Execution Version - December 28,
      2005





**Private
      and Confidential**





**EXECUTION
      DOCUMENTS**














**Purchase
      Agreement**





**by
      and between**














**GSE
      Lining Technology Chile S.A.**





**as
      Buyer**








**Inversiones
      Bellavista Uno S.A. and Inversiones Bellavista**


**Tres**





**as
      Sellers**











**Inversiones
      Vesta Limitada (Former Recubrimientos e**


**Impermeabilizaciones
      SL Limitada)**





**the
      Company**











**with
      guaranty of**





**Technología
      Hidráulica en Minería y Construcción S.A.**













**DATED
      DECEMBER 28** **TH** **,
      2005**





**Execution
          Version - December 28, 2005**


1.  PURCHASE
      AGREEMENT





1.1  EXHIBITS


Exhibit
      A
      - Assignment of Rights in Recubrimientos Industriales SL Limitada.


Exhibit
      B
      - Non
      -
      compete Agreement.


Exhibit
      C
      - Right
      of
      First Refusal No 1


Exhibit
      D
      - Right
      of
      First Refusal Agreement N 2


Exhibit
      E
      - Inventory
      Purchase Agreement


Exhibit
      F
      - Pledge
      over 30% of the shares


Exhibit
      G
      - Comfort
      Letter


Exhibit
      H
      - Leases
      of
      Offices and Warehouses





1.2  SCHEDULES


Schedule
                  3.1(ai)
              Related
                  Party ArrangementsSchedule
                  3.1 (aii)
              Company’s
                  BylawsSchedule
                  3.4
              RestrictionsSchedule
                  3.5(a)
              Fin.
                  Stat. & B.B. SheetSchedule
                  3.5(b)
              Newco’s
                  Initial B. SheetSchedule
                  3.7(a)
              Undisclosed
                  LiabilitiesSchedule
                  3.8
              Actions
                  since B.B. SheetSchedule
                  3.9
              Intellectual
                  PropertySchedule
                  3.10(a)(i)
              Real
                  Property owned, leased or utilized by the CompanySchedule
                  3.10(a)(ii)
              Real
                  Property owned, leased or utilized by NewcoSchedule
                  3.10(b)
              Piece
                  of Land to be TransferredSchedule
                  3.11(a)
              Tangible
                  Assets owned, leased or utilized by the CompanySchedule
                  3.11(b)
              Tangible
                  assets purchased but not yet arrivedSchedule
                  3.13(a)
              Company’s
                  Contract ListSchedule
                  3.13(b)
              Newco’s
                  Contract ListSchedule
                  3.14
              Newco’s
                  Powers of AttorneySchedule
                  3.15
              Insurance
                  PoliciesSchedule
                  3.16(b)
              Newco’s
                  Bank AccountsSchedule
                  3.17
              Litigation
                  and Claim ListSchedule
                  3.18(a)
              Pending
                  BidsSchedule
                  3.18(b)
              Backlog
                  and Pending OrdersSchedule
                  3.19(a)
              Governmental
                  Authorizations
  **Execution
            Version - December 28, 2005**
  Schedule
                  3.20
              Hazardous
                  MaterialsSchedule
                  3.22
              Workers’
                  InjuriesSchedule
                  3.24(b)
              EmployeesSchedule
                  3.24(c)
              Service
                  ContractorsSchedule
                  3.25
              Tax
                  ClaimsSchedule
                  3.26
              Product
                  LiabilitySchedule
                  3.27
              Contracts
                  subject to Potential Warranty ClaimsSchedule
                  7.3(a)
              Offices
                  and WarehousesSchedule
                  7.3(b)
              Space
                  at Newco’s Real Property at which Sellers Inventory shall be
                  maintained




2.
              CLOSING
                  DOCUMENT - EVIDENCE OF DELIVERY OF EMPLOYMENT
                  AGREEMENTS
 3.
              CLOSING
                  CERTIFICATE
 4.
              LEGAL
                  OPINION BY ALLAMAND & SCHAULSOHN
                  ABOGADOS
 5.
              POWERS
                  OF ATTORNEY
 6.
              NOTARY
                  INSTRUCTIONS
 7.
              ASSIGNMENTS
                  OF RIGHTS IN RECUBRIMIENTOS INDUSTRIALES SL
                  LIMITADA
 8.
              COMPLEMENTARY
                  PUBLIC INSTRUMENT TO ASSIGNMENT OF RIGHTS IN RECUBRIMIENTOS INDUSTRIALES
                  SL LIMITADA
 9.
              NON
                  - COMPETE AGREEMENT
 10.
              RIGHT
                  OF FIRST REFUSAL AGREMENT N 1
 11.
              RIGHT
                  OF FIRST REFUSAL AGREEMENT N 2
 12.
              INVENTORY
                  PURCHASE AGREEMENT
 13.
              PLEDGE
                  OVER 30% OF THE SHARES
 14.
              COMFORT
                  LETTER
 15.
              LEASES
                  OF OFFICES AND WAREHOUSES
 16.
              RELEASE
                  OF MORTGAGE BY CORPBANCA
 17.
              RELEASE
                  OF PLEDGE WITHOUT CONVEYANCE BY
                  CORPBANCA


**Execution
          Version - December 28, 2005**








**PURCHASE
      AGREEMENT**





**__________________________________________**








**GSE
      Lining Technology Chile S.A.**


**__________________________________________**





**as
      Buyer**








**Inversiones
      Bellavista Uno S.A. and Inversiones Bellavista Tres S.A.**


**___________________________________________**





**as
      Sellers**








**Inversiones
      Vesta Limitada (Former Recubrimientos e Impermeabilizaciones SL
      Limitada)**


**____________________________________**





**the
      Company**








**with
      guaranty of**





**Tecnología
      Hidráulica en Minería y Construcción S.A.**


**_____________________________________**











**Execution
          Version - December 28, 2005**





**TABLE
      OF CONTENTS**





1.
              DEFINITIONS
              21.1
              Construction.
              21.2
              Definitions.
              22.
              PURCHASE
                AND SALE OF SHARES; CLOSING
              82.1
              Purchase
                  and Sale.
              82.2
              Base
                  Purchase Price.
              82.3
              Definitive
                  Purchase Price .
              82.4
              Closing.
              92.5
              Method
                  of Payment.
              112.6
              Allocation
                  of Purchase Price.
              112.7
              Exchange
                  Rate.
              112.8
              Additional
                  Covenant.
              113.
              REPRESENTATIONS
                AND WARRANTIES OF SELLERS
              123.1
              Corporate
                  Status.
              123.2
              Capitalization
                  and Ownership.
              123.3
              Corporate
                  Authority.
              133.4
              Restrictions.
              133.5
              Financial
                  Statements.
              133.6
              Intentionally
                  Left Blank.
              143.7
              Absence
                  of Undisclosed Liabilities.
              143.8
              Actions
                  Since date of Base Balance Sheet.
              143.9
              Intellectual
                  Property.
              153.10
              Real
                  Property and Leases.
              153.11
              Personal
                  Property.
              163.12
              Title
                  to Property.
              163.13
              Contracts
                  and Commitments.
              173.14
              Powers
                  of Attorney.
              183.15
              Insurance
              183.16
              Indebtedness;
                  Bank Accounts.
              193.17
              Legal
                  Proceedings.
              19
   **Execution
            Version - December 28, 2005**
  3.18
              Pending
                  Bids, Customers Backlog and Sales Volume.
              193.19
              Governmental
                  Authorizations.
              193.20
              Hazardous
                  Materials.
              193.21
              Environmental
                  Matters.
              203.22
              Workers'
                  Injuries.
              203.23
              Trade
                  Union Activity.
              203.24
              Employees;
                  Employee Benefits.
              213.25
              Taxes.
              213.26
              Product
                  Liability.
              223.27
              Customer
                  Warranty Claims.
              223.28
              Sufficiency
                  of the Assets.
              233.29
              Legal
                  Compliance.
              233.30
              Accuracy
                  of Statements.
              233.31
              Brokers
                  and Finders.
              233.32
              Certain
                  Practices.
              233.33
              Books
                  and Records/Accounting Controls.
              243.34
              US
                  export control and trade sanction laws.
              244.
              REPRESENTATIONS
                AND WARRANTIES OF BUYER
              244.1
              Corporate
                  Status.
              244.2
              Capitalization
                  and Ownership.
              244.3
              Authority.
              254.4
              Restrictions.
              254.5
              Government
                  Approvals.
              254.6
              Brokers
                  and Finders.
              255.
              COVENANTS
                OF SELLERS PRIOR TO CLOSING DATE
              255.1
              Access
                  and Investigation.
              255.2
              Spin-off.
              265.3
              Operation
                  of the Business of the Company and Newco.
              265.4
              Negative
                  Covenant.
              265.5
              Required
                  Approvals.
              265.6
              Notification.
              285.7
              Newco
                  free of Liabilities and Indebtedness.
              28
   **Execution
            Version - December 28, 2005**
  5.8
              Agreement
                  for the purchase and sale of Inventory.
              285.9
              Execution
                  of Ancillary Agreements.
              295.10
              Bonuses,
                  Vacations and Sales Commissions.
              295.11
              No
                  Negotiation.
              295.12
              Best
                  Efforts.
              296.
              COVENANTS
                OF BUYER PRIOR TO CLOSING DATE
              306.1
              Approvals
                  of Governmental Bodies.
              306.2
              Best
                  Efforts.
              307.
              COVENANTS
                OF SELLERS AND BUYER AFTER THE CLOSING DATE
              307.1
              Transfer
                  of Piece of Land.
              307.2
              Severance
                  Payments.
              307.3
              Right
                  to use Real Property.
              317.4
              Transition
                  Period.
              318.
              CONDITIONS
                PRECEDENT TO CLOSING
              328.1
              Conditions
                  to Buyer's Obligations.
              328.2
              Conditions
                  to Sellers’ Obligations.
              329.
              TERMINATION
              339.1
              Termination
                  Events.
              339.2
              Effect
                  of Termination.
              3410.
              INDEMNIFICATION
              3410.1
              Scope
                  of Sellers' and Guarantor’s Indemnity.
              3410.2
              Scope
                  of Buyer’s Indemnity.
              3510.3
              Indemnity
                  Procedures.
              3510.4
              Limitations
                  on Liability.
              3710.5
              Survival
                  of Representations, Warranties and Indemnity.
              3710.6
              Collateral
                  and Guaranties.
              3711.
              MISCELLANEOUS
              3811.1
              Further
                  Assurances.
              3811.2
              Notices.
              3811.3
              Entire
                  Agreement.
              4011.4
              Confidentiality
                  and Public Announcements.
              4011.5
              Governing
                  Law and Arbitration.
              4011.6
              Expenses
                  and Taxes.
              44111.7
              Severability.
              54211.8
              Waiver.
              4211.9
              Assignment.
              4211.10
              Governing
                  Language.
              4211.11
              Counterparts.
              43


**Execution
          Version - December 28, 2005**







**THIS
      PURCHASE AGREEMENT** (" **Agreement** ")
      is
      made this 28 day of December, 2005, by and between:





·
            **GSE
                Lining Technology Chile S.A.,**a
                stock company organized and existing under the laws of Chile, with
                head
                offices at Renca 2203, Comuna de Renca, Santiago, Chile (**"****Buyer****"**);





**and
      the following parties:**





·   
              ****
            **Inversiones
                Bellavista Uno S.A. and Inversiones Bellavista Tres
                S.A.**,
                both*sociedades anónimas*organized and existing under the laws of Chile, with head offices
                at Avda.
                Isidora Goyenechea Nro.3.120 Piso 8, Comuna de Las Condes, Santiago,
                Chile****(hereinafter,
                collectively, referred to as**"****Sellers****"**).





·
            **Tecnología
                Hidráulica en Minería y Construcción S.A.,**(hereinafter,
                referred to as**"****Guarantor****"**).








**RECITALS**





A.
            Sellers
                are the owners, in the aggregate, of: (a) 100% percent of the outstanding
                equity interests of**Inversiones
                Vesta Limitada**(previously
                named Recubrimientos e Impermeabilizaciones SL Limitada)**,**a*sociedad
                de responsabilidad limitada*organized and existing under the laws of Chile, with head office
                at Avda.
                Isidora Goyenechea Nro.3.120 Piso 8, Comuna de Las Condes, Santiago,
                Chile
                (hereinafter referred to as the "**Company**");
                and (b) 100% percent of the outstanding equity interests of**Recubrimientos
                Industriales SL Limitada,**a*sociedad
                de responsabilidad limitada*organized and existing under the laws of Chile (hereinafter referred
                to as
                the "**Newco**").





B.
            Newco
                has been created recently by Sellers as a result of the reorganization
                and
                spin off of Recubrimientos e Impermeabilizaciones SL Limitada, pursuant
                to
                which all Operating Assets of the Company (as hereinafter defined)
                were
                contributed and assigned to Newco.





C.
            On
                the basis of the representations, warranties, covenants and agreements
                and
                subject to the terms and conditions contained herein, Sellers wish
                to sell
                to Buyer the totality of the equity interests of Newco (hereinafter
                referred to as "**Newco’s
                Equity Interests**").





D.
            On
                the basis of the representations, warranties, covenants and agreements
                and
                subject to the terms and conditions contained herein, Buyer wishes
                to
                purchase Newco’s Equity Interests.





In
      consideration of the mutual promises contained herein, Buyer, Sellers and
      Guarantor (each one a Party and collectively, the " **Parties** ")
      mutually agree as follows:




**Execution
          Version - December 28, 2005**


**1.**  **DEFINITIONS** ****




**1.1**  **Construction**




Any
      reference in this Agreement to an “Article,” “Section” or “Schedule” refers to
      the corresponding Article, Section or Schedule of or to this Agreement, unless
      the context indicates otherwise. The headings of Articles and Sections are
      provided for convenience only and should not affect the construction or
      interpretation of this Agreement. All words used in this Agreement should be
      construed to be of such gender or number, as the circumstances require. The
      terms “include” and “including” indicate examples of a foregoing general
      statement and not a limitation on that general statement. Any reference to
      a
      statute refers to the statute, any amendments or successor legislation, and
      all
      decrees, regulations and Orders promulgated under or implementing the statute,
      as in effect at the relevant time. Any reference to a Contract or other document
      as of a given date means the Contract or other document as amended, supplemented
      and modified from time to time through such date. Any reference to a party includes
      his or its respective successors and permitted assigns. References to US$ or $ are references to United States dollars, the legal
      currency of the United States of America. References to CLP are references
      to
      Chilean peso, the legal currency of Chile.





**1.2**  **Definitions**




In
      this
      Agreement and the Recitals, where the context so admits, the following terms
      and
      variations on them have the following meanings:





“ **Adverse
      Consequence** ”
means
      any Liability, loss, damage (including incidental and consequential damage),
      claim, cost, deficiency, (assessment, fine, penalty, settlement, judgment,
      award, diminution of value, interest or expense (including cost of investigation
      and defense, costs of bonds and similar litigation costs, and reasonable legal,
      accounting, consultant and expert witness fees and costs), whether or not
      involving a third-party claim.





