Exhibit 10.1


 


Confidential/Subject to Confidentiality
Agreement


 


 


STOCK PURCHASE
AGREEMENT


 


between


 


BROWN-FORMAN
CORPORATION

Seller


 


and


 


DEPARTMENT 56, INC.

Buyer


 


 


DATED AS OF JULY 21,
2005


 





















 


TABLE OF CONTENTS


 


	
  ARTICLE 1

  	
  CERTAIN
  DEFINITIONS

  	
   

  
	
  1.1

  	
  Defined Terms

  	
   

  
	
  1.2

  	
  General Rules of Construction and
  Interpretation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  PURCHASE
  AND SALE OF STOCK

  	
   

  
	
  2.1

  	
  Sale

  	
   

  
	
  2.2

  	
  Purchase Price; Initial Payment

  	
   

  
	
  2.3

  	
  Closing Working Capital Statement

  	
   

  
	
  2.4

  	
  Settlement

  	
   

  
	
  2.5

  	
  Expenses

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  CLOSING

  	
   

  
	
  3.1

  	
  Time and Place

  	
   

  
	
  3.2

  	
  Simultaneous Actions

  	
   

  
	
  3.3

  	
  Deliveries by Seller

  	
   

  
	
  3.4

  	
  Deliveries by Buyer

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  REPRESENTATIONS
  AND WARRANTIES REGARDING SELLER

  	
   

  
	
  4.1

  	
  Organization

  	
   

  
	
  4.2

  	
  Power

  	
   

  
	
  4.3

  	
  Authorization

  	
   

  
	
  4.4

  	
  Noncontravention

  	
   

  
	
  4.5

  	
  Consents

  	
   

  
	
  4.6

  	
  Stock Ownership

  	
   

  
	
  4.7

  	
  Litigation

  	
   

  
	
  4.8

  	
  Brokers

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  REPRESENTATIONS
  AND WARRANTIES REGARDING COMPANY

  	
   

  
	
  5.1

  	
  Organization

  	
   

  
	
  5.2

  	
  Capitalization

  	
   

  
	
  5.3

  	
  Company Subsidiaries

  	
   

  
	
  5.4

  	
  Noncontravention

  	
   

  
	
  5.5

  	
  Consents

  	
   

  
	
  5.6

  	
  Financial Statements

  	
   

  
	
  5.7

  	
  Absence of Undisclosed Liabilities

  	
   

  
	
  5.8

  	
  Absence of Changes

  	
   

  
	
  5.9

  	
  Real Property

  	
   

  
	
  5.10

  	
  Company Contracts

  	
   

  
	
  5.11

  	
  Litigation

  	
   

  
	
  5.12

  	
  Compliance

  	
   

  
	
  5.13

  	
  Environmental

  	
   

  
	
  5.14

  	
  Employment Matters

  	
   

  
	
  5.15

  	
  Employee Benefit Plans

  	
   

  
	
  5.16

  	
  Intercompany Transactions

  	
   

  
	
  5.17

  	
  Intellectual Property

  	
   

  



 


i





















 


	
  5.18

  	
  Ownership of Necessary Assets and Rights

  	
   

  
	
  5.19

  	
  Tax Matters

  	
   

  
	
  5.20

  	
  Products

  	
   

  
	
  5.21

  	
  No Other Representations or Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
  REPRESENTATIONS AND WARRANTIES OF BUYER

  	
   

  
	
  6.1

  	
  Organization

  	
   

  
	
  6.2

  	
  Power

  	
   

  
	
  6.3

  	
  Authorization

  	
   

  
	
  6.4

  	
  Noncontravention

  	
   

  
	
  6.5

  	
  Consents

  	
   

  
	
  6.6

  	
  Investment Intent

  	
   

  
	
  6.7

  	
  Litigation

  	
   

  
	
  6.8

  	
  Brokers

  	
   

  
	
  6.9

  	
  Financial Capability

  	
   

  
	
  6.10

  	
  Environmental Audits

  	
   

  
	
  6.11

  	
  Non-Reliance

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  COVENANTS OF THE PARTIES UNTIL CLOSING

  	
   

  
	
  7.1

  	
  Conduct of Business Pending Closing

  	
   

  
	
  7.2

  	
  Negative Covenants

  	
   

  
	
  7.3

  	
  Access

  	
   

  
	
  7.4

  	
  Consents

  	
   

  
	
  7.5

  	
  HSR Act

  	
   

  
	
  7.6

  	
  Public Statements

  	
   

  
	
  7.7

  	
  Satisfaction of Company Debt

  	
   

  
	
  7.8

  	
  Satisfaction of Conditions

  	
   

  
	
  7.9

  	
  No Sale

  	
   

  
	
  7.10

  	
  No Negotiations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
  CONDITIONS TO OBLIGATION OF BUYER

  	
   

  
	
  8.1

  	
  Representations and Warranties

  	
   

  
	
  8.2

  	
  Performance of Agreements

  	
   

  
	
  8.3

  	
  Approvals

  	
   

  
	
  8.4

  	
  Legal Matters

  	
   

  
	
  8.5

  	
  Material Adverse Effect

  	
   

  
	
  8.6

  	
  Financing

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
  CONDITIONS TO OBLIGATION OF SELLER

  	
   

  
	
  9.1

  	
  Representations and Warranties

  	
   

  
	
  9.2

  	
  Performance of Agreements

  	
   

  
	
  9.3

  	
  Approvals

  	
   

  
	
  9.4

  	
  Legal Matters

  	
   

  
	
  9.5

  	
  Release of Guarantees

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
  TERMINATION

  	
   

  
	
  10.1

  	
  Termination

  	
   

  



 


ii





















 


	
  10.2

  	
  Effect of Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
  POST-CLOSING COVENANTS; TAX MATTERS

  	
   

  
	
  11.1

  	
  Access to Records

  	
   

  
	
  11.2

  	
  Further Assurances

  	
   

  
	
  11.3

  	
  Tax Matters

  	
   

  
	
  11.4

  	
  Environmental
  Obligations

  	
   

  
	
  11.5

  	
  Cash
  Sweep

  	
   

  
	
  11.6

  	
  Confidentiality

  	
   

  
	
  11.7

  	
  Noncompete;
  Nonsolicit

  	
   

  
	
  11.8

  	
  Litigation
  Support

  	
   

  
	
  11.9

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12

  	
  EMPLOYEE MATTERS COVENANTS

  	
   

  
	
  12.1

  	
  General

  	
   

  
	
  12.2

  	
  Welfare
  Plans

  	
   

  
	
  12.3

  	
  Severance
  Benefit

  	
   

  
	
  12.4

  	
  Omnibus
  Compensation Plans

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13

  	
  INDEMNIFICATION

  	
   

  
	
  13.1

  	
  Survival

  	
   

  
	
  13.2

  	
  Indemnification

  	
   

  
	
  13.3

  	
  Third
  Party Claims

  	
   

  
	
  13.4

  	
  Remedies
  Exclusive

  	
   

  
	
  13.5

  	
  Recoveries

  	
   

  
	
  13.6

  	
  Characterization

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14

  	
  MISCELLANEOUS

  	
   

  
	
  14.1

  	
  Expenses

  	
   

  
	
  14.2

  	
  Binding
  Effect

  	
   

  
	
  14.3

  	
  Entire
  Agreement; Amendments

  	
   

  
	
  14.4

  	
  Notices

  	
   

  
	
  14.5

  	
  Counterparts

  	
   

  
	
  14.6

  	
  Governing
  Law

  	
   

  
	
  14.7

  	
  Jurisdiction

  	
   

  
	
  14.8

  	
  Waivers

  	
   

  



 


iii





















 


INDEX
TO EXHIBITS


 


	
  Exhibit

  	
   

  	
  Description

  
	
   

  	
   

  	
   

  
	
  3.3(c)

  	
   

  	
  Form of Transition Services Agreement

  



 


 


INDEX TO SCHEDULES


 


	
  Disclosure Schedule

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 2.3

  	
   

  	
  Preparation of Closing Working Capital Statement

  
	
   

  	
   

  	
   

  
	
  Schedule 6.10

  	
   

  	
  Buyer’s Environmental Audits

  
	
   

  	
   

  	
   

  
	
  Schedule 11.3(n)

  	
   

  	
  Allocation

  
	
   

  	
   

  	
   

  
	
  Schedule 11.4

  	
   

  	
  Certain Assumed Environmental Obligations

  
	
   

  	
   

  	
   

  
	
  Schedule 11.9

  	
   

  	
  Insurance

  



 


iv





















 


STOCK PURCHASE
AGREEMENT


 


This STOCK PURCHASE AGREEMENT
(this “Agreement”) is entered into as of July 21,
2005 by and between Brown-Forman Corporation, a Delaware corporation (“Seller”); and Department 56, Inc., a Delaware
corporation (“Buyer”).


 


WHEREAS, Seller owns
all of the issued and outstanding capital stock of Lenox, Incorporated, a New
Jersey corporation (“Company”),
which Buyer desires to purchase;


 


WHEREAS, Company and
Company Subsidiaries are engaged primarily in the business of designing,
marketing and manufacturing dinnerware and silver flatware, collectibles and
other tabletop and giftware products (the “Business,” but
excluding the UK Subsidiary and its business); and


 


WHEREAS, this
Agreement sets forth the terms and conditions upon which Seller will sell to
Buyer, and Buyer will acquire from Seller, all of the outstanding shares of
capital stock of Company (the “Share Purchase”);


 


NOW, THEREFORE, in
consideration of the mutual agreements contained herein, the parties agree as
follows:


 


ARTICLE 1

CERTAIN DEFINITIONS


 


1.1                               Defined
Terms.  As used in this Agreement,
the following terms shall have the respective meanings set forth below:


 


“338(h)(10) Elections”
is defined in Section 11.3.


 


“Adjustment Amount”
is defined in Section 2.2.


 


“Affiliate” means,
with respect to any Person, each Person that controls, is controlled by or is
under common control with such Person. 
For the purpose of this definition, “control” of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of
voting securities, by contract or otherwise.


 


“Agreement” is
defined in the preamble.


 


“Arbitrator” is
defined in Section 2.3.


 


“Balance Sheet” and “Balance Sheet Date” are defined in Section 5.6.


 


“Base Consideration”
is defined in Section 2.2.


 


“Basket” is defined
in Section 13.2.


 


“Business” is
defined in the preamble.


 


1





















 


“business day”
means any day that is not a Saturday, a Sunday or other day on which banks in
Louisville, Kentucky are authorized or obligated by Law to close.


 


“Buyer” is defined
in the preamble.


 


“Buyer Damages” is
defined in Section 13.2.


 


“Buyer Material Adverse Effect”
means any change, effect, event or occurrence that is materially adverse to the
business, results of operations or financial condition of Buyer and Buyer’s
subsidiaries, viewed as a whole, or on Buyer’s ability to consummate the
transactions contemplated hereby; provided however, that none of the following
(nor the effects thereof) shall be deemed, individually or in the aggregate, to
constitute, and none of the following (nor the effects thereof) shall be taken
into account in determining whether there has been or will be, a Buyer Material
Adverse Effect:


 


(a)                                   this Agreement, the transactions contemplated by this
Agreement or the announcement thereof;


 


(b)                                  changes or conditions affecting the United States economy or
financial markets or foreign economies or financial markets;


 


(c)                                   changes
in or developments in any industry in which Buyer or any Buyer subsidiary
operates or changes in customer demand, including seasonal changes (provided
that Buyer is not disproportionately affected thereby as compared to its peer
companies); or


 


(d)                                  changes or conditions resulting from political or regulatory
conditions, acts of war, terrorism, escalation of hostilities or earthquakes or
other natural occurrences.


 


“Buyer Parties”
means, collectively, Buyer and its officers, directors, employees,
subsidiaries, Affiliates (including Company and Company Subsidiaries from and
after the Closing) and their respective successors and permitted assigns.


 


“Buyer Tax Indemnitee” is
defined in Section 11.3.


 


“Buyer’s Accountants”
is defined in Section 2.3.


 


“Buyer’s Notice” is
defined in Section 2.3.


 


“Cap Amount” is
defined in Section 13.2.


 


“Cause” means (a) conviction
of the applicable employee for committing a felony under federal law or the law
of the state in which such action occurred, (b) dishonesty or gross
negligence in the course of fulfilling the applicable employee’s employment
duties, or (c) willful and deliberate failure on the part of the
applicable employee to perform his or her employment duties in any material
respect.


 


2





















 


“Claim” is defined
in Section 13.3.


 


“Closing” means the
closing of the transactions contemplated by this Agreement as described in Article 3.


 


“Closing Date” means
the date on which the Closing actually occurs.


 


“Closing Working Capital Statement”
is defined in Section 2.3.


 


“COBRA Coverage”
means the continuation coverage requirements under Section 4980B of the
Code and Part 6 of Title I of ERISA.


 


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


 


“Commitment Letter”
is defined in Section 6.9.


 


“Company” is defined
in the preamble.


 


“Company Contracts”
means the Contracts set forth on Section 5.10 of the Disclosure Schedule (and
additional Contracts entered into after the date hereof which would be required
to be identified in Section 5.10 of the Disclosure Schedule if they
were in effect on the date hereof).


 


“Company Material Adverse Effect”
means any change, effect, event or occurrence that is materially adverse to the
business, results of operations or financial condition of Company and Company
Subsidiaries, viewed as a whole; provided however, that none of the following
(nor the effects thereof) shall be deemed, individually or in the aggregate, to
constitute, and none of the following (nor the effects thereof) shall be taken
into account in determining whether there has been or will be, a Company
Material Adverse Effect:


 


(a)                                   this Agreement, the transactions contemplated by this
Agreement or the announcement thereof, including disclosure of the fact that
Buyer is the prospective buyer of Company;


 


(b)                                  Buyer’s
announcement or other disclosure of its plans or intentions with respect to the
conduct of the Business;


 


(c)                                   changes, conditions, events, effects or occurrences
affecting the United States economy or financial markets or foreign economies
or financial markets;


 


(d)                                  changes,
conditions, events, effects or occurrences in or developments in any industry
in which Company or any Company Subsidiary operates or changes in customer
demand, including seasonal changes (provided that the Business is not
disproportionately affected thereby as compared to its peer companies);


 


3





















 


(e)                                   changes,
conditions, events, effects or occurrences resulting from political or
regulatory conditions, acts of war, terrorism, escalation of hostilities or
earthquakes or other natural occurrences;


 


(f)                                     changes, conditions, events, effects or occurrences to the
extent predominantly arising from any action taken by Buyer or any of its
Affiliates;


 


(g)                                  any
change, condition, occurrence, effect or event resulting from Buyer’s refusal
to consent to Company or a Company Subsidiary taking any action otherwise
prohibited by Section 7.2; or


 


(h)                                  any change in Laws or GAAP accounting rules.


 


“Company Plan” is
defined in Section 5.15.


 


“Company Subsidiary”
means each entity listed on Section 5.3 of the Disclosure Schedule,
provided, however, that such term does not include the UK Subsidiary.


 


“Confidential Information”
is defined in Section 11.6.


 


“Confidentiality Agreement”
means the letter agreement dated as of March 2, 2005, entered into between
Seller and Buyer.


 


“Contract” means any
written contract, lease, undertaking, agreement or other arrangement to or
under which Company or any Company Subsidiary is legally bound, including any
and all amendments and modifications thereto.


 


“Disclosure Schedule”
is defined at the beginning of Article 4.


 


“Employee Beneficiaries”
is defined in Section 12.1.


 


“Encumbrance” means
any mortgage, pledge, claim, security interest, encumbrance, lien, assessment,
conditional sale or other title retention agreement, whether consensual,
statutory or otherwise.


 


“Environmental Claim”
means any Proceeding seeking Environmental Damages or an order, injunction or
similar relief against Company or any Company Subsidiary by any Person, arising
out of, based on, or resulting from any actual or threatened (a) release
or disposal, or the presence in the environment, of any Hazardous Substances by
Company or any Company Subsidiary at any location, (b) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Laws by Company or any Company Subsidiary or (c) exposure to any Hazardous
Substances caused by Company or any Company Subsidiary.


 


“Environmental Damages”
means any and all liabilities, costs and expenditures (including any fees and
expenses of attorneys and of environmental consultants or engineers, and any
fees, fines, penalties or charges imposed by a Governmental Body) incurred in
connection 


 


4





















 


with (i) any
violation or alleged violation of Environmental Laws, or (ii) the defense,
Remediation or other required response to any Release of Hazardous Materials.


 


“Environmental Laws”
means all applicable Laws as in effect as of the date hereof (a) related
to Releases or threatened Releases of any Hazardous Substances in soil, surface
water, groundwater or air, (b) governing the use, treatment, storage,
disposal, transport, or handling of Hazardous Substances, or (c) related
to the protection of the environment, human health or natural resources.  Such Environmental Laws include the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Toxic Substances Control Act, the Clean
Water Act, the Clean Air Act, the Safe Drinking Water Act, the Emergency
Planning and Community Right-to-Know Act, and their respective state and local
counterparts.


 


“Environmental Sites”
means such Properties of Company or Company Subsidiaries and other locations as
are set forth at Section 5.13 of the Disclosure Schedule.


 


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


 


“ERISA Affiliate”
means, with respect to any entity, trade or business, any other entity, trade
or business that is, or was at the relevant time, a member of a group described
in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of
ERISA that includes or included the first entity, trade or business, or that
is, or was at the relevant time, a member of the same “controlled group” as the
first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.


 


“Financial Statements”
is defined in Section 5.6.


 


“Form 8023” is
defined in Section 11.3.


 


“Form 8883” is
defined in Section 11.3.


 


“GAAP” means, as of
any date, generally accepted accounting principles in the United States as in
effect on such date.


 


“Governmental Authorizations”
is defined in Section 5.12.


 


“Governmental Body”
means any United States or foreign, national, multinational, federal, state,
provincial or local governmental, regulatory or administrative authority,
agency or commission or any court or self-regulatory organization, tribunal or
judicial or arbitral body and any instrumentality of any of the foregoing.


 


“Hazardous Substance”
means all hazardous or toxic substances, wastes or materials, any pollutants or
contaminants (including all oil and petroleum of any kind and in any form,
asbestos and raw materials which include hazardous constituents), or any other
similar substances, or materials which are included under or regulated by any
applicable Environmental Law.


 


5





















 


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


 


“Income Taxes” means
U.S. federal, state or local net income or capital gain Taxes, together with
any interest or penalties imposed with respect thereto.


 


“Indemnified Party”
is defined in Section 13.3.


 


“Indemnifying Party”
is defined in Section 13.3.


 


“Initial Payment” is
defined in Section 2.2.


