Document:

Exhibit 10.1

 

INCREMENTAL FACILITY
AMENDMENT

 

To:                              Credit Suisse, as
Administrative Agent under the Credit Agreement referred to below

 

Dated:             November 1, 2005

 

Reference is
hereby made to the Credit Agreement dated as of July 19, 2005 (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”), among SAFETY PRODUCTS HOLDINGS, INC., a Delaware
corporation, as a Guarantor, SPH ACQUISITION LLC, a Delaware limited liability
company (now known as NORCROSS SAFETY PRODUCTS L.L.C., a Delaware limited liability
company (the “Parent Borrower”)), NORTH SAFETY PRODUCTS INC., a Delaware
corporation, and MORNING PRIDE MANUFACTURING L.L.C., a Delaware limited company
(the “U.S. Subsidiary Borrowers”) (the U.S. Subsidiary Borrowers together
with the Parent Borrower being collectively referred to as the “U.S.
Borrowers”), NORTH SAFETY PRODUCTS LTD., a company organized and existing
under the laws of Canada (“the Canadian Borrower”) (the Canadian
Borrower, together with the U.S. Borrowers, being collectively referred to as
the “Borrowers”), the several banks and other financial institutions or
entities from time to time parties to this Agreement which extend a Commitment
to the U.S. Borrowers (the “U.S. Lenders”), the several banks and other
financial institutions or entities from time to time parties to this Agreement
which extend a Commitment to the Canadian Borrower (the “Canadian Lenders”
and, together with the U.S. Lenders, the “Lenders”), GMAC COMMERCIAL
FINANCE LLC, LASALLE BANK NATIONAL ASSOCIATION and US BANK NATIONAL
ASSOCIATION, as documentation agents (in such capacity, the “Documentation
Agents”), BANK OF AMERICA, N.A., as syndication agent (in such capacity,
the “Syndication Agent”), CREDIT SUISSE, as administrative agent (in
such capacity, the “Administrative Agent”) and CREDIT SUISSE, TORONTO
BRANCH, as Canadian agent (in such capacity, the “Canadian Agent”).  Terms used herein without definition shall
have the meanings assigned to such terms in the Credit Agreement.

 

WHEREAS,
pursuant to Section 2.25 of the Credit Agreement, Borrower may from time
to time request incremental Term Loans and related incremental Term Commitments
in an aggregate amount not to exceed $100,000,000, subject to the terms and
conditions set forth therein;

 

WHEREAS, Credit
Suisse and the other Lenders listed on the signature pages hereto (the “Increasing
Lenders”) have agreed, subject to the terms and conditions set forth herein
and in the Credit Agreement, to make an incremental Term Loan (the “Incremental
Term Loan”) and provide a related incremental Term Commitment (the “Incremental
Term Commitment”) to Borrower in an amount of $65,000,000, the proceeds of
which will be used to acquire all of the equity interests of The Fibre-Metal
Products Company (“FMP”) (the “Acquisition”) pursuant to a
purchase and sale agreement entered into between FMP and the Parent Borrower
dated September 29, 2005 and to pay the costs and expenses related thereto;
and

 

WHEREAS,
pursuant to Section 2.25 of the Credit Agreement, amendments to the Credit
Agreement that are required to give effect to increases in the Term Loans shall
only require the consent of the Parent Borrower and the Administrative Agent.

 

 

NOW,
THEREFORE:

 

SECTION 1.           Incremental
Amendment.

 

(a)           This
amendment (this “Incremental Facility Amendment”) is an amendment
increasing the Term Loans referred to in Section 2.25 of the Credit
Agreement, and Parent Borrower and the Increasing Lenders hereby agree and notify
you that:

 

(i)            the
total Incremental Term Commitment of the Increasing Lenders is $65,000,000; and

 

(ii)           subject
to the satisfaction of the conditions to Borrowing under Section 5.2 of
the Credit Agreement and to the satisfaction of the conditions set forth in
clauses (A) through (C) below, the funding of the Incremental
Term Loan will occur in one drawing upon the Parent Borrower’s request in
accordance with Sections 2.1 and 5.2 of the Credit Agreement (provided that the
Closing Date shall be the date hereof).  In
the event that all or any portion of the Incremental Term Loan is not borrowed
on or before the date hereof, the unborrowed portion of the Incremental Term
Commitment shall automatically terminate on such date unless the Increasing
Lenders shall agree to an extension.

 

(A)          no
Event of Default shall have occurred and be continuing or occur as a result of
the Incremental Term Loan;

 

(B)           the
proceeds of the Incremental Term Loans will be used solely for Permitted
Acquisitions and the costs and expenses related thereto;

 

(C)           on
a pro forma basis, after giving effect to the making of the Incremental Term
Loan and the use of proceeds, the Consolidated Senior Leverage Ratio does not
exceed 3.25 to 1.00;

 

(D)          on
a pro forma basis (as set forth in the definition of the term “Permitted
Acquisition” in the Credit Agreement), the Borrowers are in compliance with
Section 7.1 of the Credit Agreement; and

 

(E)           Parent
Borrower shall have delivered to the Administrative Agent and Increasing
Lenders an officer’s certificate, dated the date of borrowing, certifying
satisfaction of the requirements of Section 2.25(a) of the Credit
Agreement, including as described in clauses (A), (B), (C) and (D) above.

 

(b)           Each
of the Increasing Lenders and the Parent Borrower hereby agree that the
Incremental Term Loan made pursuant to this Incremental Facility Amendment will
be a Term Loan and any Lender with an outstanding Incremental Term Loan will be
a Term Lender, in each case for any and all purposes under the Credit Agreement
and (A) shall rank pari  passu in right of payment and right
of security in respect of the Collateral with the existing Term Loans and (B) shall
have the same terms as Term Loans existing immediately prior to the
effectiveness of this Incremental Facility Amendment.

 

2

 

(c)           The
table set forth in Section 2.2 of the Credit Agreement is hereby amended by
adding (i) to each quarterly installment from and including the second
quarterly installment to and including the twenty-forth quarterly installment,
$169,565.22 and (ii) to each quarterly installment from and including the
twenty-fifth quarterly installment to and including the twenty-eighth quarterly
installment, $15,275,000.

 

(d)           The
Parent Borrower covenants and agrees that the proceeds of the Incremental Term
Loan shall be used by the Parent Borrower for the Acquisition and to pay the
costs and expenses related thereto.

 

SECTION 2.           Representations,
Warranties and Covenants.  The Parent
Borrower represents, warrants and covenants to the Administrative Agent and to
the Increasing Lenders that:

 

(a)           this
Incremental Facility Amendment has been duly authorized, executed and delivered
by it and constitutes a legal, valid and binding obligation of the Parent Borrower,
enforceable against the Parent Borrower in accordance with its terms;

 

(b)           after
giving effect to this Incremental Facility Amendment, the representations and
warranties set forth in Section 4 of the Credit Agreement and the other
Loan Documents will be true and correct with the same effect as if made on and
as of the date hereof (unless expressly stated to relate to an earlier date, in
which case such representations and warranties shall be true and correct as of
such earlier date), as supplemented by
the updated schedules attached hereto as Exhibit A with regard to the
corresponding schedules, representations and warranties in the Credit Agreement;
and

 

(c)           as
applicable, (i) each of the conditions to requesting Incremental Term
Loans set forth in clause (a) of Section 2.25 of the Credit Agreement
that does not require funding of the Incremental Term Loans is satisfied on the
date of entering into this Incremental Facility Amendment and (ii) each
and all of the conditions to requesting Incremental Term Loans set forth in
clause (a) of Section 2.25 of the Credit Agreement will be satisfied
on the date of borrowing of the Incremental Term Loan.

 

SECTION 3.           Conditions
to Effectiveness.  This Incremental
Amendment shall become effective when:

 

(a)           the
Administrative Agent shall have received counterparts of this Incremental Facility
Amendment that, when taken together, bear the signatures of the Parent Borrower
and the Increasing Lenders;

 

(b)           the
representations and warranties set forth in Section 2 hereof are true and
correct (as set forth on an officer’s certificate delivered to the
Administrative Agent and the Increasing Lenders); and

 

(c)           all
fees and expenses required to be paid or reimbursed by the Parent Borrower
pursuant to the Credit Agreement, including all invoiced fees and expenses of
counsel to the Administrative Agent and Increasing Lenders shall have been paid
or reimbursed, on or prior to effectiveness applicable.

 

3

 

SECTION 4.           Roles.  Credit Suisse shall act in the capacity as Sole
Lead Arranger and Sole Bookrunner and Bank of America, N.A. shall act in the
capacity as Syndication Agent with respect to this Incremental Facility
Amendment, but in such capacity shall not have any obligations, duties or
responsibilities, nor shall incur any liabilities, under this Incremental
Facility Amendment or any other Loan Document.

 

SECTION 5.           Applicable Law.  THIS INCREMENTAL FACILITY AMENDMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.  SECTION 10.16 OF THE CREDIT AGREEMENT
SHALL APPLY TO THIS INCREMENTAL FACILITY AMENDMENT.

 

SECTION 6.           Credit
Agreement; Loan Document.  Except as
expressly set forth herein, this Incremental Facility Amendment shall not by
implication or otherwise limit, impair, constitute a waiver of, or otherwise
affect the rights and remedies of any party under, the Credit Agreement, nor
alter, modify, amend or in any way affect any of the terms, conditions,
obligations, covenants or agreements contained in the Credit Agreement, all of
which are ratified and affirmed in all respects and shall continue in full
force and effect.  For the avoidance of
doubt, this Incremental Facility Amendment shall be deemed to be a “Loan
Document” within the meaning of the Credit Agreement.

 

SECTION 7.           Counterparts.  This Incremental Facility Amendment may be
executed in two or more counterparts, each of which shall constitute an
original, but all of which when taken together shall constitute but one
agreement.  Delivery of an executed
counterpart of a signature page of this Incremental Facility Amendment by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Incremental Facility Amendment.

 

[Signature Page Follows]

 

4

 

IN WITNESS
WHEREOF, the parties hereto have caused this Incremental Facility Amendment to
be duly executed by their authorized officers as of the date set forth above.

 

	
   

  	
  U.S.
  BORROWERS

  
	
   

  	
   

  
	
   

  	
  NORCROSS
  SAFETY PRODUCTS L.L.C.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ David F. Myers, Jr.

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NORTH SAFETY
  PRODUCTS INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  David F. Myers, Jr.

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MORNING
  PRIDE MANUFACTURING L.L.C.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  David F. Myers, Jr.

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

 

	
   

  	
  INCREASING
  LENDERS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CREDIT
  SUISSE, acting through its Cayman

  Islands Branch, as Increasing Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Bill O’Daly

  	
   

  
	
   

  	
   

  	
  Name: Bill O’Daly

  	
   

  
	
   

  	
   

  	
  Title: Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Rianka Mohan

  	
   

  
	
   

  	
   

  	
  Name: Rianka Mohan

  	
   

  
	
   

  	
   

  	
  Title: Associate

  	
   

  

 

2

 

	
   

  	
  [OTHER INCREASING LENDERS]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [if
  a second signature is required by the institution

  	
   

  
	
   

  	
   

  	
  named on this page:]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

3

 

	
   

  	
  CONSENTED TO:

  
	
   

  	
   

  
	
   

  	
  CREDIT
  SUISSE, acting through its Cayman

  
	
   

  	
  Islands
  Branch, as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Bill
  O’Daly

  	
   

  
	
   

  	
  Name: Bill O’Daly

  	
   

  
	
   

  	
  Title: Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    /s/ Rianka
  Mohan

  	
   

  
	
   

  	
  Name: Rianka Mohan

  	
   

  
	
   

  	
  Title: Associate

  	
   

  

 

4

 

EXHIBIT AExhibit 10.2

 

STOCK
PURCHASE AGREEMENT

 

by and
among

 

NORCROSS
SAFETY PRODUCTS L.L.C.,

 

THE
FIBRE-METAL PRODUCTS COMPANY,

 

RESIDUARY
TRUST UNDER THE WILL OF CHARLES E. BOWERS, JR.,

 

TRUST UNDER
THE WILL OF CHARLES E. BOWERS, JR. FOR THE BENEFIT OF JUDITH L. BOWERS,

 

and

 

CHARLES E.
BOWERS, JR. IRREVOCABLE TRUST DATED DECEMBER 17, 1990

 

 

October 3,
2005

 

 

Table of Contents

 

	
  ARTICLE I

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1.

  	
  Defined Terms

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  SALE AND PURCHASE OF STOCK

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1.

  	
  Agreement to Sell

  	
   

  
	
   

  	
   

  	
   

  
	
  2.2.

  	
  Agreement to Purchase

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  PURCHASE PRICE

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1.

  	
  Purchase Price

  	
   

  
	
   

  	
   

  	
   

  
	
  3.2.

  	
  Estimated Closing Date
  Balance Sheet; Estimated Net Working Capital and Estimated Net Debt

  	
   

  
	
   

  	
   

  	
   

  
	
  3.3.

  	
  Closing Date Balance Sheet;
  Net Working Capital and Net Debt

  	
   

  
	
   

  	
   

  	
   

  
	
  3.4.

  	
  Review by Stockholders and
  Grandi

  	
   

  
	
   

  	
   

  	
   

  
	
  3.5.

  	
  Independent Review

  	
   

  
	
   

  	
   

  	
   

  
	
  3.6.

  	
  Payment of Net Working
  Capital and Net Debt Adjustment

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  CLOSING

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1.

  	
  Closing

  	
   

  
	
   

  	
   

  	
   

  
	
  4.2.

  	
  Deliveries by Stockholders

  	
   

  
	
   

  	
   

  	
   

  
	
  4.3.

  	
  Deliveries by Buyer

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  REPRESENTATIONS AND
  WARRANTIES OF STOCKHOLDERS AND GRANDI

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1.

  	
  Authorization

  	
   

  
	
   

  	
   

  	
   

  
	
  5.2.

  	
  Capitalization

  	
   

  
	
   

  	
   

  	
   

  
	
  5.3.

  	
  Ability to Carry Out
  Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  REPRESENTATIONS AND
  WARRANTIES OF THE COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1.

  	
  Organization

  	
   

  
	
   

  	
   

  	
   

  
	
  6.2.

  	
  Ability to Carry Out
  Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  6.3.

  	
  Authorization

  	
   

  
	
   

  	
   

  	
   

  
	
  6.4.

  	
  Permits and Licenses

  	
   

  
	
   

  	
   

  	
   

  
	
  6.5.

  	
  Compliance with Regulations

  	
   

  
	
   

  	
   

  	
   

  
	
  6.6.

  	
  Financial Statements

  	
   

  
	
   

  	
   

  	
   

  
	
  6.7.

  	
  Title to and Condition of Assets

  	
   

  
	
   

  	
   

  	
   

  
	
  6.8.

  	
  Tax Returns and Taxes

  	
   

  

 

 

	
  6.9.

  	
  Labor Relations

  	
   

  
	
   

  	
   

  	
   

  
	
  6.10.

  	
  Material Contracts

  	
   

  
	
   

  	
   

  	
   

  
	
  6.11.

  	
  Changes or Events

  	
   

  
	
   

  	
   

  	
   

  
	
  6.12.

  	
  Employees and Employee
  Benefits

  	
   

  
	
   

  	
   

  	
   

  
	
  6.13.

  	
  Real Property; Leaseholds

  	
   

  
	
   

  	
   

  	
   

  
	
  6.14.

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  
	
  6.15.

  	
  Litigation

  	
   

  
	
   

  	
   

  	
   

  
	
  6.16.

  	
  Accounts
  Receivable

  	
   

  
	
   

  	
   

  	
   

  
	
  6.17.

  	
  Proprietary
  Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  6.18.

  	
  Environmental
  Requirements

  	
   

  
	
   

  	
   

  	
   

  
	
  6.19.

  	
  Inventory

  	
   

  
	
   

  	
   

  	
   

  
	
  6.20.

  	
  Consents

  	
   

  
	
   

  	
   

  	
   

  
	
  6.21.

  	
  Related
  Party Transactions

  	
   

  
	
   

  	
   

  	
   

  
	
  6.22.

  	
  Finders’
  Fees

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  REPRESENTATIONS
  AND WARRANTIES OF BUYER

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1.

  	
  Organization

  	
   

  
	
   

  	
   

  	
   

  
	
  7.2.

  	
  Ability to
  Carry Out Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  7.3.

  	
  Authorization

  	
   

  
	
   

  	
   

  	
   

  
	
  7.4.

  	
  Financing

  	
   

  
	
   

  	
   

  	
   

  
	
  7.5.

  	
  Finders’
  Fees

  	
   

  
	
   

  	
   

  	
   

  
	
  7.6.

  	
  Litigation

  	
   

  
	
   

  	
   

  	
   

  
	
  7.7.

  	
  Purchase
  for Investment

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1.

