**Exhibit 10.(q)**

** **

**EXECUTION COPY**

** **

**ASSET PURCHASE AGREEMENT**

** **

**by and among**

** **

**CATERPILLAR FOREST PRODUCTS INC.,**

**CATERPILLAR INC.**

**and the Caterpillar Subsidiaries set forthherein**

** **

**and**

** **

**BLOUNT, INC.,**

**BLOUNT INTERNATIONAL, INC.**

**and the Blount Subsidiaries set forth herein**

** **

**November 5, 2007**

 

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| 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 |

 

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|           | (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     |

 

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|           | (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                           |

 

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**ASSET PURCHASEAGREEMENT**

** **

This Asset Purchase Agreement(this “**Agreement**”) is entered intoas of November 5, 2007, by and among Caterpillar Forest Products Inc., aDelaware corporation (“**CFPI**”),Caterpillar Inc., a Delaware corporation (“**BuyerParent**”), the direct and indirect subsidiaries of Buyer Parent setforth on the signature page hereto (the “**CaterpillarSubsidiaries**” 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 atransaction in which Buyer will purchase all of the assets (and assume certainof the liabilities) primarily relating to Seller’s Industrial Power EquipmentGroup – Forestry Division in return for cash.

 

Now, therefore, inconsideration of the premises and the mutual promises herein made, and inconsideration of the representations, warranties and covenants hereincontained, the Parties agree as follows:

 

# **SECTION 1          DEFINITIONS**

# ** **

“**Accountants**” means Deloitte & Touche LLP or, ifDeloitte & Touche LLP is unable or unwilling to act, such othernationally recognized independent public accounting firm mutually selected inwriting by Buyer and Seller.

 

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

 

“**Accounts Receivable**” means the accounts receivable, and anyother accounts, notes and other receivables, of the Target Business, calculatedusing line items and methodology consistent with the Target Business FinancialStatements.  Such line items comprising “AccountsReceivable” are set forth on Exhibit B.

 

“**Accrued Expenses**” means the accrued expenses of the TargetBusiness, calculated (a) using line items and methodology consistent withthe Target Business Financial Statements and (b) notwithstandingdifferences between actual line item values and reserves or other estimates,subject to normal and recurring year-end adjustments (to the extent Sellercalculated such reserves or other estimates using methodology consistent withthe 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, productliability or Taxes other than accrued property Taxes (and Exhibit Cdoes not include such items).

 

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

 

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primarily in connection withthe operation of the Target Business throughout the world where the TargetBusiness operates, the goodwill associated therewith, licenses and sublicensesgranted and obtained with respect thereto, and rights thereunder, remediesagainst infringements thereof, and rights to protection of interests thereinunder the laws of any applicable jurisdictions, (j) leases and subleasesand rights thereunder, in each case primarily related to the Target Business, (k) therights 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 relatingto the payment of Taxes, but only if and to the extent such Taxes are treatedas Assumed Liabilities) in each case arising primarily from the operation ofthe Target Business, (m) franchises, approvals, permits, flex engineallowances, licenses, orders, registrations, certificates, variances, andsimilar rights obtained from governments and governmental agencies, in eachcase primarily relating to the Target Business, (n) copiers, data cablingand 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, andother such devices along with the computer software, except where softwarelicensing restrictions limit assignment, loaded on or used by the immediatelypreceding devices, in each case primarily relating to the Target Business, (o) books,records, ledgers, files, documents, correspondence, lists, plats, architecturalplans, drawings, and specifications, advertising and promotional materials,studies, product support and training materials and other printed or writtenmaterials, in each case to the extent primarily related to the Target Business butnot including personnel records (except as set forth in the parenthetical inclause (viii) below), and (p) all assets of, or assets relating to,any Employee Benefit Plan that are transferred to any employee benefit planmaintained by Buyer or any of its Affiliates, as expressly provided in Section 5(h);*provided*,*however*, that the Acquired Assets shallnot include (i) the charter, qualifications to conduct business as aforeign entity, arrangements with registered agents relating to foreignqualifications, taxpayer and other identification numbers, seals, minute books,stock transfer books, blank stock certificates, and other documents relating tothe organization, maintenance, and legal existence of any of Seller Parent,Blount or any Blount Subsidiary, (ii) any of the rights of Seller underthis Agreement or any Transaction Agreement (or under any side agreement towhich Seller Parent, Seller or any Blount Subsidiary, on the one hand, or CFPIor any Caterpillar Subsidiary, on the other hand, are parties that is enteredinto on or after the date of this Agreement), (iii) the assets primarilyrelating to Gear Products, (iv) the Menominee Facility, (v) theExcluded Contracts, (vi) marketable securities, (vii) the “Blount”tradename and the Argentina Trademarks, (viii) personnel records (otherthan (A) as required to be transferred to Buyer under applicable Law, (B) forwhich the applicable employee has consented to such transfer to Buyer or (C) asset forth on Section 1(a) of the Disclosure Schedule), (ix) documents,files and records related to pending, threatened, active or closed productliability actions and (x) all assets of or assets relating to any EmployeeBenefit Plan, except to the extent such assets are transferred to an employeebenefit plan maintained by Buyer or any of its Affiliates, as expresslyprovided in Section 5(h).

 

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

 

“**Adjusted Purchase Price**” means the Purchase Price, as adjustedpursuant 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 entitydirectly or indirectly controlling, controlled by or under common control withsuch Person, where “control” means a direct or indirect ownership interest ofmore than 50% in such legal entity.

 

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

 

“**Applicable Rate**” means the blended prime rate as publisheddaily 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 inArgentina (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 orasbestos-containing materials present or allegedly present (a) in anyproduct manufactured, sold, marketed, installed, transported, or distributed bythe Target Business on or prior to the Closing Date (regardless of whether anyexposure to such asbestos or asbestos-containing materials occurred prior to,on or after the Closing Date), or (b) at any Real Property, or in anyfacility or structure thereat, to the extent any exposure to such asbestos orasbestos-containing materials occurred prior to or on the Closing Date,including the case of each of (a) and (b), any such Liabilities arisingfrom, relating to or based on any personal or bodily injury or illness.

 

“**Assumed Contracts**” means (a) all written contracts (andsuch oral or other contracts for which Seller provides Buyer a summary of thematerial terms within ten Business Days of the Closing Date)  primarily relating to the Target Business andhaving an aggregate value, or providing for obligations, contingent orotherwise, 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 eachsuch Material Contract, including all material amendments thereto, has beendelivered to Buyer within ten Business Days of the Closing, (c) allunfulfilled customer purchase orders listed on Section 3(m)(ii) ofthe Disclosure Schedule (except that orders for service parts need not belisted on such schedule to be deemed an Assumed Contract hereunder) and providedto Buyer within ten Business Days of the Closing Date and (d) allunfulfilled supplier purchase orders, but only to the extent listed on Section 3(m)(iii) ofthe Disclosure Schedule (except that orders for service parts need not belisted on such schedule to be deemed an Assumed Contract hereunder).  Notwithstanding the foregoing, “AssumedContracts” do not include the Excluded Contracts.

 

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

 

“**AssumedLiability**” or “**Assumed Liabilities**”means only (a) the Accounts Payable, (b) the Accrued Expenses, (c) theCovered Employee Liabilities, (d) obligations in respect of the BankAccounts, (e) subject to clause (viii) below, obligations of Sellerunder the Assumed Contracts, (f) Liabilities relating to the TargetBusiness that arise after the Closing (including any Post-Closing Asbestos,Silica, and Welding Rod Liabilities and any Post-Closing EnvironmentalLiabilities) and (g) Liabilities relating to the Target Business thatarise after the Closing in connection with any breach of contract, tort orviolation of any Law.  For clarification,“Assumed Liabilities” shall not include any other past, current or futureLiability or Loss including, among other things, (i) contingent,off-balance sheet, unasserted claims or Liabilities of a type for which thereis no provision for accrual (other than in respect of Assumed 

 

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Contracts), ineach case arising on or prior to the Closing, (ii) any Asbestos Liability,Silica Liability or Welding Rod Liability, (iii) any Pre-ClosingEnvironmental Liabilities, (iv) any and all past, current or futureLiability for product liability arising from products wholly manufactured on orprior to the Closing Date, (v)  Liabilities for infringement of thirdparty Intellectual Property rights arising from products wholly manufactured onor prior to the Closing Date, (vi) any and all past, current or futureLiability of Seller Parent or Seller for Taxes (other than Tax Liabilitiesrelating to the Target Business that arise after the Closing), (vii) anyand all past, current or future Liability of Seller Parent or Seller for unpaidTaxes of any Person under Reg. Section 1502-6 (or any similar provision ofstate, local, or foreign law), as a transferee or successor, by contract orotherwise (other than Tax Liabilities relating to the Target Business that ariseafter the Closing), (viii) Liabilities relating to the Target Businessthat arise prior to the Closing in connection with any breach of contract(other than a judgment or settlement (with the consent of Buyer, such consentnot to be unreasonably withheld or delayed) for specific performance in respectof any Assumed Contract), tort or violation of any Law, (ix) any and allpast, current or future obligation of Seller to indemnify any Person by reasonof the fact that such Person was a director, officer, employee, or agent ofSeller or was serving at the request of Seller as a partner, trustee, director,officer, employee, or agent of another entity (whether such indemnification isfor judgments, damages, penalties, fines, costs, amounts paid in settlement,losses, expenses, or otherwise and whether such indemnification is pursuant toany statute, charter document, bylaw, agreement, or otherwise), (x) TransferFees, (xi) any and all past, current or future Liability of Seller Parentor Seller for costs and expenses incurred in connection with this Agreement andthe transactions contemplated hereby, (xii) any Liability or obligation ofSeller under this Agreement or the Transaction Agreements or under any sideagreement to which Seller Parent, Blount or any Blount Subsidiary, on the onehand, 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 inconnection with any Assumed Liability, (xiv) any and all past, current orfuture Liability relating to the Target Business arising out of Seller’sparticipation prior to the Closing in the U.S. Environmental Protection Agencypercent-of-production allowance flexibility or similar programs contained in 40CFR 89.102, (xv) any and all past, current or future Liability of Seller to theextent relating to a warranty campaign not being transferred to Buyer hereunderor under any Transaction Agreement, including those warranty campaigns setforth on Section 1(b) of the Disclosure Schedule,(xvi) any and all past or current royalty payments due under the licenseagreements related to the Hamby patents, Quadco license agreements, Fabtekpatents or the Stone and Wood patents, (xvii) any and all past, current orfuture Liability to the extent relating to the Menominee Facility,(xviii) any and all past, current or future Liability arising from thedesign and certification existing as of the Closing of Seller’s RolloverProtection Structure, Falling Object Protection Structure or OperatorProtection System, as applicable, in each case not including materials andconstruction in respect thereof, (xix) any and all past, current or futureLiability with respect to any Target Business Employee, other than the CoveredEmployee Liabilities, (xx) any and all past, current or future Liabilityarising from Seller’s failure to comply with any bulk transfer laws of anyapplicable jurisdiction in connection with the transactions contemplatedhereby, (xxi) any and all past, current or future bonus or other paymentrelated to successful completion of the transactions contemplated hereunder,(xxii) any other Liabilities relating to the Target Business that arise priorto the Closing except to the extent any such Liability would otherwise be anAssumed Liability hereunder, (xxii) any Losses resulting from theforegoing items (i) through (xxii), in each case other than Liabilities ofBuyer or its Affiliates pursuant to the Alliance Agreements.  For further clarification, for purposes ofthe definition of “Assumed Liabilities”, a Liability shall be deemed to “arise”when the event giving rise to such Liability occurs.

 

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“**August 31, 2007 Financial Statements**” means the followingdocuments attached hereto as Exhibit H: unaudited consolidated andconsolidating balance sheets and statements of income and cash flows as of andfor the eight-month and two-month periods ended August 31, 2007, in eachcase for the Target Business and prepared using methodology consistent with theTarget Business Financial Statements (except for normal and recurring year-endadjustments).

 

“**August 31, 2007 Balance Sheet**” means the balance sheetincluded within the August 31, 2007 Financial Statements.

 

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

 

“**August 31, 2007 Inventory Adjustment**” means (a) ifthe August 31, 2007 Inventory is less than $21,000,000, a reduction of thePurchase Price by the amount that the August 31, 2007 Inventory is lessthan $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, anincrease of the Purchase Price by the amount that the August 31, 2007Inventory is greater than $21,000,000 on a dollar-for-dollar basis inaccordance 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 rightsand obligations in respect thereof, of Blount or any of the Blount Subsidiariesthat relate solely to the Target Business, other than payroll accounts and thebank account of Seller in Sweden, and that are set forth on Section 3(u) ofthe 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 thebasis 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 andits 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 itsgeneral ledger to the extent relating to the Target Business.

 

“**Caterpillar Contract Consent Costs**” means anyout-of-pocket costs (other than Contract Consent Fees) incurred by CFPI or itsAffiliates solely in connection with the 

 

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

 

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

 

“**Closing Date**” means the date of this Agreement.

 

“**Closing Inventory**” means the aggregate value of the Inventoryat the close of business on October 31, 2007 (as adjusted for activityoccurring until immediately prior to the Closing), calculated (a) basedupon the physical count of Inventory to be conducted by Seller (with theassistance of its accountants and in the presence of Buyer representatives andits accountants) using Seller’s historical methodology for conducting such aphysical count and beginning on November 1, 2007 and (b) usingmethodology consistent with the Target Business Financial Statements (includingwith 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 anyLiabilities not assumed by Buyer), in each case (i) at the close ofbusiness on the Business Day immediately preceding the Closing Date, (ii) calculatedusing methodology consistent with the Target Business Financial Statements and (iii) calculatedwithout giving effect to any items related to Taxes other than property Taxes.

 

“**Closing Statement of Inventory**” means a statement showing thecomputation of Closing Inventory.  Anexample Closing Statement of Inventory is attached as Exhibit F.

 

“**Closing Statement of Net Working Capital**”**means a statement showing the computationof Closing Net Working Capital.  Anexample Closing Statement of Net Working Capital is attached as Exhibit E.

 

“**Closing Statements**” means the Closing Statement of Net WorkingCapital and the Closing Statement of Inventory.

 

“**COBRA**” means the requirements of Part 6 of Subtitle B ofTitle 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 Agreementrelating to the transactions contemplated hereby dated as of April 5, 2007between Blount and Buyer Parent.