 


“Intellectual Property”
means all of the following owned or used by Company or any Company Subsidiary
in the operation of their business:


 


(a)                                   United
States and foreign trademarks, service marks and trademark and service mark
registrations and applications, trade names, logos, trade dress and slogans,
and all goodwill related to the foregoing;


 


(b)                                  patent
applications, patents, inventions, improvements, know-how, formula methodology,
research and development, business methods, processes, technology and software
in any jurisdiction, including re-issues, continuations, divisions,
continuations-in-part, renewals or extensions;


 


(c)                                   trade secrets;


 


(d)                                  copyrights
in writings, designs, software, mask works or other works, applications or
registrations in any jurisdiction for the foregoing, other original works of
authorship and all  moral rights related
thereto; and


 


(e)                                   Internet
web sites, web pages, domain names and applications and registrations
pertaining thereto (excluding any third-party websites linked to or from the
websites of Company).


 


“Knowledge of Seller”
means such facts and other information that, as of the date of this Agreement,
are known to any of the individuals set forth in Section 1.1A of the
Disclosure Schedule after review of this Agreement, including the
Disclosure Schedule.


 


“Law” means any law,
statute, ordinance, regulation, judgment, order, award or other decision or
requirement of any Governmental Body.


 


“Leased Properties”
means any real property that is leased by Company or any Company Subsidiary.


 


“List” means the
United States Environmental Protection Agency’s National Priorities List of
Hazardous Waste Sites or any other list, official record or determination made
by any Governmental Entity schedule log, inventory or record maintained by
any Governmental Entity identifying any sites at which there has been a Release
of Hazardous Materials.


 


6





















 


“Losses” is defined
in Section 13.2.


 


“Multiemployer Plan”
means any “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA.


 


“Multiple Employer Plan”
means any Plan that has two or more contributing sponsors at least two of whom
are not under common control, within the meaning of Section 4063 of ERISA.


 


“Other Antitrust Regulations”
is defined in Section 7.4.


 


“Other Party” is
defined in Section 11.7.


 


“Other Taxes”  means any Taxes other than Income Taxes.


 


“Owned Properties”
means any real property that is owned in fee simple by Company or any Company
Subsidiary.


 


“Permits” is defined
in Section 5.13.


 


“Permitted Encumbrances”
means


 


(a)                                   Encumbrances
for Taxes (and assessments and other governmental charges or levies) not yet
due and payable or due but not delinquent or being contested in good faith by
appropriate proceedings;


 


(b)                                  mechanics’,
builders’, workmen’s, repairmen’s, warehousemen’s, landlord’s, carriers’ or
other like Encumbrances (including Encumbrances created by operation of law)
with respect to which Company or any Company Subsidiary is not in default in
payment or which are being contested by Company or a Company Subsidiary in good
faith;


 


(c)                                   Encumbrances
in respect of easements, permits, licenses, right-of-way, restrictive covenants
or encroachments or irregularities in, and other similar exceptions to title;


 


(d)                                  zoning, entitlement, building, planning, land use and
environmental restrictions or regulations and other Laws;


 


(e)                                   Encumbrances
with respect to debt or other liabilities that are reflected on the Balance
Sheet;


 


(f)                                     such
other imperfections in title, easements, charges, restrictions and Encumbrances
which do not materially detract from, materially diminish the value of or
materially interfere with the present use of the affected property; and


 


(g)                                  Encumbrances
consented to by Buyer.


 


7





















 


“Person” means an
individual, a partnership (general or limited), a corporation, a limited
liability company, an association, a joint stock company, Governmental Body, a
business or other trust, a joint venture, any other business entity or an
unincorporated organization.


 


“Plan” is defined in
Section 5.15.


 


“Proceeding” means
any suit, proceeding, action, arbitration, complaint, decree or lawsuit before
or involving any third party or Governmental Body.


 


“Properties” means
the Leased Properties and the Owned Properties, collectively.


 


“Proposed Adjustment”
is defined in Section 2.3.


 


“Purchase Price” is
defined in Section 2.2.


 


“Qualified Plan” is
defined in Section 5.15.


 


“Qualifying Termination” shall
mean a termination of the employment of a Company employee


 


(a)                                if terminated by Buyer or its Affiliates, other than a
termination for Cause; or,


 


(b)                                  if
terminated by the Company employee following a reduction in base salary or a
required relocation that would move such Company employee’s principal place of
employment by more than 50 miles.


 


“Release” means the
spilling, leaking, disposing, discharging, emitting, depositing, ejecting,
leaching, escaping or any other release, whether intentional or unintentional,
of any Hazardous Material.


 


“Remediation” means
any investigative, response, removal, remedial, treatment, cleanup, disposal,
monitoring and other corrective actions with respect to environmental matters,
including the Release of any Hazardous Material.


 


“Reports” is defined
in Section 5.13.


 


“Seller” is defined
in the preamble.


 


“Seller Damages” is
defined in Section 13.2.


 


“Seller Group” means
Seller and any subsidiary of Seller, other than Company or any Company
Subsidiary.


 


“Seller Parties” means,
collectively, Seller, its Affiliates (including, prior to Closing, Company and
the Company Subsidiaries), their respective officers, directors and employees,
and their respective successors and permitted assigns.


 


“Seller Restricted Business”
is defined in Section 11.7.


 


8





















 


“Seller Tax Indemnitee”
is defined in Section 11.3.


 


“Seller’s Accountants”
is defined in Section 2.3(b).


 


“Share Purchase” is
defined in the preamble.


 


“Shares” is defined
in Section 2.1.


 


“Subsidiary” means,
with respect to any Person, any other Person of which such Person (either alone
or through or together with any other subsidiary) owns, directly or indirectly,
a majority of the outstanding equity securities or securities or interests
carrying a majority of the voting power in the election of the board of
directors or other governing body of such Person.


 


“Survival Date” is
defined in Section 13.1.


 


“Surviving Entity”
is defined in Section 11.7.


 


“Tax” or “Taxes”
means


 


(a)                                   all
taxes, levies or other assessments of any kind or nature, including U.S.,
state, local and foreign income taxes, withholding taxes, branch profit taxes,
gross receipts taxes, franchise taxes, transfer taxes, sales and use taxes,
business and occupation taxes, license taxes, property taxes, VAT, custom
duties or imposts, stamp taxes, excise taxes, payroll taxes, employment taxes,
estimated taxes, severance taxes, occupancy taxes, intangible taxes and capital
taxes;


 


(b)                                  any
interest or penalties, additions to tax or additional amounts imposed in
connection with any item described in the foregoing clause (a) or the
failure to comply with any requirement imposed with respect to any Tax Return;
and


 


(c)                                   any
obligation with respect to Taxes described in the foregoing clause (a) or (b) payable
by reason of being a successor or indemnitor or by reason of contract,
assumption, transferee liability, operation of Law, Treasury Regulation §1.1502-6
(or any predecessor or successor thereof or any analogous or similar provision
under Law) or otherwise.


 


“Tax Affiliates” is defined in Section 5.19.


 


“Tax Benefit” means the Tax effect of any item of
loss, deduction or credit or any other item which decreases Taxes paid or
payable or increases tax basis, including any interest with respect thereto or
interest that would have been payable but for such item, net of any tax
detriment associated therewith.


 


“Tax Item” means any
item of income, gain, loss, deduction, credit, recapture of credit or any other
item which increases or decreases Taxes paid or payable, including an
adjustment under Section 481 of the Code resulting from a change in
accounting method.


 


9





















 


“Tax Proceeding”
means any Tax audit, contest, litigation, defense or other proceeding with or
against any Taxing Authority.


 


“Tax Return” or “Return”
means any return, report, declaration, statement, extension, form or other
documents or information filed with or submitted to, or required to be filed
with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax.


 


“Taxing Authority”
means any Governmental Body exercising any authority to impose, regulate, or
administer the imposition of Taxes.


 


“Threshold Amount”
is defined in Section 13.2.


 


“Transition Services Agreement”
means the agreement referred to in Section 3.3(c).


 


“Treasury Regulation”
means the regulations promulgated under the Code by the United States
Department of Treasury.


 


“UK Subsidiary”
means Brooks & Bentley Limited, an English private company limited by
shares.


 


“Welfare Benefits”
shall mean the types of benefits described in Section 3(1) of ERISA
(whether or not covered by ERISA).


 


“Welfare Plan” shall
mean any employee welfare benefit plan within the meaning of Section 3(1) of
ERISA.


 


“Withdrawal Liability”
means liability to a Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as those terms are defined in Part I of Subtitle E of Title IV of ERISA.


 


1.2                               General Rules of
Construction and Interpretation.


 


(a)                                  The
words “hereof,” “herein,” and “hereunder” and words of similar import, when
used in this Agreement, shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.


 


(b)                                 Terms
defined in the singular shall have a comparable meaning when used in the
plural, and vice versa.


 


(c)                                  Any
reference to a particular gender shall be deemed to include all other genders
unless the context otherwise requires.


 


(d)                                 Headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.


 


(e)                                  Unless
an express reference is made to a different document, all references to a Section or
Article will be understood to refer to the indicated Section or Article of
this 


 


10





















 


Agreement, and all references to a Schedule or
Exhibit will be understood to refer to the indicated Schedule or Exhibit to
this Agreement.


 


(f)                                    Whenever
the word “include,” “includes” or “including” is used in this Agreement, it
shall be deemed to be followed by the words “without limitation.”


 


(g)                                 In
the event of an alleged ambiguity or a question of intent or interpretation,
this Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.


 


(h)                                 The
word “will” shall be construed to have the same
meaning and effect as the word “shall.”


 


(i)                                     The
Disclosure Schedule, and all other Schedules and Exhibits attached hereto or
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein.  Any
capitalized terms used in the Disclosure Schedule or any other Schedule or
any Exhibit but not otherwise defined therein shall have the meaning
defined in this Agreement.


 


ARTICLE 2

PURCHASE AND SALE OF STOCK


 


2.1                               Sale.  Upon the terms and subject to the conditions
of this Agreement, on the Closing Date, Seller shall sell, assign, transfer and
deliver to Buyer, and Buyer shall purchase and accept from Seller, all of the
issued and outstanding capital stock of Company, consisting of 1000 shares of
Common Stock, par value $1 per share (the “Shares”),
free and clear of all Encumbrances.


 


2.2                               Purchase
Price; Initial Payment.


 


(a)                                  The
purchase price (the “Purchase Price”)
to be paid by Buyer to Seller for the Shares shall be One Hundred Ninety
Million Dollars ($190,000,000.00) (the “Base
Consideration”) plus the Adjustment Amount.


 


(b)                                 The
“Adjustment Amount” (which may be
a positive or negative number) will be equal to the working capital of Company
and the Company Subsidiaries as determined from the Closing Working Capital
Statement prepared in accordance with Section 2.3, minus Ninety Six
Million Nine Hundred Thousand Dollars ($96,900,000.00).


 


(c)                                  At
Closing, Buyer will deliver to Seller, as an initial payment (the “Initial Payment”) of the Purchase Price,
an amount equal to (i) Seller’s estimate of the Adjustment Amount,
estimated on the basis of the interim unaudited balance sheet of Company and
Company Subsidiaries as at the end of the most recently ended month for which
such balance sheet is available at Closing, estimated as though the end of such
month were the Closing Date, plus (ii) the Base Consideration.


 


11





















 


2.3                               Closing
Working Capital Statement.


 


(a)                                  As
promptly as practicable following the Closing, but not later than 60 days
thereafter, Seller shall


 


(1)                                  prepare
and deliver to Buyer a statement of the consolidated current assets and current
liabilities of Company and the Company Subsidiaries as of the close of business
on the last business day immediately preceding the Closing Date, including a
calculation of the Adjustment Amount (the “Closing
Working Capital Statement”), which shall be prepared in accordance
with Schedule 2.3 attached hereto; and


 


(2)                                  deliver
to Buyer a report of PricewaterhouseCoopers LLP or another
nationally-recognized independent public accounting firm selected by Seller (“Seller’s Accountants”) stating that the
Closing Working Capital Statement has been prepared in accordance with Schedule 2.3.


 


(b)                                 Buyer
may cause another independent public accounting firm selected by Buyer (“Buyer’s Accountants”), to conduct a review
of the Closing Working Capital Statement. 
Representatives of Buyer and Buyer’s Accountants shall have reasonable
access to all journal entries and other records used by Seller in its
preparation of the Closing Working Capital Statement.  Within 45 days after Buyer’s receipt of the
Closing Working Capital Statement and report of Seller’s Accountants, Buyer
shall deliver written notice (the “Buyer’s
Notice”) to Seller either (i) stating that Buyer accepts the
Closing Working Capital Statement or (ii) describing in reasonable detail,
including the nature and amount thereof, each adjustment (a “Proposed Adjustment”) that Buyer proposes
be made to the Closing Working Capital Statement; provided, however,
that Buyer’s Notice of any Proposed Adjustment shall not be effective unless
accompanied by a special report of Buyer’s Accountants stating that each such
Proposed Adjustment is required to be made in order for the Closing Working
Capital Statement to have been prepared in accordance with Schedule 2.3.  Furthermore, the Closing Working Capital
Statement shall not be subject to any adjustment unless the aggregate amount of
all such adjustments as finally determined exceeds $300,000; provided, that, if such adjustments exceed $300,000, then
the final amount of such adjustments (and not merely the excess over $300,000)
shall be included in the Closing Working Capital Statement and the final
determination of the Adjustment Amount. 
If Seller has not received Buyer’s Notice within such 45-day period,
Buyer shall be deemed to have accepted the amount of the working capital and
the calculation of the Adjustment Amount set forth in the Closing Working
Capital Statement.


 


(c)                                  If
Buyer’s Notice contains any Proposed Adjustment, then Buyer and Seller shall
negotiate in good faith to resolve such Proposed Adjustment in accordance with
this Agreement, provided that if the parties have not resolved all
Proposed Adjustments within 30 days following Seller’s receipt of Buyer’s
Notice, then Buyer and Seller shall engage Ernst & Young LLP (provided
it is not serving as Buyer’s Accountants) or another mutually acceptable firm
of independent public accountants of nationally recognized reputation (the “Arbitrator”).  The Arbitrator shall act as an arbitrator to
determine only those Proposed Adjustments still in 


 


12





















 


dispute and the resulting computation of
the Adjustment Amount, which determination shall be made in accordance with the
terms of this Agreement, rendered within 60 days of the Arbitrator’s
engagement, and shall be final and binding on all parties.


 


2.4                               Settlement.  Within five business days following the final
determination of the Adjustment Amount in accordance with Section 2.3
above, whether by agreement or deemed agreement of the parties or by the
Arbitrator:


 


(a)                                  if
the Purchase Price is more than the Initial Payment, Buyer shall deliver to
Seller immediately available funds in an amount equal to the difference between
the Purchase  Price and the Initial
Payment plus interest on such amount at the rate of 4.5% per annum from the
Closing Date to, but not including, the date of payment; or


 


(b)                                 if the Initial Payment is more than the Purchase Price,
Seller shall deliver to Buyer immediately available funds in an amount equal to
the difference between the Initial Payment and the Purchase Price plus interest
on such amount at the rate of 4.5% per annum from the Closing Date to, but not
including, the date of payment.


 


2.5                               Expenses.  All expenses relating to the work to be
performed by Buyer’s Accountants as contemplated by Section 2.3 shall be
borne by Buyer, all expenses relating to the work to be performed by Seller’s
Accountants as contemplated by Section 2.3 shall be borne by Seller, and
all expenses relating to the work, if any, to be performed by the Arbitrator in
accordance with Section 2.3 to resolve disputes shall be borne equally by
Buyer and Seller.


 


ARTICLE 3

CLOSING


 


3.1                               Time
and Place.  The Closing shall take
place at the offices of Seller, Louisville, Kentucky at 10:00 a.m.,
Louisville, Kentucky time, on the second business day after the date on which all
of the conditions to the Closing (other than those that by their terms are to
be satisfied at Closing) set forth in Article 8 and Article 9 have
been satisfied or waived, or on such other date and at such other time and
place as Seller and Buyer may mutually agree.


 


3.2                               Simultaneous
Actions.  All proceedings to be taken
and all documents to be executed and delivered by the parties at the Closing
shall be deemed to have been taken and executed simultaneously and no
proceedings shall be deemed taken nor any documents executed or delivered until
all have been taken, executed and delivered.


 


3.3                               Deliveries
by Seller.  On or before the Closing
Date, Seller will deliver to Buyer the following:


 


(a)                                  a
certificate, dated the Closing Date, executed by Seller, certifying that the
conditions to Buyer’s obligation to consummate the Closing under Sections 8.1
and 8.2 have been satisfied;


 


(b)                                 the original certificate(s) evidencing the Shares
accompanied by duly executed stock transfer power(s) and any other documents necessary
to transfer to Buyer good title to the Shares;


 


13





















 


(c)                                  the Transition Services Agreement, duly executed by Seller
and Company, in the form of Exhibit 3.3(c);


 


(d)                                 an assignment to Buyer of Seller’s rights with respect to
confidentiality agreements signed by other prospective purchasers of Company;


 


(e)                                  a
certificate of good standing for Company and a certified copy of the
Certificate of Incorporation of Company issued by the Secretary of State of New
Jersey, as of a recent date; and


 


(f)                                    resignations of all members of the board of directors of
Company, to the extent received by Seller at or prior to Closing.


 


3.4                               Deliveries
by Buyer.  On or before the Closing
Date, Buyer will deliver to Seller the following:


 


(a)                                  a
certificate, dated the Closing Date, executed by Buyer, certifying that the
conditions to Seller’s obligation to consummate the Closing under Sections 9.1
and 9.2 have been satisfied;


 


(b)                                 the
Initial Payment, by wire transfer of immediately available funds in United
States currency to an account or accounts designated in writing by Seller; and


 


(c)                                  the Transition Services Agreement, duly executed by Buyer,
in the form of Exhibit 3.3(c).


 


ARTICLE 4

REPRESENTATIONS AND WARRANTIES REGARDING SELLER


 


Simultaneously with the execution of this Agreement by Seller, Seller
is delivering to Buyer a disclosure schedule (the “Disclosure
Schedule”) with numbered sections corresponding to sections in this
Agreement.  Any matter disclosed in any section of
the Disclosure Schedule shall be deemed disclosed in all other sections of
the Disclosure Schedule to the extent that such disclosure is reasonably
apparent to be applicable to such other sections, notwithstanding the reference
to a particular section or subsection. 
The inclusion of any information in the Disclosure Schedule shall
not be deemed an admission or acknowledgement that such information is required
to be set forth therein or that such information is material or that such
information constitutes or would reasonably be expected to constitute a Company
Material Adverse Effect.


 


Except as set forth in the Disclosure
Schedule, Seller represents and warrants to Buyer as follows:


 


4.1                               Organization.  Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.


 


14





















 


4.2                               Power.  Seller has all requisite corporate power and
authority to own the Shares and to enter into this Agreement, to perform its
obligations hereunder, and to consummate the sale of the Shares and other
transactions contemplated by this Agreement.


 


4.3                               Authorization.  The execution, delivery and performance of
this Agreement by Seller and the consummation of the transactions contemplated
hereby by Seller have been duly and validly authorized by all necessary
corporate action on the part of Seller. 
This Agreement has been duly and validly executed and delivered by
Seller, and is a valid and binding obligation of Seller, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights and to general principles of equity.


