**EXHIBIT 10.24****ASSET PURCHASE AGREEMENT****BY AND AMONG****POLYONE CORPORATION,****PVC CONTAINER CORPORATION****AND****NOVATEC PLASTICS CORPORATION, INC.****DATED AS OF****MAY 13, 2005**
 

 
**TABLE OF CONTENTS**       1. Agreement to Sell and Purchase  2 2. Purchase Price  2 3. Retained Liabilities  4 4. The Closing  5 5. Representations and Warranties of Parent and Seller  7 6. Representations and Warranties of Purchaser  10 7. Additional Covenants of Purchaser and Seller  11 8. Indemnification  13 9. Covenant Not to Compete  16 10. General  16 -i-
 

 
**EXHIBITS**   Exhibit A Equipment   Exhibit B Intangible Assets   Exhibit C Existing Customers**APPENDICES**   Appendix A Supply Agreement   Appendix B Bill of Sale**SCHEDULES**   Schedule 5(g) Products, Specifications and Recipes   Schedule 5(k) Customers and Suppliers   Schedule 7(b) Transition Operating Expenses   Schedule 7(d) Certain Key Employees-ii-
 

 
*Execution Version***ASSET PURCHASE AGREEMENT**     THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of the 13th dayof May, 2005, by and among POLYONE CORPORATION, an Ohio corporation (“Purchaser”), PVCCONTAINER CORPORATION, a Delaware corporation (“Parent”), and NOVATEC PLASTICS CORPORATION,INC., a Delaware corporation (“Seller”).RECITALS     WHEREAS, Seller is a wholly-owned subsidiary of Parent and is engaged in the business (the“Business”) of manufacturing polyvinyl chloride compounds for internal consumption and forsale to plastic manufacturers;     WHEREAS, the Parent and the Parent’s two other wholly-owned subsidiaries, Novapak Corporationand Airopak Corporation, conduct all aspects of Parent’s business and operations, other than theBusiness, including, but not limited to, the manufacturing and selling of plastic bottles andcontainers (collectively, the “Excluded Business”);     WHEREAS, Seller, as of the Closing Date, owns the following assets used in the Business:     (i) All of the existing machinery and equipment used in the Business in connection with themanufacture of the Products (as defined below), including the upstream and downstream compoundingequipment, laboratory equipment, silos and transfer lines (collectively, the “Equipment”),including, but not limited to, those items listed on Exhibit A attached hereto;     (ii) All of the technology, know-how, patents, patent applications, research and development,customer lists and customer relationships, recipes, trademarks or service marks, trade names,slogans or other like property, including, without limitation, the marks or names relating to orincluding the name Novatec, the mark Novatec or any derivatives thereof and any Novatec logos orany derivatives thereof and all goodwill related thereto, and other intangible property used in theBusiness in connection with the manufacture and sale of the Products (collectively, the“Intangible Assets” and together with the Equipment, the “Purchased Assets”),including, but not limited to, those items identified on Exhibit B attached hereto;     WHEREAS, Seller desires to sell, transfer and convey the Purchased Assets to Purchaser, andPurchaser desires to purchase and otherwise acquire the Purchased Assets from Seller, pursuant tothe terms and conditions hereof; and     WHEREAS, for purposes of this Agreement, “Products” shall mean those polyvinylchloride compounds specifically identified and set forth on Schedule 5(g) together with thespecifications and recipes for each (such listed specifications and recipes, collectively, the“Specifications”).
 

 
AGREEMENT     NOW THEREFORE, in consideration of the premises, and other good and valuable consideration,the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereto agree asfollows:     1. Agreement to Sell and Purchase.          (a) Subject to the terms and conditions hereof, Seller hereby agrees to sell, transfer andconvey to Purchaser, and Purchaser agrees to purchase or otherwise acquire from Seller, thePurchased Assets.          (b) Notwithstanding anything to the contrary contained herein, the following assets andproperties of Seller are specifically excluded from the Purchased Assets and shall be retained bySeller (the “Excluded Assets”): (i) all inventory, equipment and other assets relating tothe Excluded Business; (ii) all cash, cash equivalents, accounts and notes receivable, prepaiditems and deposits; (iii) claims or rights against third parties; (iv) all insurance policies andrights thereunder; (v) any and all of Parent’s trademarks or service marks, trade names, slogans orother like property relating to the Excluded Business, including, without limitation, the marks ornames relating to or including the name PVC, the marks PVC or any derivatives thereof and any PVClogos or any derivatives thereof and all goodwill related thereto; (vi) all software owned by orlicensed to Seller; (vii) all other assets of Seller not specifically included in the PurchasedAssets, including, but not limited to, assets used by Seller in its other businesses, operations orcorporate functions; and (viii) all inventory of the Business.     2. Purchase Price. The purchase price (the “Purchase Price”) payable byPurchaser to Seller for the Purchased Assets is:          (a) $625,000 for the Equipment (the “Equipment Purchase Price”) at Closing (as definedbelow); and          (b) An Earn-Out (as defined below) for the Intangible Assets, payable as follows:               (i) A $500,000 nonrefundable advance (the “Advance”) at Closing, which Advance shallbe repaid to Purchaser by Seller to the extent the External Earn-Out is paid pursuant to Sections2(b)(ii)-(v) below;               (ii) For each pound of Product sold by Purchaser to the existing customers of Seller set forthin “Group A” on Exhibit C attached hereto (collectively, the “Group A ExistingCustomers”), Purchaser will make payments to Seller as follows (the “Group A ExternalEarn-Out”):                    (A) From the Closing Date (as defined below) through August 31, 2007:$0.04/Pound;                    (B) From September 1, 2007, through August 31, 2008: $0.03/Pound;
