Document:

Exhibit 10.1

 

CONFIDENTIAL MATERIAL APPEARING
IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED
WITH BLANKS.

 

 

AMENDED AND RESTATED PULP SUPPLY AGREEMENT

BETWEEN

KIMBERLY-CLARK GLOBAL SALES, INC.

AND

NEENAH PAPER, INC.

MADE AS OF

November 30, 2004

and

AS AMENDED AND RESTATED AS OF

August 29, 2006

 

TABLE OF
CONTENTS

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
   

  	
  DEFINITIONS

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.01

  	
   

  	
  Airdry Metric Ton (“ADMT”)

  	
   

  	
  1

  
	
  1.02

  	
   

  	
  Annual Supply Obligation or ASO

  	
   

  	
  1

  
	
  1.03

  	
   

  	
  Annual Purchase Obligation or APO

  	
   

  	
  1

  
	
  1.04

  	
   

  	
  Contract Year

  	
   

  	
  1

  
	
  1.05

  	
   

  	
  Delivery Point

  	
   

  	
  1

  
	
  1.06

  	
   

  	
  Distribution Date

  	
   

  	
  1

  
	
  1.07

  	
   

  	
  Environmental/Safety Laws

  	
   

  	
  2

  
	
  1.08

  	
   

  	
  Invoice Price

  	
   

  	
  2

  
	
  1.09

  	
   

  	
  Option Pulp

  	
   

  	
  2

  
	
  1.10

  	
   

  	
  Phase Down Period

  	
   

  	
  2

  
	
  1.11

  	
   

  	
  Pulp

  	
   

  	
  2

  
	
  1.12

  	
   

  	
  Regions

  	
   

  	
  2

  
	
  1.13

  	
   

  	
  Shipping Points

  	
   

  	
  2

  
	
  1.14

  	
   

  	
  Specifications

  	
   

  	
  2

  
	
  1.15

  	
   

  	
  Transaction Price

  	
   

  	
  2

  
	
  1.16

  	
   

  	
  2004 Supply Period

  	
   

  	
  2

  
	
  1.17

  	
   

  	
  Force Majeure Event

  	
   

  	
  2

  
	
  1.18

  	
   

  	
  Force Majeure Period

  	
   

  	
  2

  
	
  1.19

  	
   

  	
  Force Majeure Notice

  	
   

  	
  2

  
	
  1.20

  	
   

  	
  Freight Agreement Period

  	
   

  	
  2

  
	
  1.21

  	
   

  	
  Resumption Notice

  	
   

  	
  3

  
	
  1.22

  	
   

  	
  Step-down Notice

  	
   

  	
  3

  
	
  1.23

  	
   

  	
  Seller Reduction Notice

  	
   

  	
  3

  
	
  1.23

  	
   

  	
  K-C Reduction Notice

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
   

  	
  ANNUAL PURCHASE AND
  SUPPLY OBLIGATIONS; ANNUAL FORECASTS AND QUARTERLY ESTIMATES; SAFETY STOCKS

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.01

  	
   

  	
  Annual Purchase and Supply Obligations

  	
   

  	
  3

  
	
  2.02

  	
   

  	
  Regional Terms

  	
   

  	
  4

  
	
  2.03

  	
   

  	
  Quarterly Estimates

  	
   

  	
  4

  
	
  2.04

  	
   

  	
  Annual Forecasts

  	
   

  	
  4

  
	
  2.05

  	
   

  	
  Safety Stocks

  	
   

  	
  5

  
	
  2.06

  	
   

  	
  Ordering

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
   

  	
  QUALITY AND
  SPECIFICATIONS; SPECIFICATION CHANGES; WARRANTIES; PRODUCT SAFETY
  CERTIFICATIONS; REPORTS, RECORDKEEPING, AND ACCESS

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.01

  	
   

  	
  Quality and Specifications

  	
   

  	
  6

  
	
  3.02

  	
   

  	
  Specifications Change

  	
   

  	
  6

  
	
  3.03

  	
   

  	
  Forestry

  	
   

  	
  6

  
	
  3.04

  	
   

  	
  Warranties; Product Safety Certification

  	
   

  	
  7

  
	
  3.05

  	
   

  	
  Reports, Recordkeeping, and Access

  	
   

  	
  7

  

 

 i
 

 

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
   

  	
  PRICE AND PAYMENT TERMS

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.01

  	
   

  	
  Price

  	
   

  	
  8

  
	
  4.02

  	
   

  	
  Discounts

  	
   

  	
  9

  
	
  4.03

  	
   

  	
  Freight and Other Shipping Costs

  	
   

  	
  9

  
	
  4.04

  	
   

  	
  Payment Terms

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
   

  	
  SHIPMENT AND DELIVERY

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.01

  	
   

  	
  Shipment Method/Shipping and Delivery Points

  	
   

  	
  9

  
	
  5.02

  	
   

  	
  Arrearage

  	
   

  	
  10

  
	
  5.03

  	
   

  	
  Title and Risk of Loss

  	
   

  	
  10

  
	
  5.04

  	
   

  	
  Bale Finishing

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
   

  	
  TERM AND TERMINATION

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.01

  	
   

  	
  Term

  	
   

  	
  10

  
	
  6.02

  	
   

  	
  Termination

  	
   

  	
  10

  
	
  6.03

  	
   

  	
  Termination Limitation

  	
   

  	
  10

  
	
  6.04

  	
   

  	
  Termination Without Cause

  	
   

  	
  11

  
	
  6.05

  	
   

  	
  Effect of Termination

  	
   

  	
  11

  
	
  6.06

  	
   

  	
  Partial Termination by Seller

  	
   

  	
  12

  
	
  6.07

  	
   

  	
  Partial Termination by KC

  	
   

  	
  11

  
	
  6.08

  	
   

  	
  Freight Incentive During a Freight Agreement Period

  	
   

  	
  11

  
	
  6.09

  	
   

  	
  Absence of a Resumption Notice by Sepetmber 29, 2006

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
   

  	
  CLAIMS: DISPUTE
  RESOLUTION

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.01

  	
   

  	
  Claims

  	
   

  	
  13

  
	
  7.02

  	
   

  	
  Dispute Resolution

  	
   

  	
  13

  
	
  7.03

  	
   

  	
  Litigation

  	
   

  	
  13

  
	
  7.04

  	
   

  	
  Governing Law

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
   

  	
  INDEMNIFICATION

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
   

  	
  CONTINGENCIES

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.01

  	
   

  	
  Force Majeure

  	
   

  	
  14

  
	
  9.02

  	
   

  	
  Environmental/Safety Laws

  	
   

  	
  17

  
	
  9.03

  	
   

  	
  Forestry Considerations

  	
   

  	
  17

  
	
  9.04

  	
   

  	
  Notice

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
   

  	
  CONFIDENTIALITY

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
   

  	
  CUSTOMS

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 12

  	
   

  	
  GENERAL

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.01

  	
   

  	
  Parties Bound/Assignment

  	
   

  	
  18

  
	
  12.02

  	
   

  	
  Right of Offset

  	
   

  	
  18

  
	
  12.03

  	
   

  	
  Compliance With Law

  	
   

  	
  18

  
	
  12.04

  	
   

  	
  Independent Contractor Status

  	
   

  	
  19

  
	
  12.05

  	
   

  	
  Waiver of Breach

  	
   

  	
  19

  
	
  12.06

  	
   

  	
  Notices

  	
   

  	
  19

  
							

 

 ii
 

 

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.07

  	
   

  	
  Severability of Provisions

  	
   

  	
  20

  
	
  12.08

  	
   

  	
  Headings

  	
   

  	
  20

  
	
  12.09

  	
   

  	
  Entire Agreement

  	
   

  	
  20

  
	
  12.10

  	
   

  	
  Counterparts

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
   

  	
  PULP PURCHASE OBLIGATIONS, SUPPLY OBLIGATIONS,
  DELIVERY POINTS AND TRANSPORTATION TERMS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT B

  	
   

  	
  SPECIFICATIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT C

  	
   

  	
  DISCOUNT SCHEDULE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT D

  	
   

  	
  CERTIFICATE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULE A

  	
   

  	
  PULP PURCHASE OBLIGATIONS, SUPPLY OBLIGATIONS,
  DELIVERY POINTS AND TRANSPORTATION TERMS FOLLOWING THE EFFECTIVE DATE OF A
  REDUCTION NOTICE BY SELLER

  	
   

  	
   

  
										

 

 iii

 

AMENDED AND RESTATED PULP SUPPLY AGREEMENT

THIS
AMENDED AND RESTATED PULP SUPPLY AGREEMENT (the “Agreement”), entered into as
of the 29th day of August, 2006, is by and between NEENAH
PAPER, INC., a Delaware corporation (“Seller”), and KIMBERLY-CLARK GLOBAL
SALES, INC., a Delaware corporation (“K-C”).

WITNESSETH

WHEREAS,
pursuant to a Distribution Agreement (the “Distribution Agreement”) dated as of
November 30, 2004, Kimberly-Clark Corporation, a Delaware corporation (“Parent”),
transferred certain assets and businesses to Seller and its subsidiaries in
connection with a tax free spin-off of Parent’s United States paper and
Canadian pulp businesses to the stockholders of Parent (the “Spin-off
Transaction”); and

WHEREAS,
following the Spin-off Transaction, Seller and its subsidiaries owned and
operated pulp mills and related woodlands operations in Terrace Bay, Ontario
and Pictou, Nova Scotia; and

WHEREAS,
as part of the Spin-off Transaction, K-C and Seller entered into a Pulp Supply
Agreement (“PSA”), dated as of November 30, 2004, pursuant to which K-C
thereafter purchased from Seller, and Seller sold to K-C, Pulp, as
defined herein; and

WHEREAS,
the PSA was amended by that certain Amendment to the PSA, dated as of January
16, 2006 (the “Amended PSA”), entered into by Seller and K-C to address, among
other matters, a Force Majeure Event anticipated at Seller’s Terrace Bay,
Ontario mill (the “Terrace Bay Mill”); and

WHEREAS,
Seller delivered to K-C a Force Majeure Notice on April 3, 2006 in accordance
with Section 9.01 of the Amended PSA stating that a Force Majeure Event had
occurred at its Terrace Bay Mill that prevented Seller from meeting its
obligations under the Amended PSA, effective on or about April 5, 2006; and

WHEREAS,
Seller has informed K-C that Seller has entered into two asset purchase
agreements, one with Terrace Bay Pulp Inc. (“TBPI”) and the other with Eagle
Logging Inc (“Eagle”), whereby Seller will sell, respectively, to TBPI,
substantially all of the assets and properties used to produce pulp at its
Terrace Bay Mill (“Terrace Bay Operations”) and to Eagle, all of the assets and
properties of its Longlac Woodlands operations (“Longlac Operations”); and

WHEREAS,
Seller has also informed K-C that (i) it intends to issue a Resumption Notice
to K-C on or before August 31, 2006 stating, among other things, the dates and
quantities of Pulp available for purchase by K-C and (ii) that
contemporaneously with the closing of the sale of its Terrace Bay Operations
and Longlac Operations, Seller will enter into a toll manufacturing agreement
with TBPI whereby TBPI will produce and sell Pulp to Seller who, in turn, will
sell Pulp to K-C under the terms of this Amended PSA; and

WHEREAS,
K-C and Seller desire to enter into this Agreement in order to reflect the
foregoing circumstances and the terms and conditions under which K-C will
continue to purchase from Seller, Pulp produced at TBPI’s Terrace Bay Mill and
at Seller’s Pictou, Nova Scotia pulp mill (the “Pictou Mill”). 

NOW
THEREFORE, in consideration of the foregoing premises, which are incorporated
herein, and the mutual covenants recited hereinafter, it is hereby agreed as
follows.

 1
 

 

ARTICLE 1

DEFINITIONS

The
following terms shall have the meanings set forth below when used in this
Agreement and when used in any Purchase Order issued pursuant to this
Agreement.

1.01                           Airdry
Metric Ton (“ADMT”).  One Thousand (1,000) kilograms of air-dry
Pulp, containing ninety percent (90%) bone-dry fiber and ten percent (10%)
moisture.

1.02                           Annual
Supply Obligation or ASO.  The maximum tonnage of Pulp, as set forth in Exhibit
A hereto and as amended from time to time, which Seller must make available
to K-C for purchase in any one Contract Year.

1.03                           Annual
Purchase Obligation or APO.  The maximum tonnage of Pulp, as set forth in Exhibit
A hereto and as amended from time to time, which K-C must purchase from
Seller in any one Contract Year.

1.04                           Contract
Year.  Any of the consecutive calendar years in the
term of this Agreement, with the first year beginning on January 1, 2005 and
ending December 31, 2005.

1.05                           Delivery
Point.  The facilities or ports set forth in Exhibit
A, or as otherwise mutually agreed to by the parties in writing from time
to time.

1.06                           Distribution
Date.  As such term is defined in the Distribution
Agreement.                                        

1.07                           Environmental/Safety
Laws.  Any foreign or domestic law, regulation,
rule, order or directive related to a concern for human health, safety, welfare
or the natural environment, which in any way affects Seller’s ability to sell
Pulp to K-C or K-C’s ability to purchase and utilize Pulp, all pursuant
to the terms hereof.

1.08                           Invoice
Price.  Transaction Price less discounts as set forth
in Exhibit C.

1.09                           Option
Pulp.  Has the meaning stated in section 2.01 (e)
hereof.

1.10                           Phase
Down Period.  The two (2) year phase down period, invoked
by either party pursuant to Section 3.02 or Section 6.03. 

1.11                           Pulp.  Prime bleached Elemental Chlorine Free (“ECF”)
grade northern bleached softwood kraft (NBSK) or hardwood kraft (NBHK, which is
either High-Maple or Aspen as requested by K-C) pulp grades meeting the
Specifications and the provisions of Section 9.02 hereof.

1.12                           Regions.  K-C’s global locations referred to regionally
as: North America (US and Canada), and Europe.

1.13                           Shipping
Points.  Seller’s existing stocking terminals from
which Pulp purchased by K-C is to be shipped, or such other locations as the
parties mutually agree in writing.

1.14                           Specifications.  Any or all of K-C’s Pulp specifications
listed in Exhibit B hereto, as amended from time to time by mutual
agreement of the parties.

 2
 

 

1.15                           Transaction
Price.  The price, in USD, per ADMT of Pulp from
which discounts are to be taken as set forth in Article 4.

1.16                           2004
Supply Period.  The period from the day after the
Distribution Date to December 31, 2004, inclusive.

1.17                           Force
Majeure Event.  Any cause or event that is beyond the
affected party’s immediate or reasonable control and which arises without its
fault or negligence, including an act of God, war or threat of war, strike or
other form of labor disturbances (but excluding a lock-out by the employer),
fire, explosion, or other casualty, any law, restraint, rule, regulation or
other governmental restriction, or by any Environmental/Safety Laws.

1.18                           Force
Majeure Period.  The period of time beginning on the first day
that a Force Majeure Event prevents a party from performing its obligations
hereunder and ending on the date that such event no longer prevents the
applicable party from performing its obligation hereunder.  In the event of a Force Majeure Event
affecting Seller’s ability to perform its obligations, hereunder, the
commencement date of such Force Majeure Period shall be the day of the month on
which Seller is no longer able to ship Pulp to K-C in accordance with the K-C
forecast in effect on the date of Seller’s Force Majeure Notice.

1.19                           Force
Majeure Notice.  A written notice given by one party to the
other pursuant to Section 9.01 that (a) specifies the Force Majeure Event that
prevents the affected party from timely performing its obligations under this
Agreement, (b) quantifies, to the extent practicable, the quantities of Pulp
that the affected party expects to be able to deliver or purchase during the
Force Majeure Period, and (c) provides the affected party’s best estimate under
the circumstances of when the Force Majeure Period commenced or will commence
and when the Force Majeure Period will end, each to the best knowledge of the
party providing the Force Majeure Notice.

1.20                           Freight
Agreement Period.  Has the meaning
stated in Section 6.08 hereof.

1.21                           Resumption
Notice.  A written notice given by a party who has
previously given a Force Majeure Notice stating that the Force Majeure Event
has ended and that such party is no longer prevented from performing its
obligations under this Agreement because of the Force Majeure Event. The
Resumption Notice shall specify the quantities of Pulp and the date on which
purchases and sales of such quantities of Pulp previously affected by the Force
Majeure Event will be available for purchase and sale, and the amount of the
Annual Supply Obligation and the Annual Purchase Obligation for the remainder
of the Contract Year in which the resumption date occurs.

1.22                           Step-down
Notice.  A written notice given by K-C pursuant to
Section 9.01(f).

1.23                           Seller
Reduction Notice.  A written notice given by Seller pursuant to
Section 6.06.

1.24                           K-C
Reduction Notice.  A written notice given by K-C pursuant to
Section 6.07.   

 3
 

 

ARTICLE 2

ANNUAL
PURCHASE AND SUPPLY OBLIGATIONS; ANNUAL FORECASTS

AND QUARTERLY ESTIMATES; SAFETY STOCKS

2.01                           Annual
Purchase and Supply Obligations/Option Tons.

(a)                                  Subject
to the terms and conditions herein: 

(i)                                     For
the 2004 Supply Period, Seller shall make available to K-C for purchase, and
K-C shall purchase from Seller, Pulp in each Region as set forth in Exhibit
A; and 

(ii)                                  Beginning
January 1, 2005, Seller shall make the Annual Supply Obligations available to
K-C for purchase, and K-C shall purchase from Seller, the Annual Purchase
Obligations.   

(b)                                 Failure
of K-C to Satisfy its Annual Purchase Obligations.  If K-C fails to purchase the Annual Purchase
Obligation for any Contract Year, and such failure is not excused pursuant to
this Agreement, then in lieu of any other direct, indirect, incidental,
special, or consequential damages arising from K-C’s failure to purchase,
Seller shall be entitled to receive from K-C the Purchase Shortfall Amount (as
defined below).  Upon notification that
K-C will be unable to meet the Annual Purchase Obligation, Seller will diligently
attempt to procure an alternate purchaser for that quantity of Pulp which, when
added to the quantity of Pulp actually purchased by K-C during the applicable
Contract Year, would equal the Annual Purchase Obligation for such year (the “Purchase
Shortfall Quantity”).  

The Purchase Shortfall Amount shall be equal to the
amount Seller would have received from K-C had K-C purchased the Purchase
Shortfall Quantity in accordance with the price and payment terms in Article 4
of this Agreement (the “Purchase Shortfall Price”), reduced by the amount of
payments made to Seller for the Purchase Shortfall Quantity by alternate
purchasers (the “Purchase Shortfall Mitigation Amount”), and increased by ten
percent (10%) of the difference between the Purchase Shortfall Price and the
Purchase Shortfall Mitigation Amount.  If
the Purchase Shortfall Mitigation Amount is greater than the Purchase Shortfall
Price, then the Purchase Shortfall Amount will be zero.

Any tonnage for which payment is made by K-C as a
result of the circumstances described in this subparagraph (b) shall be
deducted from K-C’s Annual Purchase Obligation and Seller’s Annual Supply
Obligation for such Contract Year.

