EXHIBIT 10(r)

ASSET PURCHASE AGREEMENT

Dated June 8, 2000

By and Between

TYCO INTERNATIONAL (US) INC.,

LUDLOW BUILDING PRODUCTS, INC.

as Buyer

TYCO PLASTICS SERVICES AG

as IP Buyer

and

K2 INC.,

as Seller

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TABLE OF CONTENTS

 

               Page 1.    AGREEMENT TO SELL AND AGREEMENT TO PURCHASE.    1   
1.1    ASSETS TO BE CONVEYED    1    1.2    EXCLUDED ASSETS    3    1.3   
FURTHER ASSURANCES    3 2.    CONSIDERATION TO BE PAID BY BUYER.    3    2.1   
PURCHASE PRICE FOR ACQUISITION ASSETS    3    2.2    ADJUSTMENT TO PURCHASE
PRICE    4    2.3    ASSUMED LIABILITIES    5    2.4    LIABILITIES NOT ASSUMED
BY BUYER    7    2.5    ALLOCATION OF PURCHASE PRICE    8 3.    REPRESENTATIONS
AND WARRANTIES OF SELLER.    8    3.1    ORGANIZATION AND GOOD STANDING    8   
3.2    AUTHORIZATION OF AGREEMENT    8    3.3    OWNERSHIP OF ACQUISITION ASSETS
OWNERSHIP OF ACQUISITION ASSETS    9    3.4.    FINANCIAL CONDITION    9    3.5
   PROPERTY OF SELLER    10    3.6    AGREEMENT NOT IN BREACH OF OTHER
INSTRUMENTS    12    3.7    LABOR AND EMPLOYMENT MATTERS; PENSION AND EMPLOYEE
BENEFIT PLANS    12    3.8    LITIGATION AND COMPLIANCE WITH LAWS    14    3.9
   CONTRACTS AND OTHER INSTRUMENTS    15    3.10    COMPENSATION OF AND
INDEBTEDNESS TO AND FROM OFFICERS    16    3.11    INSURANCE    16    3.12   
BROKERAGE    17    3.13    KNOWLEDGE    17    3.14    TAXES    17    3.15   
PRODUCT LIABILITY AND RECALLS    18    3.16    UNDISCLOSED LIABILITIES    18   
3.17    RESTRICTIONS ON BUSINESS ACTIVITIES    18    3.18    NO ILLEGAL OR
IMPROPER TRANSACTIONS    18    3.19    INVENTORY    18    3.20    NO IMPLIED
WARRANTIES    18 4.    REPRESENTATIONS AND WARRANTIES OF BUYER.    19    4.1   
ORGANIZATION; GOOD STANDING; AND CORPORATE AUTHORITY    19    4.2    AGREEMENT
NOT IN BREACH OF OTHER INSTRUMENTS    19    4.3    REGULATORY APPROVALS    19

 

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Table of Contents

(Continued)

 

               Page    4.4    BROKERAGE    19    4.5    SUFFICIENT FUNDS    20
   4.6    RELIANCE ON REPRESENTATIONS AND WARRANTIES    20 5.    CLOSING.    20
6.    CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES.    20    6.1   
ACCESS    20    6.2    CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS    21    6.3   
CONDUCT OF BUSINESS OF DIVISION    21    6.4    PRESERVATION OF ORGANIZATION   
22    6.5    CURRENT INFORMATION    22    6.6    CONTRACTS    22    6.7   
COMPLETION OF TRANSACTION; HART-SCOTT-RODINO    22    6.8    ACCOUNTS RECEIVABLE
   22    6.9    CONDITION TO TRANSFER OF CERTAIN CONTRACTS    23    6.10   
WAIVER OF COMPLIANCE WITH BULK SALES LAWS    23    6.11    EMPLOYEES    23   
6.12    TAXES    24    6.13    COVENANT NOT TO COMPETE    24    6.14   
COOPERATION WITH LITIGATION    24    6.15    PRODUCT CLAIMS    25 7.   
CONDITIONS TO OBLIGATIONS OF SELLER.    25    7.1    CORRECTNESS OF
REPRESENTATIONS AND WARRANTIES    25    7.2    PERFORMANCE OF COVENANTS AND
AGREEMENTS    25    7.3    OPINION OF COUNSEL FOR BUYER    25    7.4   
ADDITIONAL CLOSING DOCUMENTS    25    7.5    NO LEGAL BAR    26    7.6    HSR
EXPIRATION/TERMINATION    26    7.7    MICHIGAN DEPARTMENT OF ENVIRONMENTAL
QUALITY, WASTE MANAGEMENT DIVISION APPROVAL    26 8.    CONDITIONS TO
OBLIGATIONS OF BUYER.    26    8.1    CORRECTNESS OF REPRESENTATIONS AND
WARRANTIES    26    8.2    PERFORMANCE OF COVENANTS AND AGREEMENTS    26    8.3
   OPINION OF COUNSEL FOR SELLER    26    8.4    NO LEGAL BAR    26    8.5   
TRANSFER DOCUMENTS    27    8.6    HSR EXPIRATION/TERMINATION    27 9.   
SURVIVAL; INDEMNIFICATION.    27    9.1    SURVIVAL    27    9.2   
INDEMNIFICATION BY SELLER    27

 

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Table of Contents

(Continued)

 

               Page    9.3    INDEMNIFICATION BY BUYER    27    9.4    GENERAL
INDEMNIFICATION LIMITATIONS; REMEDIATION    28    9.5    NOTICE OF CLAIMS    28
   9.6    THIRD PARTY CLAIMS    29    9.7    PAYMENTS    29    9.8    REMEDIES
EXCLUSIVE    29    9.9    CERTAIN DAMAGES    29 10.    TERMINATION OF AGREEMENT
   29    10.1    EVENTS OF TERMINATION    29    10.2    RIGHTS AND OBLIGATIONS
ON TERMINATION    30 11.    MISCELLANEOUS PROVISIONS.    30    11.1   
CONSTRUCTION    30    11.2    NOTICES    30    11.3    ASSIGNMENT    31    11.4
   AMENDMENTS AND WAIVERS    31    11.5    REMEDIES    32    11.6    ATTORNEYS’
FEES    32    11.7    BINDING NATURE OF AGREEMENT    32    11.8    EXPENSES   
32    11.9    ENTIRE AGREEMENT    32    11.10    SEVERABILITY    32    11.11   
COUNTERPARTS    33    11.12    SECTION HEADINGS    33

 

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “AGREEMENT”) is made and entered into as of
this 8th day of June, 2000 by and between Tyco International (US) Inc., a
Massachusetts corporation (“TYCO”), Ludlow Building Products, Inc., a Virginia
corporation (“BUYER”), Tyco Plastics Services AG, a Swiss corporation (“IP
BUYER”), and K2 Inc., a Delaware corporation (“SELLER”). (Except as used in this
paragraph and Sections 1, 4.1, 9 and 11.3 of this Agreement, the term “Buyer” is
used herein to refer to Tyco, Buyer and IP Buyer collectively.)

RECITALS

1. Seller’s division, Simplex Products (the “DIVISION”), is engaged in the
business of manufacturing and selling a variety of industrial and building
products, including exterior sheathing and housewrap, recycled chipboard,
exterior insulative finishing systems (“EIFS”), industrial flexible packaging
materials, paperboard products and container components.

2. Tyco desires to cause Buyer and IP Buyer to acquire, and Seller desires to
sell, all of the assets (tangible and intangible), properties and goodwill of
Seller used or held for use primarily in the Division, on the terms and
conditions hereinafter set forth.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:

1. AGREEMENT TO SELL AND AGREEMENT TO PURCHASE.

1.1 ASSETS TO BE CONVEYED. On the Closing Date (as hereinafter defined) Seller
shall convey, transfer, assign, sell and deliver to Buyer and IP Buyer, and Tyco
shall cause Buyer and IP Buyer to acquire, accept and purchase, all of the
assets, properties and rights of Seller used or held for use primarily in the
Division (hereinafter collectively referred to as the “ACQUISITION ASSETS”)
including, but not limited to, the following:

(a) Prepaid items and deposits of the Division;

(b) Accounts receivable, notes and notes receivable arising from the conduct of
the Division’s business (the “ACCOUNTS RECEIVABLE”);

(c) Inventories of raw material, work-in-process and finished goods of the
Division (collectively, the “INVENTORY”), whether located at the premises of the
Division or elsewhere, including, without limitation, inventory of the Division
held by third parties on consignment at the locations listed in SCHEDULE 1.1(c)
attached hereto;

(d) Office supplies, drums, containers, tote bins and other packaging material,
spare parts, safety equipment, maintenance supplies and other similar items of
the Division;

 

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(e) Subject to Section 6.9 hereof, real property leases (including, but not
limited to, leases relating to the Leased Real Estate (as hereinafter defined)),
equipment or other leases, licenses, contracts, agreements, purchases or sales
orders or commitments, written or oral (collectively, the “CONTRACTS”),
including, without limitation, those set forth on SCHEDULE 1.1.(e);

(f) Motor vehicles and other rolling stock used by the Division, including those
which are listed in SCHEDULE 1.1(f) attached hereto;

(g) Machinery, equipment, tooling, dies, tools, furniture, fixtures, cranes and
craneways owned or used by the Division on the Closing Date (hereinafter
referred to collectively with the motor vehicles and other rolling stock owned
or used by Seller as the “FIXED ASSETS”), whether or not fully depreciated on
the books and records of Seller, including, without limitation, those assets set
forth in SCHEDULE 1.1(g) attached hereto;

(h) Domestic and foreign patents, patent applications, copyrights, copyright
applications, trademarks, trademark applications, service marks, service mark
applications, trade names (including without limitation the names “THERMO-PLY,”
“BREATHEDRY,” “FINESTONE,” “BARRICADE,” “R-WRAP” and all derivatives and
variants thereof) and trade name registrations (in any such case, whether
registered or to be registered in the United States of America or elsewhere) and
processes, inventions, trade secrets, trade names, computer programs, formulae,
know how and other intangible personal property (all of the foregoing in this
Section 1.1(h) being hereinafter referred to collectively as “INTANGIBLE
PERSONAL Property”) used or held for use primarily in the Division, including,
without limitation, those items set forth in SCHEDULE 1.1(h) attached hereto;

(i) The real property commonly known as the Adrian, Michigan plant, the
Constantine, Michigan plant and the Jacksonville, Florida facility (the “OWNED
REAL ESTATE”) and more particularly described on SCHEDULE 1.1(i) attached
hereto, including without limitation all improvements and fixtures located
thereon and all rights and interests appurtenant thereto (such real property,
improvements, fixtures and appurtenant rights and interests being hereinafter
referred to collectively with the Leased Real Estate as the “REAL PROPERTY”);

(j) All federal, state, local and foreign licenses, permits and other
governmental authorizations relating to the Division, including without
limitation those listed in SCHEDULE 3.8.2;

(k) All goodwill of the Division, customer lists, sales brochures, computer
software, books, records and accounts, correspondence, production records,
employment records and any confidential information relating to or arising out
of the Division, it being understood that Seller will retain duplicate copies of
such books, records, accounts and other information as it may deem appropriate
for its tax and other ongoing record keeping requirements;

(l) All rights of Seller under express or implied warranties from the suppliers
of Seller with respect to the Acquisition Assets; and

 

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(m) computer systems, equipment and other assets, properties or rights of Seller
used in the Division.

With respect to the Acquisition Assets listed above, IP Buyer will acquire those
Acquisition Assets referred to in Section 1.1(h).

