EXHIBIT 10.1

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into and dated as of
August 21, 2006 (the “Effective Date”), by and among TR Acquisition Co., Inc., a
Delaware corporation (the “Purchaser”), Radnor Holdings Corporation, a Delaware
corporation (the “Company”), and each of the Company’s domestic direct and
indirect subsidiaries listed on the signature page hereto (individually, a
“Seller” and, together with the Company, the “Sellers”).

WITNESSETH:

WHEREAS, Sellers are engaged in the business of manufacturing and distributing a
broad line of disposable food service products in the United States and
specialty chemical products worldwide (the “Business”);

WHEREAS, upon the execution of this Agreement, each of the Sellers has agreed to
file a voluntary petition for relief under Chapter 11 of Title 11 of the United
States Code, 11 U.S.C. §§ 101-1532 (as amended, the “Bankruptcy Code”) in the
United States Bankruptcy Court for the District of Delaware (the “Bankruptcy
Court”) on August 21, 2006, and each such Seller will request that the Sellers’
respective Chapter 11 cases be jointly administered for procedural purposes
under a single Case Number (the “Bankruptcy Case”);

WHEREAS, upon the terms and subject to the conditions set forth herein and as
authorized under Sections 105, 363, and 365 of the Bankruptcy Code, Purchaser
desires to purchase from the Sellers, and the Sellers desire to sell to
Purchaser, all of the Sellers’ assets (other than the Excluded Assets (as
defined below)) in exchange for the payment to the Sellers of the Purchase Price
(as defined below) and the assumption by the Purchaser of certain of the
Sellers’ liabilities and obligations;

WHEREAS, the Sellers believe, following consultation with their financial
advisors and consideration of available alternatives, that, in light of the
current circumstances, a sale of their assets is necessary to maximize value and
is in the best interest of the Sellers, their respective shareholders and
creditors; and

WHEREAS, the transactions contemplated by this Agreement (the “Transactions”)
are subject to the approval of the Bankruptcy Court and will be consummated only
pursuant to a Sale Order (as defined below) to be entered in the Bankruptcy Case
and other applicable provisions of the Bankruptcy Code.

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NOW, THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and agreements hereinafter contained, and intending to be
bound hereby, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 Certain Definitions.

For purposes of this Agreement, the following terms shall have the meanings
specified in this Section 1.1 or in other Sections of this Agreement, as
identified in the chart in Section 1.2:

“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person, and the term “control” (including
the terms “controlled by” and “under common control with”) means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through ownership of voting
securities, by contract or otherwise.

“Allowed Administrative Amount” means $8,600,000 as such amount may be adjusted
in accordance with Schedule 8.2(c).

“Assumed Executory Contracts” means all Assumed Contracts and Assumed Leases.

“Assumption Order” means an Order of the Bankruptcy Court authorizing the
assumption or the assumption and assignment of a Contract or Lease pursuant to
Section 365 of the Bankruptcy Code, which Order may be the Sale Order.

“Bank Loan Amount” means $30,730,000 as such amount may be adjusted in
accordance with Schedule 1.1A.

“Budget” has the meaning set forth in the DIP Credit Agreement.

“Business Day” means any day of the year on which national banking institutions
in New York are open to the public for conducting business and are not required
or authorized by law to close.

“Claim” has the meaning set forth in Section 101(5) of the Bankruptcy Code.

“Code” means the Internal Revenue Code of 1986, as amended.

“Contract” means any contract, indenture, note, bond, personal property or other
lease, license, purchase or sale order, warranties, commitments, or other
written or oral agreement, other than a Lease, to which a Seller is a party.

“Cure Costs” means amounts that must be paid and obligations that otherwise must
be satisfied, including pursuant to Sections 365(b)(1)(A) and (B) of the
Bankruptcy Code, in connection with the assumption and/or assignment of the
Assumed Leases and the Assumed Contracts.

“Designation Deadline” means 5:00 p.m., New York time, on the day that is five
(5) Business Days prior to the Bid Deadline.

 

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“DIP Credit Agreement” means the debtor in possession financing facility
approved by the Bankruptcy Court.

“Documents” means all files, documents, instruments, papers, books, reports,
records, tapes, microfilms, photographs, letters, budgets, forecasts, ledgers,
journals, title policies, customer lists, regulatory filings, operating data and
plans, technical documentation (design specifications, functional requirements,
operating instructions, logic manuals, flow charts, etc.), user documentation
(installation guides, user manuals, training materials, release notes, working
papers, etc.), marketing documentation (sales brochures, flyers, pamphlets, web
pages, etc.), whether or not in electronic form.

“Employee Benefit Plans” means each deferred compensation and each bonus or
other incentive compensation, stock purchase, stock option and other equity
related compensation plan, program, agreement or arrangement; each severance or
termination pay, medical, surgical, hospitalization, life insurance and other
“welfare” plan, fund or program (within the meaning of Section 3(1) of ERISA);
each profit-sharing, stock bonus or other “pension” plan, fund or program
(within the meaning of Section 3(2) of ERISA); each employment, termination,
change in control, retention or severance plan, agreement or arrangement; and
each other employee benefit plan, fund, program, agreement or arrangement, in
each case, that is sponsored, maintained or contributed to, or required to be
contributed to, by the Company, the Sellers or an ERISA Affiliate or to which
the Company, the Sellers or an ERISA Affiliate is party, whether written or
oral, for the benefit of any director or employee or former director or employee
of the Company or any former Subsidiary of the Company.

“Employees” means all individuals, as of the date hereof, who are employed by
any of the Sellers.

“Encumbrances” means any security interest, lien, collateral assignment, right
of setoff, debt, obligation, liability, pledge, levy, charge, escrow,
encumbrance, option, right of first refusal, transfer restriction, conditional
sale contract, title retention contract, mortgage, lease, deed of trust,
hypothecation, indenture, security agreement, easement, servitude, proxy, voting
trust or agreement, transfer restriction under any shareholder or similar
agreement, or any other agreement, arrangement, contract, commitment,
understanding or obligation of any kind whatsoever, whether written or oral.

“Environmental Laws” means all federal, state, local and foreign laws,
regulations, rules and ordinances, and common law, relating to pollution or
protection of human health, safety, or the environment, including, without
limitation, laws relating to releases or threatened releases of Hazardous
Substances into the environment (including, without limitation, ambient air,
surface water, groundwater, land, surface and subsurface strata).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means any entity that with the Company or the Sellers is:

 

  (a) a member of a controlled group of corporations within the meaning of
Section 414(b) of the Code.

 

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  (b) a member of a group of trades or businesses under common control within
the meaning of Section 414(c) of the Code;

 

  (c) a member of an affiliated service group within the meaning of
Section 414(m) of the Code; or

 

  (d) a member of a group of organizations required to be aggregated under
Section 414(o) of the Code.

“Excluded Contract” means any Contract that is not an Assumed Contract.

“Excluded Environmental Liabilities” means any Liability, whenever arising or
occurring, whether or not constituting a breach of any representation or
warranty herein and whether or not set forth on any disclosure schedule hereto,
arising under Environmental Laws with respect to (i) the Excluded Assets,
(ii) any assets other than the Purchased Assets and the Excluded Assets owned,
leased, operated or occupied by the Sellers at any time, or (iii) the Business,
the Purchased Assets or the Real Property (including without limitation any
arising from the on-site or off-site release, threatened release, treatment,
storage, disposal, or arrangement for disposal of Hazardous Substances) with
respect to Liabilities that occurred or existed prior to the Closing Date,
except in each case to the extent such Liability is an Assumed Liability
pursuant to Section 2.3(a) hereof.

“Excluded Executory Contract” means any Excluded Contract or Excluded Lease.

“Excluded Lease” means any Lease that is not an Assumed Lease.

“Excluded Matter” means: (i) any material change in the United States or foreign
economies or financial markets in general; (ii) any material change that
generally affects the industry in which Sellers operate; (iii) any material
change arising in connection with acts of God, hostilities, acts of war,
sabotage, terrorism or military actions or any escalation or material worsening
of any such hostilities, acts of war, sabotage or terrorism or military actions
existing or underway as of the date hereof; (iv) any change in applicable Laws
or GAAP or generally accepted interpretation thereof; or (v) any actions taken
or proposed to be taken by Purchaser or any of its Affiliates or with
Purchaser’s prior written consent or permission; (vi) any actions required by
law; (vii) any change resulting from the public announcement of this Agreement,
compliance with terms of this Agreement or the consummation of the Transactions,
including by reason of the identity of the Purchaser or communication by the
Purchaser of its plans or intentions regarding the operation of the Business;
(vii) any material adverse effect resulting from the filing of the Bankruptcy
Case.

“Executory Contract” means any Contract or Lease that is executory as that term
is used in Section 365 of the Bankruptcy Code.

“Final Order” means an Order of the Bankruptcy Court the operation of which has
not been modified or amended without the consent of Purchaser, reversed or
stayed, as to which Order no appeal or motion, application, petition or writ
seeking reversal, reconsideration, reargument, rehearing, certiorari, amendment,
modification, a stay or similar relief is pending, and the time to file any such
appeal or motion, application, petition or writ has expired.

 

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“GAAP” means generally accepted accounting principles in the United States,
consistently applied throughout the specified period.

“Governmental Body” means any government or governmental or regulatory body
thereof, or political subdivision thereof, whether foreign, federal, state, or
local, or any agency, instrumentality or authority thereof, or any court or
arbitrator (public or private).

“Hazardous Substances” means any chemical, mixture, waste, substance, material,
pollutant, or contaminant, including without limitation petroleum, asbestos and
asbestos-containing materials, with respect to which liability or standards of
conduct are imposed under any Environmental Laws.

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

“Intellectual Property” means all intellectual property arising from or in
respect of the following: (i) all patents and applications therefor, including
continuations, divisionals, continuations-in-part, or reissues of patent
applications and patents issuing thereon, (ii) all trademarks, service marks,
trade names, service names, brand names, all trade dress rights, logos, Internet
domain names and corporate names and general intangibles of a like nature,
together with the goodwill associated with any of the foregoing, and all
applications, registrations and renewals thereof, (iii) copyrights and
registrations and applications therefor and works of authorship, and mask work
rights, and (iv) all Software of Sellers.

“Interest” shall mean an “interest in property” as such phrase is used in
Section 363(f) of the Bankruptcy Code.

“Knowledge of Non-Debtor Subsidiaries” means the actual knowledge of Michael
Kennedy, Paul Ridder, Rad Hastings, Richard C. Hunsinger, Carrie Williamson,
Scott Myers, Michael Pate, Stan Springel, Henrik Akermark, Markuu Rautanen,
Pierrette Morissette and Jouni Lattu, and, to the extent not included in the
aforementioned individuals, the senior most executive and financial officers of
each of the Non-Debtor Subsidiaries.

“Knowledge of Sellers” means the actual knowledge of Michael Kennedy, Paul
Ridder, Rad Hastings, Richard C. Hunsinger, Carrie Williamson, Scott Myers,
Michael Pate and Stan Springel.

“Law” means any federal, state, local or foreign law, statute, code, ordinance,
rule or regulation or common law requirement.

“Leases” means all unexpired leases, subleases, licenses or other agreements,
including all amendments, extensions, renewals, guaranties or other agreements
with respect thereto, pursuant to which the Sellers hold or use any
non-residential Real Property.

“Legal Proceeding” means any judicial, administrative or arbitral actions,
suits, proceedings (public or private) or claims or any proceedings by or before
a Governmental Body.

 

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“Liability” means any debt, liability or obligation (whether direct or indirect,
known or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, or due or to become due), and including all costs and expenses
relating thereto.

“Lien” has the meaning set forth in Section 101(37) of the Bankruptcy Code.

“Material Adverse Change” means any event, occurrence or effect (regardless of
whether such event, occurrence or effect constitutes a breach of any
representation, warranty or covenant of Sellers hereunder) that has had or would
be reasonably likely to have, individually or when considered together with any
other events, occurrences or effects (i) a material adverse change in the
Business, financial condition, or assets or property of the Company and its
Subsidiaries taken as a whole or (ii) a material adverse change in or to the
ability of Sellers to consummate the Transactions or perform their obligations
under this Agreement, other than, in either case, to the extent such effect or
change results from or relates to an Excluded Matter; provided, however, that
the act of filing a case under chapter 11 of the Bankruptcy Code by the Sellers
does not and shall not constitute a Material Adverse Change.

“Material Decision” shall mean any of the following to the extent the same may
affect the Business following the Closing Date: (i) entering into any Material
Contract; (ii) terminating any Lease or Contract; (iii) making any material
amendment or waiving any of Seller’s rights in respect of any Lease or Contract;
or (iv) taking any action to respond to any material customer or regulatory
complaint outside of the normal course of business.

“Non-Debtor Subsidiaries” means all of the Company’s direct and indirect
subsidiaries that are not Sellers.

“Order” means any order, injunction, judgment, decree, ruling, writ, assessment
or arbitration award of a Governmental Body.

“Permits” means any approvals, authorizations, consents, licenses, permits or
certificates of a Governmental Body.

“Permitted Exceptions” means, with respect to or upon any of the property or
assets of the Sellers, whether owned as of the date hereof or thereafter,
(i) all Liens, defects, exceptions, restrictions, easements, rights of way and
encumbrances of record of such property or asset and which would not
individually (or in the aggregate with others) be reasonably expected to have a
Material Adverse Change on the use or enjoyment of such asset, (ii) any other
imperfections in title, charges, easements, restrictions, encumbrances and other
matters affecting title that do not materially affect the value or use of the
affected asset, (iii) Liens for Taxes that constitute Assumed Liabilities,
(iv) zoning, entitlement and other land use and environmental laws and
regulations by any Governmental Body; (v) Liens, Claims, Interests or
Encumbrances that constitute Assumed Liabilities; (vi) violations of laws,
regulations, ordinances, orders or requirements, if any, arising out of the
adoption, promulgation, repeal, modification or reinterpretation of any law,
rule, regulation, ordinance or order of any federal, state, county or local
government, governmental agency, court, commission, department or other such
entity which occurs subsequent to the Effective Date, (vii) Liens, title
exceptions or other imperfections of title caused by or resulting from the acts
of Purchaser or any of its affiliates, employees,

 

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officers, directors, agents, contractors, invitees or licensees and
(viii) encroachments, overlaps, boundary line disputes, and any other matters
which would be disclosed by an accurate survey and inspection of the affected
asset and that do not materially detract from the value of or materially impair
the use of the affected asset.

“Permitted Restructuring Alternative” means any of the Sellers’ other
restructuring alternatives to the extent and only to the extent they result in a
lump-sum cash payment to the Tennenbaum Lenders in full satisfaction of all
Liabilities and other obligations under the Tennenbaum Credit Agreement on or
before ninety (90) days following the Petition Date.

“Person” means any individual, corporation, limited liability company,
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Body or other entity.

“Petition Date” means the date on which each of the Sellers filed their
respective petitions for relief under Chapter 11 of the Bankruptcy Code.

“Revolving Credit Facility” means the Revolving Credit and Security Agreement,
dated as of December 29, 2005, entered into by and among Radnor and certain of
its subsidiaries and National City Bank, as lender and agent, and certain other
lenders, as amended, modified or restated.

“Sale Order” means an order entered by the Bankruptcy Court in the form annexed
hereto as Exhibit 1.1A, which attached form is acceptable to the Purchaser.

“Software” means any and all (i) computer programs, including any and all
software implementations of algorithms, models and methodologies, whether in
source code or object code, (ii) databases and compilations, including any and
all data and collections of data, whether machine readable or otherwise,
(iii) descriptions, flow-charts and other work product used to design, plan,
organize and develop any of the foregoing, (iv) screens, user interfaces, report
formats, firmware, development tools, templates, menus, buttons and icons, and
(v) all documentation including user manuals and other training documentation
related to any of the foregoing.

“Subsidiary” means all direct and indirect subsidiaries of the Company.

“Substantially All” means more than fifty percent (50%).

“Tax Authority” means any government, or agency, instrumentality or employee
thereof, charged with the administration of any law or regulation relating to
Taxes.

“Taxes” means (i) all federal, state, local or foreign taxes, charges or other
assessments, including, without limitation, all net income, gross receipts,
capital, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and
estimated taxes, (ii) any item described in clause (i) for which a taxpayer is
liable as a transferee or successor, by reason of the regulations under
Section 1502 of the Code, or by contract, indemnity or otherwise, and (iii) all
interest, penalties, fines, additions to tax or additional amounts imposed by
any Tax Authority in connection with any item described in clause (i) or (ii).