(c)                                  Failure
of Seller to Satisfy its Annual Supply Obligations.  If Seller fails to make available for
purchase by K-C the Annual Supply Obligation for any Contract Year, and such
failure is not excused pursuant to this Agreement, then in lieu of any other
direct, indirect, incidental, special, or consequential damages arising from
Seller’s failure to sell, K-C shall be entitled to receive from Seller the
Supply Shortfall Amount (as defined below). The quantity of Pulp which, when
added to the quantity of Pulp actually supplied by Seller during the applicable
Contract Year, would equal the Annual Supply Obligation for such year is
referred to below as the “Supply Shortfall Quantity”). 

The Supply Shortfall
Amount shall be equal to the price paid by K-C for the Supply Shortfall
Quantity on the open market (the “Supply Shortfall Cover Amount”), reduced by the
price K-C would have paid Seller for the Supply Shortfall Quantity if Seller
had supplied such Pulp as 

 4
 

 

required by this
Agreement (the “Supply Shortfall Price”) and increased by ten percent (10%) of
the difference between the Supply Shortfall Cover Amount and the Supply
Shortfall Price.  If the Supply Shortfall
Cover Amount is less than the Supply Shortfall Price, then the Supply Shortfall
Amount will be zero.

Any tonnage purchased
elsewhere by K-C as a result of the circumstances described in this subparagraph
(c) shall be deducted from K-C’s Annual Purchase Obligation and Seller’s Annual
Supply Obligation for such Contract Year.

(d)                            Shortfall
Payments; Exclusive Remedy.  In the event that a shortfall occurs in the
Annual Purchase Obligation, or in the Annual Supply Obligation, the Purchase
Shortfall Amount or the Supply Shortfall Amount, as the case may be, shall be
payable within forty-five (45) days of the date that a written claim is made,
provided that such claim shall not be made until the amount of the shortfall
can be determined with reasonable certainty. 
Seller’s sole remedy for K-C’s unexcused failure to satisfy its Annual
Purchase Obligation shall be as set forth in paragraph 2.01(b).  K-C’s sole remedy for Seller’s unexcused
failure to satisfy its Annual Supply Obligation shall be as set forth in
paragraph 2.01(c).                          

(e)                             K-C
Option Tons in 2006 and 2007.  In addition to K-C’s Annual Purchase
Obligations for 2006 and 2007, respectively, K-C shall have the right to
purchase additional ADMT of North American softwood Pulp for delivery to North
America Delivery Points (“Option Tons”) in 2006 and 2007, respectively, to be
allocated 75% to the Terrace Bay Mill and 25% to the Pictou Mill, unless the
parties otherwise agree in writing, and, further, subject to the following
limitations:

(i)                                     2006
Option Tons.  K-C may elect to purchase from Seller during
the months of October, November and December 2006 up to 20,000 Option Tons by
delivering to Seller on or before September 10, 2006 a written notice specifying
the ADMT quantity of Option Tons from each pulp mill to be delivered to K-C
during each such month; provided, however, that in no event, shall Seller be
obliged to deliver to K-C Delivery Points more than 10,000 Option Tons during
any single month.

(ii)                                  2007
Option Tons.  K-C may elect to purchase from Seller during
2007 up to 50,000 Option Tons by delivering to Seller on or before October 15,
2006 a written notice specifying the ADMT quantity of Option Tons from each
pulp mill to be delivered to K-C and each month in which such deliveries shall
be made; provided, however, that in no event shall Seller be obliged to deliver
more than 6,500 Option Tons in any single month in 2007.

2.02                           Regional
Terms.  Both parties agree that the terms and
conditions of this Agreement adequately reflect differences in market Regions
for Pulp specifications, transaction price, delivery, and payment terms.   

2.03                           Quarterly
Estimates.  Beginning with the calendar quarter
commencing January 1, 2005, the parties shall communicate thirty (30) days
prior to the commencement of each quarter to forecast:  1) proposed quarterly purchases to be made by
K-C for each of K-C’s mills listed in Exhibit A; and 2) the month within
the calendar quarter upon which Seller shall make such quantities available to
K-C. 

2.04                           Annual
Forecasts.  By October 15 of each preceding Contract
Year, for general guidance, K-C shall provide Seller with K-C’s preliminary
non-binding forecast of purchases for the subsequent Contract Year.  K-C shall provide Seller with its final
non-binding forecast of purchases for each 

 5
 

 

subsequent Contract Year by November 15.  Additionally, on an annual basis Seller and
K-C may agree to start discussions on or before October 15, without binding
obligation unless so mutually agreed, to increase the volume of Pulp to be
supplied and purchased above the volumes required by this Agreement, and such
discussions will conclude by November 15 (regardless whether mutual agreement
is reached or not).  If mutually agreed
upon, the additional volume of Pulp to be supplied and purchased will be
according to the terms and conditions of this Agreement.

2.05                           Safety
Stocks.  Seller shall maintain safety stocks which are
adequate to assure the continuous supply of Pulp to K-C set forth in Exhibit
A, taking into account K-C’s forecasts, Seller’s production schedule,
normal shipping times for vessel and inland shipments and other pertinent
factors.  In the event that K-C believes
that additional safety stock is required, K-C shall discuss in good faith the
safety-stock levels with Seller.  If
after the discussions, K-C reasonably determines that additional safety stock
is needed, it shall so notify Seller and, at Seller’s election either (i)
Seller may bring the safety-stock level to the required level within 30 days of
receipt of K-C’s notice or (ii) K-C may purchase Pulp from other suppliers and
Seller shall pay K-C the difference between the higher price paid by K-C for
safety stock on the open market and the price K-C would have paid Seller if
Seller had supplied Pulp as required by this Agreement, plus liquidated damages
equal to ten percent (10%) of such difference in lieu of any other direct,
indirect, incidental, special or consequential damages arising from such
failure to deliver. Any tonnage purchased by K-C from other suppliers pursuant
to this Section 2.05 shall be deducted from K-C’s Annual Purchase Obligation
and Seller’s Annual Supply Obligation.

2.06                           Ordering.  Periodic scheduling instructions for Pulp
shall be placed by K-C and followed by Seller as follows, or as the parties may
otherwise mutually agree in writing from time to time:

(a)                                  K-C
shall advise Seller of K-C’s particular need for Pulp under this Agreement (a “Delivery
Schedule”).  The Delivery Schedule shall
be communicated to Seller, at least 30 days prior to the date on which the
shipment would be scheduled to leave the mill, by e-mail, or other means
mutually agreed upon in writing by K-C and Seller.  The Delivery Schedule shall set forth:

(i)                                     the
specific quantity and grade of Pulp needed;

(ii)                                  the
requested shipping date(s) and delivery date(s); and

(iii)                               shipping
instructions and Delivery Points. 

(b)                                 Subject
to K-C’s obligations pursuant to Section 2.01, K-C may cancel any specific
quantity of Pulp specified in the Delivery Schedule by providing a revised
Delivery Schedule to Seller for such quantity, by e-mail, or other means
mutually agreed upon in writing by K-C and Seller.  If the revised Delivery Schedule for such
quantity is received by Seller prior to Seller delivering such quantity to a
carrier for shipment, then K-C will be responsible for any out-of-pocket
demurrage or other costs incurred by Seller as a result of such cancellation,
provided that Seller uses commercially reasonable efforts to mitigate any such
additional costs.  If the revised
Delivery Schedule for such quantity is received by Seller after such quantity
has been delivered to a carrier for shipment, then K-C will be responsible for
any additional costs incurred by Seller in complying with the revised Delivery
Schedule for such quantity, provided that Seller uses commercially reasonable
efforts to mitigate any such additional costs.

(c)                                  Upon
Seller’s receipt of a Delivery Schedule, Seller shall promptly notify K-C of
any proposed deviations from K-C’s instructions.

 6
 

 

ARTICLE 3

QUALITY
AND SPECIFICATIONS; SPECIFICATION CHANGES; 

WARRANTIES;
PRODUCT SAFETY CERTIFICATIONS; 

REPORTS, RECORDKEEPING, AND ACCESS

3.01                           Quality
and Specifications.  The Pulp to be sold and purchased hereunder
shall be consistent with the quality of prime pulp grades used throughout the
world and shall be produced in accordance with and shall meet all of K-C’s
requirements and Specifications as set forth in this Agreement and K-C’s
shipping instructions under Article 5. In the event of any conflict or
inconsistency between or among requirements, standards or conditions and unless
otherwise herein specifically provided otherwise, the higher or more detailed
requirement, standard or condition shall control. The parties agree to work
together to make any necessary changes to the Specifications to ensure that the
Pulp meets the performance, processing and other requirements in the
manufacture of products into which the Pulp is incorporated and that the
requirements of such products are met.

3.02                           Specifications
Change.  K-C shall have the right to propose
reasonable changes to Specifications at any time during the term of this
Agreement, and Seller agrees to use its commercially reasonable efforts to meet
such changes within a reasonable period of time (not to exceed 90 days) after K-C’s
written request has been received.  For
purposes of this paragraph, a reasonable change to Specifications shall mean
that the Specifications requested could be met by third-party pulp suppliers in
the commercial pulp market.  If Seller is
unable to meet such changes within such reasonable period, K-C may purchase
Pulp meeting changed Specifications elsewhere, and K-C’s Annual Purchase
Obligations shall be reduced accordingly. 
If Seller is able to make such changes, but Seller’s costs are increased
or decreased as a direct result of such revised Specifications, Seller and K-C
agree to negotiate in good faith to establish, within thirty (30) days of
Seller’s knowledge that price changes shall result, any commercially reasonable
revisions in price and terms. If the parties are unable to agree on a price
adjustment within such 30 day period and K-C elects not to forego the
Specifications change, irrespective of any other provision hereof, either party
shall have the right to commence the Phase Down Period immediately with respect
to the quantity of Pulp for which the change to Specifications was requested. 

Seller
understands that the introduction of process changes in its Pulp manufacturing
can potentially affect K-C’s manufacturing process and/or final product
attributes.  Therefore, Seller will
provide K-C with Pulp samples for evaluation at least one hundred twenty (120)
days in advance of making any such changes. 
If, in the sole, reasonable opinion of K-C, a process change by Seller
will negatively affect K-C’s manufacturing process and/or final product
attributes, then K-C agrees to give Seller an additional ninety (90) days
written notice of such negative effects. At the end of such ninety (90) day
notice period Seller shall either revoke such process change or immediately and
permanently release K-C from its purchase obligations under this Agreement as
to the Pulp in question.

3.03                           Forestry.  

(a)                                  Seller
shall, by December 31, 2005, cause its wholly-owned wood fiber suppliers to be
formally certified in one of the internationally-recognized forest
certification programs, such as the American Forest and Paper Association’s
(AF&PA) Sustainable Forestry Initiative® (SFI)
program.  In addition, Seller agrees that
the woodlands operated by TBPI will have submitted all appropriate applications
and documentation, and done all things necessary to support said applications,
to be “audit ready” for certification in the SFI program on or before March 31,
2007.  TBPI will exert commercially
reasonable best efforts to remediate any deficiencies noted in the SFI audits
of TBPI’s woodlands and to have formal SFI certification issued as soon as
reasonably possible following submission of its SFI certification applications
and will have obtained SFI certification for all of the woodlands operated by
TBPI on or before 

 7
 

 

June 30, 2007.
Notwithstanding the immediately preceding sentence, TBPI will obtain SFI
certification for the Ogoki forest (which, in conjunction with fiber from other
certified forests, will provide at least 85% of the wood fiber to the Terrace
Bay Mill) on or before April 30, 2007 and shall exert commercially reasonable
best efforts to obtain SFI certification on the Ogoki forest on or before April
15, 2007.  TBPI shall provide copies of
all applications for SFI certification of the woodlands operated by TBPI to
Seller and K-C within a reasonable period of time following the filing of said
applications and shall provide copies of all audit reports to Seller and K-C
when received.  Seller shall also use its
commercially reasonable efforts to work with and encourage its other industrial
contract wood fiber suppliers (including purchasers of land from Seller in Nova
Scotia as it relates to the purchased lands) to become certified in one of the
internationally-recognized forest certification programs and shall encourage
its non-industrial contract wood suppliers to adopt the principles of
sustainable forestry and to seek independent certification of their woodlands
in an appropriate program such as the American Tree Farm System’s Standards of
Sustainability for Forest Certification. 
Further, for all Pulp supplied by Seller to K-C from the Terrace Bay
Mill, at least 85% of the fiber used in the production of such Pulp shall be
produced from certified wood fiber on or before April 30, 2007 and all of the
wood fiber used in the production of such Pulp shall be manufactured from
certified fiber on or before June 30, 2007. 
On or before June 30, 2007, and thereafter for the remainder of the term
of this Agreement, all Pulp supplied to K-C from the Terrace Bay Mill will meet
the labeling and certification requirements of one of the
internationally-recognized forest certification programs and on or before April
30, 2007, at least 85% of the Pulp supplied to K-C shall be produced with
certified wood fiber.  Seller further
agrees that all Pulp supplied by Seller to K-C from the Pictou Mill will
continue to meet the labeling and certification requirements of one of the
internationally-recognized forest certification programs during the term of
this Agreement.

(b)                                 By
January 1, 2007 Seller agrees that TBPI shall develop and present to K-C a plan
to obtain Forest Stewardship Council certification for the Kenogami Woodlands
including the shortest, reasonable timeline for implementing such plan, and
how, if possible, sufficient quantities of FSC certified wood fiber could be
made available to allow all Pulp sold to K-C from the Terrace Bay Mill to meet
the FSC’s labeling and certification requirements for FSC certified pulp. The
parties agree to negotiate in good faith (including negotiations with TBPI)
with respect to any changes necessary to this Agreement required to implement
said plan upon commercially reasonable terms, including price, timing, contract
length, cost allocation and any other relevant terms and condtions for sale by
Seller and purchase by K-C of such FSC certified Pulp.

3.04                           Warranties;
Product Safety Certification.

(a)                                  Each
party represents and warrants to the other party that:  

(i)                                     it
is a corporation duly organized, existing and in good standing under the laws
of the state of Delaware and its execution and performance of this Agreement is
within its corporate powers, has been duly authorized, and is not in contravention
or violation of its charter, by-laws or any corporate resolution or of law or
of any indenture, agreement, undertaking or other obligation to which it is
bound; 

(ii)                                  it
has obtained all governmental licenses, approvals and registrations necessary
to perform and fulfill its obligations under this Agreement; 

(iii)                               the
individual signing this Agreement on its behalf is duly authorized to do so and
this Agreement is legally valid, binding and enforceable in accord with its
terms; and 

 8
 

 

(iv)                              it
shall take all steps necessary to assure that all delivery dates and other
obligations established in this Agreement by it to be performed are met in a
timely fashion.

(b)                                 Seller
agrees that the Pulp shall be, at the time of delivery to K-C, free from
contamination or other defects and shall conform in all respects with the
Specifications and other requirements hereof.

(c)                                  Seller
agrees that, in addition to the other requirements of this Agreement, each
shipment of the Pulp: 

(i)                                     shall
conform to the U.S. Food and Drug Administration requirement for pulp as
defined in 21 C.F.R. Section 186.1673, and requirements for Indirect Food
Additives: Pulp and Paperboard Components as defined in 21 C.F.R. Part 176; and

(ii)                                  will
be sufficiently tested to certify that it meets the Council of Northeast
Governors (“CONEG”) heavy metal requirements for levels of lead, mercury,
cadmium and chromium.

Upon execution of
this Agreement, Seller shall provide to K-C a certificate attesting to the
foregoing in the form attached hereto as Exhibit D.  

(d)                                 Seller represents and warrants to K-C that, as long
as TBPI manufacturers Pulp for Seller for sale to K-C under the terms of this
Agreement:

(i)                                     TBPI
has obtained, or will obtain within a commercially reasonable period of time
following the execution of this Agreement, all material governmental licenses,
approvals and registrations necessary to perform and fulfill its duties to
manufacture Pulp in accordance with this Agreement for Seller;

(ii)                                  Seller
is at all times responsible for the full
performance of its obligations under this Agreement; 

(iii)                               Seller will not create any obligation on the part of K-C
to pay any sums directly to TBPI; 

(iv)                              Seller will be fully responsible for the acts and
omissions of TBPI in the performance of Seller’s obligations under this
Agreement to the extent such acts or omissions cause liability to K-C; and 

(v)                                 Seller
and TBPI have entered into a Pulp Manufacturing Agreement and such agreement is
legally valid, binding and enforceable in accordance with its terms and is not
inconsistent with the terms of this Agreement.

3.05                           Reports,
Recordkeeping, and Access.  Seller shall maintain a quality assurance
program that meets the sampling process, test methods and technical attributes
set forth in the Specifications in Exhibit B.  Seller understands that K-C relies on Seller’s
quality assurance program to assure that Pulp delivered is in compliance with
the Specifications and other provisions set forth herein.  During the term of this Agreement, Seller
shall collect and for five (5) years after termination hereof, shall maintain:
(i) process control data and property data typical in the industry for the
production of Pulp, (ii) all data 

 9
 

 

required to document compliance with the
Specifications and other terms hereof, and (iii) any other process control or
property data related to the production of Pulp as K-C may from time to time
reasonably request.  Seller shall provide
K-C, upon its request, with access, at reasonable times, to Seller’s facilities
and cause TBPI to provide such access to the facilities of TBPI, for purposes
of reviewing such operations and Seller’s compliance with the terms hereof,
including Seller’s records required to be kept pursuant to this Section 3.05.

ARTICLE 4

PRICE
AND PAYMENT TERMS 

4.01                           Price.  

(a)                                  The
parties acknowledge that the price for Pulp fluctuates with market conditions
and agree that the price at which Seller shall sell and K-C shall purchase Pulp
hereunder shall be determined as set forth in this Article 4.  In order to determine the price for Pulp
invoiced in any given month, the parties shall first establish the Transaction
Price which shall be based on the prevailing price per ADMT of Pulp for the
preceding month as quoted by one or more major, regular market producers of prime
bleached Pulp for contract or regular, long-term customers for any given
month.  Based upon such quote(s), Seller
and K-C shall attempt to mutually agree on the applicable Transaction Price for
any given month’s shipments.  If the parties cannot agree on the
Transaction Price, then the Transaction Price shall be determined by reference
to published market data as follows:

For
Softwood (NBSK) Shipped to North American Delivery Points:

The
Transaction Price shall be the average of:

1)                                      Pulp
and Paper Week’s posted price in the “Price
Watch: Market Pulp” table for the preceding month.  In the case of a range of prices, the range
average; and

2)                                      The
posted price in RISI World Pulp Monthly’s “Table 5 Market Pulp Price
Summary” Delivered to United States for the preceding month.

In the event that the
next issue of the subject publications adjusts or corrects previously published
prices, such resulting adjustments shall be credited to the proper party and
incorporated into the methodology on a going-forward basis.

For
Hardwood (NBHK):

The Transaction Price
shall be the posted Aspen and Maple price in RISI World Pulp Monthly’s “Table
5 Market Pulp Price Summary” Delivered to United States for the preceding
month.

For Softwood (NBSK)
Shipped to European Delivery Points: 

The Transaction Price
shall be the average of:

 10
 

 

1)                                      The
Hawkins Wright PulpWatch posted price in the “Price Indication” table
for the preceding month.  In the case of
a range of prices, the range average; and

2)                                      The
posted price in RISI World Pulp Monthly’s “Table 5 Market Pulp Price
Summary” Delivered to Europe for the preceding month.