1.2 EXCLUDED ASSETS. Notwithstanding Section 1.1 hereof, Seller is not selling,
and Buyer is not purchasing, pursuant to this Agreement, any of the following
(the “EXCLUDED ASSETS”), all of which shall be retained by Seller:

(a) Cash, cash equivalents and marketable securities;

(b) Rights of Seller under this Agreement and the agreements, instruments and
certificates delivered in connection with this Agreement;

(c) Seller’s minute books, tax returns and other corporate documents;

(d) Seller’s duplicate copy of the books, records and accounts of the Division;

(e) All rights to claims, available to or being pursued by Seller for refunds of
or credits against income taxes attributable to the Division for taxable periods
ending on or before the Closing Date and for the portion ending on the Closing
Date of any taxable period that includes but does not end on the Closing Date
(the “PRE-CLOSING TAX PERIODS”) (determined as if such taxable period ended as
of the close of business on the Closing Date).

(f) The name and mark “K2” and any name or mark derived from or including the
foregoing and any other name or mark owned by the Seller and not used by the
Division;

(g) All rights of Seller under any liability insurance policies except for those
disclosed in SCHEDULE 3.11 attached hereto; and

(h) Computer programs, systems, equipment, intangible personal property and any
other assets, properties or rights of Seller used generally in the conduct of
Seller’s business and not used or held for use in the Division.

1.3 FURTHER ASSURANCES. On the Closing Date and from time to time thereafter,
Seller will execute and deliver to Buyer such instruments of sale, transfer,
conveyance, assignment and delivery, consents, assurances, powers of attorney
and other instruments as may be reasonably requested by Buyer in order to vest
in Buyer all right, title and interest in and to the Acquisition Assets and
otherwise in order to carry out the purpose and intent of this Agreement.

2. CONSIDERATION TO BE PAID BY BUYER.

2.1 PURCHASE PRICE FOR ACQUISITION ASSETS. The aggregate purchase price for the
Acquisition Assets (the “PURCHASE PRICE”) shall be $27,500,000, subject to
adjustment under Section 2.2. The Purchase Price shall be paid to Seller by wire
transfer at the Closing (as hereinafter defined) to an account designated by
Seller at least three (3) business days prior to the Closing Date.

 

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2.2 ADJUSTMENT TO PURCHASE PRICE. The Purchase Price shall be subject to
adjustment after the Closing in accordance with the following procedure:

(a) As soon as practicable (but in no event later than forty-five (45) days
after the Closing Date), Seller, with Buyer’s cooperation, shall prepare and
deliver an unaudited balance sheet of the Division as of the Closing Date (the
“CLOSING DATE BALANCE SHEET”) including a calculation of the Net Assets, as of
the Closing Date. As used herein, “NET ASSETS” shall mean the net assets of the
Division as shown on the Closing Balance Sheet. In connection with the Closing
Date Balance Sheet, the physical inventory of the Acquisition Assets shall be
jointly conducted by Seller and Buyer. The Closing Date Balance Sheet and Net
Asset calculation: (i) shall include only the Acquisition Assets and Assumed
Liabilities of the Division, (ii) shall be prepared in accordance with GAAP,
except as set forth on SCHEDULE 3.4.2, and (iii) in all cases where there is a
permissible choice among accounting principles and procedures in accordance with
GAAP, shall be prepared on a basis consistent with Seller’s Balance Sheet as of
April 2, 2000, except as indicated on APPENDIX A. Attached hereto as APPENDIX A
is statement of Net Assets of the Division, as of April 2, 2000, which
illustrates, and shall be used as a model, in preparing the statement of Net
Assets as of the Closing Date. Seller’s Chief Financial Officer shall certify
that the Closing Date Balance Sheet fairly reflects the financial position of
the Division as of the Closing Date (exclusive of the Excluded Assets) and is
prepared in accordance with the provisions of this Section 2.2(a).

(b) If the Net Assets of the Division set forth in the Closing Date Balance
Sheet are less than $24,827,000, the Purchase Price shall be reduced to the
extent of the difference. If the Net Assets of the Division set forth in the
Closing Date Balance Sheet are more than $24,827,000, the Purchase Price shall
be increased to the extent of the difference. The amount of any increase in the
Purchase Price shall be paid by Buyer to Seller within five (5) days after final
determination of the Net Assets, with interest from the date of Closing at the
prime rate of Bank of America N.T.S.A., as in effect from time to time. The
amount of any reduction in the Purchase Price shall be refunded by Seller to
Buyer within five (5) days after such final determination, with interest for the
period and at the rate set forth in the preceding sentence. Any amounts payable
hereunder shall be payable by wire transfer in immediately available funds to an
account designated by the party entitled to such payment at least one day before
the wire transfer.

(c) Buyer shall have a reasonable time, not in excess of thirty (30) days, to
review the Closing Date Balance Sheet and the Net Assets and Seller shall
cooperate in furnishing all such working papers and accounting records as Buyer
shall reasonably request for such purpose. If Buyer does not timely deliver a
“Contest Notice” (as hereinafter defined) in accordance with Section 2.2(d), the
Closing Date Balance Sheet, Net Assets and the Purchase Price adjustment derived
therefrom will be final and binding on the parties. If a Contest Notice is so
delivered, the Closing Date Balance Sheet, Net Assets and any adjustment to the
Purchase Price shall be determined as set forth below.

 

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(d) In the event that Buyer contests any part of the Purchase Price as adjusted,
as set forth above, Buyer shall give Seller written notice of its objections
thereto (a “CONTEST NOTICE”) within thirty (30) days following the delivery of
the Closing Date Balance Sheet. Any such Contest Notice shall specify in
reasonable detail the nature of any disagreement asserted and the amount claimed
by Buyer. Buyer’s right to contest the Purchase Price, as adjusted hereunder,
shall be limited to the inclusion on the Closing Date Balance Sheet of assets
that do not exist. Without limiting the generality of the foregoing, Buyer
expressly waives any right to challenge the amount of any reserve or accrual
reflected on the Closing Date Balance Sheet so long as there is no downward
movement in such reserve or accrual reflected in Seller’s Balance Sheet as of
April 2, 2000.

(e) During the period of thirty (30) days following the timely delivery of any
such Contest Notice, Buyer and Seller shall attempt to resolve any differences
which Buyer and Seller may have with respect to any matter specified in the
Contest Notice (which resolution, if any, shall be final and binding on all the
parties). If, at the end of such thirty (30) day period, Buyer and Seller shall
fail to reach written agreement with respect to all of such matters, then the
matters specified in any Contest Notice with respect to which such written
agreement has not been reached (the “DISPUTED MATTERS”) shall be submitted for
determination by an independent certified public accounting firm of national
standing (the “ACCOUNTANTS”) mutually selected by Buyer’s accountants and
Seller’s accountants, respectively. The Accountants shall consider only the
Disputed Matters. The Accountants shall not be required to follow any particular
rules of procedure, it being the intention of the parties to create a flexible,
practical and expeditious method for resolving any disagreement hereunder. The
Accountants’ decision with respect to all Disputed Matters shall be final and
binding upon the parties hereto.

(f) Each party shall bear its own costs and expenses for its independent
auditors. The fees and expenses of the Accountants incurred in connection with
its review and determination of any Disputed Matters shall be borne one-half by
Buyer and one-half by Seller.

2.3 ASSUMED LIABILITIES. As further consideration for consummation of the
transactions contemplated hereby, subject to Section 2.4 hereof, at the Closing,
Buyer shall assume and agree to thereafter pay when due and discharge and
indemnify Seller and hold Seller harmless with respect to the following
liabilities (the “ASSUMED LIABILITIES”):

(a) All obligations and liabilities of Seller under Contracts that are to be
acquired by Buyer pursuant to the provisions of this Agreement;

(b) All accounts payable owed by Seller arising out of operations of the
Division or otherwise in respect of the Division;

(c) All obligations and liabilities (other than non-contractual product
liability claims for defective products) in respect of any and all products made
(if the date of manufacture is readily determinable) and sold by the Division on
or after the Closing Date, including obligations and liabilities for refunds,
adjustments, allowances, rebates, repairs, exchanges, returns and warranties of
merchantability and other contractual warranty claims;

 

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(d) All non-contractual obligations and liabilities in respect of product
liability claims relating to any and all defective products (other than building
products) made (if the date of manufacture is readily determinable) and sold by
the Division on or after the Closing Date, including obligations and liabilities
for property damage and related refunds, adjustments, allowances, repairs,
exchanges, returns, claims of warranty of merchantability and other claims;

(e) All non-contractual obligations and liabilities in respect of product
liability claims for any and all defective building products made (if the date
of manufacture is readily determinable) and sold by the Division on or after the
Closing Date, including obligations and liabilities for property damage and
related refunds, adjustments, allowances, repairs, exchanges, returns, claims of
warranty of merchantability and other claims;

(f) Environmental Liabilities related to the real property included in the
Acquired Assets relating to any facts or circumstances arising on or after the
Closing Date;

(g) All obligations and liabilities in respect of personal injury or property
damage claims with respect to any real property included in the Acquired Assets
as to which the date of such damage or injury (as determined in a manner
consistent with the determination of the date of loss under an “occurrence
based” insurance policy) was on or after the Closing Date;

(h) All obligations and liabilities arising under or in connection with
(i) accrued payroll and accrued vacation with respect to all Transferred
Employees; (ii) accrued benefits other than severance benefits, if any, under
the Paper Industry Union Management Pension Fund (the “PAPER INDUSTRY PLAN”);
(iii) severance of any Transferred Employee who is terminated as a result of or
in connection with the transactions contemplated hereby, who does not accept
Buyer’s offer of employment pursuant to Section 6.11 hereof or who terminates
employment with Buyer after the Closing Date; (iv) post-retirement medical
benefits for Transferred Employees pursuant to the terms of any applicable
Collective Bargaining Agreement; and (v) any wrongful termination, grievance or
other employment related claim brought by any Transferred Employee whose
employment is terminated following the Closing Date to the extent that such
claim is solely attributable to the actions of Buyer subsequent to the Closing
Date; provided, however, that (A) (x) accrued payroll with respect to all
Transferred Employees, (y) accrued vacation with respect to all hourly employees
and (z) the monthly liabilities with respect to the Paper Industry Plan accrued
through the Closing Date shall only be included to the extent reflected or
reserved on the Closing Balance Sheet and (B) with respect to claims arising
pursuant to benefits described in clause (iv) of this Section 2.3(h), Buyer will
administer all such claims and Seller shall reimburse Buyer for the portion of
any payments attributable to the Transferred Employees based upon years of
service prior to the Closing Date; and

(i) All other liabilities, contingent or otherwise, owed by Seller, to the
extent arising prior to the Closing Date out of the conduct of the Division
Business by Seller and to the extent that they are reflected or reserved on the
Closing Date Balance Sheet (including, without limitation, obligations and
liabilities in respect of products sold by the Division prior to the Closing
Date). In addition to the foregoing, to the extent of the unused Basket Amount
referred to in Section 9.4(a), Buyer shall assume obligations and liabilities of
the kind referred to in Section 2.3(c) above in respect of products sold by the
Division prior to the Closing Date.

