Exhibit 10.1

 

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STOCK PURCHASE AGREEMENT

 

between

 

RENTECH, INC.,

 

as Seller,

 

and

 

ZINSSER CO., INC.,

 

as Buyer,

 

Dated as of March 8, 2005

 

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TABLE OF CONTENTS

 

        Page

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SECTION 1 DEFINITIONS

  1

    1.1.

 

Certain Defined Terms

  1

SECTION 2 PURCHASE AND SALE OF STOCK

  6

    2.1.

 

Basic Agreement

  6

    2.2.

 

Purchase Price

  6

    2.3.

 

Earn Out

  6

    2.4.

 

Assets to be Retained by Seller

  6

    2.5.

 

Adjustment for Working Capital

  6

    2.6.

 

Section 338(h)(10) Election.

  7

    2.7.

 

Lease Guaranty.

  7

    2.8.

 

Closing.

  7

SECTION 3 REPRESENTATIONS AND WARRANTIES OF SELLER

  7

    3.1.

 

The Company.

  7

    3.2.

 

The Transaction Agreements.

  8

    3.3.

 

The Business Assets.

  8

    3.4.

 

Financial Matters.

  9

    3.5.

 

Operational Matters.

  11

    3.6.

 

Employee Matters.

  12

    3.7.

 

Environmental Matters.

  15

    3.8.

 

Brokers, Finders, etc.

  17

    3.9.

 

Receivables.

  17

    3.10.

 

Inventories.

  17

    3.11.

 

Insurance.

  18

    3.12.

 

Workers Compensation.

  18

    3.13.

 

Disclosure.

  18

SECTION 4 REPRESENTATIONS AND WARRANTIES OF BUYER

  18

    4.1.

 

Organization and Standing.

  18

    4.2.

 

Execution and Validity of Agreements.

  18

    4.3.

 

No Violation or Approval.

  18

    4.4.

 

Brokers, Finders, etc.

  19

    4.5.

 

Securities Law Matters.

  19

SECTION 5 POST-CLOSING COVENANTS

  19

    5.1.

 

[INTENTIONALLY OMITTED]

  19

    5.2.

 

Tax Returns and Contests.

  19

    5.3.

 

Health Benefits for Company Employees.

  20

    5.4.

 

Further Assurances.

  20

    5.5.

 

Press Releases.

  20

    5.6.

 

Termination of Obligations.

  21

    5.7.

 

COBRA Coverage.

  21

    5.8.

 

Restrictive Covenants.

  21

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SECTION 6 INDEMNIFICATION   23

    6.1.

 

Buyer’s Indemnification.

  23

    6.2.

 

Seller’s Indemnification.

  23

    6.3.

 

Survival; Time Limits for Indemnification.

  24

    6.4.

 

Basket and Cap.

  24

    6.5.

 

Exclusivity.

  24

    6.6.

 

Defense of Claims.

  24

SECTION 7 MISCELLANEOUS

  25

    7.1.

 

[INTENTIONALLY OMITTED]

  25

    7.2.

 

Governing Law.

  25

    7.3.

 

Notices.

  25

    7.4.

 

Entire Agreement, Assignability, Etc.

  26

    7.5.

 

Counterparts.

  26

    7.6.

 

Representations as to Knowledge.

  27

    7.7.

 

Headings, Terms.

  27

    7.8.

 

Waivers.

  27

    7.9.

 

Severability.

  27

    7.10.

 

Remedies Cumulative.

  27

    7.11.

 

Expenses.

  27

    7.12.

 

Construction.

  27

    7.13.

 

Incorporation of Exhibit.

  27

 

EXHIBIT

 

Exhibit A

   -      Financial Statements of the Company

 

SCHEDULES

 

Schedule 3.2.2

   Encumbrances

Schedule 3.3.1

   Business Assets

Schedule 3.3.2

   Title

Schedule 3.3.3

   Trademarks

Schedule 3.5.1

   Suppliers

Schedule 3.5.2

   Customers

Schedule 3.5.4

   Litigation

Schedule 3.5.5

   Product Warranties/Product Liability

Schedule 3.5.6

   Licenses

Schedule 3.5.7

   Contracts

Schedule 3.5.8

   Bank Accounts

Schedule 3.6.1(a)

   List of Employee Plans

Schedule 3.6.1(b)

   Multiemployer and Pension Plans

Schedule 3.6.1(c)

   Compliance

Schedule 3.6.1(h)

   Continuation of Coverage

Schedule 3.6.1(i)

   ERISA Affiliate

Schedule 3.6.3

   Employee Claims

 

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Schedule 3.7.2

  Hazardous Substances

Schedule 3.7.3

  Environmental

Schedule 3.10

  Inventories

Schedule 3.11

  Insurance

Schedule 3.12

  Workers Compensation

 

3

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THIS STOCK PURCHASE AGREEMENT is made on March 8, 2005, between Rentech, Inc., a
Colorado corporation (“Seller”), and Zinsser Co., Inc., a New Jersey corporation
(“Buyer”).

 

Recitals

 

Seller owns all of the issued and outstanding stock of Okon, Inc., a Colorado
corporation (the “Company”). Seller has agreed to sell all of the stock of the
Company to Buyer on the terms and conditions set forth in this Agreement.

 

Agreement

 

Accordingly, in consideration of the mutual covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Seller and the Buyer agree as follows:

 

SECTION 1

DEFINITIONS

 

1.1. Certain Defined Terms. As used in this Agreement, the following terms have
the indicated meanings:

 

“Adverse Consequences” means all actions, suits, proceedings, investigations,
complaints, claims, demands, orders, decrees, rulings, injunctions, judgments,
directives, notices of violation, Liabilities, liens, losses, damages,
penalties, fines, settlements, costs, expenses and fees (including court costs
and reasonable fees and expenses of counsel and other experts).

 

“Affiliate” means, as to any Person, another Person that controls, is controlled
by or is under common control with such Person. For that purpose, “control”
means the power, directly or indirectly, by stock ownership, contract, family
relationship, employment, position or otherwise, to significantly influence the
business decisions of another Person.

 

“Benefit Arrangement” means any written or oral employment, consulting, bonus,
noncompetition, management, agency, change of control, severance, layoff, salary
continuation, deferred compensation, profit sharing, bonus, stock option,
phantom stock, stock appreciation right, stock purchase, employee loan,
allowance or reimbursement, or other similar contract or policy, supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health,
dental, vision, disability or accident benefits, fringe benefit plans,
arrangements or practices, and each plan, arrangement, understanding or program
which provides for insurance coverage (including any self insured arrangements)
or other forms of compensation or insurance (including, without limitation,
post-retirement insurance), compensation or benefits, which is not a Welfare
Plan, a Pension Plan or a Multiemployer Plan.

 

“Business Assets” means all assets, properties and rights owned by the Company
or used by the Company in the conduct of its business, tangible or intangible,
real or personal.

 

“Buyer” has the meaning given in the Preamble.

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“Claim” has the meaning given in Section 6.6.

 

“Closing” has the meaning given in Section 2.8.

 

“Closing Date” has the meaning given in Section 2.8.

 

“Closing Date Working Capital” means the excess of (i) the sum of the Company’s
accounts receivable (net of any allowance for doubtful accounts) plus its
inventory over (ii) the sum of the Company’s accounts payable plus its accrued
liabilities (including accrued salary, vacation and sick pay, but excluding any
accrued liabilities relating to any Company Pension Plan or Company Welfare Plan
and excluding any liabilities for federal income Taxes or state Taxes in which
Company and Seller file Tax returns on a combined basis, all of which Taxes will
be paid by Seller), in each case, as of the Closing Date and determined in
accordance with GAAP, excluding any receivables from and payables or liabilities
to Seller.

 

“COBRA” means Section 4980B of the Code and Sections 601 through 608, inclusive,
of ERISA, and any regulations or rulings promulgated thereunder.

 

“Code” means the United States Internal Revenue Code of 1986, as amended, and
the regulations and rulings promulgated thereunder.

 

“Company” has the meaning given in the Recitals.

 

“Company Benefit Arrangement” means any Benefit Arrangement which provides
coverage or benefits to any employee or former employee of the Company with
respect to his or her relationship with the Company.

 

“Company Employee Plans” means all Employee Plans which provide coverage or
benefits to any employee or former employee of the Company with respect to his
or her relationship with the Company.

 

“Company Pension Plan” means any Pension Plan which provides coverage or
benefits to any employee or former employee of the Company with respect to his
or her relationship with the Company.

 

“Company Welfare Plan” means any Welfare Plan which provides coverage or
benefits to any employee or former employee of the Company with respect to his
or her relationship with the Company.

 

“Contracts” has the meaning given in Section 3.5.7.

 

“Disposal” means disposal as defined by RCRA or as defined by any applicable
similar law of any jurisdiction where the Company has operated its business or
Released Hazardous Substances. However, “Disposal,” as used herein, shall not be
limited to the disposal of Hazardous Wastes, as defined in RCRA, but shall
extend to the disposal of any Hazardous Substance, as defined herein.

 

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“Employee Plans” shall mean all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.

