Document:

Exhibit 10.26

 

Execution Version

 

ASSET PURCHASE AGREEMENT

 

BY AND AMONG

 

BASIC CHEMICALS COMPANY, LLC,

 

KMG-BERNUTH, INC., AND

 

KMG CHEMICALS INC.

 

DATED AS OF JUNE 7, 2005

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1 DEFINITIONS

  	
   

  
	
  ARTICLE 2 PURCHASE AND SALE OF ASSETS

  	
   

  
	
  2.1

  	
  Purchased Assets

  	
   

  
	
  2.2

  	
  Excluded Assets

  	
   

  
	
  2.3

  	
  Assumed Liabilities

  	
   

  
	
  2.4

  	
  Limitation of Liabilities

  	
   

  
	
  ARTICLE 3 PURCHASE PRICE

  	
   

  
	
  3.1

  	
  Purchase Price

  	
   

  
	
  3.2

  	
  Allocation of Purchase Price

  	
   

  
	
  ARTICLE 4 CLOSING

  	
   

  
	
  4.1

  	
  Closing

  	
   

  
	
  4.2

  	
  Deliveries by Seller

  	
   

  
	
  4.3

  	
  Deliveries by Buyer

  	
   

  
	
  ARTICLE 5 REPRESENTATIONS AND
  WARRANTIES OF SELLER

  	
   

  
	
  5.1

  	
  Organization and Existence

  	
   

  
	
  5.2

  	
  Authority

  	
   

  
	
  5.3

  	
  No Violations

  	
   

  
	
  5.4

  	
  Governmental Approval

  	
   

  
	
  5.5

  	
  Seller Proceedings

  	
   

  
	
  5.6

  	
  No Brokers

  	
   

  
	
  5.7

  	
  Ownership of Purchased Assets

  	
   

  
	
  5.8

  	
  Environmental Matters

  	
   

  
	
  5.9

  	
  Compliance With Laws

  	
   

  
	
  5.10

  	
  Financial Information

  	
   

  
	
  5.11

  	
  Intangible Assets

  	
   

  
	
  5.12

  	
  Instruments in Full Force and Effect

  	
   

  
	
  5.13

  	
  Taxes

  	
   

  
	
  5.14

  	
  DISCLAIMER OF REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
  ARTICLE 6 REPRESENTATIONS AND
  WARRANTIES OF BUYER

  	
   

  
	
  6.1

  	
  Organization and Existence

  	
   

  
	
  6.2

  	
  Authority

  	
   

  
	
  6.3

  	
  No Violations

  	
   

  
	
  6.4

  	
  Governmental Approval

  	
   

  
	
  6.5

  	
  Buyer Proceedings

  	
   

  
	
  6.6

  	
  No Brokers

  	
   

  
	
  ARTICLE 7 REPRESENTATIONS AND
  WARRANTIES OF GUARANTOR

  	
   

  
	
  7.1

  	
  Organization and Existence

  	
   

  
	
  7.2

  	
  Authority

  	
   

  
	
  7.3

  	
  No Violations

  	
   

  
	
  7.4

  	
  Governmental Approval

  	
   

  
	
  7.5

  	
  Guarantor Proceedings

  	
   

  
	
  ARTICLE 8 COVENANTS

  	
   

  
	
  8.1

  	
  Confidentiality

  	
   

  
	
  8.2

  	
  Employees and Employee Benefits

  	
   

  

 

2

 

	
  8.3

  	
  Taxes Resulting From Sale

  	
   

  
	
  8.4

  	
  Ad-Valorem Taxes

  	
   

  
	
  8.5

  	
  Expenses

  	
   

  
	
  8.6

  	
  Agreement to Not Compete

  	
   

  
	
  8.7

  	
  Specific Performance

  	
   

  
	
  ARTICLE 9 POST-CLOSING SERVICES

  	
   

  
	
  9.1

  	
  Remittances

  	
   

  
	
  9.2

  	
  Delivery of Purchased Assets

  	
   

  
	
  9.3

  	
  Transition Activities

  	
   

  
	
  9.4

  	
  Removal of Equipment

  	
   

  
	
  ARTICLE 10 INDEMNIFICATION

  	
   

  
	
  10.1

  	
  Indemnification by Seller

  	
   

  
	
  10.2

  	
  Indemnification by Buyer

  	
   

  
	
  10.3

  	
  Indemnification Procedure

  	
   

  
	
  10.4

  	
  Survival

  	
   

  
	
  10.5

  	
  Applicability of Indemnification Obligation

  	
   

  
	
  10.6

  	
  Limitation on Amounts

  	
   

  
	
  10.7

  	
  Sole Remedy; Limitations

  	
   

  
	
  ARTICLE 11 GUARANTY

  	
   

  
	
  11.1

  	
  Guaranty

  	
   

  
	
  11.2

  	
  Amendments

  	
   

  
	
  11.3

  	
  Waivers

  	
   

  
	
  ARTICLE 12 MISCELLANEOUS

  	
   

  
	
  12.1

  	
  Notices

  	
   

  
	
  12.2

  	
  Entire Agreement

  	
   

  
	
  12.3

  	
  Amendments and Waiver; Rights and Remedies

  	
   

  
	
  12.4

  	
  Governing Law

  	
   

  
	
  12.5

  	
  Binding Effect; Assignment

  	
   

  
	
  12.6

  	
  Counterparts

  	
   

  
	
  12.7

  	
  Interpretation

  	
   

  
	
  12.8

  	
  Severability of Provisions

  	
   

  

 

SCHEDULES AND EXHIBITS

 

	
  Schedules

  
	
   

  	
   

  
	
  Schedule 1.1:

  	
  Knowledge

  
	
  Schedule 2.1(c):

  	
  Equipment

  
	
  Schedule 2.1(f):

  	
  Ordinary
  Course Agreements

  
	
  Schedule 5.3:

  	
  Exception to
  No Violations

  
	
  Schedule 5.4:

  	
  Seller’s
  Governmental Approvals

  
	
  Schedule 5.5:

  	
  Pending
  Proceedings

  
	
   

  	
   

  
	
  Exhibits

  
	
   

  	
   

  
	
  Exhibit A:

  	
  Form of
  Promissory Note

  
	
  Exhibit B:

  	
  Form of
  Bill of Sale

  
	
  Exhibit C:

  	
  Form of
  Assumption Agreement

  
	
  Exhibit D:

  	
  Form of
  Registration Assignment

  
	
  Exhibit E:

  	
  Form of
  Chlorine Supply Agreement

  

 

3

 

ASSET
PURCHASE AGREEMENT

 

This ASSET PURCHASE AGREEMENT (“Agreement”) is
entered into on and effective as of this June 7, 2005, by and among
KMG-BERNUTH, INC., a Delaware corporation (“Buyer”), BASIC CHEMICALS COMPANY, LLC, a
Delaware limited liability company (“Seller”), and KMG CHEMICALS INC., a Delaware
corporation (“Guarantor”).  Seller and Buyer are each a “party” hereunder and
collectively the “parties”
hereunder.

 

RECITALS

 

WHEREAS, Seller desires to sell and transfer
to Buyer certain of the properties, assets and liabilities related to the Penta
Business (as defined below) other than the Excluded Assets (as defined below),
which Seller intends to acquire in connection with its acquisition of certain
assets of Vulcan Materials Company (“VMC”) and Buyer desires to purchase and
acquire such properties, assets and liabilities, all upon the terms set forth
herein; and

 

WHEREAS, the parties hereto desire to set
forth certain representations, warranties and agreements, all as more fully set
forth below;

 

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

 

AGREEMENT

 

ARTICLE 1

DEFINITIONS

 

As used in this Agreement, the following
terms have the following respective meanings:

 

“Affiliate” means, as to the Person
specified, any Person controlling, controlled by or under common control with
such Person, with the concept of control in such context meaning the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of another, whether through the
ownership of voting securities, by contract or otherwise.

 

“Aggregate Inventory Cost” has the
meaning specified in Section 3.1.

 

“Agreement” has the meaning specified in
the opening paragraph.

 

“Assumed Liabilities” has the meaning
specified in Section 2.3.

 

“Assumption Agreement” has the meaning
specified in Section 4.2(c).

 

“Bill of Sale” has the meaning specified
in Section 4.2(c).

 

“Business Records” means all Records in
possession of Seller to the extent that such Records relate primarily to the
Penta Business, the Purchased Assets or the Assumed Liabilities, and shall

 

 

include
historical financial and tax records primarily related to the prior operation
of the Penta Business, but shall exclude all Excluded Assets; provided, however, that if any Business
Records pertain both to the Penta Business and to unrelated activities or other
businesses of Seller or VMC, then only the portion of such documents or other
records which pertain to the Penta Business shall be included in the Purchased
Assets.

 

“Buyer” has the meaning specified in the
opening paragraph of this Agreement.

 

“Claims” means all losses, liabilities,
claims, demands, damages, costs, fees and expenses (including reasonable
attorneys’ fees and disbursements) of every kind, nature and description.

 

“Closing” has the meaning specified in Section 4.1.

 

“Closing Date” means the date upon which the Closing occurs.

 

“Confidential Information” has the
meaning specified in Section 8.1.

 

“Encumbrances” means liens, charges,
pledges, options, mortgages, security interests, claims, easements, rights-of-way,
servitudes, title defects and other similar encumbrances, but specifically
excluding the Permitted Encumbrances.

 

“Environmental Laws” means any and all
Legal Requirements pertaining to (i) the control of any potential
pollutant or protection of the air, water or land, (ii) solid, gaseous or
liquid waste generation, handling, treatment, storage, disposal or
transportation, or (iii) exposure to hazardous, toxic or other substances
alleged to be harmful.  Environmental
Laws shall include all such laws in effect in any and all jurisdictions in
which the Purchased Assets are located or in which any Seller or its Affiliates
has conducted operations using any of the Purchased Assets, including the Clean
Air Act, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Rivers and Harbors Act of 1899, the Federal Water Pollution
Control Act, the Occupational Safety and Health Act of 1970, the Resource
Conservation and Recovery Act of 1976, the Safe Drinking Water Act, the Toxic
Substances Control Act, the Superfund Amendments and Reauthorization Act of
1986, the Hazardous Materials Transportation Act, Federal Insecticide,
Fungicide and Rodenticide Act, the Food Quality Protection Act, and other
environmental conservation or protection laws.

 

“EPA” means the United States
Environmental Protection Agency and all subdivisions thereof.