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                    (C) From September 1, 2008, through August 31, 2009: $0.02/Pound; and                    (D) From September 1, 2009, through December 31, 2009: $0.01/Pound.               (iii) For each pound of Product identified in “Group B” on Exhibit C attached hereto(each a “Group B Product”) sold within the Group B Range (as defined below) by Purchaser tothe existing customers of such Group B Product set forth in “Group B” on Exhibit C attachedhereto (collectively, the “Group B Existing Customers”), Purchaser will make payments toSeller as follows (the “Group B External Earn-Out”):                    (A) From the Closing Date through August 31, 2007: $0.04/Pound;                    (B) From September 1, 2007, through August 31, 2008: $0.03/Pound;                    (C) From September 1, 2008, through August 31, 2009: $0.02/Pound; and                    (D) From September 1, 2009, through December 31, 2009: $0.01/Pound.               For purposes of this subpart (iii), “Group B Range” shall be defined as sales of aGroup B Product, in pounds, to a related Group B Existing Customer in the range (I) between and notincluding the minimum number of pounds set forth in column A of “Group B” on Exhibit Cattached hereto for such Group B Product, and (II) up to and including the maximum number of poundsset forth in column B of “Group B” on Exhibit C attached hereto for such Group B Product.By way of example, if Purchaser sells 500,000 pounds of a Group B Product to a Group B ExistingCustomer, and if the figure in column A relating thereto is 150,000 pounds and the figure in columnB relating thereto is 300,000 pounds, then the Group B Range for purposes of computing the Group BExternal Earn-Out would be 150,000 pounds, as the Group B Range would be defined as the rangebetween and not including 150,000 pounds and up to and including 300,000 pounds.               (iv) For each pound of Product identified in “Group C” on Exhibit C attached hereto(each a “Group C Product”) sold by Purchaser to the existing customers of such Group CProduct set forth in “Group C” on Exhibit C attached hereto (collectively, the “Group CExisting Customers”), Purchaser will make payments to Seller as follows (the “Group CExternal Earn-Out”):                    (A) From the Closing Date through August 31, 2007: $0.04/Pound;                    (B) From September 1, 2007, through August 31, 2008: $0.03/Pound;
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                    (C) From September 1, 2008, through August 31, 2009: $0.02/Pound; and                    (D) From September 1, 2009, through December 31, 2009: $0.01/Pound.               (v) The Group A External Earn-Out, the Group B External Earn-Out and the Group C ExternalEarn-Out are collectively referred to herein as the “External Earn-Out.” The Group AExisting Customers, the Group B Existing Customers and the Group C Existing Customers arecollectively referred to herein as the “Existing Customers.” The External Earn-Outpayments described in subparts (ii)-(iv) above shall be payable by Purchaser to Seller quarterly inarrears, commencing at the end of the first calendar quarter after Closing, and shall be due toSeller within thirty (30) days of the end of each such quarter; provided, however, that until suchtime as the Advance is repaid in full, Purchaser shall retain fifty percent (50%) of all suchExternal Earn-Out payments to offset and repay the Advance; and               (vi) For each pound of Products sold by Purchaser to Seller pursuant to that certain supplyagreement to be entered into by and between Purchaser and Seller at Closing (as attached hereto asAppendix A, the “Supply Agreement”), Purchaser will make payments to Seller asfollows (the “Internal Earn-Out”):                    (A) From September 1, 2005, through August 31, 2007: $0.06/Pound;                    (B) From September 1, 2007, through August 31, 2009: $0.04/Pound; and                    (C) From September 1, 2009, through December 31, 2009: $0.02/Pound.Such Internal Earn-Out payments shall be payable by Purchaser to Seller quarterly in arrears andshall be due to Seller within thirty (30) days of the end of each calendar quarter followingSeptember 30, 2005.               (vii) The External Earn-Out and the Internal Earn-Out are collectively referred to herein asthe “Earn-Out.”     3. Retained Liabilities. Purchaser is not assuming any liabilities or obligations ofSeller of any nature whatsoever (collectively, the “Retained Liabilities”), including, butnot limited to, any expenses, liabilities or obligations of Seller arising out of the execution anddelivery of this Agreement or the Supply Agreement or the consummation of the transactionscontemplated hereby or thereby (nor may Seller pay any of such expenses, or discharge any of suchliabilities or obligations, out of the Purchased Assets), and any liabilities or obligations ofSeller relating to federal, state or local income or franchise taxes, or sales, use or grossreceipts taxes, attributable to Seller’s ownership of the Purchased Assets, the transactionscontemplated hereby or by the Supply Agreement or the conduct of the Business prior to the ClosingDate. For any taxable period during which both Purchaser and Seller owned the Purchased Assets forsome
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portion of the period, any property or similar tax on the Purchased Assets shall be proratedby the parties based upon the number of days such party owned the Purchased Assets. Except as maybe otherwise provided in Section 7(d) below, Purchaser will not assume any employee compensation,severance obligation, collective bargaining agreement, employee benefit, pension, profit sharing orother retirement obligation with respect to Seller’s current or former employees. Seller remainsliable for all obligations, severance, costs and expenses related to the shutdown or termination ofany operations or facilities in connection with this transaction.     4. The Closing.          (a) Date. The closing of the sale and purchase of the Purchased Assets (the“Closing”) shall take place on May 31, 2005 (the “Closing Date”), or at such othertime or place as the parties mutually agree.          (b) Purchaser Deliverables. Purchaser shall deliver or cause to be delivered toSeller at the Closing (i) the Equipment Purchase Price and the Advance by wire transfer ofimmediately available funds to such bank account or accounts as Seller shall have designated bywritten notice delivered to Purchaser, (ii) the Supply Agreement executed by Purchaser, (iii) thatcertain bill of sale by and between Purchaser and Seller (as attached hereto as Appendix B,the “Bill of Sale”) executed by Purchaser, and (iv) all other documents reasonably requiredby Seller to consummate the transactions contemplated by this Agreement.          (c) Seller Deliverables. Seller shall deliver or cause to be delivered to Purchaserat the Closing (i) a bringdown certificate, dated as of the Closing and executed on behalf ofSeller by a duly authorized officer of Seller, stating that the conditions specified in Sections4(e)(i)-(iii) below have been fulfilled, (ii) a certified copy of resolutions of the Board ofDirectors of Seller authorizing the execution, delivery and performance of this Agreement, theSupply Agreement and the other related agreements and instruments to which Seller is a party, (iii)the Supply Agreement executed by Seller, (iv) the Bill of Sale executed by Seller, and (v) allother documents reasonably required by Purchaser to consummate the transactions contemplated bythis Agreement (all such other documents, together with the Supply Agreement and the Bill of Sale,the “Related Agreements”).          (d) Covenants. Purchaser and Seller shall have the rights and obligations set forthbelow during the period between the date hereof and the Closing:               (i) Seller shall continue to operate the Business in the ordinary course and shall utilize itsreasonable best efforts to maintain good relations with its employees and with the ExistingCustomers.               (ii) Seller shall continue to provide Purchaser and its officers, employees, attorneys,consultants, accountants, agents and representatives reasonable access during normal business hoursto all of the properties, books, contracts, documents, records, vendors, customers and keypersonnel of or with respect to the Business and shall furnish to Purchaser and such persons asPurchaser shall designate such information as Purchaser or such persons may at any time and fromtime to time reasonably request. Purchaser shall conduct its