 

“Encumbrance” means any interest in an asset securing performance of an
obligation, any adverse claim of title to or the right to possession or use of
an asset and any option or other right to acquire title to or the right to
possession or use of an asset.

 

“Environmental Law” means all currently effective statutes, ordinances, codes,
common law principles, rules, regulations, orders, decrees, standards,
procedures, permit or license requirements or other requirements of any
governmental authority relating to land use, public or employee health, safety,
welfare or the environment, including, without limitation: the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601, et
seq. (“CERCLA”); RCRA; the Emergency Planning and Community Right-to-Know Act,
42 U.S.C. § 11001, et seq.; the Hazardous Materials Transportation Act, 49
U.S.C. § 5101, et seq.; the Clean Air Act, 42 U.S.C. § 7401, 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 Substances Control Act, 15 U.S.C. § 2601, et
seq. (“TSCA”); the Rivers and Harbors Act of 1899, 33 U.S.C. § 401, et seq.; the
Oil Pollution Act of 1990, 33 U.S.C. § 2701, et seq., the California State
Drinking Water and Toxic Enforcement Act of 1986 (“Proposition 65”); and
regulations adopted by the South Coast Air Quality Management District, each as
amended; any state or local law similar to the foregoing; all policy and
guidance documents and memoranda issued pursuant to the foregoing with which the
Company is required to comply under applicable law; and all permits issued to
the Company pursuant to the foregoing; in each case, where and as applicable to
the Company, its products or operations.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and rulings promulgated thereunder.

 

“ERISA Affiliate” means any entity which is a member of a “controlled group of
corporations” with, under “common control” with, or otherwise treated as a
single employer or aggregated with, the Company, pursuant to Section 414 of the
Code.

 

“Financial Statements” has the meaning given in Section 3.4.1.

 

“GAAP” has the meaning given in Section 3.4.1.

 

“Hazardous Substance” means any pollutant, contaminant, toxic or hazardous
material, substance, chemical, compound or mixture that is defined, listed,
classified or regulated by any Environmental Law, including, without limitation:
petroleum (including, without limitation, crude oil or any fraction thereof),
gasoline, diesel fuel or other petroleum hydrocarbons; polychlorinated
biphenyls; and asbestos, in each case, whether specifically listed or designated
as a hazardous substance under any Environmental Law.

 

“Hazardous Waste” shall have the meaning given under RCRA and any similar state
statutes and any regulations adopted pursuant thereto.

 

“Indemnifying Party” has the meaning given in Section 6.6.

 

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“Indemnitee” has the meaning given in Section 6.6.

 

“Initial Payment” has the meaning given in Section 2.2.

 

“Liability” means any liability, debt or obligation, whether known or unknown,
absolute or contingent, arising under contract, in tort, by statute or
regulation or otherwise, accrued or unaccrued, liquidated or unliquidated and
due or to become due, and whether for the payment of money, the provision of
goods or services or the performance of any other obligation.

 

“Multiemployer Pension Plan” shall mean any “employee pension benefit plan” (as
such term is defined in Section 3(2) of ERISA) that is a “multiemployer plan”
(as such term is defined in Section 4001(a)(3) of ERISA).

 

“Multiemployer Plan” shall mean Multiemployer Pension Plan, Multiemployer
Welfare Plan or both.

 

“Multiemployer Welfare Plan” shall mean any “employee welfare benefit plan” (as
such term is defined in Section 3(1) of ERISA) that is a “multiemployer plan”
(as such term is defined in Section 3(37) of ERISA.

 

“Okon Products” means all products sold by the Company or any Affiliate of the
Company after the Closing that are either labeled with the name Okon (or any
other trade name or trademark of the Company) or are based upon formulations
included in the Business Assets.

 

“PBGC” means the Pension Benefit Guaranty Corporation or any person succeeding
to the present powers and functions of the Pension Benefit Guaranty Corporation.

 

“Pension Plan” means any “employee pension benefit plan” (as such terms is
defined in Section 3(1) of ERISA), other than a Multiemployer Pension Plan.

 

“Person” means an individual and any corporation, partnership, trust, limited
liability company, association, governmental authority or any other entity.

 

“Premises” means the real property occupied by Company at 4725 Leyden Street,
Denver, Colorado 80216.

 

“Premises Lease” means the Lease between CSM Investors, Inc., as lessor, and the
Company, as lessee, dated February 28, 2000, as amended by the First Amendment
of Lease and Reaffirmation of Guaranty dated April 15, 2004, pursuant to which
the Company leases the Premises.

 

“Purchase Price” has the meaning given in Section 2.2.

 

“RCRA” means the Resource Conservation and Recovery Act of 1976, as amended, and
as codified in the Solid Waste Disposal Act, 42 U.S.C. § 6901, et seq., as
amended. All references to RCRA in this Agreement incorporate all regulations at
40 C.F.R. Part 260, et seq., promulgated pursuant to RCRA as well as all state
statutes or regulations adopted pursuant to RCRA.

 

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“Release” means any direct or indirect spilling, pumping, pouring, emitting,
emptying, placing, discharging, injecting, escaping, leaking, dumping,
disposing, leaching or abandonment on or into any building or facility or the
environment, whether intentional or unintentional, known or unknown.

 

“Seller” has the meaning given in the Preamble.

 

“Storage” means storage as defined by RCRA or as defined by any applicable
similar law of any jurisdiction where the Company has operated its business or
Released Hazardous Substances, provided, however, that the term “Storage” as
used herein shall not be limited to the storage of Hazardous Wastes, as defined
in RCRA, but shall extend to the storage of any Hazardous Substance.

 

“Tax” means any federal, state or local tax or any foreign tax (including,
without limitation, any net income, gross income, profits, premium, estimated,
excise, sales, value added, services, use, occupancy, gross receipts, franchise,
license, ad valorem, severance, capital levy, production, stamp, transfer,
withholding, employment, unemployment, social security (including FICA), payroll
or property tax, customs duty, or any other governmental charge or assessment),
together with any interest, addition to tax or penalty.

 

“Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

 

“Third Party” means a Person other than Seller or an Affiliate of the Company or
Seller.

 

“Transaction Agreements” means this Agreement and all other instruments and
agreements executed and delivered pursuant to this Agreement.

 

“Transport” means transport as defined by RCRA or as defined by any applicable
similar law of any jurisdiction where the Company has operated its business or
Released Hazardous Substances, provided, however, that the term “Transport” as
used herein shall not be limited to the transport of Hazardous Wastes, as
defined in RCRA, but shall extend to the transport of any Hazardous Substance,
as defined herein.

 

“Treatment” means treatment as defined by RCRA or as defined by any applicable
similar law of any jurisdiction where the Company has operated its business or
Released Hazardous Substances, provided, however, that the term “Treatment” as
used herein shall not be limited to the treatment of Hazardous Wastes, as
defined in RCRA, but shall extend to the treatment of any Hazardous Substance,
as defined herein.

 

“Welfare Plan” means any “employee welfare benefit plan” (as such term is
defined in Section 3(1) of ERISA), other than a Multiemployer Plan.

 

5

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SECTION 2

PURCHASE AND SALE OF STOCK

 

2.1. Basic Agreement. Seller hereby sells to Buyer, and Buyer hereby purchases
from Seller, all of the issued and outstanding capital stock of the Company (the
“Stock”).

 

2.2. Purchase Price. The aggregate purchase price (the “Purchase Price”) to be
paid by Buyer to Seller for the Stock shall be (i) $1,700,000, subject to
adjustment pursuant to Section 2.5, payable by wire contemporaneously with the
execution of this Agreement (and, if applicable, thereafter as provided in
Section 2.5) to an account designated by Seller (the “Initial Payment”) plus
(ii) the earn out payments that become due under Section 2.3, payable as
provided therein.

 

2.3. Earn Out. Buyer shall pay Seller an earn out equal to 7% of net sales
(i.e., gross sales less returns) of Okon Products by the Company or any
Affiliate of the Company after the Closing until a total of $300,000 has been
paid to Seller. After $300,000 in earn out payments has been paid, no further
earn out payments shall be due. Earn out payments shall be payable monthly
within 15 days after the end of each calendar month in respect of net sales
during that month. Each earn out payment shall be accompanied by a statement
reflecting in reasonable detail the calculation of the amount of the payment.
Seller shall have the right to examine and audit the sales records of the
Company not more than twice annually to verify the earn out payments due.

 

2.4. Assets to be Retained by Seller. Prior to the execution and delivery of
this Agreement, Seller caused the Company to distribute to Seller all cash of
the Company and all inter-company receivables owing to the Company from Seller.
All inter-company payables owing to Seller from the Company are hereby
cancelled.

