Document:

EXHIBIT
10(ii)

 

 

 

ASSET PURCHASE AGREEMENT

 

 

among

 

 

KERR GROUP, INC.,

 

 

KERR ACQUISITION SUB II, LLC,

as Purchaser,

 

 

and

 

 

TUBED PRODUCTS, INC.,

as Seller

 

 

Dated as of June 26, 2003

 

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I DEFINITIONS

  
	
  1.1

  	
  Definitions

  
	
  1.2

  	
  Rules of Construction

  
	
   

  	
   

  
	
  ARTICLE II PURCHASE AND SALE OF PURCHASED
  ASSETS

  
	
  2.1

  	
  Purchased Assets

  
	
  2.2

  	
  Excluded Assets

  
	
  2.3

  	
  Assumed Liabilities

  
	
  2.4

  	
  Retained Liabilities

  
	
  2.5

  	
  Purchase Price; Payment of Purchase
  Price; Adjustments

  
	
  2.6

  	
  Allocation of Purchase
  Price

  
	
  2.7

  	
  Closing

  
	
  2.8

  	
  Assignment of Contracts

  
	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS AND WARRANTIES
  OF SELLER

  
	
  3.1

  	
  Organization and
  Qualification

  
	
  3.2

  	
  Authority
  Relative to this Agreement

  
	
  3.3

  	
  No Conflict

  
	
  3.4

  	
  Required Filings and
  Consents

  
	
  3.5

  	
  Financial Statements

  
	
  3.6

  	
  Absence of
  Undisclosed Liabilities

  
	
  3.7

  	
  Absence of Certain
  Changes or Events

  
	
  3.8

  	
  Sufficiency and Title
  to Assets

  
	
  3.9

  	
  Intellectual Property

  
	
  3.10

  	
  Contracts

  
	
  3.11

  	
  Permits

  
	
  3.12

  	
  Compliance with Laws

  
	
  3.13

  	
  Litigation

  
	
  3.14

  	
  Books and Records

  
	
  3.15

  	
  Employment
  Matters.

  
	
  3.16

  	
  Employee Benefits

  
	
  3.17

  	
  No
  Finder

  
	
  3.18

  	
  Environmental Matters

  
	
  3.19

  	
  Taxes and Tax Returns

  
	
  3.20

  	
  Customers and Suppliers

  
	
  3.21

  	
  Inventory

  
	
  3.22

  	
  Insurance

  
	
  3.23

  	
  Affiliate Transactions

  
	
  3.24

  	
  Questionable Payments

  
	
  3.25

  	
  Products Liability

  
	
  3.26

  	
  No Powers of Attorney

  
	
  3.27

  	
  Full Disclosure

  

 

i

 

	
  ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
  KERR AND PURCHASER

  
	
  4.1

  	
  Organization and Qualification

  
	
  4.2

  	
  Authority Relative
  to this Agreement

  
	
  4.3

  	
  No
  Conflict

  
	
  4.4

  	
  Required Filings and
  Consents

  
	
  4.5

  	
  No
  Finder

  
	
  4.6

  	
  No Litigation

  
	
  4.7

  	
  Commitment
  Letters

  
	
   

  	
   

  
	
  ARTICLE V ADDITIONAL COVENANTS

  
	
  5.1

  	
  Conduct
  of Business

  
	
  5.2

  	
  Intentionally
  Omitted

  
	
  5.3

  	
  Consents, Filings and
  Authorizations; Efforts to Consummate

  
	
  5.4

  	
  Notices
  of Certain Events

  
	
  5.5

  	
  Public Announcements

  
	
  5.6

  	
  Access to
  Information; Confidentiality

  
	
  5.7

  	
  Expenses

  
	
  5.8

  	
  Title and Survey Matters

  
	
  5.9

  	
  No Recording

  
	
  5.10

  	
  Intentionally
  Omitted

  
	
  5.11

  	
  Intentionally
  Omitted

  
	
  5.12

  	
  Patent
  Transfer

  
	
  5.13

  	
  Price
  Decrease Notification

  
	
   

  	
   

  
	
  ARTICLE VI CONDITIONS TO CLOSING

  
	
  6.1

  	
  Conditions
  to the Obligations of Seller and Purchaser

  
	
  6.2

  	
  Conditions to
  Obligation of Seller

  
	
  6.3

  	
  Conditions to
  Obligation of Purchaser

  
	
   

  	
   

  
	
  ARTICLE VII TERMINATION; EFFECT OF
  TERMINATION

  
	
  7.1

  	
  Termination of Agreement

  
	
  7.2

  	
  Effect of
  Termination; Right to Proceed

  
	
   

  	
   

  
	
  ARTICLE VIII POST-CLOSING COVENANTS

  
	
  8.1

  	
  Certain Transitional
  Matters

  
	
  8.2

  	
  Transfer and
  Retention of Transferred Employees; Employee Benefits

  
	
  8.3

  	
  Non-Competition Covenant

  
	
  8.4

  	
  Trademarks, Etc.

  
	
  8.5

  	
  Tax Covenants

  
	
  8.6

  	
  Records;
  Retention

  
	
  8.7

  	
  Designated Reporting Person

  
	
  8.8

  	
  Further Assurances

  
	
   

  	
   

  
	
  ARTICLE IX SURVIVAL; INDEMNIFICATION

  
	
  9.1

  	
  Expiration
  of Representations and Warranties

  
	
  9.2

  	
  Indemnification by Seller

  

 

ii

 

	
  9.3

  	
  Indemnification
  by Kerr and Purchaser

  
	
  9.4

  	
  Notice of Claims

  
	
  9.5

  	
  Opportunity to
  Defend Third Party Claims

  
	
  9.6

  	
  Limitation of Liability

  
	
  9.7

  	
  Effect of Taxes and
  Insurance

  
	
  9.8

  	
  Treatment of Indemnity
  Payments; No Duplication

  
	
   

  	
   

  
	
  ARTICLE X GENERAL

  
	
  10.1

  	
  Notices

  
	
  10.2

  	
  Severability

  
	
  10.3

  	
  Assignment; Binding Effect; Benefit

  
	
  10.4

  	
  Incorporation
  of Exhibits and Schedules

  
	
  10.5

  	
  Governing Law; Submission to Jurisdiction

  
	
  10.6

  	
  Waiver of Jury Trial

  
	
  10.7

  	
  Interpretation

  
	
  10.8

  	
  Counterparts

  
	
  10.9

  	
  Entire Agreement

  
	
  10.10

  	
  Waivers and Amendments

  

 

iii

 

EXHIBITS

 

	
  Exhibit A

  	
   

  	
  Form of Assignment and
  Assumption Agreement

  
	
  Exhibit B

  	
   

  	
  Intentionally Omitted

  
	
  Exhibit C

  	
   

  	
  Intentionally Omitted

  
	
  Exhibit D

  	
   

  	
  Form of Transition
  Services Agreement

  
	
  Exhibit E

  	
   

  	
  Intentionally Omitted

  
	
  Exhibit F

  	
   

  	
  Form of Assignment of
  Lease

  
	
  Exhibit G

  	
   

  	
  Form of Bill of Sale

  
	
  Exhibit H

  	
   

  	
  Form of Deed

  

 

iv

 

SCHEDULES

 

	
  Schedule 1.1(a)

  	
   

  	
  Seller Affiliates

  
	
  Schedule 1.1(b)

  	
   

  	
  Closing Balance Sheet /
  Working Capital

  
	
  Schedule 2.1(a)(i)

  	
   

  	
  Real Property

  
	
  Schedule 2.1(a)(ii)

  	
   

  	
  Real Property Leases

  
	
  Schedule 2.1(b)

  	
   

  	
  Tangible Personal Property

  
	
  Schedule 2.1(e)

  	
   

  	
  Assigned Contracts

  
	
  Schedule 2.1(f)

  	
   

  	
  Listed Permits

  
	
  Schedule 2.1(g)

  	
   

  	
  Listed Intellectual
  Property

  
	
  Schedule 2.1(j)

  	
   

  	
  Vehicles

  
	
  Schedule 2.2(d)

  	
   

  	
  Excluded Tangible
  Personal Property

  
	
  Schedule 2.2(g)

  	
   

  	
  Excluded Assets

  
	
  Schedule 3.1

  	
   

  	
  Subsidiaries

  
	
  Schedule 3.3

  	
   

  	
  No Conflict of Seller

  
	
  Schedule 3.4

  	
   

  	
  Seller Consents

  
	
  Schedule 3.5

  	
   

  	
  Seller’s Balance Sheets

  
	
  Schedule 3.6

  	
   

  	
  Undisclosed Liabilities

  
	
  Schedule 3.7

  	
   

  	
  Certain Changes or
  Events

  
	
  Schedule 3.8

  	
   

  	
  Title to Assets

  
	
  Schedule 3.9(a)

  	
   

  	
  Registered Intellectual
  Property Rights

  
	
  Schedule 3.9(d)

  	
   

  	
  Intellectual Property
  Infringement

  
	
  Schedule 3.9(e)

  	
   

  	
  Intellectual Property
  Claims

  
	
  Schedule 3.9(g)

  	
   

  	
  Computer Software

  
	
  Schedule 3.9(h)

  	
   

  	
  Domain Names

  
	
  Schedule 3.10

  	
   

  	
  Material Contracts

  
	
  Schedule 3.13

  	
   

  	
  Litigation

  
	
  Schedule 3.15

  	
   

  	
  Employment Matters

  
	
  Schedule 3.15(c)

  	
   

  	
  Employment Loss

  
	
  Schedule 3.16

  	
   

  	
  Benefit Plans

  
	
  Schedule 3.18

  	
   

  	
  Environmental Matters

  
	
  Schedule 3.19

  	
   

  	
  Taxes and Tax Returns

  
	
  Schedule 3.20

  	
   

  	
  Customers and Suppliers

  
	
  Schedule 3.22

  	
   

  	
  Insurance

  
	
  Schedule  3.23

  	
   

  	
  Affiliate Transactions

  
	
  Schedule 5.1

  	
   

  	
  Conduct of Business

  
	
  Schedule 5.1(m)

  	
   

  	
  Permitted Capital
  Expenditures

  
	
  Schedule 5.9

  	
   

  	
  Title Commitments

  
	
  Schedule 6.2(f)

  	
   

  	
  Required Consents

  
	
  Schedule 6.3(h)

  	
   

  	
  Required Consents

  

 

v

 

ASSET
PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT is
made as of June 26, 2003 among KERR GROUP, INC., a Delaware corporation (“Kerr”),
KERR ACQUISITION SUB II, a wholly-owned limited liability company (“Purchaser”),
and TUBED PRODUCTS, INC., a Maryland corporation (“Seller”).

 

RECITALS

 

Seller
engages in the business of developing, manufacturing, marketing and
distributing specialty molded closures and flexible plastic packaging primarily
for the healthcare, personal care, health and beauty, pharmaceutical, household
chemical, automotive, industrial and dentifrice industries (the “Business”).  Subject to the terms and conditions set
forth herein, Seller desires to sell, convey, transfer, assign and deliver to
Purchaser, and Purchaser desires to purchase and acquire from Seller, all of
Seller’s right, title and interest in and to all of the Purchased Assets, as
defined herein (the “Acquisition”).

 

NOW,
THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby expressly
acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:

 

ARTICLE I

DEFINITIONS

 

1.1           Definitions.  As used herein, the following terms shall have the following
meanings:

 

“Accounts
Payable” means normal trade payables
associated with the ongoing operations of the business, including liabilities
relating to sales allowances, customer rebates, third party royalty payments
and commissions, and pro-card accruals; provided that the disputed Manpower
International, Inc. payable shall not be
deemed to be an “Account Payable”.

 

“Acquisition”
has the meaning given to such term in the Recitals.

 

“Affiliate”
means, with respect to any Person, any other Person directly or indirectly
controlling, controlled by or under common control with such Person.  For purposes of this definition, “control”
(including, with correlative meanings, the terms “controlled by” and “under
common control with”), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise. 
The Affiliates of Seller include the Persons listed on Schedule 1.1(a).

 

“Affiliate
Marks” means the service marks, trademarks, trade names and domain names
used by Seller in the operation of the Business and owned by or licensed to an
Affiliate of Seller, as listed on Schedule 2.2(g).

 

“Agreement”
means this Asset Purchase Agreement.

 

 

“Asserted
Liability” has the meaning given to such term in Section 9.4.

 

“Assigned
Contracts” has the meaning given to such term in Section 2.1(e).

 

“Assignment
and Assumption Agreement” has the meaning given to such term in
Section 2.5(b)(ii).

 

“Assignment
of Lease” has the meaning given to such term in Section 6.2(d)(i).

 

“Associate”
means, as to any Person, (a) any trust or other estate in which such
Person has a substantial beneficial interest or as to which such Person serves
as trustee or in a similar fiduciary capacity, and (b) any family member
or spouse of such Person, or any family member of such spouse, or any
individual who has the same home as such Person or who is a director or officer
of such Person or any of its parents or Subsidiaries.

 

“Assumed
Liabilities” has the meaning given to such term in Section 2.3.

 

“Audited
Financials” has the meaning given to such term in Section 3.5.

 

“Base
Purchase Price” has the meaning given to such term in
Section 6.2(c)(vii).

 

“Business”
has the meaning given to such term in the Recitals.

 

“Business
Day” means any day other than a Saturday, Sunday or a day on which banks in
New York City or San Francisco, California, are authorized or obligated by
applicable Law to close.

 

“Capital
Expenditures” means Seller’s actual capital expenditures properly
classified as property, plant and equipment in accordance with GAAP (using, to
the extent permitted by GAAP, the practices, procedures and methods
historically used by Seller), accrued during the period beginning on December
1, 2002 and ending on the earlier of August 31, 2003 and the Closing Date;
provided, however, that if the Closing does not occur on or prior to August 31,
2003 as a result of (i) postponement of the Closing by Seller pursuant to
Section 5.8(b), (ii) a second request under the HSR Act under Section 7.1(b),
or (iii) breach by Seller of its obligations hereunder, then Capital
Expenditures shall accrue during the period beginning on December 1, 2002 and
ending on the Closing Date.  For the
avoidance of doubt, items set forth on Capital Expenditures Schedule 5.1(m)
shall be deemed to be Capital Expenditures for purposes of this Agreement.

 

 “Capital Expenditures Adjustment” has
the meaning given to such term in Section 2.5(f).

 

“Closing”
has the meaning given to such term in Section 2.7.

 

“Closing
Balance Sheet” means a balance sheet of Seller, prepared pursuant to
Section 2.5(d) setting forth the Purchased Assets and the Assumed
Liabilities as of the Closing Date to the extent such assets and liabilities
would be shown on a balance sheet of Seller prepared in accordance with GAAP,
using, to the extent permitted by GAAP, the practices,

 

2

 

procedures and methods used by Seller in preparing the
Audited Financials, which balance sheet shall be prepared by Purchaser.

 

“Closing
Capital Expenditures” has the meaning given to such term in Section
2.5(f)(ii).

 

“Closing
Capital Expenditures Adjustment” has the meaning given to such term in
Section 2.5(f)(ii).

 

“Closing
Capital Expenditures Objection Notice” has the meaning given to such term
in Section 2.5(f)(ii).

 

“Closing
Date” has the meaning given to such term in Section 2.7.

 

“Closing
Proration” has the meaning given to such term in Section 2.5(c).

 

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

 

“Commitments”
has the meaning given to such term in Section 5.8(a).

 

“Computer
Software” means all computer programs other than computer programs designed
for use in the preparation of Tax Returns, and all documentation relating to
the foregoing.

 

“Counterpart
Plans” has the meaning given to such term in Section 8.2.

 

“Current
Assets” shall mean the current assets of the Business that are among the
Purchased Assets set forth in the Closing Balance Sheet.

 

“Current
Liabilities” shall mean the current liabilities of the Business that are
among the Assumed Liabilities set forth in the Closing Balance Sheet.

 

“De
Minimis Losses” means a Loss resulting from a single set of facts or
circumstances that does not exceed $10,000.

 

“Environmental
Claim” means any claim, action, cause of action, investigation or notice by
any person or entity alleging potential liability (including potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (a) the presence, or release
into the environment, of any Material of Environmental Concern at any location,
whether or not owned or operated by Seller, (b) any violation, or alleged
violation, of any Environmental Law, and (c) the presence of fungus or mold in
any building owned or operated by Seller.

 

“Environmental
Laws” means all Laws relating to pollution or protection of human health or
the environment (including ambient air, surface water, ground water, land
surface or subsurface strata, and natural resources), including laws and
regulations relating to emissions, discharges, releases or threatened releases
of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.

 

3

 

“Estimated
Capital Expenditures” has the meaning given to such term in Section
2.5(f)(i).

 

“Exceptions”
has the meaning given to such term in Section 5.8(a).

 

“Excluded
Assets” has the meaning given to such term in Section 2.2.

 

“Excluded
Contracts” has the meaning given to such term in Section 2.2(g).

 

“Final
Closing Capital Expenditures” has the meaning given to such term in Section
2.5(f)(ii).

 

“Final
Closing Capital Expenditures Adjustment” has the meaning given to such term
in Section 2.5(f)(ii).

 

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

 

“Governmental
Authority” means any nation or government, any state or other political
subdivision thereof and any entity (including a court exercising executive, legislative,
judicial, regulatory, administrative functions of, or pertaining to,
government).

 

“Guarantee
Obligations” has the meaning given to such term in
Section 3.10(a)(vi).

 

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

 

“Indebtedness”
of any Person at any date shall include (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any
other indebtedness of such Person which is evidenced by a note, bond, debenture
or similar instrument, (c) all obligations of such Person under any lease
of property, real or personal, the obligations of the lessee in respect of
which are required in accordance with GAAP to be capitalized on a balance sheet
of the lessee, (d) all obligations of such Person in respect of
acceptances issued or created for the account of such Person, (e) all liabilities
secured by any Lien on property owned by such Person even though such Person
has not assumed or otherwise become liable for the payment thereof, and
(f) all Guarantee Obligations of such Person.

 

“Indemnified
Party” has the meaning given to such term in Section 9.4.

 

“Indemnifying
Party” has the meaning given to such term in Section 9.4.

 

“Independent
Accounting Firm” means PricewaterhouseCoopers or such other independent accounting
firm of national reputation as is selected by mutual agreement of Seller and
Purchaser; provided, that if PricewaterhouseCoopers declines to serve
and Seller and Purchaser cannot agree, the Independent Accounting Firm shall be
selected by the American Arbitration Association in accordance with its
then-prevailing rules; provided, further, that any services to be
performed by PricewaterhouseCoopers or such firm selected by the American

 

4

 

Arbitration Association shall be performed by
professionals who (i) have not previously performed any services for any of the
Parties, Parent or their respective Affiliates and (ii) are based in an office
of such firm that has not previously been the primary office from which
services for any of the Parties, Parent or their respective Affiliates have
been performed.

 

“Initial
Capital Expenditures Adjustment” has the meaning given to such term in
Section 2.5(f)(i).

 

“Intellectual
Property” means, collectively, the Listed Intellectual Property and the
Other Intellectual Property.

 

“IRS”
means the United States Internal Revenue Service.

 

“Kerr”
has the meaning given to such term in the preamble of this Agreement.

 

“Knowledge
of Seller” means the actual knowledge of a particular fact or other matter
being possessed as of the pertinent date by any of Robert G. Davey, Paul C.
Beard, W. Geoffrey Carpenter, Tony Imbraguglio, Jim Dunn, Stephen Rafter, Craig
Berger, James Farley, Linda Santos and CJ Nusom.

 

“Latest
Balance Sheet” has the meaning given to such term in Section 3.6.

 

“Latest
Balance Sheet Date” has the meaning given to such term in Section 3.6.

 

“Law”
means any federal, state, local, municipal, foreign or other law, statute,
legislation, constitution, principle of common law, resolution, ordinance,
code, edict, decree, proclamation, treaty, convention, rule, regulation,
ruling, directive, requirement, specification, determination, decision, opinion
or interpretation issued, enacted, adopted, passed, approved, promulgated,
made, implemented or otherwise put into effect by or under the authority of any
Governmental Authority.

 

 “Lien” means any mortgage, lien,
claim, pledge, charge, equitable interest, right-of-way, easement,
encroachment, security interest, preemptive right, right of first refusal or
similar restriction or right, option, judgment, title defect or encumbrance of
any kind.

 

“Listed
Intellectual Property” has the meaning given to such term in
Section 2.1(g).

 

“Listed
Permits” has the meaning given to such term in Section 2.1(f).

 

“Losses”
means any costs, payments, Taxes, losses, claims, damages and expenses
whatsoever, including court costs and reasonable counsel and other professional
fees and expenses.

 

“Material
Adverse Effect” means any change or effect that, individually or taken
together with all other such changes or effects that have occurred prior to the
date of determination of the Material Adverse Effect, is materially adverse to
the ability of Seller to achieve its projections or to the Business, assets,
liabilities, financial condition or results of operations of Seller considered
as a whole; provided, however, that in no event shall any of the
following, alone or in

 

5

 

combination, be deemed to constitute, nor shall any of
the following be taken into account in determining whether there has been, or
will be, a Material Adverse Effect: 
(a) changes in general economic conditions or changes generally
affecting the industry in which Seller operates (which changes do not affect Seller
in a materially disproportionate manner); or (b) changes resulting from
the loss, diminution or disruption, whether actual or threatened, of existing
or prospective employee, customer, distributor or supplier relationships as to
which Seller furnishes reasonable evidence that such changes have resulted from
the announcement that Seller entered into this Agreement.

 

“Material
Contracts” has the meaning given to such term in Section 3.10(a).

 

“Materials
of Environmental Concern” means chemicals, pollutants, contaminants,
wastes, toxic substances or hazardous substances listed, regulated, defined or
included under Environmental Laws, including petroleum and petroleum products,
asbestos or asbestos-containing materials or products, polychlorinated
biphenyls, lead or lead-based paints or materials, and radon.

 

“Other
Intellectual Property” means trade secrets and know-how, if any, owned by
Seller and used by Seller in the operation of the Business as currently
conducted, including trade secrets and know-how relating to the technology,
systems and processes identified as such on Schedule 2.1(g).  Other Intellectual Property does not include
patents, copyrights, service marks, service names, trademarks, trade names or
domain names (or any applications therefor).

 

“Other
Liens” has the meaning given to such term in Section 5.8(b).

 

“Parent”
means McCormick & Company, Incorporated, a Maryland corporation.

 

“Party”
means Seller, Purchaser or Kerr, as the context requires, and the term “Parties”
means, collectively, Seller, Purchaser and Kerr.

 

“Permitted
Exceptions” has the meaning given to such term in Section 5.8(a).

 

“Permitted
Lien” means:  (a) any Lien
imposed by Law for Taxes, assessments or governmental charges that are not yet
delinquent and remain payable without penalty or that are being contested in good
faith by appropriate proceedings; (b) any carrier’s, warehousemen’s,
mechanic’s, materialmen’s, repairmen’s or other like Lien imposed by Law,
arising in the ordinary course of business and securing obligations that are
not overdue by more than forty-five (45) days or are being contested in good
faith by appropriate proceedings; (c) any pledge or deposit made in the
ordinary course of business in compliance with workers’ compensation,
unemployment insurance or other social security Laws or other statutory
obligations of Seller; (d) any cash deposit or right of set-off to secure
the performance of bids, tenders, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds, government contracts
and other obligations of a like nature, in each case in the ordinary course of
business; (e) any Lien arising by operation of Law; and (f) any
Permitted Exception.

 

“Person”
means an individual, corporation, partnership, limited partnership, limited
liability company, limited liability partnership, syndicate, person (including
a “person” as

 

6

 

defined in Section 13(d)(3) of the Securities
Exchange Act of 1934), trust, association, entity or government or political
subdivision, agency or instrumentality of a government.

 

“Plan”
or “Plans” have the meanings given to such terms in Section 3.16.

 

“Pro
Forma Revenues” has the meaning given to such term in Section 3.5.

 

“Product”
has the meaning given to such term in Section 3.10(a)(ix).

 

“Purchase
Price” has the meaning given to such term in Section 2.5(a).

 

“Purchase
Price Objection Notice” has the meaning given to such term in
Section 2.5(d).

 

“Purchased
Assets” has the meaning given to such term in Section 2.1.

 

“Purchaser”
has the meaning given to such term in the preamble of this Agreement.

 

“Purchaser
Indemnitee” has the meaning given to such term in Section 9.2.

 

“Real
Property” has the meaning given to such term in Section 2.1(a).

 

“Real
Property Leases” has the meaning given to such term in Section 2.1(a).

 

“Registered
Intellectual Property Rights” has the meaning given to such term in
Section 3.9(a).

 

“Representative”
means, with respect to either Party, any of such Party’s directors, officers,
employees, attorneys, accountants or other agents.

 

“Retained
Liabilities” has the meaning given to such term in Section 2.4.

 

“Security
Deposits” means the full amount of any and all deposits made by or on
behalf of Seller.

 

“Seller”
has the meaning given to such term in the preamble of this Agreement.

 

“Seller
Indemnitee” has the meaning given to such term in Section 9.3.

 

“Subsidiary”
means, with respect to Seller, any corporation, partnership, limited
partnership, limited liability company or other legal entity of which Seller
(either alone or through or together with any other subsidiary) owns, directly
or indirectly, a majority of the stock or other equity interests.

 

“Supply
Agreement” has the meaning given to such term in Section 6.2(c)(vi).

 

“Surveys”
has the meaning given to such term in Section 5.8(a).

 

“Tangible
Personal Property” has the meaning given to such term in
Section 2.1(b).

 

7

 

“Target
Capital Expenditures” means * million multiplied by the quotient of (x) the
number of days actually elapsed from December 1, 2002 through and
including the applicable date provided in the definition of Capital
Expenditures in this Section 1.1; divided by (y) 365.

 

“Target
Working Capital” means the difference of (A) the product of (i) the sum of
the net sales (which shall be net of discounts, allowances and other, similar
adjustments used to calculate the Pro Forma Revenues, consistently applied) of
Seller for the three full calendar months immediately preceding the Closing
Date multiplied by *, multiplied by (ii) * minus (B) the lower of (i) * and
(ii) the sum of accrued customer rebates, accrued commissions (third parties)
and customer royalties as of the Closing Date.

 

“Tax
Return” means any return, report, statement, form or other documentation
(including any additional or supporting material and any amendments or
supplements) filed or maintained, or required to be filed or maintained, with
respect to or in connection with the calculation, determination, assessment or
collection of any Taxes.

 

“Taxes”
means:  (a) any and all taxes,
fees, levies, duties, tariffs, imposts and other charges of any kind, imposed
by any Governmental Authority, including: 
(i) taxes or other charges on, measured by, or with respect to
income, franchise, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers’
compensation, unemployment compensation or net worth; (ii) taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value-added
or gains taxes; (iii) license, registration and documentation fees; and
(iv) customs duties, tariffs and similar charges; (b) any liability
for the payment of any amounts of the type described in (a) as a result of
being a member of an affiliated, combined, consolidated or unitary group for
any taxable period; (c) any liability for the payment of amounts of the
type described in (a) or (b) as a result of being a transferee of, or a
successor in interest to, any Person or as a result of an express or implied
obligation to indemnify any Person; and (d) any and all interest,
penalties, additions to tax and additional amounts imposed in connection with
or with respect to any amounts described in (a), (b) or (c).

 

“Terminated
Employee” has the meaning given to such term in Section 8.2.

 

“Title
Company” has the meaning given to such term in Section 5.8(a).

 

“Title
Documents” has the meaning given to such term in Section 5.8(a).

 

“Title
Objections” has the meaning given to such term in Section 5.8(b).

 

“Title
Policy” has the meaning given to such term in Section 6.3(g).

 

“Transaction
Documents” means, collectively, this Agreement and each of the other
agreements and instruments to be executed and delivered by either or both of
the Parties in connection with the consummation of the Acquisition.

 

“Transferred
Employee” has the meaning given to such term in Section 8.2.

 

*  Confidential
treatment has been requested for certain portions of this document pursuant to
an application for confidential treatment sent to the SEC.  Such portions are omitted from this filing
and filed separately with the SEC.

 

8

 

“Transition
Services Agreement” has the meaning given to such term in
Section 6.2(c)(v).

 

“WARN
Act” means the Worker Adjustment and Retraining Notification Act.

 

“Withholding
Taxes” has the meaning given to such term in Section 2.5(b).

 

“Working
Capital” shall mean Current Assets minus Current Liabilities, (prepared in
accordance with GAAP, using, to the extent permitted by GAAP, the accounting
principles, methodologies, procedures and classifications used by Seller in
preparing the Audited Financials).

 

“Working
Capital Adjustment” has the meaning given to such term in
Section 2.5(d).

 

1.2           Rules of Construction.  The definitions in Section 1.1 shall
apply equally to both the singular and plural forms of the terms defined.  Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter
forms.  The words “include,” “includes”
and “including” shall be deemed to be followed by the phrase “but not limited
to.”  All references herein to Articles,
Sections, Exhibits and Schedules shall be deemed references to Articles and
Sections of, and Exhibits and Schedules to, this Agreement unless the context
shall otherwise require.  All Exhibits
and Schedules attached to this Agreement shall be deemed incorporated herein by
reference as if fully set forth herein. 
Words such as “herein,” “hereof,” “hereto,” “hereby” and “hereunder” refer
to this Agreement and to the Schedules and Exhibits, taken as a whole.  Except as otherwise expressly provided
herein:  (a) any reference in this
Agreement to any agreement shall mean such agreement as amended, restated,
supplemented or otherwise modified from time to time; (b) any reference in
this Agreement to any Law shall include corresponding provisions of any
successor Law and any regulations and rules promulgated pursuant to such Law or
such successor Law; and (c) all terms of an accounting or financial nature
shall be construed in accordance with GAAP, as in effect from time to
time.  Neither the captions to Sections
or subdivisions thereof nor the Table of Contents shall be deemed to be a part
of this Agreement.

 

ARTICLE II

PURCHASE AND SALE OF PURCHASED ASSETS

 

2.1           Purchased Assets.  Subject to the terms and conditions of this
Agreement and in reliance upon the representations, warranties, covenants and
agreements of the Parties contained herein, at the Closing, Seller shall sell,
convey, transfer, assign and deliver to Purchaser, and Purchaser shall purchase
and acquire from Seller, free and clear of all Liens other than Permitted Liens
(except with respect to the Real Property, subject only to Permitted
Exceptions), all of Seller’s right, title and interest in and to the following
assets, properties, rights and interests of Seller as of the date hereof and
those acquired after the date hereof and on or before the Closing Date, except
for those assets, properties, rights and interests that are set forth in
Section 2.2 as being Excluded Assets (collectively, the “Purchased Assets”):

 

(a)           all
the real property and interests in real property described on Schedule 2.1(a)(i)
and such as are required to make the statement in the second sentence of Section 3.8(a)
true, together with all buildings, fixtures, facilities and other improvements

 

9

 

located
on such real property (collectively, the “Real Property”), and the
leasehold estates, including any Security Deposits relating thereto, described
on Schedule 2.1(a)(ii) and such as are required to make the
statement in the first sentence of Section 3.8(b) true, under which Seller
is a lessee (collectively, the “Real Property Leases”);

 

(b)           all
the machinery, equipment, tools, furniture, computer hardware, materials,
leasehold improvements, computing and telecommunications equipment and other
items of tangible personal property owned by the Seller or (to the extent
assignable) leased by Seller or by Affiliates of Seller and used in the
operation of the Business on the Closing Date, including those listed or
described on Schedule 2.1(b), together with any express or implied
warranty by the manufacturer, seller or lessor of any such item or component
part thereof, to the extent such warranties may be assigned without consent or
any requisite consent is obtained (collectively, the “Tangible Personal
Property”);

 

(c)           all
inventories of Seller, including all finished goods, work in process, supplies
and raw materials;

 

(d)           (i) all
trade accounts receivable and other rights to payment from customers of Seller
and the full benefit of all security for such accounts or rights to payment;
(ii) all other accounts or notes receivable of Seller and the full benefit
of all security for such accounts or notes; and (iii) any claim, remedy or
other right related to any of the foregoing;

 

(e)           all
the contracts, leases, licenses, purchase orders, commitments and other binding
arrangements of Seller, including those listed or described on Schedule 2.1(e)
(“Assigned Contracts”);

 

(f)            all
the permits, licenses, approvals, franchises, certificates, consents and other
authorizations of any Governmental Authority issued to or held by Seller,
including those listed or described on Schedule 2.1(f), and such as
are required to make the statement in the first sentence of Section 3.11
true (collectively, the “Listed Permits”), to the extent they may be
legally transferred by agreement;

 

(g)           all
the patents, copyrights, service marks, trademarks, trade names and domain
names (and all registrations and applications therefor) owned by or licensed to
Seller and used, held for use or planned to be used in connection with products
currently under active development, in each case, by Seller in the operation of
the Business, including those listed or required to be listed on Schedule 2.1(g),
and such as are required to make the statement in the first sentence of
Section 3.9(a) true (the “Listed Intellectual Property”), together
with the Other Intellectual Property;

 

(h)           all
the data, records, files, manuals, blueprints and other documentation of
Seller, in each case related to the Purchased Assets and used, held for use or
planned to be used in connection with products currently under active
development, in each case, by Seller in the operation of the Business,
including:  (i) service and
warranty records; (ii) sales promotion materials, creative materials, art
work, photographs, public relations and advertising material, studies, reports,
correspondence and other similar documents and records, whether in electronic
form or otherwise; (iii) all client, customer and supplier lists,
telephone numbers and electronic

 

10

 

mail
addresses with respect to past, present or prospective clients, customers and
suppliers; (iv) copies of accounting and tax books, ledgers and records
and other financial records; (v) all sales and credit records, catalogs
and brochures, purchasing records and records relating to suppliers; and (vi) subject
to applicable Law, original personnel records of all Transferred Employees;

 

(i)            all
the payments (or pro rata portions thereof) made by Seller with respect to the
Purchased Assets or the Business which constitute, as of the Closing Date, prepaid
expenses in accordance with GAAP;

 

(j)            all
the vehicles owned or (to the extent assignable) leased by Seller or by
Affiliates of Seller and used in the operation of the Business on the Closing
Date, in each case as listed on Schedule 2.1(j);

 

(k)           the
goodwill related to the conduct of the Business and all rights to continue to
use the Purchased Assets as an ongoing business;

 

(l)            all
assets included in the calculation of Current Assets on the Closing Balance Sheet; and

 

(m)          all
other assets, properties, rights, claims and interests of Seller that are not
specifically included in the definition of the term “Excluded Assets” in
Section 2.2.

 

2.2           Excluded Assets.  Notwithstanding anything to the contrary in
Section 2.1, the following assets, properties, rights and interests of Seller
(collectively, the “Excluded Assets”) are excluded from the Purchased
Assets and shall remain the property of Seller after the Closing:

 

(a)           corporate
seals, articles of incorporation, minute books, stock books, Tax Returns, original
accounting and tax books, ledgers, records and other financial records or other
records relating to the corporate organization of Seller;

 

(b)           all
cash on hand, cash equivalents, investments (including stock, debt instruments,
options and other instruments and securities) and bank deposits;

 

(c)           all
accounts or notes receivable owed to Seller by Parent or any Person listed on Schedule 1.1(a)
other than accounts owed by O.G. Dehydrated, a California corporation;

 

(d)           all
rights of Seller:  (i) to use any
service marks, service names, trademarks, trade names, domain names, logos or
brand names, and related goodwill, of Parent or any other Person listed on Schedule 1.1(a)
(including any derivatives thereof), or to use blueprints, drawings, designs,
manuals, documentation or other intellectual property rights attributable to or
which are used solely in Seller’s manufacturing of products for Parent or any
other Person listed on Schedule 1.1(a) and (ii) in any
tangible personal property (including molds, tooling and other equipment) which
are used or usable solely in Seller’s manufacturing of products for Parent or
any other Person listed on Schedule 1.1(a), in each case to the
extent listed on Schedule 2.2(d);

 

11

 

(e)           all
insurance policies, fidelity or surety bonds or fiduciary liability policies
covering the Purchased Assets, the Business or the operations, employees,
officers or directors of Seller and all rights of Seller of every nature and
description under or arising out of such policies and bonds;

 

(f)            originals
of all personnel records and other records that Seller is required by Law to
retain in its possession;

 

(g)           the
assets listed on Schedule 2.2(g), including the contracts, leases,
licenses, permits, plans, purchase orders, commitments and other binding
arrangements of Seller, including those between Seller and its Affiliates,
listed on Schedule 2.2(g) (the “Excluded Contracts”);

 

(h)           any
assets, properties, rights or interests of Seller which have been transferred
or disposed of in the ordinary course of the Business prior to the Closing Date
to the extent permitted by Section 5.1;

 

(i)            except
as expressly provided in Section 2.5(c), claims for refunds of Taxes paid
by Seller;

 

(j)            all
shares of capital stock or other ownership interests held by Seller in any
Subsidiary set forth on Schedule 3.1; and

 

(k)           all
rights of Seller under this Agreement, including Seller’s rights in the
consideration paid to Seller pursuant to this Agreement.

 

2.3           Assumed Liabilities.  Upon the terms and subject to the conditions
of this Agreement, Purchaser shall assume on the Closing Date, upon the
consummation of the Closing, and shall pay, perform and discharge when due, the
following obligations and liabilities arising on or after the Closing Date (the
“Assumed Liabilities”):

 

(a)           all
obligations of Seller under the Assigned Contracts other than (i) liabilities
or obligations arising from any pre-Closing breach or default by Seller of or
under any Assigned Contract and (ii) liabilities for Capital Expenditures not
yet paid that are included in the calculation of the Capital Expenditures
Adjustment; and

 

(b)           Accounts
Payable as set forth in the Closing Balance
Sheet as of the Closing Date.

 

2.4           Retained Liabilities.  Purchaser shall not assume, and Seller shall
pay, perform and discharge when due and remain liable for any and all
liabilities of Seller (including any liability of Seller under this Agreement)
and any liabilities that otherwise encumber the Business or the Purchased
Assets, in each case other than the Assumed Liabilities (collectively, the “Retained
Liabilities”).

 

12

 

2.5           Purchase Price; Payment of Purchase Price; Adjustments.

 

(a)           The
aggregate consideration payable to Seller for the Purchased Assets
(collectively, the “Purchase Price”) shall be as follows:

 

(i)            The
Base Purchase Price, as adjusted at Closing in accordance with
Section 2.5(c) and as adjusted after Closing in accordance with
Sections 2.5(d) and 2.5(f);

 

(ii)           the
assumption of the Assumed Liabilities; and

 

(b)           The
Purchase Price shall be paid as follows:

 

(i)            At
Closing, Purchaser shall pay Seller cash in the amount equal to the Base
Purchase Price, plus or minus the Closing Proration, as determined
in accordance with Section 2.5(c), plus or minus the Initial
Capital Expenditures Adjustment and minus all applicable withholding
Taxes (the “Withholding Taxes”). 
Purchaser shall make such payment via wire transfer of immediately
available funds to an account specified by Seller, which account shall be so
specified at least two (2) Business Days prior to the Closing Date.

 

(ii)           At
Closing, Purchaser shall execute and deliver an Assignment and Assumption
Agreement, in the form attached as Exhibit A (the “Assignment
and Assumption Agreement”), evidencing the assignment by Seller of certain
of the Purchased Assets and the assumption by Purchaser of the Assumed
Liabilities.

 

(iii)          After Closing, any Working Capital Adjustment
due shall be paid by the paying Party within five (5) Business Days after the
calculation of the Working Capital Adjustment becomes conclusive and binding on
the Parties in accordance with Section 2.5(d).  The paying Party shall make such payment via wire transfer of
immediately available funds to an account specified by the recipient Party,
which account shall be so specified at least two (2) Business Days before
payment of the Working Capital Adjustment becomes due.

 

(iv)          After
Closing, any Final Closing Capital Expenditures Adjustment due shall be paid by
the paying Party within five (5) Business Days after the calculation of the
Final Closing Capital Expenditures Adjustment becomes conclusive and binding on
the Parties in accordance with Section 2.5(f).  The paying Party shall make such payment via wire transfer of
immediately available funds to an account specified by the recipient Party,
which account shall be so specified at least two (2) Business Days before
payment of the Final Capital Expenditure Adjustment becomes due.