 

“Equipment” has the meaning specified in Section 2.1(c).

 

“Excluded Assets” has the meaning
specified in Section 2.2.

 

“Facility” means Seller’s Penta Products
manufacturing facility in Wichita, Kansas.

 

2

 

“Governmental Entity” means any court or
tribunal in any jurisdiction (domestic or foreign) or any public, governmental
or regulatory body, agency, department, commission, board, bureau or other
authority or instrumentality (domestic or foreign).

 

“Guarantor” has the meaning specified in
the opening paragraph of this Agreement.

 

“Indemnified Party” has the meaning
specified in Section 10.3.

 

“Indemnifying Party” has the meaning specified
in Section 10.3.

 

“Instruments” has the meaning specified
in Section 5.12.

 

“Intellectual Property Rights” has the
meaning specified in Section 2.1(b).

 

“Knowledge” with respect to Buyer or
Guarantor means the actual knowledge after reasonable inquiry of the executive
management of such entity and any other Person with direct supervisory
responsibility over a matter for such party, and with respect to Seller means
the actual knowledge of the individuals set forth on Schedule 1.1,
all of whom are employees of Seller or VMC or their respective affiliates.

 

“Legal Requirements” has the meaning
specified in Section 5.9(a).

 

“MAE” means (a) when used with
respect to Seller’s or VMC’s Penta Business, any material adverse change in the
business, properties, results of operations or financial condition of such
Penta Business, taken as a whole, but excluding any change to the extent
arising from any (i) changes in laws, (ii) changes resulting from the
announcement of the execution hereof, or the execution of the Asset Purchase
Agreement between VMC and Seller, or the execution of the Asset Purchase and
Sale Agreement between ERCO Worldwide (USA) Inc. and Seller, and the
transactions contemplated hereby and thereby, (iii) changes in general
economic conditions or (iv) changes generally affecting the industry in
which such Penta Business competes, including changes in the price of energy,
supplies and raw materials, (b) when used with respect to Seller or the
Penta Business of Seller or VMC, any effect that materially impairs the ability
of Seller to complete the transactions contemplated hereby or to fulfill its
respective obligations hereunder, and (c) when used with respect to Buyer
or Guarantor, any effect that materially impairs the ability of Buyer or
Guarantor to complete the transactions contemplated hereby or to fulfill their
respective obligations hereunder.

 

“Non-Compete Term” has the meaning
specified in Section 8.6.

 

“Note” has the meaning specified in Section 3.1(b).

 

“Open Orders” has the meaning specified
in Section 2.3.

 

“Ordinary Course Agreements” has the
meaning specified in Section 2.1(f).

 

“Penta” means pentachlorophenol.

 

3

 

“Penta Business” means the manufacturing,
formulating, processing, storing, distributing, selling, marketing, use and
licensing of the Penta Products.

 

“Penta Inventory” means all inventory of
Penta Products stored in the Facility as of the Closing that meets the relevant
product specification for such Penta Product, based on a physical inventory
jointly conducted by the parties on or about the Closing Date.

 

“Penta Products” means the
pentachlorophenol product lines of Seller formerly owned by VMC, including the
following products:

 

	
  PRODUCT NAME:

  	
   

  	
  Registration Number

  
	
  VULCAN GLAZD
  PENTA

  	
   

  	
  EPA Reg. No. 5382-16

  
	
  VULCAN
  PREMIUM 4 LB. PENTA (PCP 2) CONCENTRATE

  	
   

  	
  EPA Reg. No. 5382-36

  
	
  VULCAN GLAZD
  PENTA

  	
   

  	
  PMRA Reg. No. 21785

  
	
  VULCAN BLOCK
  PENTA

  	
   

  	
  PMRA Reg. No. 22024

  

 

“Permits” means any permit, approval,
authorization, license, variance, or other permission or consent required from
a Governmental Entity for operation of the Penta Business under any applicable
Legal Requirement.

 

“Permitted Encumbrances” shall
mean (i) liens for current Taxes, assessments or other claims by a
governmental authority not yet delinquent, or which is being contested in good
faith by appropriate proceedings or for which an appropriate reserve or
security deposit is established, (ii) mechanics’, carriers’, workers’,
repairers’ and similar Encumbrances arising or incurred in the ordinary course
of business, (iii) zoning, entitlement and other land use and
environmental regulations by Governmental Entities, (iv) such other
imperfections in title, charges, easements, restrictions and other encumbrances
that do not materially detract from or materially diminish the value of the
Purchased Assets or do not materially interfere with the present use of such
asset in the Penta Business as currently conducted, and (v) matters
resulting from the actions of Buyer or its agents or Affiliates.

 

“Person” means a corporation, an
association, a partnership, an organization, a business, an individual or a
Governmental Entity.

 

“PMRA” means the Canadian Pest Management
Regulatory Agency and all subdivisions thereof.

 

“Proceedings” means all proceedings,
arbitration, litigation, actions, claims and suits by or before any arbitrator
or Governmental Entity.

 

“Purchase Price” has the meaning
specified in Section 3.1.

 

“Purchased Assets” has the meaning
specified in Section 2.1.

 

4

 

“Real Property” means (i) all land
in which Seller has an ownership interest, (ii) all buildings, structures,
fixtures, and improvements located on such land, including those under
construction, and (iii) means all privileges, rights, easements, and
appurtenances belonging to or for the benefit of such land.

 

“Records” means all information,
regardless of the medium, including schedules, work papers, books, records,
notes, sales and sales promotional data, advertising materials, credit
information, cost and pricing information, equipment maintenance data,
purchasing records and information, supplier lists, business plans, reference
catalogs, purchase orders, sales forms, labels, catalogs, brochures, artwork,
photographs, product display and other similar property, rights and
information.

 

“Retained Liabilities” has the meaning
specified in Section 2.4.

 

“Seller” has the meaning specified in the
opening paragraph of this Agreement.

 

“Supply Agreement” has the meaning specified
in Section 4.2(c).

 

“Taxes” means all federal, state, local,
foreign and other taxes, charges, fees, duties, levies, imposts, customs or
other assessments, including all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, profit sharing, license,
lease, service, service use, value added, withholding, payroll, employment,
excise, estimated, severance, stamp, recording, occupation, premium, property,
windfall profits, or other taxes, fees, assessments, customs, duties, levies,
imposts, or charges of any kind whatsoever, together with any interest,
penalties, additions to tax, fines or other additional amounts imposed thereon
or related thereto, and the term “Tax” means any one of the foregoing Taxes.

 

ARTICLE 2

PURCHASE AND SALE OF ASSETS

 

2.1                               Purchased
Assets.

 

Upon the terms set forth in
this Agreement, at the Closing, Seller shall convey, transfer, assign and
deliver to Buyer, and Buyer shall purchase, free and clear of any Encumbrances,
the following assets and rights of Seller (collectively, the “Purchased Assets”),
excluding for all purposes the Excluded Assets:

 

(a)                                  The registrations of the Penta Products, any
similar registrations under applicable United States or Canadian authorizations
and applications therefor, effective upon approval by the EPA or PMRA, as
required;

 

(b)                                 All
of Seller’s rights to (i) the names of the Penta Products and all
derivatives thereof, (ii) all registered and unregistered trademarks,
service marks, logos, corporate names, and trade names, with respect to the
names of the Penta Products and all derivatives thereof (iii) all related
goodwill, (iv) Seller’s rights to intellectual property embodied in or
required for the operation of the Equipment, to the extent assignable, and (v) all
other intellectual property rights and other intangible assets, including all
efficacy, toxicology, residue, health and environmental data and studies

 

5

 

primarily
relating to Penta and any data compensation rights in respect thereto, (clauses
(i) through (v), collectively, the “Intellectual Property Rights”), and all of
the documentation and other materials, and all Seller’s rights thereto,
primarily associated with the Intellectual Property Rights, including all
manufacturing and product designs, specifications, processes and documentation,
product labels, technical information and all copyrights thereto, but
specifically excluding items described in Section 2.2(f);

 

(c)                                  All
removable equipment, machinery, tools, appliances, implements, spare parts,
supplies, and all other tangible personal property listed on Schedule 2.1(c) (the
“Equipment”),
which shall be purchased on an “AS IS, WHERE IS” basis and shall be free and
clear of all Encumbrances, and subject to Sections 5.14 and 9.4;

 

(d)                                 All
Penta Inventory purchased pursuant to Section 3.1;

 

(e)                                  All
Open Orders and trade accounts receivable for Penta Products shipped after the
Closing Date;

 

(f)                                    Seller’s
rights accruing on or after the Closing under those certain contracts and
agreements described on Schedule 2.1(f) (the “Ordinary Course Agreements”)
and under third party warranties relating to the Purchased Assets, to the
extent such warranties are transferable; and

 

(g)                                 All
Business Records, except that Seller shall have the right to retain copies of
any such Business Records.

 

2.2                               Excluded
Assets.

 

The Purchased Assets shall not include the
following (collectively, the “Excluded Assets”):

 

(a)                                  all
cash and bank accounts of Seller;

 

(b)                                 all
trade accounts receivable for products shipped prior to the Closing Date, and
any claim, remedy, security interest, lien, or other right related to any such
accounts receivable;

 

(c)                                  all
intracompany and intercompany accounts of Seller;

 

(d)                                 all
prepaid expenses of Seller;

 

(e)                                  all
raw materials used in the manufacture of Penta Products, including, but not
limited to, phenol, aluminum chloride, HCL, and Dowtherm®;

 

(f)                                    all
rights to use the designations “Vulcan”, “Vulcan Materials”, “Vulcan Chemicals”,
the Vulcan logo or any other similar marks and derivatives or such names, marks
and other indicia, including domain names and copyrighted works or to the
extent utilizing such names and indicia, together with all of the goodwill
represented thereby or pertaining thereto;

 

6

 

(g)                                 other
than the Intellectual Property Rights, the computer equipment and programs used
in the Penta Business, all policies and procedures of Seller, and all other
intellectual property of Seller to the extent not primarily used in the
operation or conduct of the Penta Business;

 

(h)                                 all
Real Property and all interests of any kind therein;

 

(i)                                     the
claims and rights under all contracts to which Seller is a party not assigned
to and assumed by Buyer hereunder and, in the case of the Ordinary Course
Agreements, claims and rights thereunder to the extent, but only to the extent,
that such claims and rights accrue prior to Closing (for purposes of clarity,
excluding any claims or rights of Seller under third party warranties relating
to the Purchased Assets, to the extent such warranties are transferable);

 

(j)                                     all
other rights and claims of Seller against third parties (including, without
limitation, those not yet ascertained and/or unliquidated) relating to operation
of the Penta Business for the period prior to the Closing Date;

 

(k)                                  all
insurance policies of Seller and all rights of Seller of every nature and
description under or arising out of such insurance policies;

 

(l)                                     all
losses, carryovers and rights to receive refunds with respect to any and all
Taxes of Seller, including interest receivable with respect thereto;

 

(m)                               the
basic books and records of account relating to any Taxes of Seller;

 

(n)                                 the
business of Seller or VMC, except as expressly included in the definition of
the Purchased Assets, none of which shall relate exclusively to the manufacture
or sale of the Penta Products;

 

(o)                                 all
supplies, equipment, office furnishings, computer equipment, vehicles, trucks,
trailers, machinery and other tangible personal property not included in the
Equipment; and

 

(p)                                 all
other assets, properties and rights of Seller that are not Purchased Assets.