 

2.5. Adjustment for Working Capital. Within 60 days after the Closing Date,
Buyer shall provide Seller with a balance sheet of the Company as of the Closing
Date, prepared in accordance with GAAP, accompanied by Buyer’s calculation of
the Closing Date Working Capital based on that balance sheet. Buyer’s
calculations of Closing Date Working Capital shall be binding on the parties
unless, within 15 days after its receipt of such calculation from Buyer, Seller
gives Buyer notice that Seller disagrees with Closing Date Working Capital as
calculated by Buyer. If Seller gives such a notice, then Buyer and Seller shall
attempt in good faith to resolve the disagreement and agree upon Closing Date
Working Capital. Buyer shall provide Seller access to the books and records of
the Company for purposes of attempting to resolve the disagreement. If they are
unable to agree within 30 days after Seller’s notice, either party may elect to
refer the matter to the Denver office of Hein + Associates (or such other
independent accounting firm as the parties may agree upon) for resolution, and
the determination of that firm shall be binding on the parties. Each party may
provide the independent accounting firm with such information as it deems
appropriate and Buyer shall provide the independent accounting firm with access
to the books and records of the Company, as necessary to determine the Closing
Date Working Capital. The fees and expenses of the independent accounting firm
shall be shared equally by the parties. The independent accounting firm shall
provide Seller and Buyer with a written statement of its calculation of actual
Closing Date Working Capital. If

 

6

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actual Closing Date Working Capital as finally determined is less than $220,000,
within 5 days after such final determination, Seller shall pay Buyer the amount
of said shortfall. Any such payment shall be first by set off against amounts
due Seller pursuant to Section 2.3. If actual Closing Date Working Capital as
finally determined is equal to or greater than $220,000, no purchase price
refund or further purchase price payment shall be paid.

 

2.6. Section 338(h)(10) Election. At the Closing, Seller and Buyer shall jointly
make an election under section 338(h)(10) of the Code and any similar provision
of any state or local tax law. For that purpose, the Purchase Price shall be
allocated among the Business Assets as agreed by the parties within 60 days
after the Closing Date.

 

2.7. Lease Guaranty. At the Closing, Buyer shall execute a guaranty of the
Premises Lease in a form substantially similar to the existing guaranty signed
by Seller and Seller shall be released from its guaranty of the Premises Lease,
but only with respect to the Company’s performance after the Closing.

 

2.8. Closing. The closing of the transactions contemplated by this Agreement
(the “Closing”) is being held at the offices of Sherman & Howard L.L.C., 633
Seventeenth Street, Suite 3000, Denver, Colorado 80202 contemporaneously with
the execution of this Agreement, and shall be effective as of 12:00 a.m. local
time in Denver, Colorado on the date of this Agreement (such effective time
being the “Closing Date”).

 

SECTION 3

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrants to Buyer as follows:

 

3.1. The Company.

 

3.1.1. Organization and Standing. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado.
The Company is not required to be qualified to do business as a foreign
corporation in any jurisdiction. The Company has the requisite corporate power
and authority to own its assets and carry on its business as presently being
conducted. Complete and correct copies of the charter, bylaws, minute books and
stock records of the Company current as of the date of this Agreement have been
delivered to Buyer.

 

3.1.2. Subsidiaries. The Company does not own, directly or indirectly, any
capital stock, any partnership, equity or other ownership interest in or any
security issued by any other Person.

 

3.1.3. Capitalization. The authorized capital stock of the Company consists of
100 shares of Common Stock, no par value, of which 100 shares are issued and
outstanding. All of the Stock is duly authorized, validly issued, fully paid and
nonassessable and is owned of record and beneficially by Seller, free and clear
of Encumbrances. There are no outstanding options, warrants, convertible
securities or other rights to acquire any of the Stock from Seller or any other
capital stock or security from the Company. The Stock was not issued in
violation of any preemptive or similar right of any Person and has not been
transferred in violation of, and is not currently subject to, any right of first
refusal or similar right of any Person. The Stock is not subject to any voting
trust or other voting agreement.

 

7

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3.2. The Transaction Agreements.

 

3.2.1. Execution and Validity. This Agreement and each of the other Transaction
Agreements to which Seller is a party have been duly executed and delivered by
Seller and constitute the legal, valid and binding obligations of Seller,
enforceable in accordance with their terms, subject to bankruptcy, insolvency,
moratorium, reorganization and similar laws of general applicability affecting
the rights and remedies of creditors and to general principles of equity,
regardless of whether enforcement is sought in proceedings in equity or at law.

 

3.2.2. No Violation or Approval. The execution, delivery and performance by
Seller of the Transaction Agreements and the consummation of the transactions
contemplated by the Transaction Agreements do not and will not constitute or
result in (i) a violation of any order, judgment or decree of any court or
governmental agency or body having jurisdiction over Seller, the Company or any
of the Business Assets, or (ii) except as disclosed on Schedule 3.2.2, a breach
of or default under, or the acceleration of any obligation or creation of any
Encumbrance under (whether immediately, upon the passage of time or after the
giving of notice), or otherwise require a consent or waiver under, any
agreement, instrument, lease, contract, mortgage, deed or license to which
Seller or the Company is a party or by which Seller or the Company or any of
their assets are bound or affected or (iii) a violation of or a conflict with
the charter or bylaws of the Company. Except as disclosed on Schedule 3.2.2, no
notice to, or consent, approval, order or authorization of, or declaration or
filing with, any governmental authority or entity or other Person is required to
be obtained or made by Seller or the Company in connection with the execution,
delivery and performance of or the consummation of the transactions contemplated
by any of the Transaction Agreements.

 

3.3. The Business Assets.

 

3.3.1. Description. The Business Assets and the Premises constitute all of the
assets, properties and rights used by the Company to conduct its business and
necessary to conduct the Company’s business as currently conducted. Schedule
3.3.1 is a true and complete description of all material Business Assets,
including a list of all material tangible Business Assets. The Business Assets
include all of the assets reflected on the Company’s balance sheet as of
February 28, 2005 included in the Financial Statements and all assets acquired
in the ordinary course of business since that date, except (i) assets sold or
used in the ordinary course of business since that date, (ii) the assets
retained by Seller pursuant to Section 2.4 and (iii) any prepaid expenses
relating to insurance or employee benefit programs, which are managed on a
consolidated basis for Seller and its subsidiaries and will not be available to
the Company following the Closing.

 

3.3.2. Title. The Company has good and marketable title to all of the Business
Assets, free and clear of Encumbrances except (a) Encumbrances securing current
Taxes not yet due and payable and (b) Encumbrances set forth in Schedule 3.3.2.

 

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3.3.3. Intellectual Property. Schedule 3.3.3 is a list of the trademarks that
the Company currently has registered with the United States Patent and Trademark
Office. None of such trademarks infringes the intellectual property rights of
any other Person. To the knowledge of Seller, no other Person is infringing the
rights of the Company with respect to such trademarks. The Company’s
manufacture, use, performance or sale of products or services has not violated
or infringed on any intellectual property rights of any Person. The Company’s
operations have not otherwise infringed on the intellectual property right of
any Person.

 

3.4. Financial Matters.

 

3.4.1. Financial Statements. Attached to this Agreement as Exhibit A are the
unaudited balance sheet of the Company as of February 28, 2005 (the “Interim
Balance Sheet”) and the related unaudited statements of income, shareholders’
equity and cash flows for the three months then ended and the unaudited balance
sheets of the Company as of September 30, 2002, 2003 and 2004 and the related
unaudited statements of income, shareholders’ equity and cash flows for the
fiscal years then ended (collectively, the “Financial Statements”). The
Financial Statements were prepared from the books and records of the Company,
which are correct and complete. The Financial Statements present fairly the
financial position of the Company and the results of its operations as of the
respective dates and for the periods presented therein and have been prepared in
accordance with generally accepted accounting principles consistently applied
(“GAAP”), except that they do not include a statement of cash flows or the notes
required by GAAP.

 

3.4.2. No Undisclosed Liabilities. The Company has no Liabilities except (i) as
set forth in the Interim Balance Sheet, (ii) as disclosed on Schedule 3.4.2,
(ii) accounts payable, accrued salary, vacation and sick pay arising in the
ordinary course of business since the date of the Interim Balance Sheet; (iii)
performance obligations (other than any Liability arising out of or relating to
any breach that occurred prior to the Closing) under the express terms of the
Premises Lease or any Contract listed on Schedule 3.5.7, (iv) warranty
obligations under the terms of the warranties included on Schedule 3.5.5; (v)
current obligations to purchase and sell products or services under any purchase
and sale orders entered into by the Company in the ordinary course of business;
or (vi) the obligation to comply with applicable law in the ordinary course of
business, first required to be performed after the Closing and not arising in
connection with (A) any act, fact, or condition giving rise to a breach of any
representation or warranty of Seller herein, or (B) any act or omission of
Company or the Seller prior to the Closing.