“ **Affiliate** ”
of
      any
      Person means any Person or entity, directly or indirectly, Controlling,
      Controlled by, or under common Control with such Person.





" **Ancillary
      Agreements** "
      are
      defined in Section 2.4(d).




“ **Base
      Balance Sheet** ”
means
      the unaudited balance sheet of the Company dated October 31, 2005 a copy of
      which is included within Schedule
      3.5(a) .





" **Base
      Purchase Price** " is
      defined in Section 2.2.





“ **Best
      Efforts** ”
means
      the efforts that a prudent person desirous of achieving a result would use
      in
      similar circumstances to ensure that the result is achieved as expeditiously
      as
      possible.





**“** **Business** **”** means
      the
      manufacturing, marketing and sales of polyethylene and polypropylene based
      geomembranes in sheets or rolls of a thickness between 0.5 millimeters and
      3.0
      millimeters, smooth or textured, used in the following applications: (i) Solid
      waste landfills; (ii) Leach pads; (iii) Water management, including canals,
      waste water treatment, sewage systems and ponds; and (iv) Aquaculture
      applications, excluding applications for the salmon industry. The above
      definition excludes those sales made by Membrantec S.A. as a part of its
      Geosynthetics installation business.





2
 **Execution
          Version - December 28, 2005**


**“** **Business
      Day** **”** means
      any
      day excluding Saturday, Sunday and any date that shall be a legal holiday in
      Santiago, Chile.





“ **Buyer’s
      Advisors** ”
are
      defined in Section 5.1(a).





“ **By-laws** ”
means
      the constitutional and organizational documents including the constitution,
      by-laws, and “ *estatutos* ”.





" **Closing** "
      means the
      consummation and completion of the purchase and sale of Newco’s Equity Interests
      and all other transactions to be completed and consummated by the Parties and
      any third party on the Closing Date.





" **Closing
      Date** "
      is
      defined in Section 2.4(a).





“ **Company** ”
means
      Inversiones Vesta Limitada (previosly named Recubrimientos e
      Impermeabilizaciones SL Limitada).




" **Company’s
      Contract List** "
      is
      defined in Section 3.13.(a) herein.





“ **Contemplated
      Transactions** ”
means
      all of the transactions to be carried out in accordance with this Agreement,
      including the purchase and sale of the Equity Interests, the performance by
      the
      parties of their other obligations under this Agreement and the execution,
      delivery and performance of the Ancillary Agreements.





" **Contract** "
      means
      any contract, agreement, commitment, understanding, lease, license, franchise,
      warranty, guaranty, mortgage, note, bond or other instrument or consensual
      obligation (whether written or oral and whether express or implied) that is
      legally binding.





**“** **Contravene** **”** —
      an act or omission would “Contravene” something if, as the context
      requires:





(a)
            the
                act or omission would conflict with it, violate it, result in a breach
                or
                violation of or failure to comply with it, or constitute a default
                under
                it;





(b)
            the
                act or omission would give any Governmental Body or other Person
                the right
                to challenge, revoke, withdraw, suspend, cancel, terminate or modify
                it,
                to exercise any remedy or obtain any relief under it, or to declare
                a
                default or accelerate the maturity of any obligation under it;
                or





(c)
            the
                act or omission would result in the imposition or creation of any
                Encumbrance upon or with respect to Newco’s Equity Interets or the equity
                interests of the Company or any of the assets owned or used by the
                Company
                or Newco.




3
 **Execution
          Version - December 28, 2005**


“ **Control** ”
means
      (i) the ownership, in the case of a corporation, of more than 50% of the voting
      stock of the corporation, or in the case of any other entity, the ownership
      of a
      majority of the beneficial or voting interest or (ii) the power, directly or
      indirectly, to direct the management of the controlled entity, whether through
      the ownership of voting securities, by Contract or otherwise.





" **Defense
      Costs** "
      is
      defined in Section 10.3(b)(ii).





" **Deferred
      Purchase Price** " is
      defined in Section 2.3(d)(ii).





" **Definitive
      Purchase Price** " is
      defined in Section 2.3(a).




“ **Encumbrance** ”
means
      any charge, claim, mortgage, servitude, easement, right of way, marital property
      interest, condition, equitable interest, license, lease or other possessory
      interest, lien, option, pledge, security interest, right of first refusal,
      preference, priority, or restriction of any kind, including any restriction
      on
      use, voting, transfer, receipt of income, or exercise of any other attribute
      of
      ownership.





" **Event
      Subject to Indemnification** "
      is
      defined in Section 10.3.





“ **Excluded
      Assets** ”
means
      the following assets: (a) Hyundai Atos Prime GL1.0, white, plate number
      UF2680-K; (b) Nissan Terrano Pick-Up, silver, plate number VU4524-3; (c) Solomon
      ERP software/hardware; (d) Offices in Santiago; (e) Office furniture in
      Santiago; (e) warehouse in Santiago; (f) Telephone lines and switchboard
      equipment in Santiago.





" **Financial
      Statements** "
      means
      the audited financial statements of the Company for the last three years, and
      an
      unaudited financial statement for the period January 1 through October 31,
      ,
      2005, including the balance sheets and related statements of income and expense
      for the periods then ended.





" **GAAP** "
      means
      generally accepted accounting principles in effect in Chile.





**“** **Governing
      Document** **”** means
      the
      By-laws and any other document adopted, filed or registered in connection with
      the creation, formation, organization or management of an entity, and any
      Contract among all equity holders, partners or members of an
      entity.





**“** **Governmental
      Authorization** **”** means
      any Consent, permit, license, franchise, registration or authorization issued,
      granted, given or otherwise made available by or under the authority of any
      Governmental Body or pursuant to any Legal Requirement relative to the conduct
      of the Company's or Newco’s business, manufacturing and other operations, and
      the sale of its products.





**“** **Governmental
      Body** **”** means
      any:




4
 **Execution
          Version - December 28, 2005**





(i)
            international
                or multinational organization, nation, region, province, state,
                department, county, city, town, village, or district government,
                or other
                jurisdiction of any nature;


(ii)
            governmental
                or quasi-governmental authority of any nature (including any governmental
                agency, branch department, official, or entity and any court or other
                tribunal); or


(iii)
            body
                exercising, or entitled to exercise, any administrative, executive,
                judicial, legislative, policy, regulatory, or taxing authority or
                power of
                any nature.





**"** **Guarantor** **"** means
      Tecnología Hidráulica en Minería y Construcción S.A. (also known as Tehmco
      S.A.), Rut N° 84.912.700-4.





" **Hazardous
      Materials** "
      means
      all dangerous, hazardous or toxic substances as defined in the applicable
      Chilean legislation.





" **Indebtedness** "
      means,
      in respect of any Person, the aggregate of: (a) all indebtedness for borrowed
      money, all the mark to market value of any agreement for managing or hedging
      currency and/or interest rates and all indebtedness for unsatisfied deferred
      purchase consideration for property, shares, assets, services or sales
      commissions (including without limitation, any liability outstanding under
      any
      such instrument and the costs of closing out); (b) all obligations evidenced
      by
      notes, bonds, loan stock, debentures or similar instruments; (c) all
      indebtedness created or arising under any conditional sale or other title
      retention agreements with respect to property acquired by such Person; (d)
      all
      guarantees of such Person (save to the extent that such underlying indebtedness
      shall already have been taken into account for the purposes of calculating
      Indebtedness); (e) all finance leases (as the term is generally accepted under
      GAAP) (but limited to the principal portions of such capital lease payments);
      (f) any amount raised under any other transaction (including any forward sale
      or
      purchase agreement) having the commercial effect of a borrowing; (g)
      indebtedness of the type referred to in paragraphs (a) to (f) above secured
      by
      (or for which the holder of such indebtedness has an existing right, contingent
      or otherwise, to be secured by) any Encumbrance over property or assets owned
      by
      such Person, even if such Person has not assumed or become liable for the
      payment of such indebtedness (save to the extent that such underlying
      indebtedness shall already have been taken into account for the purposes of
      calculating indebtedness), provided that, where the market value of the property
      or assets so encumbered is lower than the amount of such indebtedness, only
      the
      market value of the relevant property or assets shall constitute Indebtedness;
      (h) accrued interest in respect of paragraphs (a) to (f) above; provided that
      this definition shall not operate to double count any Liability.





" **Intellectual
      Property** "
      means
      (a) all inventions, industrial designs and models, all improvements thereto,
      and
      all patents, patent applications and patent disclosures, together with all
      reissuances, continuations, continuations-in-part, revisions, extensions and
      reexaminations thereof; (b) all trademarks, services marks, trade dress, logos,
      trade names and corporate names, together with all translations, adaptations,
      derivations and combinations thereof and including all good will associated
      therewith, and all applications, registrations and renewals in connection
      therewith; (c) all copyrightable works, all copyrights, and all applications,
      registrations, and renewals in connection therewith; (d) all mask works and
      all
      applications, registrations and renewals in connection therewith; (e) all trade
      secrets and confidential business information (including ideas, research and
      development, know-how, formulas, compositions, manufacturing and production
      processes and techniques, technical data, designs, drawings, specifications,
      customer and supplier lists, pricing and cost information, and business and
      marketing plans and proposals); (f) all computer software (including data and
      related documentation); (g) all domain names; (h) all other proprietary rights;
      and (i) all copies and tangible embodiments thereof (in whatever form or
      medium).





5
 **Execution
          Version - December 28, 2005**


" **Knowledge** " means
      the actual knowledge of a Person after due inquiry, or of any of the Sellers’,
      Guarantor’s or Company’s officers or senior managerial employees, as well as
      their consultants Mr. Jaime Lavados Germain, Mr. Antonio Becker Cristinich
      and
      Mr. Andres Rifo Aguado, provided that such Person, officers or senior managerial
      employees, and consultants shall be presumed to know any matter which has been
      notified with Legal Requirements. **** For
      these purposes senior managerial employees shall mean those officers acting
      as
      General Manager, the Chief Financial Manager, Commercial Manager and Chief
      Operational Manager.





" **Legal
      Requirement** "
      means
      any constitution, law, statute, treaty, rule, regu-lation, ordinance, binding
      case law, order, injunction, notice, approval or judg-ment of any Governmental
      Body, which applies to either the Company or Newco or any of their assets,
      businesses, or activities, and any Contract with any Governmental Body relating
      to com-pliance with any of the foregoing.





" **Liability** **"** means
      any liability absolute, contingent or inchoate, accrued or unaccrued, liquidated
      or unliquidated, and due or to become due, including, but not limited to
      liabilities with respect to tax, labor, environmental, import/export, licenses
      or permits, product, contractual, corporate or civil matters. Expressly excluded
      from this definition are those contingent liabilities consisting solely in
      severance payments accrued, but not yet due, in favor of Newco’s Employees as of
      the Closing Date.





" **Litigation
      and Claims List** "
      means
      those Proceedings and claims, pending or Threatened against the Company or
      Newco, set forth in Schedule
      3.17.





**“** **Material
      Adverse Effect** **”** -
      something would be considered to have a "material adverse effect" on an the
      Company or Newco if it (i) materially adversely affects the financial or other
      condition or result of operations, assets, Liabilities, equity, business or
      prospects of the Company or Newco, (ii) materially impedes the ongoing
      operations of the Company or Newco, or (iii) significantly adversely affects
      a
      material asset of the Company or Newco.





" **Newco** **"** means
      the Chilean *sociedad
      de responsabilidad limitada* incorporated pursuant to the Spin-off, under the name of Recubrimientos
      Industriales SL Limitada.





" **Newco’s
      Contract List** "
      means
      the list set forth in Schedule
      3.13(b) ,
      including all Contracts contributed or transferred to Newco upon its
      incorporation.





" **Newco’s
      Employees** "
      are
      defined in Section 5.2(d).





" **Newco’s
      Equity Interests** **"** means
      the totality of the equity interests of Newco.





6
 **Execution
          Version - December 28, 2005**


" **Newco’s
      Initial Balance Sheet** " is
      defined in Section 3.5(b).





" **Notification** "
      means
      written notice in connection with an Event Subject to Indemnification, as set
      forth in Section 10.3.





" **Obsolete** "
      means,
      with respect to materials, any material that is not being incorporated into
      a
      finished product actively promoted and sold; and with respect to products,
      any
      product that is not actively promoted and sold.





" **Operating
      Assets** "
      means
      all right, title and interest in and to all of the assets, both tangible and
      intangible, currently used by the Company in its business and operations,
      including, but not limited to (a) all the Intellectual Property listed on Schedule
      3.9 ;
      (b) all
      the Real Property listed on Schedule
      3.10(a)(ii) and Schedule 3.10(b) ;
      (c) all
      tangible personal property listed on Schedule
      3.11; (d) all
      Contracts listed on Newco’s Contract List; (e) all Governmental Authorizations
      listed on Schedule
      3.19(a) ;
      and (f)
      all customers information, data and lists in possession of the Company.
      Expressly excluded from this definition are the Excluded Assets.





**“** **Order** **”** means
      any order, injunction, judgment, judicial decree, ruling, assessment or
      arbitration award of any Governmental Body or arbitrator, and any Contract
      with
      any Governmental Body relating to compliance with Legal
      Requirements.





“ **Ordinary
      Course of Business** ”
refers
      to actions taken in the Company’s normal operation, consistent with its past
      practice and practices of other Persons in its same line of business and having
      no material adverse effect on the financial or other condition, results of
      operations, assets, Liabilities, equity, business or prospects of the
      Company.





" **Person** "
      means
      an individual, corporation, partnership, or any other entity.





“ **Proceeding** ”
means
      any action, arbitration, audit, examination, investigation, hearing, litigation
      or suit (whether civil, criminal, administrative, judicial or investigative,
      whether formal or informal, and whether public or private) commenced, brought,
      conducted or heard by or before, or otherwise involving, any Governmental Body
      or arbitrator.





" **Real
      Property** "
      means
      all real or immovable property interests of the Company, including all parcels
      and tracts of land which the Company owns, leases or utilizes under any title,
      all real or immovable property operated by the Company, and all Improvements
      thereon.





“ **Representative** ”,
      with
      respect to a particular Person, means any director, officer, employee, agent,
      consultant, advisor, or other representative of such Person, including legal
      counsel, accountants, and financial advisors;





**"** **Sellers** **"** means
      Inversiones Bellavista Uno S.A. and Inversiones Bellavista Tres
      S.A.





**"** **Senior
      Officers** **"** are
      defined in Section 11.5(a).





7
 **Execution
          Version - December 28, 2005**


" **Spin-off** "
      means
      the reorganization and spin-off of Recubrimientos
      e Impermeabilizaciones SL Limitada pursuant
      to which Newco was incorporated, and pursuant to which all Operating Assets
      were
      contributed and transferred to Newco, and all remaining assets, all Liabilities
      and Indebtedness of the Company remained in the Company.