 

“**Contract Consent Fees**” means any fees paid or payable toparties to the Assumed Contracts other than Seller or Buyer solely inconnection with the assignment by Seller to Buyer of the Assumed Contracts, butnot including any payments, fees or expenses due as a result of rate changes ormodifications to the terms of such Assumed Contracts.

 

“**Controlled Group Liability**”****hasthe meaning set forth in Section 3(r).

 

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

 

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“**Covered Employee Liabilities**” means all Liabilities withrespect to the Target Business Employees that (a) CFPI has explicitlyagreed to assume pursuant to Section 5(h) or (b) areAccrued Expenses.

 

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

 

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

 

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

 

“**Employee Benefit Agreement**”****meanseach employment, consulting, retention, severance, termination, change incontrol, bonus or similar agreement or arrangement between Seller and anyTarget Business Employee, other than (a) any agreement or arrangementmandated by applicable Law and (b) any Employee Benefit Plan.

 

“**Employee Benefit Plan**” means any “employee benefit plan” (assuch term is defined in ERISA Section 3(3) and all applicableregulations) and any other employee benefit plan, program or arrangement of anykind, including any defined benefit or defined contribution plan, stockownership 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 orarrangement, vacation pay, sickness, disability, or death benefit plan (whetherprovided through insurance, on a funded or unfunded basis or otherwise),medical or life insurance plan providing benefits to employees, retirees orformer 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 Sellermaintains or sponsors (or to which Seller contributes or has any obligation tocontribute) for the benefit of any Target Business Employee, but excluding anyplan, program or arrangement mandated by applicable Law.

 

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

 

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

 

“**Environmental Indemnification Claim**” has the meaning set forthin Section 6(g).

 

“**ERISA**” means the Employee Retirement Income Security Act of1974, as amended, and all applicable regulations.

 

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

 

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“**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*AccruedExpenses (excluding any Liabilities not assumed by Buyer).

 

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

 

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

 

“**Excluded Contracts**” means (a) those contractsspecifically listed or categorized on Exhibit J and (b) anyother contract that is not an Assumed Contract.

 

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

 

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

 

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

 

“**GAAP**” means United States generally accepted accountingprinciples 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 Oklahomacorporation and wholly owned subsidiary of Blount.

 

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

 

“**General Escrow Agreement**” means the General Escrow Agreementdated 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 orforeign 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 ofexistence, use, manufacture, disposal, transportation, spill, release or effectis regulated as a contaminant, or as a threat or potential threat to humanhealth, safety or the environment by any Environmental, Health, and SafetyRequirement, including  hydrocarbons,petroleum, gasoline, crude oil or any products or by-products thereof,pentachlorophenol (“PCP”), chloromethane, benzene, naphthalene, lead and anyother substances, metals, materials, wastes, pollutants and the like which aredefined or characterized as hazardous or toxic by any applicable Environmental,Health, and Safety Requirement.

 

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“**Improvements**” means buildings, structures, fixtures, buildingsystems 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 otherbuilding systems, environmental control, remediation and abatement systems,sewer, storm and waste water systems, irrigation and other water distributionsystems, parking facilities, fire protection, security and surveillancesystems, and wiring and cable installations, utility installations andlandscaping present on any Real Property.

 

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

 

“**Indemnified Party**” means whomever of the Buyer IndemnifiedParties, 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 ofindemnification is or may be asserted pursuant to Section 6.

 

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

 

“**Inventory**” means raw materials and supplies, manufactured andpurchased parts, goods in process and finished goods, service parts,consignment inventory and other inventory of the Target Business, in each casenet of reserves.  For purposes of theInventory Adjustment, “Inventory” shall be calculated using methodologyconsistent with the Target Business Financial Statements.

 

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

 

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

 

“**Knowledge**” means information or facts that a Party’s officersand responsible employees know or should have known after due inquiry andinvestigation.

 

“**Labor Organization**” means any organization of any kind,including any union or any agency or employee representation committee, inwhich employees participate and which exists for the purpose, in whole or inpart, 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 andall Owned Real Property Leases.

 

“**Law**” means any law (including any zoning law), statute, rule orregulation,  including engineeringstandards applicable to products manufactured by the Target Business havingforce and effect of law as of the date hereof (if any), and any judgment ororder of any federal, state, 

 

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local or foreign governmentalagency, commission, bureau, authority, court or arbitration tribunal.

 

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

 

“**Leased Real Property**” means all leasehold or subleaseholdestates and other rights to use or occupy any land or Improvements held bySeller 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 allamendments, extensions, renewals, and guaranties with respect thereto, pursuantto which Seller has conveyed an interest in, or right to use, any portion ofthe Leased Real Property.

 

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

 

“**Liabilities**” means any and all liabilities or obligations ofwhatever kind or nature (whether known or unknown, whether asserted orunasserted, 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 liabilityrelating to operations, debt, property used, leased or owned, infringement,contracts, safety, product warranty, recalls, product improvement programs,product liability, environmental, Tax, litigation, dealer termination, pensionand 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 andpayable or for Taxes that the taxpayer is contesting in good faith throughappropriate proceedings that are properly reflected in the FinancialStatements, (b) purchase money liens and liens securing rental paymentsunder capital lease arrangements, (c) other liens arising in the OrdinaryCourse of Business and not incurred in connection with the borrowing of moneyand (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 anyobligation to pay any of the foregoing.

 

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

 

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

 

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“**Menominee Facility**” means Seller’s real and personal propertyand 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 theApplicable Rate on the Net Working Capital Adjustment, accrued from the ClosingDate 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 ofbusiness consistent with past custom and practice (including with respect toquantity, quality and frequency).

 

“**Owned Real Property**” means all land, together with allImprovements thereon or thereto, and all easements and other rights andinterests appurtenant thereto (including air, oil, gas, mineral, and waterrights), owned by Seller and used primarily in the operation of the TargetBusiness.  Owned Real Property does notinclude the Menominee Facility.

 

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

 

“**Party**” means CFPI, Buyer Parent and the CaterpillarSubsidiaries, on the one hand, and Blount, Seller Parent and the BlountSubsidiaries, on the other hand.

 

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

 

“**Permitted Encumbrances**” means, with respect to each parcel ofReal Property, (a) real estate taxes, assessments and other governmentallevies, fees, or charges imposed with respect to such Real Property that are (i) notdue and payable as of the Closing Date or (ii) being contested in goodfaith and for which appropriate reserves have been established in accordancewith GAAP, (b) mechanics’ liens and similar liens for labor, materials, orsupplies provided with respect to such Real Property incurred in the OrdinaryCourse of Business for amounts that are (i) not due and payable as of theClosing Date or (ii) being contested in good faith and for whichappropriate reserves have been established in accordance with GAAP, (c) zoning,building codes and other land use laws that are regulating the use or occupancyof such Real Property or the activities conducted thereon which are imposed byany Governmental Authority having jurisdiction over such Real Property and arenot violated by the current use or occupancy of such Real Property or theoperation of the Target Business as currently conducted by Seller thereon, (d) easements,covenants, conditions, restrictions, and other similar matters of recordaffecting title to such Real Property that do not or would not impair the useor occupancy of such Real Property in the operation of the Target Business ascurrently conducted by Seller thereon and (e)

 

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liens that have been placed byany developer, landlord, or other third party on the Leased Real Property andsubordination or similar agreements relating thereto.

 

“**Person**” means an individual, a partnership, a corporation, alimited liability company, an association, a joint stock company, a trust, ajoint venture, an unincorporated organization, any other business entity, or agovernmental entity (or any department, agency, or political subdivisionthereof).

 

“**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 allLiabilities arising under any applicable Environmental, Health, and SafetyRequirements to the extent resulting from or in connection with the operationof the Target Business on or prior to the Closing, including any and allLiabilities arising out of (a) any non-compliance with any Environmental,Health, and Safety Requirements, or with any Permits required thereunder, tothe extent resulting from or in connection with the operation of the TargetBusiness on or prior to the Closing, (b) any presence or release ofHazardous Materials at, on, in or under any Real Property, to the extentexisting or occurring on or prior to the Closing and (c) any off-sitetransportation or disposal, or arrangement for transportation or disposal, ofany Hazardous Materials by or in connection with the operation of the TargetBusiness on or prior to the Closing; *provided*that Pre-Closing Environmental Liabilities shall not include any Liabilitiesarising 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 portionthereof) ending on or before the Closing Date.

 

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

 

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

 

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

 

“**Prepaid Expenses**” means the prepaid expenses of the TargetBusiness, calculated (a) using line items and methodology consistent withthe Target Business Financial Statements and (b) notwithstandingdifferences between actual line item values and reserves or other estimates,subject to normal and recurring year-end adjustments (to the extent Sellercalculated such reserves or other estimates using methodology consistent withthe 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 LeasedReal 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 GovernmentalAuthorities, boards of fire underwriters, associations or any other entityhaving jurisdiction over the Real Property that are required to use or occupythe Real Property or operate the Target Business as currently conducted bySeller 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 Affiliatesand 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 auditedconsolidated balance sheets and statements of income and cash flows of SellerParent as of and for the fiscal years ended December 31, 2004, December 31,2005, December 31, 2006.

 

“**Silica Liability**” means any Liability arising from, relatingto, or based on the exposure or alleged exposure of silica present or allegedlypresent (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 priorto, on or after the Closing), or (b) at any Real Property, or in anyfacility or structure thereat, to the extent any exposure to such silicaoccurred 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 orbodily injury or illness related to silica.

 

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

 

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

 

“**Specified Environmental Escrow Agreement**” means the SpecifiedEnvironmental Escrow Agreement dated as of the date hereof among Seller, Buyerand the Specified Environmental Escrow Agent.

 

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

 

“**Specified Environmental Losses**” means any Losses arising fromany Pre-Closing Environmental Liabilities (a) at the Owned Real Propertyin Prentice, Wisconsin or (b) in connection with any release of HazardousMaterials at, on, in, or under any Owned Real Property in Zebulon, NorthCarolina or Owatonna, Minnesota, (i) to the extent such release, to theKnowledge of Seller as of the Closing Date, existed or occurred thereat and (ii) asto which Seller has, prior to the Closing, acknowledged in writing itsobligation to provide indemnification therefor.

 

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

 

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

 

“**Target Business**” means Seller’s Industrial Power EquipmentGroup – Forestry Division.  For theavoidance 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 employeeof Seller that, as of the Closing, is primarily engaged in the Target Business,other than the individuals set forth on Section 1(e) of theDisclosure 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’semployment with Seller, was primarily engaged in the Target Business.

 

“**Target Business Financial Statements**” means the financialstatements 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, windfallprofits, environmental (including taxes under Code Section 59A), customs,duties, capital stock, franchise, profits, withholding, social security (orsimilar), unemployment, disability, real property, personal property, sales,use, ad valorem, transfer, registration, value added, alternative or add-onminimum, estimated, or other tax of any kind whatsoever, including anyinterest, penalty, or addition thereto, whether disputed or not and includingany obligations to indemnify or otherwise assume or succeed to the Taxliability of any other Person.

 

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

 

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

 

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“**Third-Party Claim**” means a claim, demand, suit, proceeding orinvestigation of a Person that is not a Party including, but not limited to, a federalstate or local government agency (or instrumentality thereof) concerning anymatter that may give rise to a claim for indemnification against a Partypursuant to the terms of Section 6.

 

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

 

“**Transfer Fees**” mean the Transfer Taxes and all transfer andconsent fees paid or payable as a result of the transactions contemplated underthis Agreement and the Transaction Agreements, including any Contract ConsentFees.

 

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

 

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

 

“**WARN Act**” means the Worker Adjustment and RetrainingNotification Act of 1988, as amended, or any similar foreign, state, or locallaw, regulation, or ordinance.

 

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

 

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

 

# **SECTION 2**                               BASICTRANSACTION

# ** **

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

##  

## (b)         **Liabilities**.  On and subject to the terms and conditions ofthis Agreement, as of the Closing, Buyer hereby assumes and becomes responsiblefor the Assumed Liabilities.  Buyer will notassume or have any responsibility with respect to, and Seller shall retain, anyLiability, Loss or obligation of Seller not expressly included within thedefinition of “Assumed Liabilities”.  Inconnection with Closing, Buyer and Seller each hereby agree to execute anddeliver to the other Party or any applicable third party such assumptionagreements or other instruments as may be necessary or reasonably requested bythe other Party to effectuate the provisions of this Section 2(b) orto transfer and assign the Assumed Contracts.

 

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

##  

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

##  

### (i)                                     *minus* the General Escrow Amount (whichBuyer shall transfer to the General Escrow Agent pursuant to the terms andconditions of the General Escrow Agreement);

###  

### (ii)                                  *minus* the Specified Environmental EscrowAmount (which Buyer shall transfer to the Specified Environmental Escrow Agentpursuant to the terms and conditions of the Specified Environmental EscrowAgreement);

###  

### (iii)                               *plus or minus*the Estimated Net WorkingCapital Adjustment;

###  

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

###  

### (v)                                 *minus* the Post-Retirement Amount.

###  

## (e)          **Net Working Capital Adjustment**.  As used herein, the term “**Net Working Capital Adjustment**” means (a) theClosing Net Working Capital *minus*(b) the Estimated Net Working Capital. If the Net Working Capital Adjustment is a positive number, then Buyershall pay to Seller the Net Working Capital Adjustment *plus*the Net Working Capital AdjustmentInterest.  If the Net Working CapitalAdjustment is a negative number, then Seller shall pay to Buyer the Net WorkingCapital Adjustment (multiplied by negative one) *plus* the Net Working Capital Adjustment Interest.  In either case, such payment shall be madeprior to the tenth Business Day following the final determination of theClosing Net Working Capital pursuant to Section 2(g) by wiretransfer or other delivery of immediately available funds to such bank accountas such other Party shall specify.

##  

## (f)            **Inventory Adjustment**.  As used herein, the term “**Inventory Adjustment**” means (i) theClosing Inventory *minus* (ii) theAugust 31, 2007 Inventory *plus*(iii) the excess, if any, of the August 31, 2007 Inventory over$25,000,000.  If the Inventory Adjustmentis a positive number, then Buyer shall pay to Seller the Inventory Adjustment *plus*the Inventory Adjustment Interest; *provided* that the aggregate increase tothe Purchase Price pursuant to Sections 2(d)(iv) and (f) shallnot exceed $4,000,000 *plus* theInventory Adjustment Interest.  If theInventory Adjustment is a negative number, then Seller shall pay to Buyer theInventory Adjustment (multiplied by negative one) *plus* the Inventory Adjustment Interest.  In either case, such payment shall be madeprior to the tenth Business Day following the final determination of theClosing Inventory pursuant to Section 2(g) by wire transfer orother delivery of immediately available funds to such bank account as suchother Party shall specify.