 

3.4.3. Absence of Changes. Since February 28, 2005 the Company has not undergone
any material adverse change in its business, assets, liabilities, financial
condition, operating performance, or suffered any material damage, destruction
or loss (whether or not covered by insurance), and to Seller’s knowledge, no
event has occurred or circumstance exists that could reasonably be expected to
result in such a material adverse change. Since February 28, 2005, the Company
has operated only in the ordinary course of business, consistent with historical
practice. Without limiting the generality of the foregoing, since February 28,
2005, the Company has not:

 

(a) increased or experienced any material adverse change in any assumption
underlying any method of calculating bad debts, contingencies or other reserves
from that reflected in the Financial Statements;

 

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(b) cancelled, compromised, written down, written off or waived any claim or
right of having a value in excess of $10,000;

 

(c) sold, transferred, distributed or otherwise disposed of any of its material
assets except for sales of merchandise in the ordinary course of business and
sales or other dispositions of raw materials, inventory and equipment no longer
needed for its operation in the ordinary course of business and distributions
pursuant to Section 2.4;

 

(d) made any capital expenditure or commitment for additions to property, plant
or equipment having an aggregate cost in excess of $10,000;

 

(e) made or agreed to make any increase in the compensation payable or benefits
provided to any of the officers, directors, employees or consultants of the
Company, except for salary increases in the ordinary course of business;

 

(f) entered into, amended or modified any Company or Seller Employee Plan,
except in the ordinary course of business and consistent with past practice

 

(g) entered into any transaction or contract, or amended or terminated any
transaction or contract, with respect to the business of the Company, except
normal transactions or contracts entered into in the ordinary course of business
in arm’s-length transactions;

 

(h) terminated or been advised of the termination of or material reduction in
its relationship with any material customer or supplier;

 

(i) changed in any material respect the business policies, methods of accounting
or practices of the Company; or

 

(j) agreed, whether in writing or not, to do any of the foregoing.

 

3.4.4. Taxes. During the period that Seller has owned the Company, the Company
has been part of Seller’s affiliated group filing consolidated income Tax
Returns for federal and, where applicable, state income Tax purposes. All
required Tax Returns relating to the Company have been filed. All such Tax
Returns were correct and complete in all material respects. All Taxes owed by
the Company in respect of its operation that have become due prior to the
Closing Date have been paid. The Company has not waived any statutes of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency, other than waivers or extensions relating to
the consolidated income tax returns of Seller’s affiliated group. The Company
has not received notice from a taxing authority in a jurisdiction where it does
not file Tax Returns that it may be subject to taxation by that jurisdiction.
All Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee of the Company have been withheld and paid. The
Company has not been a “distributing corporation” or a “controlled corporation”
within the meaning of section 355(e) of the Code within the last two years.
Seller and the Company are part of a “selling consolidated group” as defined in
section 338(h)(10) of the Code.

 

10

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3.5. Operational Matters.

 

3.5.1. Suppliers. Schedule 3.5.1 lists the top twenty (dollar value) suppliers
or subcontractors from which the Company purchased goods or services in any of
the fiscal years ended September 30, 2004 and 2003. Schedule 3.5.1 lists each
supplier which is the Company’s sole source of supply for any product. The
Company has no knowledge that any such supplier or subcontractor intends to
discontinue, materially reduce delivery of any goods or services, default under
or terminate any agreement with the Company or modify the terms of its sales to
the Company within the next twelve months.

 

3.5.2. Customers. Schedule 3.5.2 lists all customers to which the Company sold
goods or services in any of the fiscal years ended September 30, 2004 and 2003.
The Company has no knowledge that any such customer intends to discontinue or to
materially reduce purchases of such goods or services or default under or
terminate any agreement with the Company within the next twelve months. Except
as accrued for the purpose of determining the Closing Date Net Working Capital,
the Company has not received any prepayments or deposits from customers for
products to be shipped or services to be performed in the future.

 

3.5.3. Compliance With Law. The Company is, and at all times been, in compliance
with applicable law in all material respects. The Company has not received
notice of any allegations or inquires concerning any violations of law relating
to the Company, the Premises or any facility or property currently or formerly
owned, occupied or used by the Company, the Company’s operations or the Business
Assets.

 

3.5.4. Litigation. Except as disclosed in Schedule 3.5.4, there are no actions,
claims, suits, audits, examinations, investigations or proceedings pending or to
Seller’s knowledge threatened against the Company, whether by a private Person
or a governmental agency or body and, to Seller’s knowledge, no event has
occurred or circumstance exists that is reasonably likely to give rise to or
serve as the basis for any such action, claim or the like. No judgments, orders,
decrees, citations, fines or penalties have been entered or assessed (and not
discharged or otherwise satisfied) against the Company.

 

3.5.5. Product Warranties/Product Liability. No product sold by the Company to
customers prior to the Closing Date is subject to any guaranty, warranty or
other indemnity beyond the applicable standard terms and conditions of sale
which are attached to or described on Schedule 3.5.5. Except as set forth on
Schedule 3.5.5, there have been no product recalls by the Company during the
past five years. Except as set forth on Schedule 3.5.5, since March 20, 1997, no
claims (whether or not insured by insurance policies) alleging personal injury,
bodily injury or property damage as a result of any defect in the design,
manufacture or installation of any product manufactured or sold by the Company,
or a breach of a duty to warn, test, inspect or instruct of dangers associated
with any such product has been made, or, to Sellers knowledge, threatened,
against the Company or, to Seller’s knowledge, its customers.

 

11

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3.5.6. Licenses, etc. Schedule 3.5.6 is a list of all governmental and
regulatory licenses and permits necessary for the conduct of the Company’s
business as presently conducted by the Company and the ownership or use of the
Business Assets. All of those licenses and permits required to be set forth on
Schedule 3.5.6 are in full force and effect, and the Company has been and is in
compliance with the same, except where the failure to be in compliance would not
have a material adverse effect on the Company, the Business Assets or its
operations. No proceeding is pending to revoke or limit any of such licenses and
permits or otherwise impose any conditions or obligations on the possession or
transfer of any of them, and to the Knowledge of seller, there is no proceeding
which has been threatened in writing which would have such an effect. No written
notice of any violation has been received by the Company relating to any license
or permit.

 

3.5.7. Contracts. Schedule 3.5.7 contains a true and complete list of all
contracts, agreements, deeds, mortgages, leases, licenses, instruments,
commitments, sales orders, purchase orders, quotations and bids to which the
Company is a party or by which the Company is bound, except for (i) the Premises
Lease, (ii) contracts for the purchase and sale of products or services entered
into by the Company in the ordinary course of business, and (iii) contracts
under which all material obligations of the Company have been performed (as
listed on Schedule 3.5.7, collectively, the “Contracts”). Seller has made
available to Buyer a true and complete copy of each Contract. Except as set
forth on Schedule 3.5.7, neither the Company nor, to the knowledge of Seller,
any other Person is in default under or in breach or violation of any Contract.

 

3.5.8. Bank Accounts; Powers of Attorney. All bank and brokerage accounts used
by the Company are master accounts for Seller and its subsidiaries and none of
those accounts will be available to the Company after the Closing. The Company
has not granted any powers of attorney.

 

3.5.9. Premises. The Premises constitute all of the real property, buildings and
improvements used by the Company in its business. Seller has made available to
Buyer a true and complete copy of the Premises Lease. Neither the Company nor,
to the knowledge of Seller, the lessor of the Premises is in default under or in
breach or violation of the Premises Lease.

 

3.6. Employee Matters.

 

3.6.1. Benefit Plans.

 

(a) List of Employee Plans. Schedule 3.6.1(a) contains a full and complete list
of all Company Employee Plans. True, correct and complete copies of each Company
Employee Plan have been made available by the Company to Buyer, including: (i)
each Company Welfare Plan and each Company Pension Plan and all amendments
thereto and the current summary plan description and summary annual reports, if
any, for each such plan; and (ii) each written (or a written description of any
oral) Company Benefit Arrangement. The Boards of Directors of Seller and the
Company have taken all necessary action to terminate the Company’s participation
in all Company Pension Plans effective on or before the Closing Date.

 

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(b) Multiemployer and Pension Plans. Except as set forth on Schedule 3.6.1(b),
the Company and its ERISA Affiliates do not, and have not for the past seven
calendar years, sponsored, maintained, contributed to, been required to
contribute to, or had any Liability with respect to, any Pension Plan or
Multiemployer Plan subject to Section 302 or Title IV of ERISA or Section 412 of
the Code. There are no unfunded benefit liabilities (within the meaning of
Section 4001(a)(18) of ERISA) with respect to any such Pension Plan or
Multiemployer Plan. No such Pension Plan or Multiemployer Plan has been the
subject of, and no event has occurred or condition exists that could be deemed,
a “reportable event” (as such term is defined in Section 4043 of ERISA) as to
which a notice would be required (regardless of whether waived) to be filed with
the PBGC. No such Pension Plan or Multiemployer Plan has been completely or
partially terminated, nor has any event occurred, nor do any circumstance exist,
that could result in the partial termination of any such Pension Plan or
Multiemployer Plan. The PBGC has not instituted or threatened a proceeding to
terminate or to appoint a trustee to administer any such Pension Plan or
Multiemployer Plan pursuant to Title IV of ERISA, and no condition or set of
circumstances exists that presents a material risk of termination or partial
termination of any such Pension Plan or Multiemployer Plan by the PBGC. Neither
the Company nor any of its ERISA Affiliates has any Liability to the PBGC (other
than payment of required premiums, all of which have been paid).

 

(c) Compliance. Except as set forth on Schedule 3.6.1(c), each Company Employee
Plan has at all times complied in all material respects with, and been
administered in all material respects in compliance with, its terms and all
applicable Law. All contributions and payments with respect to each Company
Employee Plan have been timely made when due.

