Document:

Exhibit 10.24

 

EXHIBIT 10.24

ASSET PURCHASE AGREEMENT

BY AND AMONG

POLYONE CORPORATION,

PVC CONTAINER CORPORATION

AND

NOVATEC PLASTICS CORPORATION, INC.

DATED AS OF

MAY 13, 2005

 

 

TABLE OF CONTENTS

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

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EXHIBITS

	 	 	 
	Exhibit A

	 	Equipment
	 
	 	 
	Exhibit B

	 	Intangible Assets
	 
	 	 
	Exhibit C

	 	Existing Customers

APPENDICES

	 	 	 
	Appendix A

	 	Supply Agreement
	 
	 	 
	Appendix B

	 	Bill of Sale

SCHEDULES

	 	 	 
	Schedule 5(g)

	 	Products, Specifications and Recipes
	 
	 	 
	Schedule 5(k)

	 	Customers and Suppliers
	 
	 	 
	Schedule 7(b)

	 	Transition Operating Expenses
	 
	 	 
	Schedule 7(d)

	 	Certain Key Employees

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Execution Version

ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of the 13th day
of May, 2005, by and among POLYONE CORPORATION, an Ohio corporation (“Purchaser”), PVC
CONTAINER CORPORATION, a Delaware corporation (“Parent”), and NOVATEC PLASTICS CORPORATION,
INC., a Delaware corporation (“Seller”).

RECITALS

     WHEREAS, Seller is a wholly-owned subsidiary of Parent and is engaged in the business (the
“Business”) of manufacturing polyvinyl chloride compounds for internal consumption and for
sale to plastic manufacturers;

     WHEREAS, the Parent and the Parent’s two other wholly-owned subsidiaries, Novapak Corporation
and Airopak Corporation, conduct all aspects of Parent’s business and operations, other than the
Business, including, but not limited to, the manufacturing and selling of plastic bottles and
containers (collectively, the “Excluded Business”);

     WHEREAS, Seller, as of the Closing Date, owns the following assets used in the Business:

     (i) All of the existing machinery and equipment used in the Business in connection with the
manufacture of the Products (as defined below), including the upstream and downstream compounding
equipment, laboratory equipment, silos and transfer lines (collectively, the “Equipment”),
including, but not limited to, those items listed on Exhibit A attached hereto;

     (ii) All of the technology, know-how, patents, patent applications, research and development,
customer lists and customer relationships, recipes, trademarks or service marks, trade names,
slogans or other like property, including, without limitation, the marks or names relating to or
including the name Novatec, the mark Novatec or any derivatives thereof and any Novatec logos or
any derivatives thereof and all goodwill related thereto, and other intangible property used in the
Business in connection with the manufacture and sale of the Products (collectively, the
“Intangible Assets” and together with the Equipment, the “Purchased Assets”),
including, but not limited to, those items identified on Exhibit B attached hereto;

     WHEREAS, Seller desires to sell, transfer and convey the Purchased Assets to Purchaser, and
Purchaser desires to purchase and otherwise acquire the Purchased Assets from Seller, pursuant to
the terms and conditions hereof; and

     WHEREAS, for purposes of this Agreement, “Products” shall mean those polyvinyl
chloride compounds specifically identified and set forth on Schedule 5(g) together with the
specifications and recipes for each (such listed specifications and recipes, collectively, the
“Specifications”).

 

 

AGREEMENT

     NOW THEREFORE, in consideration of the premises, and other good and valuable consideration,
the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereto agree as
follows:

     1. Agreement to Sell and Purchase.

          (a) Subject to the terms and conditions hereof, Seller hereby agrees to sell, transfer and
convey to Purchaser, and Purchaser agrees to purchase or otherwise acquire from Seller, the
Purchased Assets.

          (b) Notwithstanding anything to the contrary contained herein, the following assets and
properties of Seller are specifically excluded from the Purchased Assets and shall be retained by
Seller (the “Excluded Assets”): (i) all inventory, equipment and other assets relating to
the Excluded Business; (ii) all cash, cash equivalents, accounts and notes receivable, prepaid
items and deposits; (iii) claims or rights against third parties; (iv) all insurance policies and
rights thereunder; (v) any and all of Parent’s trademarks or service marks, trade names, slogans or
other like property relating to the Excluded Business, including, without limitation, the marks or
names relating to or including the name PVC, the marks PVC or any derivatives thereof and any PVC
logos or any derivatives thereof and all goodwill related thereto; (vi) all software owned by or
licensed to Seller; (vii) all other assets of Seller not specifically included in the Purchased
Assets, including, but not limited to, assets used by Seller in its other businesses, operations or
corporate functions; and (viii) all inventory of the Business.

     2. Purchase Price. The purchase price (the “Purchase Price”) payable by
Purchaser to Seller for the Purchased Assets is:

          (a) $625,000 for the Equipment (the “Equipment Purchase Price”) at Closing (as defined
below); and

          (b) An Earn-Out (as defined below) for the Intangible Assets, payable as follows:

               (i) A $500,000 nonrefundable advance (the “Advance”) at Closing, which Advance shall
be repaid to Purchaser by Seller to the extent the External Earn-Out is paid pursuant to Sections
2(b)(ii)-(v) below;

               (ii) For each pound of Product sold by Purchaser to the existing customers of Seller set forth
in “Group A” on Exhibit C attached hereto (collectively, the “Group A Existing
Customers”), Purchaser will make payments to Seller as follows (the “Group A External
Earn-Out”):

                    (A) From the Closing Date (as defined below) through August 31, 2007:
$0.04/Pound;

                    (B) From September 1, 2007, through August 31, 2008: $0.03/Pound;

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                    (C) From September 1, 2008, through August 31, 2009: $0.02/Pound; and

                    (D) From September 1, 2009, through December 31, 2009: $0.01/Pound.

               (iii) For each pound of Product identified in “Group B” on Exhibit C attached hereto
(each a “Group B Product”) sold within the Group B Range (as defined below) by Purchaser to
the existing customers of such Group B Product set forth in “Group B” on Exhibit C attached
hereto (collectively, the “Group B Existing Customers”), Purchaser will make payments to
Seller as follows (the “Group B External Earn-Out”):

                    (A) From the Closing Date through August 31, 2007: $0.04/Pound;

                    (B) From September 1, 2007, through August 31, 2008: $0.03/Pound;

                    (C) From September 1, 2008, through August 31, 2009: $0.02/Pound; and

                    (D) From September 1, 2009, through December 31, 2009: $0.01/Pound.

               For purposes of this subpart (iii), “Group B Range” shall be defined as sales of a
Group B Product, in pounds, to a related Group B Existing Customer in the range (I) between and not
including the minimum number of pounds set forth in column A of “Group B” on Exhibit C
attached hereto for such Group B Product, and (II) up to and including the maximum number of pounds
set forth in column B of “Group B” on Exhibit C attached hereto for such Group B Product.
By way of example, if Purchaser sells 500,000 pounds of a Group B Product to a Group B Existing
Customer, and if the figure in column A relating thereto is 150,000 pounds and the figure in column
B relating thereto is 300,000 pounds, then the Group B Range for purposes of computing the Group B
External Earn-Out would be 150,000 pounds, as the Group B Range would be defined as the range
between and not including 150,000 pounds and up to and including 300,000 pounds.

               (iv) For each pound of Product identified in “Group C” on Exhibit C attached hereto
(each a “Group C Product”) sold by Purchaser to the existing customers of such Group C
Product set forth in “Group C” on Exhibit C attached hereto (collectively, the “Group C
Existing Customers”), Purchaser will make payments to Seller as follows (the “Group C
External Earn-Out”):

                    (A) From the Closing Date through August 31, 2007: $0.04/Pound;

                    (B) From September 1, 2007, through August 31, 2008: $0.03/Pound;

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                    (C) From September 1, 2008, through August 31, 2009: $0.02/Pound; and

                    (D) From September 1, 2009, through December 31, 2009: $0.01/Pound.

               (v) The Group A External Earn-Out, the Group B External Earn-Out and the Group C External
Earn-Out are collectively referred to herein as the “External Earn-Out.” The Group A
Existing Customers, the Group B Existing Customers and the Group C Existing Customers are
collectively referred to herein as the “Existing Customers.” The External Earn-Out
payments described in subparts (ii)-(iv) above shall be payable by Purchaser to Seller quarterly in
arrears, commencing at the end of the first calendar quarter after Closing, and shall be due to
Seller within thirty (30) days of the end of each such quarter; provided, however, that until such
time as the Advance is repaid in full, Purchaser shall retain fifty percent (50%) of all such
External Earn-Out payments to offset and repay the Advance; and

               (vi) For each pound of Products sold by Purchaser to Seller pursuant to that certain supply
agreement to be entered into by and between Purchaser and Seller at Closing (as attached hereto as
Appendix A, the “Supply Agreement”), Purchaser will make payments to Seller as
follows (the “Internal Earn-Out”):

                    (A) From September 1, 2005, through August 31, 2007: $0.06/Pound;

                    (B) From September 1, 2007, through August 31, 2009: $0.04/Pound; and

                    (C) From September 1, 2009, through December 31, 2009: $0.02/Pound.

