Exhibit 10.1

 

 

 

ASSET PURCHASE AGREEMENT

DATED AS OF JULY 23, 2010

AMONG

WATERBURY COMPANIES, INC.,

AIR GUARD CONTROL (CANADA) LIMITED,

AIR GUARD CONTROL CORPORATION

(AS SELLERS)

AND

AMREP, INC.,

AMREP IP HOLDINGS, LLC

ACUITY HOLDINGS, INC.

(as Buyers)

AND, SOLELY WITH RESPECT TO SECTION 5.9,

WATCO INTERNATIONAL HOLDINGS CORP.,

WIND POINT PARTNERS V, L.P.

AND

WIND POINT EXECUTIVE ADVISOR PARTNERS, L.P.

AND, SOLELY WITH RESPECT SECTION 10.14,

ZEP INC.

 

 

 

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TABLE OF CONTENTS

 

          Page

ARTICLE 1     DEFINITIONS

   1

SECTION 1.1

  

Certain Definitions

   1

ARTICLE 2     TRANSFER OF ASSETS

   8

SECTION 2.1

  

Transfer of Assets by Sellers

   8

SECTION 2.2

  

Excluded Assets

   11

SECTION 2.3

  

Assumption of Liabilities

   13

SECTION 2.4

  

Excluded Liabilities

   14

SECTION 2.5

  

Assignment of Contracts and Rights

   15

SECTION 2.6

  

Closing

   16

SECTION 2.7

  

Purchase Price

   16

SECTION 2.8

  

Working Capital Adjustment

   18

SECTION 2.9

  

Purchase Price Allocations

   20

SECTION 2.10

  

Adjustments

   21

ARTICLE 3     REPRESENTATIONS AND WARRANTIES OF SELLERS

   22

SECTION 3.1

  

Organization and Qualification

   22

SECTION 3.2

  

Authorization

   22

SECTION 3.3

  

Financial Information

   23

SECTION 3.4

  

Consents and Approvals; No Violations

   23

SECTION 3.5

  

Litigation

   23

SECTION 3.6

  

Compliance with Applicable Law

   24

SECTION 3.7

  

Compliance with Permits

   24

SECTION 3.8

  

Labor Matters

   24

SECTION 3.9

  

Employee Plan Matters

   25

SECTION 3.10

  

Taxes

   25

SECTION 3.11

  

Intellectual Property

   26

SECTION 3.12

  

Inventory

   28

SECTION 3.13

  

Brokers

   28

SECTION 3.14

  

Assumed Contracts

   28

SECTION 3.15

  

Title to and Adequacy of Assets

   30

SECTION 3.16

  

Insurance

   30

SECTION 3.17

  

Registrations

   30

SECTION 3.18

  

Product Warranty

   32

SECTION 3.19

  

Suppliers and Customers

   32

SECTION 3.20

  

Accounts Receivable

   32

SECTION 3.21

  

GST Registration

   33

SECTION 3.22

  

Absence of Changes

   33

SECTION 3.23

  

Transactions with Affiliates

   33

SECTION 3.24

  

Unlawful Benefits

   33

SECTION 3.25

  

Books and Records

   34

 

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SECTION 3.26

  

Personal Information Consents

   34

ARTICLE 4     REPRESENTATIONS AND WARRANTIES OF BUYERS

   34

SECTION 4.1

  

Organization

   34

SECTION 4.2

  

Authorization

   34

SECTION 4.3

  

Consents and Approvals; No Violations

   34

SECTION 4.4

  

Financial Ability

   35

SECTION 4.5

  

Brokers

   35

SECTION 4.6

  

Litigation

   35

SECTION 4.7

  

GST Registration

   35

SECTION 4.8

  

Personal Information

   35

ARTICLE 5     COVENANTS

   35

SECTION 5.1

  

Conduct of the Business

   35

SECTION 5.2

  

Access to Information

   37

SECTION 5.3

  

Exclusive Dealing

   37

SECTION 5.4

  

Approvals and Consents

   38

SECTION 5.5

  

Additional Agreements

   38

SECTION 5.6

  

Employee Benefits

   38

SECTION 5.7

  

Public Announcements

   40

SECTION 5.8

  

Regulatory Filings

   40

SECTION 5.9

  

Noncompetition Provisions

   41

SECTION 5.10

  

Updating Schedules

   43

SECTION 5.11

  

Possession of Acquired Assets

   45

SECTION 5.12

  

Post-Closing Supply

   45

SECTION 5.13

  

Name Change

   45

SECTION 5.14

  

Risk of Loss

   45

SECTION 5.15

  

Receivables

   45

SECTION 5.16

  

Use of Personal Information

   46

SECTION 5.17

  

Product Returns

   46

SECTION 5.18

  

Insurance

   46

SECTION 5.19

  

Registration Data

   46

SECTION 5.20

  

Consultant

   46

ARTICLE 6     CONDITIONS TO CLOSING

   46

SECTION 6.1

  

Conditions to the Obligations of Sellers

   46

SECTION 6.2

  

Conditions to the Obligations of Buyers

   48

ARTICLE 7     TERMINATION; AMENDMENT; WAIVER

   51

SECTION 7.1

  

Termination

   51

SECTION 7.2

  

Effect of Termination

   51

SECTION 7.3

  

Amendment

   52

SECTION 7.4

  

Extension; Waiver

   52

SECTION 7.5

  

Specific Performance and Other Remedies

   52

ARTICLE 8     SURVIVAL AND INDEMNIFICATION

   52

SECTION 8.1

  

Survival; No Additional Representations and Warranties

   52

 

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SECTION 8.2

  

Indemnification

   53

SECTION 8.3

  

Limits on Indemnification

   55

SECTION 8.4

  

Matters Involving Third Parties

   58

SECTION 8.5

  

Tax Treatment of Indemnity Payments

   59

SECTION 8.6

  

GST Gross Up

   59

ARTICLE 9     TAX MATTERS

   59

SECTION 9.1

  

Transfer Taxes Elections

   59

SECTION 9.2

  

HST Election

   59

SECTION 9.3

  

Canadian Tax Elections

   60

SECTION 9.4

  

Pre-Closing Taxes; Elections

   60

SECTION 9.5

  

Pre-Closing Withholding and Reporting

   60

SECTION 9.6

  

Cooperation

   61

ARTICLE 10     MISCELLANEOUS

   61

SECTION 10.1

  

Entire Agreement; Assignment

   61

SECTION 10.2

  

Severability

   62

SECTION 10.3

  

Notices

   62

SECTION 10.4

  

Governing Law

   63

SECTION 10.5

  

Construction

   63

SECTION 10.6

  

Parties in Interest

   64

SECTION 10.7

  

Compliance with Bulk Sales Laws

   64

SECTION 10.8

  

Cooperation Following the Closing

   64

SECTION 10.9

  

Personal Liability

   64

SECTION 10.10

  

Expenses

   64

SECTION 10.11

  

Disclosure Generally

   65

SECTION 10.12

  

Counterparts

   65

SECTION 10.13

  

Arbitration; Waiver of Jury Trial

   65

SECTION 10.14

  

Zep Guaranty

   68

List of Exhibits

Exhibit A - Form of Escrow Agreement

Exhibit B - Net Working Capital Calculations

Exhibit C - Financial Information

Exhibit D - Employees

Exhibit E - Buyers’ Closing Certificate

Exhibit F - Transition Services Agreement

Exhibit G - IP License Agreement

Exhibit H - Seller’s Closing Certificate

Exhibit I - Guaranty by Watco

 

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of July 23, 2010, by
and among WATERBURY COMPANIES, INC., a Delaware corporation (“Waterbury”), AIR
GUARD CONTROL (CANADA) LIMITED, a Canadian Federal corporation (“Air Guard
Canada”) and AIR GUARD CONTROL CORPORATION, a Delaware corporation (“Air Guard
Control” and together with Air Guard Canada, “Air Guard”) (each of Waterbury,
Air Guard Canada, and Air Guard Control being individually referred to herein as
a “Seller” and, collectively, as the “Sellers”), and Amrep, Inc., a Delaware
corporation (“US Buyer”), Amrep IP Holdings, LLC, a Delaware limited liability
company (“IP Buyer”) and Acuity Holdings, Inc., a Québec corporation (“Canadian
Buyer,” each of US Buyer, IP Buyer and Canadian Buyer being individually
referred to herein as “Buyer” and, collectively, as the “Buyers”), and, solely
with respect to Section 5.9 hereof, Watco International Holdings Corp., a
Delaware corporation (“Watco”), Wind Point Partners V, L.P., a Delaware limited
partnership (“WPP V”) and Wind Point Executive Advisor Partners, L.P., a
Delaware limited partnership (“WPP EAP”), and, solely with respect to
Section 10.14 hereof, Zep Inc., a Delaware corporation (“Zep”).

RECITALS

WHEREAS, Sellers are engaged in the business of developing, manufacturing,
distributing, marketing and selling air hygiene and pest control delivery
systems, including through automated dispensing of odor counteractants, insect
control, waterless urinal technology, touchless bathroom facilities, and other
products (as such business is conducted on the date hereof, the “Business”).

WHEREAS, each Seller desires to sell to Buyers such Sellers’ assets used in the
Business and Buyers desire to purchase each Seller’s assets used in the
Business, all on the terms set forth herein.

AGREEMENT

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

ARTICLE 1

DEFINITIONS

SECTION 1.1 Certain Definitions.

(a) The following terms, as used herein, have the following meanings:

“Affiliate” means a Person that, directly or indirectly, through one or more
intermediaries controls, is controlled by or is under common control with the
first-mentioned Person.

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“Ancillary Agreements” means the Assignment Agreements and the Assumption
Agreements, the Escrow Agreement, the IP License Agreement and all other
certificates and agreements delivered in connection with this Agreement, but
excluding the Transition Services Agreement.

“Applicable Laws” means all statutes, laws, rules, regulations, codes,
injunctions, restrictions, ordinances, judgments, orders, decrees, rulings,
approvals, directives, writs, awards, policies, procedures and charges of
federal, state, local, and foreign governments any and all agencies thereof.

“Available Cash” means cash and cash equivalents held by any Seller (including,
without limitation, marketable securities and short-term investments).

“Business Day” means any day that is not a Saturday, Sunday or day on which the
banks in Chicago, Illinois are required or permitted to be closed.

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, and regulations promulgated thereunder.

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

“Contracts” means all contracts, subcontracts, agreements, arrangements,
options, leases, subleases, licenses, sublicenses, sales and accepted purchase
orders, commitments and other agreements of any kind, whether written or oral,
which relate to the Business and to which one or more Sellers is a party or to
which one or more Sellers or the Acquired Assets is otherwise bound.

“Direct Affiliates” means, with respect to any Seller, such Seller’s Affiliates,
including without limitation Watco and its direct and indirect subsidiaries, but
specifically excluding, (i) the Wind Point Partner entities, such entities’
portfolio companies (other than Watco and its subsidiaries), and such portfolio
companies’ subsidiaries and (ii) the P&L Companies.

“Employee Plan” means any “pension plan” (as defined under Section 3(2) of
ERISA, determined without regard to whether such plan is subject to ERISA) (any
“Pension Plan”); “welfare plan” (as defined under Section 3(1) of ERISA,
determined without regard to whether such plan is subject to ERISA) (any
“Welfare Plan” and, collectively with any Pension Plan, any “ERISA-Type Plan”);
any other plan, fund, policy, program, agreement, arrangement or scheme,
qualified or non-qualified, whether or not considered legally binding, that
involves any pension, thrift, saving, retirement, profit sharing, deferred
compensation, bonus, stock option, stock purchase, phantom stock or other
incentive plan; any other “fringe” benefits including, without limitation,
voluntary employees’ beneficiary associations or related trusts, vacation,
summer hours, severance, disability, medical, hospitalization, dental, life,
accidental death and dismemberment and other insurance, tuition, company car,
club dues, income tax preparation, sick leave, maternity, paternity or family
leave, child care, education, cafeteria plan or other benefits; or other
employment, supplemental unemployment, layoff, consulting, “golden parachutes”
engagement or retainer agreement, arrangement or plan including, without
limitation all Employee Plans provided to any Canadian Hired Employees.

 

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

“Escrow Agent” means Wells Fargo Bank, N.A.

“Escrow Agreement” means an escrow agreement, by and among Sellers, Buyers and
the Escrow Agent, in substantially the form of Exhibit A hereto, pursuant to
which Buyers shall fund Two Million Dollars ($2,000,000.00) (the “Escrow Funds”)
into an escrow account at Closing to secure and to serve as the first source of
funds in respect of the Sellers’ indemnification obligations hereunder, and, in
the Buyers’ sole discretion, in respect of the payment of any post-Closing
adjustments made pursuant to Section 2.8 hereof.

“Environmental Law” means any federal, state, local or foreign law, statute,
ordinance, rule, regulation, code, license, permit, written authorization,
written approval, written consent, order, consent agreement, or any applicable
judicial or administrative decision relating to (a) pollution or the protection,
preservation, remediation or restoration of health, safety or the environment,
including: (i) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980; (ii) the Resource Conservation and Recovery Act of 1976;
(iii) the Hazardous Materials Transportation Act; (iv) the Toxic Substances
Control Act; (v) the Clean Water Act; (vi) the Clean Air Act; (vii) the Safe
Drinking Water Act; (viii) the National Environmental Policy Act of 1969; and
(ix) the Emergency Planning and Community Right-to-Know Act; (b) the use,
storage, recycling, treatment, generation, transportation processing, handling,
labeling, production, release or disposal of Hazardous Substances; or (c) the
production, registration, transportation, testing, analysis, labeling,
advertisement, manufacture, development, sale, distribution, or any other use of
any pesticidal product or material.

“FMC” means FMC Corporation, a Delaware corporation.

“FMC APA” means that certain Asset Purchase Agreement, dated as of February 17,
2009, by and between Waterbury and FMC, as amended.

“GAAP” means generally accepted accounting principles as applied in the United
States at the time such term is used (unless the context expressly indicates
otherwise).

“GST/HST” means goods and services tax or harmonized sales tax payable pursuant
to Part IX of the Excise Tax Act (Canada), or any other statute in any other
jurisdiction of Canada, as such statutes may be amended, modified or replaced
from time to time, including any successor statute.

“Governmental Entity” means any federal, state or local U.S., Canadian or other
foreign government, any political subdivision thereof or any court,
administrative or regulatory agency, department, instrumentality, body or
commission or other governmental authority or agency, domestic or foreign.

“Hazardous Substance” means: each and every element, compound, chemical mixture,
contaminant, pollutant, material or other substance included within any
applicable federal, state, local or foreign definition or listings of “hazardous
substances,” “special waste,” “hazardous waste,” “extremely hazardous
substance,” “hazardous materials,” or “toxic substances,” under

 

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any Environmental Law or the use, handling or Release of which is governed by or
subject to any Environmental Law.

“Hired Employee Obligations” means all obligations of each Seller as of the
Closing Date with respect to the Hired Employees’ compensation payable and
accrued in the Ordinary Course of Business (including, without limitation,
earned but unused vacation liabilities, accrued bonus and other accrued
incentive payments, accrued payroll and related taxes) and with respect to the
Hired Employees’ severance entitlements.

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

“Indebtedness” of any Person means as of the Closing Date all obligations of
such Person (except for any account listed on Exhibit B and included in the
Final Actual Net Working Capital) which in accordance with GAAP should be
classified on a balance sheet of such Person as a liability, and in any event,
regardless of how classified in accordance with GAAP, shall include (without
duplication) all obligations of such Person (a) for borrowed money or funded
indebtedness (including obligations in respect of accrued interest) or evidenced
by notes, bonds, debentures or similar instruments, and any prepayment premiums,
charges, penalties or other costs or expenses related to any of the foregoing;
(b) for capital lease obligations (including the amount necessary to pay in full
all principal, interest, break fees, penalties, lease payments, buyout options,
or similar payments such that as of the date of such payment, the payor would
own all equipment or other property that is the subject of a lease or similarly
styled agreement); (c) for all of the following: (i) obligations which have been
incurred in connection with the acquisition of property or assets (including
obligations in respect of principal and accrued interest but excluding trade
payables or accruals included in the Final Actual Net Working Capital),
(ii) obligations created or arising under any deferred purchase price,
conditional sale or other title retention agreement with respect to property
acquired by such Person, (excluding trade payables or accruals included in the
Final Actual Net Working Capital), (iii) all obligations of such Person in
regard to guaranties or sureties by others of such Person’s obligations, and
(iv) any prepayment premiums, charges, penalties or other costs or expenses
related to any of the foregoing.

“Intellectual Property” means all United States, international and foreign
patents, copyrights, copyrightable works, trademarks and service marks
(including all pending patent applications (including all continuations,
continuations-in-part, divisions, renewals, extensions, provisionals, re-issues
and re-examination certificates related thereto) and all registered, applied for
and common law copyrights, trademarks and service marks), trade names, service
names, rights to trade dress and company names, all goodwill associated with
such trademarks, service marks, and trade dress, copyrighted material contained
within labels, software, database rights whether registered or unregistered,
designs, know-how, processes, formulations (including formula recipes), trade
secrets, inventions, invention disclosures, improvements, domain names,
technical data, customer lists and other proprietary data, whether registered or
unregistered, including all files, notes, books and records related thereto and
all documentation embodying, representing or documenting any of the foregoing
(excluding any Registration Data which is separately defined).

 

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“Intercompany Payables” means, collectively, all intercompany payables owed by a
Seller to one of its Affiliates.

“Intercompany Receivables” means, collectively, all intercompany receivables
owed to a Seller by one of its Affiliates.

“Liabilities” means all obligations and other liabilities of a Person (of
whatever kind or nature, known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, or due or to
become due).

“Lien” means any mortgage, pledge, lien, encumbrance, charge, or other security
interest, other than (a) statutory liens of landlords and liens of carriers,
warehousemen, mechanic’s, materialmen’s, and similar liens for amounts not yet
due and payable or that are being contested in good faith through appropriate
proceedings, (b) liens for Taxes and/or utilities not yet due and payable or for
Taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments under
capital lease arrangements that have been disclosed pursuant hereto to the
extent required to be disclosed, and (d) liens incurred or deposits made in the
Ordinary Course of Business in connection with workers’ compensation,
unemployment insurance or other types of social security to the extent the same
are not yet due and payable.

“Loss” or “Losses” means any and all damages, dues, penalties, fines, costs,
losses, liabilities, (including any reasonable environmental investigation and
remediation costs), obligations, Taxes, expenses, fees, and fines, (including
without limitation amounts paid in settlement and reasonable costs of
investigation and defense, reasonable legal expenses and other reasonable costs)
whether such matters arise out of contract, tort, violation of law or any other
theory and whether such matters are brought or initiated by a Person or a
Governmental Entity.

“Major Customer” means any customer of the Business to whom sales in the twelve
(12) full calendar months prior to the date hereof generated revenue for the
Business in excess of $250,000.

“Material Adverse Effect” or “Material Adverse Change” means any state of facts,
event, occurrence, circumstance, change or effect that, individually or when
taken together with all other such states of fact, events, occurrences,
circumstances, changes or effects, is, or could reasonably be likely to be,
materially adverse to the Business, Acquired Assets and Assumed Liabilities
taken as a whole, or the financial condition or results of operations of the
Business, in each case taken as a whole; provided, however, that none of the
following and no circumstance, change or effect resulting from any of the
following shall be deemed either alone or in combination to constitute a
Material Adverse Effect or Material Adverse Change: (a) any failure by one or
more Sellers, for any period ending (or for which revenues or earnings are
released) on or after the date of this Agreement, to meet internal projections
or forecasts or earnings predictions (unless the underlying cause of any such
failure is a Material Adverse Effect or a Material Adverse Change); or (b) any
circumstances, changes or effects that are attributable to or resulting from
(i) the announcement or pendency of the transaction contemplated by this
Agreement; (ii) conditions affecting the industry in which the Business
participates, the U.S. economy as a whole, the Canadian economy as a whole, or
the capital/credit markets or economy

 

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in general or in any of the markets in which one or more of Seller’s Business
operates, unless such conditions have a significantly disproportionate and
adverse effect on the Business relative to the effect on other similarly sized
and similarly situated companies operating in the industry in which the Business
operates; (iii) any change in GAAP or other accounting requirements or
principles or any change in applicable laws, rules or regulations or the
interpretation thereof; or (iv) actions required to be taken under applicable
laws, rules or regulations; or (v) act of God, natural disaster, hurricane,
earthquake, epidemic, riot, terrorism or military action or the threat thereof
(collectively, “Acts of God”).

“Net Working Capital” means (i) the Accounts Receivable that are included in the
Acquired Assets (net of reserves), plus the Inventory that is included in the
Acquired Assets (net of reserves), plus the other categories of current assets
of the Sellers in each case included in the determination of Net Working Capital
set forth in the Net Working Capital section of Exhibit B (other than items
identified therein as “excluded”), (ii) less accounts payable of the Sellers,
less other current liabilities of the Sellers in each case included in the
determination of Net Working Capital set forth in the Net Working Capital
section of Exhibit B (including without limitation the Hired Employee
Obligations), (iii) plus or minus the adjustments to Net Working Capital of the
categories set forth in the Adjustments section of Exhibit B, in each case
determined in accordance with Exhibit B hereto (including the Walkthrough and
Explanation section of Exhibit B) or, if the calculation of any of the foregoing
is not addressed by Exhibit B, then determined in accordance with GAAP.

“Net Working Capital Target” means Six Million, Seven Hundred Sixty-Two Thousand
Dollars ($6,762,000).

“Ordinary Course of Business” means the ordinary course of business of a Seller
or the Sellers (as the context requires) that is consistent in nature and scope
with such Seller’s or Sellers’, as applicable, past custom and practice
(including as to frequency and amount), including with respect to pricing,
rebates, promotional discounts, volume discounts and other similar pricing or
sale promotions, and policies regarding sales returns and allowances.

“P&L Companies” means, collectively, P+L Systems Corporation, a Delaware
corporation and its wholly owned direct and indirect subsidiaries.

“Person” means an individual, corporation, general partnership, limited
partnership, venture, limited liability company, association, trust,
unincorporated organization, business, union, society, firm, Governmental Entity
or any other entity or organization.

“Personal Information” means information about an identifiable individual as
defined by Privacy Laws.

“Prime Rate” means the prime rate as reported from time to time in The Wall
Street Journal.

“Privacy Laws” means the federal Personal Information Protection and Electronic
Documents Act and any comparable law of any other province or territory of
Canada applicable to the parties hereto or the Business.

 

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“Registrations” means all registrations, approvals, consents, licenses or other
authorizations required by Applicable Law and, to the extent not required by
Applicable Law, previously granted by a Governmental Entity, which permit the
research, testing, development, manufacture, sale or distribution by a Seller,
in such Seller’s operation of the Business, of a product containing one or more
pesticidal substances, including to the extent utilized by any Seller in the
operation of the Business, any sub-registration, “me-too” registration or
similar registration.

“Registration Data” means all studies, data, reports, or information generated
with respect to seeking, applying for, obtaining or maintaining any Registration
in any jurisdiction including in any country in the world or any state or
territory in the United States or any province or territory in Canada, whether
or not submitted to any Governmental Entity.

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or dispensing into the
environment of any Hazardous Substance.

“Seller Facilities” means the owned or leased real property at which Sellers
have operated the Business, or at which Sellers will operate after Closing in
order to provide services under the Transition Services Agreement.

“Sellers’ Software” shall mean all software owned by one or more of Sellers,
including without limitation all production-related, database and inventory
control software, currently used in the Business.

“Tax” and “Taxes” means any and all taxes, charges, fees, duties, levies,
unclaimed property and escheat obligations or other assessments, including,
without limitation, all net income, gross income, gross receipts, premium,
sales, use, ad valorem, goods and services, harmonized sales, value added,
transfer, franchise, capital stock, profits, license, withholding, payroll,
employment, excise, estimated, severance, stamp, occupation, property or other
taxes, fees, assessments or charges of any kind whatsoever, together with any
interest and any penalties (including penalties for failure to file in
accordance with applicable information reporting requirements), and additions to
tax by any Taxing Authority, excluding any maintenance fees paid to any
Governmental Authority related to Registrations.

“Taxing Authority” means, with respect to any Tax, the Governmental Entity or
political subdivision thereof that imposes such Tax, and the agency (if any)
charged with the collection of such Tax for such entity or subdivision,
including any Governmental Entity that imposes, or is charged with collecting,
social security or similar charges or premiums.

“Tax Return” means any report, return, form, declaration or other document or
information required to be supplied to any Taxing Authority in connection with
Taxes, including estimated returns and reports of every kind with respect to
Taxes.

“Third Party Software” shall mean all software currently used in the Business
owned in whole or in part by a Person other than one or more of the Sellers and
licensed to one or more of the Sellers, including without limitation all
production-related, database and inventory control software.