 

(c)           Liability
for all accrued or prepaid real estate Taxes attributable to the Real Property
and the Real Property Leases shall be prorated between Seller and Purchaser as
of 12:01 a.m. on the Closing Date based on the most recently ascertainable real
estate Tax bill.  Such proration between
the pre-Closing Date period and the post-Closing Date period shall be made by
multiplying such Taxes by a fraction, the numerator of which is the actual
number of days in the pre-Closing period and the denominator of which is the
number of days in the real property tax year in which the real property taxes
are assessed, as the case may be.  Any
net credit resulting from such proration in favor of Seller shall be paid in
cash by Purchaser to Seller at Closing and any resulting net credit in favor of
Purchaser shall be credited against the

 

13

 

Purchase
Price paid by Purchaser at Closing (such amount, as applicable, the “Closing
Proration”).  Any refunds of such
real estate Taxes made after the Closing shall first be applied to the
unreimbursed third-party costs incurred by Seller or Purchaser in obtaining the
refund, then shall be paid to Seller (for such Taxes accrued through the period
prior to the Closing Date) and to Purchaser (for the period commencing on and
after the Closing Date).  If any
proceeding to determine the assessed value of the Real Property or the real
estate Taxes payable with respect to the Real Property commenced before the date
hereof is continuing as of the Closing Date, Seller shall be authorized to
continue to prosecute such proceeding and shall be entitled to any abatement
proceeds therefrom allocable to any period before the Closing Date, and
Purchaser agrees to cooperate as reasonably requested with Seller and to
execute any and all documents reasonably requested by Seller in furtherance of
the foregoing.

 

(d)           The
Purchase Price shall be: (i)  increased on a dollar for dollar basis to
the extent that the Working Capital on the Closing Date exceeds the Target Working
Capital and (ii) decreased on a dollar for dollar basis to the extent that the
Working Capital on the Closing Date is less than the Target Working Capital
(the “Working Capital Adjustment”). 
Within sixty (60) days following the Closing, Purchaser shall prepare
and deliver to Seller a Closing
Balance Sheet as of the Closing Date, together with a calculation of the
Working Capital Adjustment based on such Closing
Balance Sheet.  Following delivery of
the Closing Balance Sheet and Working Capital Adjustment, Purchaser shall
provide Seller and its Representatives with reasonable access to the books,
records, facilities and employees of Purchaser, and shall cooperate with
Seller’s Representatives, in connection with Seller’s review of the Closing
Balance Sheet and Working Capital Adjustment. 
The Working Capital Adjustment calculated by Purchaser shall be
conclusive and binding on the Parties unless Seller, within thirty (30) days
after its receipt of the Working Capital Adjustment, gives Purchaser a written
notice of objection setting forth in reasonable detail the amount in dispute
and the basis for such dispute (a “Purchase Price Objection Notice”); provided,
that Seller shall not be required to give details regarding the amount or basis
of any dispute if Purchaser shall have failed to provide Seller the access and
cooperation required by this Section. 
If Seller delivers a Purchase Price Objection Notice, the Parties shall
attempt in good faith to resolve such dispute through negotiation, and any
agreement reached shall be conclusive and binding on the Parties.  If the Parties are unable, despite good
faith negotiations, to resolve the disputes described in the Purchase Price
Objection Notice within thirty (30) days after delivery of the Purchase Price
Objection Notice, then the Parties shall promptly submit any such unresolved
dispute to the Independent Accounting Firm. 
The Parties shall cooperate fully with the Independent Accounting Firm,
including providing all work papers and back-up materials relating to the
unresolved disputes requested by the Independent Accounting Firm to the extent
available to the Parties and their respective Representatives.  The determination of the Independent
Accounting Firm shall be set forth in a written notice delivered to Purchaser
and Seller within thirty (30) days after submission of the disputes to the
Independent Accounting Firm and shall be conclusive and binding on the
Parties.  The fees and expenses of the
Independent Accounting Firm shall be shared equally by Seller and
Purchaser.  The Working Capital
Adjustment shall be revised to reflect the resolution of the disputes resolved
in accordance with this Section 2.5(d).

 

(e)           Intentionally
Omitted.

 

(f)            The
Purchase Price shall be adjusted as follows:

 

14

 

(i)            Two
Business Days before the Closing Date, the Seller shall deliver to Purchaser a
certificate containing a calculation of the Capital Expenditures as of such
date (the “Estimated Capital Expenditures”).  The Estimated Capital Expenditures minus the Target Capital
Expenditures shall be the “Initial Capital Expenditures Adjustment”; provided
that the Initial Capital Expenditures Adjustment shall be zero if such
adjustment would otherwise be less than the product of (A) 0.05 and (B) the
Target Capital Expenditures.  On the
Closing Date, the Purchase Price shall be (i) increased on a dollar for
dollar basis to the extent that the Initial Capital Expenditures Adjustment
exceeds zero and (ii) decreased on a dollar for dollar basis to the extent that
the Initial Capital Expenditures Adjustment is less than the zero.

 

(ii)           Within sixty (60) days
following the Closing, Purchaser shall prepare and deliver to Seller a
calculation of the Capital Expenditures as of the Closing Date (the “Closing
Capital Expenditures”).  The Closing
Capital Expenditures minus the Target Capital Expenditures, if any, shall be
the “Closing Captial Expenditures Adjustment”; provided that the Closing
Capital Expenditures Adjustment shall be zero if such adjustment would
otherwise be less than the product of (A) 0.05 and (B) the Target Capital
Expenditures.  Following delivery of the
calculation of the Closing Capital Expenditures Adjustment, Purchaser shall
provide Seller and its Representatives with reasonable access to the books,
records, facilities and employees of Purchaser, and shall cooperate with Seller
and its Representatives, in connection with Seller’s review of the Closing
Capital Expenditures Adjustment.  The Closing
Capital Expenditures Adjustment calculated by Purchaser shall be conclusive and
binding on the Parties unless Seller, within thirty (30) days after its receipt
of the Closing Capital Expenditures Adjustment, gives Purchaser a written
notice of objection setting forth in reasonable detail the amount in dispute
and the basis for such dispute (a “Closing Captial Expenditures Objection
Notice”); provided, that Seller shall not be required to give
details regarding the amount or basis of any dispute if Purchaser shall have
failed to provide Seller the access and cooperation required by this Section.  If Seller delivers a Closing Capital
Expenditures Objection Notice, the Parties shall attempt in good faith to
resolve such dispute through negotiation, and any agreement reached shall be conclusive
and binding on the Parties.  If the
Parties are unable, despite good faith negotiations, to resolve the disputes
described in the Closing Capital Expenditures Objection Notice within thirty
(30) days after delivery of the Closing Capital Expenditures Objection Notice,
then the Parties shall promptly submit any such unresolved dispute to the
Independent Accounting Firm.  The
Parties shall cooperate fully with the Independent Accounting Firm, including
providing all work papers and back-up materials relating to the unresolved
disputes requested by the Independent Accounting Firm to the extent available
to the Parties and their respective Representatives.  The determination of the Independent Accounting Firm shall be set
forth in a written notice delivered to Purchaser and Seller within thirty (30)
days after submission of the disputes to the Independent Accounting Firm and
shall be conclusive and binding on the Parties.  The fees and expenses of the Independent Accounting Firm shall be
shared equally by Seller and Purchaser. 
The Closing Capital Expenditures and the Closing Capital Expenditures
Adjustment shall be revised to reflect the resolution of the disputes resolved
in accordance with this Section 2.5(f) (the “Final Closing Capital
Expenditures” and the “Final Closing Capital Expenditures Adjustment”,
respectively).  After the Final Closing
Capital Expenditures is determined in accordance with this Section 2.5(f), (x)
Purchaser shall pay to Seller in accordance with Section 2.5(b)(iv) any amount
by which the Final Closing Capital Expenditures Adjustment exceeds the Initial
Capital Expenditures Adjustment and (y) Seller shall pay to Purchaser in

 

15

 

accordance
with Section 2.5(b)(iv) any amount by which the Final Capital Expenditures
Adjustment is less than the Initial Capital Expenditures Adjustment.

 

2.6           Allocation of Purchase Price.  Promptly after the date hereof, but in any
event within five (5) Business Days after the date hereof, Purchaser shall
engage a valuation or appraisal firm and shall instruct it to deliver to
Purchaser and Seller within twenty (20) days after engagement a statement of
the value of the Real Property, Real Property Leases, and any motor vehicles
for which a value must be stated in the applicable transfer documents or
related filings to be made on or about the Closing Date.  By the later of: (i) February 1, 2004, (ii)
30 Business Days after the calculation of the Working Capital Adjustment
becomes conclusive and binding on the Parties in accordance with Section 2.5(d)
or (iii) 30 Business Days after the calculation of the Final Closing Capital
Expenditures Adjustment becomes conclusive and binding on the Parties in
accordance with Section 2.5(f), Purchaser shall deliver to Seller a statement
(the “Final Allocation Statement”), such Final Allocation Statement to
be subject to Seller’s consent, which consent shall not be unreasonably
withheld allocating the Purchase Price, in accordance with Section 1060 of the
Code and (with respect to the Real Property, Real Property Leases and motor
vehicles described therein) in conformity with the statement of the valuation
or appraisal firm described above, among: (a) the Purchased Assets, (b) the
non-competition covenant contained in Section 8.3 of this Agreement and (c)
the Assumed Liabilities required to be transferred pursuant to Section
6.3(e).  If the Parties are unable,
despite good faith negotiations, to agree on such allocation within twenty (20)
days after delivery of the Final Allocation Statement, then the Independent
Accounting Firm will be retained to determine such allocation (the fees and
expenses of which shall be shared equally by Purchaser and Seller) and shall be
instructed to provide its determination to Purchaser and Seller, which
determination shall be final and binding upon Purchaser and Seller.  The Parties agree that such allocation
pursuant to the Final Allocation Statement shall be used in filing IRS Form
8594, Asset Acquisition Statement under Section 1060 of the Code (“Form 8594”),
and all Tax Returns (except to the extent such filings are required to be made
by Seller prior to receipt of the Final Allocation Statement, in which case the
Parties shall agree on the appropriate allocation for such filings).  Subject to the requirements of applicable
Tax Laws or prior Tax elections, neither Seller nor Purchaser will take any
position inconsistent with such allocations in any Tax Return or in any
examination of any Tax Return, in any refund claim or in any Tax litigation.  For
avoidance of doubt, Seller shall have no liability for inconsistent Tax Returns
or other filings made prior to Seller’s receipt of the Final Allocation
Statement if made in a manner consistent with the procedures provided above if
after receipt of the Final Allocation Statement Seller takes such steps as are
reasonably available under applicable Law to amend such inconsistent Tax
Returns to be consistent with the Final Allocation Statement.

 

2.7           Closing.  The
consummation of the purchase and sale of the Purchased Assets in accordance
with this Agreement (the “Closing”) shall take place at 10:00 a.m.,
local time, at the offices of Skadden, Arps, Slate, Meagher & Flom LLP,
Four Embarcadero Center, San Francisco, California 94111, on the second
Business Day after all of the conditions precedent to Closing hereunder shall
have been satisfied or waived, or at such other time and place as the Parties
shall agree in writing.  Unless the
parties otherwise agree in writing, the Closing with respect to the Real Property
shall be conducted through a customary escrow arrangement with

 

16

 

the Title Company.  The date of the Closing is referred to as the “Closing Date.”  The Parties shall deliver at the Closing
such documents, certificates of officers and other instruments as are set forth
in Article VI hereof and as may reasonably be required to effect the
transfer by Seller of the Purchased Assets pursuant to and as contemplated by
this Agreement and to consummate the Acquisition.  All events occurring at the Closing shall be deemed to occur
simultaneously (with the concurrent delivery of the documents required to be
delivered pursuant to Article VI, delivery of the Title Policies and payment of
the Purchase Price).

 

2.8           Assignment of Contracts.  Seller shall use its best efforts (subject
to the limitations below) to obtain the written consent of any third party
required in connection with the transfer of any Assigned Contract to Purchaser
on or before the Closing Date (including, for the avoidance of doubt, leaving
in place any guarantees requested by any such third party as set forth under
Section 5.11). Notwithstanding anything in this Agreement to the contrary, to
the extent that any Assigned Contract is not assignable without the consent of
another party whose consent has not been obtained, this Agreement shall not
constitute an assignment or attempted assignment of such Assigned Contract if
the assignment or attempted assignment would constitute a breach thereof or
materially detract from the rights transferred to Purchaser.  If such consent is not obtained, then (A)
Seller shall use its best efforts to enter into any arrangement requested by
Purchaser that is designed to give Purchaser the full benefit of such Assigned
Contract accruing on or after the Closing and that does not violate any
applicable Law or presently existing agreement to which Seller is a party, and
(B) Purchaser shall use its best efforts to cooperate with Seller to consummate
such arrangement.  Notwithstanding
anything to the contrary in this Section 2.8, (i) Seller shall not be required
to make out-of-pocket payments to third parties (excluding payments to Seller’s
or Parent’s employees or other internal costs of Seller or Parent) in excess of
* in connection with its obligations under this Section 2.8 and (ii) neither of
Purchaser and Kerr shall be required to make any payment to any third party in
connection with its obligations under this Section 2.8.  Seller shall provide Purchaser with a reasonable
opportunity to participate in any discussions or negotiations, written or oral,
with each lessor under each Lease in connection with obtaining consent
thereunder.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

 

As an
inducement to Kerr and Purchaser to enter into this Agreement and to consummate
the Acquisition, Seller represents and warrants to Kerr and Purchaser as
follows:

 

3.1           Organization and Qualification.  Seller is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Maryland
and has all requisite corporate power and authority to own, lease and operate
its assets and properties and to carry on the Business as it is now being
conducted.  Seller is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction where
the character of the assets and properties owned, leased or operated by it or
the nature of the Business makes such qualification or licensing necessary,
except for failures to be so qualified or licensed and in good standing that do
not have a Material Adverse Effect. 
Except as set forth on Schedule 3.1, Seller has no
Subsidiaries.

 

3.2           Authority Relative to this Agreement.  Seller has all necessary corporate power and
authority to execute and deliver this Agreement and the other Transaction
Documents to

 

*  Confidential treatment has been requested
for certain portions of this document pursuant to an application for
confidential treatment sent to the SEC. 
Such portions are omitted from this filing and filed separately with the
SEC.

 

17

 

which it is a party, to perform its obligations
hereunder and to consummate the Acquisition. 
The execution and delivery of this Agreement and such other Transaction
Documents by Seller and the consummation by Seller of the Acquisition have been
duly and validly authorized by all necessary corporate action on the part of
Seller, and no other corporate proceedings on the part of Seller are necessary
to authorize this Agreement or to consummate the Acquisition other than filing
and recordation of Articles of Transfer as required by Maryland law.  This Agreement and such other Transaction
Documents have been or will be duly executed and delivered by Seller and,
assuming the due authorization, execution and delivery by Purchaser, each such
agreement constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, subject to the effect
of any applicable bankruptcy, moratorium, insolvency, fraudulent conveyance,
reorganization or other similar Law affecting the enforceability of creditors’
rights generally and to the effect of general principles of equity which may
limit the availability of remedies (whether in a proceeding at law or in
equity).

 

3.3           No Conflict. 
Except as set forth on Schedule 3.3, the execution and
delivery of this Agreement by Seller do not, and the performance by Seller of
its obligations hereunder and the consummation of the Acquisition will
not:  (a) conflict with or violate
any provision of the articles of incorporation or by-laws of Seller;
(b) assuming that all filings and notifications described in
Section 3.4 have been made, conflict with or violate any Law or order
applicable to Seller or by which any of the Purchased Assets or Seller is bound
or affected; or (c) result in any material breach of or constitute a
material default under, or require notice or consent under, any mortgage,
indenture, deed of trust, lease, contract, agreement, license or other instrument
to which Seller is a party or by which any of the Purchased Assets is bound or
affected, or result in the creation of a material Lien on any of the Purchased
Assets, except in the case of clauses (b) and (c), for any conflict, violation,
breach or default that would not reasonably be expected to have a Material
Adverse Effect.

 

3.4           Required Filings and Consents.  The execution and delivery of this Agreement
by Seller do not, and the performance by Seller of its obligations hereunder
and the consummation of the Acquisition will not, require any consent,
approval, authorization or permit of, or filing by Seller with or notification
by Seller to, any Governmental Authority, except for:  (a) the consents, approvals, authorizations, declarations or
rulings set forth on Schedule 3.4; (b) the filing of a
Notification and Report Form pursuant to the HSR Act and the expiration or
earlier termination of the applicable waiting period thereunder with respect to
the Acquisition; and (c) such consents, approvals, authorizations, permits
and filings the failure of which to obtain would not reasonably be expected to
have a Material Adverse Effect.

 

3.5           Financial Statements.  Set forth on Schedule 3.5 are
true and complete copies of (a) Seller’s balance sheets at November 30,
2001 and 2002, and its income statements and statements of cash flows for the
three (3) years ended November 30, 2002, together with the notes thereto and
the report thereon of Ernst & Young LLP (the “Audited Financials”),
and (b) Seller’s unaudited balance sheet at May 31, 2003 and the related
unaudited consolidated income statements and a statement of capital
expenditures for the six month period ended at such date (the “Interim
Financials”) and (c) the pro forma presentation of Seller’s revenues for
(i) the year ended November 30, 2002, and (ii) the six months ended May 31,
2003, which pro forma presentations are based on the Audited Financials or the
Interim Financials, as applicable, and have been adjusted solely to reflect the
pricing referred to in subclauses (x) and (y) below (the

 

18

 

“Pro Forma Revenues”).  The Audited Financials and, subject to
normal and recurring quarter-end, year-end and audit adjustments, the Interim
Financials have been prepared in accordance with GAAP, applied on a consistent
basis throughout the periods covered (except as may be indicated in the notes
to the Audited Financials and except for the absence of notes to the Interim
Financials), and present fairly the financial position of Seller as of the
applicable date and Seller’s results of operations and cash flows for the
periods then ended.  Parent and Seller
agree that the Pro Forma Revenues represent in all material respects the
revenues of Seller for the periods set forth therein as if sales by Seller to
Parent (x) during the year ended November 30, 2002 had occurred at prices set
forth on Schedule 3.5 hereto and (y) during the six months ended May 31,
2003 had occurred at prices set forth on Schedules 3.1(a) and 3.1(b) to the
Supply Agreement.  Parent and Seller
agree that Seller’s aggregate gross margin on sales to Parent and the other
Persons identified on Schedule 1.1(a) for the six months ended May 31, 2003
would not have been materially less than the aggregate gross margin set forth
on Schedule 3.5 if the pricing on Schedules 3.1(a) and 3.1(b) to the Supply
Agreement had been in effect during such period and such aggregate gross
margins had otherwise been calculated in accordance with the practices,
procedures and methods used by Seller in preparing the Interim Financials.  Parent and Seller acknowledge that Kerr and
Purchaser’s acceptance of the prices set forth on Schedules 3.1(a) and 3.1(b)
to the Supply Agreements is made solely in reliance on this representation.

 

3.6           Absence of Undisclosed Liabilities.  As of the date hereof, Seller does not have
any liabilities (absolute, contingent, accrued or otherwise) in respect of the
Business other than: 
(a) liabilities reflected in the balance sheet of Seller at May 31,
2003 included in the Interim Financials (the “Latest Balance Sheet”);
(b) liabilities incurred since the date of the Latest Balance Sheet (the “Latest
Balance Sheet Date”) in the ordinary course of business;
(c) obligations of continued performance under contracts and other
commitments and arrangements entered into in the ordinary course of the
Business to the extent permitted under Section 5.1; (d) the
liabilities described on Schedule 3.6; and (e) liabilities
under this Agreement.

 

3.7           Absence of Certain Changes or Events.  From the Latest Balance Sheet Date to the
date hereof, except as contemplated by this Agreement or disclosed on Schedule 3.7,
Seller has conducted the Business in the ordinary course of business and:

 

(a)           there
has not been any material damage to or destruction or loss of any asset,
property, right or interest of Seller used in the Business, whether or not
covered by insurance, that has had or would reasonably be expected to have a
Material Adverse Effect;

 

(b)           Seller
has not sold or transferred any material amount of its assets, properties,
rights or interests used in the Business, other than sales of inventory and
disposal of obsolete, damaged or defective inventory or other assets in the
ordinary course of business;

 

(c)           Seller
has not increased the salary, bonus or other compensation payable to any
officer or employee of Seller other than in the ordinary course of business
consistent with past practice;

 

(d)           Seller
has not entered into, modified or terminated any contract or transaction
involving a total remaining commitment of at least $250,000  other than in the

 

19

 

ordinary course of
business, or received written notice of termination of any material contract or
transaction;

 

(e)           Seller
has not entered into any agreement to take any of the actions set forth in
subsections (b) through (d) of this Section 3.7; and

 

(f)            Seller
has not taken or failed to take any other action which action or failure would
violate Section 5.1 if such action or failure were to occur after the date
hereof.

 

3.8           Sufficiency and Title to Assets.  Except as set forth on Schedule 3.8:

 

(a)           No
proceeding is pending or, to the Knowledge of Seller, threatened for the taking
or condemnation of all or any portion of the Real Property.  The Real Property is all of the real
property owned by Seller.  Seller has not
entered into any agreements giving any Person any right to lease, sublease or
otherwise occupy any portion of the Real Property.  To the Knowledge of Seller, true and complete copies of all
surveys of the Real Property in Seller’s possession have heretofore been
furnished to Purchaser.  There are no
ongoing proceedings (judicial or, to the Knowledge of Seller, legislative),
claims or disputes of which Seller has notice affecting any Real Property that
might curtail or interfere with the use of such property.  To the Knowledge of Seller, each Real
Property is in material compliance with all Laws, including (i) the
Americans with Disabilities Act, 42 U.S.C. § 12102, et seq., together with
all rules, regulations and official interpretations promulgated pursuant
thereto, and (ii) all Laws with respect to zoning, building, fire, life
safety, health codes and sanitation. 
Seller has not, since June 1, 2001, received any notices of existing
violations of any Laws applicable to any Real Property.  Since January 1, 2001, Seller has not
received any notice of, or other writing referring to, any requirements or
recommendations by any insurance company that has issued a policy covering any
part of the Real Property or by any board of fire underwriters or other body
exercising similar functions, requiring or recommending any repairs or work to
be done on any part of the Real Property, which repair or work has not been completed.  To the Knowledge of Seller, Seller has
obtained all appropriate certificates of occupancy required to use and operate
the Real Property located in the State of California in the manner in which
such Real Property is currently being used and operated.  True and complete copies of all such
certificates have heretofore been furnished to Purchaser.

 

(b)           The
Real Property Leases are the only leasehold estates under which Seller is a
lessee (or sublessee) of any real property or interest therein.  To the Knowledge of Seller, no proceeding is
pending (and Seller has not received notice of any pending proceeding) and, to
the Knowledge of Seller, no proceeding is threatened for the taking or
condemnation of all or any portion of the property demised under the Real
Property Leases.  A true and complete
copy of each Real Property Lease has heretofore been delivered to
Purchaser.  Each Real Property Lease is
valid, binding and enforceable against Seller and, to the Knowledge of Seller
(without inquiry), against the landlord thereunder in accordance with its terms
and is in full force and effect with respect to Seller and, to the Knowledge of
Seller (without inquiry) the landlord thereunder.  Seller has not encumbered the leasehold estate created by each
Real Property Lease with any leasehold mortgages or any other Liens.  Seller has not received notice of any
existing defaults by Seller under any of the Real Property Leases and, to the
Knowledge of Seller, there are no existing defaults by Seller under any of the
Real Property Leases.  To the Knowledge
of

 

20

 

Seller, no event has
occurred that (whether with or without notice, lapse of time or the happening
or occurrence of any other event) would constitute a default under any Real
Property Lease.  To the Knowledge of
Seller, Seller has obtained all appropriate certificates of occupancy required
to use and operate each Real Property Lease in the manner in which such Real
Property Lease is currently being used and operated in California and
Massachusetts to the extent that Seller is obligated to obtain such certificate
of occupancy pursuant to applicable Laws and the terms of the Real Property
Leases.  True and complete copies of all
such certificates have heretofore been furnished to Purchaser.

 

(c)           The
Real Property, the premises demised under the Real Property Leases, the other
assets comprising the Purchased Assets and the Affiliate Marks are, taken
together, all of the assets used, held for use or planned to be used in
connection with products currently under active development, in each case, in
the Business, and are adequate and sufficient for the operation of the Business
as currently conducted.

 

(d)           To
the Knowledge of Seller, except as disclosed in the engineering reports
previously made available to Purchaser and listed on Schedule 3.8,
each of the buildings, improvements, and equipment owned, leased or used by
Seller are structurally sound with no known defects and are in good operating
condition and repair and are adequate for the uses to which they are being
put.  Seller is not in possession of any
engineering reports dated June 1, 1993 or later regarding the structural
sufficiency of the buildings, improvements, and/or equipment owned, leased or
used by Seller except as set forth in Schedule 3.8.  To the Knowledge of Seller, except as
disclosed in the engineering reports previously made available to Purchaser and
listed on Schedule 3.8, none of such buildings, improvements, or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs which are not material in nature or cost.  The roof of each such structure is in good
repair and condition.

 

(e)           Seller
has good and valid title to the Tangible Personal Property, free and clear of
all Liens other than Permitted Liens.

 

3.9           Intellectual Property.

 

(a)           Schedule 3.9(a)
is a complete list of the Listed Intellectual Property that is the subject of
any application filed with, or any registration issued by, any government
agency (collectively, “Registered Intellectual Property Rights”).  All Registered Intellectual Property Rights
and the Affiliate Marks are, to the Knowledge of Seller, enforceable, and all
material fees, payments and filings due in respect of such Registered Intellectual
Property Rights and the Affiliate Marks as of the date hereof have been
made.  Each material item of
Intellectual Property is: 
(i) owned by Seller, free and clear of all Liens, restrictions or
encumbrances on Seller’s right to transfer to Purchaser the Listed Intellectual
Property and Other Intellectual Property (or in the case of the Affiliate
Marks, owned by an Affiliate of Seller), or (ii) rightfully used by Seller
pursuant to a valid license, sublicense, consent or other similar agreement
identified as such in Schedule 3.9(a); and the Intellectual
Property (together with any intellectual property included in the Excluded
Assets) constitutes all of the intellectual property that is necessary to
conduct the Business as currently conducted and in connection with products
currently under active development.

 

21

 

(b)           Each
material item of Intellectual Property transferred to Purchaser pursuant to the
Acquisition shall be owned, available for use or enforceable, as the case may
be, by Purchaser immediately following the Closing on substantially identical
terms and conditions as it was owned by, available to or enforceable by, as the
case may be, Seller immediately prior to the Closing.

 

(c)           The
consummation of the Acquisition will not result in Kerr or Purchaser being
bound by any non-compete or other restriction on the operation of the Business
that was previously binding on Seller or the granting by Kerr or Purchaser of
any rights or licenses to any intellectual property rights of Kerr or Purchaser
to a third party (including a covenant not to sue) that was previously binding
on Seller.

 

(d)           Except
as disclosed on Schedule 3.9(d), Seller is not aware of any facts
which would lead it to reasonably believe that the operation of the Business as
currently conducted infringes or will infringe on any intellectual property
rights of any other Person.

 

(e)           Except
as disclosed on Schedule 3.9(e), no claims have been asserted nor,
to the Knowledge of Seller, are threatened by any Person against Seller
that:  (i) challenge the validity,
enforceability, registrability or ownership by Seller of any of the
Intellectual Property or (ii) claim that the operation of the Business as
currently conducted infringes or will infringe any intellectual property rights
of any other Person.  To the Knowledge
of Seller, no third party is engaged in unauthorized use, infringement or
misappropriation of any Intellectual Property.

 

(f)            There
are no settlements, forbearances to sue, consents, judgments, or orders or
similar obligations (other than license agreements in the ordinary course of
business) which (i) restrict Seller’s rights to use any Intellectual
Property; (ii) restrict Seller’s Business in order to accommodate a third
party’s intellectual property rights; or (iii) permit third parties to use
any intellectual property owned by Seller.

 

(g)           Schedule 3.9(g)
lists all Computer Software owned or licensed by, or otherwise used in the
Business, other than third party software applications that are generally
available and have an individual acquisition cost of $5,000 or less, and
identifies whether each of the foregoing items of Computer Software are owned,
licensed or otherwise used, as the case may be.

 

(h)           Schedule
3.9(h) lists all domain names that are the subject of any application filed
by Seller with, or any registration issued to Seller by, a recognized
registration authority.

 

3.10         Contracts.

 

(a)           Schedule 3.10
sets forth a list of the following contracts, agreements and instruments
pertaining to the Business to which Seller is a party or is bound as of the
date hereof (collectively, the “Material Contracts”):

 

(i)            any
contract involving more than $100,000 over the life of the contract;

 

22

 

(ii)           any
contract that expires more than one (1) year after the date of this Agreement
or that may be renewed at the option of any Person other than Seller so as to
expire more than one (1) year after the date of this Agreement;

 

(iii)          any trust indenture, mortgage, promissory
note, loan agreement or other contract for borrowed money (other than trade
payables incurred in the ordinary course of business not exceeding $100,000
individually or $200,000 in the aggregate);

 

(iv)          any
contract for capital expenditures in excess of $200,000  in the aggregate except as set forth on Schedule
5.1(m);

 

(v)           any
contract limiting the freedom of Seller to engage in any line of business or to
compete with any other Person, or any confidentiality, secrecy or non-disclosure
contract or any contract that may be terminable as a result of Seller’s status
as a competitor of any party to such contract;

 

(vi)          any
agreement of guarantee, support, indemnification, assumption or endorsement of,
or any similar commitment with respect to, the liabilities of any other Person
other than customer agreements made in the ordinary course of the Business (“Guarantee
Obligations”);

 

(vii)         any employment contract, arrangement or policy
(including any collective bargaining contract or union agreement) which may not
be immediately terminated without notification or penalty (including any
augmentation or acceleration of benefits);

 

(viii)        any contract providing for a joint venture,
partnership or similar legal relationship with any other Person;

 

(ix)           any
contract granting to any Person, on a conditional basis or otherwise, any
ownership interest in, or license to manufacture or prepare, any product
developed, manufactured or sold by the Business (each, a “Product”)
utilizing any proprietary recipe or formulation;

 

(x)            any
sales agency, distribution or similar agreements with respect to Products or
for the distribution by Seller of products of another party involving
consideration in excess of $100,000;

 

(xi)           any
agreement providing for a rebate, discount, bonus or commission in excess of
$100,000 with respect to the sale of any Product;

 

(xii)          any agreement requiring Seller to advance or
loan any amount in excess of $100,000 to or on behalf of any of its directors,
employees, shareholders, Affiliates or Associates (or their respective
Affiliates or Associates);

 

(xiii)         any agreement providing for the acquisition
after January 1, 2001 by Seller (or any predecessor in interest) of any real
property, operating business or the shares or other equity interests of any
Person for consideration in excess of $100,000;

 

23

 

(xiv)        any employment, severance, consulting or other
agreement of any nature with any current or former shareholder, director,
officer or any Affiliate thereof involving consideration in excess of $100,000
per year individually or $100,000 per year in the aggregate;

 

(xv)         any
agreement restricting the ability of Seller to incur Indebtedness;

 

(xvi)        any agreement relating to Indebtedness,
interest rate swap or hedging agreements, sale and leaseback transactions and
other similar financing transactions;

 

(xvii)       any contract existing between Seller and any
Governmental Authority;

 

(xviii)      any agreement providing for the provision by
Seller to any third party of any confidential information or restricting Seller
from providing such information to third parties;

 

(xix)         any agreement restricting Seller’s ownership,
operation, sale, transfer, pledge or other disposition of any of the Purchased
Assets;

 

(xx)          any
Real Property Lease;

 

(xxi)         any agreement providing for production by
Seller of any Product on an exclusive or requirements basis;

 

(xxii)        any agreement with a consultant or
subcontractor involving payment of consideration over the term of such
agreement in excess of $100,000; or

 

(xxiii)       any contract, agreement or instrument within the
Knowledge of Seller which is otherwise material to the conduct or operation of
the Business.

 

(b)           Seller
has performed in all material respects the obligations required to be performed
by it under the Material Contracts, and, to the Knowledge of Seller, each of
the Material Contracts is valid and binding and in full force and effect.  True, correct and complete copies of all
Material Contracts have been made available to Purchaser.  Seller has not made or received any claim of
any material default under any Material Contract, and as of the date hereof, to
the Knowledge of Seller, there is no material breach or anticipated breach by
any other party to any Material Contract.

 

3.11         Permits.  The
Listed Permits are all material permits, licenses, approvals, franchises,
certificates, consents and other authorizations of any Governmental Authority
that are required in order for Seller to conduct the Business as it is now
being conducted.  Each of the Listed
Permits is in full force and effect, except for immaterial failures.  To the Knowledge of Seller, Seller is not in
conflict in any material respect with or in material default or violation of
any Listed Permit.

 

3.12         Compliance with Laws.  Seller is not in material conflict with or
in material default or violation of any Law applicable to the Purchased Assets
or the Business.

 

24

 

3.13         Litigation.  Except
as set forth on Schedule 3.13, as of the date hereof, there are no
material claims, actions, suits, investigations, arbitrations, inquiries or
proceedings pending or, to the Knowledge of Seller, threatened, against Seller
before any Governmental Authority.

 

3.14         Books and Records.  All books of account and other financial
books and records of Seller directly relating to the Business are true, correct
and complete in all material respects.

 

3.15         Employment Matters.

 

(a)           Schedule 3.15
sets forth a list of all Persons who were employed by Seller, on a full time or
a part time basis, as of February 1, 2003, including all such Persons who
at such date were on military leave, disability leave or any other leave
approved by the Company or mandated by applicable Law and a description of all
compensation and benefits provided by Seller to each such Person, which list is
true and complete in all material respects. 
Except as otherwise required by Law or as set forth on Schedule 3.15,
the employment of all such employees is terminable by Seller at will.

 

(b)           Except
as set forth on Schedule 3.15: 
(i) Seller is not a party to any contract with any labor
organization or other bargaining representative of its employees;
(ii) there is no unfair labor practice charge or complaint pending or, to
the Knowledge of Seller, threatened against Seller; (iii) Seller has not
experienced any labor strike, slowdown, work stoppage or similar labor
controversy within the past three (3) years; (iv) Seller has paid in full
to all of its employees all compensation and benefits due and payable to such
employees; and (v) Seller is in material compliance with all applicable
Laws respecting employment and employment practices, terms and conditions of
employment, wages and hours and occupational safety and health and Seller has
not received written notice of any investigation, charge or complaint against
Seller relating to the Business pending before the Equal Employment Opportunity
Commission or any other federal, state or local government agency or court or other
tribunal regarding an unlawful employment practice.

 

(c)           Since
January 1, 2003, (i) Seller has not effectuated a “plant closing” (as
defined in the WARN Act) affecting any site of employment or one or more
facilities or operating units within any site of employment or facility;
(ii) there has not occurred a “mass layoff” (as defined in the WARN Act)
affecting any site of employment or facility of the Seller; and
(iii) Seller has not engaged in layoffs or employment terminations
sufficient in number to trigger application of the WARN Act or any similar
state, local or foreign law or regulation. 
Except as set forth on Schedule 3.15(c), no employee of Seller
has suffered an “employment loss” (as defined in the WARN Act) during the
six-month period prior to the date of this Agreement.

 

3.16         Employee Benefits.  Schedule 3.16 sets forth a
complete and accurate list as of the date hereof of each employment,
consulting, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, stock appreciation right or other equity-based
incentive, severance or termination pay, change in control, hospitalization or
other medical, life, disability or other insurance, supplemental unemployment
benefits, savings, profit-sharing, pension or retirement plan, program, policy,
agreement or arrangement, and each other employee or fringe benefit plan,
program, policy agreement or arrangement, sponsored, maintained or

 

25

 

contributed to or
required to be contributed to by Seller for the benefit of Seller’s employees,
whether formal or informal and whether legally binding or not (each, a “Plan;”
collectively, the “Plans”).  No
event has occurred in connection with any Plan that has, will or may result in
any fine, penalty, assessment or other liability for which any transferee of
assets of Seller may be responsible, whether by operation of Law or by
contract.  The transactions contemplated
by this Agreement, will not, either alone or in combination with any other event
or events, cause Kerr or Purchaser to incur any liabilities with respect to any
Plan, including (a) any liability under Section 4980B of the Code or
(b) any liability with respect to any employee of Seller that was incurred
or arose on or prior to the Closing Date.

 

3.17         No Finder.  Seller
has not incurred any liability to any broker, finder, investment banker or any
other Person for any brokerage, finder’s or other fee or commission in
connection with this Agreement or the Acquisition.

 

3.18         Environmental Matters.

 

(a)           Except
as set forth on Schedule 3.18, (i) the Business is in material
compliance with all applicable Environmental Laws, which compliance includes,
but is not limited to, the possession by Seller and its Subsidiaries of all
permits and other governmental authorizations required under Environmental Laws
for the Business, and compliance with the terms and conditions thereof;
(ii) neither Seller nor any of its Subsidiaries has received any written
or, to the Knowledge of Seller, oral communication, whether from a Governmental
Authority or any other Person, that alleges that the Business is not in
compliance with any Environmental Laws, and, to the Knowledge of Seller, there
are no circumstances that would be reasonably expected to prevent or interfere
with such compliance in the future.  For
purposes of this Section 3.18, “Knowledge of Seller” includes the actual
knowledge of each plant Manager and environmental manager for each facility or
property in the Business named in Schedule 3.18.

 

(b)           Except
as set forth on Schedule 3.18, there is no Environmental Claim pending or,
to the Knowledge of Seller, threatened against Seller and any of its
Subsidiaries relating to the Business or, to the Knowledge of Seller, against
any Person whose liability for any Environmental Claim relating to the Business
Seller or any of its Subsidiaries has retained or assumed either contractually
or by operation of law.

 

(c)           Except
as set forth on Schedule 3.18, to the Knowledge of Seller, there has been
no release, emission, discharge, presence or disposal of any Material of
Environmental Concern, and there are no actions, activities, circumstances,
conditions, events or incidents that present a material threat of release,
emission, discharge, presence or disposal of any Material of Environmental
Concern, that would reasonably be expected to form the basis of any material
Environmental Claim against Seller or any Subsidiary relating to the Business,
or, to the Knowledge of Seller, against any Person whose liability for any
Environmental Claim relating to the Business Seller or any of its Subsidiaries
has retained or assumed either contractually or by operation of law.

 

(d)           Except
as set forth on Schedule 3.18: 
(i) neither Seller nor any Subsidiary is the subject, either
directly or indirectly, of any Environmental Claim with respect to any on-site
or off-site locations where Seller or any Subsidiary has stored, disposed or
arranged for the disposal of Materials of Environmental Concern for, from or
with respect to the Business, (ii)

 

26

 

there are no underground
storage tanks located on property owned or controlled by Seller or any
Subsidiary for the Business, and, to the Knowledge of Seller, there are no
underground storage tanks located on property otherwise used for the Business,
(iii) there is no damaged asbestos contained in or forming part of any
building, building component, structure or office space owned, leased or
otherwise used for the Business, (iv) to the Knowledge of the Seller, there is
no other asbestos contained in or forming part of any building, building
component, structure or office space owned, leased or otherwise used for the
Business, and (v) to the Knowledge of Seller, no polychlorinated biphenyls (PCBs)
or PCB-containing items are used or stored at any property owned, used or
leased for the Business.

 

(e)           Except
as set forth on Schedule 3.18, Seller has provided to Purchaser all
written assessments, reports, data, results of investigations or audits and
similar documents that are in the possession of or reasonably available to
Seller or any Subsidiary regarding the environmental condition of the property
owned, used or leased for the Business, or the compliance (or noncompliance) by
Seller or any Subsidiary with any Environmental Laws relating to the Business.

 

(f)            Except
as set forth in Section 5.10 or on Schedule 3.18, Seller is not
required by virtue of the transactions set forth herein and contemplated
hereby, or as a condition to the effectiveness of any transactions contemplated
hereby, (i) to perform a site assessment for Materials of Environmental
Concern, (ii) to remove or remediate Materials of Environmental Concern, (iii)
to give notice to or receive approval from any governmental authority, or (iv)
to record or deliver to any person or entity any disclosure document or
statement pertaining to environmental matters.

 

(g)           With
respect to the matters disclosed in the reports listed in Schedule 3.18(g)
hereto, there is no individual item or series of related items that would
reasonably be expected to cause Losses greater than $200,000, or that, taken in
the aggregate, would reasonably be expected to have a Material Adverse Effect.

 

3.19         Taxes and Tax Returns.  Except as set forth on Schedule 3.19:

 

(a)           Seller
has timely filed or will have timely filed on its behalf (taking into account
extensions to file) those Tax Returns which are currently due or, if not yet
due, will timely file, or will have timely filed on its behalf (taking into
account extensions to file) all Tax Returns required to be filed by it or on
its behalf for all taxable periods ending on or before the Closing Date, and
all such Tax Returns are, or will be when filed, true, correct and complete in
all material respects;

 

(b)           Seller
has paid, or had paid on its behalf, to the appropriate Governmental Authority,
or, if payment is not yet due, will pay, or will have paid, to the appropriate
Governmental Authority, all Taxes due and payable for all taxable periods
beginning on or before the Closing Date;

 

(c)           except
in the case of a Lien for ad valorem
property taxes or income taxes not yet due and payable or otherwise disclosed
on Schedule 3.19, there is no unpaid Tax which constitutes a Lien upon
any of the Purchased Assets;

 

27

 

(d)           Seller
is not a party to any Tax allocation or Tax sharing agreement or has any
liability or obligation to any Person as a result of, or pursuant to, any such
allocation or agreement, except as set forth in the notes to the Audited
Financials; and

 

(e)           Seller
is not a Person other than a “United States Person” within the meaning of the
Code.

