Exhibit 10.(q)


 


EXECUTION COPY


 


ASSET PURCHASE AGREEMENT


 


by and among


 


CATERPILLAR FOREST PRODUCTS INC.,


CATERPILLAR INC.


and the Caterpillar Subsidiaries set forth
herein


 


and


 


BLOUNT, INC.,


BLOUNT INTERNATIONAL, INC.


and the Blount Subsidiaries set forth herein


 


November 5, 2007


 

















 


	
  SECTION 1

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  SECTION 2

  	
  BASIC
  TRANSACTION

  	
  15

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Purchase and
  Sale of Assets

  	
  15

  
	
   

  	
  (b)

  	
  Liabilities

  	
  15

  
	
   

  	
  (c)

  	
  Closing

  	
  16

  
	
   

  	
  (d)

  	
  Purchase
  Price

  	
  16

  
	
   

  	
  (e)

  	
  Net Working
  Capital Adjustment

  	
  16

  
	
   

  	
  (f)

  	
  Inventory
  Adjustment

  	
  16

  
	
   

  	
  (g)

  	
  Adjustment
  Calculation and Dispute Resolution

  	
  16

  
	
   

  	
  (h)

  	
  Post-Closing
  Accounting Practice; Access

  	
  17

  
	
   

  	
  (i)

  	
  Parent
  Guaranties

  	
  17

  
	
   

  	
  (j)

  	
  Purchase
  Price Allocation for Tax Purposes

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3

  	
  SELLER’S
  REPRESENTATIONS AND WARRANTIES

  	
  18

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Organization
  of Blount

  	
  18

  
	
   

  	
  (b)

  	
  Authorization
  of Transaction

  	
  18

  
	
   

  	
  (c)

  	
  Non-contravention

  	
  19

  
	
   

  	
  (d)

  	
  Brokers’
  Fees

  	
  19

  
	
   

  	
  (e)

  	
  Title to and
  Sufficiency and Condition of Assets

  	
  19

  
	
   

  	
  (f)

  	
  Financial
  Statements

  	
  19

  
	
   

  	
  (g)

  	
  Events
  Subsequent to December 31, 2006

  	
  20

  
	
   

  	
  (h)

  	
  Legal
  Compliance

  	
  21

  
	
   

  	
  (i)

  	
  Tax Matters

  	
  21

  
	
   

  	
  (j)

  	
  Real
  Property

  	
  21

  
	
   

  	
  (k)

  	
  Intellectual
  Property

  	
  23

  
	
   

  	
  (l)

  	
  Inventory

  	
  25

  
	
   

  	
  (m)

  	
  Contracts

  	
  25

  
	
   

  	
  (n)

  	
  Notes and
  Accounts Receivable

  	
  26

  
	
   

  	
  (o)

  	
  Litigation

  	
  26

  
	
   

  	
  (p)

  	
  Product
  Warranty

  	
  26

  
	
   

  	
  (q)

  	
  Employees

  	
  26

  
	
   

  	
  (r)

  	
  Employee
  Benefits

  	
  27

  
	
   

  	
  (s)

  	
  Environmental,
  Health, and Safety Matters

  	
  28

  
	
   

  	
  (t)

  	
  Customers
  and Suppliers

  	
  29

  
	
   

  	
  (u)

  	
  Bank
  Accounts

  	
  30

  
	
   

  	
  (v)

  	
  Permits

  	
  30

  



 


i

















 


	
   

  	
  (w)

  	
  Improper and Other Payments

  	
  30

  
	
   

  	
  (x)

  	
  Accounting
  and Disclosure Controls

  	
  30

  
	
   

  	
  (y)

  	
  Contracts
  with Affiliates

  	
  30

  
	
   

  	
  (z)

  	
  Absence of
  Undisclosed Liabilities

  	
  30

  
	
   

  	
  (aa)

  	
  Disclosure
  of Evaluation Material

  	
  31

  
	
   

  	
  (bb)

  	
  No Further
  Representation or Warranty

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4

  	
  BUYER’S
  REPRESENTATIONS AND WARRANTIES

  	
  31

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Organization
  of Buyer

  	
  31

  
	
   

  	
  (b)

  	
  Authorization
  of Transaction

  	
  31

  
	
   

  	
  (c)

  	
  Non-contravention

  	
  31

  
	
   

  	
  (d)

  	
  Brokers’
  Fees

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5

  	
  POST-CLOSING
  COVENANTS

  	
  32

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  General

  	
  32

  
	
   

  	
  (b)

  	
  Assignment.

  	
  32

  
	
   

  	
  (c)

  	
  Litigation
  Support

  	
  33

  
	
   

  	
  (d)

  	
  Insurance

  	
  33

  
	
   

  	
  (e)

  	
  Transition

  	
  33

  
	
   

  	
  (f)

  	
  Confidentiality

  	
  33

  
	
   

  	
  (g)

  	
  Covenant Not
  to Compete and Nonsolicitation

  	
  34

  
	
   

  	
  (h)

  	
  Employment
  and Benefit Arrangements

  	
  34

  
	
   

  	
  (i)

  	
  Additional
  Tax Matters

  	
  40

  
	
   

  	
  (j)

  	
  Environmental
  Permits

  	
  41

  
	
   

  	
  (k)

  	
  Parts
  Buyback

  	
  42

  
	
   

  	
  (l)

  	
  Preparation
  of Closing Statements

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6

  	
  REMEDIES FOR
  BREACH OF THIS AGREEMENT; INDEMNITY

  	
  42

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Survival

  	
  42

  
	
   

  	
  (b)

  	
  Indemnification
  by Seller

  	
  42

  
	
   

  	
  (c)

  	
  Indemnification
  by Buyer

  	
  43

  
	
   

  	
  (d)

  	
  No
  Materiality Qualifiers

  	
  43

  
	
   

  	
  (e)

  	
  Limitations
  on Liability

  	
  43

  
	
   

  	
  (f)

  	
  Matters
  Involving Third Parties

  	
  46

  
	
   

  	
  (g)

  	
  Additional
  Environmental Procedures, Control and Access

  	
  47

  
	
   

  	
  (h)

  	
  Recoupment
  Against General Escrow Amount and Specified Environmental Escrow Amount

  	
  49

  
	
   

  	
  (i)

  	
  Purchase
  Price Adjustments

  	
  49

  



 


ii

















 


	
   

  	
  (j)

  	
  Mitigation

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7

  	
  MISCELLANEOUS

  	
  50

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Press
  Releases and Public Announcements

  	
  50

  
	
   

  	
  (b)

  	
  No
  Third-Party Beneficiaries

  	
  50

  
	
   

  	
  (c)

  	
  Entire
  Agreement

  	
  50

  
	
   

  	
  (d)

  	
  Succession
  and Assignment

  	
  50

  
	
   

  	
  (e)

  	
  Counterparts

  	
  50

  
	
   

  	
  (f)

  	
  Headings

  	
  50

  
	
   

  	
  (g)

  	
  Notices

  	
  50

  
	
   

  	
  (h)

  	
  Applicable
  Law; Choice of Forum; Waiver of Jury Trial

  	
  51

  
	
   

  	
  (i)

  	
  Amendments
  and Waivers

  	
  51

  
	
   

  	
  (j)

  	
  Severability

  	
  52

  
	
   

  	
  (k)

  	
  Expenses

  	
  52

  
	
   

  	
  (l)

  	
  Construction

  	
  52

  
	
   

  	
  (m)

  	
  Incorporation
  of Exhibits and Schedules

  	
  52

  
	
   

  	
  (n)

  	
  Specific
  Performance

  	
  52

  
	
   

  	
  (o)

  	
  Joint and
  Several Obligations

  	
  53

  
	
   

  	
  (p)

  	
  Governing
  Language

  	
  53

  
	
   

  	
  (q)

  	
  Remittances

  	
  53

  



 


	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Accounts Payable

  
	
  Exhibit B

  	
   

  	
  Accounts Receivable

  
	
  Exhibit C

  	
   

  	
  Accrued Expenses

  
	
  Exhibit D

  	
   

  	
  Prepaid Expenses

  
	
  Exhibit E

  	
   

  	
  Example Closing Statement of Net Working Capital

  
	
  Exhibit F

  	
   

  	
  Example Closing Statement of Inventory

  
	
  Exhibit G

  	
   

  	
  Target Business Financial Statements

  
	
  Exhibit H

  	
   

  	
  August 31, 2007 Financial Statements

  
	
  Exhibit I

  	
   

  	
  Certain Acquired Assets

  
	
  Exhibit J

  	
   

  	
  Excluded Contracts

  
	
  Exhibit K

  	
   

  	
  Transaction Agreements

  



 


iii

















 


ASSET PURCHASE
AGREEMENT


 


This Asset Purchase Agreement
(this “Agreement”) is entered into
as of November 5, 2007, by and among Caterpillar Forest Products Inc., a
Delaware corporation (“CFPI”),
Caterpillar Inc., a Delaware corporation (“Buyer
Parent”), the direct and indirect subsidiaries of Buyer Parent set
forth on the signature page hereto (the “Caterpillar
Subsidiaries” and, together with CFPI, “Buyer”), Blount, Inc., a Delaware corporation (“Blount”), Blount International, Inc.,
a Delaware Corporation (“Seller Parent”)
and the direct and indirect subsidiaries of Blount set forth on the signature page hereto
(the “Blount Subsidiaries” and,
together with Blount, “Seller”).


 


This Agreement contemplates a
transaction in which Buyer will purchase all of the assets (and assume certain
of the liabilities) primarily relating to Seller’s Industrial Power Equipment
Group – Forestry Division in return for cash.


 


Now, therefore, in
consideration of the premises and the mutual promises herein made, and in
consideration of the representations, warranties and covenants herein
contained, the Parties agree as follows:


 


SECTION 1          DEFINITIONS


 


“Accountants” means Deloitte & Touche LLP or, if
Deloitte & Touche LLP is unable or unwilling to act, such other
nationally recognized independent public accounting firm mutually selected in
writing by Buyer and Seller.


 


“Accounts Payable” means the accounts payable of the Target
Business, calculated using line items and methodology consistent with the
Target Business Financial Statements. 
Such line items comprising “Accounts Payable” are set forth on Exhibit A.


 


“Accounts Receivable” means the accounts receivable, and any
other accounts, notes and other receivables, of the Target Business, calculated
using line items and methodology consistent with the Target Business Financial
Statements.  Such line items comprising “Accounts
Receivable” are set forth on Exhibit B.


 


“Accrued Expenses” means the accrued expenses of the Target
Business, calculated (a) using line items and methodology consistent with
the Target Business Financial Statements and (b) notwithstanding
differences between actual line item values and reserves or other estimates,
subject to normal and recurring year-end adjustments (to the extent Seller
calculated such reserves or other estimates using methodology consistent with
the Target Business Financial Statements). 
Such line items comprising “Accrued Expenses” are set forth on Exhibit C;
provided that “Accrued Expenses”
do not include pension, retirement savings, professional services, product
liability or Taxes other than accrued property Taxes (and Exhibit C
does not include such items).


 


“Acquired Assets” means all right, title and interest in and to
all of the assets of Seller used by Seller primarily in the operation of the
Target Business, including, but not limited to, (a) those assets listed on
Exhibit I, (b) Accounts Receivable, (c) Bank Accounts, (d) Cash
on Hand, (e) Inventory, (f) Prepaid Expenses, (g) Owned Real
Property and Leased Real Property, (h) operating assets and other tangible
personal property (such as machinery, equipment, assets held for sale,
furniture, automobiles, trucks, tractors, trailers, tools, jigs and dies), in
each case primarily related to the Target Business, (i) Intellectual
Property of Seller held for use or used 


 

















 


primarily in connection with
the operation of the Target Business throughout the world where the Target
Business operates, the goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of any applicable jurisdictions, (j) leases and subleases
and rights thereunder, in each case primarily related to the Target Business, (k) the
rights of Seller under the Assumed Contracts, (l) claims, deposits,
prepayments, refunds, causes of action, choses in action, rights of recovery,
rights of set-off, and rights of recoupment (including any such item relating
to the payment of Taxes, but only if and to the extent such Taxes are treated
as Assumed Liabilities) in each case arising primarily from the operation of
the Target Business, (m) franchises, approvals, permits, flex engine
allowances, licenses, orders, registrations, certificates, variances, and
similar rights obtained from governments and governmental agencies, in each
case primarily relating to the Target Business, (n) copiers, data cabling
and wiring, data communication circuits, desktop PCs, docking stations,
external hard drives and other storage devices, facsimile machines, firewalls,
laptop PCs, printers, routers, servers, switches, wireless access points, and
other such devices along with the computer software, except where software
licensing restrictions limit assignment, loaded on or used by the immediately
preceding devices, in each case primarily relating to the Target Business, (o) books,
records, ledgers, files, documents, correspondence, lists, plats, architectural
plans, drawings, and specifications, advertising and promotional materials,
studies, product support and training materials and other printed or written
materials, in each case to the extent primarily related to the Target Business but
not including personnel records (except as set forth in the parenthetical in
clause (viii) below), and (p) all assets of, or assets relating to,
any Employee Benefit Plan that are transferred to any employee benefit plan
maintained by Buyer or any of its Affiliates, as expressly provided in Section 5(h);
provided, however, that the Acquired Assets shall
not include (i) the charter, qualifications to conduct business as a
foreign entity, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and legal existence of any of Seller Parent,
Blount or any Blount Subsidiary, (ii) any of the rights of Seller under
this Agreement or any Transaction Agreement (or under any side agreement to
which Seller Parent, Seller or any Blount Subsidiary, on the one hand, or CFPI
or any Caterpillar Subsidiary, on the other hand, are parties that is entered
into on or after the date of this Agreement), (iii) the assets primarily
relating to Gear Products, (iv) the Menominee Facility, (v) the
Excluded Contracts, (vi) marketable securities, (vii) the “Blount”
tradename and the Argentina Trademarks, (viii) personnel records (other
than (A) as required to be transferred to Buyer under applicable Law, (B) for
which the applicable employee has consented to such transfer to Buyer or (C) as
set forth on Section 1(a) of the Disclosure Schedule), (ix) documents,
files and records related to pending, threatened, active or closed product
liability actions and (x) all assets of or assets relating to any Employee
Benefit Plan, except to the extent such assets are transferred to an employee
benefit plan maintained by Buyer or any of its Affiliates, as expressly
provided in Section 5(h).


 


“Active Employee” has the meaning set forth in Section 5(h).


 


“Adjusted Purchase Price” means the Purchase Price, as adjusted
pursuant to Sections 2(d)(iii), 2(d)(iv), 2(d)(v), 2(e) and 2(f).


 


“Affiliates” means, with respect to a Person, any legal entity
directly or indirectly controlling, controlled by or under common control with
such Person, where “control” means a direct or indirect ownership interest of
more than 50% in such legal entity.


 


2

















 


“Alliance Agreements” means the Marketing, Cooperation and
Trademark Licensing Agreement and the Supply Agreement, each dated March 11,
2003 by and between Blount and Buyer Parent, including all amendments and side
letter agreements related thereto.


 


“Applicable Rate” means the blended prime rate as published
daily by the Eastern edition of the Wall Street Journal.


 


“Applicable Welfare Plan” has the meaning set forth in Section 5(h).


 


“Argentina Trademarks” means the “PRENTICE OMARK INDUSTRIES & design” trademarks registered in
Argentina (registration numbers 1,928,718 and 1,928,719).


 


“Asbestos Liabilities” means any Liabilities arising from,
relating to, or based on the exposure or alleged exposure to asbestos or
asbestos-containing materials present or allegedly present (a) in any
product manufactured, sold, marketed, installed, transported, or distributed by
the Target Business on or prior to the Closing Date (regardless of whether any
exposure to such asbestos or asbestos-containing materials occurred prior to,
on or after the Closing Date), or (b) at any Real Property, or in any
facility or structure thereat, to the extent any exposure to such asbestos or
asbestos-containing materials occurred prior to or on the Closing Date,
including the case of each of (a) and (b), any such Liabilities arising
from, relating to or based on any personal or bodily injury or illness.


 


“Assumed Contracts” means (a) all written contracts (and
such oral or other contracts for which Seller provides Buyer a summary of the
material terms within ten Business Days of the Closing Date)  primarily relating to the Target Business and
having an aggregate value, or providing for obligations, contingent or
otherwise, under $100,000, (b) the Material Contracts listed on Section 3(m)(i)
of the Disclosure Schedule if a materially accurate and complete copy of each
such Material Contract, including all material amendments thereto, has been
delivered to Buyer within ten Business Days of the Closing, (c) all
unfulfilled customer purchase orders listed on Section 3(m)(ii) of
the Disclosure Schedule (except that orders for service parts need not be
listed on such schedule to be deemed an Assumed Contract hereunder) and provided
to Buyer within ten Business Days of the Closing Date and (d) all
unfulfilled supplier purchase orders, but only to the extent listed on Section 3(m)(iii) of
the Disclosure Schedule (except that orders for service parts need not be
listed on such schedule to be deemed an Assumed Contract hereunder).  Notwithstanding the foregoing, “Assumed
Contracts” do not include the Excluded Contracts.


 


“Assumed Employee Benefit Agreement” means each Employee
Benefit Agreement that is explicitly designated as an Assumed Employee Benefit
Agreement in Section 3(q)(ii) of the Disclosure Schedule.


 


“Assumed
Liability” or “Assumed Liabilities”
means only (a) the Accounts Payable, (b) the Accrued Expenses, (c) the
Covered Employee Liabilities, (d) obligations in respect of the Bank
Accounts, (e) subject to clause (viii) below, obligations of Seller
under the Assumed Contracts, (f) Liabilities relating to the Target
Business that arise after the Closing (including any Post-Closing Asbestos,
Silica, and Welding Rod Liabilities and any Post-Closing Environmental
Liabilities) and (g) Liabilities relating to the Target Business that
arise after the Closing in connection with any breach of contract, tort or
violation of any Law.  For clarification,
“Assumed Liabilities” shall not include any other past, current or future
Liability or Loss including, among other things, (i) contingent,
off-balance sheet, unasserted claims or Liabilities of a type for which there
is no provision for accrual (other than in respect of Assumed 


 


3

















 


Contracts), in
each case arising on or prior to the Closing, (ii) any Asbestos Liability,
Silica Liability or Welding Rod Liability, (iii) any Pre-Closing
Environmental Liabilities, (iv) any and all past, current or future
Liability for product liability arising from products wholly manufactured on or
prior to the Closing Date, (v)  Liabilities for infringement of third
party Intellectual Property rights arising from products wholly manufactured on
or prior to the Closing Date, (vi) any and all past, current or future
Liability of Seller Parent or Seller for Taxes (other than Tax Liabilities
relating to the Target Business that arise after the Closing), (vii) any
and all past, current or future Liability of Seller Parent or Seller for unpaid
Taxes of any Person under Reg. Section 1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract or
otherwise (other than Tax Liabilities relating to the Target Business that arise
after the Closing), (viii) Liabilities relating to the Target Business
that arise prior to the Closing in connection with any breach of contract
(other than a judgment or settlement (with the consent of Buyer, such consent
not to be unreasonably withheld or delayed) for specific performance in respect
of any Assumed Contract), tort or violation of any Law, (ix) any and all
past, current or future obligation of Seller to indemnify any Person by reason
of the fact that such Person was a director, officer, employee, or agent of
Seller or was serving at the request of Seller as a partner, trustee, director,
officer, employee, or agent of another entity (whether such indemnification is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such indemnification is pursuant to
any statute, charter document, bylaw, agreement, or otherwise), (x) Transfer
Fees, (xi) any and all past, current or future Liability of Seller Parent
or Seller for costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby, (xii) any Liability or obligation of
Seller under this Agreement or the Transaction Agreements or under any side
agreement to which Seller Parent, Blount or any Blount Subsidiary, on the one
hand, or Buyer Parent, CFPI or any Caterpillar Subsidiary, on the other hand,
are parties that is entered into on or after the date of this Agreement, (xiii)
any insurance claim liability incurred on or prior to the Closing, except in
connection with any Assumed Liability, (xiv) any and all past, current or
future Liability relating to the Target Business arising out of Seller’s
participation prior to the Closing in the U.S. Environmental Protection Agency
percent-of-production allowance flexibility or similar programs contained in 40
CFR 89.102, (xv) any and all past, current or future Liability of Seller to the
extent relating to a warranty campaign not being transferred to Buyer hereunder
or under any Transaction Agreement, including those warranty campaigns set
forth on Section 1(b) of the Disclosure Schedule,
(xvi) any and all past or current royalty payments due under the license
agreements related to the Hamby patents, Quadco license agreements, Fabtek
patents or the Stone and Wood patents, (xvii) any and all past, current or
future Liability to the extent relating to the Menominee Facility,
(xviii) any and all past, current or future Liability arising from the
design and certification existing as of the Closing of Seller’s Rollover
Protection Structure, Falling Object Protection Structure or Operator
Protection System, as applicable, in each case not including materials and
construction in respect thereof, (xix) any and all past, current or future
Liability with respect to any Target Business Employee, other than the Covered
Employee Liabilities, (xx) any and all past, current or future Liability
arising from Seller’s failure to comply with any bulk transfer laws of any
applicable jurisdiction in connection with the transactions contemplated
hereby, (xxi) any and all past, current or future bonus or other payment
related to successful completion of the transactions contemplated hereunder,
(xxii) any other Liabilities relating to the Target Business that arise prior
to the Closing except to the extent any such Liability would otherwise be an
Assumed Liability hereunder, (xxii) any Losses resulting from the
foregoing items (i) through (xxii), in each case other than Liabilities of
Buyer or its Affiliates pursuant to the Alliance Agreements.  For further clarification, for purposes of
the definition of “Assumed Liabilities”, a Liability shall be deemed to “arise”
when the event giving rise to such Liability occurs.