 


4.4                               Noncontravention.  Neither the execution, delivery and
performance of this Agreement by Seller, nor the consummation by Seller of the
transactions contemplated hereby nor compliance by Seller with any of the
provisions hereof will:


 


(a)                                  conflict with or result in a breach of any provision of the
Certificate of Incorporation or Bylaws of Seller;


 


(b)                                 cause
a default, or result in a material breach or give rise to any right of
termination, cancellation, or acceleration under any material agreement or
other material obligation to which Seller is a party, except for such matters
as would not reasonably be expected to result in a material adverse effect upon
the ability of Seller to perform its obligations under this Agreement;


 


(c)                                  assuming
compliance with the HSR Act, violate any Law, order of any Governmental Body or
Governmental Authorization applicable to Seller, except as would not reasonably
be expected to result in a material adverse effect upon the ability of Seller
to perform its obligations under this Agreement; or


 


(d)                                 result in the creation of any Encumbrance upon the Shares
held by Seller.


 


4.5                               Consents.  No consent or approval by, or notification of
or filing with, any Governmental Body is required to be obtained or made by
Seller in connection with the execution, delivery and performance by Seller of
this Agreement, or the consummation by Seller of the transactions contemplated
hereby, except for compliance with the HSR Act and except for any such consent,
approval, notification or filing the failure of which to obtain or make would
not reasonably be expected to result in a material adverse effect upon Seller’s
ability to perform its obligations under this Agreement.


 


4.6                               Stock
Ownership.  Seller has, and agrees to
transfer to Buyer at Closing, good and valid title to the Shares, free and
clear of all Encumbrances, options, restrictions on transfer or rights of
refusal.  No Person owns or has any
beneficial interest in any of the Shares except Seller.  Seller has not transferred or assigned, or
entered into any agreement to transfer or assign, any of the Shares or any of
the voting rights or dividend rights pertaining thereto.


 


4.7                               Litigation.  No Proceeding has, as of the date of this
Agreement, been commenced or, to the Knowledge of Seller, threatened against
Seller that challenges the validity 


 


15





















 


of this Agreement or the transactions
contemplated hereby or that would reasonably be expected to have the effect of
preventing, materially delaying, materially impairing or making illegal the
transactions contemplated, or have a material adverse effect on Seller’s
ability to perform its obligations under this Agreement.


 


4.8                               Brokers.  Neither Seller nor Company has employed any
broker, finder or investment banker in connection with the transactions
contemplated by this Agreement which would be entitled to a fee or commission
in connection with such transactions, except for any broker, finder or
investment banker whose fees or commissions shall be the sole responsibility of
Seller.


 


ARTICLE 5

REPRESENTATIONS AND WARRANTIES REGARDING COMPANY


 


Except as set forth in the Disclosure
Schedule, Seller represents and warrants to Buyer as follows:


 


5.1                               Organization.  Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey
and has all requisite corporate power and authority to own, lease and operate
its material properties and to carry on its business as now being
conducted.  Company is duly qualified and
in good standing to do business in every jurisdiction in which such
qualification is necessary because of the nature of the property owned, leased
or operated by it or the nature of the business conducted by it, except where
the failure to be so qualified or be in good standing would not result in a
Company Material Adverse Effect.


 


5.2                               Capitalization.  The entire authorized capital stock of
Company consists of 2000 shares of Common Stock, par value $1 per share, and
1000 shares of Preferred Stock, par value $5 per share.  There are currently issued and outstanding
only the Shares, which are all duly authorized, validly issued, fully paid and
nonassessable.  There is no:


 


(a)                                  outstanding security convertible into or exchangeable for
capital stock of Company;


 


(b)                                 option, warrant, put, call or other right to purchase or
subscribe to capital stock of Company;


 


(c)                                  stock
restriction agreement, or contract, commitment or agreement of any kind
relating to the issuance or disposition of Company capital stock or the
issuance or disposition of any security convertible into or exchangeable for
Company capital stock; or


 


(d)                                 registration rights agreement, voting trust, proxy or other
agreement or restriction on transfer with respect to the Shares.


 


The Shares are
all duly authorized, validly issued, fully paid and non-assessable, and in
certificated form, and have been offered, sold and issued by Company in
compliance with all applicable securities and corporate Laws, agreements or
contracts applicable to Company and Company’s Certificate of Incorporation and
Bylaws, and in compliance with any preemptive rights, rights of first refusal
or other rights.  The consummation of the
Share Purchase will 


 


16





















 


convey to Buyer good and valid title to the
Shares, of record and beneficially, free and clear of all Encumbrances, except
for those created by Buyer or arising out of ownership of the Shares by Buyer.


 


5.3                               Company
Subsidiaries.  All entities
of which Company owns, directly or indirectly, any capital stock, together with
the jurisdiction of incorporation, are set forth at Section 5.3 of the
Disclosure Schedule.  Such entities are
duly organized, validly existing and in good standing under the laws of their
respective jurisdictions of organization, have all requisite corporate power
and authority to own, lease and operate their respective material properties
and to carry on their respective businesses as now being conducted, and are
duly qualified and in good standing to do business in every jurisdiction in which
such qualification is necessary because of the nature of the property owned,
leased or operated by such entities or the nature of the business conducted by
such entities, except where the failure to be so qualified or be in good
standing would not result in a Company Material Adverse Effect.  Company owns all of the issued and
outstanding capital stock of each such entity free and clear of all
Encumbrances, options, restrictions on transfer and rights of refusal other
than Permitted Encumbrances.


 


5.4                               Noncontravention.  Neither the execution, delivery and
performance of this Agreement by Seller, nor the consummation by Seller of the
transactions contemplated hereby nor compliance by Seller or Company with any
of the provisions hereof will:


 


(a)                                  conflict with or result in a breach of any provision of the
Certificate of Incorporation or Bylaws of Company or any Company Subsidiary;


 


(b)                                 except
as would not reasonably be expected to result in a Company Material Adverse
Effect, cause a default, or result in a breach or give rise to any right of
termination, cancellation, or acceleration under any Company Contract or other
material obligation to which Company or any Company Subsidiary is a party, or
by which Company or any Company Subsidiary or any of their respective material
properties or assets is or may be bound or benefited; or


 


(c)                                  except as would not reasonably be expected to result in a
Company Material Adverse Effect and except for compliance with the HSR Act,
violate any Law applicable to Company or any Company Subsidiary.


 


5.5                               Consents.  Except for compliance with the HSR Act or as
would not reasonably be expected to result in a Company Material Adverse
Effect, no consent or approval by, or notification of or filing with, any
Governmental Body is required to be obtained or made by Company or any Company
Subsidiary in connection with the execution, delivery and performance by Seller
of this Agreement, or the consummation of the transactions contemplated hereby.


 


5.6                               Financial
Statements.


 


(a)                                  Seller
has delivered to Buyer true and complete copies of the audited consolidated
balance sheets of Company and Company Subsidiaries as of April 30, 2005
(the “Balance Sheet Date”, with
the consolidated balance sheet as of such date being referred to as the “Balance Sheet”), and April 30, 2004,
with the Company’s investment in the UK Subsidiary 


 


17





















 


accounted for
under the equity method, and the related statements of operations, stockholder’s
equity and cash flow for the fiscal years then ended (collectively, the “Financial Statements”).


 


(b)                                 The
Financial Statements


 


(1)                                  have been prepared based on the books and records of Company
and Company Subsidiaries;


 


(2)                                  have
been prepared in accordance with GAAP (in effect as of the respective dates
thereof), consistently applied, in all material respects, except that the UK
Subsidiary has been accounted for under the equity method, and except that the
stock option expense for the Company employees participating in the Brown-Forman
Corporation Omnibus Compensation Plan for the periods ended April 30, 2005
and 2004, and the associated disclosures required by Statement of Financial
Accounting Standard Number 123, Accounting for Stock-Based Compensation, as
amended, have been omitted from the Financial Statements; and


 


(3)                                  present fairly in all material respects the financial
position of Company and Company Subsidiaries on a consolidated basis as of the
respective dates thereof and the results of operations, changes in stockholder’s
equity and cash flows for the periods covered thereby.


 


5.7                               Absence
of Undisclosed Liabilities.  There
are no liabilities or obligations of Company or any Company Subsidiary (whether
accrued, absolute, contingent, unliquidated or otherwise), in each case to the
extent required by GAAP to be disclosed or reserved against in the Financial
Statements, other than those that (a) are accrued, reflected, disclosed or
reserved against in the Financial Statements, (b) have arisen in the
ordinary course of business since the Balance Sheet Date, (c) were
incurred pursuant to the transactions contemplated by this Agreement, (d) were
discharged or paid in full prior to the date hereof in the ordinary course of
business, or (e) would not reasonably be expected to result in a Company
Material Adverse Effect.


 


5.8                               Absence
of Changes.  Since the Balance Sheet
Date, Company’s business has operated in all material respects in the ordinary
course and consistent with past practice, and there has not been any Company
Material Adverse Effect.


 


5.9                               Real
Property.


 


(a)                                  Section 5.9
of the Disclosure Schedule sets forth a true and complete list of the
addresses of all Properties (identifying those that are Owned Properties and
those that are Leased Properties) that are owned, used by or occupied by and,
in each case, material to the operations of Company and the Company
Subsidiaries, taken as a whole.


 


18










 













 


(b)                                 Company
has valid title in fee simple to all of the Owned Properties and valid
leasehold interests in all Leased Properties, in each case free and clear of
any Encumbrance, except for Permitted Encumbrances.


 


(c)                                  Neither
Seller nor Company has received written notice with respect to any Owned
Property or to any Leased Property in either case that is material to the
operation of Company and the Company Subsidiaries taken as a whole:


 


(1)                                  that
any building or structure thereon, any equipment therein or the operation or
maintenance thereof violates any Law in any material respect (including
applicable zoning ordinances);


 


(2)                                  that
any building or other improvement owned by Company encroaches upon property of
others or encroaches over applicable setback lines in a way that would be
material to the operation of such building or improvement; or


 


(3)                                  that
any condemnation proceeding is pending or threatened.


 


(d)                                 Except
as would not reasonably be expected to result in a Company Material Adverse
Effect:


 


(1)                                  neither
Company nor any Company Subsidiary is in default under any lease for any Leased
Property and there are no events which with the passage of time or the giving
of notice or both would constitute a default by Company or a Company Subsidiary
under any such lease; and


 


(2)                                  there
are no outstanding written notices of breach or default given to Company or a
Company Subsidiary by any party to any such lease that remains uncured.


 


5.10                        Company
Contracts.  Section 5.10 of the
Disclosure Schedule sets forth a true and complete list of the following
Contracts to which Company or a Company Subsidiary is a party:


 


(a)                                  material
distributor, dealer, advertising, agency, sales representative or similar
material Contracts relating to the marketing or sale of Company’s products
(excluding customer purchase orders accepted in the ordinary course of
business);


 


(b)                                 Contracts
in amounts in excess of $500,000 for the future purchase or lease by Company or
a Company Subsidiary of material, supplies, equipment, services or finished
products purchased for resale;


 


(c)                                  Contracts
having a term exceeding one year or involving amounts in excess of $500,000 for
the future sale of products by Company or a Company Subsidiary;


 


(d)                                 collective
bargaining agreements with any labor union;


 


19





















 


(e)                                  Contracts
for the employment of any officer, director or employee, or any other material
Contracts with or commitments to any officer, director or employee;


 


(f)                                    Material
joint venture, partnership, design or license agreements;


 


(g)                                 indenture,
mortgage, promissory note, loan agreement, reimbursement agreement, guaranty,
or other Contract or commitment for the borrowing of money, for a line of
credit or letter of credit, or for a leasing transaction of a type required to
be capitalized in accordance with FASB Statement of Financial Accounting
Standards No. 13;


 


(h)                                 agreement
for the sale of assets of Company and Company Subsidiaries, which assets have a
book value of $500,000 or more in the aggregate, other than sales of inventory
in the ordinary course of business;


 


(i)                                     all
product licensing Contracts in which Company has guaranteed an annual
obligation of $500,000 or more; and


 


(j)                                     all
Contracts or commitments for capital expenditures with respect to which the
remaining unpaid balance exceeds $500,000.


 


Neither Company nor any Company Subsidiary (i) is in breach or
default with respect to any material term of any Company Contract and, to the
Knowledge of Seller, no other party to any Company Contract is in breach or
default with respect to any material term of any Company Contract, or (ii) has
received any written notice since January 1, 2005 of any breach or default
with respect to any Company Contract which remains uncured.


 


5.11                        Litigation.  Section 5.11 of the Disclosure Schedule sets
forth a list, as of the date of this Agreement, of all: (a) Proceedings
pending or, to the Knowledge of Seller, threatened against Company or a Company
Subsidiary, which (i) if resolved unfavorably to Company or any Company
Subsidiary, is reasonably likely to result in payments by Company or Company
Subsidiary in excess of $500,000, (ii) would materially adversely affect
the ability of Seller or Company to consummate the transactions contemplated by
this Agreement, (iii) would materially adversely affect the ability of
Buyer to operate the Business following the Closing in substantially the same
manner as operated by Company prior to the Closing, or (iv) involve or
relate to any trade practices of Company, including any pricing, promotion,
rebate, discount, commission, allocation, merchandising practice or territorial
restriction; and (b) judgments, decrees, injunctions or orders of any
Governmental Body having a material continuing effect against Company or a
Company Subsidiary.


 


5.12                        Compliance.


 


(a)                                  Company
and each Company Subsidiary is in compliance with, and has not received any
written notice of any violation of, applicable Laws (including the U. S.
Foreign Corrupt Practices Act and applicable import and export Laws), except,
in each case, for such non-compliance or violations as would not result in a
Company Material Adverse Effect.


 


(b)                                 Except
as would not result in a Company Material Adverse Effect, (i) Company and
the Company Subsidiaries have all governmental licenses and permits necessary
in


 


20





















 


the conduct of
their business as currently conducted (“Governmental
Authorizations”), which Governmental Authorizations are in full
force and effect, and (ii) no violations are outstanding or uncured with
respect to any such Governmental Authorizations and, as of the date hereof, no
Proceeding is pending or, to the Knowledge of Seller, threatened to revoke any
of them.


 


5.13                        Environmental.


 


(a)                                  Notwithstanding
the generality of any other representations and warranties in this Agreement,
this Section 5.13 shall be deemed to contain the only representations and
warranties in this Agreement or arising out of the transactions contemplated by
this Agreement with respect to Environmental Laws, Hazardous Substances,
Environmental Claims, the environment or workplace health and safety.  Section 5.13(a) of the Disclosure Schedule lists
each Environmental Site with respect to which Company has incurred costs to
investigate, remediate or settle Environmental Claims that are, to Seller’s
Knowledge, not fully resolved or has received notification of potential
Environmental Claims against Company or any Company Subsidiary.


 


(b)                                 Seller
has provided Buyer true and complete copies of the environmental reports listed
in Section 5.13(b) of the Disclosure Schedule (which, together
with the environmental audits obtained by Buyer as referred to in Section 6.10,
are collectively referred to as the “Reports”).  To the Knowledge of Seller and except as set
forth in the Reports, since May 1, 2003 there has been no storage,
disposition, generation, treatment, Release or discharge of any Hazardous
Substance by Company or any Company Subsidiary, in any manner or at a level
that is in violation of applicable Environmental Laws in any material respect,
on, in, under, about or from the Properties or the land and buildings on and in
which Company or the Company Subsidiaries previously conducted their
operations.


 


(c)                                  To
the Knowledge of Seller and except as set forth in the Reports, Company and
each Company Subsidiary is in compliance in all material respects with all
Environmental Laws and since May 1, 2003 has not received written notice
of any unresolved potential liability with respect to any Environmental Law
that would be material to the conduct of Company’s business.


 


(d)                                 Except
as set forth in the Reports or Section 5.11 of the Disclosure Schedule,
there is no material Environmental Claim pending or, to the Knowledge of
Seller, threatened against Company or any Company Subsidiary or otherwise
relating to any of the Properties.  Section 5.13(d) of
the Disclosure Schedule sets forth insurance settlement and PRP agreements
related to Environmental Sites to which Company or a Company Subsidiary is a
party.


 


(e)                                  Each
of Company and the Company Subsidiaries have obtained all permits, licenses and
approvals (“Permits”) relating to
the Environmental Laws necessary for its operation, except as would not have a
Company Material Adverse Effect.


 


5.14                        Employment
Matters.


 


(a)                                  To
the Knowledge of Seller, Company and the Company Subsidiaries are in material
compliance with all applicable Laws respecting labor, employment and employment


 


21





















 


practices,
terms and conditions of employment and wages and hours.  There is no material labor strike or work
stoppage pending or, to the Knowledge of Seller, threatened involving
Company or any Company Subsidiary.  There
is no material unfair labor practice complaint against Company or any Company
Subsidiary pending before the National Labor Relations Board or other
Governmental Body.  To the Knowledge of
Seller, there are no union organizational activities currently underway with
respect to non-union employees of Company or any Company Subsidiary.


 


(b)                                 As
of the date of this Agreement, there are no pending or, to the Knowledge of
Seller, threatened material investigations, audits, complaints or Proceedings
against Company by or before any Governmental Body, respecting or involving any
applicant for employment, any employee or any former employee, or any class of
the foregoing, including:


 


(1)                                  the
Equal Employment Opportunity Commission or any other corresponding state or
local agency relating to any claim or charge concerning discrimination,


 


(2)                                  the
United States Department of Labor or any other corresponding state or local
agency relating to any claim or charge concerning hours or wages,


 


(3)                                  the
Occupational Safety and Health Administration or any other corresponding state
or local agency relating to any claim or charge concerning the safety and
health of employees or former employees,


 


(4)                                  the
Office of Federal Contract Compliance or any corresponding state agency, and


 


(5)                                  the
U. S. Citizenship and Immigration Services, a bureau of the Department of
Homeland Security, with respect to matters involving employees of Company who
hold a temporary work authorization, including H-1B, F-1 or J-1 visas or work
authorizations.


 


(c)                                  Company
is not obligated as of the date of this Agreement to pay any amounts pursuant
to the requirements of the Worker Adjustment and Retraining Notification Act of
1988.


 


5.15                        Employee
Benefit Plans.


 


(a)                                  Section 5.15(a) of
the Disclosure Schedule lists each material plan, agreement, arrangement
or policy providing for compensation, bonuses, profit-sharing, stock option or
other stock related rights or other forms of incentive or deferred
compensation, vacation benefits, insurance (including any self-insured
arrangements), health or medical benefits, employee assistance program,
disability or sick leave benefits, workers’ compensation, supplemental
unemployment benefits, change in control benefits, severance benefits and
post-employment or retirement benefits (including compensation, pension,
health, medical or life


 


22





















 


insurance
benefits), or other employee benefits, in each case, which is maintained,
administered, sponsored or contributed to by Company or any Affiliate of
Company for the benefit of any current or former employee (excluding, as to
employees of Company who also are or were employed by Seller, those benefits
attributable solely to their employment with Seller) of Company or any Company
Subsidiary or which is between Company or any of its Affiliates and any such
individual (each, individually, a “Plan”
and collectively, the “Plans”).
The Disclosure Schedule specifically denotes each Plan that is either
sponsored by Company or a Company Subsidiary or to which Company or a Company
Subsidiary is party (each, a “Company Plan”).


