.L.C., as Representative

TABLE OF CONTENTS

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EXHIBITS

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AGREEMENT AND PLAN OF MERGER

     THIS AGREEMENT AND PLAN OF MERGER, dated as of May 27, 2002 (this “Agreement”), is by and among United States Marine Repair, Inc., a Delaware corporation (the “Company”), United Defense Industries, Inc., a Delaware corporation (“Parent”), UDII Torch Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Parent (“Acquisition”), and TC Group, L.L.C., a Delaware limited liability company, solely in its capacity as the Representative. Capitalized terms not otherwise defined herein have the meanings ascribed to such terms in Article I of this Agreement.

BACKGROUND

     A.     The Boards of Directors of the Company, Parent and Acquisition have each (i) determined that the Merger is advisable, fair and in the best interests of its respective stockholders and (ii) approved the Merger upon the terms and subject to the conditions set forth in this Agreement.

     B.     Certain stockholders of the Company have agreed to vote their shares in favor of the adoption of this Agreement and the approval of the transactions contemplated hereby pursuant to the Voting Agreement.

     C.     As an essential inducement for Parent and Acquisition to enter into this Agreement, certain employees of the Company have agreed to enter into employment agreements with Parent and the Company, and a separate holder of the Company’s securities will enter into a non-competition and non-solicitation agreement.

     D.     It is a condition to Parent’s and Acquisition’s obligations under this Agreement that certain stockholders of the Company agree to the creation of an indemnification fund and to the execution and delivery of the Escrow Agreement;

     NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the Company, Parent and Acquisition hereby agree as follows:

ARTICLE I
DEFINITIONS

     1.01. Definitions.

             (a) Defined terms used in this Agreement shall have the meanings specified in this Section 1.01, or elsewhere in this Agreement.

             “Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with the first Person.

             “Applicable Law” means any domestic or foreign, federal, state or local statute, law, ordinance, rule, administrative interpretation, regulation, order, writ, injunction, directive,

judgment, award, decree or other requirement having the force of law, of any Governmental Entity (including any Environmental Law).

             “Bid” means any written quotation, bid, tender or proposal made by the Company or any Subsidiary that if accepted or awarded would lead to a Contract.

             “Certificate of Merger” means a certificate of merger prepared and executed in accordance with the relevant provisions of the DGCL substantially in the form attached as Exhibit 1.01-A.

             “Closing Net Debt” means the total interest-bearing borrowings or debt obligations of the Company and the Subsidiaries plus all accrued and unpaid interest on such borrowings and debt obligations less total cash and cash equivalents of the Company and the Subsidiaries, as reflected on the bank ledger cash balances of the Company, as of the close of business on the day before the Closing Date.

             “Company Option Plan” means the Company’s 1998 Stock Option Plan, as amended.

             “Contracts” means all contracts, sub-contracts, agreements, consortium arrangements, leases, licenses, commitments, sales and purchase orders, and other instruments, arrangements or understandings of any kind to which the Company or any Subsidiary is a party.

             “Damages” means all costs, damages, losses, judgments, awards, Liabilities, fines, penalties, costs of Remediation, sanctions and expenses (including, without limitation, settlement costs, reasonable attorneys’ fees and other standard reasonable expenses incurred in connection with the investigation or defense of any action, suit or proceeding).

             “DGCL” means the Delaware General Corporation Law.

             “Effective Time” means the later of (i) the time at which the Company and Acquisition file the Certificate of Merger with the Secretary of State of the State of Delaware or (ii) at such other time as is provided in the Certificate of Merger.

             “Environment” means any ambient air; workplace or indoor air; surface water; drinking water; groundwater; aquifer; land surface; subsurface strata; soil; subsoil; river sediment; plant or animal life; natural resources; real property and the physical buildings, structures, improvements and fixtures thereon; or other media whatsoever.

             “Environmental Law” shall mean any and all Applicable Laws: (1) regulating protection of the Environment, (2) regulating the Management, Release or Remediation of Hazardous Substances, (3) regulating the exposure of Persons to Hazardous Substances, or (4) regulating occupational health and safety, including without limitation the Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C. 9601 et seq.), the Clean Air Act (42 U.S.C. §§ 7401 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §§ 6901 et seq.), the Clean Water Act (33 U.S.C. §§ 1251 et seq.), the Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.), the Toxic Substance Control Act (15 U.S.C. §§ 2601 et

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seq.), the Safe Drinking Water Act (42 U.S.C. §§ 300f et seq.) and any requirements promulgated pursuant to these Applicable Laws.