 

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2.4 LIABILITIES NOT ASSUMED BY BUYER. Buyer shall not be deemed by anything
contained in this Agreement to have assumed and Seller hereby agrees to fully
pay and perform in a prompt and timely manner and to indemnify Buyer and hold
Buyer harmless with respect to the following excluded liabilities (the “EXCLUDED
LIABILITIES”):

(a) Any liability of Seller to any person or entity the existence of which
constitutes a breach of any covenant, agreement, representation or warranty of
Seller contained in this Agreement;

(b) Any liability of Seller for any federal, state, local, foreign or other
taxes, except to the extent liabilities or reserves therefor are included on the
Closing Date Balance Sheet;

(c) Any non-contractual obligations and liabilities in respect of product
liability claims related to any defective products (other than building
products) made (if the date of manufacture is readily determinable) or sold by
the Division prior to the Closing Date, including obligations and liabilities
for property damage and related refunds, adjustments, allowances, repairs,
exchanges, returns, claims of warranty of merchantability and other claims;

(d) Any non-contractual obligations and liabilities in respect of product
liability claims related to any defective building products made (if the date of
manufacture is readily determinable) or sold by the Division prior to the
Closing, including obligations and liabilities for property damage and related
refunds, adjustments, allowances, repairs, exchanges, returns, claims of
warranty of merchantability and other claims

(e) All Environmental Liabilities relating to the real property included in the
Acquired Assets arising out of any facts or circumstances existing or arising
prior to the Closing Date;

(f) All obligations arising in respect of personal injury or property damage
claims with respect to any real property included in the Acquired Assets as to
which the date of such injury or loss (as determined in a manner consistent with
the determination of the date of loss under an “occurrence based” insurance
policy) was prior to the Closing Date;

(g) Except as set forth in SECTION 2.3(h) or 2.3(i) and except for liabilities
under Contracts to be acquired by Buyer as a part of the Acquired Assets, any
liability of Seller under any “EMPLOYEE BENEFIT PLANS” for any event occurring
prior to the Closing Date or any obligation for benefits accrued prior to the
Closing Date. “Employee Benefit Plans” means any employee pension benefit plans
(as defined in Section (3)(2) of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”)), employee welfare benefit plans (as defined in
Section 3(1) of ERISA, bonus, deferred compensation, incentive compensation,
stock ownership, phantom stock, disability, death, dependent care, employee
assistance, scholarship or other plan or program, arrangement or understanding
(whether or not covered by ERISA) maintained in whole or in part, contributed
to, or required to be contributed to by Seller for the benefit of any present or
former officer, employee, or director of Seller or any entity which is under
common control with Seller within the meaning of Section 414 of the Internal
Revenue Code of 1986 (the “CODE”), any such entity being hereafter referred to
as a “COMMONLY CONTROLLED ENTITY”);

 

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(h) Any liability or obligation relating to claims related to wrongful
termination, occupational safety, workers’ or workmen’s compensation or
grievance proceedings arising out of events occurring on or before the Closing
Date except to the extent any of the foregoing (i) arise in connection with the
termination of any Transferred Employee following the Closing Date or (ii) are
reflected on the Closing Date Balance Sheet;

(i) Any liability arising under or in connection with the matters set forth in
Schedules 3.8.1, 3.8.2 and 3.15 attached hereto, except, in each case, to the
extent of any reserve therefor set forth on Closing Balance Sheet and except, in
the case of Section 3.15, to the extent referred to in the last sentence of
Section 2.3(i); and

(j) Any liability or obligation arising as a result of any breach by Seller
prior to the Closing Date of its obligations under that certain Contract dated
December 26, 1995 between the Division and the Michigan Department of
Environmental Quality Waste Management Division (the “Michigan Contract”).

2.5 ALLOCATION OF PURCHASE PRICE. The parties hereto agree to allocate the
Purchase Price prior to the Closing among the Acquisition Assets. Seller and
Buyer shall jointly complete and separately file Form 8594 with their respective
federal income tax returns for the tax year in which the Closing Date occurs in
accordance with such allocation, and unless required by law, each of the parties
shall refrain from taking a position on any income, transfer or gains tax
return, before any governmental agency charged with the collection of any such
tax or in any judicial proceeding that is in any manner inconsistent with the
terms of any such allocation without written consent of the other in each
instance.

3. REPRESENTATIONS AND WARRANTIES OF SELLER.

Seller represents and warrants to Buyer as follows:

3.1 ORGANIZATION AND GOOD STANDING. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with full corporate power to carry on the business of the Division as it is now
and has since its organization been conducted and to own, lease or operate the
Acquisition Assets and is duly licensed or qualified to do business and in good
standing as a foreign corporation under the laws of every jurisdiction in which
the name of the activities conducted by Seller and/or the character of the
assets owned or leased by Seller makes such qualification or license necessary,
except for those jurisdictions where the failure to be so qualified would not
have a Material Adverse Effect . As used in this Agreement, “MATERIAL ADVERSE
EFFECT” means any change in or effect on the business or properties of the
Division that (a) is or is reasonably likely to be materially adverse to the
business, operations, properties, condition (financial or otherwise), assets or
liabilities of the Division taken as a whole (excluding adverse changes that are
the result of: (i) economic factors affecting the economy as a whole and
(ii) the announcement and pendency of the transactions contemplated hereby) or
(b) materially impairs or prohibits the ability of Seller and Buyer to
consummate the transactions contemplated by this Agreement.

3.2 AUTHORIZATION OF AGREEMENT. Seller has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.

 

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This Agreement and all other agreements and instruments to be executed by Seller
in connection herewith have been (or upon execution will have been) duly
executed and delivered by Seller, have been effectively authorized by all
necessary action, corporate or otherwise, and constitute (or upon execution will
constitute) legal, valid and binding obligations of Seller, enforceable against
Seller in accordance with their respective terms.

3.3 OWNERSHIP OF ACQUISITION ASSETS OWNERSHIP OF ACQUISITION ASSETS. Seller is
the lawful owner of or, in the case of leased assets, has the right to use and
transfer to Buyer each of the Acquisition Assets, and the Acquisition Assets are
free and clear of all mortgages, pledges, liens, security interests,
encumbrances and restrictions of every kind and nature (collectively, “LIENS”),
other than Liens disclosed pursuant to this Agreement and encumbrances and
restrictions affecting real property which do not materially interfere with the
present use thereof. The delivery to Buyer of the instruments of transfer of
ownership contemplated by this Agreement will vest good and marketable title to
the Acquisition Assets in Buyer, free and clear of all Liens, except as referred
to in the preceding sentence. The Acquisition Assets include all assets, rights
and interests necessary for the conduct of the Division, as presently conducted,
except as disclosed in SCHEDULE 3.3.

3.4. FINANCIAL CONDITION.

3.4.1 FINANCIAL STATEMENTS. Seller has furnished to Buyer unaudited financial
statements of the Division, consisting of balance sheets as of December 31, 1999
and consolidated statements of income and cash flows for the year then ended
(the “FINANCIAL STATEMENTS”). The Financial Statements, including the footnotes
thereto, are attached hereto as Schedule 3.4.1.

3.4.2 ACCOUNTING STANDARDS. The Financial Statements: (i) have been prepared in
accordance with the books and records of Seller; (ii) have been prepared in
accordance with GAAP in a manner consistent with past practice, except for
adjustments as set forth on SCHEDULE 3.4.2; and (iii) present fairly the
financial position and results of operations of the Division at and for the
fiscal periods indicated therein; except for the absence of certain information
and footnotes required for complete financial statements prepared in accordance
with GAAP and except as disclosed in the footnotes thereto.

3.4.3 ABSENCE OF CERTAIN CHANGES. Since December 31, 1999, there has not been
relating to the Division:

(a) any sale, distribution, transfer or subjection to any Lien of any of
Seller’s assets, except sales of inventory in the ordinary and usual course of
business;

(b) any increase in the salary or other compensation or benefits payable or to
become payable to any officer, director or employee, other than routine
increases in the ordinary course of business consistent with past practices;

(c) any adoption of a new benefit plan or any amendment to an existing benefit
plan for the employees or officers of the Division;

(d) any transaction by Seller not in the ordinary and usual course of business;

 

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(e) any Material Adverse Effect;

(f) any damage, destruction or loss, whether or not covered by insurance, which
has a Material Adverse Effect;

(g) any material alteration in the manner in which Seller keeps its books,
accounts or records or in the accounting practices therein reflected, including
the recognition and computation of accrued expenses;

(h) the incurrence of any indebtedness for borrowed money or any commitment to
borrow money or any guaranty, direct or indirect, of indebtedness of others, or
any prepayment of long-term debt;

(i) except as listed on SCHEDULE 3.4.3(i) or as provided elsewhere herein, any
acquisition or lease of or commitment to acquire or lease any realty, or any
capital expenditure in excess of $50,000 individually or in the aggregate; or

(j) any change in the operations, business or manner of conducting the Division,
other than changes in the ordinary and usual course of business consistent with
prior practice, none of which, individually or in the aggregate, has had or is
expected to have a Material Adverse Effect.

3.5 PROPERTY OF SELLER.

3.5.1 REAL PROPERTY.

(a) Except for the Owned Real Estate and the real property commonly known as the
(i) Jacksonville, Florida sales office, which constitutes the leased premises
under the Lease between Seller as lessee and Beach Marine as lessor (the
“JACKSONVILLE OFFICE LEASE”), (ii) Jacksonville, Florida warehouse, which
constitutes the leased premises under the Lease between Seller as lessee and
Eastport Partner as lessor (the “JACKSONVILLE WAREHOUSE LEASE”), (iii) Adrian,
Michigan railsiding, which constitutes the leased premises under the Lease
between Seller as lessee and Norfolk & Western as lessor (the “ADRIAN RAILSIDING
LEASE”), (iv) Adrian, Michigan Group headquarters, which constitutes the leased
premises under the Lease between Seller as lessee and Mangold LLC as lessor (the
“ADRIAN HEADQUARTERS LEASE”) and (v) Seattle, Washington office, which
constitutes the leased premises under the Lease between Seller as lessee and
Gabriel Enterprises as lessor (the “SEATTLE LEASE” and together with the
Jacksonville Office Lease, the Jacksonville Warehouse Lease, the Adrian
Railsiding Lease and the Adrian Headquarters Lease, the “LEASED REAL ESTATE”),
each as more fully described in SCHEDULE 3.5.1, there is no parcel of real
property, building or other improvement owned or leased by Seller and used by
the Division. Seller owns the Owned Real Estate free and clear of all Liens and
such other covenants, restrictions, easements and imperfections of title as do
not materially interfere with the present use of such property;

(b) All of the buildings, fixtures and other improvements located on the Real
Property are, in all material respects, in satisfactory operating condition and
repair, and the operation thereof as presently conducted is not in material
violation of any applicable building code, zoning ordinance or other law or
regulation;

 

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(c) Seller holds valid and effective certificates of occupancy, underwriters’
certificates relating to electrical work, zoning, building, housing, safety,
fire and health approvals and all other material permits and licenses required
by applicable law relating to the operation of the Real Property;

(d) Seller has not experienced during the two (2) years preceding the date
hereof any material interruption in the delivery of adequate quantities of any
utilities (including, without limitation, electricity, natural gas, potable
water, water for cooling or similar purposes and fuel oil) or other public
services (including, without limitation, sanitary and industrial sewer service)
required by Seller in the operation of the Division during such period; and

(e) There is no condemnation or eminent domain proceeding pending which relates
to the Real Property, and, to the knowledge of Seller, there is no such
proceeding threatened by any relevant governmental authority nor any such
proceeding to which Seller is not a party but as to which its properties are
subject which materially and adversely affects any of such properties.

3.5.2 TANGIBLE PERSONAL PROPERTY. SCHEDULE 1.1(f) or SCHEDULE 1.1(g) lists each
item of tangible personal property (other than Inventory) owned by Seller or in
the possession of Seller which is to be transferred to Buyer pursuant hereto and
an identification of the owner of, and any agreement relating to the use of,
each item of tangible personal property the rights to which are to be
transferred to Buyer pursuant hereto under leases or other similar agreements
included in the Contracts. Except as otherwise indicated on SCHEDULE 3.5.2,
Seller owns all of the tangible personal property used in the Division free and
clear of all Liens, and except as set forth in Section 1.2, all such property
will be transferred to Buyer at the Closing free and clear of all Liens. Each
item of such tangible personal property is located on the Real Property and is
in satisfactory operating condition and repair subject to normal wear and tear.