##  

## (g)         **Adjustment Calculation and Dispute Resolution**.  Seller will deliver each of the ClosingStatements to Buyer within 60 days after the Closing Date.  If, within 30 days following delivery of aClosing Statement, Buyer has not given Seller a Buyer’s Notice (as definedbelow), then such Closing Statement shall be final, conclusive and binding onthe Parties.  If, within 30 days ofreceiving a Closing Statement, Buyer delivers to Seller a written notice of anobjection with respect to such Closing Statement (“**Buyer’s Notice**”), then the Parties will meet to discuss suchobjection and attempt in good faith to reach a mutually satisfactory resolutionwithin 30 

 

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## days following the date of Buyer’sNotice.  Any Buyer’s Notice shall (i) specifyin reasonable detail the nature of any objection so asserted and (ii) onlyinclude objections based on mathematical or factual errors or based on theClosing Net Working Capital not being calculated in accordance with Exhibit Eor the Closing Inventory not being calculated in accordance with Exhibit F,as applicable; *provided* that, inthe case of the Closing Statement of Inventory, Buyer shall not object to theresults of the physical count of Inventory described in the definition of “ClosingInventory”.  If the Parties cannotresolve such issues within 30 days after the date of a Buyer’s Notice, then theParties will submit the issues in dispute to the Accountants for resolution andfinal determination of Closing Net Working Capital or Closing Inventory, asapplicable.  If the issues in dispute aresubmitted to the Accountants for resolution, (A) each Party will furnishto the Accountants such workpapers and other documents and information relatingto the disputed issues as the Accountants may request and are available to thatParty or its Affiliates (or its independent public accountants), and will beafforded the opportunity to present to the Accountants any material relating tothe determination and, so long as a representative of the other Party ispresent, to discuss the determination with the Accountants, (B) theAccountants shall be instructed to render their determination of all matterssubmitted to it within 30 days following submission and (C) thedetermination by the Accountants, as set forth in a notice delivered to theParties by the Accountants, will be binding and conclusive on the Parties.  The scope of the disputes to be resolved bythe Accountants shall be limited to whether the Closing Net Working Capital wascalculated consistently with Exhibit E or the Closing Inventory wascalculated consistently with Exhibit F, as applicable, and whetherthere were mathematical or factual errors in the applicable Closing Statement,and the Accountants are not to make any other determination (including withrespect to the physical count of Inventory described in the definition of “ClosingInventory”).  The fees and expenses ofthe Accountants incurred pursuant to this Section 2(g) shallbe borne by Buyer and Seller in inverse proportion as they may prevail onmatters resolved by the Accountants, which proportionate allocation also shallbe determined by the Accountants at the time the determination of theAccountants is rendered on the merits of the matter submitted.  The fees and disbursements of Buyer’saccountants incurred in connection with their review of the Closing Statementsand preparation and review of any Buyer’s Notice shall be borne by Buyer, andthe fees and disbursements of Seller’s accountants incurred in connection withtheir preparation and review of the Closing Statements and review of any Buyer’sNotice shall be borne by Seller.

##  

## (h)         **Post-Closing Accounting Practice; Access**.  Following the Closing, neither Buyer norSeller shall take any action that is not consistent with Seller’s pastpractices with respect to the accounting books and records of Seller on whichthe Closing Statements are to be based. During the period of time from and after the Closing Date through theresolution of any adjustment to the Purchase Price contemplated by this Section 2,Buyer shall afford to Seller, and any accountants, counsel or financialadvisers retained by Seller in connection with any adjustment to the PurchasePrice contemplated by this Section 2, reasonable access during normalbusiness hours to all the properties, books, contracts, personnel and recordsrelevant to the Purchase Price adjustments contemplated by this Section 2.

##  

## (i)             **Parent Guaranties**.

##  

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

 

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### (ii)          Buyer Parent hereby unconditionallyguarantees the representations and warranties contained herein and the full andprompt payment and performance of all obligations, covenants and duties ofBuyer, including the payment of the Purchase Price, under and pursuant to thisAgreement and the Transaction Agreements.

###  

## (j)             **Purchase Price Allocation for Tax Purposes**.  Buyer shall prepare a proposed allocation ofthe Adjusted Purchase Price (and other capitalized costs) and AssumedLiabilities among the Acquired Assets in accordance with Code Section 1060and 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 than120 days after the Closing Date.  IfSeller and Buyer agree upon such proposed allocation, then such proposedallocation shall become the final allocation (the “**Final Allocation**”).  IfSeller raises any objections in respect of the proposed allocation, then Sellerand Buyer shall negotiate in good faith until they will have resolved all suchobjections and the so negotiated allocation shall become the FinalAllocation.  Buyer and Seller and theirAffiliates shall report, act and file Tax Returns (including Internal RevenueService Form 8594) in all respects and for all purposes consistent withsuch Final Allocation.  Seller shalltimely and properly prepare, execute, file and deliver all such documents,forms and other information as Buyer may reasonably request to prepare suchFinal Allocation.  Neither Buyer norSeller (nor their Affiliates) shall take any position (whether in audits, TaxReturns or otherwise) that is inconsistent with such Final Allocation unlessrequired to do so by applicable law.  If,after the proposed allocation becomes the Final Allocation, any event occursthat will result in an adjustment of the Adjusted Purchase Price (including anyindemnity payments pursuant to this Agreement), then Seller and Buyer (andtheir respective Affiliates) shall amend the Final Allocation accordingly.

##  

# **SECTION 3**                               SELLER’SREPRESENTATIONS AND WARRANTIES

# ** **

Seller represents and warrantsto Buyer that the statements contained in this Section 3 arecorrect and complete as of the date hereof, except as set forth in thedisclosure schedule accompanying this Agreement (the “**Disclosure Schedule**”).  Items disclosed under any particular Section shallbe deemed as disclosed for other Sections where its relevance to such otherSections is obvious and clearly apparent on its face.  Nothing in the Disclosure Schedule shall bedeemed adequate to disclose an exception to a representation or warranty madeherein unless the reason for it being disclosed is obvious and clearlyapparent.  The inclusion of an item onthe Disclosure Schedule as an exception to a representation or warranty willnot by itself be deemed an admission by Seller that such item is material orwas required to be disclosed therein.

 

## (a)          **Organization of Blount**.  Each of Seller Parent, Blount and each BlountSubsidiary has been duly organized, is validly existing and is in good standingunder the laws of its jurisdiction of organization.

##  

## (b)         **Authorization of Transaction**.  Each of Seller Parent,****Blount and each Blount Subsidiary has fullpower and authority to execute and deliver this Agreement and each TransactionAgreement to which it is a party and to perform its obligations hereunder andthereunder.  Without limiting thegenerality of the foregoing, the board of directors of Seller Parent, Blountand each Blount Subsidiary have duly authorized the execution, delivery, andperformance of this Agreement and each Transaction Agreement to which suchentity is a party.  This Agreement andeach Transaction Agreement to which it is a party has been duly executed anddelivered by Seller Parent, Blount and each Blount Subsidiary and constitutesthe valid and legally binding obligation of Seller Parent, Blount and eachBlount Subsidiary, enforceable in accordance with its terms and conditions,except as such enforcement may be limited by (i) 

 

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

##  

## (c)          **Non-contravention**.  Neither the execution and delivery of thisAgreement nor the consummation of the transactions contemplated hereby(including the assignments and assumptions referred to in Section 2) will (i) violateany constitution, statute, regulation, rule, injunction, judgment, order,decree, ruling, charge, or other restriction of any government, governmentalagency, or court to which Blount or any of the Blount Subsidiaries is subjector any provision of the charter or bylaws of Blount or any of the BlountSubsidiaries, (ii) materially conflict with, result in a material breachof, constitute a material default under, result in the acceleration of, createin any party the right to accelerate, terminate, modify, or cancel, or requireany notice under any agreement, contract, lease, license, instrument, or otherarrangement to which Blount or any of the Blount Subsidiaries is a party or bywhich it is bound or to which any of its assets is subject (or result in theimposition of any Lien upon any of its assets) or (iii) conflict with,result in a breach of, constitute a default under, result in the accelerationof, 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 orapprovals that have been obtained prior to Closing or are set forth on Section 3(c) ofthe Disclosure Schedule, none of Blount or the Blount Subsidiaries needs togive any notice to, make any filing with, or obtain any authorization, consent,or approval of any government or governmental agency in order for the Partiesto consummate the transactions contemplated by this Agreement, except where thefailure to do so would not result in a Material Adverse Effect.

##  

## (d)         **Brokers’ Fees**.  Seller has no Liability to pay any fees orcommissions to any broker, finder, or agent with respect to the transactionscontemplated by this Agreement for which Buyer could become liable orobligated.

##  

## (e)          **Title to and Sufficiency and Condition of Assets**.  Seller has good and marketable title to, or avalid leasehold interest in, all of the Acquired Assets, free and clear of anyLien or restriction on transfer (other than Permitted Encumbrances in the caseof Real Property).  Other than thoseassets expressly excluded from the definition of “Acquired Assets”, theAcquired Assets (i) constitute all of the assets, tangible and intangible,of any nature whatsoever, necessary to operate the Target Business in themanner presently operated by Seller, (ii) include all of the operatingassets of Seller primarily used in the Target Business and (iii) aresufficient for the continued conduct of the Target Business by Buyer after theClosing in substantially the same manner as conducted by Seller prior to theClosing.  Each Acquired Asset that is atangible asset having a net book value in excess of $30,000 (x) is in goodworking order (ordinary wear and tear excepted), (y) has been maintainedin all material respects in accordance with the past practice of Seller andgenerally accepted industry practice and (z) is suitable for the purposesfor which it presently is used in connection with the Target Business.

##  

## (f)            **Financial Statements**.  The Financial Statements (i) have beenprepared (A) in the case of the Seller Parent Financial Statements, inaccordance with GAAP consistently applied throughout the periods coveredthereby and (B) in the case of the August 31, 2007 FinancialStatements, using methodology consistent with the Target Business FinancialStatements and consistently applied, (ii) present fairly the financialcondition of the Seller Parent and Target Business, as applicable, as of suchdates and for the periods covered thereby and (iii) are consistent withand 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*, 

 

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

##  

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

##  

### (i)                                     Sellerhas operated the Target Business in the Ordinary Course of Business;

###  

### (ii)                                  Sellerhas not sold, leased, transferred, or assigned any asset with a net book valuein excess of $100,000 that would have constituted an Acquired Asset, tangibleor intangible, other than for fair consideration in the Ordinary Course ofBusiness;

###  

### (iii)                               noparty (including Seller and any of the Blount Subsidiaries) has accelerated,terminated, materially modified or cancelled any agreement, contract, lease, orlicense involving more than $100,000 to which Blount or any of the BlountSubsidiaries is a party or by which any of them is bound or outside theOrdinary Course of Business;

###  

### (iv)                              Sellerhas not entered into any Material Contract having an aggregate value, orproviding for obligations, in excess of $100,000 or outside the Ordinary Courseof Business.

###  

### (v)                                 Sellerhas not imposed or permitted to exist any Lien upon any of its assets, tangibleor intangible (other than Permitted Encumbrances with respect to RealProperty);

###  

### (vi)                              Sellerhas not made any capital expenditure (or series of related capitalexpenditures) either involving more than $100,000 or outside the OrdinaryCourse of Business;

###  

### (vii)                           Sellerhas not made any capital investment in, any loan to, or any acquisition of thesecurities or assets of, any other Person (or series of related capitalinvestments, loans, and acquisitions) either involving more than $100,000****or outside the Ordinary Course ofBusiness;

###  

### (viii)                        Sellerhas not delayed or postponed the payment of accounts payable or any otherLiabilities outside the Ordinary Course of Business;

###  

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

###  

### (x)                                   neitherSeller nor any of the Blount Subsidiaries has made any loan that remainsoutstanding to, or entered into any other transaction with, any Target BusinessEmployee outside the Ordinary Course of Business;

 

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### (xi)                                Sellerhas not discharged any material Liability or Lien primarily relating to theTarget Business outside the Ordinary Course of Business;

###  

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

###  

### (xiii)                          Sellerhas not entered into any agreement pertaining to the Target Business thatconcerns non-competition or exclusive dealing; and

###  

### (xiv)                         Sellerhas not committed to do any of the foregoing.

###  

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

##  

## (i)             **Tax Matters**.  Each of Blount and the Blount Subsidiarieshas timely filed all employment, sales and use and property Tax Returns thatrelate to the Target Business that it was required to file under applicablelaws and regulations.  All such employment,sales and use and property Tax Returns were correct and complete in allrespects and were prepared in compliance with all applicable laws andregulations.  All such employment, salesand use and property Taxes due and owed by Blount or any of its BlountSubsidiaries have been paid.  There areno Tax liens on Acquired Assets, except (i) for such Tax liens whereinBlount or one of the Blount Subsidiaries is contesting such Taxes or (ii) forTaxes not yet due and payable.  To theKnowledge of Seller, with respect to the Target Business, Seller has notparticipated in a transaction that is of the type set forth in Code Section 6011and the regulations promulgated thereto.

##  

## (j)             **Real Property**.

##  

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

###  

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

 

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

###  

### (iii)                               Section 3(j)(iii) ofthe Disclosure Schedule sets forth a true and complete list of all Owned RealProperty Leases and Leased Real Property Subleases, including the date and nameof the parties to each Landlord Lease document. Seller has delivered to Buyer atrue and complete copy of each Landlord Lease document and, in the case of anyoral Landlord Lease, a written summary of the material terms of such Lease.Except as set forth in Section 3(j)(iii) of the DisclosureSchedule, with respect to each of the Landlord Leases, (A) such LandlordLease is legal, valid, binding, and in full force and effect, (B) neitherSeller nor, to the Knowledge of Seller, any other party to such Landlord Leaseis in material breach of or default thereunder, and, to the Knowledge ofSeller, no event has occurred or circumstance exists that, with the delivery ofnotice, the passage of time or both, would constitute such a material breach ofor default thereunder, (C) no security deposit or portion thereofdeposited with respect to such Landlord Lease has been applied in respect of abreach or default under such Landlord Lease that has not been redeposited infull, (D) Seller does not owe, or will not owe in the future, anybrokerage commissions or finder’s fees with respect to such Landlord Lease, (E) theother party to such Landlord Lease is not an Affiliate of, and otherwise doesnot have any known economic interest in, Seller, (F) to the Knowledge ofSeller, the other party to such Landlord Lease has not subleased, licensed orotherwise granted any Person the right to use or occupy the premises demisedthereunder or any portion thereof, (G) to the Knowledge of Seller, theother party has not collaterally assigned or granted any other Lien in suchLandlord Lease and (H) to the Knowledge of Seller, there are no Liens onthe estate or interest created by such Landlord Lease other than PermittedEncumbrances.