 

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“Transaction Documents” means the Ancillary Agreements and Transition Services
Agreements.

“Transaction Expenses” means all third party expenses incurred by one or more
Sellers in connection with the preparation, execution and consummation of this
Agreement, including fees and disbursements of attorneys, accountants, brokers
and other professional advisors; provided, however, that in no event shall the
Transaction Expenses include the HSR Filing Fees which are addressed in
Section 5.8 hereof.

“Transition Services Agreements” has the meaning set forth in Section
6.1(f)(vi).

“WARN Act” means the Worker Adjustment Retraining and Notification Act of 1988.

ARTICLE 2

TRANSFER OF ASSETS

SECTION 2.1 Transfer of Assets by Sellers.

(a) Upon the terms and subject to the conditions of this Agreement and in
reliance upon the representations, warranties and agreements herein set forth,
and subject to Section 2.2, US Buyer agrees to purchase and acquire from
Waterbury, Canadian Buyer agrees to purchase and acquire from Air Guard Canada
and Air Guard Control, Waterbury agrees to grant, sell, assign, transfer, convey
and deliver to US Buyer and Air Guard Canada, and Air Guard Control agree to
grant, sell, assign, transfer, convey and deliver to Canadian Buyer, at the
Closing (or to the extent provided in Section 2.1(a)(vii) below, at such times
as provided in Section 2.1(a)(vii) below) (defined below in Section 2.6), in
each case free and clear of all Liens, all of such Seller’s right, title and
interest in and to the following (which shall be collectively referred to
herein, together with the Transferred Intellectual Property to be conveyed
pursuant to Section 2.1(b) below, as the “Acquired Assets”):

(i) all rights of the Sellers under any Contracts relating to the Business
(excluding (i) the Contracts listed on Section 2.2(a) of the Seller Disclosure
Schedule (the “Excluded Contracts”); (ii) any lease or agreement related to any
real property; (iii) any Employee Plan, employment agreement or similar
agreement; and (iv) any sales representative agreement if such agreement is not
amended, in a form and substance reasonably acceptable to Buyers, to provide
that the exclusive rights of such sales representative applies only to products
of Sellers as of the date of this Agreement and, if not already provided in such
agreement, imposing non-competition obligations on such sales representative)
including without limitation those contracts listed on Section 2.1(a)(i) of the
Seller Disclosure Schedule which are in effect as of the Closing and, subject to
the provisions of Section 5.1(e), any Contracts relating to the Business to
which a Seller becomes a party in the Ordinary Course of Business between the
date hereof and the Closing (collectively, the “Assumed Contracts”) and, to the
extent maintained by a Seller, all files, notes, books and records primarily
related thereto;

(ii) except for (i) each Seller’s Intercompany Receivables, (ii) rights with
respect to payments pursuant to Section 2.7 of the FMC APA, and (iii) Accounts

 

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Receivable from FMC and Spectrum Brands (a/k/a United Industries), all trade
accounts receivable, notes receivable and other receivables due and payable to
the Sellers and any security therefor (the “Accounts Receivable”);

(iii) all inventories owned by Sellers, wherever located, including all finished
goods, work in process, and raw materials (excluding any finished goods
inventory manufactured for FMC or Spectrum Brands (a/k/a United Industries) and
any raw materials that are used exclusively for products manufactured for FMC or
Spectrum Brands (a/k/a United Industries)) (the “Inventory”);

(iv) subject to Section 2.2 hereof, the deposits, advances, pre-paid expenses
and credits of the Sellers and used in the Business including without limitation
those listed on Section 2.1(a)(iv) of the Seller Disclosure Schedule (the
“Deposits”);

(v) subject to Section 2.2(n), the equipment, machinery and other tangible
personal property of the Sellers and used in the Business, whether or not
located at any Sellers’ location or any vendor, customer, or bailee of any
Seller, including without limitation those listed on Section 2.1(a)(v) of the
Seller Disclosure Schedule, together with all parts, tools, spare parts and
repair parts related thereto (the “Transferred Equipment”);

(vi) other than to the extent, but only to the extent, relating to an Excluded
Liability or Excluded Asset, all Sellers’ rights, claims, credits, causes of
action or rights of set-off against third parties to the extent relating to the
Business or affecting the Acquired Assets, whether liquidated or unliquidated,
fixed or contingent (“Business Claims”) and whether arising by way of
counterclaim or otherwise and all third party guarantees thereof. Other than to
the extent relating to Excluded Liabilities or Excluded Assets, Business Claims
shall include claims pursuant to all warranties, representations and guarantees
made by suppliers, manufacturers, contractors and other third parties in
connection with inventory, equipment, products or services purchased by or
furnished to a Seller for use in the Business or affecting any of the Acquired
Assets;

(vii) in accordance with Applicable Law and at such times as provided in the TSA
(i) all Registrations used in the operation of the Business including without
limitation those identified on Sections 3.17(a) and 3.17(b) of the Seller
Disclosure Schedule (excluding those EPA Registrations identified in
Section 2.1(a)(vii) of the Seller Disclosure Schedule) (ii) the Registration
Data relating to the Registrations being transferred pursuant to
Section 2.1(a)(vii)(i) hereof (and any associated rights to data compensation),
and all applications, files, notes, lab notebooks, documents, reports, data,
books, records, and correspondence with Governmental Agencies relating to such
Registrations and Registration Data (including, without limitation all
documentation of the internal and external costs of studies, data, reports or
information), (iii) all other rights a Seller may have to Registrations used in
the Business, and (iv) all other rights a Seller may have to the Registration
Data or the use thereof relating to the Registrations being transferred pursuant
to Section 2.1(a)(vii)(i) hereof;

 

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(viii) those transferable franchises, licenses, permits, consents, approvals,
registrations or other authorizations issued or granted by a Governmental Entity
or to the extent not covered by the foregoing issued pursuant to any Applicable
Law, (other than Registrations which are separately addressed), including
without limitation those that are listed on Section 2.1(a)(viii) of the Seller
Disclosure Schedule (“Permits”) and, to the extent maintained by a Seller, all
files, notes, books and records primarily related thereto;

(ix) (i) to the extent related to the Acquired Assets and not (a) primarily
relating to an Excluded Asset and/or an Excluded Liability, relating to an
Assumed Contract, Registration and Registration Data and/or a Permit (all of
which are otherwise addressed herein) and (b) already included in Intellectual
Property, all books and records related to or used in connection with the
Business, including, without limitation, (1) all records and lists of Sellers
relating to the Acquired Assets and the Assumed Liabilities, (2) all records and
lists relating to the Business, and customers, suppliers, vendors, distributors
or personnel of the Business, (3) all product, business and marketing plans,
advertising and sales literature and promotional literature, sales and call
reports relating to the Business, including product specifications and material
safety data sheets, and (4) all other books, ledgers, files, reports, plans,
drawings and operating records, manuals and reports, notes, models, databases,
sales and receivables history, other sales and purchase correspondence and
treatises and other publications of every kind maintained by Sellers in
connection with the Business, and (ii)(a) copies of books and records which
primarily relate to an Excluded Asset and/or an Excluded Liability but which
also relate to or are used in the Business, (the books and records and copies of
books and records set forth in this Section 2.1(a)(ix)(i) and 2.1(a)(ix)(ii)
being collectively referred to as the “Books and Records”), which, for purposes
of clarity, shall in all events exclude the originals of Sellers’ minute books,
stock record books and Tax Returns; provided, that Sellers shall be permitted to
retain a copy of the Books and Records for recordkeeping purposes and Buyers
shall provide Waterbury with copies of the Books and Records to the extent
necessary to enable Waterbury to fulfill its obligations under the Transition
Services Agreement;

(x) all goodwill associated with the Business or the Acquired Assets;

(xi) other than to the extent, but only to the extent, related to an Excluded
Liability or Excluded Asset, all rights in and under all express or implied
guarantees, warranties, representations, covenants, indemnities and similar
rights in favor of the Sellers with respect to the Business, any Acquired Asset
or any Assumed Liability;

(xii) all unfilled customer orders of the Business;

(xiii) in the event of an Act of God between the date hereof and the Closing,
all amounts recovered and recoverable under the applicable insurance policies of
Sellers including any property and casualty insurance related to the Acquired
Assets, business interruption insurance (allocated between Buyers and Sellers at
a ratio of the contribution margin of the products included as part of the
Acquired Assets to the

 

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contribution margins for the Business immediately prior to the date hereof) and
other insurance policy and coverages;

(xiv) to the extent such transfer is permitted under Applicable Law, but in each
case as is, where is, without representations, warranties or covenants of any
kind, any rights of the Sellers under and pursuant to any employment or similar
agreement with respect to non-solicitation, non-competition, non-disparagement
and similar clauses to the extent related to the Business (provided that
notwithstanding anything herein to the contrary Buyers shall not assume any
liability with respect to any officer or employee of any Seller other than Hired
Employee Obligations to the extent, but only to the extent, included in the
Actual Final Net Working Capital and other than the Listed Employee Obligations)
and Sellers’ rights under and pursuant to any non-competition or
non-solicitation clauses or provisions in any other Contract; and

(xv) that certain Indenture made the 4th day of February 2002 in Pursuance of
the Short Forms of Leases Act between Charlie Graci and Graziell Graci and
3974782 Canada Inc. (n/k/a as Air Guard Control (Canada) Ltd) as amended by that
certain Renewal Agreement made as of March 1, 2010 (the “Canadian Lease”) and
all of Air Guard Canada’s real property rights and interests in and to the real
property leased pursuant to the Canadian Lease.

(b) IP Buyer agrees to purchase and acquire from Sellers and Sellers agree to
grant, sell, assign, transfer, convey and deliver to IP Buyer, at the Closing
(defined below in Section 2.6), in each case free and clear of all Liens, all of
Sellers’ right, title and interest in and to all Intellectual Property used in
whole or in part in the Business together with all Intellectual Property
assignments, transfers and acknowledgments, other than the Excluded Intellectual
Property (“Transferred Intellectual Property”).

SECTION 2.2 Excluded Assets. Notwithstanding anything herein to the contrary,
each Seller will retain and will not transfer, convey, assign or deliver to
Buyers, and Buyers will not acquire any right, title or interest in or to any of
the following (all being the “Excluded Assets”):

(a) the Excluded Contracts;

(b) any Available Cash;

(c) each Seller’s Intercompany Receivables or any other amounts owed to a Seller
by one of its Affiliates, any unpaid interest or fees accrued thereon or other
amounts due with respect thereto, and any security or collateral therefor,
including recoverable advances and deposits;

(d) any life insurance policies covering officers and other employees of one or
more of the Sellers and any other insurance policies relating to the operation
of the Business;

(e) all ownership and other rights with respect to any Employee Plans, including
assets held in trust or insurance contracts for the benefit of Employee Plan
participants or beneficiaries, and amounts otherwise set aside or recorded as
available for the payment of costs and benefits attributable to the operation of
any Employee Plans, and all employee

 

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advances owed to a Seller by its employees (including by each person who,
following the Closing, is a Hired Employee);

(f) any real property, whether owned or leased other than the real property
rights under and pursuant to the Canadian Lease;

(g) any refunds or credits, if any, of Taxes due to or from a Seller by reason
of its ownership of the Acquired Assets or operation of the Business to the
extent attributable to any time or period ending at or prior to the Closing
Date, the Sellers’ respective Tax identification numbers and Tax Returns;

(h) any rights (including indemnification) and claims and recoveries under
litigation of any Seller against third parties (other than rights, claims and
recoveries acquired by Buyers pursuant to Section 2.1(a)(vi) and other than
pursuant to Section 2.1(a)(xiii));

(i) any personnel business records, and other business records (copies of which
have been provided to Buyers), that a Seller is required by law to retain in its
possession, the Sellers’ respective minute books and the Sellers’ respective
stock record books;

(j) consideration to be received by any Seller, and each Seller’s other rights,
under this Agreements and the Transaction Documents;

(k) the Intellectual Property which is owned or licensed by a Seller and listed
on Section 2.2(k) of the Seller Disclosure Schedule and any rights with respect
thereto, (collectively, the “Excluded Intellectual Property”);

(l) the deposits, advances, pre-paid expenses and credits of the Sellers and
used in the Business listed on Section 2.2(l) of the Seller Disclosure Schedule
(the “Excluded Deposits”);

(m) all right, title and interest to the Excluded Milestone Payments; and

(n) furniture, machinery and equipment identified on Section 2.2(n) of the
Seller Disclosure Schedule.

 

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SECTION 2.3 Assumption of Liabilities. Except as provided herein, Buyers shall
not assume, in connection with the transactions contemplated hereby, any
liability or obligation of Sellers whatsoever, and Sellers shall retain
responsibility for all liabilities and obligations accrued on or prior to the
Closing Date and all liabilities and obligations arising from the Sellers’
operations on or prior to the Closing Date, whether or not accrued and whether
or not disclosed. As the sole exceptions to the foregoing, but in any case
subject to the limitations contained in Section 2.4, upon the terms and subject
to the conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, US Buyer agrees to assume from
Waterbury and Canadian Buyer agrees to assume from Air Guard Canada at Closing,
and each agrees to thereafter perform and discharge, only the Liabilities
identified specifically below (collectively, the “Assumed Liabilities”):

(a) all liabilities and obligations of Sellers included in the Final Net Actual
Working Capital, including all accounts payable and other current liabilities,
but excluding (i) any liabilities or obligations of a Seller to an Affiliate and
(ii) trade and accounts payable for raw materials used exclusively in finished
goods manufactured for FMC or Spectrum Brands (a/k/a United Industries) and
excluding that portion of the trade and accounts payable for raw materials used
for finished goods manufactured for FMC or Spectrum Brands (a/k/a United
Industries) and for other finished goods allocated based on the finished goods
inventory for FMC and Spectrum Brands (a/k/a United Industries) as of the
Closing Date as a ratio of the total finished goods inventory for the Business
as of the Closing Date;

(b) to the extent not covered by Section 2.3 but in each case to the extent but
only to the extent accrued in or reserved for in the Final Actual Net Working
Capital, (i) each Seller’s obligations with respect to the replacement of or
refund for damaged, defective or returned goods of the Business sold by such
Seller prior to the Closing; or (ii) Seller’s obligations under, pursuant to, or
with respect to any marketing fund, sales rebates, volume discounts or similar
obligations;

(c) all liabilities and obligations of Sellers under each Assumed Contract other
than any liability or obligation resulting from, arising out of, relating to, in
the nature of, or caused by (A) tort, infringement or violation of Law occurring
prior to or arising from facts, events, actions, or circumstances that occurred
or failed to occur prior to the Closing Date; (B) any breach by the Sellers of
such Assumed Contract occurring prior to the Closing Date; (C) any facts,
events, actions, or circumstances that occurred or failed to occur prior to the
Closing Date which, with notice or passage of time, would result in or give rise
to a default or breach by Buyers of such Assumed Contract; and (D) any
indemnification (or similar) obligation under and pursuant to Assumed Contracts
to the extent arising from or relating to any facts, events, actions, or
circumstances that occurred or failed to occur prior to the Closing Date;

(d) all rent and other obligations of Air Guard Canada under and pursuant to the
Canadian Lease due and payable after the Closing Date; provided that Canadian
Buyer (or any other Buyer) shall not assume any liability or obligation
resulting from, arising out of, relating to, in the nature of, or caused by
(A) tort, infringement or violation of Law (including any Environmental Law)
occurring prior to or arising from facts, events, actions, or circumstances that
occurred or failed to occur prior to the Closing Date; (B) any breach by the
Sellers of the Canadian Lease occurring prior to the Closing Date; (C) any
facts, events, actions,

 

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or circumstances that occurred or failed to occur prior to the Closing Date
which, with notice or passage of time, would result in or give rise to a default
or breach by Buyers of the Canadian Lease; and (D) any indemnification (or
similar) obligation under and pursuant to the Canadian Lease to the extent
arising from or relating to any facts, events, actions, or circumstances that
occurred or failed to occur prior to the Closing Date; and

(e) all obligations in any way related to the termination or cessation of
employment of any or all of the Canadian Listed Employees, including without
limitation such obligations arising out of such Canadian Listed Employees’
employment with Air Guard Canada (the “Listed Employee Obligations”).

SECTION 2.4 Excluded Liabilities. Specifically, and without in any way limiting
the generality of the first sentence of Section 2.3, the Assumed Liabilities
shall not include, and Sellers shall not assign to Buyers, and Buyers shall not
assume, agree to pay, discharge or satisfy any of the following (collectively,
the “Excluded Liabilities”): any of Sellers’ Liabilities, or any of the costs,
expenses, claims, losses or other obligations and liabilities related thereto,
whether known or unknown, accrued, absolute, matured or unmatured, liquidated or
unliquidated, known or unknown, contingent, actual or otherwise, except for the
Assumed Liabilities specifically enumerated in Section 2.3. For clarity, except
to the extent an Assumed Liability, the Excluded Liabilities include, but are
not limited to, the following:

(a) other than the Hired Employee Obligations to the extent included in the
Final Actual Net Working Capital and other than the Listed Employee Obligations,
(i) any Liabilities related to any Seller’s employees, officers, directors or
stockholders, (ii) any Liabilities related to Sellers’ Employee Plans, including
those under ERISA (whether or not such liabilities arise prior to, on or
following the Closing Date), or (iii) to the extent arising from Sellers’
actions, any WARN Act Liabilities (whether or not such liabilities arise prior
to, on or following the Closing Date);

(b) any Seller Liabilities relating to any violations or failure to comply with
any Applicable Laws;

(c) any Indebtedness of any Seller or any costs, expenses, or amounts necessary,
required or incurred to remove or release any Lien on any Acquired Asset;

(d) to the extent pertaining to any Excluded Assets;

(e) except as provided in Section 2.3(d), any Seller Liability with respect to
real property, whether owned or leased;

(f) except as set forth in Section 2.3(b) hereof, relating to, resulting from,
or arising out of, (i) claims made in pending or future suits, actions,
investigations or other legal, governmental or administrative proceedings or
(ii) claims based on violations of law, breach of contract, employment practices
or environmental, health and safety matters or any other actual or alleged
failure of Sellers to perform any obligation, in each case, to the extent,
arising out of, or relating to, (x) events that shall have occurred,
(y) services performed or (z) the operation of the Business, in each case, prior
to the Closing Date;

 

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(g) any Liability arising from any claims, demands, suits, or causes of action
for personal injury arising from any product transferred, distributed, shipped
or sold by a Seller prior to Closing;

(h) any Seller Liability with respect to Taxes other than that portion of any of
the Transfer Taxes Buyers have agreed to pay as provided in the first sentence
of Section 9.1;

(i) any Liability, whether currently in existence or arising hereafter, owed by
any Seller to any of its Affiliates;

(j) any Transaction Expenses; and

(k) any liability associated with Seller Facilities, including without
limitation Sellers’ past, current or future operations, Sellers’ ownership of
Seller Facilities, and Release of Hazardous Substances by Sellers, and/or
Sellers’ compliance with or liability under Environmental Laws.

To the extent, if any, that any Liability might be partly an Assumed Liability
and partly an Excluded Liability, the apportionment of such Liability shall be
determined pursuant to equitable principles. Nothing set forth in the foregoing
sentence shall be deemed to affect, amend, modify, supplement or otherwise
change the definitions of Assumed Liabilities and Excluded Liabilities. In no
event shall any Buyer Indemnifiable Losses or Liabilities arising out of a
Transaction Document (the responsibility for which is addressed in that
Transaction Document) constitute Excluded Liabilities. In no event shall any
Seller Indemnifiable Losses or Liabilities arising out of a Transaction Document
(the responsibility for which is addressed in that Transaction Document)
constitute Assumed Liabilities.

SECTION 2.5 Assignment of Contracts and Rights.

(a) Except as provided in Section 5.4(b), with respect to any Assumed Contract
and any claim, right or benefit arising thereunder or resulting therefrom,
promptly after the date hereof, to the extent required by the terms of the
Assumed Contract, each Seller will use commercially reasonable efforts to obtain
the written consent of the other parties to any such Assumed Contract for the
assignment thereof to Buyers in form and substance reasonably satisfactory to
Buyers.

(b) If (i) such consent is not obtained with respect to any such Assumed
Contract and (ii) Buyers elect to waive the conditions in Section 6.2(d) with
respect to such Assumed Contract and agree to consummate the Closing, applicable
Seller and Buyers shall cooperate in an arrangement reasonably satisfactory to
Buyers and such Seller under which Buyers would obtain, to the extent
practicable, the claims, rights and benefits with respect to such Assumed
Contract and assume the Assumed Liabilities (but no Excluded Liabilities)
associated therewith and corresponding to the claims, rights and benefits
obtained by Buyers. In such event, such Seller will promptly pay to Buyers all
monies received by such Seller under any Acquired Asset or any claim, right or
benefit arising thereunder not transferred to Buyers pursuant to this
Section 2.5.

 

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SECTION 2.6 Closing.

(a) The closing (the “Closing”) of the transactions contemplated by this
Agreement shall take place at the offices of Reed Smith LLP, 10 S. Wacker Drive,
40th Floor, Chicago, IL 60606, on the second Business Day after the last of the
conditions to Closing set forth in Sections 6.1 and 6.2 have been satisfied or
waived by the party or parties entitled to waive the same or such other date as
to which Buyers and Sellers may mutually agree, provided that the closing shall
not occur prior to 12:01 a.m. on September 1, 2010. The date on which the
Closing actually occurs is referenced herein as the “Closing Date”. Other than
for purposes of the representations and warranties set forth herein (and with
respect to which the Closing shall be deemed effective as of the time the
Closing is consummated) the Closing shall be deemed effective as of the close of
business (Eastern Time) on the Closing Date.

(b) At the Closing, Buyers shall deliver to the Sellers such customary
instruments of assumption as may be reasonably requested by Sellers to evidence
the assumption of the Assumed Liabilities (the “Assumption Agreements”);
provided, however, that no such documents shall expand in any way any of Buyers’
obligations to assume anything other than the Assumed Liabilities.

(c) At the Closing, Sellers shall deliver to Buyers such bills of sale,
certificates of title, endorsements, assignments and other good and sufficient
instruments of conveyance and assignment of such rights as may be reasonably
requested by Buyers to vest in Buyers all of the Sellers’ respective right,
title and interest in, to and under the Acquired Assets (the “Assignment
Agreements”), provided, however, that no such documents shall expand in any way
the Acquired Assets being assigned to Buyers hereunder.

SECTION 2.7 Purchase Price.

(a) The consideration for the Acquired Assets (the “Purchase Price”) shall be

(i) an amount equal to

(A) Sixty-Six Million Dollars ($66,000,000.00) in cash (the “Closing Cash
Payment”),

plus or minus, as applicable,

(B) the Net Working Capital Adjustment, if any (as defined and described below
in Section 2.7(b)), and

(ii) the amount of the Assumed Liabilities.

The consideration for the Acquired Assets owned by Air Guard Canada shall be an
amount equal to U.S. $4,000,000 of the Purchase Price plus the amount of the
Assumed Liabilities being assumed from Air Guard Canada as shown in the Closing
Date Statement (the “Air Guard Canada Purchase Price”). The consideration for
the assets of Air Guard Control and Waterbury shall be the balance of the
Purchase Price.

 

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(b) The Purchase Price shall be reduced, dollar for dollar, by the amount, if
any, by which the Net Working Capital Target is greater than the Final Actual
Net Working Capital (as defined below). The Purchase Price shall be increased,
dollar for dollar, by the amount, if any, by which the Net Working Capital
Target is less than the Final Actual Net Working Capital. The amount by which
the Purchase Price shall be reduced or increased in accordance with this
Section 2.7(b) is herein referred to as the “Net Working Capital Adjustment”.

(c) The Purchase Price shall be paid or satisfied at Closing per the direction
of the Sellers as follows:

(i) Buyers shall wire the Escrow Funds to the escrow account designated by the
Escrow Agent pursuant to the Escrow Agreement, to be distributed in accordance
with the terms of the Escrow Agreement;

(ii) Buyers shall, on behalf of Sellers, remit an amount equal to the amount of
the Indebtedness of Sellers specified in the payment letters delivered to Buyers
pursuant to Section 6.2(f)(vi) (the “Payoff Payment”) at least two (2) Business
Days prior to the Closing by wire transfer of immediately available funds in
accordance with such payment letters;

(iii) Buyers shall pay the balance of the Estimated Cash Payment (as defined
below) by wire transfer of immediately available funds to an account or accounts
designated by the Sellers by written notice delivered to Buyers at least two
(2) Business Days prior to the Closing; and

(iv) Buyers shall assume the Assumed Liabilities.