3.5.3 INTANGIBLE PERSONAL PROPERTY. SCHEDULE 1.1(h) lists (i) an identification
of each domestic and foreign patent, patent application, copyright, copyright
application, trademark, trademark application, service mark, service mark
application and trade name (the “INTELLECTUAL PROPERTY”) owned by Seller or used
by Seller in the conduct of the business of the Division and (ii) a true and
complete list of all licenses or similar agreements or arrangements to which
Seller is a party either as licensee or licensor for each such item of
Intellectual Property. Except as otherwise indicated on SCHEDULE 1.1(h), Seller
owns or has a valid license to use all of such Intellectual Property free and
clear of all Liens, and, all such Intellectual Property will be transferred to
Buyer at the Closing free and clear of all Liens.

(a) There have not been any actions or other judicial or adversary proceedings
involving Seller concerning any of the Intangible Personal Property included in
the Acquisition Assets, nor, to the knowledge of Seller, is any such action or
proceeding threatened;

 

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(b) Seller has the right and authority to use all items of Intangible Personal
Property included in the Acquisition Assets in connection with the conduct of
the Division in the manner presently conducted and to convey such right and
authority to Buyer, and such use does not, to the knowledge of Seller, conflict
with, infringe upon or violate any patent, copyright, trademark, service mark,
trade secret, trade name or other right of any other person, firm or
corporation;

(c) There are no outstanding, nor, to the knowledge of Seller, are there any
threatened, disputes or disagreements with respect to any licenses or similar
agreements or arrangements included in the Intangible Personal Property included
in the Acquisition Assets and the consummation of the transactions contemplated
hereby will not impair any right or privilege enjoyed by Seller under any
license granted to Seller by others, or give rise to the termination or
cancellation thereunder except as disclosed in Schedule 1.1(h) attached hereto;

(d) The conduct of the business of the Division does not, to the knowledge of
Seller, conflict with any patent, copyright, trademark, service mark, trade
secret, trade name or other similar rights of others; and

(e) To the knowledge of Seller (i) there is no person, firm or corporation
engaging in any activity or using any of the Intellectual Property that
infringes upon, or conflicts with, the rights of the Division, and (ii) there
has been no misappropriation of any material trade secrets or other confidential
rights of the Division by any person, firm or corporation.

3.6 AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. Except as set forth in
SCHEDULE 3.6, the execution, delivery and performance of this Agreement by
Seller and the consummation of the transactions contemplated hereby will not
result in a breach of any of the terms and provisions of, or constitute a
default under, or conflict with, any Contract or any other material agreement,
indenture or other instrument to which Seller is a party or by which Seller is
bound, the Certificate of Incorporation or Bylaws of Seller, or any judgment,
decree, order or award of any court, governmental body or arbitrator, or any
law, rule or regulation applicable to Seller.

3.7 LABOR AND EMPLOYMENT MATTERS; PENSION AND EMPLOYEE BENEFIT PLANS.

(a) Except as set forth in SCHEDULE 3.7 attached hereto, there is no
(i) collective bargaining agreement or other labor agreement to which Seller is
a party or by which it is bound; (ii) employment, profit sharing, deferred
compensation, bonus, stock option, stock purchase, retainer, consulting,
retirement, welfare, incentive or severance plan, policy or contract to which
Seller is a party or by which it is bound; or (iii) each employee benefit plan
and arrangement including plans described in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), in which
Transferred Employees (as defined in Section 6.11) currently participate. Seller
has made available to Buyer copies of all current documents and instruments
governing such plans;

 

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(b) Each of the plans listed in Schedule 3.7 have been administered in
compliance with their terms and with all filings, reporting, disclosure and
other requirements of ERISA and the Internal Revenue Code of 1986, as amended
(the “Code”) and each plan (together with its related funding instrument) which
is an employee pension benefit plan is qualified under Section 401 of the Code
and the regulations issued thereunder, and each plan and its related funding
instrument have been the subject of a favorable determination letter issued by
the Internal Revenue Service holding that such plan and its related funding
instrument are so qualified;

(c) Other than routine claims for benefits made in the ordinary course of
business, there are no pending claims, investigations, or causes of action
(“Claims”) and to the best knowledge of Seller and its affiliates, no such
claims are threatened against any plan listed in Schedule 3.7 or fiduciary of
any such plan by any participant, beneficiary or governmental agency with
respect to the qualification or administration of such plan;

(d) No withdrawal liability (as defined in Section 4021, 4063 or 4064 of the
Code or ERISA) has been, or will be, incurred as a result of the transactions
contemplated by this agreement with respect to, any defined benefit plan or
multi-employer plan covering the Transferred Employees;

(e) No party to any such agreement, plan or contract is in default with respect
to any material term or condition thereof, nor has any event occurred which
through the passage of time or the giving of notice, or both, would constitute a
default thereunder or would cause the acceleration of any obligation of any
party thereto; and

(f) Seller has complied in all material respects with all applicable laws, rules
and regulations relating to the employment of labor, including those related to
wages, hours, collective bargaining and the payment and withholding of taxes and
other sums as required by appropriate governmental authorities and has withheld
and paid to the appropriate governmental authorities or is holding for payment
not yet due to such authorities, all amounts required to be withheld from such
employees of Seller and is not liable for any arrearages of wages, taxes,
penalties or other sums for failure to comply with any of the foregoing. Except
as set forth in SCHEDULE 3.7(c) attached hereto, there is no: (i) unfair labor
practice complaint against Seller pending before the National Labor Relations
Board or any state or local agency or any basis for any such complaint;
(ii) pending labor strike or other material labor trouble affecting the
Division; (iii) labor grievance pending against Seller or any basis for any such
grievance; (iv) pending representation question respecting the employees of the
Division; (v) pending arbitration proceedings arising out of or under any
collective bargaining agreement to which Seller is a party; (vi) to the
knowledge of Seller, any basis for which a claim may be made under any
collective bargaining agreement to which Seller is a party; or (vii) pending or,
to the knowledge of Seller, threatened claim against Seller regarding the
discharge or dismissal of any employee based on discrimination or for any other
reason and, to the knowledge of Seller there is no basis for any such claim. All
reasonably anticipated obligations of Seller (whether arising by operation of
law, by contract, by past custom or otherwise), for salaries, vacation and
holiday pay, sick pay, bonuses and other forms of compensation payable to the
officers, directors or other employees of the Division in respect of the
services rendered by any of them have been paid or adequate accruals therefor
have been made in the ordinary course of business in the books and records of
Seller.

 

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3.8 LITIGATION AND COMPLIANCE WITH LAWS.

3.8.1 LITIGATION PENDING OR THREATENED. Except as set forth in SCHEDULE 3.8.1,
there is no action, suit, arbitration, proceeding, grievance or investigation,
pending or (to the knowledge of Seller) threatened, before any court, tribunal,
panel, master or governmental agency, authority or body in which Seller is a
party or to which the Division is subject, nor is Seller, or any officer or
employee of Seller enjoined from any action or subject to any continuing
restriction which may adversely affect the Division.

3.8.2 VIOLATION OF LAW. Seller is not in material violation of any provision of
any law, decree, order or regulation (including, without limitation, those
relating to antitrust or prohibiting other anti-competitive business practices,
those relating to employment practices, such as discrimination, health and
safety, and those relating to minority business enterprises), applicable to the
Division. Seller has all material federal, state, local, foreign and other
licenses, permits and other governmental authorizations required in the conduct
of the business of the Division and the operation of its properties. Such
licenses, permits and other governmental authorizations, including those
obtained under applicable Environmental Laws (as hereinafter defined) are listed
in SCHEDULE 3.8.2. Except as provided by this Agreement, no notice to, filing
with, or approval or consent of, any governmental agency or body issuing any of
the permits, licenses or other governmental authorizations, or otherwise having
jurisdiction over Seller or the Division or the operations or properties of the
Division, is required in order to permit the execution, delivery or performance
of this Agreement, the consummation of the transactions contemplated hereby or
the sale, transfer and delivery of the Acquisition Assets or the continuation of
the Division after the Closing. No present or, to the knowledge of Seller,
prospective zoning or use restriction will adversely affect the business of the
Division as now conducted or as presently proposed to be conducted hereafter,
and the present conduct of the business of the Division is not dependent upon
any so-called “non-conforming use” exception or any other exception which would
terminate or otherwise be impaired by the transactions contemplated hereby.
Seller is not a party to any consent decree issued by any governmental agency,
authority or body relating to the Division.

3.8.3 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.8.3 attached
hereto:

(a) Seller is in compliance in all material respects with all Environmental Laws
(as defined below) which are applicable to the business, operations or assets of
the Division;

(b) Seller holds, and is in compliance in all material respects with, all
permits, licenses, franchises, approvals and authorizations by governmental or
regulatory authorities or bodies (collectively, “PERMITS”) required under
Environmental Laws for Seller to conduct the business of the Division conducted
by it;

(c) Prior to the date of this Agreement, (i) to Seller’s knowledge, there are no
events, conditions, actions, or omissions relating to the conduct of the
business of the Division that have given or will give rise to any Environmental
Liability (as defined below) based on or related to the use, processing,
generation, treatment, storage, disposal,

 

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transport, emission, discharge, release or threatened release of any Hazardous
Substance (as defined below), and (ii) Seller has not received any written
notice of the institution or pendency of any lawsuit, action, proceeding,
investigation or claim by any person alleging any Environmental Liability
arising from or relating to the conduct of the business of the Division;

(d) As used herein:

“ENVIRONMENTAL LAWS” means any domestic or foreign, federal, state, interstate
or local statute, law or regulation having the force of law and in effect and
promulgated as such as of the Closing Date (collectively, “PRE-CLOSING
ENVIRONMENTAL LAWS AND REGULATIONS”) or any order, injunction, judgment, decree,
common law or other enforceable requirement of any governmental entity, except
to the extent that it sets forth more stringent or additional requirements than
those authorized by Pre-Closing Environmental Laws and Regulations, and relating
to the protection of human health, safety or the environment, including any of
the foregoing related to: (i) Remedial Actions (as defined below); (ii) the
reporting, licensing, permitting, or investigating of the emission, discharge,
release or threatened release of Hazardous Substances into the air, surface
water, groundwater or land; (iii) the manufacture, release, distribution, use,
generation, treatment, storage, disposal, transport or handling of Hazardous
Substances; or (iv) the protection of the health and safety of employees or the
public;

“ENVIRONMENTAL LIABILITY” means any liability or obligation arising under
Environmental Laws in connection with the Acquired Assets or the business or
operation of the Division to the extent arising from any condition existing or
any act or omission of Seller at or prior to the Closing Date, including claims,
demands, assessments, judgments, orders, causes of action (including toxic tort
suits), notices of actual or alleged violations or liability (including such
notices regarding the disposal or release of Hazardous Substances on the
premises or elsewhere), proceedings and any associated costs, assessments,
losses, damages (except consequential damages), obligations, liabilities,
awards, fines, sanctions, penalties, or amounts paid in settlement (including
reasonable costs, fees and expenses of attorneys, accountants, consultants and
other agents of such person);

“HAZARDOUS SUBSTANCE” means any substance or material: (i) that is defined as a
“hazardous waste” or “hazardous substance” under any Environmental Law;
(ii) that is considered toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic or mutagenic or otherwise regulated under any
Environmental Law; or (iii) that contains gasoline, diesel fuel or other
petroleum hydrocarbons, polychlorinated biphenyls or asbestos; and

“REMEDIAL ACTION” means any response action, removal action, remedial action,
corrective action, monitoring program, sampling program, investigation or other
cleanup activity required by any Environmental Law to clean up, remove,
remediate, treat or abate any Hazardous Substance in the environment.