In the event that the
next issue of the subject publications adjusts or corrects previously published
prices, such resulting adjustments shall be credited to the proper party and
incorporated into the methodology on a going-forward basis.

Discontinuation of a
Publication

In the event that one or
more of the subject publications cease to exist, then the parties agree to
negotiate in good faith to determine a commercially reasonable alternative to
that publication for use in this Section 4.01.

(b)                                 Notwithstanding
anything in Section 4.01(a) to the contrary, in no event shall the Transaction
Price for NBSK shipped during the period from the Distribution Date to and
including December 31, 2007 to North American Delivery Points be less than $      
per ADMT or more than $       per ADMT.

4.02                           Discounts.  The price to be paid by K-C for Pulp
purchased pursuant to this Agreement shall be the Transaction Price established
pursuant to Section 4.01 (including, if applicable Section 4.01(b)) less the
discounts set forth in Exhibit C.

4.03                           Freight
and Other Shipping Costs.  Except as otherwise set forth herein, Seller
shall pay shipping costs for, and insure deliveries of Pulp to the Delivery
Points set forth in Exhibit A. 
K-C may request accelerated deliveries or designate other Delivery
Points, in which event the parties shall review costs associated with such
accelerated deliveries or other Delivery Points and establish appropriate shipping
costs therefor. 

4.04                           Payment
Terms.  Seller shall invoice K-C on a per load basis
for all Pulp sold under this Agreement. 
K-C North America’s payment term is forty-five (45) days from date of
shipment of Pulp.  Seller shall invoice
K-C Europe and K-C Europe shall pay Seller sixty (60) days from vessel arrival.

ARTICLE 5

SHIPMENT
AND DELIVERY

5.01                           Shipment
Method/Shipping and Delivery Points.  All purchases of Pulp made hereunder shall be
shipped from Seller’s Pictou Mill and TBPI’s Terrace Bay Mill to K-C Delivery
Points consistent with the parties’ 2004 shipping history or as mutually
agreed.  Commencing October 1, 2006, all
deliveries of Pulp made hereunder shall be shipped from Seller’s Pictou pulp
mill or TBPI’s Terrace Bay Mill to K-C Delivery Points consistent with the
parties 2004 shipping history.  Seller
shall deliver all Pulp to K-C at the Delivery Points set forth in Exhibit A,
or as otherwise mutually agreed from time to time, in accordance with K-C’s
shipping instructions.  All pulp received
by K-C’s European locations shall be supplied solely by Seller’s Pictou Mill. 

5.02                           Arrearage.  Seller shall make and monitor all shipments
and deliveries in accordance with the shipment schedules specified in K-C’s
shipping instructions.  When Seller
becomes aware that it may be unable to ship any quantity of Pulp hereunder in
accordance with K-C’s specified delivery schedule, 

 11
 

 

Seller shall immediately notify K-C both orally
and in writing of this possibility, and the parties shall determine whether
Seller can effect delivery to meet K-C’s requirements.  If, after discussion with Seller, K-C
reasonably determines, in its sole good faith judgment, that Seller will not be
able to make a delivery in time to meet K-C’s requirements, K-C shall
have the right to obtain delivery of the required quantities of Pulp from an
alternate supplier.  In the event that
K-C is required to purchase Pulp from another supplier pursuant to this Section
5.02, Seller shall pay K-C the difference between the higher price paid by K-C
for Pulp on the open market and the price K-C would have paid to Seller if
Seller had supplied Pulp as required by this Agreement, plus liquidated damages
equal to ten percent (10%) of such difference, in lieu of any other direct,
indirect, incidental, special or consequential damages arising from such
failure to deliver. Purchases by
K-C of Pulp from another supplier pursuant to this Section 5.02 shall be
deducted from K-C’s Annual Purchase Obligation and Seller’s Annual Supply
Obligation.

5.03                           Title
and Risk of Loss.  All shipments to North American Delivery
Points shall be made FOB Delivery Point at which point risk of loss or damage
shall pass to K-C.  All shipments to
European Delivery shall be made CIF European Delivery Point and risk of loss or
damage shall pass in accordance with such CIF terms.  Legal title to the Pulp shall pass to K-C
at the Delivery Point designated by K-C.

5.04                           Bale
Finishing.  For North America, Seller will use
commercially reasonable best efforts to work with K-C to develop and supply
wireless bales meeting K-C technical and transportation requirements no later
than June 1, 2006 at Seller’s Pictou Mill and no later than June 1, 2007 at the
Terrace Bay Mill.  For Europe, Seller
will continue to provide wired bales, unless and until the parties mutually
agree otherwise.  Additionally, Seller
will use commercially reasonable efforts to work with K-C to create uniform
bale shape, dimensions, weights, and wrap requirements that will be implemented
by June 1, 2006, but the parties acknowledge that transitioning to uniform bale
shape, dimensions, weights, and wrap requirements is capital intensive and that
there is not currently a provision in the budget of Seller or of TBPI for such
an outlay and operational priorities may delay the implementation of uniform
bale shape, dimensions, weights, and wrap requirements.

ARTICLE 6

TERM
AND TERMINATION

6.01                           Term.  The term of this Agreement shall commence on
the Distribution Date, and shall continue until terminated in accordance with
the terms of this Agreement.

6.02                           Termination.  This Agreement may be terminated:

(a)                                  Upon
the mutual written agreement of the parties; or

(b)                                 Except
as provided in Section 6.03 hereof, by either party for material breach of any
of the terms hereof by the other party if the breach is not corrected (or
remedied) within thirty (30) calendar days after written notice of breach is
delivered to the defaulting party; or

(c)                                  Except
as provided in Section 6.03 hereof, by either party, upon thirty (30) days
written notice to the other party, for three or more material breaches of the
terms of this Agreement by the other party within a Contract Year, whether or
not such breaches have been cured; or

(d)                                 By
either party, forthwith, upon written notice to the other party, if such other
party shall become insolvent, or shall be placed in receivership,
reorganization, liquidation or bankruptcy, by the other party, immediately,
upon written notice; or

 12
 

 

(e)                                  By
K-C, forthwith, upon written notice to Seller, if for any reason, the ownership
or control of Seller or any of Seller’s production facilities becomes vested
in, or is made subject to the control or direction of, any direct competitor of
K-C or any governmental or regulatory authority or any other third party, who
in K-C’s reasonable judgment may not be able to reliably perform the
obligations of Seller hereunder; or

(f)                                    By
either party, upon no less than ninety (90) days written notice to the other
party, in the event of a fundamental change in the nature of the business of
either party that may substantially affect its ability to sell or to purchase
and utilize Pulp hereunder; or

(g)                                 As
otherwise provided for in this Agreement in Article 6, Sections 9.01,
Section 9.02, Section 9.03, or Article 11.

6.03                           Termination
Limitaton.  Neither party shall have
the right to terminate its respective rights and obligations hereunder
pertaining to the Pictou Mill pursuant to Sections 6.02(b) or (c) for any
breach of the terms hereof relating to or otherwise arising out of the parties
respective rights and obligations hereunder pertaining to the Terrace Bay
Mill.  Additionally, neither party shall
have the right to terminate its respective rights and obligations hereunder
pertaining to the Terrace Bay Mill pursuant to Sections 6.02(b) and (c) hereof
for any breach of the terms hereof relating to or otherwise arising out of the
parties respective rights and oblilgations hereunder pertaining to the Pictou
Mill.

6.04                           Termination
Without Cause.

(a)                                  As
to the Entire Agreement, at any time on or after December 31, 2007, either
party may provide written notice to the other party of its intent to commence
the Phase Down Period.  The notice shall
specify the commencement date of such Phase Down Period.  The earliest that the twenty-four month Phase
Down Period can start is January 1, 2009. 
The Annual Purchase Obligation and Annual Supply Obligation under the
Phase Down Period are set forth at Exhibit A.

(b)                                 As
to that portion of the Agreement concerning NBHK Pulp only, Seller may give a
three month written notice, consistent with timing of the Quarterly Estimate
process per Section 2.03, to terminate the Purchase and Supply Obligations for
the remaining hardwood Pulp grade.  The
notice shall specify the effective termination date and must be acknowledged by
K-C in writing.  For clarity, it is
recognized that as of June 30, 2005 the Aspen Pulp grade was removed from the
Amended PSA.

6.05                           Effect
of Termination.  Upon termination of this Agreement:

(a)                                  The
parties shall meet and discuss which outstanding and not yet fulfilled orders
should be filled and which shall be cancelled.

(b)                                 Each
party shall immediately return to the other (or destroy) all items of
Confidential Information delivered hereunder and all copies thereof.

(c)                                  Seller
shall continue to fulfill its warranty obligations with respect to any Pulp
sold by Seller to K-C pursuant to this Agreement.

(d)                                 All
requirements of warranties, reports, recording, access, indemnification,
payment terms, obligations related to use or protection of Confidential
Information, and 

 13
 

 

provisions related to
venue and choice of laws, shall survive termination or expiration of this
Agreement according to their terms.

6.06                           Partial
Termination by Seller. Seller may, on June
29, 2007 only, elect to permanently reduce its Annual Supply Obligation for
softwood Pulp sourced from the Terrace Bay Mill by giving K-C a Seller
Reduction Notice. The Seller Reduction Notice shall specify the Effective Date
of the reduction, the amount of the reduced Annual Supply Obligation in North America
for softwood Pulp from the Terrace Bay Mill, and shall reduce the Annual Supply
Obligation for hardwood Pulp to zero. The Seller Reduction Notice shall be
subject to the following limitations:

(a)                                  Without
K-C’s written consent, Seller’s Annual Supply Obligation for softwood Pulp may
not be reduced below the amounts set forth on the attached Schedule A.

(b)                                 Without
the prior written consent of K-C, the Effective Date of the Seller Reduction
Notice may not be earlier than June 30, 2008. Notwithstanding such restriction
on the Effective Date of the Seller Reduction Notice, at the request of Seller,
K-C shall exercise commercially reasonable efforts to purchase Pulp from third
party producers as promptly as possible so as to enable the Effective Date to occur
earlier than stated in the Seller Reduction Notice. To this end, K-C shall
regularly communicate with Seller regarding its efforts to purchase Pulp from
third party producers and will provide Seller with such other information
regarding such efforts as the parties may reasonably agree upon. Nothing herein
shall obligate K-C to disclose to Seller any information that K-C deems to be
confidential or proprietary in the exercise of K-C’s reasonable commercial
judgment, or that is subject to a confidentiality agreement with a third
party.  Any reduction in the Annual
Supply Obligation pursuant to this Section 6.06(b) shall reduce the Annual
Purchase Obligation by an equal amount.

(c)                                  To
the extent permitted by applicable law, rule, regulation or disclosure obligation,
as determined in the sole discretion of Seller, the Seller Reduction Notice
will be provided to K-C no less than thirty (30) days prior to any public
disclosure of the event, circumstance or reason for the giving of the Seller
Reduction Notice.

(d)                                 Without
the prior written consent of K-C, no Seller Reduction Notice may be sent prior
to December 1, 2006 unless accompanied by (i) a legal opinion in form and
substance, from McDermott, Will & Emery or another law firm with a national
reputation for a federal tax practice, acceptable to K-C in its sole discretion
who will act as counsel to K-C for the purposes of such opinion, to the effect
that any actions to be taken by Seller with respect to its Terrace Bay pulp
mill in connection with the submission of the Seller Reduction Notice will not
adversely affect the tax-free nature of the transactions described in the
private letter ruling issued by the Internal Revenue Service (“IRS”) to
Kimberly-Clark Corporation and dated September 15, 2004 (the “Private Letter
Ruling”); (ii) a private letter ruling from the IRS that (A) approves a change
in the “active trade or business” under the existing Private Letter Ruling from
Seller’s Terrace Bay mill to another entity or business of Seller and (B) does
not otherwise adversely affect the tax-free nature of the transactions
described in the Private Letter Ruling, or (iii) a private letter ruling from
the IRS which would otherwise establish that the actions to be conducted by
Seller in connection with the submission of the Seller Reduction Notice will
not adversely affect the tax-free nature of the transactions described in the
Private Letter Ruling. At the request of Seller, K-C will cooperate with and
support Seller’s reasonable efforts (and K-C agrees to undertake to engage the
support and cooperation of Kimberly-Clark Corporation), on a timely basis, to
obtain the legal opinion or the private letter rulings described in
subparagraphs (i), (ii) and (iii) above; provided that Seller shall be
responsible for, and shall promptly reimburse K-C for, all reasonable 

 14
 

 

fees and expenses of K-C
and/or Kimberly-Clark Corporation incurred by them in connection with any such
requested cooperation.

(e)                                  It
is expressly understood and agreed between the parties that during the period
of time between the delivery date and the Effective Date of the Seller
Reduction Notice, Seller may satisfy its obligation to supply Pulp under the
Supply Agreement by supplying Pulp purchased from third parties that meets the
Specifications and the provisions of Sections 9.02 and 9.03 and Articles 3 and
11 of the Supply Agreement.

6.07                           Partial
Termination by K-C.  K-C may, on June 29, 2007 only, elect to
permanently reduce its Annual Purchase Obligation for softwood Pulp sourced
from the Terrace Bay Mill by giving Seller a K-C Reduction Notice. The K-C
Reduction Notice shall specify the Effective Date of the reduction and the
amount of the reduced Annual Purchase Obligation for softwood Pulp from the
Terrace Bay Mill. The K-C Reduction Notice shall be subject to the following
limitations:

(a)                                  Without
Seller’s written consent, K-C’s Annual Purchase Obligation for softwood Pulp
may not be reduced below the amounts set forth on the attached Schedule A.

(b)                                 Without
the prior written consent of Seller, the Effective Date of the K-C Reduction
Notice may not be earlier than June 30, 2008. Notwithstanding such restriction
on the Effective Date of the K-C Reduction Notice, at the request of K-C,
Seller shall exercise commercially reasonable efforts to sell Pulp on
substantially the same economic and other terms and conditions to third party
purchasers as promptly as possible so as to enable the Effective Date to occur
earlier than stated in the K-C Reduction Notice. To this end, Seller shall use
commercially reasonable efforts to cause TBPI to regularly communicate with K-C
regarding its efforts to sell Pulp to third party purchasers and will provide
K-C with such other information regarding such efforts as K-C and TBPI may
reasonably agree upon. Nothing herein shall obligate Seller or TBPI to disclose
to K-C any information that Seller or TBPI deems to be confidential or
proprietary in the exercise of Seller’s or TBPI’s reasonable commercial
judgment, or that is subject to a confidentiality agreement with a third party.  Any reduction in the Annual Purchase
Obligation pursuant to this Section 6.07(b) shall reduce the Annual Supply
Obligation by an equal amount.

(c)                                  To
the extent permitted by applicable law, rule, regulation or disclosure
obligation, as determined in the sole discretion of K-C, the K-C Reduction
Notice will be provided to Seller no less than thirty (30) days prior to any
public disclosure of the event, circumstance or reason for the giving of the
K-C Reduction Notice.

6.08                           Freight
Incentive During a Freight Agreement Period.

(a)                                  If
during a Freight Agreement Period, as defined in this Section 6.08, K-C
requests that Seller supply Pulp from the Pictou Mill to Delivery Points that
are customarily supplied from Terrace Bay, the parties acknowledge that the
freight and other shipping costs to be incurred by Seller under Section 4.03
could be higher because the Pictou Mill is further from some Delivery Points
than is Terrace Bay.  In order to create
an incentive for K-C to plan purchases of third party Pulp in a manner that
will result in lower freight and shipping costs under Section 4.03, Seller will
make a payment to K-C and K-C will make a payment to Seller, in the
amounts and on the terms and conditions set forth below:

 15
 

 

(i)                                     Definitions.

A.           Group I Delivery
Points means Chester, Pennsylvania; Mobile, Alabama; Huntsville, Ontario;
and New Milford, Connecticut;

B.             Group II Delivery
Points means Beech Island, South Carolina; Jenks, Oklahoma; Corinth,
Mississippi; and All European Delivery Points;

C.             Group I Base Line
means 40% of Pictou Mill Pulp tonnage shipped to all K-C delivery points during
a Freight Agreement Period;

D.            Group II Base Line
means 46% of Pictou Mill Pulp tonnage shipped to all K-C delivery points during
a Freight Agreement Period; and

E.              Freight Agreement
Period means each period following the date of a Force Majeure Event that
begins on the first day of a Force Majeure Period and ends six months after the
end of such Force Majeure Period, unless the parties otherwise agree in
writing. Additionally, if, as a result of a Reduction Notice given by Seller or
K-C hereunder, the Terrace Bay Mill ceases supplying Pulp to K-C Delivery
Points and the Pictou Mill delivers Pulp to K-C Delivery Points formerly
supplied by Terrace Bay, the Freight Agreement Period shall begin on the date
that Terrace Bay ceases supplying Pulp to K-C Delivery Points and shall
continue in effect during the remaining term of this Agreement.

(ii)                                During
any Freight Agreement Period:

A.           If Seller’s Pictou Mill
ships more tons to Group I Delivery Points than the Group I Base Line, then
Seller will pay K-C $8.00/ADMT for each ton in excess of the Group I Base Line;

B.             If Seller’s Pictou
Mill ships less tons to Group I Delivery Points than the Group I Base Line,
then K-C will pay Seller $8.00/ADMT for each ton less than the Group I Base
Line;

C.             If Seller’s Pictou
Mill ships more tons to Group II Delivery Points than the Group II Base Line,
then K-C will pay Seller $8.00/ADMT for each ton in excess of the Group II Base
Line; and

D.            If Seller’s Pictou
Mill ships less tons to Group II Delivery Points than the Group II Base Line,
then Seller will pay K-C $8.00/ADMT for each ton less than the Group II Base
Line.

(iii)                               Such
amounts shall be due and payable within thirty (30) days after the end of each
calendar quarter (i.e., March 31, June 30, September 30 and December 31) during
a Freight Agreement Period.

(iv)                              In
no event will any payments made under this Section 9.01(f) by either party to
the other party exceed $1,300,000 in any four (4) consecutive calendar
quarters.

 16

 

6.09                           Absence of a Resumption Notice by September
29, 2006 - In the event that
Seller fails to issue a Resumption Notice for the Terrace Bay Mill on or before
September 29, 2006, Seller shall immediately deliver a Seller Reduction Notice
to K-C, for the amount of Seller’s Annual Supply Obligation for softwood Pulp
sourced from the Terrace Bay Mill under this Agreement.  Subject to the limitations contained in
Section 6.06(a), (b)(except the June 30, 2008 Effective Date), (c), (d) and
(e), such Seller Reduction Notice shall take effect on March 31, 2007.

ARTICLE 7

CLAIMS: DISPUTE RESOLUTION

7.01                           Claims.  Claims by K-C relative to its inability to
utilize the Pulp as a result of the failure of the Pulp to meet the
Specifications must be made within thirty (30) calendar days after receipt and
acceptance of the shipment by K-C at one of the Delivery Points.  K-C shall retain fifty percent (50%) of the
Pulp shipment in dispute, when practical, pending examination by Seller or its
nominee.  Seller shall examine the Pulp
held by K-C or its consignee within ten (10) calendar days of notification by
K-C, and Seller shall immediately notify K-C regarding how to dispose of any
Pulp which is nonconforming.