For purposes of the Closing and not less than five (5) Business Days prior to
the scheduled Closing Date, Sellers shall provide Buyers with a good faith
estimate of the Net Working Capital as of the Closing (“Sellers’ Net Working
Capital Estimate”), and a calculation, as applicable, of the amount by which the
Net Working Capital Target is greater than Sellers’ Net Working Capital Estimate
or the amount by which the Net Working Capital Target is less than the Sellers’
Net Working Capital Estimate. Buyers shall have three (3) Business Days to
propose reasonable adjustments to Sellers’ Net Working Capital Estimate in good
faith (the Sellers’ Net Working Capital Estimate, as such amount would be
adjusted per Buyers’ proposal, the “Buyers’ Net Working Capital Estimate”).

If Sellers disagree with Buyers’ Net Working Capital Estimate, Sellers and
Buyers shall negotiate in good faith to immediately resolve any disputes
regarding the estimated amount. The amount, if any, agreed to by Sellers and
Buyers shall constitute the Estimated Net Working Capital. If Sellers and Buyers
are unable to resolve the disagreement prior to the scheduled Closing the
Estimated Net Working Capital shall be the arithmetic average of the Sellers’
Net Working Capital Estimate and the Buyers’ Net Working Capital Estimate.

The “Estimated Cash Payment” shall be an amount equal to the Closing Cash
Payment minus the Escrow Funds, minus, if applicable, the amount by which the
Net Working

 

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Capital Target is greater than the Estimated Net Working Capital, plus, if
applicable, the amount by which the Net Working Capital Target is less than the
Estimated Net Working Capital.

SECTION 2.8 Working Capital Adjustment.

(a) On or about the Closing Date (but in no event more than five (5) days before
the Closing Date), Buyers and Sellers agree that Sellers’ representatives from
McGladrey & Pullen, LLP shall conduct a physical inventory of the Business as of
the Closing Date (the “Physical Inventory”), and Buyers and their
representatives shall be allowed full, unconditional observation rights of the
Physical Inventory. As promptly as practicable after the Physical Inventory (but
in no event later than sixty (60) days after the Closing Date), Sellers shall
prepare and deliver to Buyers a statement (the “Closing Date Statement”) setting
forth a calculation, with reasonable supporting written documentation detail
(including, but not limited to, supporting schedules setting forth in reasonable
detail all assets and liabilities included therein (including such detail
regarding the Inventory) for the determination of Net Working Capital as of the
close of business (Eastern Time) on the Closing Date (the “Actual Net Working
Capital”). The Closing Date Statement shall be prepared as of the close of
business (Eastern Time) on the Closing Date in accordance with Exhibit B, or to
the extent not addressed by Exhibit B, GAAP (as in effect as of the Closing
Date). Until such time as the calculation of the amounts shown on the Closing
Date Statement is final, binding and conclusive on the Parties in accordance
with this Section 2.8, Buyers and their accountants shall be permitted to
discuss with Sellers and their accountants the proposed Closing Date Statement,
and shall be provided copies of, and have reasonable access, at the cost and
expense of the Buyers, upon reasonable notice at times during normal business
hours to, the work papers and supporting records of Sellers and their Affiliates
and their respective accountants so as to allow Buyers and their accountants to
become fully informed concerning the preparation of the Closing Date Statement
and the accounting procedures, methodologies, tests and approaches being used in
connection therewith.

(i) If Buyers have any objections to the Closing Date Statement as prepared by
Sellers (including objections to Inventory as determined by the Physical
Inventory), Buyers shall, within sixty (60) days after Buyers’ receipt of the
Closing Date Statement (the “Notice Period”), give written notice to Sellers,
which, to be effective, must set forth the specific line items in Sellers’
calculation of Actual Net Working Capital with which Buyers disagree and Buyers’
calculation of such line items and of Actual Net Working Capital together with
supporting schedules setting forth in reasonable detail all assets and
liabilities included therein (the “Notice”). If Buyers do not deliver the Notice
within the Notice Period, the Sellers’ calculations on the Closing Date
Statement shall be final, binding and conclusive on Sellers and Buyers. If
Buyers provide a Notice to Sellers within the Notice Period, all calculations,
terms, facts, amounts, valuations, and line items expressly set forth on the
Closing Date Statement not objected to in the Notice shall be final, binding and
conclusive on Sellers and Buyers. If Buyers provide a Notice within the Notice
Period, Sellers and Buyers shall negotiate in good faith during the thirty
(30) day period after the date of Sellers’ receipt of the Notice (the
“Resolution Period”) to resolve any disputes regarding the amounts set forth in
the Notice, which shall include each side exchanging in writing their positions
concerning the matter or matters in dispute and a meeting to discuss their
respective positions. Any

 

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resolution by Sellers and Buyers as to any matters in dispute shall be final,
binding and conclusive on the parties hereto.

(ii) If Sellers and Buyers are unable to resolve all such disputes through good
faith negotiations within the Resolution Period, then Sellers and Buyers shall
submit, within five (5) Business Days after the expiration of the Resolution
Period, all unresolved disputes to an independent nationally recognized account
firm mutually acceptable to Sellers and Buyers (the “Neutral Accountant”), who
Buyers and Sellers shall use their good faith efforts to engage as promptly as
possible to provide a final, binding and conclusive resolution of all unresolved
disputes. Within ten (10) days after the Neutral Accountant is appointed, Buyers
and Sellers shall each submit their respective calculations of the unresolved
disputed items in the Notice together with work papers, calculations and other
materials that such party has determined supports such party’s calculation. The
Neutral Accountant’s role shall be limited to resolving such disputed items in
the Notice that have not been resolved by Buyers and Sellers. In resolving such
objections, the Neutral Accountant shall calculate such unresolved disputed
items in the Notice in accordance with the terms and conditions of this
Agreement including Exhibit B, provided that if any such calculation or item is
not included on Exhibit B then it shall be calculated in accordance with GAAP
and the decision of the Neutral Accountant shall be solely based on (x) whether
such item objected to was calculated in accordance with Exhibit B or GAAP, as
applicable or (y) whether the item objected to contains a mathematical or
clerical error. The Neutral Accountant shall promptly provide written notice of
its resolution of such objections to Buyers and Sellers and the resulting
adjustments shall be deemed finally determined for purposes of Section 2.8. The
Neutral Accountant shall be instructed to use reasonable efforts to perform its
services within thirty (30) days of submission of the Closing Date Statement and
objection(s) to it and, in any case, as soon as practicable after such
submission. If the Neutral Accountant selected as described above is unable or
unwilling to act when called upon pursuant to this Section 2.8, then the Parties
shall jointly appoint a substitute to act in substitution for the original
designee, (or if no substitute is so appointed within fifteen (15) days after
the Neutral Accountant notifies Buyers and Sellers of its inability or
unwillingness to act, then such dispute shall be resolved by a single arbitrator
having financial accounting experience and having experience with working
capital disputes and calculations similar to the provisions in this Agreement,
sitting in Chicago, Illinois appointed by the American Arbitration Association
upon application by the Parties to be made within five (5) days thereafter),
and, upon acceptance of such appointment, such substitute, or arbitrator so
appointed, shall, for purposes of this Agreement, be deemed the Neutral
Accountant, as applicable, and the time periods prescribed above in this
Section 2.8(a)(ii) shall run from the date of such substitute’s or arbitrator’s
acceptance of appointment hereunder. The fees and expenses of the Neutral
Accountant shall be borne by the Parties in proportion to the amounts by which
their proposals differed from the Neutral Accountant’s final determination. In
connection with the resolution of any dispute, each of Sellers and Buyers shall
pay its own fees and expenses, including without limitation, legal, accounting
and consultant fees and expenses. Notwithstanding anything to the contrary in
this Agreement, any disputes regarding amounts shown in the Closing Date
Statement shall be resolved as set forth in this Section 2.8(a). The Actual Net
Working Capital, as finally determined

 

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pursuant to this Section 2.8(a) shall be referred to herein as the “Final Actual
Net Working Capital.”

(b) Any differences between the Final Actual Net Working Capital and the
Estimated Net Working Capital shall be paid as follows (any such adjustment, the
“Final Net Working Capital Adjustment”):

(i) If the Final Actual Net Working Capital is greater than the Estimated Net
Working Capital, then Buyers shall pay to Sellers an amount equal to the
difference between the Final Actual Net Working Capital and the Estimated Net
Working Capital.

(ii) If the Final Actual Net Working Capital is less than the Estimated Net
Working Capital, then Sellers shall pay to Buyers an amount equal to the
difference between the Final Actual Net Working Capital and the Estimated Net
Working Capital.

(c) Any payment required pursuant to Section 2.8(b) above (any “True-Up
Payment”) shall include interest at the Prime Rate from the Closing Date through
the date of payment. Interest on any True-Up Payment shall be calculated monthly
on a compounding basis assuming thirty (30) day months and three hundred sixty
(360) day years. Undisputed True-Up Payments shall be made within five
(5) Business Days after delivery of the Notice (or, if no Notice is delivered
within the Notice Period with respect to the amounts governing such True-Up
Payment, then five (5) Business Days after the last day of the Notice Period).
Disputed True-Up Payments shall be made within five (5) Business Days after
resolution during the Resolution Period or resolution by the Neutral Accountant,
as applicable. All True-Up Payments shall be made by wire transfer of
immediately available funds to a bank account designated by the recipient party.

SECTION 2.9 Purchase Price Allocations.

(a) The parties hereto shall allocate the purchase price for the Acquired Assets
purchased by US Buyer and IP Buyer, in accordance with the applicable provisions
of Section 1060 of the Code and the Treasury regulations promulgated thereunder
(the “U.S. Price Allocation”).

(b) The parties hereto shall allocate the Air Guard Canada Purchase Price in
accordance with the fair market value of each such Acquired Asset sold by Air
Guard Canada pursuant to this Agreement (“Canadian Price Allocation”).

(c) Within sixty (60) days after the Closing, the Buyers shall provide Sellers
with statements (“Price Allocation Statement”) containing Buyers’ proposed U.S.
Price Allocation (“Price Allocation”). If Sellers do not notify the Buyers that
Sellers object to Buyers’ proposed Price Allocation within twenty (20) days
after delivery thereof, Buyers’ proposed Price Allocation shall be deemed the
Final Price Allocation. If within twenty (20) days after the delivery of the
Price Allocation Statement, Sellers notify Buyers that Sellers object to Buyers’
proposed Price Allocation contained in the Price Allocation Statement, Buyers
and Sellers shall negotiate in good faith to resolve such dispute within twenty
(20) days of Buyers’ notification and the Price Allocation agreed to by Buyers
and Sellers shall be deemed the Final Price

 

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Allocation. Each of Buyers and Waterbury shall prepare and timely file all Tax
Returns, including, without limitation, IRS Form 8594 (and all supplements
thereto) reflecting the Final Price Allocation for the taxable year that
includes the Closing Date and to make any timely filing required by applicable
state or local laws. None of the Buyers and Sellers shall take any position
inconsistent with the Final Price Allocation in the preparation of financial
statements, the filing of any Tax Returns or in the course of any audit by any
Taxing Authority, Tax review or Tax proceeding relating to any Tax Returns. In
the event that Buyers and Sellers are unable to agree to a Final Purchase Price
Allocation, there shall be no Final Purchase Price Allocation and the prior two
sentences shall not apply.

(d) Notwithstanding the foregoing, in the event that any Transfer Taxes (as
defined in Section 9.1) are payable in respect of the Acquired Assets being sold
by Air Guard Canada, Air Guard Canada and Canadian Buyer shall, no later than
seven (7) days prior to the date when such Transfer Taxes are required to be
remitted or self-assessed, mutually agree on an allocation of the Purchase Price
payable in respect of such Acquired Assets, including an allocation of such
amount to the Acquired Assets located in each Canadian province, to be used for
calculating the amount(s) of Transfer Taxes to be remitted or self-assessed to
the relevant Taxing Authority.

(e) Prior to Closing, Air Guard Canada and Canadian Buyer shall agree on the
Canadian Price Allocation, provided that if within ten (10) days prior to the
expected Closing Date, Air Guard Canada and Canadian Buyer do not so agree, they
shall jointly hire a third party valuation firm to determine, prior to Closing,
the Canadian Price Allocation (as agreed to or determined pursuant to this
Section 2.9(e) the “Final Canadian Price Allocation”). The parties shall
allocate the Air Guard Canada Purchase Price in accordance with the Final
Canadian Price Allocation. The parties shall not take any position inconsistent
with such allocation in the preparation of financial statements, the filing of
any Tax Returns or in the course of any audit by any Governmental Entity, Tax
review or Tax proceeding relating to any Tax Returns.

SECTION 2.10 Adjustments.

(a) Following Closing, Sellers shall pay to Buyers the cost of any and all
returns received and refunds paid pursuant to Section 5.17 to the extent, but
only to the extent, the costs of such returns and refunds exceed the reserves
for such returns and refunds and included in the Final Actual Net Working
Capital. The costs of such returns shall be determined based on the value of
such inventory on and as of the Closing Date and the cost of such refunds shall
equal the actual amount paid to such customer with respect to such refunds.

(b) Following Closing, Sellers shall pay to Buyers an amount equal to the pro
rata portion of any and all marketing allowances, sales volume refunds and
similar sales allowances and payments in excess of the aggregate of the accruals
for such items included in the Final Actual Net Working Capital. The pro rata
portion of such amounts shall be determined based on the ratio of the
pre-closing sales used to determine the amount of such allowances, refunds and
payments to the total sales used to determine the amount of such allowances,
refunds and payments.

 

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(c) Any amounts due and payable hereunder shall be paid within ten (10) Business
Days of demand for the same by Buyers to Sellers. In making any such demand,
Buyers shall provide Sellers with such calculations and information necessary to
support such payments and Sellers shall have, upon reasonable notice at times
during normal business hours, access to such books and records of Buyers
necessary to support the determination of the payments required pursuant to this
Section 2.10.

(d) Any adjustments made pursuant to this Section 2.10 shall for all purposes be
considered an adjustment of the Purchase Price.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLERS

Except as set forth on the Disclosure Schedule attached hereto (the “Seller
Disclosure Schedule”), the Sellers hereby represent and warrant to Buyers, on a
joint and several basis, that the following statements are true and correct as
of the date of this Agreement:

SECTION 3.1 Organization and Qualification. Each of Waterbury and Air Guard
Control is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Air Guard Canada is a
corporation incorporated, organized and subsisting under the laws of Canada.
Each Seller has all corporate power and authority to own, lease and operate the
properties owned, leased and operated by it in the Business and to carry on the
Business as now being conducted. Each Seller is duly qualified or licensed and
in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it in the Business or the nature of the Business
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not have a Material Adverse Effect. Each Seller has made available to Buyers a
correct and complete copy of its articles of incorporation and by-laws (or
similar governing documents), as currently in effect and its corporate record
books with respect to actions taken by its shareholders and board of directors
(or similar governing body) since February 5, 2005. Section 3.1 of the Seller
Disclosure Schedule contains a correct list of the jurisdictions in which any
Seller is qualified or registered to do business as a foreign corporation.
Except as set forth on Section 3.1 of the Seller Disclosure Schedule, no Seller
currently owns, directly or indirectly, any capital stock or other equities,
securities or similar interests in any other corporation, limited liability
company, partnership, joint venture or other entity that is engaged in or
conducts the Business.

SECTION 3.2 Authorization. The execution, delivery and performance by each
Seller of this Agreement and the Transaction Documents and the consummation by
each Seller of the transactions contemplated hereby and thereby are, or with
respect to the Transaction Documents shall be as of the Closing Date, within
each Seller’s corporate powers and authority and have been, or with respect to
the Transaction Documents shall be as of the Closing Date, duly and validly
authorized by all requisite corporate action on the part of each Seller. This
Agreement has been and the Transaction Documents shall be as of the Closing Date
duly and validly executed and delivered by each Seller and constitute (or when
executed will constitute) the legal, valid and binding agreements of each
Seller, enforceable against it in accordance with

 

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their respective terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’
rights generally and subject to general principles of equity.

SECTION 3.3 Financial Information.

(a) Attached hereto as Exhibit E are true, correct and complete copies of the
following information (collectively, the “Financial Information”): the
statements of contribution margin for the Business for the fiscal years ended
December 31, 2008 and December 31, 2009 and the four-month period ending
April 30, 2010, and schedule of working capital for the Business as of the end
of each month for each of the twelve (12) months prior to the date hereof and
consolidating balance sheets for the Business dated December 31, 2009 and
April 30, 2010.

(b) Other than the manner in which it was formatted and classified and except as
set forth on Section 3.3(b) of the Seller Disclosure Schedule, the Financial
Information has been prepared from the books and records of Sellers and in
accordance with GAAP consistently applied during the periods presented. The
Financial Information presents fairly, in all material respects, the financial
details regarding the Business, the contribution margins for the operation of
the Business for the periods shown therein, and the assets and liabilities of
the Business as of the date hereof.

SECTION 3.4 Consents and Approvals; No Violations.

(a) Except as set forth on Section3.4(a) of the Seller Disclosure Schedule or
expressly contemplated by this Agreement or the Transaction Documents
(including, without limitation, filings pursuant to the HSR Act), and except as
set forth on Schedule 6.2(c), no filing with or notice to, permit,
authorization, consent, waiver or approval of any Governmental Entity is
necessary for the execution and delivery by the Sellers of this Agreement or any
Transaction Document or the consummation by the Sellers of the transactions
contemplated hereby or thereby.

(b) Neither the execution, delivery and performance of this Agreement or the
Transaction Documents by the Sellers nor the consummation by the Sellers of the
transactions contemplated hereby or thereby will (i) conflict with or result in
any breach of any provision of the Certificate of Incorporation or Bylaws (or
similar governing documents) of the Sellers, (ii) except as set forth on
Section 3.4(b) of the Seller Disclosure Schedule, result in a material breach
of, constitute a material default under (with or without notice or lapse of
time, or both), result in the acceleration of, create in any party the right to
modify in any material respect, accelerate, terminate or cancel, create in any
party the right to encumber any of the Acquired Assets under, increase or
accelerate any Assumed Liability under, or require any consent or approval of
any Person under, any Assumed Contract or (iii) violate any Applicable Laws
applicable to the Sellers or any of the Acquired Assets or any Assumed
Liability.

SECTION 3.5 Litigation.

(a) Except as set forth on Section 3.5(a) of the Seller Disclosure Schedule
there is no claim, suit, demand, legal action, proceeding or, to the Knowledge
of Sellers, investigation pending, or to the Knowledge of Sellers threatened,
before any Governmental

 

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Entity, against any Seller or relating to any of the Acquired Assets or which
could reasonably be expected to prevent or delay the consummation of the
transactions contemplated by this Agreement in any material respect. The Sellers
are not subject to any outstanding consent or administrative order, writ,
injunction, decree judgment, injunction or award with respect to the Business
(any “Litigation Action”) nor is any such Litigation Action binding on any
Acquired Asset or Assumed Liability or which could reasonably be expected to
prevent or delay the consummation of the transactions contemplated hereby in any
material respect.

(b) Except as set forth on Section 3.5(b) of the Seller Disclosure Schedule
there is no claim, suit, demand, legal action, arbitration, proceeding or, to
the Knowledge of Sellers, investigation, pending or, to the Knowledge of
Sellers, threatened (other than, in each case, those before any Governmental
Entity which are addressed in Section 3.5(a) hereof) directly relating to, or
involving, any Seller, any of the Acquired Assets, any Assumed Liability or the
Business or which could reasonably be expected to prevent or delay the
consummation of the transactions contemplated by this Agreement in any material
respect.

SECTION 3.6 Compliance with Applicable Law. Except as set forth on Section 3.6
of the Seller Disclosure Schedule, Sellers are and have been at all times in the
past five (5) years in material compliance with all Applicable Laws relating to
the Business, and in the past five (5) years no Seller has been charged in
writing with or received written notice that it is under investigation with
respect to, and, to the knowledge of the Sellers, no Seller is otherwise now
under investigation with respect to, a material violation of any Applicable Law.

SECTION 3.7 Compliance with Permits. Except with respect to Registrations (which
are addressed in Section 3.17), between them, the Sellers currently and at all
times have filed all reports and hold all permits, licenses, variances,
exemptions, orders, registrations, consents and approvals of all Governmental
Entities necessary for the lawful conduct of the Business (collectively, the
“Seller Permits”). The Business is being conducted in all material respects in
compliance with all Seller Permits and in all material respects with Applicable
Laws relating to the Business. Section 3.7 of the Seller Disclosure Schedule
sets forth all the Seller Permits necessary for Air Guard Canada to conduct its
business and operate at its current location.

SECTION 3.8 Labor Matters. No Seller is a party to any collective bargaining
agreement, contract or legally binding commitment to any labor union or similar
employee organization in respect of or affecting employees of the Business nor
does any Seller know of any activities or proceedings of any labor union or
similar employee organization to organize any such employees. No Seller is
currently engaged in any negotiation with any labor union or similar employee
organization. No Seller has engaged in any unfair labor practice within the
meaning of the United States National Labor Relations Act, and there is no
pending or, to the Sellers’ Knowledge, threatened complaint regarding any
alleged unfair labor practices. There is no strike, labor dispute, work slow
down or stoppage pending or, to the Sellers’ Knowledge, threatened against any
of Sellers, and , since February 5, 2005, none of the Sellers have experienced
any material work stoppage. Sellers are in compliance in all material respects
with all Applicable Laws related to labor matters.

 

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SECTION 3.9 Employee Plan Matters. Section 3.9 of the Seller Disclosure Schedule
sets forth a list of the ERISA-Type Plans sponsored or maintained by any Seller
or to which any Seller is required to make contributions. In all material
respects, each Employee Plan maintained or sponsored by a Seller for its
employees or former employees and subject to Title IV of ERISA or Section 412 or
430 of the Code has been maintained, funded and administered in accordance with
its terms, ERISA, the Code or other Applicable Law. Except as disclosed on
Section 3.9 of the Seller Disclosure Schedule, no Employee Plan constitutes a
“multiemployer plan,” as defined in Section 3(37) of ERISA, or a “defined
benefit plan,” as defined in Section 3(35) of ERISA and is subject to Title IV
of ERISA. Each Employee Plan that is subject to the COBRA health continuation or
similar state law has complied in all material respects with all applicable
requirements of such laws. Buyers shall have no liability with respect to any of
the Sellers’ Employee Plans (except for Listed Employee Obligations and except
to the extent of Hired Employee Obligations included in the Final Actual Net
Working Capital).

SECTION 3.10 Taxes.

(a) All Tax Returns required to be filed by a Seller or otherwise in respect of
the Business have been duly filed on a timely basis or within appropriate
extensions of time, and all such Tax Returns were when filed, and continue to
be, correct and complete in all material respects. Except as set forth on
Section 3.10 of the Seller Disclosure Schedule, all Taxes owed by any Seller or
otherwise relating to the Business (whether or not shown on any Tax Return) for
any taxable period or portion thereof ending on or before the Closing Date have
been timely paid or adequate provision has been or will be made therefor prior
to Closing. Except as set forth on Section 3.10 of the Seller Disclosure
Schedule, no Seller currently is the beneficiary of any extension of time within
which to file any Tax Return in respect of the Business. No Seller has received
any written claim or written notice of a proposed claim by any Governmental
Entity in a jurisdiction where such Seller does not file Tax Returns that such
Seller is or may be subject to taxation by that jurisdiction. No Seller has
received written notice of a proposed audit by any Governmental Entity in any
jurisdiction where such Seller does not file Tax Returns.

(b) All Taxes required to have been withheld or collected and paid prior to the
date hereof in connection with amounts paid or owing to any employee,
independent contractor, creditor, member, shareholder or any other third party,
or otherwise in connection with the Business have been withheld or collected and
timely paid by or on behalf of the Sellers.

(c) There are no Liens with respect to Taxes on any of the Acquired Assets, and
no Seller has received any written notice that any such Liens are pending or
threatened.

(d) No proposed adjustment, claim, assessment, deficiency, audit, investigation,
or administrative judicial proceeding involving any Taxes or any Tax Return of
any Seller relating to the Business has been asserted in writing, is pending or,
to the knowledge of Sellers, has been threatened.

(e) No Seller has waived any statute of limitations in respect of Taxes relating
to the Business or agreed to any extension of time with respect to any such Tax
assessment or deficiency.

 

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(f) None of the Acquired Assets owned by Waterbury directly or indirectly
secures any debt the interest on which is exempt from tax under §103(a) of the
Code, and none of the Acquired Assets owned by Waterbury is “tax-exempt use
property” within the meaning of §168(h) of the Code.

(g) Sellers with respect to the Acquired Assets are not obligated to make any
payments that will not be fully deductible under Section 280G of the Code (or
any similar provision of any Applicable Law)

(h) Air Guard Canada is not a non-resident of Canada for purposes of section 116
of the Income Tax Act (Canada) (the “Tax Act”).

SECTION 3.11 Intellectual Property.