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due diligence and exercise its rights under this Section 4(d)(ii) in a manner that does notdisrupt Seller’s normal operations of the Business.          (e) Purchaser Closing Conditions. The obligations of Purchaser under this Agreementin connection with the Closing are subject to the fulfillment at or before the Closing of each ofthe following conditions:               (i) The representations and warranties of Parent and Seller contained in Section 5 below shallbe true and correct in all material respects at the Closing with the same effect as though suchrepresentations and warranties had been made at and as of the Closing Date.               (ii) Parent and Seller shall have performed and complied with all agreements and obligationscontained in this Agreement in all material respects that are required to be performed or compliedwith by them or either of them at or before the Closing.               (iii) There shall not have occurred since the date hereof any event or condition that has hada material adverse effect on the Purchased Assets but excluding any event or condition that relatesto (A) the transactions contemplated by this Agreement and the Related Agreements and any publicannouncements thereof, (B) Seller’s preparation to wind down its operations relating to theBusiness, including, but not limited to, the closing of its manufacturing facility at which theProducts are currently manufactured, (C) changes or conditions affecting the industries of whichthe Business is a part generally, (D) changes in economic, regulatory, or political conditionsgenerally, or (E) any acts of war or terrorism (a “Material Adverse Effect”).               (iv) Seller shall have entered into each of the Related Agreements, each in form and substancesatisfactory to Purchaser.               (v) The consent listed in Section 5(d) shall have been obtained in form and substancesatisfactory to Purchaser.               (vi) Purchaser shall be satisfied:                    (A) With the final form and substance of all exhibits, appendices andschedules to this Agreement;                    (B) With its pre-Closing inspection of the Equipment;                    (C) That Existing Customers representing, collectively, at least 60% ofSeller’s revenues from the sale of Products on an annualized basis as of thedate of this Agreement will convert to being customers of, and will purchaseProducts from, Purchaser after the Closing; and                    (D) That the Purchased Assets will be transitioned to Purchaser’sfacilities by October 1, 2005.
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          (f) Seller Closing Conditions. The obligations of Seller under this Agreement inconnection with the Closing are subject to the fulfillment at or before the Closing of each of thefollowing conditions:               (i) The representations and warranties of Purchaser contained in Section 6 below shall be trueand correct in all material respects at the Closing with the same effect as though suchrepresentations and warranties had been made at and as of the Closing Date.               (ii) Purchaser shall have performed and complied with all agreements and obligations containedin this Agreement in all material respects that are required to be performed or complied with by itat or before the Closing.               (iii) Purchaser shall have entered into the Supply Agreement, the Bill of Sale and all otherdocuments reasonably required by Seller to consummate the transactions contemplated by thisAgreement, each in form and substance satisfactory to Seller.     5. Representations and Warranties of Parent and Seller . Except as set forth in theSchedules attached hereto, Parent and Seller, jointly and severally, hereby represent and warrantto Purchaser as of the Closing Date as follows:          (a) Organization. Parent and Seller are each a corporation duly organized, validlyexisting and in good standing under the laws of the State of Delaware and Seller has corporatepower and authority to own the Purchased Assets and to carry on the Business as it is now beingconducted, and is duly qualified as a foreign corporation and is in good standing in alljurisdictions in which the conduct of the Business requires it to so qualify, except where thefailure to be so qualified would not have a Material Adverse Effect.          (b) Authorization; Enforceability.               (i) The execution, delivery and performance of this Agreement and the Related Agreements havebeen duly authorized by all necessary corporate action of Parent and Seller, as applicable. Noother corporate proceedings on the part of Parent or Seller are necessary to authorize thisAgreement or the Related Agreements or the consummation of the transactions contemplated hereby orthereby.               (ii) This Agreement and each of the Related Agreements has been duly executed and delivered byParent and Seller, as applicable, and is a valid and legally binding obligation of Parent andSeller, as applicable, enforceable against it in accordance with its terms, except as may belimited by bankruptcy or other laws affecting creditors’ rights and by equitable principles.          (c) No Violation or Conflict. Neither the execution and delivery of this Agreement orany of the Related Agreements nor the consummation of the transactions contemplated hereby orthereby will (i) violate, or conflict with, or result in a breach of any provision of, orconstitute a default (or an event which, with notice or lapse of time or both, would constitute adefault) under, or result in the termination of, or accelerate the performance