 

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“Tax Return” means all returns, declarations, reports, estimates, information
returns and statements required to be filed in respect of any Taxes (including
any attachments thereto or amendments thereof).

“Tennenbaum Credit Agreement” means the Credit Agreement, dated as of
December 1, 2005 entered into by and among Radnor, various guarantors and
Special Value Expansion Fund, LLC, Special Value Opportunities Fund, LLC and
Tennenbaum Capital Partners, LLC, as amended, modified or restated.

“Transition Services Agreement” means an agreement mutually agreeable to the
parties hereto and substantially in the form attached hereto as Exhibit 1.1B,
which agreement shall provide for (i) the services of certain Retained Employees
designated therein, at the Company’s cost, (ii) continued salary and ordinary
benefits at current levels for such Employees with severance in the amounts set
forth therein, and (iii) an aggregate cost to the Purchaser not in excess of
$1,000,000.

1.2 Terms Defined Elsewhere in this Agreement. For purposes of this Agreement,
the following terms have meanings set forth in the sections indicated:

 

Term    Section Advancement Amount    3.1(a)(v) Agreement    Preamble Allocation
Statement    11.2 Antitrust Division    8.4(a) Antitrust Laws    8.4(b) Assigned
Permits    2.1(b)(xvi) Assumed Contracts    2.1(b)(xiii) Assumed Leases   
2.1(b)(xii) Assumed Liabilities    2.3 Assumed Liabilities Amount    3.1(a)(vi)
Auction Date    7.2(a) Avoidance Action    2.2(h) Bankruptcy Case    Recitals
Bankruptcy Code    Recitals Bankruptcy Court    Recitals Bid Deadline    7.2(a)
Bidding Procedures Order    7.2(a) Break-Up Fee and Expense Reimbursement    7.4
Business    Recitals Closing    4.1 Closing Date    4.1 Company    Preamble
Competing Transaction    7.1

 

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Credit Bid Amount

   3.1(a)(ii)

Cure Costs Deadline

   2.5(a)

D&O Policies

   2.2(d)

Effective Date

   Preamble

Environmental Liability

   2.4(k)

Excepted Commitments

   8.2(c)

Excluded Assets

   2.2

Excluded Liabilities

   2.4

Excluded Non-Debtor Subsidiaries

   2.2(k)

Existing L/Cs

   8.10

FTC

   8.4(a)

Funding Commitment

   4.4(h)

Initial Incremental Bid Amount

   7.2(b)

Inventory

   2.1(b)(ii)

ISRA

   8.4(c)

Leased Machinery and Equipment

   2.1(b)(i)

Leased Real Property

   5.13(b)

Liquidated Damages Amount

   4.6(b)

Machinery and Equipment

   2.1(b)(i)

Material Contracts

   5.11

Miscellaneous Secured Debt

   2.10

Miscellaneous Secured Facilities Amount

   3.1(a)(iii)

New Jersey Property

   8.4(c)

NJDEP

   8.4(c)

Non-Debtor Consents

   8.3

Owned Machinery and Equipment

   2.1(b)(i)

Owned Real Property

   2.1(b)(iv)

Payoff Deadline

   2.10

Periodic Taxes

   11.1

Prior Event

   12.11(a)

Purchased Assets

   2.1(b)

Purchased Intellectual Property

   2.1(b)(xiv)

Purchase Price

   3.1

Purchaser

   Preamble

Purchaser Group

   12.11(a)

Qualified Bid

   7.2(b(iii)

Qualified Bidder

   7.2(b)(ii)

Real Property

   5.13(b)

Released Claims

   12.11(a)

Retained Employee

   9.1(a)

Sale Hearing

   7.2(a)

Secured Asset

   2.10

Seller or Sellers

   Preamble

Seller Group

   12.11(a)

Supplies

   2.1(b)(iii)

Tennenbaum Lenders

   3.1(a)(ii)

Termination Date

   4.4(b)

Transactions

   Recitals

Transferred Employees

   9.1(a)

WARN Act

   2.7(c)

Wind Down Amount

   2.8(e)

 

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1.3 Other Definitional and Interpretive Matters.

(a) Unless otherwise expressly provided, for purposes of this Agreement, the
following rules of interpretation shall apply:

Calculation of Time Period. When calculating the period of time before which,
within which or following which any act is to be done or step taken pursuant to
this Agreement, the date that is the reference date in calculating such period
shall be excluded. If the last day of such period is a non-Business Day, the
period in question shall end on the next succeeding Business Day.

Dollars. Any reference in this Agreement to $ means U.S. dollars.

Exhibits/Schedules. All Exhibits and Schedules annexed hereto or referred to
herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. Any capitalized terms used in any Schedule or Exhibit but
not otherwise defined therein shall be defined as set forth in this Agreement.

Gender and Number. Any reference in this Agreement to gender shall include all
genders, and words imparting the singular number only shall include the plural
and vice versa.

Headings. The provision of a Table of Contents, the division of this Agreement
into Articles, Sections and other subdivisions and the insertion of headings are
for convenience of reference only and shall not affect or be utilized in
construing or interpreting this Agreement. All references in this Agreement to
any “Section” are to the corresponding Section of this Agreement unless
otherwise specified.

Herein. The words such as “herein,” “hereinafter,” “hereof” and “hereunder”
refer to this Agreement as a whole and not merely to a subdivision in which such
words appear unless the context otherwise requires.

Including. The word “including” or any variation thereof means “including,
without limitation” and shall not be construed to limit any general statement
that it follows to the specific or similar items or matters immediately
following it.

(b) Construction. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement and, in the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as jointly drafted by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provision of this Agreement.

 

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ARTICLE II

PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES

2.1 Purchase and Sale of Assets.

(a) On the terms and subject to the conditions set forth in this Agreement, at
the Closing, Purchaser shall purchase, acquire and accept from Sellers, and
Sellers shall sell, transfer, convey and deliver to Purchaser all of Sellers’
right, title and interest in, to and under the Purchased Assets, free and clear
of all Liens, Claims, Interests and Encumbrances other than those created by
Purchaser and other than Permitted Exceptions to the fullest extent permitted by
Sections 363 and 365 of the Bankruptcy Code.

(b) For all purposes of and under this Agreement, the term “Purchased Assets”
means all of the properties, assets, and rights of Sellers (other than the
Excluded Assets) existing as of the Closing, real or personal, tangible or
intangible, including but not limited to:

(i) All (x) equipment, computers, machinery, tooling, dies, furniture, fixtures
and improvements and other tangible personal property owned by Sellers (the
“Owned Machinery and Equipment”), (y) equipment, computers, machinery, tooling,
dies, furniture, fixtures and improvements and other tangible personal property
which are leased by Sellers pursuant to an Assumed Contract (the “Leased
Machinery and Equipment,” and together with the Owned Machinery and Equipment,
the “Machinery and Equipment”), and (z) rights of Sellers to the warranties,
express or implied, and licenses received from manufacturers, sellers and
lessors of the Machinery and Equipment;

(ii) All inventories of raw materials, goods, work in process, and finished
products (the “Inventory”);

(iii) All supplies, items, spare parts, replacement and component parts and
office and other materials and tangible items used, held for use or necessary to
operate and maintain the Machinery and Equipment or to process raw materials and
work in process into finished products (the “Supplies”);

(iv) All owned real property, together with any and all buildings, fixtures,
structures and improvements located thereon and all rights, privileges,
easements, licenses, hereditaments and other appurtenances relating thereto (the
“Owned Real Property”);

(v) All cars, trucks, fork lifts, other industrial vehicles and other motor
vehicles owned by Sellers or leased by Sellers pursuant to an Assumed Contract;

(vi) All Software owned by Sellers (including, without limitation, process
control software) or leased by Sellers pursuant to an Assumed Contract;

(vii) All (x) of any Seller’s ownership rights and equity interests in the
Non-Debtor Subsidiaries and (y) to the extent in the possession of Sellers,
organizational documents, record books, copies of Tax and financial records and
such other files, books

 

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and records of Sellers relating to the Non-Debtor Subsidiaries, except those
ownership rights and equity interests designated by the Purchaser as Excluded
Assets pursuant to Section 2.2(k);

(viii) All goodwill associated with the Business or the Purchased Assets;

(ix) Any interest in and to any refund of Taxes;

(x) All cash (including checks received prior to the close of business on the
day prior to the Closing Date, whether or not deposited or cleared prior to the
close of business on the Closing Date), commercial paper, marketable securities,
certificates of deposit and other bank deposits, treasury bills and other cash
equivalents (other than cash amounts in any Blocked Account or cash in the
possession of the agent, any lender or participant under the DIP Credit
Agreement that is credited to the loan accounts of Sellers maintained by the
agent in accordance with the terms of the DIP Credit Agreement, but solely to
the extent that such cash has been set off against or has reduced the amount
outstanding under the DIP Credit Agreement as of immediately prior to Closing);

(xi) all accounts receivable of the Sellers that relate to the Purchased Assets;

(xii) all Leases of Sellers set forth on Schedule 2.1(b)(xiv) that are assumed
and assigned to the Purchaser pursuant to the Sale Order (the “Assumed Leases”),
together with all security deposits related thereto and all permanent fixtures,
improvements and appurtenances thereto and associated with such Assumed Leases;

(xiii) all Contracts of Sellers set forth on Schedule 2.1(b)(xv) that are
assumed and assigned to the Purchaser pursuant to the Sale Order (the “Assumed
Contracts”), together with all security deposits related thereto and the right
to receive income in respect of such Assumed Contracts on or after the Closing
Date, and any causes of action relating to past or present breaches of the
Assumed Contracts;

(xiv) subject to Section 8.9, (x) all rights in and to Intellectual Property
rights owned or licensed by Sellers to the broadest extent Sellers are permitted
by law to transfer such Intellectual Property (the “Purchased Intellectual
Property”) and (y) to the extent such Intellectual Property may not be
transferred to Purchaser, each Seller shall be deemed to have granted to
Purchaser an exclusive, royalty free right and license to use the Intellectual
Property from and after the Closing Date, to the broadest extent permitted by
law;

(xv) all Documents that are used in, held for use in or intended to be used in,
or that arise primarily out of, the Business and operations of the Sellers,
including Tax Returns, financial statements, Documents relating to products of
the Sellers, services, marketing, advertising, promotional materials, Purchased
Intellectual Property, personnel files for Transferred Employees and all files,
customer files and documents (including credit information), supplier lists,
records, literature and correspondence, whether or not physically located on
Owned Real Property or premises subject to a Assumed Lease, but excluding any
Documents exclusively related to an Excluded Asset; provided, that, Purchaser
shall provide Sellers with reasonable access to such Documents;

 

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(xvi) all Permits used by Sellers that relate to the Purchased Assets, to the
extent assignable (the “Assigned Permits”);

(xvii) all rights under all insurance policies and all rights of every nature
and description under or arising out of such policies, except as provided in
Section 2.2(d) and (e);

(xviii) all prepaid expense and deposits, including security deposits, utility
deposits, deposits with creditors and other deposits or prepaid items of any
kind or nature whatsoever related to the Purchased Assets, net of any amounts
properly set off, recouped or otherwise retained by third party holders of such
prepaid expenses and deposits;

(xix) subject to Section 2.6, any asset that requires the consent of a third
party to be transferred, assumed or assigned notwithstanding the provisions of
Section 365 of the Bankruptcy Code, as to which such consent has not been
obtained as of the Closing Date, upon receipt of such consent on or after the
Closing Date and entry of an appropriate Assumption Order as provided in
Section 2.6;

(xx) any rights, claims or causes of action of Sellers against third parties
arising out of events occurring prior to the Closing Date, including, for the
avoidance of doubt, arising out of events occurring prior to the Petition Date,
and including any rights under or pursuant to any and all warranties,
representations and guarantees made by suppliers, manufacturers and contractors
relating to products sold, or services provided, to Sellers, excluding only the
rights, claims and causes of action that are identified as Excluded Assets in
Section 2.2; and

(xxi) all other tangible or intangible assets not expressly identified as
Excluded Assets.

2.2 Excluded Assets. Notwithstanding anything to the contrary contained herein,
nothing herein shall be deemed to sell, transfer, assign or convey the Excluded
Assets to Purchaser, and Sellers shall retain all right, title and interest to,
in and under, and all obligations with respect to, the Excluded Assets. For all
purposes of and under this Agreement, the term “Excluded Assets” means:

(a) all Excluded Leases;

(b) all Excluded Contracts;

(c) all receivables, claims or causes of action related exclusively to any
Excluded Executory Contract or any other Excluded Asset;

(d) all claims or cause of actions of the Sellers against any current or former
directors or officers and all of the rights of the Sellers and non-Seller third
parties under the

 

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Sellers’ insurance policies providing coverage for current and former directors
and officers of the Sellers (the “D&O Policies”) and to the proceeds thereof
with respect to such claims or causes of action;

(e) all rights under insurance policies relating to claims for losses related
exclusively to any Excluded Asset;

(f) all Documents exclusively related to any Excluded Asset; provided, that
Sellers shall provide Purchaser reasonable access to such Documents;

(g) any amounts that a Seller is entitled to in connection with all prepaid
expenses, letters of credit, security deposits or Claims with respect to any
Excluded Executory Contract;

(h) any avoidance causes of action of Sellers against non-Seller third parties
other than the Purchaser Group (as defined herein), arising under Subchapters II
and III of Chapter 5 of Title 11 of the Bankruptcy Code, and causes of action
under Section 550 and 551 of the Bankruptcy Code to recover any such avoided
transfers (“Avoidance Actions”); provided that Sellers may not bring any
Avoidance Action with respect to any payment that would constitute a Cure Cost
under an Assumed Contract;

(i) any shares of capital stock or other equity interest of any Seller or any
securities convertible into, exchangeable or exercisable for shares of capital
stock or other equity interest of any Seller;

(j) any minute books, stock ledgers, corporate seals and stock certificates of
Sellers, and other similar books and records that Sellers are required by Law to
retain or that Sellers determine are reasonably necessary to retain including
corporate or other entity filings; provided, that Sellers shall provide
Purchaser reasonable access to any Excluded Asset described in this subclause
(j);

(k) subject to Section 2.9, all rights and ownership interests in any Non-Debtor
Subsidiary identified by Purchaser on or before the Designation Deadline and
listed on Schedule 2.2(k) hereto (the “Excluded Non-Debtor Subsidiaries”); and

(l) any rights of Sellers under this Agreement.

2.3 Assumption of Liabilities. On the terms and subject to the conditions and
limitations set forth in this Agreement, at the Closing, Purchaser shall assume,
effective as of the Closing, and shall timely perform and discharge in
accordance with their respective terms, the following Liabilities (without
duplication) existing as of the Closing Date (collectively, the “Assumed
Liabilities”) and no others:

(a) All accrued and unpaid Liabilities of the Sellers arising in the ordinary
course of business during the Bankruptcy Case through and including the Closing
Date to the extent such Liabilities are allowed administrative expenses of the
Sellers’ estates pursuant to Section 503(b) of the Bankruptcy Code, including
but not limited to, Liabilities of the Sellers, to the extent allowed, in
respect of Taxes, environmental obligations, salary, wages commissions, and
other employee payroll obligations and expenses incurred in the operation of the
Business (except for Liabilities of the type otherwise assumed in this
Section 2.3 or set forth in Section 2.8);

 

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(b) all Liabilities of Sellers under the Assumed Executory Contracts arising
after the Closing Date;

(c) all Cure Costs related to the Assumed Executory Contracts;

(d) the Liabilities of Sellers under any court-approved management incentive
plan, but only to the extent set forth on Schedule 2.3(d) hereto;

(e) all Liabilities of Sellers as of the Closing Date for any accrued and unpaid
claims that are allowed administrative expenses pursuant to Sections 503(b)(9)
or 546(c) of the Bankruptcy Code in an aggregate amount not to exceed the
Allowed Administrative Amount, which amount shall be in addition to the
Liabilities assumed pursuant to Sections 2.3(a), (b) and (c) above;

(f) all of Purchaser’s Liabilities under the Transition Services Agreement;

(g) all Liabilities under any product-related warranties or product-related
guarantees of the Sellers with respect to the Purchased Assets, but not
including Claims of any entity against Sellers or Sellers’ estates that existed
or arose prior to the Petition Date;

(h) all Liabilities of Sellers with respect to statutory liens for current
Taxes, assessments or other governmental charges not yet delinquent or the
amount or validity of which is being contested in good faith by appropriate
proceedings provided an appropriate reserve is established therefore, but only
to the extent such Liabilities constitute allowed administrative claims under
Section 503(b) of the Bankruptcy Code;

(i) all Liabilities of Sellers for mechanics’, carriers’, workers’, repairers’
and similar Liens arising or incurred in the ordinary course of the Sellers’
business, but only to the extent such Liabilities constitute (i) allowed
administrative claims under Section 503(b) of the Bankruptcy Code or (ii) are
secured claims that are senior in priority and right of payment to the claims of
the agents and lenders arising under the Revolving Credit Facility and the
Tennenbaum Credit Agreement;

(j) all transfer Taxes and all documentary or deed stamps and all charges for or
in connection with the recording of any document or instrument contemplated
hereby, in connection with the transfer of the Purchased Assets; and

(k) all Taxes that are allowed as administrative expenses in the Bankruptcy
Case, including but not limited to Taxes payable under Section 503(b)(1)(B) and
(C) of the Bankruptcy Code.