 


(b)                                 With
respect to each Company Plan, Seller has made available to Buyer: (i) a
true, correct and complete copy of such Company Plan; (ii) the most recent
Annual Report (Form 5500 Series) and accompanying schedules, if any; (iii) the
most recent annual financial report, if any; (iv) the most recent
actuarial report, if any; and (v) the most recent determination letter
from the Internal Revenue Service, if any. 
Seller has also made available to Buyer the current summary plan
description and any material modifications thereto for each Plan in respect of
which there exists a summary plan description.


 


(c)                                  Section 5.15(c) of
the Disclosure Schedule identifies each Company Plan that is intended to
be a “qualified plan” within the meaning of Section 401(a) of the
Code (“Qualified Plan”).  The Internal Revenue Service has issued a
favorable determination letter with respect to each Qualified Plan and the
related trust that has not been revoked, and, to the Knowledge of Seller, no
events have occurred that would adversely affect the qualified status of any
Qualified Plan or the related trust.


 


(d)                                 Company
or a Company Subsidiary has in all material respects timely made or accrued all
contributions required with respect to any Qualified Plan subject to Title IV
of ERISA.  No “accumulated funding
deficiency” (determined under the rules set forth in Section 412 of
the Code and related Code sections and regulations), whether or not waived,
exists with respect to any Qualified Plan subject to Title IV of ERISA.  There have not, within the past five years,
been any “reportable events” (within the meaning of Section 4043 of ERISA)
with respect to any Qualified Plan subject to Title IV of ERISA.


 


(e)                                  Neither
any Plan nor any other employee benefit plan maintained by an ERISA Affiliate
of Company is a Multiemployer Plan or a Multiple Employer Plan.  None of Company, any Company Subsidiary or
any of their respective ERISA Affiliates has (i) at any time during the
last six years, contributed to or been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan, or (ii) incurred any
Withdrawal Liability that has not been satisfied in full.


 


(f)                                    The
Plans are in material compliance both in form and operation with ERISA, the
Code and other applicable Laws, and have been administered in all material
respects in accordance with their terms.


 


(g)                                 Consummation
of the transactions contemplated by this Agreement will not be a factor causing
payments to be made by Company or any Tax Affiliate that are not deductible (in
whole or in part) as a result of the application of Section 280G of the
Code.


 


23





















 


5.16                        Intercompany
Transactions.  Section 5.16 of
the Disclosure Schedule sets forth a list of all material Contracts
between Seller or its subsidiaries (other than Company and Company
Subsidiaries), on the one hand, and Company or a Company Subsidiary, on the
other hand, and other material arrangements whereby Seller or its subsidiaries
(other than Company and Company Subsidiaries) provide goods or services to, or
obtain goods or services from, Company or Company Subsidiaries.  All such arrangements will cease as of the
Closing Date other than (a) those provided for in Contracts specifically
noted at Section 5.16 of the Disclosure Schedule as continuing in
effect after Closing, which will continue in effect in accordance with their
respective terms, and (b) as provided in the Transition Services
Agreement.


 


5.17                        Intellectual
Property.


 


(a)                                  Company
or the Company Subsidiaries own all right, title and interest in and to, or
have valid licenses to use, all Intellectual Property that is material to the
current operations of Company and the Company Subsidiaries taken as a whole,
free and clear of all Encumbrances other than Permitted Encumbrances.


 


(b)                                 Section 5.17(b) of
the Disclosure Schedule sets forth a true and complete list of all
material patents, patents pending, trademark/service mark applications and
registrations, copyright applications and registrations, and domain name
registrations that are owned by Company or any Company Subsidiary.


 


(c)                                  To
the Knowledge of Seller:


 


(1)                                  there
is no material infringement, misappropriation or other misuse being made by any
third person of any Intellectual Property material to the business of Company
and Company Subsidiaries as a whole;


 


(2)                                  no
claim is pending or threatened to the effect that the operations of Company or
Company Subsidiaries infringe or conflict with the asserted rights of others in
respect of any Intellectual Property material to the business of Company and
Company Subsidiaries as a whole; and


 


(3)                                  no
claim is pending or threatened to the effect that any Intellectual Property
material to the business of Company and Company Subsidiaries as a whole is
invalid or unenforceable.


 


(d)                                 Section 5.17(d) of
the Disclosure Schedule sets forth the licenses pursuant to which Company
or any Company Subsidiary grants to any other Person (other than Company or any
Company Subsidiary) the right to use Intellectual Property owned by Company or
any Company Subsidiary material to the business of Company and Company
Subsidiaries as a whole, and the licenses pursuant to which any other Person
grants to Company or any Company Subsidiary the right to use Intellectual
Property material to the business of Company and Company Subsidiaries as a
whole owned by any other Person (other than licenses to use off-the-shelf
software).  To the Knowledge of Seller:


 


24





















 


(1)                                  neither
Company nor any Company Subsidiary is in material breach or default with
respect to any of such licenses;


 


(2)                                  no
other party thereto is in material breach or default with respect to any of
such licenses; and


 


(3)                                  no
event has occurred which, with due notice or lapse of time or both, would
constitute such a default.


 


5.18                        Ownership
of Necessary Assets and Rights.


 


(a)                                  Except
for


 


(1)                                  those
assets and services to be provided pursuant to the terms of the Transition
Services Agreement,


 


(2)                                  those
assets and services that, prior to the Closing, were provided to Company or any
Company Subsidiary by Seller or any of its other Affiliates, and


 


(3)                                  the
capital stock of the UK Subsidiary and the related trademarks and other
intangible assets that are described at Section 5.18 of the Disclosure Schedule (which
have been distributed to Seller prior to the execution of this Agreement),


 


the assets of Company and Company
Subsidiaries are and as of the Closing will be in all material respects
sufficient for the conduct of the Business immediately following the Closing in
substantially the same manner as currently conducted, subject to such changes
as are implemented in accordance with Article 7.


 


(b)                                 Company
has good and valid title to, or a valid leasehold interest in, all machinery,
equipment and other tangible assets and personal property used by the Business,
wherever located, or shown in the Balance Sheet or acquired after the date
thereof, which in any case are material to and necessary for the conduct of the
Business as a whole as presently conducted, free and clear of all Encumbrances,
except for Permitted Encumbrances and except for properties and assets disposed
of in the ordinary course of business since the Balance Sheet Date.


 


(c)                                  Since
May 1, 2005, Company has not reduced in any material respect its ordinary
course practices with respect to the maintenance and repair of its material
operating assets.


 


5.19                        Tax
Matters.  Notwithstanding the
generality of any other representations and warranties in this Agreement, this Section 5.19
shall be deemed to contain the only representations and warranties in this
Agreement or arising out of the transactions contemplated herein with respect
to Taxes.  Except as would not reasonably
be expected to have a Company Material Adverse Effect:


 


25





















 


(a)                                  Company
and any affiliated combined or unitary group of which Company is a member, as
the case may be (“Tax Affiliates”)
have filed within the time and in the manner prescribed by Law all Tax Returns
required to be filed by it or any Company Subsidiary.  All such Tax Returns are true and
complete.  Company and its Tax Affiliates
have paid or will pay all Taxes which are due and payable with respect to such
Tax Returns and Company has set up in its financial records adequate reserves
for all Taxes in dispute or not yet due and payable.


 


(b)                                 there
are no liens for Taxes outstanding against Company, any Company Subsidiary,
their respective assets or against the Shares, except for Permitted
Encumbrances.


 


(c)                                  all
Taxes and assessments that Company or a Company Subsidiary is required to
withhold or to collect have been duly withheld or collected, and all such
withholdings and collections have either been duly and timely paid over to the
appropriate Taxing Authorities or are, together with the payments due or to
become due in connection therewith, duly reflected in Company’s financial
records in accordance with GAAP.


 


(d)                                 there
are no outstanding waivers or comparable consents regarding the application of
the statute of limitations with respect to any Taxes that have been given by
Company or any Company Subsidiary.


 


(e)                                  no
federal, state, local or foreign audits or other administrative or court
proceedings are presently pending against Company or any Company Subsidiary
with regard to any Taxes or Tax Returns. 
No deficiency for any Taxes has been proposed, asserted or assessed
against Company or any Company Subsidiary which has not been resolved and paid
in full.


 


(f)                                    neither
Company nor any Company Subsidiary has any liability for Taxes in a
jurisdiction where it does not file a Return, nor has Company or any Company
Subsidiary received notice from a taxing authority in such a jurisdiction that
it is or may be subject to taxation by that jurisdiction.


 


(g)                                 neither
Company nor any Subsidiary constitutes either a “distributing corporation” or a
“controlled corporation” (within the meaning of Section 355(a)(1)(A) of
the Code) in a distribution of shares qualifying for tax-free treatment under Section 355
of the Code which took place during the two year period ending on the date of
this Agreement.


 


5.20                        Products.  Company has not, during the past three years,
whether voluntarily or as a result of any action by any Governmental Body or
regulatory authority or trade or consumer group, generally recalled or
withdrawn a product for any reason, including any manufacturing or labeling
defect, or issued any press release or public statements advising its trade
customers or consumers of its products to treat such products in any manner other
than in the ordinary course.


 


5.21                        No Other
Representations or Warranties. 
Except for the representations and warranties contained herein or in the
certificate to be delivered by Seller pursuant to Section 3.3(a) of
this Agreement, none of Seller, any Affiliate of Seller, any of its or its
Affiliates’ officers, directors, employees, agents, advisors, representatives
or any other Person makes any representations or warranties, and Seller hereby
disclaims any other representations or warranties, whether made by Seller or
any Affiliate of Seller, or any of their respective officers, directors,
employees, agents, advisors, representatives or other Person, with respect to
the


 


26





















 


execution and
delivery of this Agreement, the transactions contemplated hereby or Company,
the Company Subsidiaries or their respective businesses, assets or liabilities,
notwithstanding the delivery or disclosure to Buyer or its representatives of
any documentation or other information with respect to any one or more of the
foregoing.


 


ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF BUYER


 


Buyer represents and warrants to Seller as follows:


 


6.1                               Organization.  Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.


 


6.2                               Power.  Buyer has all requisite corporate power
and authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the purchase of the Shares and other transactions
contemplated by this Agreement.


 


6.3                               Authorization.  The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate and
stockholder action on the part of Buyer. 
This Agreement has been duly and validly executed and delivered by Buyer
and is a valid and binding obligation of Buyer, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights and to general principles of equity.


 


6.4                               Noncontravention.  Neither the execution, delivery and
performance of this Agreement, nor the consummation of the transactions
contemplated hereby, nor compliance by Buyer with any of the provisions hereof
will:


 


(a)                                  conflict
with or result in a breach of any provision of its Certificate of Incorporation
or By-laws or similar governing documents;


 


(b)                                 cause
a default (or give rise to any right of termination, cancellation or
acceleration) under any material agreement or other material obligation to
which Buyer is a party, except for such matters as would not reasonably be
expected to result in a material adverse effect upon the ability of Buyer to
perform its obligations under this Agreement; or


 


(c)                                  assuming
compliance with the HSR Act, violate any Law applicable to Buyer, except as
would not reasonably be expected to result in a material adverse effect upon
the ability of Buyer to perform its obligations under this Agreement.


 


6.5                               Consents.  No consent or approval by, or any
notification of or filing with, any Governmental Body is required in connection
with the execution, delivery and performance by Buyer of this Agreement, or the
consummation by Buyer of the transactions contemplated hereby, except for
compliance with the HSR Act and except for any such consent, approval,
notification or filing the failure of which to obtain or make would not
reasonably be expected to result in a material adverse effect upon Buyer’s
ability to perform its obligations under this Agreement.


 


27





















 


6.6                               Investment
Intent.  Buyer is acquiring the
Shares for its own account for investment without a view to the sale, distribution,
subdivision, transfer or fractionalization thereof.  Buyer acknowledges that the Shares (a) have
not been registered under the Securities Act of 1933, as amended, or any state
securities law and there is no commitment to register the Shares, (b) have
no public or other market, and (c) cannot be resold, unless they are
subsequently registered or an exemption from registration is available.  Buyer has such knowledge and experience in
financial and business matters and in investments of this type that it is
capable of evaluating the risks and merits of its investment in the Shares and
of making an informed investment decision.


 


6.7                               Litigation.  No Proceeding has, as of the date of this
Agreement, been commenced or, to the knowledge of Buyer, threatened against
Buyer that challenges the validity of this Agreement or the transactions
contemplated hereby or that may have the effect of preventing, delaying or
impairing, or making illegal the transactions contemplated hereby, or
materially affecting Buyer’s ability to perform its obligations hereunder or to
consummate the transactions contemplated hereby.


 


6.8                               Brokers.  Buyer has not employed any broker, finder or
investment banker in connection with the transactions contemplated by this
Agreement which would be entitled to a fee or commission in connection with
such transactions, except for any broker, finder or investment banker whose
fees or commissions shall be the sole responsibility of Buyer.


 


6.9                               Financial
Capability.


 


(a)                                  Buyer
will have, as of the Closing Date, and subject to the terms and conditions of
the financing commitment letter addressed to Buyer from UBS Loan Finance LLC
and UBS Securities LLC, dated July 21, 2005 (the “Commitment Letter”) and previously
delivered to Seller, access to funds which will be in an amount sufficient to
effect the Closing, including payment of the Purchase Price, and all other
transactions contemplated by this Agreement and the Transition Services
Agreement.


 


(b)                                 Since
January 1, 2005, Buyer has not undertaken any acquisition of any business,
division or material assets (other than inventory acquired in the ordinary
course of business); incurred, assumed, guaranteed or otherwise become liable
for any indebtedness or other liabilities other than trade payables or borrowings
under existing lines of credit, in each case, in the ordinary course of
business; undertaken any other transaction outside the ordinary course of
business that would reasonably be expected to impair, delay or prevent Buyer’s
ability to consummate the transactions contemplated hereby, including its
ability to obtain the financing for payment of the Purchase Price; or suffered
a Buyer Material Adverse Effect.


 


6.10                        Environmental
Audits.  Schedule 6.10 attached
hereto is a true and complete list of all Phase 1 environmental audits and
other environmental audits or reports obtained by Buyer or its representatives
with respect to any of the Properties. 
Buyer has furnished true and complete copies of such audits and reports
to Seller and all matters disclosed by such audits and reports shall be deemed
for all purposes of this Agreement as having been disclosed by Seller pursuant
to Section 5.13.


 


28





















 


6.11                        Non-Reliance.  Buyer acknowledges that it, together with its
advisors, has made its own investigation of Company, Company Subsidiaries and
their respective businesses and assets. 
Buyer is not relying on any representations, warranties or statements
other than those expressly set forth in this Agreement and is not relying on
implied warranties (whether of merchantability or fitness for a particular
purpose or otherwise), or upon any representation or warranty whatsoever as to
the prospects (financial or otherwise), or the viability or likelihood of
success, of the businesses of Company and Company Subsidiaries as conducted
after the Closing Date, or upon the information (including any forecasts or
projections) contained in the Confidential Memorandum furnished by Goldman,
Sachs & Co. on behalf of Seller, or in any other materials provided by
Seller, Company, their Affiliates or any of their respective officers,
directors, employees, agents, advisers or representatives, including any data
room or management presentations, and none of Seller, Company, their Affiliates,
or their respective officers, directors, employees, agents, advisers or
representatives shall have any liability resulting therefrom.


 


ARTICLE 7

COVENANTS OF THE PARTIES UNTIL CLOSING


 


7.1                               Conduct
of Business Pending Closing.  Except
as set forth in Section 7.1 of the Disclosure Schedule or as
otherwise provided in this Agreement, between the date hereof and the Closing,
Seller shall cause Company and each Company Subsidiary to:


 


(a)                                  operate
its respective business in the ordinary course consistent with past practice in
accordance with applicable Laws, unless Seller obtains the prior written
consent of Buyer, which consent shall not be unreasonably withheld, delayed or
conditioned;


 


(b)                                 use
its reasonable best efforts to preserve its business organization and goodwill,
keep available the services of its officers and employees, and maintain
satisfactory relationships with vendors, customers and others having business
relationships with it; and


 


(c)                                  notify
Buyer of any governmental or third party complaint, investigations or hearings
involving Company or a Company Subsidiary (or written communications indicating
that the same are contemplated) if such complaint, investigation or hearing
would have a Company Material Adverse Effect.


 


7.2                               Negative
Covenants.  Except as set forth in Section 7.2
of the Disclosure Schedule, as otherwise provided in this Agreement or as
required by applicable Law, between the date hereof and the Closing, unless
Seller obtains the prior written consent of Buyer, which consent shall not be
unreasonably withheld, delayed or conditioned, Seller shall cause Company and
each Company Subsidiary not to:


 


(a)                                  make
any change in Company’s or such Company Subsidiary’s authorized or issued
capital stock, grant any option, warrant or other right to purchase or
otherwise acquire any capital stock of Company or any Company Subsidiary, issue
or make any security convertible into capital stock of Company or any Company
Subsidiary, grant any registration rights, or purchase, redeem, retire or make
any other acquisition of any shares of capital stock of Company or any Company
Subsidiary;


 


29





















 


(b)                                 amend
(as applicable) the articles or certificate of incorporation, bylaws, or other
organizational document of Company or any Company Subsidiary, or enter into any
merger, share exchange or dissolution with respect to Company or any Company
Subsidiary;


 


(c)                                  enter
into, adopt, amend in any material respect or terminate any Company Contract,
other than in the ordinary course of business;


 


(d)                                 sell,
assign, transfer or abandon assets of Company or any Company Subsidiary or any
part thereof (including the factoring of accounts receivable) that are material
to the operations of Company, except (i) transactions pursuant to existing
Company Contracts (or Company Contracts entered into after the date hereof that
do not violate Section 7.2(c)), and (ii) dispositions of inventory or
worn-out or obsolete equipment and machinery, in each case in the ordinary
course of business and consistent with past practice, provided that nothing in
this Section 7.2 shall restrict Company or any Company Subsidiary from
making any cash dividend or cash distribution to its respective shareholder;


 


(e)                                  make
or commit for capital expenditures of more than $250,000 in the aggregate in
excess of those provided for in Company’s capital expenditure budget for its
current fiscal year;


 


(f)                                    settle
any material litigation if the settlement requires Company or any Company
Subsidiary to agree to take, or refrain from taking, any action after the
Closing Date (other than a payment of money that is entirely reflected in the
computation of the Adjustment Amount);


 


(g)                                 make
any change in the financial accounting principles or policies of Company or any
Company Subsidiary, except as required by applicable Law or GAAP;


 


(h)                                 enter
into any loan agreement, credit agreement, promissory note or other agreement
for borrowing money (other than intercompany arrangements with Company
Subsidiaries, Seller or its Affiliates in the ordinary course of business) or
issue any debt securities or assume, guarantee or endorse the obligations of
any other persons;


 


(i)                                     acquire,
or enter into an agreement to acquire, the capital stock or substantially all
the assets or business of any other entity;


 


(j)                                     adopt,
grant or extend any increase in compensation or benefits for directors,
officers or employees of Company, except as required by the terms of existing
Company Contracts and except for budgeted annual merit increases scheduled to be
effective August 1, 2005 as disclosed in Section 7.2 of the
Disclosure Schedule;


 


(k)                                  issue
or sell any additional shares or equity interest or any options, warrants,
conversion privileges or rights of any kind to acquire any shares of capital
stock or equity interests of Company;


 


(l)                                     fail
to maintain and repair Company’s facilities in the ordinary course of business
consistent with Company’s past practices;


 


30





















 


(m)                               fail
to carry out promotional and marketing programs in the ordinary course of
business consistent with Company’s past practices; or


 


(n)                                 adopt
or amend any bonus, profit sharing, stock option, pension, retirement, deferred
compensation or other employee benefit plan, agreement, trust, fund or arrangements
for the benefit or welfare of any director or employee of the Company, except
as required by Law.