 

3.20         Customers and Suppliers.

 

(a)           Schedule 3.20
lists the ten customers of Seller who, during the period December 1, 2001 to
November 30, 2002, purchased the largest amount of Products from Seller, based
on net sales.  Since December 1, 2002,
except as set forth on Schedule 3.20, there has not been any
material adverse change in the business relationship of Seller with any such
customer or customers.  Except as set
forth on Schedule 3.20, no such customer has materially reduced its purchases
since December 1, 2002, or, to the Knowledge of Seller or to the actual
knowledge of the salesperson responsible for the account of such customer, has
advised Seller that it is (i) terminating, considering terminating, or planning
to terminate its business relationship with Seller, or (ii) considering
reducing or planning to reduce (other than oral statements made in the ordinary
course of business in connection with contract renewal negotiations) its future
purchases from Seller by 10% or more.

 

(b)           Since
December 1, 2002, no Person who supplies resin to Seller has reduced the supply
of resin available to Seller or, to the Knowledge of Seller or to the actual
knowledge of the purchaser responsible for the account of such supplier,
advised Seller that it is (i) terminating or intends to terminate its business
relationship with Seller or (ii) reducing or intends to reduce the supply of
resin available to Seller by 10% or more. 
Seller currently maintains sufficient resin inventory to conduct the
Business as it is conducted.  Seller has
access to sufficient amounts of resin supply, purchasable at then prevailing
market prices, necessary to conduct the Business as it is conducted.

 

3.21         Inventory.  The
inventory reflected in the Latest Balance Sheet is good and merchantable
material, of a quality and quantity saleable in the ordinary course of Business
consistent with Seller’s past practice and was acquired by Seller in the
ordinary course of business of the Business consistent with Seller’s past
practice and is carried on the books and records of Seller in accordance with
GAAP.

 

3.22         Insurance.  Set
forth in Schedule 3.22 is a complete and accurate list as of the
date hereof of all insurance policies carried by Seller (as a party, named
insured or otherwise the beneficiary of coverage).  All such insurance policies are in full force and effect and
shall remain in full force and effect through the Closing Date.  Such policies are sufficient for compliance
with all requirements of Law and of all agreements to which Seller is a party,
are valid, outstanding and enforceable policies, insure against risks of the
kind customarily insured against and in amounts customarily carried by
companies similarly situated and by companies engaged in similar businesses and
owning similar properties.  Neither
Seller nor, to the Knowledge of Seller, any other insured party to any
insurance policy, is in breach or default (including any breach or default with
respect to the payment of premiums or the giving of notices) and no event has
occurred that, with notice or lapse of time or both, would constitute such a
breach or default

 

28

 

or permit termination or
modification of any such policy.  The
Seller has not been denied coverage since January 1, 2000.  Seller does not currently owe any deficiency
amounts or Taxes for industrial insurance obligations arising under applicable
state law.

 

3.23         Affiliate Transactions.  Schedule 3.23 lists all
agreements and arrangements and contains a summary of all transactions since
January 1, 2000 and all currently proposed agreements, arrangements and
transactions related to the Business and that are between Seller, on the one
hand, and any current or former director, officer, shareholder or other
Affiliate or Associate of Seller, or any of their respective Affiliates or
Associates, or any entity in which any such Person has a direct or indirect
material interest, on the other hand. 
All Indebtedness that is related to the Business and that is owed by any
of the current or former officers, directors, shareholders or other Affiliate
or Associate of Seller, or any of their respective Affiliates or Associates,
are reflected in the Latest Balance Sheet.

 

3.24         Questionable Payments.  Neither Seller nor any employee, officer,
director, Affiliate or Associate of Seller or other Person acting on behalf of
Seller, has (a) used any corporate or company funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) made any direct or indirect unlawful payments to
government officials or employees from corporate funds; (c) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets;
(d) made any false or fictitious entries on the books or records of any of
such corporations; (e) made any bribe, payoff, kickback or other unlawful
payment; or (f) made any material favor or gift which is not, in good faith,
believed by Seller to be fully deductible by Seller or Seller’s consolidated
group for any income tax purposes and which was, in fact, so deducted.

 

3.25         Products Liability.  Except as set forth on Schedule 3.13,
there are no material claims presently pending or, to the Knowledge of Seller,
threatened against Seller that are (a) for products liability on account
of any express or implied warranty, law, regulation or other theory or
(b) for personal injury.

 

3.26         No Powers of Attorney.  Seller has not granted any general or
special powers of attorney or any other authorizations of third parties to act
as agents for Seller except for powers of attorney granted in connection with
Seller’s Taxes and Tax Returns.

 

3.27         Full Disclosure.  No representation or warranty by Seller in
this Agreement or statement in any Schedule contains any untrue statements
of a material fact or omits to state any material fact necessary, in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF KERR AND PURCHASER

 

As an
inducement to Seller to enter into this Agreement and to consummate the
Acquisition, each of Kerr and Purchaser jointly and severally represents and
warrants to Seller as follows:

 

4.1           Organization and Qualification.  Purchaser is a limited liability company and
Kerr is a corporation, each duly organized, validly existing and in good
standing under the laws

 

29

 

of the State of
Delaware.  Each of Kerr and Purchaser is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for failures to be so qualified or licensed and in good
standing that do not have a material adverse effect on the ability of Kerr and
Purchaser to consummate the transactions contemplated hereby.

 

4.2           Authority Relative to this Agreement.  Each of Kerr and Purchaser has all necessary
corporate or limited liability company power and authority to execute and
deliver this Agreement and the other Transaction Documents to which it is a
party, to perform its obligations hereunder and to consummate the
Acquisition.  The execution and delivery
of this Agreement and the other Transaction Documents to which it is a party by
each of Kerr and Purchaser and the consummation by Purchaser of the Acquisition
have been duly and validly authorized by all necessary corporate action on the
part of each of Kerr and Purchaser, and no other corporate proceedings on the
part of Kerr or Purchaser are necessary to authorize this Agreement or to consummate
the Acquisition other than the filing and recordation of Articles of Transfer
as required by Maryland law.  This
Agreement and the other Transaction Documents to which it is a party have been
or will be duly executed and delivered by each of Kerr and Purchaser and,
assuming the due authorization, execution and delivery by Seller, each such
agreement constitutes a legal, valid and binding obligation of each of Kerr and
Purchaser, enforceable against each of Kerr and Purchaser in accordance with its
terms, subject to the effect of any applicable bankruptcy, moratorium,
insolvency, fraudulent conveyance, reorganization or other similar Law
affecting the enforceability of creditors’ rights generally and to the effect
of general principles of equity which may limit the availability of remedies
(whether in a proceeding at law or in equity).

 

4.3           No Conflict. 
The execution and delivery of this Agreement by each of Kerr and
Purchaser do not, and the performance by each of Kerr and Purchaser of its
obligations hereunder and the consummation of the Acquisition will not:  (a) conflict with or violate any
provision of the certificate of incorporation or by-laws of Kerr or the
certificate of formation or limited liability company operating agreement for
Purchaser; (b) to the knowledge of Kerr and Purchaser, assuming that all
filings and notifications described in Section 4.4 have been made,
conflict with or violate any Law or order applicable to Kerr or Purchaser or by
which Kerr or Purchaser or any of their assets or properties is bound or
affected; or (c) to the knowledge of Kerr and Purchaser, result in any
material breach of or constitute a material default under, or require notice or
consent under, any mortgage, indenture, deed of trust, lease, contract, agreement,
license or other instrument to which Kerr or Purchaser is a party or by which
Kerr’s or Purchaser’s assets or properties are bound, or result in the creation
of a material Lien on any asset or property of Kerr or Purchaser, except in the
case of clauses (b) and (c), for any conflict, violation, breach or default
that would not reasonably be expected to have a material adverse effect on the
ability of Kerr or Purchaser to consummate the transactions contemplated
hereby.

 

4.4           Required Filings and Consents.  The execution and delivery of this Agreement
by each of Kerr and Purchaser do not, and the performance by Kerr or Purchaser
of its obligations hereunder and the consummation of the Acquisition will not,
require any consent, approval, authorization or permit of, or filing by Kerr or
Purchaser with or notification by Kerr or Purchaser to, any Governmental
Authority, except for:  (a) the
filing of a Notification and

 

30

 

Report Form pursuant to
the HSR Act and the expiration or earlier termination of the applicable waiting
period thereunder with respect to the Acquisition and (b) such consents,
approvals, authorizations, permits and filings the failure of which to obtain
would not reasonably be expected to have a material adverse effect on the
ability of Kerr or Purchaser to consummate the transactions contemplated
hereby.

 

4.5           No Finder.  Other
than an aggregate fee of $1,687,500 payable to Fremont Partners, L.L.C. and
Fremont Partners III, L.L.C., which fee shall be the sole responsibility of
Kerr and/or Purchaser, neither Kerr nor Purchaser has agreed to pay to any
broker, finder, investment banker or any other Person a brokerage, finder’s or
other fee or commission in connection with this Agreement or the Acquisition.

 

4.6           No Litigation.  There is no claim, action, suit or proceeding pending or, to the
knowledge of Kerr and Purchaser, threatened, before any Governmental Authority
that prohibits or restricts, or seeks to prohibit or restrict, the consummation
of the Acquisition.

 

4.7           Commitment Letters. 
Kerr has provided to Seller a true and complete copy of the commitment
letter received by Kerr from Wells Fargo Bank.

 

ARTICLE V

ADDITIONAL COVENANTS

 

5.1           Conduct of Business.  From the date hereof through the Closing
Date, except as contemplated by this Agreement or described on Schedule 5.1,
Seller agrees to conduct Seller’s operations in the ordinary course, consistent
with past practice, and agrees to:

 

(a)           use
its commercially reasonable efforts to (i) preserve for the benefit of
Purchaser the goodwill and the existing relationships of Seller with its
customers, suppliers and others with whom Seller deals; (ii) retain the
services of its key employees; (iii) perform its obligations under the Material
Contracts; (iv) maintain, keep and preserve the Business and the Purchased
Assets in the same condition as the date hereof, except that in the case of any
Purchased Assets constituting Tangible Personal Property, ordinary wear and
tear and casualty is permitted; (v) preserve intact the Business and its
organization; (vi) maintain books and records in accordance with past practice;
and (vii) maintain in effect the insurance coverage provided under the policies
set forth in Schedule 3.22;

 

(b)           not
waive, release or cancel any material claims against third parties or material
debts owing to Seller, other than customer billing reductions and write-downs
made in the ordinary course of business consistent with past practice and other
than in respect of claims or debts that would be Excluded Assets;

 

(c)           not
(i) grant any general increase in the compensation of officers or employees,
except in accordance with pre-existing contracts or consistent with past
practice; (ii) enter into any contract with any employee, officer, director,
Affiliate or Associate of Seller or any Affiliate or Associate of any such
Person, provided, however, that this shall not prevent Seller
from hiring employees on an at-will basis to fill an opening vacated by a
departing or transferring employee in the ordinary course of business, provided
that the compensation being offered to the individual is consistent with other
personnel in the same or a similar position; (iii)

 

31

 

enter into any collective
bargaining agreement or similar contract; (iv) enter into any agreement that
requires Seller to pay any severance or termination pay (or that requires that
the Seller provide a certain period of notice to an employee in advance of the
effective date of termination or pay in lieu of such advance notice) to any
employee, director, officer or consultant of Seller, provided that this
shall not serve to prohibit Seller from paying any severance or termination pay
(or pay in lieu of advance notice) which Seller was obligated to pay pursuant
to any agreement, policy or practice entered into prior to the execution of
this Agreement, even if the event triggering the actual obligation to pay such
amounts occurs after the execution of this Agreement; (v) adopt or materially
amend any employee or fringe benefit plans, agreements or arrangements, except
as required pursuant to applicable Law; or (vi) engage in any work force
reduction or restructuring resulting in employee layoffs triggering the
notification requirements under the Worker Adjustment and Retraining
Notification Act or similar applicable state or municipal statute or ordinance;

 

(d)           not
make any change in any accounting principle, method, estimate or practice,
except for any such change required by reason of a concurrent change in GAAP;

 

(e)           not
(i) enter into any contract, agreement, commitment or binding understanding or
arrangement requiring performance during or following a period in excess of one
year or outside of the ordinary course of business consistent with past
practice; or (ii) without prior consultation with Purchaser, renew, fail to
renew, or permit or not permit to be automatically renewed any material
agreement, including any material customer, supplier, distributor, licensing,
employment or other material contracts, to which Seller is a party (other than
amendments or terminations of agreements pursuant to or contemplated by this
Agreement);

 

(f)            not
(i) cancel, materially modify or materially amend any Real Property Lease or
Material Contract; (ii) contract for or incur any expense in connection with
opening any additional Business facility; (iii) cancel any of the Listed
Permits or allow any Listed Permit to expire or not be renewed; (iv) revalue
any of its material assets or any material amount of its properties, other than
in the ordinary course of business consistent with past practice; or (v) sell
or dispose of any of the Purchased Assets (except for the sale of inventory and
the disposition of damaged or defective inventory, equipment or other material
in the ordinary course of business consistent with past practice), or permit
the creation of any Lien, except for Permitted Liens;

 

(g)           not
enter into or amend any agreements pursuant to which any other party is granted
exclusive marketing, manufacturing or other exclusive rights of any type or
scope with respect to any of its products or proprietary technology, other than
exclusive rights of Seller’s customers in molds, tooling and other design
materials of such customers;

 

(h)           not
amend the certificate of incorporation, bylaws or similar organizational
documents of Seller;

 

(i)            not
merge or consolidate with any other Person or acquire a material amount of
assets or equity or debt securities from any other Person, except for purchases
of supplies and capital expenditures in the ordinary course of business
consistent with past practice or otherwise in accordance with Seller’s
projections;

 

32

 

(j)            not
commence a lawsuit, claim, action, arbitration or other administrative or
judicial proceeding other than (i) for the routine collection of bills, (ii) in
such cases where Seller in good faith determines that failure to commence suit
would result in a material impairment of a valuable aspect of Seller’s
business, provided Seller consults with Purchaser prior to filing such
suit, or (iii) for a breach of this Agreement;

 

(k)           not
(i) pay, discharge, or satisfy any material claim, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than in the ordinary course of business consistent with past practice; or (ii)
fail to pay or otherwise satisfy (except if being contested in good faith) any
material accounts payable, liabilities or obligations when due and payable;

 

(l)            not
take or fail to take any action that would cause any of the representations and
warranties of Seller contained in this Agreement to be untrue in any material
respect as of the Closing Date (disregarding for these purposes any materiality
or Material Adverse Effect qualifier contained therein);

 

(m)          
not make any capital expenditure exceeding $200,000 individually or in the
aggregate other than those set forth on Schedule 5.1(m) without the
prior written consent of Kerr;

 

(n)           not
perform or take, or fail to perform or take, any action that has or is
reasonably likely to have a Material Adverse Effect; or

 

(o)           not
agree or commit to do any of the foregoing provided in subsections (b) through
(n).

 

Notwithstanding
any of the foregoing, nothing herein shall be construed to prohibit or restrict
any activities or transactions undertaken with respect to any of the Excluded
Assets, the Retained Liabilities, or the business of Seller other than the
Business, so long as, in each case, such activities or transactions will not
have a negative effect on the Purchased Assets or the Business.

 

5.2           Intentionally
Omitted

 

5.3           Consents, Filings and Authorizations; Efforts to Consummate.  As
promptly as practicable after the date hereof, Purchaser and Seller shall make
all filings and submissions under such Laws as are applicable to them or to
their respective Affiliates, including the filing of a Notification and Report
Form pursuant to the HSR Act, and as may be required for the consummation of
the Acquisition in accordance with the terms of this Agreement.  Purchaser and Seller shall consult with each
other prior to any such filing, and neither Seller nor Purchaser shall make any
such filing or submission to which the other of them reasonably objects in
writing.  All such filings shall comply
in form and content in all material respects with applicable Laws.  Subject to the terms and conditions herein,
each of Seller and Purchaser, without payment or further consideration, shall
use its commercially reasonable efforts to take or cause to be taken all
actions and to do or cause to be done all things necessary, proper or
advisable:  (a) to cause the
conditions to the obligations of the other Party to consummate the Acquisition
to be satisfied as soon as reasonably practicable (including, in the case of
Seller, the removal of all Liens on the

 

33

 

Purchased
Assets other than Permitted Liens) and (b) under applicable Laws, permits
and orders, to consummate and make effective the Acquisition as soon as
reasonably practicable, including obtaining all consents required in connection
with such Party’s consummation of the Acquisition.  Seller and Parent (but only to the extent that Parent shall make
available its Representatives who are substantially involved in the Business)
shall provide Kerr and Purchaser with reasonable assistance to obtain the debt
financing needed by Purchaser for the consummation of the transactions
contemplated by this Agreement, subject to reimbursement by Kerr and Purchaser
for any reasonable documented out-of-pocket expenses incurred by Seller or
Parent in connection with the providing of such assistance.  Such assistance shall include, to the extent
it is commercially reasonable for Seller and Parent to do so, making
appropriate Representative of Parent and Seller available to participate in
informational meetings, assisting with the preparation of an information
package in connection with such financing, including the syndication of any
loans to be funded in connection with the transactions contemplated by this
Agreement, cooperating with respect to matters relating to bank collateral to
take effect as of the Closing in connection with such financing (including the
pledge of the Purchased Assets by Purchaser and the obtaining of
authorizations, consents and approvals required under any Real Property Lease
in order to subject the leasehold interest represented thereby to Liens in
favor of any lenders providing such financing), using its commercially reasonable
efforts to obtain customary “comfort” letters and legal opinions and executing
and delivering such documents, certificates, agreements and other writings as
shall take effect as of the Closing and as are reasonably requested in
connection therewith.  Without limiting
the generality of the foregoing, Purchaser shall use its commercially
reasonable efforts to obtain such debt financing.  Nothing herein shall require any Party to take any action
that would reasonably be expected to have a material adverse effect on such
Party.

 

5.4           Notices of
Certain Events.  Prior to
the Closing Date, each of Seller and Purchaser shall promptly notify the other
of:

 

(a)           any
notice or other communication from any Person alleging that the consent of such
Person is or may be required in connection with the Acquisition;

 

(b)           any
material notice or other material oral or written communication from any
Governmental Authority in connection with the Acquisition;

 

(c)           any
change that has a Material Adverse Effect, or could delay or impede the ability
of either Seller or Purchaser to perform its obligations under this Agreement
and to consummate the Acquisition;

 

(d)           the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would cause any representation or warranty contained in this Agreement to
be untrue or inaccurate in any material respect at or prior to the Closing
Date; and

 

(e)           any
material failure of any Party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied hereunder.

 

5.5           Public Announcements.  From and after the date of this Agreement
until the Closing Date, Kerr and Purchaser, on the one hand, and Seller, on the
other hand, agree not to

 

34

 

make any public
announcement or other disclosure concerning this Agreement or the transactions
contemplated herein without obtaining the prior consent of the other Party as
to form, content and timing (such consent not to be unreasonably withheld); provided,
however, that the foregoing shall not restrict (a) any Party (or
Parent) from making any public announcement or disclosure as may be required by
applicable Law (including the rules of any stock exchange or other
self-regulated body) on advice of a nationally recognized securities law firm
that such Party is reasonably obliged to make public announcements or
disclosure or (b) Seller from informing its employees and agents about
this Agreement and the transactions contemplated hereby, provided that
Kerr and Purchaser shall be permitted reasonable opportunity to comment upon
the initial proposed communication to Seller’s employees and agents before
release.

 

5.6           Access to Information; Confidentiality.

 

(a)           From
and after the date of this Agreement until the Closing Date, upon reasonable
notice and subject to applicable Law relating to the exchange of information
and to confidentiality obligations of Seller entered into prior to the date
hereof, Seller shall afford to Purchaser’s Representatives access during normal
business hours to the employees of Seller and to such properties, books,
computer systems, records, contracts, commitments and other information of
Seller relating to the Business as Purchaser may reasonably request, but
excluding books, computer systems, records, contracts, commitments and
information primarily related to the sale of the Business, the Excluded Assets
or the Retained Liabilities.  In the
event that Purchaser’s due diligence reveals any condition of the Real Property
or the premises demised under the Real Property Leases that in Purchaser’s
judgment requires disclosure to any Governmental Authority, Purchaser shall
immediately notify Seller thereof.  In
such event, Seller, and not Purchaser or any Person acting on Purchaser’s
behalf, shall make such disclosures to the extent Seller reasonably deems
appropriate.  Notwithstanding the
foregoing, Purchaser may disclose matters concerning the Real Property to a
Governmental Authority on written advice of a nationally-recognized law firm
that Purchaser is reasonably obliged to make such disclosure if Purchaser gives
Seller not less than ten (10) days prior written notice of the proposed
disclosure, together with a copy of such written advice.

 

(b)           Purchaser
acknowledges that the information provided to Purchaser and its Representatives
in connection with the Acquisition and this Agreement is subject to, and
Purchaser shall, and shall cause its Representatives to, fully comply with the
provisions of, that certain Confidentiality Agreement, dated as of February 6,
2003, between Purchaser and Seller (the “Confidentiality Agreement”),
the terms of which are incorporated herein by this reference.  Notwithstanding the foregoing, following the
Closing Date, any information with respect to the Business that is included in
the Purchased Assets shall not be subject to the Confidentiality Agreement.

 

(c)           From
and after the Closing Date, Parent, Seller and any Representatives of Parent or
Seller shall maintain in confidence and not use or disclose to any third party
any confidential or proprietary information regarding the business operations,
product formulations, ingredients or processes, technical know-how or data,
specifications, finances or other business matters of Seller which information
constitutes any part of the Purchased Assets; provided, that nothing in
this Section 5.6(d) shall apply to information that (i) is in the
public domain, (ii) is

 

35

 

independently developed
by such Person after the Closing, or (iii) is disclosed to the recipient
by a third party which has no duty of confidentiality to Purchaser or its
Affiliates.  Upon discovery by Parent,
Seller or any of their respective Representatives that such Person is in
possession of any such confidential or proprietary information, such Person
shall promptly return all such information to Purchaser, without retaining any
copies thereof except for copies that such Person is required to retain by
applicable Law.  Parent and Seller shall
be responsible for ensuring the compliance of their respective Representatives
with the obligations in this Section 5.6(d). 
If Parent, Seller or their respective Representatives receive a request
or are required (by deposition, interrogatory, request for documents, subpoena,
civil investigative demand or similar process) to disclose all or any part of
such confidential or proprietary information, Parent and Seller, as the case
may be, agree to, or will ensure that their respective Representatives,
promptly notify Purchaser of the existence, terms and circumstances surrounding
such request so that Purchaser may seek a protective order or other appropriate
remedy.

 

(d)           Notwithstanding
any provision herein to the contrary, each Party and each of the respective
employees, representatives and agents of each Party are hereby expressly
authorized to disclose to any and all persons, without limitation of any kind,
the tax treatment and any facts that may be relevant to the tax structure of
the transactions contemplated by this Agreement and the Transaction Documents, provided
that the confidentiality provisions of this Agreement shall continue to apply
to the extent that any information (e.g., names of the Parties) is not relevant
to understanding the tax treatment or tax structure of the transactions
contemplated hereby.

 

5.7           Expenses.  Except
as otherwise specifically provided in this Agreement, each Party shall bear its
own expenses incurred in connection with the preparation, execution and
performance of this Agreement and the Acquisition, including all fees and
expenses of such Party’s Representatives, provided that:

 

(a)           Purchaser
shall pay all fees required in connection with the filing of the Notification
and Report Form under the HSR Act; and

 

(b)           Seller
shall pay all recording fees, sales taxes, transfer taxes and similar taxes
imposed upon transfer of the Purchased Assets pursuant to this Agreement.

 

5.8           Title and Survey Matters.

 

(a)           Seller
has delivered to Purchaser, and Purchaser has reviewed and approved the
following:  (i) the owner’s title
commitments identified on Schedule 5.8, as the same have been
supplemented or updated prior to the dated hereof (collectively, the “Commitments”)
for the Real Property prepared by First American Title Insurance Company (the “Title
Company”); (ii) copies of all documents supporting exceptions (“Exceptions”)
set forth in the Commitments; and (iii) a copy of the existing surveys for
the Real Property identified on Schedule 2.1(a)(i) (collectively,
the “Surveys”) (such Commitments, Exceptions, and Surveys collectively,
the “Title Documents”).  The
following matters are hereby approved by Purchaser (collectively, the “Permitted
Exceptions”):  (A) all
exceptions to title shown on the Commitments and all matters shown on the
Surveys; (B) all of the contracts, leases and other agreements listed as
Items 1 through 106 on Schedule 2.1(e); (C) the Lien of
non-delinquent

 

36

 

Taxes (it being agreed by
Purchaser and Seller that if any Tax is levied or assessed with respect to the
Real Property for public improvements that will benefit the Real Property
subsequent to the date of this Agreement and Seller has the election to pay
such Tax either immediately or under a payment plan with interest, Seller may elect
to pay under a payment plan, which election shall be binding on Purchaser);
(D) all printed exceptions and exclusions contained in the form of the
Title Policies to be issued at Closing; and (E) any matters caused or
created by, or otherwise approved or consented to in writing by, Purchaser.

 

(b)           Purchaser
shall have the right to object in writing to any title matter that is not a
Permitted Exception (other than any matter falling within subsection (E) of the
definition of Permitted Exceptions) which may appear on supplemental title
commitments or updates to the Commitments issued after the date of the
respective Commitments (collectively, “Other Liens”) within five (5)
days after receipt thereof (together with a copy of such new exception) by
Purchaser.  Unless Purchaser shall
timely object to such Other Liens, all such Other Liens which are set forth in
any such supplemental commitments or updates shall be deemed to constitute
additional Permitted Exceptions.  Any
exceptions which are timely objected to by Purchaser shall be herein
collectively called the “Title Objections.”  Seller may elect (but shall not be obligated) to remove, or cause
to be removed at its expense, any Title Objections, and shall be entitled to a
reasonable adjournment of the Closing (not to exceed a period of thirty (30)
days) for the purpose of such removal, which removal will be deemed effected by
the issuance of title insurance eliminating the Title Objections or insuring
against the effect of the Title Objections; provided, however,
Seller shall be obligated to remove or bond over any and all Liens for borrowed
money, mechanics’ and materialmen’s liens, tax liens and any Liens resulting
from the failure to satisfy an obligation when due, in each case affecting any
Real Property, on or before the Closing Date. 
Seller shall notify Purchaser in writing within five (5) days after
receipt of Purchaser’s notice of Title Objections whether Seller elects to
remove the same.  If Seller fails to
remove any Title Objections prior to the Closing, Purchaser may elect either
to:  (i) terminate this Agreement
or (ii) waive such Title Objections, in which event such Title Objections
shall be deemed additional “Permitted Exceptions” and the Closing shall occur
as herein provided (A) with a reduction of or credit against the Purchase Price
as the Parties may agree or (B) subject to Purchaser’s right to indemnification
pursuant to Section 9.2.

 

(c)           If
on the Closing Date there are any Title Objections which Seller has elected to
remove, Seller may use any portion of the Purchase Price to satisfy the same; provided
Seller shall either deliver to Purchaser at Closing instruments sufficient to
cause such Title Objections to be released of record, together with the cost of
recording or filing such instruments, or cause the Title Company to omit as an
exception, the same, without any additional cost to Purchaser, whether such
insurance is made available in consideration of payment, bonding, indemnity of
Seller or otherwise.

 

5.9           No Recording.  The
provisions of this Agreement shall not constitute a Lien on the Real
Property.  Neither Purchaser nor any of
its Representatives shall record or file this Agreement or any notice or
memorandum hereof in any public records. 
If Purchaser breaches the foregoing provision, this Agreement shall, at
Seller’s election, terminate.

 

5.11         Intentionally
Omitted

 

37

 

5.12         Intentionally
Omitted

 

5.13         Patent Transfer.  Prior to the Closing, Parent shall assign to
Seller all of Parent’s rights in and to the patents identified as Items 3, 5,
6, and 7 on Schedule 2.1(g) pursuant to valid and effective assignment
documentation in form and substance reasonably acceptable to Purchaser.

 

5.14         Price Decrease
Notification.  Seller
shall notify Purchaser within three Business Days after offering any price
decrease in excess of 1% to any customer, which notice shall include the name
of the customer, the products for which the decrease was made and the amount of
the decrease.

 

ARTICLE VI

CONDITIONS TO CLOSING

 

6.1           Conditions to the Obligations of Seller and Purchaser.  The obligations of Seller and Purchaser to
consummate the Acquisition are subject to the satisfaction  or, if permitted by
applicable Law, waiver of the following conditions on or prior to the Closing
Date:

 

(a)           No
Injunction.  No provision of any
applicable Law shall be in effect and no interlocutory, appealable or final
order shall have been issued that prohibits or restricts the consummation of
the Acquisition.

 

(b)           HSR.  All waiting periods applicable to the
consummation of the Acquisition under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the Department of
Justice or the Federal Trade Commission challenging or seeking to enjoin the
consummation of the Acquisition, which action shall not have been withdrawn or
terminated.

 

6.2           Conditions to Obligation of Seller.  The obligation of Seller to consummate the
Acquisition is subject to the fulfillment at or prior to the Closing of the following
conditions, any one or more of which may be waived in whole or in part by
Seller:

 

(a)           Accuracy
of Representations and Warranties. 
Each of the representations and warranties of Purchaser contained in
this Agreement shall have been true and correct in all material respects (other
than representations and warranties subject to “materiality” qualifiers, which
shall be true and correct as stated) when made and on and as of the Closing as
if made at and as of the Closing; provided, that representations and
warranties which address matters only as of a certain date shall have been true
and correct in all material respects (other than representations and warranties
subject to “materiality” qualifiers, which shall be true and correct as stated)
as of such certain date.

 

(b)           Performance.  Purchaser shall have performed and complied
in all material respects with all agreements, obligations and covenants
required to be performed or complied with by it on or prior to the Closing
Date.

 

(c)           Deliveries
to Seller.  Purchaser shall have
delivered to Seller the following:

 

38

 

(i)            A
certificate, dated the Closing Date, of an executive officer of Purchaser
confirming the matters set forth in Section 6.2(a) and (b);

 

(ii)           A
certificate, dated the Closing Date, of the Secretary or Assistant Secretary of
Purchaser certifying, that attached or appended to such certificate:  (A) is a true and correct copy of the
certificate of formation of Purchaser, and all amendments thereto; (B) is
a true copy of all limited liability company actions taken by it, including
actions of its sole member, authorizing the consummation of the Acquisition and
the execution, delivery and performance of this Agreement and each of the
Transaction Documents to be delivered by Purchaser pursuant hereto; and
(C) are the names and signatures of its duly elected or appointed officers
who are authorized to execute and deliver this Agreement and the other
Transaction Documents to which Purchaser is a party;

 

(iii)          A counterpart of the Assignment and
Assumption Agreement duly executed by Purchaser;

 

(iv)          A
certificate of good standing from the appropriate state agency, dated as of a
recent date, certifying that Purchaser is in good standing in the State of Delaware;

 

(v)           A
counterpart of a transition services agreement, in the form attached as Exhibit D
(the “Transition Services Agreement”), duly executed by Purchaser;

 

(vi)          A
counterpart of a supply agreement in the form agreed upon by Kerr and Parent
(the “Supply Agreement”), duly executed by Kerr; and

 

(vii)         A certificate setting forth the “Base Purchase
Price” (the “Base Purchase Price”).

 

(d)           Real
Property Deliveries.  Purchaser
shall have delivered to Seller the following:

 

(i)            A
counterpart of an assignment and assumption of each of the Real Property Leases
in the form attached as Exhibit F or in the form required by the
applicable Real Property Lease (each, an “Assignment of Lease”); and

 

(ii)           If
applicable, duly completed and executed real estate transfer tax declarations.

 

(e)           Withholding
Tax Estimate.  At least three
Business Days before the Closing Date, Purchaser shall have delivered to Seller
a good faith estimate of the Withholding Taxes.

 

(f)            Consents.  Seller shall have obtained the third party
consents to the assignment of the contracts listed on Schedule 6.2(f).

 

6.3           Conditions to Obligation of Purchaser.  The obligations of Kerr and Purchaser to
consummate the Acquisition is subject to the fulfillment at or prior to the
Closing of the

 

39

 

following conditions, any
one or more of which may be waived in whole or in part by Kerr and Purchaser:

 

(a)           Accuracy
of Representations and Warranties. 
Each of the representations and warranties of Seller contained in this
Agreement shall have been true and correct in all material respects (other than
representations and warranties subject to “materiality” qualifiers, which shall
be true and correct as stated) when made and on and as of the Closing as if
made at and as of the Closing; provided, that representations and
warranties which address matters only as of a certain date shall have been true
and correct in all material respects (other than representations and warranties
subject to “materiality” qualifiers, which shall be true and correct as stated)
as of such certain date.

 

(b)           Performance.  Seller shall have performed and complied in
all material respects with all agreements, obligations and covenants required
to be performed or complied with by it on or prior to the Closing Date.

 

(c)           No
Material Adverse Effect.  During the
period from the date hereof to the Closing Date, there shall not have occurred
and be continuing any Material Adverse Effect.

 

(d)           Deliveries
by Seller.  Seller shall have
delivered to Purchaser the following:

 

(i)            A
certificate, dated the Closing Date, of an executive officer of Seller
confirming the matters set forth in Section 6.3(a), (b) and (c);

 

(ii)           A
certificate, dated the Closing Date, of the Secretary or Assistant Secretary of
Seller certifying, among other things, that attached or appended to such
certificate:  (A) is a true and
correct copy of the charter and by-laws of Seller, and all amendments thereto;
(B) is a true copy of all corporate actions taken by it, including resolutions
of its board of directors and sole stockholder, authorizing the consummation of
the Acquisition and the execution, delivery and performance of this Agreement
and each of the Transaction Documents to be delivered by Seller pursuant
hereto; and (C) are the names and signatures of its duly elected or
appointed officers who are authorized to execute and deliver this Agreement and
the other Transaction Documents to which Seller is a party;

 

(iii)          A counterpart of the Assignment and
Assumption Agreement duly executed by Seller;

 

(iv)          Certificates
of good standing from the appropriate state agencies, dated as of a recent
date, certifying that Seller is in good standing in the State of Maryland and
in each jurisdiction in which Seller is qualified to do business as a foreign
corporation;

 

(v)           An
affidavit certifying, under penalties of perjury, Seller’s United States
taxpayer identification number and that Seller is not a “foreign person” within
the meaning of Section 1445(b)(2) of the Code;

 

(vi)          Any
certificates, affidavits or forms necessary to comply with or to reduce state
withholding Taxes.

 

40

 

(vii)         A counterpart of the Transition Services
Agreement, duly executed by Seller;

 

(viii)        A counterpart of the Supply Agreement, duly
executed by Seller;

 

(ix)           A
bill of sale for the Tangible Personal Property, in the form attached as Exhibit G,
duly executed by Seller;

 

(x)            Original
certificates of title to all vehicles included in the Purchased Assets,
executed by Seller to the extent necessary to reflect the assignment by Seller
to Purchaser of such assets;

 

(xi)           Articles
of Transfer or other transfer document executed by Seller to the extent such
transfer document is required to be filed with any Governmental Authority upon
consummation of the Acquisition; and

 

(xii)          Valid and effective assignment documentation,
in form and substance reasonably acceptable to Purchaser, of any rights to the
Intellectual Property that are included in the Purchased Assets.

 

(e)           [Intentionally
Omitted]

 

(f)            Real
Property Deliveries.  Seller shall
have delivered to Purchaser the following:

 

(i)            Special
warranty deeds, grant deeds or quitclaim deeds, in the form attached as Exhibit H,
duly executed by Seller, in favor of Purchaser, in recordable form,
transferring good and valid fee simple title to the Real Property to be
conveyed by Seller to Purchaser hereunder, subject only to Permitted
Exceptions, and such affidavits or other customary instruments as the Title
Company or Purchaser may reasonably request;

 

(ii)           A
counterpart of each Assignment of Lease duly executed by Seller; and

 

(iii)          If applicable, duly completed and executed
real estate Tax declarations.

 

(g)           Title
Company Deliveries.  The Title
Company shall have delivered to Purchaser (and if applicable, Purchaser’s
lenders) an owner’s (or lender’s) form of title insurance policy (or a mark-up
commitment therefor) in the form of the Title Commitments (each, a “Title
Policy”), in the amount of the Purchase Price applicable to the Real
Property insured by such Title Policy, insuring that fee simple title to the
Real Property is vested in Purchaser or its nominee subject only to the
Permitted Exceptions.

 

(h)           Consents.  Seller shall have obtained the third party
consents to the assignment of the contracts listed on Schedule 6.3(h)
and the pledges of leasehold interests as reasonably requested by Kerr and
Purchaser pursuant to Section 5.3.

 

41

 

(i)            Financing.  Kerr and Purchaser shall have received the
financing contemplated by either or both of the commitment letters referred to
in Section 4.7.

 

(j)            Liens.  Seller shall have removed all Liens on the
Purchased Assets other than Permitted Liens.

 

(k)           Evidence
of Patent Transfer.  Seller shall
have provided evidence in a form reasonably satisfactory to Purchaser that all
patents referred to in Section 5.12 have been transferred to Seller pursuant to
Section 5.12.

 

ARTICLE VII

TERMINATION; EFFECT OF TERMINATION

 

7.1           Termination of Agreement.  This Agreement may be terminated and the
Acquisition may be abandoned at any time prior to the Closing:

 

(a)           by
mutual written consent of Seller and Purchaser;

 

(b)           after
September 15, 2003, by either Seller or Purchaser, if the Closing has not
occurred by that date; provided, however, that Seller shall have
the right to extend such date in accordance with Section 5.8(b); provided,
further, that such date shall be extended to 120 days after a second
request, if any, by the Department of Justice or the Federal Trade Commission
in connection with the filing of a Notification and Report Form pursuant to the
HSR Act; and provided, further, that the right to terminate this
Agreement pursuant to this Section 7.1(b) shall not be available to a Party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Acquisition to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement;

 

(c)           by
Seller, upon written notice, if any representation or warranty of Purchaser
shall have become untrue such that the condition set forth in
Section 6.2(a) would not be satisfied or if Purchaser shall have
materially breached any agreement, obligation or covenant such that the
condition set forth in Section 6.2(b) would not be satisfied; provided
that if the inaccuracy in Purchaser’s representations and warranties or the
breach of Purchaser’s agreement, obligation or covenant is curable through the
exercise of Purchaser’s commercially reasonable efforts, then Seller may not
terminate this Agreement for thirty (30) days after Seller shall have given
written notice of such inaccuracy or breach to Purchaser (so long as Purchaser
continues to use commercially reasonable efforts to cure the inaccuracy or
breach during such period), it being understood that Seller may not terminate
this Agreement if Purchaser cures such inaccuracy or breach within such thirty
(30) day period;

 

(d)           by
Purchaser, upon written notice if any representation or warranty of Seller
shall have become untrue such that the condition set forth in
Section 6.3(a) would not be satisfied or if Seller shall have materially
breached any agreement, obligation or covenant such that the condition set
forth in Section 6.3(b) would not be satisfied; provided that if
the inaccuracy in Seller’s representations and warranties or the breach of
Seller’s agreement, obligation or covenant is curable through the exercise of
Seller’s commercially reasonable efforts, then Purchaser may not terminate this
Agreement for thirty (30) days after Purchaser shall have given written notice
of such inaccuracy or breach to Seller (so long as Seller continues

 

42

 

to use commercially
reasonable efforts to cure such inaccuracy or breach during such period), it
being understood that Purchaser may not terminate this Agreement if Seller
cures such inaccuracy or breach within such thirty (30) day period;

 

(e)           by
Purchaser or Seller if there shall be any Law that makes consummation of the Acquisition
illegal or otherwise prohibited, or if any order of any Governmental Authority
enjoining Purchaser or Seller from consummating the Acquisition is entered and
such order shall have become final and nonappealable; or

 

(f)            by
Purchaser, to the extent permitted by Section 5.8(b) if Seller fails to remove
any Title Objections.

 

7.2           Effect of Termination; Right to Proceed.

 

(a)           In
the event that Seller can demonstrate by a preponderance of the evidence that,
prior to the execution of this Agreement by the Parties, Richard Hofmann,
Lawrence Caldwell, Robert Rathsam, Timothy Guhl, Kathy Kruse or Megan Petry had
actual knowledge of any facts and circumstances that would constitute a breach
of or inaccuracy in any representation or warranty of Seller contained in
Article III hereof, and such facts and circumstances were not within the
Knowledge of Seller as of the execution of this Agreement by the Parties, then
Purchaser shall not be entitled to seek indemnification for such breach or
inaccuracy pursuant to Section 9.2(a).