 


4

















 


“August 31, 2007 Financial Statements” means the following
documents attached hereto as Exhibit H: unaudited consolidated and
consolidating balance sheets and statements of income and cash flows as of and
for the eight-month and two-month periods ended August 31, 2007, in each
case for the Target Business and prepared using methodology consistent with the
Target Business Financial Statements (except for normal and recurring year-end
adjustments).


 


“August 31, 2007 Balance Sheet” means the balance sheet
included within the August 31, 2007 Financial Statements.


 


“August 31, 2007 Inventory” means the aggregate value of
the Inventory set forth on the August 31, 2007 Balance Sheet.


 


“August 31, 2007 Inventory Adjustment” means (a) if
the August 31, 2007 Inventory is less than $21,000,000, a reduction of the
Purchase Price by the amount that the August 31, 2007 Inventory is less
than $21,000,000 on a dollar-for-dollar basis in accordance with Section 2(d)(iv) and
(b) if the August 31, 2007 Inventory is greater than $21,000,000, an
increase of the Purchase Price by the amount that the August 31, 2007
Inventory is greater than $21,000,000 on a dollar-for-dollar basis in
accordance with Section 2(d)(iv); provided
that such increase of the Purchase Price shall not exceed $4,000,000.


 


“Bank Accounts” means those bank accounts, including all rights
and obligations in respect thereof, of Blount or any of the Blount Subsidiaries
that relate solely to the Target Business, other than payroll accounts and the
bank account of Seller in Sweden, and that are set forth on Section 3(u) of
the Disclosure Schedule.


 


“Basis” means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could form the
basis for any specified consequence.


 


“Books and Records” has the meaning set forth in Section 5(a).


 


“Buyer” has the meaning set forth in the preamble.


 


“Buyer Benefit Plans” has the meaning set forth in Section 5(h).


 


“Buyer 401(k) Plan” has the meaning set forth in Section 5(h).


 


“Buyer Indemnified Parties” means Buyer and its Affiliates and
its and their directors, officers, employees, successors, and assigns.


 


“Buyer’s Notice” has the meaning set forth in Section 2(h).


 


“Buyer Parent” has the meaning set forth in the preamble.


 


“Buyer Welfare Plan” has the meaning set forth in Section 5(h).


 


“Cash on Hand” means Seller’s cash balance as reflected on its
general ledger to the extent relating to the Target Business.


 


“Caterpillar Contract Consent Costs” means any
out-of-pocket costs (other than Contract Consent Fees) incurred by CFPI or its
Affiliates solely in connection with the 


 


5

















 


assignment by Seller to Buyer
of the Assumed Contracts, but not including any payments, fees or expenses due
as a result of rate changes or modifications to the terms of such Assumed
Contracts.


 


“Closing” means the transfer of the Acquired Assets and Assumed
Liabilities from Seller to Buyer as set forth herein.


 


“Closing Date” means the date of this Agreement.


 


“Closing Inventory” means the aggregate value of the Inventory
at the close of business on October 31, 2007 (as adjusted for activity
occurring until immediately prior to the Closing), calculated (a) based
upon the physical count of Inventory to be conducted by Seller (with the
assistance of its accountants and in the presence of Buyer representatives and
its accountants) using Seller’s historical methodology for conducting such a
physical count and beginning on November 1, 2007 and (b) using
methodology consistent with the Target Business Financial Statements (including
with respect to accounting for reserves).


 


“Closing Net Working Capital” means (a) Cash on Hand plus Accounts Receivable plus Prepaid Expenses minus (b) Accounts Payable plus Accrued Expenses (excluding any
Liabilities not assumed by Buyer), in each case (i) at the close of
business on the Business Day immediately preceding the Closing Date, (ii) calculated
using methodology consistent with the Target Business Financial Statements and (iii) calculated
without giving effect to any items related to Taxes other than property Taxes.


 


“Closing Statement of Inventory” means a statement showing the
computation of Closing Inventory.  An
example Closing Statement of Inventory is attached as Exhibit F.


 


“Closing Statement of Net Working Capital”  means a statement showing the computation
of Closing Net Working Capital.  An
example Closing Statement of Net Working Capital is attached as Exhibit E.


 


“Closing Statements” means the Closing Statement of Net Working
Capital and the Closing Statement of Inventory.


 


“COBRA” means the requirements of Part 6 of Subtitle B of
Title I of ERISA and Code Section 4980B and of any similar state law.


 


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


 


“Confidentiality Agreement” means the Confidentiality Agreement
relating to the transactions contemplated hereby dated as of April 5, 2007
between Blount and Buyer Parent.


 


“Contract Consent Fees” means any fees paid or payable to
parties to the Assumed Contracts other than Seller or Buyer solely in
connection with the assignment by Seller to Buyer of the Assumed Contracts, but
not including any payments, fees or expenses due as a result of rate changes or
modifications to the terms of such Assumed Contracts.


 


“Controlled Group Liability”  has
the meaning set forth in Section 3(r).


 


“Controlling Party” has the meaning set forth in Section 6(g).


 


6

















 


“Covered Employee Liabilities” means all Liabilities with
respect to the Target Business Employees that (a) CFPI has explicitly
agreed to assume pursuant to Section 5(h) or (b) are
Accrued Expenses.


 


“Designated Contracts” means the contracts set forth on Section 1(c) of
the Disclosure Schedule.


 


“Designated Terminated Dealers” means the dealers set forth on Section 1(d) of
the Disclosure Schedule.


 


“Disclosure Schedule” means the disclosure schedule delivered
by Seller to Buyer on the date hereof and initialed by the Parties.


 


“Employee Benefit Agreement”  means
each employment, consulting, retention, severance, termination, change in
control, bonus or similar agreement or arrangement between Seller and any
Target Business Employee, other than (a) any agreement or arrangement
mandated by applicable Law and (b) any Employee Benefit Plan.


 


“Employee Benefit Plan” means any “employee benefit plan” (as
such term is defined in ERISA Section 3(3) and all applicable
regulations) and any other employee benefit plan, program or arrangement of any
kind, including any defined benefit or defined contribution plan, stock
ownership plan, executive compensation program or arrangement, bonus plan,
incentive compensation plan or arrangement, profit sharing plan or arrangement,
deferred compensation plan or arrangement, supplemental retirement plan or
arrangement, vacation pay, sickness, disability, or death benefit plan (whether
provided through insurance, on a funded or unfunded basis or otherwise),
medical or life insurance plan providing benefits to employees, retirees or
former employees or any of their dependents, survivors, or beneficiaries,
employee stock option or stock purchase plan, severance pay, termination,
salary continuation or employee assistance plan, in each case, that Seller
maintains or sponsors (or to which Seller contributes or has any obligation to
contribute) for the benefit of any Target Business Employee, but excluding any
plan, program or arrangement mandated by applicable Law.


 


“Encumbrance Documents” means easements, covenants, conditions,
restrictions or similar provisions in any instrument of record relating to the
Real Property, or, to the extent its existence is within the Knowledge of
Seller, any unrecorded easement, covenant, condition, restriction or similar
agreement relating to the Real Property.


 


“Environmental, Health, and Safety Requirements” means all
applicable Laws concerning public or worker health and safety (to the extent
relating to the exposure to Hazardous Materials), pollution or protection of
the environment, including all such Laws relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any Hazardous Materials.


 


“Environmental Indemnification Claim” has the meaning set forth
in Section 6(g).


 


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


 


“ERISA Affiliate” means each entity that is treated as a single
employer with Seller for purposes of Code Section 414.


 


7

















 


“Estimated Net Working Capital” means, based upon the August 31,
2007 Financial Statements, (a) Cash on Hand plus Accounts Receivable plus
Prepaid Expenses minus
(b) Accounts Payable plus Accrued
Expenses (excluding any Liabilities not assumed by Buyer).


 


“Estimated Net Working Capital Adjustment” means (a) if
the Estimated Net Working Capital is a positive number, an increase of the
Purchase Price by such number on a dollar-for-dollar basis in accordance with Section 2(d)(iii) and
(b) if the Estimated Net Working Capital is a negative number, a reduction
of the Purchase Price by such number (multiplied by negative one) on a
dollar-for-dollar basis in accordance with Section 2(d)(iii).


 


“Evaluation Material” has the meaning set forth in the
Confidentiality Agreement.


 


“Excluded Contracts” means (a) those contracts
specifically listed or categorized on Exhibit J and (b) any
other contract that is not an Assumed Contract.


 


“Final Allocation” has the meaning set forth in Section 2(j).


 


“Financial Statements” means (a) the Seller Parent
Financial Statements and (b) the August 31, 2007 Financial
Statements.


 


“FSA Plans” has the meaning set forth in Section 5(h).


 


“GAAP” means United States generally accepted accounting
principles as in effect from time to time, consistently applied.


 


“Gear Products” means Seller’s Industrial Power Equipment Group
– Gear Division, which is held by Gear Products, Inc., an Oklahoma
corporation and wholly owned subsidiary of Blount.


 


“General Escrow Agent” means JPMorgan Chase Bank, N.A., in its
capacity as escrow agent under the General Escrow Agreement


 


“General Escrow Agreement” means the General Escrow Agreement
dated as of the date hereof among Seller, Buyer and the General Escrow Agent.


 


“General Escrow Amount” means $5,250,000.


 


“Governmental Authority” means any federal, state, local or
foreign government, governmental, regulatory or administrative authority,
agency or commission, or any court, tribunal or judicial body.


 


“Hazardous Material” means any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or effect
is regulated as a contaminant, or as a threat or potential threat to human
health, safety or the environment by any Environmental, Health, and Safety
Requirement, including  hydrocarbons,
petroleum, gasoline, crude oil or any products or by-products thereof,
pentachlorophenol (“PCP”), chloromethane, benzene, naphthalene, lead and any
other substances, metals, materials, wastes, pollutants and the like which are
defined or characterized as hazardous or toxic by any applicable Environmental,
Health, and Safety Requirement.


 


8

















 


“Improvements” means buildings, structures, fixtures, building
systems and equipment, and all components thereof, including the roof,
foundation, load-bearing walls and other structural elements thereof, heating,
ventilation, air conditioning, mechanical, electrical, plumbing and other
building systems, environmental control, remediation and abatement systems,
sewer, storm and waste water systems, irrigation and other water distribution
systems, parking facilities, fire protection, security and surveillance
systems, and wiring and cable installations, utility installations and
landscaping present on any Real Property.


 


“Inactive Employee” has the meaning set forth in Section 5(h).


 


“Indemnified Party” means whomever of the Buyer Indemnified
Parties, on the one hand, or the Seller Indemnified Parties, on the other hand,
is asserting a claim of indemnification pursuant to Section 6.


 


“Indemnifying Party” means a Party against whom a claim of
indemnification is or may be asserted pursuant to Section 6.


 


“Intellectual  Property” means any patent (including all
reissues, divisions, continuations and extensions thereof), patent application,
patent right, trademark, trademark registration, trademark application,
servicemark, trade name, business name, brand name, copyright, copyright
registration, design, design registration, trade secret, know-how or any right
to any of the foregoing.


 


“Inventory” means raw materials and supplies, manufactured and
purchased parts, goods in process and finished goods, service parts,
consignment inventory and other inventory of the Target Business, in each case
net of reserves.  For purposes of the
Inventory Adjustment, “Inventory” shall be calculated using methodology
consistent with the Target Business Financial Statements.


 


“Inventory Adjustment” has the meaning set forth in Section 2(f).


 


“Inventory Adjustment Interest” means interest at the
Applicable Rate on the Inventory Adjustment, accrued from the Closing Date to
the date of payment pursuant to Section 2(f); provided that such interest shall accrue
only with respect to that portion of the Inventory Adjustment that is payable
pursuant to Section 2(f).


 


“Knowledge” means information or facts that a Party’s officers
and responsible employees know or should have known after due inquiry and
investigation.


 


“Labor Organization” means any organization of any kind,
including any union or any agency or employee representation committee, in
which employees participate and which exists for the purpose, in whole or in
part, of dealing with employers concerning labor grievances, labor disputes,
wages, rates of pay, hours of employment, or conditions of work.


 


“Landlord Leases” means all Leased Real Property Subleases and
all Owned Real Property Leases.


 


“Law” means any law (including any zoning law), statute, rule or
regulation,  including engineering
standards applicable to products manufactured by the Target Business having
force and effect of law as of the date hereof (if any), and any judgment or
order of any federal, state, 


 


9

















 


local or foreign governmental
agency, commission, bureau, authority, court or arbitration tribunal.


 


“Lease Consents” means written consents for the assignment of
each of the Leases, if required pursuant to any such Lease, and, if requested
by Buyer’s lender, if any, a waiver of landlord liens, collateral assignment of
lease or leasehold mortgage from the landlord or other party whose consent
thereto is required under each such Lease.


 


“Leased Real Property” means all leasehold or subleasehold
estates and other rights to use or occupy any land or Improvements held by
Seller primarily in connection with the operation of the Target Business.


 


“Leased Real Property Subleases” means all leases, subleases,
licenses, concession and other agreements (written or oral), including all
amendments, extensions, renewals, and guaranties with respect thereto, pursuant
to which Seller has conveyed an interest in, or right to use, any portion of
the Leased Real Property.


 


“Leases” means all leases, subleases, licenses, concessions and
other agreements, including all amendments, extensions, renewals, guaranties,
and other agreements with respect thereto, pursuant to which Seller holds any
Leased Real Property, including the right to all security deposits and other
amounts and instruments deposited by or on behalf of Seller or any of the
Blount Subsidiaries thereunder.


 


“Liabilities” means any and all liabilities or obligations of
whatever kind or nature (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due
(off-balance sheet or otherwise), including, but not limited to, any liability
relating to operations, debt, property used, leased or owned, infringement,
contracts, safety, product warranty, recalls, product improvement programs,
product liability, environmental, Tax, litigation, dealer termination, pension
and benefit plan funding or applicable regulations.


 


“Lien” means any mortgage, pledge, lien, encumbrance, charge,
or other security interest other than (a) liens for Taxes not yet due and
payable or for Taxes that the taxpayer is contesting in good faith through
appropriate proceedings that are properly reflected in the Financial
Statements, (b) purchase money liens and liens securing rental payments
under capital lease arrangements, (c) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money
and (d) liens that shall have terminated at or prior to the Closing.


 


“Losses” means losses, Liabilities, costs, claims, damages,
actions, suits, proceedings, hearings, investigations, charges, complaints,
demands, injunctions, judgments, orders, decrees, rulings, dues, penalties,
fines, costs, amounts paid in settlement, Taxes, Liens, expenses and fees,
including court costs and reasonable attorneys’ fees and expenses or any
obligation to pay any of the foregoing.


 


“Material Adverse Effect” or “Material
Adverse Change” means any effect, change or event that would be (or
could reasonably be expected to be) materially adverse to the business, assets,
liabilities, condition (financial or otherwise), operating results or
operations of the Target Business, taken as a whole.


 


“Material Contract” has the meaning set forth in Section 3(m).


 


10

















 


“Menominee Facility” means Seller’s real and personal property
and facility located in Menominee, Michigan


 


“Multiemployer Plan” has the meaning set forth in ERISA Section 3(37)
and all applicable regulations.


 


“Net Working Capital Adjustment” has the meaning set forth in Section 2(e).


 


“Net Working Capital Adjustment Interest” means interest at the
Applicable Rate on the Net Working Capital Adjustment, accrued from the Closing
Date to the date of payment pursuant to Section 2(e).


 


“Non-Assignable Asset” has the meaning set forth in Section 5(b).


 


“Non-Controlling Party” has the meaning set forth in Section 6(g).


 


“Ordinary Course of Business” means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity, quality and frequency).


 


“Owned Real Property” means all land, together with all
Improvements thereon or thereto, and all easements and other rights and
interests appurtenant thereto (including air, oil, gas, mineral, and water
rights), owned by Seller and used primarily in the operation of the Target
Business.  Owned Real Property does not
include the Menominee Facility.


 


“Owned Real Property Leases” means all leases, subleases,
licenses, concessions and other agreements (written or oral), including all
amendments, extensions, renewals, and guaranties with respect thereto, pursuant
to which Seller has leased, licensed, or otherwise granted the right to use the
Owned Real Property to another Person.


 


“Party” means CFPI, Buyer Parent and the Caterpillar
Subsidiaries, on the one hand, and Blount, Seller Parent and the Blount
Subsidiaries, on the other hand.


 


“Permits” means permits, approvals, consents or other
authorizations required or granted by any Governmental Authority.


 


“Permitted Encumbrances” means, with respect to each parcel of
Real Property, (a) real estate taxes, assessments and other governmental
levies, fees, or charges imposed with respect to such Real Property that are (i) not
due and payable as of the Closing Date or (ii) being contested in good
faith and for which appropriate reserves have been established in accordance
with GAAP, (b) mechanics’ liens and similar liens for labor, materials, or
supplies provided with respect to such Real Property incurred in the Ordinary
Course of Business for amounts that are (i) not due and payable as of the
Closing Date or (ii) being contested in good faith and for which
appropriate reserves have been established in accordance with GAAP, (c) zoning,
building codes and other land use laws that are regulating the use or occupancy
of such Real Property or the activities conducted thereon which are imposed by
any Governmental Authority having jurisdiction over such Real Property and are
not violated by the current use or occupancy of such Real Property or the
operation of the Target Business as currently conducted by Seller thereon, (d) easements,
covenants, conditions, restrictions, and other similar matters of record
affecting title to such Real Property that do not or would not impair the use
or occupancy of such Real Property in the operation of the Target Business as
currently conducted by Seller thereon and (e)


 


11
















 


liens that have been placed by
any developer, landlord, or other third party on the Leased Real Property and
subordination or similar agreements relating thereto.


 


“Person” means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, any other business entity, or a
governmental entity (or any department, agency, or political subdivision
thereof).


 


“Plan Transition Date” has the meaning set forth in Section 5(h).


 


“Plan Transition Period” has the meaning set forth in Section 5(h).


 


“Post-Retirement Amount” means $1,750,000.


 


“Pre-Closing Environmental Liabilities” means any and all
Liabilities arising under any applicable Environmental, Health, and Safety
Requirements to the extent resulting from or in connection with the operation
of the Target Business on or prior to the Closing, including any and all
Liabilities arising out of (a) any non-compliance with any Environmental,
Health, and Safety Requirements, or with any Permits required thereunder, to
the extent resulting from or in connection with the operation of the Target
Business on or prior to the Closing, (b) any presence or release of
Hazardous Materials at, on, in or under any Real Property, to the extent
existing or occurring on or prior to the Closing and (c) any off-site
transportation or disposal, or arrangement for transportation or disposal, of
any Hazardous Materials by or in connection with the operation of the Target
Business on or prior to the Closing; provided
that Pre-Closing Environmental Liabilities shall not include any Liabilities
arising from or relating to any exposure or alleged exposure to asbestos,
silica, welding rods or welding rod fumes.