  	
  Access

  	
   

  
	
   

  	
   

  	
   

  
	
  8.2.

  	
  Confidentiality;
  No Publicity

  	
   

  
	
   

  	
   

  	
   

  
	
  8.3.

  	
  Non-Solicitation

  	
   

  
	
   

  	
   

  	
   

  
	
  8.4.

  	
  Governmental
  Approvals

  	
   

  
	
   

  	
   

  	
   

  
	
  8.5.

  	
  Consents

  	
   

  
	
   

  	
   

  	
   

  
	
  8.6.

  	
  Restrictive
  Covenants

  	
   

  
	
   

  	
   

  	
   

  
	
  8.7.

  	
  Tax Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  8.8.

  	
  Transfer of
  Premises; Satisfaction of Indebtedness and Transaction Expenses; Retention of
  Related Party Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  8.9.

  	
  Appointment
  of Sellers Representative

  	
   

  

 

ii

 

	
  ARTICLE IX

  	
  CONDUCT OF
  BUSINESS PRIOR TO CLOSING

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1.

  	
  Conduct of
  Business

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  CONDITIONS
  PRECEDENT TO BUYER’S OBLIGATIONS ON THE CLOSING DATE

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1.

  	
  Representations
  and Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  10.2.

  	
  Compliance
  with Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  10.3.

  	
  Closing
  Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  10.4.

  	
  Consents

  	
   

  
	
   

  	
   

  	
   

  
	
  10.5.

  	
  HSR Act

  	
   

  
	
   

  	
   

  	
   

  
	
  10.6.

  	
  Resignations
  of Directors

  	
   

  
	
   

  	
   

  	
   

  
	
  10.7.

  	
  Transfer
  Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  10.8.

  	
  Material
  Adverse Effect

  	
   

  
	
   

  	
   

  	
   

  
	
  10.9.

  	
  Ancillary
  Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  10.10.

  	
  Incumbency
  Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  10.11.

  	
  Resolutions

  	
   

  
	
   

  	
   

  	
   

  
	
  10.12.

  	
  Good
  Standing Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  10.13.

  	
  Absence of
  Litigation

  	
   

  
	
   

  	
   

  	
   

  
	
  10.14.

  	
  Consulting/Employment
  Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  CONDITIONS
  PRECEDENT TO STOCKHOLDERS’ OBLIGATIONS ON THE CLOSING DATE

  	
   

  
	
   

  	
   

  	
   

  
	
  11.1.

  	
  Representations
  and Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  11.2.

  	
  Compliance
  with Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  11.3.

  	
  Closing
  Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  11.4.

  	
  HSR Act

  	
   

  
	
   

  	
   

  	
   

  
	
  11.5.

  	
  Ancillary
  Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  11.6.

  	
  Incumbency
  Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  11.7.

  	
  Resolutions

  	
   

  
	
   

  	
   

  	
   

  
	
  11.8.

  	
  Good
  Standing Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  11.9.

  	
  Absence of
  Litigation

  	
   

  
	
   

  	
   

  	
   

  
	
  11.10.

  	
  Consulting/Employment
  Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  
	
  12.1.

  	
  Indemnification
  by Stockholders and Grandi

  	
   

  
	
   

  	
   

  	
   

  
	
  12.2.

  	
  Indemnification
  by Buyer

  	
   

  

 

iii

 

	
  12.3.

  	
  Claims for
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  
	
  12.4.

  	
  Defense by
  the Indemnifying Party

  	
   

  
	
   

  	
   

  	
   

  
	
  12.5.

  	
  Limitations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
  TERMINATION

  	
   

  
	
   

  	
   

  	
   

  
	
  13.1.

  	
  Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  13.2.

  	
  Effect of
  Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  
	
  14.1.

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV

  	
  GENERAL

  	
   

  
	
   

  	
   

  	
   

  
	
  15.1.

  	
  Further
  Assurances

  	
   

  
	
   

  	
   

  	
   

  
	
  15.2.

  	
  Finder’s
  Fees

  	
   

  
	
   

  	
   

  	
   

  
	
  15.3.

  	
  Expenses

  	
   

  
	
   

  	
   

  	
   

  
	
  15.4.

  	
  Governing
  Law; Jurisdiction

  	
   

  
	
   

  	
   

  	
   

  
	
  15.5.

  	
  No Waiver

  	
   

  
	
   

  	
   

  	
   

  
	
  15.6.

  	
  Entire
  Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  15.7.

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
  15.8.

  	
  Headings

  	
   

  
	
   

  	
   

  	
   

  
	
  15.9.

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  15.10.

  	
  Amendments

  	
   

  
	
   

  	
   

  	
   

  
	
  15.11.

  	
  Third Party
  Beneficiaries

  	
   

  

 

iv

 

STOCK
PURCHASE AGREEMENT

 

THIS STOCK
PURCHASE AGREEMENT (this “Agreement”)
is made and entered into as of this 3rd day of October, 2005, by and
among Norcross Safety Products L.L.C., a Delaware limited liability company (“Buyer”), The Fibre-Metal Products
Company, a Delaware corporation (“Fibre-Metal”), Residuary Trust under the Will
of Charles E. Bowers, Jr., Trust under the Will of Charles E. Bowers, Jr.
for the benefit of Judith L. Bowers, and Charles E. Bowers, Jr.
Irrevocable Trust dated December 17, 1990 (each of whom is a stockholder
of the Company and is referred to herein individually as a “Stockholder” and
collectively as the “Stockholders”), and Charles J. Grandi (“Grandi”) who is an
executive officer of Fibre-Metal who has a contractual right to receive a
portion of the proceeds of the transactions contemplated hereby.

 

RECITALS

 

WHEREAS,
Fibre-Metal, along with its wholly-owned subsidiary Fibre-Metal (Canada)
Limited (“FMC”) (Fibre-Metal and FMC are collectively referred to herein as the
“Company”), is engaged in the business of designing, manufacturing, marketing
and selling an array of high performance head (including welding helmets),
face, hearing and respiratory protective products (the “Business”).

 

WHEREAS,
Stockholders own all of the issued and outstanding capital stock of Fibre-Metal
(the “Stock”).

 

WHEREAS, Buyer
desires to purchase from Stockholders, and Stockholders desire to sell to
Buyer, all of the Stock in accordance with the terms and conditions set forth
in this Agreement.

 

NOW,
THEREFORE, in consideration of the premises, mutual covenants, promises,
agreements and undertakings contained herein, and intending to be legally
bound, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1.         Defined
Terms.  As used herein, the terms
below shall have the following meanings. 
Unless the context otherwise requires, any such terms may be used in the
singular or plural, depending upon the reference.

 

“Action”
shall mean any action, suit (whether civil or criminal), litigation,
proceeding, labor dispute, arbitration, mediation, audit, or investigation
commenced before any Governmental Entity or arbitrator.

 

“Affiliate”
means, with respect to any Person, any other Person that, directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person; provided, however, that such term shall not
include FMC.

 

 

“Agreement”
shall have the meaning set forth in the Recitals of this Agreement.

 

“Annual
Financial Statements” shall have the meaning set forth in Section 6.6
of this Agreement.

 

“Arbiter”
shall have the meaning set forth in Section 3.5 of this Agreement.

 

“Basket”
shall have the meaning set forth in Section 12.5(b) of this Agreement.

 

“Books and
Records” shall mean all books, ledgers, files, records, plans and reports
of the Company.

 

“Business”
shall have the meaning set forth in the Recitals section.

 

“Business
Day” shall mean any day other than a Saturday or Sunday or a day that is a
bank holiday in Philadelphia, Pennsylvania or New York, New York.

 

“Buyer”
shall have the meaning set forth in the Recitals of this Agreement.

 

“Buyer’s
Target Net Working Capital Collar” shall mean the Target Net Working
Capital minus Two Hundred Thousand Dollars ($200,000).

 

“Cap”
shall have the meaning set forth in Section 12.5(b) of this
Agreement.

 

“Claims”
shall have the meaning set forth in Section 6.12(h) of this
Agreement.

 

“Closing”
shall have the meaning set forth in Section 4.1 of this Agreement.

 

“Closing
Date” shall have the meaning set forth in Section 4.1 of this
Agreement.

 

“Closing
Date Balance Sheet” shall mean a Balance Sheet of the Company as of the
Closing Date as prepared in accordance with GAAP, and consistent with the
preparation of the Annual Financial Statements (as defined in Section 6.6),
pursuant to the provisions of Section 3.3 of this Agreement.

 

“Code”
shall mean the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.

 

“Company”
shall have the meaning set forth in the Recitals of this Agreement.

 

“Confidentiality
Agreement” shall have the meaning set forth in Section 8.1 of this
Agreement.

 

“Consent”
shall mean any consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, or notice to, any Governmental Entity
or other Person.

 

“Contract”
shall mean any agreement, contract, note, loan, evidence of indebtedness,
purchase order, letter of credit, indenture, security or pledge agreement,
franchise agreement,

 

2

 

covenant not to compete,
employment agreement, license, instrument, obligation or commitment to which
the Company is a party, whether oral or written.

 

“Court
Order” shall mean any judgment, decision, consent decree, injunction, writ,
ruling or order of any Governmental Entity, department or authority that is
binding on any Person or its property under applicable law.

 

“Employee
Claims” shall have the meaning set forth in Section 6.9(b) of
this Agreement.

 

“Employee
Plans” shall mean all employee benefit plans as defined in Section 3(3) of
ERISA, and all severance, bonus, retirement, pension, profit sharing and
deferred compensation plans, and other similar fringe or employee benefit plans
or programs, maintained or contributed to by the Company.

 

“Encumbrance”
shall mean any claim, lien, pledge, charge, easement, security interest, deed
of trust, security deed, mortgage, right-of-way, encroachment, encumbrance,
covenant, condition, restriction, indemnity, option, assignment, judgment,
stockholders agreement, right of first refusal, right of first offer or other
right of a third party.

 

“Environmental
Requirements” shall mean all applicable Regulations relating to the
protection of human health or the environment, including (a) all
requirements pertaining to reporting, licensing, permitting, investigation, and
remediation of emissions, discharges, Releases or threatened Releases of
Hazardous Materials, and (b) all other limitations, restrictions, conditions,
standards, prohibitions, obligations, schedules and timetables contained
therein or in any notice or demand letter issued, entered, promulgated or
approved thereunder.

 

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

 

“ERISA
Affiliate” means, with respect to any Person, any entity that is, or at any
time for which any relevant statue of limitations remains open, was, a member
of a “controlled group of corporations” with, or is under “common control”
with, or is a member of the same “affiliated service group” with such Person as
defined in Sections 414(b), 414(c) or 414(m) of the Code.

 

“Escrow
Account” shall mean the account held by the Escrow Agent under the Escrow
Agreement.

 

“Escrow
Agent” shall mean Wilmington Trust Corporation.

 

“Escrow
Agreement” shall mean the Escrow Agreement entered into on the Closing Date
by and among the Escrow Agent, Stockholders, Grandi, Sellers Representative,
and Buyer in substantially the form of Exhibit A hereto.

 

“Escrow
Amount” shall mean Three Million Four Hundred Thousand Dollars
($3,400,000).

 

“Estimated
Closing Date Balance Sheet” shall mean a pro-forma Balance Sheet of the
Company as prepared in accordance with GAAP and consistent with the preparation
of the Annual Financial Statements reflecting the Stockholders’ and Grandi’s
good faith estimate of the

 

3

 

Company’s financial position as
of the Closing, to be prepared in advance of the Closing pursuant to the
provisions of Section 3.2 of this Agreement.

 

“Estimated
Net Debt” shall mean the Net Debt as of the Closing Date as set forth on
the Estimated Closing Date Balance Sheet and calculated pursuant to the formula
set forth on Schedule 1.1(a).

 

“Estimated
Net Working Capital” shall mean the Net Working Capital as of the Closing
Date as set forth on the Estimated Closing Date Balance Sheet and calculated
pursuant to the formula set forth on Schedule 1.1(a).

 

“Fibre-Metal”
shall have the meaning set forth in the Recitals of this Agreement.

 

“FMC”
shall have the meaning set forth in the Recitals of this Agreement.

 

“Financial
Statements” shall have the meaning set forth in Section 6.6 of this
Agreement.

 

“Fixtures
and Equipment” shall mean all of the furniture, fixtures, furnishings, machinery,
supplies, equipment, molds, and other tangible personal property owned by the
Company, wherever located, except for the items set forth on Schedule 1.1(b).

 

“Formation
Documents” means, as to any entity, those instruments that (i) define
its existence, as filed or recorded with the applicable Governmental Entity,
including, without limitation, its certificate or articles of incorporation (in
the case of a corporation), its certificate of limited partnership (in the case
of a limited partnership), or its certificate of formation (in the case of a
limited liability company), and (ii) govern its internal affairs,
including, without limitation, its by-laws (in the case of a corporation), its
agreement of general or limited partnership (in the case of a general or
limited partnership), or its operating agreement (in the case of a limited
liability company), in each case as amended, supplemented or restated.

 

“Fundamental
Representations” shall have the meaning set forth in Section 12.3 of
this Agreement.

 

“GAAP”
means generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board, which are applicable on any particular
date and are consistently applied.

 

“Governmental
Entity” means any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, federal, state
or local.

 

“Grandi”
shall have the meaning set forth in the Recitals of this Agreement.

 

“Hazardous
Materials” shall mean any (a) substances or waste classified as “hazardous,”
“toxic,” or a “pollutant” pursuant to (i) any Environmental Requirement
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 USC 9601, et
seq., the Solid Waste Disposal Act, as amended by the Resource
Conservation and

 

4

 

Recovery Act of 1976 and
Hazardous and Solid Waste Amendments of 1984, 42 USC 6901 et seq., the Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1977, 33 USC 1251 et seq., the Clean Air Act of 1966, as
amended, 42 USC 7401 et seq., the
Toxic Substances Control Act of 1976, 15 USC 2601 et seq., and the Hazardous Materials Transportation Act, 49
USC 5101 et seq., and (ii) the
Pennsylvania Health and Safety Code; (b) asbestos or asbestos-containing
materials; (c) polychlorinated biphenyls; (d) petroleum, including
crude oil or any fraction thereof, natural gas, natural gas liquids, liquefied
natural gas, methane or synthetic gas usable for fuel, and (e) radioactive
materials.

 

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

 

“Indebtedness”
shall mean (i) all indebtedness for borrowed money of the Company, (ii) all
obligations of the Company for the deferred purchase price of property or
services, (iii) all obligations of the Company evidenced by notes, bonds,
debentures or similar instruments (other than capital lease obligations), (iv) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by the Company, (v) all
obligations, contingent or otherwise, of the Company under acceptance, letter
of credit or similar facilities, (vi) the amount of the liability in
respect of all capital lease obligations of the Company, (vii) all
indebtedness of the type described in clauses (i) through (vi) above
guaranteed directly or indirectly in any manner by the Company including
interest and penalties thereon, (viii) any indebtedness of the type
described in clauses (i) through (vi) above secured by (or for which
the holder of such indebtedness has an existing right, contingent or otherwise,
to be secured by) any lien on assets or property owned by the Company and (ix) all
accrued but unpaid interest (or interest equivalent) to the date of
determination, and all prepayment premiums or penalties or commitment fees,
related to any items of indebtedness of the type described in clauses (i) through
(viii) above.

 

“Indemnification
Claim Notice” shall have the meaning set forth in Section 12.3 of this
Agreement.

 

“Indemnified
Party” shall have the meaning set forth in Section 12.3 of this
Agreement.

 

“Indemnifying
Party” shall have the meaning set forth in Section 12.3 of this
Agreement.

 

“Indemnity
Percentages” shall have the meaning set forth in Section 12.5(e) of
this Agreement.

 

“Interest
Rate” shall have the meaning set forth in Section 3.6 of this
Agreement.

 

“Interim
Financial Statements” shall have the meaning set forth in Section 6.6
of this Agreement.

 

“IP
Contracts” shall have the meaning set forth in Section 6.17 of this
Agreement.

 

“IP
Litigation” shall have the meaning set forth in Section 12.1(e) of
this Agreement.

 

“JP/S
Patents” shall have the meaning set forth in Section 12.1(e) of
this Agreement.

 

5

 

“Knowledge
of the Company” shall mean the actual knowledge, after due inquiry
reasonable under the circumstances, of Grandi, Richard Say, Robert Ennamorato,
Dean Simpson, Alex Stefanelli or Paul Brooks.

 

“Leaseholds”
shall mean all the right, title and interest of the Company as lessee, licensee
or occupant in, to and under any lease or occupancy right of land, improvements
and/or fixtures.

 

“Leases”
shall mean leases with the Company for the Premises to be entered into on the
Closing Date in substantially the form of Exhibit B-1 hereto for the
Premises located in Concordville, Pennsylvania, in substantially the form of Exhibit B-2
hereto for the Premises located in Aston, Pennsylvania, and in substantially
the form of Exhibit B-3 hereto for the Premises located in Mississauga,
Ontario, Canada.