3.9 CONTRACTS AND OTHER INSTRUMENTS.

3.9.1 Except as set forth in SCHEDULE 3.9.1 attached hereto, there has not
occurred any material default under any Contract on the part of Seller or, to
the knowledge of

 

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Seller, on the part of the other parties thereto, and no event has occurred
which, with the giving of notice or the lapse of time, or both, would constitute
any default under any Contract. Except as set forth in SCHEDULE 3.6 attached
hereto, no consent of any party to any Contract is required in order to permit
the execution, delivery or performance of this Agreement, the consummation of
the transactions contemplated hereby, or the sale, transfer or delivery of the
Acquisition Assets or the assumption of the liabilities to be assumed by Buyer
under Section 2.3, nor will the execution, delivery or performance of this
Agreement, the consummation of the transactions contemplated hereby or the sale,
transfer and delivery of the Acquisition Assets or the assumption of the
liabilities to be assumed by Buyer, result in a material breach of any of the
terms and provisions of, or constitute a default under, or conflict with, or
result in a modification of, any Contract of Seller, except for such breaches,
defaults, conflicts or modifications that would not in the aggregate reasonably
be expected to have a Material Adverse Effect.

3.9.2 SCHEDULE 1.1(e) attached hereto lists each Contract, except:
(a) agreements for the purchase by Seller of goods, materials, supplies or
services in the ordinary course of business involving less than $50,000 in
consideration in each such case; and (b) agreements for the sale of goods or
services in the ordinary course of business in which the sales price of the
goods to be sold and the services to be rendered pursuant to each such agreement
is less than $50,000 for each such agreement. True and complete copies of each
of the Contracts, or where they are oral, true and complete written summaries
thereof, have been delivered to Buyer by Seller.

3.10 COMPENSATION OF AND INDEBTEDNESS TO AND FROM OFFICERS.

3.10.1 SCHEDULE 3.10.1 attached hereto sets forth a true and complete list of
the names of and offices held by the officers of the Division. The current
compensation of each of the officers and employees of the Division (including
salary, bonus, other incentive compensation and other perquisites and benefits)
has been disclosed in writing to Buyer, except for any officer or employee whose
aggregate compensation is less than $50,000 per annum.

3.10.2 Except as set forth in SCHEDULE 3.10.2, Seller has no financial
obligation and is not otherwise indebted to any person who is an officer or
employee of the Division, or to any relative of any such person or to any entity
controlled directly or indirectly by, or otherwise affiliated with, such person,
in any amount whatsoever other than for compensation for services rendered since
the start of the current pay period of Seller and for business expenses.

3.11 INSURANCE. SCHEDULE 3.11 sets forth a true and correct list of all
insurance policies of any nature whatsoever maintained by Seller relating solely
to the Division at any time during the three (3) years prior to the date of this
Agreement and the annual or other premiums payable thereunder. Except as
disclosed in Schedule 3.11, attached hereto, there are no outstanding
requirements or recommendations by any insurance company that issued any policy
of insurance applicable, in whole or in part, to the properties or operations of
the Division or by any Board of Fire Underwriters or other similar body
exercising similar functions or by any governmental authority exercising similar
functions which requires or recommends any changes in the conduct of the
Division of, or any repairs or other work to be done on or with respect to any
of the properties or assets of, Seller. Seller has not received any notice or
other

 

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communication from any such insurance company within the two (2) years preceding
the date hereof canceling or materially amending or materially increasing the
annual or other premiums payable under any of said insurance policies, and to
the knowledge of Seller, no such cancellation, amendment or increase of premiums
is threatened.

3.12 BROKERAGE. Seller has not dealt with, and is not obligated to make any
payment to, any finder, broker, investment banker or financial advisor other
than Salomon Smith Barney in connection with any of the transactions
contemplated by this Agreement or the negotiations looking toward the
consummation of such transactions.

3.13 KNOWLEDGE. Certain of the representations and warranties are made “to the
knowledge.” The parties hereto agree that the meaning of such expression shall
in all cases be understood as comprising actual knowledge and belief of the
persons identified on SCHEDULE 3.13 after reasonable inquiry of the Division’s
employees and representatives and reasonable review of the Division’s files,
books and records.

3.14 TAXES.

(a) DEFINITIONS. For purposes of this Agreement:

(i) The term “Taxes” means all federal, state, local, foreign, and other net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to
taxes, or additional amounts with respect thereto, and the term “Tax” means any
one of the foregoing Taxes;

(ii) The term “Returns” means all returns, declarations, reports, statements,
and other documents required to be filed in respect of Taxes, and the term
“Return” means any one of the foregoing Returns;

(iii) The term “Code” means the Internal Revenue Code of 1986, as amended. All
citations to the Code or to the regulations promulgated thereunder shall include
any amendments or any substitute or successor provisions thereto.

(b) Seller has paid or will pay when due or finally settled all Taxes relating
to the Division or to the Acquisition Assets which are or become due or payable
for all periods up to and including the Closing Date (other than those to be
paid by Buyer hereunder). Seller has properly filed on a timely basis, or so
will file when due, all Returns relating to the Division or the Acquisition
Assets for all periods up to and including the Closing Date (other than those to
be filed by Buyer hereunder).

(c) LIENS. There are no liens for Taxes (other than for current Taxes not yet
due and payable) on the Acquisition Assets.

(d) FOREIGN PERSON. Seller is not a person other than a United States person
within the meaning of the Code.

 

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3.15 PRODUCT LIABILITY AND RECALLS.

(a) Except as set forth in SCHEDULE 3.15 attached hereto, there is no action,
suit, claim, inquiry, proceeding, or investigation in any case by or before any
court or governmental body pending or, to the best knowledge of Seller,
threatened, against or involving the Division relating to any product alleged to
have been designed, manufactured, or sold by the Division and alleged to have
been defective or improperly designed or manufactured.

(b) Except as set forth in SCHEDULE 3.15 attached hereto, there is no pending,
or to the best knowledge of Seller, threatened recall or investigation of any
product sold by Seller in connection with the Division.

3.16 UNDISCLOSED LIABILITIES. Seller has no liabilities or obligations, whether
accrued, absolute, contingent or otherwise, that would be required to be
reflected on a balance sheet prepared in accordance with GAAP, except (i) to the
extent reflected or reserved for on the Financial Statements; (ii) liabilities
or obligations disclosed in the Schedules thereto; or (iii) liabilities or
obligations incurred in the ordinary course of business since the date of the
Financial Statements or reflected on the Closing Date Balance Sheet.

3.17 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this Agreement or as set
forth in SCHEDULE 3.17 attached hereto, to the best knowledge of Seller, there
is no agreement, judgment, injunction, order or decree binding upon Seller which
has or could reasonably be expected to have the effect of prohibiting or
impairing any business practice of Seller, acquisition of property by Seller, or
the conduct of business by Seller as currently conducted by Seller.

3.18 NO ILLEGAL OR IMPROPER TRANSACTIONS. To Seller’s knowledge, neither the
Seller nor any stockholder, officer, or employee of Seller, has directly or
indirectly, used funds or other assets of the Division, or made any promise or
undertaking in such regards, for (a) illegal contributions, gifts, entertainment
or other expenses relating to political activity; (b) illegal payments to or for
the benefit of governmental officials or employees, whether domestic or foreign;
(c) illegal payments to or for the benefit of any person, firm, corporation, or
other entity, or any director, officer, employee, agent, or representative
thereof; (d) gifts, entertainment, or other expenses that materially jeopardize
the normal business relations between the Division and any of its customers; or
(e) the establishment or maintenance of a secret or unrecorded fund which would
violate any material law.

3.19 INVENTORY. The inventory reflected in the most recent financial statements
of the Division is carried at an amount not in excess of the lower of cost or
net realizable value, in each case, net of applicable reserves. The inventory is
merchantable and fit for the purpose for which it was procured or manufactured,
and no inventory is obsolete, damaged or defective, or not usable or saleable
within one year after the Closing Date in the ordinary course of business of the
Division as heretofore conducted, except to the extent reflected in applicable
reserves.

3.20 NO IMPLIED WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH HEREIN, SELLER MAKES
NO REPRESENTATION OR WARRANTY CONCERNING THE ACQUISITION ASSETS, INCLUDING AS TO
THE QUALITY, CONDITION,

 

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MERCHANTABILITY, SALABILITY, OBSOLESCENCE, WORKING ORDER OR FITNESS FOR A
PARTICULAR PURPOSE THEREOF. EXCEPT AS SO SET FORTH, THE ACQUISITION ASSETS ARE
SOLD TO BUYER “AS IS AND WHERE IS.”

4. REPRESENTATIONS AND WARRANTIES OF BUYER.

Buyer represents and warrants to Seller that:

4.1 ORGANIZATION; GOOD STANDING; AND CORPORATE AUTHORITY. Tyco is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Massachusetts. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Massachusetts. IP Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of Switzerland. Each of Tyco, Buyer and IP Buyer has the full corporate power
and authority to conduct all of the business and activities conducted by it and
to own or license all of the assets owned or leased by it, and is duly licensed
or qualified to do business and in good standing as a foreign corporation under
the laws of every jurisdiction in which the nature of the activities conducted
by it, and/or the character of the assets owned or leased by it, makes such
qualification or license necessary, except for those jurisdictions where the
failure to be so qualified would not have a Material Adverse Effect on Tyco,
Buyer or IP Buyer. Each of Tyco, Buyer and IP Buyer has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement and all other agreements herein contemplated
to be executed in connection herewith have been (or upon execution will have
been) duly executed and delivered by each of Tyco, Buyer and IP Buyer, have been
effectively authorized by all necessary action, corporate or otherwise, and
constitute (or upon execution will constitute) legal, valid and binding
obligations of each of Tyco, Buyer and IP Buyer, enforceable against each of
them in accordance with their respective terms.

4.2 AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. The execution, delivery and
performance of this Agreement by Buyer and the consummation of the transactions
contemplated hereby will not result in a breach of any of the terms or
provisions of, or constitute a default under, or conflict with, any agreement,
indenture or other instrument to which Buyer is a party or by which it is bound,
Buyer’s Articles of Incorporation and Bylaws or other governing instruments, any
judgment, decree, order or award of any court, governmental body or arbitrator,
or any law, rule or regulation applicable to Buyer.

4.3 REGULATORY APPROVALS. All consents, approvals, authorizations and other
requirements prescribed by any law, rule or regulation which must be obtained or
satisfied by Buyer and which are necessary for the consummation of the
transactions contemplated by this Agreement have been obtained and satisfied.

4.4 BROKERAGE. Buyer has not dealt with, and is not obligated to make any
payment to, any finder, broker or investment banker or financial advisor in
connection with any of the transactions contemplated by this Agreement or the
negotiations looking toward the consummation of such transactions.

 

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4.5 SUFFICIENT FUNDS. Buyer has sufficient funds available for the payment of
the Purchase Price upon consummation of the transactions contemplated hereby.