 

2.3                               Assumed
Liabilities.

 

Subject to Section 2.4, Buyer
shall assume the rights and obligations of Seller under the unfilled,
non-delinquent customer purchase orders received in the ordinary course of
business for which no payment has been collected (“Open Orders”) and
under the Ordinary Course Agreements and trade accounts payable of the Penta
Business properly accrued after the Closing. 
Notwithstanding the foregoing, the Ordinary Course Agreements shall be
assumed by Buyer to the extent and only to the extent the duties and
obligations thereunder accrue on or after the Closing Date, excluding any
Retained Liabilities (collectively, the “Assumed Liabilities”).  Nothing in this Section shall operate to
reduce Buyer’s obligations with respect to remittances under Section 9.1.

 

7

 

2.4                               Limitation
of Liabilities.

 

Except as otherwise expressly provided in Section 2.3,
Buyer does not assume and is not in any way liable or responsible for any
liabilities or obligations of Seller or VMC, whether fixed or contingent, and
whether known or unknown (“Retained
Liabilities”).  Without
limiting the generality of the foregoing, except to the extent specifically
provided in Section 2.3, Buyer shall not assume, or take
responsibility for:

 

(a)                                  Accounts
payable of the Penta Business as of the Closing including, (i) all trade
accounts payable and other obligations of payment to providers of goods and
services, (ii) all other accounts and notes payable and (iii) any
obligations, penalties, judgments and other liabilities related thereto, in
each case properly accrued prior to the Closing;

 

(b)                                 Any
liability or obligation for any and all Taxes of, or pertaining or attributable
to (i) the Penta Business and/or the Purchased Assets for any period or
portion thereof that ends on or before the Closing or (ii) Seller or VMC,
including any and all Taxes described in clauses (i) and (ii) of
this Section 2.4(b) for which liability is or may be sought to
be imposed on Buyer under any successor liability, transferee liability or
similar provision of any applicable federal, foreign, state or local law;

 

(c)                                  Liabilities
or obligations of Seller or VMC under any note, bond or other instrument;

 

(d)                                 Any
defects in or Claims related to products manufactured, formulated, stored,
handled, transported, maintained, sold or distributed in connection with the
Penta Business prior to the Closing, or any liability or obligation of Seller
or VMC in respect of any express or implied representation, warranty, agreement
or guaranty made (or claimed to have been made), or imposed (or asserted to be
imposed) by operation of law, in connection with the Penta Business prior to
the Closing;

 

(e)                                  Any
obligation (including indemnification and other contingent obligations)
relating to (i) acts or omissions in connection with the Penta Business, (ii) goods
or services provided to or for the benefit of Seller or VMC, (iii) goods
or services provided as part of the Penta Business prior to the Closing, (iv) any
Proceedings or Claims arising during any period prior to the Closing that are
related to acts or omissions of Seller or VMC, including any liability arising
out of the payment or non-payment of worker’s compensation premiums on behalf
of employees or other issues arising out of the coverage of employees with
respect to worker’s compensation insurance, or (v) any liability that accrued
under any Ordinary Course Agreement prior to the Closing;

 

(f)                                    Any
statutory liens accrued or existing at the time of the Closing against the
Purchased Assets;

 

(g)                                 Any
violation of, or default under, any Legal Requirements prior to the Closing,
including Environmental Laws, which affects the ownership or operation of the
Purchased Assets or results in any change in the Assumed Liabilities, or any
remedial obligation under any Environmental Law arising out of or related to
the ownership or operation of the Purchased Assets prior to the Closing;

 

8

 

(h)                                 Any
liability resulting from or relating to the employment relationship between
Seller or its Affiliates, or VMC, and any of their present or former employees
or the termination of any such employment relationship, including accrued
severance pay and other similar benefits, if any, and any claim filed at any
time by or on behalf of any employee or former employee relating to the
employment or termination of employment of any such employee, including any
claim for wrongful discharge, breach of contract, unfair labor practice,
employment discrimination, unemployment compensation or workers’ compensation
on or prior to the Closing;

 

(i)                                     Any
liabilities or obligations of Seller arising from or incurred in connection
with the negotiation, preparation or execution of this Agreement or the
transactions contemplated hereby, including fees and expenses of counsel; or

 

(j)                                     Any
liabilities or obligations of VMC.

 

ARTICLE 3

PURCHASE PRICE

 

3.1                               Purchase
Price.

 

Subject to the terms and conditions of this
Agreement, the aggregate purchase price for the Purchased Assets (the “Purchase Price”)
shall be the sum of (i) Thirteen Million Dollars ($13,000,000) plus (ii) the
aggregate cost of the Penta Inventory (the “Aggregate Inventory Cost”), in
accordance with Section 9.3, all which shall be paid by delivery of
the following at the Closing:

 

(a)                                  a wire transfer of immediately available
funds in the amount of Three Million Dollars ($3,000,000) plus the Aggregate
Inventory Cost to an account specified in writing to Buyer by Seller at least
three (3) business days before the Closing Date; and

 

(b)                                 a promissory note, substantially in the form
of Exhibit A hereto (the “Note”), in the principal amount of Ten
Million Dollars ($10,000,000), payable in five (5) annual installments of
Two Million Dollars ($2,000,000), and bearing interest on the then outstanding
principal amount at the rate of four percent (4%) per year, starting from the
Closing Date.  Each annual installment
plus accrued interest shall be due and payable to Seller on each subsequent
anniversary of the Closing Date.

 

3.2                               Allocation
of Purchase Price.

 

The Purchase Price shall be
allocated for purposes of this Agreement and for federal, state and local tax
purposes in such manner as is agreed to by the parties.  The parties shall reach such agreement in a
timely manner and in conjunction with Seller’s obligation to reach a similar
agreement with VMC.  The consideration
shall be allocated among the Assets in the manner required by Section 1060
of the Code and the regulations thereunder. 
Each of Buyer and Seller shall file on a timely basis all federal,
state, local and foreign tax returns and reports, including, the “Asset Acquisition
Statement under Section 1060” on Form 8594 to be filed with the
Internal Revenue Service with respect hereto, in accordance with such
allocation.  If the parties are unable to
agree on such allocation in the time and manner contemplated earlier in this
Section, any disputed items shall be resolved by the an independent nationally
recognized auditing firm, acceptable to both parties (the

 

9

 

“Neutral Auditors”).  The determination of the Neutral Auditors
shall be final and binding upon both parties, and each party shall bear 50% of
the costs, fees and expenses of the Neutral Auditors relating to the
allocation.  The parties shall not file
(and shall cause their respective Affiliates not to file) any tax return or
other documents or otherwise take any position with respect to taxes which is
inconsistent with such allocation of the final Purchase Price; provided,
however, that neither party (nor its Affiliates) shall be obligated to litigate
any challenge to such allocation of the final Purchase Price by any
Governmental Entity.  The parties shall
promptly inform one another of any challenge by any Governmental Entity to any
allocation made pursuant to this Section 3.2 and agree to consult
with and keep one another informed with respect to the state of, and any
discussion, proposal or submission with respect to, such challenge.

 

ARTICLE 4

CLOSING

 

4.1                               Closing.

 

The consummation of the transactions
contemplated by this Agreement (the “Closing”) will take place at the offices of Wachtell,
Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York, on the
date that Seller closes the acquisition by Seller from VMC of the Purchased
Assets or such other mutually agreed time and place.  The documents to be delivered at the Closing
may be delivered by electronic transmission, to be followed by exchange of
original counterparts.

 

4.2                               Deliveries
by Seller.

 

At Closing, Seller shall hereby deliver to
Buyer the following:

 

(a)                                  Certificate
of the Secretary of State of the State of Delaware attesting to the due
organization and good standing of Seller as a limited liability company in its
jurisdiction of incorporation;

 

(b)                                 A
certificate of an executive officer of Seller dated as of the Closing
certifying that all required corporate authorizations and approvals for the
execution of this Agreement and all other documentation executed in connection
herewith, and for the consummation of the transactions contemplated hereby and
thereby, has been received and duly recorded; and

 

(c)                                  Executed
counterparts of a Bill of Sale, substantially in the form attached hereto as Exhibit B
(the “Bill of Sale”),
an Assumption Agreement, substantially in the form attached hereto as Exhibit C
(the “Assumption
Agreement”), the Penta Products registration transfers with the
EPA and PMRA in the forms attached hereto as Exhibit D, and a
Chlorine Supply Agreement in the form attached hereto as Exhibit E
(“Supply Agreement”).

 

4.3                               Deliveries
by Buyer.

 

At Closing, Buyer shall hereby deliver the
following to Seller:

 

(a)                                  Certificate
of the Secretary of State of the State of Delaware attesting to the due
organization and good standing of Buyer as a corporation in its jurisdiction of
incorporation;

 

10

 

(b)                                 A
certificate of an executive officer of Buyer dated as of the Closing certifying
that all required corporate authorizations and approvals for the execution of
this Agreement and all other documentation executed in connection herewith, and
for the consummation of the transactions contemplated hereby and thereby, has
been received and duly recorded;

 

(c)                                  Executed
counterparts of the Assumption Agreement and Supply Agreement;

 

(d)                                 The
Purchase Price in accordance with Section 3.1, including the Note;
and

 

(e)                                  Buyer’s
Estimated Ad Valorem Share in accordance with Section 8.4.