 

“Losses”
shall have the meaning set forth in Section 12.1 of this Agreement.

 

“Material
Adverse Effect” shall mean any change, effect, event, occurrence, state of
facts, development or circumstance that has had or will have a material adverse
effect on the business, financial condition or results of operation of the
Company, taken as a whole; provided, however, that none of the following shall
be deemed, either alone or in combination, to constitute, and none of the
following shall be taken into account in determining whether there has been or
will be a Material Adverse Effect: (a) attributable to conditions
affecting (i) the industries in which the Company participate (including fluctuating
conditions resulting from cyclicality or seasonality affecting the business of
the Company, including its customers and suppliers), (ii) the U.S. economy
as a whole, or (iii) the economy of any foreign country as a whole in
which country the Company purchases product or has operations or sales; or (b) arising
from or relating to any change after the date of this Agreement in accounting
requirements or principles or any change in applicable laws, rules or
regulations.  The parties hereto
acknowledge and agree that the Company is not making any representations,
warranties or covenants in this Agreement with regard to any internal or
published projections, forecasts, or revenue or earnings predictions for any
period ending on or after the date of this Agreement, and a failure by the
Company to meet, any internal or published projections, forecasts, or revenue
or earnings predictions for any period ending on or after the date of this
Agreement shall not be considered with respect to whether a Material Adverse
Effect has occurred or will occur.

 

“Material
Contracts” shall have the meaning set forth in Section 6.10 of this
Agreement.

 

“Net Debt”
shall be based on and calculated pursuant to the formula set forth on Schedule 1.1(a).

 

“Net
Working Capital” shall be based on and calculated pursuant to the formula
set forth on Schedule 1.1(a).

 

“Notices”
shall have the meaning set forth in Section 14.1 of this Agreement.

 

“Permits
and Licenses” shall mean all licenses (other than software or other
intellectual property licenses), permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any Governmental Entity
or any other Person.

 

6

 

“Permitted
Encumbrances” shall mean (i) liens, arising by operation of law or
otherwise, to secure obligations which arose in the ordinary course of business
and are not yet due or delinquent, to the extent such obligations are reflected
on the balance sheet as of July 31, 2005 contained in the Financial Statements,
and (ii) minor liens which in the aggregate are not substantial in amount,
do not materially detract from the value or transferability of the property or
assets subject thereto or interfere with the present use thereof and have not
arisen other than in the ordinary course of business, to the extent the
liability in respect of such liens are reflected on the balance sheet as of July 31,
2005 contained in the Financial Statements.

 

“Person”
shall mean a natural person, joint venture, corporation, partnership (general
and/or limited), limited liability company, trust, estate, sole proprietorship,
governmental agency or authority or other juridical entity.

 

“Pre-Closing
Taxes” shall mean (i) all Taxes (or the non-payment thereof), whenever
due and payable, of the Company for all taxable periods ending on or before the
Closing Date and the portion through the end of the Closing Date for any
taxable period that includes (but does not end on) the Closing Date (“Pre-Closing
Tax Period”) and all Taxes payable in connection with the transfer of the
Premises contemplated by Section 8.8 hereof.  In the case of any taxable period that
includes (but does not end on) the Closing Date (a “Straddle Period”),
the amount of any Taxes based on or measured by income, receipts or
expenditures of the Company for the Pre-Closing Tax Period shall be determined
based on an interim closing of the books as of the close of business on the
Closing Date (and for such purpose, the taxable period of any partnership or
other pass-through entity in which the Company holds a beneficial interest
shall be deemed to terminate at such time) and the amount of other Taxes of the
Company for a Straddle Period which relate to the Pre-Closing Tax Period shall
be deemed to be the amount of such Tax for the entire taxable period multiplied
by a fraction the numerator of which is the number of days in the taxable
period ending on the Closing Date and the denominator of which is the number of
days in such Straddle Period; provided, however, that if the amount of periodic
Taxes imposed for such taxable period reflects different rates of tax imposed
for different persons within such taxable period, the formula described in the
preceding clause shall be applied separately with respect to each such period
within the taxable period; (ii) all Taxes of any member of an affiliated,
consolidated, combined or unitary group of which the Company (or any
predecessor thereof) is or was a member on or prior to the Closing Date,
including pursuant to Treasury Regulation §1.1502-6 or any analogous or similar
state, local, or foreign law or regulation, and (iii) any and all Taxes of
any Person (other than the Company) imposed on the Company as a transferee or
successor, by contract or pursuant to any law, rule, or regulation, which Taxes
relate to an event or transaction occurring before the Closing.

 

“Premises”
shall mean the real property and Leaseholds described on Schedule 1.1(c) attached hereto.

 

“Proprietary
Rights” shall mean all rights in trademarks, logos, trade names, domain
name registrations and all goodwill related thereto, patents, patent
applications and, computer software (including without limitation any source or
object codes therefor or documentation relating thereto), trade secrets,
inventions and all other intellectual property rights, in addition to all
registrations, applications and common-law rights related thereto, all rights
to obtain renewals, reissues and extensions of registrations or other legal
protections related thereto and

 

7

 

any licenses, consents,
settlements or other agreements relating to the use of any of the foregoing.

 

“Purchase
Price” shall have the meaning set forth in Section 3.1 of this
Agreement.

 

“Regulations”
shall mean any laws, statutes, ordinances, rules, regulations, court decisions,
principles of law and orders of any foreign, federal, state or local
governmental and any other governmental department or agency, including without
limitation Environmental Requirements.

 

“Related
Party” shall mean any Stockholder and Grandi, any Affiliate of any
Stockholder or Grandi, or any of their respective Affiliates or any relative of
any of the foregoing.

 

“Release”
shall mean any past or present spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, migration, dumping or
disposing of Hazardous Materials into the environment or any structure or
facility.

 

“Scheduled
Contracts” shall mean (a) the Material Contracts, (b) the
Leaseholds, and (c) the IP Contracts.

 

“Sellers
Representative” shall have the meaning set forth in Section 8.9 of
this Agreement.

 

“Special
Environmental Indemnity” shall have the meaning set forth in Section 12.1(c) of
this Agreement.

 

“Stock”
shall have the meaning set forth in the Recitals section.

 

“Stockholder”
shall have the meaning set forth in the Recitals section.

 

“Stockholders’
Target Net Working Capital Collar” shall mean the Target Net Working
Capital plus Two Hundred Thousand Dollars ($200,000).

 

“Target Net
Working Capital” shall mean the amount of $9,138,000, as set forth on Schedule 1.1(a), and calculated pursuant to the formula set forth on Schedule 1.1(a).

 

“Taxes”
means, with respect to any entity, all income taxes (including any tax on or
based upon net income, gross income as specially defined, earnings, profits or
selected items of income, earnings or profits) and all gross receipts, sales,
use, transfer, conveyance, value added, capital gains, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation, or
property taxes, alternative minimum taxes, customs, duties and other taxes,
fees, assessments or charges of any kind whatsoever, together with all interest
and penalties, imposed by any taxing authority (domestic or foreign) on such
entity.

 

“Tax
Returns” shall mean all returns, reports, declarations, and information
returns and statements relating to Taxes, including any amendments thereto.

 

8

 

“Termination
Date” shall have the meaning set forth in Section 13.1(c) of this
Agreement.

 

“Transaction
Expenses” shall mean the amount of any fees and expenses in connection with
the transactions contemplated by this Agreement (other than any fees and
expenses incurred by Buyer), including any change of control payments, sale
bonuses, success fees, severance obligations, legal fees, investment banking
fees and other professional fees, payable or to be paid by the Company in
connection with the transactions contemplated by this Agreement, including any
transfer taxes or fees in connection with the transfer of the real property
comprising the Premises pursuant to Section 8.8, and one-half the HSR Act
fee as described in Section 15.3.

 

ARTICLE II

SALE AND PURCHASE OF STOCK

 

2.1.         Agreement
to Sell.  Subject to all of the
terms and conditions of this Agreement, at the Closing, Stockholders shall
sell, assign, transfer, convey and deliver to Buyer all of Stockholders’ right,
title and interest in and to the Stock, free and clear of all Encumbrances.

 

2.2.         Agreement
to Purchase.  Subject to all of
the terms and conditions of this Agreement, at the Closing, Buyer shall
purchase the Stock by paying the Purchase Price (as defined in Section 3.1)
pursuant to Section 3.1.

 

ARTICLE III

PURCHASE PRICE

 

3.1.         Purchase
Price.  In
consideration for the Stock, at the Closing, Buyer shall pay: (i) to
Stockholders and Grandi by wire transfer of immediately available funds, to the
accounts set forth on Schedule 3.1
hereto, the aggregate sum of (a) Sixty-Eight Million Dollars
($68,000,000), (b) as applicable, plus the amount by which the Estimated
Net Working Capital exceeds the Stockholders’ Target Net Working Capital
Collar, or minus the amount by which Buyer’s Target Net Working Capital Collar
exceeds the Estimated Net Working Capital (there being no increase or decrease
if the Estimated Net Working Capital is between Stockholders’ Target Net
Working Capital Collar and Buyer’s Target Net Working Capital Target Collar), (c) minus
Estimated Net Debt ((a) through (c) collectively, the “Purchase Price”),
and (d) minus the Escrow Amount, and (ii) to the Escrow Agent by wire
transfer of immediately available funds, to the account designated by the
Escrow Agent, the Escrow Amount.

 

3.2.         Estimated
Closing Date Balance Sheet; Estimated Net Working Capital and Estimated Net
Debt.  On or prior to three (3) Business Days
prior to the Closing Date, Stockholders and Grandi shall deliver to Buyer the
Estimated Closing Date Balance Sheet, together with their good faith
computation of the Estimated Net Working Capital and Estimated Net Debt.  If Buyer disagrees with the Estimated Closing
Date Balance Sheet, Estimated Net Working Capital or Estimated Net Debt,
Stockholders, Grandi and Buyer shall negotiate in good faith to resolve their
differences prior to the Closing.

 

3.3.         Closing
Date Balance Sheet; Net Working Capital and Net Debt. 
As promptly as possible following the close of business on the Closing
Date, but in no event later than forty-five (45) days after the Closing Date, the
Company shall prepare the Closing Date Balance Sheet

 

9

 

in conformity with
GAAP and historical preparation of the Annual Financial Statements, and (b) deliver
the Closing Date Balance Sheet, together with the computations of the Net
Working Capital and Net Debt, to Buyer. 
Stockholders and Grandi agree to provide, or cause to be provided, to
the Company any materials or information in their possession requested by the
Company as necessary for the preparation of the Closing Date Balance Sheet and
the computation of the Net Working Capital and the Net Debt.

 

3.4.         Review
by Stockholders and Grandi.  Stockholders and
Grandi shall have a period of thirty (30) days following delivery of the
Closing Date Balance sheet to review, at their expense, the Closing Date
Balance Sheet and the computation of the Net Working Capital and Net Debt.  Within such thirty (30) day period, Sellers
Representative shall notify Buyer in writing when Stockholders and Grandi have
completed their review and whether or not Stockholders and Grandi agree with
the Closing Date Balance Sheet and the computations of the Net Working Capital
and Net Debt.  Any objection to the
Closing Date Balance Sheet or to the computation of Net Working Capital or Net
Debt may only be made to the extent such balance sheet or computation has not
been made in accordance with GAAP and consistent with the preparation of the
Annual Financial Statements or to the extent it contains computational errors.  If Sellers Representative does not give Buyer
notice of Stockholders and Grandi’s objection within such thirty (30) day
period, the Closing Date Balance Sheet and the computations of Net Working
Capital and Net Debt shall become final and Stockholders and Grandi shall have
no further right to disagree therewith, and the payment of the Net Working
Capital adjustment and the Net Debt adjustment pursuant to Section 3.6
shall be made.  The Company agrees to
provide, or cause to be provided, to Sellers Representative or its designated
representatives any materials or information in the Company’s possession or the
possession of the Company’s accountants (upon execution of such accountants’
standard waiver letter) requested by Sellers Representative relating to the
preparation of the Closing Date Balance Sheet and the computations of the Net
Working Capital and Net Debt.

 

3.5.         Independent
Review.  In the event Sellers Representative and Buyer
do not agree upon the Closing Date Balance Sheet or the computation of the Net
Working Capital or Net Debt within ten (10) Business Days after delivery
by Sellers Representative of a notice of disagreement pursuant to Section 3.4,
Sellers Representative and Buyer shall submit to PricewaterhouseCoopers, LLP
(the “Arbiter”) such Closing Date Balance Sheet and computations of the Net
Working Capital and Net Debt, and any other documents or information that the
Arbiter deems pertinent to make a final and binding determination of any issues
as to which the parties are in disagreement. 
The Arbiter shall advise the parties of its decision relative to the
controversy within thirty (30) days after its receipt of the applicable
statements and other documents or information that it has requested.  Such firm shall be acting as an arbitrator
and not as an auditor and shall decide only those issues as to which the
parties are not in agreement on the grounds that the Closing Date Balance Sheet
or the relevant computation of Net Working Capital or Net Debt delivered by the
Company pursuant to Section 3.3 was not prepared in accordance with GAAP
consistent with the preparation of the Annual Financial Statements or contained
computational errors.  The fees and
expenses of the Arbiter shall be equally apportioned between the Stockholders
and Grandi, on the one hand, and Buyer, on the other hand.

 

10

 

3.6.         Payment
of Net Working Capital and Net Debt Adjustment.  Within five (5) Business
Days after the final determination of the Net Working Capital and Net Debt as
provided for in Sections 3.4 or 3.5, as the case may be (provided that any
undisputed amount shall be paid within five (5) Business Days of Sellers
Representative’s notice of objection pursuant to Section 3.4), (i) if
the Purchase Price as calculated pursuant to the formula set forth in Section 3.1
substituting such Net Working Capital and Net Debt for Estimated Net Working
Capital and Estimated Net Debt (the “Final Purchase Price”) is greater than the
Purchase Price determined at Closing using Estimated Net Working Capital and
Estimated Net Debt (the “Closing Purchase Price”), Buyer shall pay to an
account designated by Stockholders and Grandi an amount in cash equal to the
difference.  If the Final Purchase Price
is less than the Closing Purchase Price, Stockholders and Grandi shall pay to
Buyer an amount in cash equal to the difference.  In each of the
foregoing, interest shall accrue thereon from the date of Closing to the date
of payment thereof, at an interest rate equal to the “Prime Rate” as published
in the Wall Street Journal on the Closing Date plus one percent (1%) (the “Interest
Rate”).

 

ARTICLE IV

CLOSING

 

4.1.         Closing.  The closing for the sale and purchase of the
Stock (“Closing”) shall take place at the offices of Stradley, Ronon, Stevens &
Young, LLP, 2600 One Commerce Square, Philadelphia, Pennsylvania, at 10:00 a.m.
(local time) on the fifth (5th) Business Day following the
satisfaction of the conditions contained in Article X and Article XI
of this Agreement (except those conditions which by their terms require
performance at Closing), or such other date and time as is mutually agreed upon
by the parties hereto.  The date and time
of Closing are hereinafter referred to as the “Closing Date.”  The Closing shall be effective as of 11:59 p.m.
(local time) on the Closing Date.

 

4.2.         Deliveries
by Stockholders.  At Closing,
Stockholders shall deliver to Buyer:

 

(a)           Stock
certificates for the Stock, which certificates shall be duly endorsed to Buyer,
or accompanied by duly executed stock powers; and

 

(b)           Such
documents listed in Article X of this Agreement, as are to be delivered to
Buyer by Stockholders.

 

4.3.         Deliveries
by Buyer.  At Closing, Buyer
shall deliver to Stockholders:

 

(a)           The
Purchase Price, as specified in Section 3.1; and

 

(b)           Such documents
listed in Article XI of this Agreement, as are to be delivered to
Stockholders by Buyer.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS AND GRANDI

 

Stockholders
hereby represent and warrant, and Grandi represents and warrants solely with respect
to the provisions contained in Sections 5.1(b), to Buyer as follows:

 

11

 

5.1.         Authorization.  (a) The execution, delivery and
performance of this Agreement, and the consummation of the transactions contemplated
hereby, have been duly and validly authorized and approved by all necessary
action on the part of Stockholders.  This
Agreement constitutes a valid and binding obligation of Stockholders,
enforceable in accordance with its terms, except as the enforceability hereof
may be limited by bankruptcy, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights generally or by equitable
principles.  No Consent is required with
respect to Stockholders in connection with the execution, delivery and
performance of this Agreement, except (i) Consent under the HSR Act, or (ii) as
set forth on Schedule 5.1.