7.02                           Dispute
Resolution.  The parties shall attempt to resolve claims
or other disputes arising with respect to this Agreement within ninety (90)
calendar days of the time a claim or other dispute arises by presenting the
major issues for resolution to appropriate level managers in the normal chain
of command of the affected business units.

7.03                           Litigation.  Nothing herein, including the provisions of
Section 7.02 above, shall prohibit either party from at any time pursuing or
exercising any or all of its remedies at law or equity.

7.04                           Governing
Law.  The interpretation, validity and enforcement
of this Agreement shall be governed by and construed in accordance with the
laws of the State of Wisconsin, without regard to choice of law provisions, and
shall not be governed by the Convention on Contracts for the International Sale
of Goods.

ARTICLE 8

INDEMNIFICATION

Each party hereto agrees to defend, indemnify
and hold harmless the other party, its officers, directors, agents and
employees, from and against any and all claims, demands, judgments, costs,
expenses and damages for personal injury or property damage caused by the
indemnifying party’s negligent act or omission or willful misconduct.

The foregoing indemnifications are subject to
and conditioned upon:

(a)                                  prompt
written notice being given to the indemnifying party by the indemnified party
of any threatened or pending claim or other liability;

(b)                                 the
indemnified party fully cooperating with the indemnifying party in the
investigation and/or defense of any such claim or other liability; and

(c)                                  the
indemnifying party having the absolute right to direct the defense and/or
settlement of any such claim or other liability and to select counsel to
represent it and the indemnified party.

 17
 

 

ARTICLE 9

CONTINGENCIES

9.01                           Force
Majeure.

(a)                                  If
either party is prevented or delayed in the performance of its obligations
under this Agreement because of a Force Majeure Event, then the obligations of
the parties to sell and deliver or to purchase and receive Pulp shall be
reduced or canceled during the Force Majeure Period with regard to the quantity
of Pulp which cannot be delivered or purchased as a direct consequence of such
event.

(b)                                 During
the continuance of any one or more Force Majeure Event(s) impairing Seller’s
ability to perform, Seller shall offer available supplies first to its long
term contract customers, including K-C, and shall allocate to K-C quantities
not less than that quantity determined by multiplying K-C’s percentage of such
total long term contract amounts by the total available supply. During the
continuance of any one or more Force Majeure Event(s) impairing K-C’s ability
to accept or utilize Pulp, K-C’s obligations to purchase Pulp shall be reduced
by such quantity as K-C shall be unable to accept or utilize.

(c)                                  Quantities
which Seller is unable to deliver by reason of a Force Majeure Event shall be deducted from K-C’s Annual Purchase Obligation and
Seller’s Annual Supply Obligation. If a Force Majeure Event shall
prevent a party from performing its obligations under this Agreement for more
than nine (9) months, the other party may, upon written notice, terminate this
Agreement as to that portion affected by the Force Majeure Event.

(d)                                 The party affected by a Force Majeure Event
shall promptly provide the other party with a Force Majeure Notice. During the
Force Majeure Period, the parties will regularly communicate with each other
about the progress, if any, that has been made in resolving the Force Majeure
Event. Subject to Section 9.01(e) below, the parties shall cooperate to the
extent commercially reasonable for the orderly resumption of the purchase and
sale of Pulp following the end of the Force Majeure Period. Upon receipt of a
Resumption Notice, the parties shall, subject to the provisions of Section
9.01(e) hereof, promptly endeavor to agree as appropriate upon quarterly
estimates pursuant to Section 2.03 and K-C shall provide Seller with Delivery
Schedules pursuant to Section 2.06.

(e)                                  Seller expects to issue a Resumption Notice
to K-C on or before August 31, 2006.  In
order to ensure an orderly and efficient resumption of production at the
Terrace Bay Mill, Seller shall be obliged to sell and deliver Pulp sourced from
the Terrace Bay Mill and K-C shall be obliged to purchase and accept delivery
of such Pulp in the quantities and in the time periods set forth in the
following table, unless the parties otherwise agree in writing:

	
  

  	
   

  	
  Required/Minimum Purchases/Sales per

  
	
  Time Period

  	
   

  	
  Month of Terrace Bay Pulp

  
	
   

  	
   

  	
   

  
	
  September 2006

  	
   

  	
  6,000

  	
   ADMT (if
  available)

  
	
  October 2006

  	
   

  	
  13,488

  	
   ADMT

  
	
  November 2006

  	
   

  	
  13,488

  	
   ADMT

  
	
  December 2006

  	
   

  	
  13,488

  	
   ADMT

  
	
  Each Month in
  2007

  	
   

  	
  14,879

  	
   ADMT

  

 

 18
 

 

(f)                                    If Seller fails to deliver a Resumption
Notice to K-C on or before August 31, 2006 but delivers to K-C a Resumption
Notice on or before  September 29, 2006,
K-C may at its option seek alternative sources of Pulp, including entering into
supply and purchase agreements for third party pulp. In such event, K-C may
elect to reduce its 2006 and 2007 Annual Purchase Obligations for Pulp sourced
from the Terrace Bay Mill, in an amount not to exceed 20,000 ADMT in the
aggregate.  K-C may exercise this option
by giving Seller a Step Down Notice on or before September 29, 2006 stating the
aggregate amount of Pulp to be reduced (the “Reduction Amount”) during 2006 and
2007 (the “Reduction Period”) and specifying, for each month during the
Reduction Period, the ADMT portion of the Reduction Amount to be exercised in
such month.  Any Reduction in the Annual
Purchase Obligation pursuant to this Section 9.01(f) shall reduce the
corresponding Annual Supply Obligation in an equal amount.

9.02                           Environmental/Safety
Laws.  Irrespective of any provision herein to the
contrary, if Seller is unable to supply K-C with Pulp or K-C is unable to
purchase and/or receive Pulp hereunder which complies with all applicable
Environmental/Safety Laws, K-C may reduce the quantity of Pulp to be purchased
hereunder in accordance with Section 9.01 during the period of
non-compliance.  Notwithstanding any such
reductions, K-C and Seller shall work together for a reasonable period of time
(not to exceed ninety (90) days) to determine whether Seller can provide any
Pulp not affected by Environmental/Safety Laws. 
In the event Seller is unable to provide Pulp meeting Environmental/Safety
Laws by the end of such ninety (90) day period, K-C may terminate this
Agreement, in whole or in part, immediately upon written notice to Seller.

9.03                           Forestry
Considerations.

(a)                                  In
the event that as a result of Seller’s or TBPI’s forestry activities, continued
use of Seller’s Pulp by K-C does, or in the reasonable judgment of K-C is
likely to, result in a substantial loss of sales of K-C products or to
otherwise materially and adversely affect the reputation of K-C or its
products, K-C shall give Seller written notice of the facts or allegations upon
which it relies to base its conclusion that continued use of Seller’s Pulp will
likely cause such consequences (such notice is referred to herein as the “Section
9.03 Notice”). Within a reasonable time (not to exceed 90 days from the receipt
of K-C’s Section 9.03 Notice), Seller and K-C shall discuss such facts or
allegations and work together in good faith to arrive at a mutually agreeable
solution to reasonably address such facts or allegations.

(b)                                 If
Seller and K-C are able to agree on a mutually acceptable solution, that
agreement will be reduced to writing and will set forth the respective
obligations of the parties under the agreed solution. If Seller and K-C are
unable to agree on a solution, then K-C shall have the right to terminate this
Agreement as to the affected Pulp upon written notice effective not earlier
than one year following the date of such written notice.

9.04                           Notice.  If either party is prevented or delayed in
performance by any of the events specified in Section 9.01 or Section 9.02, the
party affected shall give immediate written notice to the other party of the
cause, the date of commencement and other relevant details of any such
nonperformance, and to the best of its knowledge, the extent of such nonperformance
and when deliveries, acceptance or utilization may be anticipated to
resume.  The parties agree to cooperate
with each other and to use all commercially reasonable efforts to resolve any
such situation in good faith and in a timely manner.  Such resolution may include, but shall not be
limited to, reapportioning or otherwise adjusting the Annual Purchase
Obligation to be purchased by K-C during the term hereof and/or the Annual
Supply Obligation.

 19
 

 

ARTICLE 10

CONFIDENTIALITY

The specific terms and conditions of this
Agreement and any information conveyed or otherwise received by or on behalf of
a party in conjunction herewith are confidential and are subject to the terms
of the Confidentiality provisions of the Distribution Agreement.

ARTICLE 11

CUSTOMS

K-C is certified by the U.S. Customs Service as
compliant with the Customs-Trade Partnership Against Terrorism program (“C-TPAT”).  Seller agrees to familiarize itself with the
applicable standards of the C-TPAT program 
(i.e., see www.customs.gov/xp/cgov/import/
commercial_enforcement/ctpat/).  To the
extent Seller deals with K-C in the supply chain of products to be
imported into the U.S., Seller shall implement a verifiable, documented program
that complies with C-TPAT standards and K-C’s requests that K-C
reasonably believes are necessary to maintain K-C’s C-TPAT certification.   If K-C has received notice of non-compliance
with C-TPAT from the U.S. Customs Service or a court or federal agency of
competent jurisdiction or if K-C reasonably believes that Seller has failed to
comply with the preceding sentence, K-C shall give Seller written notice
stating in reasonable detail the factual basis for K-C’s claim of
non-compliance, including a copy (if any) of the notice of non-compliance with
C-TPAT from the U.S. Customs Service or a court or federal agency of competent
jurisdiction. The parties shall attempt to resolve K-C’s claim in accordance
with the Dispute Resolution procedure stated in §7.02 hereof and in good faith
discussions among K-C, Seller and the U.S. Customs Service or court or federal
agency of competent jurisdiction. If the parties have not resolved K-C’s claim
to the reasonable satisfaction of K-C or within the time period the U.S.
Customs Service provides to K-C for remedying the non-compliance, then K-C
shall have the right to terminate this Agreement, in whole or in part, without
penalty by giving 180 days written notice to Seller.

ARTICLE 12

GENERAL

12.01                     Parties
Bound/Assignment.  This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective legal
representatives, successors, and permitted assigns.  Neither party shall assign or transfer any
right, obligation or interest, including sub-licensing and sub-contracting
except as is customary in the industry, 
under this Agreement without the prior written consent of the other,
provided that either party may assign this Agreement to a wholly owned
subsidiary and, except for the situation described in Section 6.02(e), either
party may assign to a successor company by merger or corporate reorganization
but only upon assumption by such successor of the assignor’s obligations under
this Agreement.  K-C hereby consents to
TBPI being a contract manufacturer of Pulp for Seller as set forth in this
Agreement.

12.02                     Right
of Offset.  Upon written notice to the other party, each
party has the right to deduct from amounts owed to the other party undisputed
amounts due and owing to it by the other party if those amounts go unpaid more
than 60 days after they are due and owing.

12.03                     Compliance
With Law.  Each party shall comply with all applicable
laws, rules, regulations or other requirements of any governmental entity that
affect such party’s obligations and other responsibilities hereunder in
performing this Agreement.

 20
 

 

12.04                     Independent
Contractor Status.  Each party shall be an independent contractor
in its performance of this Agreement and shall not be deemed, expressly or by
implication, to be an agent, employee, representative or servant of the other
for any purpose whatsoever.

12.05                     Waiver
of Breach.  No waiver of breach or non-performance of any
of the provisions of this Agreement shall be construed as a waiver of any
succeeding breach or non-performance of the same or any other provision.

12.06                     Notices.  Other than routine communications in the
ordinary course of performing any obligations under this Agreement, all notices
and communications in connection with this Agreement shall be in writing and
shall be deemed complete upon transmittal by a recognized international courier
or by facsimile, with a confirmation of receipt, addressed to the parties
hereto at their respective addresses or facsimile numbers set forth below:

if to Seller:

Neenah Paper, Inc.

Preston Ridge III, Suite 600

3460 Preston Ridge Road

Alpharetta, Georgia 30005

Attn: Chief Executive Officer

Phone: (678) 566-6500

Fax:  (678)  518-3283

with copy to:

Neenah
Paper, Inc.

Preston Ridge III, Suite 600

3460 Preston Ridge Road

Alpharetta, Georgia 30005

Attn: General Counsel

Phone: (678) 566-6500

Fax:  (678)  518-3283

if to K-C:

Kimberly-Clark Global Sales, Inc.

2300 Winchester Road

Neenah, WI  54956

Attn: Director Virgin Fiber Procurement

Phone: (920) 721-4116

Fax:  (920)  721-4976

with copy to:

Chief Counsel, Neenah Operations

Kimberly-Clark Corporation

401 N. Lake Street

Neenah, WI 54957 –0349

Phone:  (920) 721-2000

Fax:  (920) 721-8446

 21
 

 

or any other address or fax number and to the
attention of any other person as either of the parties may specify hereafter by
written notice to the other.

12.07                     Severability
of Provisions.  If any provision of this Agreement shall be
determined to be invalid, illegal or unenforceable under law, the validity and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

12.08                     Headings.  Article and section headings used in this
Agreement are for the purpose of reference only and shall not be considered in
construing this Agreement.

12.09                     Entire
Agreement.  This Agreement, including its Exhibits and
documents referenced herein, constitutes the entire agreement between the
parties related to the subject matter hereof, and cancels and supersedes all
prior or contemporaneous agreements, whether oral or written, relating to the
subject matter of this Agreement and all prior agreements, negotiations,
dealings and understandings, whether written or oral, regarding the subject
matter hereof are hereby superseded and merged into this Agreement.  No conditions, usage of trade, course of
dealing or performance, understanding or agreement purporting to modify, vary,
explain or supplement the terms or conditions of this Agreement shall be
binding unless hereafter made in writing and signed by the party to be bound,
and no modification shall be effected by the acknowledgement or acceptance of
purchase order or shipping instruction, invoice or other forms containing terms
or conditions at variance with or in addition to those set forth in this
Agreement.

12.10                     Counterparts.  This Agreement may be executed by the parties
in two or more counterparts, each of which shall be deemed an original, but
which together shall constitute one and the same agreement.

*******

[Remainder
of page intentionally left blank]

*******

 22
 

 

IN WITNESS
WHEREOF, this Agreement has been executed in multiple counterparts by the duly
authorized representatives of the parties as of the date first written above.

 

	
  NEENAH PAPER, INC.

  	
  KIMBERLY-CLARK GLOBAL SALES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  BY:

  	
   

  	
   

  	
  BY:

  	
   

  
	
   

  	
  Sean T. Erwin

  	
   

  	
  Dan M. Smith, Vice President

  
	
   

  	
  Chief Executive Officer

  	
   

  	
   

  
					

 

 23

 

EXHIBIT A

NORTH AMERICAN ANNUAL 
SOFTWOOD PULP PURCHASE OBLIGATIONS,

SUPPLY OBLIGATIONS, DELIVERY POINTS AND TRANSPORTATION TERMS

Northern Bleach Softwood Kraft
(NBSK)

	
  Contract Year

  	
   

  	
  Annual Purchase Obligation

  (K-C)

  	
   

  	
  Annual Supply Obligation (Seller)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2004 [Fourth Quarter Only]

  	
   

  	
  93,000 ADMT (less tonnage transferred to K-C during the Fourth Quarter
  of 2004 prior to the Distribution Date)

  	
   

  	
  93,000 ADMT (less tonnage transferred to

  K-C during the Fourth Quarter of 2004 prior to the Distribution Date)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2005

  	
   

  	
  360,000 ADMT

  	
   

  	
  360,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2006

  	
   

  	
  235,000 ADMT

  	
   

  	
  235,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2007†

  	
   

  	
  240,000 ADMT

  	
   

  	
  240,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2008 and all subsequent Contract Years

  	
   

  	
  275,000 ADMT

  	
   

  	
  275,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Phase Down Year 1

  	
   

  	
  225,000 ADMT

  	
   

  	
  225,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Phase Down Year 2

  	
   

  	
  150,000 ADMT

  	
   

  	
  150,000 ADMT

  

 

†
Seller shall use its
commercially reasonable best efforts so that, as of January 1, 2007, each K-C
mill shall receive pulp solely from one Seller mill.

Delivery Points and Transportation Terms for K-C
North America

	
  Beech Island, SC

  	
   

  	
  Chester, PA

  	
   

  	
  Owensboro, KY

  
	
  Huntsville,
  Ontario

  	
   

  	
  Loudon, TN

  	
   

  	
  Marinette, WI

  
	
  Mobile, AL

  	
   

  	
  Corinth, MS

  	
   

  	
  Cellu-Tissue Mills*

  
	
  Jenks, OK

  	
   

  	
  New Milford, CT

  	
   

  	
  Schweitzer-Mauduit Lee, MA Mill*

  

 

Delivery
during the Phase Down Period to be consistent with tonnages across Delivery
Points during the two contract years prior to the start of the Phase Down
Period.

All transportation costs to be
paid by Seller.

* Solely for fiber needs
related to K-C products.

 1
 

 

NORTH AMERICAN ANNUAL  HARDWOOD
PULP PURCHASE OBLIGATIONS,

SUPPLY OBLIGATIONS, DELIVERY POINTS AND TRANSPORTATION TERMS

Northern Bleached Hardwood Kraft
(NBHK)

	
  Contract Year

  	
   

  	
  Annual Purchase Obligation (K-C)

  	
   

  	
  Annual Supply Obligation

  (Seller)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2004 [Fourth Quarter Only]

  	
   

  	
  High-Maple 10,000 ADMT*
Aspen 12,500ADMT*

  	
   

  	
  High-Maple 10,000 ADMT*
Aspen 12,500ADMT*

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2005

  	
   

  	
  High-Maple
  40,000 ADMT

  Aspen 40,000 ADMT

  	
   

  	
  High-Maple
  40,000 ADMT

  Aspen 40,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2006

  	
   

  	
  High-Maple14,000
  ADMT **

  	
   

  	
  High-Maple14,000
  ADMT **

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2007†

  	
   

  	
  High-Maple
  20,000 ADMT

  	
   

  	
  High-Maple
  20,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2008

  	
   

  	
  High-Maple
  10,000 ADMT

  	
   

  	
  High-Maple
  10,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2009 and all subsequent contract years

  	
   

  	
  No obligation

  	
   

  	
  No obligation

  

 

* These amounts shall be reduced by any
tonnage transferred to K-C during the Fourth Quarter of 2004 prior to the
Distribution Date.

** The volume of this Pulp purchased for January
2006 though the end of June 2006 was about 14,000 ADMT.  Anticipating an August start up means start
receiving Pulp again as of October 2006 and estimate receiving only 7,500 ADMT
for the months of October through the end of December 2006.

†
Seller will use
its commercially reasonable best efforts so that, as of January 1, 2007, each
K-C mill shall receive pulp solely from one Seller mill.

Delivery Points and Transportation Terms for K-C
North America

	
  Beech Island, SC

  	
  Chester, PA

  	
  Marinette, WI

  
	
  Owensboro, KY

  	
  Huntsville, Ontario

  	
  Loudon, TN

  
	
  Fullerton, CA*

  	
  Mobile, AL

  	
  Corinth, MS

  
	
  Jenks, OK

  	
  New Milford, CT

  	
  Cellu-Tissue Mills**

  

 

All transportation costs to above delivery points
to be paid by Seller.