 

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller hereby represents and warrants to
Buyer as follows:

 

5.1                               Organization
and Existence.

 

Seller is a limited liability
company, duly organized, validly existing and in good standing under the laws
of the State of Delaware, with all necessary company power and authority to own
the Purchased Assets and to carry on the Penta Business.  Seller is in good standing in all
jurisdictions in the United States and Canada in which the character of the
Purchased Assets or the nature of the Penta Business currently conducted by it
requires it to be so qualified or licensed unless the failure to so qualify or
be licensed would not reasonably be expected to have a MAE.

 

5.2                               Authority.

 

Seller has all necessary corporate power and
authority to execute, deliver, and perform this Agreement and the other
agreements and instruments to be executed and delivered by it in connection
with the transactions contemplated hereby and thereby, has taken all necessary
action to authorize the execution and delivery of this Agreement and such other
agreements and instruments and the consummation of the transactions
contemplated hereby and thereby.  This
Agreement is, and the other agreements and instruments to be executed and
delivered by Seller in connection with the transactions contemplated hereby
shall be, the legal, valid, and binding obligations of Seller, enforceable in
accordance with their terms, except to the extent the enforceability hereof and
thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or
other laws relating to or affecting creditors’ rights generally or by general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).

 

5.3                               No
Violations.

 

The execution and delivery of this Agreement
by Seller, the fulfillment of and compliance by it with the terms and
conditions hereof and the consummation of the transactions by it contemplated
hereby will not, except as specifically described in Schedule 5.3:

 

11

 

(a)                                  Violate
any of the provisions of Seller’s articles of incorporation or bylaws, or any
agreement to which Seller is a party;

 

(b)                                 Result
in a breach of any Ordinary Course Agreement or any material contract,
agreement, note, mortgage, indenture or instrument to which Seller is a party
or by which Seller is bound or to which any of the Purchased Assets is subject,
except where such breach would not have a MAE on the Penta Business or
Purchased Assets;

 

(c)                                  Result
in the creation of any Encumbrance on any of the Purchased Assets, or otherwise
give any Person the right to terminate any Open Order or Ordinary Course
Agreement or other agreements assumed by Buyer, except where such Encumbrance
would not have a MAE on the Penta Business or Purchased Assets;

 

(d)                                 Violate
any Legal Requirement applicable to or binding upon Seller or the Purchased
Assets, other than such violations as would not have a MAE on the Penta
Business or Purchased Assets; or

 

(e)                                  Require
any consent, approval or authorization from any Person other than those the
failure of which to obtain would not have a MAE on the Penta Business or
Purchased Assets.

 

5.4                               Governmental
Approval.

 

Except as set forth in Schedule 5.4,
no consent, approval, waiver, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required to be obtained
or made in connection with the execution and delivery of this Agreement by
Seller or the consummation by Seller of the transactions contemplated hereby.

 

5.5                               Seller
Proceedings.

 

(a)                                  There
are no Proceedings pending, instituted or, to Seller’s Knowledge, threatened
against Seller and relating to the Penta Business or the Purchased Assets or
that challenge or seek injunctive relief with respect to the transactions
contemplated by this Agreement;

 

(b)                                 Except as provided in Schedule 5.5,
to Seller’s Knowledge, there is no action, suit, investigation, audit,
claim or assessment pending or threatened in writing with respect to the Penta
Business or the Purchased Assets; and

 

(c)                                  There
are no investigations or inquiries pending, instituted or, to Seller’s
Knowledge, threatened against Seller that challenge or seek injunctive relief
with respect to the transactions contemplated by this Agreement.

 

5.6                               No Brokers.

 

Seller has not employed or authorized anyone
to represent it as a broker or finder in connection with the transactions
contemplated by this Agreement, and no broker or other Person is entitled to
any commission or finder’s fee from Seller in connection with such
transactions.

 

12

 

5.7                               Ownership of
Purchased Assets.

 

Seller owns good title to the
Purchased Assets, free and clear of all Encumbrances, and, upon Seller’s
execution and delivery of this Agreement and Seller’s execution and delivery of
the Bill of Sale, Buyer will own good title to the Purchased Assets, free and
clear of all Encumbrances.  No Affiliate
of Seller owns any part of the Purchased Assets (including the Business
Records).

 

5.8                               Environmental
Matters.

 

(a)                                  Neither
Seller nor, to Seller’s Knowledge, VMC, has received any written notice of any
investigation or inquiry by any Governmental Entity under any applicable
Environmental Laws relating to the Penta Business or the ownership or operation
of the Purchased Assets.

 

(b)                                 Except
as to matters that would not constitute a MAE, Seller and, to Seller’s
Knowledge, the Penta Business of VMC and the Purchased Assets are in material
compliance with all of the terms and conditions of all Permits required under,
and all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained in,
all applicable Environmental Laws.

 

(c)                                  Neither
Seller nor, to Seller’s Knowledge, VMC, has received any written notice from
any Governmental Entity regarding (i) any actual, alleged, possible or
potential violation of or failure to comply with any term or requirement of any
Permit that pertains to applicable Environmental Laws or (ii) any actual,
proposed, possible or potential revocation, withdrawal, suspension,
cancellation, termination of or modification to any such Permit.

 

5.9                               Compliance With
Laws.

 

Except as would not have a
Seller MAE:

 

(a)                                  To
Seller’s Knowledge, the Penta Business of VMC is being, and since January 1,
2003 has been, conducted in all material respects in compliance with each law, rule, regulation, code, directive,
order, injunction, judgment, decree of any Governmental Entity, or other
legally enforceable requirement or guideline (collectively, “Legal
Requirements”) applicable to VMC in the operation of the
Penta Business or the ownership or use of the Purchased Assets, considered
without regard to environmental matters, which are addressed in Section 5.8;

 

(b)                                 To Seller’s Knowledge, VMC has not received any notice or other
communication (written or otherwise) from any Governmental Entity regarding any
actual, alleged, possible or potential violation of, or failure to comply with,
any Legal Requirement applicable to VMC in the operation of the Penta
Business or the ownership or use of the Purchased Assets, considered without
regard to environmental matters, which are addressed in Section 5.8.

 

5.10                        Financial
Information.

 

To Seller’s Knowledge, a schedule of
the annual net sales revenues of the Penta Business for the five calendar years
ended December 31, 2004 has been previously delivered to Buyer that is
true and correct in all material respects. 
Neither Seller, nor, to Seller’s Knowledge, VMC, has entered

 

13

 

into any
agreement granting to any third person a right to purchase, lease or otherwise
acquire any assets or interests comprising the Purchased Assets.

 

5.11                        Intangible
Assets.

 

To Seller’s Knowledge, there are no pending or threatened
infringement claims against Seller or VMC by any Person with respect to any of
the Intellectual Property Rights.  To
Seller’s Knowledge, the use of the Intellectual Property Rights does not and
the conduct of the Penta Business as presently conducted does not, infringe on
the rights of any other Person, except as would not reasonably be expected to
have a MAE on the Penta Business.

 

5.12                        Instruments
in Full Force and Effect.

 

To Seller’s Knowledge, the Ordinary Course
Agreements and Open Orders constituting a part of the Purchased Assets (the “Instruments”) are
valid, binding and in full force and effect, have not been amended or supplemented
in any manner or respect except as disclosed, and upon assignment and
assumption, with applicable consents if necessary, will be enforceable by Buyer
in accordance with their respective terms. 
To Seller’s Knowledge, there are no defaults thereunder by any party
thereto, and, to Seller’s Knowledge, no event has occurred that with the lapse
of time or action or inaction by any party thereto would result in a violation
thereof or a default thereunder.

 

5.13                        Taxes.

 

To Seller’s Knowledge, (i) all
Tax returns required to be filed by or with respect to VMC’s Penta Business or
the Purchased Assets for any period ending on or before the Closing Date have
been or will be timely filed (taking into account any extensions validly
obtained) and all such Tax returns are complete and accurate in all material
respects, and (ii) none of the Purchased Assets is subject to any lien
arising in connection with any failure or alleged failure to pay any Tax, and
all Taxes due and owing (whether or not shown on any Tax return) with respect
to the Purchased Assets have been or will be timely paid, other than such
failures to pay such Taxes as would not result in an Encumbrance upon the
Purchased Assets or in Buyer becoming liable or responsible therefor.

 

5.14                        DISCLAIMER
OF REPRESENTATIONS AND WARRANTIES.

 

Except for the express
representations and warranties by Seller in this Agreement, (i) Buyer has
made its own independent inspection and investigation of the Equipment and the
condition thereof and is purchasing the Equipment AS IS, WHERE IS AND WITH ALL
FAULTS, (ii) Seller disclaims any warranty of merchantability or fitness
for a particular purpose, (iii) Seller disclaims all liability and
responsibility for any representation, warranty, statement or information
(financial or otherwise) made or communicated (orally or in writing) to Buyer
or any of its affiliates, or their respective employees, agents, consultants or
representatives, and (iv) Seller makes no representation or warranty
regarding the future success or profitability of the Penta Business.

 

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer hereby represents and warrants to
Seller as follows:

 

14

 

6.1                               Organization
and Existence.

 

Buyer is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with all necessary corporate power and authority to own the Purchased Assets
and to carry on the Penta Business. 
Buyer is in good standing in all jurisdictions in the United States and
Canada in which the character or the nature of the business currently conducted
by it requires it to be so qualified or licensed unless the failure to so
qualify or be licensed would not reasonably be expected to have a MAE.