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required by, or result in the creation of any lien, security interest, charge or otherencumbrance (collectively, “Liens”) upon any of the Purchased Assets under, any of theterms, conditions or provisions of the Articles of Incorporation or By-Laws (or any similar charterdocument) of Parent or Seller or any note, bond, mortgage, indenture, deed of trust, license,agreement (including, but not limited to, any employee benefit plan) or other instrument orobligation to which Parent or Seller is a party, or by which Parent or Seller or any of thePurchased Assets may be bound or affected, or (ii) violate any order, writ, injunction, decree,statute, rule or regulation applicable to Parent or Seller or any of the Purchased Assets.          (d) Consents and Notices. Except for the consent of PNC Bank, no consent or approvalby, notice to or registration with any governmental authority, creditor or other party to anyagreement with Parent or Seller is required on the part of Parent or Seller prior to the executionand delivery by Parent or Seller of this Agreement or any of the Related Agreements, as applicable,or the consummation by Seller of any of the transactions contemplated hereby or thereby.          (e) Title to and Condition of the Purchased Assets; Sufficiency.               (i) Seller has, and at Closing will convey to Purchaser, good, valid and marketable title tothe Purchased Assets, free and clear of any Liens, except for Liens for current taxes, assessments,fees and other governmental or similar charges or levies that are not yet due and payable as of thedate of this Agreement.               (ii) The Equipment has been maintained in accordance with normal practice and is in sufficientoperating condition and good repair (subject to normal wear and tear), taken as a whole. ThePurchased Assets constitute all the equipment and all the intangible property necessary to operatethe Business as it was operated prior to the Closing Date.          (f) Employees. There are no pending or, to the best knowledge of Seller, threatenedclaims against Seller by any current or former employee of Seller engaged in the Business otherthan for compensation and benefits due in the ordinary course of employment. There are no pendingor, to the best knowledge of Seller, threatened claims against Seller arising out of any statute,ordinance or regulation relating to employment practices or occupational or safety and healthstandards with respect to employees or former employees engaged in the Business. There are nopending or, to the best knowledge of Seller, threatened labor disputes, strikes or work stoppagesagainst Seller with respect to employees engaged in the Business.          (g) Intangible Property.               (i) Seller owns and has the right and authority to use the Intangible Property. To the bestknowledge of Seller, such ownership and use does not conflict with, infringe upon or violate anyrights of any other person, firm or corporation, and to the best knowledge of Seller, no otherperson, firm or corporation is infringing upon or violating the rights of Seller in and to theIntangible Property. There are no Liens on or encumbering the Intangible Property. There is noother Intellectual Property necessary for the operation of the Business as it was operated prior tothe Closing Date that is not owned by Seller and included in Purchased Assets. For purposes ofthis Section 5(g), “Intellectual Property” means inventions,
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discoveries, ideas, processes, designs, models, formulae, patterns, compilations, programs,devices, methods, techniques, processes, know-how, proprietary information, technical information,data and databases, drawings and blueprints, and all other information and materials that wouldconstitute a trade secret under applicable law, as well as all patents, industrial and utilitymodels, industrial designs, certificates of invention and other indicia of invention ownership, andall applications, provisionals, reissues, re-examinations, extensions, divisions, continuations (inwhole or in part) and equivalents and counterparts of the foregoing.               (ii) The Specifications set forth in Schedule 5(g) for each Product are true, correctand complete in all respects and constitute all of the information necessary to manufacture each ofthe Products. Schedule 5(g) also lists each item of Intellectual Property which isregistered by, issued by or on file with a governmental authority.          (h) Litigation. There is no action, dispute, claim, litigation, proceeding, labordispute (other than routine grievance procedures), arbitration, investigation or other proceedingat law or in equity pending against Parent or Seller with respect to the Purchased Assets or theBusiness or, to the best knowledge of Seller, threatened against Parent or Seller with respect tothe Purchased Assets or the Business, or otherwise relating to the validity, legality or proprietyof the transactions contemplated by this Agreement, whether sounding in tort, contract, warranty,product liability or otherwise. There are no decrees, injunctions or orders of any court orgovernmental department or agency outstanding against Seller with respect to the Purchased Assetsor the Business.          (i) Compliance with Laws. Seller has complied and is currently complying in allmaterial respects with all applicable statutes, regulations, orders, ordinances and other laws ofthe United States of America and all state and local governments, and agencies of any of theforegoing, as they relate to the Purchased Assets, the Business or the real property on which thePurchased Assets have been located and the Business operated, including federal, state and localstatutes, regulations, orders, ordinances and other laws relating to the protection of theenvironment. Seller has not received any notice to the effect that, or otherwise been advisedthat, Seller is not in compliance in all material respects with any of such statutes, regulations,orders, ordinances or other laws as they relate to the Purchased Assets, the Business or the realproperty on which the Purchased Assets have been located and the Business operated.          (j) Taxes. All federal, state, local, foreign and other material taxes, assessments,fees and other governmental charges, including any interest or penalties (“Taxes”), imposedupon Seller with respect to the Purchased Assets or the Business which are due and payable withrespect to all periods ending prior to or on the Closing Date have been paid, and all Tax returnsand reports required by law to be timely filed (taking into account applicable extension periods)with respect to all periods ending prior to or on the Closing Date have been timely filed. Thereare no Tax claims pending against Seller with respect to the Purchased Assets or the Business, andSeller knows of no threatened claims for Tax deficiencies against Seller with respect to thePurchased Assets or the Business.          (k) Customers and Suppliers. To the best knowledge of Seller, none of the ExistingCustomers or suppliers to the Business intends to cease doing business with the Business.Schedule 5(k) lists (i) the five largest Existing Customers of the Business, on the basis