 

(b)           In
the event that this Agreement is terminated pursuant to Section 7.1(a),
(b), (e) or (f), all further obligations of the Parties shall terminate without
further liability of either Party (except for obligations under this Section 7.2,
Sections 5.5, 5.6 and 5.7 and Articles I, IX and X); provided
that termination shall not relieve any party of liability for any breach of
this agreement occurring before such termination.

 

(c)           Subject
to Section 7.2(a), upon termination of this Agreement for breach pursuant
to Section 7.1(c) or (d): 
(i) the breaching Party shall be liable to the non-breaching Party
for any breach of any representation, warranty, covenant or agreement of such
breaching Party existing at the time of termination and (ii) the
non-breaching Party may seek such remedies, including damages against the
breaching Party, with respect to any such breach as are provided in this
Agreement or as are otherwise available at Law or in equity.  The agreements contained in
Sections 3.17, 4.5, 5.5, 5.6, 5.7, 10.5 and 10.6 and Articles I, IX and X
shall survive the termination hereof.

 

(d)           In
the event that a condition precedent to a Party’s obligation is not met,
nothing contained herein shall be deemed to require any Party to terminate this
Agreement, rather than to waive such condition precedent and proceed with the
Acquisition.

 

ARTICLE VIII

POST-CLOSING COVENANTS

 

8.1           Certain Transitional Matters.  From and after the Closing Date:

 

43

 

(a)           Purchaser
shall have the right and authority to collect for Purchaser’s own account all
accounts or notes receivable which are included in the Purchased Assets;

 

(b)           Purchaser
shall have the right and authority to retain and endorse without recourse the name
of Seller on any check or any other evidence of indebtedness received by
Purchaser on account of any accounts receivable which are included in the
Purchased Assets;

 

(c)           Seller
shall promptly transfer and deliver to Purchaser any cash or other property, if
any, that Seller may receive which constitutes Purchased Assets; and

 

(d)           Purchaser
shall promptly transfer and deliver to Seller any cash or other property, if
any, that Purchaser may receive which constitutes Excluded Assets.

 

8.2           Transfer and Retention of Transferred Employees;
Employee Benefits.  On the
Closing Date, Seller shall terminate all Persons who are employed by Seller as
of such date, excluding only those Persons who are on short- or long-term
disability leave as of such date (the “Terminated Employees”).  Purchaser shall offer employment, from and
after the Closing Date, on an at-will basis (but shall not be restricted from
entering into employment agreements with any Terminated Employee) to all
Terminated Employees. In addition, if any Person who was on short- or long-term
disability leave from Seller returns to work for Seller on a date that is
within six months of the Closing Date, and provides the proper medical
authorization to resume work, Purchaser shall offer employment to such Person
as of the date of such Person’s return to work; provided that Purchaser
shall not be obligated to offer employment to more than 20 such employees,
taking into account all such employees hired by Purchaser from Seller or any
Affiliate of Seller.  Employees of
Seller who are not offered employment with Purchaser as of the Closing Date
shall continue as employees of Seller and to be covered under Seller’s employee
benefit plans and programs in accordance with the terms of such plans and
programs.  Seller shall cash-out each
Terminated Employee with respect to such Terminated Employee’s accrued and
unused vacation as of the Closing Date. 
On and after the Closing Date, Purchaser shall arrange for each employee
of Seller who becomes an employee of Purchaser or any Affiliate of Purchaser
(each, a “Transferred Employee”) to participate in such active
counterpart employee benefit plans, programs, and arrangements in which
similarly situated employees of Purchaser and its Affiliates participate from
time to time (the “Counterpart Plans”), in accordance with the
eligibility criteria thereof, provided that such Transferred Employees
shall: (a) receive full credit for years of service prior to the Closing Date
for all purposes for which such service was recognized under the Plans, provided
that such crediting of service shall not result in the duplication of benefits
(such as pension benefits, accrued vacation, etc.), and (b) to the extent
Counterpart Plans are maintained by Purchaser or its Affiliates, participate in
such Plans on terms no less favorable, in the aggregate, than those offered to
similarly-situated employees of the Purchaser and its Affiliates.  Purchaser or its Affiliates shall give
credit under those of its Counterpart Plans that are welfare benefit plans for
all co-payments, deductibles and out-of-pocket maximums satisfied by
Transferred Employees (and their eligible dependents) in respect of the
calendar year in which the Closing occurs. 
Purchase or its Affiliates shall waive all pre-existing conditions (to
the extent waived under the applicable Plans of the Seller) that would
otherwise be applicable to Transferred Employees under the Counterpart Plans in
which Transferred Employees of the Seller or Affiliates become eligible to
participate on or following the Closing Date. 
Purchaser will retain the Transferred Employees for such period as may
be

 

44

 

necessary, when
considered together with any employees discharged by Seller prior to Closing,
to avoid, with respect to any facility operated by Seller in the Business:  (a) a “plant closing,” “mass layoff,”
“layoff,” “relocation” or “termination” of “employees” (as those terms are
defined in the Worker Adjustment and Retraining Notification Act of 1988 or California
Labor Code Section 1400, et seq., effective January 1, 2003); or (b) any
liability to Seller under any Law which would reasonably be expected to arise
from any actual or anticipated termination of employees by Purchaser after
Closing, provided Seller has provided Purchaser (i) by July 1, 2003 with
an accurate list of employees terminated by Seller within 180 days prior to and
including such date and (ii) on the Closing Date with an accurate list of
employees terminated by Seller within 180 days prior to and including the
Closing Date.  No assets, liabilities or
reserves relating to any Seller Plan will be transferred in connection with
this Agreement from Seller or its Affiliates or any Seller Plan to Purchaser or
its Affiliates or any employee benefit plan of Purchaser or its Affiliates; provided,
however, that the plan administrator of an applicable Counterpart Plan
shall accept rollover contributions from an appropriate Plan to the extent such
rollover contributions comply with the terms of such Counterpart Plan and the
plan administrator of such Counterpart Plan reasonably concludes that the
contribution is a valid rollover contribution.

 

8.3           Non-Competition Covenant.  Seller and Parent shall not,
directly or indirectly, within North America, South America and Europe, for a
period of five (5) years after the Closing Date, engage in the business of
manufacturing, marketing or distributing to third parties molded closures and
flexible plastic packaging for the healthcare, personal care, health and beauty,
pharmaceutical, household chemical, automotive, industrial and dentifrice
industries; provided, however, that the foregoing shall not
restrict (a) Seller’s and Parent’s ownership, operation or control of any
entity acquired by Seller or Parent after the Closing Date (an “Acquired
Entity”) if the gross revenues of such entity attributable to products, the
production, marketing or sale of which would otherwise violate the terms of
this Section 8.3, (i) do not exceed five percent (5%) of the net
revenues of the Acquired Entity for the twelve (12) month period ending on the
last day of the last fiscal quarter preceding the date of the definitive
agreement providing for such acquisition for which such results of operation
are available and (ii) do not exceed $25,000,000, or (b) the direct
or indirect ownership by Seller of five percent (5%) or less of any entity
whose securities have been registered under the Securities Act of 1933 or under
the Securities Exchange Act of 1934 or the securities Laws of any other
jurisdiction.  For the avoidance of
doubt, nothing in this Section 8.3 shall restrict Parent or any Affiliate
of Parent from developing, purchasing, marketing, distributing or otherwise
dealing in any products to be sold to third parties by Parent or such Affiliate
which incorporate such molded closures or flexible plastic packaging.  Further,
for a period of five (5) years after the Closing Date, Seller and Parent shall
not, directly or indirectly solicit, request, cause or induce Steven
Rafter or James Farley to leave the employ of or otherwise terminate his
relationship with the Purchaser nor shall Seller hire or seek to hire any such
person while he is employed by the Purchaser.  Seller acknowledges that
Purchaser shall be entitled to seek equitable relief from a court of competent
jurisdiction restraining any breach by Seller of this Section 8.3.

 

8.4           Trademarks, Etc.. 
As promptly as practicable after the Closing, Purchaser shall revise
trademarks and product literature, change signage and stationery and otherwise
discontinue use of all intellectual property constituting Excluded Assets and
all Affiliate Marks (collectively, “Excluded Intellectual Property”); provided,
however, that for a period of forty-

 

45

 

five (45) days from the
Closing Date, Purchaser may consume stationery and similar supplies and may
sell inventory on hand as of the Closing Date which contain such Excluded
Intellectual Property so long as such items are, as promptly as practicable
after the Closing Date, overstamped or otherwise appropriately indicate that
the Business is then owned by Purchaser. 
Without limiting the foregoing, Purchaser shall, and shall cause each of
its Affiliates to, (i) no later than the close of business on the business
day following the Closing Date, discontinue affixing in any manner whatsoever
such Excluded Intellectual Property to any Product and (ii) no later than
the close of business on the forty-fifth (45th) calendar day after
the Closing Date, discontinue selling, shipping and delivering any product
having such Excluded Intellectual Property affixed thereto in any manner
whatsoever.

 

8.5           Tax Covenants.

 

(a)           From
and after the Closing, each of Seller and Purchaser shall cooperate with the
other in connection with Tax matters relating to the Business and the Purchased
Assets, including:  (i) the
preparation and filing of Tax Returns; (ii) the determination of a Party’s
liability for Taxes and the amounts of any Taxes due or of a Party’s right to a
refund of Taxes and the amount of any such refund; (iii) the examination
of Tax Returns; and (iv) the conduct of any administrative or judicial
proceedings in respect of Taxes assessed or proposed to be assessed.  Subject to Section 5.6(b), such
cooperation shall include each Party making all information and documents in
its possession relating to the Business and Purchased Assets available to the
other Party.

 

(b)           The
Parties shall retain all Tax Returns, schedules and work papers, and all
material records and other documents relating thereto, until the expiration of
the applicable statute of limitations (including, to the extent notified by any
Party, any extension thereof) of the Tax period to which such Tax Returns and
other documents and information relate. 
Each Party shall also make available to the other Party, as reasonably
requested and available, personnel (including officers, directors, employees
and agents) responsible for preparing, maintaining and interpreting information
and documents relevant to Taxes, and personnel reasonably required as witnesses
or for purposes of providing information or documents in connection with any
administrative or judicial proceedings relating to Taxes.  Any information or documents provided under
this Section 8.5(b) shall be kept confidential by the party receiving such
information or documents, except as may otherwise be necessary in connection
with the filing of Tax Returns or in connection with administrative or judicial
proceedings relating to Taxes.

 

(c)           In
the event any Governmental Authority with responsibility for Taxes informs
Seller or Purchaser of any notice of proposed audit, claim, assessment or other
dispute concerning an amount of Taxes with respect to which the other Party may
incur liability hereunder, the Party so informed shall promptly notify the
other Party of such matter.  Such notice
shall contain factual information (to the extent known) describing any asserted
Tax liability in reasonable detail and shall be accompanied by copies of any
notice or other documents received from such Governmental Authority with
respect to such matter.  If an
Indemnified Party has knowledge of an asserted Tax liability with respect to a
matter for which it is to be indemnified hereunder and such Party fails to
provide the Indemnifying Party prompt notice of such asserted Tax liability,
then (i) if the Indemnifying Party is precluded from contesting the
asserted Tax liability in any forum as a result of the failure to give prompt
notice,

 

46

 

the Indemnifying Party
shall have no obligation to indemnify the Indemnified Party for Taxes arising
out of such asserted Tax liability, and (ii) if the Indemnifying Party is
not precluded from contesting the asserted Tax liability in any forum, but such
failure to provide prompt notice results in a monetary detriment to the
Indemnifying Party, then any amount which the Indemnifying Party is otherwise
required to pay the Indemnified Party pursuant to this Agreement shall be
reduced by the amount of such detriment.

 

(d)           Seller
and Purchaser agree that Purchaser has purchased substantially all the property
used in Seller’s trade or business, and in connection therewith, Purchaser
shall employ Transferred Employees who immediately before the Closing Date were
employed in such trade or business by Seller. 
Accordingly, Seller shall
provide Purchaser with all necessary and accurate payroll records for the
calendar year which includes the Closing Date. 
Furthermore, pursuant to Rev. Proc. 96-60, 1996-2 C.B. 399,
if Purchaser elects, each Party shall comply with the requirements provided in
the alternative procedure under Rev. Proc. 96-60, pursuant to which Purchaser
shall furnish a Form W-2 to each employee employed by Purchaser who had been employed
by Seller disclosing all wages and other compensation paid for such calendar
year, and Taxes withheld therefrom, and Seller shall be relieved of the
responsibility to do so.  If Purchaser
does not elect such alternative procedure, each Party shall comply with the
requirements provided in the standard procedure under Rev. Proc. 96-60.

 

8.6           Records; Retention.  Following the Closing, each of Purchaser and Seller shall afford
the other and its Representatives reasonable access during normal business hours
to, and (if permitted by law) the right to make copies and extracts from, the
books, records and other data in Purchaser’s or Seller’s possession relating to
the Business, the Purchased Assets, the Excluded Assets, the Assumed
Liabilities and the Retained Liabilities with respect to periods prior to the
Closing Date, at the requesting Party’s expense, to the extent that such access
may be requested by Purchaser or Seller for any business purpose, including to
facilitate the investigation, litigation and final disposition of any claims
which may have been or may be made against Purchaser, Seller or their
respective Affiliates.  Purchaser and
Seller agree that for a period of seven (7) years following the Closing Date,
such Party shall not destroy or otherwise dispose of any such books, records or
data in its possession without (a) giving the other at least sixty (60)
days’ prior written notice of such intended disposition and (b) offering
to deliver to the other, at the other’s expense, custody of any or all of the
books, records and data that such Party intends to destroy.

 

8.7           Designated Reporting Person.  In order to assure compliance with the
requirements of Section 6045 of the Code (and any related reporting
requirements), the Parties agree as follows:

 

(a)           If
the Title Company executes a statement in writing, in form and substance
reasonably acceptable to the Parties, pursuant to which the Title Company
agrees to assume all responsibilities for information reporting required under
Section 6045(e) of the Code, Seller and Purchaser shall designate the
Title Company as the person to be responsible for all information reporting
under Section 6045(e) of the Code (the “Reporting Person”).  If the Title Company refuses to execute a
statement pursuant to which it agrees to be the Reporting Person, Seller and
Purchaser agree to appoint another third party mutually satisfactory to the
Parties as the Reporting Person.

 

47

 

(b)           Seller
and Purchaser hereby agree:

 

(i)            to
provide to the Reporting Person all information and certifications regarding
such Party, as reasonably requested by the Reporting Person or otherwise
required to be provided by a Party under Section 6045 of the Code; and

 

(ii)           to
provide to the Reporting Person such Party’s taxpayer identification number and
a statement (on IRS Form W-9 or an acceptable substitute form, or on any other
form the Code might require and/or any form requested by the Reporting Person),
signed under penalties of perjury, stating that the taxpayer identification
number supplied by such Party to the Reporting Person is correct.

 

(c)           Each
Party agrees to retain a copy of this Agreement for not less than four (4)
years from the end of the calendar year in which the Closing occurs and to
produce such copy to the IRS upon a valid request therefor.

 

8.8           Further Assurances.  Seller hereby agrees, without further
consideration, to execute and deliver following the Closing such other
instruments of transfer and take such other action as Purchaser or its counsel
may reasonably request in order to put Purchaser in possession of, and to vest
in Purchaser, good and valid title to the Purchased Assets in accordance with
this Agreement and to consummate the Acquisition.  Purchaser hereby agrees, without further consideration, to take
such other action following the Closing and execute and deliver such other
documents as Seller or its counsel may reasonably request in order to
consummate the Acquisition in accordance with this Agreement.

 

ARTICLE IX

SURVIVAL; INDEMNIFICATION

 

9.1           Expiration of Representations and Warranties.  The representations and warranties in this
Agreement (other than the representations and warranties contained in
Sections 3.1, 3.2, 3.3(a) and (b), 3.8(e), 3.15(b) and (c), 3.16, 3.17,
3.18, 3.19, 3.23, 3.24 and 3.25) shall survive the Closing until the second
anniversary of the Closing Date, at which time they shall terminate; provided
that (i) the representations and warranties contained in Sections 3.1,
3.2, 3.3(a) and (b), 3.8(e), 3.17 and 3.23 shall survive the Closing
indefinitely and (ii) the representations and warranties contained in
Sections 3.15(b) and (c), 3.16, 3.18, 3.19, 3.24 and 3.25 shall survive
the Closing until ninety (90) days after the expiration of the relevant statute
of limitations.

 

9.2           Indemnification by Seller.  Subject to the limitations set forth in
Section 7.2(a) and this Article IX, Seller shall indemnify, defend,
save and hold Kerr, Purchaser, and their respective Affiliates and the
Representatives of any of them (collectively, “Purchaser Indemnitees”)
harmless from and against any and all Losses incurred by any Purchaser
Indemnitee (except to the extent included in the Assumed Liabilities) arising
out of:

 

(a)           Seller’s
breach or the failure of any representation or warranty contained in this
Agreement (such breach or failure to be determined without giving effect to any
qualifications for “Knowledge,” “materiality” or “Material Adverse Effect”
contained in any

 

48

 

representation or
warranty) and any action, suit or proceeding arising out of such breach or
failure;

 

(b)           Seller’s
breach of any covenant or agreement made by Seller in or pursuant to this
Agreement and any action, suit or proceeding arising out of such breach;

 

(c)           Seller’s
failure to pay, perform or discharge when due any of the Retained Liabilities
and any action, suit or proceeding arising out of such failure;

 

(d)           Seller’s
operation of the Business or any event relating to or arising out of Seller’s
assets (including the Purchased Assets), in each case prior to the Closing,
except with respect to the Assumed Liabilities;

 

(e)           Taxes
assessed on, or expenses attributable to, any of the Real Property or the Real
Property Leases after the Closing Date for the period prior to the Closing Date
(such that Seller shall have borne all real property Taxes and all expenses
attributable thereto allocable to the period prior to the Closing Date), in
each case net of any amount previously paid under Section 2.5(c).  Notwithstanding the foregoing, an increase
in a Real Property Tax assessment as a result of the Acquisition, including the
California Supplemental Tax Bill and any similar Taxes, shall not be prorated under
this Section 9.2(e) or Section 2.5(c) and shall be the sole liability
of Purchaser;

 

(f)            a third party claim that the conduct of the
Business as it is currently conducted infringes U.S. Patent No. *, or any other
patent claiming priority over U.S. Patent No.*; or

 

(g)           a third-party claim by * or any other Person
alleging that the conduct of the Business as it is currently conducted with
respect to the items at issue in this lawsuit gives rise to liability under the
theories alleged in *.

 

Without limiting the generality of the foregoing, Seller
shall indemnify, defend and hold harmless Purchaser Indemnitees from and
against all Losses asserted against, resulting to, imposed on, sustained,
incurred or suffered by any of Purchaser Indemnitees, directly or indirectly
(except to the extent included in the Assumed Liabilities), by reason of or
resulting from (i) any claim, action, suit, investigation, arbitration,
inquiry, proceeding or litigation involving the Business, Seller or any of
Seller’s agents or assets (including the Purchased Assets), in each case
arising from events on or prior to the Closing Date but excluding (A) all
Assumed Liabilities and (B) Losses to the extent arising from or related
to any post-Closing breach or default by Purchaser of or under any Assumed
Contract, (ii) any liability of Purchaser Indemnitees arising from the
non-compliance with any applicable bulk transfer laws or Article 6 of the
Uniform Commercial Code, (iii) any Environmental Claim or pollution or threat
to human health or the environment that is related in any way to the
management, use, control, ownership or operation of the Business, including all
on-site and off-site activities involving Materials of Environmental Concern,
and that occurred, existed, arises out of conditions or circumstances that
occurred or existed, or was caused, in whole or in part, on or before the
Closing Date, whether or

 

*  Confidential treatment has been requested
for certain portions of this document pursuant to an application for
confidential treatment sent to the SEC. 
Such portions are omitted from this filing and filed separately with the
SEC.

 

49

 

not the pollution or
threat to human health or the environment is described in Schedule 3.18,
(iv) any and all obligations or liabilities under covenants relating to
employment, other than those obligations and liabilities expressly undertaken
or assumed by Purchaser hereunder, (v) any and all Taxes of Seller for all
taxable periods, whether before, on or after the Closing Date (except to the
extent allocated to Purchaser with respect to the Real Property or the Real
Property Leases pursuant to Sections 2.5(c) and 9.2(e) of this Agreement), (vi)
any and all employee benefits or employment related liabilities relating to any
employee benefit plan that is sponsored, maintained or contributed to or
required to be contributed to by Seller or any Affiliate of Seller, (vii)
arising from any conflict, violation, breach or default by Seller described in
Section 3.3(a) or 3.3(b) (without giving effect to any qualifications
described in the Schedules or for “Knowledge,” “materiality” or “Material
Adverse Effect” contained therein), (viii) Seller’s failing to obtain any
consents, approvals, authorizations, permits and filings pursuant to Section 3.4(c)
(without giving effect to any qualifications for “Knowledge,” “materiality” or
“Material Adverse Effect” contained therein) and (ix) failing to remove any
Title Objections pursuant to Section 5.8(b).

 

9.3           Indemnification by Kerr and Purchaser.  Subject to the limitations set forth in this
Article IX, Kerr and Purchaser shall jointly and severally indemnify,
defend, save and hold Seller, Seller’s Affiliates and the Representatives of
any of them (collectively, “Seller Indemnitees”) harmless from and against
any and all Losses incurred by any Seller Indemnitee arising out of:

 

(a)           Kerr’s
or Purchaser’s breach of any representation or warranty contained in this
Agreement and any action, suit or proceeding arising out of such breach;

 

(b)           Kerr’s
or Purchaser’s breach of any covenant or agreement made by Kerr or Purchaser in
or pursuant to this Agreement (such breach or failure to be determined without
giving effect to any qualifications for “Knowledge,” “materiality” or “Material
Adverse Effect” contained in any representation or warranty) and any action,
suit or proceeding arising out of such breach;

 

(c)           Kerr’s
or Purchaser’s failure to pay, perform or discharge when due any of the Assumed
Liabilities and any action, suit or proceeding arising out of such failure;

 

(d)           any
Assumed Liabilities, except for Losses to the extent attributable to a breach
by Seller of any Assigned Contract prior to Closing; or

 

(e)           following
the Closing, Purchaser’s operation of the Business or any event relating to or
arising out of Purchaser’s assets (including the Purchased Assets).

 

9.4           Notice of Claims.  Except as provided in Section 8.5, if
any Purchaser Indemnitee or Seller Indemnitee (an “Indemnified Party”)
believes that it has suffered or incurred any Losses for which it is entitled
to indemnification under this Article IX, such Indemnified Party shall so
notify the Party from whom indemnification is being claimed (the “Indemnifying
Party”) with reasonable promptness and reasonable particularity in light of
the circumstances then existing.  If any
claim is instituted by or against a third party with respect to which any
Indemnified Party intends to claim indemnification under this Article IX,
such Indemnified Party shall promptly

 

50

 

notify the Indemnifying
Party of such claim.  The notice
provided by the Indemnified Party to the Indemnifying Party shall describe the
claim (the “Asserted Liability”) in reasonable detail and shall indicate
the amount (or an estimate) of the Losses that have been or may be suffered by
the Indemnified Party.  The failure of
an Indemnified Party to give any notice required by this Section 9.4 shall
not affect any of the Indemnified Party’s rights under this Article IX or
otherwise except and to the extent that such failure is prejudicial to the
rights or obligations of the Indemnifying Party.

 

9.5           Opportunity to Defend Third Party Claims.
If any action is brought by a third party against any Indemnified Party, the
Indemnifying Party shall be entitled: 
(a) to participate in such action and (b) to elect, by written
notice delivered to the Indemnified Party within thirty (30) days after the
Indemnifying Party’s receipt of notice of the Asserted Liability, to defend,
compromise or settle such action, with counsel reasonably satisfactory to the
Indemnified Party.  The Indemnified
Party shall cooperate with respect to any such participation, defense,
settlement or compromise.  The
Indemnified Party shall have the right to employ its own counsel in any such
case, but the fees and expenses of the Indemnified Party’s counsel shall be at
the sole expense of the Indemnified Party unless:  (i) the Indemnifying Party shall have authorized in writing
employment of such counsel at the expense of the Indemnifying Party;
(ii) the Indemnifying Party shall not have employed counsel reasonably
satisfactory to the Indemnified Party to defend such action within thirty (30)
days after the Indemnifying Party received notice of the Asserted Liability;
(iii) the Indemnified Party shall have reasonably concluded, based upon
written advice of counsel, that there are defenses available to the Indemnified
Party that are different from or additional to those available to the
Indemnifying Party (in which case the Indemnifying Party shall not have the
right to direct the defense of such action on behalf of the Indemnified Party
with respect to such different defenses); or (iv) representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding, in any of which events the fees and expenses of one additional
counsel shall be borne by the Indemnifying Party.  The Indemnifying Party shall not settle or compromise any action
or consent to the entry of a judgment that: 
(a) does not provide for the claimant to give an unconditional
release to the Indemnified Party in respect of the Asserted Liability;
(b) involves relief other than monetary damages; (c) places
restrictions or conditions on the operation of the business of the Indemnified
Party or any of its Affiliates; or (d) involves any finding or admission
of liability or of any violation of Law. 
The Indemnifying Party shall not be liable for any settlement of any
claim or action effected without its written consent; provided that such
consent is not unreasonably withheld. 
After payment of any Asserted Liability by the Indemnifying Party, the
Indemnified Party, if requested by the Indemnifying Party, shall assign to the
Indemnifying Party all rights the Indemnified Party may have against any
applicable account debtor or other responsible Person in respect of the
Asserted Liability.  If the Indemnifying
Party chooses to defend any Asserted Liability, the Indemnified Party shall
make available to the Indemnifying Party any books, records or other documents
within its control that are necessary or appropriate for such defense.  Any expenses of any Indemnified Party for
which indemnification is available hereunder shall be paid upon written demand
therefor.

 

51

 

9.6           Limitation of Liability.

 

(a)           Seller
shall not be obligated to provide any indemnification under Section 9.2(a)
except to the extent the aggregate amount for which it is obligated to provide
such indemnification exceeds the sum of $1,000,000, after which Seller shall be
obligated to pay the entire amount, beginning with the first dollar of Loss,
which is payable pursuant to Section 9.2(a); provided, however,
that De Minimis Losses shall not count towards such $1,000,000 amount unless
and until the aggregate amount of all De Minimis Losses exceeds $100,000; provided,
further, that in the case of any breach of any representation or
warranty under Sections 3.1, 3.2, 3.3, 3.6, 3.8(e), 3.16, 3.17, 3.18, 3.19,
3.23 and 3.24, respectively, Seller shall be obligated to provide
indemnification for the entire amount of such Loss, beginning with the first
dollar of Loss, without regard to whether such loss is a De Minimis Loss and
without regard to whether the aggregate amount for which the obligation to
provide indemnification under this Article IX exceeds the sum of $1,000,000; provided,
further, that in no event shall the aggregate liability of Seller under
this Article IX with respect to Seller’s breach of its representations and
warranties exceed one-half of the Purchase Price other than for breach of any
representation or warranty contained in Sections 3.1, 3.2, 3.3, 3.6, 3.8, 3.16,
3.17, 3.18, 3.19, 3.23 and 3.24, which liability and obligation to indemnify
shall be without limitation.

 

(b)           Kerr
and Purchaser shall not be obligated to provide any indemnification under
Section 9.3(a) except to the extent the aggregate amount for which they
are obligated to provide such indemnification exceeds the sum of $1,000,000,
after which Kerr and Purchaser shall be obligated to pay the entire amount,
beginning with the first dollar of Loss, which is payable pursuant to Section 9.3(a);
provided, however, that De Minimis Losses shall not count towards
such $1,000,000 amount unless and until the aggregate amount of all De Minimis
Losses exceeds $100,000; provided, further, that in the case of
any breach of any representation or warranty under Sections 4.1, 4.2, 4.3(a) or
(b), and 4.5, respectively, Kerr and Purchaser shall be obligated to provide
indemnification for the entire amount of such Loss, beginning with the first
dollar of Loss, without regard to whether such loss is a De Minimis Loss and
without regard to whether the aggregate amount for which the obligation to
provide indemnification under this Article IX exceeds the sum of $1,000,000; provided,
further, that in no event shall the aggregate liability of Kerr and
Purchaser under this Article IX with respect to Kerr’s and Purchaser’s
breach of their representations and warranties exceed one-half of the Purchase
Price other than for breach of any representation or warranty contained in
Sections 4.1, 4.2, 4.3(a) or (b), and 4.5, which liability and obligation to
indemnify shall be without limitation; provided, further, that
the preceding clause shall not limit Purchaser’s obligation or liability with
respect to the Assumed Liabilities.

 

(c)           The
provisions of this Article IX shall be the exclusive remedy available to
the Seller Indemnitees and the Purchaser Indemnitees after the Closing in the
event any such Person shall have a claim with respect to the matters covered by
this Agreement, other than with respect to claims involving intentional
misrepresentation, fraud, or willful misconduct.

 

9.7           Effect of Taxes and Insurance.  The amount of any Losses for which
indemnification is provided under this Article IX (a) shall be
reduced to take account of any net Tax benefit realized, in the year of the Tax
payment or the next succeeding taxable year and shall be increased to take
account of any net Tax detriment realized, in the year of the Tax payment or

 

52

 

the next succeeding taxable
year arising from the incurrence or payment of any such Losses or from the
receipt of any such indemnification payment determined on a with or without
basis and (b) shall be reduced by the insurance proceeds received and any
other amount, if any, recovered from third parties by the Indemnified Party (or
its Affiliates) with respect to any Losses. 
If any Indemnified Party shall have received any indemnification payment
pursuant to this Article IX with respect to any Loss, such Indemnified
Party shall, upon written request by the Indemnifying Party, assign to such
Indemnifying Party (to the extent of the indemnification payment) any claim
which such Indemnified Party may have under any applicable insurance policy
which provides coverage for such Loss. 
Such Indemnified Party shall reasonably cooperate (at the expense of the
Indemnifying Party) to collect under such insurance policy.  If any Indemnified Party shall have received
any payment pursuant to this Article IX with respect to any Loss and has
or shall subsequently have received insurance proceeds or other amounts with
respect to such Loss, then such Indemnified Party shall promptly pay over to
the Indemnifying Party the amount so recovered (after deducting the amount of
the expenses incurred by it in procuring such recovery), but not in excess of
the amount previously so paid by the Indemnifying Party.

 

9.8           Treatment of Indemnity Payments; No
Duplication.  Any
indemnification payment made pursuant to this Article IX shall be treated, to
the extent permitted or required by law, by all Parties as an adjustment to the
Purchase Price.  Notwithstanding
anything contained in this Article IX to the contrary, Purchaser shall not be
entitled to indemnification hereunder to the extent that any Losses were  (i)   included in the calculation of the Working
Capital Adjustment or the Final Closing Capital Expenditures (excluding losses
resulting from Seller’s breach of any payment or other obligation to any
counterparty with respect to any Capital Expenditures)  or (ii) offset by an adjustment pursuant
to Section 3.3 or 3.4 of the Supply Agreement.

 

ARTICLE X

GENERAL

 

10.1         Notices.  All
notices, requests, claims, demands or other communications that are required or
may be given pursuant to the terms of this Agreement or the other Transaction
Documents shall be in writing and shall be deemed to have been duly given:  (a) when delivered, if delivered by
hand; (b) one (1) Business Day after transmitted, if transmitted by a nationally-recognized
overnight courier service; (c) when sent by facsimile transmission, if
sent by facsimile transmission which is confirmed; or (d) three (3)
Business Days after mailing, if mailed by registered or certified mail (return
receipt requested), in each case to the Parties at the following addresses (or
at such other address for a Party as shall be specified in a notice given in
accordance with this Section 10.1):

 

(a)           If
to Seller:

 

Tubed Products, Inc.

18 Loveton Circle

Sparks, Maryland  21152

Attention:  Corporate Secretary

Telephone:  (410) 771-7563

Fax:  (410) 527-8228

 

53

 

With a simultaneous copy
to:

 

Piper Rudnick LLP

6225 Smith Avenue

Baltimore, Maryland
21209-3600

Attention:  Theodore Segal, Esq.

Telephone:  (410) 580-3000

Fax:  (410) 580-3001

 

(b)           If
to Purchaser:

 

Kerr Acquisition Sub II,
LLC

c/o Kerr Group Inc.

500 New Holland Avenue

Lancaster,
Pennsylvania  17602-2104

Attention:  Lawrence
C. Caldwell

Telephone:  (717)
390-8439

 

With a simultaneous copy
to:

 

Skadden, Arps, Slate,
Meagher & Flom LLP

525 University Avenue,
Suite 1100

Palo Alto,
California  94301

Attention:  Kenton J. King, Esq.

Telephone:  (650) 470-4500

Fax:  (650) 470-4570

 

(c)           If
to Kerr:

 

Kerr Group, Inc.

500 New Holland Avenue

Lancaster,
Pennsylvania  17602-2104

Attention:  Lawrence
C. Caldwell

Telephone:  (717)
390-8439

 

With a simultaneous copy
to:

 

Skadden, Arps, Slate,
Meagher & Flom LLP

525 University Avenue,
Suite 1100

Palo Alto,
California  94301

Attention:  Kenton J. King, Esq.

Telephone:  (650) 470-4500

Fax:  (650) 470-4570

 

10.2         Severability.  If any provision of this Agreement for any reason shall be held
to be illegal, invalid or unenforceable, such illegality shall not affect any
other provision of this

 

54

 

Agreement, but this
Agreement shall be construed as if such illegal, invalid or unenforceable
provision had never been included herein.

 

10.3         Assignment; Binding Effect; Benefit.  No assignment by any Party of its rights nor
delegation by any Party of its obligations under this Agreement or any
Transaction Document shall be permitted unless Kerr and Purchaser, on the one
hand, or Seller, on the other hand, consents in writing thereto, except that
Purchaser may (a) assign, in its sole discretion, any of or all of its
rights, interests and obligations under this Agreement to Kerr or to any direct
or indirect wholly-owned Subsidiary of Kerr, and (b) pledge this Agreement
and any of its rights and obligations hereunder in whole or in part to any
other Person, in each case without the consent of Seller, provided in
each case that no such assignment shall relieve Purchaser of any of its
obligations hereunder.  This Agreement
shall be binding upon and shall inure to the benefit of the Parties and their
respective successors and permitted assigns. 
Notwithstanding anything in this Agreement to the contrary, expressed or
implied, this Agreement is not intended to confer any rights or remedies on any
Person other than the Parties and their respective successors and permitted
assigns.

 

10.4         Incorporation of Exhibits and Schedules.  All Exhibits and Schedules attached hereto
and referred to herein are hereby incorporated herein and made a part of this
Agreement for all purposes as if fully set forth herein.  The disclosures made by the Parties in any
Schedule to this Agreement shall apply with the same force and effect to each
other Section hereof to which it is reasonably apparent that such disclosures
should apply.

 

10.5         Governing Law; Submission to Jurisdiction.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
OTHER THAN CONFLICT OF LAWS PRINCIPLES THEREOF DIRECTING THE APPLICATION OF ANY
LAW OTHER THAN THAT OF NEW YORK.  COURTS
WITHIN THE STATE OF NEW YORK (LOCATED WITHIN NEW YORK CITY) WILL HAVE
JURISDICTION OVER ALL DISPUTES BETWEEN THE PARTIES ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS.  THE PARTIES HEREBY CONSENT TO AND AGREE TO
SUBMIT TO THE JURISDICTION OF SUCH COURTS. 
EACH OF THE PARTIES WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH
DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT
(A) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH
COURTS; (B) SUCH PARTY AND SUCH PARTY’S PROPERTY IS IMMUNE FROM ANY LEGAL
PROCESS ISSUED BY SUCH COURTS; OR (C) ANY LITIGATION COMMENCED IN SUCH
COURTS IS BROUGHT IN AN INCONVENIENT FORUM.

 

10.6         Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED IN CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION
OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

 

55

 

10.7         Interpretation.  The Parties have participated jointly in the
negotiation and drafting of this Agreement. 
In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any provisions of this Agreement.

 

10.8         Counterparts.  This Agreement may be executed and delivered (including by
facsimile transmission) in one or more counterparts, and by the different
Parties in separate counterparts, each of which when executed and delivered
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.

 

10.9         Entire Agreement.  This Agreement (including the Schedules and
Exhibits attached hereto) and the other Transaction Documents executed in
connection with the consummation of the Acquisition contain the entire
agreement between the Parties with respect to the subject matter hereof and
supersede all prior agreements, written or oral, with respect thereto.

 

10.10       Waivers and
Amendments.  This
Agreement may be amended, superseded, canceled, renewed or extended only by a
written instrument signed by all of the Parties.  The provisions hereof may be waived only in writing signed by the
Party or Parties waiving compliance.  No
delay on the part of any Party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part
of any Party of any such right, power or privilege, nor any single or partial
exercise of any such right, power or privilege, preclude any further exercise
thereof or the exercise of any other such right, power or privilege.

 

 

[Signatures
appear on the next page]

 

56

 

EXECUTION

 

IN
WITNESS WHEREOF, the Parties have caused this Agreement to be signed in their
respective names by their duly authorized representatives as of the date first
above written.

 

	
   

  	
  KERR GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Richard D. Hofmann

  	
   

  
	
   

  	
  Name:

  	
  Richard D.
  Hofmann

  
	
   

  	
  Title:

  	
  President &
  CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KERR ACQUISITION
  SUB II, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Richard
  D. Hofmann

  	
   

  
	
   

  	
  Name:

  	
  Richard D. Hofmann

  
	
   

  	
  Title:

  	
  President &
  CEO

  
	
   

  	
   

  
							

 

Signature
Page 1 of 3 to

Asset
Purchase Agreement, dated as of June 26, 2003, among

Kerr
Group, Inc., Purchaser and Tubed Products, Inc.

 

 

 

	
   

  	
   

  
	
   

  	
  TUBED PRODUCTS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Robert
  G. Davey

  	
   

  
	
   

  	
  Name:

  	
  Robert G. Davey

  
	
   

  	
  Title:

  	
  President

  
					

 

Signature
Page 2 of 3 to

Asset
Purchase Agreement, dated as of June 26, 2003, among

Kerr
Group, Inc., Purchaser and Tubed Products, Inc.

 

 

 

GUARANTY

 

Parent hereby guarantees the prompt payment by Seller
of Seller’s indemnification obligations under Section 9.2 of this
Agreement.  If Seller defaults in the
payment of any such indemnification obligation, Parent shall pay to Purchaser
or the applicable Purchaser Indemnitee any damages, costs and expenses that
such Person is entitled to recover from Seller by reason of Seller’s
default.  Parent acknowledges that the
bankruptcy of Seller shall not relieve Parent of its obligations under this
Guaranty.  Parent further agrees to the
provisions of Sections 5.3 (Consents, Filings and Authorizations; Efforts to
Consummate), 5.6 (Access to Information; Confidentiality), 5.12 (Patent
Transfer), 8.3 (Non-Competition Covenant) and the last three sentences of
Section 3.5 (Financial Statements) of this Agreement.