 

6.2                               Authority.

 

Buyer has all necessary corporate power and
authority to execute, deliver, and perform this Agreement, the Note and the
other agreements and instruments to be executed and delivered by it in
connection with the transactions contemplated hereby and thereby, has taken all
necessary action to authorize the execution and delivery of this Agreement, the
Note and such other agreements and instruments and the consummation of the
transactions contemplated hereby and thereby. 
This Agreement, the Note and the other agreements and instruments to be
executed and delivered by Buyer in connection with the transactions
contemplated hereby shall be the legal, valid, and binding obligations of
Buyer, enforceable in accordance with their terms, except to the extent the enforceability
hereof and thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or other laws relating to or affecting creditors’ rights
generally or by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

 

6.3                               No
Violations.

 

The execution and delivery of this Agreement
and the Note by Buyer, the fulfillment of and compliance by it with the terms
and conditions hereof and the consummation by it of the transactions contemplated
hereby will not:

 

(a)                                  Violate
any of the terms of Buyer’s certificate of incorporation or bylaws, or any
agreement to which Buyer is a party;

 

(b)                                 (i) With
respect to this Agreement, result in a breach of any material contract,
agreement, note, mortgage, indenture or instrument to which Buyer is a party or
by which Buyer is bound or result in the creation of any Encumbrance on any of
its assets, which breach or default would reasonably be expected to have a MAE
on Buyer, or (ii) with respect to the Note, result in a breach of any
contract, agreement, note, mortgage, indenture or instrument to which Buyer is
a party or by which Buyer is bound or result in the creation of any Encumbrance
on any of its assets, which has an adverse impact on the ability of Buyer to
perform its obligations under the Note;

 

(c)                                  To
Buyer’s Knowledge, violate any provision of any law, statute, rule or
administrative regulation or any judgment, order, injunction or decree of any
Governmental Entity applicable to or binding upon Buyer or any of its
Affiliates; or

 

15

 

(d)                                 (i) With
respect to this Agreement, require the consent or approval of any Person other
than those the failure of which to obtain would not have a MAE on Buyer, or (ii) with
respect to the Note, require the consent or approval of any Person other than
those the failure of which to obtain would have an adverse impact on the
ability of Buyer to perform its obligations under the Note.

 

6.4                               Governmental
Approval.

 

Except for the EPA and PMRA approvals
required for transfer of the registrations of the Penta Products, no consent,
approval, waiver, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made in
connection with the execution and delivery, of this Agreement by Buyer or the
consummation by Buyer of the transactions contemplated herein.

 

6.5                               Buyer
Proceedings.

 

Buyer is not the subject of any current
bankruptcy proceeding.  There are no Proceedings,
suits or investigations pending, instituted or, to Buyer’s Knowledge, threatened against Buyer or its Affiliates
that could reasonably be expected to have a MAE on Buyer or in which Buyer
would be declared insolvent or the subject of any bankruptcy or reorganization
laws or procedures.

 

6.6                               No Brokers.

 

Buyer has not employed or authorized anyone
to represent it as a broker or finder in connection with the transactions contemplated
by this Agreement, and no broker or other Person is entitled to any commission
or finder’s fee from Buyer in connection with such transactions.

 

ARTICLE 7 

REPRESENTATIONS AND WARRANTIES OF GUARANTOR

 

Guarantor hereby represents and warrants to
Seller as follows:

 

7.1                               Organization
and Existence.

 

Guarantor is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with all necessary corporate power and authority to guarantee Buyer’s
obligations under this Agreement.

 

7.2                               Authority.

 

Guarantor has all necessary corporate power
and authority to execute, deliver, and perform its obligations under this
Agreement and the other agreements and instruments to be executed and delivered
by it in connection with the transactions contemplated hereby and thereby, has
taken all necessary action to authorize the execution and delivery of this
Agreement and such other agreements and instruments and the consummation of the
transactions contemplated hereby and thereby. 
This Agreement is, and the other agreements and instruments to be executed
and delivered by Guarantor in connection with the transactions contemplated
hereby shall be, the legal, valid, and

 

16

 

binding obligations of
Guarantor, enforceable in accordance with their terms, except to the extent the
enforceability hereof and thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or other laws relating to or affecting creditors’
rights generally or by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

 

7.3                               No
Violations.

 

The execution and delivery of this Agreement
by Guarantor, the fulfillment of and compliance by it with the terms and
conditions hereof and the consummation by it of the transactions contemplated
hereby will not:

 

(a)                                  Violate
any of the terms of Guarantor’s certificate of incorporation or bylaws, or any
agreement to which Guarantor is a party;

 

(b)                                 Result
in a breach of any material contract, agreement, note, mortgage, indenture or
instrument to which Guarantor is a party or by which Guarantor is bound or
result in the creation of any Encumbrance on any of its assets, which breach or
default would reasonably be expected to have a MAE on Guarantor;

 

(c)                                  To
Guarantor’s Knowledge, violate any provision of any law, statute, rule or
administrative regulation or any judgment, order, injunction or decree of any
Governmental Entity applicable to or binding upon Guarantor or any of its
Affiliates; or

 

(d)                                 Require
any consent or approval of any Person other than those the failure of which to
obtain would not have a MAE on Guarantor.

 

7.4                               Governmental
Approval.

 

No consent, approval, waiver, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained or made in connection with the execution and
delivery, of this Agreement by Guarantor or the consummation by Guarantor of
the transactions contemplated herein.

 

7.5                               Guarantor
Proceedings.

 

There are no Proceedings, suits or investigations
pending, instituted or, to Guarantor’s Knowledge, threatened against Guarantor or its
Affiliates that could reasonably be expected to have a MAE on the business or
financial condition of Guarantor taken as a whole or that, if adversely
determined, would delay or prevent the consummation of the transactions
contemplated by this Agreement.

 

ARTICLE 8

COVENANTS

 

Seller and Buyer hereby covenant and agree as
follows:

 

17

 

8.1                               Confidentiality.

 

(a)                                  For
a period of five (5) years from the Closing Date, Seller shall maintain in
strict confidence all Confidential Information and disclose such Confidential
Information only (A) to its employees and duly authorized agents and
representatives who have been informed of the obligations of the parties under
this Agreement with respect to such Confidential Information, who have a need
to know information in connection with consummating the transactions
contemplated herein, and who agree to keep such information confidential, or (B) as
required by legal process (of which the other party shall be given prompt
notice).  Seller shall be responsible for
any breach of this Section 8.1 with respect to such Confidential
Information by any of its representatives and agrees to take all reasonable
measures to restrain its representatives from prohibited or unauthorized
disclosure of the Confidential Information. 
For the purpose of this Section 8.1(a), the term “Confidential Information”
means confidential or proprietary information that relates primarily to the
Penta Business, the Purchased Assets or the Assumed Liabilities and is the
subject of efforts that under the circumstances are reasonable to maintain its
confidentiality; provided however “Confidential Information” shall not mean (A) information
generally available to the public which has not become available as a result of
disclosure in violation of this Section 8.1 and (B) information
which becomes available on a non-confidential basis from a source other than
Seller or its representatives, provided that such source is not known by Seller
to be bound by a confidentiality agreement or other obligation of secrecy to
another party to this Agreement or its representative.

 

(b)                                 No
press release, public announcement, confirmation or other information regarding
this Agreement or the contents hereof shall be made by Buyer or Seller without
prior consultation with Buyer and Seller, except as may be necessary in the
opinion of counsel to any party to meet any Legal Requirements (including
disclosure requirements in connection with securities laws and regulations or
exchange rules) or the determination of any court.

 

8.2                               Employees
and Employee Benefits.

 

It is understood and agreed that Buyer is not
hiring any employees of Seller or VMC in connection with the transactions
contemplated by this Agreement.  To the
extent that any employees of Seller or VMC are terminated in connection with
this transactions contemplated under this Agreement, Seller shall be
responsible for such termination and any liability associated therewith under Section 2.4(h).

 

8.3                               Taxes
Resulting From Sale.

 

Buyer shall be responsible for
any documentary, excise, stamp, and transfer taxes and any sales, use or other
Taxes imposed by reason of the sale or transfer of the Assets contemplated
hereunder, regardless of which party has liability for such Tax under Legal
Requirements, and any deficiency, interest or penalty asserted with respect
thereto; provided, however, that Seller shall be responsible for all Taxes related
to the income of Seller or its Affiliates resulting from or in connection with
the sale of the Purchased Assets pursuant to this Agreement.  Buyer shall pay the fees and costs of its
recording or filing any conveyance instruments, and all third party costs of
applying for new permits in replacement of the Permits and obtaining the
transfer of existing Permits which may be lawfully transferred.

 

18

 

8.4                               Ad-Valorem
Taxes.

 

Ad valorem property Taxes
imposed on or with respect to the Equipment removed and Penta Inventory
purchased by Buyer for the taxable period that contains the Closing Date shall
be prorated between Seller and Buyer based on the relative number of days prior
to the Closing Date and on and after the Closing Date during the taxable
period, with Seller being responsible for such ad valorem property Taxes and
Buyer reimbursing Seller for prorated ad valorem property Taxes for the period
on and after the Closing Date.  Buyer’s
reimbursement of the prorated post-Closing ad valorem property Taxes shall be
an addition to the Purchase Price.  As an
estimate of the amount of post-Closing ad valorem property taxes that Buyer
would be required to reimburse Seller hereunder (“Buyer’s Estimated Ad Valorem Share”),
Buyer shall deliver Ten Thousand Dollars ($10,000) to Seller at the
Closing.  Seller shall be responsible as
between Seller and Buyer for the payment of the total amount of ad valorem
property Taxes imposed on or with respect to the Purchased Assets for the
taxable period that contains the Closing Date. 
Upon receipt of the ad valorem property Tax bills for the taxable period
that contains the Closing Date, Seller shall calculate the prorated ad valorem
property Taxes and shall refund to Buyer the amount, if any, by which Buyer’s
prorated share of such ad valorem property Taxes hereunder is less than Buyer’s
Estimated Ad Valorem Share.  The maximum
amount of ad valorem Taxes that Buyer shall be required to bear hereunder is
Buyer’s Estimated Ad Valorem Share, regardless of whether the actual prorated
amount of such ad valorem Taxes calculated hereunder exceed Buyer’s Estimated
Ad Valorem Share.

 

8.5                               Expenses.

 

Except as otherwise expressly provided in
this Agreement, each of the parties hereto shall assume and bear all expenses,
costs and fees incurred or assumed by such party in the preparation and
execution of this Agreement and in compliance with and performance of the
agreements and covenants contained in this Agreement.

 

8.6                               Agreement to
Not Compete.

 

In consideration of the Purchase Price and as
an inducement for Buyer to enter into this Agreement, Seller agrees that,
effective as of the date hereof and for a period of sixty (60) months hereafter
(the “Non-Compete Term”),
none of Seller or its Affiliates shall, without the consent of Buyer, directly
or indirectly, own, engage in, manage, operate, join, control, finance or
participate in the ownership, management, operation, control or financing of,
or be connected as an employer, principal, agent, representative, consultant,
investor, owner (including shareholder), lender, partner, manager, joint
venturer or otherwise with, or permit its name to be used by or in connection
with the Penta Business or the manufacture,
formulation, distribution or sales of pentachlorophenol or solvents for
pentachlorophenol used to pressure treat wood in the United States and/or
Canada.  Notwithstanding the foregoing,
Seller shall be entitled to own up to twenty-five percent (25%) of any class of
equity securities of any such competitive Person if (x) such equity
securities are listed on a national or regional securities exchange or
registered under Section 12(g) of the Securities Act of 1933, or
(y) such Person does not derive more than ten percent (10%) of their net
sales revenue from the business of such Person that competes with the Penta
Business of Buyer, provided, in each case, that Seller does not participate in
the activities or operations of such Person.