 


“Pre-Closing Tax Period” means any Tax period (or portion
thereof) ending on or before the Closing Date.


 


“Post-Closing Asbestos, Silica and Welding Rod
Liabilities” means any Liabilities arising from, relating to, or
based on the exposure or alleged exposure to asbestos or asbestos-containing
materials, silica, or any Hazardous Materials in any welding rods or welding
rod fumes present or allegedly present (a) in any product manufactured,
sold, marketed, installed, transported or distributed by the Target Business
after the Closing Date, or (b) at any Real Property, or in any facility or
structure thereat, to the extent any exposure to such asbestos or
asbestos-containing materials occurred after the Closing Date, including the
case of each of (a) and (b), any such Liabilities arising from, relating
to or based on any personal or bodily injury or illness.


 


“Post-Closing Environmental Liabilities” means any and all
Liabilities arising under any applicable Environmental, Health and Safety
Requirements to the extent resulting from or in connection with the operation
of the Target Business after the Closing, including any and all Liabilities
arising out of (a) any non-compliance with any Environmental, Health and
Safety Requirements, or with any permits required thereunder, to the extent resulting
from or in connection with the operation of the Target Business after the
Closing, (b) any presence or release of Hazardous Materials at, on, in or
under any Real Property, to the extent arising or occurring after the Closing
and (c) any off-site transportation or disposal, or arrangement for
transportation or disposal, of any Hazardous Materials by or in connection with
the operation of the Target Business after the Closing.


 


12

















 


“Post-Closing Tax Period” means any Tax period (or portion
thereof) beginning after the Closing Date.


 


“Prepaid Expenses” means the prepaid expenses of the Target
Business, calculated (a) using line items and methodology consistent with
the Target Business Financial Statements and (b) notwithstanding
differences between actual line item values and reserves or other estimates,
subject to normal and recurring year-end adjustments (to the extent Seller
calculated such reserves or other estimates using methodology consistent with
the Target Business Financial Statements). 
Such line items comprising “Prepaid Expenses” are set forth on Exhibit D.


 


“Purchase Price” has the meaning set forth in Section 2(d).


 


“Real Property” means all Owned Real Property and all Leased
Real Property, collectively.


 


“Real Property Impositions” means Taxes, assessments, fees,
charges or similar costs or expenses imposed by any Governmental Authority,
association or other entity having jurisdiction over the Owned Real Property.


 


“Real Property Laws” means applicable building, zoning,
subdivision, and other land use laws, affecting the Owned Real Property.


 


“Real Property Permits” means certificates of occupancy,
permits, licenses, franchises, approvals and authorizations of all Governmental
Authorities, boards of fire underwriters, associations or any other entity
having jurisdiction over the Real Property that are required to use or occupy
the Real Property or operate the Target Business as currently conducted by
Seller thereon.


 


“Remedial Actions” has the meaning set forth in Section 6(g).


 


“Seller” has the meaning set forth in the preamble.


 


“Seller 401(k) Plan” has the meaning set forth in Section 3(r).


 


“Seller Indemnified Parties” means Seller and its Affiliates
and its and their directors, officers, employees, successors, and assigns.


 


“Seller Parent” has the meaning set forth in the preamble.


 


“Seller Parent Financial Statements” means the audited
consolidated balance sheets and statements of income and cash flows of Seller
Parent as of and for the fiscal years ended December 31, 2004, December 31,
2005, December 31, 2006.


 


“Silica Liability” means any Liability arising from, relating
to, or based on the exposure or alleged exposure of silica present or allegedly
present (a) in any product manufactured, sold, marketed, installed,
transported, or distributed by the Target Business on or prior to the Closing
(regardless of whether any exposure to such Hazardous Materials occurred prior
to, on or after the Closing), or (b) at any Real Property, or in any
facility or structure thereat, to the extent any exposure to such silica
occurred prior to or on the Closing Date, including in the case of each of (a) and
(b) any Liability arising from, relating to or based on any personal or
bodily injury or illness related to silica.


 


13

















 


“Specified Employees” has the meaning set forth in Section 5(h).


 


“Specified Environmental Escrow Agent” means JPMorgan Chase
Bank, N.A., in its capacity as escrow agent under the Specified Environmental
Escrow Agreement


 


“Specified Environmental Escrow Agreement” means the Specified
Environmental Escrow Agreement dated as of the date hereof among Seller, Buyer
and the Specified Environmental Escrow Agent.


 


“Specified Environmental Escrow Amount” means $3,500,000.


 


“Specified Environmental Losses” means any Losses arising from
any Pre-Closing Environmental Liabilities (a) at the Owned Real Property
in Prentice, Wisconsin or (b) in connection with any release of Hazardous
Materials at, on, in, or under any Owned Real Property in Zebulon, North
Carolina or Owatonna, Minnesota, (i) to the extent such release, to the
Knowledge of Seller as of the Closing Date, existed or occurred thereat and (ii) as
to which Seller has, prior to the Closing, acknowledged in writing its
obligation to provide indemnification therefor.


 


“Straddle Period” has the meaning set forth in Section 5(i) of
this Agreement.


 


“Blount Subsidiary” has the meaning set forth in the preamble.


 


“Target Business” means Seller’s Industrial Power Equipment
Group – Forestry Division.  For the
avoidance of doubt, “Target Business” shall not include (a) Gear Products,
(b) any wire harness operations or assets owned by Blount (Fuzhou)
Industries Co. Limited and (c) the Menominee Facility.


 


“Target Business Employee” means (a) each current employee
of Seller that, as of the Closing, is primarily engaged in the Target Business,
other than the individuals set forth on Section 1(e) of the
Disclosure Schedule, and (b) each individual who, as of the Closing Date,
was an employee of Seller, and, as of the last day of such employee’s
employment with Seller, was primarily engaged in the Target Business.


 


“Target Business Financial Statements” means the financial
statements of the Target Business as of and for the fiscal year ended December 31,
2006, as set forth in Exhibit G.


 


“Tax” or “Taxes”
means any federal, state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code Section 59A), customs,
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, ad valorem, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not and including
any obligations to indemnify or otherwise assume or succeed to the Tax
liability of any other Person.


 


“Tax Return” means any return, declaration, report, form, claim
for refund, or information return or statement relating to Taxes, including any
schedule, or attachment thereto, and including any amendment thereof.


 


“Termination Costs” has the meaning set forth in Section 5(h).


 


14

















 


“Third-Party Claim” means a claim, demand, suit, proceeding or
investigation of a Person that is not a Party including, but not limited to, a federal
state or local government agency (or instrumentality thereof) concerning any
matter that may give rise to a claim for indemnification against a Party
pursuant to the terms of Section 6.


 


“Transaction Agreements” means those agreements entered into at
Closing or otherwise in connection with this Agreement or the transactions
contemplated hereby, including, but not limited to the agreements set forth on Exhibit K.


 


“Transfer Fees” mean the Transfer Taxes and all transfer and
consent fees paid or payable as a result of the transactions contemplated under
this Agreement and the Transaction Agreements, including any Contract Consent
Fees.


 


“Transfer Taxes” means any federal, state, local or non-U.S.
sales, conveyance, documentary transfer, stamp duty, recording, transfer, value
added or similar Tax imposed in connection with any transfer of any Acquired
Asset contemplated by this Agreement.


 


“Transferred Employee” has the meaning set forth in Section 5(h).


 


“WARN Act” means the Worker Adjustment and Retraining
Notification Act of 1988, as amended, or any similar foreign, state, or local
law, regulation, or ordinance.


 


“Welding Rod Liability”  means
any Liability arising from, relating to, or based on the exposure or alleged
exposure of any Hazardous Materials in any welding rods or welding rod fumes
present or allegedly present (a) in any product manufactured, sold,
marketed, installed, transported, or distributed by the Target Business on or
prior to the Closing Date (regardless of whether any exposure to such Hazardous
Materials occurred prior to, on or after the Closing Date), or (b) at any
Real Property, or in any facility or structure thereat, to the extent any
exposure to such Hazardous Materials occurred prior to or on the Closing Date,
including in the case of each of (a) and (b) any Liability arising
from, relating to or based on any personal or bodily injury or illness related
to welding rods or welding rod fumes.


 


“Workers’ Compensation Event” has the meaning set forth in Section 5(h).


 


SECTION 2                               BASIC
TRANSACTION


 


(a)          Purchase and Sale of Assets.  On and subject to the terms and conditions of
this Agreement, Buyer hereby purchases and accepts from Seller, and Seller
hereby sells, transfers, conveys, assigns and delivers to Buyer, all of the
Acquired Assets in exchange for the consideration specified in this Section 2.


 


(b)         Liabilities.  On and subject to the terms and conditions of
this Agreement, as of the Closing, Buyer hereby assumes and becomes responsible
for the Assumed Liabilities.  Buyer will not
assume or have any responsibility with respect to, and Seller shall retain, any
Liability, Loss or obligation of Seller not expressly included within the
definition of “Assumed Liabilities”.  In
connection with Closing, Buyer and Seller each hereby agree to execute and
deliver to the other Party or any applicable third party such assumption
agreements or other instruments as may be necessary or reasonably requested by
the other Party to effectuate the provisions of this Section 2(b) or
to transfer and assign the Assumed Contracts.


 


15

















 


(c)          Closing.  The Closing shall occur simultaneously with
the execution and delivery of this Agreement by the Parties.


 


(d)         Purchase Price.  Buyer agrees to pay to Seller at Closing by
wire transfer or other delivery of immediately available funds to such bank
account as Seller shall specify $84,000,000 (the “Purchase Price”):


 


(i)                                     minus the General Escrow Amount (which
Buyer shall transfer to the General Escrow Agent pursuant to the terms and
conditions of the General Escrow Agreement);


 


(ii)                                  minus the Specified Environmental Escrow
Amount (which Buyer shall transfer to the Specified Environmental Escrow Agent
pursuant to the terms and conditions of the Specified Environmental Escrow
Agreement);


 


(iii)                               plus or minus the Estimated Net Working
Capital Adjustment;


 


(iv)                              plus or minus the August 31, 2007
Inventory Adjustment;


 


(v)                                 minus the Post-Retirement Amount.


 


(e)          Net Working Capital Adjustment.  As used herein, the term “Net Working Capital Adjustment” means (a) the
Closing Net Working Capital minus
(b) the Estimated Net Working Capital. 
If the Net Working Capital Adjustment is a positive number, then Buyer
shall pay to Seller the Net Working Capital Adjustment plus the Net Working Capital Adjustment
Interest.  If the Net Working Capital
Adjustment is a negative number, then Seller shall pay to Buyer the Net Working
Capital Adjustment (multiplied by negative one) plus the Net Working Capital Adjustment Interest.  In either case, such payment shall be made
prior to the tenth Business Day following the final determination of the
Closing Net Working Capital pursuant to Section 2(g) by wire
transfer or other delivery of immediately available funds to such bank account
as such other Party shall specify.


 


(f)            Inventory Adjustment.  As used herein, the term “Inventory Adjustment” means (i) the
Closing Inventory minus (ii) the
August 31, 2007 Inventory plus
(iii) the excess, if any, of the August 31, 2007 Inventory over
$25,000,000.  If the Inventory Adjustment
is a positive number, then Buyer shall pay to Seller the Inventory Adjustment plus the Inventory Adjustment Interest; provided that the aggregate increase to
the Purchase Price pursuant to Sections 2(d)(iv) and (f) shall
not exceed $4,000,000 plus the
Inventory Adjustment Interest.  If the
Inventory Adjustment is a negative number, then Seller shall pay to Buyer the
Inventory Adjustment (multiplied by negative one) plus the Inventory Adjustment Interest.  In either case, such payment shall be made
prior to the tenth Business Day following the final determination of the
Closing Inventory pursuant to Section 2(g) by wire transfer or
other delivery of immediately available funds to such bank account as such
other Party shall specify.


 


(g)         Adjustment Calculation and Dispute Resolution.  Seller will deliver each of the Closing
Statements to Buyer within 60 days after the Closing Date.  If, within 30 days following delivery of a
Closing Statement, Buyer has not given Seller a Buyer’s Notice (as defined
below), then such Closing Statement shall be final, conclusive and binding on
the Parties.  If, within 30 days of
receiving a Closing Statement, Buyer delivers to Seller a written notice of an
objection with respect to such Closing Statement (“Buyer’s Notice”), then the Parties will meet to discuss such
objection and attempt in good faith to reach a mutually satisfactory resolution
within 30 


 


16

















 


days following the date of Buyer’s
Notice.  Any Buyer’s Notice shall (i) specify
in reasonable detail the nature of any objection so asserted and (ii) only
include objections based on mathematical or factual errors or based on the
Closing Net Working Capital not being calculated in accordance with Exhibit E
or the Closing Inventory not being calculated in accordance with Exhibit F,
as applicable; provided that, in
the case of the Closing Statement of Inventory, Buyer shall not object to the
results of the physical count of Inventory described in the definition of “Closing
Inventory”.  If the Parties cannot
resolve such issues within 30 days after the date of a Buyer’s Notice, then the
Parties will submit the issues in dispute to the Accountants for resolution and
final determination of Closing Net Working Capital or Closing Inventory, as
applicable.  If the issues in dispute are
submitted to the Accountants for resolution, (A) each Party will furnish
to the Accountants such workpapers and other documents and information relating
to the disputed issues as the Accountants may request and are available to that
Party or its Affiliates (or its independent public accountants), and will be
afforded the opportunity to present to the Accountants any material relating to
the determination and, so long as a representative of the other Party is
present, to discuss the determination with the Accountants, (B) the
Accountants shall be instructed to render their determination of all matters
submitted to it within 30 days following submission and (C) the
determination by the Accountants, as set forth in a notice delivered to the
Parties by the Accountants, will be binding and conclusive on the Parties.  The scope of the disputes to be resolved by
the Accountants shall be limited to whether the Closing Net Working Capital was
calculated consistently with Exhibit E or the Closing Inventory was
calculated consistently with Exhibit F, as applicable, and whether
there were mathematical or factual errors in the applicable Closing Statement,
and the Accountants are not to make any other determination (including with
respect to the physical count of Inventory described in the definition of “Closing
Inventory”).  The fees and expenses of
the Accountants incurred pursuant to this Section 2(g) shall
be borne by Buyer and Seller in inverse proportion as they may prevail on
matters resolved by the Accountants, which proportionate allocation also shall
be determined by the Accountants at the time the determination of the
Accountants is rendered on the merits of the matter submitted.  The fees and disbursements of Buyer’s
accountants incurred in connection with their review of the Closing Statements
and preparation and review of any Buyer’s Notice shall be borne by Buyer, and
the fees and disbursements of Seller’s accountants incurred in connection with
their preparation and review of the Closing Statements and review of any Buyer’s
Notice shall be borne by Seller.


 


(h)         Post-Closing Accounting Practice; Access.  Following the Closing, neither Buyer nor
Seller shall take any action that is not consistent with Seller’s past
practices with respect to the accounting books and records of Seller on which
the Closing Statements are to be based. 
During the period of time from and after the Closing Date through the
resolution of any adjustment to the Purchase Price contemplated by this Section 2,
Buyer shall afford to Seller, and any accountants, counsel or financial
advisers retained by Seller in connection with any adjustment to the Purchase
Price contemplated by this Section 2, reasonable access during normal
business hours to all the properties, books, contracts, personnel and records
relevant to the Purchase Price adjustments contemplated by this Section 2.


 


(i)             Parent Guaranties.


 


(i)             Seller Parent hereby unconditionally
guarantees the representations and warranties contained herein and the full and
prompt payment and performance of all obligations, covenants and duties of
Seller under and pursuant to this Agreement and the Transaction Agreements.


 


17

















 


(ii)          Buyer Parent hereby unconditionally
guarantees the representations and warranties contained herein and the full and
prompt payment and performance of all obligations, covenants and duties of
Buyer, including the payment of the Purchase Price, under and pursuant to this
Agreement and the Transaction Agreements.


 


(j)             Purchase Price Allocation for Tax Purposes.  Buyer shall prepare a proposed allocation of
the Adjusted Purchase Price (and other capitalized costs) and Assumed
Liabilities among the Acquired Assets in accordance with Code Section 1060
and the Treasury regulations thereunder (and any similar provision of state,
local or foreign law, as appropriate). 
Buyer shall deliver such proposed allocation to Seller not later than
120 days after the Closing Date.  If
Seller and Buyer agree upon such proposed allocation, then such proposed
allocation shall become the final allocation (the “Final Allocation”).  If
Seller raises any objections in respect of the proposed allocation, then Seller
and Buyer shall negotiate in good faith until they will have resolved all such
objections and the so negotiated allocation shall become the Final
Allocation.  Buyer and Seller and their
Affiliates shall report, act and file Tax Returns (including Internal Revenue
Service Form 8594) in all respects and for all purposes consistent with
such Final Allocation.  Seller shall
timely and properly prepare, execute, file and deliver all such documents,
forms and other information as Buyer may reasonably request to prepare such
Final Allocation.  Neither Buyer nor
Seller (nor their Affiliates) shall take any position (whether in audits, Tax
Returns or otherwise) that is inconsistent with such Final Allocation unless
required to do so by applicable law.  If,
after the proposed allocation becomes the Final Allocation, any event occurs
that will result in an adjustment of the Adjusted Purchase Price (including any
indemnity payments pursuant to this Agreement), then Seller and Buyer (and
their respective Affiliates) shall amend the Final Allocation accordingly.


 


SECTION 3                               SELLER’S
REPRESENTATIONS AND WARRANTIES


 


Seller represents and warrants
to Buyer that the statements contained in this Section 3 are
correct and complete as of the date hereof, except as set forth in the
disclosure schedule accompanying this Agreement (the “Disclosure Schedule”).  Items disclosed under any particular Section shall
be deemed as disclosed for other Sections where its relevance to such other
Sections is obvious and clearly apparent on its face.  Nothing in the Disclosure Schedule shall be
deemed adequate to disclose an exception to a representation or warranty made
herein unless the reason for it being disclosed is obvious and clearly
apparent.  The inclusion of an item on
the Disclosure Schedule as an exception to a representation or warranty will
not by itself be deemed an admission by Seller that such item is material or
was required to be disclosed therein.


 


(a)          Organization of Blount.  Each of Seller Parent, Blount and each Blount
Subsidiary has been duly organized, is validly existing and is in good standing
under the laws of its jurisdiction of organization.


 


(b)         Authorization of Transaction.  Each of Seller Parent,  Blount and each Blount Subsidiary has full
power and authority to execute and deliver this Agreement and each Transaction
Agreement to which it is a party and to perform its obligations hereunder and
thereunder.  Without limiting the
generality of the foregoing, the board of directors of Seller Parent, Blount
and each Blount Subsidiary have duly authorized the execution, delivery, and
performance of this Agreement and each Transaction Agreement to which such
entity is a party.  This Agreement and
each Transaction Agreement to which it is a party has been duly executed and
delivered by Seller Parent, Blount and each Blount Subsidiary and constitutes
the valid and legally binding obligation of Seller Parent, Blount and each
Blount Subsidiary, enforceable in accordance with its terms and conditions,
except as such enforcement may be limited by (i) 


 


18

















 


bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and (ii) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).


 


(c)          Non-contravention.  Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2) will (i) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which Blount or any of the Blount Subsidiaries is subject
or any provision of the charter or bylaws of Blount or any of the Blount
Subsidiaries, (ii) materially conflict with, result in a material breach
of, constitute a material default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Blount or any of the Blount Subsidiaries is a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Lien upon any of its assets) or (iii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any Assumed Contract.  Except for such authorizations, consents or
approvals that have been obtained prior to Closing or are set forth on Section 3(c) of
the Disclosure Schedule, none of Blount or the Blount Subsidiaries needs to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order for the Parties
to consummate the transactions contemplated by this Agreement, except where the
failure to do so would not result in a Material Adverse Effect.


 


(d)         Brokers’ Fees.  Seller has no Liability to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Buyer could become liable or
obligated.