 

(b)           Grandi
has full capacity to enter into this Agreement, and it constitutes a valid and
binding obligation of Grandi, enforceable in accordance with its terms, except
as the enforceability hereof may be limited by bankruptcy, reorganization,
moratorium or similar laws relating to or limiting creditors’ rights generally
or by equitable principles.  The
execution, delivery and performance of this Agreement, does not constitute a
violation of, default under, or conflict with, any Court Order applicable to
Grandi.

 

5.2.         Capitalization.  The authorized number of shares of capital
stock of Fibre-Metal, the par value per share, and the number of shares of
capital stock of Fibre-Metal issued and outstanding, and the holders thereof,
as of the date of this Agreement are as set forth on Schedule 5.2.  Except as set forth on Schedule 5.2,
each Stockholder is the sole record and beneficial owner of each share of Stock
indicated on Schedule 5.2 as
owned by such Stockholder, free and clear of any and all Encumbrances.  All of the outstanding shares of the Stock
have been duly and validly issued and are fully paid and non-assessable.  None of the outstanding shares of the Stock
were issued in violation of applicable state or federal securities laws.  Other than as set forth on Schedule 5.2, there are no outstanding options,
warrants, calls, commitments, agreements, pre-emptive or other rights to subscribe
for, purchase or otherwise acquire any capital stock of the Company, or
securities convertible into or exchangeable for any capital stock of the
Company, to which the Company or any Stockholder is bound.

 

5.3.         Ability
to Carry Out Agreement.  Except
as set forth on Schedule 5.3, the
consummation of the transactions contemplated hereby, including, but not
limited to, the execution, delivery and performance of this Agreement, does
not: (a) constitute a violation of or default under, conflict with or result
in a breach of (i) the Formation Documents for any Stockholder, (ii) the
terms of any contract, agreement or understanding to which any Stockholder is
bound (except where any such breach would not have a material adverse effect on
the Stockholders’ ability to consummate the transactions contemplated hereby), (iii) any
Court Order to which such Stockholder is subject, or (iv) any Regulation
applicable to such Stockholder; (b) result in the creation or imposition
of any Encumbrance on, or give to any Person any interest or right in any of
the Stock; or (c) accelerate the maturity of, or otherwise modify, or give
to others any right of termination, amendment, acceleration, suspension,
revocation or cancellation of any rights under, any material contract, agreement
or understanding to which any Stockholder is bound (except where any such
breach would not have a material adverse effect on the Stockholders’ ability to
consummate the transactions contemplated hereby).

 

12

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company
hereby represents and warrants to Buyer as follows:

 

6.1.         Organization.  Fibre-Metal is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and FMC is a corporation duly organized, validly existing and in good standing
under the laws of Canada.  The Company
has full power and authority to own its assets and to carry on its business as
and where such business is now conducted. 
The Company is duly qualified or licensed to do business and is in good
standing in all jurisdictions in which the nature of its business or the
character of its properties or assets requires such qualification or license,
all such jurisdictions are set forth on Schedule 6.1,
except where the failure to so qualify would not constitute a Material Adverse
Effect.  Copies of the Formation
Documents for the Company heretofore delivered to Buyer are true, accurate and
complete as of the date of this Agreement.

 

6.2.         Ability
to Carry Out Agreement.  Except
as set forth on Schedule 6.2, the
consummation of the transactions contemplated hereby, including, but not
limited to, the execution, delivery and performance of this Agreement, does
not: (a) constitute a violation of or default under, conflict with or
result in a breach of (i) the Formation Documents for the Company, (ii) the
terms of any of the Scheduled Contracts (except where any such breach would not
have a material adverse effect on the Company’s ability to consummate the
transactions contemplated hereby), (iii) any Court Order to which the
Company is subject, or (iv) any Regulation applicable to the Company; (b) result
in the creation or imposition of any Encumbrance on, or give to any Person any
interest or right in any of the Stock or any of the Company’s assets; or (c) accelerate
the maturity of, or otherwise modify, or give to any Person any right of
termination, amendment, acceleration, suspension, revocation or cancellation of
any rights under, any of the Scheduled Contracts (except where any such breach
would not have a material adverse effect on the Company’s ability to consummate
the transactions contemplated hereby).

 

6.3.         Authorization.  The execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated hereby,
have been duly and validly authorized and approved by all necessary action on
the part of the Company.  This Agreement
constitutes the valid and binding obligation of the Company, enforceable in
accordance with its terms, except as the enforceability hereof may be limited
by bankruptcy, reorganization, moratorium or similar laws relating to or
limiting creditors’ rights generally or by equitable principles relating to
enforceability.  No Consent is required
with respect to the Company in connection with the execution, delivery and
performance of this Agreement, except (i) Consent under the HSR Act, (ii) as
set forth on Schedule 6.3, or (iii) such
Consents which, if not obtained, would not constitute a Material Adverse
Effect.

 

6.4.         Permits
and Licenses.  The Company holds
all Permits and Licenses that are necessary for the operation of the Business
as now conducted and as presently planned to be conducted as of the date of
this Agreement, except for Permits and Licenses which, if not in full force and
effect and currently valid, would not constitute a Material Adverse
Effect.  The

 

13

 

Company is in
material compliance with all of the terms and conditions of all material
Permits and Licenses.

 

6.5.         Compliance
with Regulations.  The Company is
in compliance with all material Regulations and the Company has not received
written notice of any violation of any material Regulations.

 

6.6.         Financial
Statements.  Attached as Schedule 6.6 are copies of the audited balance sheets,
statements of income, statements of cash flows and statements of Stockholder’s
equity for the Company for the fiscal years ending December 31, 2003 and
2004 (collectively, the “Annual
Financial Statements”) and copies of the unaudited balance sheets and
statements of income for the Company for the six (6) month period ending June 30,
2005 and the seven (7) month period ending July 31, 2005 (the “Interim Financial Statements” and,
together with the Annual Financial Statements, sometimes collectively referred
to herein as the “Financial Statements”).  Except as described on Schedule 6.6,
or as disclosed in the Financial Statements, as of their respective dates, the
Financial Statements (i) were prepared from the Books and Records, (ii) were
prepared in accordance with GAAP, consistently applied from period to period
(except for changes, if any, permitted by GAAP and disclosed therein), (iii) fairly
present in all material respects in accordance with GAAP consistently applied,
the financial position and results of operations of the Company as of the dates
and for the periods covered thereby, subject, in the case of the Interim
Financial Statements, to normal year end adjustments and the absence of
footnotes, and (iv) in the case of the Annual Financial Statements, are
accompanied by a report of the Company’s independent auditors prepared in
accordance with generally accepted auditing standards.  The Company does not have any material
liability or obligation of any nature, whether due or to become due, absolute,
contingent or otherwise, including liabilities for or in respect of federal,
state, local and foreign Taxes and any interest or penalties relating thereto,
except (a) to the extent reflected as a liability contained in the balance
sheet as of July 31, 2005 included in the Financial Statements, (b) liabilities
incurred in the ordinary course of business since July 31, 2005 and fully
reflected as liabilities on the Books and Records, which are consistent in
amounts and consistent with the type as those set forth on such July 31,
2005 balance sheet, and (c) liabilities disclosed on Schedule 6.6A.

 

6.7.         Title
to and Condition of Assets.  The
Company has good, valid and marketable title to all of its assets, tangible and
intangible, including, without limitation, the assets set forth on the Interim
Financial Statements, free and clear of all Encumbrances, other than Permitted
Encumbrances and except as set forth on Schedule 6.7
(which items set forth on Schedule 6.7
shall be removed at or prior to the Closing). 
All Fixtures and Equipment are, and shall on the Closing Date be, in a
condition sufficient for the operation of the Business as currently conducted,
and there are no material defects in such Fixtures and Equipment that would
constitute a Material Adverse Effect. 
Except as set forth on Schedule 6.7,
none of the Company’s assets consist of any capital stock or debt security of,
or other debt or equity interest in, any other Person, and the Company has not
entered into any agreement requiring it to acquire any such interest or
otherwise contribute to the capital of any other Person.  The Company has sufficient right, title and
interest in and to all assets necessary for the operation of the Business as
now conducted.

 

14

 

6.8.         Tax
Returns and Taxes.  The Company
has duly and timely filed (taking into account all extensions of due dates)
with the appropriate Governmental Entity all tax and other returns and reports
required to be filed, all of which have been accurately prepared in all
material respects.  All Taxes due, owing
and payable, or which may be due, owing and payable, have been fully paid or
reserved for by the Company in the Financial Statements.  Except as set forth on Schedule 6.8,
all Taxes arising from January 1, 2005 to the Closing Date will be, on the
Closing Date, fully paid or reserved for on the Closing Balance Sheet.  The Company has not received, with respect to
the Company’s tax returns, notice from any Governmental Entity of any
deficiency or other adjustment that has not been satisfied.  Except as set forth on Schedule 6.8,
the Company (i) is not presently under audit by the Internal Revenue
Service (“IRS”) or any other tax
authority for any Taxes, (ii) has not been the subject of an IRS audit
during the past five (5) years, and (iii) has not received any notice
of a proposed IRS audit.  There are no
agreements, waivers, or other arrangements providing for an extension of time
with respect to the assessment of any Taxes or deficiency against the Company,
nor are there any Actions, now pending or, to the Knowledge of the Company,
threatened against the Company in respect of any Taxes.  The Company has withheld, and will withhold
prior to Closing, proper and accurate amounts from employees of the Company in
compliance in all material respects with all withholding and similar provisions
of any and all applicable federal, foreign, state, and local laws, statutes,
codes, ordinances, rules and regulations. 
No liens for Taxes exist with respect to any assets or properties of the
Company, except for statutory liens for Taxes not yet due.  The Company has duly elected to be an S
corporation for purposes of Sections 1361 through 1379 of the Code (the “S
Election”).  The S Election has been
effective from September 1, 2002 and continuously thereafter.  The Company is treated as an S corporation
for state and local income tax purposes as set forth on Schedule 6.8,
which indicates the effective date of such tax status in each listed
jurisdiction.  During the last three
fiscal years, the Company has not distributed stock of another Person, or has
had its stock distributed by another Person, in a transaction that was
purported or intended to be governed in whole or in part by Section 355 of
the Code; since the date of the latest balance sheet, the Company has not
incurred any material liability for Taxes arising from extraordinary gains or
losses, as the term is used in GAAP, outside the ordinary course of business
consistent with past practice; the Company (A) has not been a member of an
affiliated group of corporations, within the meaning of Section 1504 of
the Code, and (B) has no liability for the Taxes of any Person under
Treas. Reg. §1.1502-6 (or any similar provision of state, local or foreign
income Tax law), as a transferee or successor, by contract, or otherwise; no
claim has been made in writing by a tax authority in a jurisdiction where the
Company does not file Tax Returns that the Company is or may be subject to
Taxes assessed by such jurisdiction; the unpaid income Taxes of the Company did
not, as of the date of the latest balance sheet, exceed the reserve for income
Tax liability set forth on the latest balance sheet; the Company has not
entered into any transaction which is a “reportable transaction” (as defined in
Treasury Regulation Section 1.6011-4) or a “potentially abusive tax
shelter” (as defined in Treasury Regulation Section 1.6112-1); the Company
is not a party to any contract, plan or arrangement (written or otherwise)
covering any Person that, individually or collectively, would, in whole or in
part resulting from the consummation of the transactions contemplated hereby,
result in the payment of any amount that will not be deductible pursuant to the
terms of Section 280G of the Code; the Company is not nor has the Company
been, a United States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period described in Code
Section 897(c)(1)(A)(ii).  The
Company has not filed a consent under Code

 

15

 

Section 341(f);
the Company will not be required to include any item of income in, or exclude
any item of deduction from, taxable income for any taxable period ending after
the Closing Date as a result of any change in accounting method for any taxable
period ending on or prior to the Closing Date, any installment sale or open
transaction disposition made on or prior to the Closing Date or, any prepaid
amount received on or prior to the Closing Date.

 

6.9.         Labor
Relations.

 

(a)           The
Company is party to the collective bargaining agreements set forth on Schedule 6.9. 
During the most recent twelve (12) month period prior to the date of
this Agreement, the Company has not received any notice of, and there have not
been, any strikes, slowdowns, work stoppages or lock-outs, or threats
thereof, by or with respect to any of the Company’s employees.  There are no unfair labor practice complaints
pending or, to the Knowledge of the Company, threatened against the
Company.  Other than the collective
bargaining agreement listed on Schedule 6.9, to the Knowledge of the
Company, there are no present activities or proceedings by any labor union to
organize any of the Company’s employees.

 

(b)           Except as set forth on Schedule 6.9(b),
there are no controversies, grievances or claims by any, or on behalf of any,
of the Company’s employees pending with respect to their employment or benefits
incident thereto, including, but not limited to, sexual harassment and
discrimination claims and claims arising under workers’ compensation laws
(collectively, “Employee Claims”), and to the Company’s Knowledge, there is no
state of facts or event which could reasonably be expected to form the basis
for any Employee Claims.

 

6.10.       Material
Contracts.  Schedule 6.10
identifies each Contract between the Company and any third party that (i) involves
the future payment by the Company thereunder of an amount in excess of $50,000 during
a one-year period or $100,000 during the term of the Contract, (ii) was
entered into not in the ordinary course of the Business, (iii) contains
any provision or covenant prohibiting or limiting the ability of the Company to
operate the Business or pursuant to which the Company has agreed not to compete
with any other Person or to solicit the customers of employees of any other
Person, (iv) is a sales representative or distribution Contract that
involves or will reasonably involve payments in excess of $50,000 during a
one-year period or $100,000 during the term of the Contract, (v) is a
supply Contract with any customer or vendor that involves or will reasonably
involve payments in excess of $50,000 during a one-year period or $100,000
during the term of the Contract, (vi) is a Contract pursuant to which the
Company has acquired or disposed of any business that involves or will
reasonably involve payments in excess of $50,000 during a one-year period or
$100,000 during the term of the Contract, or (vii) is a Contract relating
to any Indebtedness ((i) through (vii) collectively, “Material Contracts”).  Each Material Contract is in full force and
effect and constitutes the valid and binding obligation of the Company and, to
the knowledge of the Company, the other parties thereto, enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, reorganization, moratorium or similar laws relating to or
limiting creditors’ rights generally or by equitable principles.  Except as set forth on Schedule 6.10,
the Company is not in default under, the Company has not received or delivered
any written notice of default, cancellation or termination of, and, to the
Knowledge of the Company, no other party is in material default under, any
Material Contract.

 

16

 

6.11.       Changes
or Events.  Except as set forth
on Schedule 6.11 and except for the
transfer of the Premises contemplated by Section 8.8, since January 1,
2005, the Company has conducted its business in the ordinary course and none of
the following has occurred with respect to the Company:

 

(a)           Any
amendments to the Company’s Formation Documents;

 

(b)           Any
disposition of, or agreement to dispose of, or placement of an Encumbrance
upon, any of the Company’s assets, other than dispositions of inventory and
obsolete equipment in the regular, normal and ordinary course of business,
consistent with past custom or practice;

 

(c)           Any
acquisition, by merger, consolidation, purchase of stock or assets or
otherwise, of any corporation, partnership, association or other business
organization or of all or substantially all of its assets, or any sale or
agreement to sell the Company, by merger, consolidation, sale of stock or sale
of all or substantially all of the Company’s assets;

 

(d)           Any (i) issuance
or sale (or agreement to issue or sell) any of the Company’s capital stock or
any options, warrants or other rights to purchase any such shares or any
securities convertible into or exchangeable for such shares, (ii) declaration,
setting aside or payment of any distributions, dividends or similar payments
(other than cash dividends) in respect of the Stock or any other capital stock
(or similar equity interest) of the Company; or (iii) redemption, purchase
or other acquisition of the Stock or any other capital stock (or similar equity
interest) of the Company;

 

(e)           Any
incurrence of any Indebtedness or making of loans or advances by the Company to
any Person other than advances to employees in the ordinary course of business
consistent with past practice;

 

(f)            Any
increase in the compensation or other payment to any director, officer or
employee, whether now or hereafter payable or granted (other than increases in
base compensation in the ordinary course consistent in timing and amount with
past practices), or entry into or variation of the terms of any employment or
incentive agreement with any such person;

 

(g)           Any
commencement, entering into, or altering of any Scheduled Contract, or any Employee
Plan, stock option, stock purchase, or incentive plan for employees of the
Company;

 

(h)           Any
capital expenditure or commitment to any capital expenditure in excess of
$100,000;

 

(i)            Any
termination of employees of the Company, except in the ordinary course of
business;

 

(j)            Any
change in the Company’s accounting procedures or practices;

 

17

 

(k)           Any
development, change or occurrence that constitutes a Material Adverse Effect;

 

(l)            Any
cancellation of any debts or waiver of any material rights or payment,
discharge or satisfaction of any claim, liabilities or obligations (absolute,
accrued, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent with past practice
of liabilities and obligations reflected on or reserved against on the
Financial Statements or incurred in the ordinary course of business consistent
with past practice since July 31, 2005;

 

(m)          Any
disposition of or permission to lapse of any rights to the use of any material
Proprietary Rights or disposition of or disclosure of (except as necessary in
the conduct of its business) to any Person, of any trade secret, formula,
process or know-how not a matter of public knowledge prior to such disclosure;

 

(n)           Any
entering into or termination of any agreement or transaction with any Related
Party;

 

(o)           Any making
or revoking of any election for Tax purposes by the Company or on its behalf or
any change in the Company’s status as an S corporation;

 

(p)           Any
incurrence of any material damage, destruction or loss, whether or not covered
by insurance, adversely affecting the properties, business or assets of the
Company; or

 

(q)           Any
agreement or commitment by the Company to do or take any of the foregoing
actions.