* Seller willnot be
required to deliver to Fullerton, CA after December 31, 2004

** Solely for fiber needs
related to K-C products.

 2
 

 

EUROPE ANNUAL  SOFTWOOD PULP
PURCHASE OBLIGATIONS,

SUPPLY OBLIGATIONS, DELIVERY POINTS AND TRANSPORTATION TERMS

Northern Bleached Softwood Kraft
(NBSK)

	
  Contract Year

  	
   

  	
  Annual Purchase Obligation (K-C)

  	
   

  	
  Annual Supply Obligation (Seller)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2004 [Fourth Quarter Only]

  	
   

  	
  21,250 ADMT (less tonnage transferred to K-C during the Fourth Quarter
  of 2004 prior to the Distribution Date)

  	
   

  	
  21,250 ADMT (less tonnage transferred to K-C during the Fourth Quarter
  of 2004 prior to the Distribution Date)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2005

  	
   

  	
  80,000 ADMT

  	
   

  	
  80,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2006

  	
   

  	
  67,000 ADMT

  	
   

  	
  67,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2007†

  	
   

  	
  75,000 ADMT

  	
   

  	
  75,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2008 and all subsequent Contract Years

  	
   

  	
  70,000 ADMT

  	
   

  	
  70,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Phase Down Year 1

  	
   

  	
  52,500 ADMT

  	
   

  	
  52,500 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Phase Down Year 2

  	
   

  	
  35,000 ADMT

  	
   

  	
  35,000 ADMT

  

 

Delivery
Points and Transportation Terms for K-C North America

	
  Beech Island, SC

  	
  Chester, PA

  	
  Owensboro, KY

  
	
  Huntsville,
  Ontario

  	
  Loudon, TN

  	
  Marinette, WI

  
	
  Mobile, AL

  	
  Corinth, MS

  	
  Cellu-Tissue Mills*

  
	
  Jenks, OK

  	
  New Milford, CT

  	
  Schweitzer-Mauduit Lee, MA*

  

 

All transportation costs to above delivery points
to be paid by Seller.

* Solely for fiber needs
related to K-C products.

Delivery Points and
Transportation Terms for K-C Europe

	
  Europe (can only be supplied
  by Seller’s Pictou Mill)

  	
   

  
	
  Duffel

  	
  CIF* Flushing

  
	
  Northfleet

  	
  CIF* Northfleet

  
	
  Barrow

  	
  CIF* Northfleet/Barrow

  
	
  Rouen

  	
  CIF* Rouen

  
	
  Salamanca

  	
  CIF* Santander

  
	
  VSE

  	
  CIF* Rouen

  

 

* As defined according to
INCOTERMS 2001(or applicable latest edition).

END OF EXHIBIT A

 3
 

 

EXHIBIT B

Kimberly-Clark Raw Material Specifications

K-C Raw Material Specification (RMS)
documents listed below are incorporated herein by reference.  These documents are controlled by the K-C
Corporate Quality Systems & Compliance team in Neenah, Wisconsin.  Copies of RMS documents are forwarded
directly to Seller’s Sales Department and are otherwise available upon
request.  These documents are the primary
source of information necessary to specify pulp for K-C pursuant to this
Agreement.

Pulp
Grade Specifications

	
  K-C RMS Department

  	
   

  	
  Material

  
	
  RM 2763

  	
   

  	
  LL-19 ECF

  
	
  RM 3061

  	
   

  	
  LL-16 ECF

  
	
  RM 3082

  	
   

  	
  Pictou Harmony

  
	
  RM 3087

  	
   

  	
  Hi-Mape Pictou

  

The RMS documents listed above contain
Quality Parameters and summarize key aspects of pulp quality mutually agreed to
by K-C and Seller.  As used therein,
Quality Parameters have the following definitions:

ACCEPTANCE Characteristics:  used to determine suitability of pulp for
shipment to K-C.

TRACKING Characteristics:  not for ACCEPTANCE,
but run-to-target is expected, per vendor test results.

OTHER Instructions:  additional features of the material and
packaging details for shipping.

The RMS documents listed above shall
govern purchases by all K-C locations. 
Should any K-C location seek different specifications for pulp to be
delivered to a specific mill(s), such requirements shall be detailed in a K-C
regional Purchase Order, and shall be accommodated in accordance with Section
3.02 of this Agreement.

In order to continually and accurately
specify the pulp materials being purchased by K-C, the RMS documents listed
above, any exceptions thereto, and the information shown in this EXHIBIT B,
may  be modified from time to time upon
mutual written agreement between K-C and Seller. All mutually approved
modifications will be communicated in writing and on a timely basis to all
concerned parties.

END OF EXHIBIT B

 4
 

 

EXHIBIT C

DISCOUNT  SCHEDULE

Northern Bleached Softwood Kraft (NBSK)

NORTH
AMERICA:       % off of the North American
Transaction Price for the prior month.

EUROPE:
      % off of the European Transaction Price
for  the prior month.

Northern Bleached Hardwood Kraft (NBHK) (North
America only)

Aspen:
      % off the North American Transaction Price
for the prior month.

Maple:
      % 
off the North American Transaction Price for the prior month.

END OF EXHIBIT
C

 5
 

 

EXHIBIT D

CERTIFICATE

Seller will provide the following
information for all bleached kraft Pulp grades manufactured by Seller and
supplied to Kimberly-Clark Global Sales, Inc.

1.                                       The
Pulp has been sampled in the past year and found to be non-detectable for
2,3,7,8 -TCDD (dioxin). We use elemental chlorine free bleaching for all Pulp
delivered to Kimberly-Clark Global Sales, Inc.

2.                                       The
Pulp has been sampled for CONEG heavy metals in the past year.  All metals were non-detectable in all samples
and, therefore, easily meet the 100 ppm CONEG requirement.

3.                                       All
wood Pulp produced by Seller is manufactured with conventional processes and is
considered Generally Recognized As Safe (GRAS) as an indirect food additive
under 21 CFR 186.1673.  Based on this
listing, a complete survey of our raw material suppliers and an independent
review by technical and legal consultants, our products and raw materials also
conform to 21 CFR 176.170 – Indirect Food Additives: Paper and Paperboard
Components.

4.                                       In
addition, Seller does not use ozone depleting substances (ODS) in the
manufacture of its bleached kraft Pulp.

Contact
us if you require additional information.

Date & Location

Signature

Title

END OF EXHIBIT D

 6
 

 

SCHEDULE A

NORTH AMERICAN AND EUROPEAN
ANNUAL SOFTWOOD PULP PURCHASE OBLIGATIONS, SUPPLY OBLIGATIONS, DELIVERY POINTS
AND TRANSPORTATION TERMS FOLLOWING THE EFFECTIVE DATE OF A REDUCTION NOTICE
BY SELLER OR K-C

Northern Bleach Softwood Kraft
(NBSK)

	
  Contract Year*

  	
   

  	
  Annual Purchase Obligation (K-C)**

  	
   

  	
  Annual Supply

  Obligation (Seller)**

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2007†

  	
   

  	
  235,000 ADMT

  	
   

  	
  235,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2008

  and all subsequent Contract Years

  	
   

  	
  215,000 ADMT

  	
   

  	
  215,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Phase Down Year
  1

  	
   

  	
  165,000 ADMT

  	
   

  	
  165,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Phase Down Year
  2

  	
   

  	
  101,000 ADMT

  	
   

  	
  101,000 ADMT

  

 

*
The prorated tonnage for any Contract Year during which a Reduction Notice
becomes effective shall be determined by multiplying the applicable Annual
Purchase/Supply tonnage for such Contract Year by a fraction the numerator of
which is the number of days from and including the Effective Date through the
last day of such Contract Year and the denominator of which is 365.

**
K-C’s purchases of Pulp in any Contract Year for shipment to European Delivery
Points shall be no less than 15% of K-C’s Annual Purchase Obligation in each
Contract Year unless otherwise mutually agreed.

†
Seller shall use its commercially reasonable best efforts so that, as of
January 1, 2007, each K-C mill shall receive pulp solely from one Seller mill;
provided, however, following the Effective Date of a Reduction Notice, each K-C
mill shall receive Pulp solely from Seller’s Pictou Mill.

Delivery Points and Transportation Terms for K-C
North America

	
  Beech Island, SC

  	
   

  	
  Chester, PA

  	
   

  	
  Owensboro, KY

  
	
  Huntsville, Ontario

  	
   

  	
  Loudon, TN

  	
   

  	
  Marinette, WI

  
	
  Mobile, AL

  	
   

  	
  Corinth, MS

  	
   

  	
  Cellu-Tissue Mills*

  
	
  Jenks, OK

  	
   

  	
  New Milford, CT

  	
   

  	
  Schweitzer-Mauduit Lee, MA*

  

 

All transportation costs to above delivery points
to be paid by Seller.

* Solely for fiber needs
related to K-C products.

 7
 

 

Delivery Points and Transportation Terms for K-C
Europe

	
  Europe (can only be supplied by Seller’s Pictou
  Mill)

  
	
  Duffel

  	
   

  	
  CIF* Flushing

  
	
  Northfleet

  	
   

  	
  CIF* Northfleet

  
	
  Barrow

  	
   

  	
  CIF* Northfleet/Barrow

  
	
  Rouen

  	
   

  	
  CIF* Rouen

  
	
  Salamanca

  	
   

  	
  CIF* Santander

  
	
  VSE

  	
   

  	
  CIF* Rouen

  

 

* As defined according to
INCOTERMS 2001(or applicable latest edition).

END OF SCHEDULE A

 8Exhibit 10.1

 

ASSET PURCHASE
AGREEMENT

By and Among

SYMMETRY
MEDICAL USA INC.

(Buyer),

EVEREST
METAL FINISHING, LLC

(Seller),

and

CHRISTOPHER
W. HUNTINGTON, Individually,

PHILLIP
MILIDANTRI, Individually,

and LEVI
CITARELLA, Individually

(collectively
Seller Stockholders)

AUGUST 31, 2006

 

ASSET
PURCHASE AGREEMENT

ASSET
PURCHASE AGREEMENT, dated as of August 31, 2006 (the “Agreement”),
between Symmetry Medical USA Inc., a Delaware corporation (“Buyer”), and
Everest Metal Finishing, LLC, a New York limited liability company (“Seller”)
and Christopher W. Huntington, individually (“Huntington”); Phillip Milidantri, individually (“Milidantri”);
and Levi Citarella, individually (“Citarella” and together with Huntington and
Milidantri, the “Seller’s Stockholders”).

WHEREAS,
Seller is engaged in the business of “quick turn” implant finishing; implant
machining; robotic finishing and shot peening serving the major orthopedic
markets of Warsaw, Indiana and New York, New York (the “Business”); and

WHEREAS,
the parties desire that Seller sells, assigns, transfers, conveys and delivers
to Buyer, and that Buyer purchase and acquire from Seller, all of the right,
title and interest of Seller in and to the Purchased Assets (as hereinafter
defined), and that Buyer assume the Assumed Liabilities (as hereinafter
defined), upon the terms and subject to the conditions of this Agreement.

WHEREAS, Buyer
will enter into a separate Stock Purchase Agreement to acquire all of the stock
of Everest Metal International, Ltd., an Ireland limited company, owned by the
Seller’s Stockholders and operated in Cork, Ireland.

NOW,
THEREFORE, in consideration of the foregoing premises and the
respective representations and warranties, covenants and agreements contained
herein, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

1.1                                 Definitions.  When
used in this Agreement, the following terms shall have the meanings assigned to
them in this Article I or in the applicable Section of this Agreement to
which reference is made in this Article I.

“Accounts
Receivable” means (a) any trade accounts receivable and other rights to payment
from customers of the Business and (b) any other account or note receivable
Related to the Business, together with, in each case, the full benefit of any
security interest therein.  Accounts
Receivable explicitly excludes trade account receivables of the following
companies: Everest Industrial Equipment, Inc., Everest Metal, Inc., Sonicor,
Inc., Stratus Technologies, Inc., Technical Metal Finishing Inc. and any other
Affiliates of Seller.

“Affiliate” means,
with respect to any specified Person, any other Person directly or indirectly
controlling, controlled by or under common control with such specified Person.

“Ancillary
Agreements” means the Bill of Sale, Patent License Assignment and Assumption
Agreement, Non-Compete Agreements, Employment Agreements, Earn-Out
Agreements and the other agreements, instruments and documents delivered at the
Closing.

 

“Authorization”
means any authorization, approval, consent, certificate, license, permit or
franchise of or from any Governmental Entity or pursuant to any Law.

“Benefit Plan”
means (a) any “employee benefit plan” as defined in ERISA Section 3(3),
including any (i) nonqualified deferred compensation or retirement plan or arrangement
which is an Employee Pension Benefit Plan (as defined in ERISA Section 3(2)),
(ii) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (iii) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan (as defined in ERISA Section 3(37)) and (iv) Employee
Welfare Benefit Plan (as defined in ERISA Section 3(1)) or material fringe
benefit plan or program, or (b) stock purchase, stock option, severance pay,
employment, change-in-control, vacation pay, company awards, salary
continuation, sick leave, excess benefit, bonus or other incentive
compensation, life insurance, or other employee benefit plan, contract,
program, policy or other arrangement, whether or not subject to ERISA.

“Books and Records”
means books of account, general, financial, warranty and shipping records,
invoices, supplier lists, product specifications, product formulations,
drawings, correspondence, engineering, maintenance, operating and production
records, advertising and promotional materials and other documents, records and
files, in each case Related to the Business, including books and records
relating to Seller Intellectual Property and the employee and personnel records
of the Transferred Employees.

“Business Day”
means a day other than a Saturday, Sunday or other day on which banks located
in New York City are authorized or required by Law to close.

“Business Employee”
means any individual employed by any Seller in, or in connection with, the
Business.

“Capital Stock”
means (a) in the case of a corporation, its shares of capital stock, (b) in the
case of a partnership or limited liability company, its partnership or
membership interests or units (whether general or limited), and (c) any other
interest that confers on a Person the right to receive a share of the profits
and losses of, or distribution of assets, of the issuing entity.

“Charter Documents”
means, with respect to any entity, the certificate of incorporation, the
articles of incorporation, by-laws, articles of organization, limited liability
company agreement, partnership agreement, formation agreement, joint venture
agreement or other similar organizational documents of such entity (in each case,
as amended).

“Code” means the
Internal Revenue Code of 1986.

“Contract” means
any agreement, contract, license, lease, commitment, arrangement or
understanding, written or oral, including any sales order or purchase order.

“Equipment” means
machinery, fixtures, furniture, supplies, accessories, materials, equipment,
parts, automobiles, trucks, vehicles, tooling, tools, molds, office equipment,
computers, telephones and all other items of tangible personal property, in
each case Related to the Business.

 

“ERISA” means the
Employee Retirement Income Security Act of 1974.

“ERISA Affiliate”
means any entity which is a member of a “controlled group of corporations”
with, under “common control” with or a member of an “affiliated services group”
with, Seller, as defined in Section 414(b), (c), (m) or (o) of the Code.

“GAAP” means
generally accepted accounting principles in the United States.

“Governmental
Entity” means any entity or body exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to United States
federal, state, local, or municipal government, foreign, international,
multinational or other government, including any department, commission, board,
agency, bureau, subdivision, instrumentality, official or other regulatory,
administrative or judicial authority thereof, and any non-governmental
regulatory body to the extent that the rules and regulations or orders of such
body have the force of Law.

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

“Indebtedness”
means any of the following: (a) any indebtedness for borrowed money, (b) any
obligations evidenced by bonds, debentures, notes or other similar instruments,
(c) any obligations to pay the deferred purchase price of property or services,
except trade accounts payable and other current Liabilities arising in the
ordinary course of the Business, (d) any obligations as lessee under
capitalized leases, (e) any indebtedness created or arising under any
conditional sale or other title retention agreement with respect to acquired
property, (f) any obligations, contingent or otherwise, under acceptance
credit, letters of credit or similar facilities, and (g) any guaranty of any of
the foregoing.

“Indemnification
Agreement” means the agreement to be entered between Symmetry Medical USA,
Inc., Symmetry Medical International Inc., Everest Metal Finishing, LLC,
Everest Metal International, Ltd., Christopher W. Huntington, Phillip Milidantri, and Levi Citarella.

“Indemnitee” means
any Person that is seeking indemnification from an Indemnitor pursuant to the
provisions of this Agreement.

“Indemnitor” means
any party hereto from which any Indemnitee is seeking indemnification pursuant
to the provisions of this Agreement.

“Inventory” means
all raw materials, work-in-process, finished goods, supplies, spare parts and
other inventories Related to the Business, including all such items (a) located
on the Real Property, (b) in transit from suppliers of the Business, (c) held
for delivery by suppliers of the Business, or (d) held on consignment by third
parties.

“Knowledge” of
Seller or any similar phrase means, with respect to any fact or matter, the
actual knowledge of the directors, executive officers, members, partners and
Seller’s Stockholders, together with such knowledge that such directors,
executive officers, members, partners and Seller’s Stockholders could be
expected to discover after reasonable investigation concerning the existence of
the fact or matter in question.

 

“Law” means any
statute, law (including common law), constitution, treaty, ordinance, code,
order, decree, judgment, rule, regulation and any other binding requirement or
determination of any Governmental Entity.

“Lien” means, with
respect to any property or asset, any mortgage, lien, pledge, charge, security
interest, adverse claim or other encumbrance in respect of such property or
asset.

“Order” means any
award, injunction, judgment, decree, order, ruling, subpoena or verdict or
other decision issued, promulgated or entered by or with any Governmental
Entity of competent jurisdiction.

“Other Antitrust
Laws” means the antitrust and competition Laws of all jurisdictions other than
those of the United States.

“Permitted Liens”
means (a) Liens for current real or personal property Taxes not yet due and
payable and with respect to which Seller maintains adequate reserves, (b)
workers’, carriers’ and mechanics’ or other like Liens incurred in the ordinary
course of the Business with respect to which payment is not due and that do not
impair the conduct of the Business or the present or proposed use of the
affected property and (c) Liens that are immaterial in character, amount, and
extent and which do not detract from the value or interfere with the present or
proposed use of the properties they affect.

“Person” means an
individual, a corporation, a partnership, a limited liability company, a trust,
an unincorporated association, a Governmental Entity or any other entity or
body.

“Pre-Closing
Environmental Liabilities” means Liabilities arising out of (a) the ownership
or operation of the Business at any time on or prior to the Closing or (b) the
ownership, operation or condition of the Real Property or any other real
property currently or formerly owned, operated or leased by Seller Related to the
Business at any time on or prior to the Closing, in each case to the extent
based upon or arising out of (i) Environmental Law, (ii) a failure to obtain,
maintain or comply with any Environmental Permit, (iii) a Release of any
Hazardous Substance, or (iv) the use, generation, storage, transportation,
treatment, sale or other off-site disposal of Hazardous Substances.

“Related to the
Business” means used, held for use or acquired of developed for use in the
Business or otherwise relating to, or arising out of, the operation or conduct
of the Business.

“Stock Purchase
Agreement” means the agreement to be entered between Symmetry International
Inc. and Christopher W. Huntington, Phillip Milidantri, and Levi Citarella
for the purchase of all of the stock of Everest Metal International, Ltd.

“Subsidiary” or “Subsidiaries”
means with respect to any Person, any corporation, limited liability company,
partnership, association, or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers, or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation),
a majority of the 

 

partnership or other
similar ownership interests thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof and for this purpose, a Person or Persons own a
majority ownership interest in such a business entity (other than a corporation)
if such Person or Persons shall be allocated a majority of such business
entity’s gains or losses or shall be or control any managing director or
general partner of such business entity (other than a corporation). The term
“Subsidiary” shall include all Subsidiaries of such Subsidiary.