             “Environmental Liabilities” means, regardless of whether any of the following are contained in any disclosure schedule to this Agreement or otherwise disclosed to Parent prior to the Closing, any and all Damages (including Damages incurred by the Surviving Corporation for such reasonable time after the Closing as it takes the Surviving Corporation to come into compliance with Environmental Law with respect to conditions in existence on or prior to the Closing Date) and including without limitation reasonable attorneys’ fees and other defense costs, as well as costs of Remediation known or unknown, foreseen or unforeseen, whether contingent or otherwise, fixed or absolute, present or arising in the future, asserted against or reasonably incurred by Parent, Acquisition or, after the Closing, the Surviving Corporation, arising out of or related to: (1) the presence, Release, threat of Release, Management of or exposure of Persons to Hazardous Substances at, on, in, under or from any property now or previously owned, operated or leased by the Company, any Subsidiary or any of their respective predecessors in interest, whether into the Environment on-site or off-site that occurred prior to the Closing Date and to the extent that any such pre-existing presence, Release or exposure migrates or continues after the Closing Date; or (2) the off-site transportation, Release, processing or Management of Hazardous Substances, prior to the Closing Date, by or on behalf of the Company, any Subsidiary or any of their respective predecessors in interest; or (3) any violation of any Environmental Law by the Company, any Subsidiary or any of their respective predecessors in interest to the extent that such violation occurred prior to the Closing Date.

             “Government Contract” means any contract, basic ordering agreement, blanket purchase agreement, letter agreement, purchase order, delivery order, task order, grant, cooperative agreement, Bid, change order or other commitment or funding vehicle between the Company or any Subsidiary and (1) any Governmental Entity, (2) any prime contractor to any Governmental Entity or (3) any subcontractor with respect to any Contract described in clause (1) or (2).

             “Governmental Entity” means any United States federal, state or local or any non-United States government, political subdivision, governmental, regulatory or administrative authority, instrumentality, agency, body or commission, or any court, tribunal or judicial or arbitral body.

             “Hazardous Substance” means any waste, substance or any other material: (1) the Release or presence of which requires investigation or Remediation under any Environmental Law; (2) that is defined as a “pollutant,” “contaminant,” “solid waste,” “hazardous waste,” “hazardous material” or “hazardous substance” under any Environmental Law; (3) that is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic or mutagenic or otherwise hazardous; (4) without limitation, that contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenyls (PCBs) or asbestos.

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

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             “Indebtedness” means, with respect to a specified Person, all of such Person’s obligations for borrowed money, including (1) any obligation owed for all or any part of the purchase price of property or other assets or for services or for the cost of property or other assets constructed or of improvements to such property or other assets, other than current trade accounts payable included in current liabilities and incurred in respect of property or services purchased in the ordinary course of business, (2) any capital lease obligation, (3) any obligation (whether fixed or contingent) to reimburse any bank or other Person in respect of amounts paid or payable under a standby letter of credit (other than obligations under standby letters of credit securing performance under Contracts or Bids), (4) any guarantee with respect to indebtedness for borrowed money (of the kind otherwise described in this definition) of another Person, (5) accounts payable unpaid and outstanding over ninety days past due, and (6) any factored or sold receivables.

             “Liability” means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise and whether or not the same is required to be accrued on the financial statements of such Person.

             “Lien” means any mortgage, lien, pledge, charge, security interest, restriction or encumbrance of any kind.

             “Loss Contract” means a Contract or Bid in which, in the Company’s best estimate, the direct labor cost, direct material costs and applied overhead (calculated on a basis consistent with past practice) incurred and to be incurred in connection therewith (but excluding selling, general and administrative expenses), exceed the revenues derived or to be derived therefrom.

             “Management” means with respect to any substance or material, the generation, treatment, storage, recycling, transportation or disposal of that substance or material.

             “Material Adverse Effect” means any change or effect (or aggregation of changes and effects) that is, or is reasonably likely in the future to be, materially adverse to the operations, financial condition, earnings or results of operations, or the business (financial or otherwise) of the (1) Company, (2) Norshipco, (3) Southwest Marine, Inc., or (4) the Company and all of the Subsidiaries, as a group; provided, however, that, in each case, no Material Adverse Effect shall be deemed to exist in the event that such change or effect (or aggregation of changes and effects) arise from conditions affecting the marine repair industry as a whole or the U.S. economy as a whole.