" **Taxes** "
      means
      any federal, state or municipal taxes, which includes income tax, social
      security tax, excise tax, value-added tax, gross sales tax, import tax, export
      tax, financial operations tax, service tax, welfare contributions and real
      estate taxes, and respective interest, penalty or addition thereto.





" **Tax
      Return** "
      means
      any return, declaration, report, claim for refund, tax books, invoices or
      information return or statement relating to Taxes, including any schedule or
      attachment or amendment thereto, filed or required to be filed with any tax
      authority.





**“** **Threatened** **”** -
      a matter
      would be considered to have been "threatened" if any demand, statement or notice
      has been made (whether orally or in writing) or any notice has been given
      (whether orally or in writing), or any other event has occurred or any other
      circumstances exist that would lead a prudent person to conclude that such
      matter is likely to be asserted, commenced, taken or otherwise pursued in the
      future.





" **Up-front
      Purchase Price** " is
      defined in Section 2.3(d)(i).







**2.**  **PURCHASE
      AND SALE OF SHARES; CLOSING**




**2.1**  **Purchase
      and Sale** **.**




On
      the
      terms and subject to the conditions set forth in this Agreement, Sellers hereby
      sells, and Buyer hereby Purchases Newco’s Equity Interests. At the Closing,
      Sellers will assign and transfer Newco’s Equity Interests to Buyer and Buyer
      will acquire, Newco’s Equity Interests from Sellers.





**2.2**  **Base
      Purchase Price** **.**




The
      base
      purchase price for Newco’s Equity Interests and consideration for Sellers
      obligation to execute or to cause that the Ancillary Agreements be executed,
      and
      for the non-hire covenants given by the Sellers under in Section 2.8 shall
      be
      the amount of US$ 15,500,000 (fifteen million five hundred thousand U.S.
      Dollars), (the " **Base
      Purchase Price** ").





**2.3**  **Definitive
      Purchase Price** **** **.**




(a)  Buyer
      and
      Sellers agree that the definitive purchase price (the “ **Definitive
      Purchase Price** ”)
      shall
      be the result of the amount equal to the Base Purchase Price plus any Cash
      owned
      by Newco, less the following amounts: (i) an amount to be agreed in good faith
      between the Parties, for the event there exist Contracts or open orders for
      products sold at prices below market conditions, provided that said Contracts
      or
      open orders have been executed after the date of this Agreement without the
      prior written approval from Buyer. For this purposes it shall be understood
      that
      a Contract or open order has been executed below market conditions if the gross
      raw material spread margin generated by such contract or open order is less
      than
      the actual aggregate gross raw material spread margin realized by the Company
      during the first nine months of the year 2005. Gross raw material spread margin
      being the difference between the ex-work selling prices minus the resin cost;
      (ii) the amount equivalent to the amount of deferred custom duties owed by
      Company (and to be owed by Newco) in connection with the import of certain
      assets to be transferred to Newco pursuant to the Spin-Off; and (iii) the
      aggregate amount equivalent to any and all Liabilities and Indebtedness of
      Newco
      as of the Closing Date, except those contingent liabilities consisting solely
      in
      severance payments accrued, but not yet due, in favour of Newco’s Employees as
      of the Closing Date.





8
 **Execution
          Version - December 28, 2005**


(b)  Sellers
      hereby represents Buyer that as of the Closing Date, Newco will have no
      Indebtedness and no Liabilities, including without limitation, no Liabilities
      for any of the items referred under Section 8.1(a), subsections (i), (ii) and
      (iii) above, with the sole exception of the following Liabilities: (i) Acrrued
      vacations of Newco’s Employees in the amount of US$62,087.31; and (ii)
      Contingent liabilities consisting solely in severance payments accrued, but
      not
      yet due, in favour of Newco’s Employees, being the latter not subject to
      adjustment to the Base Purchase Price, but to the arrangement agreed under
      Section 7.2 of this Agreement.





(c)  Based
      on
      the representation referred on letter (b) above, the Parties agree that the
      Definitive Purchase Price is the amount of US$15,437,912.69 (fifteen million
      four hundred and thirty seven thousand nine hundred and twelfe U.S. Dollars
      and
      sixty nine cents)





(d)  Buyer
      shall pay the Definitive Purchase Price to Sellers as follows:





(i)
            An
                amount equivalent to the Definitive Purchase Price less US$ 4,500,000.-
                (the “**Up-front
                Purchase Price**”)
                shall be payable at the Closing Date; and





(ii)
            the
                balance, equivalent to US$ 4,500,000.- (the “**Deferred
                Purchase Price**”)
                together with accrued interest shall be due and payable in five equal
                consecutive annual installments commencing on January 2, 2007 until
                paid
                in full. Buyer shall pay interest on the unpaid amount of the Deferred
                Purchase Price from the Closing Date until paid at an annual interest
                rate
                of 5% for the first two years, and for the remaining period until
                the
                Deferred Purchase Price is fully paid, at an annual rate equal to
                the rate
                of interest that under current practice is listed as the prevailing
                three
                month London Interbank Offered Rate (LIBOR) as published by the Central
                Bank of Chile on the Closing Date and on each subsequent date an
                installment is due, plus 2,75% per
                year.





**2.4**  **Closing** **.** ****




(a)  Subject
      to satisfaction of the conditions precedent in Sections 8.1 and 8.2, the Closing
      of this Agreement shall take place on December 29, 2005 or on such other date
      agreed in writing by the Parties (the " **Closing
      Date** ")
      at the
      offices of Baker & McKenzie at Nueva Tajamar, 481, Torre Norte, piso 21, Las
      Condes, Santiago, or at such other place agreed in writing by the
      Parties.





9
 **Execution
          Version - December 28, 2005**


(b)  At
      the
      Closing, Sellers shall deliver to Buyer, in form and substance satisfactory
      to
      Buyer:





(i)
            certificate
                signed by duly authorized representatives of Sellers stating that
                all the
                representations and warranties of Sellers contained in Article 3
                herein
                are true and correct in all respects as of the Closing Date, and
                that the
                conditions precedents referred to in Section 8.1 have been complied
                on or
                before the Closing Date;





(ii)
            copy
                of the relevant empowerment documents of Sellers as necessary to
                authorize
                the execution of this Agreement, any other documents delivered in
                connection herewith and the consummation of the Contemplated
                Transactions;





(iii)
            authorized
                copies of the public deeds, registries, balance sheets and publications
                on
                the Official Gazzete proving that Newco has been duly incorporated
                and
                that the Company’s Operating Assets have been duly contributed and
                assigned to Newco;





(iv)
            authorized
                copies of all employment agreements of Newco’s Employees duly executed by
                Newco and each Newco Employee in terms and conditions identical to
                the
                terms and conditions of the employment agreements currently in effect
                among said employees and the
                Company;





(v)
            written
                evidence proving that any legal or voluntary/contractual bonuses
                accrued
                as of the Closing Date, based on past practices of the Company, have
                been
                paid to all employees, either by the Company or by Newco, or that
                Newco
                has in its bank accounts sufficient Cash to pay all such accrued
                bonuses;





(vi)
            written
                evidence proving that Newco has paid any and all sale commissions
                due or
                accrued on or before the Closing Date, and a certificate signed by
                duly
                authorized representatives of Sellers stating that Newco has no obligation
                to pay any sales commissions to any Employee or third party, and
                that no
                such obligation would be triggered against Newco for sales services
                provided by Employees or third parties on or before the Closing
                Date;





(vii)
            a
                written legal opinion from Chilean counsel to Sellers regarding the
                corporate status of Newco and the Company, and with regard to the
                legal
                and valid contribution of the Operating Assets to Newco;
                and





(viii)
            written
                evidence proving termination of all those Company’s employees which will
                not be Newco’s Employees, ratified on behalf of public
                notary.




10
 **Execution
          Version - December 28, 2005**




(c)
            At
                the Closing, Buyer shall deliver to
                Sellers:





(i)
            the
                Up-Front Purchase Price, in accordance with Section 2.5;
                and





(ii)
            copy
                of the relevant empowerment documents of Sellers as necessary to
                authorize
                the execution of this agreement and the consummation of the transactions
                contemplated hereby.





(iii)
            authorized
                copies of the public deeds, registries, balance sheets and publications
                on
                the Official Gazzete proving that Buyer has been duly
                incorporated.





(d)  At
      the
      Closing Sellers and Buyer shall execute or cause to be executed by the relevant
      parties the following agreements: (i) Public Deed of *Cesión
      de Derechos Sociales y Disolución de Sociedad* to
      be
      executed between Sellers and Buyer in the terms of **Exhibit
      A** ;
      (ii)
      Non-Compete Agreement to be executed in the terms of **Exhibit
      B** ,
      among
      Buyer, the Company, Sellers, Mr. Víctor Petermann Fernández, his immediate
      family and any entity owned directly or indirectly by any of the above mentioned
      entities or individuals in more than 10%; (iii) Right of First Refusal Agreement
      (the “ **RFR
      1** ”)
      to be
      executed in the terms of **Exhibit
      C** between
      Buyer and Membrantec S.A.; (iv) Right of First Refusal Agreement (the
“ **RFR
      2** ”)
      to be
      executed in the terms of **Exhibit
      D** between
      Buyer and the Company ; (v) the agreement to be executed in the terms of **Exhibit
      E** between
      Buyer and the Company pursuant to Section 5.8 of this Agreement; (vi) Pledge
      over 30% of the shares of Buyer to be executed in the terms of **Exhibit
      F** between
      GSE International, Inc. and Sellers; and (vii) Comfort letter to be delivered
      by
      GSE International, Inc. in the terms of **Exhibit
      G** (the
“ **Ancillary
      Agreements** ”) **.**





**2.5**  **Method
      of Payment** **.**




Payment
      of the Definitive Purchase Priceshall be made in US Dollars pursuant to the
      terms and conditions stated in Section 2.3 above either by bank draft or by
      wire
      transfer of immediately available funds to Sellers to their respective bank
      accounts, at Buyer's option, in accordance with the allocation in Section
      2.6.





**2.6**  **Allocation
      of Purchase Price** **.**




The
      Definitive Purchase Price shall be allocated among the Sellers as follows:
      (a)
      2% for Inversiones Bellavista Uno S.A.; and (b) 98% for Inversiones Bellavista
      Tres S.A.





**2.7**  **Exchange
      Rate** **.**




The
      effective exchange rate to convert any adjustment to the Purchase Price
      expressed in Chilean pesos into US Dollars, shall be the *Dolar
      Observado* exchange
      rate as published by the Central Bank of Chile in effect on the date the payment
      of the Up-Front Purchase Price are to be made pursuant to this Agreement.





**2.8**  **Additional
      Covenant** **.**




11
 **Execution
          Version - December 28, 2005**


To
      further induce Buyer to purchase the Shares, each Seller hereby covenants,
      effective as of the Closing Date and for a period of five years thereafter,
      that
      it will not, directly or indirectly, solicit or cause to be solicited, or hire,
      contract or employ or cause to be hired, contracted or employed, any of Newco’s
      Employees, unless agreed in advance in writing by the Parties.







**3.**  **REPRESENTATIONS
      AND WARRANTIES OF SELLERS**




Sellers
      and the Guarantor hereby jointly and severally make the following
      representations and warranties to Buyer, which are essential to the latter,
      which shall be considered as made on the date hereof and on the Closing
      Date.





**3.1**  **Corporate
      Status** **.**




(a)  The
      Company is duly organized and validly existing under the laws of Chile, and
      has
      the corporate power to own its assets and carry on its business as now being
      conducted. Except as set out in Schedule
      3.1(ai) ,
      none of
      the Sellers or their Affiliates has been involved in any business arrangement
      or
      relationship with the Company within the past twelve months, and none of the
      Sellers or their Affiliates owns any asset, tangible or intangible, which is
      used in the business and operations of the Company. There are no shareholders'
      agreements to which Sellers and/or the Company may be bound. A true and correct
      copy of the current By-laws of the Company is attached as Schedule
      3.1(aii) .





(b)  Newco
      is
      duly organized and validly existing under the laws of Chile, and has the
      corporate power to own its assets and carry on the business and operations
      as
      previously conducted by the Company. None of the Sellers or their Affiliates
      (with the exception of the Company) has been involved in any business
      arrangement or relationship with Newco within the past twelve months, and none
      of the Sellers or their Affiliates owns any asset, tangible or intangible,
      which
      were used in the business and operations of the Company, and pursuant to the
      Spin-off, are in possession and are used in the business and operations of
      Newco. There are no shareholders' or partner’s agreements to which Sellers
      and/or Newco may be bound.





**3.2**  **Capitalization** **and Ownership** **.**




(a)  The
      total
      issued and outstanding capital of the Company is CLP 181,903,817 (one hundred
      eighty one million, nine hundred and three thousand, eight hundred seventeen
      pesos **)** . All
      of
      the outstanding equity interests of the Company have been both duly authorized
      and validly issued in
      accordance with all Legal Requirements and are
      fully paid. All of
      the equity interest are legally and validly held and owned by Sellers. There
      are
      no outstanding or authorized options, warrants, purchase rights, conversion
      rights, exchange rights, or other Contracts or commitments that could require
      the Company or any Seller to issue, sell, transfer, or otherwise dispose of
      any
      of its or their equity interests in the Company.





(b)  The
      total issued and outstanding capital of Newco is CLP 353,006,183 (three hundred
      and fifty three million, six thousand and one hundred eighty three
      pesos **)** . All
      of
      the outstanding equity interests of Newco have been both duly authorized and
      validly issued in
      accordance with all Legal Requirements and are
      fully paid. All of
      the equity interest are legally and validly held and owned by each Seller free
      and clear of any and all Encumbrances. There are no outstanding or authorized
      options, warrants, purchase rights, conversion rights, exchange rights, or
      other
      Contracts or commitments that could require the Company or any Seller to issue,
      sell, transfer, or otherwise dispose of any of its or their equity interests
      in
      Newco.





12
 **Execution
          Version - December 28, 2005**


**3.3**  **Corporate
      Authority** **.**




Each
      Seller and the Guarantor has the legal right, power, capacity and authority
      to
      enter into and deliver this Agreement and each Ancillary Agreement to which
      he
      is a party and to carry out the Contemplated Transactions. The execution and
      delivery of this Agreement and the consummation of the transactions contemplated
      hereby have been duly authorized by all necessary corporate or other action
      of
      Sellers and the Guarantor. This Agreement constitutes the legal, valid and
      binding obligation of each of the Sellers and the Guarantor, enforceable against
      the Sellers and the Guarantor in accordance with its terms.





**3.4**  **Restrictions** **.**




(a)  Except
      as
      set out in Schedule
      3.4(a) ,
      neither
      the execution of this Agreement nor the consummation of the transactions
      contemplated hereby shall Contravene any provision of the By-laws or other
      Governing Document of the Company or Newco, nor any Order, Contract or
      Governmental Authorization to which the Company or Newco is subject or a party.
      There is no lawsuit, proceeding or investigation pending or Threatened against
      Sellers, the Company or Newco which might prevent the consummation of any of
      the
      Contemplated Transactions.