“Tax” or “Taxes”
means any and all federal, state, local, or foreign net or gross income, gross
receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank
shares, withholding, payroll, employment, excise, property, deed, stamp,
alternative or add-on minimum, environmental, profits, windfall profits,
transaction, license, lease, service, service use, occupation, severance,
energy, unemployment, social security, workers’ compensation, capital, premium,
and other taxes, assessments, customs, duties, fees, levies, or other
governmental charges of any nature whatever, whether disputed or not, together
with any interest, penalties, additions to tax, or additional amounts with
respect thereto.

“Tax Returns”
means any return, declaration, report, claim for refund, or information return
or statement relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof.

“Taxing Authority”
means any Governmental Entity having jurisdiction with respect to any Tax.

“Vacation Accrual”
means the total value for all employees of their outstanding vacation hours
valued by employee at their current rate of pay.

“WARN Act” means
the Worker Adjustment and Retraining Notification Act of 1988.

1.2                                 Other Defined Terms. 
The following terms have the meanings assigned to such terms in the
Sections of the Agreement set forth below:

	
  Accounting Principles

  	
   

  	
  2.6(a)(i)

  
	
   

  	
   

  	
   

  
	
  Action

  	
   

  	
  4.18(a)

  
	
   

  	
   

  	
   

  
	
  Adjustment
  Summary Statement

  	
   

  	
  2.6(a)(ii)

  
	
   

  	
   

  	
   

  
	
  Agreement

  	
   

  	
  Preamble

  
	
   

  	
   

  	
   

  
	
  Allocation
  Statement

  	
   

  	
  2.7

  
	
   

  	
   

  	
   

  
	
  Annual Financial
  Statements

  	
   

  	
  4.4(a)(i)

  
	
   

  	
   

  	
   

  
	
  Assigned
  Contracts

  	
   

  	
  2.1(d)

  
	
   

  	
   

  	
   

  
	
  Assignment and
  Assumption of Lease

  	
   

  	
  3.2(f)

  

 

 

 

	
  Assumed Liabilities

  	
   

  	
  2.3

  
	
   

  	
   

  	
   

  
	
  Balance Sheet

  	
   

  	
  4.4(b)

  
	
   

  	
   

  	
   

  
	
  Balance Sheet
  Date

  	
   

  	
  4.4(b)

  
	
   

  	
   

  	
   

  
	
  Base Amount

  	
   

  	
  2.6(a)(iii)

  
	
   

  	
   

  	
   

  
	
  Business

  	
   

  	
  Recitals

  
	
   

  	
   

  	
   

  
	
  Business
  Authorizations

  	
   

  	
  4.10(a)

  
	
   

  	
   

  	
   

  
	
  Buyer

  	
   

  	
  Preamble

  
	
   

  	
   

  	
   

  
	
  CERCLA

  	
   

  	
  4.21(a)(iv)

  
	
   

  	
   

  	
   

  
	
  Closing

  	
   

  	
  3.1

  
	
   

  	
   

  	
   

  
	
  Closing Current
  Assets

  	
   

  	
  2.6(a)(iv)

  
	
   

  	
   

  	
   

  
	
  Closing Date

  	
   

  	
  3.1

  
	
   

  	
   

  	
   

  
	
  COBRA

  	
   

  	
  6.4(i)

  
	
   

  	
   

  	
   

  
	
  Consents

  	
   

  	
  4.3(a)

  
	
   

  	
   

  	
   

  
	
  Copyrights

  	
   

  	
  4.14(a)

  
	
   

  	
   

  	
   

  
	
  Deficit Amount

  	
   

  	
  2.6(e)(i)

  
	
   

  	
   

  	
   

  
	
  Environment

  	
   

  	
  4.21(a)(i)

  
	
   

  	
   

  	
   

  
	
  Environmental
  Action

  	
   

  	
  4.21 (a)(ii)

  
	
   

  	
   

  	
   

  
	
  Environmental
  Clean-up Site

  	
   

  	
  4.21 (a)(iii)

  
	
   

  	
   

  	
   

  
	
  Environmental
  Laws

  	
   

  	
  4.21 (a)(iv)

  
	
   

  	
   

  	
   

  
	
  Environmental
  Permit

  	
   

  	
  4.21(a)(v)

  
	
   

  	
   

  	
   

  
	
  Excess Amount

  	
   

  	
  2.6(e)(ii)

  
	
   

  	
   

  	
   

  
	
  Excluded Assets

  	
   

  	
  2.2

  
	
   

  	
   

  	
   

  
	
  Excluded
  Contracts

  	
   

  	
  2.2(b)

  
	
   

  	
   

  	
   

  
	
  Excluded
  Liabilities

  	
   

  	
  2.4

  
	
   

  	
   

  	
   

  
	
  Financial
  Statements

  	
   

  	
  4.4(a)

  

 

 

 

	
  Final Current Assets

  	
   

  	
  2.6(a)(v)

  
	
   

  	
   

  	
   

  
	
  Hazardous
  Substances

  	
   

  	
  4.21(a)(vi)

  
	
   

  	
   

  	
   

  
	
  In-Bound
  Licenses

  	
   

  	
  4.14(c)

  
	
   

  	
   

  	
   

  
	
  Independent
  Expert

  	
   

  	
  2.6(d)

  
	
   

  	
   

  	
   

  
	
  Intellectual
  Property

  	
   

  	
  4.14(a)

  
	
   

  	
   

  	
   

  
	
  Intellectual
  Property Rights

  	
   

  	
  4.14(a)

  
	
   

  	
   

  	
   

  
	
  Interim Balance
  Sheet

  	
   

  	
  4.4(b)

  
	
   

  	
   

  	
   

  
	
  Interim Balance
  Sheet Date

  	
   

  	
  4.4(b)

  
	
   

  	
   

  	
   

  
	
  Interim
  Financial Statements

  	
   

  	
  4.4(a)(ii)

  
	
   

  	
   

  	
   

  
	
  Lease

  	
   

  	
  4.13(c)

  
	
   

  	
   

  	
   

  
	
  Leased Real
  Property

  	
   

  	
  4.13(a)

  
	
   

  	
   

  	
   

  
	
  Liabilities

  	
   

  	
  4.5

  
	
   

  	
   

  	
   

  
	
  Marks

  	
   

  	
  4.14(a)

  
	
   

  	
   

  	
   

  
	
  Material
  Contract

  	
   

  	
  4.16(b)

  
	
   

  	
   

  	
   

  
	
  Maximum Base
  Amount

  	
   

  	
  2.6(a)(vi)

  
	
   

  	
   

  	
   

  
	
  Minimum Base
  Amount

  	
   

  	
  2.6(a)(vii)

  
	
   

  	
   

  	
   

  
	
  Minor Contracts

  	
   

  	
  4.16(e)

  
	
   

  	
   

  	
   

  
	
  Names

  	
   

  	
  6.3(a)

  
	
   

  	
   

  	
   

  
	
  Nondisclosure
  Agreements

  	
   

  	
  4.14(i)

  
	
   

  	
   

  	
   

  
	
  Notice of
  Objection

  	
   

  	
  2.6(c)

  
	
   

  	
   

  	
   

  
	
  Out-Bound
  Licenses

  	
   

  	
  4.14(d)

  
	
   

  	
   

  	
   

  
	
  Owned Real
  Property

  	
   

  	
  4.13(a)

  
	
   

  	
   

  	
   

  
	
  Patents

  	
   

  	
  4.14(a)

  
	
   

  	
   

  	
   

  
	
  PCBs

  	
   

  	
  4.21(i)

  
	
   

  	
   

  	
   

  
	
  Pension Plan

  	
   

  	
  4.19(b)

  

 

 

 

	
  Personal Property

  	
   

  	
  4.11(a)

  
	
   

  	
   

  	
   

  
	
  Policies

  	
   

  	
  4.22(a)

  
	
   

  	
   

  	
   

  
	
  Post-Closing Tax
  Period

  	
   

  	
  6.5(b)

  
	
   

  	
   

  	
   

  
	
  Pre-Closing Tax
  Period

  	
   

  	
  6.5(b)

  
	
   

  	
   

  	
   

  
	
  Products

  	
   

  	
  4.23(a)

  
	
   

  	
   

  	
   

  
	
  Proprietary
  Information

  	
   

  	
  4.14(a)

  
	
   

  	
   

  	
   

  
	
  Purchase Price

  	
   

  	
  2.5

  
	
   

  	
   

  	
   

  
	
  Purchased Assets

  	
   

  	
  2.1

  
	
   

  	
   

  	
   

  
	
  RCRA

  	
   

  	
  4.21(a)(iv)

  
	
   

  	
   

  	
   

  
	
  Real Property

  	
   

  	
  4.13(a)

  
	
   

  	
   

  	
   

  
	
  Release

  	
   

  	
  4.21(a)(vii)

  
	
   

  	
   

  	
   

  
	
  Restricted
  Contract

  	
   

  	
  2.8(a)

  
	
   

  	
   

  	
   

  
	
  Review Period

  	
   

  	
  2.6(c)

  
	
   

  	
   

  	
   

  
	
  Section 1060
  Forms

  	
   

  	
  2.7

  
	
   

  	
   

  	
   

  
	
  Seller

  	
   

  	
  Preamble

  
	
   

  	
   

  	
   

  
	
  Seller
  Disclosure Schedule

  	
   

  	
  Preamble Article IV

  
	
   

  	
   

  	
   

  
	
  Seller Employees

  	
   

  	
  6.4(f)

  
	
   

  	
   

  	
   

  
	
  Seller Benefit
  Plans

  	
   

  	
  4.19(a)

  
	
   

  	
   

  	
   

  
	
  Seller
  Intellectual Property

  	
   

  	
  4.14(e)

  
	
   

  	
   

  	
   

  
	
  Seller Owned
  Intellectual Property

  	
   

  	
  4.14(b)

  
	
   

  	
   

  	
   

  
	
  Seller
  Registered Items

  	
   

  	
  4.14(f)

  
	
   

  	
   

  	
   

  
	
  Software

  	
   

  	
  4.14(a)

  
	
   

  	
   

  	
   

  
	
  Transferred
  Employees

  	
   

  	
  6.4(b)

  
	
   

  	
   

  	
   

  
	
  Work Product
  Agreements

  	
   

  	
  4.14(j)

  

 

 

ARTICLE II

PURCHASE
AND SALE

2.1                                 Purchase and Sale of the Purchased Assets.  Upon the terms and subject to the conditions
of this Agreement, at the Closing, Seller shall sell, assign, transfer, convey
and deliver to Buyer and Buyer shall purchase, acquire and accept from Seller,
free and clear of Liens except for Permitted Liens, the entire right, title and
interest of Seller in, to and under all of the assets, properties and rights of
every kind and description, real, personal and mixed, tangible and intangible,
wherever situated, that are Related to the Business other than the Excluded
Assets (the “Purchased Assets”). The Purchased Assets include the following
assets, properties and rights:

(a)                                  all
Inventory;

(b)                                 all
Equipment;

(c)                                  all
Seller Intellectual Property in name of Seller, Seller’s Stockholders or
Affiliates used in the Business;

(d)                                 all
Contracts Related to the Business that are approved by Buyer and set forth on
Schedule 2.1(d) (the “Assigned Contracts”);

(e)                                  all
Accounts Receivable;

(f)                                    all
Business Authorizations;

(g)                                 all
Books and Records;

(h)                                 all
claims, causes of action, choses in action, rights of recovery and rights under
all warranties, representations and guarantees made by suppliers of products,
materials or equipment, or components thereof, arising from or relating to the
other Purchased Assets or the Assumed Liabilities;

(i)                                     all
insurance benefits, including rights and proceeds, arising from or relating to
the other Purchased Assets or the Assumed Liabilities;

(j)                                     all
prepaid expenses Related to the Business;

(k)                                  all
security deposits, earnest deposits and all other forms of deposit or security
placed with or by Seller for the performance of an Assigned Contract;

(l)                                     all
goodwill of the Business as going concern;

(m)                               2004
Ford Truck F350 VIN#1FTSX30L04EC46670; and

(n)                                 1994
Ford Ranger Pickup VIN#1FTCR15X8RTB20672.

2.2                                 Excluded Assets.  The
Purchased Assets do not include, and Seller is not selling, assigning,
transferring, conveying or delivering, and neither Buyer nor any Subsidiary of Buyer

 

is purchasing, acquiring
or accepting from Seller, any of the assets, properties or rights set forth in
this Section 2.2 (collectively, the “Excluded Assets”):

(a)                                  all
cash, cash equivalents and bank accounts of Seller;

(b)                                 all
Contracts that are not Assigned Contracts (the “Excluded Contracts”);

(c)                                  all
Policies and, subject to Section 2.1(i) hereof, all rights and benefits
thereunder;

(d)                                 the
assets, properties and rights specifically set forth on Schedule 2.2(d);

(e)                                  the
rights which accrue or will accrue to Seller under this Agreement and the
Ancillary Agreements.

2.3                                 Assumed Liabilities. 
Upon the terms and subject to the conditions of this Agreement, Buyer
shall assume effective as of the Closing, and from and after the Closing Buyer
shall pay, discharge or perform when due, as appropriate, only the Liabilities
of Seller in respect of the Assigned Contracts but only to the extent that such
Liabilities thereunder are required to be performed after the Closing Date,
were incurred in the ordinary course of the Business and do not relate to any
failure to perform, improper performance, warranty or other breach, default or
violation by Seller on or prior to the Closing Date (the “Assumed Liabilities”).

2.4                                 Excluded Liabilities. 
Neither Buyer nor any of its Affiliates shall assume any Liabilities of
Seller (such unassumed Liabilities, the “Excluded Liabilities”) other than the
Assumed Liabilities set forth in Section 2.3. Without limiting the generality
of the foregoing, in no event shall Buyer or any of its Affiliates assume or
incur any Liability in respect of, and Seller shall remain bound by and liable
for, and shall pay, discharge or perform when due, the following Liabilities of
Seller:

(a)                                  all
Liabilities for (i) Taxes relating to the Business or the Purchased Assets for
any Pre-Closing Tax Period and (ii) Taxes of Seller or any Affiliate of Seller;

(b)                                 all
Liabilities in respect of the Excluded Contracts and other Excluded Assets;

(c)                                  all
product Liability, warranty and similar claims for damages or injury to person
or property, claims of infringement of Intellectual Property Rights and all
other Liabilities, regardless of when made or asserted, which arise out of or
are based upon any events occurring or actions taken or omitted to be taken by Seller,
or otherwise arising out of or incurred in connection with the conduct of the
Business, on or before the Closing Date;

(d)                                 all
Pre-Closing Environmental Liabilities;

(e)                                  all
Indebtedness of the Business;

(f)                                    all
Liabilities under Seller Benefit Plans; and

 

(g)                                 all
Liabilities arising out of or incurred in connection with the negotiation,
preparation and execution of this Agreement and the Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby, including
Taxes and fees and expenses of counsel, accountants and other experts.

2.5                                 Purchase Price.  The
consideration to be paid by Buyer to Seller for the Purchased Assets (the “Purchase
Price”) shall be $7,820,000, subject to adjustment as set forth in (i)
Section 2.6, and (ii) the Earn-Out Agreement.  $1,000,000 of the Purchase Price will be
wired directly to Tower Trust Company, as Escrow Agent under the Escrow
Agreement.

2.6                                 Purchase Price Adjustment.

(a)                                  For
purposes of this Section 2.6, the following terms shall have the meanings
assigned to them in this Section 2.6(a):

(i)                                     “Accounting
Principles” means GAAP applied on a basis consistent with its application in
the preparation of the Balance Sheet.

(ii)                                  “Adjustment
Summary Statement” means an unaudited statement setting forth a summary of the
Closing Current Assets.

(iii)                               “Base
Amount” means the average monthly sum of Seller’s Inventory and Accounts
Receivable for the twelve (12) calendar months ending immediately preceding the
month that includes the Closing Date, as reported by Seller on its financial
statements in accordance with the Accounting Principles.

(iv)                              “Closing
Current Assets” means all Inventory and Accounts Receivable, net of applicable
write-offs and reserves, of the Business as of the Closing Date, calculated in
accordance with the Accounting Principles. 
The Closing Current Assets will be reduced by the total value of the
Vacation Accrual as of the Closing Date.

(v)                                 “Final
Current Assets” means the Closing Current Assets as set forth on the Adjustment
Summary Statement, as finally determined in accordance with Section 2.6(d).

(vi)                              “Maximum
Base Amount” means the Base Amount plus $25,000.

(vii)                           “Minimum
Base Amount” means the Base Amount minus $25,000.

(b)                                 Within
90 days after the Closing Date, Buyer will prepare, or cause to be prepared,
and deliver to Seller the Adjustment Summary Statement which shall set forth
Buyer’s calculation of Closing Current Assets. At Buyer’s option, Buyer may
conduct a physical inventory for purposes of preparing the Adjustment Summary
Statement, and Seller and its representatives shall have the right to observe
the taking of such physical inventory.

 

(c)                                  Upon
receipt from Buyer, Seller shall have 15 days to review the Adjustment Summary
Statement (the “Review Period”). If Seller disagrees with Buyer’s computation
of the Closing Current Assets, Seller may, on or prior to the last day of the
Review Period, deliver a notice to Buyer (the “Notice of Objection”), which
sets forth its objections to Buyer’s calculations; provided, however, the
Notice of Objection shall include only objections based on (i) noncompliance
with the Accounting Principles and (ii) mathematical errors in the computation
of the Closing Current Assets. Any Notice of Objection shall specify those
items or amounts with which Seller disagrees, together with a detailed written
explanation of the reasons for disagreement with each such item or amount and
shall set forth Seller’s calculation of the Closing Current Assets based on
such objections. To the extent not set forth in the Notice of Objection, Seller
shall be deemed to have agreed with Buyer’s calculation of all other items and
amounts contained in the Adjustment Summary Statement.

(d)                                 Unless
Seller delivers the Notice of Objection to Buyer within the Review Period,
Seller shall be deemed to have accepted Buyer’s calculations and the Adjustment
Summary Statement shall be final, conclusive and binding. If Seller delivers
the Notice of Objection to Buyer within the Review Period, Buyer and Seller
shall, during the 30 days following such delivery or any mutually agreed
extension thereof, use their commercially reasonable efforts to reach agreement
on the disputed items and amounts in order to determine the amount of the
Closing Current Assets. If, at the end of such period or any mutually agreed
extension thereof, Buyer and Seller’s are unable to resolve their
disagreements, they shall jointly retain and refer their disagreements to an
internationally recognized independent accounting firm (other than either of
the parties respective regular outside accounting firms) mutually acceptable to
Buyer and Seller (the “Independent Expert”). The parties shall instruct the
Independent Expert promptly to review this Section 2.6 and to determine solely
with respect to the disputed items and amounts so submitted whether and to what
extent, if any, the amounts set forth in the Adjustment Summary Statement
requires adjustment. The Independent Expert shall base its determination solely
on written submissions by Buyer and Seller and not on an independent review.
Buyer and Seller shall make available to the Independent Expert all relevant
books and records and other items reasonably requested by the Independent
Expert. The parties shall request that the Independent Expert deliver to Buyer
and Seller, as promptly as practicable but in no event later than 45 days after
its retention, a report which sets forth its resolution of the disputed items
and amounts and its calculation of the Closing Current Assets; provided that in
no event shall Closing Current Assets as determined by the Independent Expert
be less than Buyer’s calculation thereof set forth in the Adjustment Summary
Statement nor more than Seller’s calculation thereof set forth in the Notice of
Objection. The decision of the Independent Expert shall be final, conclusive
and binding on the parties. The costs and expenses of the Independent Expert
shall be allocated between the parties based upon the percentage which the
portion of the contested amount not awarded to each party bears to the amount
actually contested by such party. Each party agrees to execute, if requested by
the Independent Expert, a reasonable engagement letter, including customary
indemnities in favor of the Independent Expert.