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of revenues for goods sold or services provided for the most recently-completed fiscal year,and (ii) the five largest suppliers of the Business, on the basis of cost of goods or servicespurchased for the most recently-completed fiscal year. Schedule 5(k) also lists theparties with whom Parent or Seller has confidentiality agreements concerning the Business or theProducts.          (l) Insurance. Seller maintains insurance policies covering the Purchased Assets andthe Business in such amounts and against such risks as Seller believes to be customarily carriedand insured by owners of comparable businesses and with such deductibles as are customary in thecircumstances. Such insurance policies are in full force and effect, and Seller is not in defaultwith respect to the payment of any premium and is in material compliance with the provisionscontained in such policies.          (m) Product Liability and Warranty. Each Product sold or otherwise delivered bySeller has been in conformity with all applicable contractual commitments and all express andimplied warranties, and Seller does not have any liability (and there is no basis for any presentor future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demandagainst Seller) for replacement or repair of any such Products or other damages in connectiontherewith. No Product manufactured, sold or delivered by Seller is subject to any guaranty,warranty or other indemnity beyond the applicable standard terms and conditions of sale. Sellerdoes not have any liability, and there is no basis for any present or future action, suit,proceeding, hearing, investigation, charge, complaint, claim or demand against Seller giving riseto any liability, arising out of any injury to any person, party or property as a result of theownership, possession or use of a Product manufactured, sold or delivered by Seller.          (n) No Brokers. Seller has not retained the services of any broker, finder or agentin connection with the transactions contemplated by this Agreement.     6. Representations and Warranties of Purchaser. Purchaser hereby represents andwarrants to Seller as of the Closing Date as follows:          (a) Organization. Purchaser is a corporation duly organized, validly existing and ingood standing under the laws of the State of Ohio and has corporate power and authority to own itsassets and to carry on its business as it is now being conducted, and is duly qualified to dobusiness as a foreign corporation and is in good standing in all jurisdictions in which the conductof its business requires it to so qualify, except where the failure to be so qualified would nothave a Material Adverse Effect.          (b) Authorization; Enforceability.               (i) The execution, delivery and performance of this Agreement have been duly authorized by allnecessary corporate action of Purchaser. No other corporate proceedings on the part of Purchaserare necessary to authorize this Agreement or the consummation of the transactions contemplatedhereby.               (ii) This Agreement has been duly executed and delivered by Purchaser and is a valid andlegally binding obligation of Purchaser, enforceable against it in
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accordance with its terms, except as may be limited by bankruptcy or other laws affectingcreditors’ rights and by equitable principles.          (c) No Violation or Conflict. Neither the execution and delivery of this Agreementnor the consummation of the transactions contemplated hereby will (i) violate, or conflict with, orresult in a breach of any provision of, or constitute a default (or an event which, with notice orlapse of time or both, would constitute a default) under, or result in the termination of, oraccelerate the performance required by, any of the terms, conditions or provisions of the Articlesof Incorporation or Regulations (or any similar charter document) of Purchaser or any note, bond,mortgage, indenture, deed of trust, license, agreement (including, but not limited to, any employeebenefit plan) or other instrument or obligation to which Purchaser is a party, or (ii) violate anyorder, writ, injunction, decree, statute, rule or regulation applicable to Purchaser.          (d) Consents and Notices. No consent or approval by, notice to or registration withany governmental authority, creditor or other party to any agreement with Purchaser is required onthe part of Purchaser prior to the execution and delivery by Purchaser of this Agreement or theconsummation by Purchaser of any of the transactions contemplated hereby.          (e) No Brokers. Purchaser has not retained the services of any broker, finder oragent in connection with the transactions contemplated by this Agreement.     7. Additional Covenants of Purchaser and Seller.          (a) License. For the manufacture of Products for Seller’s internal purposes only,from and after the Closing, Purchaser grants to Seller a perpetual, nonexclusive, royalty-freelicense to use the technology and recipes (the “Licensed Technology”), which are embodiedin the Intangible Property, that are necessary for the manufacture of Products currently used bySeller in the Business. Seller may sublicense the Licensed Technology to a third-party supplier ormanufacturer (each a “Sublicensee”) for the limited purpose of manufacturing Products forSeller’s internal purposes only. Subject to the provisions of Section 7(b) below, from and afterthe Closing, Seller may not manufacture any Products for sale to customers, sell Products tocustomers, or purchase from a third-party supplier, manufacturer or distributor Products for resaleto customers.          (b) Transition. Purchaser and Seller will work together to develop a mutuallyacceptable plan to transition the Purchased Assets to Purchaser’s facilities following the Closingand to transition to Purchaser the customer relationships of the Business. The parties anticipatea transition period of three to six months for the injection and profile Products and a transitionperiod of six to nine months for the bottle Products. During the period of these respectivetransitions, which will commence on the Closing Date (the “Transition Periods”), Sellerwill continue to operate the facilities in which the Products are manufactured and to employ theemployees of the Business consistent with its past practices. Seller shall be entitled to all ofthe revenues generated for Products manufactured by Seller and sold to customers during therespective and applicable Transition Periods and shall also be responsible for all cash operatingexpenses relating to the operation of the Business at Seller’s existing manufacturing facilities,which expenses are specified and estimated on Schedule 7(b) (the “Transition OperatingExpenses”). Purchaser will use its reasonable best efforts to assist Seller in minimizing the