4.6 RELIANCE ON REPRESENTATIONS AND WARRANTIES. Buyer acknowledges that it
enters into this Agreement and agrees to consummate the transactions
contemplated hereby in sole reliance on the express representations and
warranties contained in this Agreement and not upon any other information
furnished to Buyer by Seller. BUYER ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY SET
FORTH HEREIN, SELLER MAKES NO REPRESENTATION OR WARRANTY CONCERNING THE
ACQUISITION ASSETS, INCLUDING AS TO THE QUALITY, CONDITION, MERCHANTABILITY,
SALABILITY, OBSOLESCENCE, WORKING ORDER OR FITNESS FOR A PARTICULAR PURPOSE
THEREOF AND BUYER IS PURCHASING THE ACQUISITION ASSETS “AS IS AND WHERE IS.”

5. CLOSING.

The closing of the transactions herein contemplated (the “CLOSING”) shall,
unless another date, time or place is agreed to in writing by the parties
hereto, take place at the offices of Gibson, Dunn & Crutcher LLP, 333 South
Grand Avenue, 47th Floor, Los Angeles, California 90071 at 10:00 a.m., Los
Angeles time, on June 30, 2000 or, if later, the third business day following
expiration of the waiting period under the HSR Act, as defined below (the
“CLOSING DATE”).

6. CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES.

6.1 ACCESS.

6.1.1 FOR THE BUYER.

(a) Between the date hereof and the Closing Date, (i) Buyer’s authorized
representatives shall have reasonable access during normal business hours to all
properties, operations, books, records, contracts, and documents of Seller
relating to the Division, (ii) Seller will furnish and request its accountants
and outside legal counsel to furnish to Buyer all information with respect to
its affairs and the business of the Division that Buyer may reasonably request,
(iii) Buyer shall have the right to discuss the affairs and the business of the
Division with the employees of Seller and (iv) authorized representatives of
Buyer shall have reasonable access during normal business hours to all Real
Property in order to conduct environmental surveys and tests; provided:
(1) without the prior written approval of Seller, Buyer shall not communicate
with any employee of Seller or the Division, other than the employees listed on
Schedule 6.1.1, attached hereto; (2) Buyer will not enter any of the premises of
the Division, without first making arrangements with Seller, and any such visits
shall be minimized to the extent practicable to avoid disruption of the
Business; (3) that all surveys and tests shall be conducted in such a manner as
to minimize the disruption to the business of the Division; (4) that at least
two days prior to entering any parcel of Real Property, Buyer shall provide
Seller with written notice of its intention to enter a specific parcel of Real
Property and a description of and schedule for the proposed activities it plans
to undertake; (5) that

 

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Buyer shall cause the work to be done by qualified employees, consultants and
contractors who are reasonably acceptable to Seller; and (6) that Buyer shall,
at its own expense and immediately after completion of the investigating
activities, restore the Real Property to substantially the same condition it was
in prior to Buyer’s entry.

(b) Prior to the execution and delivery of this Agreement, Seller has not
provided Buyer with access to certain competitively information concerning the
Division, as set forth on SCHEDULE 6.1.1 attached hereto (“Sensitive
Information”). Promptly following the date of this Agreement, and in no event
later than [INSERT DATE], Seller shall provide Buyer access to the Sensitive
Information. Buyer agrees that it shall implement internal procedures to assure
that the Sensitive Information will not be made available, until completion of
the transactions contemplated hereby, to any person engaged in sales or
marketing, or in the establishment of pricing or pricing policy in any activity
of Buyer which is engaged in competition with the Division.

6.1.2 FOR THE SELLER. After the Closing Date, upon reasonable prior notice,
(i) authorized representatives of Seller shall have reasonable access during
normal business hours to all books, records, contracts and documents of Buyer
pertaining to periods prior to the Closing and relating to the Division, and may
make copies thereof, to the extent that Seller reasonably determines necessary
in connection with the preparation of Seller’s tax returns, or in connection
with any tax, insurance, litigation or other proceeding or activity and (ii) in
connection therewith, Seller shall have reasonable access to discuss the
relevant affairs and business of the Division with the employees of Buyer.

6.2 CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS.

6.2.1 CONFIDENTIALITY. The Confidentiality Agreement between Buyer and Seller
dated April 25, 2000 shall continue in full force and effect and shall apply to
all information concerning the Division obtained by Buyer pursuant hereto.

6.2.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity with
respect to this Agreement or the transactions contemplated hereby will be
issued, if at all, at such time and in such manner as the parties jointly
determine. Seller will consult with Buyer concerning the means by which Seller’s
employees will be informed of the transactions contemplated by this Agreement,
and Buyer shall have the right to be present for any such communication.

6.3 CONDUCT OF BUSINESS OF DIVISION. The business of the Division shall be
conducted from the date hereof through the Closing Date in accordance with prior
practice and in the ordinary course of the business of the Division, and without
limiting the generality of the foregoing, Seller shall not (except with the
prior written consent of Buyer) do or cause or permit to occur any act, event or
other occurrence which is represented or warranted not to have occurred since
December 31, 1999 in Section 3.4.3 hereof. Not later than five (5) days prior to
Closing, Seller shall update all Schedules hereto to reflect changes occurring
subsequent to signing this Agreement with respect to any matter hereafter
arising or discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or described in such schedules. Such
supplement or amendment will be deemed to have amended

 

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the applicable schedule to have qualified the representations and warranties
contained in Article 3 and to have cured any misrepresentation or breach of
warranty that otherwise might have existed hereunder by reason of the matter(s)
set forth in the amendment or supplement..

6.4 PRESERVATION OF ORGANIZATION. Seller shall use its best efforts to preserve
the business of the Division and the organization of Seller, to keep available
to Buyer the services of Seller’s present employees, and to preserve for Buyer
Seller’s favorable business relationships with its suppliers, its customers and
others with whom business relationships exist.

6.5 CURRENT INFORMATION. Seller will advise Buyer in writing immediately, but in
any event prior to the Closing, of:

(a) the occurrence of any event which renders any of the representations or
warranties set forth herein inaccurate in any material respect or the awareness
of Seller that any representation or warranty set forth herein was not accurate
in all material respects when made; and

(b) the failure of Seller to comply with or accomplish any of the covenants or
agreements set forth herein in any material respect. Seller will also provide
Buyer, promptly on becoming available, copies of all operating and financial
reports prepared by, or in the normal conduct of business of, the Division.

6.6 CONTRACTS. Between the date hereof and the Closing Date, Seller will not,
without the prior written consent of Buyer, (a) amend in any material respect or
terminate any Contract listed on SCHEDULE 1.1(e), or (b) enter into or become a
party to or submit any bid or proposal for any contract, agreement, instrument,
arrangement, purchase order or commitment with any customer of the Division
under which the reasonably anticipated costs and expenses of the Division will
exceed its anticipated receipts.

6.7 COMPLETION OF TRANSACTION; HART-SCOTT-RODINO. Buyer and Seller shall use all
necessary efforts to complete the transaction contemplated hereby. Buyer and
Seller acknowledge that the transactions contemplated by this Agreement require
filings with the Federal Trade Commission (the “FTC”) and the Antitrust Division
of the United States Department of Justice (the “ANTITRUST DIVISION”) under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the rules
and regulations promulgated under such Act (the “HSR ACT”). Buyer and Seller
shall each promptly file with the FTC and the Antitrust Division the
notifications and reports required to be filed pursuant to the HSR Act and shall
undertake in good faith to file promptly any supplemental information which may
be requested in connection therewith which notifications and reports will comply
in all material respects with the requirements of the HSR Act. Buyer and Seller
shall each furnish to the other such information as either may reasonably
request to make such filings.

6.8 ACCOUNTS RECEIVABLE. If Seller receives any payments on Accounts Receivable
of the Division after the Closing Date, Seller shall promptly forward such
amounts to Buyer.

 

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6.9 CONDITION TO TRANSFER OF CERTAIN CONTRACTS.

(a) Seller shall use commercially reasonable efforts to procure all consents,
approvals or waivers which must be obtained by Seller and which are necessary
for completion of the transactions described herein, including all required
consents from third parties under the Contracts or otherwise and all required
consents of any governmental agency or body issuing any permits, licenses or
other governmental authorizations affecting Seller or its businesses or
properties so that the Division may continue to be operated by Buyer without
interruption or any adverse effect following the Closing. However, nothing
herein shall require Seller to make any material payment in connection with the
foregoing.

(b) Notwithstanding anything herein to the contrary, the parties hereto
acknowledge and agree that at the Closing Seller will not assign to Buyer any
such Contract which by its terms requires the consent of any other contracting
party thereto unless each such consent has been obtained prior to the Closing
Date. With respect to each such unassigned Contract, after the Closing Date
Seller shall continue to deal with the other contracting party(ies) to such
Contract as the prime contracting party and shall use its best efforts to obtain
the consent of all required parties to the assignment of such Contract, but
Buyer shall be entitled to the benefits of such Contract accruing after the
Closing Date to the extent that Seller may provide Buyer with such benefits
without violating the terms of such Contract. Buyer agrees to perform at its
sole expense all of the obligations of Seller to be performed under any such
Contract the benefits of which Buyer is receiving after the Closing Date.

6.10 WAIVER OF COMPLIANCE WITH BULK SALES LAWS. Buyer and Seller hereby waive
compliance with the requirements of the Michigan Bulk Transfer Law and Florida
Bulk Transfer Law and any other applicable bulk sales laws of any other
jurisdiction.

6.11 EMPLOYEES.

(a) Buyer shall offer employment commencing on the Closing Date, on
substantially similar compensation terms as those offered by Seller, to any
individual who is actively employed by the Division as of the Closing Date
(collectively, the “TRANSFERRED EMPLOYEES”). An employee of the Division who is
absent on the Closing Date due to vacation or holiday or who has been absent as
a result of a short-term or long-term disability prior to the Closing Date shall
be considered actively at work on the Closing Date. On and after the Closing
Date, Buyer shall comply, at its expense, with all employment laws with respect
to the Transferred Employees employed as of the Closing Date, including, but not
limited to, the Family and Medical Leave Act, the American Disability Act, and
all federal or state laws on military leave. Transferred Employees shall be
enumerated in SCHEDULE 6.11. Subject to paragraph (b) below, nothing herein
shall limit the right of Buyer to make such changes in compensation, position,
or responsibilities of employees of the Division as it may deem appropriate
following the Closing.

(b) Buyer agrees that as of the Closing Date and for a six-month period
thereafter, Buyer shall provide the Transferred Employees, for so long as they
remain employees of the Division, with employee benefits that are no less
favorable in the aggregate than those provided to them immediately prior to the
Closing Date. With respect to Buyer’s benefit plans,

 

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service accrued by Transferred Employees while employed by Seller shall be
recognized for all purposes except to the extent necessary to prevent
duplication of benefits. With respect to any medical, dental or other welfare
benefits that are provided at any time to Transferred Employees, any applicable
pre-existing exclusions shall be waived and any expenses incurred before such
time under Seller’s comparable plan shall be taken into account under Buyer’s
plan for purposes of satisfying applicable deductible, co-payment and maximum
out-of-pocket provisions, provided that such information is provided to Buyer
within 90 days following the Closing Date.

(c) All Transferred Employees shall cease active participation in Seller’s
Employee Benefit Plans as of the Closing Date except to the extent required
under Section 4980(B) of the Internal Revenue Code of 1986, as amended. Seller
shall be responsible under the Anthony Industries Inc. Life, AD&D, Medical and
Dental Insurance and workers’ compensation for claims incurred by Transferred
Employees and their eligible dependents on or prior to the Closing Date.

6.12 TAXES. Seller and Buyer shall share equally any transfer, sales or use or
similar taxes relating to the transactions contemplated hereby upon the
consummation of such transactions.