 


(e)          Title to and Sufficiency and Condition of Assets.  Seller has good and marketable title to, or a
valid leasehold interest in, all of the Acquired Assets, free and clear of any
Lien or restriction on transfer (other than Permitted Encumbrances in the case
of Real Property).  Other than those
assets expressly excluded from the definition of “Acquired Assets”, the
Acquired Assets (i) constitute all of the assets, tangible and intangible,
of any nature whatsoever, necessary to operate the Target Business in the
manner presently operated by Seller, (ii) include all of the operating
assets of Seller primarily used in the Target Business and (iii) are
sufficient for the continued conduct of the Target Business by Buyer after the
Closing in substantially the same manner as conducted by Seller prior to the
Closing.  Each Acquired Asset that is a
tangible asset having a net book value in excess of $30,000 (x) is in good
working order (ordinary wear and tear excepted), (y) has been maintained
in all material respects in accordance with the past practice of Seller and
generally accepted industry practice and (z) is suitable for the purposes
for which it presently is used in connection with the Target Business.


 


(f)            Financial Statements.  The Financial Statements (i) have been
prepared (A) in the case of the Seller Parent Financial Statements, in
accordance with GAAP consistently applied throughout the periods covered
thereby and (B) in the case of the August 31, 2007 Financial
Statements, using methodology consistent with the Target Business Financial
Statements and consistently applied, (ii) present fairly the financial
condition of the Seller Parent and Target Business, as applicable, as of such
dates and for the periods covered thereby and (iii) are consistent with
and based upon the books and records of the Seller Parent and Target Business
(which books and records are correct and complete in all material respects); provided, however, 


 


19

















 


that the August 31, 2007 Financial
Statements are subject to normal and recurring year-end adjustments.


 


(g)         Events Subsequent to December 31, 2006.  Except as set forth on Section 3(g) of
the Disclosure Schedule, since December 31, 2006, there has not been any
Material Adverse Change and, without limiting the generality of the foregoing,
with respect to the Target Business, since such date:


 


(i)                                     Seller
has operated the Target Business in the Ordinary Course of Business;


 


(ii)                                  Seller
has not sold, leased, transferred, or assigned any asset with a net book value
in excess of $100,000 that would have constituted an Acquired Asset, tangible
or intangible, other than for fair consideration in the Ordinary Course of
Business;


 


(iii)                               no
party (including Seller and any of the Blount Subsidiaries) has accelerated,
terminated, materially modified or cancelled any agreement, contract, lease, or
license involving more than $100,000 to which Blount or any of the Blount
Subsidiaries is a party or by which any of them is bound or outside the
Ordinary Course of Business;


 


(iv)                              Seller
has not entered into any Material Contract having an aggregate value, or
providing for obligations, in excess of $100,000 or outside the Ordinary Course
of Business.


 


(v)                                 Seller
has not imposed or permitted to exist any Lien upon any of its assets, tangible
or intangible (other than Permitted Encumbrances with respect to Real
Property);


 


(vi)                              Seller
has not made any capital expenditure (or series of related capital
expenditures) either involving more than $100,000 or outside the Ordinary
Course of Business;


 


(vii)                           Seller
has not made any capital investment in, any loan to, or any acquisition of the
securities or assets of, any other Person (or series of related capital
investments, loans, and acquisitions) either involving more than $100,000  or outside the Ordinary Course of
Business;


 


(viii)                        Seller
has not delayed or postponed the payment of accounts payable or any other
Liabilities outside the Ordinary Course of Business;


 


(ix)                                There
has been no individual occurrence in which Seller has experienced any damage,
destruction or Loss (whether or not covered by insurance) in excess of $100,000
with respect to an Acquired Asset;


 


(x)                                   neither
Seller nor any of the Blount Subsidiaries has made any loan that remains
outstanding to, or entered into any other transaction with, any Target Business
Employee outside the Ordinary Course of Business;


 


20

















 


(xi)                                Seller
has not discharged any material Liability or Lien primarily relating to the
Target Business outside the Ordinary Course of Business;


 


(xii)                             Seller
has not cancelled, compromised, waived, or released any right or claim (or
series of related rights and claims) involving more than $100,000  outside the Ordinary Course of Business;


 


(xiii)                          Seller
has not entered into any agreement pertaining to the Target Business that
concerns non-competition or exclusive dealing; and


 


(xiv)                         Seller
has not committed to do any of the foregoing.


 


(h)         Legal Compliance.  Except as set forth on Section 3(h) of
the Disclosure Schedule, with respect to the Target Business, Seller has
materially complied with all applicable Laws. 
This Section does not apply to environmental, health or safety
matters which are exclusively the subject of Section 3(s).


 


(i)             Tax Matters.  Each of Blount and the Blount Subsidiaries
has timely filed all employment, sales and use and property Tax Returns that
relate to the Target Business that it was required to file under applicable
laws and regulations.  All such employment,
sales and use and property Tax Returns were correct and complete in all
respects and were prepared in compliance with all applicable laws and
regulations.  All such employment, sales
and use and property Taxes due and owed by Blount or any of its Blount
Subsidiaries have been paid.  There are
no Tax liens on Acquired Assets, except (i) for such Tax liens wherein
Blount or one of the Blount Subsidiaries is contesting such Taxes or (ii) for
Taxes not yet due and payable.  To the
Knowledge of Seller, with respect to the Target Business, Seller has not
participated in a transaction that is of the type set forth in Code Section 6011
and the regulations promulgated thereto.


 


(j)             Real Property.


 


(i)                                     Section 3(j)(i) of
the Disclosure Schedule sets forth the address and description of each parcel
of Owned Real Property.  With respect to
each parcel of Owned Real Property, (A) Blount or one of the Blount
Subsidiaries has good and marketable indefeasible fee simple title, free and
clear of all Liens, except Permitted Encumbrances, (B) except as set forth
in Section 3(j)(i) of the Disclosure Schedule as being Owned
Real Property Leases, neither Seller nor any of the Blount Subsidiaries has
leased or otherwise granted to any Person the right to use or occupy such Owned
Real Property or any portion thereof and (C) there are no outstanding
options, rights of first offer or rights of first refusal to purchase such
Owned Real Property or any portion thereof or interest therein.


 


(ii)                                  Section 3(j)(ii) of
the Disclosure Schedule sets forth the address of each parcel of Leased Real
Property, and a true and complete list of all Leases for each such parcel of
Leased Real Property (including the date and name of the parties to such Lease
document).  Seller has delivered to Buyer
a true and complete copy of each such Lease document and, in the case of any
oral Lease, a written summary of the material terms of such Lease.  Except as set forth in Section 3(j)(ii) of
the Disclosure Schedule, with respect to each of the Leases, (A) such
Lease is legal, valid, binding, and in full force and effect, (B) the
transactions contemplated by this Agreement do not require the consent of any
other party to such Lease (except for those Leases for which Lease 


 


21

















 


Consents are
required), will not result in a breach of or default under such Lease, and will
not otherwise cause such Lease to cease to be legal, valid, binding, and in
full force and effect on identical terms following the Closing, (C) Seller’s
possession and quiet enjoyment of the Leased Real Property under such Lease has
not been disturbed and there are no material disputes with respect to such
Lease, (D) Seller is not in material breach of or default under such
Lease, and no event has occurred or circumstance exists that, with the delivery
of notice, the passage of time or both, would constitute such a material breach
or default, or permit the termination, modification or acceleration of rent
under such Lease, (E) no security deposit or portion thereof deposited
with respect to such Lease has been applied in respect of a breach of or
default under such Lease that has not been redeposited in full, (F) Seller
does not owe, or will not owe in the future, any brokerage commissions or
finder’s fees with respect to such Lease, (G) the other party to such
Lease is not an Affiliate of, and otherwise does not have any known economic
interest in, Seller, (H) Seller has not subleased, licensed or otherwise
granted any Person the right to use or occupy the Leased Real Property or any
portion thereof other than any Leased Real Property Sublease set forth in Section 3(j)(ii) of
the Disclosure Schedule, (I) Seller has not collaterally assigned or
granted any other Lien in such Lease or any interest therein and (J) there
are no Liens on the estate or interest created by such Lease other than
Permitted Encumbrances.


 


(iii)                               Section 3(j)(iii) of
the Disclosure Schedule sets forth a true and complete list of all Owned Real
Property Leases and Leased Real Property Subleases, including the date and name
of the parties to each Landlord Lease document. Seller has delivered to Buyer a
true and complete copy of each Landlord Lease document and, in the case of any
oral Landlord Lease, a written summary of the material terms of such Lease.
Except as set forth in Section 3(j)(iii) of the Disclosure
Schedule, with respect to each of the Landlord Leases, (A) such Landlord
Lease is legal, valid, binding, and in full force and effect, (B) neither
Seller nor, to the Knowledge of Seller, any other party to such Landlord Lease
is in material breach of or default thereunder, and, to the Knowledge of
Seller, no event has occurred or circumstance exists that, with the delivery of
notice, the passage of time or both, would constitute such a material breach of
or default thereunder, (C) no security deposit or portion thereof
deposited with respect to such Landlord Lease has been applied in respect of a
breach or default under such Landlord Lease that has not been redeposited in
full, (D) Seller does not owe, or will not owe in the future, any
brokerage commissions or finder’s fees with respect to such Landlord Lease, (E) the
other party to such Landlord Lease is not an Affiliate of, and otherwise does
not have any known economic interest in, Seller, (F) to the Knowledge of
Seller, the other party to such Landlord Lease has not subleased, licensed or
otherwise granted any Person the right to use or occupy the premises demised
thereunder or any portion thereof, (G) to the Knowledge of Seller, the
other party has not collaterally assigned or granted any other Lien in such
Landlord Lease and (H) to the Knowledge of Seller, there are no Liens on
the estate or interest created by such Landlord Lease other than Permitted
Encumbrances.


 


(iv)                              Seller
is not party to any agreement (other than with Buyer) under which a third party
has any right or option to purchase any of the Owned Real Property or any
interest therein.


 


(v)                                 None
of the Improvements contain any material structural defects and the Improvements
are sufficient for the operation of the Target Business in the manner presently
operated by Seller.


 


22

















 


(vi)                              To
the Knowledge of Seller, there is no condemnation, expropriation or other
proceeding in eminent domain, pending or threatened, affecting any parcel of
Real Property or any portion thereof or interest therein.


 


(vii)                           Neither
Seller nor any of the Blount Subsidiaries has received any written notice of
violation of any Real Property Law and to Seller’s Knowledge, there is no Basis
for the issuance of any such notice or the taking of any action for such
violation.


 


(viii)                        Each
parcel of Owned Real Property has direct vehicular and pedestrian access to a
public street adjoining the Owned Real Property, or has vehicular and
pedestrian access to a public street via an insurable, permanent, irrevocable
and appurtenant easement benefiting such parcel of Owned Real Property, and
such access is not dependent on any land or other real property interest that
is not included in the Owned Real Property. 
None of the Improvements or any portion thereof is dependent for its
access, use or operation, as currently conducted thereat, on any land,
building, improvement or other real property interest that is not included in
the Owned Real Property.  To the
Knowledge of Seller, each utility service enters the Owned Real Property from
an adjoining public street or valid easement in favor of the supplier of such
utility service or such utility service is appurtenant to such Real Property,
and is not dependent for its access, use or operation on any land, building,
improvement or other real property interest that is not included in the Real
Property.


 


(ix)                                Section 3(j)(ix) of
the Disclosure Schedule lists all material Real Property Permits held by Seller
or any of the Blount Subsidiaries with respect to each parcel of Real
Property.  Seller has delivered to Buyer
a true and complete copy of all such material Real Property Permits.  Neither Seller nor any of the Blount
Subsidiaries has received any written notice from any Governmental Authority
having jurisdiction over the Real Property threatening a suspension,
revocation, modification or cancellation of any material Real Property Permit
and to Seller’s Knowledge, there is no Basis for the issuance of any such
notice or the taking of any such action. 
The material Real Property Permits are transferable to Buyer without the
consent or approval of the issuing Governmental Authority, except where the
failure to obtain such consent or approval would not result in a Material
Adverse Effect.


 


(x)                                   The
current use and occupancy of the Real Property and the operation of the Target
Business as currently conducted thereon do not violate, in any material
respect, any Encumbrance Documents. 
Neither Seller nor any of the Blount Subsidiaries has received any
written notice of violation of any Encumbrance Documents, and to Seller’s
Knowledge, there is no Basis for the issuance of any such notice or the taking
of any action for such violation.


 


(xi)                                With
respect to each Owned Real Property, to the Knowledge of Seller, other than as
set forth in the title commitments and surveys ordered by Buyer and other than
as may be set forth in Section 3(j)(xi) of the Disclosure Schedule,
there are no encroachments by the Improvements on any land that is not included
in such Owned Real Property, there are no Real Property Impositions that are
delinquent, and no portion of such Owned Real Property is located in a “special
flood hazard” (as such term is defined by the Federal Emergency Management
Agency).


 


23

















 


(k)          Intellectual Property.


 


(i)                                     Section 3(k)(i) of
the Disclosure Schedule sets forth a true and complete list of all Intellectual
Property of Seller (and licenses or other permissions granted by Seller with
respect thereto) held for use or used primarily in the operation of the Target
Business, other than (A) copyrights and unregistered trademarks that,
individually and in the aggregate, are not material to the conduct of the
Target Business as presently conducted, (B) unregistered designs and (C) trade
secrets and know-how.  Seller has taken
all necessary and desirable action to maintain and protect each such item of
Intellectual Property that is necessary to operate the Target Business as
presently conducted.


 


(ii)                                  Section 3(k)(ii) of
the Disclosure Schedule sets forth a true and complete list of all Intellectual
Property of any third party, other than an Affiliate of Seller Parent or Buyer
Parent, that Seller holds for use or uses primarily in the operation of the
Target Business and is material to the operation of the Target Business as
presently conducted by Seller.


 


(iii)                               Except
as set forth on Section 3(k)(iii) of the Disclosure Schedule, (A) to
the Knowledge of Seller, all the Intellectual Property set forth on Section 3(k)(i) of
the Disclosure Schedule has been duly registered in, filed in or issued by the
appropriate Governmental Authority where such registration, filing or issuance
is necessary or appropriate for the conduct of the Target Business as presently
conducted, (B) to the Knowledge of Seller, Seller is the sole and
exclusive owner of, and Seller has the right to use, execute, reproduce,
display, perform, modify, enhance, distribute, prepare derivative works of and
sublicense, without payment to any other person, all such Intellectual Property
and the consummation of the transaction contemplated hereby and in the
Transaction Agreements do not and will not conflict with, alter or impair any
such rights and (C) since December 31, 2005, Seller has not received
any written communication from any person asserting any ownership interest in
any such Intellectual Property.  The
Intellectual Property of Seller referred to in clause (i) of the definition
of “Acquired Assets” (other than the “Blount” tradename and the Argentina
Trademarks) constitutes all of the Intellectual Property (other than
Intellectual Property of any third parties) necessary to operate the Target
Business in the manner presently operated by Seller.


 


(iv)                              With
respect to the Intellectual Property set forth on Section 3(k)(i) of
the Disclosure Schedule, Seller has delivered or transferred to Buyer
materially correct and complete copies of evidencing ownership and prosecution
(if applicable) of (A) each issued patent (including utility, model and
design patents, supplementary protection certificates, certificates of
invention and the like) and registered trademark (including service marks) that
has been issued to Seller, (B) each pending patent application (including
utility, model and design patents, supplementary design certificates,
certificates of invention and the like) and each application for trademark and
service mark registration that Seller has made and (C) each license, sublicense,
agreement or other permission that Seller has granted to any third party.


 


(v)                                 Seller’s
present operation of the Target Business does not, and the continued operation
of the Target Business as presently conducted will not, interfere with, infringe
upon, misappropriate or otherwise come into conflict with any third party
Intellectual Property rights, and Seller has received no notice regarding any
of the foregoing.


 


24

















 


(l)             Inventory.  Each item of Inventory (i) is, subject
to industry standards, free of any material defect or deficiency, (ii) is
in good, usable and currently marketable condition in the Ordinary Course of
Business of the Target Business (subject, in the case of raw materials and
work-in-process, to the completion of the production process) and (iii) is
reflected on the August 31, 2007 Financial Statements (subject to Seller’s
operation of the Target Business in the Ordinary Course of Business since August 31,
2007) at the lesser of cost and fair market value, with adequate obsolescence
reserves, all as determined in accordance with the past practices of the Target
Business.  Except as set forth on Section 3(l) of
the Disclosure Schedule, since August 31, 2007, there have not been any
write-downs of the value of, or establishment of any reserves against, any
Inventory, except for write-downs and reserves in the Ordinary Course of
Business.  Section 3(l) of
the Disclosure Schedule sets forth the accurate amount, in units, of the “flex”
production engines held by Seller.  To
the extent that, after the Closing, Buyer conducts the Target Business as it is
presently conducted by Seller, there are no facts or circumstances relating to
engines emissions compliance that would reasonably be expected to materially
restrict or prevent production, shipment or sales of prime product during the
period from the date hereof until December 31, 2008.


 


(m)       Contracts.  Section 3(m)(i) of the
Disclosure Schedule sets forth a complete and accurate list of each of the
following agreements (whether oral or written), in each case other than any
customer purchase order or supplier purchase order (each, a “Material Contract”):


 


(i)                                     any
letter of intent, agreement, contract, lease, or license primarily relating to
the Target Business having an aggregate value, or providing for obligations,
contingent or otherwise, in excess of $100,000, in each case other than any
dealer agreement disclosed pursuant to clause (viii) below;


 


(ii)                                  each
Assumed Employee Benefit Agreement;


 


(iii)                               any
agreement primarily relating to the Target Business under which Seller has
created, incurred, assumed or guaranteed any indebtedness for borrowed money or
any capitalized lease obligation having an aggregate value, or providing for
obligations, in excess of $100,000;


 


(iv)                              any
agreement primarily relating to the Target Business concerning a partnership or
joint venture, in each case other than any dealer agreement disclosed pursuant
to clause (viii) below;


 


(v)                                 any
agreement primarily relating to the Target Business concerning confidentiality
or non-competition or exclusive dealing;


 


(vi)                              any
agreement primarily relating to the Target Business for the sale, license or
development of Intellectual Property;


 


(vii)                           any
agreement under which the consequences of a default or termination could
reasonably be expected to have a Material Adverse Effect; and


 


(viii)                        any
dealer agreement or other agreement under which products of the Target Business
are distributed, anywhere in the world, regardless of brand.


 


Notwithstanding anything to the
contrary herein, no customer purchase order or supplier purchase order shall be
a “Material Contract”.  Seller has
delivered to Buyer an accurate and 


 


25

















 


complete copy of each Material
Contract.  Except as set forth on Section 3(m)(i) of
the Disclosure Schedule, (A) each Material Contract is the legal, valid,
binding and enforceable obligation of Blount and/or the Blount Subsidiary party
thereto and, to the Knowledge of Seller, of the other parties thereto, in each
case except as such enforcement may be limited by (1) bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and (2) general principles
of equity (regardless of whether such enforcement is considered in a proceeding
in equity or at law), (B) each Material Contract is in full force and
effect, (C) Seller is not, and, to the Knowledge of Seller, no other party
is, in material breach or default of any Material Contract, and no event has
occurred that with notice or lapse of time would constitute a material breach
or default by Seller or, to the Knowledge of Seller, any other party, or permit
termination, modification or acceleration of any Material Contract other than
by Seller or, to the Knowledge of Seller, by any other party and (D) no
party has repudiated any provision of any Material Contract.


 


(n)         Notes and Accounts Receivable.  To the extent relating to the Target
Business, all notes and accounts receivable of Seller are reflected properly on
their books and records and are good and collectible at the aggregate recorded
amounts thereof, net of any applicable reserves for doubtful accounts reflected
on the August 31, 2007 Balance Sheet, as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
Seller.


 


(o)         Litigation.  Section 3(o) of the
Disclosure Schedule sets forth each instance with respect to the Target
Business in which Seller is subject to, a party to or, to the Knowledge of
Seller, is threatened to be made a party to, any outstanding action, suit,
proceeding, hearing, known investigation, charge, complaint, claim, demand,
notice, Tax audit (in respect of employment, sales and use or property Taxes),
injunction, judgment, order, decree, ruling or charge of, in, or before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator.


 


(p)         Product Warranty.  To the extent relating to the Target
Business, each product manufactured, sold, leased or delivered by Seller has
been in conformity with all applicable contractual commitments and all express
and implied warranties, and Seller has no Liability (and there is no Basis for
any action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand against Seller giving rise to any Liability) for replacement or
repair thereof or other damages in connection therewith, subject only to the
reserve for product warranty claims reflected in the August 31, 2007
Balance Sheet as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of Seller.  Such reserve for product warranty claims was
established in good faith based on reasonable investigation as to exposure and
using methodology consistent with the Target Business Financial Statements
(subject to normal and recurring year-end adjustments).  Except as set forth on Section 3(p) of
the Disclosure Schedule, there are no open or pending before or after warranty
failure service letters.  No product
manufactured, sold, leased or delivered by Seller is subject to any guaranty,
warranty or other indemnity beyond the applicable standard terms and conditions
of sale or lease set forth in Section 3(p) of the Disclosure
Schedule.