2.4 Excluded Liabilities. Purchaser shall not assume and shall be deemed not to
have assumed, and Sellers shall be solely and exclusively liable with respect
to, (i) the Excluded Environmental Liabilities, but only to the extent of
applicable law, or (ii) any other Liabilities of Sellers of whatever nature,
whether presently in existence or arising hereafter, known or unknown, disputed
or undisputed, contingent or non-contingent, liquidated or unliquidated or
otherwise, other than the Assumed Liabilities (collectively, the “Excluded
Liabilities”).

 

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2.5 Executory Contract Designation.

(a) Prior to the Designation Deadline, the Purchaser shall designate each
Executory Contract that the Purchaser elects to be assumed and assigned to it as
of the Closing Date. Purchaser shall pay, satisfy or otherwise discharge its
obligations with respect to the Cure Costs related to such Executory Contracts
no later than 45 days after the Closing Date (the “Cure Costs Deadline”).

(b) Subsequent to the Designation Deadline and on or prior to the Cure Costs
Deadline, Purchaser may designate any Executory Contract that the Sellers have
not rejected pursuant to Section 365 of the Bankruptcy Code as an Assumed
Contract or Assumed Lease without being required to pay the Sellers any
additional Purchase Price, and Sellers shall use their reasonable efforts to
seek an Assumption Order with respect any such Executory Contract so designated;
provided, however, that Purchaser shall be obligated to pay any Cure Costs with
respect to any such Assumed Executory Contract; and provided, further, however,
that Purchaser advances or reimburses Sellers for any and all costs (including
the professional fees associated with) related to or incurred in connection with
the Sellers seeking entry of the Assumption Order with respect to such Executory
Contract. Purchaser shall pay, satisfy or otherwise discharge its obligations
with respect to Cure Costs related to the assumption and assignment of such
Executory Contracts no later than forty-five (45) days after entry of the
Assumption Order with respect to any Executory Contract assumed or assigned to
Purchaser pursuant to this Section 2.5(b).

(c) From the Effective Date through and including the Cure Costs Deadline,
Sellers shall not reject any Executory Contract unless otherwise agreed to in
writing by Purchaser.

(d) From the Closing Date through and including the Cure Costs Deadline,
Purchaser shall advance or reimburse all of Sellers’ costs and expenses accruing
after the Closing Date under any Executory Contract that Purchaser has not
(i) agreed that Sellers may reject pursuant to Section 2.5(c) or (ii) provided
Sellers with written notice that such Executory Contract will not be assumed and
assigned pursuant to Section 2.5(a) or (b) above.

2.6 Assignment of Contracts and Rights. To the maximum extent permitted by the
Bankruptcy Code, the Purchased Assets and the Sellers’ rights to the
Intellectual Property shall be assumed and assigned to Purchaser pursuant to
Section 365 of the Bankruptcy Code as of the Closing Date or such other date as
specified in an Order or this Agreement, as applicable. Notwithstanding any
other provision of this Agreement to the contrary, this Agreement shall not
constitute an agreement to assign any asset or any right thereunder if an
attempted assignment without the consent of a third party would constitute a
breach or in any way adversely affect the rights of the Purchaser or Seller
thereunder. If such consent is not obtained or such assignment is not attainable
pursuant to Sections 105, 363 or 365 of the Bankruptcy Code other than as a
result of the failure to pay Cure Costs which are not Assumed Liabilities, then
such Purchased Assets shall not be transferred hereunder and the Closing shall
proceed with respect to the Remaining Purchased Assets without any reduction in
Purchase Price.

 

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2.7 Further Conveyances and Assumptions.

(a) From time to time following the Closing, Sellers shall, or shall cause their
Affiliates to, transfer to the Purchaser any Purchased Assets received by or in
the possession of the Sellers.

(b) From time to time following the Closing, Sellers and Purchaser shall, and
shall cause their respective Affiliates to, execute, acknowledge and deliver all
such further conveyances, notices, assumptions, releases and other instruments,
and shall take such further actions, as may be reasonably necessary or
appropriate to assure fully to Purchaser and its respective successors or
assigns, all of the properties, rights, titles, interests, estates, remedies,
powers and privileges intended to be conveyed to Purchaser under this Agreement
and to assure fully to each Seller and its Affiliates and their successors and
assigns, the assumption of the liabilities and obligations intended to be
assumed by Purchaser under this Agreement, and to otherwise make effective the
Transactions.

(c) Within ten (10) Business Days following the Purchaser’s identification of
all of the Transferred Employees, Sellers shall provide a list of the name and
site of employment of any and all employees of Sellers who have experienced, or
will experience, an employment loss or mass layoff (as defined by the Worker
Adjustment and Retraining Notification Act of 1988 or any similar applicable
state or local law requiring notice to employees in the event of a closing or
layoff (the “WARN Act”)) as a result of the Transactions contemplated by this
Agreement.

(d) Sellers and Purchaser shall cooperate to comply with and take all actions
necessary to minimize the obligations arising under the WARN Act. Sellers shall
send notices under the WARN Act as Sellers may deem advisable or as Purchaser
may reasonably request.

2.8 Advancement for Certain Amounts. Purchaser shall either advance or reimburse
Sellers, or, in the case of clause (d) below, pay directly on behalf of Sellers,
on the Closing Date or, if the Closing occurs, such later date as the same may
become due and payable, the following amounts:

(a) any Bankruptcy Court-approved accrued and unpaid professional fees and
expenses incurred by the Sellers in connection with the administration of the
Bankruptcy Case (other than those described in clauses (b) and (d) below) as of
the Closing Date, but not including any fees and expenses of any professional in
pursuing or supporting Claims, objections, avoidance actions or any other
litigation against any member of the Purchaser Group;

(b) any Bankruptcy Court-approved transaction, restructuring or similar success
fees incurred by Sellers as of the Closing Date and payable to Lehman Brothers,
Inc. (or any subsequent financial advisor) representing the Sellers in
connection with consummation of the Transactions contemplated by this Agreement,
in an aggregate amount not to exceed Three Million Dollars ($3,000,000), minus
the aggregate amount of any monthly or other fees paid or payable to Lehman
Brothers, Inc. (or any subsequent financial advisor) under Section 2.8(a)
hereof;

 

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(c) any accrued and unpaid fees and expenses of any officers provided to the
Sellers by Alvarez & Marsal incurred by the Sellers as of the Closing Date;

(d) any accrued and unpaid professional fees payable by the Sellers to the
professionals retained by a Tennenbaum Lender in connection with the DIP Credit
Agreement or the Tennenbaum Credit Agreement; and

(e) the costs and expenses of the Sellers (including Bankruptcy Court-approved
professional fees and expenses) incurred in connection with the Sellers winding
down of their affairs, the filing and prosecution of a liquidating plan of
reorganization and the closing of the Sellers’ Bankruptcy Case, in an amount not
to exceed $750,000 (the “Wind Down Amount”), payable pursuant to Section 3.1(b).

Notwithstanding the foregoing, the aggregate amount advanced or reimbursed by
Purchaser for the fees and expenses set forth in clauses (a) and (c) above shall
not exceed $4,000,000 in the aggregate (the “Expense Cap”); provided, however,
that such Expense Cap shall be reduced dollar for dollar by the amount of any
fees and expenses described in clauses (a) and (c) above that are paid from
proceeds of the DIP Credit Agreement.

2.9 Non-Debtor Subsidiaries.

(a) Prior to the Designation Deadline, the Purchaser shall designate each
Non-Debtor Subsidiary the ownership rights and equity interests of which the
Purchaser elects to be included in the Purchased Assets as of the Closing Date.

(b) Subsequent to the Designation Deadline and on or prior to ten (10) Business
Days prior to the Cure Costs Deadline, Purchaser may designate any Excluded
Non-Debtor Subsidiary as a Purchased Asset without being required to pay the
Sellers any additional Purchase Price, and Sellers shall use their reasonable
efforts to seek an Order approving the sale, assignment, transfer or conveyance
any such Excluded Non-Debtor Subsidiary to Purchaser; provided, however, that
Purchaser advances or reimburses Sellers for any and all costs (including the
professional fees associated with) related to or incurred in connection with the
Sellers seeking entry of the Order with respect to such Excluded Non-Debtor
Subsidiary.

(c) From the Effective Date through and including the tenth Business Day prior
to the Cure Costs Deadline, Sellers shall not reject or otherwise liquidate,
sell, assign, transfer or convey any Non-Debtor Subsidiary unless otherwise
agreed to in writing by Purchaser.

(d) From the Closing Date through and including the Cure Costs Deadline,
Purchaser shall advance or reimburse all of Sellers’ costs and expenses accruing
after the Closing Date and on or prior to the tenth Business Day following any
designation pursuant to Section 2.9(b) with respect to such designated Excluded
Non-Debtor Subsidiary, net of any cash or other benefit received by any of the
Sellers with respect to such designated Excluded Non-Debtor Subsidiary.

 

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2.10 Miscellaneous Secured Facilities.

(a) Notwithstanding Sections 2.1, 3.1(a)(iii) and 3.1(b)(i) hereof, prior to the
Designation Deadline, the Purchaser may elect to designate any Purchased Asset
subject to a lien pursuant to any of the miscellaneous secured financing
arrangements set forth on Schedule 3.1(a)(iii) (the “Miscellaneous Secured
Debt”) as an Excluded Asset on the Closing Date (any such designated asset, a
“Secured Asset”). In such an event, Schedule 3.1(a)(iii) hereto shall thereafter
be deemed not to include the aggregate outstanding amount of any Miscellaneous
Secured Debt securing such Secured Asset.

(b) At any time on or prior to thirty (30) days after the Closing Date (the
“Payoff Deadline”), Purchaser may designate any Secured Asset previously
designated as an Excluded Asset pursuant to Section 2.10(a) above as a Purchased
Asset. In such an event, Purchaser shall pay, satisfy or otherwise discharge all
outstanding obligations with respect to the Miscellaneous Secured Debt secured
by any such Secured Asset no later than the Payoff Deadline.

(c) From the Effective Date through and including the Payoff Deadline, Sellers
shall not sell, assign, transfer or convey any Secured Asset unless otherwise
agreed to in writing by Purchaser.

(d) From the Closing Date and on or prior to the date of any designation
pursuant to Section 2.10(b) with respect to such designated Secured Asset,
Purchaser shall advance or reimburse all of Sellers’ costs and expenses accruing
after the Closing Date with respect to such designated Secured Asset, including
under any Miscellaneous Secured Debt related thereto.

ARTICLE III

CONSIDERATION

3.1 Consideration.

(a) Subject to Section 3.2, the aggregate consideration for the Purchased Assets
(the “Purchase Price”) shall be equal to the following, as calculated on the
Closing Date:

(i) obligations of any kind outstanding under the Revolving Credit Facility and
the DIP Credit Agreement in an aggregate amount up to the sum of (a) all
outstanding obligations of any kind under the Revolving Credit Agreement as of
the Petition Date plus (b) all outstanding obligations under the DIP Credit
Agreement but not in excess of the Bank Loan Amount; plus

(ii) $95,000,000, plus the amount of any accrued and unpaid interest payable to
the lenders under Tranches A and B of the Tennenbaum Credit Agreement (the
“Tennenbaum Lenders”) through the Auction Date (the “Credit Bid Amount”); plus

(iii) the aggregate outstanding amount under any mortgage or secured financing
arrangements listed on Schedule 3.1(a)(iii) hereto (as such schedule shall be

 

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deemed modified in accordance with Section 2.10(a)), in an aggregate principal
amount not to exceed $19,211,237, plus the amount of any accrued and unpaid
interest, late fees, penalties and other charges, in each case to the extent
constituting allowed secured claims under Section 506(b) of the Bankruptcy Code
(the “Miscellaneous Secured Facilities Amount”); plus

(iv) the Wind Down Amount; plus

(v) the aggregate amount either advanced or reimbursed pursuant to Sections
2.8(a), (b), (c) and (d) (the “Advancement Amount”); plus

(vi) the aggregate amount of any Liabilities assumed pursuant to Section 2.3
(the “Assumed Liabilities Amount”).

(b) At Closing, the Purchase Price shall be payable, in Purchaser’s sole
discretion and subject to Section 3.2, as follows:

(i) with respect to the Bank Loan Amount and Miscellaneous Secured Facilities
Amount, by paying cash or, with the consent of the lenders under the applicable
agreements, by assuming the Sellers’ obligations thereunder;

(ii) with respect to the Credit Bid Amount, by (x) paying cash, (y) delivering
fully executed releases and waivers by the Tennenbaum Lenders of the aggregate
amount of the Credit Bid Amount, or (z) assuming the Sellers’ obligations with
respect to the Credit Bid Amount on terms reasonably acceptable to the
Tennenbaum Lenders; and

(iii) with respect to the Wind Down Amount, by paying cash.

3.2 Purchase Price Adjustment.

(a) On the Closing Date, the Purchase Price shall be reduced dollar for dollar
by an aggregate amount equal to the amount of any (i) payment(s) made by any
Seller in breach of Section 8.2(c) hereof or (ii) other than Excepted
Commitments, commitments made or Liabilities incurred by any Seller to make any
payment in excess of the amounts set forth on Schedule 8.2(c), as such amounts
may be reduced in accordance with the definition of Bank Loan Amount and
Schedule 1.1A, to the extent such commitments or Liabilities constitute Assumed
Liability under Section 2.3.

(b) On or after the Closing Date, in reimbursement of amounts advanced or
otherwise paid by Purchaser to Sellers in respect of the Wind Down Amount and
the assumed allowed administrative expenses under Section 2.3(e) hereof, the
Sellers’ estates shall promptly pay to Purchaser 100% of all recoveries from the
prosecution, settlement or adjudication of any claim of Sellers’ estates or
their assignees, including avoidance claims, plus the net proceeds from the
transfer, liquidation or other disposition of the Excluded Assets, until the
Wind Down Amount is repaid and reimbursed to Purchaser in full, and thereafter
until 50% of the amount of Assumed Liabilities under Section 2.3(e) has been
repaid and reimbursed to Purchaser.

 

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ARTICLE IV

CLOSING AND TERMINATION

4.1 Closing Date. Subject to the satisfaction of the conditions set forth in
Sections 10.1, 10.2 and 10.3 hereof (or the waiver thereof by the party entitled
to waive that condition), the closing of the purchase and sale of the Purchased
Assets and the assumption of the Assumed Liabilities provided for in Article II
hereof (the “Closing”) shall take place at the offices of Milbank, Tweed,
Hadley & McCloy LLP, 1 Chase Manhattan Plaza, New York, NY 10005 (or at such
other place as the parties may designate in writing) at 10:00 a.m. (New York
City time) on the date the conditions set forth in Article X are satisfied or
waived (other than conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of such conditions), unless
another time or date, or both, are agreed to in writing by the parties hereto.
The date on which the Closing shall be held is referred to in this Agreement as
the “Closing Date.”