 

	
   

  	
  McCORMICK
  & COMPANY, INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Robert G. Davey

  	
   

  
	
   

  	
  Name:

  	
  Robert G. Davey

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  
					

 

Signature
Page 3 of 3 to

Asset
Purchase Agreement, dated as of June 26, 2003, among

Kerr
Group, Inc., Purchaser and Tubed Products, Inc.EXHIBIT
10(iii)

 

 

 

ASSET
PURCHASE AGREEMENT

 

 

among

 

 

KERR
GROUP, INC.,

 

 

KERR
ACQUISITION SUB II, LLC,

as Purchaser,

 

 

and

 

 

O.G.
DEHYDRATED, INC.,

as
Seller

 

 

Dated as
of June 26, 2003

 

 

 

 

TABLE OF
CONTENTS

 

	
  ARTICLE I
  DEFINITIONS

  
	
   

  	
  1.1

  	
  Definitions

  
	
   

  	
  1.2

  	
  Rules of Construction

  
	
   

  	
   

  	
   

  
	
  ARTICLE II
  PURCHASE AND SALE OF PURCHASED ASSETS

  
	
   

  	
  2.1

  	
  Purchased
  Assets

  	 

	
   

  	
  2.2

  	
  Excluded
  Assets

  	 

	
   

  	
  2.3

  	
  Assumed
  Liabilities

  	 

	
   

  	
  2.4

  	
  Retained
  Liabilities

  	 

	
   

  	
  2.5

  	
  Purchase
  Price; Payment of Purchase Price; Adjustments

  	 

	
   

  	
  2.6

  	
  Allocation of Purchase Price

  	 

	
   

  	
  2.7

  	
  Closing

  	 

	
   

  	
  2.8

  	
  Assignment of Contracts

  	 

	
   

  	
  2.9

  	
  Natural
  Hazard Disclosure Statement

  	 

	
   

  	
   

  	
   

  	 

	
  ARTICLE III
  REPRESENTATIONS AND WARRANTIES OF SELLER

  
	
   

  	
  3.1

  	
  Organization and
  Qualification

  	 

	
   

  	
  3.2

  	
  Authority
  Relative to this Agreement

  	 

	
   

  	
  3.3

  	
  No Conflict

  	 

	
   

  	
  3.4

  	
  Required Filings and
  Consents

  	 

	
   

  	
  3.5

  	
  Financial Statements

  	 

	
   

  	
  3.6

  	
  Absence of
  Undisclosed Liabilities

  	 

	
   

  	
  3.7

  	
  Absence of Certain
  Changes or Events

  	 

	
   

  	
  3.8

  	
  Sufficiency and Title
  to Assets

  	 

	
   

  	
  3.9

  	
  Intellectual Property

  	 

	
   

  	
  3.10

  	
  Contracts

  	 

	
   

  	
  3.11

  	
  Permits

  	 

	
   

  	
  3.12

  	
  Compliance with Laws

  	 

	
   

  	
  3.13

  	
  Litigation

  	 

	
   

  	
  3.14

  	
  Books and Records

  	 

	
   

  	
  3.15

  	
  Employment
  Matters

  	 

	
   

  	
  3.16

  	
  Employee Benefits

  	 

	
   

  	
  3.17

  	
  No
  Finder

  	 

	
   

  	
  3.18

  	
  Environmental Matters

  	 

	
   

  	
  3.19

  	
  Taxes and Tax Returns

  	 

	
   

  	
  3.20

  	
  Customers and Suppliers

  	 

	
   

  	
  3.21

  	
  Inventory

  	 

	
   

  	
  3.22

  	
  Insurance

  	 

	
   

  	
  3.23

  	
  Affiliate Transactions

  	 

	
   

  	
  3.24

  	
  Questionable Payments

  	 

	
   

  	
  3.25

  	
  Products Liability

  	 

	
   

  	
  3.26

  	
  No Powers of Attorney

  	 

	
   

  	
  3.27

  	
  Full Disclosure

  	 

 

i

 

	
  ARTICLE IV REPRESENTATIONS AND
  WARRANTIES OF KERR AND PURCHASER

  
	
   

  	
  4.1

  	
  Organization and Qualification

  	 

	
   

  	
  4.2

  	
  Authority Relative
  to this Agreement

  	 

	
   

  	
  4.3

  	
  No Conflict

  	 

	
   

  	
  4.4

  	
  Required Filings and
  Consents

  	 

	
   

  	
  4.5

  	
  No
  Finder

  	 

	
   

  	
  4.6

  	
  No Litigation

  	 

	
   

  	
  4.7

  	
  Commitment
  Letters

  	 

	
   

  	
   

  	
   

  	 

	
  ARTICLE V ADDITIONAL COVENANTS

  
	
   

  	
  5.1

  	
  Conduct
  of Business

  	 

	
   

  	
  5.2

  	
  Intentionally Omitted

  	 

	
   

  	
  5.3

  	
  Consents,
  Filings and Authorizations; Efforts to Consummate

  	 

	
   

  	
  5.4

  	
  Notices of Certain Events

  	 

	
   

  	
  5.5

  	
  Public Announcements

  	 

	
   

  	
  5.6

  	
  Access to
  Information; Confidentiality

  	 

	
   

  	
  5.7

  	
  Expenses

  	 

	
   

  	
  5.8

  	
  Title and Survey Matters

  	 

	
   

  	
  5.9

  	
  No Recording

  	 

	
   

  	
  5.10

  	
  Price Decrease Notification

  	 

	
   

  	
   

  	
   

  	 

	
  ARTICLE VI CONDITIONS TO CLOSING

  
	
   

  	
  6.1

  	
  Conditions to the
  Obligations of Seller and Purchaser

  	 

	
   

  	
  6.2

  	
  Conditions to
  Obligation of Seller

  	 

	
   

  	
  6.3

  	
  Conditions to Obligation
  of Purchaser

  	 

	
   

  	
   

  	
   

  	 

	
  ARTICLE VII TERMINATION; EFFECT
  OF TERMINATION

  
	
   

  	
  7.1

  	
  Termination of Agreement

  	 

	
   

  	
  7.2

  	
  Effect of
  Termination; Right to Proceed

  	 

	
   

  	
   

  	
   

  	 

	
  ARTICLE VIII POST-CLOSING
  COVENANTS

  
	
   

  	
  8.1

  	
  Certain Transitional Matters

  	 

	
   

  	
  8.2

  	
  Transfer
  and Retention of Transferred Employees; Employee Benefits

  	 

	
   

  	
  8.3

  	
  Non-Competition Covenant

  	 

	
   

  	
  8.4

  	
  Trademarks, Etc

  	 

	
   

  	
  8.5

  	
  Tax Covenants

  	 

	
   

  	
  8.6

  	
  Records;
  Retention

  	 

	
   

  	
  8.7

  	
  Designated Reporting Person

  	 

	
   

  	
  8.8

  	
  Further Assurances

  	 

	
   

  	
   

  	
   

  	 

	
  ARTICLE IX SURVIVAL;
  INDEMNIFICATION

  
	
   

  	
  9.1

  	
  Expiration
  of Representations and Warranties

  	 

	
   

  	
  9.2

  	
  Indemnification by Seller

  	 

	
   

  	
  9.3

  	
  Indemnification
  by Kerr and Purchaser

  	 

	
   

  	
  9.4

  	
  Notice of Claims

  	 

	
   

  	
  9.5

  	
  Opportunity to
  Defend Third Party Claims

  	 

 

ii

 

	
   

  	
  9.6

  	
  Limitation of Liability

  	 

	
   

  	
  9.7

  	
  Effect of Taxes and
  Insurance

  	 

	
   

  	
  9.8

  	
  Treatment of Indemnity Payments;
  No Duplication

  	 

	
   

  	
   

  	
   

  	 

	
  ARTICLE X GENERAL

  
	
   

  	
  10.1

  	
  Notices

  
	
   

  	
  10.2

  	
  Severability

  
	
   

  	
  10.3

  	
  Assignment; Binding Effect; Benefit

  
	
   

  	
  10.4

  	
  Incorporation of
  Exhibits and Schedules

  
	
   

  	
  10.5

  	
  Governing Law; Submission to Jurisdiction

  
	
   

  	
  10.6

  	
  Waiver of Jury Trial

  
	
   

  	
  10.7

  	
  Interpretation

  
	
   

  	
  10.8

  	
  Counterparts

  
	
   

  	
  10.9

  	
  Entire Agreement

  
	
   

  	
  10.10

  	
  Waivers and Amendments

  

 

iii

 

EXHIBITS

 

	
  Exhibit A

  	
   

  	
  Form of Assignment and
  Assumption Agreement

  
	
  Exhibit B

  	
   

  	
  Natural Hazard
  Disclosure Statement

  
	
  Exhibit C

  	
   

  	
  Intentionally Omitted

  
	
  Exhibit D

  	
   

  	
  Form of Transition
  Services Agreement

  
	
  Exhibit E

  	
   

  	
  Intentionally Omitted

  
	
  Exhibit F

  	
   

  	
  Form of Assignment of
  Lease

  
	
  Exhibit G

  	
   

  	
  Form of Bill of Sale

  
	
  Exhibit H

  	
   

  	
  Form of Deed

  

 

iv

 

SCHEDULES

 

	
  Schedule 1.1(a)

  	
   

  	
  Seller Affiliates

  
	
  Schedule 1.1(b)

  	
   

  	
  Closing Balance Sheet /
  Working Capital

  
	
  Schedule 2.1(a)(i)

  	
   

  	
  Real Property

  
	
  Schedule 2.1(a)(ii)

  	
   

  	
  Real Property Leases

  
	
  Schedule 2.1(b)

  	
   

  	
  Tangible Personal
  Property

  
	
  Schedule 2.1(e)

  	
   

  	
  Assigned Contracts

  
	
  Schedule 2.1(f)

  	
   

  	
  Listed Permits

  
	
  Schedule 2.1(g)

  	
   

  	
  Listed Intellectual
  Property

  
	
  Schedule 2.1(j)

  	
   

  	
  Vehicles

  
	
  Schedule 2.2(d)

  	
   

  	
  Excluded Tangible
  Personal Property

  
	
  Schedule 2.2(g)

  	
   

  	
  Excluded Assets

  
	
  Schedule 3.1

  	
   

  	
  Subsidiaries

  
	
  Schedule 3.3

  	
   

  	
  No Conflict of Seller

  
	
  Schedule 3.4

  	
   

  	
  Seller Consents

  
	
  Schedule 3.5

  	
   

  	
  Seller’s Balance Sheets

  
	
  Schedule 3.6

  	
   

  	
  Undisclosed Liabilities

  
	
  Schedule 3.7

  	
   

  	
  Certain Changes or
  Events

  
	
  Schedule 3.8

  	
   

  	
  Title to Assets

  
	
  Schedule 3.9(a)

  	
   

  	
  Registered Intellectual
  Property Rights

  
	
  Schedule 3.9(d)

  	
   

  	
  Intellectual Property
  Infringement

  
	
  Schedule 3.9(e)

  	
   

  	
  Intellectual Property
  Claims

  
	
  Schedule 3.9(g)

  	
   

  	
  Computer Software

  
	
  Schedule 3.9(h)

  	
   

  	
  Domain Names

  
	
  Schedule 3.10

  	
   

  	
  Material Contracts

  
	
  Schedule 3.13

  	
   

  	
  Litigation

  
	
  Schedule 3.15

  	
   

  	
  Employment Matters

  
	
  Schedule 3.15(c)

  	
   

  	
  Employment Loss

  
	
  Schedule 3.16

  	
   

  	
  Benefit Plans

  
	
  Schedule 3.18

  	
   

  	
  Environmental Matters

  
	
  Schedule 3.19

  	
   

  	
  Taxes and Tax Returns

  
	
  Schedule 3.20

  	
   

  	
  Customers and Suppliers

  
	
  Schedule 3.22

  	
   

  	
  Insurance

  
	
  Schedule 3.23

  	
   

  	
  Affiliate Transactions

  
	
  Schedule 5.1

  	
   

  	
  Conduct of Business

  
	
  Schedule 5.1(m)

  	
   

  	
  Permitted Capital
  Expenditures

  
	
  Schedule 5.9

  	
   

  	
  Title Commitments

  
	
  Schedule 6.2(f)

  	
   

  	
  Required Consents

  
	
  Schedule 6.3(h)

  	
   

  	
  Required Consents

  

 

v

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT is
made as of June 26, 2003 among KERR GROUP, INC., a Delaware corporation (“Kerr”),
KERR ACQUISITION SUB II, LLC, a wholly-owned limited liability company (“Purchaser”),
and O.G. DEHYDRATED, INC., a California corporation (“Seller”).

 

RECITALS

 

Seller
engages in the business of developing, manufacturing, marketing and
distributing specialty molded closures and flexible plastic packaging for the
healthcare, personal care, health and beauty, pharmaceutical, household
chemical, automotive, industrial and dentifrice industries (the “Business”).  Subject to the terms and conditions set
forth herein, Seller desires to sell, convey, transfer, assign and deliver to
Purchaser, and Purchaser desires to purchase and acquire from Seller, all of
Seller’s right, title and interest in and to all of the Purchased Assets, as
defined herein (the “Acquisition”).

 

NOW,
THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby expressly
acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:

 

ARTICLE I

DEFINITIONS

 

1.1                                 Definitions.  As
used herein, the following terms shall have the following meanings:

 

“Accounts
Payable” means normal trade payables
associated with the ongoing operations of the business, including liabilities
relating to sales allowances, customer rebates, third party royalty payments
and commissions, and pro-card accruals; provided that the disputed Manpower
International, Inc. payable shall not be
deemed to be an “Account Payable”.

 

“Acquisition”
has the meaning given to such term in the Recitals.

 

“Affiliate”
means, with respect to any Person, any other Person directly or indirectly
controlling, controlled by or under common control with such Person.  For purposes of this definition, “control”
(including, with correlative meanings, the terms “controlled by” and “under
common control with”), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.  The Affiliates of Seller include the Persons
listed on Schedule 1.1(a).

 

“Affiliate
Marks” means the service marks, trademarks, trade names and domain names
used by Seller in the operation of the Business and owned by or licensed to an
Affiliate of Seller, as listed on Schedule 2.2(g).

 

“Agreement”
means this Asset Purchase Agreement.

 

 

“Asserted
Liability” has the meaning given to such term in Section 9.4.

 

“Assigned
Contracts” has the meaning given to such term in Section 2.1(e).

 

“Assignment
and Assumption Agreement” has the meaning given to such term in
Section 2.5(b)(ii).

 

“Assignment
of Lease” has the meaning given to such term in Section 6.2(d)(i).

 

“Associate”
means, as to any Person, (a) any trust or other estate in which such
Person has a substantial beneficial interest or as to which such Person serves
as trustee or in a similar fiduciary capacity, and (b) any family member
or spouse of such Person, or any family member of such spouse, or any
individual who has the same home as such Person or who is a director or officer
of such Person or any of its parents or Subsidiaries.

 

“Assumed
Liabilities” has the meaning given to such term in Section 2.3.

 

“Audited
Financials” has the meaning given to such term in Section 3.5.

 

“Base
Purchase Price” has the meaning given to such term in
Section 6.2(c)(vii).

 

“Business”
has the meaning given to such term in the Recitals.

 

“Business
Day” means any day other than a Saturday, Sunday or a day on which banks in
New York City or San Francisco, California, are authorized or obligated by
applicable Law to close.

 

“Capital
Expenditures” means Seller’s actual capital expenditures properly
classified as property, plant and equipment in accordance with GAAP (using, to
the extent permitted by GAAP, the practices, procedures and methods
historically used by Seller), accrued during the period beginning on
December 1, 2002 and ending on the earlier of August 31, 2003 and the
Closing Date; provided, however, that if the Closing does not occur on or prior
to August 31, 2003 as a result of (i) postponement of the Closing by Seller
pursuant to Section 5.8(b), (ii) a second request under the HSR Act under
Section 7.1(b), or (iii) breach by Seller of its obligations hereunder,
then Capital Expenditures shall accrue during the period beginning on
December 1, 2002 and ending on the Closing Date.  For the avoidance of doubt, items set forth on Capital
Expenditures Schedule 5.1(m) shall be deemed to be Capital Expenditures
for purposes of this Agreement.

 

“Capital
Expenditures Adjustment” has the meaning given to such term in
Section 2.5(f).

 

“Closing”
has the meaning given to such term in Section 2.7.

 

“Closing
Balance Sheet” means a balance sheet of Seller, prepared pursuant to
Section 2.5(d) setting forth the Purchased Assets and the Assumed
Liabilities as of the Closing Date to the extent such assets and liabilities
would be shown on a balance sheet of Seller prepared in accordance with GAAP,
using, to the extent permitted by GAAP, the practices,

 

2

 

procedures and methods used by Seller in preparing the
Audited Financials, which balance sheet shall be prepared by Purchaser.

 

“Closing
Capital Expenditures” has the meaning given to such term in
Section 2.5(f)(ii).

 

“Closing
Capital Expenditures Adjustment” has the meaning given to such term in
Section 2.5(f)(ii).

 

“Closing
Capital Expenditures Objection Notice” has the meaning given to such term
in Section 2.5(f)(ii).

 

“Closing
Date” has the meaning given to such term in Section 2.7.

 

“Closing
Proration” has the meaning given to such term in Section 2.5(c).

 

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

 

“Commitments”
has the meaning given to such term in Section 5.8(a).

 

“Computer
Software” means all computer programs other than computer programs designed
for use in the preparation of Tax Returns, and all documentation relating to
the foregoing.

 

“Counterpart
Plans” has the meaning given to such term in Section 8.2.

 

“Current
Assets” shall mean the current assets of the Business that are among the
Purchased Assets set forth in the Closing Balance Sheet.

 

“Current
Liabilities” shall mean the current liabilities of the Business that are
among the Assumed Liabilities set forth in the Closing Balance Sheet.

 

“De
Minimis Losses” means a Loss resulting from a single set of facts or
circumstances that does not exceed $10,000.

 

“Environmental
Claim” means any claim, action, cause of action, investigation or notice by
any person or entity alleging potential liability (including potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (a) the presence, or release
into the environment, of any Material of Environmental Concern at any location,
whether or not owned or operated by Seller, (b) any violation, or alleged
violation, of any Environmental Law, and (c) the presence of fungus or mold in
any building owned or operated by Seller.

 

“Environmental
Laws” means all Laws relating to pollution or protection of human health or
the environment (including ambient air, surface water, ground water, land
surface or subsurface strata, and natural resources), including laws and
regulations relating to emissions, discharges, releases or threatened releases
of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.

 

3

 

“Estimated
Capital Expenditures” has the meaning given to such term in
Section 2.5(f)(i).

 

“Exceptions”
has the meaning given to such term in Section 5.8(a).

 

“Excluded
Assets” has the meaning given to such term in Section 2.2.

 

“Excluded
Contracts” has the meaning given to such term in Section 2.2(g).

 

“Final
Closing Capital Expenditures” has the meaning given to such term in
Section 2.5(f)(ii).

 

“Final
Closing Capital Expenditures Adjustment” has the meaning given to such term
in Section 2.5(f)(ii).

 

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

 

“Governmental
Authority” means any nation or government, any state or other political
subdivision thereof and any entity (including a court exercising executive,
legislative, judicial, regulatory, administrative functions of, or pertaining
to, government).

 

“Guarantee
Obligations” has the meaning given to such term in
Section 3.10(a)(vi).

 

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

 

“Indebtedness”
of any Person at any date shall include (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any
other indebtedness of such Person which is evidenced by a note, bond, debenture
or similar instrument, (c) all obligations of such Person under any lease
of property, real or personal, the obligations of the lessee in respect of
which are required in accordance with GAAP to be capitalized on a balance sheet
of the lessee, (d) all obligations of such Person in respect of
acceptances issued or created for the account of such Person, (e) all
liabilities secured by any Lien on property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof,
and (f) all Guarantee Obligations of such Person.

 

“Indemnified
Party” has the meaning given to such term in Section 9.4.

 

“Indemnifying
Party” has the meaning given to such term in Section 9.4.

 

“Independent
Accounting Firm” means PricewaterhouseCoopers or such other independent accounting
firm of national reputation as is selected by mutual agreement of Seller and
Purchaser; provided, that if PricewaterhouseCoopers declines to serve
and Seller and Purchaser cannot agree, the Independent Accounting Firm shall be
selected by the American Arbitration Association in accordance with its then-prevailing
rules; provided, further, that any services to be performed by
PricewaterhouseCoopers or such firm selected by the American

 

4

 

Arbitration Association shall be performed by
professionals who (i) have not previously performed any services for any of the
Parties, Parent or their respective Affiliates and (ii) are based in an office
of such firm that has not previously been the primary office from which
services for any of the Parties, Parent or their respective Affiliates have
been performed.

 

“Initial
Capital Expenditures Adjustment” has the meaning given to such term in
Section 2.5(f)(i).

 

“Intellectual
Property” means, collectively, the Listed Intellectual Property and the
Other Intellectual Property.

 

“IRS”
means the United States Internal Revenue Service.

 

“Kerr”
has the meaning given to such term in the preamble of this Agreement.

 

“Knowledge
of Seller” means the actual knowledge of a particular fact or other matter
being possessed as of the pertinent date by any of Robert G. Davey, Paul C.
Beard, W. Geoffrey Carpenter, Tony Imbraguglio, Jim Dunn, Stephen Rafter, Craig
Berger, James Farley, Willie Lam and Jim Robertson.

 

“Latest
Balance Sheet” has the meaning given to such term in Section 3.6.

 

“Latest
Balance Sheet Date” has the meaning given to such term in Section 3.6.

 

“Law”
means any federal, state, local, municipal, foreign or other law, statute,
legislation, constitution, principle of common law, resolution, ordinance,
code, edict, decree, proclamation, treaty, convention, rule, regulation,
ruling, directive, requirement, specification, determination, decision, opinion
or interpretation issued, enacted, adopted, passed, approved, promulgated,
made, implemented or otherwise put into effect by or under the authority of any
Governmental Authority.

 

“Lien”
means any mortgage, lien, claim, pledge, charge, equitable interest,
right-of-way, easement, encroachment, security interest, preemptive right,
right of first refusal or similar restriction or right, option, judgment, title
defect or encumbrance of any kind.

 

“Listed
Intellectual Property” has the meaning given to such term in
Section 2.1(g).

 

“Listed
Permits” has the meaning given to such term in Section 2.1(f).

 

“Losses”
means any costs, payments, Taxes, losses, claims, damages and expenses
whatsoever, including court costs and reasonable counsel and other professional
fees and expenses.

 

“Material
Adverse Effect” means any change or effect that, individually or taken
together with all other such changes or effects that have occurred prior to the
date of determination of the Material Adverse Effect, is materially adverse to
the ability of Seller to achieve its projections or to the Business, assets,
liabilities, financial condition or results of operations of Seller considered
as a whole; provided, however, that in no event shall any of the
following, alone or in

 

5

 

combination, be deemed to constitute, nor shall any of
the following be taken into account in determining whether there has been, or
will be, a Material Adverse Effect: 
(a) changes in general economic conditions or changes generally
affecting the industry in which Seller operates (which changes do not affect
Seller in a materially disproportionate manner); or (b) changes resulting
from the loss, diminution or disruption, whether actual or threatened, of
existing or prospective employee, customer, distributor or supplier
relationships as to which Seller furnishes reasonable evidence that such
changes have resulted from the announcement that Seller entered into this
Agreement.

 

“Material
Contracts” has the meaning given to such term in Section 3.10(a).

 

“Materials
of Environmental Concern” means chemicals, pollutants, contaminants, wastes,
toxic substances or hazardous substances listed, regulated, defined or included
under Environmental Laws, including petroleum and petroleum products, asbestos
or asbestos-containing materials or products, polychlorinated biphenyls, lead
or lead-based paints or materials, and radon.

 

“NHDS”
has the meaning given to such term in Section 2.9.

 

“Other
Intellectual Property” means trade secrets and know-how, if any, owned by
Seller and used by Seller in the operation of the Business as currently
conducted, including trade secrets and know-how relating to the technology,
systems and processes identified as such on Schedule 2.1(g).  Other Intellectual Property does not include
patents, copyrights, service marks, service names, trademarks, trade names or
domain names (or any applications therefor).

 

“Other
Liens” has the meaning given to such term in Section 5.8(b).

 

“Parent”
means McCormick & Company, Incorporated, a Maryland corporation.

 

“Party”
means Seller, Purchaser or Kerr, as the context requires, and the term “Parties”
means, collectively, Seller, Purchaser and Kerr.

 

“Permitted
Exceptions” has the meaning given to such term in Section 5.8(a).

 

“Permitted
Lien” means:  (a) any Lien
imposed by Law for Taxes, assessments or governmental charges that are not yet
delinquent and remain payable without penalty or that are being contested in
good faith by appropriate proceedings; (b) any carrier’s, warehousemen’s,
mechanic’s, materialmen’s, repairmen’s or other like Lien imposed by Law,
arising in the ordinary course of business and securing obligations that are
not overdue by more than forty-five (45) days or are being contested in good
faith by appropriate proceedings; (c) any pledge or deposit made in the
ordinary course of business in compliance with workers’ compensation,
unemployment insurance or other social security Laws or other statutory
obligations of Seller; (d) any cash deposit or right of set-off to secure
the performance of bids, tenders, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds, government contracts
and other obligations of a like nature, in each case in the ordinary course of
business; (e) any Lien arising by operation of Law; and (f) any
Permitted Exception.

 

6

 

“Person”
means an individual, corporation, partnership, limited partnership, limited
liability company, limited liability partnership, syndicate, person (including
a “person” as defined in Section 13(d)(3) of the Securities Exchange Act
of 1934), trust, association, entity or government or political subdivision,
agency or instrumentality of a government.

 

“Plan”
or “Plans” have the meanings given to such terms in Section 3.16.

 

“Pro
Forma Revenues” has the meaning given to such term in Section 3.5.

 

“Product”
has the meaning given to such term in Section 3.10(a)(ix).

 

“Purchase
Price” has the meaning given to such term in Section 2.5(a).

 

“Purchase
Price Objection Notice” has the meaning given to such term in
Section 2.5(d).

 

“Purchased
Assets” has the meaning given to such term in Section 2.1.

 

“Purchaser”
has the meaning given to such term in the preamble of this Agreement.

 

“Purchaser
Indemnitee” has the meaning given to such term in Section 9.2.

 

“R&T
Code” has the meaning given to such term in Section 8.7.

 

“Real
Property” has the meaning given to such term in Section 2.1(a).

 

“Real
Property Leases” has the meaning given to such term in Section 2.1(a).

 

“Registered
Intellectual Property Rights” has the meaning given to such term in
Section 3.9(a).

 

“Representative”
means, with respect to either Party, any of such Party’s directors, officers,
employees, attorneys, accountants or other agents.

 

“Retained
Liabilities” has the meaning given to such term in Section 2.4.

 

“Security
Deposits” means the full amount of any and all deposits made by or on
behalf of Seller.

 

“Seller”
has the meaning given to such term in the preamble of this Agreement.

 

“Seller
Indemnitee” has the meaning given to such term in Section 9.3.

 

“Subsidiary”
means, with respect to Seller, any corporation, partnership, limited
partnership, limited liability company or other legal entity of which Seller
(either alone or through or together with any other subsidiary) owns, directly
or indirectly, a majority of the stock or other equity interests.

 

“Supply
Agreement” has the meaning given to such term in Section 6.2(c)(vi).

 

7

 

“Surveys”
has the meaning given to such term in Section 5.8(a).

 

“Tangible
Personal Property” has the meaning given to such term in
Section 2.1(b).

 

“Target
Capital Expenditures” means *.

 

“Target
Working Capital” means *.

 

“Tax
Return” means any return, report, statement, form or other documentation
(including any additional or supporting material and any amendments or
supplements) filed or maintained, or required to be filed or maintained, with
respect to or in connection with the calculation, determination, assessment or
collection of any Taxes.

 

“Taxes”
means:  (a) any and all taxes,
fees, levies, duties, tariffs, imposts and other charges of any kind, imposed
by any Governmental Authority, including: 
(i) taxes or other charges on, measured by, or with respect to
income, franchise, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers’
compensation, unemployment compensation or net worth; (ii) taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer,
value-added or gains taxes; (iii) license, registration and documentation
fees; and (iv) customs duties, tariffs and similar charges; (b) any
liability for the payment of any amounts of the type described in (a) as a
result of being a member of an affiliated, combined, consolidated or unitary
group for any taxable period; (c) any liability for the payment of amounts
of the type described in (a) or (b) as a result of being a transferee of, or a
successor in interest to, any Person or as a result of an express or implied
obligation to indemnify any Person; and (d) any and all interest,
penalties, additions to tax and additional amounts imposed in connection with
or with respect to any amounts described in (a), (b) or (c).

 

“Terminated
Employee” has the meaning given to such term in Section 8.2.

 

“Title
Company” has the meaning given to such term in Section 5.8(a).

 

“Title
Documents” has the meaning given to such term in Section 5.8(a).

 

“Title
Objections” has the meaning given to such term in Section 5.8(b).

 

“Title
Policy” has the meaning given to such term in Section 6.3(g).

 

“Transaction
Documents” means, collectively, this Agreement and each of the other
agreements and instruments to be executed and delivered by either or both of
the Parties in connection with the consummation of the Acquisition.

 

“Transferred
Employee” has the meaning given to such term in Section 8.2.

 

“Transition
Services Agreement” has the meaning given to such term in
Section 6.2(c)(v).

 

“WARN
Act” means the Worker Adjustment and Retraining Notification Act.

 

*  Confidential treatment has been requested
for certain portions of this document pursuant to an application for
confidential treatment sent to the SEC. 
Such portions are omitted from this filing and filed separately with the
SEC.

 

8

 

“Withholding
Taxes” has the meaning given to such term in Section 2.5(b).

 

“Working
Capital” shall mean Current Assets minus Current Liabilities, (prepared in
accordance with GAAP, using, to the extent permitted by GAAP, the accounting
principles, methodologies, procedures and classifications used by Seller in
preparing the Audited Financials).

 

“Working
Capital Adjustment” has the meaning given to such term in
Section 2.5(d).

 

1.2                                 Rules of Construction.  The definitions in Section 1.1 shall
apply equally to both the singular and plural forms of the terms defined.  Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter
forms.  The words “include,” “includes”
and “including” shall be deemed to be followed by the phrase “but not limited
to.”  All references herein to Articles,
Sections, Exhibits and Schedules shall be deemed references to Articles and
Sections of, and Exhibits and Schedules to, this Agreement unless the context
shall otherwise require.  All Exhibits
and Schedules attached to this Agreement shall be deemed incorporated herein by
reference as if fully set forth herein. 
Words such as “herein,” “hereof,” “hereto,” “hereby” and “hereunder”
refer to this Agreement and to the Schedules and Exhibits, taken as a
whole.  Except as otherwise expressly
provided herein:  (a) any reference
in this Agreement to any agreement shall mean such agreement as amended,
restated, supplemented or otherwise modified from time to time; (b) any
reference in this Agreement to any Law shall include corresponding provisions
of any successor Law and any regulations and rules promulgated pursuant to such
Law or such successor Law; and (c) all terms of an accounting or financial
nature shall be construed in accordance with GAAP, as in effect from time to
time.  Neither the captions to Sections
or subdivisions thereof nor the Table of Contents shall be deemed to be a part
of this Agreement.

 

ARTICLE II

PURCHASE AND SALE OF PURCHASED ASSETS

 

2.1                                 Purchased Assets. 
Subject to the terms and conditions of this Agreement and in reliance
upon the representations, warranties, covenants and agreements of the Parties
contained herein, at the Closing, Seller shall sell, convey, transfer, assign
and deliver to Purchaser, and Purchaser shall purchase and acquire from Seller,
free and clear of all Liens other than Permitted Liens (except with respect to
the Real Property, subject only to Permitted Exceptions), all of Seller’s
right, title and interest in and to the following assets, properties, rights
and interests of Seller as of the date hereof and those acquired after the date
hereof and on or before the Closing Date, except for those assets, properties,
rights and interests that are set forth in Section 2.2 as being Excluded
Assets (collectively, the “Purchased Assets”):

 

(a)                                  all
the real property and interests in real property described on Schedule 2.1(a)(i)
and such as are required to make the statement in the second sentence of
Section 3.8(a) true, together with all buildings, fixtures, facilities and
other improvements located on such real property (collectively, the “Real
Property”), and the leasehold estates, including any Security Deposits
relating thereto, described on Schedule 2.1(a)(ii) and such as are
required to make the statement in the first sentence of Section 3.8(b)
true, under which Seller is a lessee (collectively, the “Real Property
Leases”);

 

9

 

(b)                                 all
the machinery, equipment, tools, furniture, computer hardware, materials, leasehold
improvements, computing and telecommunications equipment and other items of
tangible personal property owned by the Seller or (to the extent assignable)
leased by Seller or by Affiliates of Seller and used in the operation of the
Business on the Closing Date, including those listed or described on Schedule 2.1(b),
together with any express or implied warranty by the manufacturer, seller or
lessor of any such item or component part thereof, to the extent such
warranties may be assigned without consent or any requisite consent is obtained
(collectively, the “Tangible Personal Property”);

 

(c)                                  all
inventories of Seller, including all finished goods, work in process, supplies
and raw materials;

 

(d)                                 (i) all
trade accounts receivable and other rights to payment from customers of Seller
and the full benefit of all security for such accounts or rights to payment;
(ii) all other accounts or notes receivable of Seller and the full benefit
of all security for such accounts or notes; and (iii) any claim, remedy or
other right related to any of the foregoing;

 

(e)                                  all
the contracts, leases, licenses, purchase orders, commitments and other binding
arrangements of Seller, including those listed or described on Schedule 2.1(e)
(“Assigned Contracts”);

 

(f)                                    all
the permits, licenses, approvals, franchises, certificates, consents and other
authorizations of any Governmental Authority issued to or held by Seller,
including those listed or described on Schedule 2.1(f), and such as
are required to make the statement in the first sentence of Section 3.11
true (collectively, the “Listed Permits”), to the extent they may be
legally transferred by agreement;

 

(g)                                 all
the patents, copyrights, service marks, trademarks, trade names and domain
names (and all registrations and applications therefor) owned by or licensed to
Seller and used, held for use or planned to be used in connection with products
currently under active development, in each case, by Seller in the operation of
the Business, including those listed or required to be listed on Schedule 2.1(g),
and such as are required to make the statement in the first sentence of
Section 3.9(a) true (the “Listed Intellectual Property”), together
with the Other Intellectual Property;

 

(h)                                 all
the data, records, files, manuals, blueprints and other documentation of
Seller, in each case related to the Purchased Assets and used, held for use or
planned to be used in connection with products currently under active
development, in each case, by Seller in the operation of the Business, including:  (i) service and warranty records;
(ii) sales promotion materials, creative materials, art work, photographs,
public relations and advertising material, studies, reports, correspondence and
other similar documents and records, whether in electronic form or otherwise;
(iii) all client, customer and supplier lists, telephone numbers and
electronic mail addresses with respect to past, present or prospective clients,
customers and suppliers; (iv) copies of accounting and tax books, ledgers
and records and other financial records; (v) all sales and credit records,
catalogs and brochures, purchasing records and records relating to suppliers;
and (vi) subject to applicable Law, original personnel records of all
Transferred Employees;

 

10

 

(i)                                     all
the payments (or pro rata portions thereof) made by Seller with respect to the
Purchased Assets or the Business which constitute, as of the Closing Date,
prepaid expenses in accordance with GAAP;

 

(j)                                     all
the vehicles owned or (to the extent assignable) leased by Seller or by
Affiliates of Seller and used in the operation of the Business on the Closing
Date, in each case as listed on Schedule 2.1(j);

 

(k)                                  the
goodwill related to the conduct of the Business and all rights to continue to
use the Purchased Assets as an ongoing business;

 

(l)                                     all
assets included in the calculation of Current Assets on the Closing Balance Sheet; and

 

(m)                               all
other assets, properties, rights, claims and interests of Seller that are not
specifically included in the definition of the term “Excluded Assets” in
Section 2.2.

 

2.2                                 Excluded Assets. 
Notwithstanding anything to the contrary in Section 2.1, the
following assets, properties, rights and interests of Seller (collectively, the
“Excluded Assets”) are excluded from the Purchased Assets and shall
remain the property of Seller after the Closing:

 

(a)                                  corporate
seals, articles of incorporation, minute books, stock books, Tax Returns,
original accounting and tax books, ledgers, records and other financial records
or other records relating to the corporate organization of Seller;

 

(b)                                 all
cash on hand, cash equivalents, investments (including stock, debt instruments,
options and other instruments and securities) and bank deposits;

 

(c)                                  all
accounts or notes receivable owed to Seller by Parent or any Person listed on Schedule 1.1(a)
other than accounts owed by Tubed Products, Inc. a Maryland corporation;

 

(d)                                 all
rights of Seller:  (i) to use any
service marks, service names, trademarks, trade names, domain names, logos or
brand names, and related goodwill, of Parent or any other Person listed on Schedule 1.1(a)
(including any derivatives thereof), or to use blueprints, drawings, designs,
manuals, documentation or other intellectual property rights attributable to or
which are used solely in Seller’s manufacturing of products for Parent or any
other Person listed on Schedule 1.1(a) and (ii) in any
tangible personal property (including molds, tooling and other equipment) which
are used or usable solely in Seller’s manufacturing of products for Parent or
any other Person listed on Schedule 1.1(a), in each case to the
extent listed on Schedule 2.2(d);

 

(e)                                  all
insurance policies, fidelity or surety bonds or fiduciary liability policies
covering the Purchased Assets, the Business or the operations, employees,
officers or directors of Seller and all rights of Seller of every nature and
description under or arising out of such policies and bonds;

 

11

 

(f)                                    originals
of all personnel records and other records that Seller is required by Law to
retain in its possession;

 

(g)                                 the
assets listed on Schedule 2.2(g), including the contracts, leases,
licenses, permits, plans, purchase orders, commitments and other binding arrangements
of Seller, including those between Seller and its Affiliates, listed on Schedule 2.2(g)
(the “Excluded Contracts”);

 

(h)                                 any
assets, properties, rights or interests of Seller which have been transferred
or disposed of in the ordinary course of the Business prior to the Closing Date
to the extent permitted by Section 5.1;

 

(i)                                     except
as expressly provided in Section 2.5(c), claims for refunds of Taxes paid
by Seller;

 

(j)                                     all
shares of capital stock or other ownership interests held by Seller in any
Subsidiary set forth on Schedule 3.1; and

 

(k)                                  all
rights of Seller under this Agreement, including Seller’s rights in the
consideration paid to Seller pursuant to this Agreement.

 

2.3                                 Assumed Liabilities.  Upon the terms and subject to the conditions of this Agreement,
Purchaser shall assume on the Closing Date, upon the consummation of the
Closing, and shall pay, perform and discharge when due, the following
obligations and liabilities arising on or after the Closing Date (the “Assumed
Liabilities”):

 

(a)                                  all
obligations of Seller under the Assigned Contracts other than (i) liabilities
or obligations arising from any pre-Closing breach or default by Seller of or
under any Assigned Contract and (ii) liabilities for Capital Expenditures not
yet paid that are included in the calculation of the Capital Expenditures
Adjustment; and

 

(b)                                 Accounts
Payable as set forth in the Closing Balance
Sheet as of the Closing Date.

 

2.4                                 Retained Liabilities.  Purchaser shall not assume, and Seller shall pay, perform and discharge
when due and remain liable for any and all liabilities of Seller (including any
liability of Seller under this Agreement) and any liabilities that otherwise
encumber the Business or the Purchased Assets, in each case other than the
Assumed Liabilities (collectively, the “Retained Liabilities”).

 

2.5                                 Purchase Price; Payment of Purchase Price; Adjustments.

 

(a)                                  The
aggregate consideration payable to Seller for the Purchased Assets
(collectively, the “Purchase Price”) shall be as follows:

 

(i)                                     The
Base Purchase Price, as adjusted at Closing in accordance with
Section 2.5(c) and as adjusted after Closing in accordance with
Sections 2.5(d) and 2.5(f); and

 

12

 

(ii)                                  the
assumption of the Assumed Liabilities; and

 

(b)                                 The
Purchase Price shall be paid as follows:

 

(i)                                     At
Closing, Purchaser shall pay Seller cash in the amount equal to the Base
Purchase Price, plus or minus the Closing Proration, as
determined in accordance with Section 2.5(c), plus or minus
the Initial Capital Expenditures Adjustment and minus all applicable
withholding Taxes (the “Withholding Taxes”).  Purchaser shall make such payment via wire transfer of
immediately available funds to an account specified by Seller, which account
shall be so specified at least two (2) Business Days prior to the Closing Date.

 

(ii)                                  At
Closing, Purchaser shall execute and deliver an Assignment and Assumption
Agreement, in the form attached as Exhibit A (the “Assignment
and Assumption Agreement”), evidencing the assignment by Seller of certain
of the Purchased Assets and the assumption by Purchaser of the Assumed
Liabilities.

 

(iii)                               After
Closing, any Working Capital Adjustment due shall be paid by the paying Party
within five (5) Business Days after the calculation of the Working Capital
Adjustment becomes conclusive and binding on the Parties in accordance with
Section 2.5(d).  The paying Party
shall make such payment via wire transfer of immediately available funds to an
account specified by the recipient Party, which account shall be so specified
at least two (2) Business Days before payment of the Working Capital Adjustment
becomes due.

 

(iv)                              After
Closing, any Final Closing Capital Expenditures Adjustment due shall be paid by
the paying Party within five (5) Business Days after the calculation of the
Final Closing Capital Expenditures Adjustment becomes conclusive and binding on
the Parties in accordance with Section 2.5(f).  The paying Party shall make such payment via wire transfer of
immediately available funds to an account specified by the recipient Party,
which account shall be so specified at least two (2) Business Days before
payment of the Final Capital Expenditure Adjustment becomes due.

 

(c)                                  Liability
for all accrued or prepaid real estate Taxes attributable to the Real Property
and the Real Property Leases shall be prorated between Seller and Purchaser as
of 12:01 a.m. on the Closing Date based on the most recently ascertainable real
estate Tax bill.  Such proration between
the pre-Closing Date period and the post-Closing Date period shall be made by
multiplying such Taxes by a fraction, the numerator of which is the actual
number of days in the pre-Closing period and the denominator of which is the
number of days in the real property tax year in which the real property taxes
are assessed, as the case may be.  Any
net credit resulting from such proration in favor of Seller shall be paid in
cash by Purchaser to Seller at Closing and any resulting net credit in favor of
Purchaser shall be credited against the Purchase Price paid by Purchaser at
Closing (such amount, as applicable, the “Closing Proration”).  Any refunds of such real estate Taxes made
after the Closing shall first be applied to the unreimbursed third-party costs
incurred by Seller or Purchaser in obtaining the refund, then shall be paid to
Seller (for such Taxes accrued through the period prior to the Closing Date)
and to Purchaser (for the period commencing on and after the Closing
Date).  If any proceeding to determine
the assessed value of the Real Property or the real estate Taxes payable with
respect to the Real Property commenced before the date hereof is continuing as
of the Closing Date,

 

13

 

Seller shall be authorized to continue to prosecute
such proceeding and shall be entitled to any abatement proceeds therefrom
allocable to any period before the Closing Date, and Purchaser agrees to
cooperate as reasonably requested with Seller and to execute any and all
documents reasonably requested by Seller in furtherance of the foregoing.