 

(d) Tax-Favored Status. Each Company Employee Plan and any related trust
currently satisfies, and for all prior periods have satisfied, in form and
operation, all requirements for any Tax-favored treatment intended for such plan
or trust or applicable to plans or trusts of its type including, as applicable,
Sections 105, 106, 125, 401(a), 401(k) and 501 of the Code. The IRS has issued a
favorable determination letter with respect to the requirements for Tax-favored
status under Sections 401(a) and 501 of the Code for each Company Employee Plan
and each trust created under any such plan of a type that could be eligible for
such a determination letter, which applies to all amendments to the Code
effected by the laws generally known by the acronym “GUST” and all prior laws,
and nothing has happened since the date of such letter that would prevent any
such plan from remaining so qualified.

 

(e) Excess Payments. No payment which the Company is required to pay to any
employee, former employee, director, consultant or agent as a result of the
Transaction Agreements and related events will or could be characterized as an
“excess parachute payment” within the meaning of Section 280G(b)(1) of the Code.

 

(f) COBRA. Each Company Welfare Plan which is a “group health plan” (within the
meaning of Section 4980B of the Code or Section 607(1) of ERISA) has been
administered in compliance with COBRA.

 

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(g) Trigger Events. Neither the execution and delivery of the Transaction
Agreements nor the consummation of the transactions contemplated thereunder
will:

 

(i) give rise to any Liability on the part of the Company or Buyer for severance
pay, unemployment compensation, layoff benefits, change of control payments or
benefits, termination pay, or withdrawal liability or any other Liability to any
of their employees, former employees or any other Persons; or (ii) accelerate
the time of payment or vesting or increase the amount or value of compensation
or benefits due from the Company to any of its employees, former employees or
any other Persons.

 

(h) Representations. No written or oral representations have been made to any
employee or former employee of the Company promising or guaranteeing any
employer payment or funding for the continuation of medical, dental, life,
disability or other welfare coverages for any period of time beyond the end of
the current plan year (except, and to the extent, required by COBRA). No written
or oral representations have been made to any employee or former employee of the
Company concerning the Employee Plans of Buyer that are inconsistent in any
material respect with the terms of such Employee Plans.

 

(i) Single Employer. Except as set forth on Schedule 3.6.1(i), the Company would
not now be, and would never have been, considered an ERISA Affiliate of any
other Person.

 

3.6.2. Employees. The list of all employees of the Company provided by Seller to
Buyer as of the Closing Date that sets forth for each such employee: (i) his or
her position and title; (ii) his or her date of hire; (iii) his or her salary;
(iv) his or her unpaid wages, accrued vacation time and accrued personal time as
of February 28, 2005; and (v) any bonuses paid to him or her with respect to the
fiscal year ended September 30, 2004 or earned by or promised to him or her with
respect to the current fiscal year; is accurate and complete in all respects.
The Company has complied with all applicable Laws relating to the employment of
labor including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other Taxes, the
Worker Adjustment and Retraining Notification Act and the Immigration Reform and
Control Act of 1986; provided that Seller makes no representation or warranty
concerning the Company’s compliance with such laws in connection with any
termination or other action taken by Buyer or the Company after the effective
time of the Closing.

 

3.6.3. Employment. The Company has paid in full to all its employees, or made
appropriate accruals for on its books of account, all wages, commissions,
bonuses and other direct compensation for all services performed by them up to
the effective time of the Closing. The Company has withheld or collected from
each payment made to each of its employees the amount of all Taxes required to
be withheld or collected therefrom, and the Company has paid the same when due
to the proper governmental authorities through Closing. Except as set forth in
Schedule 3.6.3, there are no controversies, grievances or claims by any of the
Company’s employees, former employees of the Company or beneficiaries of
employees of the Company pending or, to the knowledge of Seller, threatened with
respect to their employment or benefits incident thereto, including, but not
limited to, sexual harassment and discrimination claims and claims arising under
workers’ compensation laws (collectively, “Employee Claims”), and to the
knowledge of Seller, there is no state of facts or event which could reasonably
be expected to form the basis for any Employee Claims. Except as set forth on
Schedule 3.6.3 there have been no Employee Claims with respect to the Company’s
employees

 

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in the past three years. Except as described on Schedule 3.6.3, the Company has
not promised any employee that he or she will receive any payment, bonus or
other special compensation if the transactions contemplated by this Agreement
are consummated.

 

3.6.4. Labor Relations. The Company is not a party to any collective bargaining
agreement with respect to any of its employees, none of its employees is
represented by a labor union and, to Seller’s knowledge, there is no labor union
organizing activity by or among its employees, nor has there been any such
activity during the past five years.

 

3.7. Environmental Matters.

 

3.7.1. Compliance. The Company is conducting and at all times has conducted its
business and operations, including, without limitation, its occupancy, use and
operation of the Premises or any facility or property currently or formerly
owned, occupied or used by the Company, in compliance in all material respects
with applicable Environmental Laws. Neither Seller nor the Company has received
any communication, whether from a governmental authority, citizens’ group,
employee or other individual or entity, that has alleged that the operation of
the Company’s business is not in compliance with any Environmental Law. No
notice has been filed by the Company under applicable Environmental Laws
reporting the Release or threatened Release of any Hazardous Substance and no
such notice has been required to be filed by the Company related to the Premises
or any facility or property currently or formerly owned, occupied or used by the
Company or the Company’s operation of its business.

 

3.7.2. Hazardous Substances. Any Hazardous Substances which are included among
the assets of the Company are used or intended for use in the conduct of the
Company’s business, have not been and are not intended to be discarded or
abandoned, and are not waste or waste materials. Except as set forth in Schedule
3.7.2, the Company does not generate, handle, use, transport or dispose of
Hazardous Substances in such quantities or in a manner that could reasonably be
expected to give rise to liability under any environmental law. All Hazardous
Substances generated or used as part of the business of the Company have been
handled, stored, treated and disposed of in compliance in all material respects
with applicable Environmental Laws.

 

3.7.3. Except as set forth in Schedule 3.7.3:

 

(a) (i) no underground storage tanks are located on the Premises or any facility
or property currently or formerly owned, occupied or used by the Company, (ii)
no underground storage tanks were located on the Premises or any facility or
property currently or formerly owned, occupied or used by the Company, during or
prior to the time that the subject facility or property was owned, occupied or
used by the Company, and (iii) the Company has not used any of the underground
storage tanks set forth in Schedule 3.7.3;

 

(b) there has been no Disposal or Release of any Hazardous Substance by the
Company or, to the Company’s knowledge, by any other Person, at or from the
Premises or any facility or property currently or formerly owned, occupied or
used by the Company, during or prior to the time that the subject facility or
property was owned, occupied or used by the Company in violation of any
Environmental Law, or which will or could reasonably be expected to give rise to
any Liability under any Environmental Law;

 

15

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(c) to the knowledge of Seller, there has been no Release of any Hazardous
Substance at or from any properties adjacent to any facility or property
currently or formerly owned, occupied or used by the Company, during or prior to
the time that the subject facility or property was owned, occupied or used by
the Company in violation of any Environmental Law, or which will or could
reasonably be expected to give rise to any Liability under any Environmental
Law;

 

(d) there is no electrical transformer, fluorescent light fixture with ballasts,
or other equipment containing polychlorinated biphenyls on the Premises or any
facility or property currently or formerly owned, occupied or used by the
Company;

 

(e) there has been no Treatment or Disposal of any Hazardous Substance by the
Company on the Premises or any facility or property currently or formerly owned,
occupied or used by the Company, during or prior to the time that the subject
facility or property was owned, occupied or used by the Company in violation of
any Environmental Law, or which will or could reasonably be expected to give
rise to any Liability under any Environmental Law, and all Hazardous Substances
owned or used by the Company that are not in the Company’s current and usable
supplies or inventory have been removed from any facility or property owned,
occupied or used by the Company and disposed of in compliance in all material
respects with all Environmental Laws;

 

(f) there has been no generation or Storage of any Hazardous Waste by the
Company on the Premises or any facility or property owned, occupied or used by
the Company, which generation or Storage was not in material compliance with
Environmental Law;

 

(g) there has been no Treatment, Storage or Disposal or arrangement for Disposal
of Hazardous Substances by the Company on any property not owned, operated, used
or leased by the Company in violation of any Environmental Law, or which will or
could reasonably be expected to give rise to any Liability under any
Environmental Law;

 

(h) the Company has not, in the course of operating it business, sent a
Hazardous Substance to a site that, pursuant to any Environmental Law (i) has
been placed or proposed for placement on the National Priorities List or any
similar state list, or (ii) is subject to or the source of an order, demand or
request from a government authority to take “response,” “corrective,” “removal,”
“remedial” or investigative action, as defined in any Environmental Law, or to
pay for the costs of any such action at the site; and

 

(i) the Company has prepared, maintained and filed all reports required to be
prepared, maintained or filed, and has timely obtained, and is in compliance in
all material respects with, all certificates, approvals, authorizations,
registrations and permits including, without limitation, all air permits,
authorizations and registrations, (all of which certificates, approvals,
authorizations, registrations and permits are set forth in Schedule 3.7.3 and
are in full force and effect, and copies of which have been furnished to Buyer)
and has generated and maintained all data, documentation and records required
under all Environmental Laws in connection with the operation of the Company’s
business;

 

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(j) Neither Seller nor the Company has received any written notice, order or
other communication from any Governmental Authority, citizens’ group, employee
or other individual or entity claiming that, as a result of the operation of the
business by the Company, that the Company is or may be a liable party under
CERCLA, any state superfund laws or comparable laws relating to environmental
cleanup or that the Company is or may be otherwise liable for personal injury or
property damage related to any Release, Treatment, Storage or Disposal of, or
exposure to, any Hazardous Substance;

 

(k) the Company maintains all records and has prepared and filed all lists,
reports and other information required pursuant to, and has otherwise complied
in all material respects with, TSCA and any and all rules and regulations
adopted pursuant thereto with respect to any products manufactured, produced,
distributed or sold by the Company. All of the products manufactured, produced,
distributed or sold by the Company, and all raw materials and intermediates
purchased from others used in such products, which were required to be reported
to the United States Environmental Protection Agency for the listing of “TSCA
Inventory” have been so reported. No report of substantial risk under TSCA has
been made by the Company, nor was any such report required in connection with
the operation of the Company’s business; and

 

(l) None of the products manufactured, produced, distributed or sold by the
Company contains or did contain any: (i) lead, (ii) asbestos, or (iii)
pentachlorophenal.