###  

### (iv)                              Selleris not party to any agreement (other than with Buyer) under which a third partyhas any right or option to purchase any of the Owned Real Property or anyinterest therein.

###  

### (v)                                 Noneof the Improvements contain any material structural defects and the Improvementsare sufficient for the operation of the Target Business in the manner presentlyoperated by Seller.

 

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### (vi)                              Tothe Knowledge of Seller, there is no condemnation, expropriation or otherproceeding in eminent domain, pending or threatened, affecting any parcel ofReal Property or any portion thereof or interest therein.

###  

### (vii)                           NeitherSeller nor any of the Blount Subsidiaries has received any written notice ofviolation of any Real Property Law and to Seller’s Knowledge, there is no Basisfor the issuance of any such notice or the taking of any action for suchviolation.

###  

### (viii)                        Eachparcel of Owned Real Property has direct vehicular and pedestrian access to apublic street adjoining the Owned Real Property, or has vehicular andpedestrian access to a public street via an insurable, permanent, irrevocableand appurtenant easement benefiting such parcel of Owned Real Property, andsuch access is not dependent on any land or other real property interest thatis not included in the Owned Real Property. None of the Improvements or any portion thereof is dependent for itsaccess, use or operation, as currently conducted thereat, on any land,building, improvement or other real property interest that is not included inthe Owned Real Property.  To theKnowledge of Seller, each utility service enters the Owned Real Property froman adjoining public street or valid easement in favor of the supplier of suchutility 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 RealProperty.

###  

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

###  

### (x)                                   Thecurrent use and occupancy of the Real Property and the operation of the TargetBusiness as currently conducted thereon do not violate, in any materialrespect, any Encumbrance Documents. Neither Seller nor any of the Blount Subsidiaries has received anywritten notice of violation of any Encumbrance Documents, and to Seller’sKnowledge, there is no Basis for the issuance of any such notice or the takingof any action for such violation.

###  

### (xi)                                Withrespect to each Owned Real Property, to the Knowledge of Seller, other than asset forth in the title commitments and surveys ordered by Buyer and other thanas 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 includedin such Owned Real Property, there are no Real Property Impositions that aredelinquent, and no portion of such Owned Real Property is located in a “specialflood hazard” (as such term is defined by the Federal Emergency ManagementAgency).

 

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## (k)          **Intellectual Property**.

##  

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

###  

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

###  

### (iii)                               Exceptas set forth on Section 3(k)(iii) of the Disclosure Schedule, (A) tothe Knowledge of Seller, all the Intellectual Property set forth on Section 3(k)(i) ofthe Disclosure Schedule has been duly registered in, filed in or issued by theappropriate Governmental Authority where such registration, filing or issuanceis necessary or appropriate for the conduct of the Target Business as presentlyconducted, (B) to the Knowledge of Seller, Seller is the sole andexclusive owner of, and Seller has the right to use, execute, reproduce,display, perform, modify, enhance, distribute, prepare derivative works of andsublicense, without payment to any other person, all such Intellectual Propertyand the consummation of the transaction contemplated hereby and in theTransaction Agreements do not and will not conflict with, alter or impair anysuch rights and (C) since December 31, 2005, Seller has not receivedany written communication from any person asserting any ownership interest inany such Intellectual Property.  TheIntellectual Property of Seller referred to in clause (i) of the definitionof “Acquired Assets” (other than the “Blount” tradename and the ArgentinaTrademarks) constitutes all of the Intellectual Property (other thanIntellectual Property of any third parties) necessary to operate the TargetBusiness in the manner presently operated by Seller.

###  

### (iv)                              Withrespect to the Intellectual Property set forth on Section 3(k)(i) ofthe Disclosure Schedule, Seller has delivered or transferred to Buyermaterially correct and complete copies of evidencing ownership and prosecution(if applicable) of (A) each issued patent (including utility, model anddesign patents, supplementary protection certificates, certificates ofinvention and the like) and registered trademark (including service marks) thathas been issued to Seller, (B) each pending patent application (includingutility, model and design patents, supplementary design certificates,certificates of invention and the like) and each application for trademark andservice 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’spresent operation of the Target Business does not, and the continued operationof the Target Business as presently conducted will not, interfere with, infringeupon, misappropriate or otherwise come into conflict with any third partyIntellectual Property rights, and Seller has received no notice regarding anyof the foregoing.

 

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## (l)             **Inventory**.  Each item of Inventory (i) is, subjectto industry standards, free of any material defect or deficiency, (ii) isin good, usable and currently marketable condition in the Ordinary Course ofBusiness of the Target Business (subject, in the case of raw materials andwork-in-process, to the completion of the production process) and (iii) isreflected on the August 31, 2007 Financial Statements (subject to Seller’soperation 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 obsolescencereserves, all as determined in accordance with the past practices of the TargetBusiness.  Except as set forth on Section 3(l) ofthe Disclosure Schedule, since August 31, 2007, there have not been anywrite-downs of the value of, or establishment of any reserves against, anyInventory, except for write-downs and reserves in the Ordinary Course ofBusiness.  Section 3(l) ofthe Disclosure Schedule sets forth the accurate amount, in units, of the “flex”production engines held by Seller.  Tothe extent that, after the Closing, Buyer conducts the Target Business as it ispresently conducted by Seller, there are no facts or circumstances relating toengines emissions compliance that would reasonably be expected to materiallyrestrict or prevent production, shipment or sales of prime product during theperiod from the date hereof until December 31, 2008.

##  

## (m)       **Contracts**.  Section 3(m)(i) of theDisclosure Schedule sets forth a complete and accurate list of each of thefollowing agreements (whether oral or written), in each case other than anycustomer purchase order or supplier purchase order (each, a “**Material Contract**”):

##  

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

###  

### (ii)                                  eachAssumed Employee Benefit Agreement;

###  

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

###  

### (iv)                              anyagreement primarily relating to the Target Business concerning a partnership orjoint venture, in each case other than any dealer agreement disclosed pursuantto clause (viii) below;

###  

### (v)                                 anyagreement primarily relating to the Target Business concerning confidentialityor non-competition or exclusive dealing;

###  

### (vi)                              anyagreement primarily relating to the Target Business for the sale, license ordevelopment of Intellectual Property;

###  

### (vii)                           anyagreement under which the consequences of a default or termination couldreasonably be expected to have a Material Adverse Effect; and

###  

### (viii)                        anydealer agreement or other agreement under which products of the Target Businessare distributed, anywhere in the world, regardless of brand.

###  

Notwithstanding anything to thecontrary herein, no customer purchase order or supplier purchase order shall bea “Material Contract”.  Seller hasdelivered to Buyer an accurate and 

 

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complete copy of each MaterialContract.  Except as set forth on Section 3(m)(i) ofthe Disclosure Schedule, (A) each Material Contract is the legal, valid,binding and enforceable obligation of Blount and/or the Blount Subsidiary partythereto and, to the Knowledge of Seller, of the other parties thereto, in eachcase except as such enforcement may be limited by (1) bankruptcy,insolvency, reorganization, moratorium and other laws of general applicationaffecting the rights and remedies of creditors and (2) general principlesof equity (regardless of whether such enforcement is considered in a proceedingin equity or at law), (B) each Material Contract is in full force andeffect, (C) Seller is not, and, to the Knowledge of Seller, no other partyis, in material breach or default of any Material Contract, and no event hasoccurred that with notice or lapse of time would constitute a material breachor default by Seller or, to the Knowledge of Seller, any other party, or permittermination, modification or acceleration of any Material Contract other thanby Seller or, to the Knowledge of Seller, by any other party and (D) noparty has repudiated any provision of any Material Contract.

 

## (n)         **Notes and Accounts Receivable**.  To the extent relating to the TargetBusiness, all notes and accounts receivable of Seller are reflected properly ontheir books and records and are good and collectible at the aggregate recordedamounts thereof, net of any applicable reserves for doubtful accounts reflectedon the August 31, 2007 Balance Sheet, as adjusted for the passage of timethrough the Closing Date in accordance with the past custom and practice ofSeller.

##  

## (o)         **Litigation**.  Section 3(o) of theDisclosure Schedule sets forth each instance with respect to the TargetBusiness in which Seller is subject to, a party to or, to the Knowledge ofSeller, 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 anycourt 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 TargetBusiness, each product manufactured, sold, leased or delivered by Seller hasbeen in conformity with all applicable contractual commitments and all expressand implied warranties, and Seller has no Liability (and there is no Basis forany action, suit, proceeding, hearing, investigation, charge, complaint, claim,or demand against Seller giving rise to any Liability) for replacement orrepair thereof or other damages in connection therewith, subject only to thereserve for product warranty claims reflected in the August 31, 2007Balance Sheet as adjusted for the passage of time through the Closing Date inaccordance with the past custom and practice of Seller.  Such reserve for product warranty claims wasestablished in good faith based on reasonable investigation as to exposure andusing methodology consistent with the Target Business Financial Statements(subject to normal and recurring year-end adjustments).  Except as set forth on Section 3(p) ofthe Disclosure Schedule, there are no open or pending before or after warrantyfailure service letters.  No productmanufactured, sold, leased or delivered by Seller is subject to any guaranty,warranty or other indemnity beyond the applicable standard terms and conditionsof sale or lease set forth in Section 3(p) of the DisclosureSchedule.

##  

## (q)         **Employees**.

##  

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

 

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###  

### exclusiverepresentative of all the employees in any unit deemed appropriate for purposesof collective bargaining; (B) other than as set forth in Section 3(q)(i) ofthe Disclosure Schedule, to the Knowledge of Seller, no Labor Organization orgroup of employees has filed any representation petition or made any written ororal demand for recognition; (C) other than as set forth in Section 3(q)(i) ofthe Disclosure Schedule, to the Knowledge of Seller, (1) no organizingcampaign or decertification efforts involving any Labor Organization areunderway or threatened and (2) no other question concerning representationwith respect to, or recognition of the bargaining status of, any LaborOrganization exists; (D) no labor strike, work stoppage, slowdown or othermaterial labor dispute has occurred within the past 12 months, and none isunderway or, to the Knowledge of Seller, threatened; (E) there is noworkmen’s compensation liability, experience, or matter that could have aMaterial Adverse Effect; and (F) to the Knowledge of Seller, there is nocharge, complaint, grievance, investigation, inquiry or obligation of any kind,pending or threatened in any forum, involving a Target Business Employee andrelating to an alleged violation or breach by Seller or any of its BlountSubsidiaries (or its or their officers or directors) of any law, regulation orcontract.

###  

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

###  

### (iii)                               Withrespect to the transactions contemplated hereby, any notice required under anylaw or collective bargaining agreement to be given to the Target BusinessEmployees has been given, and all bargaining obligations with any employeerepresentative have been satisfied. Seller has not taken any actions that would cause the Buyer or any ofits Affiliates to have any Liability under the WARN Act with respect to theTarget Business Employees.

###  

### (iv)                              Section 3(q)(iv) ofthe Disclosure Schedule sets forth the name and total compensation (includingaccrued bonuses) of each Target Business Employee whose total compensation for2007 is expected to exceed $100,000, except for any such information thatSeller is prohibited from making available to Buyer as the result of Lawsrelating to the safeguarding of data privacy, all of which prohibitions are setforth in Section 3(q)(iv) of the Disclosure Schedule.

###  

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

###  

## (r)            **Employee Benefits**.

##  

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

###  

### (ii)                                  Exceptas set forth on Section 3(r)(ii) of the Disclosure Schedule,Seller has made available to Buyer correct and complete copies of the plandocuments and 

 

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### summary plandescriptions, in each case with respect to each material Employee Benefit Plan.

###  

### (iii)                               Theredoes not exist, nor do any circumstances exist that would reasonably beexpected to result in, any Controlled Group Liability of Seller and itsAffiliates that would reasonably be expected to become a Liability, at or afterthe Closing, of Buyer or any entity that, together with Buyer, is treated as asingle employer under Code Section 414. For purposes of this Agreement, “**ControlledGroup Liability**” means any and all Liabilities (A) under TitleIV of ERISA, (B) under Section 302 of ERISA, (C) under Code Section 412(n) or4971 or (D) for violation of the continuation coverage requirements ofCOBRA.  Neither Seller nor any of itsAffiliates is obligated to contribute to any Multiemployer Plan on behalf ofany Target Business Employees.

###  

### (iv)                              Section 3(r)(iv) ofthe Disclosure Schedule identifies each Employee Benefit Plan that is a definedcontribution plan that includes a qualified cash or deferred arrangement withinthe meaning of Code Section 401(a) (each, a “**Seller 401(k) Plan**”).  The Internal Revenue Service has issued afavorable determination letter with respect to each Seller 401(k) Plan andthe related trust that has not been revoked.

###  

### (v)                                 Otherthan as set forth in Section 3(r)(v) of the DisclosureSchedule, and provided that Buyer and its Affiliates comply with all of theirobligations under this Agreement, neither the execution and delivery of thisAgreement nor the consummation of the transactions contemplated hereby shall (A) resultin any payment (including severance, change in control or otherwise) becomingdue to any Target Business Employee under any Employee Benefit Plan or EmployeeBenefit Agreement, (B) increase any benefits otherwise payable under anyEmployee Benefit Plan or Employee Benefit Agreement to any Target BusinessEmployee, or (C) result in the acceleration of time of payment or vestingof any such benefits under any Employee Benefit Plan or Employee BenefitAgreement 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) ofthe Disclosure Schedule and except for any matters, individually or in theaggregate that would not be reasonably expect to have a Material AdverseEffect:

##  

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

###  

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

###  

### (iii)                               Tothe Knowledge of Seller, the Real Property does not have any (A) undergroundstorage tanks containing Hazardous Materials, (B) asbestos-containingmaterial in any form or condition, (C) materials or equipment containingpolychlorinated biphenyls, or (D) landfills, surface impoundments, ordisposal areas, or (E) toxic mold.