             “Norshipco” means Norfolk Shipbuilding & Drydock Corporation, a wholly owned subsidiary of the Company.

             “Nuclear Damage” means any Damages, whether arising before or after the date of this Agreement, that in whole or in part, directly or indirectly, are caused by, arise out of or result from (1) the hazardous properties of source, special nuclear or byproduct material (as those materials are defined in the Atomic Energy Act of 1954, as amended, and applicable regulations

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thereunder), nuclear fuel and any other radioactive material; or (2) the transportation, treatment, storage, handling or disposal of radioactive material or waste.

             “Nuclear Services” means (1) any repair, maintenance or modernization services performed on those parts of a ship that contain nuclear fuel, radioactive material or any other material with hazard properties of source, special nuclear or byproduct material (as those materials are defined in the Atomic Energy Act of 1954, as amended, and applicable regulations thereunder); or (2) the transportation, treatment, storage, handling or disposal of radioactive waste.

             “Optionholder” means each holder of an Option.

             “Options” means all of the options to purchase shares of Common Stock under the Company Option Plan granted to eligible Persons pursuant to the terms of the Company Option Plan that are outstanding immediately prior to the Effective Time (not including any option that terminates as a result of the Merger).

             “Person” means any individual, corporation, partnership, association, trust or other entity or organization, including a Governmental Entity.

             “Reference Balance Sheet” means the unaudited consolidated balance sheet of the Company and the Subsidiaries as at the close of business on the Reference Date.

             “Reference Date” means March 31, 2002.

             “Release” when used in connection with Hazardous Substance, shall have the meaning ascribed to that term in 42 U.S.C. 9601(22), but not including the exceptions in Subsection (A) and (D) of 42 U.S.C. 9601(22).

             “Remediation” means (1) any remedial action, response or removal as those terms are defined in 42 U.S.C. § 9601; or (2) any “corrective action” as that term has been construed by Governmental Entities pursuant to 42 U.S.C. § 6924.

             “Representative” means TC Group, L.L.C., acting solely in its capacity as Representative.

             “Seller Expenses” means the fees and expenses incurred by the Company or any Subsidiary, or for which any of them is or becomes liable, in connection with the Merger or the Company’s proposed public offering of its securities, including without limitation (1) all fees payable to financial, legal, accounting and other advisers retained by the Company in connection with the Merger or such proposed public offering or who are otherwise entitled to such fees; (2) all fees payable to the Representative (whether in its capacity as such or otherwise) and its affiliates; (3) all out-of-pocket expenses incurred by the Company in connection with the foregoing; and (4) bonuses or other cash compensation issued to management and other employees of the Company or a Subsidiary in connection with the Merger.

             “Significant Employees” means Richard Camacho, Frank Collins, Daniel Cotter, Monty Dickinson and Alexander Krekich.

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             “Stockholders” means the holders of the issued and outstanding capital stock of the Company.

             “Time of Formation” means (1) with respect to matters relating to the Company and each of the Subsidiaries other than Norshipco, the date of the formation of the Company; and (2) with respect to matters relating to Norshipco, September 30, 1998.

             “Voting Agreement” means the Irrevocable Proxy, Waiver and Voting Agreement, of even date herewith, by and among Parent, Acquisition, the Company, the Escrowed Stockholders and B. Edward Ewing, in substantially the form attached hereto as Exhibit 1.01-B.

             (b) In addition, each of the following terms is defined in the Section set forth opposite such term:

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ARTICLE II
THE MERGER

     2.01. The Merger. Upon and subject to the terms and conditions of this Agreement, Acquisition shall merge with and into the Company (the “Merger”) at the Effective Time. From and after the Effective Time, the separate corporate existence of Acquisition shall cease, and the Company shall continue as the surviving corporation in the Merger (the “Surviving Corporation”). The Merger shall have the effects set forth in the DGCL.