Such Internal Earn-Out payments shall be payable by Purchaser to Seller quarterly in arrears and
shall be due to Seller within thirty (30) days of the end of each calendar quarter following
September 30, 2005.

               (vii) The External Earn-Out and the Internal Earn-Out are collectively referred to herein as
the “Earn-Out.”

     3. Retained Liabilities. Purchaser is not assuming any liabilities or obligations of
Seller of any nature whatsoever (collectively, the “Retained Liabilities”), including, but
not limited to, any expenses, liabilities or obligations of Seller arising out of the execution and
delivery of this Agreement or the Supply Agreement or the consummation of the transactions
contemplated hereby or thereby (nor may Seller pay any of such expenses, or discharge any of such
liabilities or obligations, out of the Purchased Assets), and any liabilities or obligations of
Seller relating to federal, state or local income or franchise taxes, or sales, use or gross
receipts taxes, attributable to Seller’s ownership of the Purchased Assets, the transactions
contemplated hereby or by the Supply Agreement or the conduct of the Business prior to the Closing
Date. For any taxable period during which both Purchaser and Seller owned the Purchased Assets for
some

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portion of the period, any property or similar tax on the Purchased Assets shall be prorated
by the parties based upon the number of days such party owned the Purchased Assets. Except as may
be otherwise provided in Section 7(d) below, Purchaser will not assume any employee compensation,
severance obligation, collective bargaining agreement, employee benefit, pension, profit sharing or
other retirement obligation with respect to Seller’s current or former employees. Seller remains
liable for all obligations, severance, costs and expenses related to the shutdown or termination of
any operations or facilities in connection with this transaction.

     4. The Closing.

          (a) Date. The closing of the sale and purchase of the Purchased Assets (the
“Closing”) shall take place on May 31, 2005 (the “Closing Date”), or at such other
time or place as the parties mutually agree.

          (b) Purchaser Deliverables. Purchaser shall deliver or cause to be delivered to
Seller at the Closing (i) the Equipment Purchase Price and the Advance by wire transfer of
immediately available funds to such bank account or accounts as Seller shall have designated by
written notice delivered to Purchaser, (ii) the Supply Agreement executed by Purchaser, (iii) that
certain bill of sale by and between Purchaser and Seller (as attached hereto as Appendix B,
the “Bill of Sale”) executed by Purchaser, and (iv) all other documents reasonably required
by Seller to consummate the transactions contemplated by this Agreement.

          (c) Seller Deliverables. Seller shall deliver or cause to be delivered to Purchaser
at the Closing (i) a bringdown certificate, dated as of the Closing and executed on behalf of
Seller by a duly authorized officer of Seller, stating that the conditions specified in Sections
4(e)(i)-(iii) below have been fulfilled, (ii) a certified copy of resolutions of the Board of
Directors of Seller authorizing the execution, delivery and performance of this Agreement, the
Supply Agreement and the other related agreements and instruments to which Seller is a party, (iii)
the Supply Agreement executed by Seller, (iv) the Bill of Sale executed by Seller, and (v) all
other documents reasonably required by Purchaser to consummate the transactions contemplated by
this Agreement (all such other documents, together with the Supply Agreement and the Bill of Sale,
the “Related Agreements”).

          (d) Covenants. Purchaser and Seller shall have the rights and obligations set forth
below during the period between the date hereof and the Closing:

               (i) Seller shall continue to operate the Business in the ordinary course and shall utilize its
reasonable best efforts to maintain good relations with its employees and with the Existing
Customers.

               (ii) Seller shall continue to provide Purchaser and its officers, employees, attorneys,
consultants, accountants, agents and representatives reasonable access during normal business hours
to all of the properties, books, contracts, documents, records, vendors, customers and key
personnel of or with respect to the Business and shall furnish to Purchaser and such persons as
Purchaser shall designate such information as Purchaser or such persons may at any time and from
time to time reasonably request. Purchaser shall conduct its

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due diligence and exercise its rights under this Section 4(d)(ii) in a manner that does not
disrupt Seller’s normal operations of the Business.

          (e) Purchaser Closing Conditions. The obligations of Purchaser under this Agreement
in connection with the Closing are subject to the fulfillment at or before the Closing of each of
the following conditions:

               (i) The representations and warranties of Parent and Seller contained in Section 5 below shall
be true and correct in all material respects at the Closing with the same effect as though such
representations and warranties had been made at and as of the Closing Date.

               (ii) Parent and Seller shall have performed and complied with all agreements and obligations
contained in this Agreement in all material respects that are required to be performed or complied
with by them or either of them at or before the Closing.

               (iii) There shall not have occurred since the date hereof any event or condition that has had
a material adverse effect on the Purchased Assets but excluding any event or condition that relates
to (A) the transactions contemplated by this Agreement and the Related Agreements and any public
announcements thereof, (B) Seller’s preparation to wind down its operations relating to the
Business, including, but not limited to, the closing of its manufacturing facility at which the
Products are currently manufactured, (C) changes or conditions affecting the industries of which
the Business is a part generally, (D) changes in economic, regulatory, or political conditions
generally, or (E) any acts of war or terrorism (a “Material Adverse Effect”).

               (iv) Seller shall have entered into each of the Related Agreements, each in form and substance
satisfactory to Purchaser.

               (v) The consent listed in Section 5(d) shall have been obtained in form and substance
satisfactory to Purchaser.

               (vi) Purchaser shall be satisfied:

                    (A) With the final form and substance of all exhibits, appendices and
schedules to this Agreement;

                    (B) With its pre-Closing inspection of the Equipment;

                    (C) That Existing Customers representing, collectively, at least 60% of
Seller’s revenues from the sale of Products on an annualized basis as of the
date of this Agreement will convert to being customers of, and will purchase
Products from, Purchaser after the Closing; and

                    (D) That the Purchased Assets will be transitioned to Purchaser’s
facilities by October 1, 2005.

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          (f) Seller Closing Conditions. The obligations of Seller under this Agreement in
connection with the Closing are subject to the fulfillment at or before the Closing of each of the
following conditions:

               (i) The representations and warranties of Purchaser contained in Section 6 below shall be true
and correct in all material respects at the Closing with the same effect as though such
representations and warranties had been made at and as of the Closing Date.

               (ii) Purchaser shall have performed and complied with all agreements and obligations contained
in this Agreement in all material respects that are required to be performed or complied with by it
at or before the Closing.

               (iii) Purchaser shall have entered into the Supply Agreement, the Bill of Sale and all other
documents reasonably required by Seller to consummate the transactions contemplated by this
Agreement, each in form and substance satisfactory to Seller.

     5. Representations and Warranties of Parent and Seller . Except as set forth in the
Schedules attached hereto, Parent and Seller, jointly and severally, hereby represent and warrant
to Purchaser as of the Closing Date as follows:

          (a) Organization. Parent and Seller are each a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and Seller has corporate
power and authority to own the Purchased Assets and to carry on the Business as it is now being
conducted, and is duly qualified as a foreign corporation and is in good standing in all
jurisdictions in which the conduct of the Business requires it to so qualify, except where the
failure to be so qualified would not have a Material Adverse Effect.

          (b) Authorization; Enforceability.

               (i) The execution, delivery and performance of this Agreement and the Related Agreements have
been duly authorized by all necessary corporate action of Parent and Seller, as applicable. No
other corporate proceedings on the part of Parent or Seller are necessary to authorize this
Agreement or the Related Agreements or the consummation of the transactions contemplated hereby or
thereby.

               (ii) This Agreement and each of the Related Agreements has been duly executed and delivered by
Parent and Seller, as applicable, and is a valid and legally binding obligation of Parent and
Seller, as applicable, enforceable against it in accordance with its terms, except as may be
limited by bankruptcy or other laws affecting creditors’ rights and by equitable principles.

          (c) No Violation or Conflict. Neither the execution and delivery of this Agreement or
any of the Related Agreements nor the consummation of the transactions contemplated hereby or
thereby will (i) violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the performance

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required by, or result in the creation of any lien, security interest, charge or other
encumbrance (collectively, “Liens”) upon any of the Purchased Assets under, any of the
terms, conditions or provisions of the Articles of Incorporation or By-Laws (or any similar charter
document) of Parent or Seller or any note, bond, mortgage, indenture, deed of trust, license,
agreement (including, but not limited to, any employee benefit plan) or other instrument or
obligation to which Parent or Seller is a party, or by which Parent or Seller or any of the
Purchased Assets may be bound or affected, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Parent or Seller or any of the Purchased Assets.

          (d) Consents and Notices. Except for the consent of PNC Bank, no consent or approval
by, notice to or registration with any governmental authority, creditor or other party to any
agreement with Parent or Seller is required on the part of Parent or Seller prior to the execution
and delivery by Parent or Seller of this Agreement or any of the Related Agreements, as applicable,
or the consummation by Seller of any of the transactions contemplated hereby or thereby.

          (e) Title to and Condition of the Purchased Assets; Sufficiency.

               (i) Seller has, and at Closing will convey to Purchaser, good, valid and marketable title to
the Purchased Assets, free and clear of any Liens, except for Liens for current taxes, assessments,
fees and other governmental or similar charges or levies that are not yet due and payable as of the
date of this Agreement.

