EX-10.1



 







Exhibit 10.1




ASSET PURCHASE AGREEMENT




BY AND AMONG




ULTRA PREMIUM OILFIELD SERVICES, LTD.,




NS GROUP, INC.,




FISHING TOOLS SPECIALTY, L.P., AND




WAYNE D. GILLIAM, JR.




DATED AS OF JULY 21, 2006




 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	ARTICLE I DEFINITIONS	 	 	1	 
	 
	 	1.1	 	“Accountant	 	 	1	 
	 
	 	1.2	 	“Accounts Payable	 	 	1	 
	 
	 	1.3	 	“Accounts Receivable	 	 	1	 
	 
	 	1.4	 	“Action”	 	 	1	 
	 
	 	1.5	 	“Affiliate”	 	 	1	 
	 
	 	1.6	 	“Aggregate Consideration”	 	 	2	 
	 
	 	1.7	 	“Agreement”	 	 	2	 
	 
	 	1.8	 	“Assumed Contracts”	 	 	2	 
	 
	 	1.9	 	“Assumed Liabilities”	 	 	2	 
	 
	 	1.10	 	“Balance Sheet”	 	 	2	 
	 
	 	1.11	 	“Business”	 	 	2	 
	 
	 	1.12	 	“Business Day”	 	 	2	 
	 
	 	1.13	 	“Buyer”	 	 	2	 
	 
	 	1.14	 	“Buyer Indemnified Persons”	 	 	2	 
	 
	 	1.15	 	“Closing”	 	 	2	 
	 
	 	1.16	 	“Closing Date”	 	 	2	 
	 
	 	1.17	 	“Closing Net Working Capital	 	 	2	 
	 
	 	1.18	 	“COBRA”	 	 	2	 
	 
	 	1.19	 	“Code”	 	 	2	 
	 
	 	1.20	 	“Contract”	 	 	2	 
	 
	 	1.21	 	“Covenantor”	 	 	2	 
	 
	 	1.22	 	“D&T”	 	 	3	 
	 
	 	1.23	 	“December Net Working Capital”	 	 	3	 
	 
	 	1.24	 	“Debt”	 	 	3	 
	 
	 	1.25	 	“Effective Time”	 	 	3	 
	 
	 	1.26	 	“Employment Agreement”	 	 	3	 
	 
	 	1.27	 	“Environmental Indemnified Loss”	 	 	3	 
	 
	 	1.28	 	“Environmental Law”	 	 	3	 
	 
	 	1.29	 	“Environmental Permits”	 	 	3	 
	 
	 	1.30	 	“Environmental Property”	 	 	4	 
	 
	 	1.31	 	“Environmental Reports”	 	 	4	 
	 
	 	1.32	 	“ERISA”	 	 	4	 
	 
	 	1.33	 	“Escrow Agent”	 	 	4	 
	 
	 	1.34	 	“Excluded Assets”	 	 	4	 
	 
	 	1.35	 	“Excluded Liabilities”	 	 	4	 






i









 






	 	 	 	 	 	 	 	 	 
	 
	 	1.36	 	“Financial Statements”	 	 	4	 
	 
	 	1.37	 	“GAAP”	 	 	4	 
	 
	 	1.38	 	“Gilliam”	 	 	4	 
	 
	 	1.39	 	“Government”	 	 	4	 
	 
	 	1.40	 	“GP”	 	 	4	 
	 
	 	1.41	 	“Hazardous Materials”	 	 	4	 
	 
	 	1.42	 	“Holdings”	 	 	4	 
	 
	 	1.43	 	“Houston Assets”	 	 	4	 
	 
	 	1.44	 	“Houston Liabilities”	 	 	4	 
	 
	 	1.45	 	“Houston Net Book Value”	 	 	5	 
	 
	 	1.46	 	“HSR Act”	 	 	5	 
	 
	 	1.47	 	“Identified Environmental Matters”	 	 	5	 
	 
	 	1.48	 	“Indemnified Losses”	 	 	5	 
	 
	 	1.49	 	“Indemnification Threshold”	 	 	5	 
	 
	 	1.50	 	“Indemnifying Party”	 	 	5	 
	 
	 	1.51	 	“Injured Party”	 	 	5	 
	 
	 	1.52	 	“Intellectual Property”	 	 	5	 
	 
	 	1.53	 	“Inventory”	 	 	5	 
	 
	 	1.54	 	“IRCA”	 	 	5	 
	 
	 	1.55	 	“Key Representations”	 	 	5	 
	 
	 	1.56	 	“Know-how”	 	 	5	 
	 
	 	1.57	 	“Known Environmental Liabilities”	 	 	6	 
	 
	 	1.58	 	“Law”	 	 	6	 
	 
	 	1.59	 	“Leased Real Property”	 	 	6	 
	 
	 	1.60	 	“Liability” or “Liabilities”	 	 	6	 
	 
	 	1.61	 	“Lien”	 	 	6	 
	 
	 	1.62	 	“Losses”	 	 	6	 
	 
	 	1.63	 	“LP Group”	 	 	6	 
	 
	 	1.64	 	“Material Adverse Effect”	 	 	6	 
	 
	 	1.65	 	“Notice of Claim”	 	 	6	 
	 
	 	1.66	 	“Notice of Dispute”	 	 	6	 
	 
	 	1.67	 	“NS Group”	 	 	6	 
	 
	 	1.68	 	“Order”	 	 	6	 
	 
	 	1.69	 	“Ordinary Course”	 	 	6	 
	 
	 	1.70	 	“Owned Real Property”	 	 	6	 
	 
	 	1.71	 	“Party”	 	 	6	 
	 
	 	1.72	 	“Past Infringement Claims”	 	 	7	 
	 
	 	1.73	 	“Past Validity Claims”	 	 	7	 






ii









 






	 	 	 	 	 	 	 	 	 
	 
	 	1.74	 	“Patents”	 	 	7	 
	 
	 	1.75	 	“PBGC”	 	 	7	 
	 
	 	1.76	 	“Permitted Exceptions”	 	 	7	 
	 
	 	1.77	 	“Permitted Liens”	 	 	7	 
	 
	 	1.78	 	“Person”	 	 	7	 
	 
	 	1.79	 	“Plan”	 	 	7	 
	 
	 	1.80	 	“Property Taxes”	 	 	7	 
	 
	 	1.81	 	“Public Company”	 	 	7	 
	 
	 	1.82	 	“Purchased Assets”	 	 	7	 
	 
	 	1.83	 	“Real Property”	 	 	7	 
	 
	 	1.84	 	“Related Agreements”	 	 	7	 
	 
	 	1.85	 	“Retention Agreements”	 	 	7	 
	 
	 	1.86	 	“Restrictive Period”	 	 	8	 
	 
	 	1.87	 	“Seller”	 	 	8	 
	 
	 	1.88	 	“Seller’s Employees”	 	 	8	 
	 
	 	1.89	 	“Seller’s Knowledge”	 	 	8	 
	 
	 	1.90	 	“Statement of Closing Net Working Capital”	 	 	8	 
	 
	 	1.91	 	“Straddle Period”	 	 	8	 
	 
	 	1.92	 	“Tax Returns”	 	 	8	 
	 
	 	1.93	 	“Taxes”	 	 	8	 
	 
	 	1.94	 	“Third Party Infringement Claim”	 	 	8	 
	 
	 	1.95	 	“Third Party Validity Claim”	 	 	8	 
	 
	 	1.96	 	“Third Person”	 	 	8	 
	 
	 	1.97	 	“Third Person Claim”	 	 	8	 
	 
	 	1.98	 	“Title Company”	 	 	8	 
	 
	 	1.99	 	“Title Policy”	 	 	8	 
	 
	 	1.100	 	“Trademarks”	 	 	8	 
	 
	 	1.101	 	“Trade Names”	 	 	8	 
	 
	 	1.102	 	“Transaction Escrow Agreement”	 	 	8	 
	 
	 	1.103	 	“Transaction Escrow Deposit”	 	 	9	 
	 
	 	1.104	 	“US Patents”	 	 	9	 
	 
	 	1.105	 	“VEBA”	 	 	9	 
	 
	 	1.106	 	“WARN”	 	 	9	 
	 
	 	1.107	 	“Work”	 	 	9	 
	 
	 	1.108	 	“Yard 4”	 	 	9	 
	ARTICLE II PURCHASE AND SALE OF THE PURCHASED ASSETS	 	 	9	 
	 
	 	2.1	 	Purchased Assets	 	 	9	 
	 
	 	2.2	 	Assumed Liabilities	 	 	11	 






iii









 






	 	 	 	 	 	 	 	 	 
	 
	 	2.3	 	Consideration	 	 	13	 
	 
	 	2.4	 	Statement of Closing Net Working Capital	 	 	13	 
	 
	 	2.5	 	Post-Closing Adjustment	 	 	13	 
	 
	 	2.6	 	Closing	 	 	15	 
	 
	 	2.7	 	Transaction Escrow Deposit	 	 	15	 
	 
	 	2.8	 	Employee Retention Payments	 	 	15	 
	 
	 	2.9	 	Allocation of Aggregate Consideration	 	 	15	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER AND GILLIAM	 	 	15	 
	 
	 	3.1	 	Existence and Power	 	 	15	 
	 
	 	3.2	 	Valid and Enforceable Agreement; Authorization; Non-contravention	 	 	16	 
	 
	 	3.3	 	Financial Statements	 	 	16	 
	 
	 	3.4	 	Absence of Certain Changes	 	 	16	 
	 
	 	3.5	 	Taxes	 	 	18	 
	 
	 	3.6	 	Accounts Receivable	 	 	19	 
	 
	 	3.7	 	Inventories; Consignment	 	 	20	 
	 
	 	3.8	 	Litigation	 	 	20	 
	 
	 	3.9	 	Real Property	 	 	20	 
	 
	 	3.10	 	Title to Purchased Assets	 	 	21	 
	 
	 	3.11	 	Necessary Property	 	 	22	 
	 
	 	3.12	 	Intellectual Property	 	 	22	 
	 
	 	3.13	 	No Breaches of Law or Governing Documents; Licenses and Permits	 	 	23	 
	 
	 	3.14	 	Contracts and Commitments	 	 	24	 
	 
	 	3.15	 	Validity of Contracts	 	 	25	 
	 
	 	3.16	 	Customers and Suppliers	 	 	25	 
	 
	 	3.17	 	Employees, Consultants and Agents; Compensation	 	 	25	 
	 
	 	3.18	 	Labor Matters	 	 	26	 
	 
	 	3.19	 	Employee Benefit Matters	 	 	27	 
	 
	 	3.20	 	Overtime, Back Wages, Vacation and Minimum Wage	 	 	28	 
	 
	 	3.21	 	Discrimination and Occupational Safety and Health	 	 	29	 
	 
	 	3.22	 	Insurance Policies	 	 	29	 
	 
	 	3.23	 	Product and Service Warranties	 	 	29	 
	 
	 	3.24	 	Product Liability Claims	 	 	29	 
	 
	 	3.25	 	Product Safety Authorities	 	 	30	 
	 
	 	3.26	 	Environmental Matters	 	 	30	 
	 
	 	3.27	 	Foreign Operations and Export Control	 	 	32	 
	 
	 	3.28	 	Related Party Transactions	 	 	32	 
	 
	 	3.29	 	Books and Records and Financial Controls	 	 	32	 






iv









 






	 	 	 	 	 	 	 	 	 
	 
	 	3.30	 	Brokers, Finders and Other Offers	 	 	33	 
	 
	 	3.31	 	Disclosure	 	 	33	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER	 	 	33	 
	 
	 	4.1	 	Corporate Existence and Power	 	 	33	 
	 
	 	4.2	 	Valid and Enforceable Agreement; Authorization; Non-Contravention	 	 	34	 
	 
	 	4.3	 	Brokers, Finders	 	 	34	 
	ARTICLE V COVENANTS NOT TO COMPETE, DISCLOSE OR HIRE	 	 	34	 
	 
	 	5.1	 	Covenant	 	 	34	 
	 
	 	5.2	 	Enforceability	 	 	35	 
	 
	 	5.3	 	Time Period	 	 	36	 
	ARTICLE VI ADDITIONAL COVENANTS OF THE PARTIES	 	 	36	 
	 
	 	6.1	 	Public Disclosure	 	 	36	 
	 
	 	6.2	 	Tax Covenants	 	 	36	 
	 
	 	6.3	 	Title Matters	 	 	36	 
	 
	 	6.4	 	Obligations with Respect to Employees	 	 	37	 
	 
	 	6.5	 	Other Prorations and Adjustments	 	 	38	 
	 
	 	6.6	 	Books and Records	 	 	39	 
	 
	 	6.7	 	Filings	 	 	39	 
	 
	 	6.8	 	Accounts Receivable	 	 	39	 
	 
	 	6.9	 	Tail Insurance Coverage	 	 	39	 
	 
	 	6.10	 	Cessation of Business Operations of Curley’s	 	 	40	 
	 
	 	6.11	 	Financial Statements	 	 	40	 
	 
	 	6.12	 	Further Assurances; Cooperation	 	 	40	 
	ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER	 	 	40	 
	 
	 	7.1	 	Accuracy of Representations and Warranties and Performance of Obligations	 	 	40	 
	 
	 	7.2	 	Consents and Approvals	 	 	40	 
	 
	 	7.3	 	No Litigation or Contrary Judgment	 	 	40	 
	 
	 	7.4	 	No Material Adverse Effect	 	 	41	 
	 
	 	7.5	 	Foreign Patent and Patent Application Assignments	 	 	41	 
	 
	 	7.6	 	Deliveries of Seller at Closing	 	 	41	 
	ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND GILLIAM	 	 	42	 
	 
	 	8.1	 	Accuracy of Representations and Warranties and Performance of Obligations	 	 	42	 
	 
	 	8.2	 	Consents and Approvals	 	 	42	 
	 
	 	8.3	 	No Litigation or Contrary Judgment	 	 	42	 
	 
	 	8.4	 	Deliveries of Buyer at Closing	 	 	42	 
	ARTICLE IX INDEMNIFICATION	 	 	43	 
	 
	 	9.1	 	Indemnification of Buyer	 	 	43	 






v









 






	 	 	 	 	 	 	 	 	 
	 
	 	9.2	 	Indemnification of Seller	 	 	44	 
	 
	 	9.3	 	Survival	 	 	44	 
	 
	 	9.4	 	Limitations	 	 	45	 
	 
	 	9.5	 	Notice of Claim; Satisfaction of Claim	 	 	47	 
	 
	 	9.6	 	Environmental Matters	 	 	47	 
	 
	 	9.7	 	Right to Contest Claims of Third Persons	 	 	48	 
	 
	 	9.8	 	Third Party Infringement Claim; Third Party Validity Claim	 	 	49	 
	ARTICLE X MISCELLANEOUS PROVISIONS	 	 	49	 
	 
	 	10.1	 	Notice	 	 	49	 
	 
	 	10.2	 	Entire Agreement	 	 	50	 
	 
	 	10.3	 	Amendment and Modification	 	 	50	 
	 
	 	10.4	 	Assignment; Binding Agreement	 	 	50	 
	 
	 	10.5	 	Counterparts	 	 	51	 
	 
	 	10.6	 	Headings; Interpretation	 	 	51	 
	 
	 	10.7	 	Exhibits; Schedules	 	 	51	 
	 
	 	10.8	 	Expenses	 	 	51	 
	 
	 	10.9	 	Remedies Cumulative	 	 	51	 
	 
	 	10.10	 	Governing Law	 	 	52	 
	 
	 	10.11	 	No Third Party Beneficiaries or Other Rights	 	 	52	 







vi









 








ASSET PURCHASE AGREEMENT




     This ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into as of this 21st day
of July, 2006, by and among Ultra Premium Oilfield Services, Ltd., a Kentucky limited partnership
(“Buyer”), NS Group, Inc., a Kentucky corporation (“NS Group”), Fishing Tools
Specialty, L.P., a Texas limited partnership and successor by conversion to Fishing Tools
Specialty, Inc. d/b/a Curley’s Fishing Tools Specialty (“Seller”), and Wayne D. Gilliam,
Jr. (“Gilliam”). Capitalized terms are defined in Article I.



RECITALS




     A. Buyer desires to purchase the Purchased Assets and to assume the Assumed Liabilities, on
the following terms and conditions; and



     B. Seller desires to sell and cause its Affiliates to sell the Purchased Assets and assign the
Assumed Liabilities to Buyer, on the following terms and conditions;



     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants,
representations, warranties, conditions, and agreements hereinafter expressed, the Parties agree as
follows:



ARTICLE I

DEFINITIONS




     The following terms shall have the meanings set forth below in this Article I.



     1.1 “Accountant” means PricewaterhouseCoopers or such other national accounting firm
that has no material relationship with any of the Parties as the Parties may mutually agree upon.



     1.2 “Accounts Payable” means the trade accounts payable of Seller incurred in the
Ordinary Course consistent with past practices.



     1.3 “Accounts Receivable” means all accounts receivable and other rights to payment
from customers of the Business.



     1.4 “Action” has the meaning set forth in Section 3.8.



     1.5 “Affiliate” means with respect to any Person, any other Person which is controlling,
controlled by, or under common control with, directly or indirectly through any Person, the Person
referred to, and, if the Person referred to is a natural person, any member of such Person’s
immediate family; provided that for purposes of Section 5.1(a)(i), the term “Affiliates” will not
include Cory Roberson in his capacity as an employee of SMC, Inc., a Texas corporation. The term
“control” (including, with correlative meaning, the terms “controlled by” and “under common control
with”) as used with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management



1









 







and policies of such Person, whether through the ownership of voting securities, by contract or
otherwise.



     1.6 “Aggregate Consideration” has the meaning set forth in Section 2.3.



     1.7“Agreement” has the meaning set forth in the first paragraph hereof.



     1.8 “Assumed Contracts” has the meaning set forth in Section 2.2(a)(ii).



     1.9 “Assumed Liabilities” has the meaning set forth in Section 2.2(b).



     1.10 “Balance Sheet” means the unaudited balance sheet of Seller as of December 31, 2005.



     1.11 “Business” means the business conducted, or planned to be conducted by Seller, as of
the Closing Date, including without limitation the activity of threading, distributing, repairing,
promoting and selling tubular goods, drill pipes, tool joints, services, parts and accessories.



     1.12 “Business Day” means any day which is not a Saturday, Sunday or legal holiday in the
State of Texas.



     1.13 “Buyer” has the meaning set forth in the first paragraph hereof.



     1.14 “Buyer Indemnified Persons” has the meaning set forth in Section 9.1(a).



     1.15 “Closing” means the consummation of the transactions contemplated by this Agreement.



     1.16 “Closing Date” means July 21, 2006, or such other date as the Parties may mutually
agree upon in writing, subject to the expiration or earlier termination of applicable waiting
periods under the HSR Act.



     1.17 “Closing Net Working Capital” means, as of the Effective Time, the Accounts
Receivable, net of applicable reserves, and Inventory, net of applicable reserves, included in the
Purchased Assets (excluding the Houston Assets) less the Accounts Payable included in the Assumed
Liabilities (excluding the Houston Liabilities).



     1.18 “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.