 

6.12.       Employees
and Employee Benefits.

 

(a)           Set forth
on Schedule 6.12(a) is a true
and complete listing of (i) all written employment and consulting
agreements to which the Company is a party; (ii) all confidentiality or
other agreements between the Company and its employees protecting proprietary
processes or information; and (iii) all Employee Plans.  A true and complete copy of each agreement,
plan or arrangement listed on Schedule 6.12(a),
and, where applicable, a copy of the most recent IRS Determination Letter
received, and the three most recent IRS Forms 5500 filed, including all
schedules and exhibits filed with that 5500, with respect to each such
agreement, plan or arrangement, has been furnished to Buyer.

 

(b)           Except as
set forth on Schedule 6.12(b),
the Employee Plans have been administered in accordance with their terms and
all applicable provisions of ERISA, the Code and state law.  The Company has made all payments to all
Employee Plans as required by the terms of each such plan and applicable law.

 

(c)           Except as
set forth on Schedule 6.12(c),
the IRS has issued a letter for each Employee Plan that is an employee pension
benefit plan, as defined in Section 3(2) of ERISA, which is intended
to be a qualified plan, determining that such plan is so qualified under Section 401(a) of
the Code as amended through the effective dates of the legislation referred to

 

18

 

as “GUST” and is exempt
from United States Federal Income Tax under Section 501(a) of the
Code, and there has been no occurrence, including any amendment or failure to
amend, since the date of any such determination letter that has adversely
affected such qualification.

 

(d)           Except as
set forth on Schedule 6.12(d), neither the
Company nor any ERISA Affiliate has contributed
to, or been required to contribute to, during any period with respect to which
any relevant statute of limitations remains open, any multiemployer plan as
defined by Section 3(37) of ERISA, nor has the Company or any ERISA
Affiliate incurred any withdrawal liability within the meaning of Section 4201
of ERISA with respect to any multiemployer plan or have any potential
withdrawal liability arising from a transaction described in Section 4204
of ERISA.

 

(e)           None of
the Employee Plans which is an employee welfare benefit plan, within the
meaning of Section 3(l) of ERISA, provides benefits to retirees or other
former employees of the Company, regardless of whether such benefits are vested
and the Company has not terminated any employee welfare benefit plan providing
benefits to retirees.  The Company and
each ERISA Affiliate have complied with the notice and continuation coverage
requirements of section 4980B of the Code and the regulations thereunder,
including, without limitation, the “M&A regulations” issued as Treasury
Regulations § 54.4980B-9, with respect to each Employee Welfare Benefit
Plan that is, or was during any taxable year of the Company or any ERISA
Affiliate for which the statute of limitations on the assessment of federal
income taxes remains open, by consent or otherwise, a group health plan within
the meaning of section 5000(b)(1) of the Code.

 

(f)            No ERISA
Affiliate has incurred any liability which could subject Buyer or the Company
to liability under Section 4062, 4063, 4064 or 4069 of ERISA, nor has any
ERISA Affiliate, during any period with respect to which any relevant statute
of limitations remains open, been required to contribute to, or incurred any
withdrawal liability, within the meaning of Section 4201 of ERISA to any
multiemployer pension plan, within the meaning of Section 3(37) of ERISA
nor does any ERISA Affiliate have any potential withdrawal liability arising
from a transaction described in Section 4204 of ERISA.

 

(g)           Except as
set forth on Schedule 6.12(g),
the assets of each Employee Plan that is a defined benefit pension plan, as
defined by Section 3(35) of ERISA maintained or contributed to by the
Company or any ERISA Affiliate and subject to Title IV of ERISA (other than any
multiemployer plan) are at least equal to the liabilities for accrued benefits
under such Employee Plan, determined in accordance with Statement of Financial
Accounting Standards No. 87.  No
such Employee Plan has incurred any accumulated funding deficiency or requested
a waiver of the minimum funding standards of section 412 of the Code or Section 302
of ERISA.  The Company has furnished to
Buyer the most recent actuarial report with respect to each such Employee Plan.

 

(h)           Other than
routine claims for benefits made in the ordinary course of business, there are
no pending claims, investigations or causes of action (“Claims”) and to the
Knowledge of the Company, no such Claims are threatened, against any Employee
Plan or fiduciary of any such Employee Plan by any participant, beneficiary or
Governmental Entity

 

19

 

with respect to the
qualification or administration of any such Employee Plan and there is no basis
to anticipate that any such claims will be made.

 

(i)            Except as
described on Schedule 6.12(i), neither the execution and delivery of this Agreement,
nor the sale of the Stock or any of the transactions contemplated herein, will
terminate or modify, or give a third party a right to terminate or modify, the
provisions or terms of any Employee Plan (including employment agreements) and
will not constitute a stated triggering event under any Employee Plan
(including employment agreements) that will result in any payment (including
parachute payments, severance payments or any similar payments) becoming due to
any employees of the Company.  No payment
which is or may be made by from or with respect to any Employee Plan, to any
employee, former employee, director or agent of the Company or any ERISA Affiliate,
either alone or in conjunction with any other payment, will or could properly
be characterized as an excess parachute payment under section 280G of the
Code, provided that the Company remains a small business corporation (as
defined in Section 1361(b) of the Code) until the Closing.

 

(j)            No
Employee Plan or other arrangement listed on Schedule 6.12(a),
is maintained outside the jurisdiction of the United States or Canada.

 

6.13.       Real
Property; Leaseholds.

 

(a)           The
Company does not own any interest in any real property other than the real
property constituting the Premises.  No
portion of the real property constituting the Premises is subject to any
pending condemnation proceeding by any public or quasi-public authority and, to
the Knowledge of the Company, there is no threatened condemnation proceeding
with respect thereto, except as set forth on Schedule 6.13.  The Company has not received written notice
of any outstanding violation of any Regulation respecting any portion of the
Premises.  The real property constituting
the Premises is supplied with utilities and other services necessary for the
operation of the facilities located thereon as presently conducted, and all of
such services are adequate to conduct that portion of the Business as is presently
conducted at such facility.  The Company
has not sublet, underlet or assigned any portion of the Premises and no third
party is in possession of any portion of the Premises other than the Company.  The zoning of the real property constituting
the Premises permits the presently existing improvements and the Business
presently being conducted thereon as a conforming use.

 

(b)           Schedule 1.1(c) includes a list of all
Leaseholds.  The Company is the holder of
each Leasehold and each Leasehold is in full force and effect and constitutes a
valid and binding obligation of the Company and, to the Knowledge of the
Company, all other parties thereto and is enforceable in accordance with its
terms.  The Company has the sole right to
use or occupy the realty subject of each Leasehold and, upon consummation of
the transactions contemplated hereby, each Leasehold will continue in full
force and effect and constitute a valid and binding obligation on the part of
the Company and all other parties thereto enforceable in accordance with its
terms.  The Company has not received any
notice of any default related to a Leasehold and, to the Knowledge of the
Company, no party currently has the right to cancel or terminate a Leasehold.

 

20

 

6.14.       Insurance.

 

(a)           Schedule 6.14
lists:

 

(i)            All
policies of insurance pertaining to the Company, including policies covering
the Company’s public and product liability and its personnel, properties,
buildings, machinery, equipment, furniture, fixtures and operations, specifying
with respect to each such policy, the name of the insurer, type of coverage,
term of policy, limits of liability and annual premium.  All such policies are presently in full force
and effect, all premiums with respect thereto have been fully paid, and no
notice of cancellation or termination has been received by the Company with
respect to any such policy. With respect to each such insurance policy:  (i) the policy is legal, valid, binding,
enforceable, and in full force and effect; (ii) there are no outstanding
claims under the policy; (iii) neither the Company nor, to the Knowledge
of the Company, any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices), and
no event has occurred which, with notice or the lapse of time, would constitute
such a breach or default, or permit termination or modification, under the
policy; (iv) the Company is not subject to a retroactive rate adjustment,
loss sharing arrangement or other actual or contingent liability; and (v) in
the past two years, no notice of cancellation or non-renewal with respect to,
or disallowance (other than reservation of rights by the insurer) of any
material claim under, the policy has been received.  All such insurance policies are sufficient for
compliance with all material Regulations applicable to the Company and the
Company’s obligations under the Contracts. 
There has been no failure to give any notice or present any claim under
any insurance policy in a timely fashion or in the manner or detail required by
the policy.  The Company has not been
refused any property and casualty insurance, nor has any of its coverages been
limited by any insurance carrier to which it has applied for insurance or with
which has carried insurance during the last five years and the Company has been
fully covered at all times during the past five years by insurance in scope and
amount customary and reasonable for the businesses in which it has engaged and
the nature and amount of the liabilities it has incurred during the
aforementioned period; and

 

(ii)           All
insurance claims by the Company for damage to or loss of property or income, or
against the Company, that have been referred to its insurers for coverage
during the last four (4) years.

 

(b)           The
Company has not manufactured, sold or distributed manganese welding rods.

 

6.15.       Litigation.  Except as disclosed on Schedule 6.15,
there is no Action or Court Order pending or, to the Knowledge of the Company,
threatened against the Company that constitutes a Material Adverse Effect or
materially impairs the Company’s ability to perform its obligations hereunder
or to consummate the transactions contemplated hereby.

 

6.16.       Accounts
Receivable.  All accounts
receivable of the Company shown on the Interim Financial Statements or arising
thereafter, to the extent uncollected on the date hereof, represent obligations
arising from bona fide transactions in the ordinary course of the
Business.  Except as set forth on Schedule 6.16, there are no refunds, rights of setoff,
discounts or other adjustments payable in respect of any of the accounts
receivable of the Company.  Schedule 6.16

 

21

 

contains a summary
of accounts receivable due the Company, specifying the name, amount, age, and
any amount written off or reserved against, as of August 31, 2005.

 

6.17.       Proprietary
Rights.  Schedule 6.17
contains a listing of all Proprietary Rights that the Company owns or licenses
(the “IP Contracts”), pursuant to which the Company has rights to any
Proprietary Rights, setting forth as to each such item of owned Proprietary
Rights: the item, owner, jurisdiction, registration or issuance date, as
applicable, and as to each licensed item of Proprietary Rights, the identity of
the licensor, date and subject matter of the license.  Each IP Contract is in full force and effect
and constitutes the valid and binding obligation of the Company and, to the
knowledge of the Company, the other parties thereto, enforceable in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, reorganization, moratorium or similar laws relating to or limiting
creditors’ rights generally or by equitable principles.  The Company is not in default under, the
Company has not received or delivered any written notice of default,
cancellation or termination of, and, to the Knowledge of the Company, no other
party is in material default under, any such IP Contract.  Except as disclosed on Schedule 6.17:

 

(a)           The
Company (i) owns or has the right to use in the Business all Proprietary
Rights used in the conduct of the Business as now conducted, and (ii) owns
all right, title and interest in the Proprietary Rights described on Schedule 6.17 as Company-owned Proprietary Rights
(including, without limitation, exclusive rights to use and license the same)
free and clear of any Encumbrances;

 

(b)           The
Company is not in default under any agreement relating to the Proprietary
Rights and, to the Knowledge of the Company, no other party is in default
thereunder and the transactions contemplated hereby will not result in any
default under, or trigger any right of renegotiation, rescission or other
modification under any such agreements;

 

(c)           There is
no written claim or demand of any Person pertaining to, or any proceeding
pending or, to the Knowledge of the Company, threatened in writing, which
challenges the rights of the Company in respect of the Proprietary Rights or
that seeks to invalidate, cancel or otherwise challenge the extent or validity
of the Proprietary Rights;

 

(d)           To the
Knowledge of the Company, the operation of the Business as it is currently
conducted, including but not limited to the design, development, use, import,
manufacture and sale of the products, technology or services of the Company,
does not infringe, dilute, misappropriate or otherwise violate the Proprietary
Rights of any third party, or constitute unfair competition or trade practices
under the laws of any jurisdiction, and no claim has been made, notice given,
or dispute arisen to that effect.  To the
Knowledge of the Company, the Company has not benefited from any other Person’s
misappropriation of the Proprietary Rights of any third party.  The Company does not have any pending claims
that a third party has violated or infringed any of the Company’s Proprietary
Rights;

 

(e)           All of the
patents, trademark registrations, and domain name registrations indicated in Schedule 6.17 are valid and in full force and effect,
and are held of record in the name of the Company;

 

22

 

(f)            To the
Knowledge of the Company, none of the trade secrets, material know-how or other
confidential or proprietary information of the Company has been disclosed to any
Person unless such disclosure was necessary and made pursuant to an appropriate
confidentiality agreement, and to the Knowledge of the Company there has been
no unauthorized release or disclosure of the Company’s trade secrets or other
confidential or proprietary information; and

 

(g)           All of the
computer software used in the Business is adequately documented.  Except as set forth in Schedule 6.17,
all of the computer software used in the Business performs in material
conformance with the applicable documentation for such software.  The information technology systems owned,
licensed, leased, operated on behalf of, or otherwise held for use in the
Business by Company, including all computer hardware, software, firmware and
telecommunications systems used in the Business, perform reliably in the
operation of the Business.

 

6.18.       Environmental
Requirements.  Except as
specifically disclosed on Schedule 6.18:

 

(a)           Neither the Company nor, to the Knowledge of
the Company, any predecessor or other Person has engaged in or permitted any
operations or activities or any use or occupancy of the Premises resulting in
the storage, emission, Release, discharge, dumping, transportation or disposal
of any Hazardous Materials on, under, in or about the Premises or in connection
with the operation of the Business, in any case in such a way as to give rise
to, or that would reasonably be expected to give rise to, any material
liability (contingent or otherwise) under any applicable Environmental
Requirements (including without limitation for response costs, corrective
action costs, personal injury, property damage, natural resources damages or
attorney fees, or any investigative, corrective or remedial obligations);

 

(b)           (i)  Each of the Premises and its
existing and prior uses and activities comply, and have for the applicable
statute of limitations complied, in all material respects with all
Environmental Requirements, except for such violations that have been resolved,
and the Company has obtained and complied with all material Permits and
Licenses necessary under applicable Environmental Requirements and (ii) the
Company has not received any notice or other communication in writing
concerning any alleged violation of or liability under Environmental
Requirements, whether or not corrected to the satisfaction of the appropriate
Governmental Entity, and no Action or Court Order exists or is threatened
relating to the ownership, use, maintenance or operation of the Premises
arising from an alleged violation of Environmental Requirements, or from the
suspected presence of Hazardous Materials thereon;

 

(c)           The
Company has not received notice that it has been identified as a potentially
responsible party at any federal or state site that requires remedial, response
or other action as a result of a Release or threat of Release of Hazardous
Substances, including without limitation any such site listed or proposed for
listing on the National Priority List of Superfund sites or any similar list of
sites;

 

(d)           The Company has not entered into any consent
decree or other written agreement in settlement of any alleged violation of or
liability under any Environmental

 

23

 

Requirements under which
decree or agreement the Company has any unfulfilled obligations, and the
Company has not assumed or retained any such liabilities by contract, law or
otherwise; and

 

(e)           The
Company has furnished to Buyer all environmental audits, reports and other
environmental documents in the Company’s possession or control prepared during
the twenty (20) year period prior to the date of this Agreement relating to the
Business, the Company, or the Premises, except such reports that only identify
conditions or violations (i) that have been resolved and where the statute
of limitations for such liabilities has expired, or (ii) that are not
material.

 

6.19.       Inventory.  Attached hereto as Schedule 6.19
is a summary of the inventory of raw materials, work-in-process and finished
goods of the Company as of August 31, 2005.  Except as disclosed on Schedule 6.19,
the Company’s inventory of raw materials, work-in-process and finished goods
are of a quality and quantity that is usable or saleable in the ordinary course
of business.  Except as disclosed on Schedule 6.19, none of the Company’s inventory is
obsolete.

 

6.20.       Consents.  Except for the Consents set forth on Schedule 6.20, no Consent is required to be obtained
pursuant to any of the Scheduled Contracts in connection with the execution,
delivery and performance of this Agreement by the Company.