     2.02. Closing of the Merger. Subject to Section 3.06 (which governs the timing with respect to the condition set forth in Section 10.02(j)), the closing of the Merger (the “Closing”) will take place at 10:00 a.m. Eastern Standard Time on the third business day after satisfaction (or waiver) of the conditions set forth in Article X (the “Closing Date”), at the offices of Gibson, Dunn & Crutcher LLP, 1050 Connecticut Avenue, N.W., Washington, D.C. 20036, unless another time, date or place is agreed to by the parties hereto.

     2.03. Actions at the Closing. At the Closing: (i) the Company shall deliver to Parent and Acquisition the various certificates, instruments and documents referred to in Section 10.02; (ii) Parent and Acquisition shall deliver to the Company the various certificates, instruments and documents referred to in Section 10.03; (iii) the Company shall file the Certificate of Merger with the Secretary of State of the State of Delaware; (iv) Parent, the Representative, and the Escrowed Stockholders shall execute and deliver the Escrow Agreement or otherwise become bound thereby to the reasonable satisfaction of Parent; and (vi) Parent shall deposit an amount equal to the Escrow Amount with the Escrow Agent in accordance with Section 3.05(d).

     2.04. Additional Action. The Surviving Corporation may, at any time after the Effective Time, take any action, including executing and delivering any document, in the name and on behalf of either the Company or Acquisition, in order to consummate the transactions contemplated by this Agreement.

     2.05. Effects of the Merger. The Merger shall have the effects set forth in the DGCL. Without limiting the generality of the foregoing and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and Acquisition shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Acquisition shall become the debts, liabilities and duties of the Surviving Corporation.

     2.06. Certificate of Incorporation and By-laws. The certificate of incorporation of the Surviving Corporation shall be in the form attached to the Certificate of Merger until amended in accordance with Applicable Law. The by-laws of the Surviving Corporation shall be amended and restated at the Effective Time to read the same as the by-laws of Acquisition until amended in accordance with Applicable Law.

     2.07. Directors. The directors of Acquisition at the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and by-laws of the Surviving Corporation until such director’s successor is duly elected or appointed and qualified.

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     2.08. Officers. The officers of Acquisition at the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and by-laws of the Surviving Corporation until such officer’s successor is duly elected or appointed and qualified.

ARTICLE III
CONSIDERATION; PAYMENT; EFFECT ON SHARES IN THE MERGER

     3.01. Maximum Merger Consideration. The maximum aggregate merger consideration to be paid by Parent and Acquisition pursuant to this Agreement is U.S. $209 million less the Seller Expenses (the “Maximum Merger Consideration”), subject to adjustment as set forth in this Article III. In addition, at the Effective Time, Parent shall satisfy the Company’s interest-bearing borrowings and debt obligations (other than the Company’s outstanding letters of credit) pursuant to payoff letters delivered to Parent by the Company at least two days prior to the Closing Date.

     3.02. Conversion of Shares. At the Effective Time, by virtue of the Merger and without any action on the part of any Stockholder or other Person:

             (a) Each share (a “Share”) of common stock of the Company (“Common Stock”) issued and outstanding as of the Effective Time, but excluding Dissenting Shares and shares described in Section 3.02(b), shall be canceled and converted into the right to receive cash in an amount (the “Per Share Amount”) equal to (i) the Maximum Merger Consideration plus an amount equal to the amount the Company would receive if all of the Options were exercised in full at the exercise price set forth therein, divided by (ii) the total number of Shares, including Shares issuable upon the exercise of Options, with the result of such calculation subject to adjustment and payable as provided in this Article III.

             (b) Each Share, if any, held in the Company’s treasury immediately prior to the Effective Time shall automatically be canceled, retired and cease to exist at the Effective Time, and no consideration will be delivered in exchange therefor.

             (c) At the Effective Time, each outstanding share of common stock of Acquisition shall be converted into one (1) fully paid and non-assessable share of common stock of the Surviving Corporation and shall constitute the only shares of capital stock of the Surviving Corporation outstanding immediately after the Effective Time.

             (d) The merger consideration payable upon the Closing with respect to each Share, excluding Dissenting Shares and any Shares with respect to which dissenters’ rights have not terminated, shall be the Per Share Amount; provided, however, that the initial merger consideration payable to the stockholders listed on Schedule 3.02(d) (the “Escrowed Stockholders”) shall be the Per Share Amount less the Per Share Escrow Amount. For purposes of this Agreement, the term “Per Share Escrow Amount” means the quotient determined by dividing the Escrow Amount by the number of Shares held by the Escrowed Stockholders as of the Effective Time.