               (ii) The Equipment has been maintained in accordance with normal practice and is in sufficient
operating condition and good repair (subject to normal wear and tear), taken as a whole. The
Purchased Assets constitute all the equipment and all the intangible property necessary to operate
the Business as it was operated prior to the Closing Date.

          (f) Employees. There are no pending or, to the best knowledge of Seller, threatened
claims against Seller by any current or former employee of Seller engaged in the Business other
than for compensation and benefits due in the ordinary course of employment. There are no pending
or, to the best knowledge of Seller, threatened claims against Seller arising out of any statute,
ordinance or regulation relating to employment practices or occupational or safety and health
standards with respect to employees or former employees engaged in the Business. There are no
pending or, to the best knowledge of Seller, threatened labor disputes, strikes or work stoppages
against Seller with respect to employees engaged in the Business.

          (g) Intangible Property.

               (i) Seller owns and has the right and authority to use the Intangible Property. To the best
knowledge of Seller, such ownership and use does not conflict with, infringe upon or violate any
rights of any other person, firm or corporation, and to the best knowledge of Seller, no other
person, firm or corporation is infringing upon or violating the rights of Seller in and to the
Intangible Property. There are no Liens on or encumbering the Intangible Property. There is no
other Intellectual Property necessary for the operation of the Business as it was operated prior to
the Closing Date that is not owned by Seller and included in Purchased Assets. For purposes of
this Section 5(g), “Intellectual Property” means inventions,

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discoveries, ideas, processes, designs, models, formulae, patterns, compilations, programs,
devices, methods, techniques, processes, know-how, proprietary information, technical information,
data and databases, drawings and blueprints, and all other information and materials that would
constitute a trade secret under applicable law, as well as all patents, industrial and utility
models, industrial designs, certificates of invention and other indicia of invention ownership, and
all applications, provisionals, reissues, re-examinations, extensions, divisions, continuations (in
whole or in part) and equivalents and counterparts of the foregoing.

               (ii) The Specifications set forth in Schedule 5(g) for each Product are true, correct
and complete in all respects and constitute all of the information necessary to manufacture each of
the Products. Schedule 5(g) also lists each item of Intellectual Property which is
registered by, issued by or on file with a governmental authority.

          (h) Litigation. There is no action, dispute, claim, litigation, proceeding, labor
dispute (other than routine grievance procedures), arbitration, investigation or other proceeding
at law or in equity pending against Parent or Seller with respect to the Purchased Assets or the
Business or, to the best knowledge of Seller, threatened against Parent or Seller with respect to
the Purchased Assets or the Business, or otherwise relating to the validity, legality or propriety
of the transactions contemplated by this Agreement, whether sounding in tort, contract, warranty,
product liability or otherwise. There are no decrees, injunctions or orders of any court or
governmental department or agency outstanding against Seller with respect to the Purchased Assets
or the Business.

          (i) Compliance with Laws. Seller has complied and is currently complying in all
material respects with all applicable statutes, regulations, orders, ordinances and other laws of
the United States of America and all state and local governments, and agencies of any of the
foregoing, as they relate to the Purchased Assets, the Business or the real property on which the
Purchased Assets have been located and the Business operated, including federal, state and local
statutes, regulations, orders, ordinances and other laws relating to the protection of the
environment. Seller has not received any notice to the effect that, or otherwise been advised
that, Seller is not in compliance in all material respects with any of such statutes, regulations,
orders, ordinances or other laws as they relate to the Purchased Assets, the Business or the real
property on which the Purchased Assets have been located and the Business operated.

          (j) Taxes. All federal, state, local, foreign and other material taxes, assessments,
fees and other governmental charges, including any interest or penalties (“Taxes”), imposed
upon Seller with respect to the Purchased Assets or the Business which are due and payable with
respect to all periods ending prior to or on the Closing Date have been paid, and all Tax returns
and reports required by law to be timely filed (taking into account applicable extension periods)
with respect to all periods ending prior to or on the Closing Date have been timely filed. There
are no Tax claims pending against Seller with respect to the Purchased Assets or the Business, and
Seller knows of no threatened claims for Tax deficiencies against Seller with respect to the
Purchased Assets or the Business.

          (k) Customers and Suppliers. To the best knowledge of Seller, none of the Existing
Customers or suppliers to the Business intends to cease doing business with the Business.
Schedule 5(k) lists (i) the five largest Existing Customers of the Business, on the basis

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of revenues for goods sold or services provided for the most recently-completed fiscal year,
and (ii) the five largest suppliers of the Business, on the basis of cost of goods or services
purchased for the most recently-completed fiscal year. Schedule 5(k) also lists the
parties with whom Parent or Seller has confidentiality agreements concerning the Business or the
Products.

          (l) Insurance. Seller maintains insurance policies covering the Purchased Assets and
the Business in such amounts and against such risks as Seller believes to be customarily carried
and insured by owners of comparable businesses and with such deductibles as are customary in the
circumstances. Such insurance policies are in full force and effect, and Seller is not in default
with respect to the payment of any premium and is in material compliance with the provisions
contained in such policies.

          (m) Product Liability and Warranty. Each Product sold or otherwise delivered by
Seller has been in conformity with all applicable contractual commitments and all express and
implied warranties, and Seller does not have any liability (and there is no basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand
against Seller) for replacement or repair of any such Products or other damages in connection
therewith. No Product manufactured, sold or delivered by Seller is subject to any guaranty,
warranty or other indemnity beyond the applicable standard terms and conditions of sale. Seller
does not have any liability, and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against Seller giving rise
to any liability, arising out of any injury to any person, party or property as a result of the
ownership, possession or use of a Product manufactured, sold or delivered by Seller.

          (n) No Brokers. Seller has not retained the services of any broker, finder or agent
in connection with the transactions contemplated by this Agreement.

     6. Representations and Warranties of Purchaser. Purchaser hereby represents and
warrants to Seller as of the Closing Date as follows:

          (a) Organization. Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio and has corporate power and authority to own its
assets and to carry on its business as it is now being conducted, and is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions in which the conduct
of its business requires it to so qualify, except where the failure to be so qualified would not
have a Material Adverse Effect.

          (b) Authorization; Enforceability.

               (i) The execution, delivery and performance of this Agreement have been duly authorized by all
necessary corporate action of Purchaser. No other corporate proceedings on the part of Purchaser
are necessary to authorize this Agreement or the consummation of the transactions contemplated
hereby.

               (ii) This Agreement has been duly executed and delivered by Purchaser and is a valid and
legally binding obligation of Purchaser, enforceable against it in

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accordance with its terms, except as may be limited by bankruptcy or other laws affecting
creditors’ rights and by equitable principles.

          (c) No Violation or Conflict. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) violate, or conflict with, or
result in a breach of any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, any of the terms, conditions or provisions of the Articles
of Incorporation or Regulations (or any similar charter document) of Purchaser or any note, bond,
mortgage, indenture, deed of trust, license, agreement (including, but not limited to, any employee
benefit plan) or other instrument or obligation to which Purchaser is a party, or (ii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to Purchaser.

          (d) Consents and Notices. No consent or approval by, notice to or registration with
any governmental authority, creditor or other party to any agreement with Purchaser is required on
the part of Purchaser prior to the execution and delivery by Purchaser of this Agreement or the
consummation by Purchaser of any of the transactions contemplated hereby.

          (e) No Brokers. Purchaser has not retained the services of any broker, finder or
agent in connection with the transactions contemplated by this Agreement.

     7. Additional Covenants of Purchaser and Seller.

          (a) License. For the manufacture of Products for Seller’s internal purposes only,
from and after the Closing, Purchaser grants to Seller a perpetual, nonexclusive, royalty-free
license to use the technology and recipes (the “Licensed Technology”), which are embodied
in the Intangible Property, that are necessary for the manufacture of Products currently used by
Seller in the Business. Seller may sublicense the Licensed Technology to a third-party supplier or
manufacturer (each a “Sublicensee”) for the limited purpose of manufacturing Products for
Seller’s internal purposes only. Subject to the provisions of Section 7(b) below, from and after
the Closing, Seller may not manufacture any Products for sale to customers, sell Products to
customers, or purchase from a third-party supplier, manufacturer or distributor Products for resale
to customers.

          (b) Transition. Purchaser and Seller will work together to develop a mutually
acceptable plan to transition the Purchased Assets to Purchaser’s facilities following the Closing
and to transition to Purchaser the customer relationships of the Business. The parties anticipate
a transition period of three to six months for the injection and profile Products and a transition
period of six to nine months for the bottle Products. During the period of these respective
transitions, which will commence on the Closing Date (the “Transition Periods”), Seller
will continue to operate the facilities in which the Products are manufactured and to employ the
employees of the Business consistent with its past practices. Seller shall be entitled to all of
the revenues generated for Products manufactured by Seller and sold to customers during the
respective and applicable Transition Periods and shall also be responsible for all cash operating
expenses relating to the operation of the Business at Seller’s existing manufacturing facilities,
which expenses are specified and estimated on Schedule 7(b) (the “Transition Operating
Expenses”). Purchaser will use its reasonable best efforts to assist Seller in minimizing the

-11-

 

Transition Operating Expenses during the respective and applicable Transition Periods. If the
Closing takes place on or before May 31, 2005, Purchaser will promptly reimburse Seller for the
Transition Operating Expenses actually incurred by Seller in connection with its operation of the
Business on or after September 1, 2005 (with such date to be extended by one day for every day the
Closing is delayed after May 31, 2005). Such reimbursement shall occur not later than thirty (30)
calendar days following Purchaser’s receipt of an invoice therefor.