(a) Except as set forth on Section 3.11 of the Seller Disclosure Schedule,
between them, Sellers own and have good and exclusive title to, or hold licenses
or other contractual rights to use (sufficient for the conduct of the Business
as currently conducted) and have the valid and enforceable right to fully and
completely assign, transfer and convey, (i) each item of Transferred
Intellectual Property, free and clear of any Liens, and (ii) those patents,
pending patent applications, trademark registrations and pending trademark
applications, copyright registrations and pending copyright applications, and
domain name registrations listed on Section 3.11 of the Seller Disclosure
Schedule, free and clear of any Liens. Section 3.11 of the Seller Disclosure
Schedule sets forth, to the extent used in or held for use in the Business as it
is currently being conducted, a list of all United States, international and
foreign patents, pending patent applications, trademark registrations, pending
trademark applications, service marks, pending service mark applications,
registered copyrights and applications for copyright registration, and domain
name registrations.

(b) Section 3.11 of the Seller Disclosure Schedule contains a true, correct and
complete list of Sellers’ Software and Third Party Software excluding
commercially available, off-the-shelf software programs licensed pursuant to
shrink-wrap or “click to accept” agreements having a license cost less than
$1,000 per copy. To Sellers’ Knowledge, Sellers are in compliance with the
material terms and conditions of all license agreements in favor of Sellers
relating to Third Party Software.

(c) All registration, annuity, maintenance, renewal and other fees required to
maintain the patents, patent applications, trademark registrations, trademark
applications, domain names registrations and other forms of registered
Intellectual Property included within the Transferred Intellectual Property are
current and, except as set forth on Section 3.11 of the Seller Disclosure
Schedule, no such fees shall be due within three months following the Closing
Date and to Sellers’ knowledge all legally necessary documents, recordations and
certifications in connection with such registered Intellectual Property included
within the Transferred Intellectual Property have been filed with the relevant
patent, copyright or trademark authorities.

(d) Except as set forth on Section 3.11 of the Seller Disclosure Schedule, no
action, suit, hearing, claim, demand or proceeding is pending or, to the
Sellers’ Knowledge, is any investigation pending, or, to the Sellers’ Knowledge,
is any action, suit, hearing, claim,

 

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demand, proceeding, or investigation threatened, that challenges the legality,
validity, enforceability, use, or ownership of the Transferred Intellectual
Property.

(e) To conduct the Business, as it is currently being conducted, no Seller
requires any rights to any Intellectual Property that it does not already own
(or to which the applicable Seller has not already been granted a valid and
existing license). Except as set forth on Section 3.11 of the Seller Disclosure
Schedule, there are no pending or to Sellers’ knowledge, threatened claims by
any third party against any Seller alleging that its use of any Transferred
Intellectual Property or the operation of the Business as it is currently
conducted, or any act, product or service of the Business as it is currently
being conducted, infringes or misappropriates the Intellectual Property of any
third party. To Sellers’ knowledge, the use of the Transferred Intellectual
Property in, and the operation of, the Business as it is currently being
conducted does not infringe or misappropriate the Intellectual Property of any
third party.

(f) Except as set forth on Section 3.11 of the Seller Disclosure Schedule, to
Sellers’ knowledge no Person is infringing or misappropriating any of the
Transferred Intellectual Property or since February 5, 2005 has infringed or
misappropriated any of the Transferred Intellectual Property.

(g) Except as set forth on Section 3.11 of the Seller Disclosure Schedule, the
Sellers have not granted any license or made any assignment of any of the
Transferred Intellectual Property, no Person jointly holds any rights with
Sellers in the Transferred Intellectual Property and no Person other than the
Sellers has any right to use any of the Transferred Intellectual Property.

(h) Except as set forth on Section 3.11 of the Seller Disclosure Schedule, in
the conduct of the Business as it is currently being conducted, the Sellers do
not pay any royalties or other consideration for the right to use any
Transferred Intellectual Property.

(i) The Sellers have no proprietary or confidential information relating to or
affecting the Business as it is currently being conducted that is owned or
claimed by third parties and that is not rightfully in the possession of the
Sellers, and the Sellers have complied in all material respects with all
contracts and agreements governing the disclosure and use of proprietary or
confidential information relating to or affecting the Business as it is
currently being conducted.

(j) Since February 5, 2005, to the extent that any Transferred Intellectual
Property has been developed or created by a third party or any employee of
Sellers, except as set forth on Section 3.11 of the Seller Disclosure Schedule,
Sellers have a written agreement with such third party or employee (as the case
may be) with respect thereto and Sellers thereby either (i) have obtained
ownership of and are the exclusive owner of, or (ii) have obtained a license
(sufficient for the conduct of the Business as currently conducted) to all of
such third party’s or employee’s Intellectual Property rights in such work,
material or invention.

(k) The Sellers have used commercially reasonable efforts to maintain the
confidentiality of all material trade secrets included within the Transferred
Intellectual Property to the extent necessary to maintain all proprietary rights
therein.

 

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(l) Since February 5, 2005, the products sold under any patents included in the
Transferred Intellectual Property include patent marking and notice in
accordance with applicable patent marking laws and regulations, including
without limitation 35 USC 287.

SECTION 3.12 Inventory. All Inventory (the “Final Inventory”) is sufficient for
the operation of the Business in the Ordinary Course of Business, is of a
quality, quantity and condition presently saleable (in the case of finished
goods Inventory) or useable (in the case of other Inventory) in the Ordinary
Course of Business, except for obsolete items and items of below-standard
quality, which as of the date hereof have been, or between the date hereof and
the Closing will be reserved for or written down to net realizable value on the
applicable Seller’s accounting records. Other than those items which as of the
date hereof have been, or between the date hereof and the Closing will in the
Ordinary Course of Business of the Sellers be, as applicable, reserved for or
written down to net realizable value on the applicable Seller’s accounting
records, and presuming the Final Inventory is utilized in the Ordinary Course of
Business, none of the Final Inventory (a) is obsolete or (b) has been or, during
the period commencing January 1, 2010 should have been, written down. Presuming
the Final Inventory is utilized in the Ordinary Course of Business, the
quantities of each item of such Inventory are not excessive and are reasonable
in the present circumstances of the Business. Presuming the Final Inventory is
utilized in the Ordinary Course of Business, all Final Inventory is free of any
material defect or other material deficiency. Except as set forth on
Section 3.12 of the Seller Disclosure Schedule, all of such inventory is located
at a Seller facility and no such inventory is held on a consignment basis.

SECTION 3.13 Brokers. Except as set forth on Section 3.13 of the Seller
Disclosure Schedule, no broker, finder or investment banker is entitled to any
brokerage, finders or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of any Seller or any of its Affiliates.

SECTION 3.14 Assumed Contracts. Section 2.1(a)(i) of the Seller Disclosure
Schedule sets forth a correct and complete list of all Assumed Contracts. True,
correct and complete copies of the Assumed Contracts (and written summaries of
the terms of any oral Assumed Contract) and the Canadian Lease have been
provided to Buyers, together with all amendments, supplements or modifications
thereto. The Canadian Lease and each Assumed Contract is legal, valid, binding
and in full force and effect, except as to enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the rights and remedies
of creditors generally and the general principles of equity. No Seller, nor to
the Sellers’ Knowledge any other party thereto, is in default (nor has an event
occurred or is a condition existing (or, with respect to any counter party to
any such Assumed Contract to the Sellers’ Knowledge has an event occurred or is
a condition existing) that, with notice or lapse of time or both, would be
reasonably expected to constitute a default) in any material respects in the
performance, observance or fulfillment of any obligation, covenant or condition
contained in any Assumed Contract or the Canadian Lease. Each Seller has duly
performed in all material respects and is in compliance in all material respect
with all its obligations under the Assumed Contracts and the Canadian Lease. No
party with whom a Seller has entered into an Assumed Contract and nor the
landlord with respect to the Canadian Lease has given such Seller written notice
that such party is terminating, rescinding or annulling such Assumed Contract or
the Canadian Lease. Sellers are not participating in any discussions or
negotiations regarding a material modification of or

 

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material amendment to any Assumed Contract or the Canadian Lease, or entry into
any new Assumed Contract, in either case outside the Ordinary Course of
Business.

(a) Except as set forth on Section 2.1(a)(i) of the Seller Disclosure Schedule,
there are none of the following Contracts related to the Business:

(i) Contracts providing for a commitment of employment or consultation services;

(ii) Contracts (other than this Agreement) providing for the future disposition
or acquisition of any assets or properties (other than purchase orders providing
for acquisition Inventory or supplies in the Ordinary Course of Business);

(iii) Contracts with employees (other than Employee Plans);

(iv) Contracts that confer rights to the Transferred Intellectual Property;

(v) Contracts with any Person that provides distribution, dealer, representative
or sales agency services for the Business;

(vi) Contracts entered into outside the Ordinary Course of Business providing
any party thereto (other than a Seller) with indemnification rights; or

(vii) any joint venture or partnership agreement or any co-marketing,
co-licensing, co-branding or similar agreement or arrangement to which a Seller
is a party or which is included in the Assumed Contracts.

(b) Section 3.14(b) of the Seller Disclosure Schedule sets forth with respect to
the Business and the Assumed Contracts each of the following:

(i) all Contracts with any Person containing any provision or covenant
prohibiting or materially limiting the ability of a Seller (or any officer or
employee of the Business) to engage in any business activity, hire employees,
solicit potential customers or compete with any Person, including any
non-competition, non-solicitation, exclusivity or similar agreement;

(ii) all Contracts that are with any Governmental Entity related to the Business
or the Acquired Assets;

(iii) each manufacturing representation, sale representation, agency, sales
brokerage, sales agency or similar agreement;

(iv) any Assumed Contract pursuant to which a Seller has agreed to indemnify any
person;

 

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(v) any supplier or vendor agreement for any materials, products or Inventory
listed on any Registration or included in or listed on any Confidential
Statements of Formula; and

(vi) any other supplier or vendor agreement for raw materials or supplies used
in the operation of the Business that, pursuant to the terms of any such
agreement, involve the payment by a Seller of more than One Hundred Thousand
Dollars ($100,000) annually or at any one time.

SECTION 3.15 Title to and Adequacy of Assets. Except for the Excluded Assets,
services to be provided pursuant to the Transition Services Agreements and
services to be provided by the Buyers and their Affiliates, the Acquired Assets
constitute all of the assets, properties and rights, and upon Closing and sale
of all such Acquired Assets to Buyers, Buyers will have all assets, properties
and rights, in each case, necessary and sufficient to conduct the operations of
the Business in the Ordinary Course of Business. Except as set forth on
Section 3.15 of the Seller Disclosure Schedule, the Sellers own (and shall
convey to Buyers at the Closing) good and marketable title, free and clear of
all Liens, to all of the Acquired Assets. Each Seller’s machinery, equipment and
other tangible personal or movable property and assets which are part of the
Acquired Assets are in good operating condition and repair, except for ordinary
wear and tear, and are useable in the Ordinary Course of Business of such
Seller.

SECTION 3.16 Insurance. The Sellers have maintained since and now maintain
(a) insurance on the Acquired Assets covering property damage and loss of income
by fire or other casualty, and (b) insurance protection against liabilities,
claims, and risks, including, without limitation, product liability insurance,
against which it is customary in the Business to insure. To Sellers’ Knowledge,
all insurance policies now maintained with respect to the Business and the
Acquired Assets are, by their terms, in effect.

SECTION 3.17 Registrations.

(a) Section 3.17(a) of the Seller Disclosure Schedule sets forth a list of all
Registrations owned and held by a Seller in connection with the Business, and
any supplemental distributor registrations held by a Seller, and further
including identification of product name, registration number, the particular
entity owns or holds such Registration and the expiration date of such
Registration (if any). Sellers have provided Buyers with true, correct and
complete copies of all such Registrations, together with all amendments,
supplements, and modifications thereto of which the Sellers have knowledge.

(b) Section 3.17(b) of the Seller Disclosure Schedule sets forth a list of all
Registrations outside the United States for which a Seller is the beneficial but
not nominal owner, including product name, registration number, the particular
entity that owns or holds such Registration and expiration date of such
Registration (if any). Each Seller has paid all maintenance and similar fees to
any Governmental Entity necessary to maintain each Registration active in each
jurisdiction reflected on Sections 3.17(a) or 3.17(b) of the Seller Disclosure
Schedule.

 

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(c) Except as set forth on Section 3.17(c) of the Seller Disclosure Schedule,
the Sellers own all Registration Data or are currently authorized to rely on any
such Registration Data owned by one or more third parties and have properly and
fully compensated all third party owners of required Registration Data needed to
support the Registrations required to be listed on Sections 3.17(a) and 3.17(b)
of the Seller Disclosure Schedule (the “Data Owners”). Except as set forth on
Section 3.17(c) of the Seller Disclosure Schedule, no Seller has granted any
letters of access, license or other form of citation rights to any of the
Registration Data. Each Registration has sufficient Registration Data to support
the label claims currently made with respect to the products sold in the
Business under such Registrations.

(d) Each Seller owns, is the beneficial owner of, holds or owns a license or
other contractual right to use in the operation of the Business all
Registrations that are necessary for it to conduct the Business and, to the
extent not covered by the foregoing, the Registrations set forth on
Section3.17(a) and 3.17(b) of the Seller Disclosure Schedule, free and clear of
all Liens, other than with respect to any Registration in which such Seller is a
sub-registrant or “me-too” Registrant, Liens on those primary registrations
owned or held by a Person other than a Seller. The Registrations owned and held
by the Sellers are valid and in full force and effect. Each Seller is in
material compliance with the key terms of such Registrations. Each such
Registration is, and the products manufactured pursuant thereto are, in
compliance with Applicable Law. Each Seller’s labels are in compliance with
Applicable Law with respect to labels and labeling.

(e) Each Seller has complied in all material respects with all requests or
notices from any Governmental Entity sent to it for any modification, change or
alteration to any Registration relating to the Business and except as set forth
on Section3.17(e) of the Seller Disclosure Schedule, to the Sellers’ Knowledge,
there are no (i) pending notices or requests from any Governmental Entity for
any modification, change or alteration to any Registration, or (ii)pending
notices or requests from any Governmental Entity requesting or requiring Sellers
or any other Person to generate additional data to support any Registration, in
either case where such Registration is required to be listed on Section 3.17(a)
or Section 3.17(b) of the Seller Disclosure Schedule.

(f) No Seller has, within the last three (3) years, received written notice of
any violation of, conflict with, failure to comply with the terms of, or any
revocation, withdrawal, termination, cancellation, suspension or modification
of, any Registration relating to the Business. No Seller is in default, nor has
any Seller received within the last three (3) years’ written notice of any claim
of default, or stop sales order, with respect to any Registration directly
relating to, the Business.

(g) Except as set forth in Section 3.17(g) of the Seller Disclosure Schedule,
the Sellers have not voluntarily or involuntarily issued any recall, market
withdrawal, safety alert, warning or any notice relating to an alleged lack of
safety of its products or received any written notice of any claim against any
of them relating to safety or the bodily injury, death or other disability
caused by the products manufactured, distributed or sold by or for the Sellers
and, to the Sellers’ Knowledge, there are no facts or circumstances that would
form a basis for any such claim or for any such recall, market withdrawal,
safety alert, warning or notice. The

 

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manufacture of the current products of the Sellers is being conducted in
material compliance with current good manufacturing standards.

(h) No Seller has received any notice from any vendor of any active, inert or
other products or ingredients in any products that such vendor cannot currently
continue or will not be able to continue to supply any such products or
ingredients. To the Knowledge of Sellers all such vendors and suppliers have
timely responded to all requests or notices from any Governmental Entity sent to
it for any modification, change, alteration to or request for data or other
information for any products or ingredients sold to Sellers.

SECTION 3.18 Product Warranty.

(a) Other than with respect to products returned in the Ordinary Course of
Business, each product of the Business sold, distributed, provided, shipped or
licensed by a Seller, and each service rendered by a Seller, prior to Closing
conformed in all material respects with all applicable contractual commitments,
warranties and Applicable Law, and there are no material design, manufacturing
or other defects, latent or otherwise, in such products. With respect to each
product of the Business sold, distributed, provided, shipped or licensed by a
Seller prior to Closing, such products complied in all material respects with
requirements of Applicable Law relating to warning labels.

(b) Each Seller’s accounting records reflect adequate reserves for product
design and warranty claims and similar claims with respect to each product of
the Business manufactured, sold, distributed, provided, shipped or licensed by
such Seller, and each service rendered by such Seller, on or prior to the date
of such accounting records. Each Seller’s accounting records reflect or will
reflect, as applicable, adequate reserves for such claims with respect to each
product of the Business manufactured, sold, distributed, provided, shipped or
licensed by such Seller, and each service rendered by such Seller, prior to
Closing.

(c) Section 3.18(c) of the Seller Disclosure Schedule sets forth the return and
refund policies of the Business pursuant to which any customer may return any
product or pursuant to which Buyers may be required to accept returns or make
refunds under and pursuant to Section 5.17.

SECTION 3.19 Suppliers and Customers. Section 3.19 of the Seller Disclosure
Schedule contains a complete and accurate list of the ten (10) largest suppliers
of the Business in the last fiscal year (the “Major Suppliers”) and of the Major
Customers. To Sellers’ Knowledge, no event has occurred which would be
reasonably likely to materially and adversely affect Sellers’ relations with
such Major Suppliers and Major Customers. To Sellers’ Knowledge, no Major
Supplier has in the last twelve (12) months indicated to any Seller that it is
considering stopping or materially decreasing the rate of supplying materials,
products or services to the Business. To Sellers’ Knowledge, no Major Customer
of the Business has in the last twelve (12) months indicated to any Seller that
it is considering stopping or materially decreasing the rate of buying products
from the Business.

SECTION 3.20 Accounts Receivable. Sellers have delivered to Buyers a schedule of
all accounts receivable showing the amount of each receivable and an aging of

 

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amounts due thereunder, which schedule is correct and complete as of [June 30,
2010]. No such sales were made pursuant to any discounts, rebates or allowances
outside the Ordinary Course of Business. All accounts receivable of the Sellers
that are reflected in the Financial Information represent bona fide receivables
and are valid obligations arising from sales actually made or services actually
performed in the Ordinary Course of Business. To Sellers’ knowledge, there is no
contest, claim, defense or right of set-off, refund or adjustment, other than
returns in the Ordinary Course of Business, of any account debtor relating to
the amount or validity of any accounts receivable reflected in the Financial
Information. Sellers have not factored any of their accounts receivable.

SECTION 3.21 GST Registration. Air Guard Canada is registered for GST purposes
under Part IX of the Excise Tax Act (Canada) and its GST registration number is
866370935.

SECTION 3.22 Absence of Changes. Except as set forth on Section 3.22 of the
Seller Disclosure Schedule, since April 30, 2010, Sellers have not with respect
to the Business or the Acquired Assets: (i) sold, assigned, transferred, leased,
exchanged or otherwise disposed of any of its properties or assets other than in
the Ordinary Course of Business or where such properties or assets were replaced
with substantially equivalent properties or assets, (ii) except in the Ordinary
Course of Business, made any general wage or salary increase, increased the
compensation of any employee, entered into any employment contract with any
employee, or instituted any employee welfare, bonus, stock option,
profit-sharing, retirement or similar plan or arrangement directly benefiting
any such employee, (iii) suffered any damage, destruction or loss, whether as
the result of fire, explosion, earthquake, accident, casualty, labor trouble,
requisition or taking of property by any government or any agency of any
government, flood, windstorm, embargo, riot or act of God or the enemy, or other
similar casualty or event or otherwise (whether or not covered by insurance),
(iv) entered into any transaction, contract or commitment outside the Ordinary
Course of Business committing a Seller to make a capital expenditure in excess
of $25,000 in the aggregate, (v) terminated, discontinued, closed or disposed of
any material business operation, (vi) entered into, materially amended or
terminated any Contract with any Major Customer or any Major Supplier.

SECTION 3.23 Transactions with Affiliates. Except as disclosed on Section 3.23
of the Seller Disclosure Schedule, Sellers are not now, nor during the past
three (3) years have been, parties directly or indirectly, to any contract,
whether for the purchase, lease or sale of property, for the rendition of
services or otherwise, with any Hired Employee or any “associate” of any Hired
Employee (as the term “associate” is defined in Rule 405 of the Rules and
Regulations promulgated under the Securities Act of 1933, as amended), other
than a contract which relates to or is entered into in connection with the full
or part time employment of an employee. Except as set forth on Section 3.23 of
the Seller Disclosure Schedule, there are not now, nor for the past three
(3) years have there been, any loans outstanding to any of the Hired Employees
from Sellers.

SECTION 3.24 Unlawful Benefits. Except as provided on Section 3.24 of the Seller
Disclosure Schedule, since February 5, 2005, no Seller or Person authorized to
act on behalf of any of them, in connection with the conduct of the Business,
directly or indirectly, has given, or has agreed to give, any significant gift
or similar benefit to any supplier, customer, or

 

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potential employee of the Business or any other Person who was, is or may be, in
a position to help or hinder the Business under circumstances that involve a
violation of any Law which was then in effect and which could reasonably be
expected to subject the Business or the Sellers to any damages or penalty in
excess of $25,000.

SECTION 3.25 Books and Records. The Books and Records of the Sellers, all of
which Sellers have made available to Buyers, are, to Sellers’ Knowledge, for all
periods after February 5, 2005: (i) complete and correct in all material
respects, (ii) reflect actual bona fide transactions or meetings of the
respective shareholders, board of directors and committees of the board of
directors (or bodies acting in similar roles) and (iii) have been maintained in
all material respects in accordance with Applicable Law and sound business
practices

SECTION 3.26 Personal Information Consents. Section 3.26 of the Seller
Disclosure Schedule sets forth the purposes pursuant to which any Seller
collected Personal Information.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF BUYERS

Except as set forth on the Disclosure Schedule attached hereto (the “Buyer
Disclosure Schedule”), Buyers hereby represent and warrant to each Seller, on a
joint and several basis that the following representations and warranties are
true and correct as of the date hereof:

SECTION 4.1 Organization. US Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. IP Buyer
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware. Canadian Buyer is a
corporation incorporated by, organized and subsisting under the laws of the
Province of Québec.

SECTION 4.2 Authorization. The execution, delivery and performance by Buyers of
this Agreement and the Transaction Documents and the consummation by Buyers of
the transactions contemplated hereby or thereby are, or with respect to the
Transaction Documents shall be as of the Closing Date, within each Buyer’s
corporate powers and have been, or with respect to the Transaction Documents
shall be as of the Closing Date, duly and validly authorized by all requisite
corporate action on the part of each Buyer. This Agreement has been and the
Transaction Documents shall be as of the Closing Date duly and validly executed
and delivered by Buyers and constitute the legal, valid and binding agreements
of Buyers, enforceable against them in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors’ rights generally and subject to
general principles of equity.

SECTION 4.3 Consents and Approvals; No Violations.

(a) Except as expressly contemplated by this Agreement or the Transaction
Documents (including, without limitation, filings pursuant to the HSR Act), no
filing with or notice to, and no permit, authorization, consent, waiver or
approval of, any Governmental Entity

 

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is necessary for the execution and delivery by Buyers of this Agreement or any
of the Transaction Documents or the consummation by Buyers of the transactions
contemplated hereby.

(b) Neither the execution, delivery and performance of this Agreement or the
Transaction Documents by Buyers nor the consummation by Buyers of the
transactions contemplated hereby or thereby will (i) conflict with or result in
any breach of any provision of the Certificate of Incorporation or Bylaws (or
similar governing documents) of Buyers, (ii) result in a material breach of,
constitute a material default under (with or without notice or lapse of time, or
both), result in the acceleration of, create in any party the right to modify in
any material respect, accelerate, terminate or cancel, or require any consent or
approval of any Person under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Buyers are a party or are otherwise bound or
(iii) violate any Applicable Laws applicable to Buyers or any of their
properties or assets.

SECTION 4.4 Financial Ability. At the Closing, the Buyers will have the
financial ability to fund the transactions contemplated by this Agreement
through a combination of debt, equity issuances and/or cash.

SECTION 4.5 Brokers. Except as set forth on Schedule 4.5, no broker, finder or
investment banker is entitled to any brokerage, finders or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Buyers or any of their
Affiliates.

SECTION 4.6 Litigation. There is no suit, claim, or action, or, to the knowledge
of Buyers, proceeding or investigation, pending, or, to the knowledge of Buyers,
any suit, claim, action, proceeding or investigation threatened, against any
Buyer or which could reasonably be expected to prevent or delay the consummation
of the transactions contemplated by this Agreement in any material respect.

SECTION 4.7 GST Registration. Canadian Buyer is registered for GST purposes
under Part IX of the Excise Tax Act (Canada) and its GST registration number is
121602353RT0005.

SECTION 4.8 Personal Information. To the extent that Buyers have been given
access to Personal Information in the custody or control of one or more of the
Sellers prior to the date hereof, Buyers have not used or disclosed any such
Personal Information for any purposes other than purposes that directly relate
to the transactions contemplated hereby.