 

Schedule 3.7.3 also contains an accurate and complete list of all environmental
reports, audits and assessments prepared by or for Seller or the Company with
respect to the Company’s operation of its business or use of the Business Assets
in the past ten (10) years, copies of which have been furnished to Buyer.

 

3.8. Brokers, Finders, etc. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the intervention
of any Person acting on behalf of Seller or the Company in such manner as to
give rise to any valid claim against Seller, the Company or Buyer for any
brokerage or finder’s commission, fee or similar compensation.

 

3.9. Receivables. The accounts receivable included in the Business Assets, net
of the reserve reflected on the Company’s books and records, represent valid
obligations to the Company arising from sales actually made, services actually
performed or value actually given in the ordinary course, will be collected in
full, subject to any reserve reflected in the Closing Date Working Capital,
within 180 days. No consignment, “pay when sold” or extended payment terms have
been granted to any customer. There is no pending contest, claim or right of
set-off with respect to any account receivable included in the Business Assets
other than returns, credits, discounts and customer rebates.

 

3.10. Inventories. Schedule 3.10 sets forth a list of inventory included in the
Business Assets as of February 28, 2005. All inventory of the Company has been
valued on each of the balance sheets included in the Financial Statements and on
the records and books of

 

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account of the Company at the lower of cost or market value on a FIFO basis.
Obsolete inventory and inventory of below standard quality have been written
down to amounts not in excess of realizable market value.

 

3.11. Insurance. Schedule 3.11 lists all insurance policies purchased, acquired
or maintained by or for the Company during the five year period prior to the
Closing Date. Neither Seller nor the Company is in material default of any
provision of any policy listed or required to be listed on Schedule 3.11. Seller
has heretofore delivered or made available to Buyer true and correct copies of
all policies listed or required to be listed on Schedule 3.11, and after the
Closing Date the Company will continue to have the benefit of all such policies
on the same basis as immediately prior to the Closing Date in respect of
occurrences prior to the Closing Date during the respective policy periods.

 

3.12. Workers Compensation. At all times prior to the Closing, the Company has
maintained statutory Workers Compensation insurance. Except as listed on
Schedule 3.12, there have been no workers compensation or employers liability
claims by any employee of the Company for the last three years.

 

3.13. Disclosure. No representation or warranty of the Company in this Agreement
and no statement in the Schedules omits to states a material fact necessary to
make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.

 

SECTION 4

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer represents and warrants to Seller as follows:

 

4.1. Organization and Standing. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey. Buyer
has the requisite corporate power and authority to execute and deliver each of
the Transaction Agreements to which it is a party and to perform it obligations
thereunder. The execution, delivery and performance by Buyer of this Agreement
and the other Transaction Agreements to which it is a party, and the
consummation by Buyer of the transactions contemplated hereby and thereby, have
been duly and validly authorized and approved by all necessary corporate action
on the part of Buyer.

 

4.2. Execution and Validity of Agreements. This Agreement and each of the other
Transaction Agreements to which Buyer is a party have been duly executed and
delivered by Buyer and constitute the legal, valid and binding obligations of
Buyer, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, moratorium, reorganization and similar laws of general applicability
affecting the rights and remedies of creditors and to general principles of
equity, regardless of whether enforcement is sought in proceedings in equity or
at law.

 

4.3. No Violation or Approval. The execution, delivery and performance by Buyer
of each of the Transaction Agreements to which it is a party and the
consummation of the

 

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transactions contemplated thereby do not and will not result in (i) a violation
of any law, rule or regulation, order, judgment or decree applicable to Buyer or
any order, judgment or decree of any court or any governmental agency or body
having jurisdiction over Buyer or its properties or assets, (ii) a breach or a
default under (whether immediately, upon the passage of time or after giving
notice), or the acceleration of any payment under any material agreement,
instrument, lease, contract, mortgage, or license to which Buyer is a party or
by which it or any of its properties or assets is bound, or (iii) a violation of
or a conflict with its charter or bylaws. No consent, approval, order or
authorization of, or declaration or filing with, any governmental authority or
entity or other party is required to be, and has not been, obtained or made by
Buyer in connection with the execution, delivery and performance of or the
consummation of the transactions contemplated by any of the Transaction
Agreements.

 

4.4. Brokers, Finders, etc. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the intervention
of any Person acting on behalf of Buyer in such manner as to give rise to any
valid claim against Seller, the Company or Buyer for any brokerage or finder’s
commission, fee or similar compensation.

 

4.5. Securities Law Matters. Buyer is acquiring the Stock for its own account
and with no view to the distribution thereof. Buyer acknowledges that the Stock
has not been registered under the Securities Act of 1933, as amended, or the
securities laws of any state and cannot be offered or sold by Buyer unless
subsequently so registered or unless exemptions from the registration
requirements of that Act and all applicable state securities laws are available
for the transaction, as established to the satisfaction of the Company, by
opinion of counsel or otherwise. Buyer has had access to all material
information concerning the Company, including the opportunity to meet with and
ask questions of the officers of the Company. Buyer is an “accredited investor”
as defined in Regulation D of the Securities and Exchange Commission.

 

SECTION 5

POST-CLOSING COVENANTS

 

5.1. [INTENTIONALLY OMITTED]

 

5.2. Tax Returns and Contests.

 

5.2.1. Tax Periods Ending on or Before the Closing Date. Seller shall file or
cause to be filed all income Tax Returns that are required to be filed, and pay
or cause to be paid all income Taxes that are required to be paid, by or with
respect to the income of the Company for Tax periods that end on or before the
Closing Date, including, without limitation, the year ended September 30, 2004
and the short tax period of the Company from that date to the Closing Date.
Seller will pay any income Taxes due in respect of any such Tax period.

 

5.2.2. Tax Periods Beginning on or After the Closing Date. Buyer shall file or
cause to be filed all income Tax Returns that are required to be filed, and pay
or cause to be paid, all income Taxes that are required to be paid, by or with
respect to the income of the Company for any Tax period beginning on or after
the Closing Date.

 

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5.2.3. Contests. Seller shall have the exclusive authority to control any audit
or examination by any taxing authority, initiate any claim for refund, amend any
income Tax Return and contest, resolve and defend against any assessment for
income Taxes, notice of income Tax deficiency or other adjustment of income
Taxes of or relating to any liability of the Company for income Taxes for any
Tax period ending on or before the Closing Date. Subject to the foregoing,
Seller shall allow Buyer to participate at Buyer’s expense in any such contest
which could have a continuing effect on the Company or could result in any
adjustment to a Tax return of the Company for any other period. Seller shall not
settle any such audit or examination in a manner which would adversely affect
the Company after the Closing Date without the prior written consent of Buyer,
which consent shall not unreasonably be withheld. Buyer shall have the exclusive
authority to control any audit or examination by any taxing authority, initiate
any claim for refund, amend any income Tax Return and contest, resolve and
defend against any assessment for income Taxes, notice of income Tax deficiency
or other adjustment of income Taxes of or relating to any liability of the
Company or Buyer or any successor thereto for income Taxes for any Tax period
ending after the Closing Date. Subject to the foregoing, Buyer shall allow
Seller to participate at Seller’s expense in any audits or examinations of
income Tax Returns including the Company to the extent that such audits or
examinations could require Seller to make a payment under this Agreement. Buyer
shall not settle any such audit or examination in a manner which would adversely
affect Seller without the prior written consent of Seller, which consent shall
not unreasonably be withheld.