 

(d)                                 The
Purchase Price shall be: (i)  increased on a dollar for dollar basis to
the extent that the Working Capital on the Closing Date exceeds the Target
Working Capital and (ii) decreased on a dollar for dollar basis to the extent
that the Working Capital on the Closing Date is less than the Target Working
Capital (the “Working Capital Adjustment”).  Within sixty (60) days following the Closing, Purchaser shall
prepare and deliver to Seller a Closing
Balance Sheet as of the Closing Date, together with a calculation of the
Working Capital Adjustment based on such Closing
Balance Sheet.  Following delivery of
the Closing Balance Sheet and Working Capital Adjustment, Purchaser shall
provide Seller and its Representatives with reasonable access to the books,
records, facilities and employees of Purchaser, and shall cooperate with
Seller’s Representatives, in connection with Seller’s review of the Closing
Balance Sheet and Working Capital Adjustment. 
The Working Capital Adjustment calculated by Purchaser shall be
conclusive and binding on the Parties unless Seller, within thirty (30) days
after its receipt of the Working Capital Adjustment, gives Purchaser a written
notice of objection setting forth in reasonable detail the amount in dispute
and the basis for such dispute (a “Purchase Price Objection Notice”); provided,
that Seller shall not be required to give details regarding the amount or basis
of any dispute if Purchaser shall have failed to provide Seller the access and
cooperation required by this Section. 
If Seller delivers a Purchase Price Objection Notice, the Parties shall
attempt in good faith to resolve such dispute through negotiation, and any
agreement reached shall be conclusive and binding on the Parties.  If the Parties are unable, despite good
faith negotiations, to resolve the disputes described in the Purchase Price
Objection Notice within thirty (30) days after delivery of the Purchase Price
Objection Notice, then the Parties shall promptly submit any such unresolved
dispute to the Independent Accounting Firm. 
The Parties shall cooperate fully with the Independent Accounting Firm,
including providing all work papers and back-up materials relating to the unresolved
disputes requested by the Independent Accounting Firm to the extent available
to the Parties and their respective Representatives.  The determination of the Independent Accounting Firm shall be set
forth in a written notice delivered to Purchaser and Seller within thirty (30)
days after submission of the disputes to the Independent Accounting Firm and
shall be conclusive and binding on the Parties.  The fees and expenses of the Independent Accounting Firm shall be
shared equally by Seller and Purchaser. 
The Working Capital Adjustment shall be revised to reflect the
resolution of the disputes resolved in accordance with this
Section 2.5(d).

 

(e)                                  Intentionally
Omitted.

 

(f)                                    The
Purchase Price shall be adjusted as follows:

 

(i)                                     Two
Business Days before the Closing Date, the Seller shall deliver to Purchaser a
certificate containing a calculation of the Capital Expenditures as of such
date (the “Estimated Capital Expenditures”).  The Estimated Capital Expenditures minus the Target Capital
Expenditures shall be the “Initial Capital Expenditures Adjustment”; provided
that the Initial Capital Expenditures Adjustment shall be zero if such
adjustment would otherwise be less than the product of (A) 0.05 and (B) the
Target Capital Expenditures.  On the
Closing Date,

 

14

 

the Purchase Price shall be (i) increased on a
dollar for dollar basis to the extent that the Initial Capital Expenditures
Adjustment exceeds zero and (ii) decreased on a dollar for dollar basis to the
extent that the Initial Capital Expenditures Adjustment is less than zero.

 

(ii)                                  Within
sixty (60) days following the Closing, Purchaser shall prepare and deliver to
Seller a calculation of the Capital Expenditures as of the Closing Date (the “Closing
Capital Expenditures”).  The Closing
Capital Expenditures minus the Target Capital Expenditures, if any, shall be
the “Closing Capital Expenditures Adjustment”; provided that the
Closing Capital Expenditures Adjustment shall be zero if such adjustment would
otherwise be less than the product of (A) 0.05 and (B) the Target Capital
Expenditures.  Following delivery of the
calculation of the Closing Capital Expenditures Adjustment, Purchaser shall
provide Seller and its Representatives with reasonable access to the books,
records, facilities and employees of Purchaser, and shall cooperate with Seller
and its Representatives, in connection with Seller’s review of the Closing
Capital Expenditures Adjustment.  The Closing
Capital Expenditures Adjustment calculated by Purchaser shall be conclusive and
binding on the Parties unless Seller, within thirty (30) days after its receipt
of the Closing Capital Expenditures Adjustment, gives Purchaser a written
notice of objection setting forth in reasonable detail the amount in dispute
and the basis for such dispute (a “Closing Capital Expenditures Objection
Notice”); provided, that Seller shall not be required to give
details regarding the amount or basis of any dispute if Purchaser shall have
failed to provide Seller the access and cooperation required by this Section.  If Seller delivers a Closing Capital
Expenditures Objection Notice, the Parties shall attempt in good faith to
resolve such dispute through negotiation, and any agreement reached shall be
conclusive and binding on the Parties. 
If the Parties are unable, despite good faith negotiations, to resolve
the disputes described in the Closing Capital Expenditures Objection Notice
within thirty (30) days after delivery of the Closing Capital Expenditures
Objection Notice, then the Parties shall promptly submit any such unresolved
dispute to the Independent Accounting Firm. 
The Parties shall cooperate fully with the Independent Accounting Firm,
including providing all work papers and back-up materials relating to the unresolved
disputes requested by the Independent Accounting Firm to the extent available
to the Parties and their respective Representatives.  The determination of the Independent Accounting Firm shall be set
forth in a written notice delivered to Purchaser and Seller within thirty (30)
days after submission of the disputes to the Independent Accounting Firm and
shall be conclusive and binding on the Parties.  The fees and expenses of the Independent Accounting Firm shall be
shared equally by Seller and Purchaser. 
The Closing Capital Expenditures and the Closing Capital Expenditures
Adjustment shall be revised to reflect the resolution of the disputes resolved
in accordance with this Section 2.5(f) (the “Final Closing Capital
Expenditures” and the “Final Closing Capital Expenditures Adjustment”,
respectively).  After the Final Closing
Capital Expenditures is determined in accordance with this Section 2.5(f),
(x) Purchaser shall pay to Seller in accordance with Section 2.5(b)(iv)
any amount by which the Final Closing Capital Expenditures Adjustment exceeds
the Initial Capital Expenditures Adjustment and (y) Seller shall pay to
Purchaser in accordance with Section 2.5(b)(iv) any amount by which the
Final Capital Expenditures Adjustment is less than the Initial Capital
Expenditures Adjustment.

 

2.6                                 Allocation of Purchase Price.  Promptly after the date hereof, but in any
event within five (5) Business Days after the date hereof, Purchaser shall
engage a valuation or appraisal firm and shall instruct it to deliver to
Purchaser and Seller within twenty (20) days after

 

15

 

engagement a statement of the value of the Real
Property, Real Property Leases, and any motor vehicles for which a value must
be stated in the applicable transfer documents or related filings to be made on
or about the Closing Date.  By the later
of: (i) February 1, 2004, (ii) 30 Business Days after the calculation of
the Working Capital Adjustment becomes conclusive and binding on the Parties in
accordance with Section 2.5(d) or (iii) 30 Business Days after the
calculation of the Final Closing Capital Expenditures Adjustment becomes
conclusive and binding on the Parties in accordance with Section 2.5(f),
Purchaser shall deliver to Seller a statement (the “Final Allocation
Statement”), such Final Allocation Statement to be subject to Seller’s
consent, which consent shall not be unreasonably withheld allocating the
Purchase Price, in accordance with Section 1060 of the Code and (with
respect to the Real Property, Real Property Leases and motor vehicles described
therein) in conformity with the statement of the valuation or appraisal firm
described above, among: (a) the Purchased Assets, (b) the
non-competition covenant contained in Section 8.3 of this Agreement and
(c) the Assumed Liabilities required to be transferred pursuant to
Section 6.3(e).  If the Parties are
unable, despite good faith negotiations, to agree on such allocation within
twenty (20) days after delivery of the Final Allocation Statement, then the
Independent Accounting Firm will be retained to determine such allocation (the
fees and expenses of which shall be shared equally by Purchaser and Seller) and
shall be instructed to provide its determination to Purchaser and Seller, which
determination shall be final and binding upon Purchaser and Seller.  The Parties agree that such allocation
pursuant to the Final Allocation Statement shall be used in filing IRS Form
8594, Asset Acquisition Statement under Section 1060 of the Code (“Form
8594”), and all Tax Returns (except to the extent such filings are required
to be made by Seller prior to receipt of the Final Allocation Statement, in
which case the Parties shall agree on the appropriate allocation for such
filings).  Subject to the requirements
of applicable Tax Laws or prior Tax elections, neither Seller nor Purchaser
will take any position inconsistent with such allocations in any Tax Return or
in any examination of any Tax Return, in any refund claim or in any Tax
litigation.  For avoidance of doubt, Seller shall have no
liability for inconsistent Tax Returns or other filings made prior to Seller’s
receipt of the Final Allocation Statement if made in a manner consistent with
the procedures provided above if after receipt of the Final Allocation
Statement Seller takes such steps as are reasonably available under applicable
Law to amend such inconsistent Tax Returns to be consistent with the Final
Allocation Statement.

 

2.7                                 Closing.  The
consummation of the purchase and sale of the Purchased Assets in accordance
with this Agreement (the “Closing”) shall take place at 10:00 a.m.,
local time, at the offices of Skadden, Arps, Slate, Meagher & Flom LLP,
Four Embarcadero Center, San Francisco, California 94111, on the second
Business Day after all of the conditions precedent to Closing hereunder shall
have been satisfied or waived, or at such other time and place as the Parties
shall agree in writing.  Unless the
parties otherwise agree in writing, the Closing with respect to the Real
Property shall be conducted through a customary escrow arrangement with the
Title Company.  The date of the Closing
is referred to as the “Closing Date.” 
The Parties shall deliver at the Closing such documents, certificates of
officers and other instruments as are set forth in Article VI hereof and
as may reasonably be required to effect the transfer by Seller of the Purchased
Assets pursuant to and as contemplated by this Agreement and to consummate the
Acquisition.  All events occurring at
the Closing shall be deemed to occur simultaneously (with the concurrent
delivery of the documents required to be delivered pursuant to Article VI,
delivery of the Title Policies and payment of the Purchase Price).

 

16

 

2.8                                 Assignment of Contracts.  Seller shall use its best efforts (subject to the limitations
below) to obtain the written consent of any third party required in connection
with the transfer of any Assigned Contract to Purchaser on or before the
Closing Date (including, for the avoidance of doubt, leaving in place any
guarantees requested by any such third party as set forth under
Section 5.11). Notwithstanding anything in this Agreement to the contrary,
to the extent that any Assigned Contract is not assignable without the consent
of another party whose consent has not been obtained, this Agreement shall not
constitute an assignment or attempted assignment of such Assigned Contract if
the assignment or attempted assignment would constitute a breach thereof or
materially detract from the rights transferred to Purchaser.  If such consent is not obtained, then (A)
Seller shall use its best efforts to enter into any arrangement requested by
Purchaser that is designed to give Purchaser the full benefit of such Assigned
Contract accruing on or after the Closing and that does not violate any
applicable law or presently existing agreement to which Seller is a party, and
(B) Purchaser shall use its best efforts to cooperate with Seller to consummate
such arrangement.  Notwithstanding anything
to the contrary in this Section 2.8, (i) Seller shall not be required to
make out-of-pocket payments to third parties (excluding payments to Seller’s or
Parent’s employees or other internal costs of Seller or Parent) in excess of *
in connection with its obligations under this Section 2.8 and (ii) neither
of Purchaser and Kerr shall be required to make any payment to any third party
in connection with its obligations under this Section 2.8.  Seller shall provide Purchaser with a
reasonable opportunity to participate in any discussions or negotiations,
written or oral, with each lessor under each Lease in connection with obtaining
consent thereunder.

 

2.9                                 Natural Hazard Disclosure Statement.  Promptly following execution of this
Agreement, Seller shall deliver to Purchaser a Natural Hazard Disclosure
Statement executed by Seller as and to the extent prescribed by California Law,
in the form attached as Exhibit B (the “NHDS”), applicable
to the Real Property.  Within seven (7)
Business Days after Purchaser’s receipt of the NHDS, Purchaser shall execute
and deliver to Seller one counterpart original of the NHDS.  Purchaser’s signature on the NHDS shall,
among other things, serve to acknowledge Purchaser’s receipt from Seller of the
NHDS and Purchaser’s understanding and acceptance thereof.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

 

As an
inducement to Kerr and Purchaser to enter into this Agreement and to consummate
the Acquisition, Seller represents and warrants to Kerr and Purchaser as
follows:

 

3.1                                 Organization and Qualification.  Seller is a corporation duly organized,
validly existing and in good standing under the Laws of the State of California
and has all requisite corporate power and authority to own, lease and operate
its assets and properties and to carry on the Business as it is now being
conducted.  Seller is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction where
the character of the assets and properties owned, leased or operated by it or
the nature of the Business makes such qualification or licensing necessary,
except for failures to be so qualified or licensed and in good standing that do
not have a Material Adverse Effect. 
Except as set forth on Schedule 3.1, Seller has no
Subsidiaries.

 

*  Confidential treatment has been requested
for certain portions of this document pursuant to an application for
confidential treatment sent to the SEC. 
Such portions are omitted from this filing and filed separately with the
SEC.

 

17

 

3.2                                 Authority Relative to this Agreement.  Seller has all necessary corporate power and
authority to execute and deliver this Agreement and the other Transaction
Documents to which it is a party, to perform its obligations hereunder and to
consummate the Acquisition.  The
execution and delivery of this Agreement and such other Transaction Documents
by Seller and the consummation by Seller of the Acquisition have been duly and
validly authorized by all necessary corporate action on the part of Seller, and
no other corporate proceedings on the part of Seller are necessary to authorize
this Agreement or to consummate the Acquisition.  This Agreement and such other Transaction Documents have been or
will be duly executed and delivered by Seller and, assuming the due authorization,
execution and delivery by Purchaser, each such agreement constitutes a legal,
valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, subject to the effect of any applicable bankruptcy,
moratorium, insolvency, fraudulent conveyance, reorganization or other similar
Law affecting the enforceability of creditors’ rights generally and to the
effect of general principles of equity which may limit the availability of
remedies (whether in a proceeding at law or in equity).

 

3.3                                 No Conflict. 
Except as set forth on Schedule 3.3, the execution and
delivery of this Agreement by Seller do not, and the performance by Seller of
its obligations hereunder and the consummation of the Acquisition will
not:  (a) conflict with or violate
any provision of the articles of incorporation or by-laws of Seller;
(b) assuming that all filings and notifications described in
Section 3.4 have been made, conflict with or violate any Law or order
applicable to Seller or by which any of the Purchased Assets or Seller is bound
or affected; or (c) result in any material breach of or constitute a
material default under, or require notice or consent under, any mortgage,
indenture, deed of trust, lease, contract, agreement, license or other instrument
to which Seller is a party or by which any of the Purchased Assets is bound or
affected, or result in the creation of a material Lien on any of the Purchased
Assets, except in the case of clauses (b) and (c), for any conflict, violation,
breach or default that would not reasonably be expected to have a Material
Adverse Effect.

 

3.4                                 Required Filings and Consents.  The execution and delivery of this Agreement
by Seller do not, and the performance by Seller of its obligations hereunder
and the consummation of the Acquisition will not, require any consent,
approval, authorization or permit of, or filing by Seller with or notification
by Seller to, any Governmental Authority, except for:  (a) the consents, approvals, authorizations, declarations or
rulings set forth on Schedule 3.4; (b) the filing of a
Notification and Report Form pursuant to the HSR Act and the expiration or
earlier termination of the applicable waiting period thereunder with respect to
the Acquisition; and (c) such consents, approvals, authorizations, permits
and filings the failure of which to obtain would not reasonably be expected to
have a Material Adverse Effect.

 

3.5                                 Financial Statements.  Set forth on Schedule 3.5 are
true and complete copies of (a) Seller’s balance sheets at November 30,
2001 and 2002, and its income statements and statements of cash flows for the
three (3) years ended November 30, 2002, together with the notes thereto
and the report thereon of Ernst & Young LLP (the “Audited Financials”),
and (b) Seller’s unaudited balance sheet at May 31, 2003 and the
related unaudited consolidated income statements and a statement of capital
expenditures for the six month period ended at such date (the “Interim
Financials”) and (c) the pro forma presentation of Seller’s revenues for
(i) the year ended November 30, 2002, and (ii) the six months ended
May 31, 2003, which pro forma presentations are based on the Audited
Financials or the Interim Financials, as applicable, and

 

18

 

have been adjusted solely to reflect the pricing
referred to in subclauses (x) and (y) below (the “Pro Forma Revenues”).  The Audited Financials and, subject to
normal and recurring quarter-end, year-end and audit adjustments, the Interim
Financials have been prepared in accordance with GAAP, applied on a consistent
basis throughout the periods covered (except as may be indicated in the notes
to the Audited Financials and except for the absence of notes to the Interim
Financials), and present fairly the financial position of Seller as of the
applicable date and Seller’s results of operations and cash flows for the
periods then ended.  Parent and Seller
agree that the Pro Forma Revenues represent in all material respects the revenues
of Seller for the periods set forth therein as if sales by Seller to Parent (x)
during the year ended November 30, 2002 had occurred at prices set forth
on Schedule 3.5 hereto and (y) during the six months ended
May 31, 2003 had occurred at prices set forth on Schedules 3.1(a) and
3.1(b) to the Supply Agreement.  Parent
and Seller agree that Seller’s aggregate gross margin on sales to Parent and
the other Persons identified on Schedule 1.1(a) for the six months ended
May 31, 2003 would not have been materially less than the aggregate gross
margin set forth on Schedule 3.5 if the pricing on Schedules 3.1(a) and
3.1(b) to the Supply Agreement had been in effect during such period and such
aggregate gross margins had otherwise been calculated in accordance with the
practices, procedures and methods used by Seller in preparing the Interim
Financials.  Parent and Seller
acknowledge that Kerr and Purchaser’s acceptance of the prices set forth on
Schedules 3.1(a) and 3.1(b) to the Supply Agreements is made solely in reliance
on this representation.

 

3.6                                 Absence of Undisclosed Liabilities.  As of the date hereof, Seller does not have
any liabilities (absolute, contingent, accrued or otherwise) in respect of the
Business other than: 
(a) liabilities reflected in the balance sheet of Seller at
May 31, 2003 included in the Interim Financials (the “Latest Balance
Sheet”); (b) liabilities incurred since the date of the Latest Balance
Sheet (the “Latest Balance Sheet Date”) in the ordinary course of
business; (c) obligations of continued performance under contracts and
other commitments and arrangements entered into in the ordinary course of the
Business to the extent permitted under Section 5.1; (d) the
liabilities described on Schedule 3.6; and (e) liabilities
under this Agreement.

 

3.7                                 Absence of Certain Changes or Events.  From the Latest Balance Sheet Date to the
date hereof, except as contemplated by this Agreement or disclosed on Schedule 3.7,
Seller has conducted the Business in the ordinary course of business and:

 

(a)                                  there
has not been any material damage to or destruction or loss of any asset,
property, right or interest of Seller used in the Business, whether or not
covered by insurance, that has had or would reasonably be expected to have a
Material Adverse Effect;

 

(b)                                 Seller
has not sold or transferred any material amount of its assets, properties,
rights or interests used in the Business, other than sales of inventory and
disposal of obsolete, damaged or defective inventory or other assets in the
ordinary course of business;

 

(c)                                  Seller
has not increased the salary, bonus or other compensation payable to any
officer or employee of Seller other than in the ordinary course of business
consistent with past practice;

 

(d)                                 Seller
has not entered into, modified or terminated any contract or transaction
involving a total remaining commitment of at least $250,000  other than in the

 

19

 

ordinary course of business, or received written
notice of termination of any material contract or transaction;

 

(e)                                  Seller
has not entered into any agreement to take any of the actions set forth in
subsections (b) through (d) of this Section 3.7; and

 

(f)                                    Seller
has not taken or failed to take any other action which action or failure would
violate Section 5.1 if such action or failure were to occur after the date
hereof.

 

3.8                                 Sufficiency and Title to Assets.  Except as set forth on Schedule 3.8:

 

(a)                                  No
proceeding is pending or, to the Knowledge of Seller, threatened for the taking
or condemnation of all or any portion of the Real Property.  The Real Property is all of the real
property owned by Seller.  Seller has not
entered into any agreements giving any Person any right to lease, sublease or
otherwise occupy any portion of the Real Property.  To the Knowledge of Seller, true and complete copies of all
surveys of the Real Property in Seller’s possession have heretofore been
furnished to Purchaser.  There are no
ongoing proceedings (judicial or, to the Knowledge of Seller, legislative),
claims or disputes of which Seller has notice affecting any Real Property that
might curtail or interfere with the use of such property.  To the Knowledge of Seller, each Real
Property is in material compliance with all Laws, including (i) the Americans
with Disabilities Act, 42 U.S.C. § 12102, et seq., together with all
rules, regulations and official interpretations promulgated pursuant thereto,
and (ii) all Laws with respect to zoning, building, fire, life safety,
health codes and sanitation.  Seller has
not, since June 1, 2001, received any notices of existing violations of
any Laws applicable to any Real Property. 
Since January 1, 2001, Seller has not received any notice of, or
other writing referring to, any requirements or recommendations by any
insurance company that has issued a policy covering any part of the Real
Property or by any board of fire underwriters or other body exercising similar
functions, requiring or recommending any repairs or work to be done on any part
of the Real Property, which repair or work has not been completed.  To the Knowledge of Seller, Seller has
obtained all appropriate certificates of occupancy required to use and operate
the Real Property located in the State of California in the manner in which
such Real Property is currently being used and operated.  True and complete copies of all such
certificates have heretofore been furnished to Purchaser.

 

(b)                                 The
Real Property Leases are the only leasehold estates under which Seller is a
lessee (or sublessee) of any real property or interest therein.  To the Knowledge of Seller, no proceeding is
pending (and Seller has not received notice of any pending proceeding) and, to
the Knowledge of Seller, no proceeding is threatened for the taking or
condemnation of all or any portion of the property demised under the Real Property
Leases.  A true and complete copy of
each Real Property Lease has heretofore been delivered to Purchaser.  Each Real Property Lease is valid, binding
and enforceable against Seller and, to the Knowledge of Seller (without
inquiry), against the landlord thereunder in accordance with its terms and is
in full force and effect with respect to Seller and, to the Knowledge of Seller
(without inquiry) the landlord thereunder. 
Seller has not encumbered the leasehold estate created by each Real
Property Lease with any leasehold mortgages or any other Liens.  Seller has not received notice of any
existing defaults by Seller under any of the Real Property Leases and, to the
Knowledge of Seller, there are no existing defaults by Seller under any of the
Real Property Leases.  To the Knowledge
of

 

20

 

Seller, no event has occurred that (whether with or
without notice, lapse of time or the happening or occurrence of any other
event) would constitute a default under any Real Property Lease.  To the Knowledge of Seller, Seller has
obtained all appropriate certificates of occupancy required to use and operate
each Real Property Lease in the manner in which such Real Property Lease is
currently being used and operated in California to the extent that Seller is
obligated to obtain such certificate of occupancy pursuant to applicable Laws
and the terms of the Real Property Leases. 
True and complete copies of all such certificates have heretofore been
furnished to Purchaser.

 

(c)                                  The
Real Property, the premises demised under the Real Property Leases, the other
assets comprising the Purchased Assets and the Affiliate Marks are, taken
together, all of the assets used, held for use or planned to be used in
connection with products currently under active development, in each case, in
the Business, and are adequate and sufficient for the operation of the Business
as currently conducted.

 

(d)                                 To
the Knowledge of Seller, except as disclosed in the engineering reports
previously made available to Purchaser and listed on Schedule 3.8,
each of the buildings, improvements, and equipment owned, leased or used by
Seller are structurally sound with no known defects and are in good operating
condition and repair and are adequate for the uses to which they are being
put.  Seller is not in possession of any
engineering reports dated June 1, 1993 or later regarding the structural
sufficiency of the buildings, improvements, and/or equipment owned, leased or
used by Seller except as set forth in Schedule 3.8.  To the Knowledge of Seller, except as
disclosed in the engineering reports previously made available to Purchaser and
listed on Schedule 3.8, none of such buildings, improvements, or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs which are not material in nature or cost.  The roof of each such structure is in good
repair and condition.

 

(e)                                  Seller
has good and valid title to the Tangible Personal Property, free and clear of
all Liens other than Permitted Liens.

 

3.9                                 Intellectual Property.

 

(a)                                  Schedule 3.9(a)
is a complete list of the Listed Intellectual Property that is the subject of
any application filed with, or any registration issued by, any government
agency (collectively, “Registered Intellectual Property Rights”).  All Registered Intellectual Property Rights
and the Affiliate Marks are, to the Knowledge of Seller, enforceable, and all
material fees, payments and filings due in respect of such Registered
Intellectual Property Rights and the Affiliate Marks as of the date hereof have
been made.  Each material item of
Intellectual Property is: 
(i) owned by Seller, free and clear of all Liens, restrictions or
encumbrances on Seller’s right to transfer to Purchaser the Listed Intellectual
Property and Other Intellectual Property (or in the case of the Affiliate
Marks, owned by an Affiliate of Seller), or (ii) rightfully used by Seller
pursuant to a valid license, sublicense, consent or other similar agreement
identified as such in Schedule 3.9(a); and the Intellectual
Property (together with any intellectual property included in the Excluded
Assets) constitutes all of the intellectual property that is necessary to
conduct the Business as currently conducted and in connection with products currently
under active development.

 

21

 

(b)                                 Each
material item of Intellectual Property transferred to Purchaser pursuant to the
Acquisition shall be owned, available for use or enforceable, as the case may be,
by Purchaser immediately following the Closing on substantially identical terms
and conditions as it was owned by, available to or enforceable by, as the case
may be, Seller immediately prior to the Closing.

 

(c)                                  The
consummation of the Acquisition will not result in Kerr or Purchaser being
bound by any non-compete or other restriction on the operation of the Business
that was previously binding on Seller or the granting by Kerr or Purchaser of
any rights or licenses to any intellectual property rights of Kerr or Purchaser
to a third party (including a covenant not to sue) that was previously binding
on Seller.

 

(d)                                 Except
as disclosed on Schedule 3.9(d), Seller is not aware of any facts
which would lead it to reasonably believe that the operation of the Business as
currently conducted infringes or will infringe on any intellectual property
rights of any other Person.

 

(e)                                  Except
as disclosed on Schedule 3.9(e), no claims have been asserted nor,
to the Knowledge of Seller, are threatened by any Person against Seller
that:  (i) challenge the validity,
enforceability, registrability or ownership by Seller of any of the
Intellectual Property or (ii) claim that the operation of the Business as
currently conducted infringes or will infringe any intellectual property rights
of any other Person.  To the Knowledge
of Seller, no third party is engaged in unauthorized use, infringement or
misappropriation of any Intellectual Property.

 

(f)                                    There
are no settlements, forbearances to sue, consents, judgments, or orders or
similar obligations (other than license agreements in the ordinary course of
business) which (i) restrict Seller’s rights to use any Intellectual
Property; (ii) restrict Seller’s Business in order to accommodate a third
party’s intellectual property rights; or (iii) permit third parties to use
any intellectual property owned by Seller.

 

(g)                                 Schedule 3.9(g)
lists all Computer Software owned or licensed by, or otherwise used in the
Business, other than third party software applications that are generally available
and have an individual acquisition cost of $5,000 or less, and identifies
whether each of the foregoing items of Computer Software are owned, licensed or
otherwise used, as the case may be.

 

(h)                                 Schedule 3.9(h)
lists all domain names that are the subject of any application filed by Seller
with, or any registration issued to Seller by, a recognized registration
authority.

 

3.10                           Contracts.

 

(a)                                  Schedule 3.10
sets forth a list of the following contracts, agreements and instruments
pertaining to the Business to which Seller is a party or is bound as of the
date hereof (collectively, the “Material Contracts”):

 

(i)                                     any
contract involving more than $100,000 over the life of the contract;

 

22

 

(ii)                                  any
contract that expires more than one (1) year after the date of this Agreement
or that may be renewed at the option of any Person other than Seller so as to
expire more than one (1) year after the date of this Agreement;

 

(iii)                               any
trust indenture, mortgage, promissory note, loan agreement or other contract
for borrowed money (other than trade payables incurred in the ordinary course
of business not exceeding $100,000 individually or $200,000 in the aggregate);

 

(iv)                              any
contract for capital expenditures in excess of $200,000  in the aggregate except as set forth on Schedule 5.1(m);

 

(v)                                 any
contract limiting the freedom of Seller to engage in any line of business or to
compete with any other Person, or any confidentiality, secrecy or
non-disclosure contract or any contract that may be terminable as a result of
Seller’s status as a competitor of any party to such contract;

 

(vi)                              any
agreement of guarantee, support, indemnification, assumption or endorsement of,
or any similar commitment with respect to, the liabilities of any other Person
other than customer agreements made in the ordinary course of the Business (“Guarantee
Obligations”);

 

(vii)                           any
employment contract, arrangement or policy (including any collective bargaining
contract or union agreement) which may not be immediately terminated without
notification or penalty (including any augmentation or acceleration of
benefits);

 

(viii)                        any
contract providing for a joint venture, partnership or similar legal
relationship with any other Person;

 

(ix)                                any
contract granting to any Person, on a conditional basis or otherwise, any
ownership interest in, or license to manufacture or prepare, any product
developed, manufactured or sold by the Business (each, a “Product”)
utilizing any proprietary recipe or formulation;

 

(x)                                   any
sales agency, distribution or similar agreements with respect to Products or
for the distribution by Seller of products of another party involving
consideration in excess of $100,000;

 

(xi)                                any
agreement providing for a rebate, discount, bonus or commission in excess of
$100,000 with respect to the sale of any Product;

 

(xii)                             any
agreement requiring Seller to advance or loan any amount in excess of $100,000
to or on behalf of any of its directors, employees, shareholders, Affiliates or
Associates (or their respective Affiliates or Associates);

 

(xiii)                          any
agreement providing for the acquisition after January 1, 2001 by Seller
(or any predecessor in interest) of any real property, operating business or
the shares or other equity interests of any Person for consideration in excess
of $100,000;

 

23

 

(xiv)                         any
employment, severance, consulting or other agreement of any nature with any
current or former shareholder, director, officer or any Affiliate thereof involving
consideration in excess of $100,000 per year individually or $100,000 per year
in the aggregate;

 

(xv)                            any
agreement restricting the ability of Seller to incur Indebtedness;

 

(xvi)                         any
agreement relating to Indebtedness, interest rate swap or hedging agreements,
sale and leaseback transactions and other similar financing transactions;

 

(xvii)                      any contract
existing between Seller and any Governmental Authority;

 

(xviii)                   any agreement
providing for the provision by Seller to any third party of any confidential
information or restricting Seller from providing such information to third
parties;

 

(xix)                           any
agreement restricting Seller’s ownership, operation, sale, transfer, pledge or
other disposition of any of the Purchased Assets;

 

(xx)                              any
Real Property Lease;

 

(xxi)                           any
agreement providing for production by Seller of any Product on an exclusive or
requirements basis;

 

(xxii)                        any
agreement with a consultant or subcontractor involving payment of consideration
over the term of such agreement in excess of $100,000; or

 

(xxiii)                     any contract,
agreement or instrument within the Knowledge of Seller which is otherwise
material to the conduct or operation of the Business.

 

(b)                                 Seller
has performed in all material respects the obligations required to be performed
by it under the Material Contracts, and, to the Knowledge of Seller, each of
the Material Contracts is valid and binding and in full force and effect.  True, correct and complete copies of all
Material Contracts have been made available to Purchaser.  Seller has not made or received any claim of
any material default under any Material Contract, and as of the date hereof, to
the Knowledge of Seller, there is no material breach or anticipated breach by
any other party to any Material Contract.

 

3.11                           Permits.  The
Listed Permits are all material permits, licenses, approvals, franchises,
certificates, consents and other authorizations of any Governmental Authority
that are required in order for Seller to conduct the Business as it is now
being conducted.  Each of the Listed
Permits is in full force and effect, except for immaterial failures.  To the Knowledge of Seller, Seller is not in
conflict in any material respect with or in material default or violation of
any Listed Permit.

 

3.12                           Compliance with Laws.  Seller is not in material conflict with or
in material default or violation of any Law applicable to the Purchased Assets
or the Business.

 

24

 

3.13                           Litigation.  Except
as set forth on Schedule 3.13, as of the date hereof, there are no
material claims, actions, suits, investigations, arbitrations, inquiries or
proceedings pending or, to the Knowledge of Seller, threatened, against Seller
before any Governmental Authority.

 

3.14                           Books and Records.  All books of account and other financial
books and records of Seller directly relating to the Business are true, correct
and complete in all material respects.

 

3.15                           Employment Matters.

 

(a)                                  Schedule 3.15
sets forth a list of all Persons who were employed by Seller, on a full time or
a part time basis, as of February 1, 2003, including all such Persons who
at such date were on military leave, disability leave or any other leave
approved by the Company or mandated by applicable Law and a description of all
compensation and benefits provided by Seller to each such Person, which list is
true and complete in all material respects. 
Except as otherwise required by Law or as set forth on Schedule 3.15,
the employment of all such employees is terminable by Seller at will.

 

(b)                                 Except
as set forth on Schedule 3.15: 
(i) Seller is not a party to any contract with any labor
organization or other bargaining representative of its employees;
(ii) there is no unfair labor practice charge or complaint pending or, to
the Knowledge of Seller, threatened against Seller; (iii) Seller has not
experienced any labor strike, slowdown, work stoppage or similar labor
controversy within the past three (3) years; (iv) Seller has paid in full
to all of its employees all compensation and benefits due and payable to such
employees; and (v) Seller is in material compliance with all applicable
Laws respecting employment and employment practices, terms and conditions of
employment, wages and hours and occupational safety and health and Seller has not
received written notice of any investigation, charge or complaint against
Seller relating to the Business pending before the Equal Employment Opportunity
Commission or any other federal, state or local government agency or court or
other tribunal regarding an unlawful employment practice.

 

(c)                                  Since
January 1, 2003, (i) Seller has not effectuated a “plant closing” (as
defined in the WARN Act) affecting any site of employment or one or more
facilities or operating units within any site of employment or facility;
(ii) there has not occurred a “mass layoff” (as defined in the WARN Act)
affecting any site of employment or facility of the Seller; and
(iii) Seller has not engaged in layoffs or employment terminations
sufficient in number to trigger application of the WARN Act or any similar
state, local or foreign law or regulation. 
Except as set forth on Schedule 3.15(c), no employee of
Seller has suffered an “employment loss” (as defined in the WARN Act) during
the six-month period prior to the date of this Agreement.

 

3.16                           Employee Benefits.  Schedule 3.16 sets forth a
complete and accurate list as of the date hereof of each employment,
consulting, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, stock appreciation right or other equity-based
incentive, severance or termination pay, change in control, hospitalization or
other medical, life, disability or other insurance, supplemental unemployment
benefits, savings, profit-sharing, pension or retirement plan, program, policy,
agreement or arrangement, and each other employee or fringe benefit plan,
program, policy agreement or arrangement, sponsored, maintained or

 

25

 

contributed to or required to be contributed to by
Seller for the benefit of Seller’s employees, whether formal or informal and
whether legally binding or not (each, a “Plan;” collectively, the “Plans”).  No event has occurred in connection with any
Plan that has, will or may result in any fine, penalty, assessment or other
liability for which any transferee of assets of Seller may be responsible,
whether by operation of Law or by contract. 
The transactions contemplated by this Agreement, will not, either alone
or in combination with any other event or events, cause Kerr or Purchaser to
incur any liabilities with respect to any Plan, including (a) any
liability under Section 4980B of the Code or (b) any liability with
respect to any employee of Seller that was incurred or arose on or prior to the
Closing Date.

 

3.17                           No Finder.  Seller
has not incurred any liability to any broker, finder, investment banker or any
other Person for any brokerage, finder’s or other fee or commission in
connection with this Agreement or the Acquisition.

 

3.18                           Environmental Matters.

 

(a)           Except as set forth on
Schedule 3.18, (i) the Business is in material compliance with all
applicable Environmental Laws, which compliance includes, but is not limited
to, the possession by Seller and its Subsidiaries of all permits and other
governmental authorizations required under Environmental Laws for the Business,
and compliance with the terms and conditions thereof; (ii) neither Seller
nor any of its Subsidiaries has received any written or, to the Knowledge of
Seller, oral communication, whether from a Governmental Authority or any other
Person, that alleges that the Business is not in compliance with any
Environmental Laws, and, to the Knowledge of Seller, there are no circumstances
that would be reasonably expected to prevent or interfere with such compliance
in the future.  For purposes of this
Section 3.18, “Knowledge of Seller” includes the actual knowledge of each
plant manager and environmental manager for each facility or property in the
Business named in Schedule 3.18.

 

(b)                                 Except
as set forth on Schedule 3.18, there is no Environmental Claim pending or,
to the Knowledge of Seller, threatened against Seller and any of its
Subsidiaries relating to the Business or, to the Knowledge of Seller, against
any Person whose liability for any Environmental Claim relating to the Business
Seller or any of its Subsidiaries has retained or assumed either contractually
or by operation of law.

 

(c)                                  Except
as set forth on Schedule 3.18, to the Knowledge of Seller, there has been
no release, emission, discharge, presence or disposal of any Material of
Environmental Concern, and there are no actions, activities, circumstances,
conditions, events or incidents that present a material threat of release,
emission, discharge, presence or disposal of any Material of Environmental
Concern, that would reasonably be expected to form the basis of any material
Environmental Claim against Seller or any Subsidiary relating to the Business,
or, to the Knowledge of Seller, against any Person whose liability for any
Environmental Claim relating to the Business Seller or any of its Subsidiaries
has retained or assumed either contractually or by operation of law.

 

(d)                                 Except
as set forth on Schedule 3.18: 
(i) neither Seller nor any Subsidiary is the subject, either
directly or indirectly, of any Environmental Claim with respect to any on-site
or off-site locations where Seller or any Subsidiary has stored, disposed or
arranged for the disposal of Materials of Environmental Concern for, from or
with respect to the Business, (ii)

 

26

 

there are no underground
storage tanks located on property owned or controlled by Seller or any
Subsidiary for the Business, and, to the Knowledge of Seller, there are no
underground storage tanks located on property otherwise used for the Business,
(iii) there is no damaged asbestos contained in or forming part of any
building, building component, structure or office space owned, leased or
otherwise used for the Business, (iv) to the Knowledge of the Seller, there is
no other asbestos contained in or forming part of any building, building
component, structure or office space owned, leased or otherwise used for the
Business, and (v) to the Knowledge of Seller, no polychlorinated biphenyls
(PCBs) or PCB-containing items are used or stored at any property owned, used
or leased for the Business.

 

(e)           Except as set forth on
Schedule 3.18, Seller has provided to Purchaser all written assessments,
reports, data, results of investigations or audits and similar documents that are
in the possession of or reasonably available to Seller or any Subsidiary
regarding the environmental condition of the property owned, used or leased for
the Business, or the compliance (or noncompliance) by Seller or any Subsidiary
with any Environmental Laws relating to the Business.

 

(f)            Except as set forth in
Section 5.10 or on Schedule 3.18, Seller is not required by virtue of
the transactions set forth herein and contemplated hereby, or as a condition to
the effectiveness of any transactions contemplated hereby, (i) to perform a
site assessment for Materials of Environmental Concern, (ii) to remove or
remediate Materials of Environmental Concern, (iii) to give notice to or
receive approval from any governmental authority, or (iv) to record or deliver
to any person or entity any disclosure document or statement pertaining to
environmental matters.

 

(g)           With respect to the
matters disclosed in the reports listed in Schedule 3.18(g) hereto, there
is no individual item or series of related items that would reasonably be
expected to cause Losses greater than $200,000, or that, taken in the
aggregate, would reasonably be expected to have a Material Adverse Effect.