 


(q)         Employees.


 


(i)                                     With
respect to the Target Business: (A) other than as set forth in Section 3(q)(i) of
the Disclosure Schedule, there is no collective bargaining agreement with any
Labor Organization, and to the Knowledge of Seller, no Labor Organization has,
following an election or by any other means, been recognized or certified as
the


 


26
















 


exclusive
representative of all the employees in any unit deemed appropriate for purposes
of collective bargaining; (B) other than as set forth in Section 3(q)(i) of
the Disclosure Schedule, to the Knowledge of Seller, no Labor Organization or
group of employees has filed any representation petition or made any written or
oral demand for recognition; (C) other than as set forth in Section 3(q)(i) of
the Disclosure Schedule, to the Knowledge of Seller, (1) no organizing
campaign or decertification efforts involving any Labor Organization are
underway or threatened and (2) no other question concerning representation
with respect to, or recognition of the bargaining status of, any Labor
Organization exists; (D) no labor strike, work stoppage, slowdown or other
material labor dispute has occurred within the past 12 months, and none is
underway or, to the Knowledge of Seller, threatened; (E) there is no
workmen’s compensation liability, experience, or matter that could have a
Material Adverse Effect; and (F) to the Knowledge of Seller, there is no
charge, complaint, grievance, investigation, inquiry or obligation of any kind,
pending or threatened in any forum, involving a Target Business Employee and
relating to an alleged violation or breach by Seller or any of its Blount
Subsidiaries (or its or their officers or directors) of any law, regulation or
contract.


 


(ii)                                  Section 3(q)(ii) of
the Disclosure Schedule lists, as of the date of this Agreement, each Employee
Benefit Agreement.  Seller has heretofore
made available to Buyer a true and complete copy, or a representative form of
agreement (in the case of non-U.S. employment agreements), as of the date of
this Agreement, of each Employee Benefit Agreement, other than any Employee
Benefit Agreements that Seller is prohibited from making available to Buyer as
the result of Laws relating to the safeguarding of data privacy, all of which
prohibitions are set forth in Section 3(q)(ii) of the Disclosure
Schedule.


 


(iii)                               With
respect to the transactions contemplated hereby, any notice required under any
law or collective bargaining agreement to be given to the Target Business
Employees has been given, and all bargaining obligations with any employee
representative have been satisfied. 
Seller has not taken any actions that would cause the Buyer or any of
its Affiliates to have any Liability under the WARN Act with respect to the
Target Business Employees.


 


(iv)                              Section 3(q)(iv) of
the Disclosure Schedule sets forth the name and total compensation (including
accrued bonuses) of each Target Business Employee whose total compensation for
2007 is expected to exceed $100,000, except for any such information that
Seller is prohibited from making available to Buyer as the result of Laws
relating to the safeguarding of data privacy, all of which prohibitions are set
forth in Section 3(q)(iv) of the Disclosure Schedule.


 


(v)                                 Section 3(q)(v) of
the Disclosure Schedule sets forth the name of each Inactive Employee.


 


(r)            Employee Benefits.


 


(i)                                     Section 3(r)(i) of
the Disclosure Schedule lists, as of the date of this Agreement, each material
Employee Benefit Plan.


 


(ii)                                  Except
as set forth on Section 3(r)(ii) of the Disclosure Schedule,
Seller has made available to Buyer correct and complete copies of the plan
documents and 


 


27

















 


summary plan
descriptions, in each case with respect to each material Employee Benefit Plan.


 


(iii)                               There
does not exist, nor do any circumstances exist that would reasonably be
expected to result in, any Controlled Group Liability of Seller and its
Affiliates that would reasonably be expected to become a Liability, at or after
the Closing, of Buyer or any entity that, together with Buyer, is treated as a
single employer under Code Section 414. 
For purposes of this Agreement, “Controlled
Group Liability” means any and all Liabilities (A) under Title
IV of ERISA, (B) under Section 302 of ERISA, (C) under Code Section 412(n) or
4971 or (D) for violation of the continuation coverage requirements of
COBRA.  Neither Seller nor any of its
Affiliates is obligated to contribute to any Multiemployer Plan on behalf of
any Target Business Employees.


 


(iv)                              Section 3(r)(iv) of
the Disclosure Schedule identifies each Employee Benefit Plan that is a defined
contribution plan that includes a qualified cash or deferred arrangement within
the meaning of Code Section 401(a) (each, a “Seller 401(k) Plan”).  The Internal Revenue Service has issued a
favorable determination letter with respect to each Seller 401(k) Plan and
the related trust that has not been revoked.


 


(v)                                 Other
than as set forth in Section 3(r)(v) of the Disclosure
Schedule, and provided that Buyer and its Affiliates comply with all of their
obligations under this Agreement, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby shall (A) result
in any payment (including severance, change in control or otherwise) becoming
due to any Target Business Employee under any Employee Benefit Plan or Employee
Benefit Agreement, (B) increase any benefits otherwise payable under any
Employee Benefit Plan or Employee Benefit Agreement to any Target Business
Employee, or (C) result in the acceleration of time of payment or vesting
of any such benefits under any Employee Benefit Plan or Employee Benefit
Agreement to any extent, except, in the case of the foregoing clauses (A), (B) and
(C), for any payments or benefits for which Seller shall be solely liable.


 


(s)          Environmental, Health, and Safety Matters.  Except as set forth in Section 3(s) of
the Disclosure Schedule and except for any matters, individually or in the
aggregate that would not be reasonably expect to have a Material Adverse
Effect:


 


(i)                                     The
Target Business is in compliance with all Environmental, Health, and Safety Requirements.


 


(ii)                                  In
connection with the Target Business and except for any matters that have been
resolved, Seller has not received any written notice, report or other request
for information regarding any actual or alleged violation of, or Liability under,
Environmental, Health, and Safety Requirements.


 


(iii)                               To
the Knowledge of Seller, the Real Property does not have any (A) underground
storage tanks containing Hazardous Materials, (B) asbestos-containing
material in any form or condition, (C) materials or equipment containing
polychlorinated biphenyls, or (D) landfills, surface impoundments, or
disposal areas, or (E) toxic mold.


 


(iv)                              To
the Knowledge of Seller, the Target Business has not treated, stored, disposed
of, arranged for or permitted the disposal of, transported, handled, 


 


28

















 


manufactured,
distributed, or released any Hazardous Material in a manner that would be
reasonably likely to result in any Liabilities pursuant to any Environmental,
Health, and Safety Requirements.


 


(v)                                 Neither
this Agreement nor the consummation of the transactions that are contemplated
by this Agreement will result in any obligations for site investigation or
cleanup, or notification to or consent of Governmental Authority or third
parties, pursuant to any of the so-called “transaction-triggered” or “responsible
property transfer” Environmental, Health, and Safety Requirements.


 


(vi)                              To
the Knowledge of Seller, the Target Business has not manufactured, sold,
marketed, installed, or distributed products or other items containing
asbestos.


 


(vii)                           To
the Knowledge of Seller, the Target Business has not assumed or undertaken any
Liability of any other Person relating to Environmental, Health, and Safety
Requirements.


 


(viii)                        To
the Knowledge of Seller, in connection with the Target Business there are no
facts, events or conditions relating to the past or present facilities,
properties or operations of the Target Business that  will prevent, hinder or limit continued
compliance with Environmental, Health, and Safety Requirements,  or give rise to any other Liabilities
pursuant to Environmental, Health, and Safety Requirements, including any
relating to on-site or off-site releases or threatened releases of Hazardous
Materials, substances or wastes, personal injury, property damage or natural
resources damage.


 


(ix)                                Seller
has furnished to Buyer all environmental audits, reports and other
environmental documents relating to the Target Business that are (A) dated
not more than five years prior to the date hereof and (B) in Seller’s
possession or under Seller’s reasonable control.


 


(x)                                   To
the Knowledge of Seller, the Target Business has not manufactured, sold,
marketed, installed or distributed products or other items containing welding
rods or that could result in fumes from welding rods.


 


(xi)                                To
the Knowledge of Seller, the Target Business has not manufactured, sold,
marketed, installed or distributed products or other items containing silica.


 


(t)            Customers and Suppliers.


 


(i)                                     Section 3(t)(i) of
the Disclosure Schedule lists the five largest dealers with respect to the
products of the Target Business for the 2006 fiscal year and for the first half
of the 2007 fiscal year and sets forth opposite the name of each such dealer
the percentage of consolidated net sales attributable to such dealer for such
period.


 


(ii)                                  Since
August 31, 2007, no supplier that accounted for more than 10% of the
aggregate cost of goods and services purchased by the Target Business in the
2006 fiscal year has indicated that it shall stop, or decrease the rate of,
supplying materials, products or services to the Target Business, and no dealer
listed on Section 3(t)(i) of the Disclosure Schedule has
indicated that it shall stop, or decrease the rate of, buying products from the
Target Business.


 


29

















 


(u)         Bank Accounts.  Section 3(u) of the
Disclosure Schedule sets forth a true, correct and complete list of the names
and locations of each bank or other financial institution at which Blount or
any of the Blount Subsidiaries has a Bank Account (giving the account numbers)
or safe deposit box and the names of all persons authorized to draw thereon or
have access thereto, and the names of all persons, if any, now holding powers
of attorney or comparable delegation of authority from Blount or any Blount
Subsidiary and a summary statement of the balance thereof.


 


(v)         Permits.  Section 3(v) of the
Disclosure Schedule sets forth a true, correct and complete list of all material
Permits held by Seller in connection with the Target Business.  All of the Permits so listed are in full
force and effect and Seller has not received any notice that any such Permit
may be revoked or canceled.  None of the
Permits set forth on Section 3(v) of the Disclosure Schedule
have been modified in any way that would reasonably be expected to have a
Material Adverse Effect.  Except for the
Permits set forth on Section 3(v) of the Disclosure Schedule,
there are no material Permits, whether federal, state, local or foreign, that
are necessary for the lawful operation of the Target Business as currently
operated by Seller.


 


(w)       Improper and Other Payments.  With respect to the Target Business, except
as set forth on Section 3(w) of the Disclosure Schedule, (i) neither
Seller nor, to the Knowledge of Seller, any director, officer, employee, agent
or representative of Blount or any of the Blount Subsidiaries, or Person acting
on behalf of any of them, has made, paid or received any bribes, kickbacks or
other similar payments to or from any Person, whether lawful or unlawful, (ii) no
unlawful contributions have been made by Seller, directly or indirectly, to a
domestic or foreign political party or candidate, (iii) no unlawful
foreign payment (as defined in the Foreign Corrupt Practices Act, 15 U.S.C.
78dd-1 et seq.) has been made by Seller or, to the Knowledge of Seller, any
director, officer, employee, agent or representative of Seller, or any Person
acting on behalf of any of them and (iv) the internal accounting controls
of Blount and the Blount Subsidiaries are adequate to provide reasonable
assurance that material instances of any of the foregoing are detected in a
timely manner.


 


(x)           Accounting and Disclosure Controls.  Except as set forth on Section 3(x) of
the Disclosure Schedule, Seller Parent has (i) established and maintained
disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934) and designed such
disclosure controls and procedures to ensure that material information relating
to it, including its consolidated subsidiaries, is made known to management by
others within it and such subsidiaries and (ii) established and maintained
internal controls over financial reporting (as defined in Rules 13a-15(f) and
15(d)-15(f) of the Securities Exchange Act of 1934), and designed such
internal controls over financial reporting to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes.


 


(y)         Contracts with Affiliates.  Except as
set forth on Section 3(y) of the Disclosure Schedule, there
are no Material Contracts between Seller Parent, Blount or any Blount
Subsidiary, on the one hand, and any of Seller Parent, Blount, any Blount
Subsidiary or any Affiliate of any of the foregoing, on the other hand, that
will continue in effect after the Closing.


 


(z)           Absence of Undisclosed Liabilities.  The Target
Business has no Liabilities except (i) as reflected or reserved against in
the August 31, 2007 Financial Statements, (ii) Liabilities that have
arisen since August 31, 2007 in the Ordinary Course of Business or that
are disclosed on Section 3(g) of the Disclosure Schedule,
(iii)(A) contingent liabilities not disclosed on the August 31, 2007
Financial Statements but, to the extent material as of August 31, 2007,
set forth on Section 3(z) of the Disclosure Schedule, (B) certain
environmental matters disclosed on 


 


30

















 


Section 3(s) of the Disclosure Schedule, (C) differences
between the Liabilities, accruals and reserves on the August 31, 2007
Balance Sheet and the Liabilities actually incurred in the Ordinary Course of
Business or (D) obligations arising from fulfilling or paying for purchase
orders relating to the Target Business or (iv) as otherwise set forth on Section 3(z) of
the Disclosure Schedule.


 


(aa)    Disclosure of Evaluation Material.  Except as
set forth on Section 3(aa) of the Disclosure Schedule, with respect
to the Target Business, Seller has not disclosed any Evaluation Material (i) since
December 31, 2006, outside the Ordinary Course of Business (other than to
any prospective buyer of the Target Business) and (ii) since July 26,
2007, to any prospective buyer of the Target Business (other than Buyer, its
Affiliates or its representatives).


 


(bb)  No Further Representation or
Warranty.  Except for the representations and warranties
contained in this Agreement and the Transaction Agreements, none of Seller
Parent, Blount, any Blount Subsidiary or any of their Affiliates makes any
representations or warranties, and Seller Parent, Blount and each Blount
Subsidiary hereby disclaim any other representations or warranties, whether
made by Seller Parent, Seller, any Blount Subsidiary or any of their
Affiliates, or any of their officers, directors, employees, agents or
representatives, with respect to the execution and delivery of this Agreement
or any Transaction Agreement, the transactions contemplated hereby or thereby
or the Target Business.


 


SECTION 4                               BUYER’S REPRESENTATIONS AND WARRANTIES


 


Buyer
represents and warrants to Seller that the statements contained in this Section 4
are correct and complete as of the date hereof.


 


(a)          Organization of Buyer.  Each of
Buyer Parent, CFPI and each Caterpillar Subsidiary has been duly organized, is
validly existing, and is in good standing under the laws of the jurisdiction of
its incorporation.


 


(b)         Authorization of Transaction.  Each of
Buyer Parent, CFPI and each Caterpillar Subsidiary has full power and authority
to execute and deliver this Agreement and each Transaction Agreement to which
it is a party and to perform its obligations hereunder and thereunder.  Each of this Agreement and each Transaction
Agreement has been duly executed and delivered by each of Buyer Parent, CFPI
and each Caterpillar Subsidiary which is a party thereto and constitutes the
valid and legally binding obligation of each of Buyer Parent, CFPI and each
such Caterpillar Subsidiary, enforceable in accordance with its terms and
conditions, except as such enforcement may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and (ii) general principles
of equity (regardless of whether such enforcement is considered in a proceeding
in equity or at law).  The execution,
delivery and performance of this Agreement, each Transaction Agreement to which
it is a party and each other agreement, document or instrument necessary to
effectuate the transactions contemplated hereby have been duly authorized by
each of Buyer Parent, CFPI and each Caterpillar Subsidiary.


 


(c)          Non-contravention.  Neither the
execution and delivery of this Agreement and any Transaction Agreement to which
it is a party nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2)
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Buyer Parent, CFPI or any
Caterpillar Subsidiary is subject or any provision of Buyer Parent’s, CFPI ‘s
or


 


31

















 


any Caterpillar Subsidiary’s
charter, bylaws, or other governing documents or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Buyer Parent, CFPI or any Caterpillar
Subsidiary is a party or by which Buyer Parent, CFPI or such Caterpillar
Subsidiary is bound or to which any of Buyer Parent’s, CFPI’s or such
Caterpillar Subsidiary’s assets are subject. 
None of Buyer Parent,  CFPI or any
Caterpillar Subsidiary needs to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement (including the assignments and assumptions referred to in Section 2)
in compliance with applicable law.


 


(d)         Brokers’ Fees.  None of
Buyer Parent,  CFPI or any Caterpillar
Subsidiary has any Liability to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement for which Seller could become liable or obligated.


 


SECTION 5                               POST-CLOSING COVENANTS


 


The Parties
agree as follows with respect to the period following the Closing:


 


(a)          General.  In case at
any time after the Closing any further actions are necessary or desirable to
carry out the purposes of this Agreement or any Transaction Agreement, each of
the Parties agrees to (i) take such further commercially reasonable
actions (including the execution and delivery of such further instruments and
documents) as any other Party may reasonably request, all, subject to Section 7(k),
at the cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Section 6) and (ii) use
commercially reasonable efforts with respect to the physical count of Inventory
described in the definition of “Closing Inventory”.  Seller acknowledges and agrees that from and
after the Closing Buyer will be entitled to possession of all documents, books,
files, records (including Tax records), agreements and financial data of any
sort (collectively, “Books and Records”)
to the extent relating to the Target Business after the Closing.  Buyer acknowledges and agrees that, from and
after the Closing, Seller will be entitled, subject to Section 5(f),
to reasonable access to Books and Records to the extent relating to the Target
Business (prior to the Closing and after the Closing) during normal business
hours to the extent necessary for Seller to conduct its business after the
Closing, and Buyer agrees to retain such Books and Records from loss or damage
and to maintain such information in accordance with its record retention
policy.  Upon the request of Buyer,
Seller agrees to provide to Buyer (at Buyer’s expense) copies of Books and
Records related to any active product liability action relating to the Target
Business.  Seller further agrees to use
commercially reasonable efforts to (i) transfer to Buyer any permit
applications primarily relating to the Target Business to the extent such
transfer would be customary and permitted by the applicable Governmental
Authority and (ii) withdraw the Argentina Trademarks.


 


(b)         Assignment.


 


(i)                                     Notwithstanding anything contained herein or
otherwise to the contrary, this Agreement shall not constitute an assignment of
any contract or permit that would otherwise be assigned to Buyer hereunder, or any
claim or right or any benefit or obligation thereunder or resulting therefrom,
if such assignment requires the consent of a third party thereto and such
consent has not been obtained as of the date hereof (each 


 


32

















 


such contract or permit, a “Non-Assignable Asset”); provided that this sentence shall not
limit or otherwise affect the terms of Section 3(c) or 4(c).


 


(ii)                                  During the period between the Closing and the earlier
of (A) the effective assignment to Buyer of a Non-Assignable Asset and (B) February 5,
2008, the Parties shall cooperate with each other in any commercially
reasonable arrangement requested by the other to (x) obtain any third
party consent necessary for the assignment to Buyer of such Non-Assignable
Asset and (y) assign to Buyer the benefits and/or obligations under or in
respect of such Non-Assignable Asset.


 


(iii)                               Notwithstanding anything
to the contrary in this Section 5(b), during the period between the Closing and the earlier of (A) the
effective assignment to Buyer of a Designated Contract and (B) February 5,
2008, Seller shall use its reasonable best efforts to (x) obtain any third
party consent necessary for the assignment to Buyer of such Designated Contract
and (y) assign to Buyer the benefits and/or obligations under or in
respect of such Designated Contract.


 


(iv)                              With
respect to clauses (ii)(x) and (iii)(x) above, Seller shall pay all
Contract Consent Fees and up to $100,000 in the aggregate of Caterpillar
Contract Consent Costs, in each case to the extent Buyer provides Seller
documentation thereof.  Buyer shall pay
any other fees, payments, expenses or costs (including any Caterpillar Contract
Consent Costs in excess of $100,000 in the aggregate) incurred in connection
with the assignment to Buyer of any Assumed Contract.


 


(c)          Litigation Support.  In the event
and for so long as any Party actively is contesting or defending against any
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand in connection with (i) any transaction consummated pursuant to this
Agreement or any Transaction Agreement or (ii) the Target Business, each
of the other Parties will provide commercially reasonable cooperation to the
other or its counsel in such contest or defense (including by making available
its personnel and providing such testimony and access to its Books and Records
as shall be reasonably necessary in connection with such contest or defense),
all at the sole cost and expense of the contesting or defending Party (unless
the contesting or defending Party is entitled to indemnification therefor under
Section 6 and except with respect to the compensation of the other
Party’s personnel).