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Transition Operating Expenses during the respective and applicable Transition Periods. If theClosing takes place on or before May 31, 2005, Purchaser will promptly reimburse Seller for theTransition Operating Expenses actually incurred by Seller in connection with its operation of theBusiness on or after September 1, 2005 (with such date to be extended by one day for every day theClosing is delayed after May 31, 2005). Such reimbursement shall occur not later than thirty (30)calendar days following Purchaser’s receipt of an invoice therefor.          (c) Inventory. At the end of the respective and applicable Transition Periods,Purchaser shall have the option to purchase from Seller usable raw material and finished goodsinventories of the Business at a purchase price equal to the lower of cost or market.          (d) Employment. Purchaser and Seller will work together to develop a mutuallyacceptable plan to retain with the Business certain key individuals. Seller will be responsiblefor all severance, termination and related payments that are due its employees in connection withthe closing by Seller of the facility at which it manufactures Products. From the Closing anduntil and through September 1, 2005, Seller will use its reasonable best efforts to continue toemploy those certain individuals, mutually identified by Seller and Purchaser, who are important tothe operation and transition to Purchaser of the Business (collectively, the “KeyEmployees”). Purchaser shall reimburse Seller an amount equal to fifty percent (50%) of anybonuses that are paid to such Key Employees as incentive to remain in the employment of the Sellerduring the Transition Period, provided, however, Purchaser shall not be obligated to reimburseSeller for any amounts exceeding $42,500; and provided, further, that as to the Key Employees setforth on Schedule 7(d), and for purposes of this sentence only and the reimbursementobligations set forth herein, the Transition Period shall be deemed to run up to and throughOctober 1, 2005. To the extent that Purchaser requires the services of any such Key Employeesafter September 1, 2005, and subject to the provisions of the preceding sentence, Purchaser may,but shall not be obligated to, make offers of employment to one or more of such Key Employees andall bonuses, compensation or other remuneration related thereto will be the sole obligation of thePurchaser. To the extent permitted by applicable law and subject to obtaining any consent of suchKey Employees, Seller will provide Purchaser, upon request, with access to the personnel records ofany of such Key Employees. If any of such Key Employees accepts Purchaser’s offer of employment,Seller will cause such existing employment to be terminated, and Seller shall remain responsiblefor any liability arising from such employment relationship with Seller.          (e) Risk of Loss. Seller will continue to cover and insure the Purchased Assetsduring the respective and applicable Transition Periods in accordance with past practices and theprovisions of Section 5(o) above. If any of the Purchased Assets are damaged or destroyed prior tothe date on which Purchaser takes possession thereof, the risk of loss shall be on Seller, andSeller shall fully indemnify and defend Purchaser for such loss.          (f) Public Announcements. All press releases, customer notifications and publicannouncements relating to the transactions contemplated by this Agreement will be agreed upon inadvance by Purchaser and Seller.          (g) Access to Books and Records. From the Closing Date until all Earn-Out paymentshave been made pursuant to Section 2(b), Purchaser shall reasonably cooperate with
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Parent and Seller to the extent that either or both reasonably request certain data, reportsor other information in order to evaluate the accuracy of the Earn-Out payments being made toSeller pursuant to Section 2(b). In the event that Purchaser reasonably believes that providingany such requested data, reports or other information to Parent or Seller would require Purchaserto disclose confidential or sensitive operating, financial, legal or other business information,then Purchaser, on the one hand, and Parent or Seller, on the other hand, shall identify a thirdparty reasonably acceptable to both (a “Third Party”) to whom or which Purchaser shalldisclose such requested data, reports or other information (the “Sensitive Information”) tothe extent reasonably necessary to respond to the underlying concerns of Parent or Seller (a“Third Party Audit”). In the course of such Third Party Audit, such Third Party, keepingconfidential such Sensitive Information and not disclosing such Sensitive Information to Parent,Seller or any other party, shall review such Sensitive Information with the sole objective ofevaluating the accuracy of the Earn-Out payments being made to Seller pursuant to Section 2(b).The expenses of any such Third Party Audit shall be borne by Parent or Seller.     8. Indemnification.          (a) Indemnity by Seller. Parent and Seller, jointly and severally, agree to indemnifyand hold harmless Purchaser and Purchaser’s stockholders, directors, officers, employees,affiliates, agents and representatives (collectively, the “Purchaser Indemnified Parties”and each a “Purchaser Indemnified Party”) from and against all liabilities, claims, losses,damages, deficiencies and expenses in respect of:               (i) Any breach of the representations and warranties made by Parent or Seller in thisAgreement;               (ii) Any non-fulfillment of any obligations of Parent or Seller pursuant to this Agreement;               (iii) Any Retained Liabilities and other liabilities of Parent or Seller not assumed byPurchaser under this Agreement;               (iv) Any claims with respect to Products manufactured or sold by Seller on or prior to theClosing Date or during the respective and applicable Transition Periods; and               (v) Any and all actions, suits, proceedings, claims, demands, assessments, judgments, costsand expenses (including court costs and other legal expenses, reasonable attorneys’ and technicalconsultants’ fees, penalties and damages) arising as a consequence of any of the foregoing.In no event will any Purchaser Indemnified Party be required, prior to making a claim againstParent or Seller or becoming entitled to recovery hereunder from Parent and Seller, to commencelitigation or to take any other action (other than reasonable efforts to file claims to obtaininsurance recoveries) against any third party with respect to a matter for which any PurchaserIndemnified Party may have a claim against Parent or Seller under this Agreement.