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



     1.20 “Contract” means any contract, agreement, indenture, evidence of indebtedness, binding
commitment or instrument or open purchase order, written or oral, express or implied, to which
Seller or any Affiliate of Seller is a party or is otherwise obligated in connection with the
Business.



     1.21 “Covenantor” has the meaning set forth in Section 5.1(a).



2









 





     1.22 “D&T” has the meaning set forth in Section 6.11.



     1.23 “December Net Working Capital” means the Accounts Receivable, net of applicable
reserves, and Inventory, net of applicable reserves, less the Accounts Payable as set forth on the
audited balance sheet of Seller as of December 31, 2005 as audited by Deloitte & Touche LLP.



     1.24 “Debt” means: either (a) any liability of Seller (i) for borrowed money
(including the unpaid principal thereof and accrued interest thereon), or (ii) under any
reimbursement obligation relating to a letter of credit, bankers’ acceptance or note purchase
facility, or (iii) evidenced by a bond, note, debenture or similar instrument (including a purchase
money obligation), or (iv) for the payment of money relating to leases that are required to be
classified as capitalized lease obligations in accordance with GAAP, or (v) for all or any part of
the deferred purchase price of property or services (other than trade payables incurred in the
ordinary course of business), including any “earnout” or similar payments incurred in connection
with a business acquisition or any non-compete payments, or (vi) under any interest rate swap,
hedging or similar arrangements incurred in connection with the repayment of any item of Debt, or
(b) any liability described in the preceding clause (a) of other persons that Seller has
guaranteed, that is recourse to Seller or any of its assets or that is otherwise its legal
liability or that is secured in whole or in part by the assets of Seller. For purposes of this
Agreement, Debt includes any and all accrued interest, success fees, prepayment premiums,
make-whole premiums or penalties associated with the prepayment of any Debt.



     1.25 “Effective Time” means the effective time of the Closing, which shall be deemed to be
as of 11:59 p.m. Eastern Time on the Closing Date.



     1.26 “Employment Agreement” means the employment agreements between Buyer and the
individuals listed on Schedule 1.26, in the forms attached hereto as Exhibit A.



     1.27 “Environmental Indemnified Loss” has the meaning set forth in Section 9.6.



     1.28 “Environmental Law” means all past and present applicable laws, statutes, enactments,
orders, regulations, rules and ordinances of any Government relating to pollution or protection of
human health, safety, the environment, natural resources or laws relating to releases or threatened
releases of Hazardous Materials into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, land, surface and subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use, treatment, storage, release,
transport or handling of Hazardous Materials, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, the Hazardous Materials Transportation Act,
the Resource Conservation and Recovery Act, the Clean Water Act, the Clean Air Act, the Toxic
Substances Control Act, the Occupational Safety and Health Act, and the common law, including, but
not limited to, the law of nuisance, trespass, and strict liability.



     1.29 “Environmental Permits” means all permits, registrations, approvals, licenses, filings
and submissions to any Government or other authority required by any Environmental Law.



3









 





     1.30 “Environmental Property” means the assets or property currently owned, leased,
operated or used by Seller or its Affiliates in connection with the Business.



     1.31 “Environmental Reports” means those certain environmental reports and studies obtained
by Seller, Buyer or third parties listed on Schedule 1.31 attached hereto.



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



     1.33 “Escrow Agent” has the meaning set forth in Section 2.7.



     1.34 “Excluded Assets” means the assets, properties and rights of Seller set forth on
Schedule 1.34.



     1.35 “Excluded Liabilities” has the meaning set forth in Section 2.2(d).



     1.36 “Financial Statements” means (i) the unaudited balance sheets of Seller as of December
31, 2003, December 31, 2004 and December 31, 2005 and the related unaudited statements of income
for the fiscal years then ended, and (ii) the unaudited balance sheets of Seller as of March 31,
2006 and May 31, 2006 and the related unaudited statements of income for the three and five month
period then ended.



     1.37 “GAAP” means U.S. generally accepted accounting principles.



     1.38 “Gilliam” has the meaning set forth in the first paragraph hereof.



     1.39 “Government” means the United States or any other nation, state, or bilateral or
multilateral governmental authority, any local governmental unit or subdivision thereof, or any
branch, agency, or judicial body thereof.



     1.40 “GP” means Fishing Tools Specialty GP, L.L.C., a Texas limited liability company.



     1.41 “Hazardous Materials” means (i) pollutants or contaminants, (ii) hazardous, toxic,
infectious or radioactive substances, chemicals, materials or wastes (including, without
limitation, those defined as hazardous under any Environmental Law), (iii) petroleum including
crude oil or any derivative or fraction thereof, (iv) asbestos fibers, (v) solid wastes, (vi) mold,
or (vii) medical wastes.



     1.42 “Holdings” means Fishing Tools Specialty Holdings, L.L.P., a Texas limited
liability partnership.



     1.43 “Houston Assets” means the assets owned by Seller listed on Schedule
1.43.



     1.44 “Houston Liabilities” means the liabilities related to the Houston Assets, being
the deferred purchase price obligations and Debt related to the Houston Assets set forth on
Schedule 1.44.



4









 





     1.45 “Houston Net Book Value” means (a) the book value of the Houston Assets, less (b)
the Houston Liabilities, as set forth on Schedule 1.45.



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



     1.47 “Identified Environmental Matters” means any environmental matter disclosed or
referenced in the Environmental Reports or on Schedule 3.26 to this Agreement, other than
any Known Environmental Liabilities or any environmental liability relating to the land disposal
area located on Yard 4, and which are violations of Environmental Laws in effect as of the Closing
Date.



     1.48 “Indemnified Losses” has the meaning set forth in Section 9.1(a).



     1.49 “Indemnification Threshold” has the meaning set forth in Section 9.4(a).



     1.50 “Indemnifying Party” has the meaning set forth in Section 9.3.



     1.51 “Injured Party” has the meaning set forth in Section 9.5.



     1.52 “Intellectual Property” mean (i) Patents, (ii) Trademarks, (iii) Trade Names, (iv)
rights in trade dress and packaging, (v) shop rights, (vi) copyrights and copyright registrations
and applications for registration, (vii) inventions and invention disclosures, (viii) trade
secrets, (ix) domain name registrations, (x) utility models, (xi) rights in industrial designs,
(xii) software, (xiii) Know-how, and (xiv) all other intellectual property rights, whether granted
or registered or not, in each case wherever such rights exist throughout the world owned by and/or
licensed to Seller, and including the right to recover for any past infringement, misappropriation
or other violations thereof.



     1.53 “Inventory” means all inventory owned by Seller, including raw materials,
packaging supplies, spare parts, work-in-process or finished goods, whether stored at a location of
Seller or stored at a third-party location.



     1.54 “IRCA” means the Immigration Reform and Control Act of 1986 and the rules and
regulations thereunder, as amended from time to time.



     1.55 “Key Representations” has the meaning set forth in Section 9.4(c).



     1.56 “Know-how” means any technical and business information relating to the operation of
the Business, including but not limited to invention records, research records and reports,
development reports, experimental and other engineering reports, formulae, processes, business
methods, product designs, specifications, quality control procedures, gauging and measuring
procedures, manufacturing, engineering and other drawings and photographs, computer data bases and
software, technical information, safety information, engineering data, design and engineering
specifications, market surveys and all promotional literature, non-public information and
materials, customer and supplier lists and similar data.



5









 





     1.57 “Known Environmental Liabilities” means the matters identified in Schedule
1.57.



     1.58 “Law” means any applicable statute, law, treaty, convention, ordinance, decree, order,
injunction, rule, directive, or regulation of any Government or quasi-governmental authority, and
includes rules and regulations of any regulatory or self-regulatory authority compliance with which
is required by Law.



     1.59 “Leased Real Property” has the meaning set forth in Section 3.9(b).



     1.60 “Liability” or “Liabilities” means all Debts, adverse claims, liabilities
and/or obligations, direct, indirect, absolute or contingent, whether accrued, vested or otherwise
and whether or not reflected or required to be reflected on the financial statements of a Person.



     1.61 “Lien” means any lien, security interest, mortgage, indenture, deed of trust, pledge,
charge, adverse claim, easement, restriction or other encumbrance.



     1.62 “Losses” has the meaning set forth in Section 9.1(a).



     1.63 “LP Group” means Seller, GP and Holdings.



     1.64 “Material Adverse Effect” means a material adverse effect on the Purchased Assets,
Assumed Liabilities or the assets, business, prospects, financial condition or results of
operations of the Business, but shall not be deemed to include (i) any changes resulting from
general economic, regulatory or political conditions or (ii) circumstances that affect the industry
in which Seller operates generally.



     1.65 “Notice of Claim” has the meaning set forth in Section 9.5.



     1.66 “Notice of Dispute” means a written notice by Seller to Buyer delivered pursuant
to Section 2.5(a), specifying in reasonable detail all points of disagreement with Closing Net
Working Capital and the Statement of Closing Net Working Capital prepared by Buyer.



     1.67 “NS Group” has the meaning set forth in the first paragraph hereof.



     1.68 “Order” means any judgment, order, writ, injunction, or decree of any court or other
Government entity.



     1.69 “Ordinary Course” means, with respect to the Business, only the ordinary course of
commercial operations customarily engaged in by Seller consistent with industry norms and Seller’s
prior practices, and specifically does not include (a) any activity (i) involving the purchase or
sale of Seller, its assets or of any product line or business unit thereof, (ii) involving
modification or adoption of any Plan or agreement or (iii) which requires approval by the manager
or limited partners of Seller, or (b) the incurrence of any Liability for any tort or any breach or
violation of or default under any Contract or Law.



     1.70 “Owned Real Property” has the meaning set forth in Section 3.9(a).



     1.71 “Party” means each of NS Group, Buyer, Seller and Gilliam.



6









 





     1.72 “Past Infringement Claims” has the meaning set forth in Section 2.2(d)(viii).



     1.73 “Past Validity Claims” has the meaning set forth in Section 2.2(d)(ix).



     1.74 “Patents” mean U.S. and foreign patents (including all reissues, re-examinations,
divisions, continuations, continuations-in-part and extensions thereof) and patent applications
(including provisional and non-provisional applications).



     1.75 “PBGC” means the Pension Benefit Guaranty Corporation.



     1.76 “Permitted Exceptions” has the meaning set forth in Section 6.3.



     1.77 “Permitted Liens” means, collectively, (a) Liens that are specifically disclosed on
Schedule 1.77, (b) liens for Property Taxes which are not yet delinquent, the liability for
which is apportioned pursuant to Section 6.5(a), or (c) liens for mechanics, materialmen, laborers,
employees, suppliers or similar liens arising by operation of law for amounts which are owed, but
not yet delinquent.



     1.78 “Person” means and shall include a natural person, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization or a governmental entity (or any department, agency or political
subdivision thereof) and shall be construed broadly.



     1.79 “Plan” means (i) any agreement, arrangement, plan, or policy, whether or not written
and whether or not considered legally binding, that involves (A) any pension, retirement, profit
sharing, deferred compensation, bonus, stock option, stock purchase, phantom stock, health,
welfare, or incentive plan; or (B) welfare or “fringe” benefits, including without limitation
vacation, severance, disability, medical, hospitalization, dental, life and other insurance,
tuition, company car, club dues, sick leave, maternity, paternity or family leave, or other
benefits; or (ii) any employment, consulting, engagement, or retainer agreement or arrangement.



     1.80 “Property Taxes” means all real estate, personal property, ad valorem and any other
similar Taxes.



     1.81 “Public Company” means any entity whose securities are listed on any national
securities exchange or authorized for quotation on the Nasdaq National Market.



     1.82 “Purchased Assets” has the meaning set forth in Section 2.1.



     1.83 “Real Property” has the meaning set forth in Section 3.9(b).



     1.84 “Related Agreements” means the Employment Agreements, the Transaction Escrow
Agreement, the Retention Agreements, and the other agreements to be delivered at Closing by Buyer
or Seller pursuant to Sections 7.6 and 8.4.



     1.85 “Retention Agreements” means the retention agreements between Buyer and the
individuals listed on Schedule 1.85, in the forms attached hereto as Exhibit D.



7









 





     1.86 “Restrictive Period” has the meaning set forth in Section 5.3.



     1.87 “Seller” has the meaning set forth in the first paragraph hereof.



     1.88 “Seller’s Employees” means each person that is an employee of Seller, including
employees on disability or leave of absence, on the Closing Date.



     1.89 “Seller’s Knowledge” means the actual knowledge, after due inquiry, of Gilliam,
Ann Self, Ed Banker, and Doug Dunford.



     1.90 “Statement of Closing Net Working Capital” has the meaning set forth in Section 2.4.



     1.91 “Straddle Period” has the meaning set forth in Section 6.5(a).



     1.92 “Tax Returns” means all returns, reports, estimates, declarations, claims for refund,
information returns or statements relating to, or required to be filed in connection with any
Taxes, including any schedule or attachment thereto, and including any amendment thereof.



     1.93 “Taxes” means all taxes, charges, fees, duties, levies, or other like assessments,
including without limitation income, gross receipts, ad valorem, value added, alternative minimum,
premium, stamp, excise, real property, personal property, windfall profit, sales, use, transfer,
license, withholding, social security, payroll, unemployment, disability, PBGC premium, and
franchise taxes imposed by any Government; and shall include any interest, fines, penalties,
assessments, or additions to tax resulting from, attributable to, or incurred in connection with
any such Taxes, any obligation to pay the Taxes of others (by contract or as a result of successor
or transferee liability, pursuant to Treasury Regulation section 1.1502-6 or otherwise) or any
contest or dispute of any of the foregoing.



     1.94 “Third Party Infringement Claim” has the meaning set forth in Section 9.4(f).



     1.95 “Third Party Validity Claim” has the meaning set forth in Section 9.4(g).



     1.96 “Third Person” has the meaning set forth in Section 9.7.



     1.97 “Third Person Claim” has the meaning set forth in Section 9.7.



     1.98 “Title Company” has the meaning set forth in Section 6.3.



     1.99 “Title Policy” has the meaning set forth in Section 6.3.



     1.100 “Trademarks” mean all registered and unregistered U.S. and foreign trademarks,
service marks and all goodwill associated therewith, and all federal and state registrations
thereof and all pending applications for registration thereof and renewal applications therefor.



     1.101 “Trade Names” mean (i) names, (ii) brand names, (iii) logos and all other names and
slogans and (iv) all goodwill associated therewith.



     1.102 “Transaction Escrow Agreement” has the meaning set forth in Section 2.7.



8









 





     1.103 “Transaction Escrow Deposit” has the meaning set forth in Section 2.7.



     1.104 “US Patents” has the meaning set forth in Section 3.12(e).



     1.105 “VEBA” means the Voluntary Employees’ Beneficiary Association.



     1.106 “WARN” has the meaning set forth in Section 6.4(e).



     1.107 “Work” has the meaning set forth in Section 9.6(a).



     1.108 “Yard 4” means the 5.125 acre irregularly shaped site bordered to the West by an
unimproved road to the North by W. 38th Street and to the East by Rasco Avenue.



ARTICLE II

PURCHASE AND SALE OF THE PURCHASED ASSETS




     2.1 Purchased Assets.



          (a) Subject to the terms and conditions hereof, on the Closing Date and as of the Effective
Time, Seller hereby agrees to sell, convey, assign and deliver and to cause its Affiliates to sell,
convey, assign and deliver to Buyer, and Buyer hereby agrees to purchase and accept from Seller and
any such Affiliate, free and clear of all Liens (other than Permitted Liens and Permitted
Exceptions), all right, title and interest of Seller or its Affiliates in and to all the assets,
properties and rights, wherever located, which are owned or used by Seller or its Affiliates in
connection with the Business, including, without limitation, the following, to the extent used or
owned in connection with the Business, but excluding the Excluded Assets:





          (i) all the assets reflected and/or described on the Balance Sheet (except to the
extent disposed of in the Ordinary Course since the date thereof), together with all other
assets owned or used by Seller or its Affiliates in connection with the Business, whether or
not fully depreciated, written off or never reflected on such Balance Sheet and all other
assets acquired by the Seller or its Affiliates and used in the Business since the date of
such Balance Sheet;




          (ii) Accounts Receivable;




          (iii) Inventory;




          (iv) all tangible personal property, including equipment, machinery, vehicles,
furniture, fixtures, computers and related hardware, all storage devices, including
diskdrives, floppy disks, cd-roms, memory sticks and tapes, supplies, spare parts, tools and
other tangible personal property, together with any express or implied warranty by the
manufacturers, sellers or lessors of any item or component part thereof and all maintenance
records and other documents relating thereto;




          (v) the Owned Real Property, including land, buildings, structures, improvements,
rights-of-way, easements and other real property interests;



9









 






          (vi) all leasehold interests in real and personal property, including any prepaid rent,
security deposits and options to renew or purchase in connection therewith;




          (vii) all rights of the Seller or its Affiliates in, to and under the Assumed
Contracts;




          (viii) all Intellectual Property and tangible embodiments of Intellectual Property,
customer contact information, marketing prospects and information, vendor information, and
the right and power to assert, defend and recover title to all of the foregoing in the same
manner and to the same extent as Seller or its Affiliates could do or could cause to be done
if the transactions contemplated hereby did not occur, and the right to sue and recover for
past damages on account of violations, infringement, misuse, or theft thereof;




          (ix) all Governmental authorizations, including permits, licenses, certificates,
consents, variances, approvals, and Environmental Permits relating to the Business;




          (x) all business and personnel records, engineering records, and other documents,
discs, tapes and records, including (but not limited to) all sales data and records,
accounts, bids, supplier records, drawings, designs, specifications, process information,
performance data, software, programs, and other information or data;




          (xi) the goodwill of the Business;




          (xii) the Houston Assets; and




          (xiii) all other assets and property owned by Seller or its Affiliates and used in the
operation of the Business.



The foregoing assets are herein sometimes collectively called the “Purchased Assets.”




          (b) In the event that the legal interest in any of the Purchased Assets to be sold, assigned,
transferred or conveyed pursuant to this Agreement, or any claim, right or benefit arising
thereunder or resulting therefrom cannot be sold, assigned, transferred or conveyed hereunder as of
the Closing Date because any waiting or notice period has not expired or any consents or approvals
required for such transfer have not been obtained or waived, then the legal interest in such
Purchased Assets shall not be sold, assigned, transferred or conveyed unless and until such waiting
or notice period shall have expired or until approval, consent or waiver thereof is obtained.
Seller and its Affiliates and Buyer shall use commercially reasonable efforts to cooperate in
obtaining such consents or approvals as may be necessary to complete such transfers as soon as
practicable. Nothing in this Agreement shall be construed as an attempt to assign to Buyer any
legal interest in any of the Purchased Assets which, as a matter of law or by the terms of any
legally binding contract, engagement or commitment to which Seller is subject, is not assignable
without the consent of any other party, unless such consent shall have been given. Pending the
assignments, conveyances and transfers referred to in this paragraph, Seller and its Affiliates
shall hold any such non-assigned Purchased Assets for the benefit and at the risk of Buyer and
shall cooperate with Buyer, without the payment of any additional




10









 






consideration by Seller or Buyer,
in any lawful and reasonable arrangements designed to provide the benefits of ownership thereof to
Buyer.
 