###  

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

 

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

###  

### (v)                                 Neitherthis Agreement nor the consummation of the transactions that are contemplatedby this Agreement will result in any obligations for site investigation orcleanup, or notification to or consent of Governmental Authority or thirdparties, pursuant to any of the so-called “transaction-triggered” or “responsibleproperty transfer” Environmental, Health, and Safety Requirements.

###  

### (vi)                              Tothe Knowledge of Seller, the Target Business has not manufactured, sold,marketed, installed, or distributed products or other items containingasbestos.

###  

### (vii)                           Tothe Knowledge of Seller, the Target Business has not assumed or undertaken anyLiability of any other Person relating to Environmental, Health, and SafetyRequirements.

###  

### (viii)                        Tothe Knowledge of Seller, in connection with the Target Business there are nofacts, events or conditions relating to the past or present facilities,properties or operations of the Target Business that  will prevent, hinder or limit continuedcompliance with Environmental, Health, and Safety Requirements,  or give rise to any other Liabilitiespursuant to Environmental, Health, and Safety Requirements, including anyrelating to on-site or off-site releases or threatened releases of HazardousMaterials, substances or wastes, personal injury, property damage or naturalresources damage.

###  

### (ix)                                Sellerhas furnished to Buyer all environmental audits, reports and otherenvironmental documents relating to the Target Business that are (A) datednot more than five years prior to the date hereof and (B) in Seller’spossession or under Seller’s reasonable control.

###  

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

###  

### (xi)                                Tothe 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) ofthe Disclosure Schedule lists the five largest dealers with respect to theproducts of the Target Business for the 2006 fiscal year and for the first halfof the 2007 fiscal year and sets forth opposite the name of each such dealerthe percentage of consolidated net sales attributable to such dealer for suchperiod.

###  

### (ii)                                  SinceAugust 31, 2007, no supplier that accounted for more than 10% of theaggregate cost of goods and services purchased by the Target Business in the2006 fiscal year has indicated that it shall stop, or decrease the rate of,supplying materials, products or services to the Target Business, and no dealerlisted on Section 3(t)(i) of the Disclosure Schedule hasindicated that it shall stop, or decrease the rate of, buying products from theTarget Business.

 

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## (u)         **Bank Accounts**.  Section 3(u) of theDisclosure Schedule sets forth a true, correct and complete list of the namesand locations of each bank or other financial institution at which Blount orany 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 orhave access thereto, and the names of all persons, if any, now holding powersof attorney or comparable delegation of authority from Blount or any BlountSubsidiary and a summary statement of the balance thereof.

##  

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

##  

## (w)       **Improper and Other Payments**.  With respect to the Target Business, exceptas set forth on Section 3(w) of the Disclosure Schedule, (i) neitherSeller nor, to the Knowledge of Seller, any director, officer, employee, agentor representative of Blount or any of the Blount Subsidiaries, or Person actingon behalf of any of them, has made, paid or received any bribes, kickbacks orother similar payments to or from any Person, whether lawful or unlawful, (ii) nounlawful contributions have been made by Seller, directly or indirectly, to adomestic or foreign political party or candidate, (iii) no unlawfulforeign 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, anydirector, officer, employee, agent or representative of Seller, or any Personacting on behalf of any of them and (iv) the internal accounting controlsof Blount and the Blount Subsidiaries are adequate to provide reasonableassurance that material instances of any of the foregoing are detected in atimely manner.

##  

## (x)           **Accounting and Disclosure Controls**.  Except as set forth on Section 3(x) ofthe Disclosure Schedule, Seller Parent has (i) established and maintaineddisclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934) and designed suchdisclosure controls and procedures to ensure that material information relatingto it, including its consolidated subsidiaries, is made known to management byothers within it and such subsidiaries and (ii) established and maintainedinternal controls over financial reporting (as defined in Rules 13a-15(f) and15(d)-15(f) of the Securities Exchange Act of 1934), and designed suchinternal controls over financial reporting to provide reasonable assuranceregarding the reliability of financial reporting and the preparation offinancial statements for external purposes.

##  

## (y)         **Contracts with Affiliates**.  Except asset forth on Section 3(y) of the Disclosure Schedule, thereare no Material Contracts between Seller Parent, Blount or any BlountSubsidiary, on the one hand, and any of Seller Parent, Blount, any BlountSubsidiary or any Affiliate of any of the foregoing, on the other hand, thatwill continue in effect after the Closing.

##  

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

 

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

##  

## (aa)    **Disclosure of Evaluation Material**.  Except asset forth on Section 3(aa) of the Disclosure Schedule, with respectto the Target Business, Seller has not disclosed any Evaluation Material (i) sinceDecember 31, 2006, outside the Ordinary Course of Business (other than toany prospective buyer of the Target Business) and (ii) since July 26,2007, to any prospective buyer of the Target Business (other than Buyer, itsAffiliates or its representatives).

##  

## (bb)  **No Further Representation orWarranty**.  Except for the representations and warrantiescontained in this Agreement and the Transaction Agreements, none of SellerParent, Blount, any Blount Subsidiary or any of their Affiliates makes anyrepresentations or warranties, and Seller Parent, Blount and each BlountSubsidiary hereby disclaim any other representations or warranties, whethermade by Seller Parent, Seller, any Blount Subsidiary or any of theirAffiliates, or any of their officers, directors, employees, agents orrepresentatives, with respect to the execution and delivery of this Agreementor any Transaction Agreement, the transactions contemplated hereby or therebyor the Target Business.

##  

# **SECTION 4**                               BUYER’S REPRESENTATIONS AND WARRANTIES

# ** **

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

 

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

##  

## (b)         **Authorization of Transaction**.  Each ofBuyer Parent, CFPI and each Caterpillar Subsidiary has full power and authorityto execute and deliver this Agreement and each Transaction Agreement to whichit is a party and to perform its obligations hereunder and thereunder.  Each of this Agreement and each TransactionAgreement has been duly executed and delivered by each of Buyer Parent, CFPIand each Caterpillar Subsidiary which is a party thereto and constitutes thevalid and legally binding obligation of each of Buyer Parent, CFPI and eachsuch Caterpillar Subsidiary, enforceable in accordance with its terms andconditions, except as such enforcement may be limited by (i) bankruptcy,insolvency, reorganization, moratorium and other laws of general applicationaffecting the rights and remedies of creditors and (ii) general principlesof equity (regardless of whether such enforcement is considered in a proceedingin equity or at law).  The execution,delivery and performance of this Agreement, each Transaction Agreement to whichit is a party and each other agreement, document or instrument necessary toeffectuate the transactions contemplated hereby have been duly authorized byeach of Buyer Parent, CFPI and each Caterpillar Subsidiary.

##  

## (c)          **Non-contravention**.  Neither theexecution and delivery of this Agreement and any Transaction Agreement to whichit 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 anygovernment, governmental agency, or court to which Buyer Parent, CFPI or anyCaterpillar Subsidiary is subject or any provision of Buyer Parent’s, CFPI ‘sor

 

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## any Caterpillar Subsidiary’scharter, bylaws, or other governing documents or (ii) conflict with,result in a breach of, constitute a default under, result in the accelerationof, 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 CaterpillarSubsidiary is a party or by which Buyer Parent, CFPI or such CaterpillarSubsidiary is bound or to which any of Buyer Parent’s, CFPI’s or suchCaterpillar Subsidiary’s assets are subject. None of Buyer Parent,  CFPI or anyCaterpillar Subsidiary needs to give any notice to, make any filing with, orobtain any authorization, consent, or approval of any government or governmentalagency in order for the Parties to consummate the transactions contemplated bythis Agreement (including the assignments and assumptions referred to in Section 2)in compliance with applicable law.

##  

## (d)         **Brokers’ Fees**.  None ofBuyer Parent,  CFPI or any CaterpillarSubsidiary has any Liability to pay any fees or commissions to any broker,finder, or agent with respect to the transactions contemplated by thisAgreement for which Seller could become liable or obligated.

##  

# **SECTION 5**                               POST-CLOSING COVENANTS

# ** **

The Partiesagree as follows with respect to the period following the Closing:

 

## (a)          **General**.  In case atany time after the Closing any further actions are necessary or desirable tocarry out the purposes of this Agreement or any Transaction Agreement, each ofthe Parties agrees to (i) take such further commercially reasonableactions (including the execution and delivery of such further instruments anddocuments) 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 isentitled to indemnification therefor under Section 6) and (ii) usecommercially reasonable efforts with respect to the physical count of Inventorydescribed in the definition of “Closing Inventory”.  Seller acknowledges and agrees that from andafter the Closing Buyer will be entitled to possession of all documents, books,files, records (including Tax records), agreements and financial data of anysort (collectively, “**Books and Records**”)to the extent relating to the Target Business after the Closing.  Buyer acknowledges and agrees that, from andafter the Closing, Seller will be entitled, subject to Section 5(f),to reasonable access to Books and Records to the extent relating to the TargetBusiness (prior to the Closing and after the Closing) during normal businesshours to the extent necessary for Seller to conduct its business after theClosing, and Buyer agrees to retain such Books and Records from loss or damageand to maintain such information in accordance with its record retentionpolicy.  Upon the request of Buyer,Seller agrees to provide to Buyer (at Buyer’s expense) copies of Books andRecords related to any active product liability action relating to the TargetBusiness.  Seller further agrees to usecommercially reasonable efforts to (i) transfer to Buyer any permitapplications primarily relating to the Target Business to the extent suchtransfer would be customary and permitted by the applicable GovernmentalAuthority and (ii) withdraw the Argentina Trademarks.

##  

## (b)         **Assignment**.

##  

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

 

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### such contract or permit, a “**Non-Assignable Asset**”); *provided* that this sentence shall notlimit or otherwise affect the terms of Section 3(c) or 4(c).

###  

### (ii)                                  During the period between the Closing and the earlierof (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 commerciallyreasonable arrangement requested by the other to (x) obtain any thirdparty consent necessary for the assignment to Buyer of such Non-AssignableAsset and (y) assign to Buyer the benefits and/or obligations under or inrespect of such Non-Assignable Asset.

###  

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

###  

### (iv)                              Withrespect to clauses (ii)(x) and (iii)(x) above, Seller shall pay allContract Consent Fees and up to $100,000 in the aggregate of CaterpillarContract Consent Costs, in each case to the extent Buyer provides Sellerdocumentation thereof.  Buyer shall payany other fees, payments, expenses or costs (including any Caterpillar ContractConsent Costs in excess of $100,000 in the aggregate) incurred in connectionwith the assignment to Buyer of any Assumed Contract.

###  

## (c)          **Litigation Support**.  In the eventand for so long as any Party actively is contesting or defending against anyaction, suit, proceeding, hearing, investigation, charge, complaint, claim, ordemand in connection with (i) any transaction consummated pursuant to thisAgreement or any Transaction Agreement or (ii) the Target Business, eachof the other Parties will provide commercially reasonable cooperation to theother or its counsel in such contest or defense (including by making availableits personnel and providing such testimony and access to its Books and Recordsas shall be reasonably necessary in connection with such contest or defense),all at the sole cost and expense of the contesting or defending Party (unlessthe contesting or defending Party is entitled to indemnification therefor underSection 6 and except with respect to the compensation of the otherParty’s personnel).

##  

## (d)          **Insurance**.  Sellercovenants to maintain its standard product liability insurance, consistent withits 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 subsidiariesto take, any action that is designed or intended to have the effect ofdiscouraging any lessor, licensor, customer, supplier, or other businessassociate of Seller from maintaining the same business relationships with theTarget Business after the Closing as it maintained with the Target Business priorto the Closing and (ii) for a period of four years from and after theClosing, Seller will refer all customer inquiries relating to the TargetBusiness to Buyer.  In addition, afterthe Closing, Buyer agrees to use a manufacturer’s name other than “Blount, Inc.”on any product serial number plate.

##  

## (f)            **Confidentiality**.  The Partiesagree that the terms of the Confidentiality Agreement are herein incorporatedby reference; *provided* that,except as set forth in this Section 5(f), such terms shall continuein full force and effect until the date that is two years after the datehereof.  After the Closing, as it relatesto Buyer, the term “Evaluation Material” shall not include any 

 

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

##  

## (g)         **Covenant Not to Compete andNonsolicitation**.  For a period of four years from and after theClosing, neither Seller nor any of its Affiliates will engage in, or own morethan 5% of the equity interests of, any business the principal business andactivities of which are substantially similar to the principal business andactivities 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 SellerParent shall not be bound by the provisions of this Section 5(g).  The Parties hereby acknowledge and agreethat, other than the Target Business, no current business or activity ofSeller, or any business or activity reasonably related thereto, reflected inSeller’s federal securities filings is substantially similar to the principalbusiness and activities of the Target Business as of the Closing for purposesof this Section 5(g). If the final judgment of a court of competentjurisdiction declares that any term or provision of this Section 5(g) isinvalid or unenforceable, the Parties agree that the court making thedetermination of invalidity or unenforceability shall have the power to reducethe scope, duration, or area of the term or provision, to delete specific wordsor phrases, or to replace any invalid or unenforceable term or provision with aterm or provision that is valid and enforceable and that comes closest toexpressing the intention of the invalid or unenforceable term or provision, andthis Agreement shall be enforceable as so modified after the expiration of thetime within which the judgment may be appealed. Seller Parent, Seller and their respective directors and officers agreethat they will not solicit or hire any Transferred Employee for a period of twoyears following the date hereof; *provided*that neither Seller Parent nor Seller shall be prohibited from hiring any suchemployee who responds to a general solicitation by Seller Parent or Seller orinitiates contact with Seller Parent or Seller.