 


(d)          Insurance.  Seller
covenants to maintain its standard product liability insurance, consistent with
its past practice, for a period of two years after the Closing.


 


(e)          Transition.  Subject to Section 5(g),
(i) Seller will not take, nor shall Seller permit any of its subsidiaries
to take, any action that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of Seller from maintaining the same business relationships with the
Target Business after the Closing as it maintained with the Target Business prior
to the Closing and (ii) for a period of four years from and after the
Closing, Seller will refer all customer inquiries relating to the Target
Business to Buyer.  In addition, after
the Closing, Buyer agrees to use a manufacturer’s name other than “Blount, Inc.”
on any product serial number plate.


 


(f)            Confidentiality.  The Parties
agree that the terms of the Confidentiality Agreement are herein incorporated
by reference; provided that,
except as set forth in this Section 5(f), such terms shall continue
in full force and effect until the date that is two years after the date
hereof.  After the Closing, as it relates
to Buyer, the term “Evaluation Material” shall not include any 


 


33

















 


information, Books and Records or
other materials to the extent relating to the Target Business, but shall
include any information, Books and Records or other materials to the extent
relating to Seller or its Affiliates, but not to the Target Business.  After the Closing, Seller shall be bound by
Buyer’s obligations under the Confidentiality Agreement prior to the Closing
with respect to the confidentiality and disclosure of the Evaluation Material
to the extent relating to the Target Business; provided
that, for the avoidance of doubt, such obligations shall cease with respect to
any such Evaluation Material that has been publicly disclosed by Buyer or its
Affiliates or at the direction of Buyer or its Affiliates.


 


(g)         Covenant Not to Compete and
Nonsolicitation.  For a period of four years from and after the
Closing, neither Seller nor any of its Affiliates will engage in, or own more
than 5% of the equity interests of, any business the principal business and
activities of which are substantially similar to the principal business and
activities of the Target Business as of the Closing Date; provided, however,
that any purchaser of more than 25% of the equity interests of Blount or Seller
Parent shall not be bound by the provisions of this Section 5(g).  The Parties hereby acknowledge and agree
that, other than the Target Business, no current business or activity of
Seller, or any business or activity reasonably related thereto, reflected in
Seller’s federal securities filings is substantially similar to the principal
business and activities of the Target Business as of the Closing for purposes
of this Section 5(g). If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 5(g) is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed. 
Seller Parent, Seller and their respective directors and officers agree
that they will not solicit or hire any Transferred Employee for a period of two
years following the date hereof; provided
that neither Seller Parent nor Seller shall be prohibited from hiring any such
employee who responds to a general solicitation by Seller Parent or Seller or
initiates contact with Seller Parent or Seller.


 


(h)         Employment and Benefit Arrangements.


 


(i)                                     CFPI  shall, or
shall cause its Affiliates to, continue to employ (where employment
continues automatically by operation of Law), or, where employment does not
continue automatically by operation of Law, CFPI  shall, or shall cause its Affiliates to, make
offers of employment (which shall include CFPI’s compliance with CFPI’s
covenants set forth in this Section 5(h)), effective as of the
Closing, to each Target Business Employee who is an Active Employee (other than
James Blasek) in accordance with the provisions of this Section 5(h).  For purposes of this Agreement, the term “Active Employee” shall mean any Target
Business Employee who is actively at work on the date hereof and any Target
Business Employee who is not actively at work on the date hereof due to
vacation, holiday, sick leave, short-term disability leave, military leave,
jury duty, bereavement leave, and, in jurisdictions where employment continues
automatically by operation of Law, any other leave of absence.  With respect to each Target Business Employee
who is not an Active Employee (an “Inactive
Employee”), CFPI, in accordance with applicable Law and any
applicable collective bargaining agreement, shall make offers of
employment (which shall include CFPI’s compliance with CFPI’s covenants
set forth in this Section 5(h)) to each such Inactive Employee,
effective as of the date on which such Inactive Employee presents himself or
herself to 


 


34

















 


CFPI for active employment following the Closing.  CFPI shall, or shall cause its Affiliates to,
make an offer of employment (which shall include CFPI’s compliance with CFPI’s
covenants set forth in this Section 5(h)) to James Blasek,
effective as of the date on which James Blasek repatriates to the United
States.  The offers of employment pursuant
to this Section 5(h) (or, where applicable, the continuation
of employment) shall be at a base salary or hourly rate of pay that is no less
than that in effect immediately prior to the date hereof and, subject to Section 5(h)(v),
on terms and conditions that are substantially comparable in the aggregate to
those applicable to similarly situated employees of CFPI and its
subsidiaries.  CFPI and Blount hereby
acknowledge that the terms and conditions of the offers of employment for James
W. Cox, Bruce Narveson and Richard Planisek (the “Specified Employees”) are substantially comparable in the
aggregate to those applicable to the Specified Employees immediately prior to
the date hereof.  In addition, with
respect to Target Business Employees who, as of the date hereof, are based
primarily outside the United States, such offers (or, where applicable, the
continuation of employment) shall be on terms sufficient to avoid statutory or
common law severance or separation benefits, any contractual or other severance
or separation benefits, or any other legally mandated payment obligations; provided that Blount has provided CFPI with any notice and
information regarding the Target Business Employees that is reasonably
necessary and sufficient to enable CFPI to comply with this covenant.  Blount and CFPI intend that for purposes of
any employment, severance or termination benefit plan, program, policy,
agreement or arrangement of Seller, the transactions contemplated by this Agreement
shall not constitute a severance of employment of any Target Business Employee
offered employment by CFPI prior to or upon the consummation of the
transactions contemplated hereby, and that the Target Business Employees
offered employment by CFPI will have continuous and uninterrupted employment
immediately before and immediately after the Closing.  Notwithstanding any other provision of this Section 5(h) to
the contrary, CFPI shall be solely responsible for, and shall assume all
Liabilities in respect of, claims arising on or after the Closing made by any
Target Business Employees who, as of the date hereof, are based primarily
outside the United States for any statutory or contractual severance benefits,
termination indemnity, redundancy, compensation or other termination benefits
(including claims for unjustified or wrongful dismissal, notice of termination
of employment or pay in lieu of notice and reasonable attorney-client costs in
defending any claim) (collectively, “Termination
Costs”) to the extent arising out of CFPI’s failure to offer
employment to, or continue the employment of, any such Target Business Employee
on terms and conditions that would preclude any claims of constructive
dismissal or similar claims; provided
that Seller shall be solely responsible for (A) any such Termination Costs
resulting from any such Target Business Employee’s decision not to accept CFPI’s
employment offer and (B) any such Termination Costs to the extent arising
out of Blount’s failure to provide CFPI with any notice and information
regarding the Target Business Employees that is reasonably necessary and
sufficient to enable CFPI to make offers that are sufficient to prevent such
Termination Costs from arising. 
Notwithstanding any other provision of this Section 5(h) to
the contrary, Seller shall be solely responsible for, and shall assume all
Liabilities in respect of, claims arising on or after the Closing for any
Termination Costs made by any Target Business Employees who, as of the date
hereof, are based primarily inside the United States.


 


(ii)                                  Each Target Business Employee who continues in or
accepts employment with CFPI or any of its Affiliates as of the
Closing (or, in the case of an Inactive Employee, as of such later date
that such Inactive Employee commences 


 


35

















 


employment with CFPI or any of its Affiliates, or in the case of James
Blasek, as of the date on which he repatriates to the United States), is
referred to herein as a “Transferred Employee”.  If any Transferred Employee requires a visa,
work permit or employment pass or other approval for his or her employment to
transfer to or continue with CFPI or its Affiliates following the Closing, CFPI
shall use its reasonable efforts to see that any necessary applications are
promptly made and to secure the necessary visa, permit, pass or other approval.


 


(iii)                               CFPI shall give or cause to be given to each
Transferred Employee full credit for purposes of eligibility to participate and
vesting of benefits under any employee benefit plans and arrangements and
employment-related entitlements provided, sponsored, maintained or contributed
to by CFPI and its Affiliates, and for purposes of level of benefits and
benefit accruals under any such plans, arrangements or entitlements that are
vacation or severance plans or policies, for such Transferred Employee’s
service with Seller and with any predecessor employer, in each case to the same
extent recognized by Seller as of the date hereof, except to the extent such
credit would result in duplication of benefits for the same period of
service.  For purposes of further
clarification, CFPI and its Affiliates shall not be required to provide credit
for such service for benefit accrual purposes under (A) any employee
benefit plan of CFPI or its Affiliates that is a defined benefit pension plan
and (B) any employee benefit plan of CFPI or its Affiliates that provides
post-retirement benefits.


 


(iv)                              Except (A) with respect to Losses under the
Assumed Employee Benefit Agreements, (B) with respect to Losses that
automatically transfer to CFPI or its Affiliates pursuant to applicable Law or (C) as
otherwise specifically provided in this Section 5(h), Seller shall
retain liability and responsibility for all employment and employee
benefits-related Losses incurred, or arising out of a period ending, on or
prior to the Closing that relate to the Target Business Employees (or any
dependent or beneficiary of any Target Business Employee) (including any
obligations under the Employee Benefit Plans), and CFPI shall have no liability
or responsibility for any such Losses. 
Except as specifically provided in this Section 5(h),
effective after the Closing, (1) CFPI shall be solely responsible for all
employment and employee benefits-related Losses that are incurred or arise
after the Closing and relate to any Transferred Employee (or any dependent or
beneficiary of any Transferred Employee) and (2) Seller shall have no
liability with respect to any Transferred Employee (or any dependent or
beneficiary of any Transferred Employee) that relates to such Transferred
Employee’s employment with CFPI or any of its Affiliates.


 


(v)                                 Effective
as of the Closing and except as otherwise provided in this Section 5(h),
each Transferred Employee shall cease to be an employee of Seller and shall
cease to participate in any Employee Benefit Plan.  CFPI shall establish or have in effect
benefit plans, programs and arrangements for the benefit of Transferred
Employees (collectively, “Buyer Benefit Plans”)
in accordance with this Section 5(h).  During the period from the day after the
Closing through December 31, 2007, Buyer Benefit Plans providing flexible
spending account benefits (“FSA Plans”)
shall provide each Transferred Employee with benefits that are substantially
the same as the benefits provided by the corresponding Employee Benefit Plan
providing flexible spending account benefits. 
During the period from the day after the Closing through March 31,
2008 (such period, the “Plan Transition
Period”), (i) Buyer Benefit Plans providing health, dental,
vision or prescription drug benefits (other than post-retirement welfare
benefits and other than the FSA Plans) to Transferred Employees (such plans,
the 


 


36

















 


“Applicable Welfare Plans”) shall provide
each Transferred Employee with benefits that are substantially the same as the
benefits provided by the corresponding Employee Benefit Plans and (ii) Buyer
Benefit Plans other than the Applicable Welfare Plans and other than the FSA
Plans shall provide each Transferred Employee with benefits that are
substantially comparable in the aggregate to the benefits provided to similarly
situated employees of CFPI and its subsidiaries; provided that CFPI shall not be required to maintain the
Buyer 401(k) plan during the Plan Transition Period.  As of April 1, 2008 (the “Plan Transition Date”), Buyer Benefit Plans
(including the Applicable Welfare Plans and the Buyer 401(k) Plan) shall
provide each Transferred Employee with benefits that are substantially
comparable in the aggregate to the benefits provided to similarly situated
employees of CFPI and its subsidiaries. 
Without limiting the generality of the foregoing, effective as of the
day after Closing, Buyer Benefit Plans shall provide Transferred Employees with
postretirement welfare benefits that are substantially comparable to the
post-retirement welfare benefits provided to similarly situated employees of
CFPI and its subsidiaries.  Subject to
the previous sentence, Blount and CFPI hereby agree that an amount equal to the
Post-Retirement Amount shall be used for the purpose of providing such
benefits.  CFPI shall inform the
Transferred Employees that Blount has requested CFPI to provide such
post-retirement welfare benefits pursuant to the transactions contemplated hereby.  At and after the Closing, CFPI shall, or
shall cause its Affiliates to, assume and honor each Assumed Employee Benefit
Agreement in accordance with its existing terms.


 


(vi)                              With respect to each Buyer Benefit Plan that is an “employee
welfare benefit plan” within the meaning of Section 3(1) of ERISA (a “Buyer Welfare Plan”), CFPI shall waive all
limitations as to waiting periods with respect to participation and coverage
requirements applicable to the Transferred Employees and their dependents and
beneficiaries, to the extent waived under the applicable corresponding Employee
Benefit Plan immediately prior to the date hereof.


 


(vii)                           Except as otherwise required by applicable Law,
Seller shall be responsible in accordance with its respective Employee Benefit
Plans that are “employee welfare benefit plans” within the meaning of Section 3(1) of
ERISA for all reimbursement claims (such as medical and dental claims) for
expenses incurred, and for all non-reimbursement claims (such as life
insurance claims) incurred, under such plans on or prior to the Closing by
Transferred Employees and their dependents. 
CFPI shall not have any obligation to contribute to or reimburse the
Employee Benefit Plans or Seller for any costs, premiums, fees, assessments or
other charges or payments associated with any Employee Benefit Plan.  CFPI shall be responsible in accordance with
the applicable Buyer Welfare Plans for all reimbursement claims (such as
medical and dental claims) for expenses incurred, and for all non-reimbursement
claims (such as life insurance claims) incurred, after the Closing by
Transferred Employees and their dependents. 
For purposes of this Section 5(h)(vii), a claim shall be
deemed to be incurred as follows:  (A) life,
accidental death and dismemberment, disability and business travel accident
insurance benefits, upon the death or accident, or the occurrence of the injury
or condition, giving rise to such benefits and (B) health, dental, vision
or prescription drug benefits (including in respect of any hospital
confinement), upon provision of such services, materials or supplies.


 


(viii)                        For purposes of determining the number of vacation or
annual leave days to which each Transferred Employee shall be entitled
following the Closing, CFPI shall assume and honor all vacation or annual leave
days accrued or earned but not yet 


 


37

















 


taken by such Transferred Employee as of the date hereof; provided that all such obligations have
been accrued to the extent required under GAAP in determining Closing Working
Capital.  To the extent that a
Transferred Employee is entitled under any applicable Law or any policy of
Seller to be paid for any vacation or annual leave days accrued or earned but
not yet taken by such Transferred Employee as of the date hereof, CFPI shall
assume the Liability to pay for such vacation or annual leave days; provided that all such obligations have
been accrued to the extent required under GAAP in determining Closing Working
Capital.


 


(ix)                                Without limiting the generality of Section 5(h)(v),
CFPI shall, or shall cause its Affiliates to, (A) assume all Liabilities
with respect to the Transferred Employees under the sales commission plans or
arrangements of Seller set forth on Section 5(h)(ix) of the
Disclosure Schedule for those participants set forth on Section 5(h)(ix) of
the Disclosure Schedule that relate to any periods during 2007 that include the
Closing Date to the extent taken into account in determining Closing Working
Capital, (B) maintain such plans or arrangements pursuant to their
respective terms as in effect as of the date hereof for such Transferred
Employees with respect to such periods and (C) at the times prescribed by
such plans or arrangements as in effect as of the date hereof, make payments to
the Transferred Employees in accordance with the terms of such plans or
arrangements as in effect as of the date hereof; provided that no payments are required to be made under such
plans or arrangements with respect to the portions of such periods following
the Closing.


 


(x)                                   Except as expressly provided herein, or provided
under applicable Law, nothing contained in this Section 5(h),
express or implied, is intended to confer upon any Target Business Employee any
right to employment or continued employment or to specific terms and conditions
of employment with CFPI or Seller or any of their respective Affiliates, or any
right to any benefits by reason of this Agreement.


 


(xi)                                Special U.S. Provisions.


 


(A)  References to “Target Business Employees” and “Transferred
Employees” in this Section 5(h)(xi) shall refer only to Target
Business Employees and Transferred Employees, as the case may be, who, as of
the date hereof, are primarily based in the United States.


 


(B)  Notwithstanding any
provision of this Agreement to the contrary, following the Closing, Seller
shall retain, or shall cause the applicable Employee Benefit Plans to retain, (1) all
assets and Liabilities that relate to benefits accrued by Target Business
Employees prior to the Closing with respect to any Employee Benefit Plan that
is a defined benefit pension plan and (2) all Liabilities with respect to
any Employee Benefit Plan that is a post-retirement welfare benefit plan, and
in the case of each of clauses (1) and (2), shall make payments to
Target Business Employees with rights thereunder in accordance with the terms
of the applicable Employee Benefit Plan, as in effect from time to time.  CFPI shall have no Liability under or with
respect to any such Employee Benefit Plans.


 


(C)  Effective not later than
the Plan Transition Date, CFPI or its Affiliates shall have in effect one or
more defined contribution plans that include a qualified cash or deferred
arrangement within the meaning of Code Section 


 


38

















 


401(k) (and a related trust exempt from
tax under Code Section 501(a)) (as applicable, the “Buyer 401(k) Plan”).  Each Transferred Employee participating in a
Seller 401(k) Plan immediately prior to the Closing shall become a participant
in the corresponding Buyer 401(k) Plan as of the Plan Transition Date, and
each Transferred Employee who would have become eligible to participate in a
Seller 401(k) Plan shall become a participant in the Buyer 401(k) Plan
no later than the later of such time as he or she would have become eligible to
participate in any Seller 401(k) Plan and the Plan Transition Date (or, in
the case of any Transferred Employee who is not an Active Employee, the date
such Transferred Employee commences employment with CFPI, if later).  CFPI agrees to cause the Buyer 401(k) Plan
to allow each Transferred Employee to make a “direct rollover” to such Buyer
401(k) Plan of the account balances of such Transferred Employee
(including promissory notes evidencing any outstanding loans) under any Seller
401(k) Plan in which such Transferred Employee participated prior to the
Closing if such direct rollover is elected in accordance with applicable Law by
such Transferred Employee.  Following
such transfer of account balances, Seller shall have no Liability for any
costs, expenses or damages that may result from any claim for any benefit
alleged to be payable under any Seller 401(k) Plan with respect to
Transferred Employees and their beneficiaries who have transferred their
account balances from any Seller 401(k) Plan to the Buyer 401(k) Plan,
other than any costs, expenses or damages that may result from any claim for
any benefit alleged to be payable under any Seller 401(k) Plan arising out
of the failure by Seller to administer any Seller 401(k) Plan in
compliance with applicable Law.


 


(D)  Effective as of the
Closing, Seller shall be responsible for providing continuation coverage within
the meaning of COBRA to Target Business Employees and their eligible dependents
to the extent required by COBRA with respect to any “qualifying event” (as
defined in COBRA) occurring on or prior to the Closing (including as a
result of the transactions contemplated hereby), and CFPI shall be responsible
for providing continuation coverage within the meaning of COBRA to Transferred
Employees and their eligible dependents to the extent required by COBRA with
respect to any qualifying event occurring after the Closing.


 


(E)  Seller shall be
responsible for all claims for workers’ compensation benefits that are incurred
on or prior to the Closing by Transferred Employees.  CFPI shall be responsible for all claims for
workers’ compensation benefits that are incurred after the Closing by
Transferred Employees.  For purposes of
this Section 5(h)(xi)(E), a claim for workers’ compensation
benefits shall be deemed to be incurred when the event giving rise to the claim
occurs (the “Workers’ Compensation Event”).  If the Workers’ Compensation Event occurs
over a period both preceding and following the Closing, the claim shall be the
joint responsibility and liability of Seller and CFPI and shall be equitably
apportioned between Seller on the one hand, and CFPI, on the other hand, based
upon the relative periods of time that the Workers’ Compensation Event transpired
preceding and following the Closing.


 


(F)  CFPI agrees to provide
any required notice under the WARN Act, and to otherwise comply with the WARN
Act, with respect to any “plant closing” or “mass layoff” (as defined in the
WARN Act) or group termination or 


 


39

















 


similar event affecting Target Business
Employees and occurring after the Closing. 
CFPI shall not take any action that would cause any termination of
employment of any employees by Seller that occurred on or before the Closing to
constitute a “plant closing” or “mass layoff” or group termination under the
WARN Act, or that would create any Liability or penalty to Seller for any
employment terminations under applicable Law.