 

3.19         Taxes and Tax Returns.  Except as set forth on Schedule 3.19:

 

(a)           Seller has timely filed
or will have timely filed on its behalf (taking into account extensions to
file) those Tax Returns which are currently due or, if not yet due, will timely
file, or will have timely filed on its behalf (taking into account extensions
to file) all Tax Returns required to be filed by it or on its behalf for all
taxable periods ending on or before the Closing Date, and all such Tax Returns
are, or will be when filed, true, correct and complete in all material
respects;

 

(b)           Seller has paid, or had
paid on its behalf, to the appropriate Governmental Authority, or, if payment
is not yet due, will pay, or will have paid, to the appropriate Governmental
Authority, all Taxes due and payable for all taxable periods beginning on or
before the Closing Date;

 

(c)           except in the case of a
Lien for ad valorem property
taxes or income taxes not yet due and payable or otherwise disclosed on Schedule 3.19,
there is no unpaid Tax which constitutes a Lien upon any of the Purchased
Assets;

 

27

 

(d)           Seller is not a party
to any Tax allocation or Tax sharing agreement or has any liability or
obligation to any Person as a result of, or pursuant to, any such allocation or
agreement, except as set forth in the notes to the Audited Financials; and

 

(e)           Seller is not a Person
other than a “United States Person” within the meaning of the Code.

 

3.20         Customers and Suppliers.

 

(a)           Schedule 3.20
lists the ten customers of Seller who, during the period December 1, 2001
to November 30, 2002, purchased the largest amount of Products from
Seller, based on net sales.  Since
December 1, 2002, except as set forth on Schedule 3.20, there
has not been any material adverse change in the business relationship of Seller
with any such customer or customers. 
Except as set forth on Schedule 3.20, no such customer has
materially reduced its purchases since December 1, 2002, or, to the
Knowledge of Seller or to the actual knowledge of the salesperson responsible
for the account of such customer, has advised Seller that it is (i)
terminating, considering terminating, or planning to terminate its business
relationship with Seller, or (ii) considering reducing or planning to reduce
(other than oral statements made in the ordinary course of business in
connection with contract renewal negotiations) its future purchases from Seller
by 10% or more.

 

(b)           Since December 1,
2002, no Person who supplies resin to Seller has reduced the supply of resin
available to Seller or, to the Knowledge of Seller or to the actual knowledge
of the purchaser responsible for the account of such supplier, advised Seller
that it is (i) terminating or intends to terminate its business relationship
with Seller or (ii) reducing or intends to reduce the supply of resin available
to Seller by 10% or more.  Seller
currently maintains sufficient resin inventory to conduct the Business as it is
conducted.  Seller has access to
sufficient amounts of resin supply, purchasable at then prevailing market
prices, necessary to conduct the Business as it is conducted.

 

3.21         Inventory.  The inventory reflected in the Latest
Balance Sheet is good and merchantable material, of a quality and quantity
saleable in the ordinary course of Business consistent with Seller’s past
practice and was acquired by Seller in the ordinary course of business of the
Business consistent with Seller’s past practice and is carried on the books and
records of Seller in accordance with GAAP.

 

3.22         Insurance.  Set forth in Schedule 3.22 is a
complete and accurate list as of the date hereof of all insurance policies
carried by Seller (as a party, named insured or otherwise the beneficiary of
coverage).  All such insurance policies
are in full force and effect and shall remain in full force and effect through
the Closing Date.  Such policies are
sufficient for compliance with all requirements of Law and of all agreements to
which Seller is a party, are valid, outstanding and enforceable policies,
insure against risks of the kind customarily insured against and in amounts
customarily carried by companies similarly situated and by companies engaged in
similar businesses and owning similar properties.  Neither Seller nor, to the Knowledge of Seller, any other insured
party to any insurance policy, is in breach or default (including any breach or
default with respect to the payment of premiums or the giving of notices) and
no event has occurred that, with notice or lapse of time or both, would
constitute such a breach or default

 

28

 

or permit termination or
modification of any such policy.  The
Seller has not been denied coverage since January 1, 2000.  Seller does not currently owe any deficiency
amounts or Taxes for industrial insurance obligations arising under applicable
state law.

 

3.23         Affiliate Transactions.  Schedule 3.23 lists all
agreements and arrangements and contains a summary of all transactions since
January 1, 2000 and all currently proposed agreements, arrangements and
transactions related to the Business and that are between Seller, on the one
hand, and any current or former director, officer, shareholder or other
Affiliate or Associate of Seller, or any of their respective Affiliates or
Associates, or any entity in which any such Person has a direct or indirect
material interest, on the other hand. 
All Indebtedness that is related to the Business and that is owed by any
of the current or former officers, directors, shareholders or other Affiliate
or Associate of Seller, or any of their respective Affiliates or Associates,
are reflected in the Latest Balance Sheet.

 

3.24         Questionable Payments.  Neither Seller nor any employee, officer,
director, Affiliate or Associate of Seller or other Person acting on behalf of
Seller, has (a) used any corporate or company funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity;
(b) made any direct or indirect unlawful payments to government officials
or employees from corporate funds; (c) established or maintained any
unlawful or unrecorded fund of corporate monies or other assets; (d) made
any false or fictitious entries on the books or records of any of such
corporations; (e) made any bribe, payoff, kickback or other unlawful
payment; or (f) made any material favor or gift which is not, in good faith,
believed by Seller to be fully deductible by Seller or Seller’s consolidated
group for any income tax purposes and which was, in fact, so deducted.

 

3.25         Products Liability.  Except as set forth on Schedule 3.13,
there are no material claims presently pending or, to the Knowledge of Seller,
threatened against Seller that are (a) for products liability on account
of any express or implied warranty, law, regulation or other theory or
(b) for personal injury.

 

3.26         No Powers of Attorney.  Seller has not granted any general or
special powers of attorney or any other authorizations of third parties to act
as agents for Seller except for powers of attorney granted in connection with
Seller’s Taxes and Tax Returns.

 

3.27         Full
Disclosure.  No
representation or warranty by Seller in this Agreement or statement in any
Schedule contains any untrue statements of a material fact or omits to
state any material fact necessary, in order to make the statements made herein
or therein, in light of the circumstances under which they were made, not
misleading.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF KERR AND PURCHASER

 

As an inducement to
Seller to enter into this Agreement and to consummate the Acquisition, each of
Kerr and Purchaser jointly and severally represents and warrants to Seller as
follows:

 

29

 

4.1           Organization
and Qualification.  Kerr
is a corporation and Purchaser is a limited liability company, each duly
organized, validly existing and in good standing under the laws of the State of
Delaware.  Each of Kerr and Purchaser is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for failures to be so qualified or licensed and in good
standing that do not have a material adverse effect on the ability of Kerr and
Purchaser to consummate the transactions contemplated hereby.

 

4.2           Authority Relative to this Agreement.  Each of Kerr and Purchaser has all necessary
corporate or limited liability company power and authority to execute and
deliver this Agreement and the other Transaction Documents to which it is a
party, to perform its obligations hereunder and to consummate the
Acquisition.  The execution and delivery
of this Agreement and the other Transaction Documents to which it is a party by
each of Kerr and Purchaser and the consummation by Purchaser of the Acquisition
have been duly and validly authorized by all necessary corporate action on the
part of each of Kerr and Purchaser, and no other corporate proceedings on the
part of Kerr or Purchaser are necessary to authorize this Agreement or to
consummate the Acquisition.  This
Agreement and the other Transaction Documents to which it is a party have been
or will be duly executed and delivered by each of Kerr and Purchaser and,
assuming the due authorization, execution and delivery by Seller, each such
agreement constitutes a legal, valid and binding obligation of each of Kerr and
Purchaser, enforceable against each of Kerr and Purchaser in accordance with
its terms, subject to the effect of any applicable bankruptcy, moratorium,
insolvency, fraudulent conveyance, reorganization or other similar Law
affecting the enforceability of creditors’ rights generally and to the effect
of general principles of equity which may limit the availability of remedies
(whether in a proceeding at law or in equity).

 

4.3           No Conflict.  The execution and delivery of this Agreement
by each of Kerr and Purchaser do not, and the performance by each of Kerr and
Purchaser of its obligations hereunder and the consummation of the Acquisition
will not:  (a) conflict with or
violate any provision of the certificate of incorporation or by-laws of Kerr or
the certificate of formation or limited liability company operating agreement
of Purchaser; (b) to the knowledge of Kerr and Purchaser, assuming that
all filings and notifications described in Section 4.4 have been made,
conflict with or violate any Law or order applicable to Kerr or Purchaser or by
which Kerr or Purchaser or any of their assets or properties is bound or
affected; or (c) to the knowledge of Kerr and Purchaser, result in any
material breach of or constitute a material default under, or require notice or
consent under, any mortgage, indenture, deed of trust, lease, contract,
agreement, license or other instrument to which Kerr or Purchaser is a party or
by which Kerr’s or Purchaser’s assets or properties are bound, or result in the
creation of a material Lien on any asset or property of Kerr or Purchaser,
except in the case of clauses (b) and (c), for any conflict, violation, breach
or default that would not reasonably be expected to have a material adverse
effect on the ability of Kerr or Purchaser to consummate the transactions
contemplated hereby.

 

4.4           Required Filings and Consents.  The execution and delivery of this Agreement
by each of Kerr and Purchaser do not, and the performance by Kerr or Purchaser
of its obligations hereunder and the consummation of the Acquisition will not,
require any consent, approval, authorization or permit of, or filing by Kerr or
Purchaser with or notification by Kerr

 

30

 

or Purchaser to, any
Governmental Authority, except for: 
(a) the filing of a Notification and Report Form pursuant to the
HSR Act and the expiration or earlier termination of the applicable waiting
period thereunder with respect to the Acquisition and (b) such consents,
approvals, authorizations, permits and filings the failure of which to obtain
would not reasonably be expected to have a material adverse effect on the
ability of Kerr or Purchaser to consummate the transactions contemplated hereby.

 

4.5           No Finder.  Other than an aggregate fee of $1,687,500
payable to Fremont Partners, L.L.C. and Fremont Partners III, L.L.C., which fee
shall be the sole responsibility of Kerr and/or Purchaser, neither Kerr nor
Purchaser has agreed to pay to any broker, finder, investment banker or any
other Person a brokerage, finder’s or other fee or commission in connection
with this Agreement or the Acquisition.

 

4.6           No
Litigation. 
There is no claim, action, suit or proceeding pending or, to the
knowledge of Kerr and Purchaser, threatened, before any Governmental Authority
that prohibits or restricts, or seeks to prohibit or restrict, the consummation
of the Acquisition.

 

4.7           Commitment Letters. 
Kerr has provided to Seller a true and complete copy of the commitment
letter received by Kerr from Wells Fargo Bank.

 

ARTICLE V

ADDITIONAL COVENANTS

 

5.1           Conduct of Business.  From the date hereof through the Closing
Date, except as contemplated by this Agreement or described on Schedule 5.1,
Seller agrees to conduct Seller’s operations in the ordinary course, consistent
with past practice, and agrees to:

 

(a)           use its commercially
reasonable efforts to (i) preserve for the benefit of Purchaser the goodwill
and the existing relationships of Seller with its customers, suppliers and
others with whom Seller deals; (ii) retain the services of its key employees;
(iii) perform its obligations under the Material Contracts; (iv) maintain, keep
and preserve the Business and the Purchased Assets in the same condition as the
date hereof, except that in the case of any Purchased Assets constituting
Tangible Personal Property, ordinary wear and tear and casualty is permitted;
(v) preserve intact the Business and its organization; (vi) maintain books and
records in accordance with past practice; and (vii) maintain in effect the
insurance coverage provided under the policies set forth in Schedule 3.22;

 

(b)           not waive, release or
cancel any material claims against third parties or material debts owing to
Seller, other than customer billing reductions and write-downs made in the
ordinary course of business consistent with past practice and other than in
respect of claims or debts that would be Excluded Assets;

 

(c)           not (i) grant any
general increase in the compensation of officers or employees, except in
accordance with pre-existing contracts or consistent with past practice; (ii)
enter into any contract with any employee, officer, director, Affiliate or
Associate of Seller or any Affiliate or Associate of any such Person, provided,
however, that this shall not prevent Seller from hiring employees on an
at-will basis to fill an opening vacated by a departing or

 

31

 

transferring employee in
the ordinary course of business, provided that the compensation being
offered to the individual is consistent with other personnel in the same or a
similar position; (iii) enter into any collective bargaining agreement or
similar contract; (iv) enter into any agreement that requires Seller to pay any
severance or termination pay (or that requires that the Seller provide a
certain period of notice to an employee in advance of the effective date of
termination or pay in lieu of such advance notice) to any employee, director,
officer or consultant of Seller, provided that this shall not serve to
prohibit Seller from paying any severance or termination pay (or pay in lieu of
advance notice) which Seller was obligated to pay pursuant to any agreement,
policy or practice entered into prior to the execution of this Agreement, even
if the event triggering the actual obligation to pay such amounts occurs after
the execution of this Agreement; (v) adopt or materially amend any employee or
fringe benefit plans, agreements or arrangements, except as required pursuant
to applicable Law; or (vi) engage in any work force reduction or restructuring
resulting in employee layoffs triggering the notification requirements under
the Worker Adjustment and Retraining Notification Act or similar applicable
state or municipal statute or ordinance;

 

(d)           not make any change in
any accounting principle, method, estimate or practice, except for any such
change required by reason of a concurrent change in GAAP;

 

(e)           not (i) enter into any
contract, agreement, commitment or binding understanding or arrangement
requiring performance during or following a period in excess of one year or
outside of the ordinary course of business consistent with past practice; or
(ii) without prior consultation with Purchaser, renew, fail to renew, or permit
or not permit to be automatically renewed any material agreement, including any
material customer, supplier, distributor, licensing, employment or other
material contracts, to which Seller is a party (other than amendments or
terminations of agreements pursuant to or contemplated by this Agreement);

 

(f)            not (i) cancel,
materially modify or materially amend any Real Property Lease or Material
Contract; (ii) contract for or incur any expense in connection with opening any
additional Business facility; (iii) cancel any of the Listed Permits or allow
any Listed Permit to expire or not be renewed; (iv) revalue any of its material
assets or any material amount of its properties, other than in the ordinary
course of business consistent with past practice; or (v) sell or dispose of any
of the Purchased Assets (except for the sale of inventory and the disposition
of damaged or defective inventory, equipment or other material in the ordinary
course of business consistent with past practice), or permit the creation of
any Lien, except for Permitted Liens;

 

(g)           not enter into or amend
any agreements pursuant to which any other party is granted exclusive
marketing, manufacturing or other exclusive rights of any type or scope with
respect to any of its products or proprietary technology, other than exclusive
rights of Seller’s customers in molds, tooling and other design materials of
such customers;

 

(h)           not amend the
certificate of incorporation, bylaws or similar organizational documents of
Seller;

 

(i)            not merge or
consolidate with any other Person or acquire a material amount of assets or
equity or debt securities from any other Person, except for purchases of

 

32

 

supplies and capital
expenditures in the ordinary course of business consistent with past practice
or otherwise in accordance with Seller’s projections;

 

(j)            not commence a
lawsuit, claim, action, arbitration or other administrative or judicial
proceeding other than (i) for the routine collection of bills, (ii) in such
cases where Seller in good faith determines that failure to commence suit would
result in a material impairment of a valuable aspect of Seller’s business, provided
Seller consults with Purchaser prior to filing such suit, or (iii) for a breach
of this Agreement;

 

(k)           not (i) pay, discharge,
or satisfy any material claim, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than in the ordinary
course of business consistent with past practice; or (ii) fail to pay or
otherwise satisfy (except if being contested in good faith) any material
accounts payable, liabilities or obligations when due and payable;

 

(l)            not take or fail to
take any action that would cause any of the representations and warranties of
Seller contained in this Agreement to be untrue in any material respect as of
the Closing Date (disregarding for these purposes any materiality or Material
Adverse Effect qualifier contained therein);

 

(m)          not make any capital
expenditure exceeding $200,000 individually or in the aggregate other than
those set forth on Schedule 5.1(m) without the prior written
consent of Kerr;

 

(n)           not perform or take, or
fail to perform or take, any action that has or is reasonably likely to have a
Material Adverse Effect; or

 

(o)           not agree or commit to
do any of the foregoing provided in subsections (b) through (n).

 

Notwithstanding any of
the foregoing, nothing herein shall be construed to prohibit or restrict any
activities or transactions undertaken with respect to any of the Excluded
Assets, the Retained Liabilities, or the business of Seller other than the
Business, so long as, in each case, such activities or transactions will not
have a negative effect on the Purchased Assets or the Business.

 

5.2           Intentionally Omitted

 

5.3           Consents, Filings
and Authorizations; Efforts to Consummate.  As promptly as practicable after the date hereof, Purchaser and
Seller shall make all filings and submissions under such Laws as are applicable
to them or to their respective Affiliates, including the filing of a
Notification and Report Form pursuant to the HSR Act, and as may be required
for the consummation of the Acquisition in accordance with the terms of this
Agreement.  Purchaser and Seller shall
consult with each other prior to any such filing, and neither Seller nor
Purchaser shall make any such filing or submission to which the other of them
reasonably objects in writing.  All such
filings shall comply in form and content in all material respects with
applicable Laws.  Subject to the terms
and conditions herein, each of Seller and Purchaser, without payment or

 

33

 

further consideration,
shall use its commercially reasonable efforts to take or cause to be taken all
actions and to do or cause to be done all things necessary, proper or
advisable:  (a) to cause the
conditions to the obligations of the other Party to consummate the Acquisition
to be satisfied as soon as reasonably practicable (including, in the case of
Seller, the removal of all Liens on the Purchased Assets other than Permitted
Liens) and (b) under applicable Laws, permits and orders, to consummate
and make effective the Acquisition as soon as reasonably practicable, including
obtaining all consents required in connection with such Party’s consummation of
the Acquisition.  Seller and Parent (but
only to the extent that Parent shall make available its Representatives who are
substantially involved in the Business) shall provide Kerr and Purchaser with
reasonable assistance to obtain the debt financing needed by Purchaser for the
consummation of the transactions contemplated by this Agreement, subject to
reimbursement by Kerr and Purchaser for any reasonable documented out-of-pocket
expenses incurred by Seller or Parent in connection with the providing of such
assistance.  Such assistance shall
include, to the extent it is commercially reasonable for Seller and Parent to
do so, making appropriate Representative of Parent and Seller available to participate
in informational meetings, assisting with the preparation of an information
package in connection with such financing, including the syndication of any
loans to be funded in connection with the transactions contemplated by this
Agreement, cooperating with respect to matters relating to bank collateral to
take effect as of the Closing in connection with such financing (including the
pledge of the Purchased Assets by Purchaser and the obtaining of
authorizations, consents and approvals required under any Real Property Lease
in order to subject the leasehold interest represented thereby to Liens in
favor of any lenders providing such financing), using its commercially
reasonable efforts to obtain customary “comfort” letters and legal opinions and
executing and delivering such documents, certificates, agreements and other
writings as shall take effect as of the Closing and as are reasonably requested
in connection therewith.  Without
limiting the generality of the foregoing, Purchaser shall use its commercially
reasonable efforts to obtain such debt financing.  Nothing herein shall require any Party to take any action that
would reasonably be expected to have a material adverse effect on such Party.

 

5.4           Notices of Certain Events.  Prior to the Closing Date, each of Seller
and Purchaser shall promptly notify the other of:

 

(a)           any notice or other
communication from any Person alleging that the consent of such Person is or
may be required in connection with the Acquisition;

 

(b)           any material notice or
other material oral or written communication from any Governmental Authority in
connection with the Acquisition;

 

(c)           any change that has a
Material Adverse Effect, or could delay or impede the ability of either Seller
or Purchaser to perform its obligations under this Agreement and to consummate
the Acquisition;

 

(d)           the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
cause any representation or warranty contained in this Agreement to be untrue
or inaccurate in any material respect at or prior to the Closing Date; and

 

34

 

(e)           any material failure of
any Party to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied hereunder.

 

5.5           Public Announcements.  From and after the date of this Agreement
until the Closing Date, Kerr and Purchaser, on the one hand, and Seller, on the
other hand, agree not to make any public announcement or other disclosure
concerning this Agreement or the transactions contemplated herein without obtaining
the prior consent of the other Party as to form, content and timing (such
consent not to be unreasonably withheld); provided, however, that
the foregoing shall not restrict (a) any Party (or Parent) from making any
public announcement or disclosure as may be required by applicable Law
(including the rules of any stock exchange or other self-regulated body) on
advice of a nationally recognized securities law firm that such Party is
reasonably obliged to make public announcements or disclosure or (b) Seller
from informing its employees and agents about this Agreement and the
transactions contemplated hereby, provided that Kerr and Purchaser shall
be permitted reasonable opportunity to comment upon the initial proposed
communication to Seller’s employees and agents before release.

 

5.6           Access to Information;
Confidentiality.

 

(a)           From and after the date
of this Agreement until the Closing Date, upon reasonable notice and subject to
applicable Law relating to the exchange of information and to confidentiality
obligations of Seller entered into prior to the date hereof, Seller shall
afford to Purchaser’s Representatives access during normal business hours to
the employees of Seller and to such properties, books, computer systems,
records, contracts, commitments and other information of Seller relating to the
Business as Purchaser may reasonably request, but excluding books, computer
systems, records, contracts, commitments and information primarily related to
the sale of the Business, the Excluded Assets or the Retained Liabilities.  In the event that Purchaser’s due diligence
reveals any condition of the Real Property or the premises demised under the
Real Property Leases that in Purchaser’s judgment requires disclosure to any
Governmental Authority, Purchaser shall immediately notify Seller thereof.  In such event, Seller, and not Purchaser or
any Person acting on Purchaser’s behalf, shall make such disclosures to the
extent Seller reasonably deems appropriate. 
Notwithstanding the foregoing, Purchaser may disclose matters concerning
the Real Property to a Governmental Authority on written advice of a
nationally-recognized law firm that Purchaser is reasonably obliged to make
such disclosure if Purchaser gives Seller not less than ten (10) days prior
written notice of the proposed disclosure, together with a copy of such written
advice.

 

(b)           Purchaser acknowledges
that the information provided to Purchaser and its Representatives in
connection with the Acquisition and this Agreement is subject to, and Purchaser
shall, and shall cause its Representatives to, fully comply with the provisions
of, that certain Confidentiality Agreement, dated as of February 6, 2003,
between Purchaser and Seller (the “Confidentiality Agreement”), the
terms of which are incorporated herein by this reference.  Notwithstanding the foregoing, following the
Closing Date, any information with respect to the Business that is included in
the Purchased Assets shall not be subject to the Confidentiality Agreement.

 

35

 

(c)           From and after the
Closing Date, Parent, Seller and any Representatives of Parent or Seller shall
maintain in confidence and not use or disclose to any third party any
confidential or proprietary information regarding the business operations,
product formulations, ingredients or processes, technical know-how or data,
specifications, finances or other business matters of Seller which information
constitutes any part of the Purchased Assets; provided, that nothing in
this Section 5.6(d) shall apply to information that (i) is in the
public domain, (ii) is independently developed by such Person after the
Closing, or (iii) is disclosed to the recipient by a third party which has
no duty of confidentiality to Purchaser or its Affiliates.  Upon discovery by Parent, Seller or any of
their respective Representatives that such Person is in possession of any such
confidential or proprietary information, such Person shall promptly return all
such information to Purchaser, without retaining any copies thereof except for
copies that such Person is required to retain by applicable Law.  Parent and Seller shall be responsible for
ensuring the compliance of their respective Representatives with the obligations
in this Section 5.6(d).  If Parent,
Seller or their respective Representatives receive a request or are required
(by deposition, interrogatory, request for documents, subpoena, civil
investigative demand or similar process) to disclose all or any part of such
confidential or proprietary information, Parent and Seller, as the case may be,
agree to, or will ensure that their respective Representatives, promptly notify
Purchaser of the existence, terms and circumstances surrounding such request so
that Purchaser may seek a protective order or other appropriate remedy.

 

(d)           Notwithstanding any
provision herein to the contrary, each Party and each of the respective
employees, representatives and agents of each Party are hereby expressly
authorized to disclose to any and all persons, without limitation of any kind,
the tax treatment and any facts that may be relevant to the tax structure of
the transactions contemplated by this Agreement and the Transaction Documents, provided
that the confidentiality provisions of this Agreement shall continue to apply
to the extent that any information (e.g., names of the Parties) is not relevant
to understanding the tax treatment or tax structure of the transactions
contemplated hereby.

 

5.7           Expenses.  Except as otherwise specifically provided in
this Agreement, each Party shall bear its own expenses incurred in connection
with the preparation, execution and performance of this Agreement and the
Acquisition, including all fees and expenses of such Party’s Representatives, provided
that:

 

(a)           Purchaser shall pay all
fees required in connection with the filing of the Notification and Report Form
under the HSR Act; and

 

(b)           Seller shall pay all
recording fees, sales taxes, transfer taxes and similar taxes imposed upon
transfer of the Purchased Assets pursuant to this Agreement.

 

5.8           Title and Survey Matters.

 

(a)           Seller has delivered to
Purchaser, and Purchaser has reviewed and approved the following:  (i) the owner’s title commitments
identified on Schedule 5.8, as the same have been supplemented or
updated prior to the dated hereof (collectively, the “Commitments”) for
the Real Property prepared by First American Title Insurance Company (the “Title
Company”); (ii) copies of all documents supporting exceptions (“Exceptions”)
set

 

36

 

forth in the Commitments;
and (iii) a copy of the existing surveys for the Real Property identified
on Schedule 2.1(a)(i) (collectively, the “Surveys”) (such
Commitments, Exceptions, and Surveys collectively, the “Title Documents”).  The following matters are hereby approved by
Purchaser (collectively, the “Permitted Exceptions”):  (A) all exceptions to title shown on
the Commitments and all matters shown on the Surveys; (B) all of the
contracts, leases and other agreements listed as Items 1 through 2 on Schedule 2.1(e);
(C) the Lien of non-delinquent Taxes (it being agreed by Purchaser and
Seller that if any Tax is levied or assessed with respect to the Real Property
for public improvements that will benefit the Real Property subsequent to the
date of this Agreement and Seller has the election to pay such Tax either
immediately or under a payment plan with interest, Seller may elect to pay
under a payment plan, which election shall be binding on Purchaser);
(D) all printed exceptions and exclusions contained in the form of the
Title Policies to be issued at Closing; and (E) any matters caused or
created by, or otherwise approved or consented to in writing by, Purchaser.

 

(b)           Purchaser shall have
the right to object in writing to any title matter that is not a Permitted
Exception (other than any matter falling within subsection (E) of the
definition of Permitted Exceptions) which may appear on supplemental title
commitments or updates to the Commitments issued after the date of the
respective Commitments (collectively, “Other Liens”) within five (5)
days after receipt thereof (together with a copy of such new exception) by
Purchaser.  Unless Purchaser shall
timely object to such Other Liens, all such Other Liens which are set forth in
any such supplemental commitments or updates shall be deemed to constitute
additional Permitted Exceptions.  Any
exceptions which are timely objected to by Purchaser shall be herein
collectively called the “Title Objections.”  Seller may elect (but shall not be obligated) to remove, or cause
to be removed at its expense, any Title Objections, and shall be entitled to a
reasonable adjournment of the Closing (not to exceed a period of thirty (30)
days) for the purpose of such removal, which removal will be deemed effected by
the issuance of title insurance eliminating the Title Objections or insuring
against the effect of the Title Objections; provided, however,
Seller shall be obligated to remove or bond over any and all Liens for borrowed
money, mechanics’ and materialmen’s liens, tax liens and any Liens resulting
from the failure to satisfy an obligation when due, in each case affecting any
Real Property, on or before the Closing Date. 
Seller shall notify Purchaser in writing within five (5) days after
receipt of Purchaser’s notice of Title Objections whether Seller elects to
remove the same.  If Seller fails to
remove any Title Objections prior to the Closing, Purchaser may elect either
to:  (i) terminate this Agreement
or (ii) waive such Title Objections, in which event such Title Objections
shall be deemed additional “Permitted Exceptions” and the Closing shall occur
as herein provided (A) with a reduction of or credit against the Purchase Price
as the Parties may agree or (B) subject to Purchaser’s right to indemnification
pursuant to Section 9.2.

 

(c)           If on the Closing Date
there are any Title Objections which Seller has elected to remove, Seller may
use any portion of the Purchase Price to satisfy the same; provided
Seller shall either deliver to Purchaser at Closing instruments sufficient to
cause such Title Objections to be released of record, together with the cost of
recording or filing such instruments, or cause the Title Company to omit as an
exception, the same, without any additional cost to Purchaser, whether such
insurance is made available in consideration of payment, bonding, indemnity of
Seller or otherwise.

 

37

 

5.9           No Recording.  The provisions of this Agreement shall not
constitute a Lien on the Real Property. 
Neither Purchaser nor any of its Representatives shall record or file
this Agreement or any notice or memorandum hereof in any public records.  If Purchaser breaches the foregoing
provision, this Agreement shall, at Seller’s election, terminate.

 

5.10         Price Decrease
Notification.  Seller
shall notify Purchaser within three Business Days after offering any price
decrease in excess of 1% to any customer, which notice shall include the name
of the customer, the products for which the decrease was made and the amount of
the decrease.

 

ARTICLE VI

CONDITIONS TO CLOSING

 

6.1           Conditions to the Obligations of Seller
and Purchaser.  The
obligations of Seller and Purchaser to consummate the Acquisition are subject
to the satisfaction  or, if permitted by applicable Law, waiver
of the following conditions on or prior to the Closing Date:

 

(a)           No Injunction.  No provision of any applicable Law shall be
in effect and no interlocutory, appealable or final order shall have been
issued that prohibits or restricts the consummation of the Acquisition.

 

(b)           HSR.  All waiting periods applicable to the
consummation of the Acquisition under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the Department of
Justice or the Federal Trade Commission challenging or seeking to enjoin the
consummation of the Acquisition, which action shall not have been withdrawn or
terminated.

 

6.2           Conditions to Obligation of Seller.  The obligation of Seller to consummate the
Acquisition is subject to the fulfillment at or prior to the Closing of the
following conditions, any one or more of which may be waived in whole or in
part by Seller:

 

(a)           Accuracy of
Representations and Warranties. 
Each of the representations and warranties of Purchaser contained in this
Agreement shall have been true and correct in all material respects (other than
representations and warranties subject to “materiality” qualifiers, which shall
be true and correct as stated) when made and on and as of the Closing as if
made at and as of the Closing; provided, that representations and
warranties which address matters only as of a certain date shall have been true
and correct in all material respects (other than representations and warranties
subject to “materiality” qualifiers, which shall be true and correct as stated)
as of such certain date.

 

(b)           Performance.  Purchaser shall have performed and complied
in all material respects with all agreements, obligations and covenants
required to be performed or complied with by it on or prior to the Closing
Date.

 

(c)           Deliveries to Seller.  Purchaser shall have delivered to Seller the
following:

 

38

 

(i)            A certificate, dated
the Closing Date, of an executive officer of Purchaser confirming the matters
set forth in Section 6.2(a) and (b);

 

(ii)           A certificate, dated
the Closing Date, of the Secretary or Assistant Secretary of Purchaser
certifying, that attached or appended to such certificate:  (A) is a true and correct copy of the
certificate of formation of Purchaser, and all amendments thereto; (B) is
a true copy of all limited liability company actions taken by it, including
actions of its sole member, authorizing the consummation of the Acquisition and
the execution, delivery and performance of this Agreement and each of the
Transaction Documents to be delivered by Purchaser pursuant hereto; and
(C) are the names and signatures of its duly elected or appointed officers
who are authorized to execute and deliver this Agreement and the other Transaction
Documents to which Purchaser is a party;

 

(iii)          A counterpart of the
Assignment and Assumption Agreement duly executed by Purchaser;

 

(iv)          A certificate of good
standing from the appropriate state agency, dated as of a recent date,
certifying that Purchaser is in good standing in the State of Delaware;

 

(v)           A counterpart of a
transition services agreement, in the form attached as Exhibit D
(the “Transition Services Agreement”), duly executed by Purchaser;

 

(vi)          A counterpart of a
supply agreement, in the form attached as Exhibit E (the “Supply
Agreement”), duly executed by Kerr; and

 

(vii)         A certificate setting
forth the “Base Purchase Price” (the “Base Purchase Price”).

 

(d)           Real Property
Deliveries.  Purchaser shall have
delivered to Seller the following:

 

(i)            A counterpart of an
assignment and assumption of each of the Real Property Leases in the form
attached as Exhibit F or in the form required by the applicable
Real Property Lease (each, an “Assignment of Lease”); and

 

(ii)           If applicable, duly
completed and executed real estate transfer tax declarations.

 

(e)           Withholding Tax
Estimate.  At least three Business
Days before the Closing Date, Purchaser shall have delivered to Seller a good
faith estimate of the Withholding Taxes.

 

(f)            Consents.  Seller shall have obtained the third party
consents to the assignment of the contracts listed on Schedule 6.2(f).

 

6.3           Conditions to Obligation of Purchaser.  The obligation of Kerr and Purchaser to
consummate the Acquisition is subject to the fulfillment at or prior to the
Closing of the

 

39

 

following conditions, any
one or more of which may be waived in whole or in part by Kerr and Purchaser:

 

(a)           Accuracy of
Representations and Warranties. 
Each of the representations and warranties of Seller contained in this
Agreement shall have been true and correct in all material respects (other than
representations and warranties subject to “materiality” qualifiers, which shall
be true and correct as stated) when made and on and as of the Closing as if
made at and as of the Closing; provided, that representations and
warranties which address matters only as of a certain date shall have been true
and correct in all material respects (other than representations and warranties
subject to “materiality” qualifiers, which shall be true and correct as stated)
as of such certain date.

 

(b)           Performance.  Seller shall have performed and complied in
all material respects with all agreements, obligations and covenants required
to be performed or complied with by it on or prior to the Closing Date.

 

(c)           No Material Adverse
Effect.  During the period from the
date hereof to the Closing Date, there shall not have occurred and be
continuing any Material Adverse Effect.

 

(d)           Deliveries by Seller.  Seller shall have delivered to Purchaser the
following:

 

(i)            A certificate, dated
the Closing Date, of an executive officer of Seller confirming the matters set
forth in Section 6.3(a), (b) and (c);

 

(ii)           A certificate, dated
the Closing Date, of the Secretary or Assistant Secretary of Seller certifying,
among other things, that attached or appended to such certificate:  (A) is a true and correct copy of the
charter and by-laws of Seller, and all amendments thereto; (B) is a true
copy of all corporate actions taken by it, including resolutions of its board
of directors and sole stockholder, authorizing the consummation of the
Acquisition and the execution, delivery and performance of this Agreement and
each of the Transaction Documents to be delivered by Seller pursuant hereto;
and (C) are the names and signatures of its duly elected or appointed
officers who are authorized to execute and deliver this Agreement and the other
Transaction Documents to which Seller is a party;

 

(iii)          A counterpart of the
Assignment and Assumption Agreement duly executed by Seller;

 

(iv)          Certificates of good
standing from the appropriate state agencies, dated as of a recent date,
certifying that Seller is in good standing in the State of California and in
each jurisdiction in which Seller is qualified to do business as a foreign
corporation;

 

(v)           An affidavit
certifying, under penalties of perjury, Seller’s United States taxpayer
identification number and that Seller is not a “foreign person” within the
meaning of Section 1445(b)(2) of the Code and Section 18662 of the
California Revenue and Taxation Code;

 

40

 

(vi)          Any certificates,
affidavits or forms necessary to comply with or to reduce state withholding
Taxes.

 

(vii)         A counterpart of the
Transition Services Agreement, duly executed by Seller;

 

(viii)        A counterpart of the
Supply Agreement, duly executed by Seller;

 

(ix)           A bill of sale for the
Tangible Personal Property, in the form attached as Exhibit G, duly
executed by Seller;

 

(x)            Original certificates
of title to all vehicles included in the Purchased Assets, executed by Seller
to the extent necessary to reflect the assignment by Seller to Purchaser of
such assets; and

 

(xi)           Valid and effective
assignment documentation, in form and substance reasonably acceptable to
Purchaser, of any rights to the Intellectual Property that are included in the
Purchased Assets.

 

(e)           [Intentionally Omitted]

 

(f)            Real Property
Deliveries.  Seller shall have
delivered to Purchaser the following:

 

(i)            Special warranty
deeds, grant deeds or quitclaim deeds, in the form attached as Exhibit H,
duly executed by Seller, in favor of Purchaser, in recordable form,
transferring good and valid fee simple title to the Real Property to be
conveyed by Seller to Purchaser hereunder, subject only to Permitted
Exceptions, and such affidavits or other customary instruments as the Title
Company or Purchaser may reasonably request;

 

(ii)           A counterpart of each
Assignment of Lease duly executed by Seller; and

 

(iii)          If applicable, duly
completed and executed real estate Tax declarations.

 

(g)           Title Company
Deliveries.  The Title Company shall
have delivered to Purchaser (and if applicable, Purchaser’s lenders) an owner’s
(or lender’s) form of title insurance policy (or a mark-up commitment therefor)
in the form of the Title Commitments (each, a “Title Policy”), in the
amount of the Purchase Price applicable to the Real Property insured by such
Title Policy, insuring that fee simple title to the Real Property is vested in Purchaser
or its nominee subject only to the Permitted Exceptions.

 

(h)           Consents.  Seller shall have obtained the third party
consents to the assignment of the contracts listed on Schedule 6.3(h)
and the pledges of leasehold interests as reasonably requested by Kerr and
Purchaser pursuant to Section 5.3.

 

41

 

(i)            Financing.  Kerr and Purchaser shall have received the
financing contemplated by either or both of the commitment letters referred to
in Section 4.7.

 

(j)            Liens.  Seller shall have removed all Liens on the
Purchased Assets other than Permitted Liens.

 

ARTICLE VII

TERMINATION; EFFECT OF TERMINATION

 

7.1           Termination of Agreement.  This Agreement may be terminated and the
Acquisition may be abandoned at any time prior to the Closing:

 

(a)           by mutual written
consent of Seller and Purchaser;

 

(b)           after
September 15, 2003, by either Seller or Purchaser, if the Closing has not
occurred by that date; provided, however, that Seller shall have
the right to extend such date in accordance with Section 5.8(b); provided,
further, that such date shall be extended to 120 days after a second
request, if any, by the Department of Justice or the Federal Trade Commission
in connection with the filing of a Notification and Report Form pursuant to the
HSR Act; and provided, further, that the right to terminate this
Agreement pursuant to this Section 7.1(b) shall not be available to a
Party whose action or failure to act has been a principal cause of or resulted
in the failure of the Acquisition to occur on or before such date and such
action or failure to act constitutes a breach of this Agreement;

 

(c)           by Seller, upon written
notice, if any representation or warranty of Purchaser shall have become untrue
such that the condition set forth in Section 6.2(a) would not be satisfied
or if Purchaser shall have materially breached any agreement, obligation or
covenant such that the condition set forth in Section 6.2(b) would not be
satisfied; provided that if the inaccuracy in Purchaser’s
representations and warranties or the breach of Purchaser’s agreement,
obligation or covenant is curable through the exercise of Purchaser’s
commercially reasonable efforts, then Seller may not terminate this Agreement
for thirty (30) days after Seller shall have given written notice of such
inaccuracy or breach to Purchaser (so long as Purchaser continues to use
commercially reasonable efforts to cure the inaccuracy or breach during such
period), it being understood that Seller may not terminate this Agreement if
Purchaser cures such inaccuracy or breach within such thirty (30) day period;

 

(d)           by Purchaser, upon
written notice if any representation or warranty of Seller shall have become
untrue such that the condition set forth in Section 6.3(a) would not be
satisfied or if Seller shall have materially breached any agreement, obligation
or covenant such that the condition set forth in Section 6.3(b) would not
be satisfied; provided that if the inaccuracy in Seller’s
representations and warranties or the breach of Seller’s agreement, obligation
or covenant is curable through the exercise of Seller’s commercially reasonable
efforts, then Purchaser may not terminate this Agreement for thirty (30) days
after Purchaser shall have given written notice of such inaccuracy or breach to
Seller (so long as Seller continues to use commercially reasonable efforts to
cure such inaccuracy or breach during such period), it being understood that
Purchaser may not terminate this Agreement if Seller cures such inaccuracy or
breach within such thirty (30) day period;

 

42

 

(e)           by Purchaser or Seller
if there shall be any Law that makes consummation of the Acquisition illegal or
otherwise prohibited, or if any order of any Governmental Authority enjoining
Purchaser or Seller from consummating the Acquisition is entered and such order
shall have become final and nonappealable; or

 

(f)            by Purchaser, to the
extent permitted by Section 5.8(b) if Seller fails to remove any Title
Objections.