##  

## (h)         **Employment and Benefit Arrangements**.

##  

### (i)                                     CFPI  shall, orshall cause its Affiliates to, continue to employ (where employmentcontinues automatically by operation of Law), or, where employment does notcontinue automatically by operation of Law, CFPI  shall, or shall cause its Affiliates to, makeoffers of employment (which shall include CFPI’s compliance with CFPI’scovenants set forth in this Section 5(h)), effective as of theClosing, to each Target Business Employee who is an Active Employee (other thanJames Blasek) in accordance with the provisions of this Section 5(h).  For purposes of this Agreement, the term “**Active Employee**” shall mean any TargetBusiness Employee who is actively at work on the date hereof and any TargetBusiness Employee who is not actively at work on the date hereof due tovacation, holiday, sick leave, short-term disability leave, military leave,jury duty, bereavement leave, and, in jurisdictions where employment continuesautomatically by operation of Law, any other leave of absence.  With respect to each Target Business Employeewho is not an Active Employee (an “**InactiveEmployee**”), CFPI, in accordance with applicable Law and anyapplicable collective bargaining agreement, shall make offers ofemployment (which shall include CFPI’s compliance with CFPI’s covenantsset forth in this Section 5(h)) to each such Inactive Employee,effective as of the date on which such Inactive Employee presents himself orherself to 

 

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### 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’scovenants set forth in this Section 5(h)) to James Blasek,effective as of the date on which James Blasek repatriates to the UnitedStates.  The offers of employment pursuantto this Section 5(h) (or, where applicable, the continuationof employment) shall be at a base salary or hourly rate of pay that is no lessthan 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 tothose applicable to similarly situated employees of CFPI and itssubsidiaries.  CFPI and Blount herebyacknowledge that the terms and conditions of the offers of employment for JamesW. Cox, Bruce Narveson and Richard Planisek (the “**Specified Employees**”) are substantially comparable in theaggregate to those applicable to the Specified Employees immediately prior tothe date hereof.  In addition, withrespect to Target Business Employees who, as of the date hereof, are basedprimarily outside the United States, such offers (or, where applicable, thecontinuation of employment) shall be on terms sufficient to avoid statutory orcommon law severance or separation benefits, any contractual or other severanceor separation benefits, or any other legally mandated payment obligations; *provided* that Blount has provided CFPI with any notice andinformation regarding the Target Business Employees that is reasonablynecessary and sufficient to enable CFPI to comply with this covenant.  Blount and CFPI intend that for purposes ofany employment, severance or termination benefit plan, program, policy,agreement or arrangement of Seller, the transactions contemplated by this Agreementshall not constitute a severance of employment of any Target Business Employeeoffered employment by CFPI prior to or upon the consummation of thetransactions contemplated hereby, and that the Target Business Employeesoffered employment by CFPI will have continuous and uninterrupted employmentimmediately before and immediately after the Closing.  Notwithstanding any other provision of this Section 5(h) tothe contrary, CFPI shall be solely responsible for, and shall assume allLiabilities in respect of, claims arising on or after the Closing made by anyTarget Business Employees who, as of the date hereof, are based primarilyoutside 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 terminationof employment or pay in lieu of notice and reasonable attorney-client costs indefending any claim) (collectively, “**TerminationCosts**”) to the extent arising out of CFPI’s failure to offeremployment to, or continue the employment of, any such Target Business Employeeon terms and conditions that would preclude any claims of constructivedismissal or similar claims; *provided*that Seller shall be solely responsible for (A) any such Termination Costsresulting from any such Target Business Employee’s decision not to accept CFPI’semployment offer and (B) any such Termination Costs to the extent arisingout of Blount’s failure to provide CFPI with any notice and informationregarding the Target Business Employees that is reasonably necessary andsufficient to enable CFPI to make offers that are sufficient to prevent suchTermination Costs from arising. Notwithstanding any other provision of this Section 5(h) tothe contrary, Seller shall be solely responsible for, and shall assume allLiabilities in respect of, claims arising on or after the Closing for anyTermination Costs made by any Target Business Employees who, as of the datehereof, are based primarily inside the United States.

###  

### (ii)                                  Each Target Business Employee who continues in oraccepts employment with CFPI or any of its Affiliates as of theClosing (or, in the case of an Inactive Employee, as of such later datethat such Inactive Employee commences 

 

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### employment with CFPI or any of its Affiliates, or in the case of JamesBlasek, as of the date on which he repatriates to the United States), isreferred 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 totransfer to or continue with CFPI or its Affiliates following the Closing, CFPIshall use its reasonable efforts to see that any necessary applications arepromptly made and to secure the necessary visa, permit, pass or other approval.

###  

### (iii)                               CFPI shall give or cause to be given to eachTransferred Employee full credit for purposes of eligibility to participate andvesting of benefits under any employee benefit plans and arrangements andemployment-related entitlements provided, sponsored, maintained or contributedto by CFPI and its Affiliates, and for purposes of level of benefits andbenefit accruals under any such plans, arrangements or entitlements that arevacation or severance plans or policies, for such Transferred Employee’sservice with Seller and with any predecessor employer, in each case to the sameextent recognized by Seller as of the date hereof, except to the extent suchcredit would result in duplication of benefits for the same period ofservice.  For purposes of furtherclarification, CFPI and its Affiliates shall not be required to provide creditfor such service for benefit accrual purposes under (A) any employeebenefit plan of CFPI or its Affiliates that is a defined benefit pension planand (B) any employee benefit plan of CFPI or its Affiliates that providespost-retirement benefits.

###  

### (iv)                              Except (A) with respect to Losses under theAssumed Employee Benefit Agreements, (B) with respect to Losses thatautomatically transfer to CFPI or its Affiliates pursuant to applicable Law or (C) asotherwise specifically provided in this Section 5(h), Seller shallretain liability and responsibility for all employment and employeebenefits-related Losses incurred, or arising out of a period ending, on orprior to the Closing that relate to the Target Business Employees (or anydependent or beneficiary of any Target Business Employee) (including anyobligations under the Employee Benefit Plans), and CFPI shall have no liabilityor 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 allemployment and employee benefits-related Losses that are incurred or ariseafter the Closing and relate to any Transferred Employee (or any dependent orbeneficiary of any Transferred Employee) and (2) Seller shall have noliability with respect to any Transferred Employee (or any dependent orbeneficiary of any Transferred Employee) that relates to such TransferredEmployee’s employment with CFPI or any of its Affiliates.

###  

### (v)                                 Effectiveas 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 shallcease to participate in any Employee Benefit Plan.  CFPI shall establish or have in effectbenefit plans, programs and arrangements for the benefit of TransferredEmployees (collectively, “**Buyer Benefit Plans**”)in accordance with this Section 5(h).  During the period from the day after theClosing through December 31, 2007, Buyer Benefit Plans providing flexiblespending account benefits (“**FSA Plans**”)shall provide each Transferred Employee with benefits that are substantiallythe same as the benefits provided by the corresponding Employee Benefit Planproviding flexible spending account benefits. During the period from the day after the Closing through March 31,2008 (such period, the “**Plan TransitionPeriod**”), (i) Buyer Benefit Plans providing health, dental,vision or prescription drug benefits (other than post-retirement welfarebenefits and other than the FSA Plans) to Transferred Employees (such plans,the 

 

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### “**Applicable Welfare Plans**”) shall provideeach Transferred Employee with benefits that are substantially the same as thebenefits provided by the corresponding Employee Benefit Plans and (ii) BuyerBenefit Plans other than the Applicable Welfare Plans and other than the FSAPlans shall provide each Transferred Employee with benefits that aresubstantially comparable in the aggregate to the benefits provided to similarlysituated employees of CFPI and its subsidiaries; *provided* that CFPI shall not be required to maintain theBuyer 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) shallprovide each Transferred Employee with benefits that are substantiallycomparable in the aggregate to the benefits provided to similarly situatedemployees of CFPI and its subsidiaries. Without limiting the generality of the foregoing, effective as of theday after Closing, Buyer Benefit Plans shall provide Transferred Employees withpostretirement welfare benefits that are substantially comparable to thepost-retirement welfare benefits provided to similarly situated employees ofCFPI and its subsidiaries.  Subject tothe previous sentence, Blount and CFPI hereby agree that an amount equal to thePost-Retirement Amount shall be used for the purpose of providing suchbenefits.  CFPI shall inform theTransferred Employees that Blount has requested CFPI to provide suchpost-retirement welfare benefits pursuant to the transactions contemplated hereby.  At and after the Closing, CFPI shall, orshall cause its Affiliates to, assume and honor each Assumed Employee BenefitAgreement in accordance with its existing terms.

###  

### (vi)                              With respect to each Buyer Benefit Plan that is an “employeewelfare benefit plan” within the meaning of Section 3(1) of ERISA (a “**Buyer Welfare Plan**”), CFPI shall waive alllimitations as to waiting periods with respect to participation and coveragerequirements applicable to the Transferred Employees and their dependents andbeneficiaries, to the extent waived under the applicable corresponding EmployeeBenefit 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 BenefitPlans that are “employee welfare benefit plans” within the meaning of Section 3(1) ofERISA for all reimbursement claims (such as medical and dental claims) forexpenses incurred, and for all non-reimbursement claims (such as lifeinsurance claims) incurred, under such plans on or prior to the Closing byTransferred Employees and their dependents. CFPI shall not have any obligation to contribute to or reimburse theEmployee Benefit Plans or Seller for any costs, premiums, fees, assessments orother charges or payments associated with any Employee Benefit Plan.  CFPI shall be responsible in accordance withthe applicable Buyer Welfare Plans for all reimbursement claims (such asmedical and dental claims) for expenses incurred, and for all non-reimbursementclaims (such as life insurance claims) incurred, after the Closing byTransferred Employees and their dependents. For purposes of this Section 5(h)(vii), a claim shall bedeemed to be incurred as follows:  (A) life,accidental death and dismemberment, disability and business travel accidentinsurance benefits, upon the death or accident, or the occurrence of the injuryor condition, giving rise to such benefits and (B) health, dental, visionor prescription drug benefits (including in respect of any hospitalconfinement), upon provision of such services, materials or supplies.

###  

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

 

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### taken by such Transferred Employee as of the date hereof; *provided* that all such obligations havebeen accrued to the extent required under GAAP in determining Closing WorkingCapital.  To the extent that aTransferred Employee is entitled under any applicable Law or any policy ofSeller to be paid for any vacation or annual leave days accrued or earned butnot yet taken by such Transferred Employee as of the date hereof, CFPI shallassume the Liability to pay for such vacation or annual leave days; *provided* that all such obligations havebeen accrued to the extent required under GAAP in determining Closing WorkingCapital.

###  

### (ix)                                Without limiting the generality of Section 5(h)(v),CFPI shall, or shall cause its Affiliates to, (A) assume all Liabilitieswith respect to the Transferred Employees under the sales commission plans orarrangements of Seller set forth on Section 5(h)(ix) of theDisclosure Schedule for those participants set forth on Section 5(h)(ix) ofthe Disclosure Schedule that relate to any periods during 2007 that include theClosing Date to the extent taken into account in determining Closing WorkingCapital, (B) maintain such plans or arrangements pursuant to theirrespective terms as in effect as of the date hereof for such TransferredEmployees with respect to such periods and (C) at the times prescribed bysuch plans or arrangements as in effect as of the date hereof, make payments tothe Transferred Employees in accordance with the terms of such plans orarrangements as in effect as of the date hereof; *provided* that no payments are required to be made under suchplans or arrangements with respect to the portions of such periods followingthe Closing.

###  

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

###  

### (xi)                                Special U.S. Provisions.

###  

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

####  

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

####  

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

 

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#### 401(k) (and a related trust exempt fromtax under Code Section 501(a)) (as applicable, the “**Buyer 401(k) Plan**”).  Each Transferred Employee participating in aSeller 401(k) Plan immediately prior to the Closing shall become a participantin the corresponding Buyer 401(k) Plan as of the Plan Transition Date, andeach Transferred Employee who would have become eligible to participate in aSeller 401(k) Plan shall become a participant in the Buyer 401(k) Planno later than the later of such time as he or she would have become eligible toparticipate in any Seller 401(k) Plan and the Plan Transition Date (or, inthe case of any Transferred Employee who is not an Active Employee, the datesuch Transferred Employee commences employment with CFPI, if later).  CFPI agrees to cause the Buyer 401(k) Planto allow each Transferred Employee to make a “direct rollover” to such Buyer401(k) Plan of the account balances of such Transferred Employee(including promissory notes evidencing any outstanding loans) under any Seller401(k) Plan in which such Transferred Employee participated prior to theClosing if such direct rollover is elected in accordance with applicable Law bysuch Transferred Employee.  Followingsuch transfer of account balances, Seller shall have no Liability for anycosts, expenses or damages that may result from any claim for any benefitalleged to be payable under any Seller 401(k) Plan with respect toTransferred Employees and their beneficiaries who have transferred theiraccount 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 forany benefit alleged to be payable under any Seller 401(k) Plan arising outof the failure by Seller to administer any Seller 401(k) Plan incompliance with applicable Law.

####  

#### (D)  Effective as of theClosing, Seller shall be responsible for providing continuation coverage withinthe meaning of COBRA to Target Business Employees and their eligible dependentsto the extent required by COBRA with respect to any “qualifying event” (asdefined in COBRA) occurring on or prior to the Closing (including as aresult of the transactions contemplated hereby), and CFPI shall be responsiblefor providing continuation coverage within the meaning of COBRA to TransferredEmployees and their eligible dependents to the extent required by COBRA withrespect to any qualifying event occurring after the Closing.

####  

#### (E)  Seller shall beresponsible for all claims for workers’ compensation benefits that are incurredon or prior to the Closing by Transferred Employees.  CFPI shall be responsible for all claims forworkers’ compensation benefits that are incurred after the Closing byTransferred Employees.  For purposes ofthis Section 5(h)(xi)(E), a claim for workers’ compensationbenefits shall be deemed to be incurred when the event giving rise to the claimoccurs (the “**Workers’ Compensation Event**”).  If the Workers’ Compensation Event occursover a period both preceding and following the Closing, the claim shall be thejoint responsibility and liability of Seller and CFPI and shall be equitablyapportioned between Seller on the one hand, and CFPI, on the other hand, basedupon the relative periods of time that the Workers’ Compensation Event transpiredpreceding and following the Closing.

####  

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

 

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

####  

#### (G)  With respect to the CY 2007 MiddleManagement Incentive Plan and the CY 2007 Executive Management Annual IncentivePlan, Seller shall make payments to the Transferred Employees with respect tothe period between January 1, 2007 and the Closing Date in accordance withthe 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 SavingsPlus” contributions that would have been required to have made by Seller in January 2008to the Seller 401(k) Plans on behalf of the Transferred Employees withrespect to the period from January 1, 2007, through the Closing Date, hadthe transactions contemplated by this Agreement not occurred, pursuant to theterms 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 shallprovide 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 alump-sum cash amount equal on an after-tax basis to the matching contributionsthat Seller would have been required to make to such Seller 401(k) Plan onbehalf of such Transferred Employee with respect to the period between theClosing Date and December 31, 2007, had the transactions contemplated bythis Agreement not occurred, pursuant to the terms of the Seller 401(k) Planin effect on the date hereof and based on the applicable deferral election ofsuch Transferred Employee in effect on the date hereof; *provided*that, for purposes of computing such amount, such matching contributions shallbe deemed to be required to be made on a dollar-for-dollar basis and the limiton such matching contributions shall be deemed to be 6%, rather than 4.5%, ofCompensation (as defined in such Seller 401(k) Plan).