 


(G)  With respect to the CY 2007 Middle
Management Incentive Plan and the CY 2007 Executive Management Annual Incentive
Plan, Seller shall make payments to the Transferred Employees with respect to
the period between January 1, 2007 and the Closing Date in accordance with
the terms of such plans as in effect as of the date hereof.


 


(H)  Prior to November 30, 2007,
Seller shall contribute to the Seller 401(k) Plans the “Retirement Savings
Plus” contributions that would have been required to have made by Seller in January 2008
to the Seller 401(k) Plans on behalf of the Transferred Employees with
respect to the period from January 1, 2007, through the Closing Date, had
the transactions contemplated by this Agreement not occurred, pursuant to the
terms of the Seller 401(k) Plans in effect on October 26, 2006; provided that such contributions shall be fully vested.  Prior to December 31, 2007, Buyer shall
provide each Transferred Employee who has made an election prior to October 26,
2007, to participate in any Seller 401(k) Plan with respect to 2007 with a
lump-sum cash amount equal on an after-tax basis to the matching contributions
that Seller would have been required to make to such Seller 401(k) Plan on
behalf of such Transferred Employee with respect to the period between the
Closing Date and December 31, 2007, had the transactions contemplated by
this Agreement not occurred, pursuant to the terms of the Seller 401(k) Plan
in effect on the date hereof and based on the applicable deferral election of
such Transferred Employee in effect on the date hereof; provided
that, for purposes of computing such amount, such matching contributions shall
be deemed to be required to be made on a dollar-for-dollar basis and the limit
on such matching contributions shall be deemed to be 6%, rather than 4.5%, of
Compensation (as defined in such Seller 401(k) Plan).


 


(xii)                             Special Non-U.S. Provisions.


 


(A)  Without limiting the generality of Section 5(h)(i) or
5(h)(v), with respect to any Transferred Employees who are employed
primarily outside the United States, following the Closing, CFPI shall, or
shall cause its Affiliates to, provide such Transferred Employees with terms
and conditions of employment in accordance with all applicable Laws.


 


(B)  CFPI shall, or shall cause its Affiliates to, pay any repatriation
expenses of James Blasek pursuant to James Blasek’s International Assignment
Provisions.


 


(i)             Additional Tax Matters.


 


(i)                                     Seller shall prepare and file any employment, sales
and use and property Tax Returns with respect to Tax periods that end (or are
deemed to end) on or before the 


 


40

















 


Closing Date. Buyer shall prepare all property Tax Returns with respect
to Tax periods that begin before the Closing Date and end after the Closing
Date (“Straddle Period”) in a
manner consistent with prior filings of such property Tax Returns (unless
Seller has already prepared and filed any such property Tax Returns).  Seller shall be responsible for the timely
filing and distribution (taking into account any extensions received from the
relevant Tax authorities) of any wage related Tax Returns for the period
covering January 1, 2007 through the Closing Date, which are required to
meet federal, state and local requirements; including, but not limited to,
federal forms 940, 941, W-2s and corresponding W-3s and state unemployment
quarterly and annual returns, whether due to be filed prior to, or after the
Closing Date and shall be responsible for payment of Taxes, if any, shown
thereon.  Buyer and Seller agree to utilize
the standard method set forth in Revenue Procedure 2004-53 with respect to wage
reporting.


 


(ii)                                  In case of a Straddle Period, (A) all income and
gross receipt Taxes shall be apportioned between the Pre-Closing Tax Period and
the Post-Closing Tax Period based upon a “closing of the books” on the Closing
Date and (B) all Taxes other than Taxes based on income or gross receipts
(e.g., property Taxes) shall be apportioned between the Pre-Closing Tax Period
and the Post-Closing Tax Period on a per  diem basis.


 


(iii)                               From time to time after the Closing Date, each Party
shall permit reasonable access, and shall cause its accountants and other
representatives to permit reasonable access, to the other Party, to the
information that it or its accountants or other representatives have within
their control and that may be reasonably necessary in connection with the
preparation of any Tax Return or the examination by any Tax authority or other
administrative or judicial proceeding relating to any Tax Return.  Each Party shall retain, or cause to be
retained, until the applicable statute of limitations (including any
extensions) have expired, copies of all Tax Returns for all Tax periods
beginning before the Closing Date, together with supporting work schedules and
other records or information that may be relevant for such Tax Returns.  No new elections with respect to Taxes, or
any changes in current elections with respect to Taxes, affecting any of the
Acquired Assets shall be made by Seller after the date of this Agreement.


 


(iv)                              Seller shall prepare and file all Tax Returns that
relate to Transfer Taxes.  Buyer shall
cooperate with Seller in good faith in respect of any such Tax return
filings.  Seller and Buyer shall also
cooperate in good faith in respect of obtaining any applicable exemptions from
Transfer Taxes.


 


(v)                                 If, after the Closing Date, any Tax authority
commences a Tax audit or similar proceeding that relates to the Target Business
and if such Tax audit or similar proceeding could result in a liability of
Seller vis-à-vis Buyer under this Agreement, then Buyer shall, as soon as
reasonably practicable, notify Seller in writing about such Tax audit or
similar proceeding.  Seller and Buyer
shall cooperate in good faith in order to resolve and/or settle any such Tax
audit or similar proceeding, and Buyer shall not settle any such Tax audit or
similar proceeding without the prior written consent of Seller.  This Section 5(i)(v) rather
than Section 6(e) shall apply to Tax matters.


 


(j)             Environmental Permits.  Buyer shall use commercially
reasonable efforts to obtain or effect the transfer as promptly as practicable
of all Permits required under Environmental, Health, and Safety Requirements to
conduct the Target Business as presently conducted by


 


41
















 


Seller.  Seller shall use commercially reasonable
efforts to cooperate with Buyer in obtaining or transferring such Permits,
including by providing Buyer and/or the appropriate Governmental Authority, as
applicable, all required information and/or documents in connection therewith.


 


(k)          Parts Buyback.  After the Closing, to the extent Seller
repurchases from any Designated Terminated Dealer any repair parts which meet
the requirements of the Target Business’ Return Parts Policy, except for the
10% dollar limitation, Buyer agrees to promptly purchase from Seller such
repair parts at 85% of the then current dealer net price.


 


(l)             Preparation of Closing Statements.  Seller shall prepare the Closing Statements (i) using
methodology consistent with the Target Business Financial Statements, (ii) such
that they present fairly the Closing Inventory and Closing Net Working Capital,
as applicable, and (iii) are consistent with and based upon the books and
records of the Seller Parent and Target Business as of the Closing; provided that, notwithstanding anything in
this Agreement to the contrary, the sole remedies of Buyer for any breach of or failure by Seller to perform the
covenants and obligations set forth in this Section 5(l) shall
be the remedies available to Seller under Section 2(g).


 


SECTION 6                               REMEDIES FOR BREACH OF THIS AGREEMENT; INDEMNITY


 


(a)          Survival.  The
representations and warranties of the Parties contained herein and in the
Transaction Agreements shall survive the Closing for a period of two (2) years
after the Closing; provided that (i) the
representations and warranties contained in Sections 3(a), 3(b), 4(a) and
4(b) shall survive in perpetuity and not expire, (ii) the
representations and warranties contained in Sections 3(c), 3(e) and 3(s) shall
survive for a period of five years after the Closing, and (iii) the
representations and warranties contained in Sections 3(i) and 3(r) shall
survive until the expiration of any applicable statute of limitations (after
giving effect to any extension or waiver) plus 45 days.  Neither Buyer nor Seller shall have any
liability with respect to claims first asserted in connection with any
representation or warranty after the survival period specified therefor in this
Section 6(a); provided, however,
that notwithstanding the foregoing, nothing herein shall be deemed to limit any
Party’s rights to recover any or all Losses incurred or suffered by it relating
to or arising out of or in connection with fraud or intentional
misrepresentation, it being understood and agreed that the right to recover
such Losses shall survive forever.


 


(b)         Indemnification by Seller.  Seller
agrees to defend and indemnify the Buyer Indemnified Parties against, and to
hold the Buyer Indemnified Parties harmless from, any and all Losses incurred
or suffered by any Buyer Indemnified Party arising out of or relating to any of
the following:


 


(i)                                     subject to Section 6(a), any breach of or
any inaccuracy in any representation or warranty made by Seller in this
Agreement or any Transaction Agreement;


 


(ii)                                  any breach of or failure by Seller to perform any
covenant or obligation of Seller set out in this Agreement or any Transaction
Agreement;


 


(iii)                               any asset of Seller or its Affiliates that is not an
Acquired Asset or any Liability of Seller or its Affiliates that is not an
Assumed Liability; and


 


42

















 


(iv)                              any Liability or Loss arising from the Acquired
Assets or Target Business on or before the Closing Date, except to the extent
such Liability or Loss is an Assumed Liability; provided that this clause (iv) shall not apply to the
extent such Liability or Loss is in respect of any breach of or any inaccuracy
in any representation or warranty made by Seller in this Agreement or any
Transaction Agreement.


 


(c)          Indemnification by Buyer.  Buyer agrees
to defend and indemnify the Seller Indemnified Parties against, and to hold the
Seller Indemnified Parties harmless from, any and all Losses incurred or
suffered by any Seller Indemnified Party arising out of or relating to any of
the following:


 


(i)                                     subject to Section 6(a), any breach of or
any inaccuracy in any representation or warranty made by Buyer in this
Agreement or any Transaction Agreement;


 


(ii)                                  any breach of or failure by Buyer to perform any
covenant or obligation of Buyer set out in this Agreement or any Transaction
Agreement; and


 


(iii)                               any Acquired Asset (to the extent such Loss arises
after the Closing) or any Assumed Liability; provided
that this clause (iii) shall not apply to the extent such Liability or
Loss is in respect of any breach of or any inaccuracy in any representation or
warranty made by Buyer in this Agreement or any Transaction Agreement.


 


(d)         No Materiality Qualifiers.  After it has
been determined that a representation or warranty has been breached, taking
into account any materiality qualification therein (including any reference to “material”,
“Material Adverse Effect”, “in all material respects” and similar
qualifications as to materiality), any such materiality qualification shall be
disregarded or purposes of calculating the amounts for which the Parties shall
be liable under Sections 6(b)(i) and (c)(i).


 


(e)          Limitations on Liability. 
Notwithstanding any other provision of this Agreement:


 


(i)             The Buyer Indemnified Parties shall have the right to
payment by Seller under Section 6(b)(i) only if the Buyer
Indemnified Parties shall have incurred as to all inaccuracies and breaches
indemnifiable Losses in excess of $500,000 (the “Deductible”); provided
that, once the Buyer Indemnified Parties have incurred such indemnifiable
Losses in excess of the Deductible, they shall have the right to payment by
Seller only to the extent such indemnifiable Losses exceed $250,000; provided, further,  that the maximum aggregate obligation of
Seller to the Buyer Indemnified Parties under Section 6(b)(i) shall
not exceed $42,000,000 (the “Cap”).  Notwithstanding anything to the contrary
herein, the limitations contained in the provisos above shall not apply to (A) any
indemnification for any Losses incurred by the Buyer Indemnified Parties for
any intentional misrepresentation or fraudulent breach of a representation or
warranty contained herein or in any Transaction Agreement, (B) any
indemnification for any Losses incurred by the Buyer Indemnified Parties in
connection with any Liability indemnified by Seller under Sections 6(b)(ii),
(iii) and (iv) or (C) any indemnification for Losses
incurred by the Buyer Indemnified Parties in connection with any Liability for
breaches of Sections 3(a), (b), (c), (e) and (l).


 


(ii)                                  The Seller Indemnified Parties shall have the right
to payment by Buyer under Section 6(c)(i) only if the Seller
Indemnified Parties shall have incurred as to all 


 


43

















 


inaccuracies and breaches indemnifiable Losses in excess of the
Deductible; provided that, once
the Seller Indemnified Parties have incurred such indemnifiable Losses in
excess of the Deductible, they shall have the right to payment by Buyer only to
the extent such indemnifiable Losses exceed $250,000.  Notwithstanding anything to the contrary
herein, the limitation contained in the proviso above shall not apply to (A) any
indemnification for any Losses incurred by the Seller Indemnified Parties for
any intentional misrepresentation or fraudulent breach of a representation or
warranty contained herein or in any Transaction Agreement, (B) any
indemnification for any Losses incurred by the Seller Indemnified Parties in
connection with any Liability indemnified by Seller under Sections 6(c)(ii) and
(iii) or (C) any indemnification for Losses incurred by the Buyer
Indemnified Parties in connection with any Liability for breaches of Sections
4(a), (b) and (c).


 


(iii)                               The indemnification provided in this Section 6
shall be the sole and exclusive remedy after the Closing for damages available
to the Parties for breach of any of the representations and warranties,
covenants (other than Sections 6(f) and 6(g)) or other obligations of
the Parties contained herein; provided,
however, that this exclusive
remedy for damages does not preclude a Party from pursuing remedies under
applicable Law for fraud or intentional misrepresentation.


 


(iv)                              Notwithstanding anything contained in this Agreement
to the contrary, no Party shall be liable to the other Party or its Affiliates
for special, consequential, punitive or exemplary Losses or damages; provided, however,
that the forgoing shall not preclude (A) recovery by an Indemnified Party
in respect of Losses directly incurred from Third-Party Claims or (B) a
Party from pursuing remedies under applicable Law for fraud or intentional
misrepresentation.


 


(v)                                 The amounts for which the Parties shall be liable
under Sections 6(b) and 6(c) shall be net of (A) any
insurance recovered by the Indemnified Parties from their own insurance
policies (it be understood that no such Indemnified Party shall be required
make a claim with its insurance carrier for any such recovery) and (B) the
amount of the applicable Loss arising out of any item which a Party can
demonstrate was included as an Account Payable or Accrued Expense in
calculating Closing Net Working Capital. 
For the avoidance of doubt, no indemnification shall be required under
this Agreement for any differences between reserves, estimates or accruals
related to any item and the actual value or level of such item.


 


(vi)                              Notwithstanding any provision of this Agreement to
the contrary, nothing in this Agreement shall eliminate, limit or prohibit any
Seller rights, and Seller shall retain all its rights, pursuant to Law,
including common law and any applicable Environmental, Health, and Safety
Requirements, to recover from any third party any Losses that are or may become
the subject of any claim for indemnification by any Buyer Indemnified Parties; provided that, upon the written request
and at the direction of Seller, Buyer Indemnified Parties shall promptly and
diligently pursue, at Seller’s expense, all remedies Buyer Indemnified Parties
may have against any third parties for any such Losses, unless such remedies
have no reasonable chance of success; provided,
further, that, the amounts for
which Seller shall be liable for such Losses under Section 6(b) shall
be net of any amounts recovered by the Buyer Indemnified Parties from any third
parties.


 


44

















 


(vii)                           Notwithstanding any provision of this Agreement to
the contrary, Seller shall not be required to indemnify any Buyer Indemnified
Parties, and shall not have any Liability for any Pre-Closing Environmental
Liabilities, any breaches of the representations and warranties contained in Section 3(s) or
Section 3(v) or any other matters pursuant to Environmental,
Health and Safety Requirements to the extent (A) any Buyer Indemnified
Parties (1) incur any costs resulting or arising from any investigation of
or Remedial Action with respect to environmental conditions (including drilling
or sampling) following the Closing other than any investigation or other
Remedial Action reasonably required by Environmental, Health and Safety
Requirements; provided
that, without limiting any other provision of this Agreement (including the
procedures in Section 6(g)(x)), this Section 6(e)(vii)(A)(1) shall
not apply to (x) Phase II sampling conducted for the purpose of reasonably
identifying a known or suspected release of Hazardous Materials at the Target
Business’ Soderhamn, Sweden facility to the extent such sampling is reasonably
recommended by a Phase I environmental site assessment commenced within 30 days
of the Closing Date and conducted to applicable ASTM standards by or on behalf
of the Buyer and to the extent such sampling is permitted by the legal owner of
the Soderhamn, Sweden facility (provided
that, Buyer shall provide Seller with a reasonable opportunity to review and
comment on a draft of any such Phase I report prior to its finalization and on
the scope and workplan of any such Phase II sampling prior to conducting such
sampling), (y) Phase II sampling conducted for the purpose of reasonably
identifying a known or suspected release of Hazardous Materials at the Real
Properties in Prentice, Wisconsin, Owatonna, Minnesota or Zebulon, North
Carolina to the extent reasonably recommended by a Phase I environmental site
assessment conducted to applicable ASTM standards and to the extent conducted
by or on behalf, and at the reasonable request, of a bone fide prospective
purchaser of the relevant Real Property from the Buyer for the purpose of
reasonably establishing a legal defense to liability for such a release of
Hazardous Materials pursuant to applicable Environmental, Health and Safety
Requirements (provided that,
Buyer shall provide Seller with a reasonable opportunity to review and comment
on a draft of any such Phase I report prior to its finalization and on the
scope and workplan of any such Phase II sampling prior to conducting such
sampling) and (z) a release of Hazardous Materials discovered solely as a
result of commercially reasonable construction activities by Buyer at any Real
Property in connection with an expansion of current Target Business operations
(provided that, commercially
reasonable construction activities shall in no case include any activities
conducted for the purpose of identifying or assessing known, unknown or
suspected environmental conditions, including any release of Hazardous
Materials, excluding activities solely conducted for a commercially reasonable
geotechnical, architectural and/or engineering purpose in connection with
construction activities), (2) incur any
costs in excess of the costs to comply with industrial cleanup standards or
other applicable minimum standards, including the use of environmental land use
restrictions, or otherwise in excess of the minimum costs necessary to bring a
condition into compliance with Environmental, Health and Safety Requirements or
to satisfy the reasonable requirements of a Governmental Authority or (3) contribute
to or  exacerbate any environmental
condition or other Pre-Closing Environmental Liability after the Closing, (B) such
Liability arises out of the cessation of or change in operations at, or the
closure or demolition of, a facility of the Target Business, (C) such
Liability results or arises from the removal of asbestos-containing materials
or lead paint, except to the extent such asbestos-containing materials or lead
paint were in a condition at or prior to the Closing not in compliance with
Environmental, Health, and Safety Requirements or (D) such Liability
arises out of any post-Closing exposure to any Hazardous Material, 


 


45

















 


except to the extent provided under Section 6(b)(iii) with
respect to any Asbestos Liability, Silica Liability or Welding Rod Liability or
to the extent such Liability constitutes a Pre-Closing Environmental Liability.


 


(f)            Matters Involving Third Parties.


 


(i)                                     If any third party notifies an Indemnified Party with
respect to a Third-Party Claim, then the Indemnified Party shall promptly
notify each Indemnifying Party thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party is thereby prejudiced.


 


(ii)                                  Any Indemnifying Party will have the right to defend
the Indemnified Party against the Third-Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third-Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against any
and all Losses the Indemnified Party may suffer arising out of or relating to
the Third-Party Claim, (B) the Indemnifying Party provides the Indemnified
Party with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the
Third-Party Claim and fulfill its indemnification obligations hereunder, (C) the
Third-Party Claim involves money damages and to the extent the Third-Party
Claim does not seek an injunction or other equitable relief and (D) the
Indemnifying Party conducts the defense of the Third-Party Claim actively and
diligently.


 


(iii)                               So long as the Indemnifying Party is conducting the
defense of the Third-Party Claim in accordance with Section 6(e)(ii),
(A) the Indemnified Party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third-Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment on or enter
into any settlement with respect to the Third-Party Claim without the prior
written consent of the Indemnifying Party (not to be unreasonably withheld) and
(C) the Indemnifying Party will not consent to the entry of any judgment
on or enter into any settlement with respect to the Third-Party Claim without
the prior written consent of the Indemnified Party (not to be unreasonably
withheld).


 


(iv)                              In the event any of the conditions in Section 6(e)(ii) is
or becomes unsatisfied, upon at least 10 Business Days’ prior written notice to
the Indemnifying Party setting forth in reasonable detail the unsatisfied
condition and the Basis under which the Indemnified Party believes such
condition to be unsatisfied, (A) the Indemnified Party may defend against,
and consent to the entry of any judgment on or enter into any settlement with
respect to, the Third-Party Claim in any manner it may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (B) the Indemnifying Party
will reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third-Party Claim (including attorneys’ fees and
expenses) and (C) the Indemnifying Party will remain responsible for any
Losses the Indemnified Party may suffer arising out of or relating to the
Third-Party Claim to the fullest extent provided in this Section 6.