     3.03. Dissenters’ Rights. Shares that have not been voted for approval of this Agreement and the Merger (or which have not consented to each of them) and with respect to

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which a demand for payment and appraisal have been properly made in accordance with Section 262 of the DGCL (“Dissenting Shares”) will not be converted into the right to receive the Per Share Amount (if and as adjusted pursuant to this Article III) otherwise payable with respect to such Shares at or after the Effective Time, but instead will be converted into the right to receive such consideration as may be determined to be due with respect to such Dissenting Shares pursuant to the laws of the State of Delaware. If a holder of Dissenting Shares (a “Dissenting Stockholder”) withdraws his or her demand for such payment and appraisal or becomes ineligible for such payment and appraisal, then, as of the Effective Time or the occurrence of such event of withdrawal or ineligibility, whichever last occurs, such holder’s Dissenting Shares will cease to be Dissenting Shares and will be converted into the right to receive, and will be exchangeable for, the Per Share Amount (if and as so adjusted) in accordance with this Agreement. The Company will give Parent and Acquisition prompt notice of any demand received by the Company from a holder of Dissenting Shares for appraisal of Shares, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demand. The Company agrees that, except with the prior written consent of Parent, or as required under the DGCL, it will not voluntarily make any payment with respect to, or settle or offer or agree to settle, any such demand for appraisal. Each Dissenting Stockholder who, pursuant to Section 262 of the DGCL, becomes entitled to payment of the value of the Dissenting Shares will receive payment therefor but only after the value therefor has been agreed upon or finally determined pursuant to such provisions. Any portion of the Per Share Amount (if and as so adjusted) that would otherwise have been payable with respect to Dissenting Shares if such Shares were not Dissenting Shares will be retained by Parent.

     3.04. Options.

             (a) Prior to the Effective Time, the board of directors of the Company (or, with respect to the Options, the applicable committee thereof with the authority to administer the Company Option Plan) shall take all action necessary to cause (i) all Options that have not been exercised prior to the Effective Time to be cancelled or terminated immediately after the Effective Time and replaced with the right to receive the applicable Option Amount in accordance with the terms of this Agreement and the Company Option Plan; and (ii) all warrants or other convertible securities to purchase shares of Company’s capital stock that have not been exercised prior to the Effective Time to be cancelled or terminated as of the Effective Time.

             (b) Immediately after the Effective Time, each Option outstanding at the date of this Agreement that has not been exercised prior to the Effective Time shall be cancelled and the holder thereof shall have the right to be paid in cash in an amount (if positive) (the “Option Amount”) equal to (i) the difference obtained by subtracting the exercise price of such Option from the Per Share Amount, multiplied by (ii) the number of shares of Common Stock purchasable upon exercise of the Option in question.

             (c) The merger consideration payable upon the Closing with respect to each Option shall be the applicable Option Amount.

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     3.05. Payment for Shares and Options; Escrow Consideration.

             (a) Prior to the Effective Time, the Company shall deliver to Parent wire instructions or other delivery instructions for use in connection with the payment of the merger consideration to the Stockholders and Optionholders hereunder. As soon as practicable after the Effective Time, upon surrender to Parent of such certificates or agreements (or affidavit of loss or destruction in lieu thereof, including any suitable bond or indemnity that may be required by Parent in its sole discretion), duly executed and completed to Parent’s satisfaction, Parent shall make payment to the persons entitled thereto by check or wire transfer, as set forth in the delivery instructions delivered by the Company, in the amount equal to the price to which such Person is entitled pursuant to Section 3.02(d) or Section 3.04(c), as the case may be, less any required tax withholdings and less any amounts due from such Person to the Company. No interest will be paid or will accrue on the amount payable upon the surrender of any such certificate or agreements. If payment is to be made to a Person other than the registered holder of the certificate or agreement surrendered, it shall be a condition of such payment that the certificate or agreement so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the Person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a Person other than the registered holder of the certificate or agreement surrendered or establish to the reasonable satisfaction of the Surviving Corporation or Parent that such tax has been paid or is not applicable.

             (b) After the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of shares of capital stock of the Company that were outstanding immediately prior to the Effective Time.