 

5.3. Health Benefits for Company Employees. From and after the Closing Date,
Buyer will use reasonable efforts to provide a health benefit plan for the
benefit of the Company’s employees and their dependents. Buyer’s health benefit
plan shall be responsible for all benefits for health care services rendered
after the effective time of the Closing to the Company’s employees and their
covered dependents (including those in the hospital or undergoing a plan of
treatment as of the Closing). In addition, Buyer shall (i) waive all
pre-existing condition exclusions and actively-at-work requirements and similar
limitations, eligibility waiting periods and evidence of insurability
requirements under any health benefit plan to the extent required by the Health
Insurance Portability and Accountability Act of 1996 (HIPAA), and (ii) take into
account any covered expenses incurred on or before the Closing Date by any
Company employee (or covered dependent thereof) for purposes of satisfying
applicable deductible provisions (as set forth in a writing delivered to Buyer
by Seller contemporaneously with the Closing) after the Closing Date under any
applicable Buyer health benefit plan. Buyer shall be responsible for complying
with COBRA with respect to any employee of the Company whose employment is
terminated on or after the Closing Date.

 

5.4. Further Assurances. Each of the parties, at and after the Closing Date,
upon the reasonable request from time to time of the other party and without
further consideration (other than the reimbursement of reasonable out-of-pocket
expenses), shall execute and deliver such documents and take such other actions
as may be necessary or reasonably desirable to consummate the transactions
contemplated hereby.

 

5.5. Press Releases. Immediately following the Closing, Seller and Buyer shall
make a press release announcing the consummation of the transactions
contemplated hereby substantially in the form previously approved by the
parties. Thereafter, neither party will issue any press release relating to the
subject matter of this Agreement without the prior

 

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written approval of the other, which approval shall not be unreasonably withheld
or delayed; provided that either party may, after attempting to obtain the
consent of the other party as far in advance as is reasonable in the
circumstance, make any press release that it is advised by counsel is necessary
or prudent under applicable securities laws.

 

5.6. Termination of Obligations. Effective as of the Closing Date, neither the
Company nor Buyer shall have any Liability to Seller or any Affiliate of Seller,
except for Liabilities under this Agreement and the other Transaction
Agreements. Effective as of the Closing Date, Seller shall not have any
Liability to the Company or Buyer, except for Liabilities under this Agreement
and the other Transaction Agreements.

 

5.7. COBRA Coverage. Seller shall timely provide all notices and continuation of
health care coverage required to be provided to any of the Company’s employees,
former employees, or the beneficiaries or dependents of such employees or former
employees, under COBRA, to the extent such notices and continuation of health
care coverage are required to be provided by reason of events occurring prior to
the effective time of the Closing.

 

5.8. Restrictive Covenants.

 

5.8.1. Confidential Information. In consideration of the consummation of the
transactions contemplated herein, Seller covenants and agrees at all times to
hold as secret and confidential (unless disclosure is required pursuant to court
order, subpoena in a governmental proceeding, arbitration or pursuant to other
process or requirement of law in which case Seller will provide Buyer reasonable
notice prior to such disclosure and shall take all reasonable steps to prevent
or limit disclosure) any and all knowledge, information, developments, methods
and processes, trade secrets, formulae, processes, technology, specifications,
know-how and confidences of the Company, its business, customers or products,
(“Confidential Information”). Seller agrees not to use any Confidential
Information for its own benefit or for the benefit of others or to disclose any
Confidential Information without the prior written consent of Buyer, which
consent shall make express reference to this Agreement. This covenant shall not
apply to (i) any information that becomes publicly available other than by or
through Seller, (ii) any information that Seller is required by law to disclose,
or (iii) any information disclosed as part of Seller’s financial statements, Tax
Returns, reports to the Securities and Exchange Commission or any analysis or
discussion thereof or press release relating thereto.

 

5.8.2. Noncompetition. In further consideration of the consummation of the
transactions contemplated herein, Seller covenants and agrees that until the
third (3rd) anniversary of the Closing Date (the “Non-Competition Period”), it
will not, without the prior written consent of Buyer, either directly or
indirectly, whether or not for consideration, (a) solicit business from, or
compete with the Company or Buyer for the business of, any customer for the
purchase of products or items the same as or substantially similar to, or which
may be otherwise used in substitution for, products sold by the Company
immediately prior to the Closing (such items, “Products”) in any state where the
Company sold Products prior to the Closing (the “Territory”); (b) operate,
control, advise, or perform any consulting services for, any business,

 

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company, partnership, organization, proprietorship, or other entity, who or
which, at any time during the Non-Competition Period, solicits business from, or
competes with the Company or Buyer for the business of, any customer for the
purchase of Products anywhere in the Territory; provided that Seller shall not
be in violation of this clause (b) unless its activities relate to the portion
of the entity’s business involving Products or (c) engage in any practice the
purpose of which is to evade the provisions of this covenant; provided, however,
that nothing contained herein shall prevent Seller from acquiring an equity
interest of up to two percent (2%) of an entity whose shares are traded on a
national securities exchange or over-the-counter market.

 

5.8.3. Noninterference. In further consideration of the consummation of the
transactions contemplated herein, during the Non-Competition Period, Seller
covenants and agrees that it will not, without the prior written consent of
Buyer, directly or indirectly, (a) solicit, induce or attempt to solicit or
induce any employee or agent of the Company or Buyer to terminate his or her
relationship with the Company or Buyer; or (b) induce or attempt to induce any
customer, supplier or contractor of the Company or Buyer to terminate or
adversely change its relationship with the Company or Buyer or otherwise
interfere with any relationship between the Company or Buyer and any of their
customers, suppliers or contractors.

 

5.8.4. Remedy for Certain Breaches. Seller acknowledges and agrees that the
covenants in Section 5.8 hereof were negotiated at arms length, are required for
the fair and reasonable protection of the Company and Buyer, that Buyer would
not have purchased the Stock had Seller not agreed to these covenants, that the
restrictions contained herein are designed to protect the business of the
Company and Buyer, and that the obligations of Buyer in this Agreement
constitute adequate consideration for Seller’s obligations under Section 5.8
hereof. Seller further acknowledges and agrees that a breach of any of the
covenants, obligations or agreements set forth in Section 5.8 hereof will result
in irreparable and continuing damage to the Company and Buyer in their
respective business and property for which there will be no adequate remedy at
law, and Seller agrees that in the event of any such breach, the Company and
Buyer shall be entitled to injunctive relief to restrain such breach by Seller,
and to such other and further relief (including damages) as is proper under the
circumstances.

 

5.8.5. Reformation of Agreement; Severability. The parties intend the covenants
set forth in Section 5.8 hereof to be enforced as written. However, in the event
that any provision set forth in Section 5.8 hereof is held by a court of
competent jurisdiction to be invalid or unenforceable to any extent, such court
shall exercise its discretion in reforming such provision to the end that Seller
shall be subject to such restrictions and obligations as the court deems
reasonable under the circumstances and enforceable by Buyer. In the event that a
provision or term of this Agreement is found to be void or unenforceable to any
extent and such court does not exercise its discretion to reform such provision,
it is the agreed upon intent of the parties hereto that all remaining provisions
or terms of this Agreement shall remain in full force and effect to the maximum
extent permitted by law and that this Agreement shall be enforceable as if such
void or unenforceable provision or term had never been a part hereof.

 

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SECTION 6

INDEMNIFICATION

 

6.1. Buyer’s Indemnification. Subject to the limitations set forth in this
Section 6, Buyer hereby agrees to indemnify and hold harmless Seller and its
Affiliates from, against and in respect of any and all Adverse Consequences
arising from:

 

(a) Any breach of any representation or warranty made by Buyer in this Agreement
or any other Transaction Agreement;

 

(b) Any breach or default in performance by Buyer of any covenant or other
agreement in this Agreement or any other Transaction Agreement; and

 

(c) All Adverse Consequences resulting from or arising solely out of the
operation of the Company’s business, the ownership of its assets or the
manufacture or sale of any product after the Closing, except any Adverse
Consequences resulting from any act, fact, or condition for which Buyer or its
Affiliates are entitled to indemnification under Section 6.2, without regard to
Section 6.4.

 

6.2. Seller’s Indemnification. Subject to the limitations set forth in this
Section 6, Seller hereby agrees to indemnify and hold harmless Buyer and its
Affiliates (including the Company) from, against and in respect of any and all
Adverse Consequences arising from:

 

(a) Any breach of any representation or warranty made by Seller in this
Agreement or any other Transaction Agreement;

 

(b) Any breach or default in performance by Seller of any covenant or other
agreement in this Agreement or any other Transaction Agreement;

 

(c) Notwithstanding any disclosure hereunder, all Adverse Consequences resulting
from or arising out of any Liability of the Company under any Environmental Law
resulting from any act, omission, or condition prior to the Closing Date;

 

(d) Notwithstanding any disclosure hereunder, all Adverse Consequences resulting
from or arising out of the operation of the Company’s business, the ownership of
its assets or the manufacture or sale of any product prior to the Closing,
except (i) Liabilities for accounts payable, accrued salary, vacation and sick
pay included in the final Closing Date Working Capital; (ii) performance
obligations (other than any Liability arising out of or relating to any breach
that occurred prior to the Closing) under the express terms of the Premise Lease
or any Contract listed on Schedule 3.5.7; (iii) warranty obligations for product
warranty claims made after the Closing under the terms of any warranty included
on Schedule 3.5.5; (iv) Adverse Consequences relating to the matters disclosed
on Schedule 3.5.4, to the extent of “Accrued Liabilities” included in the
determination of the Closing Date Working Capital; or (v) current obligations to
purchase and sell products or services under any purchase and sale orders
entered into by the Company in the ordinary course of business, but only to the
extent that, as of the Closing, the Company is not delinquent or in default with
respect thereto.