ARTICLE 5

COVENANTS

SECTION 5.1 Conduct of the Business. From the date hereof until the Closing
Date, each Seller shall, except as expressly required hereby, disclosed on
Schedule 5.1, or otherwise consented to in advance in writing by Buyers:

 

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(a) conduct the Business in the Ordinary Course of Business on a basis
consistent with past practice and not engage in any new line of business or
enter into any agreement, transaction or activity or make any commitment with
respect to the Business or the Acquired Assets, or the Assumed Liabilities
except those in the Ordinary Course of Business and not otherwise prohibited
under this Section 5.1;

(b) use its commercially reasonable efforts to preserve intact the goodwill and
business organization of each Seller, provided, however, than in no event shall
the foregoing require any Seller to expend funds outside the Ordinary Course of
Business;

(c) duly and timely file or cause to be filed all reports and returns required
to be filed with any Governmental Entity and promptly pay or cause to be paid
when due all Taxes, assessments and governmental charges, including interest and
penalties levied or assessed, unless diligently contested in good faith by
appropriate proceedings;

(d) except as may be required as a result of a change in law or in GAAP, not
change any of the accounting principles or practices used by it;

(e) except as otherwise provided herein, not amend any Assumed Contract in a
material manner, nor enter into any new Contract that would constitute an
Assumed Contract which would have to be scheduled on Section 3.14 of the Seller
Disclosure Schedule, in either case outside the Ordinary Course of Business,
unless such Assumed Contract can be cancelled by Sellers without penalty on
thirty (30) days’ notice;

(f) notwithstanding the provisions of Section 5.1(e), not enter into any new
Contract that would constitute an Assumed Contract the terms of which would
prohibit, restrict or limit access to, review by or disclosure to Buyers of such
Contract;

(g) not amend the Canadian Lease;

(h) not increase any Hired Employee’s compensation;

(i) not, with respect to the Business or the Acquired Assets, (A) sell, assign,
transfer, lease, exchange or otherwise dispose of any of its properties or
assets other than in the Ordinary Course of Business or where such properties or
assets are replaced with substantially equivalent properties or assets,
(B) except in the Ordinary Course of Business or as necessary for compliance
with Applicable Law, enter into, amend or terminate employee welfare, bonus,
stock option, profit-sharing, retirement or similar plan or arrangement directly
benefitting any Hired Employee, (C) enter into any transaction, contract or
commitment intended to be an Assumed Contract or Assumed Contracts committing
Sellers in the aggregate to make capital expenditures in excess of $25,000 or
(D) terminate, discontinue, close or dispose of any material business operation;

(j) not dispose of or permit to lapse any right to the use of any Transferred
Intellectual Property, or dispose of, or disclose to any Person (other than to a
Seller’s employees, legal counsel, Seller’s customers permitted to use Seller’s
labels, or the Persons to whom such Intellectual Property will be licensed
pursuant to the IP License Agreement), any trade secret,

 

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formula, process, technology or know-how of Sellers or the Business not
heretofore a matter of public knowledge; and

(k) not authorize, or commit or agree to take, any of the foregoing actions
which are prohibited or restricted hereunder.

SECTION 5.2 Access to Information.

(a) Prior to the Closing, Buyers and Buyers’ representatives shall contact and
communicate with the employees, customers, suppliers and other business
relations of each Seller in connection with the transactions contemplated hereby
only with the prior written consent of such Seller which consent shall not be
unreasonably withheld, conditioned or delayed. Between the date hereof and the
Closing Date, each Seller will provide Buyers and their authorized
representatives with reasonable access during normal business hours and upon
reasonable prior notice to the facilities, senior management, Books and Records
of the Business and, subject to the immediately preceding sentence, the
employees of the Business, provided that (i) Buyers agree that such access will
give due regard to minimizing interference with the operations, activities and
employees of such Seller and (ii) such access and disclosure would not violate
the terms of any agreement by which such Seller is bound or any Applicable Law,
and Sellers shall provide electronic copies of such Books and Records to Buyers
for integration planning and to facilitate the post closing transition

(b) Between the date hereof and the Closing Date, each Seller shall promptly
furnish to Buyers and their authorized representatives such financial, technical
and operating data and other information with respect to the Business and
properties thereof or the Acquired Assets as Buyers may from time to time
reasonably request.

(c) Buyers acknowledge that they remain bound by that certain Confidentiality
Agreement between Zep Inc. and Watco International Holdings Corp. dated May 27,
2010 (the “Confidentiality Agreement”).

(d) To the extent that Buyers are given access to Personal Information in the
custody or control of a Seller during the period leading up to and including
Closing, Buyers shall not use or disclose such Personal Information for any
purpose other than purposes that directly relate to the transactions
contemplated hereby.

SECTION 5.3 Exclusive Dealing. During the period from the date of this Agreement
through the earlier of the Closing Date or the termination of this Agreement
pursuant to Section 7.1, the Sellers shall not take, nor will the Sellers permit
any of their Affiliates or representatives, directly or indirectly, through any
officer, director, manager or agent of them or otherwise, to take, any action to
solicit, initiate, engage, encourage (including by way of furnishing non-public
information or assistance) or enter into discussions or negotiations with, or
enter into any confidentiality agreement, letter of intent, purchase agreement
or similar agreement with, any Person (other than Buyers, their Affiliates and
their respective representatives) concerning any proposal that constitutes, or
could reasonably be expected to lead to, a proposal to acquire all or any
portion of the Acquired Assets (other than assets sold in the Ordinary Course of
Business) (“Acquisition Proposal”). Each Seller agrees to promptly

 

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notify Buyers should it be contacted in any regard by any Person with respect to
any actual or potential Acquisition Proposal.

SECTION 5.4 Approvals and Consents.

(a) The parties hereto shall use their respective commercially reasonable
efforts, and shall cooperate with each other, to promptly make all filings with,
provide notices to, obtain all consents, waivers, approvals, authorizations and
permits that is required or reasonably appropriate in connection with the
consummation of the transactions contemplated hereby, including, without
limitation, (i) those to be made with, provided to or obtained from any
Governmental Entity and (ii) those to be made with, provided to or obtained from
any party to any Contract listed on Schedule 6.2(d).

(b) Buyers shall use their commercially reasonable efforts to cause the
conditions set forth in Section 6.1 to be satisfied and to consummate the
transactions contemplated herein, provided that, except as expressly set forth
herein, no Buyer or its Affiliates shall be required to expend any funds to
obtain any consents, waivers, permits, registrations, authorizations and
approvals of Governmental Entities. Each Seller shall use its commercially
reasonable efforts to (i) cause the conditions set forth in Section 6.2 to be
satisfied and to consummate the transactions contemplated herein and (ii) to
amend each of the sales representative agreements, in a form and substance
reasonably acceptable to Buyers, to provide that the exclusive rights of such
sales representative applies only to products of Sellers as of the date of this
Agreement and, if not already provided in such agreement, imposing
non-competition obligations on such sales representative, provided that, except
as expressly set forth herein, no Seller shall be required to expend any funds
to obtain any consents, waivers, permits, registrations, authorizations and
approvals of Governmental Entities set forth on Schedule 6.2(c).

SECTION 5.5 Additional Agreements. From time to time, as and when requested by
any party hereto and at such party’s expense, any other party(ies) hereto shall
execute and deliver, or cause to be executed and delivered, all such documents
and instruments and shall take, or cause to be taken, all such further or other
actions as the requesting party may reasonably deem necessary or desirable to
evidence and effectuate the transactions contemplated by this Agreement.

SECTION 5.6 Employee Benefits.

(a) Offer of Employment. Each Buyer shall offer employment, commencing on the
Closing Date, to the employees of the Business listed across such Buyer’s name
on Exhibit D hereto (“Listed Employees”), which offers for U.S. Hired Employees
shall be at such locations and on such terms and conditions as may be determined
by the Buyers or their Affiliates in their discretion and with respect to
Canadian Hired Employees, which offers shall be no less favorable to such
employee in the aggregate as the terms and conditions of employment for such
employees as of the date hereof; provided that nothing herein shall cause or
require the Buyers to assume or adopt any pension or similar plan of any Seller
or create any Employee Plan. The parties hereto shall cooperate in each such
Buyer’s efforts to make such offers. Those employees who accept a Buyer’s offer
of employment and become employed by Buyers shall hereafter be referred to as
“Hired Employees”. Buyers shall recognize the past

 

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services of U.S. Hired Employees with Sellers for (i) purposes of eligibility
and vesting credit (but not for the purposes of benefit accrual or rate of
benefit accrual) under employee benefit plans (but not including any
equity-based compensation plan) sponsored by Buyers, (ii) years of service for
any severance policy of Buyers, and (iii) Buyers’ vacation policy. Buyers shall,
with respect to employees of Air Guard Canada, recognize the Hired Employees’
years of service for any severance policy of Buyers and for any other purposes
as required by Applicable Law.

(b) Actions Prior to Closing. Prior to, or in connection with, the Closing,
Buyers shall take no action to cause any Seller or the Business to terminate the
employment of any employee of the Business (other than in connection with the
retention or relocation of any Hired Employee), and no Sellers nor the Business
shall be under any obligation to terminate any employee of the Business prior to
or on the Closing Date.

(c) Actions After Closing. After the Closing, each Seller shall have full
responsibility for any employment decisions regarding staff who are not Hired
Employees. Buyers shall be responsible only for those employees who are Hired
Employees, and subject to the first sentence of Section 5.6(a), shall have the
full discretion to determine the terms and conditions of employment for the
Hired Employees. Expenses and benefits with respect to claims incurred by Hired
Employees or their covered dependents on or after the Closing Date shall not,
except to the extent provided in Section 5.6(d) or required under the applicable
Employee Plan or Applicable Law, be the responsibility of any Seller (or of any
Employee Plan maintained by any Seller), but shall be the responsibility of
Buyers to the extent such claims are covered under any Employee Plan maintained
by Buyers in which the Hired Employee is then participating. For purposes of
this Section 5.6(c), a claim is deemed incurred when the services that are the
subject of the claim are performed; in the case of life insurance, when the
death occurs; in the case of long-term disability benefits, when the disability
occurs; and, in the case of a hospital stay, when the individual first enters
the hospital. Notwithstanding the foregoing, each Seller shall be solely
responsible for any obligations of such Seller to provide retiree life
insurance, retiree medical, and retiree dental benefits to employees of the
Business who are entitled to such benefits prior to the Closing and who were
covered under retiree welfare programs of such Seller as of the Closing, and to
their covered dependents.

(d) COBRA. After the Closing Waterbury shall continue to maintain its group
health plan for a limited period of time. Until termination of Waterbury’s group
health plan, Waterbury shall be solely responsible for any legally mandated
continuation of health care coverage for any “M&A qualified beneficiary” and/or
their dependents who are covered by any Employee Plan before or at the Closing,
and for satisfaction of any related notice requirements. Upon termination of
Waterbury’s group health plan, US Buyer shall be responsible for any legally
mandated continuation of health care coverage for “M&A qualified beneficiaries”,
in accordance with Treas. Reg. § 54.980B-9, Q&A 8(c). For purposes hereof, each
of “M&A qualified beneficiary,” “group health plan” and “qualifying event” shall
have the meaning ascribed thereto in Section 4980B of the Code.

(e) No Third-Party Beneficiary. Except as specifically provided, no provision of
this Agreement shall create any third-party beneficiary rights in any person or
organization, including without limitation employees or former employees
(including any beneficiary or dependent thereof) of a Seller, unions or other
representatives of such employees or former

 

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employees, or trustees, administrators, participants, or beneficiaries of any
Employee Plan of Seller, and no provision of this Agreement shall create such
third-party beneficiary rights in any such person or organization in respect of
any benefits that may be provided, directly or indirectly, under any Employee
Plan of a Seller, including the currently existing Employee Plans of Sellers.

SECTION 5.7 Public Announcements. Prior to Closing, the parties hereto will
agree on a communications plan regarding the timing and content of the public
announcement on the Closing Date of the transactions contemplated hereby. From
and after the date hereof and prior to and in connection with the Closing, no
public release or announcement concerning the transactions contemplated hereby
shall be issued by any party hereto without the prior written consent of the
other party(ies) hereto (which consent shall not be unreasonably withheld or
delayed), except as such release or announcement may be required by law or the
rules or regulations of any United States or non-United States securities
exchange, in which case the party required to make the release or announcement
shall allow the other party(ies) reasonable time to comment on such release or
announcement in advance of such issuance.

SECTION 5.8 Regulatory Filings. Not later than July 30, 2010, the applicable
Buyer(s) shall, on the one hand, and the applicable Seller(s) shall, on the
other, make any and all filings, notifications and related materials which are
required under the HSR Act with the United States Federal Trade Commission (the
“FTC”) and the Antitrust Division of the United States Department of Justice
(the “DOJ”), and with any other Governmental Entities pursuant to any other
antitrust Applicable Laws with respect to the transactions contemplated by this
Agreement. The applicable Seller(s) shall furnish to the applicable Buyer(s),
and the applicable Buyer(s) shall furnish to the applicable Seller(s), such
necessary information and reasonable assistance as the other(s) may request in
connection with its preparation of any filing or submission that is necessary
under the HSR Act or any other antitrust Applicable Laws. The applicable
Seller(s) shall promptly inform the applicable Buyer(s), and the applicable
Buyer(s) shall promptly inform the applicable Seller(s), as to any
communications with, and any inquiries or requests for additional information
from, any Governmental Entity in connection with the foregoing, and subject to
Applicable Law, shall provide the other parties with a copy of any written
communication to the foregoing, and each party hereto shall comply as promptly
as possible with any such inquiry or request. No party shall participate in any
substantive meeting or discussion with any Governmental Entity in respect of any
filing, investigation or inquiry concerning antitrust matters related to the
consummation of the transactions contemplated by this Agreement unless it
consults with the other parties hereto in advance and, to the extent permitted
by such Governmental Entity, gives the other parties hereto the opportunity to
attend and participate in such meeting or discussion. Buyers and Sellers hereby
covenant and agree to use commercially reasonable efforts to secure early
termination or expedited review of any waiting periods under the HSR Act, to
obtain the approval of any Governmental Entity necessary to consummate the
transactions contemplated hereby and to resolve such objections, if any, as may
be asserted by any Governmental Entity with respect to the transactions
contemplated hereby provided that, notwithstanding anything herein to the
contrary, neither Buyers nor Sellers shall be required to file suit, defend or
take any other legal action in order to obtain any necessary approvals. No party
hereto shall extend any waiting period under the HSR Act or enter into any
agreement with the FTC or the DOJ not to consummate the transactions
contemplated by this Agreement, except with the prior written consent of the
other parties hereto, which consent shall not be

 

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unreasonably withheld or delayed. All filing fees required in connection with
the filing of any notifications and related materials that are required under
the HSR Act shall be borne by Buyers (the “HSR Filing Fees”). Notwithstanding
anything to the contrary contained in this Agreement, in connection with any
filing or submission required or action to be taken by Buyers to consummate the
transactions contemplated herein, in no event shall Buyers be obligated to
propose or agree to accept any undertaking or condition, to enter into any
consent decree, to make any divestiture or accept any operational restriction,
or take or commit to take any action that, in the reasonable discretion of
Buyers, could be expected to limit (i) the freedom of action of Buyers with
respect to the operation of, or Buyers’ ability to retain, the Acquired Assets,
or (ii) the ability to retain, own or operate any portion of the businesses,
product lines, or assets, of Buyers or their Affiliates, or alter or restrict in
any way the business or commercial practices of Buyers or their Affiliates.

SECTION 5.9 Noncompetition Provisions.

(a) (i) Each Seller and Watco hereby agrees that, during the period beginning on
the Closing Date and ending on the date that is five (5) years following the
Closing Date (the “Seller Non-Competition Period”), it will not, and will not
cause, permit or assist any of its directors, officers, employees, agents or
Direct Affiliates to, either directly or indirectly (including by way of sale or
distribution of products to other Persons who re-sell or distribute such
products on such Seller’s or any of its Direct Affiliates behalf), do any of the
following without the prior written consent of Buyers (it being understood and
agreed that Waterbury’s fulfillment of its obligations under the Transition
Services Agreements shall not constitute a breach of this Section 5.9): other
than as a holder of less than one percent (1%) of the outstanding securities of
any class of any publicly-traded securities of a company that is engaged in a
Worldwide Competitive Business, engage, directly or indirectly, as an owner,
equity holder, member, lender, partner, co-venturer, director, officer,
employee, agent, consultant, service provider or otherwise in any business that
competes with the Business in the territories and countries where Sellers
currently conduct the Business or through the Business otherwise sell products
and services (a “Worldwide Competitive Business”).

(ii) Each Seller and Watco hereby agrees that, during the Seller Non-Competition
Period, it will not, and will not cause, permit or assist any of the P&L
Companies to, either directly or indirectly (including by way of sale or
distribution of products to other Persons who re-sell or distribute such
products on such Seller’s or any of the P&L Companies’ behalf), do any of the
following without the prior written consent of Buyers: other than as a holder of
less than one percent (1%) of the outstanding securities of any class of any
publicly-traded securities of a company that is engaged in a North American
Competitive Business, engage, directly or indirectly, as an owner, equity
holder, member, lender, partner, co-venturer, director, officer, employee,
agent, consultant, service provider or otherwise in any business that competes
with the Business in North America (a “North American Competitive Business”).

(iii) Each Seller hereby agrees that, during the Seller Non-Competition Period,
it will not, and will not cause, permit or assist any of its directors,
officers, employees, agents or Direct Affiliates or the P&L Companies to, and
each of Watco, WPP V and WPP EAP hereby agrees that, during the Seller
Non-Competition Period, it

 

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will not and will not cause, permit or assist any of its directors, officers,
employees, or agents, or the P&L Companies to, or encourage, instruct or assist
any of their respective direct or indirect subsidiaries or affiliates, to either
directly or indirectly, do any of the following without the prior written
consent of Buyers: during the term of any Hired Employee’s employment with a
Buyer and during the six month period following the termination of such
employment, solicit for employment, employ or retain, or arrange to have any
other Person solicit for employment, employ or retain, any Hired Employee.

For purposes of clarity, unless such customers are doing so at a Seller’s
direction, with a Seller’s assistance, or otherwise on a Seller’s behalf, a
Seller shall not be deemed to have breached this Section 5.9 in the event that
any of its customers take any action such Seller is prohibited to take under
this Section 5.9; provided the same is not done with the assistance,
encouragement or advice of the Sellers otherwise in violation of this
Section 5.9. Moreover, for further purposes of clarity, the fact that Watco and
Waterbury Companies Acquisition Corp., a Delaware corporation have ownership
interests in the P&L Companies shall not, in and of itself, be deemed a breach
of Section 5.9(a)(i) but nothing in this sentence shall permit Watco or
Waterbury from providing advice or assistance otherwise in violation of
Section 5.9(a)(i).

(b) Except (i) in Waterbury’s fulfillment of its obligations under the
Transition Services Agreements (and in such instance, only on a need-to-know
basis), (ii) as contemplated by this Agreement and (iii) as permitted by the IP
License Agreement each Seller hereby further agrees that during the
Non-Competition Period, it will not, and will not cause or give permission to
any of its directors, officers, employees, agents or Direct Affiliates, or to
any of its Affiliates to whom it has provided any Buyer Confidential
Information, either directly or indirectly, in any capacity whatsoever, to
divulge, disclose or communicate to any Person not subject to obligations of
confidentiality in favor of Buyers at least as stringent as those contained
herein any Buyer Confidential Information (as defined below). Each Seller agrees
that “Buyer Confidential Information” includes but is not limited to: (A) any
financial, business, planning, operations, services, potential services,
products, potential products, technical information and/or know-how, formulas,
production, purchasing, marketing, sales, personnel, customer, broker, supplier,
or other information of Buyers and/or Buyers’ business (including, after
Closing, the Business and the Acquired Assets); (B) any papers, data, records,
processes, methods, techniques, systems, models, samples, devices, equipment,
compilations, invoices, customer lists, or documents of the Business, or of
Buyers and/or Buyers’ business; (C) any confidential information or trade
secrets of or related to the Business or Buyers and/or Buyers’ business; and
(D) any other information, written, oral, or electronic, whether existing now or
at some time in the future, whether pertaining to current or future
developments, which pertains to the affairs or interests of the Business, the
Buyers and/or Buyers’ business, but shall in no event include information which
is or becomes generally available to the public other than as a result of a
breach of this Agreement by a Seller (or any of its directors, officers,
employees, agents or Affiliates). Each Seller shall be permitted to disclose
Buyer Confidential Information as may be required by Applicable Law, subject to
promptly providing Buyers with prior notice of such required disclosure and an
opportunity to request protection from the relevant Governmental Entity within
ten (10) Business Days of such notice (or such shorter period required by
Applicable Law or order of the relevant Governmental Entity).

 

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(c) Except (i) in fulfilling such Seller’s and its Direct Affiliates’
obligations under the Transition Services Agreements (and in such instance, only
on a need-to-know basis), (ii) as contemplated by this Agreement and (iii) as
permitted under the terms of the IP License Agreement, each Seller hereby agrees
that it will not, and will not cause or give permission to any of its directors,
officers, employees, agents or Direct Affiliates or any of its other Affiliates
to whom it has provided any unpublished Transferred Intellectual Property,
either directly or indirectly, in any capacity whatsoever, to divulge, disclose,
use, or communicate to any Person not in the employment of Buyers any
unpublished Transferred Intellectual Property. Each Seller and its Affiliates
shall be permitted to disclose such unpublished Transferred Intellectual
Property in connection with any disputes relating to this Agreement, any
Transaction Document and/or the transactions contemplated hereby and thereby, in
connection with the fulfillment of its obligations hereunder and as may be
required by Applicable Law, subject to providing Buyers with prior notice of
such required disclosure and an opportunity to request protection from the
relevant Governmental Entity within ten (10) Business Days of such notice (or
such shorter period required by Applicable Law or order of the relevant
Governmental Entity.

(d) The parties hereto agree that the duration and geographic area for which the
covenant not to compete and confidentiality covenant set forth in this
Section 5.9 are to be effective are reasonable. In the event that any court
determines that the time period or the geographic area or both of them, are
unreasonable and that either such covenant is to that extent unenforceable, the
parties hereto agree that such covenant shall remain in full force and effect
for the greatest time period and in the greatest geographic area that would not
render it unenforceable. The parties hereto intend that these covenants shall be
deemed to be series of separate covenants one for each and every county of each
and every state of the United States of America and each and every political
subdivision of each and every country outside of the United States of America
where these covenant are intended to be effective. The parties hereto agree that
damages are an inadequate remedy for any breach of these covenants and that each
Buyer shall be entitled to equitable relief in the form of preliminary or
permanent injunctions without bond or other security upon any actual or
potential breach of either of these covenants in addition to any other remedy
each Buyer may have hereunder.

SECTION 5.10 Updating Schedules.

(a) From the date hereof up and until the Closing Date, Sellers shall disclose
to Buyers in writing (in the form of an updated Seller Disclosure Schedule) any
material variances from the disclosures provided by Sellers in the Seller
Disclosure Schedule in connection with the representations and warranties
contained in Article 3 promptly upon discovery thereof (“Updated Disclosure”),
which shall include (i) any matter first existing or occurring following the
date hereof, with respect to the existence of which a Seller has Knowledge, and
that (1) if existing or occurring at or prior to the date hereof, would have
been required to be set forth or described in the Seller Disclosure Schedule, or
(2) is necessary to correct any information in the Seller Disclosure Schedule
that has been rendered inaccurate thereby or (ii) any matter that, to the
Sellers’ Knowledge, arose prior to the date of this Agreement and was not
previously set forth in the Seller Disclosure Schedule. Such Updated Disclosure
shall amend and supplement the Seller Disclosure Schedule delivered on the date
hereof. Notwithstanding the foregoing, Buyers shall have ten (10) days to review
any such Updated Disclosure, together with the Seller Disclosure Schedule and
any and all previously

 

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provided Updated Disclosures (notwithstanding the fact that Buyers may have
previously reviewed and accepted any such previous Updated Disclosures), to
determine if such Updated Disclosure together with any and all previously
provided Updated Disclosures would, if in effect on the Closing Date, prevent
satisfaction of the closing conditions in Section 6.2(a). During such ten
(10) day review period and notwithstanding any cure period that may be
applicable pursuant to Section 7.1, Buyers may, at their sole discretion,
terminate this Agreement pursuant to the provisions of Section 7.1 (to the
extent entitled to do so pursuant to Section 7.1). If Buyers do not provide
Sellers with a termination notice prior to the end of such ten (10) day review
period, Buyers shall be deemed to have waived their right to terminate this
Agreement, solely with respect to such Updated Disclosure unless additional
Updated Disclosures are provided. If any Updated Disclosures include information
which needed to be disclosed on the date hereof for the representations and
warranties contained in Article 3 to have been true and correct on the date
hereof (whether or not Buyers elects to terminate this Agreement pursuant to
this provisions of this Section 5.10(a), then for purposes of determining
Buyers’ indemnification rights under this Agreement, the Seller Disclosure
Schedule shall not be deemed to be amended or supplemented by such Updated
Disclosures and unless this Agreement is terminated pursuant to Section 7.1 (or
the transactions contemplated herein fail to close, in which case such Updated
Disclosures shall not limit or modify Buyers’ remedies for breach of this
Agreement) Buyers shall be entitled to indemnification for Losses resulting from
the breach to the extent set forth in this Agreement.