(b)  Sellers,
      the Company and Newco are not and will not be required to give any notice to
      any
      Person or obtain any Consent or Governmental Authorization in connection with
      the execution and delivery of this Agreement or the consummation or performance
      of any of the Contemplated Transactions, with the sole exception of the
      authorization and release of security interests over certain Operating Assets
      to
      be obtained from Corpbanca on or before the Closing Date.





**3.5**  **Financial
      Statements** **.**




(a)  Attached
      hereto as Schedule
      3.5(a )
      are the
      audited financial statements of the Company for the last three years, an
      unaudited interim financial statement of the Company for the period January
      1
      through October 31, 2005, including the balance sheets and related statements
      of
      income and expense for the periods then ended (hereinafter referred to as
      " **Financial
      Statements** ").
      The
      Financial Statements have been prepared in accordance with applicable Chilean
      corporate law and with GAAP, applied on a consistent basis throughout the
      periods covered by these Financial Statements, and present fairly the financial
      position of the Company and Newco as of the balance sheet dates, and the results
      of its operations for the periods then ended, are correct and complete and
      are
      consistent with the books and records of the Company and Newco. The above
      representation on Financial Statements does not imply a guarantee on future
      financial performance of the Company or Newco. Attached hereto as Schedule
      3.5(a) is a
      copy of the **Base
      Balance Sheet** .
      Except
      as set out in Schedule
      3.5(a) ,
      the
      Base Balance Sheet has been prepared from the books and records of the Company
      and presents fairly the financial position of the Company as at the date of
      the
      Base Balance Sheet, in accordance with applicable Chilean corporate law and
      with
      GAAP, consistent with past practices (with exceptions required by applicable
      Legal Requirements).





13
 **Execution
          Version - December 28, 2005**


(b)  Sellers
      have delivered Buyer an unaudited initial balance sheet of Newco as of the
      date
      of its incorporation (“ **Newco’s
      Initial Balance Sheet** ”),
      which
      is attached as Schedule
      3.5(b) to this
      Agreement. Sellers and Guarantor represent and warrant that Newco’s Initial
      Balance Sheet presents the exact financial position of Newco as of the date
      of
      its incorporation, and that it has been prepared in accordance with applicable
      Chilean corporate law and with GAAP, consistent with past practices of the
      Company (with exceptions required by applicable Legal Requirements).





**3.6**  **Intentionally
      Left Blank** **.**




**3.7**  **Absence
      of Undisclosed Liabilities** **.**




(a)  Except
      as
      set out in Schedule
      3.7(a) ,
      as of
      the date of the Base Balance Sheet and as of the date of the Spin Off, the
      Company did not and do not have any Liabilities except for Liabilities reflected
      in the Base Balance Sheet and except for such Liabilities arising in the
      Ordinary Course of Business subsequent to the date of the Base Balance Sheet
      (none of which results from, arises out of, relates to, is in the nature of,
      or
      was caused by any breach of contract, breach of warranty, tort, negligence,
      infringement or violation of Legal Requirements).




(b)  As
      of the
      date hereof and as of the Closing Date, Newco shall have no Liablities and
      no
      Indebtedness, with the sole exception of those referred in Section 2.3 (b)
      of
      this Agreement.





**3.8**  **Actions
      Since date of Base Balance Sheet** **.**




Except
      as
      set out in Schedule
      3.8 ,
      since
      the date of the Base Balance Sheet and until the date of the Spin Off, in the
      case of the Company, or until the Closing Date in the case of Newco, the
      business of the Company or Newco as applicable, has been or will be conducted
      only in the Ordinary Course of Business and neither the Company nor Newco have
      or will have:





(a)  made
      any
      general wage or salary increase or any increase in compensation payable or
      to
      become payable to any management employees, or entered into any employment
      contract with any officer or key salaried employee other than consumer price
      index adjustments;





(b)  sold,
      assigned or granted rights under any patent, trade name, trademark or copyright,
      or any application therefore, or any trade secrets or designs for any products
      currently manufactured or services provided by the Company except in each case
      in the Ordinary Course of Business;





(c)  become
      involved or Threatened with any labor dispute which has had or could have an
      adverse effect on the Company or Newco or their respective financial condition;





14
 **Execution
          Version - December 28, 2005**


(d)  suffered
      any material Adverse Consequence;





(e)  suffered
      any damage or destruction, whether or not covered by insurance, having an
      adverse effect on the Company, Newco or their respective assets;





(f)  materially
      changed the terms and conditions applicable to the sale of its products;





(g)  suffered
      any adverse change in its financial condition, business, operations or
      prospects; or





(h)  experienced
      any other event or condition of any character which has, or with the lapse
      of
      time or occurrence of such event or condition would have, an adverse affect
      on
      the financial condition, business, assets or operations of the Company or
      Newco;





nor
      have
      the Company or Newco committed to engage in any of the foregoing actions.





**3.9**  **Intellectual Property** **.**




Schedule
      3.9 hereto
      contains a complete and correct list of (a) each patent, design, copyright,
      trademark, trade name and domain name owned by the Company as well as all
      registrations thereof (including expiration dates) and pending applications
      therefore, and (b) each license or other agreement relating thereto or relating
      to any other proprietary information of the Company. On or before the Closing
      Date, Newco will have within its possession and control, and will own the entire
      title and interest in and to all Intellectual Property which will be transferred
      to Newco pursuant to the Spin-off (provided that registrations for publicity
      purposes may be pending), and such Intellectual Property includes all the
      proprietary information currently used by the Company in its business and
      operations and necessary to conduct its business and operations as currently
      conducted. Neither the Company nor Newco is a party to any agreement by which
      it
      has granted a license, or by which it grants a license to any Intellectual
      Property owned by it, or by which it agrees to maintain the secrecy or
      confidentiality of any proprietary property, except as set forth in Schedule
      3.9. None of the Intellectual Property is subject to any pending or Threatened
      challenge, nor has the Company or Newco received any notice nor do the Sellers
      otherwise know that the foregoing are invalid or that the Intellectual Property
      or any products or services made, sold or used by the Company or Newco conflict
      with or infringe upon the asserted rights of others except as set forth in
      the
      Litigation and Claims List ( Schedule
      3.19 ).
      Neither the Company nor the Sellers have any knowledge that any third party
      is
      infringing any of its Intellectual Property rights. The Company and Newco are
      not liable for, and have not given indemnification for, proprietary rights
      infringement as to any equipment, materials or supplies manufactured, used
      or
      sold by them.





**3.10**  **Real
      Property and Leases** **.**




Schedule
      3.10(a)(i) contains
      a list of all Real Property owned, leased or utilized by the Company in the
      conduct of its business and Schedule
      3.10(a)(ii) contains
      a list of the Real Property to be owned, leased or utilized by Newco. Copies
      of
      all notarial and other deeds, leases and other title documentation are attached
      to such Schedule 3.10(a)(ii) and such copies are correct and complete as of
      the
      date hereof. With regard to the piece of land described on Schedule
      3.10(b) ,
      Newco
      shall have the exclusive right to use such piece of land without being required
      to make any payment, until the date such piece of land be transferred to Newco
      in accordance with Article 7 of this Agreement. Except as set out in Schedule
      3.10(a) (ii) and Schedule 3.10(b):





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 **Execution
          Version - December 28, 2005**


(a)  as
      of the Closing Date, Newco will have, all easements and rights of ingress and
      egress necessary for utilities and services and for all operations conducted
      on
      the Real Property;





(b)  the
      Real
      Property is not subject to any rights of way, building use restrictions, or
      limitations of any nature, and zoning laws, urbanization laws, and other public
      land use restrictions that impair the present use of the Real Property;
      and





(c)  all
      buildings, plants, and structures lie wholly within the boundaries of the Real
      Property and/or in the piece of land described in Schedule 3.10(b) and do not
      encroach upon the property of, or otherwise conflict with the property rights
      of, any other person.





(d)  all
      buildings and constructions owned, leased or utilized and referred in those
      Schedules, comply with Legal Requirements, and all such buildings and
      constructions shall be owned by Newco and will still comply with all Legal
      Requirements.





**3.11**  **Personal
      Property** **.**




The
      Company owns, leases and/or is legally entitled to use all motor vehicles,
      machinery, equipment and other tangible assets necessary for the conduct of
      the
      Company’s operations and business as presently conducted. As of the Closing
      Date, Newco shall be the legal and beneficial owner (and not a mere lessee)
      of
      all such tangible personal property (provided that registrations for publicity
      purposes may be pending). All of such buildings, machinery, motor vehicles,
      equipment and other tangible assets are used and in good working condition
      (except for those assets currently subject to minor repair in the normal course
      of maintenance), and all have been maintained by the Company in accordance
      with
      sound and prudent maintenance practices. Schedule
      3.11(a) contains
      a description of such tangible assets, as well as a distinction between those
      assets owned, those leased and those in any other way used by the Company in
      the
      conduct of its operations and business, being the latter to be acquired by
      the
      Company and transferred to Newco before the Closing Date. Schedule
      3.11(b) contains
      a description of all such tangible assets being purchased by the Company, but
      which have not been delivered to the Company as of the date of this Agreement.
      All such tangible assets shall be owned by Newco.





**3.12**  **Title
      to Property** **.**




At
      Closing Date Newco will have good and marketable title to, and, with the sole
      exception of the piece of land referred to in Schedule 3.10(b), will own, all
      the Operating Assets which the Company uses in the conduct of its operations
      and
      businesses, located on its premises or shown on the Newco’s Initial Balance
      Sheet or acquired after the date thereof, subject to no Encumbrances of any
      kind.





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 **Execution
          Version - December 28, 2005**


**3.13**  **Contracts
      and Commitments** **.**




Schedule
      3.13(a) consists
      of a listing of all oral and written Contracts exceeding the equivalent of
      US$5,000, which are necessary for the conduct of the Company’s operations and
      business as presently conducted, to which the Company is a party (the
      " **Company’s
      Contract List** "). Schedule
      3.13(b) consists
      of a listing of all those Contracts from the Contract list that shall be
      contributed or transferred to Newco upon its incorporation ( **“** **Newco’s
      Contract List** **”** ).
      Except
      for those set forth in the Company’s Contract List, the Company is not a party
      to or bound by any written or oral:





(a)  employment,
      employment termination or severance, consulting, services, employer's
      organization or non-competition Contract;





(b)  bonus,
      deferred compensation, profit sharing, pension, retirement, stock option, stock
      purchase or ownership, hospitalization, insurance or other plan or arrangement
      providing employee benefits;





(c)  collective
      bargaining agreement or other labor Contract;





(d)  lease,
      license or occupancy agreement with respect to any real or personal property,
      whether as grantor, grantee or otherwise;





(e)  dealership,
      manufacturer's representative, distributor, franchise, license, or agency
      agreement;





(f)  Contract
      for capital expenditures;





(g)  Contract
      for the sale of any product at a price lower than its general pricing level
      for
      such product or service in effect on the date of such contract or any rebate
      agreement;





(h)  partnership
      or joint venture agreement;





(i)  mortgages,
      pledges, charges, conditional sales contracts, security agreements, factoring
      agreements or other similar agreements with respect to any assets of the
      Company;





(j)  Contract
      pursuant to which the conduct of the Company, or the use or exploitation of
      its
      assets, in any manner, is restricted in any way;





(k)  agreement
      which may be terminated by a party thereto as a result of the Contemplated
      Transactions; or





(l)  license,
      including without limitation, licenses related to any of the Intellectual
      Property.





With
      respect to each Contract in Newco’s Contract List:




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 **Execution
          Version - December 28, 2005**




(i)
            it
                is legal, valid, binding, enforceable and in full force and
                effect;





(ii)
            it
                will continue to be legal, valid, binding, enforceable and in full
                force
                and effect on identical terms following the consummation of the
                Contemplated Transactions and the Contemplated Transactions will
                not
                Contravene such Contract;





(iii)
            no
                party has Contravened, and no event has occurred which with notice
                or
                lapse of time would Contravene the
                Contract;





(iv)
            upon
                its incorporation, Newco shall become a party to such Contract, and
                shall
                be the legal successor of any and all rights and obligations of the
                Company under such Contract. Buyer acknowledges and agrees that some
                of
                the Orders and Contracts may not be assignable without the consent
                of the
                customers or providers thereof, and that in these cases a common
                strategy,
                bearing in mind normal Business practices, shall be developed between
                the
                Parties in order to cope with the customers and/or providers and
                keep
                healthy client-customer relationships. Nothing herein shall be interpreted
                as an obligation of the Parties to assume a joint and severall liability
                among them in favour of any
                provider.





(v)
            all
                payments, Liabilities or amounts due or accrued under such Contract
                on or
                before the Closing Date, shall have been paid by the Company or Newco
                before the Closing Date; and,





(vi)
            to
                the Knowledge of Sellers, no party has repudiated any provision of
                any
                such Contract.





**3.14**  **Powers
      of Attorney** **.**




Sellers
      have delivered Buyer a list, attached hereto as Schedule
      3.14 to this
      Agreement, which includes the name of each Person holding a proxy, general
      or
      special power of attorney, or other similar instrument from Newco, as well
      as
      copies of all such proxies, powers of attorney and other documents.





**3.15**  **Insurance**




Schedule
      3.15 sets
      forth a list of all insurance policies entered into by the Company. All such
      insurance policies are in force, in conformity with law, and enforceable. The
      coverage of such policies is normal and prudent in light of the activities
      carried out by the Company, and it is not in default of any of its obligations
      under the terms of such policies (including the payment of all premiums due)
      and
      has served proper and accurate notice of all events or information required
      in
      connection with such policies in a timely manner. Since its incorporation,
      Newco
      became the insured and beneficiary under such insurance policies, which shall
      remain in full force and effect until the Closing Date. All obligations under
      the terms of such policies (including the payment of all premiums) due or
      accrued on or before the Closing Date, shall have been paid by the Company
      or
      Newco before the Closing Date.





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 **Execution
          Version - December 28, 2005**


**3.16**  **Indebtedness;
      Bank Accounts** **.**




(a)  As
      of the
      Closing Date, Newco shall be free of any and all Indebtedness.





(b)  Newco
      does not maintain bank accounts, safety deposit boxes or deposit agreements
      with
      financial institutions.





**3.17**  **Legal
      Proceedings** **.**




There
      are
      no judgments, decrees, claims, or Legal Proceedings pending or Threatened
      against the Company, involving the Operating Assets, except as listed in Schedule
      3.17 (hereinafter referred to as the " **Litigation
      and Claims List** ").
      As of
      the Closing Date, there shall be no judgments, decrees, claims, or Legal
      Proceedings pending or Threatened against Newco or involving any of its property
      or the assets or any products or services made, used or sold by it.