 

(e)                                  Within
three (3) Business Days after the Adjustment Summary Statement has been finally
determined in accordance with Section 2.6(d),

(i)                                     if
Final Current Assets is less than the Minimum Base Amount (“Deficit Amount”),
Seller shall pay to Buyer, as an adjustment to the Purchase Price, in the
manner and with interest as provided in Section 2.6(f), an amount of cash equal
to the Deficit Amount; or

(ii)                                  if
Final Current Assets exceed the Maximum Base Amount (“Excess Amount”)Buyer
shall pay to Seller, as an adjustment to the Purchase Price, in the manner and
with interest as provided in Section 2.6(f), an amount of cash equal to the
Excess Amount.

(f)                                    The
payment required to be made pursuant to Section 2.6(e) shall be made by Buyer
or Seller, as the case may be, by wire transfer of immediately available funds
to an account designated in writing by Buyer or Seller, as the case may be, at
least one Business Day prior to such transfer. The amount of such payment
applicable to any Deficit Amount or Excess Amount, as the case may be, shall
bear interest from and including the Closing Date to but excluding the date of
payment at a rate per annum equal to the Prime Rate as published in the Wall
Street Journal, Eastern Edition in effect from time to time during the period
from the Closing Date to but excluding the date of payment. Such interest shall
be calculated daily on the basis of a year of 365 days and the actual number of
days elapsed, without compounding.

(g)                                 Any
rights accruing to a party under this Section 2.6 shall be in addition to and
independent of the rights to the Indemnification Agreement and any payments
made to any party under this Section 2.6 shall not be subject to the terms of
the Indemnification Agreement.

2.7                                 Allocation.  As soon
as reasonably practicable following the Closing, Buyer shall deliver to Seller
an allocation statement setting forth Buyer’s allocation of the Purchase Price
for Tax purposes pursuant to Section 1060 of the Code and any other applicable
Tax Laws (as the same may be revised pursuant to the following sentence, the “Allocation
Statement”). In the event that the Purchase Price is adjusted pursuant to
Section 2.6, Buyer shall deliver to Seller a revised Allocation Statement as
soon as reasonably practicable following the final determination of the
Adjustment Summary Statement. Except as otherwise required by Law, Buyer and
Seller shall file all Tax Returns (such as IRS Form 8594 or any other forms or
reports required to be filed pursuant to Section 1060 of the Code or any
comparable provisions of Law (“Section 1060 Forms”)) in a manner that is
consistent with the Allocation Statement and refrain from taking any action
inconsistent therewith. Buyer and Seller shall cooperate in the preparation of
Section 1060 Forms and file such Section 1060 Forms timely and in the manner
required by applicable Law. Buyer and Seller agree to treat any payments made
pursuant to the Indemnification Agreement as an adjustment to the Purchase
Price for Tax purposes.

 

2.8                                 Consents.

(a)                                  Notwithstanding
anything in this Agreement to the contrary, this Agreement shall not constitute
an agreement to sell, assign, transfer, convey or deliver any Purchased Asset
or any benefit arising under or resulting from such Purchased Asset if the
sale, assignment, transfer, conveyance or delivery thereof, without the Consent
of a third party, (i) would constitute a breach or other contravention of the
rights of such third party, (ii) would be ineffective with respect to any party
to a Contract concerning such Purchased Asset, or (iii) would, upon transfer, in
any way adversely affect the rights of Buyer under such Purchased Asset. If the
sale, assignment, transfer, conveyance or delivery by Seller to, or any
assumption by Buyer of, any interest in, or Liability under, any Purchased
Asset requires the Consent of a third party, then such sale, assignment,
transfer, conveyance, delivery or assumption shall be subject to such Consent
being obtained. Without limiting Section 2.8(b), to the extent any Assigned
Contract may not be assigned to Buyer by reason of the absence of any such
Consent (“Restricted Contract”).  Buyer
shall not be required to assume any Assumed Liabilities arising under such
Restricted Contract.

(b)                                 To
the extent that any Consent in respect of a Restricted Contract or any other
Purchased Asset shall not have been obtained on or before the Closing Date,
Buyer may elect to proceed with the Closing, in which case, Seller shall
continue to use reasonable best efforts to obtain any such Consent after the
Closing Date until such time as it shall have been obtained. Seller shall
cooperate with Buyer in any economically feasible arrangement proposed by Buyer
to provide that Buyer shall receive the interest of Seller under such
Restricted Contract or other Purchased Asset. Seller shall pay and discharge, and
shall indemnify and hold harmless, Buyer and its Affiliates from and against
any and all out-of-pocket costs of seeking to obtain or obtaining any such
Consent whether before or after the Closing Date. As soon as a Consent for the
sale, assignment, transfer, conveyance, delivery or assumption of a Restricted
Contract or other Purchased Asset is obtained, Seller shall promptly assign,
transfer, convey and deliver such Restricted Contract or Purchased Asset to
Buyer.

(c)                                  Nothing
contained in this Section 2.8 or elsewhere in this Agreement shall be deemed a
waiver by Buyer of its right to have received on the Closing Date an effective
assignment of all of the Purchased Assets or of the covenant of Seller to
obtain all Consents, nor shall this Section 2.8 or any other provision of this
Agreement be deemed to constitute an agreement to exclude from the Purchased
Assets any Assigned Contracts or other Purchased Asset as to which a Consent
may be necessary.

ARTICLE III

CLOSING

3.1                                 Closing Date.  The
closing of the transactions contemplated by this Agreement (the “Closing”)
shall take place at the offices of Barrett & McNagny LLP, located at 215
East Berry Street, Fort Wayne, Indiana, 46802, at 8:00 a.m. on August 31,
2006. The date on which the Closing occurs is referred to in this Agreement as
the “Closing Date.”

 

3.2                                 Deliveries by Seller at the Closing. At the Closing, Seller
shall deliver to Buyer the following:

(a)                                  a
Bill of Sale in the form of Exhibit A hereto duly executed by Seller;

(b)                                 [Reserved];

(c)                                  Patent
License Assignment in the form of Exhibit B hereto duly executed by
Seller;

(d)                                 with
respect to each Lease, an Assignment and Assumption of Lease in form and
substance satisfactory to Buyer (each, an “Assignment and Assumption of Lease”)
duly executed by Seller;

(e)                                  such
other good and sufficient instruments of transfer as Buyer reasonably deems
necessary and appropriate to vest in Buyer all right, title and interest in, to
and under the Purchased Assets;

(f)                                    the
Power of Attorney contemplated by Sections 6.7(c) duly executed by Seller;

(g)                                 a
completed certification of non-foreign status pursuant to Section 1.1445-2(b)(2)
of the Treasury regulations duly executed by Seller that it is selling
Purchased Assets to Buyer pursuant hereto;

(h)                                 an
Earn-Out Agreement in the form of Exhibit C;

(i)                                     Employment
Agreements with Christopher W. Huntington and Phillip Milidantri;

(j)                                     Non-Competition
Agreements with Christopher W. Huntington, Phillip Milidantri and Levi Citarella;

(k)                                  Escrow
Agreement in the form of Exhibit D;

(l)                                     Stock
Purchase Agreement;

(m)                               Indemnification
Agreement in the form of Exhibit E;

(n)                                 Title
for 2004 Ford Truck F350 VIN#1FTSX30L04EC46670; and

(o)                                 Title
for 1994 Ford Ranger Pickup VIN#1FTCR15X8RTB20672.

3.3                                 Deliveries by Buyer at the Closing.  At the Closing, Buyer shall deliver to Seller
the following:

(a)                                  the
Purchase Price by wire transfer of immediately available funds to an account of
Seller designated in writing by Seller to Buyer;

 

(b)                                 the
Assignment and Assumption Agreement duly executed by Buyer or its designee
pursuant to Section 2.1;

(c)                                  with
respect to each Lease, an Assignment and Assumption of Lease duly executed by
Buyer or its designee pursuant to Section 2.1;

(d)                                 Earn-Out
Agreement in the form of Exhibit C;

(e)                                  Escrow
Agreement in the form of Exhibit D; and

(f)                                    Stock
Purchase Agreement; and

(g)                                 Indemnification
Agreement in the form of Exhibit E.

ARTICLE IV

REPRESENTATIONS
AND WARRANTIES OF SELLER

Seller and Seller’s
Stockholders, jointly and severally, represent and warrant to Buyer as of the
date hereof and as of the Closing Date that the statements contained in this
Article IV are true and correct, except as set forth in the disclosure schedule
dated and delivered as of the date hereof by Seller to Buyer (the “Seller
Disclosure Schedule”), which is attached to this Agreement and is designated
therein as being the Seller Disclosure Schedule. The Seller Disclosure Schedule
shall be arranged in paragraphs corresponding to each representation and
warranty set forth in this Article IV. Each exception to a representation and
warranty set forth in the Seller Disclosure Schedule shall qualify the specific
representation and warranty which is referenced in the applicable paragraph of
the Seller Disclosure Schedule, and no other representation or warranty.  The liability of each Seller Stockholder,
based upon their representations and warrantees, shall not exceed the portion
of the Purchase Price that they each individually received as a result of this
Agreement, the Stock Purchase Agreement and the Earnout Agreement.  The liability of each Seller Stockholder
based upon his representations and warranties shall not exceed that portion of
the Purchase Price proportionate to such Seller Stockholder’s equity interest
in the Seller.

4.1                                 Organization and Good Standing.  Seller is a corporation, limited liability
company or other legal entity duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation or formation,
has all requisite power to own, lease and operate its properties and to carry
on its business as now being conducted and as proposed to be conducted, and is
duly qualified to do business and is in good standing in each jurisdiction in
which it owns or leases property or conducts any business so as to require such
qualification except for those jurisdictions where the failure to be so
qualified and in good standing could not individually or in the aggregate have
a material adverse effect on the Purchased Assets or the condition (financial
or otherwise), operations, prospects or results of operations of the Business
of Seller.  Seller is not in default
under its Charter Documents and Seller has no Subsidiaries.

4.2                                 Authority and Enforceability.

(a)                                  Seller
has the requisite power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of 

 

this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Seller. Seller has duly executed and delivered this Agreement. This
Agreement constitutes the valid and binding obligation of Seller, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar Laws affecting or relating to creditors’ rights generally, and (ii) the
availability of injunctive relief and other equitable remedies.

(b)                                 Seller
has the requisite power and authority to enter into each Ancillary Agreement to
which it is, or specified to be, a party and to consummate the transactions
contemplated thereby. The execution and delivery by Seller of each Ancillary
Agreement to which it is, or specified to be, a party and the consummation of
the transactions contemplated thereby have been duly authorized by all
necessary corporate, limited liability company or other action on the part of
Seller. Prior to the Closing Seller will have duly executed and delivered each
Ancillary Agreement to which it is, or specified to be, a party. The Ancillary
Agreements will constitute the valid and binding obligation of Seller thereto,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar Laws affecting or relating to creditors’ rights
generally, and (ii) the availability of injunctive relief and other equitable
remedies. The Ancillary Agreements will effectively vest in Buyer good, valid
and marketable title to all the Purchased Assets free and clear of all Liens.

4.3                                 No Conflicts; Consents.

(a)                                  The
execution and delivery of this Agreement by Seller does not, and the execution
and delivery of each Ancillary Agreement to which Seller is, or specified to
be, a party, the performance by Seller of its obligations hereunder and
thereunder and the consummation by Seller of the transactions contemplated
hereby and thereby (in each case, with or without the giving of notice or lapse
of time, or both), will not, directly or indirectly, (i) violate the provisions
of any of the Charter Documents of Seller, (ii) violate or constitute a
default, an event of default or an event creating rights of acceleration,
termination, cancellation, imposition of additional obligations or loss of
rights under any Contract (A) to which Seller is a party, (B) of which Seller
is a beneficiary or (C) by which Seller or any of their respective assets is
bound, (iii) violate or conflict with any Law, Authorization or Order applicable
to Seller, or give any Governmental Entity or other Person the right to
challenge any of the transactions contemplated by this Agreement or the
Ancillary Agreements or to exercise any remedy, obtain any relief under or
revoke or otherwise modify any rights held under, any such Law, Authorization
or Order, or (iv) result in the creation of any Liens upon any of the assets
owned or used by Seller, except for any such violations, defaults and events
referred to in clause (ii) and for any such violations, conflicts, challenges,
remedies, relief, revocations, modifications or Liens referred to in clauses
(iii) and (iv) that would not in the aggregate be material to the Business and
the Purchased Assets taken as a whole. Section 4.3(a) of the Seller Disclosure
Schedule sets forth all consents, waivers, assignments and other approvals and
actions that are required in connection with the transactions contemplated by
this Agreement under any Contract to which Seller is a party (collectively, “Consents”)
in 

 

order (i) in the case of Contracts that are not Assigned Contracts, to
preserve all rights and benefits of Seller thereunder and (ii) in the case of
Contracts that are Assigned Contracts, to sell, assign, transfer, convey and
deliver to, Buyer all rights and benefits of Seller thereunder without any
impairment or alteration whatsoever.

(b)                                 No
Authorization or Order of, registration, declaration or filing with, or notice
to, any Governmental Entity or other Person, is required by or with respect to
Seller in connection with the execution and delivery of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby, except for such Authorizations, Consents, registrations,
declarations, filings and notices as may be required under the HSR Act and the
Other Antitrust Laws.

4.4                                 Financial Statements.

(a)                                  The
Seller Disclosure Schedule contains true and complete copies of the following
financial statements of the Business as adjusted for non-recurring Affiliate transactions
(the “Financial Statements”):

(i)                                     Annual
Financial Statements dated as of December 31, 2005; and

(ii)                                  Interim
Financial Statements dated as of June 30, 2006.

(b)                                 The
Financial Statements are true, complete and correct and have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods involved,
subject, in the case of the Interim Financial Statements, to normal year-end
adjustments (the effect of which will not be materially adverse) and the
absence of notes (that, if presented, would not differ materially from those
presented in the Annual Financial Statements). The Financial Statements are
based on the books and records of Seller, and fairly present the financial
condition of the Business as of the respective dates they were prepared and the
results of the operations of the Business for the periods indicated. The
balance sheet of the Business as of June 30, 2006 is referred to herein as
the “Balance Sheet” and the date thereof as the “Balance Sheet Date” and the balance
sheet of the Business as of June 30, 2006 is referred to herein as the “Interim
Balance Sheet” and the date thereof as the “Interim Balance Sheet Date.” Seller
maintains with respect to the Business a standard system of accounting
established and administered in accordance with GAAP.

4.5                                 No Undisclosed Liabilities. 
The Business has no liabilities, obligations or commitments of any
nature whatsoever, asserted or unasserted, known or unknown, absolute or
contingent, accrued or unaccrued, matured or unmatured or otherwise (“Liabilities”),
except (a) those which are adequately reflected or reserved against in the
Balance Sheet as of the Balance Sheet Date, (b) those which have been incurred
in the ordinary course of the Business and consistent with past practice since
the Balance Sheet Date and which are not, individually or in the aggregate,
material in amount.

4.6                                 Inventory.  Each item
of Inventory is (a) free of any material defect or other deficiency, (b) of a
quality, quantity and condition useable and, as to finished goods, saleable in
the ordinary course of the Business and (c) properly stated on the Interim
Balance Sheet (to the 

 

extent existing on the
date thereof) and on the books and records of the Business at, the lesser of
cost or fair market value. None of such Inventory is obsolete and no write-down
of such Inventory has been made or should have been made in the period since
June 30, 2006. The quantities of each item of Inventory are not excessive and
are reasonable in the present circumstances of the Business. All of such
Inventory is located at the facilities of the Seller and no Inventory is held
on a consignment basis.

4.7                                 Accounts Receivable. 
The Accounts Receivable of the Business as set forth on the Interim
Balance Sheet or arising since the date thereof are, to the extent not paid in
full by the account debtor prior to the date hereof, (a) valid and genuine,
have arisen solely out of bona fide sales and deliveries of goods, performance
of services and other business transactions in the ordinary course of the
Business consistent with past practice, (b) not subject to valid defenses,
set-offs or counterclaims, and (c) collectible within 90 days after billing at
the full recorded amount thereof less the recorded allowance for collection losses
on the Interim Balance Sheet or, in the case of Accounts Receivable arising
since the Interim Balance Sheet Date, the recorded allowance for collection
losses shown on the accounting records of the Business. The allowance for
collection losses on the Interim Balance Sheet and, with respect to Accounts
Receivable arising since the Interim Balance Sheet Date, the allowance for
collection losses shown on the accounting records of the Business, have been
determined in accordance with GAAP consistent with past practice. The Accounts
Receivable existing as of the Closing Date will be collectible within 90 days
after billing at the full recorded amount thereof net of the reserves shown on
the accounting records of the Business as of the Closing Date (which reserve
shall be adequate and shall not represent a greater percentage of the Accounts
Receivable as of the Closing Date than the reserve reflected in the Interim
Balance Sheet represented of the Accounts Receivable reflected therein).

4.8                                 Taxes.

(a)                                  All Tax Returns required to have been filed by or with respect to Seller
have been duly and timely filed and each such Tax Return correctly and
completely reflects Seller’s Liability for Taxes and all other information
required to be reported thereon. All Taxes owed by Seller (whether or not shown
on any Tax Return) have been timely paid.

(b)                                 There
is no action or audit now proposed, threatened or pending against, or with
respect to, Seller in respect of any Tax. No Seller Stockholder and no director
or officer (or employee responsible for Tax matters) of Seller expects any
Governmental Entity to assess any additional Taxes. Seller is not the
beneficiary of any extension of time within which to file any Tax Return, nor
has Seller made (or had made on its behalf) any requests for such extensions.
No claim has ever been made by an authority in a jurisdiction where Seller does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction or that it must file Tax Returns in any such jurisdiction. There
are no Liens on any of the stock or assets of Seller with respect to Taxes.

(c)                                  Seller
has withheld and timely paid all Taxes required to have been withheld and paid
and has complied with all information reporting and backup withholding
requirements incidental thereto.

 

(d)                                 The Seller Disclosure Schedule (i) lists all federal, state, local, and
foreign income Tax Returns filed with respect to Seller for taxable periods
ended on or after December 31, 2003, (ii) indicates those Tax Returns that have
been audited, and (iii) indicates those Tax Returns that currently are the
subject of audit. Seller has delivered to Buyer correct and complete copies of
all income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by Seller since December 31, 2003.

(e)                                  Seller has not waived (or is subject to a waiver of) any statute of
limitations in respect of Taxes or has agreed to (or is subject to) any
extension of time with respect to a Tax assessment or deficiency.