             (c) Notwithstanding the foregoing, neither Parent nor any party hereto shall be liable to any holder of certificates or agreements formerly representing securities of the Company for any amount paid to a public official pursuant to any applicable abandoned property, escheat or similar law. The Surviving Corporation shall pay all charges and expenses, including those of Parent, in connection with the exchange of cash for securities of the Company.

             (d) At the Closing, Parent shall deposit an amount equal to U.S. $15 million (the “Escrow Amount”) with an Affiliate of Deutsche Bank or another third person mutually satisfactory to Parent and the Representative, as escrow agent (the “Escrow Agent”). The Escrow Amount, together with any interest, dividends or other income earned thereon, net of any transaction costs associated with the investment thereof (collectively, the “Escrow Fund”) shall be applied for the payment of any indemnification obligations pursuant to this Agreement and an escrow agreement in substantially the form attached hereto as Exhibit 3.05 (the “Escrow Agreement”).

     3.06. Closing Net Debt.

             (a) Three days prior to the Closing Date, the Company shall deliver to Parent:

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             (b) On the proposed Closing Date, the Company shall deliver a bring-down certificate in the same form as the certificate delivered pursuant to Section 3.06(a)(ii), setting forth the Company’s calculation of Closing Net Debt, along with such documentation as Parent may reasonably request concerning the matters set forth in Section 3.06(a)(ii). If Parent disagrees with the Company’s determination of Closing Net Debt, the parties shall retain Ernst & Young, LLP, or such other nationally recognized accounting firm as is mutually agreeable to Parent and the Company (the “Accounting Referee”), to promptly review this Agreement and the disputed items or amounts for the purpose of calculating Closing Net Debt, for a period not to exceed two business days. At the end of such period, the Accounting Referee shall deliver to Parent and the Company a report setting forth each such calculation. Such report and the Accounting Referee’s determination of Closing Net Debt shall be final and binding upon Parent and the Company. In no event shall Closing Net Debt as determined by the Accounting Referee be lower than Closing Net Debt as calculated by the Company or higher than Closing Net Debt as calculated by Parent. Subject to the satisfaction of the closing conditions set forth in Article X, the Closing shall occur on the day that the Accounting Referee’s determination is delivered; provided, however, that for accounting purposes, the transfer of the business operated by the Company and the Subsidiaries shall be deemed to have occurred at the opening of business on the date following the date used to calculate Closing Net Debt, and Parent shall be entitled to all the benefits of ownership, and responsible for all the liabilities, with respect to such business from such date.

             (c) Parent and the Company agree that they will, and agree to cause their respective independent accountants to, cooperate and assist in the calculation of Closing Net Debt and in the conduct of the audits and reviews referred to in this Section 3.06, including, without limitation, making available to the extent reasonably required books, records, work papers (subject to appropriate indemnifications) and personnel.

     3.07. Adjustment. If Closing Net Debt, as determined in accordance with Section 3.06, is greater than U.S. $107 million, the amount to be paid by Parent to the Stockholders and Optionholders at the Closing under Section 3.05 shall be reduced by the

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amount of this excess (the “Adjustment”); and the Per Share Amount shall be reduced by an amount equal to the quotient of the Adjustment divided by the sum of the number of Shares then outstanding, including the number of Shares issuable upon exercise of Options then outstanding (the “Adjustment Per Share”).

     3.08. Appointment of Representative. Pursuant to the Escrow Agreement, the Representative will be irrevocably appointed by each of the Escrowed Stockholders as its attorney-in-fact to contest, settle, compromise or otherwise dispose of any claim made by Parent or the Surviving Corporation in accordance with the Escrow Agreement. Such power of attorney shall be coupled with an interest, thereby confirming such appointment as irrevocable.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY

     The Company hereby represents and warrants to each of Parent and Acquisition, subject to the exceptions set forth in the Disclosure Schedule (the “Company Disclosure Schedule”) delivered by the Company to Parent in accordance with Section 6.05 (which exceptions shall specifically identify a Section or Subsection, as applicable, to which such exception relates) that:

     4.01. Corporate Existence and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of its governing jurisdiction, and has all corporate powers required to carry on its business as now conducted. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities requires such qualification, except in any such jurisdiction where the failure to be so qualified or in good standing would not result in a Material Adverse Effect. The Company has heretofore delivered to Parent true and complete copies of its certificate of incorporation and by-laws as currently in effect.

     4.02. Authorization.

             (a) The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby are within the Company&#