**3.18**  **Pending
      Bids, Customers Backlog and Sales Volume** **.**




(a)  Schedule
      3.18(a) contains
      a list of all pending bids of the Company, specifying the customer, product,
      product warranties, quantities, pricing and delivery dates.





(b)  Schedule
      3.18(b) contains
      a list of the backlog or pending orders, specifying the customer, products,
      product warranties, quantities, pricing and delivery dates.





**3.19**  **Governmental
      Authorizations** **.**




(a)  All
      of
      the Company's Governmental Authorizations are listed on Schedule
      3.19(a) and are
      in full force and effect and good standing, and no notices have been received
      or
      Threatened relating to termination or cancellation or withdrawal of any of
      such
      Governmental Authorizations. The Company is not in violation of the terms and
      conditions of any such Governmental Authorizations. To the knowledge of Sellers
      no Governmental Authorizations are required for the conduct of any aspect the
      Company's business other than those listed in Schedule 3.19(a).


(b)  As of
      the Closing Date, Newco shall be the legal holder and beneficiary of all the
      Company's Governmental Authorizations, which as of the Closing Date, will be
      in
      full force and effect and good standing, and no notices shall have been received
      or Threatened relating to termination or cancellation or withdrawal of any
      of
      such Governmental Authorizations. Newco will not be in violation of the terms
      and conditions of any such Governmental Authorizations.





**3.20**  **Hazardous
      Materials** **.**




Schedule
      3.20 hereto
      contains (a) a description of all Hazardous Materials which is or have been,
      used or generated by the Company, (b) a description of past and present waste
      and Hazardous Material disposal practices of the Company, including the names
      and addresses of owners or operators of each location to which such waste and
      Hazardous Materials were sent for treatment, storage or disposal, (c) copies
      of
      the results of any environmental or safety inspections of the Company's
      facilities within the last five years, (d) copies of all former or pending
      safety or environmental citations or citations by other authorities received
      by
      the Company, (e) copies of all forms filed by the Company which contain safety
      records and procedures at its facilities, (f) a list and description of the
      location of all underground tanks, sumps or pits on or beneath the Real
      Property, and (g) copies of any analysis of air, water or other discharge at
      or
      from the Company's facilities for the last five years and (h) a list of all
      environmental permits necessary for the conduct of the business of the Company.
      The Real Property listed on the Real Property List is free from all
      contamination by Hazardous Materials and there have been no releases, discharges
      or emissions of any Hazardous Materials at, into, onto, under or from such
      Real
      Property, and no Hazardous Materials have at any time been disposed of in any
      amount on, at or under such Real Property.





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 **Execution
          Version - December 28, 2005**


**3.21**  **Environmental
      Matters** **.**




The
      Company is, and at all times has been, in compliance with all Legal Requirements
      relating to environmental matters. There is no environmental contamination
      caused by the Company or emanating from the Real Property including soil or
      groundwater contamination, air or water contamination or any air emission or
      water discharge above applicable standards. To the knowledge of Sellers the
      Company has never been engaged in any inappropriate management, storage,
      transportation or final disposal of waste or by-products, whether hazardous
      or
      non-hazardous. To the knowledge of Sellers there are no (a) proceedings or
      governmental investigations pending or Threatened concerning or against the
      Company arising from or relating to environmental matters, (b) pending or
      Threatened citations, summons, directives, orders or notices of a Threatened
      or
      actual violation of any Legal Requirement concerning or against the Company
      relating to environmental matters, or (c) Encumbrances arising from or related
      to environmental matters, or any governmental actions resulting in the
      imposition of any such Encumbrance on any of the Real Property related to such
      environmental matters. No conditions or circumstances exist and no acts or
      omissions have occurred on the Real Property or affecting any of the Real
      Property which could be reasonably expected to result in any investigation,
      claim, lawsuit, arbitration or regulatory suit or action alleging harm, injury
      or non-compliance with any environmental law or regulation, or requiring
      remediation or clean-up by the Company or Newco of any environmental
      conditions.





**3.22**  **Workers'
      Injuries** **.**




Schedule
      3.22 describes (a) all closed, pending or to the knowledge of Sellers, Threatened
      claims of Newco’s Employees for compensation for any injury, disability or
      illness arising out of their employment by the Company and (b) all accidents
      in
      which any Newco Employee was injured during working hours.





**3.23**  **Trade
      Union Activity** **.**




To
      the
      knowledge of the Sellers there has not been, nor is there currently pending
      or
      Threatened, any activity by Newco’s Employees or by any trade union relating to
      the representation of such employees by any trade union, nor has there been
      any
      strike, work stoppage or labor troubles involving any Newco Employee.





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 **Execution
          Version - December 28, 2005**


**3.24**  **Employees;
      Employee Benefits** **.**




(a)  The
      Company is, and as of the Closing Date Newco will be, in compliance with all
      labor agreements and other Legal Requirements with respect to employment or
      employment practices, terms and conditions of employment, wages, hours and
      occupational health and safety, regarding Newco’s Employees. To the Knowledge of
      the Sellers, there are no, and as of the Closing Date there will not be (i)
      proceedings or governmental investigations pending or Threatened concerning
      or
      against the Company or Newco arising from or relating to any such matters,
      (ii)
      pending or Threatened citations, summons, directives, orders or notices of
      a
      Threatened or actual violation of any Legal Requirement concerning or against
      the Company or Newco relating to any such matters. There is no labor strike,
      individual or collective labor dispute (other than routine individual
      grievances), or general slowdown or stoppage pending or Threatened against
      the
      Company or Newco, including with respect to any matter relating to workers
      profits sharing benefits; and no grievance or any arbitration proceeding arising
      out of or under collective bargaining agreements is pending or Threatened
      against the Company or Newco.





(b)  Schedule
      3.24(b) contains
      (i) the name, job title, current monthly gross rate of pay, bonuses and date
      and
      amount of last salary increase of each of the current employees of the Company
      to be transferred to Newco. (ii) all presently outstanding loans and advances
      (other than routine travel advances) made by the Company or Newco to any
      employee and the current status thereof. All employee benefits, in cash or
      in
      kind, provided to employees of the Company and that will become employees of
      Newco, are also listed in said Schedule 3.24(b), including without limitation
      all pension and retirement benefits beyond mandatory Legal Requirements. The
      Company is, and as of the Closing Date Newco will be in full compliance with
      all
      Legal Requirements with respect to its employees, including, salaries, wages,
      bonuses, dividends, profit distribution, pay increases, payment of sales
      commissions, and the corresponding payment of any labor charges and social
      security and other payments under Legal Requirements. As of the Closing Date,
      Newco shall have no labour related Liabilities caused before Closing Date,
      including without limitation, Liabilities for accrued bonuses, vacations and/or
      sales commissions, all of which shall have been paid before the Closing
      Date.





(c)  Schedule
      3.24(c) contains
      a list of all written and oral consulting, distribution, sales agency, alliance
      or other service or outsourced contractor. The Company or Newco is not now,
      and
      neither the Company nor Newco will in the future be, subject to a determination
      under Legal Requirements to the effect that any individuals directly or
      indirectly performing services to the Company or Newco, are entitled to benefits
      granted to employees under Legal Requirements or should otherwise be treated
      as
      employees for tax purposes or otherwise. As of the Closing Date, Newco shall
      have no accrued Liabilities with regard to said written and oral consulting,
      distribution, sales agency, alliance or other service or outsourced contractors,
      all of which shall have been paid before the Closing Date.





**3.25**  **Taxes** **.**




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 **Execution
          Version - December 28, 2005**


(a)  The
      Company and Newco have duly and timely paid all applicable Taxes and have timely
      filed with the appropriate Governmental Body all applicable Tax returns. The
      Company and Newco have made such payments and prepared such Tax returns
      correctly and in accordance with all Legal Requirements. Except as disclosed
      in Schedule
      3.25 under
      "Tax Claims", the Company and Newco (i) have not challenged the payment and/or
      amount of any Taxes either in Court or in administrative level; (ii) has not
      received any injunction allowing it not to pay and/or reduce the amount of
      Taxes; (iii) has not executed settlement agreements with tax authorities for
      the
      payment of late Taxes; (iv) has not received notice of or is a party in any
      lawsuit or administrative proceeding for collection of Taxes; (v) has not been
      involved in any corporate, commercial or other arrangement for the purpose
      of
      evading Taxes; and (vi) has not taken advantage of any amnesty regarding Taxes
      in the previous six years.





(b)  As
      of the
      Closing Date, Newco shall be free of any and all Tax Liabilities, due or to
      become due at the end of the fiscal year.





**3.26**  **Product
      Liability** **.**




(a)  Except
      as
      disclosed in Schedule
      3.26 ,
      to the
      knowledge of the Sellers there are no pending or Threatened Legal Proceedings
      with respect to, or any Liabilities of the Company for, any products sold or
      distributed by the Company or for any injuries or damages resulting from any
      such products. The Company's products have been manufactured and sold in full
      compliance with all Legal Requirements, including consumer protection
      legislation and regulations.





(b)  As
      of the
      Closing Date, there will not be pending or Threatened Legal Proceedings with
      respect to, or any Liabilities of Newco for, any products sold or distributed
      by
      the Company or Newco or for any injuries or damages resulting from any such
      products. Newco’s products shall have been manufactured and sold in full
      compliance with all Legal Requirements, including consumer protection
      legislation and regulations.





**3.27**  **Customer
      Warranty Claims** **.**




To
      the
      Knowledge of Sellers there are no defects in the design or manufacture of
      products sold by the Company or Newco before Closing which would (i) result
      in
      other than normal warranty claims, (ii) require the recall of such products,
      or
      (iii) provide customers with a basis to reject such products or revoke
      acceptance of such products. The Company shall remain liable for all products
      returned, customer warranty claims and breach of contract or related claims
      for
      products manufactured or sold by either the Company or Newco prior to the
      Closing Date. Schedule
      3.27 contains
      a list of all Contracts for sales of products that are still subject to
      potential warranty claims by customers, specifying the name and address of
      each
      customer, the specifications and quantity of the product, its purchase price,
      and the date the product warranty expires.





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 **Execution
          Version - December 28, 2005**


**3.28**  **Sufficiency
      of the Assets** **.**




The
      Operating Assets to be owned by Newco at the Closing Date and the Piece of
      Land
      to be owned by Newco not later than 6 months following the Closing Date (a)
      are,
      with the sole exception of the Excluded Assets, all those assets currently
      used
      in the operation of the business of the Company and (b) will be all of the
      assets needed by Newco to continue to operate such business after the date
      hereof as currently operated by the Company.





**3.29**  **Legal
      Compliance** **.**




(a)  The
      Company is now and has been in all respects in compliance with all Legal
      Requirements (including those relating to antitrust and trade regulation,
      environmental protection, hazardous waste disposal, health and safely, labor,
      employment, capital market regulations and zoning and building codes). The
      Company has not received any complaint, citation or notice of violation from
      any
      Governmental Body and to the Knowledge of Sellers none is Threatened, alleging
      that it has violated any such Legal Requirement.





(b)  As
      of the
      Closing Date Newco shall be and shall have been from the date of its
      incorporation, in compliance with all Legal Requirements (including those
      relating to antitrust and trade regulation, environmental protection, hazardous
      waste disposal, health and safely, labor, employment, capital market regulations
      and zoning and building codes). As of the Closing Date, Newco shall have not
      received any complaint, citation or notice of violation from any Governmental
      Body and none shall have been Threatened, alleging that it has violated any
      such
      Legal Requirement.





**3.30**  **Accuracy
      of Statements** **.**




None
      of
      the information contained in the representations, warranties or covenants of
      Sellers and the Guarantor in this Agreement or in the Ancillary Agreements
      contain any untrue statement of fact or omits to state a fact necessary to
      make
      the statements contained herein, in light of the circumstances under which
      they
      were made, not misleading. All documents provided to Buyer by Sellers and the
      Guarantor are true, complete and correct copies of the documents they purport
      to
      represent.





**3.31**  **Brokers
      and Finders** **.**




No
      broker, finder or other Person or entity acting in a similar capacity has
      participated on behalf of the Company or Sellers in bringing about the
      transaction herein contemplated, rendered any services with respect thereto
      or
      been in any way involved therewith. Any broker or finder fee that a third party
      might claim to have a right to will be paid only by Sellers or the Company
      and
      in no event by Newco or Buyer.





**3.32**  **Certain
      Practices** **.**




Neither
      Newco nor any of its officers, managers, employees, agents or representatives,
      has directly or indirectly, offered, paid or promised to pay, or authorized
      the
      payment of any money or other thing of value (including any fee, gift, sample,
      travel expense, or entertainment with a value in excess of US$50 in the
      aggregate to any one individual in any year) to any person who is an official,
      officer, agent, employee or representative of any Governmental Body or of any
      existing or prospective customer (whether government-owned or
      non-government-owned), or to any political party or official thereof, to any
      candidate for political or political party office, or to any other individual
      or
      entity while knowing or having reason to believe that all or any portion of
      such
      money or thing of value would be offered, given, or promised, directly or
      indirectly, to any such official, officer, agent, employee, representative,
      political party, political party official, or candidate, (i) to obtain favorable
      treatment in securing business, (ii) to pay for favorable treatment for business
      secured, (iii) to obtain special concessions or for special concessions already
      obtained, for or in respect of Newco, or (iv) in violation of any Legal
      Requirement.





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 **Execution
          Version - December 28, 2005**


**3.33**  **Books
      and Records/Accounting Controls** **.**




As
      of the
      Closing Date, each transaction made by Newco shall be properly and accurately
      recorded on the books and records of Newco, and each document on which entries
      in Newco’s books or records will be based (such as purchase orders, customer or
      company invoices, travel or expense reports, service agreements, etc.) shall
      be
      complete and accurate in all respects. Newco shall maintain a system of internal
      accounting controls adequate to insure that Newco maintains no off-the-books
      accounts and that Newco’s assets are used only in accordance with such
      management’s directives.





**3.34**  **US
      export control and trade sanction laws** **.**




From
      the
      date of its incorporation Newco has at all times complied with the export
      control and trade sanction laws of the United States with respect to products,
      services and technology obtained from the United States, and with those of
      any
      other applicable jurisdictions.







**4.**  **REPRESENTATIONS
      AND WARRANTIES OF BUYER**




Buyer
      hereby makes the following representations and warranties to Sellers, which
      shall be considered as made on the date hereof, and on the Closing
      Date:





**4.1**  **Corporate
      Status** **.**




(a)  Buyer
      is
      duly organized and validly existing under the laws of Chile, and has the
      corporate power to own its assets and carry on its business as now being
      conducted.





(b)  GSE
      International, Inc. is duly organized and validly existing under the laws of
      the
      State of Delaware, and has the corporate power to own its assets and carry
      on
      its business as now being conducted.