     2.2 Assumed Liabilities.



          (a) Subject to the terms and conditions hereof, on the Closing Date and as of the Effective
Time, Seller agrees to assign and transfer to Buyer and Buyer agrees to assume only the following:





          (i) Accounts Payable;




          (ii) the obligations of Seller under the Contracts listed on Schedule
2.2(a)(ii) (the “Assumed Contracts”) to the extent such obligations (A) are
applicable to and accrue with respect to periods subsequent to the Effective Time and (B)
are accompanied by a correlated duty of performance or payment on the part of the other
parties thereto;




          (iii) the Known Environmental Liabilities; and




          (iv) the Houston Liabilities to the extent that such liabilities were taken into
account in determining the Houston Net Book Value.



          (b) The obligations referred to in Sections 2.2(a)(i), 2.2(a)(ii), 2.2(a)(iii) and 2.2(a)(iv)
are sometimes hereinafter collectively referred to as the “Assumed Liabilities.”




          (c) Notwithstanding the foregoing, if the assignment and transfer of any of the Assumed
Liabilities would cause a breach thereof and if a required consent to such assignment and transfer
has not been obtained from the third parties involved, then, without limiting the effect of any
representations and warranties hereunder, such Assumed Liabilities shall not be assigned and
transferred, but, instead, Seller or its Affiliates (i) shall continue to hold its interests in
such Assumed Liabilities in trust for the benefit of Buyer, (ii) shall receive in trust and remit
as promptly as possible to Buyer any money paid thereunder to Seller or its Affiliates and (iii)
shall cooperate in any reasonable arrangement or action requested by Buyer to secure for Buyer all
benefits under such Assumed Liabilities, provided that Seller shall not be obligated to incur any
costs or expenses in connection with such Assumed Liabilities.




          (d) Except for the Assumed Liabilities, Buyer does not and will not assume or become liable
for and shall not be obligated to pay or satisfy any obligation, debt or Liability whatsoever,
contingent or otherwise, of the Business or Seller or any other person or entity (collectively, the
“Excluded Liabilities”), including, without limitation:





          (i) except as provided in Section 6.5(a), any liability for Taxes, including any
liability for Taxes resulting from the transactions contemplated in this Agreement;




          (ii) any liability relating to a failure by Seller or its Affiliates to comply with any
bulk sales law applicable to this transaction;



11









 






          (iii) any environmental liability relating to any property previously owned, leased or
used by Seller or its Affiliates in connection with the Business;




          (iv) except for any Known Environmental Liabilities, any pollution or contamination of
the environment or damage to natural resources, or the manufacture, generation, refining,
processing, distribution, use, sale, treatment, recycling, receipt, storage, disposal,
transportation, handling, emission, discharge, leaching, release or threatened release of
any Hazardous Material by Seller or the Business, or their officers, directors, employees,
or agents, whether or not such occurred on, under or from the Environmental Property or
other property, including but not limited to, property at which Seller’s or the Business’
Hazardous Materials may have been sent for treatment, recycling, disposal or storage or any
actual or alleged violation of or liability under any Environmental Law arising out of or
related to the conduct of the business of Seller or the Business, or the Environmental
Property prior to the Effective Time, including without limitation, the Identified
Environmental Matters and any environmental liability relating to the land disposal area
located on Yard 4;




          (v) any liability with respect to any claim, whether made before or after the Effective
Time, involving allegations of personal injury (including death) or property damage arising
from the design, manufacture, marketing, sale, distribution, servicing or use of any
product of the Business manufactured before the Effective Time;




          (vi) any liability for notes payable or deferred compensation;




          (vii) any amounts owed to Ed Banker pursuant to the Employment Agreement between Ed
Banker and Seller;




          (viii) any liability for any claims, allegations, or findings of patent infringement,
trademark infringement, service mark infringement, copyright infringement, co-ownership,
misappropriation of trade secrets or any other violation of any intellectual property of any
Person which occurred at any time prior to the Effective Time (“Past Infringement
Claims”);




          (ix) any liability for any claims, allegations, or findings that the Intellectual
Property was not valid or enforceable prior to the Effective Time (“Past Validity
Claims”);




          (x) except as provided in Section 6.4, any liability to any current or former employee
of Seller or any of their Affiliates arising out of the circumstances, occurrences or the
operations of the Business prior to the Effective Time, including without limitation, any
obligation, claim or Liability which relates to compensation, pension, deferred
compensation, vacation, medical benefits, life insurance, severance or other employee health
or safety matters and any other employee benefit plans, programs or arrangements associated
with or relating to any Seller’s Employees or any other employee or former employee employed
in the Business and any obligation, claim or Liability arising from the employment or
cessation of employment of any such employee (including, but not limited to, any Liability
or obligation under any severance plan or



12









 







arrangement of the Seller or any of its
Affiliates), regardless of when the claim occurs or the obligation or liability is paid,
including, but not limited to, obligations, claims and liabilities relating to plan
administration, funding and benefits; and




          (xi) any other claim, liability or obligation arising out of the ownership or use of
the Purchased Assets or circumstances, occurrences or the operations of the Business prior
to the Effective Time, including without limitation any liability or obligation with respect
to services or work performed by Seller under the Assumed Contracts at any time prior to the
Effective Time.



     2.3 Consideration. Subject to adjustment as provided in Section 2.5(b), the aggregate
consideration (the “Aggregate Consideration”) to be paid by Buyer (A) to Seller for the
Purchased Assets, the obligations under Article V and the other rights of Buyer hereunder shall
consist of (i) One Hundred Thirteen Million Nine Hundred Fifty Thousand Dollars ($113,950,000) in
cash at the Closing, plus (ii) Two Million Six Hundred Eighty-Six Thousand Dollars ($2,686,000) in
cash at the Closing, which is the Houston Net Book Value prepared by Seller, plus (iii) the
assumption of the Assumed Liabilities, and (B) to Wayne D. Gilliam, Jr. for the personal goodwill
of Wayne D. Gilliam, Jr. related to the Business shall consist of Three Million Dollars
($3,000,000) in cash at Closing.



     2.4 Statement of Closing Net Working Capital. Within five (5) Business days after the
Closing, Buyer shall cause to be taken a physical count of all of the inventory of Seller. Seller
or its designee may observe the taking of such physical count of inventory. The Buyer shall
promptly deliver to Seller the results of such physical count of inventory. Promptly after the
Closing Date, and in any event no later than ninety (90) days thereafter, Buyer shall cause to be
prepared and delivered to Seller a statement of Closing Net Working Capital, prepared in accordance
with GAAP (the “Statement of Closing Net Working Capital”). Buyer shall permit Seller and
its accountants to review promptly upon request all records necessary for the preparation by Buyer
of such Statement of Closing Net Working Capital and the computation of Closing Net Working Capital
and to take copies of the same.



     2.5 Post-Closing Adjustment.



          (a) If Seller disputes the Closing Net Working Capital as calculated by Buyer, not more than
30 calendar days after the date Seller receives such Statement of Closing Net Working Capital,
Seller shall deliver to Buyer a Notice of Dispute. Upon receipt of the Notice of Dispute, Seller
and Buyer shall promptly consult with each other with respect to the specified points of
disagreement in an effort to resolve the dispute. If any such dispute cannot be resolved by Seller
and Buyer within 30 calendar days after Buyer receives the Notice of Dispute, Seller and Buyer
shall jointly refer the dispute to the Accountant as an arbitrator to finally resolve, as soon as
practicable, and in any event within 45 calendar days after such reference, those items and amounts
specifically set forth and objected to in the Notice of Dispute with respect to the Closing Net
Working Capital reflected on the Statement of Closing Net Working Capital. For purposes of such
arbitration each of Seller and Buyer shall submit a proposed calculation of the Closing Net Working
Capital. The Accountant shall apply the terms of Section 2.4 of this Agreement, and shall
otherwise conduct the arbitration under such procedures as the Parties may agree or, failing such
agreement, under the then prevailing Commercial Rules of the American




13









 







Arbitration Association.
Each of the Parties shall bear its own expenses in connection with the arbitration. The fees and
expenses of the Accountant incurred in connection with the arbitration of the Closing Net Working
Capital shall be allocated fifty percent (50%) to Seller and fifty percent (50%) to the Buyer;
provided, that such fees and expenses shall not include, so long as a
Party complies with the procedures of this Section, the other Party’s outside counsel or
accounting fees. All determinations by the Accountant shall be final, conclusive and binding with
respect to the Closing Net Working Capital, in the absence of fraud or manifest error. The scope
of the disputes to be arbitrated by the Accountant is limited to whether the calculation of Closing
Net Working Capital was done in a manner consistent with this Agreement and whether there were
mathematical errors in the Statement of Closing Net Working Capital, and the Accountant is not to
make any other determinations, including any determination as to whether GAAP was followed for the
Statement of Closing Net Working Capital or as to whether the December Net Working Capital is
correct.




          (b) The Aggregate Consideration shall be adjusted as follows, based on the Closing Net Working
Capital determined pursuant to Sections 2.4 and 2.5: Seller shall pay to Buyer the amount by which
the Closing Net Working Capital is less than the December Net Working Capital, or Buyer shall pay
to Seller the amount by which the Closing Net Working Capital exceeds the December Net Working
Capital, in either case, plus interest, compounded annually, calculated using a 365 day year from
the Closing Date through the date prior to the date of payment at a per annum rate equal to the
prime rate reported by the Wall Street Journal under “Money Rates” as of the Closing Date. Any
payment so required to be made by either Seller or Buyer shall be by wire transfer of immediately
available funds, not more than seven (7) Business Days after final determination thereof, to an
account to be designated by the payee at least two (2) Business Days prior to the due date.




          (c) The Parties agree that the calculation of the Houston Net Book Value set forth on
Schedule 1.45 was prepared by Seller without independent verification by Buyer. During the
period in which Buyer is preparing the Statement of Closing Net Working Capital, Buyer and its
accountants will also review the information set forth on Schedule 1.45. If Buyer believes
that there are inaccuracies in Schedule 1.45, it will submit those inaccuracies to Seller
along with Buyer’s Statement of Closing Net Working Capital. If Seller disagrees with Buyer,
Seller shall have the right to include any disagreement regarding the calculation of the Houston
Net Book Value in its Notice of Dispute, and the resolution and final settlement of any such
dispute will be handled in accordance with the provisions of Section 2.5(a) and (b) above.




          (d) The Parties acknowledge that the Aggregate Consideration assumes that prior to Closing
none of the Known Environmental Liabilities set forth on Schedule 1.57 were corrected or
remediated by Seller. The Parties agree that Seller shall have 10 calendar days after the Closing
Date to review the Known Environmental Liabilities set forth on Schedule 1.57. If Seller
believes that it has remediated or corrected any of the Known Environmental Liabilities set forth
on Schedule 1.57 prior to Closing, Seller will submit a list of those remediated or
corrected items to Buyer. Any agreed upon adjustments to the Aggregate Consideration related to
Seller’s pre-Closing correction or remediation of Known Environmental Liabilities will be paid in
accordance with Section 2.5(b) above.





14









 







     2.6 Closing. The Closing shall take place at 9:00 a.m. on the Closing Date at the
offices of Boyar & Miller, 4265 San Felipe, Suite 1200, Houston, Texas, or at such other place as
the Parties may agree in writing.



     2.7 Transaction Escrow Deposit. At the Closing, Buyer shall deliver a portion of the
Aggregate Consideration in the amount of $5,000,000 (the “Transaction Escrow Deposit”) to
J.P. Morgan Trust Company, National Association (the “Escrow Agent”), to be held in escrow
for a period of eighteen months following the Closing Date pursuant to the Transaction Escrow
Agreement substantially in the form attached hereto as Exhibit B (the “Transaction
Escrow Agreement”). Subject to the terms of the Transaction Escrow Agreement, the Transaction
Escrow Deposit, together with all income earned thereon, shall be available to satisfy (i) any
indemnity obligations of Seller or Gilliam pursuant to Article IX hereof or (ii) any and all other
claims made by Buyer or any Buyer Indemnified Person pursuant to this Agreement or in connection
with the transactions contemplated hereby.



     2.8 Employee Retention Payments. Pursuant to the terms of the Employment Agreement with Ed
Banker and the Retention Agreements, Buyer agrees, and NS Group agrees to cause Buyer, to pay to Ed
Banker and those employees set forth on Schedule 1.85 an aggregate of $1,815,000 upon the
satisfaction of certain terms and conditions set forth in such agreements. Upon payment by Buyer
of an aggregate of $312,000 (less applicable taxes and withholdings that may be required by law) to
Michael Kelly (who is holding executed copies of each Retention Agreement in escrow) for
distribution to those employees set forth on Schedule 1.85, Seller shall cause Michael
Kelly to deliver to Buyer the Retention Agreements, duly executed by such employees. 



     2.9 Allocation of Aggregate Consideration. The Aggregate Consideration provided for in
Section 2.3 hereof shall be allocated among the Purchased Assets, the personal goodwill of Wayne D.
Gilliam, Jr. and the covenant not-to-compete contained in Section 5.1 hereof in the manner set
forth on Schedule 2.9 attached hereto, consistent with Section 6.2 hereof. The allocation
of the Aggregate Consideration pursuant to this provision shall be used by the LP Group, Gilliam,
Ann Self, June Roberson and Buyer for all Tax purposes and they shall take no position inconsistent
or contrary thereto.



ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLER AND GILLIAM




          Each of Seller and Gilliam, jointly and severally, hereby makes the following representations
and warranties, each of which is true and correct on the date hereof and shall survive the Closing
and the transactions contemplated hereby to the extent set forth herein.




     3.1 Existence and Power.



          (a) Seller is a limited partnership duly organized, validly existing and in good standing
under the laws of the State of Texas. Seller has delivered to Buyer true, complete and correct
copies of its certificate of formation and limited partnership agreement, as currently in effect.





15









 








          (b) Seller has all requisite power and authority to own, lease and use its assets and to
transact the Business, and holds all authorizations, franchises, licenses and permits required
therefor and all such authorizations, franchises, licenses and permits are valid and subsisting.
Seller is duly licensed or qualified to do business as a foreign limited partnership and is in good
standing in each jurisdiction where such license or qualification is required, except those
jurisdictions where the failure to be so licensed or qualified would not, individually or in the
aggregate, have a Material Adverse Effect. Each of Seller and Gilliam has the power and authority
to execute and deliver this Agreement, to perform its or his obligations hereunder, and to
consummate the transactions contemplated hereby.




     3.2 Valid and Enforceable Agreement; Authorization; Non-contravention.



          (a) This Agreement has been duly executed and delivered by each of Seller and Gilliam and
constitutes a legal, valid and binding obligation of Seller and Gilliam, enforceable against Seller
and Gilliam in accordance with its terms, except that such enforcement may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors’ rights generally, and (ii) general principles of equity.




          (b) The execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized, approved and ratified by all action on the part of
the partners of Seller.




          (c) Except as set forth in Schedule 3.2(c), neither Seller nor Gilliam is a party to,
subject to or bound by any Contract, Law or Order which does or would (i) conflict with or be
breached or violated or the obligations thereunder accelerated or increased (whether or not with
notice or lapse of time, or both) by the execution, delivery or performance by Seller and Gilliam
of this Agreement, or (ii) prevent the carrying out of the transactions contemplated hereby.
Except as set forth on Schedule 3.2(c), no permit, consent, waiver, approval or
authorization of, or declaration to or filing or registration with, any Government or third party
is required in connection with the execution, delivery or performance of this Agreement by Seller
and Gilliam or any of the Related Agreements to which Seller or Gilliam is a party or the
consummation by Seller and Gilliam of the transactions contemplated hereby and thereby. The
transactions contemplated hereby will not result in the creation of any Lien against the Purchased
Assets.




     3.3 Financial Statements. Attached as Schedule 3.3 are the Financial Statements.
The Financial Statements (i) are true, complete and correct in all material respects, (ii) were
derived from the books and records of Seller, (iii) present fairly the financial position and
results of operations of Seller at the dates and for the periods indicated, and (iv) have been
prepared on a modified cash basis of accounting for income tax purposes, which has been applied on
a consistent basis for all periods.



     3.4 Absence of Certain Changes. Except as set forth on Schedule 3.4, since
December 31, 2005, the Business has been conducted in the Ordinary Course consistent with past
practice and Seller has not taken or allowed to occur any of the following actions or events, or
agreed or committed, in writing or otherwise, to do or allow to occur any of such actions or
events:



16









 





          (a) Any material adverse change in the business or condition (financial or otherwise),
operations, results of operations or prospects of the Business, Seller or the condition of the
Purchased Assets;




          (b) Any increase in compensation or other remuneration payable to or for the benefit of or
committed to be paid to or for the benefit of any member, manager, officer, agent, or employee of
Seller or in any benefits granted under any Plan with or for the benefit of any such member,
manager, officer, agent, or employee (other than increases in wages or salaries required under
existing Contracts listed on Schedule 3.14 or otherwise not unusual in timing, character or
amount made in the Ordinary Course to employees) or any adoption or amendment by Seller of any
Plan;




          (c) Any transaction entered into or carried out by Seller (with respect to the Business) other
than in the Ordinary Course;




          (d) Any modification or termination of any Contract or of any Government license, permit or
other authorization of Seller;




          (e) Any acquisition of any assets (whether through capital spending or otherwise) outside of
the Ordinary Course or which are material, individually or in the aggregate, to the Business;




          (f) Any disclosure by Seller of any confidential or proprietary information of the Business to
any person or entity other than to Buyer and its representatives, agents, attorneys and accountants
or to Seller’s own employees in the Ordinary Course;




          (g) Any material change in the conduct of the Business, including without limitation any
change in the methods of purchase, sale, lease, management, marketing, promotion or operation, or
any delay or postponement of the payment of accounts payable or other liabilities of the Business;




          (h) Any change in any method of accounting or accounting policies of Seller, other than those
required by GAAP, or any write-down in the accounts receivable or inventories of Seller other than
in the Ordinary Course;




          (i) Any action that will or may reasonably be expected to cause or constitute a breach of any
provision of this Agreement;




          (j) Any sale, lease, transfer, or assignment of any of the Purchased Assets, tangible or
intangible, or any waiver of any claims or rights related to any of the Purchased Assets or
abandonment or lapse of any of the Intellectual Property owned, used or held for use by Seller in
connection with the Business or grant of any license or sublicense of any of such Intellectual
Property;




          (k) Any imposition of a Lien on any of the Purchased Assets; or





17









 








          (l) Any extension of credit to, making of a loan or advance to, or execution of a guarantee
for the benefit of, any other person or entity in connection with the Business, other than advances
to employees in the Ordinary Course.




     3.5 Taxes.



          (a) Each member of the LP Group has filed, or caused to be filed or extended, on a timely
basis all Tax Returns that relate to the Business or the Purchased Assets, and each such Tax Return
is true, correct and complete. No member of the LP Group is currently the beneficiary of any
extension of time within which to file any Tax Return.




          (b) All Taxes (whether or not reflected in Tax Returns as filed) owed by any member of the LP
Group with respect to the Business or the Purchased Assets have been timely and fully paid.




          (c) Except as set forth on Schedule 3.5, no claim has ever been made by an authority
in a jurisdiction where any member of the LP Group does not file Tax Returns that it is or may be
subject to taxation in that jurisdiction based upon the Purchased Assets or the operation of the
Business.




          (d) There are no Liens for Taxes on any of the Purchased Assets other than Permitted Liens.