 

19

 

8.7                               Specific
Performance.

 

Seller acknowledges and agrees that any
breach of the restrictive covenants set forth in Section 8.6 hereof
will result in irreparable damage to Buyer for which there will be no adequate
remedy at law, and Seller consents to an injunction, issued by any court of
competent jurisdiction, in favor of Buyer, enjoining any breach of such
covenant, without prejudice to any other right or remedy to which Buyer may be
entitled.  In the event that any part of Section 8.6
herein is determined by any court of competent jurisdiction to be
unenforceable by reason of its being extended for too great a period of time or
too large a geographic area or over too great a range of activities, that section is
to be interpreted to extend only over the maximum period of time, geographic
area or range of activities required to render it valid and enforceable.

 

ARTICLE 9

POST-CLOSING SERVICES

 

9.1                               Remittances.

 

Buyer shall timely pay
Seller the full unpaid amount due for the accounts receivable of Seller that
are attributable to Buyer’s purchases from the Penta Business operated by VMC
prior to the Closing Date.  Commencing as
of the Closing Date and for a transition period not to exceed one hundred
eighty (180) days, Buyer shall use its good faith efforts to assist Seller in
collecting the uncollected accounts receivable of the Penta Business that are
Excluded Assets.  To the extent that
Buyer receives payments of receivables that are Excluded Assets, Buyer shall
forward amounts so collected to Seller at the end of each month.  From and after the Closing Date, Seller will
remit (and will cause VMC to remit) to Buyer, within one month following
receipt thereof, any payments received by Seller or VMC with respect to Open
Orders, Ordinary Course Agreements, and Penta Products sold by Buyer, or other
amounts properly payable to Buyer hereunder.

 

9.2                               Delivery of
Purchased Assets.

 

At Closing or as directed otherwise by Buyer,
Seller shall deliver to Buyer all of the Purchased Assets other than the Penta
Inventory and the Equipment.  For the
first ninety (90) days following the Closing Date, Seller shall deliver the
Penta Inventory to Buyer, or to third parties on behalf of Buyer, as directed
by Buyer.  Thereafter, any Penta
Inventory for which Buyer has not provided delivery instructions will be
delivered by Seller to Buyer’s Tuscaloosa, Alabama facility.  Buyer shall bear the transportation and
insurance costs associated with all deliveries of Penta Inventory under this Section 9.2.  Seller shall deliver the Equipment in accordance
with Section 9.4.

 

9.3                               Transition
Activities.

 

If Seller has phenol in stock as of the
Closing Date, Seller may elect to continue to operate the Equipment for a
period of thirty (30) calendar days, at Seller’s sole cost and expense, in
order to convert all of such phenol into finished Penta Products.  Seller shall sell only to Buyer, and Buyer
shall purchase, all such Penta Products that meet the relevant Vulcan Chemicals
Pentachlorophenol Product Specification and shall pay Seller for such Penta Products
at Seller’s cost therefor.  Seller shall
supply Buyer with pentachlorophenol not meeting the relevant product
specifications that is stored at the Facility as of the Closing Date, at no
additional cost, on an “AS IS, WHERE IS” basis,

 

20

 

FOB the
Facility, up to the maximum of ten (10) short tons.  Buyer and Seller shall mutually agree as to
the purchase or other disposition of any additional pentachlorophenol products
not conforming to specifications, however, in the absence of any written
agreement regarding the same, Seller shall remain responsible for the disposal
of such additional products in accordance with Legal Requirements, and all
costs and expenses associated therewith. 
Except as
otherwise specified in this Agreement, Seller shall bear all costs associated
with its operation of the Equipment during such period.

 

9.4                               Removal of
Equipment.

 

Seller shall be solely responsible for the
dismantling and cleaning the Equipment, at all times in accordance with
standard industry requirements for dismantling and cleaning such equipment,
including all costs associated with such cleaning.  Seller shall dismantle and clean the
Equipment within six (6) weeks following the Closing Date, or if Seller
continues production of Penta Products under this Agreement, six (6) weeks
following cessation of such production by Seller.  Buyer shall select the Equipment that it will
remove within three (3) weeks after Closing Date.  Buyer shall remove (or cause the removal of)
the selected Equipment from the Facility within four (4) months following
written notice from Seller that it has completed its cleaning obligations
hereunder.  The removal shall take place
during Seller’s normal business hours, shall comply with Seller’s reasonable
policies and procedures applicable to third parties undertaking similar work at
the Facility, and shall not unduly disrupt Seller’s other business
activities.  Buyer shall be responsible
for all shipping costs and for reasonable repair expenses for damage to Seller’s
property caused by removal of the selected Equipment by Buyer, its Affiliates
or agents.  Buyer shall notify Seller of
the expected date, scope of the work, and identity of any third parties
requiring access to the Facility prior to the removal of the selected
Equipment; the scope of the work as well as the employment of any third parties
must be approved by Seller prior to the removal of the removable machinery and
equipment.  The parties shall cooperate
to obtain any necessary permits and approvals of Governmental Entities and any
other third parties for the removal of the selected Equipment or any portion
thereof that Buyer elects to remove. 
Seller shall be responsible for the first $150,000 of costs associated
with the obtaining of necessary permits and approvals and the dismantling,
removal and packing of the selected Equipment, including rigging company
charges.  Buyer shall be responsible for
any such costs in excess of the first $150,000. 
Any Equipment that Buyer elects not to remove shall remain the
responsibility of Seller.

 

ARTICLE 10

INDEMNIFICATION

 

10.1                        Indemnification
by Seller.

 

Seller agrees to indemnify, defend and hold
Buyer and its Affiliates, officers, directors, employees or agents (“Buyer Indemnified Parties”)
harmless from and against any and all Claims sustained by Buyer or any of its
Affiliates based upon, arising out of or otherwise in respect of (i) the
inaccuracy of any representation or warranty, or the breach of any covenant or
agreement, of Seller contained in this Agreement, (ii) any liabilities of
Seller fixed, contingent or otherwise, including (A) any liabilities
related to the ownership, management or use of the Purchased Assets or
operation of the Penta Business prior to the Closing, or related to the
Penta Inventory while at the Facility after the Closing or to the Equipment
during the post-Closing operation by Seller thereof pursuant to

 

21

 

Section 9.3, and (B) all Retained Liabilities,
or (iii) any act of omission of Seller, prior to the Closing, with respect
to the Open Orders (specifically excluding the fact that delivery has not
occurred thereunder) or the Ordinary Course Agreements; in each case, exclusive
of the Assumed Liabilities.

 

10.2                        Indemnification
by Buyer.

 

Buyer agrees to indemnify, defend and hold
Seller and its Affiliates, officers, managers, employees or agents (“Seller Indemnified Parties”)
harmless from and against any and all Claims sustained by Seller or any of its
Affiliates based upon, arising out of or otherwise in respect of (i) the
inaccuracy of any representation or warranty, or the breach of any covenant or
agreement, of Buyer contained in this Agreement, (ii) any liabilities
of Buyer fixed, contingent or otherwise, including (A) any liabilities
related to the ownership, management or use of the Purchased Assets or
operation of the Penta Business after the Closing, except those related to the
Penta Inventory while at the Facility after the Closing or to the Equipment
during the post-Closing operation by Seller thereof pursuant to Section 9.3,
and (B) all Assumed Liabilities, or (iii) any act of omission of Buyer, after the Closing,
with respect to the Open Orders or the Ordinary Course Agreements; in each
case, exclusive of the Retained Liabilities.

 

10.3                        Indemnification
Procedure.

 

Any Seller Indemnified Party or Buyer
Indemnified Party seeking information or reimbursement for Claims hereunder
(the “Indemnified Party”)
shall as promptly as practical notify the party from which such indemnification
is sought (the “Indemnifying
Party”) upon which the Indemnified Party intends to base a claim
for indemnification or reimbursement hereunder; provided, however, that the
failure of an Indemnified Party so to notify the Indemnifying Party shall not
relieve the Indemnifying Party from any liability under this Agreement to the
Indemnified Party with respect to such Claim except to the extent the
Indemnifying Party is actually prejudiced or damaged by the failure to receive
timely notice. In the event of any claims for indemnification or reimbursement,
the Indemnifying Party, at its option, may assume (with legal counsel
reasonably acceptable to the Indemnified Party) the defense of any claim,
demand, lawsuit or other proceeding brought against the Indemnified Party,
which claim, demand, lawsuit or other proceeding may give rise to the indemnity
or reimbursement obligation of the Indemnifying Party hereunder, and may assert
any defense of any party; provided, however, that the Indemnified Party shall
have the right at its own expense to participate jointly with the Indemnifying
Party in the defense of any claim, demand, lawsuit or other proceeding in
connection with which the Indemnified Party claims indemnification or
reimbursement hereunder.  Notwithstanding
the right of an Indemnified Party so to participate, the Indemnifying Party
shall have the sole right to settle or otherwise dispose of such claim, demand,
lawsuit or other proceeding on such terms as the Indemnifying Party, in its sole
discretion, shall deem appropriate with respect to any issue involved in such
claim, demand, lawsuit or other proceeding as to which (i) the
Indemnifying Party shall have acknowledged the obligation to indemnify the
Indemnified Party hereunder and the settlement is solely for cash or (ii) the
Indemnified Party shall have declined so to participate.

 

22

 

10.4                        Survival.

 

All representations and warranties of the
parties hereto shall survive the date hereof and shall remain in full force and
effect for a period of eighteen (18) months from the Effective Date, except for
Section 5.13, which shall continue until thirty (30) days after the
expiration of the applicable statute of limitations if later than the period
set forth herein, and Section 5.8, which shall survive until the
first anniversary of the Closing Date, as such term is defined in the Asset
Purchase Agreement among Seller, Vulcan Chloralkali, LLC and VMC, dated October 11,
2004.  All representations, warranties
and covenants and agreements made by the parties shall not be affected by any
investigation heretofore or hereafter made by and on behalf of any of them and
shall not be deemed merged into any instruments or agreements delivered in
connection with the transactions contemplated hereby.  The covenants and agreements entered into
pursuant to this Agreement shall survive the date hereof, subject to the
applicable statutes of limitations.