(b) From the date hereof until the Closing Date, Buyers shall disclose to
Sellers in writing any material variances from Buyers’ representations and
warranties contained in Article 4 promptly upon discovery thereof (“Buyer
Updated Disclosures”), which shall include (i) any matter first existing or
occurring following the date hereof, with respect to the existence of which a
Buyer has knowledge, and that (1) if existing or occurring at or prior to the
date hereof, would have been required to be set forth or described in the Buyer
Disclosure Schedule, or (2) is necessary to correct any information in the Buyer
Disclosure Schedule that has been rendered inaccurate thereby or (ii) any matter
that, to the knowledge of a Buyer, arose prior to the date of this Agreement and
was not previously set forth in the Buyer Disclosure Schedule. Such Buyer
Updated Disclosure shall amend and supplement the any Buyer disclosure schedules
delivered on the date hereof. Notwithstanding the foregoing, Sellers shall have
ten (10) days to review any such Buyer Updated Disclosure, together with the
Buyers disclosure schedules delivered on the date hereof and any and all
previously provided Buyer Updated Disclosures (notwithstanding the fact that
Sellers may have previously reviewed and accepted any such previous Buyer
Updated Disclosures), to determine if such Buyer Updated Disclosure together
with any and all previously provided Buyer Updated Disclosures would, if in
effect on the Closing Date, prevent satisfaction of the closing conditions in
Section 6.1(a). During such review ten (10) day review period and
notwithstanding any cure period that may be applicable pursuant to Section 7.1
(to the extent entitled to do so pursuant to Section 7.1), Sellers may, at its
sole discretion, terminate this Agreement pursuant to the provisions of
Section 7.1. If Sellers do not provide Buyers with a termination notice prior to
the end of such ten (10) day review period, Sellers shall be deemed to have
waived their right to terminate this Agreement, solely with respect to such
Buyer Updated Disclosure unless additional Buyer Updated Disclosures are
provided. If any Buyer Updated Disclosures include information which needed to
be disclosed on the date hereof for the representations and warranties contained
in Article 4 to have been true and correct on the date hereof (whether or not
Sellers elect to terminate this Agreement pursuant to this provisions of this
Section 5.10(b), then for purposes of determining

 

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Sellers’ indemnification rights under this Agreement, the Buyers’ disclosure
schedule shall not be deemed to be amended or supplemented by such Buyer Updated
Disclosures and unless this Agreement is terminated pursuant to Section 7.1 (or
the transactions contemplated herein fail to close, in which case such Buyer
Updated Disclosures shall not limit or modify Sellers’ remedies for breach of
this Agreement). Sellers shall be entitled to indemnification for Losses
resulting from the breach to the extent set forth in this Agreement.

SECTION 5.11 Possession of Acquired Assets. Each Seller acknowledges and agrees
that from and after the Closing the Buyers will, subject to the limitations set
forth in the Transition Services Agreements, be entitled to immediate possession
of all Acquired Assets. Subject to the terms and conditions of the Transition
Services Agreements, except as may be provided in the Transition Services
Agreement, Buyers shall be solely responsible for removal and transfer of all
tangible Acquired Assets from each Seller’s facilities (the “Transferred Asset
Transfer”) and any and all Losses resulting therefrom.

SECTION 5.12 Post-Closing Supply. US Buyer agrees that in the one (1) year
period following the Closing, it will supply to P. & L. Systems Limited, at P. &
L. Systems Limited’s request, those products of Sellers set forth on
Section 5.12 of the Seller Disclosure Schedule at the prices as set forth in
such Section and in such monthly volumes during such one year period as set
forth on Section 5.12 of the Seller Disclosure Schedule. All such orders shall
be on the standard terms and conditions of US Buyer, including all payment and
delivery terms as the same may be modified by US Buyer from time to time.

SECTION 5.13 Name Change. As promptly as reasonably practicable following the
Closing, but in any event within thirty (30) days following the Closing Date,
(a) Sellers shall change their respective corporate names from Air Guard Control
Corporation, Air Guard Control (Canada) Limited and Waterbury Companies, Inc.,
respectively, to another name that is dissimilar to the foregoing and remove any
reference to the names “Air Guard,” “Waterbury” or variations thereof, or any
other trade name used in the Business, and (b) Sellers shall file in all
jurisdictions in which they are qualified to do business all documents necessary
to reflect such change of names or to terminate their qualifications therein
except in fulfilling their obligations under the Transition Services Agreements.
In connection with enabling Buyers, at or as soon as practicable following the
Closing, to use the current corporate name of the Sellers, the Sellers shall, at
or prior to the Closing, (x) execute and deliver to Buyers all consents related
to such change of name as may be reasonably requested by Buyers, and
(y) otherwise use commercially reasonable efforts to cooperate with Buyers,
provided, however, that, in connection with this clause (y), in no event shall
the foregoing require any Seller to expend funds.

SECTION 5.14 Risk of Loss. The risk of loss with respect to the Acquired Assets
shall remain with the Sellers until the Closing. Until the Closing, the Sellers
shall maintain in force all the policies of property damage insurance under
which any Acquired Asset is insured.

SECTION 5.15 Receivables. From and after the Closing, Sellers shall promptly
remit to a designated bank account any checks or other payments received by
Sellers which constitute receivables acquired by Buyers hereunder.

 

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SECTION 5.16 Use of Personal Information. To the extent that a Seller transfers
Personal Information to Buyers following the Closing, Buyers shall not, without
the consent of the individuals to whom such Personal Information relates or as
permitted or required by Applicable Law, use or disclose such Personal
Information: (a) for purposes other than those described in Section 3.26 of the
Seller Disclosure Schedule; or (b) which does not relate directly to the
carrying on of the Business.

SECTION 5.17 Product Returns. From and after the Closing, and to the extent (but
only to the extent) required under any applicable Seller’s refund and return
policy in effect as of the date hereof, Buyers shall replace or refund, as
appropriate, damaged, defective or returned goods of the Business sold by a
Seller prior to the Closing.

SECTION 5.18 Insurance. On or prior to the Closing Date, Sellers shall cause
Buyers to be named as an “additional insured” with respect to any and all
property, casualty, products liability, business interruption and other
insurance policies currently maintained by any such Seller. Following Closing,
Sellers shall not terminate or cause to be cancelled any insurance coverage for
any period prior to the Closing Date.

SECTION 5.19 Registration Data. Prior to Closing, Sellers shall have provided to
Buyers Registration Data supporting or purporting to support those Registrations
identified by the parties as Registrations “237”, “210” and “137” and as the sub
Registrations for the “Ozium” products.

SECTION 5.20 Consultant. Sellers shall engage a consultant, reasonably
acceptable to Buyers, whose scope and engagement shall be reasonably acceptable
to Buyers and which consultant shall both prior to Closing and following Closing
assist in the identification of all Registration Data necessary to support all
and any claims made in any Registration and related labels and technical and
marketing materials. If (a) any Registration has been identified as not having
all necessary Registration Data or (b) any Government Authority requests
additional data, in the case of (a) or (b) above necessary to support any claims
currently made with respect to such product on or before the Closing Date (other
than pursuant to an industry-wide data call-in), Sellers shall pay the cost of
obtaining all such Registration Data. Sellers shall pay all fees and expenses of
the consultant.

ARTICLE 6

CONDITIONS TO CLOSING

SECTION 6.1 Conditions to the Obligations of Sellers. The obligations of Sellers
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions as of the Closing Date:

(a) Representations and Warranties. The representations and warranties set forth
in Article 4 shall, without giving effect to any materiality or Material Adverse
Effect qualifier therein, be true, correct and complete in all respects at and
as of the Closing Date (except for those representations and warranties,
expressly required to be made as of a particular

 

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date, which shall be true, correct and complete in all respects as of such
date), except where the failure of such representations and warranties to be so
true and correct would not, in the aggregate, have a material adverse effect on
the ability of Buyers to consummate the transactions contemplated hereby;

(b) Performance of Covenants and Agreements. Each Buyer shall have performed or
complied with in all material respects, all the covenants and agreements
required to be performed or complied with by it under this Agreement at or prior
to the Closing;

(c) Governmental Consents and Notices. Buyers, to the extent applicable, shall
have received consents, waivers, permits, authorizations and approvals of
Governmental Entities set forth on Schedule 6.1(c)(1) and/or the applicable
waiting periods with respect thereto shall have expired; Buyers shall have made
filings with and/or provided notices to, as applicable, those Governmental
Entities set forth on Schedule 6.1(c)(2); Sellers, to the extent applicable,
shall have received consents, waivers, permits, authorizations and approvals of
Governmental Entities set forth on Schedule 6.2(c)(1) and/or the applicable
waiting periods with respect thereto shall have expired;

(d) Third Party Consents. Sellers shall have received, in form and substance
reasonably satisfactory to Sellers and in full force and effect, the consents
from the third parties set forth on Schedule 6.1(d);

(e) Actions and Proceedings. No action or proceeding before any Governmental
Entity shall be pending wherein an unfavorable judgment, decree or order would
prevent the performance of this Agreement or the consummation of any of the
transactions contemplated hereby, declare unlawful the transactions contemplated
by this Agreement or cause such transactions to be rescinded;

(f) Closing Deliverables.

(i) US Buyer shall have delivered, or caused to be delivered, to Sellers
certified copies of the resolutions duly adopted by its board of directors
authorizing the execution, delivery and performance of this Agreement and the
other agreements contemplated hereby, and the consummation of all transactions
contemplated hereby and thereby, IP Buyer shall have delivered to Sellers
certified copies of the resolutions of its sole member authorizing the
execution, delivery and performance of this Agreement and the other agreements
contemplated hereby, and the consummation of all transactions contemplated
hereby and thereby and Canadian Buyer shall have delivered to Sellers certified
copies of the resolutions of its board of directors and certified copies of the
resolutions passed by the sole shareholder of Canadian Buyer (if necessary for
the consummation of the transaction contemplated hereby) authorizing the
execution, delivery and performance of this Agreement and the other agreements
contemplated hereby, and the consummation of all transactions contemplated
hereby and thereby;

(ii) Buyers shall have delivered to Sellers, a copy of the certificate of
incorporation of US Buyer, certified by the Secretary of State of Delaware and
certified copies of US Buyer’s other governing documents, a copy of the
certificate of formation

 

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of IP Buyer, certified by the Secretary of State of Delaware and certified
copies of IP Buyer’s other governing documents, a copy of the articles of
incorporation of Canadian Buyer certified by Corporations Canada and a certified
copy of the by-laws and other governing documents of Canadian Buyer, and a
certified incumbency with respect to each Buyer’s signatory or signatories for
the Transaction Documents;

(iii) Buyers shall have delivered to Sellers, a certificate of Buyers in the
form set forth as Exhibit E hereto, dated the Closing Date, stating that the
conditions specified in Sections 6.1(a) and 6.1(b) have been satisfied;

(iv) Buyers shall have delivered the Payoff Payment in accordance with the
payment letters required pursuant to Section 6.2(f)(vi) and Buyer shall have
delivered to Sellers and/or such Persons as Sellers may have directed in writing
the balance of the Estimated Cash Payment;

(v) Buyers shall have delivered to the Escrow Agent, the Escrow Funds;

(vi) Buyers shall have delivered to Waterbury a duly executed Transition
Services Agreement, in the form of Exhibit F hereto (the “Transition Services
Agreement”);

(vii) Buyers shall have delivered a duly executed IP License Agreement, in the
form of Exhibit G hereto (the “IP License Agreement”);

(viii) Buyers shall have delivered duly executed copies of the other Transaction
Documents to which one or more Buyers is a party;

(ix) Buyers shall have delivered to Sellers a good standing certificate issued
by the Secretary of State of the State of Delaware with respect to US Buyer and
IP Buyer, as of a date no more than seven (7) days prior to the Closing and a
certificate of compliance issued by Corporations Canada with respect to Canadian
Buyer, as of a date no more that seven (7) days prior to the Closing; and

(x) Buyers shall have delivered to Sellers duly executed copies of all such
other documents or instruments as Sellers may have reasonably requested a
reasonable time prior to the scheduled Closing Date in order to give effect to
the transactions contemplated hereby.

SECTION 6.2 Conditions to the Obligations of Buyers. The obligation of Buyers to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions as of the Closing Date:

(a) Representations and Warranties. The representations and warranties set forth
in Article 3 shall, without giving effect to any materiality or Material Adverse
Effect qualifier therein, be true, correct and complete in all respects at and
as of the Closing Date (except for those representations and warranties,
expressly required to be made as of a particular date, which shall be true,
correct and complete in all respects as of such date), except where the

 

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failure of such representations and warranties to be so true and correct would
not, in the aggregate, have a Material Adverse Effect or would not have a
material adverse effect on the ability of Sellers to consummate the transactions
contemplated hereby;

(b) Performance of Covenants and Agreements. Each Seller shall have performed or
complied with in all material respects, all the covenants and agreements
required to be performed or complied with by it under this Agreement at or prior
to the Closing;

(c) Governmental Consents and Notices. Sellers, to the extent applicable, shall
have received consents, waivers, permits, registrations, authorizations and
approvals of Governmental Entities set forth on Schedule6.2(c)(1) and/or the
applicable waiting periods with respect thereto shall have expired; Sellers
shall have made filings with and/or provided notices to, as applicable, those
Governmental Entities set forth on Schedule 6.2(c)(2); Buyers, to the extent
applicable, shall have received consents, waivers, permits, authorizations and
approvals of Governmental Entities set forth on Schedule 6.1(c)(1) and/or the
applicable waiting periods with respect thereto shall have expired;

(d) Consents to Assignment. Buyers shall have received, in form and substance
reasonably satisfactory to Buyers and in full force and effect, all consents and
approvals set forth on Schedule6.2(d);

(e) Actions and Proceedings. No action or proceeding before any Governmental
Entity shall be pending wherein an unfavorable judgment, decree or order would
prevent the performance of this Agreement or the consummation of any of the
transactions contemplated hereby, declare unlawful the transactions contemplated
by this Agreement or cause such transaction to be rescinded;

(f) Closing Deliverables.

(i) Sellers shall have delivered, or caused to be delivered, to Buyers a
certificate of Sellers in the form set forth in Exhibit H hereto, dated the
Closing Date, stating that the conditions specified in Sections 6.2(a) and
6.2(b) have been satisfied;

(ii) Sellers shall have delivered to Buyers a copy of the certificate of
incorporation of each of Waterbury and Air Guard Control, certified by the
Secretary of State of Delaware, certified copies of Waterbury’s and Air Guard
Control’s other governing documents, a copy of the articles of incorporation of
Air Guard Canada certified by Corporations Canada, a certified copy of the
by-laws and other governing documents of Air Guard Canada, and a certified
incumbency with respect to each Seller’s signatory or signatories for the
Transaction Documents;

(iii) Each of Waterbury and Air Guard Control shall have delivered, or caused to
be delivered, to Buyers certified copies of the resolutions duly adopted by its
board of directors and sole stockholder (if necessary for the consummation of
the transaction contemplated hereby) authorizing the execution, delivery and
performance of this Agreement and the other agreements contemplated hereby, and
the consummation of all transactions contemplated hereby and thereby and Air
Guard Canada shall have delivered to Buyers certified copies of the resolutions
of its board of directors and

 

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certified copies of the resolutions passed by the sole shareholder of Air Guard
Canada (if necessary for the consummation of the transaction contemplated
hereby) authorizing the execution, delivery and performance of this Agreement
and the other agreements contemplated hereby, and the consummation of all
transactions contemplated hereby and thereby;

(iv) Waterbury shall have delivered to Buyers a duly executed Transition
Services Agreement;

(v) Sellers shall have delivered to Buyers a duly executed IP License Agreement;

(vi) The holders of any Liens on or affecting the Acquired Assets shall have
irrevocably released such Liens or shall have delivered payment letters
including customary language, reasonably acceptable to Buyers, relating to the
release of all Liens (including without limitation the Liens listed on
Schedule 6.2(f)(vi)) affecting the Acquired Assets upon receipt of the amount
set forth in the payment letters;

(vii) Waterbury shall have delivered to Buyers a good standing certificate
issued by the Secretary of State of the State of Delaware with respect to
Waterbury and Air Guard Control, as of a date no more than seven (7) days prior
to the Closing and a certificate of compliance issued by Corporations Canada
with respect to Air Guard Canada, as of a date no more that seven (7) days prior
to the Closing;

(viii) Sellers shall have delivered duly executed copies of the other
Transaction Documents to which one or more of Sellers is a party;

(ix) Sellers shall have delivered to Buyers duly executed copies of all such
other documents or instruments as Buyers may have reasonably requested a
reasonable time prior to the scheduled Closing Date in order to give effect to
the transactions contemplated hereby;

(x) Sellers shall have delivered to Buyers the instructions required in
Section 2.7(c);

(xi) Watco shall have duly executed and delivered a guaranty in the form
attached hereto as Exhibit I; and

(xii) Sellers shall have delivered certificates of insurance evidencing Buyers
being name as an “additional insured” pursuant to Section 5.18 hereof.

(g) Material Adverse Change. Since the date hereof, there shall not have
occurred any Material Adverse Change.

(h) Ozium Reformulation. Sellers shall have delivered to Buyers evidence, in
form and substance reasonably acceptable to Buyers, that the “Ozium” products
(and other products that contain any phthalates) will be reformulated and
commercially available at

 

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materially comparable prices to those available on the date hereof in a
formulation that does not contain phthalates.

ARTICLE 7

TERMINATION; AMENDMENT; WAIVER

SECTION 7.1 Termination. This Agreement may be terminated at any time prior to
the Closing:

(a) by the mutual written consent of each Buyer and each Seller;

(b) by written notice from Buyers to Sellers, if (i) there has been a violation
or breach by a Seller of any covenant, representation or warranty contained in
this Agreement which, if in effect as of the Closing Date, would prevent the
satisfaction of the conditions set forth in Sections 6.2(a) and 6.2(b), and such
violation or breach has not been waived by Buyers or, in the case of a covenant
breach, cured by the applicable Seller within ten (10) days after written notice
thereof from Buyers or (ii) Sellers fail to perform in any material respect any
of their agreements contained herein required to be performed by them at or
prior to the Closing and such failure has not been waived by Buyers or cured by
the applicable Seller within ten (10) days after written notice thereof from
Buyers;

(c) by written notice from Sellers to Buyers, if (i) there has been a violation
or breach by a Buyer of any covenant, representation or warranty contained in
this Agreement which, if in effect as of the Closing Date, would prevent the
satisfaction of the conditions set forth in Sections 6.1(a) and 6.1(b), and such
violation or breach has not been waived by Sellers or, in the case of a covenant
breach, cured by the applicable Buyer within ten (10) days after written notice
thereof from Sellers (provided that the failure of Buyers to deliver the
consideration to be paid by Buyers pursuant to Section 2.6 as required hereunder
shall not be subject to cure hereunder unless otherwise agreed to in writing by
Sellers) or (ii) Buyers fail to perform in any material respect any of their
agreements contained herein required to be performed by them at or prior to the
Closing and such failure has not been waived by Sellers or cured by the
applicable Buyer within ten (10) days after written notice thereof from Sellers;
or

(d) by written notice from Buyers to Sellers, or Sellers to Buyers, as the case
may be, if the Closing has not occurred by, September 30, 2010 (“Termination
Date”); provided that neither Buyers nor Sellers shall be entitled to terminate
this Agreement pursuant to this Section 7.1(d) if any such Person’s knowing or
willful breach of this Agreement has prevented the consummation of the
transactions contemplated hereby.

SECTION 7.2 Effect of Termination. In the event of termination of this Agreement
by either Buyers or Sellers pursuant to this Article 7 as provided above, the
provisions of this Agreement shall immediately become void and of no further
force and effect (other than this Section 7.2, Section 5.7, Sections 10.3
through 10.5 hereof, Sections 10.9 through 10.10 hereof, Section 10.13 hereof
and the Confidentiality Agreement, which shall each survive the termination of
this Agreement), and there shall be no liability on the part of any of

 

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Buyers (on the one hand) or Sellers (on the other hand) to one another, except
for knowing or willful breaches of this Agreement prior to the time of such
termination

The parties hereto hereby acknowledge and agree that each of the Buyers shall be
deemed to have knowingly and willfully breached this Agreement, and such breach
shall be deemed to have prevented the consummation of the transactions
contemplated hereby, in the event that all of the Closing Conditions set forth
in Section 6.2 hereof have been satisfied in accordance with the terms of
thereof, but the Buyers have, for any reason whatsoever, failed to pay the
Closing Cash Payment.

SECTION 7.3 Amendment. This Agreement may be amended only by an instrument in
writing signed on behalf of each of the parties hereto.

SECTION 7.4 Extension; Waiver. At any time prior to the Closing Date, each party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document, certificate or writing delivered pursuant hereto or (c) waive
compliance by the other parties with any of the agreements or conditions
contained herein. Except as permitted under Article 6 hereof, any agreement on
the part of any party hereto to any such extension or waiver shall be valid only
if set forth in an instrument, in writing, signed on behalf of such party.
Except as set forth in Article 6 hereof, the failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such rights.

SECTION 7.5 Specific Performance and Other Remedies. Each party hereto
acknowledges that the rights of each of the other parties hereto to consummate
the transactions contemplated hereby are special, unique and of extraordinary
character and that, in the event that any party hereto violates or fails or
refuses to perform any covenant or agreement made by it herein, the other
parties hereto may be without an adequate remedy at law. In the event that any
party hereto violates or fails or refuses to perform any covenant or agreement
made by such party herein, the other parties hereto may, subject to the terms
hereof and in addition to any remedy at law for damages or other relief,
institute and prosecute an action in any court of competent jurisdiction to
enforce specific performance of such covenant or agreement or seek any other
equitable relief.

ARTICLE 8

SURVIVAL AND INDEMNIFICATION

SECTION 8.1 Survival; No Additional Representations and Warranties.

(a) All of the representations and warranties of Sellers shall survive the
Closing until the twelve (12) month anniversary of the Closing Date (the
“Standard Survival Period”) except for (a) the representations and warranties
set forth in Sections 3.8, 3.10, and 3.11 (the “Extended Representations”) which
shall survive the Closing until sixty (60) days following the expiration of the
applicable statute of limitations (the “Extended Survival Period”); and (b) the
representations and warranties set forth in the first three sentences of
Section 3.1, in Section 3.2, in Section 3.13 and in the first two sentences of
Section 3.15 (the “Special

 

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Representations”) which shall survive indefinitely. All of the representations
and warranties of Buyers shall survive until the Standard Survival Period except
for the representations and warranties set forth in Sections 4.1 and 4.2
(collectively, the “Buyer Special Representations”) which shall survive
indefinitely. Covenants of all parties shall survive according to their terms.
Further, the survival period for claims for indemnification by any Buyer
Indemnitee pursuant to Section 8.2(a)(v) shall end on the twenty-four (24) month
anniversary of the Closing Date and pursuant to 8.2(a)(vi) shall end on the
thirty-six (36) month anniversary of the Closing Date. The survival period for
claims for indemnification by any Buyer Indemnitee pursuant to
Sections 8.2(a)(ii) through 8.2(a)(iv) shall survive indefinitely. As used
herein, the term “Survival Period” shall mean the period for which the
representations and warranties survive as set forth in this Section 8.1(a) or
during which any claim for indemnification may be made as set forth in this
Section 8.1(a).

(b) EACH PARTY HERETO UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT THE
REPRESENTATIONS AND WARRANTIES BY EACH OTHER PARTY HERETO EXPRESSLY AND
SPECIFICALLY SET FORTH IN THIS AGREEMENT CONSTITUTE THE SOLE AND EXCLUSIVE
REPRESENTATIONS AND WARRANTIES OF EACH SUCH OTHER PARTY HERETO IN CONNECTION
WITH THE ACQUIRED ASSETS, ASSUMED LIABILITIES AND THE TRANSACTIONS CONTEMPLATED
HEREBY (EXCLUDING FROM THIS LIMITATION THE REPRESENTATIONS, WARRANTIES AND
CONDITIONS PROVIDED BY SELLERS PURSUANT TO THE TRANSITION SERVICES AGREEMENT),
AND EACH PARTY HERETO UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER
REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED,
WRITTEN OR ORAL (INCLUDING, BUT NOT LIMITED TO, IN THE CASE OF THE SELLERS, ANY
RELATING TO THE FUTURE OR HISTORICAL FINANCIAL CONDITION, RESULTS OR PROJECTIONS
OF OPERATIONS, ASSETS OR LIABILITIES OF THE BUSINESS) ARE SPECIFICALLY
DISCLAIMED BY EACH OTHER PARTY HERETO AND THAT EXCEPT AS OTHERWISE PROVIDED
HEREIN EACH SELLER IS CONVEYING THE ACQUIRED ASSETS ON AN “AS IS, WHERE IS”
BASIS. Each party hereto further agree that none of the other parties hereto nor
any of its Affiliates or nor any other Person acting on behalf of any such
Party(ies) will have or be subject to any liability, except as specifically set
forth in this Agreement or any Transaction Document.