 

6.21.       Related
Party Transactions.  Except as
set forth on Schedule 6.21, no Related
Party or other Affiliate of the Company has: (a) borrowed
money from or loaned money to the Company; (b) any
contractual or other claims of any kind against the Company; (c) any interest in any assets used by the Company;
or (d) engaged in any other transaction with
the Company.

 

6.22.       Finders’
Fees.  No investment banker,
agent, broker, finder or other intermediary is entitled to any fee, commission
or expense reimbursement from the Company in connection with the transactions
contemplated by this Agreement, except for Harris Williams & Co.  Any fee, commission or expense due to Harris
Williams & Co. under its arrangements with the Company shall be the exclusive
liability of the Company, and Buyer shall not be liable for any such fees or
expenses.

 

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer hereby
represents and warrants to each Stockholder as follows:

 

7.1.         Organization.  Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware.  Buyer has full power and
authority to enter into this Agreement and to consummate the transactions contemplated
by this Agreement.

 

7.2.         Ability
to Carry Out Agreement.  The
consummation of the transactions contemplated hereby, including, but not
limited to, the execution, delivery and performance of this Agreement does not:
(a) constitute a violation of or default under, or result in a breach of (i) the
Formation Documents of Buyer, (ii) any contract to which the Buyer is
bound or constitute a

 

24

 

default thereunder
(except where any such breach would not have a material adverse effect on Buyer’s
ability to consummate the transactions contemplated hereby), (iii) any
Court Order to which Buyer is subject, or (iv) any Regulation applicable
to Buyer.

 

7.3.         Authorization.  The execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated hereby,
have been duly and validly authorized and approved by all necessary limited
liability company action on the part of Buyer. 
This Agreement will constitute valid and binding obligations of Buyer,
enforceable in accordance with its terms, except as the enforceability hereof
may be limited by bankruptcy, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights generally or by equitable principles
relating to enforceability.  No Consent
is required with respect to Buyer in connection with the execution, delivery
and performance of this Agreement, except for the Consent under the HSR Act and
such Consents which, if not obtained, would not and would not reasonably be
expected to materially impair Buyer’s ability to consummate the transactions
hereby.

 

7.4.         Financing.  Buyer has cash on hand or financing
commitments that are sufficient to satisfy all of its obligations under this
Agreement to be performed at Closing.

 

7.5.         Finders’
Fees.  No investment banker,
agent, broker, finder or other intermediary has been retained by or is
authorized to act on behalf of Buyer, or is entitled to any fee, commission or
expense reimbursement from Buyer, in connection with the transactions
contemplated by this Agreement.

 

7.6.         Litigation.  There is no Action or Court Order pending,
or, to the knowledge of Buyer, threatened that could reasonably be anticipated
to materially impair Buyer’s ability to consummate the transactions
contemplated by this Agreement.

 

7.7.         Purchase
for Investment.  Buyer will
acquire the Stock for its own account for investment and not with a view toward
any resale or distribution thereof.

 

ARTICLE VIII

COVENANTS

 

8.1.         Access.  (a) Prior
to the Closing, the Company shall afford Buyer and its representatives
(including its lenders) reasonable access during normal business hours and upon
reasonable advance notice, to the Books and Records of the Company; provided,
however, that such access shall not unreasonably disrupt or interfere
with the normal operations of the Company, and shall be subject to the terms
and conditions of the Confidentiality Agreement between Buyer and the
Company dated as of May 2, 2005 (the “Confidentiality
Agreement”).

 

(b)           Prior to the Closing, the Company shall
reasonably assist, and shall use reasonable efforts to obtain the assistance of
the Company’s accountants, in preparing financial statement information
relating to the Company to be included in Buyer’s public filings, provided that
Buyer shall provide reasonable advance notice to the Company setting forth the
assistance requested by Buyer, and Buyer shall reimburse the Company for all
out-of-pocket costs and expenses in connection with such assistance.

 

25

 

8.2.         Confidentiality; No
Publicity.  Buyer acknowledges
and agrees that the transactions contemplated by this Agreement, including,
without limitation, the information and access with regard to the Company
provided hereunder, is subject to all of the terms and conditions of the
Confidentiality Agreement.  Buyer, the Company, Stockholders and Grandi
agree that, from the date hereof through the Closing Date, no public release or
announcement concerning this Agreement or the transactions contemplated hereby
shall be issued by any party without the prior consent of all other parties,
except as such release or announcement may be required by law or the rules or
regulations of any securities exchange, in which case the party required to
make the release or announcement shall use reasonable efforts to allow the
other parties to comment on such release or announcement in advance of such
issuance.

 

8.3.         Non-Solicitation.  Until such time, if any, that this Agreement
is terminated pursuant to Section 12.1, the Company, Stockholders and
Grandi shall not, and shall cause each of their respective officers, directors,
agents, and representatives not to, directly or indirectly, make, solicit,
initiate, assist or encourage any inquiries, proposals, offers or bids from,
discuss or negotiate with, or provide any non-public information to any Person
(other than Buyer) relating to any transaction involving the sale of the
Company, or substantially all of its assets, or any merger, consolidation,
business combination or similar transaction involving the Company and agree to
promptly notify Buyer if any of them receives any such inquiry, proposal, offer
or bid specifying the party making such inquiry, proposal, offer or bid and the
terms thereof.

 

8.4.         Governmental Approvals.  Buyer and
the Company shall as promptly as practicable, but in no event later than five (5) Business
Days following the execution and delivery of this Agreement, file with the
United States Federal Trade Commission (the “FTC”) and the United States
Department of Justice (the “DOJ”) the notification and report form, if any,
required for the transactions contemplated hereby and any supplemental
information requested in connection therewith pursuant to the HSR Act and will
request early termination of the waiting period under the HSR Act.  Any such notification and report form and
supplemental information shall be in substantial compliance with the
requirements of the HSR Act.  Buyer and
the Company shall as promptly as practicable comply with any other laws of any
other country that are applicable to any of the transactions contemplated
hereby and pursuant to which any Consent in connection with such transactions
is necessary.  Buyer and the Company
shall furnish to the other such necessary information and reasonable assistance
as the other may request in connection with preparation of any filing,
submission, registration or declaration that is necessary under the HSR Act or
any other law.  Buyer and the Company
shall keep each other apprised of the status of any communications with, and
any inquiries or requests for additional information from, the FTC and the DOJ
and any other Governmental Entity and shall comply promptly with any such
inquiry or request.  Buyer and the
Company shall each use its reasonable best efforts to obtain any clearance
required under the HSR Act or any other consent, approval, order or
authorization of any Governmental Entity necessary for the consummation of the
transactions contemplated by this Agreement. 
For purposes of this Section 8.4, the “reasonable best efforts” of
Buyer shall not include Buyer’s agreement to hold separate and divest any
business or assets of the Company or of Buyer or its Affiliates.

 

8.5.         Consents.  Schedule 6.20
identifies Scheduled Contracts that require Consent in connection with the
consummation of the transactions contemplated by this Agreement.  To the extent that such Consents have not
been obtained prior to Closing, Stockholders and Grandi shall

 

26

 

use commercially
reasonable efforts to obtain any such required Consent as promptly as possible
after Closing (without requiring the payment of any money or the institution of
legal proceedings).  If any such Consent
shall not be obtained, Stockholders and Grandi shall use commercially
reasonable efforts to act as Buyer’s agent in order to obtain for it the
benefits thereunder and to cooperate with Buyer in any other reasonable
arrangement designed to provide such benefits exclusively to Buyer (absent the
institution of legal proceedings).

 

8.6.         Restrictive Covenants

 

(a)           From and
after the Closing Date, each Stockholder and Grandi will not and will cause its
Affiliates not to, for its own account or for the account of others, directly
or indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of any business conducting business
under the name “Fibre Metal,” or any variant thereof.  For a period of five (5) years from and
after the Closing Date, each Stockholder and Grandi will not and will cause its
Affiliates not to, for its own account or for the account of others, directly
or indirectly, (i) engage in any business which competes with the
Business, or (ii) own, manage, operate, join, control or participate in
the ownership, management, operation or control of any Person who or which at
any relevant time during such period is engaged in any business which competes
with the Business, except for investments in publicly traded securities where
the beneficial ownership by the Stockholder or Grandi is five percent (5%) or
less of all of the issued and outstanding publicly traded securities of the
particular entity.

 

(b)           For a
period of five (5) years from and after the Closing Date, each Stockholder
and Grandi will not and will cause its Affiliates not to, directly or
indirectly, solicit or attempt to solicit any Person who is or has been a
customer, supplier, licensor, licensee of the Business prior to or during such
period to cease its particular business relationship with the Company that
relates to the Business.

 

(c)           For a
period of five (5) years from and after the Closing Date, each Stockholder
and Grandi will not and will cause its Affiliates not to, directly or
indirectly, solicit or induce any Person who is then a director, officer,
employee or agent of the Company to terminate his, her or its relationship
with, or employment by the Company.

 

(d)           From and
after the Closing, each Stockholder and Grandi shall, and shall cause its
Affiliates and representatives to, keep confidential and not disclose to any
other Person or use for its own benefit or the benefit of any other Person any
confidential proprietary information, technology, know-how, trade secrets
(including, without limitation, all results of research and development),
product formulas, industrial designs, franchises, inventions or other
industrial and intellectual property in its possession or control regarding the
Company or the Business.  The obligations
of each Stockholder and Grandi under this Section 8.6(d) shall not
apply to information which (i) is or becomes generally available to the
public without breach of the commitment provided for in this Section 6.8(d),
(ii) is made available to Stockholders or Grandi by an independent third
party, provided, however, that such information was not obtained by said third
party in violation of a confidentiality agreement or a fiduciary relationship;
or (iii) is required to be disclosed by law, order or regulation of a
court or tribunal or governmental authority; provided, however, that, in any
such case, any Stockholder or Grandi shall in such circumstance notify the
Company as early as reasonably practicable prior to disclosure to allow the
Company to take

 

27

 

appropriate measures to
preserve the confidentiality of such information at the cost of the Company.

 

(e)           The restrictive covenants contained in this Section 6.8
are covenants independent of any other provision of this Agreement and the
existence of any claim which any Stockholder or Grandi may allege against any
other party to this Agreement, whether based on this Agreement or otherwise,
shall not prevent the enforcement of these covenants.  Stockholders and Grandi agree that Buyer’s
remedies at law for any breach or threat of breach by Stockholders or Grandi of
the provisions of this Section will be inadequate, and that Buyer shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Section 6.8 and to enforce specifically the terms and provisions
hereof, in addition to any other remedy to which Buyer may be entitled at law
or equity.  In the event of litigation
regarding the covenant not to compete, the prevailing party in such litigation
shall, in addition to any other remedies the prevailing party may obtain in
such litigation, be entitled to recover from the other party its reasonable
legal fees and out of pocket costs incurred by such party in enforcing or
defending its rights hereunder.  The
length of time for which this covenant not to compete shall be in force shall
not include any period of violation or any other period required for litigation
during which Buyer seeks to enforce this covenant.  Should any provisions of this Section be
adjudged to any extent invalid by any competent tribunal, such provision will
be deemed modified to the extent necessary to make it enforceable.

 

8.7.         Tax
Matters.

 

(a)           Buyer
shall prepare or cause to be prepared in a manner consistent with past
practice, and file or cause to be filed, all Tax Returns of the Company with
respect to periods ending on or before the Closing Date.  Such Tax Returns shall be subject to the
review and approval by Stockholders and Grandi. 
Such Tax Returns shall be delivered to Stockholders and Grandi at least
thirty (30) days prior to the due date for approval.  Buyer shall prepare or cause to be prepared,
and file or cause to be filed, all Tax Returns of the Company with respect to
periods ending after the Closing Date. 
Stockholders shall timely pay any income Taxes with respect to income
reported to them on Schedule K-1. 
Stockholders and Grandi shall reimburse the Company for any Taxes
payable with respect to such Tax Returns that are the responsibility of
Stockholders and Grandi pursuant to Section 12.1(d) within ten (10) Business
days of the payment thereof by the Company, provided that such Taxes have not
otherwise been accrued in calculating the Net Working Capital.

 

(b)           Whenever
any taxing authority sends a notice of an audit, initiates an examination of
the Company, or otherwise asserts a claim, makes an assessment, or disputes the
amounts of Taxes for which Stockholders and Grandi are or may be liable under
this Agreement, Buyer or the Company shall promptly give Notice to Stockholders
and Grandi, and Stockholders and Grandi shall have the right to control, at
their cost, any resulting proceedings and to determine whether and when to
settle any such claim, assessment or dispute to the extent such proceedings or
determinations affect the amount of Taxes for which Stockholders and Grandi are
or may be liable under this Agreement; provided, however, that in the event
that Stockholders and Grandi desire to settle any such claim, assessment or
dispute in such a manner that reasonably may negatively impact Buyer or the Company,
then Stockholders and Grandi shall obtain the prior consent of Buyer, which
shall not be unreasonably withheld. 
Whenever any

 

28

 

taxing authority sends a
notice of an audit, initiates an examination of the Company, or otherwise
asserts a claim, makes an assessment or disputes the amount of Taxes for which
Buyer is or may be liable under this Agreement and Stockholders and Grandi
receive such notice, Stockholders and Grandi shall promptly inform Buyer, and,
except to the extent such proceedings affect the amount of taxes for which
Stockholders and Grandi are liable under this Agreement, Buyer shall have the
right to control, at its cost, any resulting proceedings and to determine
whether and when to settle any such claim, assessment or dispute.

 

(c)           Buyer,
Stockholders and Grandi and the Company will provide each other with such
assistance as may reasonably be requested by any of them in connection with the
preparation of any Tax Return, any audit or other examination by any taxing
authority, or any judicial or administrative proceedings relating to liability
for Taxes, and each will retain and provide the other with any records or
information that may be relevant to such Tax Return, audit or examination,
proceedings or determination.  Such
assistance shall include making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder and shall include providing copies of any relevant Tax
Return and supporting work schedules. 
The party requesting assistance hereunder shall reimburse the other for
reasonable expense incurred in providing such assistance.  Without limiting in any way the foregoing
provisions of this Section 8.7(c), Buyer hereby agrees that it will retain
or cause the Company to retain, until the applicable statutes of limitation
(including any extensions thereof) expire, copies of all Tax Returns,
supporting work schedules and other records or information which it possesses
and which may be relevant to such Tax Returns of the Company for all taxable
periods ending on or prior to the Closing Date. 
Further, Buyer will not (and will assure that the Company will not)
destroy or otherwise dispose of such records without first providing
Stockholders and Grandi with a reasonable opportunity to review and copy such
records.

 

(d)           Buyer
covenants that it will not, nor will it cause or permit any other Affiliate of
Buyer to (i) take any action on or after the Closing Date that will give
rise to any Tax liability of Stockholders or Grandi, (ii) make any
election or deemed election under Section 338 of the Code, or (iii) make
or change any Tax election, file any amended Tax Return or take any Tax
position on any Tax Return, take any action, omit to take any action or enter
into any transaction that results in any increased Tax liability or reduction
of any net operating loss, net capital loss, investment tax credit, foreign tax
credit, charitable deduction or any other credit or Tax attribute which
attribute could increase Taxes (including, without limitation, deductions and
credits related to alternative minimum Taxes) of the Stockholders or Grandi in
respect of any Pre-Closing Tax Period. 
Buyer agrees that neither Stockholders nor Grandi is to have liability
for any Tax resulting from any action referred to in the preceding sentence,
and agrees to indemnify and hold harmless Stockholders and Grandi against any
such Tax.

 

(e)           Stockholders
shall be entitled to any Tax refunds pertaining to the activities or income of
the Company for periods ending on or before the Closing Date.  Buyer agrees to assign and promptly remit
(and to cause the Company to assign and promptly remit) to the Stockholders all
such refunds (including interest thereon) received by the Company, the Buyer or
any Affiliate of the Company or the Buyer.

 

29

 

8.8.         Transfer
of Premises; Satisfaction of Indebtedness and Transaction Expenses; Retention
of Related Party Obligations. 
Prior to Closing, the Company shall transfer to Stockholders or
Affiliates of Stockholders all of its right, title and interest in and to the
Premises located in Concordville, Pennsylvania; Aston, Pennsylvania; and
Mississauga, Ontario, Canada; in accordance with deeds substantially in the
forms attached hereto as Exhibit C,
and all beneficial rights thereto, including the effluent discharge units
issued by Concord Township with respect to Premises located in Concordville,
Pennsylvania.  At or prior to the
Closing, the Stockholders or the Company shall pay-off and fully satisfy all
Indebtedness and Transaction Expenses, and cause the removal of the
Encumbrances set forth on Schedule 6.7, and at or prior to the Closing,
the Stockholders shall retain all obligations to any Related Party, including,
without limitation, all such items set forth on Schedule 8.8.