 

10.5                        Applicability
of Indemnification Obligation.

 

EACH OF THE
AGREEMENTS TO INDEMNIFY, DEFEND OR HOLD HARMLESS CONTAINED IN SECTION 10.1
OR 10.2 SHALL APPLY IRRESPECTIVE OF WHETHER THE SUBJECT CLAIM IS BASED IN
WHOLE OR IN PART UPON THE SOLE OR CONTRIBUTORY NEGLIGENCE (WHETHER ACTIVE,
PASSIVE OR GROSS), BREACH OF COVENANT, OR BREACH OR VIOLATION OF ANY DUTY
IMPOSED BY ANY LAW OR REGULATION, ON THE PART OF THE BENEFICIARY OF THIS
AGREEMENT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT.

 

10.6                        Limitation
on Amounts.

 

Notwithstanding anything to the
contrary in this Agreement, neither Seller nor Buyer shall be liable for any
Claims with respect to the matters set forth in Section 10.1 or 10.2,
respectively, unless (i) a Claim is timely asserted during the survival
period specified in Section 10.4, and (ii) the aggregate of all
Claims under Section 10.1 or 10.2, respectively, exceeds, on a cumulative
basis, $50,000; provided however, that after the aggregate amount of
indemnified Claims reaches such threshold amount, the Indemnified Party shall
be entitled to the entire amount of the Claim suffered by the Indemnified
Party.  Notwithstanding anything to the
contrary in this Agreement, the aggregate liability of Seller to the Buyer
Indemnified Group and the aggregate liability of Buyer to the Seller
Indemnified Group, arising under or related to this Agreement and the
transactions contemplated hereby, whether based in contract, tort, strict
liability, common law or otherwise, shall not exceed, in either case,
$3,000,000.

 

10.7                        Sole Remedy;
Limitations.

 

Buyer and Seller acknowledge and agree that
in the absence of actual fraud or intentional misconduct, the foregoing
indemnification provisions in this ARTICLE 10 shall be the sole and
exclusive remedy at equity and law of Buyer and Seller arising out of, related
to or with respect to this Agreement, whether based on contract, tort, statute,
strict liability, common law or otherwise. 
NO PARTY SHALL BE LIABLE FOR SPECIAL, PUNITIVE, EXEMPLARY,
INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES OR LOST PROFITS, WHETHER BASED ON

 

23

 

CONTRACT,
TORT, STRICT LIABILITY, OTHER LAW OR OTHERWISE AND WHETHER OR NOT ARISING FROM
THE OTHER PARTY’S SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR
OTHER FAULT, EXCEPT SUCH DAMAGES THAT ARE PAYABLE TO A THIRD PARTY WITH RESPECT
TO A THIRD PARTY CLAIM FOR WHICH SELLER IS SEEKING INDEMNIFICATION HEREUNDER.

 

ARTICLE 11 

GUARANTY

 

11.1                        Guaranty

 

(a)                                  Guarantor
hereby unconditionally and irrevocably guarantees to Seller and each of its
successors, indorsees, transferees and assigns, the prompt and complete payment
in cash and performance by Buyer when due (whether at the stated maturity, by
acceleration or otherwise) of the obligations of Buyer under this Agreement and
the Note (the “Guaranteed
Obligations”).  This is a
guarantee of payment and not collection and the liability of Guarantor is
primary.

 

(b)                                 Notwithstanding
anything to the contrary in this Agreement, the maximum liability of Guarantor
hereunder shall in no event exceed the amount that can be guaranteed by it
under applicable federal and state laws relating to the insolvency of debtors.

 

(c)                                  Guarantor
agrees that if the maturity of the Guaranteed Obligations is accelerated by
bankruptcy or otherwise, such maturity shall also be deemed accelerated for the
purpose of this guarantee without demand or notice to such Guarantor.  The guarantee contained in this ARTICLE 11
shall remain in full force and effect until all the Guaranteed Obligations
shall have been satisfied by payment in full in cash.

 

11.2                        Amendments.

 

Guarantor shall remain
obligated hereunder, and its obligations hereunder shall not be released,
discharged or otherwise affected, notwithstanding that, without any reservation
of rights against Guarantor and without notice to, demand upon or further
assent by Guarantor (which notice, demand and assent requirements are hereby
expressly waived by Guarantor), (a) any demand for payment of any of the
Guaranteed Obligations made by Seller may be rescinded by Seller and any of the
Guaranteed Obligations continued; (b) this Agreement may be amended,
modified, supplemented or terminated, in whole or in part, as Buyer and Seller
may deem advisable from time to time; and (c) any additional guarantors,
makers or endorsers of the Guaranteed Obligations may from time to time be
obligated on the Guaranteed Obligations or any additional security or
collateral for the payment and performance of the Guaranteed Obligations may
from time to time secure the Guaranteed Obligations.

 

11.3                        Waivers.

 

Guarantor hereby waives any and
all notice of the creation, renewal, extension or accrual of any of the
Guaranteed Obligations and notice of or proof of reliance by Seller upon the
guarantee contained in this ARTICLE 11 or acceptance of the
guarantee contained in this ARTICLE 11; the Guaranteed Obligations,
and any of them, shall conclusively be deemed to have been created,

 

24

 

contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this ARTICLE 11 and no notice of creation of
the Guaranteed Obligations or any extension of credit already or hereafter
contracted by or extended to Buyer need be given to Guarantor; and all dealings
between Buyer and Guarantor, on the one hand, and Seller, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this ARTICLE 11.  Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon
Buyer or any of Guarantor with respect to the Guaranteed Obligations.

 

ARTICLE 12

MISCELLANEOUS

 

12.1                        Notices.

 

All notices and other communications required
or permitted to be given or made hereunder by either party hereto shall be in
writing and shall be deemed to have been duly given if delivered personally or
sent by prepaid overnight delivery service, or sent by facsimile transmission,
to the parties at the following addresses (or at such other addresses as shall be
specified by the parties by like notice):

 

If to Buyer:

 

KMG-Bernuth, Inc.

10611 Harwin, Suite 402

Houston, Texas 77036

Attention:  Chief Financial Officer

Facsimile: (713) 988-9298

 

with a copy to:

 

Roger C. Jackson, Esq.

General Counsel

KMG Chemicals Inc.

10611 Harwin, Suite 402

Houston, Texas 77036

Facsimile: (713) 988-9298

 

If to Seller:

 

Occidental Chemical Corporation

5005 LBJ Freeway

Dallas, Texas 75244

Attention: Vice President and
General Counsel

Facsimile: (972) 404-4155

 

Such notices, demands and other
communications shall be effective (i) if delivered personally or sent by
courier service, upon actual receipt by the intended receipt, (ii) if
mailed, upon the earlier

 

25

 

of five days
after deposit in the mail or the date of delivery as shown by the return
receipt therefor, or (iii) if sent by telecopy or facsimile transmission,
when confirmation of receipt is received.

 

12.2                        Entire
Agreement.

 

This Agreement, including the schedules,
exhibits, annexes and other writings referred to herein or delivered pursuant
hereto, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.

 

12.3                        Amendments
and Waiver; Rights and Remedies.

 

This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance.  No delay on
the part of either party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of either
party of any such right, power or privilege, or 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.  The rights and remedies herein provided are cumulative
and are not exclusive of any rights or remedies that any party may otherwise
have at law or in equity.  The rights and
remedies of either party based upon, arising out of or otherwise in respect of
any inaccuracy in or breach of any representation, warranty, covenant or
agreement contained in this Agreement shall in no way be limited by the fact
that the act, omission, occurrence or other state of facts upon which any claim
of any such inaccuracy or breach is based may also be the subject matter of any
other representation, warranty, covenant or agreement contained in this
Agreement (or in any other agreement between the parties) as to which there is
no inaccuracy or breach.

 

12.4                        Governing
Law.

 

This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to the principles of conflicts of laws thereof.

 

12.5                        Binding
Effect; Assignment.

 

This Agreement and all the provisions hereof
shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns. 
Buyer may upon notice to Seller direct that title to all or part of the
Purchased Assets be conveyed to one or more of Buyer’s wholly owned
subsidiaries (direct or indirect).  This
Agreement may not be assigned without prior written consent of the other party,
such consent not to be unreasonably withheld.

 

12.6                        Counterparts.

 

This Agreement may be executed in any number
of counterparts, each of which, when so executed and delivered, whether by
facsimile transmission or original form, shall be deemed an original, and all
of which together shall constitute one and the same agreement.

 

26

 

12.7                        Interpretation.

 

Unless the context of this
Agreement clearly requires otherwise:  (a) references
to the plural include the singular and vice versa; (b) references to any
Person include such Person’s successors and assigns but, if applicable, only if
such successors and assigns are permitted by this Agreement; (c) ”including”
is not limiting; (d) ”or” has the inclusive meaning represented by the
phrase “and/or”; (e) all references to dollars or “$” mean United States
dollars; (f) the words “hereof”, “herein”, “hereby”, “hereunder” and
similar terms in this Agreement refer to this Agreement as a whole and not any
particular provision of this Agreement; (g) article, paragraph,
subparagraph, section, subsection, exhibit references are to this Agreement
unless otherwise specified; (h) reference to any agreement (including this
Agreement), document or instrument means such agreement, document or instrument
as amended or modified and in effect from time to time in accordance with the
terms thereof and, if applicable, the terms hereof; (i) references to any
applicable law such applicable law as amended, modified, codified or reenacted,
in whole or in part, and in effect from time to time, unless the effect thereof
is to reduce, limit or otherwise prejudicially affect any obligation or any
right, power or remedy hereunder, in which case such agreement, modification,
codification or reenactment will not, to the maximum extent permitted by
applicable law, form part of this Agreement and is to be disregarded for
purposes of the construction and interpretation hereof.

 

12.8                        Severability
of Provisions.

 

If any provision of this Agreement is held to
be unenforceable, this Agreement shall be considered divisible and such
provision shall be deemed inoperative to the extent it is deemed unenforceable,
and in all other respects this Agreement shall remain in full force and effect;
provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by Legal Requirements.

 

[SIGNATURE PAGE FOLLOWS]

 

27

 

IN
WITNESS WHEREOF, the parties have caused this Asset
Purchase Agreement to be executed by their respective officers hereunto duly
authorized as of the date first above written.