          (e) Each member of the LP Group has withheld and timely paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee, independent contractor,
creditor or other third party, including, without limitation, amounts required to be withheld under
Sections 1441 and 1442 of the Code (or similar provisions of state, local or foreign law).




          (f) Except as set forth on Schedule 3.5, there are no audits or examinations of any
Tax Returns of any member of the LP Group in process or, for which notification of such audit has
been given. No member of the LP Group is a party to any action or proceeding by any Government
authority for the assessment or collection of Taxes, nor, to Seller’s Knowledge, has
such event been asserted or threatened. There is no waiver or tolling of any statute of
limitations in effect with respect to any Tax Return of any member of the LP Group.




          (g) None of the Purchased Assets is tax exempt use property within the meaning of Section
168(h) of the Code or has been financed with or directly or indirectly secures any industrial
revenue bonds or debt the interest on which is tax-exempt under Section 103(a) of the Code. None of
the Assumed Liabilities is an obligation or guaranty of any outstanding industrial revenue bonds
and no member of the LP Group is a tenant, principal user or related person to any principal user
within the meaning of Section 144(a) of the Code of any property that has been financed or improved
with the proceeds of industrial revenue bonds.




          (h) None of the Purchased Assets or Assumed Liabilities is an interest in a partnership for
United States federal income tax purposes.





18









 








          (i) Except as set forth on Schedule 3.5, none of the Acquired Assets or Assumed
Liabilities, including but not limited to un-cashed checks to vendors, customers or employees,
non-refunded overpayments or unclaimed subscription balances, is escheatable to any state or
municipality under any applicable escheatment laws as of the date hereof or may at any time after
the date hereof become escheatable to any state or municipality under any applicable escheatment
law.




          (j) Except as set forth on Schedule 3.5, the Business has not been conducted business
outside the State of Texas in a manner that would subject it to the Taxes of a U.S. state other
than Texas. None of the activities of the Business constitutes or has constituted a permanent
establishment in any foreign country, as defined in any applicable tax treaty or convention between
the United States and such foreign country, and the Business as conducted to date has not been
subject to income tax outside the United States.




          (k) None of the Purchased Assets is property that any member of the LP Group or the Business
is required to treat as a “safe harbor lease” within the meaning of Section 168(f)(8) of the Code,
as in effect prior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982.




          (l) Since its formation, Holdings (and prior to the formation of Holdings, Fishing Tools
Specialty, Inc.) has validly elected (and each of its owners required to consent has validly and
timely consented to its election) to (i) qualify for Federal Income Tax purposes as an “S
Corporation” within the meaning of Sections 1361 and 1362 of the Code, and (ii) be treated in a
comparable fashion under the Tax laws of each jurisdiction where it is subject to taxation. Since
March 15, 2006, Seller has been treated (i) for Federal Income Tax purposes as a qualified
subchapter S subsidiary within the meaning of Section 1361(b)(3)(B) of the Code, and (ii) in a
comparable fashion under the Tax laws of each jurisdiction where it is subject to taxation. GP is
and has always been an entity disregarded from Holdings within the meaning of Treasury Regulation
section 301.7701-3(b)(1)(ii). Neither Seller nor any of its partners will be subject to taxation
under Section 1374 as a result of the sale of the Purchased Assets.




          (m) Holding is the “resulting corporation” and Fishing Tools Specialty, Inc. is the
“transferring corporation” (within the meaning of Treasury Regulation section 1.368-1(m)) from the
transaction that occurred on March 15, 2006.




     3.6 Accounts Receivable. Set forth on Schedule 3.6 is a list of all the Accounts
Receivable of the Business and an aging schedule related thereto, as of December 31, 2005. Such
Accounts Receivable, together with any Accounts Receivable arising between such date and the
Closing Date, are (to the extent not yet paid in full) valid, genuine and existing and arose or
will have arisen from bona fide sales of products or services actually made in the Ordinary Course.
The Accounts Receivable are not subject to, and Seller has not received a notice of, any
counterclaim, set-off, defense or Lien with respect to the Accounts Receivable (except to the
extent reflected in any reserves set forth on the Balance Sheet). No agreement for deduction, free
goods, discount or deferred price or quantity adjustment has been made with respect to any Accounts
Receivable.



19









 





     3.7 Inventories; Consignment. The inventory included in the Purchased Assets consists of a
quantity and quality usable and salable in the Ordinary Course, is not physically damaged,
previously used, obsolete, discontinued or excess, subject only to the reserve, if any, for
inventory write-down set forth on the Financial Statements. Except as set forth in Schedule
3.7, Seller does not hold any inventory or materials on consignment or have title to any
inventory or materials in the possession of others.



     3.8 Litigation. Except as set forth in Schedule 3.8, (a) there is no, and for the
previous five years there has not been, any suit, action, claim, litigation, grievance, proceeding
(administrative, judicial, or in arbitration, mediation or alternative dispute resolution),
Government or grand jury investigation, or other action (any of the foregoing, an “Action”)
pending or, to Seller’s Knowledge, threatened against Seller or involving the Business, any of the
Purchased Assets or Assumed Liabilities, or, to Seller’s Knowledge, any of Seller’s partners,
directors, officers, employees, agents, or other personnel in their capacity as such, including
without limitation any Action challenging, enjoining, or preventing this Agreement, or the
consummation of the transactions contemplated hereby; (b) Seller is not and has not been subject to
any Order other than Orders of general applicability; and (c) Seller has not been subject to, or
threatened to be subject to, and, to Seller’s Knowledge, there are no grounds for, any Action or
Order relating to personal injury, death, or property or economic damage arising from products
sold, licensed or leased and services performed by Seller.



     3.9 Real Property.



          (a) Set forth in Schedule 3.9(a) is a list of the real property owned by Seller in
connection with the Business (the “Owned Real Property”), together with the legal
description of each parcel of Owned Real Property, a description of the title insurance policy or
other evidence of title issued with respect thereto, the name of the owner of such property and a
description of the type of use of each such parcel. Except for Permitted Liens and the Permitted
Exceptions,
Seller has good and marketable title to the Owned Real Property free and clear of all options,
leases, covenants, conditions, easements, agreements, claims, and other Liens of every kind and
there exists no restriction on the use or transfer of such property.




          (b) Set forth in Schedule 3.9(b) is a description of each lease under which Seller
(with respect to the Business) is the lessee of any real property (the “Leased Real
Property” and together with the Owned Real Property, the “Real Property”). Seller has
made available to Buyer a true, correct and complete copy of each lease identified in Schedule
3.9(b). The premises or property described in such leases are presently occupied or used by
Seller as lessee under the terms of such leases. Except as set forth in Schedule 3.9(b),
all rentals due under such leases have been paid and there exists no default by Seller or by any
other party to such leases under the terms of such leases and no event has occurred which, upon
passage of time or the giving of notice, or both, would result in any event of default by Seller or
by any other party to such leases, or prevent Seller from exercising and obtaining the benefits of
any rights or options contained therein. Except as set forth in Schedule 3.9(b), Seller
(with respect to the Business) has all right, title and interest of the lessee under the terms of
said leases, free of all Liens other than Permitted Liens and all such leases are valid and in full
force and effect.





20









 








          (c) All improvements located on, and the use presently being made of, the Real Property comply
with all applicable zoning and building codes, ordinances and regulations and all applicable fire,
environmental, occupational safety and health standards and similar standards established by Law,
except where non-compliance does not have a Material Adverse Effect, and the same use thereof by
Buyer following Closing, in the same manner as conducted by Seller prior to Closing, will not
result in any violation of any such code, ordinance, regulation or standard. The present use and
operation of the Real Property does not constitute a non-conforming use and, to Seller’s Knowledge,
is not subject to a variance. To Seller’s Knowledge, there is no proposed, pending or threatened
change in any such code, ordinance, regulation or standard which would materially adversely affect
the Business.




          (d) At and after the Closing, Buyer shall have the right to maintain or use such Real
Property, including the space, facilities or appurtenances outside the building set-back lines,
whether on, over or under the ground, and to conduct such activities thereon as maintained, used or
conducted by Seller on the date hereof and such right is not subject to revocation. To Seller’s
Knowledge, no proceeding is pending or threatened which could adversely affect the zoning
classification of the Real Property.




          (e) The Real Property is served by water, gas, electric, telephone, and sewer utilities, which
utilities are available on the Real Property or are available at the edge of the Real Property
within contiguous public rights-of-way, and which utilities are of proper size and/or capacity to
adequately meet all needs and requirements for the use of the Real Property and improvements for
their intended purpose. At and after the Closing, Buyer shall have all rights, easements and
agreements necessary for the use and maintenance of water, gas, electric, telephone, sewer or other
utility pipelines, poles, wires, conduits or other like facilities, and appurtenances thereto,
over, across and under the Real Property.




          (f) There is no unpaid Property Tax, levy or assessment against the Real Property (except for
Liens relating to Taxes not yet due and payable), nor is there pending or
threatened any condemnation proceeding against the Real Property or any portion thereof. No
part of any improvements on the Real Property encroaches upon any property adjacent thereto or upon
any easement, nor is there any encroachment or overlap upon the Real Property.




          (g) Except as set forth in Schedule 3.9(g), to Seller’s Knowledge, there is no
material condition affecting the Real Property or the improvements located thereon which requires
repair or correction to restore the same to reasonable operating condition.




     3.10 Title to Purchased Assets. Seller has good and indefeasible title to the Owned Real
Property and good and marketable title to all of the other Purchased Assets, free and clear of all
Liens (except Permitted Liens and Permitted Exceptions), and there exists no restriction on the use
or transfer of the Purchased Assets which would have a Material Adverse Effect on the use or
transfer of the Purchased Assets. Except as set forth on Schedule 3.10, no Purchased
Assets are in the possession of others and Seller does not hold any Purchased Assets on
consignment. All of the tangible assets included in the Purchased Assets have been maintained in
accordance with normal industry practice, are in good operating condition and repair (subject to
normal wear and tear), and are suitable for the purposes for which they are presently used and
proposed to be used.



21









 





     3.11 Necessary Property. The Purchased Assets, the Assumed Liabilities and the Excluded
Assets constitute all property and property rights now used, useful or necessary for the conduct of
the Business in the manner and to the extent presently conducted or planned to be conducted by
Seller or any of its Affiliates or used in the generation of any revenues or expenses reflected on
the Financial Statements. There exists no condition, restriction or reservation affecting the
title to or utility of the Purchased Assets or the Assumed Liabilities which would prevent Buyer
from utilizing the Purchased Assets or enforcing the rights under the Assumed Liabilities, or any
part thereof, to the same full extent that Seller or any of its Affiliates might continue to do so
if the sale and transfer contemplated hereby did not take place. Upon the Closing, good and
marketable title to the Purchased Assets and the rights under the Assumed Liabilities shall be
vested in Buyer free and clear of all Liens (except Permitted Liens and Permitted Exceptions).



     3.12 Intellectual Property.



          (a) Schedule 3.12(a) sets forth a complete and accurate list of all Patents,
Trademarks, invention disclosures, domain names, copyright registrations and applications therefor,
and all extensions and renewals for any of the foregoing, that are included in the Intellectual
Property.




          (b) Seller is the sole and exclusive owner of all right, title and interest in and to all
Intellectual Property on Schedule 3.12(a) owned by Seller, free and clear of all Liens,
including obligations to transfer or license such Intellectual Property, and there exists no
restriction on the use or transfer or licensing of such Intellectual Property. Seller owns or is
licensed or otherwise possesses the legal rights to use, free and clear of all Liens, all
Intellectual Property necessary for, or used in, the operations of Seller (including, without
limitation, the
conduct of the Business) as such operations are presently conducted and as proposed by Seller
to be conducted.




          (c) The consummation of the transactions contemplated hereby will not alter, impair,
extinguish or invalidate any Intellectual Property.




          (d) There has been no claim made, or threatened, by a third party against Seller (and Seller
has not been a party to any action, suit, investigation or proceeding including such a claim), and
except as set forth in Schedule 3.12(d), Seller has not received notice from any third
party of any such claim, asserting the invalidity, misuse or unenforceability, infringement,
misappropriation or other violation of any Intellectual Property, or challenging Seller’s ownership
of or rights to use or license any Intellectual Property, and, to Seller’s Knowledge, there are no
grounds for any such claim or challenge.




          (e) (i) The use in connection with the Business of the Patents set forth in Schedule
3.12(e)-1 (the “US Patents”), does not infringe, misappropriate or otherwise violate
the rights of any Person, and no notice of infringement, misappropriation or other violation has
been received by Seller from a third party which is not identified on Schedule 3.12(e)-2;
(ii) to Seller’s Knowledge, the use in connection with the Business of all of the other
Intellectual Property owned by and/or licensed to Seller (other than the US Patents), does not
infringe, misappropriate or otherwise violate the rights of any Person, and no notice of
infringement, misappropriation or




22









 







other violation has been received by Seller from a third party
which is not identified on Schedule 3.12(e)-2; and (iii) each of the products and services
offered by or on behalf of Seller covered by the US Patents, and each of the processes used by or
at the direction of Seller covered by the US Patents, has not infringed (whether directly, as a
contributory infringer, through inducement or otherwise), misappropriated or otherwise violated,
and does not infringe, misappropriate or otherwise violate, any proprietary rights of any Person.




          (f) To Seller’s Knowledge, there is not and has not been any unauthorized use or disclosure,
infringement, misappropriation or other violation by any person (including without limitation, any
employee or consultant of Seller) of any of the Intellectual Property owned by Seller, and, to
Seller’s Knowledge, there are no facts raising a likelihood of such unauthorized use or disclosure,
infringement, misappropriation or other violation.




          (g) Seller is taking or has taken the actions necessary to maintain and protect all
Intellectual Property that is owned by it, including recording documents of title and releases of
security interests required to perfect such rights. None of the Intellectual Property used or held
for use by Seller, the value of which to Seller is or was contingent upon maintenance of the
confidentiality thereof, has been disclosed to any Person except Persons under the obligation to
maintain the confidentiality thereof. Each of Seller’s Employees, officers and consultants that
has created any Intellectual Property used or held for use by Seller, has executed a written
assignment for the transfer of ownership of such Intellectual Property to Seller.




          (h) (i) The US Patents are valid and enforceable, and (ii) to Seller’s Knowledge, all of the
other Intellectual Property owned by Seller (other than the US Patents) is valid and enforceable.




          (i) Except as set forth on Schedule 3.12(i), Seller does not have any obligation to
compensate any Person for its use of any Intellectual Property.




          (j) Seller has not granted to any Person, any license (whether oral, written, implied or
otherwise) to use any of its Intellectual Property, whether or not requiring payment of royalties,
except for implied licenses granted by Seller in connection with the sale of products in the
ordinary course of business.




          (k) Seller has not given to any person any warranty, indemnification obligation or hold
harmless obligation in connection with any Intellectual Property, except for statutory warranties
given in the Ordinary Course in connection with the sale of goods.




          (l) Except as disclosed on Schedule 3.12(l), Seller has the right to use and disclose,
without obligations to any other person, all Intellectual Property.




     3.13 No Breaches of Law or Governing Documents; Licenses and Permits.



          (a) Seller (with respect to the Business) is not or has not been in default under or in breach
or violation of any Law, except where such default, breach or violation does not, individually or
in the aggregate, have a Material Adverse Effect, or the provisions of any Government permit,
franchise, or license, or any provision of its organizational documents, as applicable. Seller has
not received any notice alleging such default, breach or violation. Neither




23









 







the execution of this
Agreement nor the Closing do or will constitute or result in any such default, breach or violation.




          (b) Seller holds all licenses, permits and other authorizations and approvals required to
conduct the Business as presently conducted, and each such license, permit, authorization or
approval is valid, in full force and effect, and listed on Schedule 3.13 and, upon Closing,
Buyer will have all right and authority to conduct its activities pursuant to such licenses and
permits. Seller is in compliance in all material respects with each such license, permit,
authorization and approval and neither the execution of this Agreement nor the Closing do or will
constitute or result in a default under or violation of any such permit, license, authorization or
approval.




     3.14 Contracts and Commitments. Except as set forth on Schedule 3.14, neither
Seller nor its Affiliates is a party to or otherwise obligated in connection with the Business
under any of the following Contracts, whether written or oral:



          (a) Any single Contract providing for an expenditure in excess of $25,000 or Contracts with
the same or affiliated vendor(s) providing for an expenditure in excess of $50,000, in the
aggregate, for the same, or a related product or service.




          (b) Any single Contract providing for the purchase or sale of products or services in an
amount in excess of $25,000 or Contracts with the same or affiliated customer(s) providing for the
purchase or sale of products or services in an amount in excess of $50,000.




          (c) Any Contract, bid or offer to sell products or to provide services to third parties which
(i) is at a price which would result in a net loss on the sale of such products or provision of
such services, or (ii) contains terms or conditions which Seller cannot reasonably expect to
satisfy or fulfill in all material respects.




          (d) Any purchase commitment for materials, supplies, component parts or other items or
services that is in excess of the normal, ordinary, usual and current requirements of Seller (with
respect to the Business) or that is at a price in excess of the current reasonable market price at
the time of such commitment.




          (e) Any Contract pursuant to which Seller or its Affiliates (with respect to the Business) is
the lessee or sublessee of, or holds or operates, any real or personal property owned or leased by
any other person or entity (other than leases of personal property leased in the Ordinary Course
with annual lease payments no greater than $25,000).




          (f) Any revocable or irrevocable power of attorney relating to the Purchased Assets or the
Business granted to any person, firm or corporation for any purpose whatsoever.




          (g) Any arrangement or other agreement relating to the Purchased Assets or the Business which
involves (i) a sharing of profits, (ii) future payments of $25,000 or more per annum to other
persons, or (iii) any joint venture, partnership or similar contract or arrangement.




          (h) Any sales agency, sales representation, distributorship or franchise agreement relating to
the Purchased Assets or the Business.





24









 








          (i) Any contract prohibiting Seller or its Affiliates (with respect to the Business) from
competing or prohibiting Seller or its employees from freely engaging in the Business anywhere in
the world.




          (j) Any contract or commitment not made in the Ordinary Course.




          (k) Any Contract or commitment wherein Seller or its Affiliates (with respect to the Business)
guaranteed a specific level of performance, whether financial or otherwise, to a customer.




          (l) Any Contract or commitment wherein Seller or its Affiliates (with respect to the Business)
agreed to indemnify a customer for damages or losses arising from the customer’s own actions.




          (m) Any other Contract or commitment which is not cancelable without penalty on thirty (30)
days notice or less and which is not specifically described on any other Schedule to this
Agreement.




     3.15 Validity of Contracts. Each Assumed Contract is a valid and binding obligation of
Seller and, to Seller’s Knowledge, the other parties thereto in accordance with its terms and
conditions. Neither Seller nor, to Seller’s Knowledge, any other party to such a Contract is in
default under or in violation of such
Contract, and there are no disputes with regard to any such Contract. No event has occurred which,
with the passage of time or the giving of notice, or both, would constitute, and neither the
execution of this Agreement nor the Closing hereunder do or will constitute or result in, a default
under or a violation of any Assumed Contract by Seller or, to Seller’s Knowledge, any other party
to such Assumed Contract or would cause the acceleration of any obligation of any party thereto or
the creation of a Lien upon any Purchased Asset, or would require any consent thereunder. Seller
has delivered to Buyer a true, complete and accurate copy of each written Contract required to be
disclosed on Schedule 3.14 and a true, complete and accurate description of each oral
Contract required to be disclosed on Schedule 3.14, and none of such Contracts has been
modified or amended in any respect, except as reflected in such disclosure to Buyer.