**4.2**  **Capitalization
      and Ownership** **.**




(a)  The
      total
      issued and outstanding capital of Buyer is US$1,000,000 (One million US
      Dollars **)** . All
      of
      the outstanding equity interests of the Company have been both duly authorized
      and validly issued in
      accordance with all Legal Requirements and will
      be fully paid not later than on the Closing Date.





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 **Execution
          Version - December 28, 2005**


(b)  The
      total issued and outstanding capital of GSE International, Inc. is
      US$185,823,000 (One hundred eighty five million eight hundred and twenty three
      thousand Dollars **)** . All
      of
      the outstanding equity interests of GSE
      International, Inc. have
      been both duly authorized and validly issued in
      accordance with all Legal Requirements and are
      fully paid .





**4.3**  **Authority** **.**




Buyer
      has
      the legal right, power and authority to enter into this Agreement; the execution
      and delivery of this Agreement and the consummation of the transactions
      contemplated hereby have been duly authorized by the necessary corporate action
      of Buyer; and this Agreement constitutes the legal and binding obligation of
      Buyer, enforceable against Buyer in accordance with its terms.





**4.4**  **Restrictions** **.**




Neither
      the execution of this Agreement nor the consummation of the transactions
      contemplated hereby will Contravene any court order, consent decree, agreement
      or permit to which Buyer is subject or a party, or the By-laws of Buyer. There
      is no lawsuit, proceeding or investigation pending or Threatened against Buyer
      which might prevent the consummation of any of the transactions contemplated
      by
      this Agreement.





**4.5**  **Government
      Approvals** **.**




Buyer
      has
      made or obtained (as applicable) all actions, consents or approvals of,
      registrations or filings with, all Governmental Bodies required by Legal
      Requirements in connection with the performance by the Buyer of this Agreement
      or in connection with the Contemplated Transactions.





**4.6**  **Brokers
      and Finders** **.**




No
      broker, finder or other Person or entity acting in a similar capacity has
      participated on behalf of Buyer in bringing about the transaction herein
      contemplated. Any broker or finder fee that a third party might claim to have
      a
      right to in connection with the Contemplated Transactions will in no event
      be
      paid by Sellers.







**5.**  **COVENANTS
      OF SELLERS PRIOR TO CLOSING DATE** ****




**5.1**  **Access
      and Investigation** **.**




Between
      the date of this Agreement and the Closing Date, Sellers will, and will cause
      the Company and its Representatives to:





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 **Execution
          Version - December 28, 2005**


(a)  afford
      Buyer and its Representatives and prospective lenders and their Representatives
      (collectively, the " **Buyer's
      Advisors** ")
      reasonable access to the Company's personnel, properties (including subsurface
      testing), Contracts, books and records, and other documents and
      data;





(b)  furnish
      Buyer and the Buyer's Advisors with copies of all such Contracts, books and
      records, and other existing documents and data as Buyer may reasonably request,
      and





(c)  furnish
      Buyer and Buyer's Advisors with such additional financial, operating, legal
      and
      other data and information as Buyer may reasonably request in connection with
      this Agreement.





**5.2**  **Spin-off** **.**




Before
      the Closing Date, Sellers shall cause the Spin-Off to be completely consummated.
      For this purposes it shall be understood that the Spin-Off has been consummated
      upon the fulfillment of each of the following actions or
      conditions:





(a)  Execution
      of the public deed of reorganization and spin-off of the Company, contemplating
      the incorporation of Newco, Newco’s By-laws and the contribution of the
      Operating Assets to Newco.





(b)  Registration
      at the Registry of Commerce and publication at the Official Gazzete of the
      excerpt of the public deed referred in subsection (a) above;





(c)  With
      the
      sole exception of the Piece of Land referred in Section 7.1, registration in
      the
      name of Newco of all such Operating Assets which transfer is subject to
      registration requirements, at the corresponding registries, or compliance of
      all
      applicable notices which may be necessary to consummate the transfer of any
      Operating Asset to Newco; and,





(d)  Sellers
      shall cause that: (i) all those current employees of the Company which be
      determined by Buyer before the public deed referred to in subsection (a) above
      is executed (“ **Newco’s
      Employees** ”)
      and
      their respective labour agreements, be assigned to Newco, or that new employment
      agreements be executed between Newco and Newco’s Employees, in terms and
      conditions to be identical to the current terms and conditions of their labour
      agreements with the Company; and, (ii) that all other employees remain employed
      by Company or otherwise, terminate their labour agreements with the Company,
      in
      both cases, with no labour related Liabilities for Newco.




**5.3**  **Operation
      of the Business of the Company and Newco** **.** ****




Between
      the date of this Agreement and the Closing Date, Sellers will, and will cause
      each the Company and Newco to:





(a)  conduct
      their business only in the Ordinary Course of Business;





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 **Execution
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(b)  use
      their
      best efforts to preserve intact the current business organization of the
      Company, and of Newco; keep available the services of the current officers,
      employees, and agents of the Company which shall become officers, employees,
      and
      agents of Newco, and maintain the relations and goodwill with suppliers,
      customers, landlords, creditors, employees, agents, and others having business
      relationships with the Company or with Newco;





(c)  confer
      with Buyer before executing any purchase commitment or any purchase agreement
      for the acquisition of raw material, including without limitation, any purchase
      pursuant to the purchase commitments listed in Schedule 3.6(b)(ii) of this
      Agreement, and not to execute such purchase commitments or agreements unless
      with the prior written approval from Buyer, provided that in the event Sellers
      deliver a written requirement for Buyer’s approval, and Buyer does not answer
      said written requirement within 3 Business Days from the date it was received
      by
      Buyer, Sellers shall have the right but not the obligation to execute the
      corresponding purchase commitment or purchase agreement;





(d)  confer
      with Buyer before submitting any bid
      for
      the sale of products, and not to submit any bid unless with
      the
      prior written approval from Buyer, provided that in the event Sellers deliver
      a
      written requirement for Buyer’s approval, and Buyer does not answer said written
      requirement within 3 Business Days from the date it was received by Buyer,
      Sellers shall have the right but not the obligation to submit the corresponding
      bid ;





(e)  confer
      with Buyer concerning operational matters with respect to the Company, or upon
      its incorporation, with respect to Newco; and





(f)  otherwise
      report periodically to Buyer concerning the status of the business, and
      operations of the Company or Newco upon its incorporation.





**5.4**  **Negative
      Covenant** **.**




Except
      as
      otherwise expressly permitted by this Agreement, between the date of this
      Agreement and the Closing Date, Sellers will not, and will cause Newco not
      to,
      without the prior consent of Buyer, take any affirmative action, or fail to
      take
      any action within their or its control, as a result of which any of the changes
      or events listed in Section 3.8 are likely to occur.





**5.5**  **Required
      Approvals** **.**




As
      promptly as practicable after the date of this Agreement, Sellers will, and
      will
      cause the Company and Newco to, make all filings, notices, and applications
      required by Legal Requirements to be made by them in order to consummate the
      Contemplated Transactions, including those specified in this Agreement. Between
      the date of this Agreement and the Closing Date, Sellers will, and will cause
      the Company and Newco to:





(a)  cooperate
      with Buyer with respect to all filings, notices, and applications that Buyer
      elects to make or is required by Legal Requirements to make in connection with
      the Contemplated Transactions contemplated, and





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 **Execution
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(b)  cooperate
      with Buyer in obtaining all Governmental Authorizations for the Contemplated
      Transactions.





**5.6**  **Notification** **.**




Between
      the date of this Agreement and the Closing Date, Sellers will promptly notify
      Buyer in writing if Sellers, the Company or Newco become aware of any fact
      or
      condition that causes or constitutes a breach of any of Sellers' representations
      and warranties as of the date of this Agreement, or if Sellers, the Company
      or
      Newco becomes aware of the occurrence after the date of this Agreement of any
      fact or condition that would (except as expressly contemplated by this
      Agreement) cause or constitute a breach of any such representa-tion or warranty,
      had such representation or warranty been made as of the time of occurrence
      or
      discovery of such fact or condition. During the same period, Sellers will
      promptly notify Buyer of the occurrence of any breach of any covenant of Sellers
      in this Section 5.5 or of the occurrence of any event that may make the
      satisfaction of the conditions in Section 8 impossible or unlikely.





**5.7**  **Newco
      free of Liabilities and Indebtedness** **.**




Except
      as
      expressly provided in this Agreement, Sellers will cause Newco to be, as of
      the
      Closing Date free of any and all Indebtedness and Liabilities, whether due
      or to
      become due.





**5.8**  **Agreement
      for the purchase and sale of Inventory** **.**




Sellers
      and Buyer shall conduct jointly a physical count of the inventory as of the
      Closing Date, and shall cause the Company to execute with Buyer, on the Closing
      Date, an Agreement pursuant to which both parties shall be required, within
      15
      Business Days following the Closing Date, to sell and purchase, respectively,
      all such inventory owned by the Company that meet
      all
      published specifications and at the time be free from all defects in material
      and workmanship (including specifically, finished goods and the following
      resins: (a) High Density: (i) ChevronPhillips K306; (ii) ChevronPhillips TR400;
      (iii) Total 37120; (iv) Innovene G36-10-150; and (v) Daelim LH418S; (b) Low
      Density: (i) ChevronPhillips 7104; (ii) ChevronPhillips K203; and (iii) Borealis
      FB2230 (collectively the “ Inventory ”),
      but
      excluding scrap, resins and others from any other brands (the “ Excluded
      Inventory ”))
      at a
      purchase price equal to book value of such Inventory, to be paid by Newco no
      later than 15 Business Days after the Closing Date (the “ Inventory
      Purchase Agreement ”).
      The
      Inventory Purchase Agreement shall contemplate the following terms and
      conditions: (a) A representation by Sellers and the Company stating that: (i)
      a
      list to be incorporated as Schedule to the agreement contains a complete and
      correct list of the Company's Inventory, including without limitation, finished
      goods and raw material, specifying category, quality certifications, quantities
      and unit book value; (ii)
      that the finished goods meets
      all
      published specifications and at the time be free from all defects in material
      and workmanship; and (iii) the Inventory value shown in the Company's books
      and
      records at the date of the Inventory Purchase Agreement accurately reflects
      the
      book value of the Inventory as of such date, and consist of usable items which,
      as to the quality and quantity, are saleable in the ordinary course of business,
      and represent all of the inventory on such date, with the sole exception of
      the
      Excluded Inventory; (b) A representation by Sellers and the Company stating
      that
      the Inventory is sufficient to enable Newco to comply with its obligations
      due
      or to become due up to two months after the Closing Date; (c) The obligation
      of
      Sellers, the Company, Newco and Buyer to conduct jointly a confirmatory physical
      review and audit of the Inventory (including finished goods and raw material)
      not later than 5 Business Days after the Closing Date, in order to enable Newco
      and Buyer to verify that the Inventory to be purchased meets all published
      specifications and at the time be free from all defects in material and
      workmanship and that the representations and warranties referred in letters
      (a)
      and (b) above are accurate and correct; and (d) The obligation of Sellers and
      the Company to deliver Buyer and Newco the original invoices issued by the
      resin
      suppliers so that Newco and Buyer be able to verify the quality of the raw
      material.





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 **Execution
          Version - December 28, 2005**


**5.9**  **Execution
      of Ancillary Agreements** **.**




Sellers
      covenant as a *promesa
      de hecho ajeno,* that
      they
      shall cause the Company, Membrantec S.A., Mr.
      Víctor Petermann Fernández, his immediate family and any entity owned directly
      or indirectly by any of the above mentioned entities or individuals in more
      than
      10% to execute not later than on the Closing Date, the Ancillary Agreements
      to
      which each of them is to be a party pursuant to this Agreement.





**5.10**  **Bonuses,
      Vacations and Sales Commissions** **.**




Sellers
      shall cause the Company or Newco to pay before the Closing Date, any and all
      bonuses (legal and contractual), accrued vacations (to the extent possible
      under
      applicable law) or sales commissions either due or accrued until Closing Date,
      to which any Newco Employee or third party may have right against
      Newco.





**5.11**  **No
      Negotiation** **.**




Until
      such time, if any, as this Agreement is terminated pursuant to Section 9,
      Sellers will not, and will cause the Company, Newco and each of their
      Representatives not to, directly or indirectly, solicit, initiate, or encourage
      any inquiries or proposals from, discuss or negotiate with, provide any
      non-public information to, or consider the merits of any unsolicited inquiries
      or proposals from, any Person (other than Buyer) relating to the transactions
      contemplated hereby, any transaction involving the sale of the business or
      assets (other than in the ordinary course of business) of the Company or Newco,
      or any of the equity interests of the Company or Newco, or any merger,
      consolida-tion, business combination, or similar transaction involving the
      Company or Newco.





**5.12**  **Best
      Efforts** **.**




Between
      the date of this Agreement and the Closing Date, each Seller will use its Best
      Efforts to cause the conditions in Sections 8.1 to be satisfied.





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 **Execution
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**6.**  **COVENANTS
      OF BUYER PRIOR TO CLOSING DATE**




**6.1**  **Approvals
      of Governmental Bodies** **.**




As
      promptly as practicable after the date of this Agreement, Buyer will make all
      filings required by Legal Requirements to be made by it to consummate the
      transactions contemplated hereby. Between the date of this Agreement and the
      Closing Date, Buyer will:





(a)  reasonably
      cooperate with Sellers with respect to all filings that Sellers are required
      by
      Legal Requirements to make in connection with the Contemplated Transactions,
      and





(b)  reasonably
      cooperate with Sellers in obtaining all Governmental Authorizations required
      by
      Legal Requirements or this Agreement;





provided
      that this Agreement will not require Buyer to dispose of or make any change
      in
      any portion of its business or to incur any other burden, financial or
      otherwise, in connection with such filings, consents or
      authorizations.





**6.2**  **Best
      Efforts** **.**




Except
      as
      set forth in the proviso to Section 6.1, between the date of this Agreement
      and
      the Closing Date, Buyer will use its Best Efforts to cause the conditions in
      Sections 8.2 to be satisfied.




**7.**  **COVENANTS
      OF SELLERS AND BUYER AFTER THE CLOSING DATE** ****




**7.1**  **Transfer
      of Piece of Land** **.**




Sellers
      have caused its corresponding Affiliate having the ownership over the piece
      of
      land described on Schedule 3.10(b) of this Agreement, to execute a Purchase
      Agreement with Newco, which agreement was executed on December 23, 2005, and
      will ensure that the ownership in favour of Newco be registered not later than
      6
      months following the Closing Date. Newco has already paid the purchase price
      for
      said Piece of Land.





**7.2**  **Severance
      Payments** **.**




Sellers
      will, or will cause the Company to pay or reimburse Newco the proportion of
      all
      severance and labour related payments required to be made by Newco pursuant
      to
      Legal Requirements, for the event Newco terminates the employment agreements
      of
      one or more of Newco’s Employees at any time within the 18-month period
      following the Closing Date. Such payment shall be made no later than 5 Business
      Days after the date the employment agreement has been terminated, and shall
      correspond to the amount which would have been paid if the termination has
      occurred on the Closing Date. The difference between the amount that would
      have
      been paid if the termination had occurred on the Closing Date and the amount
      effectively due on the date of the employee termination, shall be paid by
      Newco.