          (c) Inventory. At the end of the respective and applicable Transition Periods,
Purchaser shall have the option to purchase from Seller usable raw material and finished goods
inventories of the Business at a purchase price equal to the lower of cost or market.

          (d) Employment. Purchaser and Seller will work together to develop a mutually
acceptable plan to retain with the Business certain key individuals. Seller will be responsible
for all severance, termination and related payments that are due its employees in connection with
the closing by Seller of the facility at which it manufactures Products. From the Closing and
until and through September 1, 2005, Seller will use its reasonable best efforts to continue to
employ those certain individuals, mutually identified by Seller and Purchaser, who are important to
the operation and transition to Purchaser of the Business (collectively, the “Key
Employees”). Purchaser shall reimburse Seller an amount equal to fifty percent (50%) of any
bonuses that are paid to such Key Employees as incentive to remain in the employment of the Seller
during the Transition Period, provided, however, Purchaser shall not be obligated to reimburse
Seller for any amounts exceeding $42,500; and provided, further, that as to the Key Employees set
forth on Schedule 7(d), and for purposes of this sentence only and the reimbursement
obligations set forth herein, the Transition Period shall be deemed to run up to and through
October 1, 2005. To the extent that Purchaser requires the services of any such Key Employees
after September 1, 2005, and subject to the provisions of the preceding sentence, Purchaser may,
but shall not be obligated to, make offers of employment to one or more of such Key Employees and
all bonuses, compensation or other remuneration related thereto will be the sole obligation of the
Purchaser. To the extent permitted by applicable law and subject to obtaining any consent of such
Key Employees, Seller will provide Purchaser, upon request, with access to the personnel records of
any of such Key Employees. If any of such Key Employees accepts Purchaser’s offer of employment,
Seller will cause such existing employment to be terminated, and Seller shall remain responsible
for any liability arising from such employment relationship with Seller.

          (e) Risk of Loss. Seller will continue to cover and insure the Purchased Assets
during the respective and applicable Transition Periods in accordance with past practices and the
provisions of Section 5(o) above. If any of the Purchased Assets are damaged or destroyed prior to
the date on which Purchaser takes possession thereof, the risk of loss shall be on Seller, and
Seller shall fully indemnify and defend Purchaser for such loss.

          (f) Public Announcements. All press releases, customer notifications and public
announcements relating to the transactions contemplated by this Agreement will be agreed upon in
advance by Purchaser and Seller.

          (g) Access to Books and Records. From the Closing Date until all Earn-Out payments
have been made pursuant to Section 2(b), Purchaser shall reasonably cooperate with

-12-

 

Parent and Seller to the extent that either or both reasonably request certain data, reports
or other information in order to evaluate the accuracy of the Earn-Out payments being made to
Seller pursuant to Section 2(b). In the event that Purchaser reasonably believes that providing
any such requested data, reports or other information to Parent or Seller would require Purchaser
to disclose confidential or sensitive operating, financial, legal or other business information,
then Purchaser, on the one hand, and Parent or Seller, on the other hand, shall identify a third
party reasonably acceptable to both (a “Third Party”) to whom or which Purchaser shall
disclose such requested data, reports or other information (the “Sensitive Information”) to
the extent reasonably necessary to respond to the underlying concerns of Parent or Seller (a
“Third Party Audit”). In the course of such Third Party Audit, such Third Party, keeping
confidential such Sensitive Information and not disclosing such Sensitive Information to Parent,
Seller or any other party, shall review such Sensitive Information with the sole objective of
evaluating the accuracy of the Earn-Out payments being made to Seller pursuant to Section 2(b).
The expenses of any such Third Party Audit shall be borne by Parent or Seller.

     8. Indemnification.

          (a) Indemnity by Seller. Parent and Seller, jointly and severally, agree to indemnify
and hold harmless Purchaser and Purchaser’s stockholders, directors, officers, employees,
affiliates, agents and representatives (collectively, the “Purchaser Indemnified Parties”
and each a “Purchaser Indemnified Party”) from and against all liabilities, claims, losses,
damages, deficiencies and expenses in respect of:

               (i) Any breach of the representations and warranties made by Parent or Seller in this
Agreement;

               (ii) Any non-fulfillment of any obligations of Parent or Seller pursuant to this Agreement;

               (iii) Any Retained Liabilities and other liabilities of Parent or Seller not assumed by
Purchaser under this Agreement;

               (iv) Any claims with respect to Products manufactured or sold by Seller on or prior to the
Closing Date or during the respective and applicable Transition Periods; and

               (v) Any and all actions, suits, proceedings, claims, demands, assessments, judgments, costs
and expenses (including court costs and other legal expenses, reasonable attorneys’ and technical
consultants’ fees, penalties and damages) arising as a consequence of any of the foregoing.

In no event will any Purchaser Indemnified Party be required, prior to making a claim against
Parent or Seller or becoming entitled to recovery hereunder from Parent and Seller, to commence
litigation or to take any other action (other than reasonable efforts to file claims to obtain
insurance recoveries) against any third party with respect to a matter for which any Purchaser
Indemnified Party may have a claim against Parent or Seller under this Agreement.

-13-

 

          (b) Indemnity by Purchaser. Purchaser agrees to indemnify and hold harmless Parent,
Seller and each of their respective stockholders, directors, officers, employees, affiliates,
agents and representatives (collectively, the “Seller Indemnified Parties” and each a
“Seller Indemnified Party”) from and against all liabilities, claims, losses, damages,
deficiencies and expenses in respect of:

               (i) Any breach of the representations and warranties made by Purchaser in this Agreement;

               (ii) Any non-fulfillment of any obligations of Purchaser pursuant to this Agreement;

               (iii) Any claims with respect to Products manufactured or sold by Purchaser subsequent to the
respective and applicable Transition Periods; and

               (iv) Any and all actions, suits, proceedings, claims, demands, assessments, judgments, costs
and expenses (including court costs and other legal expenses, reasonable attorneys’ and technical
consultants’ fees, penalties and damages) arising as a consequence of any of the foregoing.

In no event will any Seller Indemnified Party be required, prior to making a claim against
Purchaser or becoming entitled to recovery hereunder from Purchaser, to commence litigation or to
take any other action (other than reasonable efforts to file claims to obtain insurance recoveries)
against any third party with respect to a matter for which any Seller Indemnified Party may have a
claim against Purchaser under this Agreement.

          (c) Insurance and Tax Benefits. Any indemnification owing to an indemnified party
under Section 8(a) or Section 8(b) above shall be net of (i) any Tax refunds, adjustments,
benefits, savings or reductions, and (ii) any insurance proceeds (not including any proceeds under
any self-insurance arrangement), net of all costs of recovery, in either case to which the
indemnified party is entitled by virtue of the event or circumstances giving rise to the claim for
indemnification hereunder.

          (d) Maximum Losses. No claim for indemnification of losses or other amounts (whether
in an action for indemnification or otherwise) may be made by an indemnified party under Section
8(a)(i) or Section 8(b)(i) above, as the case may be, to the extent the aggregate losses and other
amounts claimed thereunder (including any losses or other amounts previously recovered thereunder)
against the indemnifying party exceed $125,000 (the “Cap”); provided, however, that any
claims against Parent or Seller arising from or relating to a breach of Section 5(e)(i) (Title to
Assets) or Section 5(n) (Brokers), or against Purchaser arising from or relating to a breach of
Section 6(e) (Brokers), or arising from or relating to the other provisions of Section 8(a) or
Section 8(b), as the case may be, shall not be subject to or credited against the foregoing Cap and
shall be fully recoverable to the maximum extent permitted by law or in equity.

          (e) Right of Set-Off. Purchaser shall be entitled to offset any Earn-Out amounts
payable to Seller against any amounts owing to Purchaser under this Section 8.

-14-

 

          (f) Defense of Claims.

               (i) As soon as is reasonably practicable after becoming aware of a claim for indemnification
under this Agreement, an indemnified party shall promptly give notice to the indemnifying party of
such claim and the amount the indemnified party will be entitled to receive hereunder from the
indemnifying party; provided, however, that the failure of the indemnified party to promptly give
notice shall not relieve the indemnifying party of its obligations except to the extent, if any,
that the indemnifying party shall have been prejudiced thereby. If the indemnifying party does not
object in writing to such indemnification claim within thirty (30) days of receiving notice
thereof, the indemnified party shall be entitled to recover from the indemnifying party the amount
of such claim. If the indemnifying party agrees that it has an indemnification obligation but
asserts that it is obligated to pay only a lesser amount, the indemnified party shall nevertheless
be entitled to recover from the indemnifying party the lesser amount, without prejudice to the
indemnified party’s claim for the difference. If the indemnifying party objects in writing to such
indemnification claim within thirty (30) days of receiving notice thereof, the validity of the
indemnification claim, and the extent of the indemnifying party’s liability therefor, shall be
determined by a court of appropriate jurisdiction.