####  

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

###  

#### (A)  Without limiting the generality of Section 5(h)(i) or5(h)(v), with respect to any Transferred Employees who are employedprimarily outside the United States, following the Closing, CFPI shall, orshall cause its Affiliates to, provide such Transferred Employees with termsand conditions of employment in accordance with all applicable Laws.

####  

#### (B)  CFPI shall, or shall cause its Affiliates to, pay any repatriationexpenses of James Blasek pursuant to James Blasek’s International AssignmentProvisions.

####  

## (i)             **Additional Tax Matters**.

##  

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

 

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### Closing Date. Buyer shall prepare all property Tax Returns with respectto Tax periods that begin before the Closing Date and end after the ClosingDate (“**Straddle Period**”) in amanner consistent with prior filings of such property Tax Returns (unlessSeller has already prepared and filed any such property Tax Returns).  Seller shall be responsible for the timelyfiling and distribution (taking into account any extensions received from therelevant Tax authorities) of any wage related Tax Returns for the periodcovering January 1, 2007 through the Closing Date, which are required tomeet federal, state and local requirements; including, but not limited to,federal forms 940, 941, W-2s and corresponding W-3s and state unemploymentquarterly and annual returns, whether due to be filed prior to, or after theClosing Date and shall be responsible for payment of Taxes, if any, shownthereon.  Buyer and Seller agree to utilizethe standard method set forth in Revenue Procedure 2004-53 with respect to wagereporting.

###  

### (ii)                                  In case of a Straddle Period, (A) all income andgross receipt Taxes shall be apportioned between the Pre-Closing Tax Period andthe Post-Closing Tax Period based upon a “closing of the books” on the ClosingDate 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 Periodand the Post-Closing Tax Period on a perdiem basis.

###  

### (iii)                               From time to time after the Closing Date, each Partyshall permit reasonable access, and shall cause its accountants and otherrepresentatives to permit reasonable access, to the other Party, to theinformation that it or its accountants or other representatives have withintheir control and that may be reasonably necessary in connection with thepreparation of any Tax Return or the examination by any Tax authority or otheradministrative or judicial proceeding relating to any Tax Return.  Each Party shall retain, or cause to beretained, until the applicable statute of limitations (including anyextensions) have expired, copies of all Tax Returns for all Tax periodsbeginning before the Closing Date, together with supporting work schedules andother records or information that may be relevant for such Tax Returns.  No new elections with respect to Taxes, orany changes in current elections with respect to Taxes, affecting any of theAcquired Assets shall be made by Seller after the date of this Agreement.

###  

### (iv)                              Seller shall prepare and file all Tax Returns thatrelate to Transfer Taxes.  Buyer shallcooperate with Seller in good faith in respect of any such Tax returnfilings.  Seller and Buyer shall alsocooperate in good faith in respect of obtaining any applicable exemptions fromTransfer Taxes.

###  

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

###  

## (j)             **Environmental Permits**.* *Buyer shall use commerciallyreasonable efforts to obtain or effect the transfer as promptly as practicableof all Permits required under Environmental, Health, and Safety Requirements toconduct the Target Business as presently conducted by

 

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##  

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

##  

## (k)          **Parts Buyback**.  After the Closing, to the extent Sellerrepurchases from any Designated Terminated Dealer any repair parts which meetthe requirements of the Target Business’ Return Parts Policy, except for the10% dollar limitation, Buyer agrees to promptly purchase from Seller suchrepair parts at 85% of the then current dealer net price.

##  

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

##  

# **SECTION 6**                               REMEDIES FOR BREACH OF THIS AGREEMENT; INDEMNITY

# ** **

## (a)          **Survival**.  Therepresentations and warranties of the Parties contained herein and in theTransaction Agreements shall survive the Closing for a period of two (2) yearsafter the Closing; *provided* that (i) therepresentations and warranties contained in Sections 3(a), 3(b), 4(a) and4(b) shall survive in perpetuity and not expire, (ii) therepresentations and warranties contained in Sections 3(c), 3(e) and 3(s) shallsurvive for a period of five years after the Closing, and (iii) therepresentations and warranties contained in Sections 3(i) and 3(r) shallsurvive until the expiration of any applicable statute of limitations (aftergiving effect to any extension or waiver) plus 45 days.  Neither Buyer nor Seller shall have anyliability with respect to claims first asserted in connection with anyrepresentation or warranty after the survival period specified therefor in thisSection 6(a); *provided, however,*that notwithstanding the foregoing, nothing herein shall be deemed to limit anyParty’s rights to recover any or all Losses incurred or suffered by it relatingto or arising out of or in connection with fraud or intentionalmisrepresentation, it being understood and agreed that the right to recoversuch Losses shall survive forever.

##  

## (b)         **Indemnification by Seller**.  Selleragrees to defend and indemnify the Buyer Indemnified Parties against, and tohold the Buyer Indemnified Parties harmless from, any and all Losses incurredor suffered by any Buyer Indemnified Party arising out of or relating to any ofthe following:

##  

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

###  

### (ii)                                  any breach of or failure by Seller to perform anycovenant or obligation of Seller set out in this Agreement or any TransactionAgreement;

###  

### (iii)                               any asset of Seller or its Affiliates that is not anAcquired Asset or any Liability of Seller or its Affiliates that is not anAssumed Liability; and

 

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### (iv)                              any Liability or Loss arising from the AcquiredAssets or Target Business on or before the Closing Date, except to the extentsuch Liability or Loss is an Assumed Liability; *provided* that this clause (iv) shall not apply to theextent such Liability or Loss is in respect of any breach of or any inaccuracyin any representation or warranty made by Seller in this Agreement or anyTransaction Agreement.

###  

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

##  

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

###  

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

###  

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

###  

## (d)         **No Materiality Qualifiers**.  After it hasbeen determined that a representation or warranty has been breached, takinginto account any materiality qualification therein (including any reference to “material”,“Material Adverse Effect”, “in all material respects” and similarqualifications as to materiality), any such materiality qualification shall bedisregarded or purposes of calculating the amounts for which the Parties shallbe 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 topayment by Seller under Section 6(b)(i) only if the BuyerIndemnified Parties shall have incurred as to all inaccuracies and breachesindemnifiable Losses in excess of $500,000 (the “**Deductible**”); *provided*that, once the Buyer Indemnified Parties have incurred such indemnifiableLosses in excess of the Deductible, they shall have the right to payment bySeller only to the extent such indemnifiable Losses exceed $250,000; *provided*, *further*,**that the maximum aggregate obligation ofSeller to the Buyer Indemnified Parties under Section 6(b)(i) shallnot exceed $42,000,000 (the “**Cap**”).  Notwithstanding anything to the contraryherein, the limitations contained in the provisos above shall not apply to (A) anyindemnification for any Losses incurred by the Buyer Indemnified Parties forany intentional misrepresentation or fraudulent breach of a representation orwarranty contained herein or in any Transaction Agreement, (B) anyindemnification for any Losses incurred by the Buyer Indemnified Parties inconnection with any Liability indemnified by Seller under Sections 6(b)(ii),(iii) and (iv) or (C) any indemnification for Lossesincurred by the Buyer Indemnified Parties in connection with any Liability forbreaches of Sections 3(a), (b), (c), (e) and (l).

###  

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

 

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### inaccuracies and breaches indemnifiable Losses in excess of theDeductible; *provided* that, oncethe Seller Indemnified Parties have incurred such indemnifiable Losses inexcess of the Deductible, they shall have the right to payment by Buyer only tothe extent such indemnifiable Losses exceed $250,000.  Notwithstanding anything to the contraryherein, the limitation contained in the proviso above shall not apply to (A) anyindemnification for any Losses incurred by the Seller Indemnified Parties forany intentional misrepresentation or fraudulent breach of a representation orwarranty contained herein or in any Transaction Agreement, (B) anyindemnification for any Losses incurred by the Seller Indemnified Parties inconnection with any Liability indemnified by Seller under Sections 6(c)(ii) and(iii) or (C) any indemnification for Losses incurred by the BuyerIndemnified Parties in connection with any Liability for breaches of Sections4(a), (b) and (c).

###  

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

###  

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

###  

### (v)                                 The amounts for which the Parties shall be liableunder Sections 6(b) and 6(c) shall be net of (A) anyinsurance recovered by the Indemnified Parties from their own insurancepolicies (it be understood that no such Indemnified Party shall be requiredmake a claim with its insurance carrier for any such recovery) and (B) theamount of the applicable Loss arising out of any item which a Party candemonstrate was included as an Account Payable or Accrued Expense incalculating Closing Net Working Capital. For the avoidance of doubt, no indemnification shall be required underthis Agreement for any differences between reserves, estimates or accrualsrelated to any item and the actual value or level of such item.

###  

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

 

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### (vii)                           Notwithstanding any provision of this Agreement tothe contrary, Seller shall not be required to indemnify any Buyer IndemnifiedParties, and shall not have any Liability for any Pre-Closing EnvironmentalLiabilities, any breaches of the representations and warranties contained in Section 3(s) orSection 3(v) or any other matters pursuant to Environmental,Health and Safety Requirements to the extent (A) any Buyer IndemnifiedParties (1) incur any costs resulting or arising from any investigation ofor Remedial Action with respect to environmental conditions (including drillingor sampling) following the Closing other than any investigation or otherRemedial Action reasonably required by Environmental, Health and SafetyRequirements; *provided*that, without limiting any other provision of this Agreement (including theprocedures in Section 6(g)(x)), this Section 6(e)(vii)(A)(1) shallnot apply to (x) Phase II sampling conducted for the purpose of reasonablyidentifying a known or suspected release of Hazardous Materials at the TargetBusiness’ Soderhamn, Sweden facility to the extent such sampling is reasonablyrecommended by a Phase I environmental site assessment commenced within 30 daysof the Closing Date and conducted to applicable ASTM standards by or on behalfof the Buyer and to the extent such sampling is permitted by the legal owner ofthe Soderhamn, Sweden facility (*provided*that, Buyer shall provide Seller with a reasonable opportunity to review andcomment on a draft of any such Phase I report prior to its finalization and onthe scope and workplan of any such Phase II sampling prior to conducting suchsampling), (y) Phase II sampling conducted for the purpose of reasonablyidentifying a known or suspected release of Hazardous Materials at the RealProperties in Prentice, Wisconsin, Owatonna, Minnesota or Zebulon, NorthCarolina to the extent reasonably recommended by a Phase I environmental siteassessment conducted to applicable ASTM standards and to the extent conductedby or on behalf, and at the reasonable request, of a bone fide prospectivepurchaser of the relevant Real Property from the Buyer for the purpose ofreasonably establishing a legal defense to liability for such a release ofHazardous Materials pursuant to applicable Environmental, Health and SafetyRequirements (*provided* that,Buyer shall provide Seller with a reasonable opportunity to review and commenton a draft of any such Phase I report prior to its finalization and on thescope and workplan of any such Phase II sampling prior to conducting suchsampling) and (z) a release of Hazardous Materials discovered solely as aresult of commercially reasonable construction activities by Buyer at any RealProperty in connection with an expansion of current Target Business operations(*provided* that, commerciallyreasonable construction activities shall in no case include any activitiesconducted for the purpose of identifying or assessing known, unknown orsuspected environmental conditions, including any release of HazardousMaterials, excluding activities solely conducted for a commercially reasonablegeotechnical, architectural and/or engineering purpose in connection withconstruction activities), (2) incur anycosts in excess of the costs to comply with industrial cleanup standards orother applicable minimum standards, including the use of environmental land userestrictions, or otherwise in excess of the minimum costs necessary to bring acondition into compliance with Environmental, Health and Safety Requirements orto satisfy the reasonable requirements of a Governmental Authority or (3) contributeto or  exacerbate any environmentalcondition or other Pre-Closing Environmental Liability after the Closing, (B) suchLiability arises out of the cessation of or change in operations at, or theclosure or demolition of, a facility of the Target Business, (C) suchLiability results or arises from the removal of asbestos-containing materialsor lead paint, except to the extent such asbestos-containing materials or leadpaint were in a condition at or prior to the Closing not in compliance withEnvironmental, Health, and Safety Requirements or (D) such Liabilityarises out of any post-Closing exposure to any Hazardous Material, 

 

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

###  

## (f)            **Matters Involving Third Parties**.

##  

### (i)                                     If any third party notifies an Indemnified Party withrespect to a Third-Party Claim, then the Indemnified Party shall promptlynotify each Indemnifying Party thereof in writing; *provided, however*, that no delay on the part of theIndemnified Party in notifying any Indemnifying Party shall relieve theIndemnifying Party from any obligation hereunder unless (and then solely to theextent) the Indemnifying Party is thereby prejudiced.

###  

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

###  

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

###  

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

 

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## (g)   **AdditionalEnvironmental Procedures, Control and Access**.

 

### (i)            If anyIndemnified Party becomes aware of any claim, the occurrence of any event, orthe existence of any facts, which could become the subject of anindemnification claim under this Agreement arising out of or relating to, inthe case of a claim by a Buyer Indemnified Party, any Pre-Closing EnvironmentalLiabilities or breaches of the representations and warranties contained in Section 3(s) orSection 3(v) or, in the case of a claim by a SellerIndemnified Party, any Post-Closing Environmental Liabilities (in each case, an“**Environmental Indemnification Claim**”),the Indemnified Party shall promptly notify each Indemnifying Party thereof inwriting; *provided, however*, thatno delay on the part of the Indemnified Party in such notification to anyIndemnifying Party shall relieve the Indemnifying Party from any obligationhereunder unless (and then solely to the extent that) the Indemnifying Party isactually prejudiced thereby.

 

### (ii)           After receiptof a notice of an Environmental Indemnification Claim submitted by any BuyerIndemnified Party, in addition to any rights Seller may have under Section 6(f),and any indemnity limitations provided under Section 6(e), Sellershall have the right, but not the obligation, upon written notice to the BuyerIndemnified Party, to assume the management, control and/or performance of anyinvestigation, cleanup or other remedial or corrective action (together, “**Remedial Actions**”) relating to any suchEnvironmental Indemnification Claim, including having sole authority to makeall final decisions and determinations with respect to any such RemedialAction; *provided*that Seller mustnotify the Buyer Indemnified Party that it intends to exercise such rightwithin 120 days of receipt of such notice of an Environmental IndemnificationClaim, and the Buyer Indemnified Party shall manage, control and/or performsuch Remedial Action during the 120 day period prior to any notice by Seller; *provided, however,*that Seller shall havethe right, but not the obligation, upon written notice to such BuyerIndemnified Party, to assume such management, control and/or performance ofsuch Remedial Action at anytime after such 120 day period where (y) theindemnifiable costs relating to any such Environmental Indemnification Claimexceed, 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 receiptof any notice of any Environmental Indemnification Claim submitted by anySeller 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 RemedialActions relating to any such Environmental Indemnification Claim; *provided however*, in the case of anyRemedial Action conducted in response to or otherwise in connection with both aPre-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 tothe provisions ofSection 6(g)(ii).