SECTION 8.2 Indemnification.

(a) Joint and Several Indemnification by Sellers. The Sellers shall (subject to
the provisions of this Article 8) indemnify, defend and hold harmless each Buyer
and its Affiliates and their officers, directors, employees, shareholders,
members, managers, partners and/or agents (each, a “Buyer Indemnitee” and
collectively, the “Buyer Indemnitees”) from and against the entirety of any
Losses Buyer Indemnitees shall suffer, sustain or become subject to (including
any Losses Buyer Indemnitees shall suffer after the end of the applicable
Survival Period with respect to claims made within such period), subject to
Section 8.3, resulting from (i)any breach or inaccuracy of any of the
representations and warranties of any Seller made herein or, subject to any
limitations on any Buyer’s remedies for Losses set forth therein, in any
Transaction Document (other than the Transition Services Agreement), (ii) any
breach of any

 

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covenant, agreement or undertaking made by any Seller in this Agreement or,
subject to any limitations on any Buyer’s remedies for Losses set forth therein,
in any Transaction Document (other than the Transition Services Agreement),
(iii) any liability or obligation of any Seller of any nature whatsoever
(including, without limitation any liability with respect to any Hired Employee
for employment periods prior to the Closing Date and any liability (including
liabilities that may be out of pocket obligations of Buyer pursuant to
Section 5.6(d) hereof, Treas. Reg. § 54.4980B-9 Q&A 8(c) or otherwise) with
respect to any past or future employee of Sellers), except the Assumed
Liabilities, (iv) any liability or obligation incurred or arising prior to the
Closing Date in connection with the conduct or operations of the Business or the
use or ownership of the Acquired Assets, except the Assumed Liabilities, (v) any
liability obligation or Losses resulting from or arising from any of the items,
events, facts or circumstances described on Section 8.2(a)(v) of the Seller
Disclosure Schedule and (vi) any liability, obligation or Losses resulting from
lost gross margin as a result of any Buyer’s inability to sell products after
the Closing Date because of deficiencies or other problems with respect to any
Registration included with the Acquired Assets. For purposes of determining
under this Section 8.2(a) (x) whether a breach of any representation or warranty
has occurred and (y) the Losses suffered by Buyer Indemnitees as a result of
such breach, the terms “material”, “Material Adverse Effect” and words of
similar import shall be disregarded wherever they appear in such representation
or warranty of any Seller in this Agreement or in any Transaction Document
(other than the Transition Services Agreement) and given no effect. The Losses
from and against which the Sellers are obligated to indemnify, defend and hold
harmless Buyer Indemnitees against under this Section 8.2(a) are collectively,
the “Seller Indemnifiable Losses”.

(b) Joint and Several Indemnification by Buyers. The Buyers shall (subject to
the provisions of this Article 8) indemnify, defend and hold harmless each
Seller and its Affiliates and their officers, directors, employees,
shareholders, members, managers, partners and/or agents (each, a “Seller
Indemnitee” and collectively, the “Seller Indemnitees”) (each Buyer and/or Buyer
Indemnitee individually and the Buyers and/or Buyer Indemnitees collectively,
each Seller and/or Seller Indemnitee individually and the Sellers and/or Seller
Indemnitees collectively, as the context requires, are each sometimes referred
to herein as an “Indemnified Party” or an “Indemnifying Party”), from and
against the entirety of any Losses Seller Indemnitees shall suffer, sustain or
become subject to (including any Losses Seller Indemnitees shall suffer after
the end of the applicable Survival Period with respect to claims made within
such period), resulting from (i) any breach or inaccuracy of any of the
representations and warranties of any Buyer made herein or in any Transaction
Document (other than the Transition Services Agreement), (ii) any breach of any
covenant, agreement or undertaking made by any Buyer in this Agreement or,
subject to any limitations on any Seller’s remedies for Losses set forth
therein, in any Transaction Document (other than the Transition Services
Agreement), (iii) any Buyer’s failure to perform, discharge or satisfy any
Assumed Liability, and (iv) any liability or obligations incurred or arising on
or after the Closing Date in connection with the conduct or operations of the
Business or the use or ownership of the Acquired Assets (including, without
limitation, except as provided in the Transition Services Agreement, the
Transferred Asset Transfer) (collectively, the “Buyer Indemnifiable Losses”).
For purpose of determining under this Section 8.2(b) (x) whether a breach of any
representation or warranty has occurred and (y) the Losses suffered by Seller
Indemnitees as a result of such breach, the terms “material,” “Material Adverse
Effect” and words of similar import shall be disregarded wherever they appear in
such representation or warranty of any Buyer in this

 

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Agreement or, subject to any limitations on any Seller’s remedies for Losses set
forth therein, in any Transaction Document and given no effect. Buyer
Indemnifiable Losses and Seller Indemnifiable Losses, as the context requires,
are each sometimes referred to herein as “Indemnifiable Losses.”

SECTION 8.3 Limits on Indemnification.

(a) With respect to Seller Indemnifiable Losses the aggregate liability of
Sellers (collectively) to indemnify Buyer Indemnitees (collectively) from and
against any Seller Indemnifiable Losses shall not exceed an amount equal to
$3,300,000 (the “Cap”). Notwithstanding the foregoing, the Cap shall not apply
to Seller Indemnifiable Losses arising from (i) breaches of any of the
representations and warranties set forth in Section 3.10, Section 3.11 or
Section 3.17 or any of the Special Representations, (ii) matters indemnified
pursuant to Sections 8.2(a)(ii) through (vi), or (iii) fraud or intentional
misrepresentation. The liability, if any, of Sellers to indemnify Buyer
Indemnitees hereunder shall first be satisfied from the Escrow Funds, and only
if and to the extent the aggregate liability of Sellers (collectively) to
indemnify Buyer Indemnitees from and against Seller Indemnifiable Losses
hereunder exceeds the Escrow Funds Buyer Indemnitees shall be entitled to seek
funding of any Seller Indemnifiable Losses directly from the Sellers. With
respect to Buyer Indemnifiable Losses, the aggregate liability of Buyers
(collectively) to indemnify Seller Indemnitees (collectively) from and against
any Buyer Indemnifiable Losses shall not exceed the Cap. Notwithstanding the
foregoing, the Cap shall not apply to Buyer Indemnifiable Losses arising from
(i) breaches of any Buyer Special Representations or any of the representations
and warranties set forth in Section 4.4, (ii) matters indemnified pursuant to
Sections 8.2(b)(ii) through (iv), or (iii) fraud or intentional
misrepresentation.

(b) Sellers will not have any obligation to indemnify Buyer Indemnitees with
respect to any Seller Indemnifiable Losses until the aggregate of all such
Seller Indemnifiable Losses exceeds an amount equal to $660,000 (the “Basket”)
(at which point Sellers will be obligated to indemnify Buyer Indemnitees for
(but only for) such Seller Indemnifiable Losses in excess of the Basket);
provided, however, that no Seller will have any obligation to indemnify Buyer
Indemnitees with respect to individual Seller Indemnifiable Losses of less than
Ten Thousand ($10,000) (the “Threshold”) unless more than one Seller
Indemnifiable Loss, each less than the Threshold, arises from the same or
similar facts or circumstances and such Seller Indemnifiable Losses collectively
exceed the Threshold, in which case all such Seller Indemnifiable Losses shall
be indemnified by Sellers pursuant to the terms hereof. Notwithstanding the
foregoing, (A) neither the Basket or Threshold shall apply to Seller
Indemnifiable Losses arising from (i) breach of any Special Representations or a
breach of any of the representations and warranties set forth in Section 3.10,
(ii) matters indemnified pursuant to Sections 8.2(a)(ii) through (v), or
(iii) fraud or intentional misrepresentation and (B) the amount of the Basket
with respect to Buyer Indemnifiable Losses from matters indemnified pursuant to
Section 8.2(a)(vi) shall be an amount equal to $150,000. Buyers will not have
any obligation to indemnify any Seller Indemnitee with respect to any Buyer
Indemnifiable Losses until the aggregate of all such Buyer Indemnifiable Losses
exceeds the Basket (at which point Buyers will be obligated to indemnify Seller
Indemnitees for (but only for) Buyer Indemnifiable Losses in excess of the
Basket); provided, however, that Buyers will not have any obligation to
indemnify any Seller Indemnitee with respect to individual Buyer Indemnifiable
Losses of less

 

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than the Threshold unless more than one Buyer Indemnifiable Loss, each less than
the Threshold, arises from the same or similar facts or circumstances and such
Buyer Indemnifiable Losses collectively exceed the Threshold, in which case all
such Buyer Indemnifiable Losses shall be indemnified by Buyers pursuant to the
terms hereof. Notwithstanding the foregoing, neither Basket or Threshold shall
apply to Buyer Indemnifiable Losses arising from (i) breaches of any Buyer
Special Representations or any representations and warranties set forth in
Section 4.4, (ii) matters indemnified pursuant to Section 8.2(b)(ii) through
(iv) or (iii) fraud or intentional misrepresentation.

(c) Sellers shall have no obligation to indemnify Buyers from and against any
Seller Indemnifiable Losses arising out of the breach or inaccuracy of any of
the representations, warranties or covenants made herein that are subject to the
Standard Survival Period unless Buyers make a written claim within the Standard
Survival Period for the breach or inaccuracy that gives rise to such Seller
Indemnifiable Losses. Sellers shall have no obligation to indemnify Buyers from
and against any Seller Indemnifiable Losses arising out of the breach or
inaccuracy of any of the representations, warranties or covenants made herein
that are subject to the Extended Survival Period or any other longer survival
period unless Buyers make a written claim for the breach or inaccuracy that
gives rise to such Seller Indemnifiable Losses within the Extended Survival
Period or any other longer survival period.

(d) Buyers shall have no obligation to indemnify Sellers from and against any
Buyer Indemnifiable Losses arising out of the breach or inaccuracy of any of the
representations, warranties or covenants made herein that are subject to the
Standard Survival Period or any other longer survival period unless Sellers made
a written claim within the Standard Survival period or any other longer survival
period for the breach or inaccuracy that gives rise to such Buyer Indemnifiable
Losses.

(e) For the avoidance of doubt, it is agreed that if there is a breach of more
than one representation or warranty on account of the same facts or
circumstances, such breach shall give rise to full single indemnification as
provided by this Article 8, but shall not give rise to indemnification more than
once on account thereof. For further avoidance of doubt, it is agreed that no
Seller shall be liable for any Seller Indemnifiable Losses to the extent, but
only to the extent, that the same has been specifically accounted for in the
determination of the Actual Final Net Working Capital.

(f) Each Indemnified Party shall use commercially reasonable efforts and shall
cause their respective Affiliates to use their commercially reasonable efforts
to mitigate and otherwise minimize the Indemnifiable Losses to the maximum
extent reasonably possible upon and promptly after becoming aware of any event
which would reasonably be expected to give rise to any Indemnifiable Losses;
provided that the costs of such efforts shall be included in the determination
of the Losses indemnified hereunder if such efforts successfully mitigate, in
whole or in part, such Indemnifiable Losses. An Indemnified Party shall, at the
Indemnifying Party’s request, cooperate in the defense of any matter subject to
indemnification or contribution hereunder. Each Indemnified Party shall use
commercially reasonable efforts to collect any amounts available from any other
Person alleged to be responsible (including, without limitation, from any other
Person responsible pursuant to any warranty, representation and/or guarantee)
for any Indemnifiable Losses to the same extent that the Indemnified Party would
if such

 

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Indemnifiable Loss were not subject to indemnification hereunder; provided that
the costs of such efforts shall be included in the determination of the Losses
indemnified hereunder.

(g) The amount of any Indemnifiable Losses payable under Section 8.2 by the
Indemnifying Party shall be net of amounts actually recovered from any other
third party with indemnification or contribution obligations or from any other
Person responsible therefor (including, without limitation, from any other
Person responsible therefor pursuant to any warranty, representation and/or
guarantee). The Indemnified Party shall use commercially reasonable efforts to
promptly notify any potential third party indemnitor or contributor which may be
liable for any portion of such losses or claims. If an Indemnified Party
receives any amounts from any other third party with indemnification obligations
or from any other Person alleged to be responsible for any Indemnifiable Losses,
subsequent to an indemnification payment by any Indemnifying Party, then such
Indemnified Party shall promptly, and in any event within ten (10) Business Days
of its receipt of such amounts reimburse the Indemnifying Party for any payment
made or expense incurred by such Indemnifying Party in connection with providing
such indemnification payment up to the amount received by the Indemnified Party.

(h) The amount of any Indemnifiable Losses payable by Sellers pursuant to
Section 8.2(a) shall be net of any insurance proceeds actually received by any
Buyer pursuant to the insurance policies maintained by Sellers and pursuant to
which Sellers have named Buyers as additional insureds. Each of Buyers and
Sellers shall use commercially reasonable efforts to seek recovery for any such
insurance proceeds, provided that neither shall be required to incur any cost in
pursuing such proceeds. If an Indemnified Party receives any amounts with
respect to such insurance policies, for an Indemnifiable Loss subsequent to the
indemnification payment by an Indemnifying Party, with respect to such
Indemnifiable Loss, then such Indemnified Party shall promptly, and in any event
within ten (10) Business Days of its receipt of such amounts, reimburse the
Indemnifying Party for any payment made or expense incurred by such Indemnifying
Party in connection with providing such indemnification payment up to the amount
received by such Indemnified Party from such insurance proceeds.

(i) Except with respect to Third-Party Claims no Indemnifying Party shall be
obligated to indemnify an Indemnified Party under this Article 8 for any
consequential, incidental, indirect, special or punitive damages, lost profits,
or opportunity costs, diminution of value or similar items or damages or losses
calculated as a multiple of damages or as a multiple of earnings, profits,
contribution margin or similar items. Notwithstanding the foregoing, in the case
of matters indemnified pursuant to Section 8.2(a)(vi), an Indemnified Party
shall be entitled to seek damages for lost profits, diminution of value or
similar items or damages or losses calculated as a multiple of damages or as a
multiple of earnings, profits, contribution margin or similar items for the
period of the event giving rise to the indemnification obligation.

(j) After the Closing, this Article 8 will provide the exclusive remedy of all
Indemnified Parties for any misrepresentation, breach of warranty, covenant or
other agreement, other than for (i) remedies of specific performance, injunction
and other equitable relief and (ii) fraud or intentional misrepresentation.

 

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SECTION 8.4 Matters Involving Third Parties.

(a) If subsequent to the Closing any third party shall notify an Indemnified
Party with respect to any claim, complaint, or the commencement of any audit,
investigation, action or proceeding (a “Third Party Claim”) which may give rise
to a claim for indemnification against the Indemnifying Party under this
Article 8, then the Indemnified Party shall promptly notify the Indemnifying
Party thereof in writing of the Third Party Claim together with a statement of
any available information regarding such Third Party Claim; provided, however,
that the failure to so notify the Indemnifying Party shall relieve the
Indemnifying Party from liability hereunder with respect to such Third Party
Claim only to the extent that such failure to notify the Indemnifying Party
materially prejudices the Indemnifying Party with respect to such Third Party
Claim.

(b) The Indemnifying Party will have the right to assume the defense of such
Third Party Claim with counsel of the Indemnifying Party’s choice, such counsel
subject to Indemnified Party’s consent (which consent shall not be unreasonably
withheld, conditioned or delayed), so long as (i) the Indemnifying Party
notifies the Indemnified Party, within thirty (30) days after the Indemnified
Party has given notice of the Third Party Claim to the Indemnifying Party that
the Indemnifying Party is assuming the defense of such Third Party Claim and
will irrevocably indemnify the Indemnified Party against such Third Party Claim
in its name or, if necessary, in the name of the Indemnified Party in accordance
with the terms and limitations of this Article 8, (ii) the Indemnifying Party
provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend the Indemnified Party and fulfill its indemnification obligations
hereunder, (iii) the applicable Third Party Claim involves only money damages,
does not involve a class action, allegations of criminal activities, or
violations of the Racketeering Influenced and Corrupt Organization Act, does not
arise from a qui tam or similar whistle blower claim, and does not seek an
injunction or other equitable relief, and (iv) the Indemnifying Party conducts
the defense of the Third Party Claim in a commercially reasonable and diligent
manner. In the event the Indemnifying Party declines or fails to assume the
defense of a Third Party Claim within the time and as prescribed in this
Section 8.4(b), then the Indemnified Party shall have the right to conduct such
defense in good faith and may employ counsel reasonably acceptable to the
Indemnifying Party to represent it or defend it against such Third Party Claim,
and the Indemnifying Party shall pay the reasonable and documented fees and
disbursements of such counsel in a timely manner, but the Indemnified Party
shall be prohibited from compromising or settling the claim without the prior
written consent of the Indemnifying Party, such consent not to be unreasonably
withheld or delayed. In the event that the Indemnifying Party does deliver
notice as prescribed in this Section 8.4(b) and thereby elects to conduct the
defense of the subject Third Party Claim, the Indemnified Party will cooperate
with and make available to the Indemnifying Party such assistance and materials
as the Indemnifying Party may reasonably request, all at the expense of the
Indemnifying Party. Regardless of which party(ies) hereto defend(s) such claim,
the other party(ies) hereto shall have the right, at its(their) expense, to
participate in the defense assisted by counsel of its own choosing. The
Indemnifying Party or the Indemnified Party (as the case may be) shall at all
times use reasonable efforts to keep the Indemnifying Party or Indemnified Party
(as the case may be) reasonably apprised of the status of the defense of any
Third Party Claim the defense of which it is maintaining and the

 

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Indemnifying Party and Indemnified Party shall cooperate in good faith with each
other with respect to the defense of any such Third Party Claim.

(c) So long as the conditions set forth in Section 8.4(b) are and remain
satisfied, then (i) the Indemnifying Party may conduct the defense of the Third
Party Claim in accordance with Section 8.4(b), (ii) the Indemnified Party may
retain separate co-counsel at its sole cost and expense and (iii) the
Indemnifying Party will not, without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld, conditioned
or delayed), consent to the entry of any judgment with respect to the matter, or
enter into any settlement which either (i) imposes an injunction or other
equitable relief upon the Indemnified Party, (ii) does not include a provision
whereby the plaintiff or claimant in the matter unconditionally releases the
Indemnified Party and its officers, directors, employees and Affiliates from all
liability with respect thereto, (iii) contains any admission or statement
suggesting any wrongdoing or liability on behalf of the Indemnified Party; or
(iv) results in any damages, costs, expenses or liabilities from such
settlement, compromise or consent being paid by any Indemnified Party for which
the Indemnified Party does not receive full indemnification hereunder.

SECTION 8.5 Tax Treatment of Indemnity Payments. Sellers and Buyers shall treat
any payments that Buyers and Sellers receive pursuant to this Article 8 as an
adjustment to and refund of the Purchase Price for federal Tax purposes, unless
a final determination (which shall include the execution of a Form 870-AD or
successor form) with respect to Buyers and Sellers causes such payment not to be
treated as an adjustment to or refund of the Purchase Price for federal Tax
purposes.

SECTION 8.6 GST Gross Up. If any payment made by Sellers or Buyers pursuant to
this Article 8 is deemed by the Excise Tax Act (Canada) to include GST, or is
deemed by any applicable provincial or territorial legislation to include a
similar value added or multi-staged tax, the amount of such payment shall be
increased accordingly.

ARTICLE 9

TAX MATTERS

SECTION 9.1 Transfer Taxes Elections. All transfer, documentary, GST/HST, value
added, sales, use, stamp, registration and other similar Taxes on, and all
conveyance fees, recording charges, and other fees and charges (including any
penalties and interest) resulting from, the transactions contemplated by this
Agreement (collectively, the “Transfer Taxes”) to the extent recoverable by a
Buyer shall be borne by Buyers. All other Transfer Taxes shall be borne one
hundred percent (100%) by Sellers. Buyers and Sellers, as required, will prepare
and file any affidavits or returns required in connection with the foregoing at
their own cost and expense. Buyers shall provide Sellers with a purchase
exemption certificate or its equivalent to support any reasonable exemption from
Transfer Taxes claimed in respect of the Acquired Assets.

SECTION 9.2 HST Election. At the Closing, Canadian Buyer and Air Guard Canada
shall execute jointly an election under Section 167 of the Excise Tax Act
(Canada) to

 

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have the sale of the Acquired Assets purchased from Air Guard Canada take place
on a GST/HST-free basis under Part IX of the Excise Tax Act (Canada). Canadian
Buyer shall file the election in the manner and within the time prescribed by
the relevant legislation. Notwithstanding anything to the contrary in this
Agreement, Buyers shall indemnify and hold Air Guard Canada harmless in respect
of any GST, penalties, interest and other amounts which may be assessed against
Air Guard Canada as a result of the transactions under this Agreement not being
eligible for such election or as a result of Canadian Buyer’s failure to file
the election within the prescribed time.

SECTION 9.3 Canadian Tax Elections. In accordance with the requirements of the
Income Tax Act (Canada), the regulations thereunder, the administrative practice
and policy of the Canada Revenue Agency and any applicable equivalent or
corresponding provincial or territorial legislative, regulatory and
administrative requirements, where applicable, with respect to each purchase and
sale of Acquired Assets, Buyers and the applicable Seller shall make and file,
in a timely manner:

(a) A joint election to have section 22 of the Income Tax Act (Canada), and any
equivalent or corresponding provision under applicable provincial or territorial
tax legislation, apply in respect of the Accounts Receivable of Air Guard Canada
included in the Acquired Assets and shall designate therein that portion of the
Air Guard Canada Purchase Price allocated to such Accounts Receivable under
Section 2.9 as the consideration paid by Canadian Buyer to Air Guard Canada.

(b) If requested by either party, Sellers and Buyer shall file any elections or
amended elections in prescribed form (or such other form as such party may
reasonably request) and within the prescribed time limits pursuant to proposed
section 56.4 of the Income Tax Act (Canada) as it reads on the date of this
Agreement or any amended or successor provision hereto, and any analogous
provision of provincial or territorial Tax legislation.

(c) Canadian Buyer and Air Guard Canada shall prepare and file their respective
Tax Returns in a manner consistent with the aforesaid elections, provided such
manner is in accordance with Applicable Law.

(d) If a party to this Agreement fails to file its Tax Returns in a manner
consistent with the aforesaid elections, provided such manner is in accordance
with Applicable Law, it shall indemnify and save harmless the other party or
parties in respect of any resulting Taxes and any resulting legal or accounting
expenses paid or incurred by the other party or parties.

SECTION 9.4 Pre-Closing Taxes; Elections. Sellers shall be liable for all Taxes
of or relating to the Acquired Assets or the Business for any period or portion
thereof ending on or prior to the Closing Date. No new elections with respect to
Taxes or any change in current elections with respect to Taxes, affecting the
Acquired Assets or Assumed Liabilities shall be made after the date of this
Agreement without Buyer’s consent.

SECTION 9.5 Pre-Closing Withholding and Reporting. Sellers shall be responsible
for and will perform all Tax withholding, payment and reporting duties with
respect

 

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to any wages and other compensation to any employee of Sellers in connection
with the operation or conduct of the Business for any period or portion thereof
ending on or prior to the Closing Date. Sellers and Buyers agree to utilize, or
cause their respective Affiliates to utilize, the standard procedures set forth
in Revenue Procedure 2004-53, 2004-2 C.B. 320 with respect to wage reporting for
the Hired Employees subject to United States Tax.

SECTION 9.6 Cooperation. Each of the Buyers and each of the Sellers shall
reasonably cooperate, and shall cause their respective Affiliates, and their and
their Affiliates’ respective officers, employees, agents, auditors and
representatives to reasonably cooperate, in connection with the preparation and
filing of all Tax Returns, any other returns, reports and forms relating to
Taxes, audit examinations and any administrative or judicial proceedings
relating to Taxes, and as necessary or desirable in order to minimize any
withholding Taxes imposed on the transactions contemplated by this agreement,
including the furnishing or making available to each other of records,
information, personnel, powers of attorney or other materials necessary or
helpful for the preparation and filing of all Tax Returns and any other returns,
reports and forms relating to Taxes, the conduct of audit examinations, the
resolving of or the defense of any administrative or judicial proceedings
relating to Taxes.