 

8.9.         Appointment
of Sellers Representative.  Stockholders
and Grandi hereby irrevocably appoint Robert Shoemaker, Jr. (“Sellers
Representative”), as Stockholders’ and Grandi’s representative,
attorney-in-fact and agent, with full power of substitution to act in the name,
place and stead of Stockholders and Grandi, and to act on behalf of
Stockholders and Grandi in all matters involving this Agreement, including,
without limitation, the power: (a) to give and receive all notices and
communications to be given or received under this Agreement and to receive
service of process in connection with any notices under this Agreement; (b) to
execute and deliver all ancillary agreements, certificates, statements,
notices, approvals, extensions, waivers, undertakings, amendments and other
documents required or permitted to be given in connection with this Agreement;
and (c) to act for each Seller and Grandi with regard to matters
pertaining to indemnification referred to in this Agreement, including the
power to compromise any claim on behalf of Stockholders and Grandi, to bring
and transact matters of litigation and to refer matters to arbitration.

 

ARTICLE IX

CONDUCT OF BUSINESS PRIOR TO CLOSING

 

9.1.         Conduct
of Business.  During the period
from the date of this Agreement until the Closing Date, except as otherwise
consented to in writing by Buyer and except for the transfer of the Premises
contemplated by Section 8.8, the Company agrees, and Stockholders agree to
cause the Company, to operate its Business only in the ordinary course and that
the Company will not:

 

(a)           Amend the
Company’s Formation Documents;

 

(b)           Dispose
of, or agree to dispose of, or place an Encumbrance upon, any of the Company’s
assets, other than dispositions of inventory and obsolete equipment in the
regular, normal and ordinary course of business, consistent with past custom or
practice;

 

(c)           Acquire,
by merger, consolidation, purchase of stock or assets or otherwise, any
corporation, partnership, association or other business organization, or all or
substantially all of its assets, or sell or agree to sell the Company, by
merger, consolidation, sale of stock or sale of all or substantially all of the
Company’s assets;

 

30

 

(d)           (i) Issue
or sell (or agree to issue or sell) any of the Company’s capital stock or any
options, warrants or other rights to purchase any such shares or any securities
convertible into or exchangeable for such shares; (ii) declare, set aside
or pay any distributions, dividends or similar payments (other than cash
dividends) in respect of the Stock or any other capital stock (or similar
equity interest) of the Company; or (iii) redeem, repurchase or otherwise
acquire the Stock or any other capital stock (or similar equity interest) of
the Company;

 

(e)           Incur any
Indebtedness (including through the issuance of debt securities) or make any
loans or advances to any Person other than advances to employees in the
ordinary course of business consistent with past practice;

 

(f)            Increase
the base compensation or other payment to any director, officer or employee,
whether now or hereafter payable or granted (other than increases in base compensation
for employees who are not officers of the Company in the ordinary course
consistent in timing and amount with past practices), or enter into or vary the
terms of any employment or incentive agreement with any such person;

 

(g)           Commence,
enter into, or alter any Scheduled Contract, or any Employee Plan, stock
option, stock purchase, or incentive plan for employees of the Company, except
that the Company shall permit Grandi to resign as a trustee of Employee Plans
as of the Closing without regard to any advance notice or resignation that
otherwise would be required;

 

(h)           Make any
capital expenditure or commit to any capital expenditure in excess of $100,000;

 

(i)            Terminate
any employees of the Company, except in the ordinary course of business;

 

(j)            Make any
change in its account procedures or practices unless required by GAAP;

 

(k)           Cancel any
debts or waive any material rights or pay, discharge or satisfy any claim,
liabilities or obligations (absolute, accrued, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of business
consistent with past practice of liabilities and obligations reflected on or
reserved against on the Financial Statements or incurred in the ordinary course
of business consistent with past practice since July 31, 2005;

 

(l)            Dispose
of or permit to lapse any rights to the use of any material Proprietary Rights
or dispose of or disclosure (except as necessary in the conduct of its
business) to any Person, any trade secret, formula, process or know-how not a
matter of public knowledge prior to such disclosure;

 

(m)          Enter into
and, except with respect to any agreement or transaction disclosed on Schedule 8.8, terminate any agreement or transaction
with any Related Party;

 

(n)           Make or revoke any election for Tax purposes
by the Company or on its behalf or allow the Company’s status as an S
corporation to change; or

 

31

 

(o)           Agree or
commit to do or take any of the foregoing actions.

 

Notwithstanding anything herein to the contrary, Buyer acknowledges and
agrees that, prior to or at the Closing, the Company may distribute all of its
cash and cash equivalents to Stockholders, and shall (i) satisfy any
outstanding long-term debt of the Company, (ii) pay any fees and expenses
in connection with the transactions contemplated hereby (other than any fees
and expenses incurred by Buyer), including any change of control payments, sale
bonuses, success fees, severance obligations incurred at or prior to the
Closing, legal fees, investment banking fees and other professional fees, or
obligations to or for the benefit of any Related Party, and (iii) pay any
fiscal year-end bonuses accrued by the Company solely with respect to Grandi.

 

ARTICLE X

CONDITIONS PRECEDENT TO BUYER’S

OBLIGATIONS ON THE CLOSING DATE

 

Each and every
obligation of Buyer to be performed on the Closing Date shall be subject to the
satisfaction, prior to or concurrently with the performance of such obligation,
of all the following conditions precedent (any of which may be waived by Buyer,
in whole or in part, and if waived by Buyer, the circumstance being waived
shall not be used as the basis for indemnification pursuant to Article XIII):

 

10.1.       Representations
and Warranties.  The representations
and warranties made by Stockholders and Grandi in Article V of this
Agreement and by the Company in Article VI of this Agreement, shall each
be true, correct and accurate, in all material respects on, as of, and with
respect to, the Closing Date, with the same force and effect as though they had
been made as of the Closing Date, except those qualified by materiality or
Material Adverse Effect which shall be true and correct in all respects.

 

10.2.       Compliance
with Obligations.  Stockholders
and the Company shall have performed and complied with, in all material
respects, all of their respective obligations under this Agreement, which are
to be performed or complied with by them prior to or on the Closing Date, as
the case may be.

 

10.3.       Closing
Certificate.  Buyer shall have
been furnished with a certificate of Stockholders, Grandi and the Company,
dated as of the Closing Date, certifying compliance with the applicable
provisions of Sections 10.1 and 10.2.

 

10.4.       Consents.  Stockholders or Grandi shall have obtained
all Consents listed on Schedule 10.4.

 

10.5.       HSR
Act.  The waiting period under
the HSR Act shall have expired or been earlier terminated.

 

10.6.       Resignations.  Buyer shall have received resignations dated
the Closing Date duly executed by all directors of the Company.

 

10.7.       Transfer
Documents.  Buyer shall have
received good and sufficient instruments and documents dated as of the Closing
Date as shall be necessary and effective to convey,

 

32

 

transfer and
assign to, and vest in Buyer all of Stockholders’ right, title and interest in
and to the Stock, free and clear of all Encumbrances.

 

10.8.       Material
Adverse Effect.  There shall not
have been any Material Adverse Effect from January 1, 2005 to the Closing
Date.

 

10.9.       Ancillary
Agreements.  Buyer shall have
received (a) the Leases duly executed by the Stockholders or Affiliates of
Stockholders, as applicable, and (b) the Escrow Agreement duly executed by
Stockholders and Grandi.

 

10.10.     Incumbency
Certificate.  Buyer shall have
received an incumbency certificate for the officers of the Company and the
trustees of the Stockholders dated as of the Closing Date, including specimen
signatures.

 

10.11.     Resolutions.  Buyer shall have received a copy of all
resolutions adopted by (a) the trustees of the Stockholders relating to
the transactions contemplated by this Agreement, and (b) the Company’s
board of directors relating to the transactions contemplated by this Agreement,
certified on the Closing Date to be complete and correct by the Secretary of
the Company.

 

10.12.     Good
Standing Certificate.  Buyer
shall have received a good standing certificate for the Company dated not more
than five (5) Business Days prior to the Closing Date issued by the Secretary
of State of Delaware.

 

10.13.     Absence
of Litigation.  No Court Order or
Regulation shall be in effect that restrains or prohibits the transactions
contemplated hereby or that would limit or adversely affect Buyer’s ability to
acquire the Stock and there shall not have been threatened, nor shall there be
pending, any action or proceeding by or before any Governmental Authority (i) challenging
any of the transactions contemplated hereby or seeking monetary relief by
reason of the consummation of such transactions, or (ii) which constitutes
a Material Adverse Effect.

 

10.14.     Consulting/Employment
Agreements.  At the Closing,
Grandi, Robert Ennamorato and Paul Brooks shall have entered into a consulting
or employment agreement, as applicable, with Buyer or the Company on the terms
set forth on Schedule 10.14, as
applicable.  Stockholders and Grandi
shall have used reasonable efforts (without making or committing to make any
payments to any Person) to cause Richard Say, Dean Simpson and Alex Stefanelli
to enter into employment agreements with Buyer or the Company at the Closing on
the terms set forth on Schedule 10.14,
as applicable.

 

ARTICLE XI

CONDITIONS PRECEDENT TO STOCKHOLDERS’

OBLIGATIONS ON THE CLOSING DATE

 

Each and every
obligation of Stockholders and Grandi to be performed on the Closing Date shall
be subject to the satisfaction, prior to or concurrently with the performance
of such obligation, of all the following conditions precedent (any of which may
be waived by Sellers Representative, in whole or in part, and if waived by
Sellers Representative, the circumstance being waived shall not be used as the
basis for indemnification pursuant to Article XIII):

 

33

 

11.1.       Representations
and Warranties.  The
representations and warranties made by Buyer in this Agreement shall each be
true, correct and accurate in all material respects on, as of, and with respect
to the Closing Date with the same force and effect as though they had been made
as of the Closing Date, except those qualified by materiality which shall be
true and correct in all respects.

 

11.2.       Compliance
with Obligations.  Buyer shall
have performed and complied with, in all material respects, all of its
obligations under this Agreement, which are to be performed or complied with by
it prior to or on the Closing Date, as the case may be.

 

11.3.       Closing
Certificate.  Stockholders shall
have been furnished with a Certificate of the Chief Executive Officer of Buyer,
dated as of the Closing Date, certifying compliance with Sections 11.1 and
11.2.

 

11.4.       HSR
Act.  The waiting period under
the HSR Act shall have expired or been earlier terminated.

 

11.5.       Ancillary
Agreements.  Stockholders shall
have received the Leases and the Escrow Agreement duly executed by Buyer.

 

11.6.       Incumbency
Certificate.  Stockholders shall
have received an incumbency certificate for the officers of Buyer dated as of
the Closing Date, including specimen signatures.

 

11.7.       Resolutions.  Stockholders shall have received a copy of
all resolutions adopted by Buyer’s board of directors relating to the
transactions contemplated by this Agreement, certified on the Closing Date to
be complete and correct by the Secretary of Buyer.

 

11.8.       Good
Standing Certificate. 
Stockholders shall have received a good standing certificate for Buyer
dated not more than five (5) Business Days prior to the Closing Date
issued by the Secretary of State of Delaware.

 

11.9.       Absence
of Litigation.  No Court Order or
Regulation shall be in effect that restrains or prohibits the transactions
contemplated hereby or that would limit or adversely affect Buyer’s ability to
acquire the Stock and there shall not have been threatened, nor shall there be
pending, any action or proceeding by or before any Governmental Authority
challenging any of the transactions contemplated hereby or seeking monetary
relief by reason of the consummation of such transactions.

 

11.10.     Consulting/Employment
Agreements.  At the Closing,
Buyer or the Company shall have entered into a consulting or employment
agreement, as applicable, with Grandi, Robert Ennamorato, and Paul Brooks on
the terms set forth on Schedule 10.14,
as applicable.  Buyer shall have used
reasonable efforts to enter into employment agreements with Richard Say, Dean
Simpson and Alex Stefanelli at the Closing on the terms set forth on Schedule 10.14, as applicable.

 

34

 

ARTICLE XII

INDEMNIFICATION

 

12.1.       Indemnification
by Stockholders and Grandi. 
Stockholders and Grandi shall severally in accordance with their
applicable Indemnity Percentages, and not jointly, indemnify and hold harmless
Buyer and the Company and their respective officers, directors, employees,
stockholders, members, agents, advisors and other representatives, from and
against all claims, damages, losses, liabilities, costs and expenses (including
reasonable legal fees and expenses), after offset by any recovery of insurance
proceeds (net of any premium increases), any tax-related benefits, or any
recovery from third parties, actually received or realized (collectively, the “Losses”), in connection with each and
all of the following:

 

(a)           Any breach
of a representation, warranty or covenant made by Stockholders, Grandi or the
Company in this Agreement;

 

(b)           Any
misrepresentation contained in any certificate or schedule furnished by
Stockholders, Grandi or the Company pursuant to this Agreement;

 

(c)           Any Losses for any environmental condition or
violation of any Environmental Requirements relating to the Premises located in
Concordville, Pennsylvania and Aston, Pennsylvania, or the real property
located at 5th & Tilghman Streets, Chester, Pennsylvania,
where the Company conducted its operations prior to moving to Concordville,
Pennsylvania, as a result of conditions, acts, events or circumstances that
first occurred or existed prior to the Closing (including the costs of
investigation and remediation, or liabilities for personal injury, property
damage or natural resources damages) (the “Special Environmental Indemnity”);

 

(d)           Pre-Closing
Taxes; and

 

(e)           any liability, claim or obligation arising
with respect to U.S. Patent No. 5,208,688, U.S. Patent No. 5,751,258,
or U.S. Patent No. 5,315,099, Swiss Patent No. 688 292 A5, EPO No. 0
550 384 (collectively, the “JP/S Patents”)
(including any foreign equivalents, extensions, continuations, continuations in
part, or divisionals of the foregoing), including any cross claims,
counterclaims, appeals, interlocutory proceedings or other actions brought in
connection with such action, or any other suits, claims or actions alleging
that Company products infringe the JP/S Patents (the “IP Litigation”).  The foregoing indemnification shall extend to
all Losses incurred, paid or resulting from the manufacture, sale, importation,
or distribution, by or on behalf of the Company, of Company products occurring
at any time prior to the one hundred eightieth (180th) day after the
Closing Date (the “IP Indemnification Period”). 
As provided in Section 12.4(b),
the Company and Buyer shall be responsible for any Losses with respect to
claims related to the JP/S Patents based on Company products manufactured,
sold, imported or distributed by or on behalf of Company at any time on or
after the one hundred eighty first (181st) day after the Closing
Date.

 

It being
understood and agreed that for purposes of determining whether there has been
any misrepresentation or breach of any representation or warranty and for
purposes of calculating the amount of any Losses arising therefrom under this Article XII,
the representations

 

35

 

and warranties shall not be deemed to be qualified by any concept of “material,”
“materiality,” “Material Adverse Effect” or similar qualification.

 

12.2.       Indemnification
by Buyer.  Buyer hereby
indemnifies and agrees to defend and hold harmless Stockholders and Grandi and
their respective trustees, officers, directors, employees, stockholders,
members, agents, advisors and other representatives from and against all Losses
in connection with each and all of the following:

 

(a)           Any breach
of a representation, warranty or covenant made by Buyer in this Agreement;

 

(b)           Any
misrepresentation contained in any certificate or schedule furnished by
Buyer pursuant to this Agreement;

 

(c)           Any
liability for or arising out of any Taxes for taxable periods ending after the
Closing Date; and

 

(d)           As provided in Section 12.4(b),
any Losses with respect to claims related to the JP/S Patents based on Company
products manufactured, sold, imported or distributed by or on behalf of Company
at any time on or after the one hundred eighty first (181st) day
after the Closing Date.

 

It being
understood and agreed that for purposes of determining whether there has been
any misrepresentation or breach of any representation or warranty and for
purposes of calculating the amount of any Losses arising therefrom under this Article XII,
the representations and warranties shall not be deemed to be qualified by any
concept of “material,” “materiality,” “Material Adverse Effect” or similar
qualification.