     3.16 Customers and Suppliers. Schedule 3.16 sets forth a true, complete and
correct list of Seller’s 15 largest customers and 15 largest suppliers by volume of sales and
purchases, respectively, (by both unit and dollar volume) for the year ended December 31, 2005.
Seller has not received any indication from any supplier of Seller (including without limitation,
those listed on Schedule 3.16) to the effect that, and has no reason to believe that, such
supplier will stop, or decrease the rate of, supplying materials, products or services to Seller.
Seller has not received any indication from any customer of Seller (including without limitation,
those listed on Schedule 3.16) to the effect that, and has any reason to believe that, such
customer will stop, or decrease the rate of, buying materials, products or services from Seller.



     3.17 Employees, Consultants and Agents; Compensation.



          (a) Set forth on Schedule 3.17(a) is a complete list of: (i) all of the Seller’s
Employees, and (ii) all current paid consultants or agents to Seller; together, in each case, with
the current rate of compensation (if any) payable to each and any paid vacation time owing to




25









 







such
person, any incentive or bonus payments and the date of employment or engagement of each such
person.




          (b) Except as set forth on Schedule 3.17(b): (i) Seller is not indebted to any of its
officers, directors, employees, agents or consultants except for amounts due as normal salaries,
wages, employee benefits and bonuses and in reimbursement of ordinary business expenses in the
Ordinary Course, and (ii) no officer, director, employee, agent or consultant of Seller is indebted
to Seller except for advances for ordinary business expenses in the Ordinary Course.




          (c) To Seller’s Knowledge, except as set forth in Schedule 3.17(c), no former or
current employee of Seller is a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, non-competition or proprietary rights agreement, between such
employee and any other person or entity that in any way adversely affected, affects or may affect
(i) the performance of his or her duties as an employee of Seller, or (ii) the ability of Seller or
Buyer to conduct the Business. To Seller’s Knowledge, other than Ann Self, none of the Seller’s
Employees intends to terminate his or her employment with Seller.




          (d) All payments to agents, consultants and others made by Seller in connection with the
Business have been in payment of bona fide fees and commissions and not as bribes or as otherwise
illegal or improper payments. All such payments have been made directly to the parties providing
the services for which such payments were made, and no such payment has been paid in a manner
intended to avoid currency controls or any party’s tax reporting or payment obligations. Seller
has properly and accurately reflected on its books and records: (i) all compensation paid to and
perquisites provided to or on behalf of its agents, consultants or employees, and (ii) all
compensation and perquisites that are due and payable to such persons, but which have not been paid
or provided at the Closing Date. Such compensation and perquisites have been properly and
accurately disclosed in the Financial Statements and other public or private reports, records or
filings of Seller, to the extent required by Law.




          (e) With respect to each of the Seller’s Employees, (i) Seller hired such employee in
compliance with the IRCA; and (ii) the Company has complied with all recordkeeping and other
regulatory requirements under IRCA.




     3.18 Labor Matters. Except as set forth on Schedule 3.18:



          (a) Seller is not a party to or bound by any collective bargaining, works council, union
representation or similar agreement or arrangement and no collective bargaining agreement is
currently being negotiated and no organizing effort is currently being made with respect to
Seller’s Employees;




          (b) There is no labor strike, dispute, slowdown, or stoppage pending or threatened against
Seller;




          (c) No right of representation exists respecting Seller’s Employees and there exists no
unresolved claim of a right of representation respecting Seller’s Employees; and





26









 








          (d) Neither Seller nor any of its agents, representatives or employees has committed any
unfair labor practice, as defined in the National Labor Relations Act of 1947, as amended. There
is not now pending or threatened, nor has there been since January 1, 2000, any charge or complaint
against Seller by the National Labor Relations Board, any state or local labor or employment agency
or any representative thereof, and the execution or consummation of this Agreement will not result
in any such charge or complaint.




     3.19 Employee Benefit Matters.



          (a) Except as set forth on Schedule 3.19, no Plan is maintained or contributed to by
Seller or by any other corporation or trade or business controlled by, controlling or under common
control with Seller (within the meaning of Code Section 414 or ERISA Section 4001(a)(14) or
40001(b)) (“ERISA Affiliate”) or has been maintained or contributed to in the last six (6)
years by either Seller or an ERISA Affiliate, or with respect to which either Seller or any ERISA
Affiliate has or may have any liability. True, correct, and complete copies of all
documents creating or evidencing any Plan listed on Schedule 3.19 have been delivered
to Buyer. There are no negotiations, demands or proposals which are pending or, to Seller’s
Knowledge, threatened with respect to the Business which concern matters now covered, or that would
be covered, by any Plans.




          (b) To the extent applicable, each Plan listed on Schedule 3.19 complies with, has
been administered, operated and maintained in compliance with, its terms and in compliance with,
and Seller does not have any direct or indirect liability for non-compliance under, ERISA or any
other Law applicable to any such Plan. To the extent applicable with respect to each Plan listed
on Schedule 3.19, true, correct and complete copies of the most recent Forms 5500 have been
delivered to Buyer. Each Plan listed on Schedule 3.19 that is intended to qualify under
Section 401(a) or Section 509(c)(9) of the Code has received a favorable determination letter from
the Internal Revenue Service (a copy of which has been provided to Buyer) and related trusts have
been determined to be exempt from taxation. Nothing has occurred that would cause, and no Action
is pending or threatened, which could reasonably be expected to result in the loss of such
exemption or qualification.




          (c) No Plan is a multiemployer plan or single-employer plan (as defined in Section 4001 of
ERISA) which is subject to Title IV of ERISA, and neither Seller nor any ERISA Affiliate has ever
contributed or been obligated to contribute to any such plan.




          (d) Neither Seller nor any ERISA Affiliate has terminated a Plan which is an employee pension
benefit plan as defined in Section 3(2) of ERISA since January 1, 2000, and no “reportable event”
(as defined in ERISA) or “prohibited transaction” (as defined in the Code Section 4975 or ERISA
Sections 406 or 407 for which a statutory or administrative exemption does not exist) has occurred
or is threatened to occur with respect to any Plan listed on Schedule 3.19.




          (e) Except as set forth on Schedule 3.19, Seller is not required under Law to prepare
statements of assets and liabilities of any of the Plans listed on Schedule 3.19.




          (f) Other than as required by COBRA, Seller does not have any liability or obligation to
provide life, medical or other welfare benefits to former or retired employees.





27









 








          (g) With respect to any Plan listed on Schedule 3.19 which is a welfare plan as
defined in Section 3(1) of ERISA: (i) each such welfare plan which is intended to meet the
requirements for tax-favored treatment under Subchapter B of Chapter 1 of the Code meets such
requirements (and a copy of the ruling letter with respect to any VEBA which is implementing such
Plan has been provided to Buyer); (ii) there is no disqualified benefit (as such term is defined in
Code Section 4976(b)) which would subject either Seller or Buyer to a tax under Code Section
4976(a); and (iii) each such welfare plan complies in all material respects with the applicable
requirements of Code Section 4980B(f).




          (h) Full payment has been made of all amounts due under each of the Plans listed on
Schedule 3.19 and to each person employed or formerly employed by Seller that are required
under the terms of such Plans, and full payment will be made of all amounts that are required to be
so paid through the Closing Date.




          (i) All insurance premiums (including premiums to the PBGC) have been paid in full, subject
only to normal retrospective adjustments in the ordinary course, with regard to the Plans listed on
Schedule 3.19 for policy years or other applicable policy periods ending on or before the
Closing Date.




          (j) Except as set forth on Schedule 3.19, the consummation of transactions
contemplated by this Agreement will not result in any of Seller’s Employees becoming entitled to
any additional benefits or in any acceleration of the time of payment or vesting of any benefits
under any Plan, including a severance benefit.




          (k) There is no pending or, to Seller’s Knowledge, threatened Action against or involving any
Plan described in Schedule 3.19 hereof and there is no basis for any such Action, and there
are no facts which could give rise to any such Action, other than routine claims for benefits
thereunder.




          (l) All contributions, expenses and liabilities relating to all of the Plans described on
Schedule 3.19 will be made prior to the Closing Date or will be, on the Closing Date, fully
and properly accrued on the books and records of Seller and the Financial Statements reflect all of
such liabilities in a manner satisfying the requirements of Financial Accounting Standards 87 and
88.




     3.20 Overtime, Back Wages, Vacation and Minimum Wage. Seller is in compliance in all
material respects with all Laws governing overtime, wages and other payments owed to employees of
Seller. No present or former employees of Seller has given notice to Seller of any claim against
Seller (whether under Law, any employment agreement or otherwise) on account of or for and no
Government agency has given notice to Seller of any claim against Seller on behalf of present or
former employees of Seller related to (a) overtime pay, other than overtime pay for the current
payroll period, (b) wages or salary (excluding current bonus, accruals and amounts accruing under
“employee benefit plans,” as defined in Section 3(3) of ERISA) for any period other than the
current payroll period, (c) vacation, time off or pay in lieu of vacation or time off, other than
that earned in respect of the current fiscal year, or (d) any violation of any Law relating to
minimum wages, overtime pay or maximum hours of work. No written or oral commitments or agreements
to increase wages or salaries of employees of Seller exist.



28









 





     3.21 Discrimination and Occupational Safety and Health. Except as set forth on
Schedule 3.21 since January 1, 2000, no person or party (including, but not limited to,
Government agencies of any kind) has asserted any Action against Seller arising out of any Law
relating to discrimination in employment, harassment, employment practices (including wrongful
termination), family leave, or occupational safety and health standards and no such Action is
threatened. Since January 1, 2000, Seller has not received any written notice from any Government
entity, or other person or entity, alleging a violation of occupational safety or health standards.
Except as set forth on Schedule 3.21, there are no pending workers compensation claims
involving Seller and there have never been any workers compensation claims against Seller relating
to the use or existence of asbestos or ceramic fibers in any of the products or facilities of the
Business. Seller has delivered to Buyer a true, correct and complete
list of all workers compensation claims against Seller made over the five years preceding the
Closing Date.



     3.22 Insurance Policies.



          (a) Set forth on Schedule 3.22 is a list of all insurance policies and bonds currently
in force covering or relating to the properties, operations or personnel of Seller and, with
respect to insurance policies covering product liability and similar occurrence based risks, in
force at any time since January 1, 2000. Such schedule clearly indicates which of such policies
are claims made and which of such policies are occurrence based. All of such insurance policies
are in full force and effect (with respect to the applicable coverage periods), and Seller is not
in default with respect to any of its obligations under any of such insurance policies.




          (b) Seller has at all times maintained: (i) commercial general and product liability
insurance against such risks as are customarily insured against by companies similar to it and in
at least such amounts as are usually carried by persons engaged in the same or a similar business,
and (ii) insurance as required by law or under any agreement to which Seller is or has been a
party, including, without limitation, unemployment and workers’ compensation coverage.




     3.23 Product and Service Warranties. Set forth on Schedule 3.23 are the
standard forms of product and service warranties and guarantees offered by Seller and all other
outstanding product and service warranties and guarantees that are currently outstanding are
included in the written contracts of Seller disclosed on Schedule 3.14 or are disclosed on
this Schedule 3.23. No oral product or service warranties or guarantees have been made by
Seller. No person or party (including, but not limited to, Government agencies of any kind) has
asserted any Action against Seller under any Law relating to unfair competition, false advertising
or other similar claims arising out of warranties, guarantees, specifications, manuals or brochures
or other advertising materials used in connection with the Business.



     3.24 Product Liability Claims. Except as described on Schedule 3.24, since January
1, 2000, Seller has not received notice or information as to any claim or allegation of personal
injury, death, or property or economic damages, any claim for punitive or exemplary damages, any
claim for contribution or indemnification, or any claim for injunctive relief in connection with
the design, manufacture, marketing, sale, distribution, servicing or use of any product of Seller,
or in connection with any service provided by, or based on any error, omission or negligent act in
the performance of services by, Seller. Schedule 3.24 accurately and completely describes
all such claims, together in each case with the date such claim was made, the amount



29









 




claimed, the
disposition or status of such claim (including settlement or judgment amount). Buyer will not
incur any losses or expenses for product liability or similar claims with respect to products
manufactured or services performed by Seller prior to the Effective Time.




     3.25 Product Safety Authorities. To Seller’s Knowledge, no person or entity has been
required to file any notification or other report with or provide information to any Government or
product safety standards group
concerning actual or potential defects or hazards with respect to any product manufactured,
sold, distributed or put in commerce by Seller in connection with the Business, and, to Seller’s
Knowledge, there exist no grounds for the recall of any such product.



     3.26 Environmental Matters.



          (a) Except as described in the Environmental Reports and as otherwise set forth on
Schedule 3.26(a), all Environmental Property, all current and previous conditions on and
uses of the Environmental Property, and all current and previous ownership and operations of Seller
in connection with the Business (including without limitation transportation and disposal of
Hazardous Materials) or the Environmental Property: (i) comply and have at all times prior to
Closing complied with all Environmental Laws; and (ii) do not cause, have not caused, and will not
cause liability to be incurred by Seller under any Environmental Law, except where such
non-compliance or liability does not have a Material Adverse Effect. Seller is not in violation of
and has not violated for the five years prior to Closing any Environmental Law. To Seller’s
Knowledge, neither Seller nor its predecessors or their Affiliates has previously owned, leased,
operated or used any real property other than the Owned Real Property and Leased Real Property in
connection with the Business.




          (b) Except as described in the Environmental Reports and as otherwise set forth on
Schedule 3.26(b), Seller, in connection with the Business, has properly obtained and is in
compliance in all material respects with all Environmental Permits, and has properly made all
filings with and submissions to any Government or other authority required by any Environmental
Law. No deficiencies have been asserted by any Government or authority with respect to such items.
Further, except as described in the Environmental Reports and as otherwise set forth on
Schedule 3.26(b), the consummation of the transactions contemplated hereby will not: (i)
require Seller, Business, or Buyer to provide notices, obtain governmental approval or take any
actions, including, but not limited to, any repairs, construction or capital expenditures, in order
for Buyer to continue to hold all Environmental Permits and to remain in compliance with the terms
and conditions of all Environmental Permits and Environmental Laws; or (ii) require Buyer to obtain
any new Environmental Permit.




          (c) Except as described in the Environmental Reports and as otherwise set forth on
Schedule 3.26(c), there has been no spill, discharge, leak, leaching, emission, migration,
injection, disposal, escape, dumping, or release of any kind on, beneath, above, or into the
Environmental Property or from the Environmental Property into the environment surrounding the
Environmental Property.




          (d) Except as described in the Environmental Reports and as otherwise set forth on
Schedule 3.26(d), there are and have been no (i) Hazardous Materials stored, disposed of,
generated, manufactured, refined, transported, produced, or treated at, upon, or from the
Environmental Property; (ii) asbestos fibers or materials, mold, lead-based paint, or




30









 







polychlorinated biphenyls on or beneath the Environmental Property; or (iii) underground storage
tanks on or beneath the Environmental Property. Schedule 3.26(d) shall include the
description and the quantity of the Hazardous Materials, the location where activities
involving the Hazardous Materials occurred, and the names and addresses of the persons involved and
the dates of the activities involving Hazardous Materials.




          (e) Seller has delivered to Buyer, prior to the execution and delivery of this Agreement,
complete copies of any and all (i) documents received by Seller from, or submitted by Seller to,
the Environmental Protection Agency and/or any state, county or municipal environmental or health
agency since January 1, 2000 concerning the environmental condition of the Environmental Property
or the effect of the operations of the Business on the environmental condition of the Environmental
Property and (ii) reviews, audits, reports, or other analyses received by or in the possession of
Seller since January 1, 2000 concerning the Environmental Property.




          (f) Except as described in the Environmental Reports and as otherwise set forth on
Schedule 3.26(f), there never has been pending or, to Seller’s Knowledge, threatened
against Seller in connection with the Environmental Property or the Business, any civil, criminal
or administrative action, suit, summons, citation, complaint, claim, notice, demand, request,
judgment, Order, Lien, proceeding, hearing, study, inquiry or investigation based on or related to
any Environmental Permit or Environmental Law.




          (g) Schedule 3.26(g)(i) contains a list of all sites where Hazardous Materials have
been sent by Seller in connection with the Business in the past, or are currently being sent for
disposal, treatment, recycling or storage, including the address of each such site, and a
description and estimate of the amount of the Hazardous Materials disposed of, treated, recycled or
stored at each such site. Schedule 3.26(g)(ii) further contains a list of the names and
addresses of all persons or entities involved in the transportation and disposal of Hazardous
Materials on behalf of the Business or from the Environmental Property and an estimate of the
amount of such Hazardous Materials handled by each such person or entity.




          (h) Except as described in the Environmental Reports and as otherwise set forth on
Schedule 3.26(h), neither Seller nor the Business has ever received from any person any
notice of, or has knowledge of, any past, present or anticipated future events, conditions,
circumstances, activities, practices, incidents, actions, agreements or plans that could: (i)
interfere with, prevent, or increase the costs of compliance or continued compliance with any
Environmental Permit or any renewal or transfer thereof or any Environmental Law; (ii) make more
stringent any restriction, limitation, requirement, or condition under any Environmental Law or any
Environmental Permit in connection with the operations at the Property; or (iii) give rise to any
liability, loss or expense, or form the basis of any civil, criminal, or administrative action,
suit, summons, citation, complaint, claim, notice, demand, request, judgment, order, lien,
proceeding, hearing, study, inquiry, or investigation involving the Environmental Property, Seller
or the Business, based on or related to an Environmental Permit, or an Environmental Law or to the
presence, manufacture, generation, refining, processing, distribution, use, sale, treatment,
recycling, receipt, storage, disposal, transport, handling, emission, discharge, release or
threatened release of any Hazardous Materials.





31









 








     3.27 Foreign Operations and Export Control. Seller and its Affiliates have at all times, in connection with the Business, acted:



          (a) pursuant to valid qualifications to do business in all jurisdictions outside the United
States where such qualification is required by local Law;




          (b) in compliance in all material respects with all applicable foreign Law, including without
limitation, Law relating to foreign investment, foreign exchange control, immigration, employment
and taxation;




          (c) without notice of violation of and in compliance with all relevant anti-boycott laws,
including without limitation, the Section 999 of the Code and regulations and guidelines issued
pursuant thereto and the Export Administration Regulations administered by the U.S. Department of
Commerce, as amended, including all reporting requirements;




          (d) without violation of any export control or sanctions laws, orders or regulations,
including without limitation, the Export Administration Regulation administrated by the U.S.
Department of Commerce and sanctions and embargo executive orders and regulations administered by
the Office of Foreign Assets Control of the U.S. Treasury Department, as amended, and without
violation and in compliance with any required export or re-export licenses or authorizations
granted under such laws, regulations or orders; and




          (e) without violation of the Foreign Corrupt Practices Act of 1977, as amended.