6.13 COVENANT NOT TO COMPETE.

(a) Seller agrees that, as part of the consideration for payment by Buyer of the
Purchase Price, for a period of five years immediately following the Closing
Date, neither Seller nor any of its divisions or subsidiaries will, directly or
indirectly, operate, perform, have any interest in, or otherwise be engaged in
or concerned with a business which develops, manufactures, prepares, sells,
installs, or distributes products or performs services in competition with the
Division. For these purposes, ownership of securities of a company whose
securities are publicly traded under a recognized securities exchange not in
excess of 10% of any class of such securities shall not be considered to be
competition with Buyer.

(b) Further, Seller agrees that for a period of three years following the
Closing Date, neither Seller nor any of its related or affiliated entities will
induce any of Seller’s employees hired by Buyer on the Closing Date to terminate
his or her relationship with Buyer and to work in a business that competes with
the Business.

(c) Each of Seller and Buyer acknowledges the restrictions on its activities
under Sections 6.13(a) and (b) hereof (as the case may be) and constitute a
material inducement to Buyer’s entering into and performing this Agreement. Each
of Seller and Buyer further acknowledges, stipulates, and agrees that a breach
of any of such obligations and agreements will result in irreparable harm and
continuing damage to the other party for which there will be no adequate remedy
at law and further agrees that in the event of any breach of said obligations
and agreements, the other party and its successors and assigns will be entitled
to injunctive relief and to such other relief as is proper under the
circumstances.

6.14 COOPERATION WITH LITIGATION. After the Closing Date, Buyer shall cooperate
with Seller and give Seller reasonable access during normal business hours to
all properties, operations books, records, contracts, and documents of Buyer
relating to proceedings

 

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for which Seller retains responsibility pursuant to the terms of this Agreement
and shall furnish and request its accountants and outside legal counsel to
furnish to Seller all information with respect to such proceedings as Seller may
reasonably request. Seller shall also have the right to discuss such proceedings
with the employees of Buyer after the Closing Date.

6.15 PRODUCT CLAIMS. Buyer and Seller shall enter into mutually acceptable
arrangements for the handling and review of obligations and liabilities (other
than non-contractual product liability claims for defective products) in respect
of products sold by the Division prior to the Closing, whether or not
constituting Assumed Liabilities, in order that: (i) for so long as Buyer
continues to engage in the Division business, at the request (and in the
discretion) of Seller, all such claims shall be administered by Buyer, and
warranty, replacement and repair work will be performed or provided for by Buyer
in respect of Excluded Liabilities on the same basis as performed or provided in
the case of Assumed Liabilities, with Seller to reimburse Buyer for all costs in
respect of Excluded Liabilities and (ii) Seller shall have a reasonable right to
review and audit Buyer’s records pertaining to such obligations and liabilities.

7. CONDITIONS TO OBLIGATIONS OF SELLER.

The obligations of Seller to make the deliveries contemplated at the Closing
shall, in addition to the conditions set forth elsewhere herein, be subject to
satisfactory completion on or prior to the Closing Date of each of the following
conditions, any of which may be waived by Seller:

7.1 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of Buyer contained in this Agreement shall have been true and
complete in all material respects on the date hereof and shall be true and
complete in all material respects on the Closing Date with the same effect as if
made on the Closing Date, and Buyer shall have executed and delivered to Seller
at Closing a certificate to such effect.

7.2 PERFORMANCE OF COVENANTS AND AGREEMENTS. All of the covenants and agreements
of Buyer contained in this Agreement and required to be performed by Buyer on or
before the Closing Date shall have been performed in all material respects, and
Buyer shall have executed and delivered to Seller at Closing a certificate to
such effect.

7.3 OPINION OF COUNSEL FOR BUYER. Seller shall have received an opinion of
counsel for Buyer, M. Brian Moroze, Esq., substantially in the form of EXHIBIT A
hereto and otherwise in form and substance reasonably satisfactory to and
addressed to Seller and dated the Closing Date. In rendering such opinion,
counsel may rely upon certificates of public officials and upon certificates of
officers of Buyer as to factual matters and on opinions of other counsel of good
standing whom such counsel believes to be reliable as to matters with respect to
which the laws of jurisdictions other than Delaware and California are
applicable.

7.4 ADDITIONAL CLOSING DOCUMENTS. Buyer shall have delivered to Seller at or
prior to the Closing such documents (including a certificate of officers of
Buyer) as Seller may reasonably request in order to enable Seller to determine
whether the conditions to Seller’s obligations under this Agreement have been
met and otherwise to carry out the provisions of this Agreement.

 

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7.5 NO LEGAL BAR. None of the parties hereto shall be prohibited by any order,
writ, injunction or decree of any governmental body of competent jurisdiction
from consummating the transactions contemplated by this Agreement, and no action
or proceeding shall then be pending which questions the validity of this
Agreement, any of the transactions contemplated hereby or any action which has
been taken by any of the parties or any corporate entity, in connection
herewith, or in connection with any of the transactions contemplated hereby.

7.6 HSR EXPIRATION/TERMINATION. The waiting period (and any statutory extension
thereof) under the HSR Act shall have expired or been terminated and no action,
suit or proceeding shall have been initiated by the Antitrust Division or the
FTC challenging the transactions provided in this Agreement under the Clayton
Act or the Sherman Act.

7.7 MICHIGAN DEPARTMENT OF ENVIRONMENTAL QUALITY, WASTE MANAGEMENT DIVISION
APPROVAL. The Michigan Department of Environmental Quality, Waste Management
Division (the “Department”) shall have approved the transactions contemplated
hereby pursuant to the Department’s rights under the Michigan Contract.

8. CONDITIONS TO OBLIGATIONS OF BUYER.

The obligations of Buyer to make the deliveries contemplated at the Closing
shall, in addition to conditions set forth elsewhere herein, be subject to the
satisfactory completion on or prior to the Closing Date of each of the following
conditions, any of which may be waived by Buyer:

8.1 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Seller contained in this Agreement shall have been true and
complete in all material respects on the date hereof and shall be true and
complete in all material respects on the Closing Date with the same effect as if
made on the Closing Date (except for any breach of such representations and
warranties, which when combined with all other breaches of such representations
and warranties, would not result in a Material Adverse Effect), and Seller shall
have executed and delivered to Buyer at Closing a certificate to that effect.

8.2 PERFORMANCE OF COVENANTS AND AGREEMENTS. All of the covenants and agreements
of Seller contained in this Agreement and required to be performed on or before
the Closing Date shall have been performed in all material respects, and Seller
shall have delivered to Buyer at Closing a certificate to that effect.

8.3 OPINION OF COUNSEL FOR SELLER. Buyer shall have received an opinion of
counsel for Seller, Gibson, Dunn & Crutcher LLP, substantially in the form of
EXHIBIT B hereto and otherwise in form and substance reasonably satisfactory to
and addressed to Buyer and dated the Closing Date. In rendering such opinion,
counsel may rely upon certificates of public officials and upon certificates of
officers of Seller as to factual matters and on opinions of other counsel of
good standing whom such counsel believes to be reliable as to matters with
respect to which the laws of jurisdictions other than Delaware or California are
applicable.

8.4 NO LEGAL BAR. None of the parties hereto shall be prohibited by any order,
writ, injunction or decree of any governmental body of competent jurisdiction
from

 

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consummating the transactions contemplated by this Agreement and no action or
proceeding shall then be pending which questions the validity of this Agreement,
any of the transactions contemplated hereby or any action which has been taken
by any of the parties in connection herewith or in connection with any of the
transactions contemplated hereby.

8.5 TRANSFER DOCUMENTS. Seller shall have executed and delivered to Buyer such
bills of sale and other instruments of sale, transfer, conveyance, assignment
and delivery covering the Acquisition Assets or any part thereof as Buyer may
reasonably require to assure the full and effective sale, transfer, conveyance,
assignment and delivery to Buyer of the Acquisition Assets.

8.6 HSR EXPIRATION/TERMINATION. The waiting period (and any statutory extension
thereof) under the HSR Act shall have expired or been terminated and no action,
suit or proceeding shall have been initiated by the Antitrust Division or the
FTC challenging the transactions provided in this Agreement under the Clayton
Act or the Sherman Act.

9. SURVIVAL; INDEMNIFICATION.

9.1 SURVIVAL. The representations and warranties contained in this Agreement and
in any document delivered in connection herewith shall survive the Closing Date
solely for the purposes of this Section 9 and shall terminate at the close of
business eighteen (18) months following the Closing Date; provided, that the
representations and warranties contained in Sections 3.2, 3.3, 3.8.3 and 3.14
shall survive until the applicable statute of limitations runs. No claim may be
asserted by Tyco, Buyer or IP Buyer for any breach of representation or warranty
herein after the survival period therefor.

9.2 INDEMNIFICATION BY SELLER. Seller shall indemnify and hold harmless Tyco,
Buyer, IP Buyer and their directors, officers, employees, agents, successors,
affiliates and assigns (the “BUYER PARTIES”) from and against, and reimburse the
Buyer Parties on demand with respect to, any and all loss, damage (including any
decrease in the value of property or securities acquired hereunder), liability,
claims, cost and expense, including reasonable attorneys’, accountants’,
consultants’ and engineers’ fees (collectively, “DAMAGES”), incurred by a Buyer
Party by reason of or arising out of or in connection with (a) the breach of any
representation or warranty contained in Section 3, or in any certificate
expressly delivered to Buyer pursuant to this Agreement; provided, that, Seller
shall not indemnify and hold harmless the Buyer Parties from and against any
Damages incurred by a Buyer Party to the extent that an item that is the subject
of a breach of a representation or warranty is reflected on the Closing Date
Balance Sheet; (b) the failure of Seller to perform any agreement or covenant
required by this Agreement to be performed by it; or (c) any failure of Seller
to pay, perform or discharge any of the Excluded Liabilities in accordance with
the terms thereof.

9.3 INDEMNIFICATION BY BUYER. Tyco, Buyer and IP Buyer agree to indemnify and
hold harmless Seller and its directors, officers, employees, agents, successors,
affiliates and assigns (the “SELLER PARTIES”) from and against, and to reimburse
the Seller Parties on demand with respect to, any and all Damages incurred by a
Seller Party by reason of or arising out of or in connection with (a) the breach
of any representation or warranty contained in Section 4, or in any certificate
expressly delivered by Tyco, Buyer and/or IP Buyer to Seller

 

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under this Agreement; (b) the failure of Tyco, Buyer or IP Buyer to perform any
agreement or covenant required by this Agreement to be performed by it; or
(c) the failure of Tyco, Buyer or IP Buyer to pay, perform or discharge any of
the Assumed Liabilities in accordance with the terms thereof.

9.4 GENERAL INDEMNIFICATION LIMITATIONS; REMEDIATION.

(a) No claim for indemnification by a Buyer Party pursuant to Section 9.2 or a
Seller Party pursuant to Section 9.3 shall be asserted until (i) with respect to
claims by a Buyer Party, the aggregate amount of all Damages incurred by the
Buyer Parties under such indemnification provisions exceed $350,000 (the “BASKET
AMOUNT”) (at which point only Damages in excess of such first $350,000 of
Damages shall be paid) and (ii) with respect to claims by a Seller Party, the
aggregate amount of all Damages incurred by the Seller Parties under such
indemnification provisions exceed $350,000 (at which point only damages in
excess of such $350,000 of Damages shall be paid). Seller’s liability in respect
of all claims for breach of representations and warranties hereunder shall not
exceed $5,000,000 in the aggregate (the “CAP”). The Basket Amount and the Cap
shall not be applicable to claims arising under Sections 3.2, 3.3, 3.8.3 and
3.14 hereof or with respect to Excluded Liabilities, provided that the Basket
Amount shall apply to obligations and liabilities in respect of products sold by
the Division prior to the Closing Date and referred to in Section 2.3(i) hereof.
The Basket Amount shall be reduced to the extent of any obligations and
liabilities incurred by Buyer pursuant to the last sentence of Section 2.3 (i),
above.