 

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(e) All Adverse Consequences resulting from or arising out of any item disclosed
on Schedule 3.6.3 pursuant to the last sentence of Section 3.6.3.

 

(f) All Adverse Consequences relating to the Company’s obligation to pay Taxes
with respect to any period prior to the Closing which are not accrued for
purposes of determining the Closing Date Net Working Capital.

 

6.3. Survival; Time Limits for Indemnification. The representations and
warranties of Seller made in this Agreement, or in any certificate or other
document delivered pursuant to this Agreement, will survive the Closing Date for
a period of two years from the Closing Date, except that the representations and
warranties in Sections 3.1, 3.2., 3.4.4, 3.6, 3.7 and 3.8 will survive the
Closing Date indefinitely. The representations and warranties of Buyer made in
this Agreement, or in any certificate or other document delivered pursuant to
this Agreement, will survive the Closing Date indefinitely. The covenants of
Seller and Buyer made in this Agreement will survive the Closing Date
indefinitely. Seller will not have any obligation to indemnify any Person
pursuant to this Agreement with respect to any breach of a representation or
warranty of Seller that survives the Closing Date for a limited period unless a
notice of such breach is given to Seller by such Person on or prior to the last
day of that period. Nothing in this Section 6.3 is intended to waive or extend
any statute of limitations or repose that is otherwise applicable to a claim
under this Agreement.

 

6.4. Basket and Cap.

 

6.4.1. Basket. Seller shall not have any obligation to indemnify Buyer or its
Affiliates under Section 6.2(a) until the aggregate Adverse Consequences
suffered by Buyer and its Affiliates for which indemnification would otherwise
be due under Section 6.2(a) exceed $35,000, but then Seller shall be liable to
Buyer for all Adverse Consequences, from the first dollar; provided that in no
event will this Section 6.4.1 apply to any claims under Sections 3.9 and 3.10.

 

6.4.2. Cap. Seller shall not be obligated to indemnify Buyer and its Affiliates
under Section 6.2(a) in an aggregate amount that exceeds $1,000,000.

 

6.5. Exclusivity. From and after the Closing Date, the right to indemnification
pursuant to (and subject to the limitations provided in) this Section 6 shall be
the exclusive remedy of the parties for any breach of a representation, warranty
or covenant in this Agreement.

 

6.6. Defense of Claims. Except as otherwise provided in Section 5.2.3, the
procedures to be followed with respect to the defense and settlement of any
claim against which any Person (an “Indemnitee”) is entitled to be indemnified
in whole or in part by Seller or Buyer (in such capacity, the “Indemnifying
Party”) under this Section 6 (a “Claim”) shall be as follows:

 

(a) Unless the Claim is also asserted against the Indemnifying Party and there
is a material conflict between the positions of the Indemnifying Party and the
Indemnitee in conducting the defense of the Claim, the Indemnifying Party shall
be entitled to assume and control such defense with counsel chosen by it. The
Indemnitee shall be entitled to participate therein after such assumption, but
the costs of such participation following such assumption shall be at the
expense of the Indemnitee. Upon assuming such defense, the

 

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Indemnifying Party shall have full right to enter into any compromise or
settlement which is dispositive of the matter involved; provided that, except
for the settlement of a Claim that involves no obligation of the Indemnitee
other than the payment of money for which indemnification is provided hereunder,
the Indemnifying Party shall not settle or compromise any Claim without the
prior written consent of the Indemnitee, which consent will not be unreasonably
withheld; and provided, further, that the Indemnifying Party may not consent to
entry of any judgment or enter into any settlement in respect of a Claim which
does not include an unconditional release of the Indemnitee from all liability
in respect of such Claim.

 

(b) With respect to a Claim as to which the Indemnifying Party (i) does not have
the right to assume the defense under Section 6.6(a) or (ii) shall not have
exercised its right to assume the defense, the Indemnitee shall assume and
control the defense of and contest such Claim with counsel chosen by it and the
Indemnifying Party shall be obligated to pay all reasonable attorneys’ fees and
expenses of the Indemnitee incurred in connection with such defense. The
Indemnifying Party shall be entitled to participate in the defense of such Claim
at its own expense. The Indemnitee shall not settle or compromise any Claim that
it is defending without the prior written consent of the Indemnifying Party,
which consent will not be unreasonably withheld.

 

(c) The Indemnifying Party and the Indemnitee shall cooperate fully with one
another in connection with the defense, compromise or settlement of any Claim,
including without limitation making available to the other all pertinent
information and witnesses within its control at reasonable intervals during
normal business hours.

 

SECTION 7

MISCELLANEOUS

 

7.1. [INTENTIONALLY OMITTED]

 

7.2. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to any
choice or conflict of laws rule or provision that would cause the application of
the domestic substantive laws of any other jurisdiction.

 

7.3. Notices. All notices and other communications required or permitted
hereunder shall be in writing (including any facsimile transmission or similar
writing), and may be given by any means selected by the sender. Any such notice
or other communication shall be effective (i) if sent by telecopy to the
recipient’s fax number given below, when such telecopy is transmitted and the
sender’s telecopier confirms transmission, (ii) if sent by reputable overnight
courier to the recipient’s address given below, one business day after being
delivered to such courier or (iii) if sent by any other means, when actually
received.

 

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To Seller:

 

            Rentech, Inc.

            1331 17th Street, Suite 720

            Denver, Colorado 80202

            Attention: Mr. Claude Corkadel

            Fax No.: (303) 298-8010

 

With a copy to:

 

            Sherman & Howard L.L.C.

            633 Seventeenth Street, Suite 3000

            Denver, Colorado 80202

            Attention: Andrew L. Blair, Jr.

            Fax No.: (303) 298-0940

 

To Buyer:

 

            Zinsser Co., Inc.

            173 Belmont Drive

            Somerset, NJ

            Attention: Robert Senior

            Fax No.: (732) 469-4539

 

With a copy to:

 

            Calfee Halter & Griswold LLP

            800 Superior Avenue

            Cleveland, OH 44114

            Attention: Edward W. Moore, Esq.

            Fax No.: (216) 241-0816

 

Any party may change its address or telecopier number to be used for purposes of
this Section 7.3 by notice to the other parties.

 

7.4. Entire Agreement, Assignability, Etc. This Agreement (including the
Schedules and Exhibit attached hereto) (i) constitutes the entire agreement, and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the transactions and matters
contemplated hereby, including the letter of intent dated December 3, 2004
between Buyer and Seller and (ii) is not intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder. Neither party
may assign its rights or delegate its duties hereunder without the written
consent of the other party.

 

7.5. Counterparts. This Agreement may be executed in any number of counterparts,
no one of which need be signed by all parties, each of which shall be deemed an
original and all of which together shall constitute one and the same instrument.
This Agreement may be executed or delivered by facsimile.

 

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7.6. Representations as to Knowledge. The representations and warranties of
Seller in Section 3 which are made to the “knowledge” of Seller or the Company
or words of similar import shall be deemed to mean the actual knowledge of
Geoffrey S. Flagg, Claude C. Corkadel, III, Frank L. Livingston and Fred A.
Merian, after inquiry of the employees of the Company who have primary
responsibility for the area of its operations to which the particular
representation and warranty relates.

 

7.7. Headings, Terms. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement. Defined terms are applicable to both singular
and plural forms. All pronouns will be deemed to refer to the masculine,
feminine or neuter, as the identity of the Person may require. The singular or
plural includes the other, as the context requires or permits. The word include
(and any variation) means including without limitation. The word day means a
calendar day. All references to Sections are to sections of this Agreement
unless indicated otherwise.

 

7.8. Waivers. No waiver by any party of any default, misrepresentation or breach
of warranty or covenant hereunder will be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence. No waiver will be effective unless set forth in
writing and signed by the party against whom such waiver is asserted.

 

7.9. Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.

 

7.10. Remedies Cumulative. Subject to Section 7.1, all remedies of Seller or
Buyer under this Agreement or any other Transaction Agreement are cumulative
with each other and with any other remedies available at law, in equity or by
contract. Any decision to pursue one remedy shall not prevent a party from
pursuing any other remedy at the same or any subsequent time.

 

7.11. Expenses. Each party will bear all costs and expenses (including, without
limitation, all legal, accounting and tax related fees and expenses) incurred by
it in connection with this Agreement or the transactions contemplated hereby.

 

7.12. Construction. The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement will be construed as if drafted jointly by
the parties and no presumption or burden of proof will arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.

 

7.13. Incorporation of Exhibit. The Exhibit and Schedules identified in this
Agreement are incorporated herein by reference and made a part hereof.

 

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.

 

SELLER: Rentech, Inc. By:  

/s/ Claude C. Corkadel III

--------------------------------------------------------------------------------

Name:   Claude C. Corkadel III Title:   Vice President – Strategic Programs
BUYER: Zinsser Co., Inc. By:  

/s/ L. Joseph Lee

--------------------------------------------------------------------------------

Name:   L. Joseph Lee Title:   Vice President/Assistant Secretary

 

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