               (ii) As soon as is reasonably practicable after receipt of notice of commencement of any
action or the assertion of any claim by a third party for which any party is entitled to be
indemnified under Section 8(a) or Section 8(b) above, the indemnified party shall give the
indemnifying party written notice thereof together with a copy of such claim, process or other
legal pleading; provided, however, that the failure of the indemnified party to promptly give
notice shall not relieve the indemnifying party of its obligations except to the extent, if any,
that the indemnifying party shall have been prejudiced thereby. The indemnifying party shall have
the right to defend the claim by representatives of its own choosing that are reasonably
satisfactory to the indemnified party and to settle or otherwise resolve the claim; provided,
however, that no obligation, restriction or loss shall be imposed on an indemnified party as a
result of such settlement or resolution without its prior written consent. In connection with any
such indemnification, the indemnified party will cooperate in all reasonable requests of the
indemnifying party.

          (g) Survival of Representations and Warranties. Except as otherwise provided herein,
the representations and warranties contained in Sections 5 and 6 of this Agreement shall survive
the Closing for a period of two years after the Closing Date; provided, however, that the
representations and warranties contained in Section 5(b)(i) (Authorization), Section 5(e)(i) (Title
to Assets), Section 5(n) (Brokers), Section 6(b)(i) (Authorization) and Section 6(e) (Brokers)
shall survive forever; and provided, further, that any specific claim or action of which specific
written notice is given to the party that made such representation or warranty prior to the date on
which such representation or warranty otherwise terminates as provided herein may continue to be
asserted and shall be indemnified against pursuant to this Section 8.

          (h) Remedies Exclusive. Except as provided in Section 9(b) below, the remedies
provided in this Section 8 shall be the exclusive remedy for monetary damages (whether at law or in
equity) and no party hereto may avoid the limitations on liability contained in this Article 8 by
seeking damages for breach of contract, tort or any other theory of liability. Without limiting
the foregoing, neither any party hereto nor any of their respective stockholders,

-15-

 

directors, officers, employees, affiliates, agents or representatives shall have any liability
or obligation to the other party in respect of any statement, representation, warranty or assurance
of any kind, other than the liabilities and obligations pursuant to this Section 8.

     9. Covenant Not to Compete.

          (a) Non-competition. Subject to the provisions of Section 7(b) above, each of Parent,
Seller and William J. Bergen (“Bergen”) agrees that, for the period commencing on the
Closing Date and ending on the fifth anniversary thereof (with respect to Parent and Seller) and on
the second anniversary thereof (with respect to Bergen), it and he will not, directly or
indirectly, (i) engage or hold an interest in any business anywhere in the world engaging in the
Business and/or in the manufacture or sale of products comprised of a substantially identical
chemical formula as the Products (a “Competitive Business”); (ii) have any interest in,
own, manage, operate, control, direct, be connected with as a stockholder (other than as a
stockholder of less than one percent (1%) of the issued and outstanding stock of a publicly-traded
corporation), joint venturer, officer, director, partner, employee or consultant, or otherwise
engage, assist or invest in, any Competitive Business; (iii) hire in connection with any
Competitive Business any person employed by, or otherwise under contract or agreement with,
Purchaser; or (iv) solicit any of Purchaser’s customers for the purpose of competing with Purchaser
in a Competitive Business. Notwithstanding the foregoing, none of Parent, Seller or Bergen shall
be prohibited from continuing the Excluded Business or manufacturing (or having manufactured for
it) any of the Products in accordance with the provisions of Sections 7(a) and 7(b) above.

          (b) Injunctive Relief. The parties hereto agree that damages would be an inadequate
remedy for Purchaser in the event of a breach of this Agreement; therefore, upon the happening of
such event, either with or without pursuing any potential damage remedies (which shall not be
subject to the limitations set forth in Section 8 above), Purchaser may immediately obtain and
enforce an injunction prohibiting Seller or Bergen from violating this Agreement from any court of
law or equity.

          (c) Acknowledgement. Bergen agrees and acknowledges that he shall personally benefit
from the consummation of the transactions contemplated by this Agreement and the Related
Agreements, that such benefits are sufficient consideration for the promises made and obligations
undertaken by him pursuant to this Section 9, and that the provisions of this Section 9 are a
condition to Purchaser entering into and performing this Agreement.

     10. General.

          (a) Entire Agreement; Amendment; Termination.

               (i) This Agreement and the documents referred to in this Agreement and required to be delivered pursuant to this Agreement constitute the entire agreement between the parties pertaining to the subject matter of this Agreement, and supersede all prior and contemporaneous agreements, understandings, negotiations and discussions of the parties, whether oral or written, including, but not limited to, that certain letter of intent between the parties dated as of May 2, 2005 (except for Paragraph 9 thereof, which paragraph shall survive

-16-

 

the execution and delivery of this Agreement and shall be binding upon the parties thereto
until the first to occur of the Closing or July 1, 2005), except for that certain confidentiality
letter agreement between the parties dated as of February 11, 2005, which agreement shall survive
the execution and delivery of this Agreement and shall be binding upon the parties thereto until
the first to occur of the Closing or the expiration of such agreement in accordance with its terms.
There are no warranties, representations or other agreements between the parties in connection
with the subject matter of this Agreement, except as specifically set forth in this Agreement. No
amendment, supplement, modification, waiver or termination of this Agreement shall be binding
unless executed in writing by the party or parties to be bound thereby.

               (ii) In the event that the Closing does not occur
before July 1, 2005, then, unless the parties hereto otherwise agree,
this Agreement shall terminate and expire and become null and void, the
transactions contemplated hereby will be deemed abandoned, and no party
hereto shall have any further liability or obligation hereunder.

          (b) Expenses.

               (i) Except as otherwise provided in this Section 10(b) or elsewhere in this Agreement, whether
or not the transactions contemplated by this Agreement are consummated, Purchaser and Seller shall
each pay the costs, fees and expenses of its respective legal counsel, accountants, consultants and
other experts incident to the negotiation and preparation of this Agreement and the consummation of
the transactions contemplated hereby.

               (ii) Purchaser shall be responsible for the payment of all recording fees and transfer Taxes
with respect to the sale and transfer of the Purchased Assets hereunder, and Seller will cooperate
with Purchaser in obtaining any applicable sales Tax exemptions.

               (iii) All ad valorem property Taxes attributable to the Purchased Assets for the taxable period
that includes the Closing Date shall be pro rated, with Seller being responsible for any such Taxes
attributable to such period up to the Closing Date, and Purchaser being responsible for any such
Taxes attributable to the remaining portion of such period

          (c) Tax Matters.

               (i) Seller and Purchaser agree to allocate the Purchase Price (including any liabilities
deemed to be assumed) among the Purchased Assets in accordance with Section 1060 of the Internal
Revenue Code of 1986, as amended (the “Code”) and U.S. Treasury Regulations thereunder.
Seller and Purchaser agree that Purchaser shall prepare and provide to Seller a draft allocation of
the Purchase Price among such Purchased Assets within 60 days after the Closing Date. Seller shall
notify Purchaser within 30 days of receipt of such draft allocation of any objection Seller may
have thereto. Seller and Purchaser agree to resolve any disagreement with respect to such
allocation in good faith. In addition, Seller and Purchaser hereby undertake and agree to file
timely any information that may be required to be filed pursuant to U.S. Treasury Regulations
promulgated under Section 1060(b) of the Code, and shall use the allocation determined pursuant to
this Section 10(c) in connection with the preparation of Internal Revenue Service Form 8594
(including any amendments thereto) as such form relates to the transactions contemplated hereunder.
Unless required to do so by applicable law, no party

-17-

 

shall file any Tax return or other document
or otherwise take any position that is inconsistent with the allocation determined pursuant to this
Section 10(c).

               (ii) Seller and Purchaser agree to provide each other with such information and assistance as
is reasonably necessary, including access to records and personnel, for the preparation of
any Tax returns or for the defense of any Tax claim or assessment, whether in connection with
an audit or otherwise.

          (d) Notices. All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given, if delivered in person or by a
nationally-recognized overnight delivery service, or telegraphed, telexed or mailed by certified or
registered mail, postage prepaid, as follows:

If to Purchaser:

PolyOne Corporation

33587 Walker Road

Avon Lake, Ohio 44012

Attention: John L. Rastetter, Treasurer

With a Copy to:

PolyOne Corporation

33587 Walker Road

Avon Lake, Ohio 44012

Attention: Wendy C. Shiba, Chief Legal Officer

And:

Thompson Hine LLP

3900 Key Center

127 Public Square

Cleveland, Ohio 44114

Attention: April V. Boise, Esq.

If to Seller:

Novatec Plastics Corporation, Inc.

2 Industrial Way West

Eatontown, NJ 07724

Attention: _____________

-18-

 

With a Copy to:

PVC Container Corp.