4.2 Deliveries by Sellers. At the Closing, Sellers shall deliver to Purchaser:

(a) one or more duly executed bills of sale in a form to be agreed upon the
parties hereto;

(b) one or more duly executed assignment and assumption agreements in a form to
be agreed upon by the parties hereto and duly executed assignments of the U.S.
trademark registrations and applications included in the Purchased Intellectual
Property, in a form suitable for recording in the U.S. trademark office, and
general assignments of all other Purchased Intellectual Property;

(c) the officer’s certificate required to be delivered pursuant to Sections
10.1(a) and 10.1(b);

(d) affidavits executed by each Seller that such Seller is not a foreign person
within the meaning of Section 1445(f)(3) of the Code;

(e) a certified copy of the Sale Order;

(f) a legal opinion of Skadden, Arps, Slate, Meagher & Flom LLP in the form of
Exhibit 4.2(f) attached hereto;

(g) all other documents, instruments or writings of conveyance and transfer, in
form and substance reasonably acceptable to Purchaser, as may be necessary or
desirable to convey the Purchased Assets to Purchaser, such documents to be
identified and provided by Purchaser to Sellers in a form acceptable to the
Purchaser on or before the Designation Deadline;

(h) one or more duly executed assignment and assumption agreements in a form to
be agreed upon by the parties hereto with respect to each of the Assumed Leases;
and

 

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(i) such other documents, instruments and certificates as the Purchaser may
reasonably request, such documents to be identified and provided to Purchaser by
Sellers in a form acceptable to the Purchaser on or before the Designation
Deadline.

4.3 Deliveries by Purchaser. At the Closing, Purchaser shall deliver:

(a) Cash in the amount of the Purchase Price minus any portion of the Purchase
Price that the Purchaser has elected to pay, pursuant to Section 3.1(b) of this
Agreement by (i) assuming the Sellers’ Liabilities under the applicable
agreements and (ii) delivering fully executed releases and waivers with respect
to the Credit Bid Amount;

(b) A writing in a form reasonably acceptable to Sellers evidencing a release
and waiver of the Credit Bid Amount, if applicable;

(c) one or more duly executed assignment and assumption agreements in a form to
be agreed upon the parties hereto;

(d) the officer’s certificate required to be delivered pursuant to Sections
10.2(a) and 10.2(b);

(e) a duly executed assignment and assumption agreement in a form to be agreed
upon by the parties hereto with respect to each of the Assumed Leases; and

(f) such other documents, instruments and certificates as the Sellers may
reasonably request, such documents to be identified and provided by Sellers to
Purchaser in a form acceptable to the Sellers on or before the Designation
Deadline.

4.4 Termination of Agreement. This Agreement may be terminated prior to the
Closing as follows:

(a) by Purchaser, (i) if the Bankruptcy Case is not filed by Sellers by the
close of business on the day that is three (3) days after the Effective Date, or
(ii) if the schedules and exhibits to be annexed hereto pursuant to Section 8.14
are not finally completed by the date set forth in Section 8.14;

(b) by Purchaser or Sellers, (i) if the Closing shall not have occurred by the
close of business on the day that is ninety (90) days after the Petition Date
(the “Termination Date”); provided, however, that if the Closing shall not have
occurred on or before the Termination Date due to a material breach of any
representations, warranties, covenants or agreements contained in this Agreement
by Purchaser on the one hand or Sellers on the other hand, then the breaching
party may not terminate this Agreement pursuant to this Section 4.4(b);

(c) by mutual written consent of Sellers and Purchaser;

(d) by Purchaser, if any condition to the obligations of Purchaser set forth in
Section 10.1 or 10.3 shall have become incapable of fulfillment other than as a
result of a breach by Purchaser of any covenant or agreement contained in this
Agreement, and such condition is not waived by Purchaser;

 

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(e) by Sellers, if any condition to the obligations of Sellers set forth in
Section 10.2 or 10.3 shall have become incapable of fulfillment other than as a
result of a breach by Sellers of any covenant or agreement contained in this
Agreement, and such condition is not waived by Sellers;

(f) by Purchaser, if there shall be a breach by Sellers of any representation or
warranty, or any covenant or agreement contained in this Agreement which would
result in a failure of a condition set forth in Section 10.1 or 10.3 and which
breach has not been cured by the earlier of (i) 10 Business Days after the
giving of written notice by Purchaser to Sellers of such breach and (ii) the
Termination Date;

(g) by Sellers, if there shall be a breach by Purchaser of (x) any
representation or warranty, or (y) any covenant or agreement contained in this
Agreement which would result in a failure of a condition set forth in Sections
10.2 or 10.3 and which breach has not been cured by the earlier of (i) 10
Business Days after the giving of written notice by Sellers to Purchaser of such
breach and (ii) the Termination Date;

(h) by Sellers, if (i) the Purchaser has neither waived nor satisfied the
conditions set forth in Section 10.1(c), (d) and (f) on or before the
Designation Deadline, (ii) the Purchaser has not delivered to the Sellers, by
the Designation Deadline, an executed copy of a commitment to fund that portion
of the Purchase Price to be paid in cash, in form and substance for a
transaction of this type (the “Funding Commitment”), which Funding Commitment
may not be amended in any material respect without the Sellers’ prior written
consent or (iii) the Tennenbaum Lenders have not contributed or otherwise
assigned to Purchaser their rights with respect to Tranches A and B under the
Tennenbaum Credit Agreement.

(i) by Sellers or Purchaser if there shall be in effect a final non-appealable
Order of a Governmental Body of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the Transactions, it being agreed that
the parties hereto shall promptly appeal any adverse determination which is not
non-appealable (and pursue such appeal with reasonable diligence);

(j) by Purchaser, if the Auction Date is not on or before a date that is sixty
(60) days following the Petition Date;

(k) by Purchaser, if (i) the Sale Order with respect to the Transactions or
(ii) a sale order with respect to a Competing Transaction has not been entered
within five (5) Business Days of the Auction Date;

(l) by Purchaser, if the Sale Order with respect to the Transactions has been
entered and (i) Purchaser has provided Sellers with written notice that it is
prepared to consummate the Transactions and (ii) the Closing Date does not occur
within two (2) Business Days of Purchaser providing the Sellers with such
notice; and

(m) automatically, upon the earlier to occur of (i) the consummation of a
Competing Transaction and (ii) no transaction being consummated twenty-five
(25) days after the entry of a sale order with respect to a Competing
Transaction.

 

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4.5 Procedure Upon Termination. In the event of termination pursuant to
Section 4.4 hereof, written notice thereof shall forthwith be given to the other
party or parties, and this Agreement shall terminate, and the purchase of the
Purchased Assets hereunder shall be abandoned, without further action by
Purchaser or Sellers. If this Agreement is terminated as provided herein, each
party shall redeliver all confidential documents, work papers and other material
of any other party relating to the Transactions, whether so obtained before or
after the execution hereof, to the party furnishing the same.

4.6 Effect of Termination.

(a) In the event that this Agreement is validly terminated as provided herein,
then each of the parties shall be relieved of its duties and obligations arising
under this Agreement after the date of such termination and such termination
shall be without liability to Purchaser or Sellers; provided, however, that the
provisions of Article XII hereof shall survive any such termination and shall be
enforceable hereunder, except Section 12.11 thereof if the Closing shall not
have occurred; provided further, however, that nothing in this Section 4.6 shall
be deemed to release any party from liability for any breach of its obligations
under this Agreement.

(b) In the event that Sellers terminate this Agreement pursuant to
Section 4.4(g)(y) and the Closing of the Transactions does not occur, Sellers
shall have a right of partial set off against the Claims of Purchaser under the
Tennenbaum Credit Agreement in an aggregate principal amount equal to ten
(10%) of the Purchase Price, as adjusted pursuant to Section 3.2, as liquidated
damages (the “Liquidated Damages Amount”). The parties hereto expressly agree
and acknowledge that Sellers’ actual damages in the event of such a breach by
Purchaser would be extremely difficult or impracticable to ascertain and that
the Liquidated Damages Amount represents the parties’ reasonable estimate of
such damages. Notwithstanding any other provision of this Agreement, Sellers
shall have no other remedy for any breach by Purchaser under this Agreement. If
Sellers shall be entitled to receive and do receive the right to set off the
Liquidated Damages Amount in accordance herewith, then Sellers agree that such
Liquidated Damages Amount shall be (i) full liquidated damages for any and all
failures to act, defaults or breaches hereunder by Purchaser and (ii) shall
constitute a full release and discharge of all claims for damages for such
failures to act, defaults or breaches and Sellers shall not have any further
cause of action for damages, specific performance or any other legal or
equitable relief against Purchaser or its Affiliates with respect thereto.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SELLERS

Each Seller hereby jointly and severally represents and warrants to Purchaser
that:

5.1 Organization and Good Standing. Each Seller is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and in each jurisdiction where it is qualified to do business,
subject to the limitations imposed on such Seller as a result of having filed a
petition for relief under the Bankruptcy Code, has the requisite power and
authority to own, lease and operate its properties and to carry on its business
as now conducted. Schedule 5.1 sets forth each Seller, the jurisdiction of its
organization and each jurisdiction in which it is qualified to do business.

 

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5.2 Authorization of Agreement. Subject to entry of the Sale Order and such
other authorization as is required by the Bankruptcy Court: (a) each Seller has
the requisite power and authority to execute and deliver this Agreement and each
other agreement, document or instrument contemplated hereby or thereby to which
it is a party and to perform its respective obligations hereunder and
thereunder; (b) the execution and delivery of this Agreement and each other
agreement, document or instrument contemplated hereby or thereby to which it is
a party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate action on the part of each
Seller; and (c) this Agreement and each other agreement, document or instrument
contemplated hereby or thereby to which it is a party has been duly and validly
executed and delivered by each Seller and (assuming the due authorization,
execution and delivery by the other parties hereto) this Agreement and each
other agreement, document or instrument contemplated hereby or thereby to which
it is a party constitutes legal, valid and binding obligations of each Seller
enforceable against such Seller in accordance with its respective terms, subject
to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity).

5.3 Conflicts; Consents of Third Parties.

(a) The execution and delivery by each Seller of this Agreement and each other
agreement, document or instrument contemplated hereby or thereby to which it is
a party, the consummation of the Transactions contemplated hereby and thereby,
or compliance by such Seller with any of the provisions hereof do not conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination or cancellation
under any provision of (i) the certificate of incorporation and by-laws or
comparable organizational documents of such Seller; (ii) subject to entry of the
Sale Order, any Contract, Lease or Permit to which such Seller is a party or by
which any of the properties or assets of such Seller are bound; (iii) subject to
entry of the Sale Order, any Order of any Governmental Body applicable to such
Seller or any of the properties or assets of such Seller as of the date hereof;
or (iv) subject to entry of the Sale Order, any applicable Law, other than, in
the case of clauses (i), (ii), (iii) and (iv), such conflicts, violations,
defaults, terminations or cancellations that would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Change.

(b) If the Sale Order is entered, no consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of Sellers in connection with the
execution and delivery of this Agreement or any other agreement, document or
instrument contemplated hereby or thereby to which it is a party, the compliance
by Sellers with any of the provisions hereof or thereof, the consummation of the
transactions contemplated hereby or thereby, the assignment or conveyance of the
Purchased Assets, or the taking by Sellers of any other action contemplated
hereby or thereby, except for (i) the Non-Debtor Consents; (ii) compliance with
the applicable requirements of the HSR Act, (iii) the entry of the Sale Order,
(iv) such other consents, waivers, approvals, Orders, Permits, authorizations,
declarations, filings and notifications, the failure of

 

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which to obtain or make would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Change and (v) those Permits listed on
Schedule 5.3(b) hereof.

5.4 Title to Purchased Assets. Sellers either own or have the right to transfer
the Purchased Assets, and, subject to the entry of the Sale Order, Purchaser
will be vested with good title to such Purchased Assets, free and clear of all
Liens, Claims, Interests and Encumbrances, other than Permitted Exceptions, to
the fullest extent permissible under Section 363(f) of the Bankruptcy Code.

5.5 Taxes.

(a) Sellers have timely filed all Tax Returns required to be filed with the
appropriate Tax Authorities in all jurisdictions in which such Tax Returns are
required to be filed (taking into account any extension of time to file granted
or to be obtained on behalf of Sellers), and all such Tax Returns are correct
and complete in all material respects and no adjustment relating to such Tax
Returns has been proposed in writing by any taxing authority. Sellers have not
received any written notice or written inquiry from any jurisdiction where the
Sellers do not currently file Tax Returns to the effect that such filings may be
required with respect to the Purchased Assets or the Business, or that the
Business may otherwise be subject to taxation by such jurisdiction. No power of
attorney currently in force has been granted by the Sellers with respect to the
Business that would be binding on Purchaser with respect to taxable periods
commencing on or after the Closing Date. Except as to Taxes of Sellers the
payment of which is or will be prohibited or stayed by the Bankruptcy Code, each
Seller has paid all Taxes due and payable by it (whether or not such Taxes are
shown on any Tax Return). Other than those set forth on Schedule 5.5(a), there
are no Tax Liens on any of the Purchased Assets other than Permitted Exceptions.

(b) None of the Sellers is a foreign person within the meaning of
Section 1445(f)(3) of the Code.

5.6 Intellectual Property. Except as set forth on Schedule 5.6, Sellers own or
have valid licenses to use all material Purchased Intellectual Property. Except
as set forth on Schedule 5.6, no claims are pending against Sellers before a
Governmental Body or, to the Knowledge of Sellers, threatened with regard to the
ownership by Sellers of any Purchased Intellectual Property.

5.7 Permits. Schedule 5.7 sets forth a true, complete and correct list of all
material Permits, including all material Permits required under Environmental
Laws, necessary for the ownership or operation of the Business and the Real
Property and held by Sellers as of the Effective Date. Except as set forth on
Schedule 5.7 and as may have resulted from the commencement of the Bankruptcy
Case, all Permits (a) are valid and in full force and effect and, to the
Knowledge of the Sellers, none of the Sellers are in default under or in
violation of any such Permit, except for such defaults or violations which would
not reasonably be expected, individually or in the aggregate, to cause a
Material Adverse Change and no suspension or cancellation of any such Permits is
pending (other than pursuant to its terms) or threatened and (b) except as set
forth on Schedule 5.7 and subject to entry of the Sale Order and the provisions
of Section 2.6 hereof, may be transferred or reissued to Purchaser in accordance
with this Agreement and without the approval of any third party (other than the
Bankruptcy Court).

 

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5.8 Environmental Matters.

(a) Except as set forth on Schedule 5.8 and except as would not reasonably be
expected to have a Material Adverse Change, Sellers are in compliance with all
applicable Environmental Laws. No Seller has received written, or to the
Knowledge of the Sellers, oral, notice of any pending or, to the Knowledge of
the Sellers, threatened claim or investigation by any Governmental Authority or
any other Person concerning material potential liability of any Seller under
Environmental Laws in connection with the ownership or operation of the
Business, the Real Property or any real property currently owned, leased or
occupied by a Seller. There has not been a Release of any Hazardous Substance
at, upon, in, from or under (i) any of the Real Property or any property
currently owned or leased by a Seller or (ii) at any location to or from which a
Seller has transported or arranged for the transportation or disposal of
Hazardous Substances, in each case, in quantities or under circumstances that
would give rise to any liability or require remediation, investigation or clean
up pursuant to any Environmental Law.

(b) Sellers have provided or made available to Purchaser written non-privileged
reports in the possession or control of Sellers relating to the presence or
migration of Hazardous Substances on, in or under the Real Property and any
property currently owned or leased by a Seller and the compliance of the
Business with applicable Environmental Laws.

(c) Except as set forth on Schedule 5.8(c), no material capital or other
expenditures are required to reach or maintain compliance with current
Environmental Laws with respect to the operations of the Business or the
Purchased Assets including without limitation, any such expenditures arising as
the result of emissions from cup storage being classified as non-fugitive
emissions by any Governmental Body.

5.9 Employee Benefits.

(a) Schedule 5.9(a) sets forth a complete and correct list of all Employee
Benefit Plans.

(b) No Employee Benefit Plans are subject to Title IV or Section 302 of ERISA.

(c) Each Employee Benefit Plan has been operated and administered in all
material respects in accordance with its terms and applicable law, including but
not limited to ERISA and the Code.

(d) Each Employee Benefit Plan intended to be “qualified” within the meaning of
Section 401(a) of the Code is so qualified and the trusts maintained thereunder
are exempt from taxation under Section 501(a) of the Code.

(e) There are no pending, or to the Knowledge of Sellers, threatened claims by
or on behalf of any Employee Benefit Plan, by any employee or beneficiary
covered under any such Plan, or otherwise involving any such Employee Benefit
Plan (other than routine claims for benefits).