(b) Seller’s liability with respect to remediation of Hazardous Substances shall
be limited to liability for remediation to standards required by any
governmental authority with jurisdiction over Seller under applicable
Environmental Laws, taking into account current and reasonably foreseeable uses
of the property. Seller shall have the right to conduct and control any such
remediation. Seller shall provide to Buyer copies of any correspondence, reports
or other documents between Seller and any governmental authority, and any
drilling logs and sample or other test results, regarding any such remediation.
In undertaking any such remediation, Seller shall cause the work to be done by
qualified employees, consultants and contractors who are reasonably acceptable
to Buyer. Buyer shall provide Seller reasonable access to its property for that
purpose; provided that all remediation shall be conducted in such a manner as to
minimize the disruption to Buyer’s business, to the extent it is commercially
reasonable to do so.

9.5 NOTICE OF CLAIMS. Whenever any claim shall arise for indemnification
hereunder, the party entitled to indemnification (the “indemnified person”)
shall promptly notify the other party (the “indemnifying person”) of the claim,
such notice to be in writing and to describe (a) the Damages allegedly incurred,
(b) the amount thereof, if known, (c) any complaints, subpoena or other
documents served against the indemnified person in connection with such Damages,
and (d) the method of computation of such Damages (but the failure so to notify
an indemnifying person shall not relieve it from any liability which it may have
under this Section 9 except to the extent that it has been prejudiced in any
material respect by such failure or from any liability which it might otherwise
have). An indemnified person shall not settle or compromise any claim by a third
party for which such indemnified person is entitled to indemnification hereunder
without the prior written consent (not to be unreasonably withheld) of

 

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the indemnifying person, unless suit in respect of such claim shall have been
instituted against the indemnified person, the indemnifying person shall not
have taken control of such suit pursuant to Section 9.6 after notification
thereof and the indemnifying person shall have received written notice of the
proposed settlement and the terms thereof.

9.6 THIRD PARTY CLAIMS. In the case of any third party claim, action or suit as
to which indemnification is sought, the indemnifying person shall have the right
at any time to notify the indemnified person that it elects to conduct and
control such action or suit. If the indemnifying person does not give the
foregoing notice and/or until the indemnifying party gives such notice, the
indemnified person shall have the right to defend and contest such action or
suit in the exercise of its exclusive discretion and settle or compromise such
suit, subject to the provisions of the last sentence of Section 9.5. The
indemnifying person shall, upon request from any indemnified person, promptly
pay to such indemnified person in accordance with the other terms of this
Section 9 the amount of any Damages. If the indemnifying person gives the
foregoing notice, the indemnifying person shall have the right to undertake,
conduct and control, through counsel of its own choosing and at the sole expense
of the indemnifying person, the conduct and settlement of such action or suit
(other than a settlement which requires or prohibits any action on the part of,
or involves any admission by, the indemnified person, in which event the consent
of such indemnified person shall be required, but shall not be unreasonably
withheld), and the indemnified person shall cooperate with the indemnifying
person in connection with any such action or suit; provided, that (a) the
indemnifying person shall permit the indemnified person to participate in such
conduct or settlement through counsel chosen by the indemnified person, but the
fees and expenses of such counsel shall be borne, after the indemnifying person
has given notice that it elects to conduct and control such action or suit, by
the indemnified person and (b) the indemnifying person shall agree promptly to
reimburse to the extent required under this Section 9 the indemnified person for
the full amount of any Damages resulting from such action or suit, except fees
and expenses of counsel for the indemnified person incurred after the assumption
of the conduct and control of such action or suit by the indemnifying person. So
long as the indemnifying person is contesting any such action or suit in good
faith, the indemnified person shall not pay or settle any such action or suit.

9.7 PAYMENTS. All payments made under this Section 9 shall be made by wire
transfer in immediately available funds in U.S. dollars.

9.8 REMEDIES EXCLUSIVE. If the Closing occurs, the remedies provided in this
Section 9 shall be the exclusive remedy for monetary damages (whether at law or
in equity) with respect to this Agreement and the transactions contemplated
herein.

9.9 CERTAIN DAMAGES. Notwithstanding anything else contained in this Section 9,
no Buyer Party or Seller Party shall be entitled to consequential Damages
hereunder.

10. TERMINATION OF AGREEMENT

10.1 EVENTS OF TERMINATION. This Agreement may be terminated and the
transactions contemplated by it abandoned at any time prior to the Closing:

(a) by mutual agreement of Seller and Buyer; or

 

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(b) by Buyer, following payment to Seller of the amount required by
Section 11.8(b), on or before the expiration of 5 business days following the
time on which Seller shall have provided Buyer access to the Sensitive
Information, if based upon such review Buyer determines, in good faith, that the
facts are materially different from those considered by it in determining to
enter into this Agreement:

(c) by Buyer, if the conditions set forth in Section 8 shall not have been
complied with or performed in any material respect and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) or if the Closing has not occurred within 75 days of the
date of this Agreement; or

(d) by Seller, if the conditions set forth in Section 7 shall not have been
complied with or performed in any material respect and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) or if the Closing has not occurred within 75 days of the
date of this Agreement.

10.2 RIGHTS AND OBLIGATIONS ON TERMINATION. Except as otherwise provided in
Section 11.8(b), any termination pursuant to Section 10.1 shall not affect any
rights (at law or in equity) that any party may have against any other party
hereto as a result of any breach by such other party of its obligations
hereunder. If this Agreement is terminated and abandoned as provided in this
Section 10, each party will redeliver all documents, work papers and other
materials of any other party relating to the transactions contemplated by this
Agreement, whether so obtained before or after the execution of this Agreement,
to the party furnishing the same, and all information received by any party to
this Agreement with respect to the business of any other party shall not at any
time be used for the advantage of, or disclosed to third parties by, such party
to the detriment of the party furnishing such information; provided, however,
that the foregoing restriction shall not apply to any documents, work papers,
material or information which is a matter of public knowledge or is otherwise in
the public domain.

11. MISCELLANEOUS PROVISIONS.

11.1 CONSTRUCTION. This Agreement shall be construed and enforced in accordance
with and governed by the internal laws of the State of Delaware, without giving
effect to the conflicts of laws provisions thereof.

11.2 NOTICES. All notices, requests, demands and other communications called for
or contemplated hereunder shall be in writing and shall be deemed to have been
duly given when delivered to the party to whom addressed or when sent by
telecopy, telegram, telex or wire (if promptly confirmed by registered or
certified mail, return receipt requested, prepaid and addressed) to the parties,
their successors in interest, or their assignees at the following addresses, or
at such other addresses as the parties may designate by written notice in the
manner aforesaid:

If to Buyer:

Ludlow Building Products, Inc.

10351 Verdon Road

P.O. Box 2002

Doswell, VA 23047

Fax: (804) 876-3139

Attention: President

 

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With copies to:

Tyco International (US) Inc.

One Tyco Park

Exeter, NH 03833

Fax: (603) 778-2823

Attention: General Counsel

If to IP Buyer:

Tyco Plastics Services

AG Schwertstrasse-9 CH-8200

Schaffhausen, Switzerland

Fax: 41 52 633-0259

Attention: Managing Director

If to Seller:

K2 Inc.

4900 South Eastern Avenue Suite 200

Los Angeles, California 90040

Fax: (323) 724-0470

Attention: Richard M. Rodstein

With copies to:

Gibson, Dunn & Crutcher LLP

333 South Grand Avenue Suite 4800

Los Angeles, California 90071

Fax: (213) 229-7520

Attention: Andrew E. Bogen

11.3 ASSIGNMENT. Neither this Agreement nor any right, remedy, obligation or
liability arising hereunder or by reason hereof nor any of the documents
executed in connection herewith may be assigned by any party without the consent
of the other parties; PROVIDED, HOWEVER, that either Buyer or IP Buyer may
assign its rights and obligations, in whole or in part, to an affiliate without
Seller’s consent. Nothing contained herein, express or implied, is intended to
confer upon any person or entity other than the parties hereto and their
successors in interest any rights or remedies under or by reason of this
Agreement unless so stated herein to the contrary.

11.4 AMENDMENTS AND WAIVERS. This Agreement and all Exhibits and Schedules
hereto may be modified only by a written instrument duly executed by each party.
No condition to any party’s obligations and no breach of any covenant,
agreement, warranty or

 

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representation shall be deemed waived unless expressly waived in writing by the
party whose obligations are subject to such condition or who might assert such
breach. No waiver of any right hereunder shall operate as a waiver of any other
right or of the same or a similar right on another occasion.

11.5 REMEDIES. No remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy. Each and every remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder now or hereafter existing at law or in equity or by statute or
otherwise, and the election by a party of one or more remedies shall not
constitute a waiver of the party’s right to pursue any other available remedies.

11.6 ATTORNEYS’ FEES. In the event that any action or proceeding, including
arbitration, is commenced by any party hereto for the purpose of enforcing any
provision of this Agreement, the parties to such action, proceeding or
arbitration may receive as part of any award, judgment, decision or other
resolution of such action, proceeding or arbitration their costs and reasonable
attorneys’ fees as determined by the person or body making such award, judgment,
decision or resolution. Should any claim hereunder be settled short of the
commencement of any such action or proceeding, including arbitration, the
parties in such settlement shall be entitled to include as part of the damages
alleged to have been incurred reasonable costs of attorneys or other
professionals in investigating or counseling on such claim.

11.7 BINDING NATURE OF AGREEMENT. The Agreement includes each of the Schedules
and Exhibits which are referred to herein or attached hereto, all of which are
incorporated by reference herein. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective executors, heirs, legal representatives, successors and assigns.

11.8 EXPENSES.

(a) The costs and expenses of Seller, including the legal fees and disbursements
of Gibson, Dunn & Crutcher LLP shall be borne by Seller. The costs and expenses
of Buyer, including legal fees and disbursements, shall be borne by Buyer.

(b) In the event Buyer shall terminate this Agreement pursuant to
Section 10.1(b), Buyer shall promptly make payment to Seller of the sum of
$1,000,000 as full compensation to Seller for its costs and expenses in
connection with this Agreement and the damage to its business which will result
from a termination of this Agreement pursuant to Section 10.1(b).

11.9 ENTIRE AGREEMENT. This Agreement and the Confidentiality Agreement contain
the entire understanding of the parties and supersede all prior agreements and
understandings relating to the subject matter hereof.

11.10 SEVERABILITY. Any provision of this Agreement which is invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceability, without
affecting in any way the remaining provisions hereof in such jurisdiction or
rendering that or any other provision of this Agreement invalid, illegal or
unenforceable in any other jurisdiction.

 

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11.11 COUNTERPARTS. This Agreement may be executed by the parties in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.

11.12 SECTION HEADINGS. The headings of each Section, subsection or other
subdivision of this Agreement are for reference only and shall not limit or
control the meaning thereof.

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

 

SELLER:

 

K2 Inc.,

a Delaware corporation

  By:  

 

  Name:  

 

  Title:  

 

TYCO:

  Tyco International (US) Inc.   By:  

 

  Name:  

 

  Title:  

 

BUYER:

  Ludlow Building Products, Inc.   By:  

 

  Name:  

 

  Title:  

 

IP BUYER:

 

Tyco Plastics Services AG

a Swiss corporation

  By:  

 

  Name:  

 

  Title:  

 

 

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