Each Buyer and each Seller recognizes that the others may need access, from time
to time, after the Closing Date, to certain accounting and Tax records and
information held by it, to the extent such records and information pertain to
events occurring prior to the Closing Date; therefor, each Buyer and each Seller
agrees, (a) to properly retain and maintain such records and (b) to allow each
of the other parties hereto and its respective agents, auditors and
representatives, at times and dates mutually acceptable to the parties hereto,
to inspect, review and make copies of such records as such party or its agents,
auditors or representatives may deem necessary or appropriate from time to time,
such activities to be conducted during normal business hours and at the expense
of the requesting party.

ARTICLE 10

MISCELLANEOUS

SECTION 10.1 Entire Agreement; Assignment. This Agreement (including the Seller
Disclosure Schedule, the Updated Disclosures (if any and as permitted pursuant
to Section 5.10) and the other exhibits and schedules hereto), the Transaction
Documents and, until Closing the Confidentiality Agreement, (a) constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof and supersede all other prior agreements and understandings
both written and oral between the parties hereto with respect to the subject
matter hereof and thereof; and (b) shall not be assigned by operation of law or
otherwise without the written consent of all the parties hereto or thereto (as
applicable); provided, however, that (i) Buyers may, without any consent, assign
any or all of their rights and obligations under this Agreement to any affiliate
of Buyers, but no such assignment shall relieve Buyers of their obligations
hereunder if such assignee does not perform such obligations, and (ii) Buyers
may, without any consent, assign any or all of their rights, but not their
obligations, hereunder to any of their financing sources as collateral security.

 

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SECTION 10.2 Severability. To the extent any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or
unenforceable in any jurisdiction, with respect to such jurisdiction, the
remainder of this Agreement and the application of such provision to other
Persons or circumstances shall not be affected thereby and to such end the
provisions of this Agreement are agreed to be severable. Any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by Applicable Law, the parties hereto waive any provision of law that renders
any such provision invalid or unenforceable in any respect.

SECTION 10.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by
facsimile, by nationally recognized overnight courier or by registered or
certified mail (postage prepaid, return receipt requested) to each other party
hereto as follows:

 

if to Buyers [or Zep]:

   Amrep, Inc.    1310 Seaboard Industrial Boulevard, NW    Atlanta, GA 30318   
Telecopier: (404) 367-4083    Attention: Mark R. Bachmann

with a copy to:

   Hunton & Williams LLP    Bank of America Plaza    600 Peachtree Street, N.E.,
Suite 4100    Atlanta, GA 30308    Telecopier: (404) 602-9012    Attention: G.
Roth Kehoe II

if to any Seller or Watco to:

   c/o Watco International    Holdings Corp.    64 Avenue of Industry   
Waterbury, CT 06705    Telecopier: (203) 805-0630    Attention: Michael Rohl

with copies to:

   Wind Point Partners    676 N. Michigan Avenue    Chicago, IL 60611   
Telecopier: (312) 255-4820    Attention: Michael L. Nelson and   

 

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   Reed Smith LLP    10 S. Wacker Drive, 40th Floor    Chicago, IL 60606   
Telecopier: (312) 207-6400    Attention:         Seth M. Hemming   
                          Michelle L. Moore

if to WPP V or WPP EAP to:

   Wind Point Partners    676 N. Michigan Avenue    Chicago, IL 60611   
Telecopier: (312) 255-4820    Attention: Michael L. Nelson

with copies to:

   Reed Smith LLP    10 S. Wacker Drive, 40th Floor    Chicago, IL 60606   
Telecopier: (312) 207-6400    Attention:         Seth M. Hemming   
                          Michelle L. Moore

or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.

SECTION 10.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
choice-of-laws or conflicts-of-laws provisions thereof, or rule (whether the
State of Georgia or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware.

SECTION 10.5 Construction. The parties hereto have jointly participated in the
negotiation and drafting of this Agreement. In the event of an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumptions or burdens of
proof shall arise favoring any party hereto by virtue of the authorship of any
of the provisions of this Agreement. Each defined term used in this Agreement
has a comparable meaning when used in its plural or singular form. Each
gender-specific term used herein has a comparable meaning whether used in a
masculine, feminine or gender-neutral form. As used in this Agreement, the word
“including” and its derivatives means “without limitation” and its derivatives
and shall be deemed to be for purposes of identifying only one or more of the
possible alternatives, the word “or” is not exclusive and the words “herein,”
“hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole.
As used in this Agreement, the term “knowledge of Sellers,” “Knowledge of
Sellers,” “Sellers’ Knowledge”, “Seller’s Knowledge,” “knowledge of Seller” or
any similar phrases, shall mean the actual knowledge of Michael Rohl, Robert
Potvin, Ron Lombardi, Mark Sargent, John Wishney and Michael Nelson and such
knowledge and awareness as any such person should have had after reasonable
inquiry of the employees who directly report to such person. The section
headings contained in this Agreement are inserted for convenience of reference
only and

 

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shall not affect in any way the meaning or interpretation of this Agreement.
Reference in this Agreement to any legal term for any law, action, remedy,
method of judicial proceeding, legal document, legal status, court, official or
any other legal concept or thing shall in respect of any jurisdiction other than
the United States be deemed to include that legal concept or thing in that other
jurisdiction which most nearly approximates that United States legal term (in
addition to any other analogous legal concept or term specified). The schedules
(including the Seller Disclosure Schedule) and exhibits hereto and any Updated
Disclosures, as permitted pursuant to Section 5.10, identified in this Agreement
are incorporated herein by reference and made a part hereof. Any capitalized
terms used in any schedule (including the Seller Disclosure Schedule) or exhibit
attached hereto or any Updated Disclosure and not otherwise defined therein
shall have the meanings set forth in this Agreement (or, in the absence of any
ascribed meaning, the meaning customarily ascribed to any such term in Sellers’
industry or in general commercial usage). Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person. All references to dollars (or
the symbol “$”) contained herein shall be deemed to refer to United States
dollars.

SECTION 10.6 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and its successors and permitted
assigns and, except as provided in Section 5.6 and Article 8, nothing in this
Agreement express or implied is intended to or shall confer upon any other
Person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.

SECTION 10.7 Compliance with Bulk Sales Laws. Each party hereto hereby waives
compliance by the parties hereto with the “bulk sales,” “bulk transfers” or
similar Applicable Laws and all other similar Applicable Laws in all applicable
jurisdictions in respect of the transactions contemplated by this Agreement;
provided that Sellers shall indemnify and hold Buyers harmless for the failure
to comply with the Bulk Sales Act (Ontario) or any similar Law in any Canadian
jurisdiction wherein any of the Acquired Assets are located.

SECTION 10.8 Cooperation Following the Closing. Following the Closing, each
party hereto shall deliver to the other party such further information and
documents and shall execute and deliver to the other party such further
instruments and agreements as any other party shall reasonably request to
consummate or confirm the transactions provided for herein, to accomplish the
purpose hereof or to assure to any other party the benefits hereof.

SECTION 10.9 Personal Liability. Except with respect to the Non-Competition
Agreements, this Agreement shall not create or be deemed to create or permit any
personal liability or obligation on the part of any direct or indirect
stockholder of any Seller or Buyers or any officer, director, manager, member,
employee, agent, representative or investor of any party hereto.

SECTION 10.10 Expenses. Except as otherwise explicitly provided for herein, each
of the parties hereto will bear all legal, accounting, and other fees and
expenses incurred by it or on its behalf in connection with the transactions
contemplated by this Agreement, whether or not such transactions are
consummated.

 

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SECTION 10.11 Disclosure Generally. Of and to the extent any information
required to be furnished in any section of the Seller Disclosure Schedule is
expressly set forth in this Agreement or is disclosed in any section of the
Seller Disclosure Schedule or in any Updated Disclosures, such information shall
be deemed to be included in all sections of the Seller Disclosure Schedule or
Updated Disclosures, in which the information is required to be included to the
extent that such other disclosure is reasonably apparent on its face.

SECTION 10.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement. It is the express intent of the
parties hereto to be bound by the exchange of signatures on this Agreement via
facsimile or electronic mail via the portable document format (PDF). A facsimile
or other copy of a signature shall be deemed an original.

SECTION 10.13 Arbitration; Waiver of Jury Trial.

(a) Arbitration. Each party to this Agreement hereby irrevocably agrees that,
except as expressly provided in Article 2 Article 8 or Section 10.13(b) and
except the enforcement (including any equitable relief or specific enforcement)
of any of the covenants contained in Article 5 hereof, any legal action or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby, shall be resolved by binding arbitration (“Arbitration”) in
accordance with the following procedures:

(i) Initiation of the Arbitration. The party or parties on one side of the
dispute(s) (collectively the “Claimant”) may initiate the Arbitration by sending
to the party or parties on the other side of the dispute(s) (collectively, the
“Respondent”) written notice identifying the matter(s) in dispute and invoking
the procedures of this Section 10.13(a) (the “Demand”). The Demand shall include
a brief statement setting forth the nature of the dispute(s), the amount in
controversy, if any and if known, and the remedy sought. Within thirty (30) days
of receipt of the Demand, the Respondent shall submit a statement (the
“Answer”), that shall set forth the Respondent’s response(s) to the Claimant’s
claim(s) and any counterclaims asserted by the Respondent, setting forth the
nature and amount of such counterclaim(s) if any and if known, and the remedy
sought by the Respondent.

(ii) Selection of the General Arbitrators. Within five (5) Business Days after
the due date of the Answer (the “Answering Date”), the parties shall confer and
make a bona fide attempt to agree upon three (3) independent arbitrators to whom
to submit the matter in dispute for final and binding arbitration (the “General
Arbitrators”). The General Arbitrators shall be individuals who are either
attorneys or business persons experienced with merger and acquisition
transactions of the type set forth in this Agreement. If the parties cannot
agree upon three arbitrators, the arbitrators they do agree upon shall select
the remaining member or members of the panel. In the event that, on or prior to
the fifteenth (15th) Business Day following the Answering Date, the parties
cannot agree upon at least one General Arbitrator, the parties shall submit the
Demand and Answer, along with required fees, to the American Arbitration
Association (“AAA”), and a three member neutral panel of General Arbitrators who
have familiarity and experience with merger and acquisition transactions of the
type set forth in this

 

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Agreement shall be selected in accordance with the Commercial Arbitration Rules
of the AAA, or any successor thereto, in effect at the time the relevant
dispute, controversy, difference or claim is submitted for arbitration pursuant
to this Agreement (the “AAA Rules”). However chosen, the parties shall use
commercially reasonable efforts to engage the General Arbitrators within thirty
(30) days of the Answering Date.

(iii) Rules of Procedure. The Arbitration proceeding shall be conducted in
accordance with the AAA Rules, except as modified in this Section 10.13(a)
(collectively, the “Arbitration Rules”).

(iv) Discovery. The parties shall have twenty (20) Business Days following the
date the third and last General Arbitrator is engaged (the “Arbitrator
Engagement Date”) to serve written document requests and not more than ten
(10) interrogatories (including subparts). Responses to written discovery shall
be due thirty (30) Business Days after service on the party(ies) from whom such
discovery is sought. Discovery shall be conducted in accordance with the
Arbitration Rules of the AAA, or any successor thereto, in effect at the time
the relevant dispute, controversy, difference or claim is submitted for
arbitration pursuant to this Agreement. The party(ies) on each side of the
dispute shall have the right to take up to ten (10) depositions, with each
deposition limited to seven hours of testimony. Subject to the availability of
the deponent, such depositions shall be completed within three (3) months of the
Arbitrator Engagement Date. The General Arbitrators shall determine the scope
and order of discovery available to the parties, and for good cause shown by the
requesting party(ies), can modify the discovery schedule set forth herein.

(v) The Arbitration Hearing. At a date that is mutually convenient to the
General Arbitrators and the parties, but commencing no later than thirty
(30) days following the close of discovery, the General Arbitrators shall
commence the arbitration hearing (the “Arbitration Hearing”). The Arbitration
Hearing shall take place at a location mutually selected by the parties or,
absent agreement, chosen by the General Arbitrators. The Arbitration Hearing
need not run for consecutive days but must be completed within sixty (60) days
following commencement of the Arbitration Hearing. At the Arbitration Hearing,
the parties to this Agreement shall follow the Federal Rules of Evidence, and
the General Arbitrators are bound to apply such rules of evidence, unless the
parties mutually agree to deviate from any rule in writing in advance of the
Arbitration Hearing. The General Arbitrators are also bound to follow the
substantive laws of Delaware applicable to the issues in the case, without
regard to conflict of law principles. Upon a showing of good cause by the
requesting party(ies), the General Arbitrators, using their reasonable
discretion, shall determine the need to modify the time limits set forth in this
clause (v).

(vi) Form of Decision. The General Arbitrators shall render a reasoned award in
writing, setting forth their decision, the basis therefor, and the relief to be
granted to the party(ies) on each side of the dispute (the “Award”), no later
than the thirty (30) days following the last day of the Arbitration Hearing. In
no event shall the General Arbitrators award punitive damages to any of the
parties involved in the dispute. The General Arbitrators shall be allowed to
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Arbitrators’ sole discretion, require the posting of a bond. The General
Arbitrators’ decision shall be a final and binding determination of the dispute.
Judgment upon the Award may be entered in any court having jurisdiction and
venue over the party(ies) against whom the execution is sought, or in any
jurisdiction in which such party’s (parties’) assets are located.

(vii) Miscellaneous Provisions.

(A) Payment of Arbitration Expenses. The parties shall pay the General
Arbitrators’ fees and expenses while the Arbitration is pending in accordance
with the AAA Rules subject to clause (C) below.

(B) Submission to Jurisdiction. To the extent any party seeks to challenge or
dispute the scope, jurisdiction, conduct or result of the Arbitration, or
requires judicial intervention in aid or furtherance of the Arbitration, such
party(ies) shall bring such action in the state or federal court located in the
state of Delaware. With respect to any such action, the parties irrevocably
submit to the exclusive jurisdiction of the state and federal courts located in
the state of Delaware; irrevocably and unconditionally waive any objection to
the laying of venue of any such action in the state or federal courts located in
the state of Delaware; and hereby further irrevocably and unconditionally agree
not to plead or claim that any such action in such court has been brought in an
inconvenient forum or to raise any similar defense or objection.

(C) Attorneys Fees and Costs. The prevailing party in the Arbitration shall be
entitled to payment of its reasonable out of pocket costs and expenses
(including reasonable and documented fees and disbursements of counsel and other
professionals). To the extent the General Arbitrators award less than all of the
relief requested, the General Arbitrators shall award the reasonable out of
pocket costs and expenses of a party in proportion to the extent such party
prevailed in the Arbitration. If a party fails to proceed with the Arbitration,
unsuccessfully challenges the Award, or fails to comply with the Award, the
party(ies) on the other side of the dispute shall be entitled to recover
its(their) costs of suit including reasonable attorneys’ fees for having to
compel arbitration or defend or enforce the Award.

(b) Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY LAW, EACH OF THE SELLERS
AND BUYERS HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY IRREVOCABLY AND
UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTION DOCUMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR THERETO IN
CONNECTION HEREWITH OR THEREWITH. EACH OF THE SELLERS AND BUYERS HEREBY
EXPRESSLY ACKNOWLEDGE THAT THIS WAIVER

 

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IS A MATERIAL INDUCEMENT FOR BUYERS AND SELLERS TO ENTER INTO THIS AGREEMENT.

SECTION 10.14 Zep Guaranty. Zep does hereby fully, absolutely, unconditionally
and irrevocably guaranty the timely payment when due and owing of the
obligations of the Buyers (i) under Sections 2.7, 2.8 and 2.10 hereof;
(ii) under Article 8 hereof and (iii) under the other Transaction Documents, in
each case, (a) including all amounts Buyers are obligated to pay hereunder or
the Transaction Documents in the event Buyers fail to perform their obligations
thereunder or hereunder or are otherwise liable for damages pursuant thereto and
(b) to the extent not paid by Buyers at such time (collectively, the
“Obligations”); provided that nothing herein shall cause Zep to be a Buyer or to
otherwise own any Acquired Asset or assume any Assumed Liability.

(a) The obligations of Zep in this Section 10.14 are primary and not as surety
only, and this Guarantee constitutes a guarantee of payment when due and owing,
and not merely of collection. Zep expressly waives any legal obligations, duty
or necessity for the Sellers to proceed first against Buyers or to exhaust any
remedy it may have against Buyers. The obligations of Zep hereunder shall remain
in full force and effect until all Obligations have been performed in full,
without regard to, and shall not be released, discharged or in any way affected
to the extent permitted by applicable law (whether or not Zep shall have any
knowledge or notice thereof):

(i) any waiver, consent, change, extension, or indulgence in respect of any
Obligation;

(ii) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation, dissolution or similar proceeding with respect to
Buyers or Zep;

(iii) any assignment or other transfer of this Agreement or any Transaction
Document by the Sellers or Buyers;

(iv) any lien, charge, restriction or encumbrance affecting Buyers;

(v) any sale or other disposition of all or any part of the capital stock or
assets of Buyers;

(vi) any payment by Buyers which is received by Buyers’ trustee in bankruptcy;
or

(vii) any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor (other than payment in full of the
Obligations).

Zep unconditionally waives, to the extent permitted by applicable law, notice of
any of the matters referred to in this Section 10.14, all notices which may be
required by statute, rule of law or otherwise to preserve any rights against Zep
hereunder, including, without limitation, any demand, proof or notice of
nonpayment of any sums payable under this Agreement or any

 

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Transaction Document (including, without limitation, any indemnity payment), any
right to the enforcement, assertion or exercise of any right, remedy, power or
privilege under or in respect of any of the Obligations, any requirement of
diligence and any requirement to mitigate the damages resulting from a breach of
or default under this Agreement or the Transaction Documents by Buyers. All of
the Obligations shall conclusively be deemed to have been created, contracted or
incurred in reliance upon this Guarantee and all dealings between the Sellers
and Buyers shall likewise be conclusively presumed to have been had or
consummated in reliance upon this Guarantee.

(b) Zep agrees that the Sellers may at any time and from time to time, either
before or after the maturity thereof, without notice to or further consent of
Zep, extend the time of payment of, exchange or surrender any collateral for, or
renew any of the Obligations, and may also make any agreement with Buyers for
the extension, renewal, payment, compromise, discharge or release thereof, in
whole or in part, or for any modification or waiver of the terms thereof or of
any agreement between Sellers and Buyers or any such other Person, without in
any way impairing or affecting the provisions of this Section 10.14.

(c) Zep agrees to pay on demand all reasonable fees and out-of-pocket expenses
(including the reasonable fees and expenses of the Sellers’ counsel) in any way
relating to the enforcement of this Section 10.14 against Zep or the protection
of the rights provided hereunder; provided, that (i) Zep shall not be liable for
any such fees and expenses of the Sellers if no payment under this Guarantee is
or was at such time due and owing and (ii) Zep shall have no liability to pay
any such fees and expenses of Sellers if such expenses would not have been
required to be paid by Buyers with respect to the enforcement of their
obligations, or the rights and remedies of the Sellers, hereunder or under the
Transaction Documents.

(d) This Section 10.14 shall remain in full force and effect and be binding upon
Zep and its successors and assigns until all of the Obligations have been
satisfied in full. If any of the present or future Obligations are guaranteed by
any Persons in addition to Zep, the death, release or discharge, in whole or in
part, or the bankruptcy, liquidation or dissolution of one or more of them shall
not discharge or affect the liabilities of Zep under this Section 10.14.

(e) No failure to exercise and no delay in exercising, on the part of Sellers,
any right, remedy, power or privilege provided for in this Section 10.14 shall
operate as a waiver thereof, nor shall any single or partial exercise by Sellers
of any right, remedy, power or privilege hereunder preclude any other or future
exercise of any such right, remedy, power or privilege. Each and every right,
remedy, power and privilege granted to Sellers under this Section 10.14 or
allowed to it by Applicable Law shall be cumulative and not exhaustive of any
other, and may be exercised by Sellers from time to time.

(f) ZEP ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS
SECTION 10.14 IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, IT HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS SECTION 10.14. ZEP

 

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CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PERSON WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) IT
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) IT MAKES
SUCH WAIVER VOLUNTARILY AND (iv) THIS WAIVER AND THE CERTIFICATIONS CONTAINED
HEREIN HAVE INDUCED THE SELLERS TO ENTER INTO THE AGREEMENT.

(g) Zep (i) irrevocably submits itself to the personal jurisdiction of any
federal or state court of appropriate jurisdiction that presides in New Castle
County, Delaware, as well as to the jurisdiction of all courts to which an
appeal may be taken from such courts, in any suit, action or proceeding arising
out of or relating to this Guarantee or any facts and circumstances leading to
its execution or performance, (ii) agrees that all claims in respect of such
suit, action or proceeding must be brought, heard and determined exclusively in
such courts, (iii) agrees that it shall not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from such courts,
(iv) agrees not to bring any action or proceeding arising out of or relating to
this Section 10.14 in any other court and (v) waives any defense of inconvenient
forum to the maintenance of any suit, action or proceeding so brought.

(h) Zep agrees to waive any bond, surety or other security that might be
required of any other party with respect to any action, suit or proceeding,
including any appeal thereof.

[signatures on following pages]

 

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IN WITNESS WHEREOF, each of the parties hereto has caused this Asset Purchase
Agreement to be duly executed on its behalf as of the day and year first above
written.

 

WATERBURY COMPANIES, INC. By:   /s/ Michael Rohl   Name:   Michael Rohl   Title:
  Chairman of the Board, Chief Executive Officer and President

 

AIR GUARD CONTROL (CANADA) LIMITED By:   /s/ Michael Rohl   Name:   Michael Rohl
  Title:   Chairman of the Board, Chief Executive Officer and President

 

AIR GUARD CONTROL CORPORATION By:   /s/ Michael Rohl   Name:   Michael Rohl  
Title:   Chairman of the Board, Chief Executive Officer and President

Signature pages to Asset Purchase Agreement

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AMREP, INC. By:   /s/ Mark R. Bachmann   Name:   Mark R. Bachmann   Title:  
Executive Vice President and Chief Financial Officer

 

AMREP IP HOLDINGS, LLC By:   /s/ Mark R. Bachmann   Name:   Mark R. Bachmann  
Title:   Executive Vice President and Chief Financial Officer

 

ACUITY HOLDINGS, INC. By:   /s/ Mark R. Bachmann   Name:   Mark R. Bachmann  
Title:   Executive Vice President, Chief Financial Officer

Signature pages to Asset Purchase Agreement

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Solely with respect to Section 5.9 hereof:

 

WATCO INTERNATIONAL HOLDINGS CORP.

By:   /s/ Michael Rohl Name:   Michael Rohl Title:   Chief Executive Officer and
President

WIND POINT PARTNERS V, L.P.

 

By: Wind Point Investors V, L.P.

Its: General Partner

By:   /s/ Nathan Brown Name:   Nathan Brown Its: Managing Member By:   /s/
Robert Cummings Name:   Robert Cummings Its: Managing Member

WIND POINT EXECUTIVE ADVISOR PARTNERS, L.P.

 

By: Wind Point Investors V, L.P.

Its: General Partner

By:   /s/ Nathan Brown Name:   Nathan Brown Its: Managing Member By:   /s/
Robert Cummings Name:   Robert Cummings Its: Managing Member

Signature pages to Asset Purchase Agreement

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Solely with respect to Section 3.14 hereof:

 

ZEP INC.

By:   /s/ Mark R. Bachmann Name:   Mark R. Bachmann Title:   Executive Vice
President and Chief Financial Officer

Signature pages to Asset Purchase Agreement

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EXHIBIT A

FORM OF ESCROW AGREEMENT

(The Registrant will furnish supplementally a copy of this exhibit to the
Commission upon request)

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EXHIBIT B

NET WORKING CAPITAL CALCULATIONS

(The Registrant will furnish supplementally a copy of this exhibit to the
Commission upon request)

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

EXHIBIT C

FINANCIAL INFORMATION

(The Registrant will furnish supplementally a copy of this exhibit to the
Commission upon request)

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EXHIBIT D

EMPLOYEES

(The Registrant will furnish supplementally a copy of this exhibit to the
Commission upon request)

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EXHIBIT E

BUYERS’ CLOSING CERTIFICATE

(The Registrant will furnish supplementally a copy of this exhibit to the
Commission upon request)

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

EXHIBIT F

TRANSITION SERVICES AGREEMENT

(The Registrant will furnish supplementally a copy of this exhibit to the
Commission upon request)

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EXHIBIT G

IP LICENSE AGREEMENT

(The Registrant will furnish supplementally a copy of this exhibit to the
Commission upon request)

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EXHIBIT H

SELLER’S CLOSING CERTIFICATE

(The Registrant will furnish supplementally a copy of this exhibit to the
Commission upon request)

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EXHIBIT I

GUARANTY BY WATCO

(The Registrant will furnish supplementally a copy of this exhibit to the
Commission upon request)