 

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(f) No amounts payable under the Employee Benefit Plans will fail to be
deductible for federal income tax purposes by virtue of Section 280G of the
Code.

(g) There are no material outstanding Liabilities of, or related to, any
Employee Benefit Plan, other than Liabilities for benefits to be paid in the
ordinary course to participants in such Employee Benefit Plan and their
beneficiaries in accordance with the terms of such Employee Benefit Plan.

5.10 Litigation. Except as set forth on Schedule 5.10, there are no Legal
Proceedings pending or, to the Knowledge of Sellers, threatened against any
Seller before any Governmental Body, which, if adversely determined, would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Change on the Business of the Sellers, the Business or the Purchased
Assets.

5.11 Material Contracts.

(a) Schedule 5.11(a) contains for each Seller and Non-Debtor Subsidiary a
correct and complete list, as of the date hereof, of all Contracts (the
“Material Contracts”) pursuant to which any Seller or Non-Debtor Subsidiary has
any rights or benefits or undertakes any obligations or liabilities that:

(i) has a duration of one year or more and is not terminable without penalty
upon 90 days or less prior written notice by any party;

(ii) requires or could reasonably be expected to require any party thereto to
pay $200,000 or more in the aggregate;

(iii) requires any severance, retention, or other termination payments to its
Employees on or after the Closing Date;

(iv) contains any non-competition covenant or exclusivity arrangement;

(v) involves any contract (i) granting or obtaining any right to use any
Intellectual Property (other than contracts granting rights to use readily
available commercial Software having an annual license and/or maintenance fee of
less than $25,000 in the aggregate for all such related contracts) or
(ii) restricting the Sellers’ or and Non-Debtor Subsidiaries’ rights to any
Purchased Intellectual Property.

(vi) regards the employment, services, consulting, termination or severance from
employment relating to or for the benefit of any director, officer, employee,
sales agent, distributor, dealer, independent contractor or consultant;

(vii) constitutes joint venture, partnership and similar contracts involving a
sharing of profits or expenses (including but not limited to joint research and
development and joint marketing contracts); or

 

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(viii) constitutes master lease agreements providing for the leasing of material
personal property.

(b) Except as set forth in Schedule 5.11(b) with respect to Material Contracts
(other than Leases): (i) all of the Material Contracts are in full force and
effect, (ii) except for breaches and defaults of the type referred to in
Section 365(b)(2) of the Bankruptcy Code, none of the Sellers or Non-Debtor
Subsidiaries, as the case may be, and to the Knowledge of the Sellers and
Non-Debtor Subsidiaries, none of the other parties to the Material Contracts,
are in material default under, and no event has occurred which, with the passage
of time or giving of notice or both, would result in the Sellers or Non-Debtor
Subsidiaries, as the case may be, or to the Knowledge of the Sellers and
Non-Debtor Subsidiaries, any of the other parties to the Material Contracts,
being in material default under, any of the terms of the Material Contracts, and
(iii) subject to entry of the Sale Order, none of the Material Contracts
requires the consent of any other party thereto in connection with the
transactions contemplated by this Agreement except, in the case of clauses (i),
(ii) and (iii) above, as have not had, or would not reasonably be expected to
have, a Material Adverse Change.

5.12 Customers and Suppliers. To the Knowledge of the Sellers and the Non-Debtor
Subsidiaries, except as set forth on Schedule 5.12 or except with respect to
outstanding disputes regarding Sellers’ failure to pay outstanding amounts,
there are no outstanding material disputes between the Sellers or the Non-Debtor
Subsidiaries and any of their respective customers or suppliers and no material
customer or supplier has notified any Seller or Non-Debtor Subsidiary in writing
that it intends to terminate or materially reduce the amount of business it
conducts with the Sellers or Non-Debtor Subsidiaries.

5.13 Property.

(a) Schedule 5.13(a) sets forth for each Seller the address or other description
of each parcel of Owned Real Property. The Sellers have delivered or made
available to the Purchaser true, correct and complete copies of the legal
descriptions of the Owned Real Property. Except as set forth in Schedule
5.13(a), with respect to each parcel of Owned Real Property, there are no Liens
or Encumbrances on the Owned Real Property that will not be extinguished
pursuant to the Sale Order other than Permitted Exceptions. To the Knowledge of
Sellers and to the extent in Sellers’ possession, the Sellers have delivered or
made available to the Purchaser true, correct and complete copies of all
(i) title insurance policies and surveys relating to each parcel of Owned Real
Property and (ii) Liens or Encumbrances affecting any parcel of Owned Real
Property listed on Schedule 5.13(a).

(b) Schedule 5.13(b) sets forth for each Seller a true, correct and complete
list of all Leases for all real property (including the date, if available, and
name of each of the parties to such Leases), together with a description of any
buildings, fixtures, structures and improvements located on such real property,
(collectively, the “Leased Real Property”, and together with the Owned Real
Property, the “Real Property”). The Sellers have delivered or made available to
the Purchaser a true and complete copy of each of the aforementioned Leases
(including all amendments, modifications and supplements thereto) and, except as
set forth on Schedule 5.13(b), such Leases have not been amended, modified,
restated or otherwise supplemented. To the Knowledge of Sellers and to the
extent in Sellers’ possessions, the Sellers

 

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have delivered or made available to the Purchaser true, correct and complete
copies of all leasehold title insurance policies and surveys relating to each
Leased Real Property. With respect to each of the aforementioned Leases:
(i) except as results directly from the pendency of the Bankruptcy Case, Sellers
have a valid and subsisting leasehold estate in such Leased Real Property for
the full term of such Lease, and such Lease is legal, valid, binding obligation
of the applicable Seller that is lessee thereunder and is in full force and
effect; (ii) there are no material disputes with respect to such Lease, nor have
the Sellers received written notice of, or are they aware of, any default
thereunder (or condition or event, which, after notice or a lapse of time or
both, would constitute a default thereunder), except as results directly from
the pendency of the Bankruptcy Case or except with respect to outstanding
disputes regarding Sellers’ failure to pay outstanding amounts; (iii) to the
Knowledge of the Sellers, no security deposit or portion thereof deposited with
respect to such Lease has been applied in respect of a breach or default under
such Lease which has not been redeposited in full, nor have the Sellers received
written notice of the foregoing; (iv) the Sellers do not owe, nor will they in
the future owe, any brokerage commissions or finder’s fees with respect to such
Lease; (v) except as set forth on Schedule 5.13(b)(v), the other party to such
Lease is not an Affiliate of, and, to the Knowledge of the Sellers, otherwise
does not have any economic interest in, the Sellers; (vi) except as set forth on
Schedule 5.13(b)(vi), to the Knowledge of the Sellers, there are no Liens or
Encumbrances other than Permitted Exceptions on the Lease or on the estate or
interest created by such Lease created or suffered to exist by the Sellers that
will not be extinguished pursuant to the Sale Order as against such Lease or
estate or interest, nor have the Sellers received written notice of any of the
foregoing; (vii) except as set forth on Schedule 5.13.(b)(vii), no Seller and,
to the Knowledge of the Sellers, no other party to such Lease has assigned the
same or sublet any part of the premises covered thereby or exercised any option
or right thereunder, and (viii) except as set forth on Schedule 5.13(b)(viii),
there are no unpaid late fees, charges or other penalties under any Lease in an
amount in excess of $50,000 individually and $250,000 in the aggregate.

(c) Sellers have received no written or, to the Sellers’ Knowledge, oral
notification that they are in violation of any applicable building, zoning,
health or other law, ordinance or regulation which would materially adversely
affect the use or operations of any Leased Real Property, except for any written
notifications that pertain to violations that have been cured or resolved. The
Sellers have received no written notification regarding unrecorded easements
and/or agreements or encroachments in respect of all or any portion of any
Leased Real Property that could materially adversely affect any such Leased Real
Property or the use thereof.

5.14 Brokers. The Sellers have no obligation to pay any fees, commissions or
other similar compensation to any broker, finder, investment banker, financial
advisor or other similar Person in connection with the Transactions, except as
set forth on Schedule 5.14.

5.15 No Other Representations or Warranties; Schedules. Except for the
representations and warranties contained in this Article V (as modified by the
Schedules hereto), none of Sellers nor any other Person makes any other express
or implied representation or warranty with respect to Sellers, the Sellers’
Business, the Purchased Assets, the Assumed Liabilities or the Transactions, and
each Seller disclaims any other representations or warranties, whether made by
Sellers, any Affiliate of Sellers, or any of Sellers’ or their Affiliates
respective officers, directors, employees, agents or representatives. Except for
the representations and

 

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warranties contained in Article V hereof (as modified by the Schedules hereto),
each Seller (i) expressly disclaims and negates any representation or warranty,
expressed or implied, at common law, by statute, or otherwise, relating to the
condition of the Purchased Assets (including any implied or expressed warranty
of merchantability or fitness for a particular purpose, or of conformity to
models or samples of materials) and (ii) disclaims all liability and
responsibility for any representation, warranty, projection, forecast,
statement, or information made, communicated, or furnished (orally or in
writing) to Purchaser or its Affiliates or representatives (including any
opinion, information, projection, or advice that may have been or may be
provided to Purchaser by any director, officer, employee, agent, consultant, or
representative of Sellers or any of its Affiliates). Except for the
representations and warranties contained in this Article V (as modified by the
Schedules hereto), Sellers makes no representations or warranties to Purchaser
regarding the probable success or profitability of the Sellers’ Business. The
disclosure of any matter or item in any schedule hereto shall not be deemed to
constitute an acknowledgment that any such matter is required to be disclosed or
is material or that such matter would result in a Material Adverse Change.

5.16 Financial Statements. The audited financial statements of the Sellers
included in the Sellers’ Annual Report on Form 10-K for the fiscal year ended
December 31, 2005, which the Sellers have disclosed cannot be relied upon due to
an error in the Sellers’ accounting treatment for certain inventory tolling
arrangements; and (ii) the unaudited financial statements of the Sellers as of
and for the six month period ended June 30, 2006, have been prepared from, and
are in accordance with, the books and records of the Sellers and their
Non-Debtor Subsidiaries, comply in all material respects with applicable
accounting requirements, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto), and fairly present the consolidated financial position and the
consolidated results of operations and cash flows of the Sellers and their
Non-Debtor Subsidiaries at the dates and for the periods covered thereby except
as follows: (a) adjustments related to the disclosed error with respect to the
Sellers’ accounting treatment for certain inventory tolling arrangements, and
(b) adjustments related to any going concern determinations with respect to the
Sellers.

5.17 Absence of Certain Changes. Except (a) as set forth in Schedule 5.17,
(b) for the commencement or pendency of the Bankruptcy Case and (c) for orders,
writs, injunctions, decrees, statutes, rules, or regulations of general
applicability to the Business, since June 30, 2006 there has been no event or
condition that has had (or is reasonably likely to result in) a Material Adverse
Change.

5.18 Tangible Personal Property. To the Knowledge of the Sellers, the items of
personal property included in the Purchased Assets are in good operating
condition and repair, subject to continued repair and replacement in accordance
with past practice and the Sellers’ liquidity constraints, and are suitable for
their intended use. During the past 6 months there has not been any significant
interruption of the operations of the Business due to inadequate maintenance of
the such personal property that have or will cause a Material Adverse Change.

5.19 Board Approval and Recommendation. The Board of Directors of each Seller
has determined that, based upon its consideration of the available alternatives,
and subject to the approval of the Bankruptcy Court and the provisions in this
Agreement regarding the solicitation

 

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of Competing Transactions, a sale, assignment and assumption of the Purchased
Assets and Assumed Contracts pursuant to this Agreement under sections 105, 363
and 365 of the Bankruptcy Code is in the best interests of such Seller.

5.20 Acknowledgment. Each Seller hereby acknowledges that, other than the
obligations of Purchaser set forth in this Agreement, Purchaser does not have
any obligation to further bid or overbid for the Purchased Assets or participate
in any auction at which Qualified Bidders bid to acquire the assets of the
Business.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF PURCHASER

The Purchaser hereby represents and warrants to Sellers that:

6.1 Organization and Good Standing. Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the state of Delaware
and has the requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now conducted.

6.2 Authorization of Agreement. Purchaser has the requisite power and authority
to execute and deliver this Agreement and each other agreement, document or
instrument contemplated hereby or thereby to which it is a party and to perform
its obligations hereunder and thereunder. The execution and delivery of this
Agreement and each other agreement, document or instrument contemplated hereby
or thereby to which it is a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action on the part of Purchaser. This Agreement and each other
agreement, document or instrument contemplated hereby or thereby to which
Purchaser is a party has been duly and validly executed and delivered by
Purchaser and (assuming the due authorization, execution and delivery by the
other parties hereto) this Agreement and each other agreement, document or
instrument contemplated hereby or thereby to which Purchaser is a party
constitutes legal, valid and binding obligations of Purchaser enforceable
against it in accordance with its respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).

6.3 Conflicts; Consents of Third Parties.

(a) The execution and delivery by Purchaser of this Agreement and each other
agreement, document or instrument contemplated hereby or thereby to which
Purchaser is a party, the consummation of the transactions contemplated hereby
and thereby, or compliance by Purchaser with any of the provisions hereof or
thereof do not conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination or cancellation under any provision of (i) its certificate of
incorporation or bylaws (ii) any Contract, Lease or Permit to which Purchaser is
a party or by which any of its

 

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properties or assets are bound; (iii) any Order of any Governmental Body
applicable to Purchaser or any of its properties or assets as of the date
hereof; or (iv) any applicable Law, other than, in the case of clauses (ii),
(iii) and (iv), such conflicts, violations, defaults, terminations or
cancellations that would not reasonably be expected to cause, individually or in
the aggregate, a material adverse effect on Purchaser.

(b) No consent, waiver, approval, Order, Permit or authorization of, or
declaration or filing with, or notification to, any Person or Governmental Body
is required in connection with the execution and delivery of this Agreement and
each other agreement, document or instrument contemplated hereby or thereby to
which Purchaser is a party, the compliance by Purchaser with any of the
provisions hereof or thereof, the consummation of the transactions contemplated
hereby or thereby, its taking of any other action contemplated hereby or
thereby, except for (i) compliance with the applicable requirements of the HSR
Act and (ii) such other consents, waivers, approvals, Orders, Permits,
authorizations, declarations, filings and notifications, the failure of which to
obtain or make, would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on Purchaser.

6.4 Brokers. Except for the fees and expenses of Houlihan, Lokey, Howard &
Zukin, the Purchaser does not have any obligation to pay any fees, commissions
or other similar compensation to any broker, finder, investment banker,
financial advisor or other similar Person in connection with the Transactions.

6.5 Adequate Assurance. Purchaser will timely provide such information to
Sellers, as Sellers believe is reasonably necessary to provide “adequate
assurance,” as that term is used in Section 365 of the Bankruptcy Code, with
respect to Assumed Leases and Assumed Contracts.

6.6 Condition of the Purchased Assets. Notwithstanding anything contained in
this Agreement to the contrary, Purchaser acknowledges and agrees that Sellers
are not making any representations or warranties whatsoever, express or implied,
beyond those expressly given by Sellers in Article V hereof (as modified by the
Schedules hereto), and Purchaser acknowledges and agrees that, except for the
representations and warranties contained therein, the Purchased Assets are being
transferred on a “where is” and, as to condition, “as is” basis. Purchaser
acknowledges that it will conduct its own due diligence and in making the
determination to proceed with the Transaction, Purchaser will be relying on the
results of its own independent investigation.

6.7 Communications with Customers and Suppliers. Prior to the Closing, the
Purchaser shall not, and shall cause its Affiliates and representatives not to,
contact, or engage in any discussions or otherwise communicate with, any of the
Business’ customers, suppliers and others with whom it has material commercial
dealings without obtaining the prior consent of Seller (which will not be
unreasonably withheld but, if given, may be conditioned on Seller having the
right to designate an officer of Seller reasonably acceptable to Purchaser, to
participate in any meetings or discussions with any such customers, suppliers or
others).