 

12.3.       Claims
for Indemnification.  Whenever
any claim shall arise for indemnification under this Article XII, the
party (parties) seeking indemnification (the “Indemnified Party”), shall notify the party (parties) from whom
indemnification is sought (the “Indemnifying
Party”) of the claim and, when known, the facts constituting the basis
for such claim (an “Indemnification
Claim Notice”); provided that the failure of the Indemnified Party to
give the Indemnification Claim Notice promptly shall not relieve the
Indemnifying Party of any liability hereunder in respect of such claim (or the
facts or circumstances giving rise thereto) except to the extent that such
Indemnifying Party is materially prejudiced or harmed as a consequence of such
failure.  Claims for indemnification
under Sections 12.1(a), 12.1(b), 12.2(a) and 12.(b) with respect to a
breach of a representation or warranty may not be brought pursuant to an
Indemnification Claim Notice or otherwise after the date that is twenty-four
(24) months from the date hereof, except for claims for indemnification with
respect to (a) the representations and warranties contained in Sections
5.1, 5.2, 5.3 and 6.1 (the “Fundamental Representations”) which may be brought
at any time; (b) the representations and warranties contained in Section 6.18
which may not be brought after the date that is three (3) years after the
Closing Date; (c) the representations and warranties contained in Section 6.8
and the indemnification pursuant to Sections 12.1(d) and 12.2(c), which
may not be brought more than sixty (60) days after the statute of limitations
has expired with respect to an Action relating to the Tax Returns and Taxes by
the Company; and (d) covenants contained in Article VIII, which may
not be brought more

 

36

 

than sixty (60)
days after the time period for performing such covenant has expired.  In the event of any such claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the Indemnification Claim Notice shall
specify, if known, the amount or an estimate of the amount of the liability
arising therefrom.  The Indemnified Party
shall not settle or compromise any claim by a third party for which it is
entitled to indemnification hereunder without the prior written consent of the
Indemnifying Party; provided, however, that if suit shall have been instituted
against the Indemnified Party and the Indemnifying Party shall not have taken
control of such suit after notification thereof as provided in Section 12.4
of this Agreement, the Indemnified Party shall have the right to settle or
compromise such claim upon giving notice to the Indemnifying Party, as provided
in Section 12.4.

 

12.4.       Defense
by the Indemnifying Party.  (a) In
connection with any claim which may give rise to indemnity hereunder resulting
from or arising out of any claim or legal proceeding, the Indemnifying Party,
at its sole cost and expense, may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding if the
Indemnifying Party acknowledges to the Indemnified Party in writing the
obligation of the Indemnifying Party to indemnify the Indemnified Party with
respect to all elements of such claim, such claim is solely for monetary
damages or relates to the IP Litigation, and, if requested, the Indemnifying
Party gives the Indemnified Party reasonable assurances of its ability to pay
any adverse judgment resulting from such claim. 
If the Indemnifying Party assumes the defense of any such claim or legal
proceeding, the Indemnifying Party shall select counsel reasonably acceptable
to the Indemnified Party to conduct the defense of such claims or legal
proceeding and at the sole cost and expense of the Indemnifying Party shall
take all steps necessary in the defense or settlement thereof.  The Indemnifying Party shall not consent to a
settlement of, or the entry of any judgment arising from, any such claim or
legal proceeding, without the prior written consent of the Indemnified Party
(which consent shall not be unreasonably withheld, conditioned or delayed it
being understood that it shall not be unreasonable for the Indemnified Party to
withhold its consent from any settlement that (1) commits the Indemnified
Party to take, or to forbear to take, any action, or (2) does not provide
for a complete release of the Indemnified Party by such third party).  The Indemnified Party shall be entitled to
participate in (but not control) the defense of any such action, with its own
counsel and at its own expense.  If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within fifteen (15) Business Days after the date of the
Indemnification Claim Notice:

 

(i)            The
Indemnified Party may defend against such claim or litigation in such manner as
it may deem appropriate, including, but not limited to, settling such claim or
litigation, after giving notice of the same to the Indemnifying Party, on such
terms as the Indemnified Party may reasonably deem appropriate and all costs of
litigation incurred by the Indemnified Party shall be included in the
calculation of the Indemnified Party’s Loss; and

 

(ii)           The
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense.  If the Indemnifying Party thereafter seeks to
question the manner in which the Indemnified Party defended such third party
claim or the amount or nature of any such settlement, the Indemnifying Party
shall have the burden to prove by a preponderance of the evidence that the
Indemnified Party did not defend or settle such third party claim in a
reasonably prudent manner.

 

37

 

(b)           Notwithstanding the
foregoing, in the event the IP Litigation is not finally concluded upon the
expiration of the IP Indemnification Period, then the IP Litigation shall be
controlled by the Company and/or Buyer at the time at which the Company’s
aggregate sales of products alleged to infringe the JP/S Patents exceed sales
of such allegedly infringing products by the Company during the IP
Indemnification Period.  Each of the
Buyer and the Company, on the one hand, and the Stockholders and Grandi, on the
other hand, must consent in writing to any settlement or compromise of the IP
Litigation (such consent not to be unreasonably withheld).  Upon the entry of any final, non-appealable
judgment or order related to the IP Litigation resulting in Losses, then the
parties agree that each shall be responsible for its attorney’s fees and costs
incurred as set forth in this Section 12.4, and that Losses shall be
apportioned, on a per-unit basis based on the number of product units sold, (i) to
Stockholder and Grandi, for sales during the IP Indemnification Period, and (ii) to
Company/Buyer for sales after the expiration of the IP Indemnification Period.

 

12.5.       Limitations.  (a) The parties agree that
indemnification under this Article XII shall be the sole and exclusive
remedy with respect to any actual or alleged breach of the provisions of this
Agreement.

 

(b)           Notwithstanding
anything contained in this Agreement to the contrary, neither Buyer nor the
Company shall be entitled to indemnification by Stockholders and Grandi for
breaches of representations and warranties pursuant to Section 12.1 (other
than Fundamental Representations and the representations and warranties
contained in Section 6.8 and Section 6.14(b)), until its Losses
exceed $680,000 in the aggregate (the “Basket”), and only to the extent of
Losses in excess of such amount.  As
such, Stockholders’ and Grandi’s indemnification for (1) breaches of
Fundamental Representations, (2) breaches of the representations and
warranties contained in Section 6.8, (3) breaches of the
representations and warranties contained in Section 6.14(b), (4) breaches
of covenants pursuant to Section 12.1, (5) Losses pursuant to the
Special Environmental Indemnity pursuant to Section 12.1(c), (6) Losses
with respect to Pre-Closing Taxes pursuant to Section 12.1(d), and (7) any
breaches that come within Section 12.5(f), shall not be subject to the
Basket.

 

(c)           Notwithstanding
anything contained in this Agreement to the contrary, the indemnification by
Stockholders and Grandi for breaches of representations and warranties pursuant
to Section 12.1 (other than Fundamental Representations and the
representations and warranties contained in Section 6.8 and Section 6.14(b))
shall in no event exceed $6,800,000 in the aggregate (the “Cap”).  As such, Stockholders’ and Grandi’s
indemnification for (1) breaches of Fundamental Representations, (2) breaches
of the representations and warranties contained in Section 6.8, (3) breaches
of the representations and warranties contained in Section 6.14(b), (4) breaches
of covenants pursuant to Section 12.1, (5) Losses pursuant to the
Special Environmental Indemnity pursuant to Section 12.1(c), (6) Losses
with respect to Pre-Closing Taxes pursuant to Section 12.1(d), and (7) any
breaches that come within Section 12.5(f), shall not be subject to the
Cap.

 

(d)           Stockholders and Grandi
shall not be entitled to indemnification by Buyer for breaches of
representations and warranties pursuant to Section 12.2 until their Losses
exceed the Basket in the aggregate, and only to the extent of Losses in excess
of such amount, provided

 

38

 

that such indemnification for
breaches of representations and warranties shall in no event exceed the Cap in
the aggregate.

 

(e)           In addition to the
foregoing limitations, each Stockholder and Grandi shall only be liable for the
portion of any Losses that is equal to the proportion of the Purchase Price
received by the Stockholder or Grandi, as set forth on Schedule 12.5(e) (the
“Indemnity Percentages”).

 

(f)            Notwithstanding
anything to the contrary in this Article XII, no limitation or condition
of liability provided in this Article XII (including, without limitation,
the time limitations set forth in Section 12.3 and the monetary
limitations and conditions set forth in Section 12.5) shall apply to the
breach of any of the representations and warranties contained herein if such
representation or warranty was made with actual knowledge of any Stockholder,
Grandi or the Company that it contained an untrue statement of a material fact
or omitted to state a material fact necessary to make the statements or facts
therein not misleading or to any claim for fraud.

 

ARTICLE XIII

TERMINATION

 

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

 

(a)           By the
mutual written consent of Stockholders, Grandi and Buyer;

 

(b)           By
Stockholders and Grandi if a material breach of any provision of this Agreement
has been committed by Buyer and such breach has not been waived by Stockholders
and Grandi, or by Buyer if a material breach of any provision of this Agreement
has been committed by either Stockholders or the Company and such breach has
not been waived by Buyer;

 

(c)           By
Stockholders and Grandi, collectively, if the Closing shall not have been
consummated by November 17, 2005 (the “Termination Date”); provided,
however, that Stockholders and Grandi may not terminate this Agreement pursuant
to this Section 13.1(c) if the Closing shall not have been consummated
by the Termination Date by reason of the failure of the Stockholders or the
Company to perform in all material respects any of their respective covenants
or agreements contained in this Agreement;

 

(d)           By Buyer
if the Closing shall not have been consummated by the Termination Date; provided, however, that Buyer may not
terminate this Agreement pursuant to this Section 13.1(c) if the
Closing shall not have been consummated by the Termination Date by reason of
the failure of Buyer to perform in all material respects any of its respective
covenants or agreements contained in this Agreement; or

 

(e)           By
Stockholders and Grandi, or Buyer, if (i) any Governmental Entity, the
Consent of which is a condition to the obligations of Stockholders to
consummate the transactions contemplated hereby, shall have determined not to
grant its Consent and all appeals of such determination shall have been taken
and have been unsuccessful, or (ii) any court of

 

39

 

competent jurisdiction in
the United States or any State shall have issued a Court Order restraining,
enjoining or otherwise prohibiting the transactions subject to this Agreement.

 

13.2.       Effect
of Termination.  In the event of
termination of this Agreement by either Stockholders and Grandi, or Buyer, as
provided for in Section 13.1, this Agreement shall forthwith become null,
void and of no further force or effect (except as set forth in Sections 15.2,
15.3 and 15.4, which shall survive the termination) and there shall be no
liability on the part of Stockholders and Grandi, or Buyer, or their respective
officers or directors, except for any breach of any of its obligations under
Sections 15.2 and 15.3.  Notwithstanding
the foregoing, neither Stockholders nor Buyer shall be relieved from liability
for any willful and material breach of this Agreement.

 

ARTICLE XIV

NOTICES

 

14.1.       Notices.  All notices, requests and other
communications hereunder (“Notices”) shall be in writing and shall either be
mailed (by registered or certified mail, postage prepaid, return receipt
requested), or sent by an overnight courier service guaranteeing next day
delivery (i.e., Federal Express), or by facsimile transmission, and shall be
effective upon receipt, in each instance, addressed as follows:

 

If to Buyer,
to:

 

Norcross Safety Products L.L.C.

2001 Spring Road

Suite 425

Oak Brook IL 60523

Attention: Robert A. Peterson

Fax:  (630) 572-8518

 

with a copy
to:

 

Dechert LLP

4000 Bell Atlantic Tower

1717 Arch Street

Philadelphia, PA 19103

Attention: Geraldine A. Sinatra

Fax: (215) 994-2222

 

If to the
Company, to:

 

The Fibre-Metal Products Company

Baltimore Pike at Brinton Lake Road

Concordville, Pennsylvania  19331

Attention: Charles J. Grandi

Fax: (610) 459-3884

 

40

 

with a copy
to:

 

Stradley, Ronon, Stevens & Young, LLP

2600 One Commerce Square

Philadelphia, Pennsylvania  19103

Attention:  John F. Dougherty, Jr.,
Esquire

Fax: (215) 564-8120

 

If to
Stockholders, to:

 

1800 East Lancaster Avenue

Paoli, Pennsylvania  19301

Attention:  Robert Shoemaker

Fax: (610) 296-4389

 

with a copy
to:

 

Morris, Nichols, Arsht & Tunnell

1201 N. Market Street

P.O. Box 1347

Wilmington, Delaware  19899

Attention:  David Ley Hamilton,
Esquire

Fax: (302) 658-3989

 

If to Grandi,
to:

 

140 Jaffrey Road

Malvern, Pennsylvania  19355

Attention:  Charles J. Grandi

Fax: (610) 722-9561

 

If to Sellers
Representative, to:

 

1800 East Lancaster Avenue

Paoli, Pennsylvania  19301

Attention:  Robert Shoemaker

Fax: (610) 296-4389

 

ARTICLE XV

GENERAL

 

15.1.       Further
Assurances.  From the date hereof
through the Closing Date and thereafter Stockholders and Buyer will execute and
deliver to one another such further instruments of transfer and conveyance and
take such action and deliver such other documents, certifications and further
assurances as may reasonably be required to carry out more effectively the sale
and transfer of the Stock.  In addition,
following Closing, Buyer will provide Stockholders and Grandi, and its
authorized accountants, attorneys and appraisers with access to

 

41

 

financial records
(including accountant’s work papers), and the tax returns of the Company to the
extent reasonably necessary, during regular business hours.

 

15.2.       Finder’s
Fees.  Stockholders and Grandi,
on the one hand, and Buyer, on the other, agree to indemnify and hold the other
harmless from and against any claim for a broker’s or finder’s fee relative to
this Agreement arising by, through or under such party.

 

15.3.       Expenses.  Stockholders, Grandi, the Company and Buyer
shall each pay all of the costs and expenses of their performance of and
compliance with all agreements and conditions contained in this Agreement on
their part to be performed or complied with; provided, however, that (i) the
Transaction Expenses shall be paid by the Stockholders or the Company at the
Closing, and (ii) Buyer has agreed to pay all filing fees under the HSR
Act for all parties, but one-half the amount of the filing fee shall be
included in the Transaction Expenses.

 

15.4.       Governing
Law; Jurisdiction.  This
Agreement shall be governed by and construed in accordance with the substantive
laws of the Commonwealth of Pennsylvania without giving effect to the conflict
of law principles thereof.  Except as
otherwise provided in Article III, the parties hereto agree to submit any
dispute or controversy arising out of or relating to this Agreement exclusively
to a federal or state court in the Eastern District of Pennsylvania.

 

15.5.       No
Waiver.  No failure or delay on
the part of any party to exercise any right, power or remedy shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
remedy preclude any other or further exercise thereof or of any other right,
power, or remedy.

 

15.6.       Entire
Agreement.  This Agreement,
including the Schedules thereto, sets forth the entire understanding of the
parties relating to the subject matter hereof and supersedes all prior oral or
written understandings relating hereto, other than the Confidentiality
Agreement, which shall continue in force according to its terms.  This Agreement shall not be modified,
supplemented or terminated orally and shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns including without limitation any successor to a party hereto by merger,
consolidation or otherwise by operation of law. 
Neither this Agreement nor any rights hereunder may be assigned by a
party hereto except that Buyer may assign any of its rights and obligations
hereunder in whole or in part to any Affiliate of Buyer and may collaterally
assign its rights hereunder to any lender or financing source to Buyer, in each
case, without the consent of Stockholders and Grandi; provided, however, that no such assignment by Buyer shall relieve the
Buyer from any of its obligations hereunder.

 

15.7.       Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original hereof, and
all of which, when taken together, shall constitute one and the same
instrument.

 

15.8.       Headings.  The headings of the several articles,
sections and subsections of this Agreement are inserted for convenience of
reference only and shall not constitute a part of this Agreement.

 

42

 

15.9.       Severability.  If any portion of this Agreement is construed
to be invalid or unenforceable, the remaining portions hereof shall not be
affected thereby and shall be enforceable without regard to the invalid or
unenforceable portions.

 

15.10.     Amendments.  This Agreement may be modified only by an
agreement in writing signed by each of the parties hereto.

 

15.11.     Third
Party Beneficiaries.  Each party
hereto intends that this Agreement shall not benefit or create any right or
cause of action in or on behalf of any Person other than the parties hereto.

 

 

[Remainder of the page intentionally left blank]

 

43

 

IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered on the date first above written.

 

	
   

  	
  NORCROSS SAFETY PRODUCTS L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Robert A. Peterson

  	
   

  
	
   

  	
  Name: Robert
  A. Peterson

  
	
   

  	
  Title:
  President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  THE FIBRE-METAL PRODUCTS COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Charles J. Grandi

  	
   

  
	
   

  	
  Name:
  Charles J. Grandi

  
	
   

  	
  Title:
  President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  RESIDUARY
  TRUST UNDER THE WILL OF CHARLES E. BOWERS, JR.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Robert Shoemaker, Trustee and Authorized Representative

  	
   

  
	
   

  	
   

  
	
   

  	
  TRUST
  UNDER THE WILL OF CHARLES E. BOWERS, JR.

  FOR THE BENEFIT OF JUDITH L. BOWERS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Robert Shoemaker, Trustee and Authorized Representative

  	
   

  
	
   

  	
   

  
	
   

  	
  CHARLES
  E. BOWERS, JR. IRREVOCABLE TRUST

  DATED DECEMBER 17, 1990

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Robert Shoemaker, Trustee and Authorized Representative

  	
   

  
	
   

  	
   

  
	
   

  	
  CHARLES J. GRANDI

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    /s/
  Charles J. Grandi

  	
   

  
					

 

44

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