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 **Execution
          Version - December 28, 2005**


**7.3**  **Right
      to use Real Property** **.**




(a)  Sellers
      and the Guarantor will, or will cause the Company, to permit Newco and Buyer
      to
      continue using the offices currently used by the Company in Santiago, as well
      as
      the warehouses and other spaces over the Real Properties referred in Schedule
      7.3 (a), provided that Buyer shall be required to pay the current monthly rents
      paid by the Company, and that Buyer shall have the right to terminate said
      leases at any time. For this purpose Buyer shall execute on the Closing Date,
      two Lease Agreements substantially in the form of **Exhibit
      H.**





(b)  Buyer
      and
      Newco will permit the Company, to use, for an interim or transition period
      not
      to exceed 6 months, the spaces over Newco’s Real Property identified in Schedule
      7.3(b) ,
      so that
      the Company be able to sell the inventory which will not be acquired by Newco
      or
      Buyer pursuant to Section 5.8 of this Agreement. If for any reason said
      inventory has not been sold during such 6 month period, the Company shall be
      required to remove the inventory from Newco’s premises but shall maintain the
      right to sell it. The Company’s right to sell said inventory will not be
      considered a breach of its obligations under the Non-Compete Agreement to be
      executed on the Closing Date.





**7.4**  **Transition
      Period** **.**




(a)  The
      Parties acknowledge that a transition period will be required in order that
      Buyer and Sellers be able, among other matters, to communicate the Company’s
      customers, clients, providers and other third parties having a business
      relationship with the Company, the transfer of Newco and the Operating Assets
      to
      Buyer, and to enable Buyer to continue such business relationship independently
      and directly with certain of said third parties.





(b)  Considering
      the above, the Parties covenant and agree to cooperate with each other in good
      faith in order to enable Buyer to get the benefit and/or to borne the costs
      of
      the contracts, agreements and services which for any reason cannot be directly
      invoiced from Buyer, or to Buyer. In such event, upon the request of Buyer:
      (i)
      the Company will accept and receive invoices for sales from Buyer, and therafter
      re-invoice the sales directly to the customers or clients, for the same
      conditions and prices, provided that the amount of the invoices will be paid
      from the Company to Buyer upon receipt, and in no event later than one Business
      Day, after receipt by the Company of the corresponding amounts from the
      customers; and (ii) the Company will receive the invoices from the providers
      or
      third parties, and re-invoice them to Buyer for the same conditions and
      prices.





(c)  The
      compliance of the above mentioned covenants by the Company, will not be
      considered a breach of the Non Compete Agreement or any other Ancillary
      Agreement to this Purchase Agreement.




31
 **Execution
          Version - December 28, 2005**




**8.**  **CONDITIONS
      PRECEDENT TO CLOSING**




**8.1**  **Conditions
      to Buyer's Obligations** **.**




Buyer’s
      obligation to Close the Contemplated Transactions is subject to the fulfillment,
      on or prior to the Closing Date, of each of the following conditions (any
      of
      which may be waived by Buyer, in whole or in part) :





(a)  **Representations
      and Warranties** .
      The
      representations and warranties of Sellers contained in this Agreement shall
      be
      true and correct in all respects as of the date of this Agreement and as of
      the
      Closing Date, with the same force and effect as if made as of the Closing Date.





(b)  **Covenants** .
      All
      Agreements and covenants contained in this Agreement to be performed or complied
      with by Sellers on or before the Closing Date shall have been performed or
      complied with in all respects.





(c)  **No
      Injunction** .
      No
      Legal Requirement issued by any court of competent jurisdiction shall be in
      effect that restricts or prohibits consummation of the transactions contemplated
      by this Agreement.





(d)  **Other
      Governmental and Regulatory Consents** .
      All
      filings required to be made prior to the Closing with, and all Governmental
      Authorizations required to be obtained prior to the Closing from, Governmental
      Authorities in connection with the execution and delivery of this Agreement
      and
      the consummation of the transactions contemplated hereby shall have been made
      or
      obtained.





(e)  **No
      Litigation** .
      No
      Proceeding shall be pending (or to Buyer’s knowledge, Threatened) which seeks to
      delay or prevent the consummation of the Contemplated Transactions, or seeks
      money damages from Buyer or Newco by reason of the consummation of the
      Contemplated Transactions by this Agreement, or, if resolved adversely to Newco,
      would have a material adverse effect on Newco or restrict or limit Buyer's
      ability to own or control Newco, operate the business, or consummate the
      transactions contemplated hereby.





(f)  **Other
      Consents** .
      All
      consents necessary for completion of the transaction contemplated under this
      Agreement have been obtained.





(h)  **Due
      Diligence.** Buyer
      shall have completed, to its satisfaction, due diligence with respect to the
      Company. ****





**8.2**  **Conditions
      to Sellers’ Obligations** **.**




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 **Execution
          Version - December 28, 2005**


Sellers’
      obligations to Close the Contemplated Transactions is subject to the
      fulfillment, on or prior to the Closing Date, of each of the following
      conditions (any
      of
      which may be waived by Sellers, in whole or in part) :





(a)  **Representations
      and Warranties** .
      The
      representations and warranties of Buyer contained in this Agreement shall be
      true and correct in all material respects as of the date of this Agreement
      and
      as of the Closing Date, with the same force and effect as if made as of the
      Closing Date.





(b)  **Covenants** .
      All
      Agreements and covenants contained in this Agreement to be performed or complied
      with by Buyer on or before the Closing Date shall have been performed or
      complied with in all material respects.





(c)  **No
      Injunction** .
      No
      Legal Requirement or order issued by any court of competent jurisdiction shall
      be in effect that restricts or prohibits consummation of the transactions
      contemplated by this Agreement.





(d)  **Other
      Governmental and Regulatory Consents** .
      All
      filings required to be made prior to the Closing with, and all Governmental
      Authorizations required to be obtained prior to the Closing from, Governmental
      Authorities in connection with the execution and delivery of this Agreement
      and
      the consummation of the Contemplated Transactions shall have been made or
      obtained.





(e)  **No
      Litigation** .
      No
      Proceeding shall be pending (or to Seller’s knowledge, Threatened) which seeks
      to delay or prevent the consummation of the Contemplated Transactions, or seeks
      money damages from Sellers or the Company by reason of the consummation of
      the
      transactions contemplated by this Agreement.




**9.**  **TERMINATION**




**9.1**  **Termination
      Events** **.**




This
      Agreement may, by notice given prior to or at the Closing, be
      terminated:





(a)  by
      either
      Buyer or Sellers if a material breach of any provision of this Agreement has
      been committed by the other Party and such breach has not been
      waived;




(b)  (i)
      by
      Buyer if (other than due to the failure of Buyer to comply with its obligations
      under this Agreement) any of the conditions in Section 8.1 have not been
      satisfied as of the Closing Date and Buyer has not waived in writing such
      condition on or before the Closing Date; or (ii) by Sellers if (other than
      due
      to the failure of Sellers to comply with its obligations under this Agreement)
      any of the conditions in Section 8.2 have not been satisfied as of the Closing
      Date or if satisfaction of such a condition is or becomes impossible and Sellers
      has not waived in writing such condition on or before the Closing Date;
      or




(c)  by
      mutual
      written agreement of Buyer and Sellers.




33
 **Execution
          Version - December 28, 2005**




**9.2**  **Effect
      of Termination** **.**




Each
      Party's right of termination under Section 9.1 is in addition to any other
      rights it may have under this Agreement or otherwise, and the exercise of such
      right of termination will not be an election of remedies. If this Agreement
      is
      terminated pursuant to Section 9.1, all further obligations of the Parties
      under this Agreement will terminate, except that the representations in Sections
      3.31 and 4.4, and the obligations in Sections 11.4, 11.5 and 11.6 will survive;
      provided, however, that the Parties’ respective rights and obligations with
      respect to any prior breach of or failure to comply with this Agreement will
      survive any termination of this Agreement.




**10.**  **INDEMNIFICATION**




**10.1**  **Scope
      of Sellers' and Guarantor’s Indemnity** **.**




Sellers
      and Guarantor, all of them acting as *codeudores
      solidarios,* jointly
      and severally agree to indemnify and hold Buyer and Newco and their respective
      affiliates, predecessors, successors and assigns (and their respective officers,
      directors, employees and agents) harmless from and against any and all Adverse
      Consequences, suffered or incurred by any of them as a result of:





(a)  any
      breach of any representation or warranty made by Sellers contained in this
      Agreement or any other document delivered by Sellers in connection with the
      Contemplated Transactions;





(b)  any
      breach by Sellers of any undertaking, covenant or agreement contained in this
      Agreement or in any other agreement or document delivered by Sellers in
      connection with the Contemplated Transactions;





(c)  all
      facts, events or conditions which occurred prior to the Closing Date including
      any risk or actual incidence of illness, disability, death or other injury
      to,
      or the contraction of any diseases by, any Person (including any current or
      former employee) resulting from exposure to Hazardous Materials, products,
      or
      other materials before the Closing Date, or arising from a defect in any product
      manufactured by the Newco before the Closing Date, without regard to when such
      injuries or diseases are first manifested;





(d)  any
      and
      all actions, suits, proceedings, demands, assessments, costs and expenses
      incidental to any and all Adverse Consequences and to any of the matters set
      forth in this Section.





(e)  a
      Contravention by Seller of Section 3.25 (Taxes).





Except
      as
      disclosed in the Schedules of this Agreement, Sellers and the Guarantor shall
      not be exempt from liability if Buyer or its advisors know or should have known
      from their review of the transaction that any of the covenants, representations
      and warranties contained in this Agreement are not accurate or complete. Except
      as disclosed in the Schedules of this Agreement, Sellers and the Guarantor
      shall
      be liable for Losses whether or not Buyer had knowledge of, or had reason to
      know, of the respective Liabilities, as a result of any due diligence by Buyer
      or Buyer’s Advisors.





34
 **Execution
          Version - December 28, 2005**


**10.2**  **Scope
      of Buyer’s Indemnity** **.**




Buyer
      agrees to indemnify and hold Sellers and their respective affiliates,
      predecessors, successors and assigns (and their respective officers, directors,
      employees and agents) harmless from and against any and all Adverse
      Consequences, suffered or incurred by any of them as a result of:





(a)  any
      breach of any representation or warranty made by Buyer contained in this
      Agreement or any other document delivered by Buyer in connection with the
      Contemplated Transactions;





(b)  any
      breach by Buyer of any undertaking, covenant or agreement contained in this
      Agreement or in any other agreement or document delivered by Buyer in connection
      with the Contemplated Transactions;





(c)  any
      and
      all actions, suits, proceedings, demands, assessments, costs and expenses
      incidental to any and all Adverse Consequences and to any of the matters set
      forth in this Section.





Buyer
      shall not be exempt from liability if Sellers or their advisors know or should
      have known from their review of the transaction that any of the covenants,
      representations and warranties contained in this Agreement are not accurate
      or
      complete.





**10.3**  **Indemnity
      Procedures****.**




The
      Party
      making a claim for indemnification under this Article Ten is hereinafter
      referred to as the “Indemnified Party” and the Party against whom such claim is
      asserted under this Article Seven is hereinafter referred to as the
“Indemnifying Party”. In the case of Sellers and the Guarantor, the term
      Indemnifying Party shall mean the Sellers and the Guarantor, acting jointly
      and
      severally. Unless otherwise stated in this Agreement, all claims by an
      Indemnified Party shall be asserted and resolved as provided for in this Article
      Ten.





If
      the
      Indemnified Party shall become aware of facts which give rise or threaten to
      give rise to the Indemnifying Party’s obligations to indemnify the Indemnified
      Party pursuant to this Section (an " **Event
      Subject to Indemnification** "),
      regardless of whether or not the Event Subject to Indemnification involves
      a
      third party, the Indemnified Party shall send written notice (the " **Notification** ")
      to the
      Indemnifying Party promptly after discovery of the Event Subject to
      Indemnification disclosing the details thereof, and the Indemnifying Party
      shall
      respond within five calendar days as of the receipt of Notification (or sooner,
      if circumstances require), provided, however, that no delay in delivering any
      Notification shall relieve the Indemnifying Party from its obligations hereunder
      unless (and then solely to the extent that) the Indemnifying Party is prejudiced
      thereby, especially as a result of not being able to file the proper defense
      because of the lack of time.





35
 **Execution
          Version - December 28, 2005**


(a)  If
      an
      Event Subject to Indemnification shall arise which does not involve any third
      party, the Indemnifying Party shall send a written response to the Indemnified
      Party in which it states its intention to either:





(i)
            pay
                the amount involved or commence any required remedial measures in
                connection with the Event Subject to Indemnification;





(ii)
            refuse
                to accept the event as an Event Subject to Indemnification;
                or





(iii)
            discuss
                the matter.





In
      the
      case of (i) above, the Indemnifying Party will either pay the amount involved
      or
      commence any required remedial measures, in either case within 30 days from
      the
      date of Notification. In the case of (ii) above, the Indemnified Party may,
      at
      its option, commence any required action to pursue or defend its rights and
      remedies. In the case of (iii) above, the Parties shall in good faith discuss
      the issues involved during a period of 30 days from the receipt of the
      Notification. If they do not reach an agreement within such period, the
      Indemnified Party may commence, at its option, any required action to pursue
      its
      rights and remedies.





(b)  If
      an
      Event Subject to Indemnification shall arise which involves any third party
      claim, the Indemnifying Party’s response shall indicate its intention either
      to:





(i)
            pay
                the amount involved;





(ii)
            assume
                the defense of the claim litigation or proceeding, which it shall
                have the
                right to do (in which case, the Indemnifying Party shall be (joint
                and
                severally in case of the Sellers and the Guarantor) responsible for
                all
                costs, expenses, legal and court fees, as well as any guaranties
                which may
                be required to be placed for the respective defense (the "**Defense
                Costs**"),
                and the Indemnified Party shall have the right to retain its own
                counsel
                at its own expense to monitor the defense);
                or





(iii)
            not
                assume the defense of the litigation or proceeding, in which case
                the
                Indemnifying Party shall nevertheless be liable for the Defense Costs
                of
                the Indemnified Party in connection
                therewith.





Whichever
      Party assumes the defense shall be entitled to the cooperation of the other
      Party in preparing and conducting the defense. If the defense occurs after
      Closing, Buyer agrees to provide Sellers and the Guarantor with reasonable
      access to all of Buyer's and Newco’s files and records reasonably necessary for
      the preparation and conduct of such defense. If the defense occurs before
      Closing, Sellers agree to provide Buyer with access to all of Sellers, Newco’s a
      files and records necessary for the preparation and conduct of such
      defense.