 

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ARTICLE VII

BANKRUPTCY COURT MATTERS

7.1 Competing Transaction. This Agreement is subject to approval by the
Bankruptcy Court and the consideration by Sellers and the Bankruptcy Court of
higher or better competing bids with respect to any transaction (or series of
transactions) involving the direct or indirect sale, transfer or other
disposition of the Purchased Assets to a purchaser or purchasers other than
Purchaser or effecting any other transaction (including a plan of
reorganization, refinancing or liquidation) the consummation of which would be
substantially inconsistent with the Transactions (a “Competing Transaction”).
Nothing contained herein shall be construed to prohibit Sellers and its
representatives from soliciting, considering, negotiating, agreeing to, or
otherwise taking action in furtherance of, any Competing Transaction.

7.2 Bidding Procedures Order.

(a) The Sellers agree promptly following, but no later than three (3) days
after, the Effective Date, to (i) file the Bankruptcy Case, (ii) file a motion
seeking an order of the Bankruptcy Court for authority to observe and perform
its obligations under this Section 7.2 (the “Bidding Procedures Order”), and
(iii) seek a hearing on the Bid Procedures Order to be scheduled as promptly as
possible but in no event shall the Bid Procedures Order be entered later than
thirty (30) days after the Petition Date. The Bidding Procedures Order shall,
among other things, (1) approve the Break-Up Fee and Expense Reimbursement (as
defined below), and provide that the Purchaser’s claim to the Break-Up Fee and
Expense Reimbursement under this Section 7.2 shall be entitled to superpriority
administrative claim treatment in the Bankruptcy Cases, senior to all other
superpriority claims (except those granted with respect to any DIP Credit
Agreement) and that the Break-Up Fee and Expense Reimbursement must be paid to
Purchaser in full upon consummation of a Competing Transaction or, if no such
transaction is consummated within 25 days following Bankruptcy Court approval of
a Competing Transaction, immediately but no later than three (3) Business Day
following the expiration of such 25 day period, (2) authorize the Purchaser to
credit bid the Break-Up Fee and Expense Reimbursement at any auction at which
Qualified Bidders may bid, (3) establish a date no more than fifty-eight
(58) days following the Petition Date by which initial Qualified Bids (as
defined below) must be submitted (the “Bid Deadline”), (4) approve the Bidding
Procedures for the solicitation of higher and otherwise better bids (whether in
a single Qualified Bid, a collection of Qualified Bids, or in concert with any
Permitted Restructuring Alternative) that, among other things, sets a date (the
“Auction Date”) no more than sixty (60) days following the Petition Date for an
auction at which only Qualified Bidders (as defined below) who have previously
submitted a Qualified Bid may bid, (5) set the Initial Incremental Bid Amount
(as defined below) for any Qualified Bid, and (6) establish the date no more
than five (5) days after the Auction Date for the hearing on the proposed sale
of the Purchased Assets to the Purchaser or to such Qualified Bidder submitting
the highest or otherwise best bid at the Auction (the “Sale Hearing”). The
Sellers agree that they shall represent to the Bankruptcy Court that Sellers
actively solicited this “stalking horse” bid from the Purchaser. The Purchaser
reserves the right to make multiple credit bids of any or all of the amount
outstanding under the Tennenbaum Credit Agreement to the fullest extent
permitted under Section 363 (k) of the Bankruptcy Code. The Bidding Procedures
Order shall be in form and substance reasonably acceptable to Purchaser and its
counsel and Sellers hereby agree not to change or modify any of the dates or
procedure set forth in the Bidding Procedures Order, including without
limitation the dates of the Sale Hearing and Closing Date, without the prior
written consent of Purchaser.

 

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(b) For the purposes of this section:

(i) The “Initial Incremental Bid Amount” shall mean the sum of the Break-Up Fee
and Expense Reimbursement and $1,000,000.

(ii) A “Qualified Bidder” is a person (a) who has delivered to the Company an
executed confidentiality agreement in form and substance acceptable to the
Sellers, (b) who has delivered to the Company a bid that identifies assets of
the Company to be acquired by the bidder and the consideration to be paid for
such assets that constitutes a Competing Transaction, and (c) whom the Company
in good faith determines is reasonably likely (based on availability of
financing, experience and other considerations) to be able to consummate a
transaction based on the Competing Transaction, if selected as the successful
bidder. The Purchaser shall be deemed a Qualified Bidder.

(iii) A “Qualified Bid” is a Competing Transaction (a) the value of which
(whether viewed separately or together with other competing proposals evidenced
by Qualified Bids or any Permitted Restructuring Alternative) is greater or
otherwise better than the sum of (i) the value of Purchaser’s offer as set forth
in the Purchase Agreement and (ii) the Initial Incremental Bid Amount (as
defined above), (b) that is accompanied by an executed copy of an alternative
purchase agreement that reflects any substantive changes to this Agreement and
includes a commitment to close by the Termination Date, a representation that
the Qualified Bidder will make all necessary HSR filings, pay all costs and
expenses associated with such filings (including the costs and expenses of the
Sellers), and satisfactory evidence of committed financing or other ability to
perform and (c) that is accompanied by a cash deposit in the amount of ten
percent (10%) of the purchase price offered in the proposal for a Competing
Transaction, which deposit shall be forfeited as liquidated damages for breach
by the purchaser thereunder on terms substantially the same as those described
in Section 4.6(b).

7.3 Submission to Bankruptcy Court. Within three (3) days following the
Effective Date, Sellers shall file with the Bankruptcy Court this Agreement and
such notices as may be appropriate in connection therewith. Purchaser shall
cooperate with Sellers in obtaining Bankruptcy Court approval of the Bidding
Procedures Order and the Sale Order.

7.4 Break-Up Fee and Expense Reimbursement. The Bidding Procedures Order shall
provide that the Purchaser, provided that Purchaser is not in default under this
Agreement and its offer is not subject to any of the conditions set forth in
Section 10.1 of this Agreement, other than Sections 10.1(a), (b) and (i) as of
the Designation Deadline, shall be entitled to be paid an amount equal to 3% of
the Purchase Price as a combined break-up fee and expense reimbursement (the
“Break-Up Fee and Expense Reimbursement”) if (a) the Bankruptcy Court approves a
Competing Transaction with a Qualified Bidder other than the Purchaser and
(b) the Sellers either consummate such an alternative transaction or fail to
consummate a transaction

 

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with the Purchaser or any other Qualified Bidder. The Break-Up Fee and Expense
Reimbursement described in this Section 7.4 shall be paid (i) upon the
occurrence of the consummation of the Competing Transaction, by the winning
Qualified Bidder or (ii) if no transaction (including a transaction with the
Purchaser) is consummated within twenty-five (25) days following Bankruptcy
Court approval of such Competing Transaction, by the Sellers. Except as provided
herein, Purchaser shall not be entitled to any portion of the Break-Up Fee and
Expense Reimbursement.

7.5 Sale Order. Subject to Section 7.1, Purchaser agrees that it will promptly
take such actions as are reasonably requested by Sellers to assist in obtaining
entry of the Sale Order and a finding of adequate assurance of future
performance by Purchaser, including furnishing affidavits or other documents or
information for filing with the Bankruptcy Court for the purposes, among others,
of providing necessary assurances of performance by Purchaser under this
Agreement and demonstrating that Purchaser is a “good faith” purchaser under
section 363(m) of the Bankruptcy Code and that the Purchase Price was not
controlled by an agreement in violation of Section 363(n) of the Bankruptcy
Code. In the event the entry of the Sale Order shall be appealed, Sellers and
Purchaser shall use their respective reasonable efforts to defend such appeal.

ARTICLE VIII

COVENANTS

8.1 Access to Information. Sellers agree that, prior to the Closing Date,
Purchaser shall be entitled, through its officers, employees, consultants and
representatives (including, without limitation, its legal advisors and
accountants), to make such investigation of the properties, business and
operations of Sellers and such examination of the books and records and
financial and operating data of Sellers, the Business, the Purchased Assets, the
Assumed Liabilities and the Leased Real Property, and access to all the
officers, key employees, accountants and other representatives of Sellers, as it
reasonably requests and to make extracts and copies of such books and records.
Any such investigation and examination shall be conducted upon reasonable
advance notice and under reasonable circumstances and shall be subject to
restrictions under applicable Law. Sellers shall cause their respective
officers, employees, consultants, agents, accountants, attorneys and other
representatives to cooperate with Purchaser and Purchaser’s representatives in
connection with such investigation, examination and access, and Purchaser and
its representatives shall cooperate with Sellers and their representatives and
shall use their reasonable efforts to minimize any disruption to their business.
Notwithstanding anything herein to the contrary, no such investigation or
examination shall be permitted to the extent that it would require Sellers to
disclose information subject to attorney-client privilege, provided Sellers
advise Purchaser of the specific assertion of such privilege.

8.2 Conduct Pending the Closing.

(a) Except (i) as expressly set forth in the Budget, (ii) required by applicable
Law, (iii) as otherwise expressly contemplated by this Agreement or (iv) with
the prior written consent of Purchaser, during the period from the date of this
Agreement to and through the Closing Date, Sellers shall, to the extent
commercially reasonable, taking into account the filing of the Bankruptcy Case:

(A) conduct their business only in the ordinary course; and

 

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(B) use their commercially reasonable efforts to (A) preserve their present
business operations, organization and goodwill, and (B) preserve their present
relationships with customers and suppliers.

(b) Except (i) as expressly set forth in the Budget, (ii) required by applicable
Law, (iii) as otherwise contemplated by this Agreement, (iv) for Excepted
Commitments, or (v) with the prior written consent of Purchaser, Sellers shall
not, and shall not file with the Bankruptcy Court a request or motion, or
support any other request or motion, to:

(A) make any promise or representation, oral or written, to, or otherwise
(1) increase the annual level of compensation payable or to become payable by
Sellers to any of their respective directors, executive officers or Employees,
(2) grant, or establish or modify any targets, goals, pools or similar
provisions in respect of, any bonus, benefit or other direct or indirect
compensation to or for any director, executive officer or Employee, (z) increase
the coverage or benefits available under any (or create any new) Employee
Benefit Plan or (3) enter into any employment, deferred compensation, severance,
consulting, non-competition or similar agreement (or amend any such agreement)
to which any Seller is a party or involving a director, executive officer or
Employee of such Seller, except, in each case, as required by any of the
Employee Benefit Plans or Employee Agreements;

(B) enter into, modify or terminate any labor or collective bargaining agreement
or, through negotiation or otherwise, make any commitment or incur any liability
or other obligation to any labor organization;

(C) make or rescind any material election relating to Taxes, settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, or, except
as may be required by the Code or GAAP, make any material change to any of its
methods of accounting or methods of reporting income or deductions for Tax or
accounting practice or policy from those employed in the preparation of its most
recent audited financial statements or Tax Returns, as applicable;

(D) subject any of the Purchased Assets to any Lien, Interest or Encumbrance,
except for Permitted Exceptions;

(E) cancel or compromise any material debt or claim or waive or release any
material right of Sellers that constitutes a Purchased Asset other than customer
accounts receivable compromised in the ordinary course of the business of
Sellers;

 

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(F) enter into any commitment for capital expenditures other than as set forth
in the Budget;

(G) engage in any transaction with any officer, director or Affiliate of any
Seller or affiliate of any such individual;

(H) sell, pledge, dispose of, transfer, lease, license or encumber or permit to
lapse or authorize the sale, pledge, disposition, transfer, lease, license, or
encumbrance of, any Purchased Assets except in the ordinary and usual course of
business consistent with past practices and as would not constitute a Material
Adverse Change;

(I) transfer, dispose of, permit to lapse (except in accordance with the terms
thereof) or grant any right or licenses under, or enter into any settlement
regarding the breach or infringement of, any Intellectual Property, or modify
any existing rights with respect thereto or enter into any material licensing or
similar agreements or arrangements other than such licenses, agreements or
arrangements entered into in the ordinary course of business consistent with
past practices and as would not constitute a Material Adverse Change;

(J) enter into, assume or terminate any Material Contract or enter into or
permit any material amendment, supplement, waiver or other material modification
in respect thereof, except in the ordinary and usual course of business
consistent with past practices and as would not constitute a Material Adverse
Change;

(K) adopt or propose any change in its certificate of incorporation or bylaws,
except a change that would not constitute a Material Adverse Change;

(L) declare, set aside, or pay any dividend or other distribution with respect
to any shares of its capital stock, or split, combine, or reclassify any of its
capital stock, or repurchase, redeem, or otherwise acquire any shares of its
capital stock;

(M) other than as a result of the Transactions, no Seller shall merge or
consolidate with any other Person or acquire a material amount of assets of any
other Person;

(N) make a Material Decision;

(O) adopt or propose any change to, or fail to maintain, the current levels of
insurance coverage afforded the Sellers under existing insurance policies; and

 

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(P) agree to do anything prohibited by this Section 8.2 or do or agree to do
anything that would cause Sellers’ representations and warranties herein to be
false in any material respect.

(c) In addition to the other covenants set forth in this Section 8.2, in no
event shall any Seller individually or all Sellers in the aggregate, make or
incur any Liability, file or propose to file any motion or other pleading with
the Bankruptcy Court in support of, or make any payment(s) of, the types of
expenditures set forth on Schedule 8.2(c) hereto in excess of the amounts for
any such type of expenditure set forth on Schedule 8.2(c), as such amounts may
be reduced in accordance with the definition of Bank Loan Amount and Schedule
1.1A; provided, however, that this Section 8.2(c) shall not prohibit Sellers
from incurring any Liability in excess of the amounts set forth on Schedule
8.2(c) to the extent and solely to the extent (x) no payment with respect to
such excess is made on or prior to the earlier of the Termination Date and the
Closing Date, (y) such Liability is expressly subordinated to all Liabilities
and other obligations under the Tennenbaum Credit Agreement, and (z) no payment
with respect to such excess may be made until after the Tennenbaum Lenders are
paid in cash an amount in full satisfaction of all Liabilities and other
obligations under the Tennenbaum Credit Agreement (any such commitments made in
compliance with this proviso being referred to herein as the “Excepted
Commitments”)); and, provided, further, that Sellers hereby agree that the
Purchaser and its Affiliates reserve all rights to object to any requests in the
Bankruptcy Case to approve any such commitment or payment.

8.3 Consents. Sellers shall use their commercially reasonable efforts, and
Purchaser shall cooperate with Sellers, to obtain at the earliest practicable
date all consents and approvals required to consummate the Transactions,
including the transfer or reissuance of any Permits, including those required
under Environmental Laws, held by Sellers and required for Purchaser to operate
the business and Purchased Assets, including, without limitation, any consents
required pursuant to any Material Contract of the Non-Debtor Subsidiaries (the
“Non-Debtor Consents”); provided, however, that neither Sellers nor Purchaser
shall be obligated to pay any consideration therefore to any third party from
whom consent or approval is requested or to initiate any litigation or legal
proceedings to obtain any such consent or approval; provided, further, that if
requested by the Purchaser, the Sellers shall initiate such litigation or legal
proceedings requested by the Purchaser to obtain such consents or approvals or
an Order but only if the Purchaser advances to the Sellers, the Sellers’ good
faith and reasonable estimate of any and all out of pocket expenses and costs
(including reasonable attorneys fees) related thereto.

8.4 Regulatory Approvals.

(a) If necessary, Purchaser and Sellers shall (i) use commercially reasonable
efforts to make or cause to be made all filings required of each of them or any
of their respective Affiliates under the HSR Act or other Antitrust Laws with
respect to the Transactions as promptly as practicable and, in any event, within
15 Business Days after the date hereof in the case of all filings required under
the HSR Act and within four weeks in the case of all other filings required by
other Antitrust Laws, (ii) comply, to the extent practicable, at the earliest
practicable date with any request under the HSR Act or other Antitrust Laws for
additional information, documents, or other materials received by each of them
or any of their respective subsidiaries from Federal Trade Commission (the
“FTC”), the Antitrust Division of the United

 

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States Department of Justice (the “Antitrust Division”) or any other
Governmental Body in respect of such filings or the Transactions, and
(iii) cooperate with each other in connection with any such filing (including,
to the extent permitted by applicable Law, providing copies of all such
documents to the non-filing parties prior to filing and considering all
reasonable additions, deletions or changes suggested in connection therewith)
and in connection with resolving any investigation or other inquiry of any of
the FTC, the Antitrust Division or other Governmental Body under any Antitrust
Laws with respect to any such filing or any Transaction. Each such party shall
use commercially reasonable efforts to furnish to each other all information
required for any application or other filing to be made pursuant to any
applicable Law in connection with the Transactions. Each such party shall
promptly inform the other parties hereto of any oral communication with, and
provide copies of written communications with, any Governmental Body regarding
any such filings or any Transaction. No party hereto shall independently
participate in any formal meeting with any Governmental Body in respect of any
such filings, investigation, or other inquiry without giving the other parties
hereto prior notice of the meeting and, to the extent permitted by such
Governmental Body, the opportunity to attend and/or participate. Subject to
applicable Law, the parties hereto will consult and cooperate with one another
in connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any party
hereto relating to proceedings under the HSR Act or other Antitrust Laws.
Sellers and Purchaser may, as each deems advisable and necessary in good faith,
reasonably designate any competitively sensitive material provided to the other
under this Section 8.4 as “outside counsel only.” Such materials and the
information contained therein shall be given only to the outside legal counsel
of the recipient and will not be disclosed by such outside counsel to employees,
officers, or directors of the recipient, unless express written permission is
obtained in advance from the source of the materials (Sellers or Purchaser, as
the case may be).