 


7.3                               Access.


 


(a)                                  Prior
to Closing, Buyer and its officers, directors, partners, members, attorneys,
accountants and representatives shall be afforded reasonable access during
normal business hours to the books and records of Company and each Company
Subsidiary, upon reasonable prior notice, and Company shall promptly make
available to Buyer other information concerning Company and the Company Subsidiaries,
their business, properties and personnel as Buyer may reasonably request;
provided, however, that any such access shall be conducted at Buyer’s expense,
under the reasonable supervision of Company’s personnel and in such a manner as
to maintain the confidentiality of such information and not to interfere with
the normal operation of the business of Company or the Company Subsidiaries.


 


(b)                                 Notwithstanding
anything to the contrary contained in this Agreement, none of Company, any
Company Subsidiary or Seller shall have any obligation to disclose any
information to Buyer to the extent such disclosure would (a) result in a
material breach of any Contract to which Company, such Company Subsidiary or
Seller is a party or is otherwise bound, (b) reasonably be expected to
jeopardize any attorney-client or other legal privilege of Company, such
Company Subsidiary or Seller, or (c) result in a violation of any Laws or
fiduciary duties applicable to Company, such Company Subsidiary or Seller.  The information contained in the Disclosure Schedule or
delivered to Buyer or its authorized representatives pursuant hereto shall be
subject to the Confidentiality Agreement, and, for that purpose and to that
extent, the terms of the Confidentiality Agreement are incorporated herein by
reference.  The Confidentiality Agreement
will terminate effective as of the Closing.


 


7.4                               Consents.  Prior to Closing, Seller, Company and Buyer
shall cooperate and use commercially reasonable efforts to obtain all consents,
permits, approvals of, and exemptions by, any Governmental Body and all
consents of any third party, in each case, necessary for the consummation of
the transactions contemplated by this Agreement; provided that Seller and its Affiliates (including Company
and the Company Subsidiaries) shall not be required to expend any money to
obtain such consents, and provided further,
that, notwithstanding the foregoing, the actions of Seller and Buyer with
respect to filings, approvals and other matters pursuant to the HSR Act and any
local, state, federal (other than the HSR Act) or foreign antitrust Law
applicable to the Share Purchase (“Other
Antitrust Regulations”) shall be governed by Section 7.5.  Each of the parties hereto shall diligently
assist and cooperate in preparing and filing all documents required to be
submitted to any Governmental Body in connection with such transactions and in
obtaining any consents, waivers, authorizations or approvals which may be
required to be obtained in connection with such transactions.  With respect to the New Jersey Department of
Environmental Protection (NJDEP) ISRA approval referred to in Sections 8.3 and
9.3, Seller, at its cost, will cause Company to file such notices, assessments,
remediation


 


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agreement
applications and other documents and information required for review by NJDEP
in order to allow Seller to transfer ownership of Company to Buyer prior to
Company’s compliance with ISRA.  Seller
will obtain Buyer’s input and approval, not to be unreasonably withheld, in
regards to any ISRA filing.  Buyer shall
cooperate with Seller and execute and deliver to NJDEP such information,
certificates and other information as may be required under ISRA.  Seller agrees to use reasonable efforts to
obtain approval by NJDEP of an ISRA remediation agreement and funding source to
be provided by and in the name of Company, if required, that are limited to the
existing remediation work at the Pomona property and an ISRA remediation
funding source not to exceed Company’s existing estimated reserves for
Pomona.  If, however, NJDEP requires an
ISRA remediation funding source in excess of Company’s existing estimated
reserves for Pomona, Buyer agrees that Company will provide an ISRA remediation
funding source in the amount required by NJDEP.


 


7.5                               HSR
Act.  Seller and Buyer shall each
promptly prepare and file any notifications and reports which may be required
with respect to this Agreement by the HSR Act, including a request for early
termination of the waiting period, and respond promptly to inquiries from the
Federal Trade Commission or the Department of Justice resulting from the
filings of such notifications, and otherwise shall use their best efforts to
comply with the requirements of such Act. 
Buyer shall pay the fee required for filing such notification.  If any Governmental Body requests information
or documents concerning the transactions contemplated by this Agreement, each
party agrees to consult with the other party’s counsel about any communications
with such Governmental Body (in advance, where practicable, and in any event
promptly), to use its reasonable best efforts to respond appropriately to such
request, as soon as reasonably practicable, to cooperate with the other party
in responding to any request, and to allow the other party to participate in
meetings with any Governmental Body.  The
parties hereto shall use their respective commercially reasonable best efforts
and take all necessary action to obtain any clearance under the HSR Act or
other authorization of any Governmental Body required under Other Antitrust
Regulations in connection with the transactions contemplated hereby or to
resolve any objections that may be asserted by any Governmental Body with
respect to the transactions contemplated hereby.  In order to avoid any Governmental Body from
filing suit, or taking any other action, to forbid or delay consummation of the
transaction, Buyer shall offer undertakings acceptable to the relevant Governmental
Body, including proposing, negotiating, committing to and effecting, by consent
decree, hold separate order or otherwise, the sale, divestiture or disposition
of, or the imposition of any limitation upon, such assets or businesses of
Buyer (including its subsidiaries) or Company or any Company Subsidiary (so
long as conditioned upon, and not occurring prior to, the Closing), along with
any ancillary agreements.


 


7.6                               Public
Statements.  Except as required by
applicable Law or securities exchange rules (in which event the parties
shall, to the extent reasonably practicable, consult with each other in
advance), prior to the Closing Date, no press release or other public
announcement (if materially different than those previously made) relating to
the transactions contemplated by this Agreement shall be made by any party to
this Agreement or its representatives without prior consultation among Seller
and Buyer.


 


7.7                               Satisfaction
of Company Debt.  At or before
Closing, Seller shall repay, or cause to be repaid, on behalf of Company, all
indebtedness for borrowed money of Company or any Company Subsidiary, and shall
obtain the release of any Encumbrance (other than Permitted


 


32





















 


Encumbrances)
securing such indebtedness, provided
that the $150,000 conditional loan from the Maryland Department of Business and
Economic Development and the $100,000 conditional grant from Washington County,
Maryland shall not be considered to be “indebtedness for borrowed money” for
purposes of this Section 7.7.


 


7.8                               Satisfaction
of Conditions.


 


(a)                                  Between
the date of this Agreement and the Closing, each party shall use its reasonable
best efforts to cause the conditions to Closing set forth in Articles 8 and 9
below to be satisfied, to the extent within the control of such party.


 


(b)                                 Notwithstanding
anything else contained herein, Buyer shall use its best efforts to cause the
condition to Closing set forth in Section 8.6 (Financing) below to be
satisfied as promptly as practicable, including using its best efforts to
satisfy all conditions within the control of Buyer that are required to obtain
such financing under the Commitment Letter; provided that
in the event that such financing is not obtained from the sources referred to
in the Commitment Letter, Buyer shall use its best efforts to obtain financing
from other sources as promptly as practicable (it being understood that Buyer
will not be required to accept financing that would be on economic terms
(including restrictive covenants) that would be materially worse in the
aggregate to Buyer than the economic terms associated with the financing
available to Buyer under the Commitment Letter).  In furtherance and not in limitation of the
preceding sentence, prior to Closing, Buyer shall not undertake any acquisition
of any business, division or material assets (other than inventory in the
ordinary course of business); incur, assume, guarantee or otherwise become
liable for any indebtedness or other liabilities other than trade payables or
borrowings under existing lines of credit, in each case, in the ordinary
course; or undertake any other transaction outside the ordinary course of
business that would reasonably be expected to impair, delay or prevent Buyer’s
ability to consummate the transactions contemplated hereby, including its
ability to obtain financing for payment of the Purchase Price.


 


7.9                               No
Sale.  Between the date of this
Agreement and the Closing Date (or earlier termination of this Agreement in
accordance with its terms), Seller agrees not to sell, pledge, transfer or
otherwise place any Encumbrance on the Shares.


 


7.10                        No
Negotiations.


 


(a)                                  Until
the earliest to occur of the Closing Date or the termination of this Agreement
in accordance with its terms, Seller shall not, and shall direct the officers
of Company and Seller’s agents or representatives, including Goldman Sachs &
Co., not to solicit any proposal, indication of interest or offer from any
Person (including any of the officers or employees of Company) relating to any
liquidation, dissolution, recapitalization, merger, consolidation or
acquisition or purchase of all or a material portion of the assets (other than
inventory in the ordinary course of business) of, or any equity interest in,
Company or other similar transaction or business combination involving the
Business, or participate in any negotiations regarding any such transaction; provided, however, that if Seller, after 60 days from the
date of this Agreement, determines in good faith that Buyer will not likely be
able to consummate the Closing by the date this Agreement terminates in
accordance with its terms, Seller may provide Buyer with written notice of such
determination, following which notice


 


33





















 


Buyer and
Seller will, within five business days, consult with each other regarding the
prospects for consummating the Closing. 
If, following such consultation, Seller in good faith again determines
that Buyer will not likely be able to consummate the Closing by the date this
Agreement terminates in accordance with its terms, Seller may provide Buyer
with a written notice regarding such determination and Seller’s obligations
under this Section 7.10 will cease ten days following Buyer’s receipt of
such second written notice.


 


(b)                                 The
foregoing subsection (a) shall not preclude Seller, or Seller’s
agents or representatives from taking any action to solicit any proposal,
indication of interest or offer from any Person relating to, or otherwise take
any action with respect to, any liquidation, dissolution, recapitalization,
merger, consolidation or acquisition or purchase of all or a material portion
of the assets of, or any equity interest in, Seller taken as a whole or any
Subsidiary of Seller (other than Company and Company Subsidiaries), or other similar
transaction or business combination involving an interest in Seller taken as a
whole or any Subsidiary of Seller (other than Company and Company
Subsidiaries).


 


ARTICLE 8

CONDITIONS TO OBLIGATION OF BUYER


 


The obligation of Buyer to consummate the transactions contemplated by
this Agreement is subject to the satisfaction at or prior to the Closing Date
of the following conditions unless waived by Buyer in its sole discretion:


 


8.1                               Representations
and Warranties.  The representations
and warranties of Seller in this Agreement that are qualified as to Company
Material Adverse Effect shall be true and correct, and the representations and
warranties of Seller in this Agreement that are not so qualified shall be true
and correct except as would not reasonably be expected to have a Company
Material Adverse Effect, in each case as of the date hereof, and, except to the
extent such representations and warranties refer to a specific date, as of the
Closing Date as though made on the Closing Date.


 


8.2                               Performance
of Agreements.  Seller shall have
performed and complied in all material respects with all covenants, obligations
and agreements to be performed or complied with by it on or before the Closing
pursuant to this Agreement or any Schedule or Exhibit hereto, including
each of Seller’s obligations under Section 3.3.


 


8.3                               Approvals.  All waiting periods applicable under the HSR
Act shall have expired or been terminated. 
Except as would not reasonably be expected to result in a Company
Material Adverse Effect or a Buyer Material Adverse Effect, all other consents,
authorizations, approvals of, and expirations of waiting periods imposed by,
any Governmental Body, the failure of which to obtain or occur would make the
consummation of the transactions contemplated hereby illegal (including action
by the New Jersey Department of Environmental Protection under the New Jersey
Industrial Site Recovery Act allowing the Share Transfer or approving a
remediation agreement to allow the Closing to proceed pending such action),
shall have been obtained or shall have occurred.


 


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8.4                               Legal
Matters.  No preliminary or permanent
injunction or other judgment, order or decree issued by a court of competent
jurisdiction which prevents or materially delays the consummation of the
transactions contemplated hereby shall have been issued and remain in effect,
no Governmental Body shall have commenced a Proceeding that remains pending
seeking any such injunction or other judgment, order or decree, and no statute,
rule or regulation shall have been enacted, promulgated or enforced by any
Governmental Body that prohibits or materially delays the consummation of, or
imposes material limitations on the parties’ ability to consummate the transactions
contemplated by this Agreement.


 


8.5                               Material
Adverse Effect.  No Company Material
Adverse Effect shall have occurred since the date of this Agreement and no
change, event, effect or occurrence shall have occurred since the date of this
Agreement that would reasonably be expected to result in a Company Material
Adverse Effect.


 


8.6                               Financing.  Buyer shall have obtained funds in an amount
sufficient to finance the payment of the Purchase Price.


 


ARTICLE 9

CONDITIONS TO OBLIGATION OF SELLER


 


The obligation of Seller to consummate the transactions contemplated by
this Agreement is subject to the satisfaction at or prior to the Closing Date
of the following conditions unless waived by Seller in its sole discretion:


 


9.1                               Representations
and Warranties.  The representations
and warranties of Buyer in this Agreement shall be true and correct except as
would not reasonably be expected to have a Buyer Material Adverse Effect, in
each case as of the date hereof and as of the Closing Date as though made on
the Closing Date.


 


9.2                               Performance
of Agreements.  Buyer shall have
performed and complied in all material respects with all covenants, obligations
and agreements to be performed or complied with by it on or before the Closing
pursuant to this Agreement or any Schedule or Exhibit hereto,
including each of Buyer’s obligations under Section 3.4.


 


9.3                               Approvals.  All waiting periods applicable under the HSR
Act shall have expired or been terminated. 
Except as would not reasonably be expected to have a material adverse
effect on Seller and its Affiliates (other than Company and Company
Subsidiaries) and their businesses, all other consents, authorizations,
approvals of, and expirations of waiting periods imposed by, any Governmental
Body, the failure of which to obtain or occur would make the consummation of
the transactions contemplated hereby illegal (including action by the New
Jersey Department of Environmental Protection under the New Jersey Industrial
Site Recovery Act allowing the Share Transfer or approving a remediation
agreement to allow the Closing to proceed pending such action), shall have been
obtained or shall have occurred.


 


9.4                               Legal
Matters.  No preliminary or permanent
injunction or other judgment, order or decree issued by a court of competent
jurisdiction which prevents or materially delays the consummation of the
transactions contemplated hereby shall have been issued and remain in effect,
no Governmental Body shall have commenced a Proceeding that remains pending
seeking


 


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any such
injunction or other judgment, order or decree, and no statute, rule or
regulation shall have been enacted, promulgated or enforced by any Governmental
Body that prohibits or materially delays the consummation of, or imposes
material limitations on the parties’ ability to consummate  the transactions contemplated by this
Agreement.


 


9.5                               Release
of Guarantees.  Seller and any
Affiliates of Seller (other than Company or any Company Subsidiary) shall have
been released from the arrangement by which Seller or any Affiliate of Seller
(other than Company or any Company Subsidiary) guarantees any obligations or
liabilities of Company or any Subsidiary listed at Section 9.5 of the
Disclosure Schedule.


 


ARTICLE 10

TERMINATION


 


10.1                        Termination.  This Agreement may be terminated at any time
prior to the Closing Date:


 


(a)                                  by
Seller or Buyer at any time after October 31, 2005 other than if caused by
the failure of the party seeking to terminate this Agreement to perform in all
material respects its obligations under this Agreement required to be performed
at or prior to the Closing or a breach of such party’s representations or
warranties;


 


(b)                                 by
Buyer, (i) in the event of a breach of any representation, warranty,
covenant or other agreement contained in this Agreement which would give rise
to the failure of the conditions in Section 8.1 or 8.2, and which, with
respect to any such breach that is capable of being cured, is not cured within
60 days after receipt of written notice thereof by Seller, or (ii) in the
event any of the conditions in Article 8 have become impossible to
satisfy;


 


(c)                                  by
Seller, (i) in the event of a breach of any representation, warranty,
covenant or other agreement contained in this Agreement which would give rise to
the failure of the conditions in Section 9.1 or 9.2, and which, with
respect to any such breach that is capable of being cured, is not cured within
60 days after receipt of written notice thereof by Buyer, or (ii) in the
event any of the conditions in Article 9 have become impossible to
satisfy;


 


(d)                                 if
a Governmental Body issues a permanent injunction or other order prohibiting
the Closing and such injunction or order shall have become final and
non-appealable; provided that the party seeking to terminate this Agreement
pursuant to this clause (d) shall have used its reasonable best efforts to
reverse or lift such injunction or order; or


 


(e)                                  by
mutual written consent of Buyer and Seller.


 


10.2                        Effect of
Termination.  In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby pursuant to Section 10.1, written notice thereof shall forthwith be
given to the other party and the transactions contemplated hereby shall be
abandoned, without further action by either party.  The provisions of this Article 10 and Article 14
shall survive any such termination.  In
addition, the Confidentiality Agreement shall survive any such termination in
accordance with its terms.  Nothing in
this Article 10 shall be


 


36





















 


deemed to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement.


 


ARTICLE 11

POST-CLOSING COVENANTS; TAX MATTERS


 


11.1                        Access to
Records.  Following the Closing, Buyer
shall (a) upon reasonable request provide Seller, its Affiliates,
accountants, attorneys and other representatives reasonable access during
normal working hours to the books, records and personnel of Company and Company
Subsidiaries relating to transactions and the operation of the business of
Company and Company Subsidiaries through the Closing Date and the right to make
copies thereof at Seller’s expense; and (b) maintain such books and
records for a period of at least five years after the Closing Date and give
Seller the opportunity to keep any books and records relating to the
pre-Closing period which Buyer thereafter intends to no longer maintain.