 

7.2           Effect of Termination; Right to Proceed.

 

(a)           In the event that
Seller can demonstrate by a preponderance of the evidence that, prior to the
execution of this Agreement by the Parties, Richard Hofmann, Lawrence Caldwell,
Robert Rathsam, Timothy Guhl, Kathy Kruse or Megan Petry had actual knowledge
of any facts and circumstances that would constitute a breach of or inaccuracy
in any representation or warranty of Seller contained in Article III
hereof, and such facts and circumstances were not within the Knowledge of
Seller as of the execution of this Agreement by the Parties, then Purchaser
shall not be entitled to seek indemnification for such breach or inaccuracy
pursuant to Section 9.2(a).

 

(b)           In the event that this
Agreement is terminated pursuant to Section 7.1(a), (b), (e) or (f), all
further obligations of the Parties shall terminate without further liability of
either Party (except for obligations under this Section 7.2,
Sections 5.5, 5.6 and 5.7 and Articles I, IX and X); provided
that termination shall not relieve any party of liability for any breach of
this agreement occurring before such termination.

 

(c)           Subject to
Section 7.2(a), upon termination of this Agreement for breach pursuant to
Section 7.1(c) or (d): 
(i) the breaching Party shall be liable to the non-breaching Party
for any breach of any representation, warranty, covenant or agreement of such
breaching Party existing at the time of termination and (ii) the
non-breaching Party may seek such remedies, including damages against the
breaching Party, with respect to any such breach as are provided in this
Agreement or as are otherwise available at Law or in equity.  The agreements contained in
Sections 3.17, 4.5, 5.5, 5.6, 5.7, 10.5 and 10.6 and Articles I, IX and X
shall survive the termination hereof.

 

(d)           In the event that a
condition precedent to a Party’s obligation is not met, nothing contained
herein shall be deemed to require any Party to terminate this Agreement, rather
than to waive such condition precedent and proceed with the Acquisition.

 

ARTICLE VIII

POST-CLOSING COVENANTS

 

8.1           Certain Transitional Matters.  From and after the Closing Date:

 

(a)           Purchaser shall have
the right and authority to collect for Purchaser’s own account all accounts or
notes receivable which are included in the Purchased Assets;

 

43

 

(b)           Purchaser shall have
the right and authority to retain and endorse without recourse the name of
Seller on any check or any other evidence of indebtedness received by Purchaser
on account of any accounts receivable which are included in the Purchased
Assets;

 

(c)           Seller shall promptly
transfer and deliver to Purchaser any cash or other property, if any, that
Seller may receive which constitutes Purchased Assets; and

 

(d)           Purchaser shall
promptly transfer and deliver to Seller any cash or other property, if any,
that Purchaser may receive which constitutes Excluded Assets.

 

8.2           Transfer and Retention of Transferred Employees; Employee
Benefits.  On the Closing
Date, Seller shall terminate all Persons who are employed by Seller as of such
date, excluding only those Persons who are on short- or long-term disability
leave as of such date (the “Terminated Employees”).  Purchaser shall offer employment, from and
after the Closing Date, on an at-will basis (but shall not be restricted from
entering into employment agreements with any Terminated Employee) to all
Terminated Employees. In addition, if any Person who was on short- or long-term
disability leave from Seller returns to work for Seller on a date that is
within six months of the Closing Date, and provides the proper medical
authorization to resume work, Purchaser shall offer employment to such Person
as of the date of such Person’s return to work; provided that Purchaser
shall not be obligated to offer employment to more than 20 such employees,
taking into account all such employees hired by Purchaser from Seller or any
Affiliate of Seller.  Employees of
Seller who are not offered employment with Purchaser as of the Closing Date
shall continue as employees of Seller and to be covered under Seller’s employee
benefit plans and programs in accordance with the terms of such plans and
programs.  Seller shall cash-out each
Terminated Employee with respect to such Terminated Employee’s accrued and
unused vacation as of the Closing Date. 
On and after the Closing Date, Purchaser shall arrange for each employee
of Seller who becomes an employee of Purchaser or any Affiliate of Purchaser
(each, a “Transferred Employee”) to participate in such active
counterpart employee benefit plans, programs, and arrangements in which
similarly situated employees of Purchaser and its Affiliates participate from
time to time (the “Counterpart Plans”), in accordance with the
eligibility criteria thereof, provided that such Transferred Employees
shall: (a) receive full credit for years of service prior to the Closing Date
for all purposes for which such service was recognized under the Plans, provided
that such crediting of service shall not result in the duplication of benefits
(such as pension benefits, accrued vacation, etc.), and (b) to the extent
Counterpart Plans are maintained by Purchaser or its Affiliates, participate in
such Plans on terms no less favorable, in the aggregate, than those offered to
similarly-situated employees of the Purchaser and its Affiliates.  Purchaser or its Affiliates shall give
credit under those of its Counterpart Plans that are welfare benefit plans for
all co-payments, deductibles and out-of-pocket maximums satisfied by
Transferred Employees (and their eligible dependents) in respect of the
calendar year in which the Closing occurs. 
Purchase or its Affiliates shall waive all pre-existing conditions (to
the extent waived under the applicable Plans of the Seller) that would
otherwise be applicable to Transferred Employees under the Counterpart Plans in
which Transferred Employees of the Seller or Affiliates become eligible to
participate on or following the Closing Date. 
Purchaser will retain the Transferred Employees for such period as may
be necessary, when considered together with any employees discharged by Seller
prior to Closing, to avoid, with respect to any facility operated by Seller in
the Business:  (a) a “plant closing,”
“mass layoff,” “layoff,” “relocation” or “termination” of “employees” (as those
terms are defined

 

44

 

in the Worker Adjustment
and Retraining Notification Act of 1988 or California Labor Code
Section 1400, et seq., effective January 1, 2003); or (b) any
liability to Seller under any Law which would reasonably be expected to arise
from any actual or anticipated termination of employees by Purchaser after
Closing, provided Seller has provided Purchaser (i) by July 1, 2003
with an accurate list of employees terminated by Seller within 180 days prior
to and including such date and (ii) on the Closing Date with an accurate list
of employees terminated by Seller within 180 days prior to and including the
Closing Date.  No assets, liabilities or
reserves relating to any Seller Plan will be transferred in connection with
this Agreement from Seller or its Affiliates or any Seller Plan to Purchaser or
its Affiliates or any employee benefit plan of Purchaser or its Affiliates; provided,
however, that the plan administrator of an applicable Counterpart Plan
shall accept rollover contributions from an appropriate Plan to the extent such
rollover contributions comply with the terms of such Counterpart Plan and the
plan administrator of such Counterpart Plan reasonably concludes that the
contribution is a valid rollover contribution.

 

8.3           Non-Competition
Covenant.  Seller and
Parent shall not, directly or indirectly, within North America, South America
and Europe, for a period of five (5) years after the Closing Date, engage in
the business of manufacturing, marketing or distributing to third parties
molded closures and flexible plastic packaging for the healthcare, personal
care, health and beauty, pharmaceutical, household chemical, automotive,
industrial and dentifrice industries; provided, however, that the
foregoing shall not restrict (a) Seller’s and Parent’s ownership,
operation or control of any entity acquired by Seller or Parent after the
Closing Date (an “Acquired Entity”) if the gross revenues of such entity
attributable to products, the production, marketing or sale of which would
otherwise violate the terms of this Section 8.3, (i) do not exceed
five percent (5%) of the net revenues of the Acquired Entity for the twelve
(12) month period ending on the last day of the last fiscal quarter preceding
the date of the definitive agreement providing for such acquisition for which
such results of operation are available and (ii) do not exceed
$25,000,000, or (b) the direct or indirect ownership by Seller of five
percent (5%) or less of any entity whose securities have been registered under
the Securities Act of 1933 or under the Securities Exchange Act of 1934 or the
securities Laws of any other jurisdiction. 
For the avoidance of doubt, nothing in this Section 8.3 shall
restrict Parent or any Affiliate of Parent from developing, purchasing,
marketing, distributing or otherwise dealing in any products to be sold to
third parties by Parent or such Affiliate which incorporate such plastic molded
closures or flexible packaging for the healthcare, personal care, health and
beauty, pharmaceutical, household chemical, automotive, industrial and
dentifrice industries.  Seller
acknowledges that Purchaser shall be entitled to seek equitable relief from a
court of competent jurisdiction restraining any breach by Seller of this
Section 8.3.

 

8.4           Trademarks, Etc.  As promptly as practicable after the
Closing, Purchaser shall revise trademarks and product literature, change
signage and stationery and otherwise discontinue use of all intellectual
property constituting Excluded Assets and all Affiliate Marks (collectively, “Excluded
Intellectual Property”); provided, however, that for a period
of forty-five (45) days from the Closing Date, Purchaser may consume stationery
and similar supplies and may sell inventory on hand as of the Closing Date
which contain such Excluded Intellectual Property so long as such items are, as
promptly as practicable after the Closing Date, overstamped or otherwise
appropriately indicate that the Business is then owned by Purchaser.

 

45

 

Without limiting the
foregoing, Purchaser shall, and shall cause each of its Affiliates to,
(i) no later than the close of business on the business day following the
Closing Date, discontinue affixing in any manner whatsoever such Excluded
Intellectual Property to any Product and (ii) no later than the close of
business on the forty-fifth (45th) calendar day after the Closing
Date, discontinue selling, shipping and delivering any product having such
Excluded Intellectual Property affixed thereto in any manner whatsoever.

 

8.5           Tax
Covenants.

 

(a)           From and after the
Closing, each of Seller and Purchaser shall cooperate with the other in
connection with Tax matters relating to the Business and the Purchased Assets,
including:  (i) the preparation and
filing of Tax Returns; (ii) the determination of a Party’s liability for
Taxes and the amounts of any Taxes due or of a Party’s right to a refund of
Taxes and the amount of any such refund; (iii) the examination of Tax
Returns; and (iv) the conduct of any administrative or judicial
proceedings in respect of Taxes assessed or proposed to be assessed.  Subject to Section 5.6(b), such
cooperation shall include each Party making all information and documents in
its possession relating to the Business and Purchased Assets available to the
other Party.

 

(b)           The Parties shall
retain all Tax Returns, schedules and work papers, and all material records and
other documents relating thereto, until the expiration of the applicable
statute of limitations (including, to the extent notified by any Party, any
extension thereof) of the Tax period to which such Tax Returns and other
documents and information relate.  Each
Party shall also make available to the other Party, as reasonably requested and
available, personnel (including officers, directors, employees and agents)
responsible for preparing, maintaining and interpreting information and
documents relevant to Taxes, and personnel reasonably required as witnesses or
for purposes of providing information or documents in connection with any
administrative or judicial proceedings relating to Taxes.  Any information or documents provided under
this Section 8.5(b) shall be kept confidential by the party receiving such
information or documents, except as may otherwise be necessary in connection
with the filing of Tax Returns or in connection with administrative or judicial
proceedings relating to Taxes.

 

(c)           In the event any
Governmental Authority with responsibility for Taxes informs Seller or
Purchaser of any notice of proposed audit, claim, assessment or other dispute
concerning an amount of Taxes with respect to which the other Party may incur
liability hereunder, the Party so informed shall promptly notify the other
Party of such matter.  Such notice shall
contain factual information (to the extent known) describing any asserted Tax
liability in reasonable detail and shall be accompanied by copies of any notice
or other documents received from such Governmental Authority with respect to
such matter.  If an Indemnified Party
has knowledge of an asserted Tax liability with respect to a matter for which
it is to be indemnified hereunder and such Party fails to provide the
Indemnifying Party prompt notice of such asserted Tax liability, then
(i) if the Indemnifying Party is precluded from contesting the asserted
Tax liability in any forum as a result of the failure to give prompt notice,
the Indemnifying Party shall have no obligation to indemnify the Indemnified
Party for Taxes arising out of such asserted Tax liability, and (ii) if
the Indemnifying Party is not precluded from contesting the asserted Tax
liability in any forum, but such failure to provide prompt notice results in a
monetary detriment to the Indemnifying Party, then any amount which the

 

46

 

Indemnifying Party is
otherwise required to pay the Indemnified Party pursuant to this Agreement
shall be reduced by the amount of such detriment.

 

(d)           Seller and Purchaser
agree that Purchaser has purchased substantially all the property used in
Seller’s trade or business, and in connection therewith, Purchaser shall employ
Transferred Employees who immediately before the Closing Date were employed in
such trade or business by Seller. 
Accordingly, Seller shall
provide Purchaser with all necessary and accurate payroll records for the
calendar year which includes the Closing Date. 
Furthermore, pursuant to Rev. Proc. 96-60, 1996-2 C.B. 399,
if Purchaser elects, each Party shall comply with the requirements provided in
the alternative procedure under Rev. Proc. 96-60, pursuant to which Purchaser
shall furnish a Form W-2 to each employee employed by Purchaser who had been
employed by Seller disclosing all wages and other compensation paid for such
calendar year, and Taxes withheld therefrom, and Seller shall be relieved of
the responsibility to do so.  If
Purchaser does not elect such alternative procedure, each Party shall comply
with the requirements provided in the standard procedure under Rev. Proc.
96-60.

 

8.6           Records; Retention.  Following the Closing, each of Purchaser and
Seller shall afford the other and its Representatives reasonable access during
normal business hours to, and (if permitted by law) the right to make copies
and extracts from, the books, records and other data in Purchaser’s or Seller’s
possession relating to the Business, the Purchased Assets, the Excluded Assets,
the Assumed Liabilities and the Retained Liabilities with respect to periods
prior to the Closing Date, at the requesting Party’s expense, to the extent
that such access may be requested by Purchaser or Seller for any business
purpose, including to facilitate the investigation, litigation and final
disposition of any claims which may have been or may be made against Purchaser,
Seller or their respective Affiliates. 
Purchaser and Seller agree that for a period of seven (7) years
following the Closing Date, such Party shall not destroy or otherwise dispose
of any such books, records or data in its possession without (a) giving
the other at least sixty (60) days’ prior written notice of such intended
disposition and (b) offering to deliver to the other, at the other’s
expense, custody of any or all of the books, records and data that such Party
intends to destroy.

 

8.7           Designated Reporting Person.  In order to assure compliance with the
requirements of Section 6045 of the Code (and any related reporting
requirements) and Section 18643 of the California Revenue and Taxation
Code (the “R&T Code”), the Parties agree as follows:

 

(a)           If the Title Company
executes a statement in writing, in form and substance reasonably acceptable to
the Parties, pursuant to which the Title Company agrees to assume all
responsibilities for information reporting required under Section 6045(e)
of the Code and Section 18643 of the R&T Code, Seller and Purchaser
shall designate the Title Company as the person to be responsible for all
information reporting under Section 6045(e) of the Code (the “Reporting
Person”) and Section 18643 of the R&T Code.  If the Title Company refuses to execute a
statement pursuant to which it agrees to be the Reporting Person, Seller and
Purchaser agree to appoint another third party mutually satisfactory to the
Parties as the Reporting Person.

 

(b)           Seller and Purchaser
hereby agree:

 

47

 

(i)            to provide to the
Reporting Person all information and certifications regarding such Party, as
reasonably requested by the Reporting Person or otherwise required to be
provided by a Party under Section 6045 of the Code; and

 

(ii)           to provide to the
Reporting Person such Party’s taxpayer identification number and a statement
(on IRS Form W-9 or an acceptable substitute form, or on any other form the Code
might require and/or any form requested by the Reporting Person), signed under
penalties of perjury, stating that the taxpayer identification number supplied
by such Party to the Reporting Person is correct.

 

(c)           Each Party agrees to
retain a copy of this Agreement for not less than four (4) years from the end
of the calendar year in which the Closing occurs and to produce such copy to
the IRS upon a valid request therefor.

 

8.8           Further Assurances.  Seller hereby agrees, without further
consideration, to execute and deliver following the Closing such other
instruments of transfer and take such other action as Purchaser or its counsel
may reasonably request in order to put Purchaser in possession of, and to vest
in Purchaser, good and valid title to the Purchased Assets in accordance with
this Agreement and to consummate the Acquisition.  Purchaser hereby agrees, without further consideration, to take
such other action following the Closing and execute and deliver such other
documents as Seller or its counsel may reasonably request in order to
consummate the Acquisition in accordance with this Agreement.

 

ARTICLE IX

SURVIVAL; INDEMNIFICATION

 

9.1           Expiration of Representations and Warranties.  The representations and warranties in this
Agreement (other than the representations and warranties contained in
Sections 3.1, 3.2, 3.3(a) and (b), 3.8(e), 3.15(b) and (c), 3.16, 3.17,
3.18, 3.19, 3.23, 3.24 and 3.25) shall survive the Closing until the second
anniversary of the Closing Date, at which time they shall terminate; provided
that (i) the representations and warranties contained in Sections 3.1,
3.2, 3.3(a) and (b), 3.8(e), 3.17 and 3.23 shall survive the Closing
indefinitely and (ii) the representations and warranties contained in
Sections 3.15(b) and (c), 3.16, 3.18, 3.19, 3.24 and 3.25 shall survive
the Closing until ninety (90) days after the expiration of the relevant statute
of limitations.

 

9.2           Indemnification by Seller.  Subject to the limitations set forth in
Section 7.2(a) and this Article IX, Seller shall indemnify, defend,
save and hold Kerr, Purchaser, and their respective Affiliates and the
Representatives of any of them (collectively, “Purchaser Indemnitees”)
harmless from and against any and all Losses incurred by any Purchaser
Indemnitee (except to the extent included in the Assumed Liabilities) arising
out of:

 

(a)           Seller’s breach or the
failure of any representation or warranty contained in this Agreement (such
breach or failure to be determined without giving effect to any qualifications
for “Knowledge,” “materiality” or “Material Adverse Effect” contained in any
representation or warranty) and any action, suit or proceeding arising out of
such breach or failure;

 

48

 

(b)           Seller’s breach of any
covenant or agreement made by Seller in or pursuant to this Agreement and any
action, suit or proceeding arising out of such breach;

 

(c)           Seller’s failure to
pay, perform or discharge when due any of the Retained Liabilities and any
action, suit or proceeding arising out of such failure;

 

(d)           Seller’s operation of
the Business or any event relating to or arising out of Seller’s assets
(including the Purchased Assets), in each case prior to the Closing, except
with respect to the Assumed Liabilities;

 

(e)           Taxes assessed on, or
expenses attributable to, any of the Real Property or the Real Property Leases
after the Closing Date for the period prior to the Closing Date (such that
Seller shall have borne all real property Taxes and all expenses attributable
thereto allocable to the period prior to the Closing Date), in each case net of
any amount previously paid under Section 2.5(c).  Notwithstanding the foregoing, an increase in a Real Property Tax
assessment as a result of the Acquisition, including the California
Supplemental Tax Bill and any similar Taxes, shall not be prorated under this
Section 9.2(e) or Section 2.5(c) and shall be the sole liability of
Purchaser;

 

(f)            a third party claim that the conduct of the
Business as it is currently conducted infringes U.S. Patent No. *, or any other
patent claiming priority over U.S. Patent No. *; or

 

(g)           a third-party claim by * or any other Person alleging that the conduct
of the Business as it is currently conducted with respect to the items at issue
in this lawsuit gives rise to liability under the theories alleged in *.

 

Without limiting the
generality of the foregoing, Seller shall indemnify, defend and hold harmless
Purchaser Indemnitees from and against all Losses asserted against, resulting
to, imposed on, sustained, incurred or suffered by any of Purchaser
Indemnitees, directly or indirectly (except to the extent included in the
Assumed Liabilities), by reason of or resulting from (i) any claim,
action, suit, investigation, arbitration, inquiry, proceeding or litigation
involving the Business, Seller or any of Seller’s agents or assets (including
the Purchased Assets), in each case arising from events on or prior to the
Closing Date but excluding (A) all Assumed Liabilities and (B) Losses
to the extent arising from or related to any post-Closing breach or default by
Purchaser of or under any Assumed Contract, (ii) any liability of Purchaser
Indemnitees arising from the non-compliance with any applicable bulk transfer
laws or Article 6 of the Uniform Commercial Code, (iii) any Environmental
Claim or pollution or threat to human health or the environment that is related
in any way to the management, use, control, ownership or operation of the
Business, including all on-site and off-site activities involving Materials of
Environmental Concern, and that occurred, existed, arises out of conditions or
circumstances that occurred or existed, or was caused, in whole or in part, on
or before the Closing Date, whether or not the pollution or threat to human
health or the environment is described in Schedule 3.18, (iv) any
and all obligations or liabilities under covenants relating to employment,
other than those obligations and liabilities expressly undertaken or assumed by
Purchaser hereunder, (v) any and

 

*  Confidential treatment has been requested
for certain portions of this document pursuant to an application for
confidential treatment sent to the SEC. 
Such portions are omitted from this filing and filed separately with the
SEC.

 

49

 

all Taxes of Seller for
all taxable periods, whether before, on or after the Closing Date (except to
the extent allocated to Purchaser with respect to the Real Property or the Real
Property Leases pursuant to Sections 2.5(c) and 9.2(e) of this Agreement), (vi)
any and all employee benefits or employment related liabilities relating to any
employee benefit plan that is sponsored, maintained or contributed to or
required to be contributed to by Seller or any Affiliate of Seller, (vii)
arising from any conflict, violation, breach or default by Seller described in
Section 3.3(a) or 3.3(b) (without giving effect to any qualifications
described in the Schedules or for “Knowledge,” “materiality” or “Material
Adverse Effect” contained therein), (viii) Seller’s failing to obtain any
consents, approvals, authorizations, permits and filings pursuant to
Section 3.4(c) (without giving effect to any qualifications for
“Knowledge,” “materiality” or “Material Adverse Effect” contained therein) and
(ix) failing to remove any Title Objections pursuant to Section 5.8(b).

 

9.3           Indemnification by Kerr and Purchaser.  Subject to the limitations set forth in this
Article IX, Kerr and Purchaser shall jointly and severally indemnify,
defend, save and hold Seller, Seller’s Affiliates and the Representatives of
any of them (collectively, “Seller Indemnitees”) harmless from and
against any and all Losses incurred by any Seller Indemnitee arising out of:

 

(a)           Kerr’s or Purchaser’s
breach of any representation or warranty contained in this Agreement and any
action, suit or proceeding arising out of such breach;

 

(b)           Kerr’s or Purchaser’s
breach of any covenant or agreement made by Kerr or Purchaser in or pursuant to
this Agreement (such breach or failure to be determined without giving effect
to any qualifications for “Knowledge,” “materiality” or “Material Adverse
Effect” contained in any representation or warranty) and any action, suit or
proceeding arising out of such breach;

 

(c)           Kerr’s or Purchaser’s
failure to pay, perform or discharge when due any of the Assumed Liabilities
and any action, suit or proceeding arising out of such failure;

 

(d)           any Assumed
Liabilities, except for Losses to the extent attributable to a breach by Seller
of any Assigned Contract prior to Closing; or

 

(e)           following the Closing,
Purchaser’s operation of the Business or any event relating to or arising out
of Purchaser’s assets (including the Purchased Assets).

 

9.4           Notice of
Claims.  Except as
provided in Section 8.5, if any Purchaser Indemnitee or Seller Indemnitee
(an “Indemnified Party”) believes that it has suffered or incurred any
Losses for which it is entitled to indemnification under this Article IX,
such Indemnified Party shall so notify the Party from whom indemnification is
being claimed (the “Indemnifying Party”) with reasonable promptness and
reasonable particularity in light of the circumstances then existing.  If any claim is instituted by or against a
third party with respect to which any Indemnified Party intends to claim
indemnification under this Article IX, such Indemnified Party shall
promptly notify the Indemnifying Party of such claim.  The notice provided by the Indemnified Party to the Indemnifying
Party shall describe the claim (the “Asserted Liability”) in reasonable
detail and shall indicate the amount (or an estimate) of the Losses that have
been or may be suffered by

 

50

 

the Indemnified
Party.  The failure of an Indemnified
Party to give any notice required by this Section 9.4 shall not affect any
of the Indemnified Party’s rights under this Article IX or otherwise
except and to the extent that such failure is prejudicial to the rights or
obligations of the Indemnifying Party.

 

9.5           Opportunity to Defend Third Party Claims.
If any action is brought by a third party against any Indemnified Party, the
Indemnifying Party shall be entitled: 
(a) to participate in such action and (b) to elect, by written
notice delivered to the Indemnified Party within thirty (30) days after the Indemnifying
Party’s receipt of notice of the Asserted Liability, to defend, compromise or
settle such action, with counsel reasonably satisfactory to the Indemnified
Party.  The Indemnified Party shall
cooperate with respect to any such participation, defense, settlement or
compromise.  The Indemnified Party shall
have the right to employ its own counsel in any such case, but the fees and
expenses of the Indemnified Party’s counsel shall be at the sole expense of the
Indemnified Party unless:  (i) the
Indemnifying Party shall have authorized in writing employment of such counsel
at the expense of the Indemnifying Party; (ii) the Indemnifying Party
shall not have employed counsel reasonably satisfactory to the Indemnified
Party to defend such action within thirty (30) days after the Indemnifying
Party received notice of the Asserted Liability; (iii) the Indemnified
Party shall have reasonably concluded, based upon written advice of counsel,
that there are defenses available to the Indemnified Party that are different
from or additional to those available to the Indemnifying Party (in which case
the Indemnifying Party shall not have the right to direct the defense of such
action on behalf of the Indemnified Party with respect to such different
defenses); or (iv) representation of such Indemnified Party by the counsel
retained by the Indemnifying Party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other
party represented by such counsel in such proceeding, in any of which events
the fees and expenses of one additional counsel shall be borne by the
Indemnifying Party.  The Indemnifying
Party shall not settle or compromise any action or consent to the entry of a
judgment that:  (a) does not
provide for the claimant to give an unconditional release to the Indemnified
Party in respect of the Asserted Liability; (b) involves relief other than
monetary damages; (c) places restrictions or conditions on the operation
of the business of the Indemnified Party or any of its Affiliates; or
(d) involves any finding or admission of liability or of any violation of
Law.  The Indemnifying Party shall not
be liable for any settlement of any claim or action effected without its written
consent; provided that such consent is not unreasonably withheld.  After payment of any Asserted Liability by
the Indemnifying Party, the Indemnified Party, if requested by the Indemnifying
Party, shall assign to the Indemnifying Party all rights the Indemnified Party
may have against any applicable account debtor or other responsible Person in
respect of the Asserted Liability.  If
the Indemnifying Party chooses to defend any Asserted Liability, the
Indemnified Party shall make available to the Indemnifying Party any books,
records or other documents within its control that are necessary or appropriate
for such defense.  Any expenses of any
Indemnified Party for which indemnification is available hereunder shall be
paid upon written demand therefor.

 

9.6           Limitation of
Liability.

 

(a)           Seller shall not be
obligated to provide any indemnification under Section 9.2(a) except to
the extent the aggregate amount for which it is obligated to provide such
indemnification exceeds the sum of $1,000,000, after which Seller shall be
obligated to pay the

 

51

 

entire amount, beginning
with the first dollar of Loss, which is payable pursuant to
Section 9.2(a); provided, however, that De Minimis Losses
shall not count towards such $1,000,000 amount unless and until the aggregate
amount of all De Minimis Losses exceeds $100,000; provided, further,
that in the case of any breach of any representation or warranty under Sections
3.1, 3.2, 3.3, 3.6, 3.8(e), 3.16, 3.17, 3.18, 3.19, 3.23 and 3.24,
respectively, Seller shall be obligated to provide indemnification for the
entire amount of such Loss, beginning with the first dollar of Loss, without
regard to whether such loss is a De Minimis Loss and without regard to whether
the aggregate amount for which the obligation to provide indemnification under
this Article IX exceeds the sum of $1,000,000; provided, further,
that in no event shall the aggregate liability of Seller under this
Article IX with respect to Seller’s breach of its representations and
warranties exceed one-half of the Purchase Price other than for breach of any
representation or warranty contained in Sections 3.1, 3.2, 3.3, 3.6, 3.8, 3.16,
3.17, 3.18, 3.19, 3.23 and 3.24, which liability and obligation to indemnify
shall be without limitation.

 

(b)           Kerr and Purchaser
shall not be obligated to provide any indemnification under Section 9.3(a)
except to the extent the aggregate amount for which they are obligated to
provide such indemnification exceeds the sum of $1,000,000, after which Kerr
and Purchaser shall be obligated to pay the entire amount, beginning with the
first dollar of Loss, which is payable pursuant to Section 9.3(a); provided,
however, that De Minimis Losses shall not count towards such $1,000,000
amount unless and until the aggregate amount of all De Minimis Losses exceeds
$100,000; provided, further, that in the case of any breach of
any representation or warranty under Sections 4.1, 4.2, 4.3(a) or (b), and 4.5,
respectively, Kerr and Purchaser shall be obligated to provide indemnification
for the entire amount of such Loss, beginning with the first dollar of Loss,
without regard to whether such loss is a De Minimis Loss and without regard to
whether the aggregate amount for which the obligation to provide
indemnification under this Article IX exceeds the sum of $1,000,000; provided,
further, that in no event shall the aggregate liability of Kerr and
Purchaser under this Article IX with respect to Kerr’s and Purchaser’s
breach of their representations and warranties exceed one-half of the Purchase
Price other than for breach of any representation or warranty contained in
Sections 4.1, 4.2, 4.3(a) or (b), and 4.5, which liability and obligation to
indemnify shall be without limitation; provided, further, that
the preceding clause shall not limit Purchaser’s obligation or liability with
respect to the Assumed Liabilities.

 

(c)           The provisions of this
Article IX shall be the exclusive remedy available to the Seller
Indemnitees and the Purchaser Indemnitees after the Closing in the event any
such Person shall have a claim with respect to the matters covered by this
Agreement, other than with respect to claims involving intentional
misrepresentation, fraud, or willful misconduct.

 

9.7           Effect of Taxes and Insurance.  The amount of any Losses for which indemnification
is provided under this Article IX (a) shall be reduced to take
account of any net Tax benefit realized, in the year of the Tax payment or the
next succeeding taxable year and shall be increased to take account of any net
Tax detriment realized, in the year of the Tax payment or the next succeeding
taxable year arising from the incurrence or payment of any such Losses or from
the receipt of any such indemnification payment determined on a with or without
basis and (b) shall be reduced by the insurance proceeds received and any
other amount, if any, recovered from third parties by the Indemnified Party (or
its Affiliates) with respect to any Losses. 
If any Indemnified Party shall have received any indemnification payment
pursuant to this Article IX

 

52

 

with respect to any Loss,
such Indemnified Party shall, upon written request by the Indemnifying Party,
assign to such Indemnifying Party (to the extent of the indemnification
payment) any claim which such Indemnified Party may have under any applicable
insurance policy which provides coverage for such Loss.  Such Indemnified Party shall reasonably
cooperate (at the expense of the Indemnifying Party) to collect under such
insurance policy.  If any Indemnified
Party shall have received any payment pursuant to this Article IX with
respect to any Loss and has or shall subsequently have received insurance
proceeds or other amounts with respect to such Loss, then such Indemnified
Party shall promptly pay over to the Indemnifying Party the amount so recovered
(after deducting the amount of the expenses incurred by it in procuring such
recovery), but not in excess of the amount previously so paid by the
Indemnifying Party.

 

9.8           Treatment of Indemnity Payments;
No Duplication.  Any
indemnification payment made pursuant to this Article IX shall be treated,
to the extent permitted or required by law, by all Parties as an adjustment to
the Purchase Price.  Notwithstanding
anything contained in this Article IX to the contrary, Purchaser shall not
be entitled to indemnification hereunder to the extent that any Losses
were  (i)  included in the
calculation of the Working Capital Adjustment or the Final Closing Capital
Expenditures (excluding losses resulting from Seller’s breach of any payment or
other obligation to any counterparty with respect to any Capital Expenditures)
or (ii) offset by an adjustment pursuant to Section 3.3 or 3.4 of the
Supply Agreement.

 

ARTICLE X

GENERAL

 

10.1         Notices.
 All notices, requests, claims, demands
or other communications that are required or may be given pursuant to the terms
of this Agreement or the other Transaction Documents shall be in writing and
shall be deemed to have been duly given: 
(a) when delivered, if delivered by hand; (b) one (1) Business
Day after transmitted, if transmitted by a nationally-recognized overnight
courier service; (c) when sent by facsimile transmission, if sent by
facsimile transmission which is confirmed; or (d) three (3) Business Days
after mailing, if mailed by registered or certified mail (return receipt
requested), in each case to the Parties at the following addresses (or at such
other address for a Party as shall be specified in a notice given in accordance
with this Section 10.1):

 

	
   

  	
  (a)

  	
  If to Seller:

  
	
   

  	
   

  
	
   

  	
   

  	
  O.G. Dehydrated, Inc.

  
	
   

  	
   

  	
  18 Loveton Circle

  
	
   

  	
   

  	
  Sparks, Maryland  21152

  
	
   

  	
   

  	
  Attention:  Corporate Secretary

  
	
   

  	
   

  	
  Telephone:  (410) 771-7563

  
	
   

  	
   

  	
  Fax:  (410) 527-8228

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a simultaneous
  copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Piper Rudnick LLP

  
	
   

  	
   

  	
  6225 Smith Avenue

  
	
   

  	
   

  	
  Baltimore, Maryland
  21209-3600

  
	
   

  	
   

  	
  Attention:  Theodore Segal, Esq.

  
	
   

  	
   

  	
  Telephone:  (410) 580-3000

  
	
   

  	
   

  	
  Fax:  (410) 580-3001

  
				

 

 

53

 

	
   

  	
  (b)

  	
  If to Purchaser:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Kerr Acquisition Sub
  II, LLC

  
	
   

  	
   

  	
  c/o Kerr Group Inc.

  
	
   

  	
   

  	
  500 New Holland Avenue

  
	
   

  	
   

  	
  Lancaster,
  Pennsylvania  17602-2104

  
	
   

  	
   

  	
  Attention:  Lawrence
  C. Caldwell

  
	
   

  	
   

  	
  Telephone:  (717)
  390-8439

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a simultaneous
  copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Skadden, Arps, Slate,
  Meagher & Flom LLP

  
	
   

  	
   

  	
  525 University Avenue,
  Suite 1100

  
	
   

  	
   

  	
  Palo Alto,
  California  94301

  
	
   

  	
   

  	
  Attention:  Kenton J. King, Esq.

  
	
   

  	
   

  	
  Telephone:  (650) 470-4500

  
	
   

  	
   

  	
  Fax:  (650) 470-4570

  
	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  If to Kerr:

  
	
   

  	
   

  
	
   

  	
   

  	
  Kerr Group, Inc.

  
	
   

  	
   

  	
  500 New Holland Avenue

  
	
   

  	
   

  	
  Lancaster,
  Pennsylvania  17602-2104

  
	
   

  	
   

  	
  Attention:  Lawrence
  C. Caldwell

  
	
   

  	
   

  	
  Telephone:  (717)
  390-8439

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a simultaneous
  copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Skadden, Arps, Slate,
  Meagher & Flom LLP

  
	
   

  	
   

  	
  525 University Avenue,
  Suite 1100

  
	
   

  	
   

  	
  Palo Alto,
  California  94301

  
	
   

  	
   

  	
  Attention:  Kenton J. King, Esq.

  
	
   

  	
   

  	
  Telephone:  (650) 470-4500

  
	
   

  	
   

  	
  Fax:  (650) 470-4570

  
				

 

10.2         Severability.  If any provision of this Agreement for any
reason shall be held to be illegal, invalid or unenforceable, such illegality
shall not affect any other provision of this Agreement, but this Agreement
shall be construed as if such illegal, invalid or unenforceable provision had
never been included herein.

 

10.3         Assignment; Binding
Effect; Benefit.  No
assignment by any Party of its rights nor delegation by any Party of its
obligations under this Agreement or any Transaction

 

54

 

Document shall be
permitted unless Kerr and Purchaser, on the one hand, or Seller, on the other
hand, consents in writing thereto, except that Purchaser may (a) assign,
in its sole discretion, any of or all of its rights, interests and obligations
under this Agreement to Kerr or to any direct or indirect wholly-owned
Subsidiary of Kerr, and (b) pledge this Agreement and any of its rights
and obligations hereunder in whole or in part to any other Person, in each case
without the consent of Seller, provided in each case that no such
assignment shall relieve Purchaser of any of its obligations hereunder.  This Agreement shall be binding upon and
shall inure to the benefit of the Parties and their respective successors and
permitted assigns.  Notwithstanding
anything in this Agreement to the contrary, expressed or implied, this
Agreement is not intended to confer any rights or remedies on any Person other
than the Parties and their respective successors and permitted assigns.

 

10.4         Incorporation of Exhibits and Schedules.  All Exhibits and Schedules attached hereto
and referred to herein are hereby incorporated herein and made a part of this
Agreement for all purposes as if fully set forth herein.  The disclosures made by the Parties in any
Schedule to this Agreement shall apply with the same force and effect to
each other Section hereof to which it is reasonably apparent that such
disclosures should apply.

 

10.5         Governing
Law; Submission to Jurisdiction.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
OTHER THAN CONFLICT OF LAWS PRINCIPLES THEREOF DIRECTING THE APPLICATION OF ANY
LAW OTHER THAN THAT OF NEW YORK.  COURTS
WITHIN THE STATE OF NEW YORK (LOCATED WITHIN NEW YORK CITY) WILL HAVE
JURISDICTION OVER ALL DISPUTES BETWEEN THE PARTIES ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS.  THE PARTIES HEREBY CONSENT TO AND AGREE TO
SUBMIT TO THE JURISDICTION OF SUCH COURTS. 
EACH OF THE PARTIES WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH
DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT
(A) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH
COURTS; (B) SUCH PARTY AND SUCH PARTY’S PROPERTY IS IMMUNE FROM ANY LEGAL
PROCESS ISSUED BY SUCH COURTS; OR (C) ANY LITIGATION COMMENCED IN SUCH
COURTS IS BROUGHT IN AN INCONVENIENT FORUM.

 

10.6         Waiver of
Jury Trial. 
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY PROCEEDING (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED
HEREBY OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.

 

10.7         Interpretation.  The Parties have participated jointly in the
negotiation and drafting of this Agreement. 
In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any provisions of this Agreement.

 

55

 

10.8         Counterparts.  This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different Parties in separate counterparts, each of which when executed and
delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.

 

10.9         Entire
Agreement.  This
Agreement (including the Schedules and Exhibits attached hereto) and the other
Transaction Documents executed in connection with the consummation of the
Acquisition contain the entire agreement between the Parties with respect to
the subject matter hereof and supersede all prior agreements, written or oral,
with respect thereto.

 

10.10       Waivers and Amendments.  This Agreement may be amended, superseded,
canceled, renewed or extended only by a written instrument signed by all of the
Parties.  The provisions hereof may be
waived only in writing signed by the Party or Parties waiving compliance.  No delay on the part of any Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any Party of any such right, power
or privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.

 

[Signatures
appear on the next page]

 

56

 

EXECUTION

 

IN WITNESS WHEREOF, the
Parties have caused this Agreement to be signed in their respective names by
their duly authorized representatives as of the date first above written.

 

	
   

  	
  KERR GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/  Richard D. Hofmann

  	
   

  
	
   

  	
  Name:

  	
  Richard D. Hofmann

  	
   

  
	
   

  	
  Title:

  	
  President & CEO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  KERR ACQUISITION SUB
  II, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/  Richard D. Hofmann

  	
   

  
	
   

  	
  Name:

  	
  Richard D. Hofmann

  	
   

  
	
   

  	
  Title:

  	
  President & CEO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
						

 

Signature
Page 1 of 3 to

Asset
Purchase Agreement, dated as of June 26, 2003, among

Kerr
Group, Inc., Purchaser and O. G. Dehydrated, Inc.

 

 

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
  O.G. DEHYDRATED, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/  Robert G. Davey

  	
   

  
	
   

  	
  Name:

  	
  Robert G. Davey

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  
							

 

Signature
Page 2 of 3 to

Asset
Purchase Agreement, dated as of June 26, 2003, among

Kerr
Group, Inc., Purchaser and O. G. Dehydrated, Inc.

 

 

GUARANTY

 

Parent hereby guarantees
the prompt payment by Seller of Seller’s indemnification obligations under
Section 9.2 of this Agreement.  If
Seller defaults in the payment of any such indemnification obligation, Parent
shall pay to Purchaser or the applicable Purchaser Indemnitee any damages,
costs and expenses that such Person is entitled to recover from Seller by
reason of Seller’s default.  Parent
acknowledges that the bankruptcy of Seller shall not relieve Parent of its
obligations under this Guaranty.  Parent
further agrees to the provisions of 5.3 (Consents, Filings and Authorizations;
Efforts to Consummate), 5.6 (Access to Information; Confidentiality), 8.3
(Non-Competition Covenant) and the last three sentences of Section 3.5
(Financial Statements) of this Agreement.

 

	
   

  	
  McCORMICK
  & COMPANY, INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/  Robert G. Davey

  	
   

  
	
   

  	
  Name:

  	
  Robert G. Davey

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  	
   

  

 

Signature
Page 3 of 3 to

Asset
Purchase Agreement, dated as of June 26, 2003, among

Kerr
Group, Inc., Purchaser and O. G. Dehydrated, Inc.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00057-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00057-of-00352.parquet"}]]