(b) Each of Purchaser and Sellers shall use its commercially reasonable efforts
to resolve such objections, if any, as may be asserted by any Governmental Body
with respect to the Transactions under the HSR Act, the Sherman Act, as amended,
the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and
any other United States federal or state or foreign statutes, rules,
regulations, orders, decrees, administrative or judicial doctrines or other laws
that are designed to prohibit, restrict or regulate actions having the purpose
or effect of monopolization or restraint of trade (collectively, the “Antitrust
Laws”). In connection therewith, if any Legal Proceeding is instituted (or
threatened to be instituted) challenging any Transaction is in violation of any
Antitrust Law, each of Purchaser and Sellers shall cooperate and use its
commercially reasonable efforts to contest and resist any such Legal Proceeding,
and to have vacated, lifted, reversed, or overturned any decree, judgment,
injunction or other order whether temporary, preliminary or permanent, that is
in effect and that prohibits, prevents, or restricts consummation of the
Transactions, including by pursuing all available avenues of administrative and
judicial appeal and all available legislative action, unless, by mutual
agreement, Purchaser and Sellers decide that litigation is not in their
respective best interests. Each of Purchaser and Sellers shall use its
commercially reasonable efforts to take such action as may be required to cause
the expiration of the notice periods under the HSR Act or other Antitrust Laws
with respect to the Transactions as promptly as possible after the execution of
this Agreement. In connection with and without limiting the foregoing, each of
Purchaser and Sellers agrees to use its commercially reasonable efforts to take
promptly any and all steps necessary to avoid or eliminate each and every
impediment under any Antitrust Laws that may be asserted by any Federal, state
and local and non-United States antitrust or competition authority, so as to
enable the parties to close the Transactions as expeditiously as possible.

 

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(c) Prior to Closing, Sellers shall have submitted to the New Jersey Department
of Environmental Protection (“NJDEP”) true, accurate and complete copies of all
filings required pursuant to the New Jersey Industrial Site Recovery Act
(“ISRA”) for the Real Property and operations of Sellers in Metuchen and Edison,
New Jersey (the “New Jersey Property”). With respect to the New Jersey Property,
Sellers shall receive and provide to Purchaser prior to the Closing Date a
nonapplicability determination, an approved negative declaration or a no further
action letter, in each case, issued pursuant to ISRA by NJDEP. In the event that
a nonapplicability determination, an approved negative declaration or a no
further action letter cannot be received by Sellers and provided to Purchaser
before the Closing Date (through no fault or delay on behalf of the Sellers),
the Parties shall enter into a Remediation Agreement or its equivalent with
NJDEP, which will allow the transaction contemplated hereby to proceed pending
prompt completion of all ISRA obligations for the New Jersey Property after
Closing.

8.5 Further Assurances. Subject to the other provisions of this Agreement, each
of Purchaser and each Seller shall use its commercially reasonable efforts to
(i) take all actions necessary or appropriate to consummate the Transactions and
(ii) cause the fulfillment at the earliest practicable date of all of the
conditions to their respective obligations to consummate the Transactions.

8.6 Preservation of Records. Sellers or their successors and Purchaser agree
that each of them shall preserve and keep the records held by it or their
Affiliates relating to the Purchased Assets for one year after the Closing Date
(except as provided below) and shall make such records available to the other as
may be reasonably required by such party in connection with, among other things,
any insurance claims by, Legal Proceedings or tax audits against or governmental
investigations of Sellers or Purchaser or any of their Affiliates or in order to
enable Sellers or Purchaser to comply with their respective obligations under
this Agreement and each other agreement, document or instrument contemplated
hereby. In the event Sellers or Purchaser wishes to destroy such records before
or within two years, such party shall first give 90 days prior written notice to
the other and such other party shall have the right at its option and expense,
upon prior written notice given to such party within such 90 day period, to take
possession of the records within 180 days after the date of such notice.

8.7 Publicity. None of the parties hereto shall issue any press release
concerning this Agreement or the Transactions without obtaining the prior
written approval of the other party hereto, which approval will not be
unreasonably withheld or delayed, unless, in the sole judgment of Purchaser or
Sellers, disclosure is otherwise required by applicable Law or by the Bankruptcy
Court with respect to filings to be made with the Bankruptcy Court in connection
with this Agreement, provided that the party intending to make such release
shall use its commercially reasonable efforts consistent with such applicable
Law or Bankruptcy Court requirement to consult with the other party with respect
to the text thereof.

8.8 Schedules. Sellers may, at their option, include in the Schedules items that
are not material in order to avoid any misunderstanding, and such inclusion, or
any references to

 

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dollar amounts, shall not be deemed to be an acknowledgement or representation
that such items are material, to establish any standard of materiality or to
define further the meaning of such terms for purposes of this Agreement.
Information provided in one Schedule will suffice, without repetition or cross
reference, as a disclosure of such information in any other Schedule to which
its relevance is reasonably apparent on its face.

8.9 Transitional License. Effective upon the Closing, Purchaser shall be deemed
to have granted Sellers a one-hundred and twenty (120) day non-exclusive,
royalty free right and license to use the name “Radnor Holdings Corporation”,
which may be used solely in connection with the wind-down of the Bankruptcy Case
for purposes of liquidating the Excluded Assets.

8.10 Letters of Credit and Security Deposits. On the Closing Date or as soon
thereafter as is practicable, Purchaser shall use reasonable efforts to
(a) replace any letters of credit securing any Seller’s obligations and issued
under the DIP Credit Agreement (the “Existing L/Cs”) and (b) cause the original
Existing L/Cs to be returned to Sellers with no drawings having been made
thereunder since the Closing Date.

8.11 Compliance with DIP Credit Agreement. Sellers shall not take any action not
in compliance with any covenant or other agreements set forth in the DIP Credit
Agreement.

8.12 Payment of Taxes. Subject to the Purchaser discharging its payment,
advancement and reimbursement obligations under Sections 2.3 and 2.8, Sellers
shall be responsible for paying or otherwise discharging all of its Taxes for
all periods (or portions thereof) ending on or prior to the Closing Date.

8.13 Motions, Orders, etc. Sellers shall promptly provide Purchaser with the
proposed final drafts of all documents, motions, orders, or pleadings that
Sellers propose to file with the Bankruptcy Court which relate to the approval
of this Agreement, the Purchased Assets, the Assumed Contracts or Assumed Leases
or the consummation of the Transactions, or any provision therein or herein, and
shall provide Purchaser and its counsel with a reasonable opportunity to review
and comment on such documents, motions, orders, or pleadings prior to filing
with the Bankruptcy Court.

8.14 Schedules and Exhibits. The parties hereto shall cooperate and work in good
faith to complete any schedules and exhibits not attached hereto on the
Effective Date by September 8, 2006. The parties hereto shall, upon completion
of and agreement on the form and substance of such missing schedules and
exhibits, acknowledge same in writing and consent to the annexation of such
schedules and/or exhibits to this Agreement.

ARTICLE IX

EMPLOYEES AND EMPLOYEE BENEFITS

9.1 Transferred and Retained Employees.

(a) The parties recognize that the continued employment of the personnel of
Sellers is significant to the business interests of both Purchaser and Sellers.
As a result, the transfer of employment relationships is important to both
parties and Sellers shall use their best efforts to accomplish the transition
with as little disruption to the Business as possible. In that

 

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regard, the Purchaser shall offer employment to Substantially All of the
Sellers’ Employees associated with the Purchased Assets and the surviving
Business related thereto, other than Employees whose services are provided
pursuant to the Transition Services Agreement (all of the Sellers’ Employees
that accept such an offer and actually commence employment with Purchaser after
the Closing Date, the “Transferred Employees”, and all other Employees of the
Sellers who are not Transferred Employees, the “Retained Employees”). Other than
as provided in Section 2.3(a) and Section 2.3(f), Purchaser shall have no
liability or any other obligation with respect to any Retained Employees.

(b) For purposes of determining eligibility to participate in and vesting under
any “employee benefit plan” (as defined in Section 3(3) of ERISA), other than
pension plans (including any defined benefit pension plan), that Purchaser
offers to Transferred Employees, and for purposes of determining vacation,
sickness benefits and other fringe benefits offered to Transferred Employees by
Purchaser, each such Transferred Employee shall be credited with the months and
years of service he or she completed while employed by the Sellers for any other
period or, to the extent such service was credited under a corresponding plan or
program maintained by the Sellers. Purchaser shall credit all Transferred
Employees with their respective amounts of accrued but unpaid vacation and
holiday pay and personal days, to the extent accrued and vested on the Closing
Date.

9.2 Employment Tax Reporting. With respect to Transferred Employees, Purchaser
and Sellers shall use the standard procedure set forth in Revenue Procedure
2004-53, 2004-34 I.R.B. 320, for purposes of employment tax reporting.

9.3 Compensation and Benefits. As of the date hereof, Purchaser intends to
either maintain the current compensation and benefit arrangements of the
Transferred Employees or provide compensation and benefits to such Employees
that Purchaser determines in good faith are, in the aggregate, generally
comparable to those presently provided to the Transferred Employees.

9.4 No Obligations. Other than as set forth in Sections 9.1(b) and 9.3, nothing
contained in this Agreement shall be construed to require, or prevent the
termination of, employment of any individual, require minimum benefit or
compensation levels or prevent any change in the employee benefits provided to
any individual Transferred Employee. No provision of this Agreement shall create
any third party beneficiary rights in any employee or former employee of any
Seller or any other persons or entities (including any beneficiary or dependent
thereof), in respect of continued employment (or resumed employment) for any
specified period of any nature or kind whatsoever.

ARTICLE X

CONDITIONS TO CLOSING

10.1 Conditions Precedent to Obligations of Purchaser. The obligation of
Purchaser to consummate the Transactions is subject to the fulfillment, on or
prior to the Closing Date, of each of the following conditions (any or all of
which may be waived by Purchaser in whole or in part to the extent permitted by
applicable Law):

 

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(a) the representations and warranties of Sellers contained in this Agreement
(i) that are not qualified by materiality or a Material Adverse Change shall be
true and correct in all respects on and as of the Closing, except to the extent
expressly made as of an earlier date, in which case as of such earlier date, and
except to the extent that the failure of such representations and warranties to
be true and correct would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Change and (ii) that are qualified by
materiality or Material Adverse Change shall be true and correct in all respects
on and as of the Closing (disregarding any materiality or Material Adverse
Change qualifier contained therein), except to the extent expressly made as of
an earlier date, in which case as of such earlier date, and except to the extent
that the failure of such representations and warranties to be true and correct
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Change, and Purchaser shall have received a certificate signed
by authorized officers of Sellers, dated the Closing Date, to the foregoing
effect;

(b) Sellers shall have performed and complied in all material respects with all
obligations and agreements required in this Agreement to be performed or
complied with by them prior to the Closing Date, and Purchaser shall have
received a certificate signed by authorized officers of Sellers, dated the
Closing Date, to the forgoing effect;

(c) Purchaser shall have obtained financing having terms reasonably satisfactory
to Purchaser and in an amount at least equal to the Purchase Price and the
expenses of Purchaser incurred in connection with the negotiation, preparation,
execution and delivery of this Agreement and the consummation of the
Transactions contemplated hereby;

(d) Purchaser shall have satisfactorily (determined at Purchaser’s sole
discretion) completed its due diligence review of the Sellers, the Business, the
Purchased Assets and Assumed Liabilities;

(e) Purchaser shall have received a policy of title insurance on forms of and
issued by one or more title companies reasonably satisfactory to Purchaser
insuring the title of Purchaser to the Real Property listed in Schedule 5.13(a)
and Schedule 5.13(b), subject only to such exceptions as are reasonably
satisfactory to Purchaser;

(f) Purchaser shall have received a Phase I environmental survey and assessment
in form and substance reasonably satisfactory to Purchaser prepared by a firm of
licensed engineers reasonably satisfactory to Purchaser, each such environmental
survey and assessment to be based upon physical on site inspections by such firm
of each of the existing manufacturing sites and facilities owned, operated and
leased by Sellers and used in connection with the Business, as well as a
historical review of the uses of such sites and facilities and of the Business
(including any former subsidiaries or divisions of any Seller which have been
disposed of prior to the date of such survey and assessment and with respect to
which any Seller may have retained liability for environmental matters);

(g) Purchaser shall have received any Non-Debtor Consents necessary to
consummate the Transactions and any consents necessary under or pursuant to any
Material Contracts not subject to the Sale Order, and such consents shall be in
full force and effect;

 

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(h) the Bankruptcy Court shall have entered an Order binding on all parties in
the Sellers’ Bankruptcy Case (which Order may be the Sale Order)
(i) unconditionally allowing a Claim by Purchaser in such Sellers’ Bankruptcy
Case in an amount equal to at least the amount of Purchaser’s final credit bid
at the auction sale contemplated under Section 7.2 hereof (including a credit
bid, if any, in excess of the Credit Bid Amount), and (ii) authorizing and
approving such final credit bid by Purchaser pursuant to Section 363(k) of the
Bankruptcy Code; and

(i) Sellers shall have delivered, or caused to be delivered, to Purchaser all of
the items set forth in Section 4.2.

10.2 Conditions Precedent to Obligations of Sellers. The obligations of Sellers
to consummate the Transactions are subject to the fulfillment, prior to or on
the Closing Date, of each of the following conditions (any or all of which may
be waived by Sellers in whole or in part to the extent permitted by applicable
Law):

(a) the representations and warranties of Purchaser contained in this Agreement
(i) that are not qualified by materiality shall be true and correct in all
respects on and as of the Closing, except to the extent expressly made as of an
earlier date, in which case as of such earlier date, and except to the extent
that the failure of such representations and warranties to be true and correct
would not reasonably be expected to have, individually or in the aggregate, a
material adverse effect and (ii) that are qualified by materiality shall be true
and correct in all respects on and as of the Closing (disregarding any
materiality qualifier contained therein), except to the extent expressly made as
of an earlier date, in which case as of such earlier date, and except to the
extent that the failure of such representations and warranties to be true and
correct would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect, and Sellers shall have received a
certificate signed by an authorized officer of Purchaser, dated the Closing
Date, to the foregoing effect;

(b) Purchaser shall have performed and complied in all material respects with
all obligations and agreements required by this Agreement to be performed or
complied with by Purchaser on or prior to the Closing Date, and Sellers shall
have received a certificate signed by an authorized officer of Purchaser, dated
the Closing Date, to the foregoing effect; and

(c) Purchaser shall have delivered to Sellers all of the items set forth in
Section 4.3.

10.3 Conditions Precedent to Obligations of Purchaser and Sellers. The
respective obligations of Purchaser and Sellers to consummate the Transactions
are subject to the fulfillment, on or prior to the Closing Date, of each of the
following conditions (any or all of which may be waived by Purchaser and Sellers
in whole or in part to the extent permitted by applicable Law):

(a) there shall not be in effect any Order by a Governmental Body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation of
the Transactions;

 

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(b) the waiting period applicable to the Transactions under the HSR Act shall
have expired or early termination shall have been granted;

(c) the Bankruptcy Court shall have entered the Sale Order in form and substance
reasonably acceptable to Sellers and Purchaser within two (2) Business Days of
the Sale Hearing;

(d) unless this condition has been waived by Purchaser in its sole discretion,
the Sale Order shall have become a Final Order;

(e) the Sellers and the Purchaser shall have entered into the Transition
Services Agreement; and

(f) the Bidding Procedures Order shall have been entered and shall have remained
in full force and effect and shall not have been stayed, vacated, modified or
supplemented in any material respect without the Purchaser’s prior written
consent.