     3.28 Related Party Transactions.



          (a) Except as set forth on Schedule 3.28(a), none of Seller or any of its Affiliates
(i) has or during the last three fiscal years has had any direct or indirect interest in, or is or
during the last three fiscal years was, a director, officer or employee of, any person that is a
client, customer, supplier, lessor, lessee, debtor, creditor or competitor of Seller or (ii) is, or
during the last three fiscal years has been, a party to any agreement or transaction with Seller.




          (b) Except as set forth on Schedule 3.28(b), all transactions between Seller and its
Affiliates which relate to the Business were on commercially reasonable and arms-length terms.




     3.29 Books and Records and Financial Controls.



          (a) True, correct and complete copies of the books of account, bank accounts, and other
corporate records of Seller have been made available to Buyer and such books and records have been
maintained in accordance with good business practices.




          (b) Seller uses reasonable efforts to ensure that (i) transactions are executed with
management’s authorization; (ii) transactions are recorded as necessary to permit preparation of
the financial statements of Seller and maintain accountability for Seller’s assets; (iii) access to
Seller’s assets is permitted only in accordance with management’s authorization;
(iv) accounts, notes and other receivables are recorded accurately, and proper and adequate




32









 







procedures are implemented to effect the collection thereof on a current and timely basis; and (v)
the methodology for recording inventory has been consistently applied amongst the reporting
periods.




     3.30 Brokers, Finders and Other Offers. Except for McClure, Schumacher & Associates,
L.L.P., no finder, broker, agent, or other intermediary, acting on behalf of Seller is entitled to
a commission, fee, or other compensation or obligation in connection with the negotiation or
consummation of this Agreement or the Related Agreements or any of the transactions contemplated
hereby or thereby. Seller is not subject to any letter of intent, agreement, understanding or
commitment with any third party (other than Buyer) or its agents or representatives, written or
unwritten, regarding any offer, proposal, or indication of interest involving the purchase, sale or
transfer of all or a material portion of the Purchased Assets or the Business, and Seller has
discontinued any negotiations with and furnishing of information to any such third party or its
agents or representatives.



     3.31 Disclosure. No representation or warranty by Seller or Gilliam in this
Agreement, or any Exhibit or Schedule referred to herein or in any Related Agreement to which
Seller or Gilliam is a party, and no statement, certificate or other information furnished to Buyer
by or on behalf of Seller or Gilliam pursuant hereto or thereto, contains any untrue statement of a
material fact or any omission of a material fact necessary to make the respective statements
contained herein and therein, in the light of the circumstances under which the statements were
made, not misleading.



ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER




     Buyer hereby make the following representations and warranties, each of which is true and
correct on the date hereof and shall survive the Closing Date and the transactions contemplated
hereby to the extent set forth herein.



     4.1 Corporate Existence and Power.



          (a) NS Group is a corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Kentucky. Buyer is a limited partnership duly organized, validly
existing and in good standing under the laws of the Commonwealth of Kentucky.




          (b) Buyer and NS Group have all requisite power and authority to own, lease and use its assets
and to transact the business in which it is engaged, and holds all authorizations, franchises,
licenses and permits required therefore and all such authorizations, franchises, licenses and
permits are valid and subsisting. Buyer and NS Group are duly licensed or qualified to do business
as a foreign corporation and are in good standing in each jurisdiction where such license or
qualification is required except for jurisdictions where the failure to be so qualified would not
have a material adverse effect on Buyer or NS Group.




          (c) Each of Buyer and NS Group has the corporate power to enter into this Agreement, to
perform its obligations hereunder, and to consummate the transactions




33









 







contemplated hereby. Neither
Buyer nor NS Group is a party to, subject to or bound by any Contract, Law or Order which does or
would (i) conflict with or be breached or violated or the obligations thereunder accelerated or
increased (whether or not with notice or lapse of time, or both) by the execution, delivery or
performance by Buyer or NS Group of this Agreement, or (ii) prevent the carrying out of the
transactions contemplated hereby.




     4.2 Valid and Enforceable Agreement; Authorization; Non-Contravention. This Agreement has
been duly executed and delivered by Buyer and NS Group and constitutes a legal, valid and binding
obligation of Buyer and NS Group, enforceable against each of Buyer and NS Group in accordance with
its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors’
rights generally, and (ii) general principles of equity. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been duly authorized,
approved and ratified by all necessary action on the part of Buyer and NS Group.



     4.3 Brokers, Finders. Except for Raymond James & Associates, Inc., no finder, broker,
agent or other intermediary, acting on behalf of Buyer or NS Group, is entitled to a commission,
fee or other compensation in connection with the negotiation or consummation of this Agreement or
the Related Agreements to which Buyer or NS Group is a party or any of the transactions
contemplated hereby or thereby.



ARTICLE V

COVENANTS NOT TO COMPETE, DISCLOSE OR HIRE




     5.1 Covenant. In consideration of the sale of the Purchased Assets, the assumption of the
Assumed Liabilities and the consummation of the transactions contemplated hereby:



          (a) Each of Seller, Gilliam, June Roberson and Ann Self (each, a “Covenantor”), agree
that he, she or it shall not, and shall cause each of its Affiliates not to:





               (i) Directly or indirectly through any entity, as a principal, employee, partner,
shareholder, member, officer, director, manager, agent, lender, paid or unpaid consultant or
otherwise, compete with, assist in or provide financial resources to any activity which
competes with the Business during the Restrictive Period (as defined below) anywhere in the
United States and anywhere outside the United States where the Business is currently
conducted or as of the Closing Date planned to be conducted; provided, however, that the
running of such time period shall be tolled during any period of time during which the
Covenantors or any of its Affiliates violates this paragraph, and provided further, that the
foregoing shall not prohibit the Covenantors or any of their Affiliates from owning 5% or
less of the outstanding equity securities of a Public
Company. Notwithstanding the foregoing, Buyer hereby agrees that the foregoing
covenant shall not be deemed breached as a result of (A) the ownership by Ann Self or her
spouse of a 50% equity interest in J. Hobbs Machine Corp.
(“J-Hobbs”) so long as (1)
Ann Self does not have any active participation in the business of
J-Hobbs and (2) neither
Ann Self nor her spouse, directly or indirectly, provides any
financial support to J-Hobbs
(whether by loan, guarantee, investment or otherwise) which
facilitates J-Hobbs engaging



34









 






in
any business enterprise that would be competitive with the business activities of FTS or
Buyer and (B) the ownership by Gilliam, Ann Self and June Roberson of a 33.3% equity
interest in Cromwell Lane Investments Corp., a Texas corporation (“Cromwell Lane”),
which owns 30% of Composite Lining Systems, L.P., a Texas limited partnership
(“CLS”), so long as Gilliam, Ann Self or June Roberson does not actively participate
in any activity that is competitive with the Business or provide any financial support to
CLS or Cromwell Lane (whether by loan, guarantee, investment or otherwise) which facilitates
CLS or Cromwell Lane engaging in any business enterprise that would be competitive with the
business activities of FTS or Buyer;




               (ii) Use or disclose to anyone except authorized personnel of the Business, whether or
not for such Covenantor’s benefit or otherwise, any trade secrets or confidential matters
concerning the Business, including, without limitation, secrets, customer lists and credit
records, employee data, sales representatives and their territories, mailing lists,
consultant arrangements, pricing policies, operational methods, marketing plans or
strategies, product development and techniques or plans, research and development programs
and plans, business acquisition plans, new personnel acquisition plans, designs and design
projects, software code, any Intellectual Property (unless previously publicly disclosed in
a manner which would not and does not constitute a breach of this Agreement or any other
relevant agreement) and any other research or business information concerning the Business
which such Covenantor currently deems to be confidential (whether or not a trade secret
under applicable law); or




               (iii) Directly or indirectly, during the Restrictive Period, solicit, encourage to
leave employment, or hire any employee of the Business or any person who at the time of
proposed hire by a Covenantor had been an employee of the Business within the previous six
(6) months, or induce or attempt to induce, or assist anyone else to induce or attempt to
induce, any customer of the Business to reduce or discontinue its business with the Business
or disclose to anyone else the name and/or requirements of any such customer; provided,
however, that the running of such time period shall be tolled during any period of time
during which the Covenantor or any of their Affiliates violates this paragraph.



5.2 Enforceability.



          (a) Each Covenantor hereby acknowledges the broad territorial scope of the covenant contained
in Section 5.1, but acknowledge and agree that the restrictions are reasonable and enforceable in
view of, among other things, (i) the narrow range of activities prohibited, (ii) the national and
international markets in which the Business operates and in which the products of the Business are
sold, (iii) the confidential, proprietary and trade secret information of the Business to which the
Covenantor may have had access and (iv) the fact that a business which
competes with the Business could greatly benefit if it were to obtain the confidential
information of the Business.




          (b) Each Covenantor acknowledges that the foregoing restrictions are reasonable and agrees
that in the event of any breach thereof the harm to Buyer and the Business will be irreparable and
without adequate remedy at law and therefore that injunctive relief with




35









 







respect thereto will be
appropriate. In the event that a court of competent jurisdiction determines, in an action brought
by or on behalf of Buyer, that any of the foregoing provisions are unenforceable as stated, the
parties intend that such restrictions be modified to permit the maximum enforceable restriction on
the Covenantors’ and their Affiliates’ competition with the Business.




     5.3 Time Period. For purposes of this Agreement, “Restrictive Period” shall
mean a period of five (5) consecutive years from and after the Closing Date.



ARTICLE VI

ADDITIONAL COVENANTS OF THE PARTIES




     6.1 Public Disclosure. Buyer shall not make any public disclosure of the terms hereof
or the transactions contemplated hereby without the prior written consent of Gilliam, except as
required by Law. Neither Seller, Gilliam, Ann Self or June Roberson shall make any public
disclosure of the terms hereof or the transactions contemplated hereby without the prior written
consent of Buyer, except as required by Law.



     6.2 Tax Covenants.



          (a) All sales, use, transfer, value added, excise, stamp, documentary, registration, real
estate transfer, transaction, real estate gains, and other similar Taxes, if any, incurred in
connection with the transactions contemplated by this Agreement shall be borne by the LP Group.




          (b) From and after the Closing Date, to the extent reasonably requested by the other party,
and at such party’s expense, the LP Group and Buyer shall assist and cooperate with the other in
the preparation and filing of any Tax Return described in this Section 6.2 and shall assist and
cooperate with the other in preparing for any disputes, audits or other litigation relating to
Taxes for which the other party is responsible pursuant to this Agreement. Seller and Buyer
further agree, upon request, to use their commercially reasonable efforts to obtain any certificate
or other document from any Government or any other person as may be necessary to mitigate, reduce
or eliminate any Tax (including additions thereto or interest and penalties thereon) that could be
imposed with respect to the transactions contemplated in this Agreement.




          (c) Buyer and Seller agree that, pursuant to the “Standard Procedure” provided in Section 4 of
Revenue Procedure 2004-53, 2004-34 I.R.B. 320, with respect to the filing and furnishing of IRS
Forms W-2, W-3, W-4, W-5 and 941, Seller will cooperate with Buyer by supplying Buyer with all
relevant wage, withholding and other relevant information with respect to each of Seller’s
Employees on a timely basis.




          (d) Seller agrees to execute such documents as are necessary in order to transfer and assign
to Buyer all state unemployment insurance wage bases and experience and tax rates with regard to
the calendar year that includes the Closing Date.




     6.3 Title Matters. Prior to the Closing Date, Seller has delivered to Buyer a
preliminary binder or title commitment(s) sufficient for the issuance of a TLTA Owner Policy of
Title Insurance with respect to the Owned Real Property (the “Title Policy”), issued by



36









 




Commonwealth Land Title Insurance Company and Basin Abstract and Title (collectively, the
“Title Company”), together with true, correct and legible copies of all instruments
referred to therein as conditions or exceptions to title. At the Closing, Buyer shall, at Buyer’s
sole cost and expense, obtain the Title Policy in an amount of not less than $1,300,000 with
respect to the Owned Real Property located in Houston and $550,000 with respect to the Owned Real
Property located in Odessa. The Title Policy shall show fee simple title to the Owned Real
Property vested in Buyer, subject only to: (a) current real estate taxes not yet due and payable,
the liability for which is apportioned pursuant to Section 6.5(a); and (b) the permitted title
exceptions listed in Schedule 6.3 attached hereto (the “Permitted Exceptions”).




     6.4 Obligations with Respect to Employees.



          (a) Buyer shall offer employment to all of the Seller’s Employees on terms and conditions that
are in Buyer’s sole and exclusive discretion.




          (b) Notwithstanding anything herein to the contrary, Buyer shall not assume as of the Closing
Date any Liability or obligation incurred under or as a result of any Plan maintained by the
Seller.




          (c) Seller shall be responsible for all costs arising on account of periods prior to the
Effective Time with respect to all of the Seller’s Employees (including without limitation, all
accrued wages, bonus, vacation and sick leave, retirement benefits, insurance and health benefits
and other employment costs, and all federal and state withholding, social security and employment
taxes payable in connection therewith). In the event that any such cost (other than any such cost
associated with any Plan maintained by Seller) would be administratively difficult for Seller to
pay because it is measured based on a period beginning before the Effective Time and ending after
the Effective Time, Buyer shall pay such costs as a matter of convenience and shall be entitled to
a credit as described in Section 6.5(c). Notwithstanding the foregoing, Buyer shall not pay such
costs with respect to any employees who were terminated before the Closing Date.




          (d) Seller will be responsible for any Liability or obligation to provide COBRA continuation
coverage to Seller’s Employees and their dependents or former dependents, as required by Code
Section 4980B(f), to the extent such individuals are M&A Qualified Beneficiaries (as defined in
Treasury Regulation section 54.4980B-9, Q&A-4 and Q&A-6) due to the transaction contemplated in
this Agreement. For the avoidance of doubt, Seller agrees to assume such Liability or obligation
even if Buyer would otherwise be responsible for such Liability or obligation under Treasury
Regulation section 54.4980B-9.




          (e) It is the intent of the parties hereto to close this transaction and address all matters
relating to the Seller’s Employees in connection with the transactions described in this Agreement
in such a manner as to ensure that the Worker Adjustment and Retraining Notification Act, 29 USC §
2102 et seq. (“WARN”) is not invoked. Buyer shall indemnify, defend, and hold harmless
Seller from and against any and all Losses (as defined hereinafter), whether direct or indirect,
known or unknown, or foreseen or unforeseen, that may be incurred by, or asserted against, any such
indemnified party arising out of or relating to Buyer’s failure to comply with WARN with respect to
Seller’s Employees in connection with the transactions described in this Agreement.





37









 








          (f) No provision of this Agreement, including without limitation this Section 6.4, shall
create any third-party beneficiary rights in any person or entity, including without limitation
employees or former employees (including any beneficiary or dependent thereof) of Seller.




     6.5 Other Prorations and Adjustments. The following matters and items pertaining to
the Business shall be apportioned between the parties hereto or, where applicable, credited in
total to a particular party, as of the Effective Time. To the extent possible, net credits in
favor of Buyer shall be deducted from the Purchase Price and net credits in favor of Seller shall
be paid in cash at the Closing. Unless otherwise indicated below, Buyer shall receive a credit for
any of the following expenses to the extent the same are incurred but unpaid as of the Effective
Time and Seller shall receive a credit to the extent any of the following items shall have been
paid prior to the Closing Date to the extent the payment thereof relates to any period of time
after the Effective Time. To the extent that the amounts of the credits cannot be determined at
the Closing, the net amount resulting from the prorations and allocations provided for in this
Section 6.5 shall be paid as soon as practicable following the Closing Date by Buyer to Seller (if
such net amount is in Seller’s favor) or by Seller to Buyer (if such net amount is in Buyer’s
favor).



          (a) Taxes. All Taxes applicable to or payable with respect to with the Business or
the Purchased Assets in respect of any taxable periods ending on or before the Effective Time are
the responsibility of and shall be paid by the LP Group. Taxes relating to any taxable period
commencing prior to and ending after the Effective Time (a “Straddle Period”) shall be
pro-rated between the LP Group and Buyer; such Taxes for the taxable period through the Effective
Time are the responsibility of the LP Group and Taxes for the taxable period after the Effective
Time are the responsibility of Buyer. The LP Group shall pay to Buyer within 15 days after the
date on which the Taxes are paid with respect to such Straddle Periods an amount equal to the
portion of such Taxes that relates to the taxable period ending as of the Effective Time. For the
purposes of this Section 6.5(a), the portion of such Straddle Period Taxes that are
allocable to LP Group shall be (i) in the case of Taxes that are (x) based upon or related to
income or receipts, (y) imposed in connection with the sale or other transfer or assignment of
property (real or personal, tangible or intangible), (z) employment, social security or other
similar taxes, deemed equal to the amount which would be payable if the taxable year ended at the
Effective Time; and (ii) in the case of Taxes imposed on a periodic basis with respect to any
assets or otherwise measured by the level of any item, deemed to be the amount of such Taxes for
the entire taxable period multiplied by a fraction the numerator of which is the number of days in
the taxable period ending as of the Effective Time and the denominator of which is the number of
days in the entire taxable period.




          (b) Utility Contracts. Telephone contracts and contracts for the supply of heat,
steam, electric power, gas, lighting and any other utility service shall be prorated at the
Closing. Where possible, cutoff readings will be secured for all utilities as of the Effective
Time. To the extent they are not available, the cost of such utilities shall be apportioned
between the parties on the basis of the latest actual (not estimated) bill for such service,
subject to reconciliation after the Closing Date when the actual bills are available.




          (c) Employee Expenses. Buyer shall be entitled to a credit for all costs and expenses
as of the Effective Time that are paid by Buyer as a matter of convenience under




38









 







Section 6.4(c),
including, without limitation, all accrued wages, bonus, vacation and sick leave, and all federal
and state withholding, social security and employment taxes payable in connection therewith. The
Parties agree that the Statement of Closing Net Working Capital will contain an accrual as of the
Effective Date for an amount which represents Seller’s pro rata portion of vacation and sick days
for Seller’s Employees with anniversary dates of employment between the Effective Date and December
31, 2006.




     6.6 Books and Records.



          (a) The Parties shall cooperate fully with each other after the Closing so that each Party has
access, for any proper purpose, to the business records, contracts and other information existing
at the Closing Date which relate in any manner to the Purchased Assets, the Assumed Liabilities or
the conduct of the Business prior to the Closing (whether such records are in the possession of
Buyer or Seller). The party in possession of any files, books or records existing at the Closing
Date which relate in any manner to the Purchased Assets, the Assumed Liabilities or the conduct of
the Business prior to the Closing shall use its reasonable efforts to not destroy such files, books
or records for a period of six (6) years after the Closing Date without giving the other party at
least thirty (30) days’ prior written notice, during which time such other party shall have the
right (subject to Section 6.6(b)) to examine and to remove any such files, books and records prior
to their destruction.




          (b) The access to files, books and records contemplated by subsection (a) above shall be
during normal business hours and upon not less than two (2) days’ prior written request, shall be
subject to such reasonable limitations as the Party having custody or control thereof may impose to
preserve the confidentiality of information contained therein, shall only be available if the Party
seeking access has a proper purpose, and shall not extend to material
subject to a claim of privilege unless expressly waived by the Party entitled to claim such
privilege.