2 Industrial Way West

Eatontown, NJ 07724

Attention: William J. Bergen, President and CEO

And:

Jones Day

North Point

901 Lakeside Avenue

Cleveland, OH 44114

Attention: Joseph D. Hatina, Esq.

          (e) Further Assurances. From and after the Closing, upon the request of any party
hereto, the other party will execute and deliver such other instruments of conveyance and transfer
and take such other action as may reasonably be requested to effectively consummate the
transactions contemplated by this Agreement.

          (f) Governing Law; Jurisdiction and Venue. This Agreement, together with the Exhibits,
Schedules and Appendices hereto, shall be construed and interpreted according to the laws of the
State of Ohio without giving effect to any choice or conflict of law provision or rule that would
cause the application of the domestic substantive laws of any other jurisdiction. Purchaser and
Seller hereby agree that (i) the proper and exclusive forum and venue for any action or proceeding
arising out of, or relating to, this Agreement shall be any federal or state court situated in
northern Ohio, and (ii) each such party hereby irrevocably consents and submits to the jurisdiction
of any of such courts.

          (g) Assignment. This Agreement may not be assigned by any party hereto without the
prior consent of the other party. Each of Parent and Seller shall cause any successor in interest
to its business, whether by sale of assets, stock purchase, recapitalization, merger or otherwise,
to become and be bound by the provisions hereof (including, but not limited to, Section 9 above)
and the provisions of the Related Agreements.

          (h) Counterparts. This Agreement may be executed in more than one counterpart, each of
which shall be deemed an original, but such counterparts shall together constitute but one and the
same instrument.

          (i) Severability.

               (i) If any provision, clause or part of this Agreement, or the application thereof under
certain circumstances, is held invalid, the remainder of this Agreement, or the application of such
provision, clause or part under other circumstances, shall not be affected thereby unless such
invalidity materially impairs the ability of the parties to consummate the transactions
contemplated by this Agreement.

-19-

 

               (ii) As to Section 9 above, if any provision, or part thereof, is held to be unenforceable
because of the duration of such provision, the geographic area covered thereby, or other aspect of
the scope of such provision, the court making such determination will have the power to reduce the
duration, geographic area, or other aspect of the scope of such provision, and/or to delete
specific words and phrases (“blue-penciling”), and in its reduced or blue-penciled form, such provision
will then be enforceable and will be enforced.

          (j) Binding Effect; No Third Party Beneficiaries. This Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the respective successors and assigns of the
parties hereto. Except as otherwise expressly provided herein, nothing expressed or implied herein
is intended or shall be construed to confer upon or give any person, firm or corporation, other
than the parties hereto, any right or remedy hereunder or by reason hereof.

[Signature Page Follows]

-20-

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by
their duly authorized officers as of the day and year first written above.

	 	 	 	 	 
	PURCHASER:

	 	PARENT:
PVC CONTAINER
CORP.
	 
	POLYONE
CORPORATION

	 	 
	 
	By:

	/s/
Thomas A. Waltermire	 	By:	/s/
William J. Bergen

	Name:

	Thomas
A. Waltermire	 	Name:	William
J. Bergen

	Title:
	President, Chief
Executive Officer	 	Title:	President
and CEO

	 

	 	 	 	 
	 

	 	 	SELLER: 
	 

	 	 	 	 
	 

	 	 	NOVATEC PLASTICS CORPORATION, INC. 
	 

	 	 	 	 
	 

	 	 	 	 
	 

	 	 	By:	/s/ William
J. Bergen

	 

	 	 	Name:	William
J. Bergen

	 

	 	 	Title:	President
and CEO

	 

	 	 	 	 
	 

	 	 	FOR PURPOSES OF SECTION 9 ONLY: 
	 

	 	 	 	 
	 

	 	 	/s/
William
J. Bergen

	 

	 	 	William J. Bergen, Personally

-21-Exhibit 10.25

 

EXHIBIT 10.25

SUPPLY AGREEMENT

     This SUPPLY AGREEMENT (“Agreement”) is entered into as of May 31, 2005 (the
“Execution Date”) and made effective as of September 1, 2005 (the “Effective Date”)
by and among PVC CONTAINER CORPORATION, a Delaware corporation (“Parent”), Novatec Plastics
Corporation, Inc. a Delaware corporation (“Novatec” and together with Parent, the “Buyer”)
and POLYONE CORPORATION, an Ohio corporation (“Supplier”).

RECITALS

     A. On or about the Execution Date, Supplier purchased certain assets of the Buyer pursuant to
an Asset Purchase Agreement dated as of May 13, 2005 (the “Asset Purchase Agreement”).

     B. As a result of such acquisition, Supplier manufactures and sells the polyvinyl chloride
compounds listed on Schedule A attached hereto (each a “Product” and collectively,
the “Products”).

     C. Buyer desires to purchase the Products from Supplier pursuant to the terms of this
Agreement.

     D. Supplier desires to sell the Products to Buyer pursuant to the terms of this Agreement.

AGREEMENTS

     In consideration of the covenants and other agreements set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:

     1. Definitions. The following terms shall have the meanings set forth below.

     “Agreement” shall have the meaning set forth in the first paragraph above.

     “Annual Forecast” shall have the meaning set forth in Section 2(b).

     “Asset Purchase Agreement” shall have the meaning set forth in the recitals.

     “Change in Control” shall have the meaning set forth in Section 8.

     “Closing Date” shall have the meaning set forth in Section 2(e).

     “Confidential Information” shall have the meaning set forth in Section 7(a).

     “Contract Year Volume Limit” shall have the meaning set forth in Section 2(a).

“Contract Year” shall mean each twelve (12) month period beginning on September 1,
2005 and continuing each twelve (12) month period thereafter until the end of the Term;
provided, however, that the final Contact Year shall not be a complete
twelve (12) month period but shall consist of the four month period from September 1, 2009
through December 31, 2009.

     “Effective Date” shall have the meaning set forth in the first paragraph above.

     “Execution Date” shall have the meaning set forth in the first paragraph above.

 

 

     “Force Majeure Event” shall have the meaning set forth in Section 9.

     “Maximum Product Volume” shall have the meaning set forth in Section 2(a).

     “Price” shall have the meaning set forth in Section 4(a).

     “Product” shall have the meaning set forth in the recitals.

     “Quarterly Forecast” shall have the meaning set forth in Section 2(b).

     “Specifications” shall have the meaning set forth in Section 2(e).

     “Supplier” shall have the meaning set forth in the first paragraph above.

     “Term” shall have the meaning set forth in Section 3(a).

     “Transition Plan” shall have the meaning set forth in Section 5.

     2. Supply of the Products; Minimum Supply; Exclusivity.

          (a) Obligation to Purchase and Supply; Volume. Commencing on the Effective Date, and
during the Term, Buyer shall purchase from Supplier, and Supplier shall supply to Buyer, a
percentage of Buyer’s requirements for the Products each Contract Year as set forth below, provided
that, in no event shall Supplier be obligated to supply more than nine million (9,000,000) pounds
of Product per Contract Year (the “Maximum Product Volume”). Volumes of Products supplied
to Buyer by Supplier shall be based upon Buyer’s requirements for each Contract Year (the
“Contract Year Volume Limit”) as follows:

               (i) 100% of Buyer’s Product requirements from September 1, 2005 through August 31, 2007;

               (ii) 80% of Buyer’s Product requirements from September 1, 2007 through August 31, 2008;

               (iii) 70% of Buyer’s Product requirements from September 1, 2008 through August 31, 2009; and

               (iv) 50% of Buyer’s Product requirements from September 1, 2009 through December 31, 2009.

          (b) Reporting. At least sixty (60) days prior to the beginning of each Contract Year,
Buyer shall provide Supplier with a written, good faith estimate of the aggregate volume of
Products (by Product) that Buyer will require in the next Contract Year (the “Annual
Forecast”). Within thirty (30) days prior to the commencement of each calendar quarter, Buyer
shall provide Supplier with a forecast for the upcoming quarter of the volume of Products (by
Product) for each month (the “Quarterly Forecast”) that Buyer will require for such
quarter.

          (c) Supply. Buyer shall issue purchase orders for the Products setting forth the
specific quantities of each Product to be supplied by Supplier. Products shall be supplied by
Supplier based on the Specifications and the purchase orders. All purchase order volumes shall be
reasonably consistent with the Annual Forecast and the most recent Quarterly Forecast. Any
purchase order issued in connection with this Agreement shall be solely for the parties’ internal
accounting and operating purposes

 

 

and to facilitate payment; in no event shall the terms of any such purchase order (other than
the line items which identify the specific quantities of each Product to be supplied by Supplier
thereunder) become part of this Agreement or be deemed to have modified, amended or waived the
provisions hereof.

          (d) Purchase Orders; Transportation; Title. Supplier shall arrange for shipment of
Products to Buyer based on the lead times set forth in Schedule B attached hereto (which
Schedule B is subject to change during the Term pursuant to the normal business practices
of Supplier). Title to and risk of loss for Products shall pass from Supplier to Buyer upon
Supplier’s delivery of the Products to the carrier selected by Supplier at Supplier’s plant.