 


11.2                        Further
Assurances.  Each party shall at any
time and from time to time after the Closing, upon the request of the other,
do, execute, acknowledge and deliver, and cause to be done, executed,
acknowledged or delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney or assurances as may be required for
the better transferring, assigning, conveying, granting, assuring and
confirming to Buyer, or for aiding and assisting in the collection of or
reducing to possession by Buyer, of the Shares or to vest in Buyer title to the
Shares and otherwise to consummate the transactions contemplated by this
Agreement.  Upon written request by Buyer
or Company at any time within three years after the Closing Date, to the extent
that Seller has records or files concerning Company, Company Subsidiaries or
their respective operations, assets, liabilities or employees, and such records
were not as of the Closing Date also available at a Company location, Seller
will provide such records or files or copies thereof to Buyer.


 


11.3                        Tax
Matters.


 


(a)                                  All
transactions not in the ordinary course of business occurring after the Closing
shall be reported on Buyer’s consolidated U.S. federal Income Tax Return in
accordance with Treasury Regulation § 1.338-1(d).  No election shall be made under Treasury
Regulation § 1.1502-76(b)(2)(ii) (relating to ratable allocation of a
year’s items) in connection with the transactions contemplated by this
Agreement.


 


(b)                                 Anything
in any other agreement to the contrary notwithstanding, all Tax allocation,
indemnity, sharing or similar agreements or arrangements (other than this
Agreement), whether or not written, by and among Seller or any of its
Affiliates on the one hand and Company or any Company Subsidiary on the other
hand (other than those agreements that are solely among Company and Company
Subsidiaries) shall be terminated immediately prior to the Closing, and after
the Closing, neither Company nor any Company Subsidiary shall be bound thereby
or have any liability or any rights thereunder.


 


(c)                                  Seller
shall be responsible for, pay, or cause to be paid, and indemnify Buyer and
each of its Affiliates (including Company and Company Subsidiaries after the
Closing


 


37





















 


Date) (each a “Buyer Tax Indemnitee”) and hold each Buyer
Tax Indemnitee harmless from and against


 


(1)                                  all
U.S. federal Income Taxes of Company or any Company Subsidiary, including all
U. S. federal Income Taxes attributable to a 338(h)(10) Election, for all
Tax periods that end on or prior to the Closing Date,


 


(2)                                  all
state Income Taxes of Company or any Company Subsidiary for all Tax periods
that end on or prior to the Closing Date to the extent that such state Income
Taxes are reportable on a consolidated, combined or unitary Tax Return which
includes any member of the Seller Group, and


 


(3)                                  any
state Income Taxes of Company or any Company Subsidiary that are not reportable
on a consolidated, combined or unitary Tax Return which includes a member of
the Seller Group and any Other Taxes of Company or any Company Subsidiary, in
each case, for any Tax period that ends on or prior to the Closing Date to the
extent such Taxes arise out of any breach of any representation or warranty
contained in Section 5.19 (Tax Matters).


 


Notwithstanding anything to the contrary in
this Agreement, Seller shall not be responsible for, pay, cause to be paid or
indemnify or otherwise hold harmless any Buyer Tax Indemnitee for any Taxes
taken into account in the Closing Working Capital Statement or any Taxes for
any Tax period that ends after the Closing Date.  Seller shall be entitled to any refund of
Taxes to the extent that such refund relates to a Tax liability paid or caused
to be paid by Seller or that is otherwise the responsibility of Seller under
this Section 11.3(c).


 


(d)                                 Buyer
shall, except to the extent that such Taxes are the responsibility of Seller
under Section 11.3(c), be responsible for, pay or cause to be paid, and
indemnify Seller and its Affiliates (other than Company and Company
Subsidiaries) (each a “Seller Tax Indemnitee”)
and hold each Seller Tax Indemnitee harmless from and against all Taxes imposed
upon or relating to Company and Company Subsidiaries.  Buyer shall be entitled to any refunds
relating to Company and Company Subsidiaries except to the extent that Seller
is entitled to such refund under Section 11.3(c) or Section 11.3(k).


 


(e)                                  Seller
shall prepare and file or cause to be prepared and filed (including causing
Company to continue to prepare and file those Tax Returns that Company has
historically prepared in the ordinary course of its business) (i) all
United States consolidated federal Income Tax Returns for the affiliated group
of which Seller is the common parent, (ii) any Tax Return which includes
Seller or any other member of the Seller Group (including any state Income Tax
Returns filed on a consolidated basis), (iii) any Tax Return due on or
before the Closing Date, and (iv) any other Tax Return on which Taxes that
are the responsibility of Seller, or refunds to which Seller is entitled, under
Section 11.3(c) are reportable.


 


38










 













 


(f)                                    Buyer
shall, except to the extent that such Tax Returns are the responsibility of
Seller under Section 11.3(e), file or cause to be filed all Tax Returns
with respect to Company and Company Subsidiaries.


 


(g)                                 As
soon as practicable, but in any event within 30 days after Buyer’s or Seller’s
request, as the case may be, from and after the Closing Date, Buyer and Seller
shall cooperate and shall deliver to each other such information and data
concerning Company and Company Subsidiaries and make available such
knowledgeable employees of Company and Company Subsidiaries as either party may
request, including providing the information and data required to complete and
file all Tax Returns which Seller or Buyer may be required to file with respect
to Company and Company Subsidiaries or to respond to audits by any Taxing
Authority with respect to Company and Company Subsidiaries, and to otherwise
enable the parties to satisfy their accounting, Tax and other legitimate
requirements.  Such cooperation and
information shall include designation of an officer of Seller as an officer of
Company or any of Company Subsidiaries for the purpose of signing Tax Returns
and defending audits and promptly forwarding copies of appropriate notices and
forms or other communications received from or sent to any Taxing Authority
which relate to Company or Company Subsidiaries, and providing copies of all
relevant Tax Returns, together with accompanying schedules and related work papers,
documents relating to rulings or other determinations by Taxing Authorities and
records concerning the ownership and tax basis of property, which Buyer,
Company or Company Subsidiaries may possess. 
Each of Seller, Buyer, Company and Company Subsidiaries shall make its
employees and facilities available during normal business hours on a mutually
convenient basis to provide explanation of any documents or information
provided hereunder.


 


(h)                                 For
a period of 10 years after the Closing Date (or such longer period as is
required by Law), Buyer shall, and shall cause Company and Company Subsidiaries
to, retain all Tax Returns, books and records (including computer files) of, or
with respect to the activities of, 
Company and Company Subsidiaries for all Tax periods ending on or prior
to the Closing Date.  Thereafter, Buyer
shall not, and shall cause Company and Company Subsidiaries not to, dispose of
any such Tax Returns, books or records unless it first offers such Tax Returns,
books and records to Seller and Seller fails to accept such offer within 60
days of its being made.


 


(i)                                     Buyer
and Seller shall, and shall cause their respective subsidiaries to, cooperate
in the preparation of all Tax Returns relating in whole or in part to Tax
periods ending on or before the Closing Date that are required to be filed after
such date and all Tax Returns for Tax periods beginning before the Closing Date
and ending after the Closing Date; provided that Seller shall have the
sole authority to make all determinations and elections with respect to such
Tax Returns to the extent such determinations and elections may affect the
amount of Taxes for which Seller is liable. 
Any state Income Tax Return that is not a consolidated, combined or
unitary Tax Return of Company or any Company Subsidiary and any Other Tax
Return of Company or any Company Subsidiary, in each case, for any Tax period,
or portion thereof, ending on or prior to the Closing Date, shall be prepared
in a manner consistent with past practices of Seller.


 


(j)                                     Buyer
shall promptly notify Seller upon receipt by Buyer or any of its Affiliates of
notice of any claim, assessment or dispute relating to any Tax Proceeding which
Seller is entitled to control hereunder and shall promptly forward to Seller
any communications 


 


39





















 


received from
or sent to any Taxing Authority in connection with any such Tax
Proceeding.  Notwithstanding anything to
the contrary contained in this Agreement, Seller shall have the right to
control, contest, resolve and defend any Tax Proceeding (including having the
right to determine whether and when to settle any Tax Proceeding) which may
affect the amount of Taxes for which Seller is liable (or refunds to which
Seller is entitled) hereunder or otherwise, provided, however, that, to the extent that such Tax Proceeding may
reasonably be expected to affect a material amount of Taxes for which Buyer is
liable (or refunds to which Buyer is entitled) hereunder, Seller
shall keep Buyer informed in a timely manner of all material actions taken or
proposed to be taken by Seller with respect to such Tax Proceeding and shall
consult with Buyer and offer Buyer a
reasonable opportunity to comment before submitting any material written
materials prepared or furnished in connection with such Tax
Proceeding.  Notwithstanding any other
provision, neither Buyer, Company nor any of their respective subsidiaries or
Affiliates shall be entitled to participate in any Tax Proceeding with respect
to any United States consolidated federal Income Tax Return which includes Seller
or any other consolidated, combined or unitary Tax Return which includes any
member of the Seller Group, nor shall Buyer, Company or any of their respective
subsidiaries or Affiliates be entitled to any information, except to the extent
relating solely to Company or Company Subsidiaries, regarding any such Tax
Return (or any Tax Returns of Seller).


 


(k)


 


(1)                                  Buyer
agrees that if as the result of any audit adjustment (or adjustment in any
other Tax Proceeding) made with respect to any Tax Item which relates to any
Tax for which Seller is responsible under Section 11.3(c), by any Taxing
Authority with respect to a Tax period (or portion thereof) ending on or prior
to the Closing Date, Buyer or any of its Affiliates, including Company and
Company Subsidiaries, receives a Tax Benefit, then Buyer shall pay to Seller
the amount of such Tax Benefit within 15 days of filing the Tax Return in which
such Tax Benefit is realized or utilized. 
For purposes of determining the amount and timing of any Tax Benefit, the
recipient of the Tax Benefit shall be deemed to pay Tax at the actual tax rate
in effect in the year such Tax Benefit is realized or utilized and shall be
deemed to realize or utilize any Tax Benefit in the first taxable year that
such Tax Benefit may be realized or utilized under Law.


 


(2)                                  Seller
shall be entitled to any Tax Benefit arising from any deduction arising in
respect of any expense, liability or Loss that is borne or paid by Seller or
for which Seller is responsible pursuant to this Agreement (each such expense,
liability or Loss, a “Seller Expense”)
and Buyer acknowledges and agrees that neither Buyer nor any of its Affiliates
shall claim any such deduction on any Tax Return that is the responsibility of
Buyer pursuant to Section 11.3(f); provided, however, that if any
deduction arising in respect of any Seller Expense is not permitted by Law or
administrative practice to be reported on a Tax Return for which Seller has
filing


 


40





















 


responsibility and is permitted
by Law or administrative practice to be reported on any Tax Return that is the
responsibility of Buyer pursuant to Section 11.3(f), then Buyer shall
claim such deduction and pay to Seller the amount of any Tax Benefit that
results from such deduction.


 


(l)                                     Claims
for indemnification with respect to Taxes shall be governed by this Section 11.3
and Sections 13.2(b), 13.4, 13.5 and 13.6 (but not any other provision of Article 13).  It is agreed and understood that the rights
set forth in this Section 11.3 in respect of Taxes are the exclusive
remedy and allocation in respect of Taxes in connection with this
Agreement.  The representations and
warranties set forth in Section 5.19 shall survive the Closing until six
months after expiration of the state and federal statute of limitations
applicable to the matters covered thereby.


 


(m)                               For
the absence of doubt, the covenants of Buyer, Company and Company Subsidiaries
set forth in this Section 11.3 shall apply to Buyer, Company and Company
Subsidiaries regardless of any post-Closing disposition of Company or any
Company Subsidiary by Buyer or any of its Affiliates.


 


(n)


 


(1)                                  Buyer
shall make (and cause such of its subsidiaries as are necessary to make), and
Seller shall join (and cause such of its subsidiaries as are necessary to join)
in timely making, irrevocable elections under § 338(h)(10) of the
Code (and any corresponding election that is available under state or local
law) with respect to the purchase and sale of the Shares and the deemed purchase
and sale of shares of any Company Subsidiary (such elections, the “338(h)(10) Elections”).


 


(2)                                  The
Purchase Price (including any adjustments made thereto pursuant to this
Agreement) shall be allocated among the assets of Company in a manner
consistent with Schedule 11.3(n) and §§ 338
and 1060 of the Code and the Treasury Regulations promulgated thereunder.


 


(3)                                  Buyer
and Seller shall, and shall cause their respective subsidiaries and Affiliates
to, treat the assets and capital stock of the UK Subsidiary that have been
distributed by Company to Seller, as referred to in Section 5.18(a) of
this Agreement, and any cash or intercompany receivables distributed by Company
to Seller pursuant to Section 11.5 of this Agreement, as having been
distributed in the deemed liquidation resulting from the 338(h)(10) Elections.


 


(4)                                  Seller
and Buyer shall and shall cause their respective subsidiaries and Affiliates to


 


41





















 


(A)                              treat
the 338(h)(10) Elections as valid,


 


(B)                                file
all Tax Returns in a manner consistent with such 338(h)(10) Elections and
this Section 11.3, and


 


(C)                                take
no position or other action contrary to the 338(h)(10) Elections or this Section 11.3,


 


in each case, except to the
extent required to do otherwise pursuant to a determination (as defined in § 1313(a) of
the Code or any similar provision of state or local Tax Law).


 


(5)                                  In
furtherance of this Section 11.3(n):


 


(A)                              prior
to Closing, Buyer and Seller shall prepare IRS Form 8023 (“Form 8023”) on which the 338(h)(10) Elections
shall be made for U.S. federal income Tax purposes;


 


(B)                                at
or prior to Closing, Seller (and such of its subsidiaries as are necessary) and
Buyer (and such of its subsidiaries as are necessary) shall execute Form 8023,
which Buyer and Seller shall promptly file or cause to be filed with the
Internal Revenue Service;


 


(C)                                upon
Seller’s request, Seller, Buyer and such of their respective subsidiaries as
are necessary shall cooperate in the preparation and timely filing of any
corrections, amendments or supplements to Form 8023, including IRS Form 8883
(“Form 8883”); and


 


(D)                               Seller,
Buyer and such of their respective subsidiaries as are necessary shall
cooperate with each other to file such other forms or Tax Returns as may be
required to effect the 338(h)(10) Elections, including corrections,
amendments or supplements thereto;


 


in each case in a manner that is consistent with (and to the extent
applicable incorporates and reflects) Schedule 11.3(n).


 


(6)                                  Neither
Seller nor Buyer shall, or shall permit any of its respective subsidiaries to,
modify any of the forms or reports (including any corrections, amendments and
supplements thereto) that are required for the making of the 338(h)(10) Elections
after their execution or modify or revoke the 338(h)(10) Elections
following the filing of Form 8023 without the written consent of the other
party, except as may be required pursuant to a determination (as defined in § 1313(a) of
the Code or any similar provision of state or local Tax Law), provided,
however, that Form 8883 may be


 


42





















 


filed without the consent of
the other party so long as such form is filed in a manner that incorporates,
reflects and is consistent with Schedule 11.3(n).


 


11.4                        Environmental
Obligations.


 


(a)                                  Effective
as of Closing, Seller hereby assumes and agrees to carry out and be responsible
for the following:


 


(1)                                  those
Remediation obligations of Company or Company Subsidiaries that are described
on Schedule 11.4;


 


(2)                                  Environmental
Claims, Environmental Damages and Remediation obligations (whether now known or
subsequently discovered and without regard to disclosures made in the
Disclosure Schedule or the Reports) of Company or a Company Subsidiary
related to the ownership or operation of any property that was owned or
operated prior to the Closing Date by Company, a Company Subsidiary or any
entity that merged into Company or a current or former subsidiary of Company,
but which property is not owned or operated by Company or a Company Subsidiary
as of the Closing Date; and


 


(3)                                  Environmental
Claims, Environmental Damages and Remediation obligations (whether now known or
subsequently discovered and without regard to disclosures made in the
Disclosure Schedule or the Reports) of Company or a Company Subsidiary
related to the disposal at other locations of Hazardous Substances from any
property described in subsection (a)(2) above.


 


(b)                                 For the avoidance of
doubt, it is understood that the assumption by Seller set forth in subsection (a) will
not include (and, effective as of Closing, Buyer assumes and will, or will
cause Company to, carry out and be responsible for) Environmental Claims,
Environmental Damages or Remediation obligations related to facilities or
properties now owned or operated by Company or a Company Subsidiary or related
to disposal at other locations of Hazardous Substances from such facilities or
properties, unless the Environmental Claim, Environmental Damages or
Remediation obligation is expressly described on Schedule 11.4.


 


(c)                                  Following
Closing, Buyer will (or will cause Company and Company Subsidiaries to), upon
request, provide Seller, its Affiliates, attorneys, consultants and other
representatives reasonable access during normal working hours to the books,
records and personnel of Company or Company Subsidiaries relating to such
assumed Remediation obligations and the related operations, facilities and
properties of Company and Company Subsidiaries. 
Prior to disposing of any such books or records, Buyer will (or will
cause Company to) give Seller a reasonable opportunity to take possession
thereof.


 


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(d)                                 Any
claim for indemnification or other claim arising under this Section 11.4
shall be subject to the procedures set forth in Sections 13.3, 13.4, 13.5 and
13.6 (but not by any other provisions of Article 13).


 


11.5                        Cash
Sweep.  In the ordinary course of
business, all cash balances remaining in Company’s bank accounts after the
payment of obligations due are transferred each business day on a same day
basis to Seller.  Each such transfer of
cash between Company and Seller is recorded as a receivable or payable, as
applicable, on each entity’s accounting records.  Any cash balances remaining in Company’s or Company’s
Subsidiaries’ bank accounts, after the payment of normal obligations then due,
on the last business day immediately preceding the Closing Date will be
transferred on the Closing Date to an account designated by Seller.  Deposits into such accounts of Company or
Company Subsidiaries made on and after the Closing Date will not be transferred
to Seller.  In addition, any payable
balance on the accounting records of Seller representing sweeps of cash from
Company or Company Subsidiaries will be cleared on the last business day
preceding Closing in the form of a dividend from Company to Seller and any cash
that had previously been swept to Seller will remain with Seller.


 


11.6                        Confidentiality.


 


(a)                                  “Confidential Information” means the
following types of information concerning the Business and affairs of Company
and the Company Subsidiaries to the extent that Company currently treats such
information as proprietary and confidential in the ordinary course of business:


 


(1)                                  the
Intellectual Property, including product specifications, formulae,
compositions, processes, designs, sketches, photographs, graphs, drawings,
samples, inventions and ideas, past, current and planned research and
development, current and planned manufacturing and distribution methods and
processes, customer lists, current and anticipated customer requirements, price
lists, market studies, business plans, Software, database technologies,
systems, structures, architectures and data (and related processes, formulae,
compositions, improvements, devices, know-how, inventions, discoveries,
concepts, ideas, designs, methods and information) of the Business,


 


(2)                                  any
and all information of Company concerning the Business (including historical
financial statements, financial projections and budgets, historical and
projected sales, capital spending budgets and plans, the names and backgrounds
of key personnel, personnel training and techniques and materials), other than
in connection with Seller’s financial reporting, and


 


(3)                                  any
and all notes, analyses, compilations, studies, summaries and other material
containing or based, in whole or in part, on any information of Company
included in the foregoing.