 

### (iv)          The party thatmanages, controls and/or performs any Remedial Actions relating to anyEnvironmental Indemnification Claim (the “**ControllingParty**”) shall (A) keep the other party (the “**Non-Controlling Party**”) reasonably informedof the progress and status of such Remedial Actions, (B) keep accuraterecords of the costs of all such Remedial Actions and (C) provide theNon-Controlling Party with copies of such records upon request.

 

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

###  

### (vi)          The selection by the Controlling Partyof (A) any consultants involved in any Remedial Actions and (B) thetype and scope of any Remedial Action and any related workplans, including thelocation of any recovery, monitoring or other remedial wells, shall be subjectto the approval of the Non-Controlling Party, which approval shall not beunreasonably withheld or delayed.

###  

### (vii)         Notwithstanding anyapproval required under Section 6(g)(vi) above, any RemedialActions conducted in connection with any Environmental Indemnification Claimshall (A) be conducted in accordance with all applicable Environmental,Health, and Safety Requirements and in a workmanlike manner and (B) whereSeller is the Controlling Party, to the extent reasonably practicable from aneconomic and engineering standpoint, avoid undue interference with the ongoingbusiness operations of the Target Business; *provided*that, where the Seller is the Indemnifying Party, in no case shall the Sellerbe required to conduct, or indemnify any Buyer Indemnified Party for, anyRemedial Action other than in accordance with the standards and limitationsprovided in Section 6(e)(vii).

###  

### (viii)        The Parties shalluse their reasonable best efforts to cooperate with each other in all mattersrelating to any Environmental Indemnification Claim, or any claims by oragainst third parties relating thereto, including access provided by Buyer toinformation or copies of documentation necessary to respond to any request byany Governmental Authority; *provided*that,if such access would require the Parties to reveal information that wouldotherwise be protected by attorney-client privilege or any attorney work productdoctrine, or other privilege pertaining to confidentiality, then Buyer andSeller shall enter into a reasonable confidentiality agreement, joint defenseor similar agreement governing the terms and conditions of such access andreasonably calculated to preserve confidentiality and the applicableprivileges.

###  

### (ix)           In connection with any EnvironmentalIndemnification Claim, Buyer shall provide access to, and Seller shall have theright, but not the obligation, at reasonable times and after reasonable notice,to enter on, the applicable Real Property (A) if Seller is the ControllingParty, 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’sperformance of any Remedial Action, including taking split samples at its ownexpense.

###  

### (x)            In the event of a disagreementbetween the Controlling Party and the Non-Controlling Party regarding that typeand scope of any Remedial Action, the Parties shall consult with theirrespective responsible executives who will undertake reasonable best efforts toresolve the disagreement in good faith.

 

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### (xi)           Notwithstanding any provision to thecontrary herein, without the Indemnifying Party’s written consent, which shallnot be unreasonably withheld, Indemnified Party shall have no right to (A) enterinto any orders or other legally-binding agreements with any GovernmentalAuthorities, any settlements with any third parties, or any voluntary cleanupprogram, or (B) except as required by any Environmental Law, submit anyreport to any Governmental Authority, with respect to any presence or releaseof Hazardous Materials, non-compliance with Environmental Law, or otherenvironmental conditions at or relating to any Real Property or the TargetBusiness that, in each of case (A) and (B) is or may reasonablybecome the subject of, in whole or in part, any Environmental IndemnificationClaim; *provided* that, whereSeller is both the Indemnifying Party and the Controlling Party, Seller shallnot, without Buyer’s written consent, which shall not be unreasonably withheldor delayed, enter into any orders or other legally binding agreements with anyGovernmental Authorities or any settlements with third parties with respect tosuch presence, release, non-compliance or environmental condition.

###  

## (h)   **RecoupmentAgainst General Escrow Amount and Specified Environmental Escrow Amount**.

##  

### (i)            Anyindemnification to which Buyer is entitled under this Agreement as a result ofany Losses, other than Specified Environmental Losses relating to the OwnedReal Property in Prentice, Wisconsin, shall first be made as a payment to Buyerfrom the General Escrow Amount pursuant to the terms and conditions of theGeneral Escrow Agreement and, to the extent that the aggregate amount of suchindemnification exceeds the General Escrow Amount, Seller shall be responsibletherefor.

###  

### (ii)           Anyindemnification to which Buyer is entitled under this Agreement as a result ofany Specified Environmental Losses relating to the Owned Real Property in (A) Prentice,Wisconsin or (B) to the extent the General Escrow Amount has been fullyexhausted and/or returned to Seller, in whole or in part, pursuant to the termsand conditions of the General Escrow Agreement, Zebulon, North Carolina orOwatonna, Minnesota, shall first be made as a payment to Buyer from theSpecified Environmental Escrow Amount pursuant to the terms and conditions ofthe Specified Environmental Escrow Agreement and, to the extent that theaggregate amount of such indemnification exceeds the Specified EnvironmentalEscrow Amount, Seller shall be responsible therefor.

###  

## (i)    **PurchasePrice Adjustments**.  ForTax purposes, to the extent permitted by applicable law, any amounts payableunder Section 6(b) or (c) shall be treated by Buyer andSeller as an adjustment to the Adjusted Purchase Price.

##  

## (j)    **Mitigation**.  Buyer and Seller shall cooperate with eachother with respect to resolving any claim or Liability with respect to whichone Party is obligated to provide indemnification hereunder, including by usingcommercially reasonable efforts to mitigate or resolve any such claim orLiability; *provided* that prior tothe Closing, Buyer shall not be deemed to have relied on any representation or warrantyof Buyer other than those expressly set forth in this Agreement.

 

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# **SECTION 7          MISCELLANEOUS**

# ** **

## (a)   **PressReleases and Public Announcements**.  For a period of thirty (30) calendar daysfollowing the Closing Date, no Party shall issue any press release or make anypublic announcement relating to the transactions contemplated hereby withoutthe prior written approval of the other Party; *provided,however*, that any Party may (i) make any public disclosure itbelieves in good faith is required by applicable law or any listing or tradingagreement concerning its publicly traded securities (in which case thedisclosing Party will use its commercially reasonable efforts to advise theother Party prior to making the disclosure) and (ii) cause its officers,directors or employees to respond to inquiries relating to the transactionscontemplated hereby to the extent such Party reasonably believes that itsfailure to respond to any such inquiry could directly or indirectly materiallyadversely effect such Party’s or such Party’s Affiliate’s market reputation.

##  

## (b)   **NoThird-Party Beneficiaries**. This Agreement shall not confer any rights or remedies upon any Personother than the Parties, and to the extent expressly set forth herein, theirAffiliates, the Buyer Indemnified Parties, the Seller Indemnified Parties, andall of their respective successors and permitted assigns.

##  

## (c)   **EntireAgreement**.  ThisAgreement, together with the Transaction Agreements, constitutes the entireagreement among the Parties and supersedes any prior understandings,agreements, or representations by or among the Parties, written or oral, to theextent they relate in any way to the subject matter hereof.

##  

## (d)   **Successionand Assignment**.  This Agreementshall be binding upon and inure to the benefit of the Parties named herein andtheir respective successors and permitted assigns.  None of Buyer Parent, CFPI or any CaterpillarSubsidiary, 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 ofBlount, in the case of Buyer Parent, CFPI or any Caterpillar Subsidiary, orCFPI, in the case of Seller Parent, Blount or any Blount Subsidiary.

##  

## (e)   **Counterparts**.  This Agreement may be executed in one or morecounterparts (including by means of facsimile), each of which shall be deemedan original but all of which together will constitute one and the sameinstrument, except no Party shall be bound unless all Parties have deliveredtheir signatures to the other Parties. Facsimile transmission of a counterpart hereto shall constitute anoriginal hereof.

##  

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

##  

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

 

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If to Buyer:

 

                Caterpillar Forest Products Inc.100 S. L. White Blvd.LaGrange, GA 30241Attn:  John Carpenter – PresidentFacsimile:  (706) 880-4328

 

with a copy to:

 

                Caterpillar Inc.100 N.E. Adams St.Peoria, Illinois 61629-9600Attn:  Deputy General CounselFacsimile:  (309) 675-1795

 

If to Seller:

 

                Blount, Inc.4909 S.E. International WayPortland, OR  97222-4679Attn:  Richard H. Irving, III, Esq.Facsimile:  (503) 653-4592

 

or such other address asany Party may from time to time specify by notice to the other Parties in themanner herein set forth.

 

## (h)   **ApplicableLaw; Choice of Forum; Waiver of Jury Trial**. * *ThisAgreement shall be governed by and construed and enforced in accordance withthe domestic laws of the State of Delaware, United States of America, withoutgiving effect to any choice or conflict of law provision or rule (whetherof the State of Delaware or any other jurisdiction) that would cause theapplication of laws of any jurisdiction other than the State of Delaware,United States of America.  The Partiesagree that any suit, action or proceeding brought by the Parties in connectionwith or arising out of this Agreement shall be brought solely in the UnitedStates District Court of the District of Delaware or, if such court lacksjurisdiction, in the Delaware Court of Chancery.  Each Party consents to the jurisdiction andvenue of each such court.  Each Partyhereby waives, to the fullest extent permitted by applicable law, any right itmay have to a trial by jury in respect to any litigation directly or indirectlyarising out of, under or in connection with this Agreement, any TransactionAgreement or any transaction contemplated hereby or thereby.  Each Party (i) certifies that norepresentative, agent or attorney of any other Party has represented, expresslyor otherwise, that such other party would not, in the event of litigation, seekto enforce that foregoing waiver and (ii) acknowledges that it and theother Parties hereto have been induced to enter into this Agreement and theTransaction Agreements, as applicable, by, among other things, the mutualwaivers and certifications in this Section 7(h).

##  

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

 

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## hereunder or affect in anyway 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 thatis invalid or unenforceable in any situation in any jurisdiction shall notaffect the validity or enforceability of the remaining terms and provisionshereof or the validity or enforceability of the offending term or provision inany other situation or in any other jurisdiction.

##  

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

##  

## (l)    **Construction**.  The Parties have participated jointly in thenegotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretationarises, this Agreement shall be construed as if drafted jointly by the Partiesand no presumption or burden of proof shall arise favoring or disfavoring anyParty by virtue of the authorship of any of the provisions of thisAgreement.  Any reference to any federal,state, local, or foreign statute or law shall mean such statute or law, asamended, codified, replaced, or re-enacted, in whole or in part, and shall alsobe deemed to refer to all rules and regulations promulgated thereunder,unless the context requires otherwise. Unless the context requires otherwise, singular includes plural and viceversa and any gender includes every gender, and where any word or phrase isgiven a defined meaning, any other grammatical form of that word or phrase willhave a correlative meaning.  The word “including”shall mean including without limitation. The Parties intend that each representation, warranty, and covenantcontained herein shall have independent significance.  If any Party has breached any representation,warranty, or covenant contained herein in any respect, the fact that there existsanother representation, warranty, or covenant relating to the same subjectmatter (regardless of the relative levels of specificity) that the Party hasnot breached shall not detract from or mitigate the fact that the Party is inbreach 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 orperformed by or on behalf of Buyer shall not limit, qualify, modify or amendthe representations, warranties or covenants of, or indemnities by, Seller madepursuant to this Agreement, irrespective of the knowledge and informationreceived (or which should have been received) therefrom by Buyer.

##  

## (m)  **Incorporationof Exhibits and Schedules**. The Exhibits and Schedules to this Agreement are incorporated herein byreference and made a part hereof.

##  

## (n)   **SpecificPerformance**.  Except asotherwise provided in Section 6(e)(iii), each Party acknowledgesand agrees that the other Party would be damaged irreparably in the event anyprovision of this Agreement is not performed in accordance with its specificterms or otherwise is breached, so that a Party shall be entitled to injunctiverelief to prevent breaches of this

 

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## Agreement and to enforcespecifically this Agreement and the terms and provisions hereof in addition toany other remedy to which such Party may be entitled, at law or in equity.  In particular, except as otherwise providedin Section 6(e)(iii), the Parties acknowledge that the TargetBusiness is unique and recognize and affirm that in the event Seller breachesthis Agreement, money damages would be inadequate and Buyer would have noadequate remedy at law, so that Buyer shall have the right, in addition to anyother rights and remedies existing in its favor, to enforce its rights and theother Parties’ obligations hereunder not only by action for damages but also byaction for specific performance, injunctive, and/or other equitable relief.

##  

## (o)   **Joint andSeveral Obligations. **The obligationsunder this Agreement of Blount and the Blount Subsidiaries, on the one hand,and CFPI and the Caterpillar Subsidiaries, on the other hand, shall be jointand several; *provided* thatneither any Blount Subsidiary nor any Caterpillar Subsidiary shall have anyLiability hereunder for damages in excess of the amount set forth next to itsname on Section 7(o) of the Disclosure Schedule.  For the avoidance of doubt, the obligationsunder this Agreement of each of Blount, on the one hand, and CFPI, on the otherhand, shall be joint and several without limitation.

##  

## (p)   **GoverningLanguage**.  This Agreementhas been negotiated and executed by the Parties in English.  In the event any translation of thisAgreement is prepared for convenience or any other purpose, the provisions ofthe English version shall prevail.

##  

## (q)   **Remittances**.  All remittances, payments, mail and othercommunications relating to the Acquired Assets or the Assumed Liabilitiesreceived by Seller at any time after the Closing Date shall be promptly turnedover to Buyer by Seller. All remittances, payments, mail and othercommunications relating to any asset that is not an Acquired Asset or anyliability that is not an Assumed Liability received by Buyer at any time afterthe Closing Date shall be promptly turned over to Seller by Buyer.

##  

[Signatures appear on the next page.]

 

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IN WITNESS WHEREOF, theParties 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 AssetPurchase Agreement]**

 

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| **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 AssetPurchase Agreement]**

 

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