10.4 Frustration of Closing Conditions. No party may rely on the failure of any
condition set forth in Sections 10.1, 10.2 or 10.3, as the case may be, if such
failure was caused by such party’s failure to comply with any provision of this
Agreement.

ARTICLE XI

TAXES.

11.1 Allocation of Taxes. All Taxes imposed on or with respect of the Purchased
Assets on a periodic basis (including but not limited to real estate Taxes and
assessments) (“Periodic Taxes”) relating to periods beginning on or before and
ending after the Closing Date shall be allocated on a per diem basis to the
Sellers and the Purchaser, respectively, in accordance with Section 164(d) of
the Code. All Periodic Taxes relating to periods ending on or before the Closing
Date shall be allocated solely to the Sellers. All Periodic Taxes relating to
the periods beginning after the Closing Date shall be allocated solely to the
Purchaser. If the actual amounts to be prorated are not known as of the Closing
Date, the prorations shall be made on the basis of Periodic Taxes assessed for
the prior year; provided, however, for purposes of calculating such prorated
amounts, such Periodic Taxes for the prior year shall be increased by five
percent (5%).

11.2 Purchase Price Allocation. Sellers and Purchaser shall allocate the
Purchase Price among Sellers (and, if applicable, Purchaser) and among the
Purchased Assets of each Seller in accordance with a statement (the “Allocation
Statement”) provided by Purchaser to Sellers as soon as practicable after the
Closing, which statement shall be prepared in accordance with Section 1060 of
the Code. The Purchase Price allocated to each Seller shall be comprised first
of the Assumed Liabilities of each Seller and then a pro rata portion of each
other item comprising the Purchase Price. Purchaser and Sellers shall file all
Tax Returns (including Form 8594) consistent with, and shall take no tax
position inconsistent with the Allocation Statement.

11.3 Tax Reporting. Purchaser shall prepare and file (or cause to be prepared
and filed) on behalf of Sellers all Tax Returns, whether related to income taxes
or non-income taxes,

 

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required to be filed or that Purchaser otherwise deems appropriate, including
the filing of amended Tax Returns, for all Tax Periods through and including any
Tax Period that includes the Closing Date. Purchaser shall furnish a completed
copy of any such Tax Return (including any supporting workpapers) to be filed by
Purchaser to Sellers for Sellers’ review at least 30 days prior to the due date
for filing such returns. Sellers shall have the right to raise reasonable
objections to such Tax Returns. In the event that the parties are unable to
resolve in good faith any dispute prior to 15 days before the due date, the
Purchaser’s position shall prevail provided such position is reasonable, and
Purchaser agrees to indemnify Sellers for their out-of-pocket expenses
associated with any required amendment to such Tax Returns to the extent such
amendment is required as a consequence of taking such position. Notwithstanding
the foregoing, Purchaser shall have no obligation to indemnify Sellers for Taxes
under this Section 11.3, and all Liabilities of Purchaser with respect to any
such Taxes will be as set forth in Section 2.3.

11.4 Cooperation and Audits. Purchaser, its Affiliates and Sellers shall
cooperate fully with each other regarding tax matters (including the execution
of appropriate powers of attorney) and shall make available to the other as
reasonably requested all information, records and documents relating to taxes
governed by this Agreement until the expiration of the applicable statute of
limitations or extension thereof or the conclusion of all audits, appeals or
litigation with respect to such taxes. Without limiting the generality of the
foregoing, Sellers shall execute on or prior to the Closing Date a power of
attorney authorizing Purchaser to correspond, sign, collect, negotiate, settle
and administer all tax payments and Tax Returns.

ARTICLE XII

MISCELLANEOUS

12.1 No Survival of Representations and Warranties. The parties hereto agree
that the representations and warranties contained in this Agreement shall not
survive the Closing hereunder and no Person shall have any liability for any
breach thereof . The parties hereto agree that the covenants contained in this
Agreement to be performed at or after the Closing shall survive the Closing
hereunder, and each party hereto shall be liable to the other after the Closing
for any breach thereof.

12.2 Expenses. Except as otherwise provided in this Agreement, each of Sellers
and Purchaser shall bear its own expenses incurred in connection with the
negotiation and execution of this Agreement and each other agreement, document
and instrument contemplated by this Agreement and the consummation of the
Transactions. Purchaser shall pay the filing fee required in connection with the
HSR Act filing contemplated by Section 8.4(a).

12.3 Injunctive Relief. Damages at law may be an inadequate remedy for the
breach of any of the covenants, promises or agreements contained in this
Agreement, and, accordingly, any party hereto shall be entitled to injunctive
relief with respect to any such breach, including without limitation specific
performance of such covenants, promises or agreements or an order enjoining a
party from any threatened, or from the continuation of any actual, breach of the
covenants, promises or agreements contained in this Agreement. The rights set
forth in this Section 12.3 shall be in addition to any other rights which a
party hereto may have at law or in equity pursuant to this Agreement.

 

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12.4 Submission to Jurisdiction; Consent to Service of Process.

(a) Without limiting any party’s right to appeal any order of the Bankruptcy
Court, (i) the Bankruptcy Court shall retain exclusive jurisdiction to enforce
the terms of this Agreement and to decide any claims or disputes which may arise
or result from, or be connected with, this Agreement, any breach or default
hereunder, or the Transactions, and (ii) any and all proceedings related to the
foregoing shall be filed and maintained only in the Bankruptcy Court, and the
parties hereby consent to and submit to the jurisdiction and venue of the
Bankruptcy Court and shall receive notices at such locations as indicated in
Section 12.8 hereof; provided, however, that if the Bankruptcy Case has closed,
the parties agree to unconditionally and irrevocably submit to the exclusive
jurisdiction of the United States District Court for the District of Delaware
and any appellate court thereof, for the resolution of any such claim or
dispute. The parties hereby irrevocably waive, to the fullest extent permitted
by applicable Law, any objection which they may now or hereafter have to the
laying of venue of any such dispute brought in such court or any defense of
inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.

(b) Each of the parties hereto hereby consents to process being served by any
party to this Agreement in any suit, action or proceeding by delivery of a copy
thereof in accordance with the provisions of Section 12.8.

12.5 Waiver of Right to Trial by Jury. Each party to this Agreement waives any
right to trial by jury in any action, matter or proceeding regarding this
Agreement or any provision hereof.

12.6 Entire Agreement; Amendments and Waivers. This Agreement (including the
schedules and exhibits hereto) collectively represent the entire understanding
and agreement between the parties hereto with respect to the subject matter
hereof. This Agreement can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the party against whom enforcement of any
such amendment, supplement, modification or waiver is sought. No action taken
pursuant to this Agreement, including without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representation, warranty, covenant or
agreement contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a further or
continuing waiver of such breach or as a waiver of any other or subsequent
breach. No failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. All remedies hereunder are cumulative and are
not exclusive of any other remedies provided by law.

12.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and performed in such State.

 

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12.8 Notices. All notices and other communications under this Agreement shall be
in writing and shall be deemed given (i) when delivered personally by hand,
(ii) when sent by facsimile (with written confirmation of transmission) or
(iii) one Business Day following the day sent by overnight courier (with written
confirmation of receipt), in each case at the following addresses and facsimile
numbers (or to such other address or facsimile number as a party may have
specified by notice given to the other party pursuant to this provision):

If to the Sellers, to:

Radnor Holdings Corporation

Radnor Financial Center, Suite A300

150 Radnor Chester Road

Radnor, PA, 19087

Attn: Carrie Williamson, Esq.

Tel:

Fax:

with copies to:

Skadden, Arps, Slate, Meagher & Flom LLP

One Rodney Square

P.O. Box 636

Wilmington DE 19801

Attn: Gregg M. Galardi, Esq.

Tel:

Fax:

and

Skadden, Arps, Slate, Meagher & Flom LLP

333 West Wacker Drive

Chicago, Illinois 60606

Attn: Timothy Pohl, Esq.

Tel:

Fax:

If to Purchaser, to:

c/o Tennenbaum Capital Partners, LLC

2951 28th Street, Suite 1000

Santa Monica, California 90405

Attn: Jose Feliciano

Tel:

Fax:

 

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With copies to:

Tennenbaum Capital Partners, LLC

2951 28th Street, Suite 1000

Santa Monica, California 90405

Attn: General Counsel

Tel:

Fax:

and

Milbank, Tweed, Hadley & McCloy LLP

601 South Figueroa Street, 30th Floor

Los Angeles, California 90017-5735

Attn: Gregory A. Bray, Esq.

Tel:

Fax:

12.9 Severability. If any term or other provision of this Agreement is invalid,
illegal, or incapable of being enforced by any law or public policy, all other
terms or provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance of the Transactions is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal, or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the Transactions are consummated
as originally contemplated to the greatest extent possible.

12.10 Assignment. This Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and permitted assigns. Nothing in
this Agreement shall create or be deemed to create any third party beneficiary
rights in any Person or entity not a party to this Agreement. No assignment of
this Agreement or of any rights or obligations hereunder may be made by either
Sellers or Purchaser (by operation of law or otherwise) without the prior
written consent of the other parties hereto and any attempted assignment without
the required consents shall be void; provided that Purchaser may assign some or
all of its rights and obligations hereunder to one or more subsidiaries formed
by it prior to the Closing and/or, upon notice to the Company, to one or more
Persons that Purchaser determines, in its sole discretion, to partner with in
connection with the Transactions. No assignment of any obligations hereunder
shall relieve the parties hereto of any such obligations. Upon any such
permitted assignment, the references in this Agreement to Sellers or Purchaser
shall also apply to any such assignee unless the context otherwise requires.

12.11 General Release.

(a) Effective upon the Closing Date, each Seller, on behalf of itself, and any
Person claiming by, through, under, derivatively for, as agent for or on behalf
of such Seller (collectively, the “Seller Group”), acknowledges that it has no
claim, counterclaim, setoff, recoupment, action or cause of action of any kind
or nature whatsoever (including, for the

 

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avoidance of doubt, actions for avoidance, subordination or recharacterization
of any of Purchaser’s pre-Petition Date Claims, Interests and Encumbrances and
Liens in respect of Sellers) against (1) any of the Purchaser, the Tennenbaum
Lenders, Tennenbaum Capital Partners, LLC, Tennenbaum & Company, LLC, and each
of their respect managing members, (2) any of their respective directors,
officers, control persons (as defined in Section 15 of the Securities Exchange
Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1933,
as amended), members, employees, agents, attorneys, financial advisors, legal
representatives, shareholders, partners, successors and assigns solely in their
capacity as such, and (3) any of their respective directors, officers, control
persons, members or employees in their capacity as a member on, or arising from
their involvement with the activities of, the Board of Directors of any of the
Sellers (including pursuant to board observer rights), (the Purchaser and all
Persons referenced in clauses (1), (2) and (3) are collectively referred to as
the “Purchaser Group”), that directly or indirectly arise out of, are based
upon, or in any manner connected with any Prior Event (as defined below)
(collectively, “Released Claims”); and, should any Released Claims nonetheless
exist, each Seller on behalf of itself and all the other members of the Seller
Group hereby (i) releases and discharges each member of the Purchaser Group from
any liability whatsoever on such Released Claims that directly or indirectly
arise out of, are based upon, or in any manner connected with a Prior Event, and
(ii) releases, remises, waives and discharges all such Released Claims against
any member of the Purchaser Group. As used herein the term “Prior Event” means
any transaction, event, circumstances, action, failure to act or occurrence of
any sort or type, including without limitation any approval or acceptance given
or denied, whether known or unknown, which occurred, existed, was taken,
permitted or begun prior to the consummation of the Transactions contemplated
hereunder. For the avoidance of doubt, “Prior Event” shall include but not be
limited to any transaction, event, circumstances, action, failure to act or
occurrence of any sort or type which occurred, existed, was taken, permitted or
begun in accordance with, pursuant to or by virtue of: (i) any terms of this
Agreement or the Operative Documents (as that term is defined in the Tennenbaum
Credit Agreement), (ii) the transactions referred to herein and in the Operative
Documents; (iii) the acquisition by any of Tennenbaum Lenders or any other of
Purchaser Group of equity interests in any of Sellers; (iv) the membership on,
and involvement with the activities of, the Board of Directors of any of the
Sellers (including pursuant to board observer rights); or (v) any oral or
written agreement relating to any of the foregoing (i) through (iv) of this
sentence.

(b) Without limiting in any way the scope of the release contained in
subparagraph (a) immediately above and effective upon the Closing Date, each
Seller, to the fullest extent allowed under applicable law, hereby waives and
relinquishes for themselves and the other members of the Seller Group, all
statutory and common law protections purporting to limit the scope or effect of
a general release, whether due to lack of knowledge of any claim or otherwise,
including, waiving and relinquishing the terms of any law, like section 1542 of
the California Civil Code, which provides that a release may not apply to
material unknown claims. Each Seller hereby affirms its intent to waive and
relinquish such unknown Claims and to waive and relinquish any statutory or
common law protection available in any applicable jurisdiction with respect
thereto.

12.12 Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
written above.

 

PURCHASER:

TR ACQUISITION CO., INC.,

a Delaware corporation

By:  

/s/ José Feliciano

Name:   José Feliciano Title:   Authorized Signatory SELLERS:     Radnor
Holdings Corporation   By:  

/s/ Paul D. Ridder

    Paul D. Ridder     Vice President and CFO   Styrochem U.S., Ltd.   By:  
StyroChem GP, L.L.C.   Its:   General Partner     By:   Radnor Chemical
Corporation     Its:   Sole Member   By:  

/s/ Paul D. Ridder

    Paul D. Ridder     President   Wincup Holdings, Inc.   By:  

/s/ Paul D. Ridder

    Paul D. Ridder     Vice President and CFO

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

WinCup Texas, Ltd. By:   WinCup GP, L.L.C. Its: General Partner   By: Wincup
Holdings, Inc.   Its: Sole Member By:  

/s/ Paul D. Ridder

  Paul D. Ridder   Vice President and CFO Radnor Chemical Corporation By:  

/s/ Paul D. Ridder

  Paul D. Ridder   President StyroChem Delaware, Inc. By:  

/s/ Paul D. Ridder

  Paul D. Ridder   President StyroChem GP, L.L.C. By:   Radnor Chemical
Corporation Its: Sole Member By:  

/s/ Paul D. Ridder

  Paul D. Ridder   President StyroChem LP, L.L.C. By:   Radnor Chemical
Corporation Its: Sole Member By:  

/s/ Paul D. Ridder

  Paul D. Ridder   President

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

WinCup GP, L.L.C. By:   Wincup Holdings, Inc. Its:   Sole Member By:  

/s/ Paul D. Ridder

  Paul D. Ridder   Vice President and CFO WinCup LP, L.L.C. By:   Wincup
Holdings, Inc. Its:   Sole Member By:  

/s/ Paul D. Ridder

  Paul D. Ridder   Vice President and CFO WinCup Europe Delaware, Inc. By:  

/s/ Paul D. Ridder

  Paul D. Ridder   President StyroChem Europe Delaware, Inc. By:  

/s/ Paul D. Ridder

  Paul D. Ridder   President Benchmark Holdings, Inc. By:  

/s/ Paul D. Ridder

  Paul D. Ridder   Vice President and CFO

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

Radnor Management, Inc. By:  

/s/ Paul D. Ridder

  Paul D. Ridder   Vice President and CFO Radnor Management Delaware, Inc. By:  

/s/ Paul D. Ridder

  Paul D. Ridder   Vice President and CFO WinCup RE, L.L.C. By:   Wincup
Holdings, Inc. Its:   Sole Member By:  

/s/ Paul D. Ridder

  Paul Ridder   Vice President and CFO Radnor Delaware II, Inc. By:  

/s/ Paul D. Ridder

  Paul D. Ridder   President Radnor Asset Management, Inc. By:  

/s/ Paul D. Ridder

  Paul D. Ridder   Vice President and CFO Radnor Investments, Inc. By:  

/s/ Paul D. Ridder

  Paul D. Ridder   President

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

Radnor Investments, L.L.C. By:   Radnor Investments II, Inc. Its:   Sole Member
By:  

/s/ Paul D. Ridder

  Paul Ridder   Vice President and CFO Radnor Investments II, Inc. By:  

/s/ Paul D. Ridder

  Paul D. Ridder   Vice President and CFO Radnor Investments III, Inc. By:  

/s/ Paul D. Ridder

  Paul D. Ridder   President