 

	
  BUYER:

  	
  SELLER:

  
	
   

  	
   

  
	
  KMG-BERNUTH,
  INC.

  	
  BASIC
  CHEMICALS COMPANY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John V. Sobchak

  	
   

  	
  By:

  	
  /s/ Chuck Anderson

  	
   

  
	
   

  	
    John
  V. Sobchak, Vice President

  	
   

  	
    Chuck
  Anderson

  
	
   

  	
    and
  Chief Financial Officer

  	
   

  	
    Executive
  Vice President

  
	
   

  	
   

  
	
  GUARANTOR:

  	
   

  
	
   

  	
   

  
	
  KMG
  CHEMICALS INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John V. Sobchak

  	
   

  	
   

  
	
   

  	
    John
  V. Sobchak, Vice President

  	
   

  
	
   

  	
    and
  Chief Financial OfficerExhibit 10.27

 

PROMISSORY
NOTE

 

	
  $10,000,000.00

  	
   

  	
  June 7,
  2005

  

 

1.                                       Promise
to Pay.  FOR VALUE RECEIVED,
KMG-BERNUTH, INC., a Delaware corporation (“Maker”),
promises to pay to the order of Basic Chemicals Company, LLC, a Delaware
limited liability company (“Payee”),
whose address for payment is set forth below, the sum of:

 

TEN MILLION
AND 00/100 UNITED STATES DOLLARS

(US
$10,000,000.00)

 

in lawful
money of the United States of America which shall be legal tender for the
payment of debts from time to time, together with interest on the principal
amount hereof remaining outstanding and unpaid from time to time computed from
the date hereof until the Maturity Date (defined below) at the Stated Rate
(defined below) payable as stipulated herein. 
Interest shall accrue on all past due principal and interest hereunder
at the Stated Rate (defined below).

 

2.                                       Defined
Terms.  The defined terms used in
this Note shall have the meanings specified below:

 

(a)                                  “Business Day” means any calendar day on
which banks in Houston, Texas, are open for business.

 

(b)                                 “Maturity Date” means the earlier of (i) June 7,
2010, or (ii) the date the principal balance of this Note is accelerated
as provided in Section 6 of this Note.

 

(c)                                  “Highest Lawful Rate” means the maximum
nonusurious rate of interest permitted by whichever of applicable federal or
state law from time to time permits the higher maximum nonusurious interest
rate.

 

(d)                                 “Stated Rate” means a fixed rate per annum
equal to FOUR PERCENT (4.00%).

 

3.                                       Payment
Terms.  This Note shall be payable as
follows:

 

(a)                                  Maker
agrees to pay, on June 7 of each succeeding year (or if such date is not a
Business Day, then on the next succeeding Business Day), installments of TWO
MILLION AND 00/100 UNITED STATES DOLLARS ($2,000,000.00) of principal, plus
accrued interest on the unpaid principal balance.

 

(b)                                 If
not paid earlier according to the terms of this Note, all unpaid principal and
unpaid accrued interest thereon shall be paid on the Maturity Date.

 

(c)                                  All
amounts payable under this Note shall be paid by wire transfer of immediately
available funds to the account specified for Payee on the last page of
this note,

 

 

or in such other reasonable manner directed by Payee in a written
notice to Maker at least thirty (30) days prior to the date such payment is due
and payable.

 

4.                                       Computation
of Interest.  Interest on this Note
shall be computed for the actual number of days elapsed and on the basis of a
year consisting of 365 days and shall accrue on the actual number of days
elapsed for any whole or partial month in which interest is being calculated.

 

5.                                       Prepayment.  This Note may be prepaid in whole or in part
without premium or penalty at any time and from time to time.  All such prepayments of principal shall be
applied first to pay accrued interest, and the balance shall be applied to the
last-maturing installment(s) of principal due on the Note.  Interest shall immediately cease accruing on
all amounts of principal prepaid.

 

6.                                       Default.  Maker agrees that in the event of default in
the payment of any installment of principal or interest on this Note when due,
or in the event of default in the performance of any of the terms, covenants or
conditions contained in any instrument or instruments relating to or given as
security for the payment of this Note, the holder of this Note, may at its or
his option, without further demand, notice, notice of default, notice of intent
to accelerate (other than written notice of Payee’s intent to accelerate the
principal portion of this Note as a result of Maker’s failure to timely pay any
interest or principal when due, which notice shall afford Maker five (5) Business
Days from the date thereof within which to cure such default), notice of
acceleration or notice of presentment, declare the unpaid principal balance of
this Note and all interest then accrued hereon, at once due and payable.  In the event default is made in the prompt
payment of this Note when due or declared due, and the same is placed in the
hands of an attorney for collection, or suit is brought on same, or the same is
collected through any judicial proceeding whatsoever, or if any action of
foreclosure be had hereon, then the Maker agrees and promises to pay all
reasonable attorneys’ fees and collection costs incurred by Payee in connection
therewith.

 

7.                                       Waiver
of Notice.  Maker and all endorsers,
sureties and guarantors of this Note, as well as all persons to become liable
on this Note, hereby waive notice, demand or presentment for payment of this
Note, notice of nonpayment, protest, notice of default, notice of intent to
accelerate and notice of acceleration notice of protest, suit, diligence or any
notice of or defense on account of the extension of time of payments or change
in the method of payments, and consent to any and ail renewals and extensions
in the time of payment hereof, and to any substitution, exchange or release of
any security herefor or the release of any party primarily or secondarily
liable hereon.  Despite the foregoing,
Payee shall provide Maker with written notice of Payee’s intent to accelerate
the principal portion of this Note as a result of Maker’s failure to timely pay
any interest or principal when due, which notice shall afford Maker five (5) Business
Days from the date thereof within which to cure such default.

 

8.                                       Usury
Savings Provision.  It is expressly
provided and stipulated that notwithstanding any provision of this Note, any
documents securing payment of this Note or any other instrument evidencing or
securing the loan evidenced by this Note, in no event shall the aggregate of
all interest paid by Maker to Payee hereunder ever exceed the Highest Lawful
Rate. In this connection, it is expressly stipulated and agreed that it is the
intent of Payee and Maker in the execution and delivery of this Note to contract
in strict compliance with the applicable usury laws.  In furtherance thereof; none of the terms of
this Note, the documents securing payment of this Note or any other instrument

 

 

evidencing or
securing the loan evidenced by this Note, shall ever be construed to create a
contract to pay, for the use, forbearance or detention of money, interest at a
rate in excess of the Highest Lawful Rate. 
Maker and any guarantors, endorsers, sureties or other parties now or
hereafter becoming liable for payment of this Note shall never be liable for
interest in excess of the Highest Lawful Rate. 
Specifically and without limiting the generality of the foregoing, it is
expressly provided that:

 

(a)                                  In
the event of the payment of the principal of this Note prior to the Maturity
Date, whether resulting from acceleration of maturity of this Note or
otherwise, if the aggregate amounts of interest accruing hereon prior to such
payment plus the amount of any interest accruing after maturity and plus any
other amounts paid or accrued in connection with the loan evidenced hereby
which by law are deemed interest on the loan evidenced by this Note and which
aggregate amounts paid or accrued (if calculated in accordance with the
provisions of this Note other than this Section 8) would exceed the
maximum amount of interest which could lawfully be charged on the unpaid
principal balance of the loan evidenced by this Note from time to time advanced
(less any discount) and remaining unpaid from the date hereof to the date of
final payment thereof, then in such event the amount of such excess shall be
promptly refunded to Maker by the holder hereof or, at the option of the holder
hereof, credited toward the payment of the amounts due and owing on this Note
so as to reduce the amount of the final payment of principal due on this Note.

 

(b)                                 If
under the circumstances the aggregate amounts paid on the loan evidenced by
this Note prior to and incident to the final payment hereof include amounts
which by law are deemed interest and which would exceed the maximum amount of
interest which could lawfully have been collected on this Note, Maker
stipulates that such payment and collection will have been and will be deemed
to have been the result of a mathematical error on the part of both Maker and
the holder of this Note, and the party receiving such excess payment shall
promptly refund the amount of such excess (to the extent only of the excess of
such interest payments above the maximum amount which could lawfully have been
collected and retained) upon the discovery of such error by the party receiving
such payment or notice thereof from the party making such payment.

 

9.                                       SUBMISSION
TO JURISDICTION.  MAKER HEREBY AGREES
THAT ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO
THIS NOTE MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN NEW YORK, NEW YORK AND SUBMITS TO THE JURISDICTION OF SUCH
COURTS.  MAKER FURTHER CONSENTS AND
AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH
SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE
PREPAID, TO MAKER AT THE ADDRESS FOR NOTICES DESCRIBED ON THE LAST PAGE HEREOF,
AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT
VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR
EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW).

 

 

10.                                 Choice
of Law.  Maker and Payee agree that
this Note shall be governed by and interpreted in accordance with the laws of
the State of New York.

 

11.                                 Prohibition
on Assignment by Payee.  This Note is
personal to Payee and its successors, whether by merger, reverse merger, spin
off, dissolution, reorganization, domestication, conversion, or complete sale
of assets.  Payee hereby waives the right
to assign, transfer, or pledge this Note to any party, to the extent such
assignment, transfer or pledge is not related to a merger, reverse merger, spin
off, dissolution, reorganization, domestication, conversion, or a complete sale
of assets involving Payee.

 

12.                                 Representations
and Warranties.  Maker hereby
represents and warrants that it has the authority to execute and deliver this
Note and all other documents relating thereto, and neither this Note nor any
documents relating thereto executed by Maker violates any of the organizational
documents of Maker or any contract, instrument, document, or undertaking to
which Maker is a party or to which Maker is subject.

 

	
   

  	
  KMG-BERNUTH, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John V. Sobchak

  	
   

  
	
   

  	
   

  	
   John
  V. Sobchak, Vice President

  
	
   

  	
   

  	
   and
  Chief Financial Officer

  

 

Maker’s
Address for Notice:

 

KMG-Bernuth, Inc.

10611 Harwin, Suite 402

Houston, Texas
77036

Attention:  Chief Financial Officer

Facsimile:
(713) 988-9298

 

Payee’s
Wire Transfer Instructions for Payment:

 

Bank
Name:  Bank of America

Bank
Address:  1401 Elm Street, Dallas,
TX  75202

Bank
Routing/ABA:  111000012

Bank Account
#:  

Beneficiary:  Occidental Chemical Corp.

Bank
Contact:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}]]