 


44





















 


Information that is available to the public (other
than as a result of any breach of this Agreement by Seller or its Affiliates)
is not Confidential Information.


 


(b)                                 For
a period of three years after the Closing, Seller and its Affiliates will keep
confidential all of the Confidential Information, and refrain from using or
disclosing any of the Confidential Information, except to the extent reasonably
required in connection with the performance of any of its duties or enforcement
of any of its rights under this Agreement or the Transition Services Agreement.


 


(c)                                  Seller
agrees that the provisions and restrictions contained in Section 11.6(b) hereof
are necessary to protect the legitimate continuing interests of Buyer in
acquiring the Business and entering into this Agreement, that agreements
contained in Section 11.6(b) have been specifically bargained for,
that any violation or breach of such provisions and restrictions will result in
irreparable injury to Buyer for which a remedy at law may be inadequate and
that, in addition to any relief at law which may be available to Buyer for such
violation or breach and regardless of any other provision contained in this
Agreement, Buyer will be entitled to injunctive and other equitable relief
restraining such violation or breach (without any requirement that Buyer
provide any bond or other security if such injunction or other relief is
awarded after an evidentiary hearing at which Seller has the opportunity to be
present and heard).


 


(d)                                 Notwithstanding
the foregoing, if Seller is requested or required (in connection with any
Proceeding, interrogatory, subpoena, civil investigative demand or similar
process) to disclose any Confidential Information, Seller shall notify Buyer
promptly of the request or requirement so that Buyer may seek an appropriate
protective order or waive compliance with the provisions of Section 11.6(b).  If, in the absence of a protective order or
the receipt of a waiver hereunder, Seller is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal, Seller may
disclose the Confidential Information to the tribunal; provided, however, that Seller will use
its best efforts to obtain, at the request and expense of Buyer, an order or
other assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed as Buyer designates.


 


(e)                                  Effective
upon the Closing, Seller shall assign to Buyer all of Seller’s right, title and
interest in and to any confidentiality agreements to which Seller or any of its
agents is a party relating to the confidentiality of information of the
Business or the hiring of employees of Company.


 


45





















 


11.7                        Noncompete;
Nonsolicit.


 


(a)                                  As
an inducement for Buyer to enter into this Agreement and as additional
consideration for the consideration to be paid to Seller under this Agreement,
for a period of three years from the Closing Date, Seller will not directly or
indirectly engage in, acquire, own or hold a business anywhere in the United
States, Canada or Mexico that engages in the Business in competition with
Company (the “Seller Restricted Business”),
including as a proprietor, principal, agent, partner, officer, director,
stockholder, employee, member of any association, consultant or otherwise.  For the avoidance of doubt, it is agreed that
Kentucky Ceramics, LLC (d/b/a “Louisville Stoneware”), which is owned by family
members of the Chairman of Seller’s Board of Directors and trusts for their or
his benefit, is not covered by this subsection (a).


 


(b)                                 Notwithstanding
the foregoing subsection (a), Seller and its Subsidiaries shall not be
precluded from directly or indirectly:


 


(1)                                  acquiring
or owning interests in or securities of any person for passive investment
purposes (whether or not such person is engaged in the Seller Restricted
Business) to the extent that such ownership does not confer on Seller more than
10% of the equity or voting power of such person;


 


(2)                                  acquiring
interests in or securities of any person as an investment by any pension fund
or fund of any other benefit plan of Seller or its Subsidiaries, whether or not
such person is engaged in the Seller Restricted Business;


 


(3)                                  acquiring
interests in or securities of any person provided that
not more than 35% of the consolidated revenues of such person (based on its
consolidated revenues for its most recently completed fiscal year prior to the
acquisition), were derived from engaging in the Seller Restricted Business;


 


(4)                                  engaging
or proposing to engage in an acquisition of or by, or business combination
transaction or other similar transaction with, another person (the “Other Party”) or an acquisition of a
portion of the equity or assets of an Other Party, including any such
acquisition, combination or other similar transaction in which, after giving
effect to the transaction, Seller, its Subsidiaries or the persons surviving or
resulting from such acquisition, business combination or other similar
transaction, as the case may be (the “Surviving
Entity”), is engaged in the Seller Restricted Business, provided that, if more than 10% of the aggregated
consolidated revenues of the Surviving Entity, calculated on a pro forma basis
based on the respective aggregate consolidated revenues of each of the Seller
Group and the Other Party (or the portion of the assets thereof subject to the
transaction) in their respective most recently completed fiscal years prior to
completion of such acquisition, business combination or other similar
transaction, were derived,


 


46





















 


directly or indirectly, from
the Seller Restricted Business and Seller is or controls the Surviving Entity,
then Seller shall use its commercially reasonable efforts to, or to cause the
Surviving Entity to, divest that portion of the business of the Surviving
Entity which is primarily engaged in the Seller Restricted Business within 18
months of completion of such acquisition, business combination or other similar
transaction, provided that no divestment is required to be made more than three
years after the Closing Date.


 


(c)                                  For
a period of 18 months from the Closing Date, except as otherwise agreed to in
writing by Buyer, Seller agrees not to, and shall not cause or permit any of
Seller’s Subsidiaries to directly or indirectly (i) solicit for employment
any employee of Buyer or Company or (ii) induce or attempt to induce any
customer or supplier of Buyer or Company to cease doing business with Buyer or
Company; provided that solicitations through
newspapers of general circulation or similar means not targeted by Seller at
the employees of Buyer or Company shall not be deemed to be a breach of this
subsection.


 


(d)                                 The
parties intend that each of the covenants contained in this Section 11.7
shall be construed as a series of separate covenants, one for each state of the
United States, each county of each state of the United States and each province
of Canada and Mexico.  Except for
geographic coverage, each such separate covenant shall be deemed identical in
terms to the covenant contained in the preceding subsections of this Section 11.7.  If, in any judicial proceeding, a court shall
refuse to enforce any of the separate covenants (or any part thereof) deemed
included in these subsections, then such unenforceable covenant (or such part)
shall be deemed eliminated from this Agreement for the purpose of those
proceedings to the extent necessary to permit the remaining separate covenants
(or portions thereof) to be enforced.  In
the event that the provisions of this Section 11.7 should ever be deemed
to exceed the time or geographic limitations, or the scope of this covenant
permitted by applicable law, then such provisions shall be reformed to the
maximum time or geographic limitations, as the case may be, permitted by
applicable laws.  The unenforceability of
any other of said covenants or provisions or of any other obligation of Seller
or Buyer hereunder, and the existence of any claim or cause of action of Seller
or Buyer against the other whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Seller or Buyer of any of
said covenants.


 


(e)                                  It
is understood and agreed that damages will be an inadequate remedy in the event
of a breach or intended or threatened breach by Seller of any of the covenants
of Seller in this Section 11.7, and that any such breach will cause Buyer
irreparable injury and damage. 
Accordingly, Seller agrees that Buyer shall be entitled, without waiving
any additional rights or remedies otherwise available to Buyer, to injunctive
and other such equitable relief in the event of a breach or intended or
threatened breach of any of said covenants by Seller (without any requirement
that Buyer provide any bond or other security if such injunction or other
relief is awarded after an evidentiary hearing at which Seller has the
opportunity to be present and heard).


 


(f)                                    In
addition, if (A) any third party (i) acquires 40% or more of the
voting securities of Seller, including by way of share purchase, exchange
offer, merger, other business combination or other similar transaction with
Seller, (ii) acquires all or substantially all of the assets of Seller or (iii) otherwise
acquires “control” of Seller, or (B) if any other merger, business 


 


47





















 


combination or
other transaction occurs as a result of which (i) the holders of the
outstanding capital stock of Seller immediately prior to such transaction
beneficially own, after giving effect to such transaction, 60% or less of the
outstanding equity securities of the Surviving Entity of such transaction
(whether Seller, such other person party to such transaction or the person
surviving or resulting from such transaction) or (ii) the individuals who,
prior to the initiation of such transaction, constituted the board of directors
of Seller cease for any reason to constitute at least a majority of the board
of directors of the Surviving Entity of such transaction, then nothing
contained in this Section 11.7 shall be a limitation on any activities of
such third party or the Surviving Entity of such transaction or any entity
directly or indirectly controlled by, controlling or under common control with,
such third party or Surviving Entity.


 


11.8                        Litigation
Support.  In the event and for so long
as Buyer or Company is actively contesting or defending against any Proceeding
in connection with any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act
or transaction existing or occurring on or prior to the Closing Date involving
Company, Seller will reasonably cooperate in the contest or defense, and
provide testimony, if necessary in connection with the contest or defense, all
at the sole cost and expense of Buyer (unless and to the extent Buyer is
entitled to indemnification therefor under Article 13).


 


11.9                        Insurance.  Following the Closing, any claims or other
matters involving insurance policies procured by Seller and insuring Company,
Company Subsidiaries or their respective operations, assets, directors,
officers and employees, and any proceeds of such insurance policies, will be
handled as set forth in Schedule 11.9, all of which is incorporated herein
by reference.


 


ARTICLE 12

EMPLOYEE MATTERS COVENANTS


 


12.1                        General.


 


(a)                                  The
provisions of this Article 12 are solely for the benefit of the parties to
this Agreement.  No employee or former
employee of Company or a Company Subsidiary or any other individual shall be a
third party beneficiary of the provisions of this Article 12.


 


(b)                                 From
and after the Closing and until December 31, 2006, Buyer shall provide
compensation and employee benefits to the continuing employees of Company and
the Company Subsidiaries and to the former employees of Company and the Company
Subsidiaries (such employees and former employees, the “Employee Beneficiaries”) that, in the
aggregate, are no less favorable for each Employee Beneficiary than those
provided to such individual immediately prior to the Closing.


 


(c)                                  From
and after the Closing, Buyer shall cause Company, Company Subsidiaries and
their respective successors and assigns to honor all Company Plans, subject to
the right to amend, modify, alter or terminate any Company Plan to the extent
the terms of such Plan permit such action, except to the extent any such action
is contrary to any other provisions of this Article 12, and provided that
if any such action is effective prior to December 31, 2006, Buyer must
remain in compliance with Section 12.1(b) above.


 


48





















 


(d)                                 For
all purposes under the employee benefit plans, practices or arrangements of
Buyer and its Affiliates providing benefits to any Employee Beneficiary after
the Closing Date, each Employee Beneficiary shall be credited with all years of
service for which such Employee Beneficiary was credited before the Closing
Date under any similar employee benefit plans, practices or arrangements of
Seller and its Affiliates, except for purposes of benefit accrual under any
final average pay defined benefit plan; provided, however, that notwithstanding
the fact that Seller and its Affiliates do not maintain a severance program,
each Company employee shall be credited with all years of service to Company
and its Affiliates (and their respective predecessors) for all purposes under
any severance plan or program of Buyer and its Affiliates.


 


12.2                        Welfare
Plans.


 


(a)                                  The
participation by Employee Beneficiaries in Welfare Plans maintained by Seller
and its Affiliates (excluding for this purpose Company and Company
Subsidiaries) shall cease at the Closing. 
Buyer shall permit each Employee Beneficiary to enroll as of the Closing
in Welfare Plans sponsored by Buyer and its Affiliates (including for this
purpose Company and Company Subsidiaries) that are substantially similar to the
Welfare Plans applicable to such Employee Beneficiaries immediately prior to
the Closing.  With respect to such
coverage of Employee Beneficiaries under the Welfare Plans of Buyer and its
Affiliates:


 


(1)                                  limitations
on benefits due to pre-existing conditions shall be waived for any Employee
Beneficiary enrolled in any Welfare Plan maintained by Seller and its
Affiliates as of the Closing Date,


 


(2)                                  any
out-of-pocket annual maximums and deductibles taken into account under Welfare
Plans maintained by Seller and its Affiliates for any Employee Beneficiary in
the calendar year which contains the Closing Date shall be credited under the
Welfare Plans of Buyer and its Affiliates for the same calendar year, and


 


(3)                                  with
respect to aggregate lifetime maximum benefits available under Welfare Plans of
Buyer and its Affiliates, an Employee Beneficiary’s prior claim experience
under Welfare Plans maintained by Seller and its Affiliates will not be taken
into account.


 


(b)                                 Except
as otherwise provided in this Article 12 with respect to specific benefits
or Plans, after the Closing:


 


(1)                                  Seller
and its Affiliates (excluding for this purpose Company and Company
Subsidiaries) shall be solely responsible for:


 


(A)                              claims
for Welfare Benefits that are incurred by or with respect to any Employee
Beneficiary before the Closing Date; and


 


49





















 


(B)                                claims
relating to COBRA Coverage attributable to “qualifying events” with respect to
any Employee Beneficiary and his or her beneficiaries and dependents that occur
before the Closing Date; and


 


(2)                                  Buyer
and its Affiliates (including for this purpose Company and Company
Subsidiaries) shall be solely responsible for:


 


(A)                              claims
for Welfare Benefits that are incurred by or with respect to any Employee
Beneficiary on or after the Closing Date, and


 


(B)                                claims
relating to COBRA Coverage attributable to “qualifying events” with respect to
any Employee Beneficiary and his or her beneficiaries and dependents that occur
on or after the Closing Date.


 


(3)                                  For
purposes of the foregoing, a medical/dental claim shall be considered incurred
when the services are rendered, the supplies are provided or medication is
prescribed, and not when the condition arose.


 


(c)                                  Notwithstanding
anything herein to the contrary, if any Company employee covered by Seller’s
Short Term Disability Plan has become disabled (within the meaning of such
plan) prior to the Closing Date, any short-term disability salary continuation
income benefits relating to such disability shall be the sole responsibility of
Seller, whether payable before or after the Closing Date.  Seller’s Long Term Disability Plan shall be
responsible for any Company employee covered by Seller’s Long Term Disability
Plan who has become disabled (within the meaning of such plan) prior to Closing
but has not qualified for benefits because the elimination period has not then
expired, subject to the elimination period requirement being met after Closing.


 


(d)                                 From
and after the Closing Date, Buyer, through Company and the Company
Subsidiaries, shall honor all vacation days of Company employees that accrued
prior to the Closing Date and that remain outstanding as of the Closing Date.


 


(e)                                  The
amount in each Company employee’s account under Seller’s Dependent Care
Assistance Plan (which is part of Seller’s Cafeteria Plan) as of the Closing
Date will be transferred by Seller as soon as practicable after Closing to a
plan to be set up by Company (or by Buyer or one of its Affiliates for the
benefit of Company employees) that provides equivalent or better benefits to
Company employees than Seller’s Dependent Care Assistance Plan.


 


(f)                                    Subject
to applicable Law, Seller shall cooperate and use its reasonable best efforts
in assisting Buyer’s efforts to transition the employees and Plans including
providing access and making available to Buyer employee records and benefit
information necessary for Buyer to fulfill its obligations under this Article 12,
but such cooperation shall not require Seller to incur out-of-pocket costs
unless Buyer agrees to reimburse Seller therefor.


 


50





















 


12.3                        Severance
Benefit.  Buyer and its Affiliates
shall provide each Company employee whose employment is terminated in a
Qualifying Termination during the period from the Closing Date through the
first anniversary of the Closing Date a payment of no less than the product of


 


(1)                                  such
employee’s weekly rate of base pay, multiplied by


 


(2)                                  the
greater of


 


(A)                              8,
or


 


(B)                                such
employee’s years of service with Company and its Affiliates (including service
with predecessor entities) multiplied by two, but not more than 52,


 


as well as welfare benefits continuation (at no cost to the employee)
for a period of weeks not less than the multiple determined in clause (2) above.  The benefits described in this Section 12.3
are contingent on Company employee’s signing a release agreement provided by
Company.  Payments will be made on a
semi-monthly basis in Company’s normal payroll cycle and will be subject to all
applicable tax withholdings.  This Section 12.3
does not apply with respect to (i) any Company employee with whom Company
has entered into a retention agreement or other agreement providing for
severance pay in an amount equal to or greater than determined under this
subsection, or (ii) any Company employee covered by a collective
bargaining agreement.


 


12.4                        Omnibus
Compensation Plans.  Outstanding
equity awards to Company employees under Seller’s Omnibus Compensation Plan and
Seller’s 2004 Omnibus Compensation Plan will be honored by Seller in accordance
with the terms of such awards.


 


ARTICLE 13

INDEMNIFICATION


 


13.1                        Survival.


 


(a)                                  All
representations and warranties of Buyer and Seller contained herein shall
survive the Closing for a period of 18 months following the Closing, provided
that the representations and warranties set forth in Section 5.19 (Tax
Matters) shall survive the Closing until six months after the expiration of the
state and federal statute of limitations applicable to the matters covered
thereby.  The covenants and agreements of
Seller or Buyer contained in this Agreement shall survive, if at all, until, by
their respective terms, they are no longer effective (together with the dates
in the preceding sentence, each is referred to herein as a “Survival Date”).


 


(b)                                 In
all instances with respect to any specific representation or warranty under
which an Indemnified Party shall have delivered a notice of a claim prior to
the Survival Date applicable to such representation or warranty and as to which
such claim has not been completely and finally resolved prior to such
termination date, such representation or warranty shall survive for purposes of
such claim for the period of time beyond such termination date sufficient to
resolve, completely and finally, the claim relating to such representation or
warranty 


 


51





















 


in accordance
with this Agreement.  Except as otherwise
provided herein, the parties agree that no claims or causes of action may be
brought against Seller or Buyer based upon the representations and warranties
contained in this Agreement after the applicable Survival Date.


 


13.2                        Indemnification.


 


(a)                                  Seller
shall indemnify, defend and save the Buyer Parties harmless from, against, for
and in respect of any damages, losses, obligations, liabilities, claims and
expenses (including interest, penalties, reasonable attorneys’ fees and
expenses and all reasonable amounts paid in investigation, defense or
settlement of any of the foregoing) (collectively, “Losses”) sustained or suffered by any of the Buyer Parties,
whether or not arising out of third party claims, arising from (i) a
breach, misrepresentation or inaccuracy of any representation or warranty of
Seller contained in this Agreement or in the certificate to be delivered by
Seller pursuant to Section 3.3(a) of this Agreement, and (ii) any
breach of any of the covenants and agreements of Seller contained in this
Agreement, including any agreement of Seller to indemnify Buyer with respect to
specific matters contained elsewhere in this Agreement (“Buyer Damages”).  Notwithstanding anything to the contrary
contained in this Agreement, for purposes of determining whether Seller is
obligated to provide indemnification under Article 13 of this Agreement
and for purposes of determining the amount of Buyer Damages to which such
indemnification applies, each representation and warranty in this Agreement


 


(1)                                  (except
Section 5.6(b), and


 


(2)                                  except
Section 5.9(a), clauses (a), (e) and (f) of Section 5.10, Section 5.15(a),
Section 5.16, Section 5.17(b) and the first sentence of Section 5.17(d),
provided that Seller’s failure to list
an item on the Disclosure Schedule, when listing is required pursuant to such
provisions (taking into account the term “material” or “material adverse effect”
or similar phrases), shall not prevent other representations and warranties
made by Seller with respect to such item from applying to all such items that
should have been listed pursuant to such provisions (taking into account the
term “material” or “material adverse effect” or similar phrases)


 


and in the certificate to be delivered
pursuant to Section 3.3(a) of this Agreement shall be read without
regard and without giving effect to the term “material” or “material adverse
effect” or similar phrases contained in such representation or warranty which
has the effect of making such representation and warranty less restrictive (as
if such word(s) were deleted from such representation and warranty).