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          (b) Indemnity by Purchaser. Purchaser agrees to indemnify and hold harmless Parent,Seller and each of their respective stockholders, directors, officers, employees, affiliates,agents and representatives (collectively, the “Seller Indemnified Parties” and each a“Seller Indemnified Party”) from and against all liabilities, claims, losses, damages,deficiencies and expenses in respect of:               (i) Any breach of the representations and warranties made by Purchaser in this Agreement;               (ii) Any non-fulfillment of any obligations of Purchaser pursuant to this Agreement;               (iii) Any claims with respect to Products manufactured or sold by Purchaser subsequent to therespective and applicable Transition Periods; and               (iv) Any and all actions, suits, proceedings, claims, demands, assessments, judgments, costsand expenses (including court costs and other legal expenses, reasonable attorneys’ and technicalconsultants’ fees, penalties and damages) arising as a consequence of any of the foregoing.In no event will any Seller Indemnified Party be required, prior to making a claim againstPurchaser or becoming entitled to recovery hereunder from Purchaser, to commence litigation or totake any other action (other than reasonable efforts to file claims to obtain insurance recoveries)against any third party with respect to a matter for which any Seller Indemnified Party may have aclaim against Purchaser under this Agreement.          (c) Insurance and Tax Benefits. Any indemnification owing to an indemnified partyunder Section 8(a) or Section 8(b) above shall be net of (i) any Tax refunds, adjustments,benefits, savings or reductions, and (ii) any insurance proceeds (not including any proceeds underany self-insurance arrangement), net of all costs of recovery, in either case to which theindemnified party is entitled by virtue of the event or circumstances giving rise to the claim forindemnification hereunder.          (d) Maximum Losses. No claim for indemnification of losses or other amounts (whetherin an action for indemnification or otherwise) may be made by an indemnified party under Section8(a)(i) or Section 8(b)(i) above, as the case may be, to the extent the aggregate losses and otheramounts claimed thereunder (including any losses or other amounts previously recovered thereunder)against the indemnifying party exceed $125,000 (the “Cap”); provided, however, that anyclaims against Parent or Seller arising from or relating to a breach of Section 5(e)(i) (Title toAssets) or Section 5(n) (Brokers), or against Purchaser arising from or relating to a breach ofSection 6(e) (Brokers), or arising from or relating to the other provisions of Section 8(a) orSection 8(b), as the case may be, shall not be subject to or credited against the foregoing Cap andshall be fully recoverable to the maximum extent permitted by law or in equity.          (e) Right of Set-Off. Purchaser shall be entitled to offset any Earn-Out amountspayable to Seller against any amounts owing to Purchaser under this Section 8.
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          (f) Defense of Claims.               (i) As soon as is reasonably practicable after becoming aware of a claim for indemnificationunder this Agreement, an indemnified party shall promptly give notice to the indemnifying party ofsuch claim and the amount the indemnified party will be entitled to receive hereunder from theindemnifying party; provided, however, that the failure of the indemnified party to promptly givenotice shall not relieve the indemnifying party of its obligations except to the extent, if any,that the indemnifying party shall have been prejudiced thereby. If the indemnifying party does notobject in writing to such indemnification claim within thirty (30) days of receiving noticethereof, the indemnified party shall be entitled to recover from the indemnifying party the amountof such claim. If the indemnifying party agrees that it has an indemnification obligation butasserts that it is obligated to pay only a lesser amount, the indemnified party shall neverthelessbe entitled to recover from the indemnifying party the lesser amount, without prejudice to theindemnified party’s claim for the difference. If the indemnifying party objects in writing to suchindemnification claim within thirty (30) days of receiving notice thereof, the validity of theindemnification claim, and the extent of the indemnifying party’s liability therefor, shall bedetermined by a court of appropriate jurisdiction.               (ii) As soon as is reasonably practicable after receipt of notice of commencement of anyaction or the assertion of any claim by a third party for which any party is entitled to beindemnified under Section 8(a) or Section 8(b) above, the indemnified party shall give theindemnifying party written notice thereof together with a copy of such claim, process or otherlegal pleading; provided, however, that the failure of the indemnified party to promptly givenotice shall not relieve the indemnifying party of its obligations except to the extent, if any,that the indemnifying party shall have been prejudiced thereby. The indemnifying party shall havethe right to defend the claim by representatives of its own choosing that are reasonablysatisfactory to the indemnified party and to settle or otherwise resolve the claim; provided,however, that no obligation, restriction or loss shall be imposed on an indemnified party as aresult of such settlement or resolution without its prior written consent. In connection with anysuch indemnification, the indemnified party will cooperate in all reasonable requests of theindemnifying party.          (g) Survival of Representations and Warranties. Except as otherwise provided herein,the representations and warranties contained in Sections 5 and 6 of this Agreement shall survivethe Closing for a period of two years after the Closing Date; provided, however, that therepresentations and warranties contained in Section 5(b)(i) (Authorization), Section 5(e)(i) (Titleto Assets), Section 5(n) (Brokers), Section 6(b)(i) (Authorization) and Section 6(e) (Brokers)shall survive forever; and provided, further, that any specific claim or action of which specificwritten notice is given to the party that made such representation or warranty prior to the date onwhich such representation or warranty otherwise terminates as provided herein may continue to beasserted and shall be indemnified against pursuant to this Section 8.          (h) Remedies Exclusive. Except as provided in Section 9(b) below, the remediesprovided in this Section 8 shall be the exclusive remedy for monetary damages (whether at law or inequity) and no party hereto may avoid the limitations on liability contained in this Article 8 byseeking damages for breach of contract, tort or any other theory of liability. Without limitingthe foregoing, neither any party hereto nor any of their respective stockholders,