     6.7 Filings. Prior to the Closing, the Parties shall proceed expeditiously and in good
faith to make such filings and take such other actions as may be reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by this Agreement,
including without limitation, making any filings required to be made pursuant to the HSR Act, as
amended. Any and all filing fees in respect of such filings shall be split equally between Buyer
and Seller.



     6.8 Accounts Receivable. Subject to the reserves set forth on the Statement of Closing Net
Working Capital, any Accounts Receivable which have not been collected by Buyer within 180 days
from the Closing Date may, at Buyer’s option exercised within 30 days after the expiration of such
180 day period, be returned and assigned to Seller and Seller will pay Buyer the amount of such
Accounts Receivable for a repurchase price equal to the amount of such Account Receivables net of
the amount of the reserves set forth on the Statement of Closing Net Working Capital.



     6.9 Tail Insurance Coverage. Prior to the expiration of Seller’s existing products
liability insurance policy, Seller shall purchase one or more policies of product liability
insurance which shall cover claims arising from facts or events which occur following the Effective
Time



39









 




and involve allegations of personal injury (including death) or property damage arising from
the design, manufacture, marketing, sale, distribution, servicing or use of any product of the
Business manufactured before the Effective Time.




     6.10 Cessation of Business Operations of Curley’s. From and after the Closing, Seller
shall cause Curley’s Machine Shop, Inc., a Texas corporation, to cease carrying on its business,
except to the extent necessary to collect its outstanding accounts receivable and to pay its
outstanding accounts payable.



     6.11 Financial Statements. Seller and Gilliam shall (i) assist with and facilitate the
completion and/or audit of any financial statements which are requested by Deloitte & Touche
(“D&T”), Buyer or NS Group in order for NS Group to comply with the rules and regulations
of the Securities Exchange Commission or other Laws applicable to NS Group and (ii) provide
necessary consents and management representation letters reasonably requested by D&T, Buyer or NS
Group in connection with such financial statements.



     6.12 Further Assurances; Cooperation. From and after the Closing, the Parties shall do such acts and execute such documents and
instruments as may be reasonably required to make effective the transactions contemplated hereby.



ARTICLE VII

CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER




     The obligation of Buyer to proceed with the Closing shall be subject to the satisfaction, on
or prior to the Closing Date, of each of the following conditions precedent, any of which may be
waived in whole or in part by Buyer:



     7.1 Accuracy of Representations and Warranties and Performance of Obligations. All
representations and warranties made by Seller and Gilliam in or pursuant to this Agreement shall be
true and correct in all material respects, except for those representations and warranties that are
qualified as to materiality which shall be true and correct in all respects, on and as of the
Closing Date with the same effect as if such representations and warranties had been made on and as
of the Closing Date, except to the extent that any such representation or warranty by its terms
relates to an earlier date, and except to the extent of any change expressly consented to in
writing by Buyer, and Seller shall have performed or complied in all material respects with all
covenants, agreements and conditions contained in this Agreement required to be performed or
complied with at or prior to the Closing.



     7.2 Consents and Approvals. All filings with Government authorities or any other third
parties shall have been made and any necessary authorizations, consents or approvals required from
such authorities or third parties shall have been obtained and shall be in full force and effect.
The filing and waiting period requirements of the HSR Act shall have been duly complied with.



     7.3 No Litigation or Contrary Judgment. On the Closing Date there shall exist no valid
Order, statute, rule, regulation, executive order, stay, decree, judgment or injunction which
prohibits or prevents the consummation of the transactions contemplated by this Agreement.



40









 





     7.4 No Material Adverse Effect. There shall not have occurred after the date hereof any
event that has had or reasonably would be expected to have a Material Adverse Effect on the
Business.



     7.5 Foreign Patent and Patent Application Assignments. All of the Patent and Patent
applications listed on Schedule 3.12(a) shall have been assigned to Seller and each of
said assignments are being recorded or shall have been recorded with the corresponding Government
office and/or authorities in each such country in which each such application was filed and/or
patent issued.



     7.6 Deliveries of Seller at Closing. At Closing, Seller shall deliver or cause to be
delivered to Buyer:



          (a) one or more applicable bills of sale with respect to the Purchased Assets, in form and
substance reasonably acceptable to Buyer and Seller, duly executed by Seller;




          (b) an assignment and assumption agreement with respect to the Assumed Liabilities, in form
and substance reasonably acceptable to Buyer and Seller, duly executed by Seller;




          (c) one or more Intellectual Property assignments, in form and substance acceptable to Buyer
and Seller, duly executed by Seller, together with such other assignment and conveyance documents
that Buyer reasonably requests to effectuate the transactions contemplated hereby;




          (d) the Employment Agreements, duly executed by the individuals listed on Schedule
1.26;




          (e) the Transaction Escrow Agreement, duly executed by Seller;




          (f) the Retention Agreements, duly executed by the individuals listed on Schedule
1.85;




          (g) opinion of Boyar & Miller, counsel to Seller, dated the Closing Date, in substantially the
form attached hereto as Exhibit C;




          (h) special warranty deeds for the Owned Real Property, in a form acceptable for filing with
and recording in the records of the appropriate office of the county recorder in which the
respective parcel of Owned Real Property resides, together with such affidavits, certificates and
other instruments as shall be reasonably requested by Buyer;




          (i) all consents and approvals required to be obtained from Governments;




          (j) the written release of all Liens (other than Permitted Liens and Permitted Exceptions)
relating to the Purchased Assets, in form and substance acceptable to Buyer, executed by the holder
of or parties to each such Lien;





41










 







          (k) a certificate of existence of Seller, dated within five Business Days of the Closing
Date, from the Texas Secretary of State;




          (l) certificates of no tax from the Texas Comptroller of Public Accounts stating that each
member of the LP Group has no outstanding franchise tax liabilities, dated no more than sixty (60)
days prior to the Closing Date;




          (m) a copy, certified by the Secretary of Seller to be true, complete and correct as of the
Closing Date, of the certificate of formation, limited partnership agreement and resolutions of the
partners of Seller, authorizing and approving the transactions contemplated hereby; and




          (n) such other customary documents, instruments or certificates as shall be reasonably
requested by Buyer and as shall be consistent with the terms of this Agreement.




ARTICLE VIII

CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND GILLIAM




     The obligation of Seller and Gilliam to proceed with the Closing shall be subject to the
satisfaction, on or prior to the Closing Date, of each of the following conditions precedent, any
of which may be waived in whole or in part by Seller and Gilliam:



     8.1 Accuracy of Representations and Warranties and Performance of Obligations. All
representations and warranties made by Buyer in this Agreement shall be true and correct in all
material respects, except for those representations and warranties that are qualified as to
materiality which shall be true and correct in all respects, on and as of the Closing Date with the
same effect as if such representations and warranties had been made on and as of the Closing Date,
except to the extent that any such representation or warranty by its terms relates to an earlier
date, and except to the extent of any change consented to by Seller, and Buyer shall have performed
or complied in all material respects with all covenants, agreements and conditions contained in
this Agreement required to be performed or complied with at or prior to the Closing.



     8.2 Consents and Approvals . All filings with Government authorities or any other
third parties shall have been made and any necessary authorizations, consents or approvals required
from such authorities or third parties shall have been obtained and shall be in full force and
effect. The filing and waiting period requirements of the HSR Act shall have been duly complied
with.



     8.3 No Litigation or Contrary Judgment . On the Closing Date there shall exist no
valid Order, statute, rule, regulation, executive order, stay, decree, judgment or injunction which
prohibits or prevents the consummation of the transactions contemplated by this Agreement.



     8.4 Deliveries of Buyer at Closing . At Closing, Buyer shall deliver:



          (a) by cash or wire transfer, $111,636,000 of the Aggregate Consideration, in immediately
available funds to the accounts designated by Seller not less than two Business Days prior to the
Closing Date;




42









 








          (b) by cash or wire transfer, $3,000,000 of the Aggregate Consideration, in immediately
available funds to the account designated by Wayne D. Gilliam, Jr. not less than two Business Days
prior to the Closing Date;




          (c) by cash or wire transfer, the Transaction Escrow Deposit to the Escrow Agent, to be held
by the Escrow Agent in accordance with the terms of the Transaction Escrow Agreement;




          (d) an assignment and assumption agreement with respect to the Assumed Liabilities, in form
and substance reasonably acceptable to Buyer and Seller, duly executed by Buyer to Seller;




          (e) one or more Intellectual Property assignments, in form and substance acceptable to Buyer
and Seller, duly executed by Buyer to Seller;




          (f) the Employment Agreements, duly executed by Buyer to Seller;




          (g) the Transaction Escrow Agreement, duly executed by Buyer to Seller;




          (h) the Retention Agreements, duly executed by Buyer to Seller;




          (i) certificate of existence of Buyer, dated within five Business Days of the Closing Date,
from the Secretary of the Commonwealth of Kentucky and from the Kentucky Comptroller of Public
Accounts to Seller; and




          (j) such other customary documents, instruments or certificates as shall be reasonably
requested by Seller and as shall be consistent with the terms of this Agreement.




ARTICLE IX

INDEMNIFICATION




     9.1 Indemnification of Buyer



          (a) Each of Seller and Gilliam shall jointly and
severally hold Buyer and its Affiliates, and their respective shareholders, directors, officers,
employees, successors, assigns, and agents (the “Buyer Indemnified Persons”), harmless and
indemnify each of the Buyer Indemnified Persons from and against, and each of Seller and Gilliam
hereby waives any claim for contribution or indemnity from any of the Buyer Indemnified Persons
with respect to, any and all claims, losses, damages, liabilities, expenses or costs
(“Losses”), plus reasonable attorneys’ fees and expenses incurred in connection with Losses
and/or enforcement of this Agreement (collectively, the “Indemnified Losses”) incurred or
to be incurred by any of them resulting from or arising out of (i) any breach or violation of a
representation or warranty made by Seller and Gilliam in Article III of this Agreement, (ii) any
breach or violation of a covenant or agreement made by Seller, Gilliam, Ann Self and June Roberson
in this Agreement, (iii) the ownership, use or possession of the Excluded Assets, and (iv) the
Excluded Liabilities.




          (b) In addition to any other indemnification granted herein and notwithstanding the
survivability or limits, if any, of any representation contained herein or the




43









 




absence of any representation herein, each of Seller and Gilliam agrees to hold the Buyer
Indemnified Persons harmless and shall jointly and severally indemnify each of them from and
against liabilities of each member of the LP Group for Taxes or liability, if any for Taxes of
others, including, but not limited to, each member of the LP Group or any of their Affiliates, or
damage or Indemnified Losses payable with respect to Taxes claimed or assessed against Buyer with
respect to the Business or the Purchased Assets (i) for any taxable period, or portion thereof,
ending on or before the Effective Time or as a result of this transaction or (ii) for any taxable
period resulting from a breach by Seller and Gilliam of any of the representations or warranties or
covenants contained in Sections 3.5 or 6.2 hereof. Each of Seller and Gilliam also agrees to
jointly and severally indemnify, defend and hold harmless the Buyer Indemnified Persons from and
against any and all Indemnified Losses sustained by Buyer in a taxable period ending after the
Effective Time that arises out of the settlement or other resolution (without the consent of Buyer)
of a proposed Tax adjustment that relates to a taxable period ending on or before the Effective
Time.




          (c) With respect to any indemnity payment under this Section 9.1, the parties agree to treat,
to the extent permitted by Law, all such payments as an adjustment to the consideration paid for
the sale and transfer of the Purchased Assets.




          (d) Notwithstanding anything contained herein or elsewhere to the contrary, all “material” and
“material adverse effect” or similar materiality type qualifications contained in the
representations and warranties set forth in this Agreement shall be ignored and not given any
effect for purposes of the indemnification provisions hereof, including, without limitation, for
purposes of determining whether or not a breach of a representation or warranty has occurred,
determining whether the threshold in Section 9.4(a) or Section 9.4(b) has been surpassed and/or
determining the amount of any Indemnified Losses.




     9.2 Indemnification of Seller. Buyer shall hold Seller and its Affiliates, and their
respective members, shareholders, directors, managers, officers, employees, successors, assigns,
and agents, harmless and indemnify each of them from and against any and all Indemnified Losses
incurred or to be incurred by any of them resulting from or arising out of (i) any breach or
violation of a representation or warranty made by Buyer in Article IV of this Agreement, (ii) any
breach or violation of a covenant or agreement made by Buyer in this Agreement, (iii) the Assumed
Liabilities, or (iv) except to the extent a Buyer Indemnified Person is entitled to be indemnified
for such matter pursuant to Section 9.1, the operation of the Business after the Effective Time.
With respect to any indemnity payment under this Section 9.2, the parties agree to treat, to the
extent permitted by Law, all such payments as an adjustment to the consideration paid for the sale
and transfer of the Purchased Assets.



     9.3 Survival. The respective representations and warranties made by the parties in
Article III and Article IV shall survive the Closing Date but shall expire eighteen (18) months
after the Closing Date, unless a claim with respect thereto shall have been made prior to such date
against the party or parties responsible for indemnification hereunder (collectively, the
“Indemnifying Party”), in which case such representation and warranty shall survive until
such claim is resolved in accordance with the terms hereof, except that: (i) the representations
and warranties under Section 3.1 (Existence and Power), Section 3.2 (Valid and Enforceable
Agreement; Authorization; Non-contravention), and Section 3.30 (Brokers, Finders and Other



44









 







Offers) shall survive without expiration; (ii) the representations and warranties under
Section 3.10 (Title to Purchased Assets) shall survive for a period of five (5) years following the
Closing Date, (iii) the representations and warranties under Section 3.12(e)(i) and (iii)
(Infringement – US Patents), Section 3.12(h)(i) (Intellectual Property – US Patents) and Section
3.26 (Environmental Matters) shall survive for a period of three (3) years following the Closing
Date, and (iv) the representations and warranties under Section 3.5 (Taxes) shall survive until the
expiration of all applicable statutes of limitation, including any suspensions, tollings or
extensions thereof. No party shall be entitled to indemnification for breach of any representation
and warranty set forth in Article III and Article IV unless a Notice of Claim of such breach has
been given to the Indemnifying Party within the period of survival of such representation and
warranty as set forth herein.



     9.4 Limitations.



          (a) The Buyer Indemnified Persons shall not be entitled to indemnification for Indemnified
Losses under Section 9.1(a)(i) for breaches of the representations and warranties made by the
Seller and Gilliam in Article III unless the aggregate amount of such Indemnified Losses exceeds
$500,000 in the aggregate (the “Indemnification Threshold”), but then to the full extent of
such Indemnified Losses (including the first $500,000 of such Indemnified Losses). Notwithstanding
the foregoing, the Indemnification Threshold limitation shall not apply in any manner to any breach
of a representation or warranty contained in Section 3.1 (Existence and Power), Section 3.2 (Valid
and Enforceable Agreement; Authorization; Non-contravention), Section 3.5 (Taxes), Section 3.10
(Title to Purchased Assets), Section 3.11 (Necessary Property), Section 3.12(e)(i) and (iii)
(Infringement – US Patents), Section 3.12(h)(i) (Intellectual Property – US Patents), Section 3.19
(Employee Benefits), Section 3.26 (Environmental Matters) and Section 3.30 (Brokers, Finders and
Other Offers).




          (b) The Buyer Indemnified Persons shall not be entitled to indemnification for Environmental
Indemnified Losses (other than the Identified Environmental Matters and the liabilities described
in Section 2.2(d)(iii)) unless the aggregate amount of such Environmental Indemnified Losses
exceeds $250,000 in the aggregate, in which case the Buyer Indemnified Persons shall be entitled to
indemnification of such Environmental Indemnified Losses (including the first $250,000 of such
Environmental Indemnified Losses). For the avoidance of doubt, the parties agree that the
obligation to indemnify the Buyer Indemnified Persons with respect to the Identified Environmental
Matters (subject to the provisions of Section 9.4(e)) or the liabilities described in Section
2.2(d)(iii) should not be limited by this Section 9.4(b).




          (c) Except as provided in Section 9.4(d), in no event shall Seller or Gilliam have any
obligation to indemnify the Buyer Indemnified Persons in respect of Indemnified Losses with respect
to the matters described in Section 9.1(a)(i) hereunder in excess of $10,000,000 in the aggregate,
other than with respect of a breach of the representations and warranties set forth in Section 3.1
(Existence and Power), Section 3.2 (Valid and Enforceable Agreement; Authorization;
Non-contravention), Section 3.5 (Taxes), Section 3.11 (Necessary Property), Section 3.19 (Employee
Benefits), and Section 3.30 (Brokers, Finders and Other Offers) (collectively, the “Key
Representations”) hereof, and any such Indemnified Losses shall
not be counted against such limit. Notwithstanding the foregoing, in no event shall Seller or
Gilliam have any obligation to indemnify the Buyer Indemnified Persons with respect to claims




45









 




for Environmental Indemnified Losses first asserted within the eighteen (18) month period
immediately following the first eighteen (18) months following the Closing Date in excess of an
amount equal to the lesser of (i) $5,000,000, and (ii) $10,000,000 less the amount of Indemnified
Losses paid by Seller or Gilliam to the Buyer Indemnified Persons pursuant to Section 9.1(a)(i),
other than with respect to the Key Representations, prior to the date that is eighteen (18) months
following the Closing Date, but not less than $0.




          (d) In no event shall Seller or Gilliam have any obligation to indemnify the Buyer Indemnified
Persons in respect of Indemnified Losses pursuant to Section 9.1(a)(i) with respect to a breach of
the representations and warranties set forth in Section 3.12(e)(i) and (iii) (Infringement – US
Patents) and Section 3.12(h)(i) (Intellectual Property – US Patent) (other than and expressly
excluding any Past Infringement Claims and Past Validity Claims), together with all other
Indemnified Losses indemnified pursuant to Section 9.1(a)(i) other than with respect to the Key
Representations, in excess of $20,000,000 in the aggregate. Notwithstanding the foregoing, in no
event shall Seller or Gilliam have any obligation to indemnify the Buyer Indemnified Persons in
respect of Indemnified Losses pursuant to Section 9.1(a)(i) with respect to claims for a breach of
the representations and warranties set forth in Section 3.12(e)(i) and (iii) (Infringement – US
Patents) and Section 3.12(h)(i) (Intellectual Property – US Patents) (other than and expressly
excluding any Past Infringement Claims and Past Validity Claims) first asserted within the eighteen
(18) month period immediately following the first eighteen (18) months following the Closing Date
in excess of an amount equal to the lesser of (i) $10,000,000, and (ii) $20,000,000 less the amount
of Indemnified Losses paid by Seller or Gilliam to the Buyer Indemnified Persons pursuant to
Section 9.1(a)(i), other than with respect to the Key Representations, prior to the date that is
eighteen (18) months following the Closing Date, but not less than $0.




          (e) With respect to the Identified Environmental Matters, in no event shall Seller and Gilliam
have any obligation to indemnify the Buyer Indemnified Persons for more than seventy-five percent
(75%) of the Indemnified Losses which arise from such Identified Environmental Matters and only
with respect to claims asserted by the Buyer Indemnified Person within the three (3) year period
following the Closing Date.