 


46
















 


(g)   Additional
Environmental Procedures, Control and Access.


 


(i)            If any
Indemnified Party becomes aware of any claim, the occurrence of any event, or
the existence of any facts, which could become the subject of an
indemnification claim under this Agreement arising out of or relating to, in
the case of a claim by a Buyer Indemnified Party, any Pre-Closing Environmental
Liabilities or breaches of the representations and warranties contained in Section 3(s) or
Section 3(v) or, in the case of a claim by a Seller
Indemnified Party, any Post-Closing Environmental Liabilities (in each case, an
“Environmental Indemnification Claim”),
the Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that
no delay on the part of the Indemnified Party in such notification to any
Indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent that) the Indemnifying Party is
actually prejudiced thereby.


 


(ii)           After receipt
of a notice of an Environmental Indemnification Claim submitted by any Buyer
Indemnified Party, in addition to any rights Seller may have under Section 6(f),
and any indemnity limitations provided under Section 6(e), Seller
shall have the right, but not the obligation, upon written notice to the Buyer
Indemnified Party, to assume the management, control and/or performance of any
investigation, cleanup or other remedial or corrective action (together, “Remedial Actions”) relating to any such
Environmental Indemnification Claim, including having sole authority to make
all final decisions and determinations with respect to any such Remedial
Action; provided that Seller must
notify the Buyer Indemnified Party that it intends to exercise such right
within 120 days of receipt of such notice of an Environmental Indemnification
Claim, and the Buyer Indemnified Party shall manage, control and/or perform
such Remedial Action during the 120 day period prior to any notice by Seller; provided, however, that Seller shall have
the right, but not the obligation, upon written notice to such Buyer
Indemnified Party, to assume such management, control and/or performance of
such Remedial Action at anytime after such 120 day period where (y) the
indemnifiable costs relating to any such Environmental Indemnification Claim
exceed, or are reasonably expected to exceed, on a cumulative basis $400,000 or
(z) the Environmental Indemnification Claim involves a Third Party Claim.


 


(iii)          After receipt
of any notice of any Environmental Indemnification Claim submitted by any
Seller Indemnified Party, in addition to any rights Buyer may have under Section 6(f),
Buyer shall assume the management, control and/or performance of any Remedial
Actions relating to any such Environmental Indemnification Claim; provided however, in the case of any
Remedial Action conducted in response to or otherwise in connection with both a
Pre-Closing Environmental Liability and a Post-Closing Environmental Liability,
this Section 6(g)(iii) shall not apply, and the management,
control and performance of such Remedial Action shall be determined pursuant to
the provisions of

Section 6(g)(ii).


 


(iv)          The party that
manages, controls and/or performs any Remedial Actions relating to any
Environmental Indemnification Claim (the “Controlling
Party”) shall (A) keep the other party (the “Non-Controlling Party”) reasonably informed
of the progress and status of such Remedial Actions, (B) keep accurate
records of the costs of all such Remedial Actions and (C) provide the
Non-Controlling Party with copies of such records upon request.


 


47

















 


(v)           The Controlling Party
shall provide the Non-Controlling Party with drafts of all proposed
remediation plans or other written submissions relating to any Remedial Action
managed, controlled and/or performed hereunder not less than ten business days
prior to the date on which they are to be submitted and shall give the
Non-Controlling Party a reasonable opportunity to comment thereon.  The Non-Controlling Party shall have the
reasonable opportunity to attend any meetings with Governmental Authorities
with respect to such Remedial Actions; provided
that Controlling Party shall have the sole right to negotiate with any
Governmental Authority with respect to the timing, scope and other conditions,
and final resolution of any such Remedial Action.


 


(vi)          The selection by the Controlling Party
of (A) any consultants involved in any Remedial Actions and (B) the
type and scope of any Remedial Action and any related workplans, including the
location of any recovery, monitoring or other remedial wells, shall be subject
to the approval of the Non-Controlling Party, which approval shall not be
unreasonably withheld or delayed.


 


(vii)         Notwithstanding any
approval required under Section 6(g)(vi) above, any Remedial
Actions conducted in connection with any Environmental Indemnification Claim
shall (A) be conducted in accordance with all applicable Environmental,
Health, and Safety Requirements and in a workmanlike manner and (B) where
Seller is the Controlling Party, to the extent reasonably practicable from an
economic and engineering standpoint, avoid undue interference with the ongoing
business operations of the Target Business; provided
that, where the Seller is the Indemnifying Party, in no case shall the Seller
be required to conduct, or indemnify any Buyer Indemnified Party for, any
Remedial Action other than in accordance with the standards and limitations
provided in Section 6(e)(vii).


 


(viii)        The Parties shall
use their reasonable best efforts to cooperate with each other in all matters
relating to any Environmental Indemnification Claim, or any claims by or
against third parties relating thereto, including access provided by Buyer to
information or copies of documentation necessary to respond to any request by
any Governmental Authority; provided that,
if such access would require the Parties to reveal information that would
otherwise be protected by attorney-client privilege or any attorney work product
doctrine, or other privilege pertaining to confidentiality, then Buyer and
Seller shall enter into a reasonable confidentiality agreement, joint defense
or similar agreement governing the terms and conditions of such access and
reasonably calculated to preserve confidentiality and the applicable
privileges.


 


(ix)           In connection with any Environmental
Indemnification Claim, Buyer shall provide access to, and Seller shall have the
right, but not the obligation, at reasonable times and after reasonable notice,
to enter on, the applicable Real Property (A) if Seller is the Controlling
Party, to conduct any Remedial Action (subject to the terms of this Section 6(g))
and (B) if Seller is the Non-Controlling Party, to monitor Buyer’s
performance of any Remedial Action, including taking split samples at its own
expense.


 


(x)            In the event of a disagreement
between the Controlling Party and the Non-Controlling Party regarding that type
and scope of any Remedial Action, the Parties shall consult with their
respective responsible executives who will undertake reasonable best efforts to
resolve the disagreement in good faith.


 


48

















 


(xi)           Notwithstanding any provision to the
contrary herein, without the Indemnifying Party’s written consent, which shall
not be unreasonably withheld, Indemnified Party shall have no right to (A) enter
into any orders or other legally-binding agreements with any Governmental
Authorities, any settlements with any third parties, or any voluntary cleanup
program, or (B) except as required by any Environmental Law, submit any
report to any Governmental Authority, with respect to any presence or release
of Hazardous Materials, non-compliance with Environmental Law, or other
environmental conditions at or relating to any Real Property or the Target
Business that, in each of case (A) and (B) is or may reasonably
become the subject of, in whole or in part, any Environmental Indemnification
Claim; provided that, where
Seller is both the Indemnifying Party and the Controlling Party, Seller shall
not, without Buyer’s written consent, which shall not be unreasonably withheld
or delayed, enter into any orders or other legally binding agreements with any
Governmental Authorities or any settlements with third parties with respect to
such presence, release, non-compliance or environmental condition.


 


(h)   Recoupment
Against General Escrow Amount and Specified Environmental Escrow Amount.


 


(i)            Any
indemnification to which Buyer is entitled under this Agreement as a result of
any Losses, other than Specified Environmental Losses relating to the Owned
Real Property in Prentice, Wisconsin, shall first be made as a payment to Buyer
from the General Escrow Amount pursuant to the terms and conditions of the
General Escrow Agreement and, to the extent that the aggregate amount of such
indemnification exceeds the General Escrow Amount, Seller shall be responsible
therefor.


 


(ii)           Any
indemnification to which Buyer is entitled under this Agreement as a result of
any Specified Environmental Losses relating to the Owned Real Property in (A) Prentice,
Wisconsin or (B) to the extent the General Escrow Amount has been fully
exhausted and/or returned to Seller, in whole or in part, pursuant to the terms
and conditions of the General Escrow Agreement, Zebulon, North Carolina or
Owatonna, Minnesota, shall first be made as a payment to Buyer from the
Specified Environmental Escrow Amount pursuant to the terms and conditions of
the Specified Environmental Escrow Agreement and, to the extent that the
aggregate amount of such indemnification exceeds the Specified Environmental
Escrow Amount, Seller shall be responsible therefor.


 


(i)    Purchase
Price Adjustments.  For
Tax purposes, to the extent permitted by applicable law, any amounts payable
under Section 6(b) or (c) shall be treated by Buyer and
Seller as an adjustment to the Adjusted Purchase Price.


 


(j)    Mitigation.  Buyer and Seller shall cooperate with each
other with respect to resolving any claim or Liability with respect to which
one Party is obligated to provide indemnification hereunder, including by using
commercially reasonable efforts to mitigate or resolve any such claim or
Liability; provided that prior to
the Closing, Buyer shall not be deemed to have relied on any representation or warranty
of Buyer other than those expressly set forth in this Agreement.


 


49

















 


SECTION 7          MISCELLANEOUS


 


(a)   Press
Releases and Public Announcements.  For a period of thirty (30) calendar days
following the Closing Date, no Party shall issue any press release or make any
public announcement relating to the transactions contemplated hereby without
the prior written approval of the other Party; provided,
however, that any Party may (i) make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly traded securities (in which case the
disclosing Party will use its commercially reasonable efforts to advise the
other Party prior to making the disclosure) and (ii) cause its officers,
directors or employees to respond to inquiries relating to the transactions
contemplated hereby to the extent such Party reasonably believes that its
failure to respond to any such inquiry could directly or indirectly materially
adversely effect such Party’s or such Party’s Affiliate’s market reputation.


 


(b)   No
Third-Party Beneficiaries. 
This Agreement shall not confer any rights or remedies upon any Person
other than the Parties, and to the extent expressly set forth herein, their
Affiliates, the Buyer Indemnified Parties, the Seller Indemnified Parties, and
all of their respective successors and permitted assigns.


 


(c)   Entire
Agreement.  This
Agreement, together with the Transaction Agreements, constitutes the entire
agreement among the Parties and supersedes any prior understandings,
agreements, or representations by or among the Parties, written or oral, to the
extent they relate in any way to the subject matter hereof.


 


(d)   Succession
and Assignment.  This Agreement
shall be binding upon and inure to the benefit of the Parties named herein and
their respective successors and permitted assigns.  None of Buyer Parent, CFPI or any Caterpillar
Subsidiary, on the one hand, or Seller Parent, Blount or any Blount Subsidiary,
on the other hand, may assign either this Agreement or any of its rights,
interests or obligations hereunder without the prior written approval of
Blount, in the case of Buyer Parent, CFPI or any Caterpillar Subsidiary, or
CFPI, in the case of Seller Parent, Blount or any Blount Subsidiary.


 


(e)   Counterparts.  This Agreement may be executed in one or more
counterparts (including by means of facsimile), each of which shall be deemed
an original but all of which together will constitute one and the same
instrument, except no Party shall be bound unless all Parties have delivered
their signatures to the other Parties. 
Facsimile transmission of a counterpart hereto shall constitute an
original hereof.


 


(f)    Headings.  The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.


 


(g)   Notices.  Any notice, request, instruction or other
document to be given hereunder by a Party shall be in writing and shall be
deemed to have been given (i) when received if given in person or by
courier or a courier service, (ii) on the date of transmission if sent by
telex, facsimile, electronic mail or other wire transmission (receipt confirmed
(other than with respect to electronic mail)) or (iii) five business days
after being deposited in the mail, certified or registered, postage prepaid:


 


50

















 


If to Buyer:


 


                Caterpillar Forest Products Inc.

100 S. L. White Blvd.

LaGrange, GA 30241

Attn:  John Carpenter – President

Facsimile:  (706) 880-4328


 


with a copy to:


 


                Caterpillar Inc.

100 N.E. Adams St.

Peoria, Illinois 61629-9600

Attn:  Deputy General Counsel

Facsimile:  (309) 675-1795


 


If to Seller:


 


                Blount, Inc.

4909 S.E. International Way

Portland, OR  97222-4679

Attn:  Richard H. Irving, III, Esq.

Facsimile:  (503) 653-4592


 


or such other address as
any Party may from time to time specify by notice to the other Parties in the
manner herein set forth.


 


(h)   Applicable
Law; Choice of Forum; Waiver of Jury Trial.  This
Agreement shall be governed by and construed and enforced in accordance with
the domestic laws of the State of Delaware, United States of America, without
giving effect to any choice or conflict of law provision or rule (whether
of the State of Delaware or any other jurisdiction) that would cause the
application of laws of any jurisdiction other than the State of Delaware,
United States of America.  The Parties
agree that any suit, action or proceeding brought by the Parties in connection
with or arising out of this Agreement shall be brought solely in the United
States District Court of the District of Delaware or, if such court lacks
jurisdiction, in the Delaware Court of Chancery.  Each Party consents to the jurisdiction and
venue of each such court.  Each Party
hereby waives, to the fullest extent permitted by applicable law, any right it
may have to a trial by jury in respect to any litigation directly or indirectly
arising out of, under or in connection with this Agreement, any Transaction
Agreement or any transaction contemplated hereby or thereby.  Each Party (i) certifies that no
representative, agent or attorney of any other Party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce that foregoing waiver and (ii) acknowledges that it and the
other Parties hereto have been induced to enter into this Agreement and the
Transaction Agreements, as applicable, by, among other things, the mutual
waivers and certifications in this Section 7(h).


 


(i)    Amendments
and Waivers.  No amendment
of any provision of this Agreement shall be valid unless the same shall be in
writing and signed by Buyer and Seller. No waiver by any Party of any provision
of this Agreement or any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be valid unless the same
shall be in writing and signed by the Party making such waiver nor shall such
waiver be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant


 


51

















 


hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such default,
misrepresentation, or breach of warranty or covenant.


 


(j)    Severability.  Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.


 


(k)   Expenses.  Except as otherwise provided herein, each
Party shall bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement, the Transaction Agreements and the
transactions contemplated hereby and thereby; provided
that (i) all fees (including any penalties and interest thereon) owed to
any Governmental Authority in Sweden in connection with the transfer of
employment of Swedish Transferred Employees from Seller to Buyer shall be paid
by Seller when due, (ii) all title fees (including any penalties and
interest thereon) owed as of the date hereof in respect of Owned Real Property
shall be paid by Seller when due, (iii) all survey fees (including any
penalties and interest thereon) owed as of the date hereof in respect of Owned
Real Property shall be paid by Buyer when due and (iv) all Transfer Fees
(including any penalties and interest thereon) incurred in connection with the
consummation of the transactions contemplated by this Agreement and the
Transaction Agreements shall be paid by Seller when due.  Buyer shall use commercially reasonable efforts
to minimize any such Transfer Fees.


 


(l)    Construction.  The Parties have participated jointly in the
negotiation and drafting of this Agreement. 
In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this
Agreement.  Any reference to any federal,
state, local, or foreign statute or law shall mean such statute or law, as
amended, codified, replaced, or re-enacted, in whole or in part, and shall also
be deemed to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. 
Unless the context requires otherwise, singular includes plural and vice
versa and any gender includes every gender, and where any word or phrase is
given a defined meaning, any other grammatical form of that word or phrase will
have a correlative meaning.  The word “including”
shall mean including without limitation. 
The Parties intend that each representation, warranty, and covenant
contained herein shall have independent significance.  If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there exists
another representation, warranty, or covenant relating to the same subject
matter (regardless of the relative levels of specificity) that the Party has
not breached shall not detract from or mitigate the fact that the Party is in
breach of the first representation, warranty, or covenant.  Except as provided in Section 6(j),
any due diligence review, audit or other investigation or inquiry undertaken or
performed by or on behalf of Buyer shall not limit, qualify, modify or amend
the representations, warranties or covenants of, or indemnities by, Seller made
pursuant to this Agreement, irrespective of the knowledge and information
received (or which should have been received) therefrom by Buyer.


 


(m)  Incorporation
of Exhibits and Schedules. 
The Exhibits and Schedules to this Agreement are incorporated herein by
reference and made a part hereof.


 


(n)   Specific
Performance.  Except as
otherwise provided in Section 6(e)(iii), each Party acknowledges
and agrees that the other Party would be damaged irreparably in the event any
provision of this Agreement is not performed in accordance with its specific
terms or otherwise is breached, so that a Party shall be entitled to injunctive
relief to prevent breaches of this


 


52

















 


Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in addition to
any other remedy to which such Party may be entitled, at law or in equity.  In particular, except as otherwise provided
in Section 6(e)(iii), the Parties acknowledge that the Target
Business is unique and recognize and affirm that in the event Seller breaches
this Agreement, money damages would be inadequate and Buyer would have no
adequate remedy at law, so that Buyer shall have the right, in addition to any
other rights and remedies existing in its favor, to enforce its rights and the
other Parties’ obligations hereunder not only by action for damages but also by
action for specific performance, injunctive, and/or other equitable relief.


 


(o)   Joint and
Several Obligations.  The obligations
under this Agreement of Blount and the Blount Subsidiaries, on the one hand,
and CFPI and the Caterpillar Subsidiaries, on the other hand, shall be joint
and several; provided that
neither any Blount Subsidiary nor any Caterpillar Subsidiary shall have any
Liability hereunder for damages in excess of the amount set forth next to its
name on Section 7(o) of the Disclosure Schedule.  For the avoidance of doubt, the obligations
under this Agreement of each of Blount, on the one hand, and CFPI, on the other
hand, shall be joint and several without limitation.


 


(p)   Governing
Language.  This Agreement
has been negotiated and executed by the Parties in English.  In the event any translation of this
Agreement is prepared for convenience or any other purpose, the provisions of
the English version shall prevail.


 


(q)   Remittances.  All remittances, payments, mail and other
communications relating to the Acquired Assets or the Assumed Liabilities
received by Seller at any time after the Closing Date shall be promptly turned
over to Buyer by Seller. All remittances, payments, mail and other
communications relating to any asset that is not an Acquired Asset or any
liability that is not an Assumed Liability received by Buyer at any time after
the Closing Date shall be promptly turned over to Seller by Buyer.


 


[Signatures appear on the next page.]


 


53

















 


IN WITNESS WHEREOF, the
Parties hereto have executed this Agreement as of this 5th day of November,
2007.


 


 


	
  Blount, Inc

  	
   

  	
  Blount International, Inc. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Calvin E. Jenness 

  	
   

  	
  By:

  	
  /s/ Calvin E. Jenness 

  
	
  Name:

  	
  Calvin E. Jenness  

  	
   

  	
  Name:

  	
  Calvin E. Jenness  

  
	
  Title:

  	
  Senior Vice President and  
 Chief Financial Officer

  	
   

  	
  Title:

  	
  Senior Vice President and  
 Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   “Blount Subsidiaries”

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Omark Properties, Inc.  

  	
   

  	
  OOO Blount  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Richard H. Irving, III 

  	
   

  	
  By: 

  	
  /s/ Richard H. Irving, III 

  
	
  Name:

  	
  Richard H. Irving, III 

  	
   

  	
  Name:  

  	
  Richard H. Irving, III

  
	
  Title:

  	
  Vice President

  	
   

  	
  Title:

  	
  Authorized Signatory

  
	
   

  	
   

  	
   

  
	
  Blount Industriales Ltda 

  	
   

  	
  Svenska Blount AB  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Calvin E. Jenness  

  	
   

  	
  By: 

  	
  /s/ Kenneth O. Saito

  
	
  Name:

  	
  Calvin E. Jenness

  	
   

  	
  Name: 

  	
  Kenneth O. Saito 

  
	
  Title:

  	
  Authorized Signatory

  	
   

  	
  Title:

  	
  Director

  
						



 


[Signature page to the Asset
Purchase Agreement]


 


54

















 


	
  Caterpillar Forest Products Inc.  

  	
   

  	
  Caterpillar Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:  

  	
  /s/ John T. Carpenter

  	
   

  	
  By:

  	
  /s/ John T. Carpenter

  
	
  Name:

  	
  John T. Carpenter

  	
   

  	
  Name:

  	
  John T. Carpenter

  
	
  Title:

  	
  President

  	
   

  	
  Title:

  	
  General Manager - Caterpillar Forest  
 Products

  
	
   

  	
   

  	
   

  
	
  “Caterpillar
  Subsidiaries”

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Caterpillar Brasil Ltda. 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Natal Garcia 

  	
   

  	
   

  
	
  Name: 

  	
  Natal
  Garcia

  	
   

  	
   

  
	
  Title:

  	
  CBL
  Managing Director

  	
   

  	
   

  



 


[Signature page to the Asset
Purchase Agreement]


 


55