36
 **Execution
          Version - December 28, 2005**


(c)  If
      an
      Indemnified Party sends a Notification in accordance with the this Section
      10.3
      and the Indemnifying Party fails to respond (jointly in the case of Sellers
      and
      the Guarantor) within the above-mentioned period, such failure to respond shall
      be deemed as an acceptance to pay the amount involved or carry out the required
      remedial measures in connection with the Event Subject to
      Indemnification.





**10.4**  **Limitations
      on Liability** **.** ****




The
      indemnification obligations of Sellers and the Guarantor shall terminate five
      years after the date hereof, except as they relate to the representations and
      warranties contained in: (i) Sections 3.21, 3.24 and 3.25, all of which shall
      terminate upon the expiration of the applicable statute of limitations or any
      extension thereof; (ii) Section 3.27 which shall terminate upon the expiration
      of the product warranty pursuant to the corresponding Contract; and (iii)
      Section 3.3, which shall survive indefinitely. The indemnification obligations
      of Buyer shall terminate five years after the date hereof and not before the
      definitive price is paid in full. If a Notification is made prior to such
      termination, such termination shall not affect or in any way impair the rights
      of the Indemnifying Party to indemnification in respect of the particular matter
      as to which the Notification is made, whether or not the amount of
      indemnification to which the Indemnifying Party is entitled in respect of such
      matter shall have been determined prior to such termination.





**10.5**  **Survival
      of Representations, Warranties and Indemnity** **.**




The
      covenants, representations and warranties of the Parties contained in this
      Agreement or in any schedule or other document delivered pursuant hereto,
      including the Parties agreement and obligation to indemnify each other, shall
      survive Closing. The
      right
      to indemnification, payment of damages or other remedy based on such
      representations, warranties, covenants, and obligations will not be affected
      by
      any investigation conducted with respect to, or any knowledge acquired (or
      capable of having been acquired) at any time, whether before or after the
      execution and delivery of this Agreement or the Closing Date, with respect
      to
      the accuracy or inaccuracy of or compliance with, any such representation,
      warranty, covenant, or obligation.





**10.6**  **Collateral
      and Guaranties** **.** ****




To
      guarantee any possible indemnification under Article 10 hereof, Sellers and
      the
      Guarantor agree that if an Event Subject to Indemnification arises, Buyer shall
      have the right to retain and set-off the corresponding amount involved and
      in no
      event more than such amount, from any outstanding installment of the Deferred
      Purchase Price due under Section 2.3(d)(ii), provided that said amount retained
      shall be delivered to an escrow account to be opened and maintained with Bank
      Boston (the “Escrow Agent”). In such an event Buyer shall be required to give
      written and irrevocable instructions to the Escrow Agent to release and deliver
      the funds to either Buyer or Sellers, once the respective Event Subject to
      Indemnification has been resolved or satisfied in accordance with this Article
      10, or upon delivery by any of the Parties of a final arbitration award from
      the
      arbitration panel referred to in Section 11.5 below instructing the Escrow
      Agent
      to realease and deliver all or part of the funds to such Party. Evidence of
      the
      establishment of the Escrow Account shall be demonstrated 5 business days after
      the retention and set-off has been made. Buyer covenants that it shall use
      in
      good faith its right hereunder, and that in no event shall retain part of the
      Deferred Purchase Price in breach of its obligation to open the escrow account
      and deliver the corresponding amount to the Escrow Agent. If this right is
      exercised by Buyer in breach of the above mentioned obligations, Buyer shall
      be
      responsible for all losses and damages incurred by Sellers.





37
 **Execution
          Version - December 28, 2005**




**11.**  **MISCELLANEOUS**




**11.1**  **Further
      Assurances** **.**




The
      Parties each agree:




(a)  to furnish
      upon request to each other such further information;




(b)  to execute
      such other documents or agreements; and




(c)  do
      such
      other acts and things,




all as the
      other Party may reasonably and in good faith request for the purpose of carrying
      out the intent of this Agreement and the documents referred to in this
      Agreement; the
      implementation of this Agreement and the consummation of the transactions
      contemplated hereby.




**11.2**  **Notices** **.**




Any
      notice ,
      consents, waivers, and other communications under
      this Agreement must be in writing and will be deemed
      to
      have been duly given when actually received,  and
      may
      be (a) delivered by hand, (b) sent by facsimile (with written confirmation
      of
      receipt) or (c) sent by a internationally recognized overnight delivery service
      (receipt requested), in each case to the appropriate addresses and facsimile
      numbers set forth below (or
      to
      such other address as such Party may designate by written notice to each other
      Party in accordance with the provisions of this Section).





to
      Sellers:


**Mr.
      Víctor Petermann**


**Av.
      Americo Vespucio 1020, Pudahuel,**


**Santiago,
      Chile**


**Facsimile:
      (562) 601-9726**








**With
      a required copy to:**





**Francisco
      Varela**


**Isidora
      Goyenechea 3120, piso 8, Las Condes,**


**Santiago,
      Chile**


**Facsimile:
      (562) 431-2010**





38
 **Execution
          Version - December 28, 2005**





to
      Buyer:


**GSE
      Lining Technology Chile S.A.**


**C/O
      Gundle/SLT Environmental, Inc.**


**19103
      Gundle Road**


**Houston,
      Texas 77073**


**Attention:
      President and Chief Executive Officer**


**Facsimile:
      (281) 230-2504**








With
      copy
      to:


**Leόn
      Larrain**


**Cruzat,
      Ortuzar & MacKenna Ltda**


**Baker
      & McKenzie**


**Nueva
      Tajamar 481, Torre Norte, Piso 21**


**Las
      Condes, Santiago, Chile**


**Facsimile:
      (562) 362-9876**








to
      Guarantor:


**Mr.
      Víctor Petermann**


**Av.
      Americo Vespucio 1020, Pudahuel,**


**Santiago,
      Chile**


**Facsimile:
      (562) 601-9726**








39
 **Execution
          Version - December 28, 2005**


**11.3**  **Entire
      Agreement** **.**




This
      Agreement, together with all schedules referenced herein, is the Parties' entire
      agreement. It supersedes all prior or contemporaneous oral or written
      communications, proposals and representations with respect to its subject matter
      and prevails over any conflicting or additional terms of any quote, order,
      acknowledgment or similar communications between the parties during the term
      of
      this Agreement. No modification to this Agreement will be binding, unless in
      writing and signed by a duly authorized representative of each Party.





**11.4**  **Confidentiality
      and Public Announcements** **.**




(a)  Each
      Party shall hold confidential all information obtained in connection with this
      Agreement with respect to the other Party which is not otherwise public
      knowledge, not independently known or developed, not received from a third
      party
      who is not subject to an obligation of confidentiality or not in the public
      domain through no fault of the receiving Party. In the event of termination
      of
      this Agreement, all documents (including copies thereof) obtained hereunder
      by
      one Party from any other Party shall be returned to such Party. Each Party
      must
      not disclose and shall hold confidential the terms and conditions of this
      Agreement, including without limitation, the consideration to be paid hereunder,
      except to the extent that disclosure of such information is necessary for
      consummation of the transactions contemplated hereby, demanded by any
      governmental authority, required by applicable law or stock exchange regulations
      to which a Party is subject, or with the consent of all other parties
      hereto.





(b)  Buyer
      and/or any of its Affiliates and Sellers shall make a joint public announcement
      or similar publicity with respect to this Agreement, which shall be prepared
      by
      Buyer, provided that it shall confer with Sellers in order to agree on the
      content and timing of such press release. Any other public announcement or
      similar publicity with respect to this Agreement or the transactions
      contemplated hereby will be issued, if at all, at such time and in such form
      and
      manner as the Parties determine. A Party may not unreasonably withhold its
      consent to a request by another Party to make such further public announcements
      or similar publicity. If a Party is required
      by applicable law or stock exchange regulations to which such Party is subject
      to make such public announcement or publicity, it may do so provided such Party
      has delivered to the other Parties a copy of the proposed announcement or
      publicity not less than 24 hours prior to making such proposed announcement
      or
      publicity. Sellers
      and Buyer will consult with each other concerning the means by which any
      employees, customers, and suppliers and others having dealings with Newco will
      be informed of this Agreement or the Contemplated Transactions
      hereby.





**11.5**  **Governing
      Law and Arbitration** **.**




This
      Agreement shall be governed by and construed in accordance with the laws of
      Chile without giving effect to the conflict of law rules thereof.




40
 **Execution
          Version - December 28, 2005**


(a)  In
      the
      event of any dispute, controversy or claim arising out of or relating to this
      Agreement, or the performance, breach, termination, or invalidity hereof (a
      “ Dispute ”),
      such
      Dispute shall be the subject of an attempt at an amicable solution, for which
      purpose a Party shall give notice to the other Party, giving a concise
      description of the matter in question and the position of such Party in respect
      thereof and proposing a meeting among the chief executive officers or their
      designees (the “ **Senior
      Officers** ”)
      of the
      Parties in Santiago, Chile (or such other place as they may agree) with the
      purpose of resolving the Dispute. In the event such a meeting is called, the
      meeting shall take place within 10 days of its being requested. Unless the
      Parties otherwise agree, if such meeting does not take place within such 10
      days
      or if within 10 days after such meeting the Senior Officers have not resolved
      such matter, then the Dispute shall be resolved by arbitration as provided
      in
      Section 11.5(b).




(b)  If
      a
      Dispute arises and is not settled by amicable negotiations within the prescribed
      time period by the representatives of the Parties and the Senior Officers of
      the
      Parties in accordance with Section 11.5(a), such Dispute shall be settled by
      arbitration in accordance with the International Arbitration Rules of the
      American Arbitration Association in effect on the date hereof. Judgment thereon
      may be entered by any court having jurisdiction. If a Party wishes to initiate
      an arbitration with respect to a Dispute, it shall first provide 10 days advance
      notice to the other Party, setting forth that it intends to initiate
      arbitration, the issues in dispute and a summary in reasonable detail of its
      position with respect thereto. Other than the procedure described in Section
      11.5(a), arbitration shall be the sole and exclusive forum for resolution of
      any
      Dispute, and the award thereunder shall be final, conclusive and binding on
      those participating in the arbitration.




(c)  The
      number of arbitrators shall be three, each of whom shall be a lawyer, shall
      be
      disinterested in the dispute, controversy or claim and shall have no connection
      with any Party. One arbitrator will be selected by each Party and one by mutual
      agreement of the first two arbitrators or, if they cannot agree, by the
      appointing authority which shall be designated in accordance with the
      International Arbitration Rules of the American Arbitration Association (the
      “ Appointing
      Authority ”).
      The
      Parties shall have 30 days to each appoint an arbitrator. If a Party fails
      to
      appoint an arbitrator within such 30 day period, the Appointing Authority shall
      appoint an arbitrator for that Party. The Parties and the Appointing Authority
      may appoint from among the nationals of any country, whether or not a Party
      is a
      national of that country. The place of arbitration shall be Miami City, State
      of
      Florida, United States of America. The arbitration shall be conducted in the
      English language and any foreign-language documents presented at such
      arbitration hearing shall be accompanied by an English translation thereof.
      Each
      Party hereby submits to the non-exclusive jurisdiction of the courts of
      Santiago, Chile in any action, suit or proceeding with respect to the
      enforcement of the arbitration provisions of this Agreement and with respect
      to
      the enforcement of any award thereunder.




(d)  Process
      in any action or proceeding referred to in the preceding sentence may be served
      on any Party anywhere in the world by notice given to the Party in accordance
      with the International
      Arbitration Rules of the American Arbitration Association .




**11.6**  **Expenses
      and Taxes** **.**




Except
      as
      otherwise expressly provided in this Agreement, each Party to this Agreement
      will bear its respective expenses (including, any taxes imposed on such Party)
      incurred in connection with the preparation, execution, and performance of
      this
      Agreement and the transactions contemplated hereby, including all fees and
      expenses of agents, Representatives, counsel, and accountants. Sellers will
      cause Newco not to incur any out-of-pocket expenses in connection with this
      Agreement. In the event of termination of this Agreement, the obligation of
      each
      Party to pay its own expenses will be subject to any rights of such Party
      arising from a breach of this Agreement by another Party.





41
 **Execution
          Version - December 28, 2005**


**11.7**  **Severability** **.**




If
      at any
      time subsequent to the date hereof, any provisions of this Agreement shall
      be
      held by any court of competent jurisdiction to be illegal, void or
      unenforceable, such provision shall be of no force and effect, but the
      illegality or unenforceability of such provision shall have no effect upon
      and
      shall not impair the enforceability of any other provision of this Agreement.




**11.8**  **Waiver** **.**




The
      rights and remedies of the Parties are cumulative and not alternative. Neither
      the failure nor any delay by any Party in exercising any right, power or
      privilege under this Agreement will operate as a waiver of such right, power
      or
      privilege, and no single or partial exercise of any such right, power or
      privilege will preclude any other or further exercise of such right, power
      or
      privilege or the exercise of any other right, power or privilege. To the maximum
      extent permitted by applicable law, (a) no claim or right arising out of this
      Agreement can be discharged by one Party, in whole or in part, by a waiver
      or
      renunciation of the claim or right unless in writing signed by the other Party;
      (b) no waiver that may be given by a Party will be applicable except in the
      specific instance for which it is given; and (c) no notice to or demand on
      one
      Party will be deemed to be a waiver of any obligation of such Party or of the
      right of the Party giving such notice or demand to take further action without
      notice or demand as provided in this Agreement.




**11.9**  **Assignment** **.**




The
      respective rights and obliga-tions of the Parties under this Agreement may
      not
      be assigned by Buyer or the Sellers without the prior written consent of the
      other.




**11.10**  **Governing
      Language** **.**




This
      Agreement is executed in the English language, and all of its terms and
      provisions shall be construed in accordance with the English language, which
      shall prevail, notwithstanding any translation thereof, whether agreed by the
      Parties or not.




42
 **Execution
          Version - December 28, 2005**


**11.11**  **Counterparts** **.**




This
      Agreement may be executed in two (2) counterparts, each of which shall be deemed
      an original, but all of which taken together shall constitute one and the same
      instrument.





**IN
      WITNESS WHEREOF** ,
      the
      parties hereto have duly executed this Purchase Agreement, as of the day and
      year first above written.





**GSE
              LINING
              TECHNOLOGY CHILE S.A.**By:
            /s/ Mark
              HarrisName:
              Mark HarrisTitle:
              General Manager 
 **INVERSIONES
                BELLAVISTA UNO S.A.**By:
              /s/ Adres
                Rifo A.Name:
                Andrés Rifo A.Title:
                Legal Representative 
 **INVERSIONES
                  BELLAVISTA TRES S.A.**By:
                /s/ Adres
                  Rifo A.Name:
                  Andrés Rifo A.Title:
                  Legal Representative
 **TECNOLOGÍA
                    HIDRÁULICA EN MINERÍA Y CONSTRUCCIÓN S.A.**By:
                  /s/ Adres
                    Rifo A.Name:
                    Andrés Rifo A.Title:
                    Legal Representative




43