          (f) With respect to a breach of the representations and warranties under Section 3.12(e)(i)
and (iii), other than and expressly excluding any Past Infringement Claims (a “Third Party
Infringement Claim”), Seller and Gilliam shall be obligated to indemnify and hold the Buyer
Indemnified Persons harmless from and against fifty percent (50%) of the Indemnified Losses which
arise from any Third Party Infringement Claim. Notwithstanding any other provision of this
Agreement, to the extent that Buyer is successful in obtaining a final, non-appealable, judgment in
its favor in connection with any Third Party Infringement Claim, Indemnified Losses for purposes of
this Section 9.4(f) shall not include any attorneys’ fees or expenses incurred by Buyer in
connection with the investigation or defense of such Third Party Infringement Claim.




          (g) With respect to a breach of the representations and warranties under Section 3.12(h)(i),
other than and expressly excluding any Past Validity Claims (a “Third Party Validity
Claim”), Seller and Gilliam shall be obligated to indemnify and hold the Buyer Indemnified
Persons harmless from and against fifty percent (50%) of the Indemnified Losses




46









 




which arise from any Third Party Validity Claim. Notwithstanding any other provision of this
Agreement, to the extent that Buyer is successful in obtaining a final, non-appealable, judgment in
its favor in connection with any Third Party Validity Claim, Indemnified Losses for purposes of
this Section 9.4(g) shall not include any attorneys’ fees or expenses incurred by Buyer in
connection with the investigation or defense of such Third Party Validity Claim.




     9.5 Notice of Claim; Satisfaction of Claim. Upon obtaining knowledge of any Indemnified
Losses, any person entitled to indemnification under Section 9.1 or 9.2 (the “Injured
Party”) shall give written notice to the Indemnifying Party specifying the facts constituting
the basis for such claim and the amount, to the extent known, of the claim asserted (such written
notice being hereinafter referred to as a “Notice of Claim”). If the Indemnifying Party
disputes such claim of indemnification, it shall notify the Injured Party thereof within thirty
(30) days after receipt of the Notice of Claim, whereupon the parties shall meet and attempt in
good faith to resolve their differences with respect to such claim or indemnification. If the
dispute has not been resolved within thirty (30) days after the parties first meet to attempt such
resolution, then either of such parties can bring an Action against the other party to recover such
Indemnified Losses in a court of competent jurisdiction. If the Indemnifying Party does not
dispute the Injured Party’s claim of indemnification, the Indemnifying Party shall pay the amount
of any valid claim within thirty (30) days after receipt of the Injured Party’s Notice of Claim.



     9.6 Environmental Matters. Any matter for which Seller and Gilliam are to indemnify a
Buyer Indemnified Person under Section 9.1(a) relating to an environmental issue, including, but
not limited to, any matter involving an environmental investigation and/or remediation on any
Environmental Property, any claim by the Government relating to an environmental matter, any
Identified Environmental Matter, or any breach of a representation or warranty in Section 3.26
(Environmental Matters) (collectively referred to as an “Environmental Indemnified Loss”),
shall be governed by this Section 9.6, provided however, any Third Person Claim involving an
environmental issue made by a Third Person other than the Government and which does not involve any
environmental investigation or remediation on the Environmental Property, shall be governed by
Section 9.7. Matters associated with an Environmental Indemnified Loss shall be addressed as
follows:



          (a) As between the Parties, Buyer shall have full authority to initiate, control, direct,
manage and implement any response or defense to an Environmental Indemnified Loss (collectively,
the “Work”); provided, however, that with respect to any Work related to
any Environmental Indemnified Loss, other than any Identified Environmental Matter, Seller shall
have the right to approve the work plan and budget related to such Work, which approval shall not
be unreasonably withheld, conditioned or delayed;




          (b) Buyer shall notify Seller within a reasonable time period of becoming aware of the
existence of an Environmental Indemnified Loss, provided that Buyer shall not be adversely affected
by a failure to give such notice unless, and only to the extent that, Seller is actually and
materially prejudiced thereby;




          (c) Buyer shall provide Seller periodic updates of the status of the Work along with summaries
of the Indemnified Losses incurred. Buyer shall give good faith consideration to any reasonable
comments or suggestions of Seller in connection with the Work. Buyer shall


47









 







provide Seller with copies of significant written reports and correspondence to third parties
generated as part of the Work. At no time shall Seller communicate directly to the Government
regarding the Work or any Environmental Indemnified Loss without the prior written consent of
Buyer, nor will Seller take any position with the Government adverse to the interests of Buyer;




          (d) Any environmental remediation undertaken shall be completed to standards consistent with
the property’s use as of the time of Closing, and the Work shall comply with all applicable
Environmental Laws;




          (e) Subject to Section 9.4 and this Section 9.6, Seller and Gilliam shall reimburse Buyer in a
timely manner for all Indemnified Losses incurred by the Buyer Indemnified Person resulting from or
arising out of an Environmental Indemnified Loss; and




          (f) Seller shall cooperate with, and not hinder or impede, Buyer with respect to issues
arising from any Environmental Indemnified Loss in which Buyer desires the cooperation of Seller.




     9.7 Right to Contest Claims of Third Persons. Except as set forth in Section 9.6 and
Section 9.8, if an Injured Party is entitled to indemnification hereunder because of a claim
asserted by any claimant other than an indemnified Person hereunder (“Third Person”), the
Injured Party shall give a Notice of Claim to the Indemnifying Party promptly after such assertion
is actually known to the Injured Party; provided, however, that the right of a Person to be
indemnified hereunder in respect of claims made by a Third Person shall not be adversely affected
by a failure to give such Notice of Claim unless, and then only to the extent that, an Indemnifying
Party is prejudiced thereby. The Indemnifying Party shall have the right, upon written notice to
the Injured Party, and using counsel reasonably satisfactory to the Injured Party, to investigate,
secure, contest, or settle the claim alleged by such Third Person (a “Third Person Claim”)
provided that the Indemnifying Party notified the Injured Party in writing of its election to
indemnify the Injured Party with respect to such Third Person Claim; and provided further that the
Indemnifying Party will not consent to the entry of any judgment with respect to the matter or
enter into any settlement with respect to the matter without the written consent of the Injured
Party (not to be withheld or delayed unreasonably) except that the Indemnifying Party shall be
entitled to consent to any judgment and/or enter into any settlement without the consent of the
Injured Party if such judgment or settlement requires only the payment of money. For the avoidance
of doubt, a claim or challenge asserted by the Internal Revenue Service against an Injured Party
shall be considered a Third Person Claim hereunder. The Injured Party may thereafter participate
in (but not control) the defense of any such Third Person Claim with its own counsel at its own
expense, unless separate representation is necessary to avoid a conflict of interest, in which case
such representation shall be at the expense of the Indemnifying Party. If the Indemnifying Party
elects not to defend the Injured Party with respect to such Third Person Claim, the Injured Party
shall have the right, at its option, to assume and control defense of the matter. The failure of
the Indemnifying Party to respond in writing to the Notice of Claim within thirty (30) days after
receipt thereof shall be deemed an election not to defend the same. If the Indemnifying Party does
not so acknowledge its obligation to indemnify and assume the defense of any such Third Person
Claim, (a) the Injured Party may defend against such claim, in
such manner as it may deem appropriate, including, but not limited to, settling such claim, after giving written notice
of the same to the Indemnifying Party, on such terms as the Injured Party may



48









 







deem appropriate;
provided that in all cases the Injured Party will not consent to the entry of a judgment or enter
into any settlement with respect to the matter without the written consent of the Indemnifying
Party (not to be withheld or delayed unreasonably), except that the Injured Party shall be entitled
to consent to any judgment and/or enter into any settlement without the consent of the Indemnifying
Party if such judgment or settlement does not require the payment of money and (b) the Indemnifying
Party may participate in (but not control) the defense of such action, with its own counsel at its
own expense. The parties shall make available to each other all relevant information in their
possession relating to any such Third Person Claim and shall cooperate in the defense thereof.



     9.8 Third Party Infringement Claim; Third Party Validity Claim. If a Buyer Indemnified
Person believes it is entitled to indemnification hereunder because of a Third Party Infringement
Claim or a Third Party Validity Claim, the Buyer Indemnified Person shall give Seller and Gilliam
prompt written notice thereof after such assertion is actually known to the Buyer Indemnified
Person provided, however, that the right of a Buyer Indemnified Person to be indemnified hereunder
in respect of a Third Party Infringement Claim or a Third Party Validity Claim shall not be
adversely affected by a failure to give such notice unless, and then only to the extent that,
Seller or Gilliam is materially prejudiced thereby. Buyer shall administer, pursue and control
the defense of all Third Party Infringement Claims and Third Party Validity Claims, utilizing its
own counsel. Seller and Gilliam shall have the right to participate in, but not control, the
defense of any such Third Party Infringement Claim and any such Third Party Validity Claim at its
own expense. Buyer may settle or compromise any such Third Party Infringement Claim or Third Party
Validity Claim without the consent of Seller or Gilliam. Seller and Gilliam shall cooperate with
Buyer in the defense of all such Third Party Infringement Claims and Third Party Validity Claims.



ARTICLE X

MISCELLANEOUS PROVISIONS




     10.1 Notice. All notices, requests, demands and other communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly given (a) when
delivered in person, (b) by facsimile, receipt confirmed, (c) on the next Business Day when sent by
overnight courier, or (d) on the second succeeding Business Day when sent by registered or
certified mail (postage prepaid, return receipt requested), to the respective Parties at the
following addresses (or at such other address for a Party as shall be specified by like notice):


If to Buyer or NS Group:



NS Group, Inc.

530 West Ninth Street

Newport, Kentucky 41071

Attention: Thomas J. Depenbrock

Telephone: 859-292-6809



Fax: 859-292-6825





49









 







With copies to:



Bryan Cave LLP

211 N. Broadway, Suite 3600

St. Louis, MO 63102

Attention: William F. Seabaugh

Telephone: 314-259-2000

Fax: 314-259-8450



If to Seller, Gilliam, Ann Self or June Roberson:



Wayne D. Gilliam, Jr.

9215 Cromwell Terrace

Odessa, Texas 79763

Telephone: 432-337-2109

Fax: 432-332-5019



With a copy to:



Rush, Kelly, Morgan, Dennis, Corzine & Hansen, P.C.

4001 E. 42ND St., Suite 200

Odessa, Texas 79762

Attention: Michael Kelly

Telephone: 432-367-7271

Fax: 432-363-9121



And



Boyar & Miller

4265 San Felipe, Suite 1200

Houston, Texas 77027

Attention: J. William Boyar

Telephone: 832-615-4218

Fax: 713-552-1758




     10.2 Entire Agreement. This Agreement and the Schedules and Exhibits hereto and the
Confidentiality Agreement dated February 22, 2006, between NS Group and Seller (the
“Confidentiality Agreement”), embody the entire agreement and understanding of the Parties
hereto with respect to the subject matter hereof, and supersede all prior and contemporaneous
agreements and understandings relative to such subject matter.



     10.3 Amendment and Modification. To the extent permitted by applicable Law, this Agreement shall be amended, modified or
supplemented only by a written agreement between Buyer and Seller.



     10.4 Assignment; Binding Agreement. This Agreement and the various rights and obligations
arising hereunder shall inure to the benefit of and be binding upon the parties hereto,



50









 







their successors and permitted assigns. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be transferred, delegated, or assigned by Seller (by
operation of law or otherwise) without the prior written consent of Buyer (which consent shall not
be unreasonably withheld, conditioned or delayed), or by Buyer without the prior written consent of
Seller (which consent shall not be unreasonably withheld, conditioned or delayed); provided,
however, that Buyer shall have the right to transfer and assign its rights, benefits or obligations
under this Agreement to any of its Affiliates, provided that Buyer shall remain liable for all of
its obligations hereunder. Buyer shall have the right to direct the transfer or delivery of any
portion of the Purchased Assets and/or Assumed Liabilities to any of its Affiliates.



     10.5 Counterparts. This Agreement may be executed simultaneously in multiple counterparts,
each of which shall be deemed an original, but all of which taken together shall constitute one and
the same instrument.



     10.6 Headings; Interpretation. The article and section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the meaning or
interpretation of the Agreement. Each reference in this Agreement to an Article, Section, Schedule
or Exhibit, unless otherwise indicated, shall mean an Article or a Section of this Agreement or a
Schedule or Exhibit attached to this Agreement, respectively. References herein to “days,” unless
otherwise indicated, are to consecutive calendar days. The term “person” includes any Government.
Gender-specific references such as “its,” “his,” and “her” shall include all other genders. Each
Party hereto has participated substantially in the negotiation and drafting of this Agreement and
each Party agrees that any ambiguity herein should not be construed against the draftsman.



     10.7 Exhibits; Schedules. All Exhibits and Schedules referred to in this Agreement shall
be attached hereto and incorporated by reference herein. Any matter disclosed in this Agreement or
in any Schedule with reference to any Section of this Agreement shall be deemed a disclosure in
respect to all sections of this Agreement to which such disclosure may apply so long as the
application to any such other section is readily apparent from such disclosure.



     10.8 Expenses. Seller shall pay all costs and expenses incurred on its behalf in
connection with the negotiation, preparation and execution of this Agreement and the consummation
of the transactions contemplated hereby, including, without limitation, the fees and expenses of
their attorneys, accountants, advisors (including McClure, Schumacher & Associates, L.L.P.) and
other representatives, whether in connection with consultation or communication with, or other
assistance to, Buyer or its advisors or representatives or otherwise. Buyer shall pay all costs
and expenses incurred on its behalf in connection with the negotiation, preparation and execution
of this Agreement and the consummation of the transactions contemplated hereby, including, without
limitation, the fees and expenses of its attorneys, accountants and advisors (including Raymond
James & Associates, Inc.).



     10.9 Remedies Cumulative. All rights and remedies of the parties under this Agreement are
cumulative and without prejudice to any other rights or remedies under Law.



51









 





     10.10 Governing Law. This Agreement shall in all respects be construed in accordance with
and governed by the substantive laws of the State of Texas applicable to contracts executed and
performed entirely within the state, without reference to its choice of law rules.



     10.11 No Third Party Beneficiaries or Other Rights. Nothing herein shall grant to or
create in any person or entity not a party hereto, or any such person’s or entity’s dependents,
heirs, successors or assigns, any right to any benefits hereunder, and no such party shall be
entitled to sue any party to this Agreement with respect thereto.



[Remainder of page intentionally left blank.]




52









 





     IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be executed as of
the date first above written.



     THIS CONTRACT CONTAINS BINDING ARBITRATION PROVISIONS WHICH MAY BE ENFORCED BY THE PARTIES.



	 	 	 	 	 	 	 	 	 
	 	 	“BUYER”	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	ULTRA PREMIUM OILFIELD SERVICES, LTD.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	UPOS GP, L.L.C.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ René J. Robichaud
 

	 	 
	 

	 	 	 	Name:

Title:
	 	René J. Robichaud


President and Chief Executive Officer
of NS Group, Inc., sole member of UPOS
GP, L.L.C.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	“NS GROUP”	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	NS GROUP, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ René J. Robichaud
 

	 	 
	 

	 	 	 	Name:

Title:
	 	René J. Robichaud


President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	“SELLER”	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	FISHING TOOLS SPECIALTY, L.P.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Fishing Tools Specialty GP, L.L.C.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:

Name:

Title:
	 	/s/ Wayne D. Gilliam, Jr.
 

Wayne D. Gilliam, Jr.

President
	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	“GILLIAM”	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	/s/ Wayne D. Gilliam, Jr.	 	 
	 	 	 	 	 
	 	 	Wayne D. Gilliam, Jr.	 	 






53









 





JOINDER AGREEMENT




     WHEREAS, June Roberson and Ann Self are indirect owners of Seller;




     WHEREAS, Buyer is acquiring goodwill and valuable confidential, proprietary and/or trade
secret information from Seller as a result of the transactions contemplated by the Agreement;



     WHEREAS, June Roberson and Ann Self have had access to such goodwill and confidential,
proprietary and/or trade secret information;



     WHEREAS, the execution of this Joinder Agreement by June Roberson and Ann Self is a condition
precedent and material inducement for Buyer to acquire the Purchased Assets pursuant to the
Agreement; and



     NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, it is hereby
agreed as follows:



     Each of June Roberson and Ann Self, being indirect owners of Seller and in consideration of
the benefits accruing to them pursuant to the consummation of the transactions contemplated by the
Agreement, hereby join in the execution of the Agreement solely and exclusively for purposes of
Article V and Article X of the Agreement.



	 	 	 	 	 
	 	 	 
	 	                                              /s/ June Roberson
 	 
	 	June Roberson 	 
	 	 	 
	 
	 	 	 
	 	                                              /s/ Ann Self
 	 
	 	Ann Self 	 
	 




54









 





TABLE OF SCHEDULES AND EXHIBITS




	 	 	 
	Schedule 1.26

	 	Employment Agreements
	Schedule 1.31

	 	Environmental Reports
	Schedule 1.34

	 	Excluded Assets
	Schedule 1.43

	 	Houston Assets
	Schedule 1.44

	 	Houston Liabilities
	Schedule 1.45

	 	Houston Net Book Value
	Schedule 1.57

	 	Known Environmental Liabilities
	Schedule 1.77

	 	Permitted Liens
	Schedule 1.85

	 	Retention Agreements
	Schedule 2.2(a)(ii)

	 	Assumed Contracts
	Schedule 2.9

	 	Allocation
	Schedule 3.2(c)

	 	Non-contravention
	Schedule 3.3

	 	Financial Statements
	Schedule 3.4

	 	Absence of Certain Changes
	Schedule 3.5

	 	Taxes
	Schedule 3.6

	 	Accounts Receivable
	Schedule 3.7

	 	Inventories
	Schedule 3.8

	 	Litigation
	Schedule 3.9(a)

	 	Owned Real Property
	Schedule 3.9(b)

	 	Leased Real Property
	Schedule 3.9(g)

	 	Repair or Correction
	Schedule 3.10

	 	Title to Purchased Assets
	Schedule 3.12(a)

	 	Intellectual Property
	Schedule 3.12(d)

	 	Intellectual Property Notices
	Schedule 3.12(e)-1

	 	US Patents
	Schedule 3.12(e)-2

	 	Notice of Infringement
	Schedule 3.12(i)

	 	Obligation to Compensate
	Schedule 3.12(l)

	 	Right to Use or Disclose
	Schedule 3.13

	 	Licenses and Permits
	Schedule 3.14

	 	Contracts
	Schedule 3.16

	 	Customers and Suppliers
	Schedule 3.17

	 	Employees, Consultants and Agents
	Schedule 3.18

	 	Labor Matters
	Schedule 3.19

	 	Employee Benefit Matters
	Schedule 3.21

	 	Workers Compensation Claims
	Schedule 3.22

	 	Insurance
	Schedule 3.23

	 	Product and Service Warranties
	Schedule 3.24

	 	Product Liability Claims
	Schedule 3.26

	 	Environmental Matters
	Schedule 3.28(a)

	 	Related Party Transactions
	Schedule 3.28(b)

	 	Certain Affiliated Transactions
	Schedule 6.3

	 	Permitted Exceptions
	 
	 	 
	Exhibit A

	 	Form of Employment Agreement(s)
	Exhibit B

	 	Form of Transaction Escrow Agreement






55









 






	 	 	 
	Exhibit C

	 	Form of Opinion Letter
	Exhibit D

	 	Form of Retention Agreements







56