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directors, officers, employees, affiliates, agents or representatives shall have any liabilityor obligation to the other party in respect of any statement, representation, warranty or assuranceof any kind, other than the liabilities and obligations pursuant to this Section 8.     9. Covenant Not to Compete.          (a) Non-competition. Subject to the provisions of Section 7(b) above, each of Parent,Seller and William J. Bergen (“Bergen”) agrees that, for the period commencing on theClosing Date and ending on the fifth anniversary thereof (with respect to Parent and Seller) and onthe second anniversary thereof (with respect to Bergen), it and he will not, directly orindirectly, (i) engage or hold an interest in any business anywhere in the world engaging in theBusiness and/or in the manufacture or sale of products comprised of a substantially identicalchemical formula as the Products (a “Competitive Business”); (ii) have any interest in,own, manage, operate, control, direct, be connected with as a stockholder (other than as astockholder of less than one percent (1%) of the issued and outstanding stock of a publicly-tradedcorporation), joint venturer, officer, director, partner, employee or consultant, or otherwiseengage, assist or invest in, any Competitive Business; (iii) hire in connection with anyCompetitive Business any person employed by, or otherwise under contract or agreement with,Purchaser; or (iv) solicit any of Purchaser’s customers for the purpose of competing with Purchaserin a Competitive Business. Notwithstanding the foregoing, none of Parent, Seller or Bergen shallbe prohibited from continuing the Excluded Business or manufacturing (or having manufactured forit) any of the Products in accordance with the provisions of Sections 7(a) and 7(b) above.          (b) Injunctive Relief. The parties hereto agree that damages would be an inadequateremedy for Purchaser in the event of a breach of this Agreement; therefore, upon the happening ofsuch event, either with or without pursuing any potential damage remedies (which shall not besubject to the limitations set forth in Section 8 above), Purchaser may immediately obtain andenforce an injunction prohibiting Seller or Bergen from violating this Agreement from any court oflaw or equity.          (c) Acknowledgement. Bergen agrees and acknowledges that he shall personally benefitfrom the consummation of the transactions contemplated by this Agreement and the RelatedAgreements, that such benefits are sufficient consideration for the promises made and obligationsundertaken by him pursuant to this Section 9, and that the provisions of this Section 9 are acondition to Purchaser entering into and performing this Agreement.     10. General.          (a) Entire Agreement; Amendment; Termination.               (i) This Agreement and the documents referred to in this Agreement and required to be delivered pursuant to this Agreement constitute the entire agreement between the parties pertaining to the subject matter of this Agreement, and supersede all prior and contemporaneous agreements, understandings, negotiations and discussions of the parties, whether oral or written, including, but not limited to, that certain letter of intent between the parties dated as of May 2, 2005 (except for Paragraph 9 thereof, which paragraph shall survive
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the execution and delivery of this Agreement and shall be binding upon the parties theretountil the first to occur of the Closing or July 1, 2005), except for that certain confidentialityletter agreement between the parties dated as of February 11, 2005, which agreement shall survivethe execution and delivery of this Agreement and shall be binding upon the parties thereto untilthe first to occur of the Closing or the expiration of such agreement in accordance with its terms.There are no warranties, representations or other agreements between the parties in connectionwith the subject matter of this Agreement, except as specifically set forth in this Agreement. Noamendment, supplement, modification, waiver or termination of this Agreement shall be bindingunless executed in writing by the party or parties to be bound thereby.               (ii) In the event that the Closing does not occurbefore July 1, 2005, then, unless the parties hereto otherwise agree,this Agreement shall terminate and expire and become null and void, thetransactions contemplated hereby will be deemed abandoned, and no partyhereto shall have any further liability or obligation hereunder.          (b) Expenses.               (i) Except as otherwise provided in this Section 10(b) or elsewhere in this Agreement, whetheror not the transactions contemplated by this Agreement are consummated, Purchaser and Seller shalleach pay the costs, fees and expenses of its respective legal counsel, accountants, consultants andother experts incident to the negotiation and preparation of this Agreement and the consummation ofthe transactions contemplated hereby.               (ii) Purchaser shall be responsible for the payment of all recording fees and transfer Taxeswith respect to the sale and transfer of the Purchased Assets hereunder, and Seller will cooperatewith Purchaser in obtaining any applicable sales Tax exemptions.               (iii) All ad valorem property Taxes attributable to the Purchased Assets for the taxable periodthat includes the Closing Date shall be pro rated, with Seller being responsible for any such Taxesattributable to such period up to the Closing Date, and Purchaser being responsible for any suchTaxes attributable to the remaining portion of such period          (c) Tax Matters.               (i) Seller and Purchaser agree to allocate the Purchase Price (including any liabilitiesdeemed to be assumed) among the Purchased Assets in accordance with Section 1060 of the InternalRevenue Code of 1986, as amended (the “Code”) and U.S. Treasury Regulations thereunder.Seller and Purchaser agree that Purchaser shall prepare and provide to Seller a draft allocation ofthe Purchase Price among such Purchased Assets within 60 days after the Closing Date. Seller shallnotify Purchaser within 30 days of receipt of such draft allocation of any objection Seller mayhave thereto. Seller and Purchaser agree to resolve any disagreement with respect to suchallocation in good faith. In addition, Seller and Purchaser hereby undertake and agree to filetimely any information that may be required to be filed pursuant to U.S. Treasury Regulationspromulgated under Section 1060(b) of the Code, and shall use the allocation determined pursuant tothis Section 10(c) in connection with the preparation of Internal Revenue Service Form 8594(including any amendments thereto) as such form relates to the transactions contemplated hereunder.Unless required to do so by applicable law, no party
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shall file any Tax return or other documentor otherwise take any position that is inconsistent with the allocation determined pursuant to thisSection 10(c).               (ii) Seller and Purchaser agree to provide each other with such information and assistance asis reasonably necessary, including access to records and personnel, for the preparation ofany Tax returns or for the defense of any Tax claim or assessment, whether in connection withan audit or otherwise.          (d) Notices. All notices, requests, demands and other communications hereunder shallbe in writing and shall be deemed to have been duly given, if delivered in person or by anationally-recognized overnight delivery service, or telegraphed, telexed or mailed by certified orregistered mail, postage prepaid, as follows:If to Purchaser:PolyOne Corporation