          (e) Specifications. Products sold to Buyer pursuant to this Agreement shall be
manufactured in accordance with the recipes and specifications for each Product as set forth in
Schedule A (the “Specifications”), which were provided to Supplier by Buyer and
used in Buyer’s business prior to the closing of the Asset Purchase Agreement (the “Closing
Date”).

     3. Term; Termination.

          (a) Term. Subject to the provisions of Section 3(b) and Section 8, the term of this
Agreement shall be the fifty-two (52) month period beginning on the Effective Date and ending
December 31, 2009 (the “Term”).

          (b) Termination. This Agreement, and any rights granted hereunder, may be terminated
in whole or in part at any time as follows:

               (i) by the mutual written consent of Supplier and Buyer effective on a date determined by the
mutual agreement of the parties;

               (ii) by either Supplier or Buyer effective sixty (60) days after giving written notice to the
other party if such other party is in material breach or default of any term or condition of this
Agreement and such material breach or default remains uncured at the end of such sixty (60) day
period; or

               (iii) by Supplier upon a Change in Control pursuant to Section 8 below.

          (c) Effect of Termination. Any termination of this Agreement shall be without
prejudice to any other remedies that Supplier or Buyer may have against the other arising out of
any breach or default and shall not affect any rights or obligations of Supplier or Buyer arising
under this Agreement prior to such termination.

     4. Pricing; Payments.

          (a) Initial Price. During the Term, the initial price for each of the Products shall
be as follows (each as shall be adjusted from time to time pursuant to the provisions of Section
4(b) below, a “Price”): GP Bottle — $0.78; GP Bottle-UV — $.081; and FDA Bottle — $0.79.
The Price reflects bulk delivered pricing. An additional $0.015 per pound will be charged for each
Product packaged in gaylord boxes. Additionally, if Buyer orders less than a truckload of Product,
there will be an additional upcharge pursuant to the provisions of Schedule B attached
hereto (which Schedule B is subject to change during the Term pursuant to the normal
business practices of Supplier). The Price shall be in effect for May 2005 and June 2005, and will
be the starting point for indexed Price movements beginning on July 1, 2005. Prices set forth in
this Agreement are based solely on the Specifications for each Product. Product prices for volumes
requested by Buyer in excess of the Maximum Product Volume shall be negotiated

 

 

separately from this Agreement. Pricing for products that use specifications substantially
different than the Specifications used in the Buyer’s business prior to the Closing Date shall be
negotiated separately from this Agreement.

          (b) Price Formula Adjustments. Commencing July 1, 2005, the Price for Product shall
be adjusted upward or downward by 85% of the price movement published by Chemical Data Inc. for GP
suspension resin (the “CDI”) in the prior two calendar months. By way of example, if the
CDI increases $0.01 per pound in May 2005 from the CDI in April 2005, then the July 2005 GP Bottle
Price shall be $0.7885 per pound, calculated as follows: $0.01 price increase between the prices
in April and May x 85% = $0.0085; $0.0085 + $0.078 (the initial price for a GP Bottle as shown in
Section 4(a)) = $0.7885 per pound.

          (c) Payment Terms. Payment to Supplier for Products shipped to Buyer shall be made in
U.S. dollars within forty-five (45) days of the date of Supplier’s invoice. Buyer will receive a
discount equal to 1% of the total amount invoiced if Supplier receives payment for Products in
Buyer’s lockbox within ten days after the date of the invoice submitted by Supplier to Buyer.

     5. Toll Manufacturing. At Seller’s request, Buyer shall toll manufacture some of the
Products listed on Schedule A for Supplier for the period commencing September 1, 2005 and
continuing up to but no longer than December 31, 2005. Buyer and Supplier shall use their good
faith efforts to ensure the provision to Supplier of the Products requested by Supplier pursuant to
this Section 5.

     6. Warranty; Limitation of Warranties.

          (a) Warranty. Supplier hereby warrants to Buyer that all of the Products shall
conform to the Specifications set forth on Schedule A and shall be free from all defects in
material and workmanship.

          (b) No Other Warranties. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT,
SUPPLIER MAKES NO WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND, INCLUDING, BUT NOT LIMITED TO, ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY OF THE
PRODUCTS. THIS PROVISION WILL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT. IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR PUNITIVE, CONSEQUENTIAL, SPECIAL, OR INCIDENTAL
DAMAGES UNDER OR IN CONNECTION WITH THIS AGREEMENT.

          (c) Off Spec Products. If any Product fails to conform to the relevant Specifications
(each an “Off Spec Product”), Buyer shall return the Off Spec Product to Supplier or
dispose of the Off Spec Product, in either case at the option and expense of Supplier. Supplier
shall replace any Off Spec Product within a commercially reasonable period, which period shall not
exceed thirty (30) days from receipt by Supplier of notice from Buyer of the failure of the Product
to meet the Specifications, or shall refund the Price of such Off Spec Product, at the option of
Buyer. Buyer agrees to cooperate with Supplier in remedying any nonconformity and with the return
or disposal of any Off Spec Product.

     7. Confidentiality.

          (a) For purposes of this Agreement, “Confidential Information” shall mean the terms of
this Agreement and certain manufacturing, technical, scientific, application, employee, financial,
customer, supplier, marketing and sales information of Buyer or Supplier that is a confidential,
proprietary and valuable commercial asset of such party, including, without limitation, the
Specifications,

 

 

as well as information provided in writing by one party to the other party that is marked
“Confidential” or, if disclosed orally, information that is designated as “Confidential” at the
time of disclosure and is confirmed in writing as “Confidential” within thirty (30) days of such
oral disclosure.

          (b) Each party (i) shall treat all Confidential Information of the other party as confidential
by taking all reasonable precautions in accordance with procedures each party follows to prevent
disclosure with respect to its own confidential information; (ii) shall not, without consent of the
other party, disclose Confidential Information of such other party, directly or indirectly, to any
third party, except to each party’s employees, agents, lenders, attorneys or advisors, who are made
aware of the confidential obligations herein and who are reasonably required to have access to such
Confidential Information in order to perform the obligations of one of the parties under this
Agreement; and (iii) shall not use any portion of such Confidential Information for any purpose not
authorized by this Agreement.

          (c) It is agreed that the obligations of this Section 7 shall not apply to Confidential
Information if: (i) either party can reasonably demonstrate that the Confidential Information was
independently developed by any such party after the Closing Date; (ii) the Confidential Information
is or becomes available to the public generally, other than by or through acts or omissions of such
party; (iii) the Confidential Information is rightfully obtained by either party without
restriction from sources that are rightfully in possession of such Confidential Information after
the Closing Date and not under any obligation of confidentiality; or (iv) the Confidential
Information is required to be disclosed by any federal, provincial or state law, rule or
regulation, or by any applicable judgment, order or decree of any court or governmental body or
agency having jurisdiction over either party; provided, however, that each party will give to the
other reasonable prior notice of such disclosure.

          (d) Each party, at the written request of the other, shall promptly return all documents
received from the other or containing any Confidential Information of the other party disclosed to
it, in whatever form contained, including all notes and copies thereof.

          (e) The confidentiality provisions of this Agreement shall apply during the term of this
Agreement and for a period of five (5) years following the date this Agreement expires or is
terminated in its entirety.

     8. Change in Control of Buyer. If, during the term of this Agreement, Buyer shall
propose to engage in a Buyer Change in Control (as defined below) transaction, then Buyer shall
notify Supplier in writing of such proposed Buyer Change in Control promptly (and in any case,
prior to the consummation of such Buyer Change in Control). Upon such Buyer Change in Control, (i)
if the acquiror in such Buyer Change in Control engages in a Restricted Business, then Supplier may
terminate this Agreement as of the date of such Buyer Change in Control, or (ii) if the acquiror
does not engage in a Restricted Business, or if the acquiror engages in a Restricted Business but
Supplier elects not to exercise its right to terminate this Agreement under subpart (i) above, then
this Agreement shall be assigned by Buyer to the acquiror in the Buyer Change in Control
transaction. Upon such assignment, the acquiror must agree in writing (a copy of which is
delivered to Supplier prior to the consummation of such Buyer Change in Control) to assume this
Agreement and to be bound by the terms of this Agreement. For purposes of this Agreement,
“Change in Control” means the sale of all or substantially all of a target’s assets to any
person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) (a “Person”), other than an affiliate, (ii) any reorganization, merger, consolidation or
similar transaction which would result in the transfer of more than fifty percent (50%) of all
voting equity securities of a target immediately prior to such transaction to a Person other than
an affiliate, or (iii) a sale or issuance of more than fifty percent (50%) of all voting securities
of a target to a Person other than an affiliate. For purposes of this Agreement, “Buyer Change
in Control” means a Change in Control transaction in which Buyer is the target. For purposes
of this Agreement, “Restricted Business” means (i)

 

 

the business of manufacturing and internally producing polyvinyl chloride compounds, or (ii)
the business of manufacturing and internally producing polyvinyl chloride resins.