 


(b)                                 Notwithstanding
anything contained herein to the contrary, the following limitations shall
apply with reference to any indemnification claim against Seller under Sections
13.2(a) or 11.3(c)(3) with respect to an alleged breach of any
representations or warranties:


 


(1)                                  No
indemnification claim shall be brought against Seller unless Buyer, at any time
prior to the applicable Survival Date, gives Seller written notice, with
reasonable specificity, of the existence


 


52





















 


of any such indemnification
claim.  Subject to the procedures with
respect to Claims under Section 13.3 hereof which shall in all events
govern third party claims (or Section 11.3(j) in the case of Taxes), if
such written notice (or an amended notice) states the amount of Buyer Damages
claimed and Seller notifies Buyer that Seller does not dispute the claim
described in such notice or fails to notify Buyer within 60 days after receipt
of such notice by Seller whether Seller disputes the claim described in such
notice, Seller shall be responsible for the payment of such Buyer Damages to
the Buyer Party.  If Seller has timely
disputed Seller’s liability with respect to such claim by delivery of notice in
accordance with this section, Buyer and Seller will proceed in good faith to
negotiate a resolution of such dispute. 
Any written notice delivered by Seller to Buyer for purposes of
disputing a claim for Buyer Damages shall, to the extent practicable, provide an
explanation with reasonable specificity for any objection to the matters set
forth in Buyer’s notice and the portion of the claim (if less than all) which
is the subject of the dispute notice.


 


(2)                                  No
indemnification shall be made under Sections 13.2(a)(i) or 11.3(c)(3) by
Seller (i) for any individual item or group of substantially similar items
where the Loss or Tax relating thereto is less than $200,000 (the “Basket”) and such items shall not be
aggregated for purposes of determining whether the Threshold Amount has been
exceeded pursuant to Section 13.2(b)(2)(ii), and (ii) unless and
until the aggregate amount of the Losses and Taxes suffered by the Buyer
Parties exceeds 2% of the Purchase Price (the “Threshold
Amount”), and then only to the extent of any such excess.


 


(3)                                  The
amount of Loss or Tax suffered by the Buyer Parties shall be determined after
offsetting the amount of any applicable reserve or allowance included in the
Financial Statements, and any Tax Benefit, insurance proceeds or third party
indemnification received.


 


(4)                                  The
amount of Losses or Taxes from a matter shall be reduced to the extent such
matter is reflected in the final determination of the Adjustment Amount
pursuant to Article 2.


 


(5)                                  Seller’s
liability for all such indemnification claims shall in no event exceed 10% of
the Purchase Price (the “Cap Amount”),
except in the event that such obligation to indemnify arises from fraud by
Seller.


 


(c)                                  Seller
will pay the amount of any Buyer Damages to the Buyer Party within ten days
following the determination of Seller’s liability for and the amount of such
Buyer 


 


53





















 


Damages
(whether such determination is made pursuant to the procedures set forth in
this Article 13, by agreement between Buyer and Seller, by arbitration
award or by final adjudication in accordance with the terms of this
Agreement).  Seller agrees that if,
following the Closing, any payment is made by Seller in respect of any Buyer
Damages, (i) Seller shall have no rights against Company or any Company
Subsidiary arising out of any pre-Closing action or omission, whether by reason
of contribution, indemnification, subrogation or otherwise, in respect of any
such payment, and shall not take any action against Company or any Company
Subsidiary with respect thereto, and (ii) any rights with respect to any
such payment that Seller may, by operation of law or otherwise, have against
Company or any Company Subsidiary arising out of any pre-Closing action or
omission shall, effective at the time of the Closing, be deemed hereby to be
expressly and knowingly waived.


 


(d)                                 Buyer
shall indemnify, defend and save the Seller Parties harmless from, against, for
and in respect of any Losses sustained or suffered by any of the Seller Parties
(“Seller Parties”) and arising
from (i) a breach, misrepresentation or inaccuracy of any representation
or warranty of Buyer contained in this Agreement or in the certificate to be
delivered by Buyer pursuant to Section 3.4(a), and (ii) any breach of
any of the covenants and agreements of Buyer contained in this Agreement,
including any agreement of Buyer to indemnify Seller with respect to specific
matters contained elsewhere in this Agreement.


 


(e)                                  Notwithstanding
anything contained herein to the contrary, the following limitations shall apply
with reference to any indemnification claim against Buyer under Section 13.2(d) with
respect to an alleged breach of any representations or warranties:


 


(1)                                  No
indemnification claim shall be brought against Buyer unless Seller, at any time
prior to the applicable Survival Date, gives Buyer written notice, with
reasonable specificity, of the existence of any such indemnification
claim.  Subject to the procedures with
respect to Claims under Section 13.3 hereof which shall in all events
govern third party claims, if such written notice (or an amended notice) states
the amount of Seller Damages claimed and Buyer notifies Seller that Buyer does
not dispute the claim described in such notice or fails to notify Seller within
60 days after receipt of such notice by Buyer whether Buyer disputes the claim
described in such notice, Buyer shall be responsible for the payment of such
Seller Damages to the Seller Party.  If
Buyer has timely disputed its liability with respect to such claim by delivery
of a notice Seller and Buyer will proceed in good faith to negotiate a
resolution of such dispute.  Any written
notice delivered by Buyer to Seller for purposes of disputing a claim for
Seller Damages shall, to the extent practicable, provide an explanation with
reasonable specificity for any objection to the matters set forth in the Seller
notice and the portion of the claim (if less than all) which is the subject of
the dispute notice.


 


(2)                                  No
indemnification shall be made under Section 13.2(d)(i) by Buyer (i) for
any individual item where the Loss relating thereto is 


 


54





















 


less than the Basket and such
items shall not be aggregated for purposes of determining whether the Threshold
Amount has been exceeded pursuant to Section 13.2(e)(2)(ii), and (ii) unless
and until the aggregate amount of the Losses suffered by the Seller Parties
exceeds the Threshold Amount, and then only to the extent of any such excess.


 


(3)                                  Buyer’s
liability for all such indemnification claims shall in no event exceed the Cap
Amount, except in the event that such obligation to indemnify arises from fraud
by Buyer.


 


(f)                                    Buyer
will pay the amount of any Seller Damages to Seller on behalf of the Seller
Parties within ten days following the determination of Buyer’s liability for
and the amount of Seller Damages (whether such determination is made pursuant
to the procedures set forth in this Article 13, by agreement between Buyer
and Seller, by arbitration award or by final adjudication in accordance with
the terms of this Agreement).


 


13.3                        Third
Party Claims.  With respect to any
claim for indemnification resulting from the assertion of liability by third
parties (a “Claim”), the
obligations and liabilities of the party allegedly responsible for
indemnification (the “Indemnifying Party”)
hereunder with respect to the Claim by the party allegedly entitled to
indemnity (the “Indemnified Party”)
shall be subject to the following terms and conditions:


 


(a)                                  The
Indemnified Party shall give prompt written notice to the Indemnifying Party of
any assertion of liability by a third party which might give rise to a Claim by
the Indemnified Party against the Indemnifying Party based on the indemnity
agreements contained in Section 13.2 hereof, stating the nature and basis
of said assertion and the amount thereof, to the extent known.


 


(b)                                 If
any Proceeding is brought against the Indemnified Party, with respect to which
the Indemnifying Party may have liability under the indemnity agreement
contained in Section 13.2 hereof, the Proceeding shall, upon the written
agreement of the Indemnifying Party, be defended (including all Proceedings on
appeal or for review which counsel for the defendant shall deem appropriate) by
the Indemnifying Party.  The Indemnified
Party shall have the right to employ its own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Party unless


 


(1)                                  the
employment of such counsel shall have been specifically authorized by the
Indemnifying Party in connection with the defense of such Proceeding,


 


(2)                                  the
Indemnifying Party shall not have agreed, within 30 days after the notice to it
provided in subsection (a) above, to assume the defense of such
Proceeding, or


 


(3)                                  the
Indemnified Party shall have reasonably concluded, based on advice of counsel,
that there may be defenses available to it which conflict with those available
to the Indemnifying Party;


 


55





















 


in any of which events (A) that portion
of such reasonable fees and expenses reasonably related to matters covered by
the indemnity agreement contained in Section 13.2 hereof shall be borne by
the Indemnifying Party, and (B) the Indemnifying Party shall not be
responsible for the fees and expenses of more than one counsel for the
Indemnified Party.  The Indemnified Party
shall be kept reasonably informed of such Proceeding at all stages thereof
whether or not it is so represented.  The
Indemnified Party shall make available to the Indemnifying Party and its
attorneys, accountants and other representatives all books and records of the
Indemnified Party relating to such Proceedings and the parties hereto agree to
render to each other such assistance as they may reasonably require of each
other in order to ensure the proper and adequate defense of any such
Proceeding.


 


(c)                                  The
Indemnifying Party shall not make any settlement of any claims without the
written consent of the Indemnified Party, which consent may not be unreasonably
withheld, delayed or conditioned, provided, however, that the Indemnified Party’s
consent shall not be required if the settlement involves only payment of money
and the settlement includes a full written release of liability of the
Indemnified Party with respect to such suit, proceeding or claim.  If an Indemnified Party does not consent to a
settlement proposed by the Indemnifying Party and accepted by the adverse third
party that involves only the payment of money by, or other consideration from, the
Indemnifying Party, the liability of the Indemnifying Party shall be limited to
the amount that would have been paid in such settlement.  The Indemnified Party shall not settle any
claim for which it seeks indemnification without the prior written consent of
the Indemnifying Party, which consent may be withheld in the sole and absolute
discretion of the Indemnifying Party.


 


(d)                                 Buyer
shall not be deemed to have notice of any claim or breach by Seller of any
representation, warranty, covenant or agreement under this Agreement by virtue
of knowledge acquired on or prior to the Closing Date by an employee of
Company.


 


13.4                        Remedies
Exclusive.  If the Closing occurs,
the remedies provided for in this Article 13 shall be the exclusive
remedies available to a party arising out of an alleged breach of a
representation, warranty, covenant or agreement made in this Agreement; provided, however, that any
indemnification matters relating to Taxes, including any indemnification
matters relating to any breach of any representation or warranty contained in Section 5.19
(Tax Matters), shall instead be governed exclusively by Section 11.3 and
by such specific portions of this Article 13 as are incorporated by Section 11.3(l).  Neither party will be liable for special,
incidental, consequential, punitive, exemplary or similar damages arising from
a breach of this Agreement, except to the extent, and subject to the
limitations on indemnification set forth in this Article 13, such party
actually paid to a third party any such damages in respect of a matter for which
such party is entitled to indemnification under Section 13.2(a) or
13.2(d), as the case may be.


 


13.5                        Recoveries.  If an Indemnified Party subsequently receives
payment (including proceeds of insurance, third party indemnification, payments
on accounts receivable and Tax Benefits) with respect to a matter for which it
has been fully indemnified by the Indemnifying Party, the Indemnified Party
shall promptly pay the amount of such payment, up to the indemnification
received, to the Indemnifying Party.  Such
Indemnified Party shall be obligated to use commercially reasonable efforts to
seek any such payments to which it may be entitled.


 


56





















 


13.6                        Characterization.  Any amounts paid by an Indemnifying Party to
an Indemnified Party pursuant to this Article 13 or Section 11.3
shall be treated for all Tax purposes as adjustments to the Purchase Price.


 


ARTICLE 14

MISCELLANEOUS


 


14.1                        Expenses.  Except as otherwise expressly provided
herein, each party shall bear its own expenses in connection with the
negotiation, preparation and execution of this Agreement and the consummation
of the transactions contemplated by this Agreement.


 


14.2                        Binding
Effect.  This Agreement shall become
binding and effective when executed by Buyer and by Seller.  This Agreement shall not be assignable by
either Buyer or Seller without the prior written consent of the other, except
that without relieving a party of any of its obligations under this Agreement,
either party may assign this Agreement to any of its wholly-owned
subsidiaries.  Subject to the foregoing,
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors, legal representatives and permitted
assigns of the parties hereto.  This
Agreement constitutes an agreement among the parties hereto and none of the
agreements, covenants, representations or warranties contained herein shall be
for the benefit of, or create any third party beneficiary rights in, any Person
not a party to this Agreement (other than the Seller Parties and the Buyer
Parties to the extent expressly provided in Article 13).


 


14.3                        Entire
Agreement; Amendments.  This
Agreement (including the Schedules and Exhibits attached hereto) and the
Confidentiality Agreement contain the entire understanding of the parties with
respect to their subject matter.  The
making, execution and delivery of this Agreement by the parties have not been
induced by any representations, warranties, statements or agreements other than
those expressed in this Agreement.  This
Agreement supersedes all prior agreements and understandings between the
parties with respect to the subject matter hereof except for the
Confidentiality Agreement.  This
Agreement may be amended only by a written instrument duly executed by the
parties.


 


14.4                        Notices.  All notices or other communications hereunder
shall be in writing and shall be delivered by hand or sent by facsimile
transmission or sent, postage prepaid, by registered, certified or express
mail, return receipt requested, or by reputable overnight courier service, as
follows:


 


	
  if to Seller:

  	
   

  	
  General Counsel

  
	
   

  	
   

  	
  Brown-Forman Corporation

  
	
   

  	
   

  	
  850 Dixie Highway

  
	
   

  	
   

  	
  Louisville, Kentucky 40210

  
	
   

  	
   

  	
  fax: 502-774-7188

  



 


57





















 


	
  with copies to (which

  	
   

  	
  Ernest W. Williams

  
	
  shall not constitute 

  	
   

  	
  Ogden Newell & Welch PLLC

  
	
  notice to Seller):

  	
   

  	
  1700 PNC Plaza, 500 West Jefferson Street

  
	
   

  	
   

  	
  Louisville, Kentucky 40202-2874

  
	
   

  	
   

  	
  fax: 502-581-9564

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Andrew R. Brownstein

  
	
   

  	
   

  	
  Wachtell, Lipton, Rosen & Katz

  
	
   

  	
   

  	
  51 West 52nd Street

  
	
   

  	
   

  	
  New York, New York 10021

  
	
   

  	
   

  	
  fax: 212-403-2000

  
	
   

  	
   

  	
   

  
	
  if to Buyer:

  	
   

  	
  Department 56, Inc.

  
	
   

  	
   

  	
  One Village Place

  
	
   

  	
   

  	
  6436 City West Parkway

  
	
   

  	
   

  	
  Eden Prairie, MN 55344

  
	
   

  	
   

  	
  Attention: Chief Financial
  Officer

  
	
   

  	
   

  	
  fax: 952-943-4490

  
	
   

  	
   

  	
   

  
	
  with a copy to (which 

  	
   

  	
  Dorsey & Whitney LLP

  
	
  shall not constitute 

  	
   

  	
  50 South Sixth Street

  
	
  notice to Buyer):

  	
   

  	
  Minneapolis, Minnesota 55402

  
	
   

  	
   

  	
  fax: 612-340-7800

  
	
   

  	
   

  	
  Attention: Robert A. Rosenbaum

  



 


or to such other address as the party to whom notice is to be given may
have furnished to the other party in writing in accordance herewith.  Any such communication shall be deemed
effective on the earlier of the date of receipt (or, if received on a non-business
day, on the first business day after the date of receipt) or, if sent by
registered, certified or express mail, on the fifth calendar day after such
mailing.


 


14.5                        Counterparts.  This Agreement may be signed by each party
upon a separate copy or separate signature page, and any combination of
separate copies signed by all parties or including signature pages so
signed will constitute a single counterpart of this Agreement.  This Agreement may be signed in any number of
counterparts, each of which will be deemed to be an original, but all of which
together will constitute one and the same agreement. It will not be necessary,
in proving this Agreement in any proceeding, to produce or account for more
than one counterpart of this Agreement. 
This Agreement will become effective when one or more counterparts have
been signed by each party, and delivered to the other party.  Any party may deliver an executed copy of
this Agreement (and an executed copy of any documents contemplated by this
Agreement) by facsimile transmission to the other party, and such delivery will
have the same force and effect as any other delivery of a manually signed copy
of this Agreement (or such other document).


 


58





















 


14.6                        Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
without regard to conflicts of laws principles.


 


14.7                        Jurisdiction.  Each party irrevocably submits to the
jurisdiction of the courts of the State of Delaware in connection with any legal
proceeding arising out of or relating hereto or the transactions contemplated
hereby, and hereby irrevocably agrees that all claims in respect of such legal
proceeding shall be heard and determined in such state or federal court.  Each party irrevocably waives (and agrees not
to plead or claim) any objection to the laying of venue of any legal proceeding
arising out of or relating hereto or the transactions contemplated thereby in
the courts of Delaware and the defense of an inconvenient forum to the maintenance
of such action or proceeding.  Each party
further agrees, to the fullest extent permitted by law, that a final and
non-appealable judgment against it in any legal proceeding contemplated above
shall be conclusive and may be enforced in any other jurisdiction within or
outside the United States by suit on the judgment, a certified copy of which
shall be conclusive evidence of the fact and amount of such judgment.  Each party agrees that service of process,
summons, notice or document by U.S. registered mail to such person’s respective
notice address determined in accordance with Section 14.4 herein shall be
effective service of process for any legal proceeding with respect to any
matters to which it has submitted to jurisdiction pursuant to this Section 14.7.


 


14.8                        Waivers.  Any provision of this Agreement may be waived
only by a written instrument executed by the party to be charged with such
waiver.  The waiver by any party hereto
of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach. 
Any condition to a party’s obligations under this Agreement may be
waived only in writing by such party.


 


[signatures follow]


 


59





















 


IN WITNESS WHEREOF,
the parties hereto have caused this Stock Purchase Agreement to be executed and
delivered effective as of the date first above written.


 


	
   

  	
  BROWN-FORMAN
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Phoebe
  A. Wood

  	
   

  
	
   

  	
  Name:

  	
  Phoebe A.
  Wood

  
	
   

  	
  Title:

  	
  Executive
  Vice President and Chief

  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEPARTMENT
  56, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  	
   

  
	
   

  	
  Name:

  	
  Susan E.
  Engel

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
					



 


60