     9. Force Majeure. Supplier shall not be responsible for its failure to perform its
obligations under this Agreement for such time and to the extent such failure to perform is caused
by fire, flood, earthquake, tornado, hurricane, or other acts of God, strikes, riots, war, acts of
terrorism, rules or regulations of any governmental authority, or by compliance with any order or
decision of any court, board or other governmental authority (each a “Force Majeure
Event”). Supplier shall promptly give verbal notification, promptly confirmed in writing, to
Buyer of the nature and extent of the matter causing the delay or failure and estimated duration of
the suspension period.

     10. Notices. Any notice or other communication given under this Agreement shall be in
writing and shall be (a) delivered personally; (b) sent by documented overnight delivery service;
(c) sent by facsimile transmission, provided that a confirmation copy of such transmission is sent
no later than the business day following the day of such transmission by documented overnight
delivery service or first class mail, postage prepaid; or (d) sent by first class mail, postage
prepaid. Such notice shall be deemed to have been duly given (i) on the date of delivery, if
delivered personally; (ii) on the business day after dispatch by documented overnight delivery
service, if sent in such manner; (iii) on the date of facsimile transmission, if so transmitted; or
(iv) on the fifth business day after sent by first class mail, postage prepaid, if sent in such
manner. Notices or other communications shall be directed to the following addresses:

	 	 	 
	If to Supplier:

	 	PolyOne Corporation
	 

	 	33587 Walker Road
	 

	 	Avon Lake, Ohio 44012
	 

	 	Attn: Robert Rosenau, Vice President and General Manager — Vinyl
	 

	 	Compounds
	 

	 	Fax No.: (440) 930-1671
	 
	 	 
	With a copy to

	 	PolyOne Corporation
	(which copy shall

	 	33587 Walker Road
	not constitute

	 	Avon Lake, Ohio 44012
	notice):

	 	Attn: Wendy C. Shiba, Chief Legal Officer
	 

	 	Fax No.: (440) 930-1002
	 
	 	 
	 

	 	And to:
	 
	 	 
	 

	 	Thompson Hine, LLP
	 

	 	3900 Key Tower
	 

	 	127 Public Square
	 

	 	Cleveland, Ohio 44115
	 

	 	Attn: April V. Boise, Esq.
	 

	 	Fax No.: (216) 566-5800
	 
	 	 
	If to Buyer:

	 	PVC Container Corp.
	 

	 	2 Industrial Way West
	 

	 	Eatontown, New Jersey 07724
	 

	 	Attn: William J. Bergen, President and Chief Executive Officer
	 

	 	Fax No.: (732) 544-8007

 

 

	 	 	 
	With a copy to

	 	Jones Day
	(which copy shall

	 	North Point
	not constitute

	 	901 Lakeside Avenue
	notice):

	 	Cleveland, Ohio 44114
	 

	 	Attn: Joseph D. Hatina, Esq.
	 

	 	Fax No.: (216) 579-0212

Either party may, by notice given in accordance with this Section 10, specify a new address for
notices under this Agreement.

     11. Governing Law. This Agreement, together with all Exhibits and Schedules hereto,
shall be construed and interpreted according to the laws of the State of Ohio without giving effect
to any choice or conflict of law provision or rule that would cause the application of the domestic
substantive laws of any other jurisdiction.

     12. Assignment. This Agreement shall be binding and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This Agreement may not be
assigned by either party without the prior written consent of the other party hereto, which consent
shall not be unreasonably withheld; provided, however, that, subject to the
provisions of Section 8 above, this Agreement may be freely assigned by either party hereto in a
Change in Control transaction (without the requirement of the other party’s consent).

     13. Dispute Resolution.

          (a) Cooperation. The parties agree that if any dispute or controversy, other than a
matter for which a party is entitled to specific performance, injunctive relief or other equitable
relief, arises out of this Agreement or the performance, breach, validity, interpretation or
enforcement hereof, it is in the best interests of the parties for such dispute or controversy to
be resolved in the shortest time and with the lowest cost of resolution practicable. Consequently,
the parties, at all times acting in good faith, agree to attempt to resolve any such dispute or
controversy pursuant to the terms of this Section 13, other than a matter for which a party may be
entitled to specific performance, injunctive relief or other equitable relief.

          (b) Negotiation. If any dispute or controversy arises under this Agreement, the
parties will negotiate in good faith in an attempt to agree as to whether a dispute exists, the
exact nature of the dispute and the manner in which the dispute should be resolved. If deemed
appropriate by the parties, a professional mediator may be engaged to assist in resolving the
dispute. Any resolution of the dispute will be evidenced by a written agreement setting forth in
reasonable detail the actions to be taken by each party. If no such written agreement is reached
within 30 days after the date on which a party first notifies the other in writing of its belief
that a dispute or controversy exists, a party may pursue other remedies under Section 13(c) below.

          (c) Arbitration. In the event that the parties are unable to resolve a dispute after
complying with the provisions of Section 13(b) above, then a party may seek to resolve such dispute
by final and binding arbitration in Cleveland, Ohio, under the rules of the American Arbitration
Association. The parties shall select a single arbitrator mutually agreeable to both such parties.
In the event that the parties are unable to agree upon an arbitrator, then each party shall select
an arbitrator within ten (10) days thereof, those two arbitrators shall select a third arbitrator,
and such third arbitrator shall arbitrate the dispute. In the event that a party does not timely
select an arbitrator under the preceding sentence, then the arbitrator selected by the other party
shall arbitrate the dispute. In the arbitration, each party shall

 

 

present its case and proposed resolution of the dispute to the arbitrator, and such arbitrator
shall resolve such dispute by selecting one such proposed resolution as the final and binding
resolution of the dispute. The arbitrator shall have no power to add to, subtract from or modify
any of the terms or conditions of any proposed resolution.

     14. Miscellaneous.

          (a) Buyer agrees to indemnify and hold harmless Supplier and Supplier’s officers, directors,
employees, affiliates, agents and representatives (collectively, the “Supplier Indemnified
Parties”) from and against all liabilities, claims, losses, damages, deficiencies and expenses,
including reasonable attorney’s fees (collectively, “Losses”) incurred by the Supplier
Indemnified Parties that arise from or relate to Buyer’s gross negligence or willful misconduct in
the performance of its obligations and duties under this Agreement. Supplier agrees to indemnify
and hold harmless Buyer and Buyer’s officers, directors, employees, affiliates, agents and
representatives (collectively, the “Buyer Indemnified Parties”) from and against all Losses
incurred by the Buyer Indemnified Parties that arise from or relate to Supplier’s gross negligence
or willful misconduct in the performance of its obligations and duties under this Agreement.

          (b) Counterparts. This Agreement may be executed in counterparts, each of which shall
be considered an original, but all of which together shall constitute the same instrument.

          (c) Waiver. No waiver by Buyer or Supplier of any breach of or default under this
Agreement shall constitute a wavier of any other breach or default.

          (d) Relationship of Parties. The parties hereby acknowledge that Supplier and Buyer
are acting solely in the capacity as an independent contractor and nothing in this Agreement shall
be construed to constitute either Supplier or Buyer as an agent of the other.

          (e) Remedies. The parties’ remedies hereunder will be cumulative and in addition to
any other remedies afforded by law or equity.

          (f) Severability; Enforceability of Remedies. If any provision of this Agreement is
held by a court of competent jurisdiction to be unenforceable, invalid or void to any extent for
any reason, that provision shall remain in full force and effect to the maximum extent allowable,
if any, and the enforceability and validity of the remaining provisions of this Agreement will not
be affected thereby.

          (g) Headings. The headings and titles of the sections in this Agreement are for
convenience of reference only and shall not affect the interpretation or construction of any
provisions.

          (h) Entire Agreement. This Agreement, the Asset Purchase Agreement and the schedules
and exhibits attached hereto and thereto (and hereby incorporated herein), together are a complete
and exclusive statement of the terms of the agreement between the parties with respect to the
subject matter hereof and may not be amended, changed, modified, or waived except by an instrument
in writing executed by Supplier and Buyer. Any provisions in Supplier’s or Buyer’s purchase
orders, invoices, billing remittances, acknowledgment forms or similar documents which are
inconsistent with the provisions of this Agreement shall be of no force or effect, regardless of
whether such provisions would materially alter the terms hereof.

[signature page to follow]

 

 

     The parties hereto have caused this Agreement to be duly executed by their respective
officers, thereunto duly authorized, as of the date first written above.

	 	 	 	 	 
	SUPPLIER:

	 	 	 	 

	PolyOne
Corporation
	 	 	 

	 
	By:

	/s/ John Rastetter	 	 	 

	Name:

	John Rastetter	 	 	 

	Title:
	Treasurer	 	 	 

	 
	BUYER:

	 	 	 	 

	PVC
Container Corporation
	 	 	 

	 
	By:

	/s/ William J. Bergen	 	 	 

	Name:

	William J. Bergen	 	 	 

	Title:
	President & CEO	 	 	 

 

 

     Novate Plastics Container Corporation has caused this Supply Agreement to be duly executed by
its respective officer, thereunto duly authorized, as of the date first written above.

	 	 	 	 	 
	BUYER:

	 	 	 	 

	Novatec Plastics Corporation
	 	 	 

	 
	By:

	/s/ William J. Bergen	 	 	 

	Name:

	William J. Bergen	 	 	 

	Title:
	President & CEO

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