(f)                                    Seller’s unpaid Taxes (i) did not, as of their Interim Balance Sheet
Date, exceed their respective Liability reserves for Taxes (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of their respective Interim Balance
Sheet (rather than in any notes thereto) and (ii) do not exceed such reserves
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of Seller in filing its Tax Returns.

(g)                                 Seller has no obligation to make a payment that is not deductible under
Code §280G. Seller has disclosed on its income Tax Returns, all positions taken
therein that could give rise to a substantial understatement of income Tax
within the meaning of Code §6662 (or any similar provision of state, local, or
foreign law).

(h)                                 Seller
is not a party to any Tax allocation or sharing agreement. Seller (i) has not
been a member of an affiliated group filing a consolidated income Tax Return
nor (ii) has any Liability for the Taxes of any Person under Reg. §1.1502-6 (or
any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise. Seller is not a party to any joint
venture, partnership or other arrangement that is treated as a partnership or
similar entity for purposes of the applicable income Tax Law.

(i)                                     Seller
is not, nor at any time has been, a passive foreign investment company within
the meaning of Section 1297 of the Code and Seller is not a shareholder,
directly or indirectly, in a passive foreign investment company.

(j)                                     Seller
is not now or at any time been subject to (i) the overall foreign loss
provisions of Section 904(f) of the Code or (ii) the recharacterization
provisions of Section 952(c)(2) of the Code.

4.9                                 Compliance with Law.

(a)                                  Seller
has conducted, and is conducting, the Business in compliance with all
applicable Laws.

(b)                                 No
event has occurred and no circumstances exist that (with or without the passage
of time or the giving of notice) may result in a violation of, conflict with or

 

failure on the part of
Seller to conduct the Business in compliance with, any applicable Law, except
for any such violations, conflicts or failures to comply that would not in the
aggregate be material to the Business and the Purchased Assets taken as a
whole. Seller has not received notice regarding any violation of, conflict
with, or failure to conduct the Business in material compliance with, any
applicable Law.

4.10                           Business Authorizations.

(a)                                  Seller
owns, holds or lawfully uses in the operation of the Business all
Authorizations which are necessary for it to conduct the Business as currently
conducted or as proposed to be conducted or for the ownership and use of the
assets owned or used by Seller in the conduct of the Business (the “Business
Authorizations”) free and clear of all Liens, except where the failure to own,
hold or lawfully use any such Business Authorizations would not in the
aggregate be material to the Business and the Purchased Assets taken as a
whole. Such Business Authorizations are valid and in full force and effect. All
material Business Authorizations are listed in the Seller Disclosure Schedule.

(b)                                 No
event has occurred and no circumstances exist that (with or without the passage
of time or the giving of notice) may result in a violation of, conflict with,
failure on the part of Seller to comply with the terms of, or the revocation,
withdrawal, termination, cancellation, suspension or modification of any
Business Authorization. Seller has not received notice regarding any violation
of, conflict with, failure to comply with the terms of, or any revocation,
withdrawal, termination, cancellation, suspension or modification of, any
Business Authorization. Seller is not in default, nor has Seller received notice
of any claim of default, with respect to any Business Authorization.

4.11                           Title to Personal Properties.

(a)                                  The
Seller Disclosure Schedule sets forth a complete and accurate list of all
personal properties and assets (“Personal Property”) that are Purchased Assets
as of the date of this Agreement, specifying whether, and by which Seller, such
Personal Property is owned or leased and, in the case of leased assets,
indicating the parties to, execution dates of and annual payments under, the
lease.

(b)                                 With
respect to Personal Property that it purports to own including all Personal
Property reflected as owned on the Interim Balance Sheet (other than inventory
sold in the ordinary course of the Business since the date thereof).  Seller has good and transferable title to all
such Personal Property, free and clear of all Liens except for Permitted Liens.

(c)                                  All
leases under which Personal Property is leased are in full force and effect and
constitute valid and binding obligations of the other party(ies) thereto, and
neither Seller nor, to Seller’s Knowledge, any other party thereto, is in
breach of any of the terms of any such lease.

4.12                           Condition of Tangible Assets.  All Purchased Assets that are tangible
property are structurally sound, are in good operating condition and repair
(subject to normal wear and tear given the use and age of such assets), are
usable in the ordinary course of the Business and 

 

conform to all Laws and
Authorizations relating to their construction, use and operation. There are no
facts or conditions affecting such Purchased Assets that could interfere in any
material respect with the use or operation thereof as used or operated for the
12 months preceding the date of this Agreement.

4.13                           Real Property.

(a)                                  The
Seller Disclosure Schedule contains (i) a list of all real property and
interests in real property owned in fee by Seller Related to the Business (the “Owned
Real Property”), and (ii) a list of all real property and interests in real
property leased by Seller Related to the Business (the “Leased Real Property”
and, together with the Owned Real Property, the “Real Property”).

(b)                                 With
respect to each parcel of Owned Real Property:

(i)                                     Seller
has good and marketable title to each such parcel of Owned Real Property free
and clear of all Liens, except (A) Permitted Liens and (B) zoning and building
restrictions, easements, covenants, rights-of-way and other similar
restrictions of record, none of which impairs the current or proposed use of
such Owned Real Property.

(ii)                                  The
legal description for such parcel of Owned Real Property contained in the deed
thereof describes the property fully and accurately. All buildings, structures
and facilities located on, and improvements to, such parcel of Owned Real
Property are located within the boundary lines of such Owned Real Property and
do not encroach on any easement, right of way or other encumbrance which
burdens any portion of the Owned Real Property. No structures, facilities or
other improvements on any parcel adjacent to the Owned Real Property encroach
onto any portion of the Owned Real Property.

(iii)                               Seller
has provided to Buyer copies of the deeds and other instruments (as recorded)
by which Seller acquired such parcel of Owned Real Property, and copies of all
title insurance policies, opinions, abstracts and surveys in the possession of
Seller with respect to such parcel.

(iv)                              There
are no outstanding options or rights of first refusal to purchase such parcel
of Owned Real Property, or any portion thereof or interest therein.

(c)                                  With
respect to Leased Real Property, Seller has delivered to Buyer a true and
complete copy of every lease and sublease pursuant to which Seller is a party
or by which it is bound (each, a “Lease”). Seller has peaceful, undisturbed and
exclusive possession of the Leased Real Property.  The Leases are legal, valid, binding,
enforceable, in full force and effect, and no party thereto is in default or
breach under any such Lease. No event has occurred which, with the passage of
time or the giving of notice or both, would cause a material breach of or
default under any of such Leases.  The
Leases have been duly assigned to the Buyer and such assignments are valid and
enforceable as against the landlord and third parties.  No consents are required for such 

 

assignments, or to the extent that consents to the assignments are
required, Seller has obtained such consents and has provided Buyer with copies
of same.

(d)                                 The
uses for which the buildings, facilities and other improvements located on the
Real Property are zoned do not restrict, or impair, the use of the Real
Property for purposes of the Business.

(e)                                  No
Governmental Entity having the power of eminent domain over the Real Property
has commenced or, to Seller’s Knowledge, intends to exercise the power of
eminent domain or a similar power with respect to all or any part of the Real
Property. There are no pending or, to Seller’s Knowledge, threatened
condemnation, fire, health, safety, building, zoning or other land use
regulatory proceedings, lawsuits or administrative actions relating to any
portion of the Real Property or any other matters which do or may adversely
effect the current use, occupancy or value thereof. Seller has not received
notice of any pending or threatened special assessment proceedings affecting any
portion of the Real Property.

(f)                                    The
Real Property and all present uses and operations of the Real Property comply
in all material respects with all Laws, covenants, conditions, restrictions,
easements, disposition agreements and similar matters affecting the Real
Property. The Real Property and its continued use, occupancy and operation as
used, occupied and operated in the conduct of the Business do not constitute a
nonconforming use and is not the subject of a special use permit under any Law.

(g)                                 The
Real Property is in suitable condition for the conduct of the Business as
currently conducted and as proposed to be conducted. Seller has good and valid
rights of ingress and egress to and from all Real Property from and to the
public street systems for all usual street, road and utility purposes.

(h)                                 No
Person other than Seller is in possession of any of the Real Property or any
portion thereof, and there are no leases, subleases, licenses, concessions or
other agreements, written or oral, granting to any Person other than Seller the
right of use or occupancy of the Real Property or any portion thereof. No
easement, utility transmission line or water main located on the Real Property
adversely affects the use of the Real Property or any improvement on the Real
Property.

(i)                                     All
water, sewer, gas, electric, telephone and drainage facilities, and all other
utilities required by any Law or by the use and operation of the Real Property
in the conduct of the Business are installed to the property lines of the Real
Property, are connected pursuant to valid permits to municipal or public
utility services or proper drainage facilities, are fully operable and are
adequate to service the Real Property in the operation of the Business and to
permit compliance with the requirements of all Laws in the operation thereof.
No fact or condition exists which could result in the termination or material
reduction of the current access from the Real Property to existing roads or to
sewer or other utility services presently serving the Real Property.

 

4.14                           Intellectual Property.

(a)                                  As
used in this Agreement, “Intellectual Property” means: (i) inventions (whether
or not patentable), trade secrets, technical data, databases, customer lists,
designs, tools, methods, processes, technology, ideas, know-how, source code,
product road maps and other proprietary information and materials (“Proprietary
Information”); (ii) trademarks and service marks (whether or not registered),
trade names, logos, trade dress and other proprietary indicia and all goodwill
associated therewith; (iii) documentation, advertising copy, marketing
materials, websites, specifications, mask works, drawings, graphics, databases,
recordings and other works of authorship, whether or not protected by
Copyright; (iv) computer programs, including any and all software
implementations of algorithms, models and methodologies, whether in source code
or object code, design documents, flow-charts, user manuals and training
materials relating thereto and any translations thereof (collectively, “Software”);
and (v) all forms of legal rights and protections that may be obtained for, or
may pertain to, the Intellectual Property set forth in clauses (i) through (iv)
in any country of the world (“Intellectual Property Rights”), including all
letters patent, patent applications, provisional patents, design patents, PCT
filings, invention disclosures and other rights to inventions or designs (“Patents”),
all registered and unregistered copyrights in both published and unpublished
works (“Copyrights”), all trademarks, service marks and other proprietary
indicia (whether or not registered) (“Marks”), trade secret rights, mask works,
moral rights or other literary property or authors rights, and all
applications, registrations, issuances, divisions, continuations, renewals,
reissuances and extensions of the foregoing.

(b)                                 The
Seller Disclosure Schedule lists (by name, owner and, where applicable,
registration number and jurisdiction of registration, application,
certification or filing) all Intellectual Property that is owned by Seller and
Related to the Business (whether exclusively, jointly with another Person or
otherwise) (“Seller Owned Intellectual Property”); provided that the Seller
Disclosure Schedule is not required to list items of Seller Owned Intellectual
Property which are both (i) immaterial to the Business and (ii) not registered
or the subject of an application for registration. Except as described in the
Seller Disclosure Schedule, Seller owns the entire right, title and interest to
all Seller Owned Intellectual Property free and clear of all Liens.

(c)                                  The
Seller Disclosure Schedule lists all licenses, sublicenses and other agreements
(“In-Bound Licenses”) pursuant to which a third party authorizes Seller to use,
practice any rights under, or grant sublicenses with respect to, any
Intellectual Property Related to the Business owned by a third party, including
the incorporation of any such Intellectual Property into products of Seller
and, with respect to each In-Bound License, whether the In-Bound License is
exclusive or non-exclusive.

(d)                                 The
Seller Disclosure Schedule lists all licenses, sublicenses and other agreements
(“Out-Bound Licenses”) pursuant to which Seller authorizes a third party to
use, practice any rights under, or grant sublicenses with respect to, any
Seller Owned Intellectual Property or pursuant to which Seller grants rights to
use or practice any rights under any Intellectual Property owned by a third
party and, with respect to each Out-Bound License, whether the Out-Bound
License is exclusive or non-exclusive.

 

(e)                                  Seller
(i) exclusively owns the entire right, interest and title to each item of
Intellectual Property Related to the Business as it is currently conducted or
as proposed to be conducted free and clear of Liens (including the design,
manufacture, license and sale of all products currently under development or in
production), or (ii) otherwise rightfully uses or otherwise enjoys such
Intellectual Property pursuant to the terms of a valid and enforceable In-Bound
License that is listed in the Seller Disclosure Schedule. The Seller Owned
Intellectual Property, together with Seller’s rights under the In-Bound
Licenses listed in the Seller Disclosure Schedule (collectively, the “Seller
Intellectual Property”), constitutes all the Intellectual Property used in or
necessary for the operation of the Business as it is currently conducted and as
proposed to be conducted.

(f)                                    All
registration, maintenance and renewal fees related to Patents, Marks,
Copyrights and any other certifications, filings or registrations that are
owned by Seller and Related to the Business (“Seller Registered Items”) that
are currently due have been paid and all documents and certificates related to
such Seller Registered Items have been filed with the relevant Governmental
Entity or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Seller Registered Items.
There are no actions that must be taken by Buyer within 120 days after the date
hereof, including the payment of any registration, maintenance or renewal fees
or the filing of any documents, applications or certificates for the purposes
of maintaining, perfecting or preserving or renewing any Seller Registered Items.
All Seller Registered Items are in good standing, held in compliance with all
applicable legal requirements and enforceable by Seller. All Patents Related to
the Business that have been issued to Seller are valid.

(g)                                 Seller
is not aware of any challenges (or any basis therefor) with respect to the
validity or enforceability of any Seller Owned Intellectual Property. The
Seller Disclosure Schedule lists the status of any proceedings or actions
before the United States Patent and Trademark Office or any other Governmental
Entity anywhere in the world related to any of the Seller Owned Intellectual
Property, including the due date for any outstanding response by Seller in such
proceedings. Seller has not taken any action or failed to take any action that could
reasonably be expected to result in the abandonment, cancellation, forfeiture,
relinquishment, invalidation, waiver or unenforceability of any Seller Owned
Intellectual Property. The Seller Disclosure Schedule lists all previously held
Seller Registered Items that Seller has abandoned, cancelled, forfeited or
relinquished during the 12 months prior to the date of this Agreement.

(h)                                 None
of the products or services currently or formerly developed manufactured, sold,
distributed, provided, shipped or licensed by Seller, or which are currently
under development, in each case Related to the Business, has infringed or
infringes upon, or otherwise unlawfully used or uses, the Intellectual Property
Rights of any third party. Seller, by conducting the Business as currently
conducted or as proposed to be conducted, has not infringed or infringes upon,
or otherwise unlawfully used or uses, any Intellectual Property Rights of a
third party. Seller has not received any communication alleging that Seller has
violated or, by conducting the Business as currently conducted or as proposed
to be conducted, would violate, any Intellectual Property Rights of a third
party nor, to Seller’s Knowledge, is there any basis therefor. 

 

No Action has been instituted, or, to Seller’s Knowledge, threatened,
relating to any Intellectual Property formerly or currently used by Seller
Related to the Business and none of the Seller Intellectual Property is subject
to any outstanding Order. To Seller’s Knowledge, no Person has infringed or is
infringing any Intellectual Property Rights of Seller Related to the Business
or has otherwise misappropriated or is otherwise misappropriating any Seller
Intellectual Property.

(i)                                     With
respect to the Proprietary Information of Seller Related to the Business, the
documentation relating thereto is current, accurate and sufficient in detail
and content to identify and explain it and to allow its full and proper use
without reliance on the special knowledge or memory of others. Seller has taken
commercially reasonable steps to protect and preserve the confidentiality of
all Proprietary Information owned by Seller Related to the Business that is not
covered by an issued Patent. Any receipt or use by, or disclosure to, a third
party of Proprietary Information Related to the Business owned by Seller has
been pursuant to the terms of binding written confidentiality and non-use
agreement between Seller and such third party (“Nondisclosure Agreements”).
True and complete copies of the Nondisclosure Agreements, and any amendments
thereto, have been provided to Buyer. Seller is, and to Seller’s Knowledge, all
other parties thereto are, in compliance with the provisions of the
Nondisclosure Agreements. Seller is in compliance with the terms of all
Contracts pursuant to which a third party has disclosed to, or authorized
Seller to use, Proprietary Information Related to the Business owned by such
third party.

(j)                                     All
current and former employees, consultants and contractors of the Business have
executed and delivered, and are in compliance with, enforceable agreements
regarding the protection of Proprietary Information and providing valid written
assignments of all Intellectual Property Related to the Business conceived or
developed by such employees, consultants or contractors in connection with
their services for the Business (“Work Product Agreements”). True and complete
copies of the Work Product Agreements have been provided to Buyer. No current
or former employee, consultant or contractor or any other Person has any right,
claim or interest to any of the Seller Owned Intellectual Property.

(k)                                  No
employee, consultant or contractor of Seller has been, is or will be, by
performing services for the Business, in violation of any term of any
employment, invention disclosure or assignment, confidentiality or
noncompetition agreement or other restrictive covenant or any Order as a result
of such employee’s or contractor’s employment in the Business or any services
rendered by such employee or contractor.

(1)                                  All
Intellectual Property that has been distributed, sold or licensed to a third
party by Seller Related to the Business that is covered by warranty conformed
and conforms to, and performed and performs in accordance with, the
representations and warranties provided with respect to such Intellectual
Property by or on behalf of Seller for the time period during which such
representations and warranties apply.

(m)                               The
execution and delivery of this Agreement by Seller does not, and the
consummation of the transactions contemplated hereby (in each case, with or
without the 

 

giving of notice or lapse of time, or both), will not, directly or
indirectly, result in the loss or impairment of, or give rise to any right of
any third party to terminate or reprice or otherwise renegotiate Seller’s
rights to own any of its Intellectual Property or their respective rights under
any Out-Bound License or In-Bound License, nor require the consent of any
Governmental Entity or other third party in respect of any such Intellectual
Property.

4.15                           Absence of Certain Changes or Events.  Since the Interim Balance Sheet Date to the
date of this Agreement and to the Closing Date:

(a)                                  there
has not been any material adverse change in the condition (financial or
otherwise), operations, prospects or results of operations of the Business or
Seller;

(b)                                 Seller
has not amended or changed, or proposed to amend or change, its Charter
Documents in a manner that could be expected to delay the consummation of the
transactions contemplated by this Agreement;

(c)                                  Seller
has not declared, set aside or paid any dividend or other distribution (whether
in cash, stock or property) with respect to any equity security or debt
security;

(d)                                 Seller
has not (i) increased or modified the compensation or benefits payable or to
become payable by Seller to any current or former directors, employees,
consultants or contractors of the Business, (ii) increased or modified any
Benefit Plan made to, for or with any current or former directors, employees or
contractors of the Business, or (iii) entered into any employment, severance or
termination agreement Related to the Business;

(e)                                  Seller
has not sold, leased, transferred or assigned any property or assets Related to
the Business, except for (i) the sale of Inventory, (ii) the grant of
non-exclusive Out-Bound Licenses, and (iii) the sale of obsolete Equipment, in
each case in the ordinary course of the Business consistent with past practice;

(f)                                    Seller
has not incurred, assumed or guaranteed any Indebtedness Related to the
Business;

(g)                                 Seller
has not mortgaged, pledged or subjected to Liens any assets, properties or
rights Related to the Business, except for Liens arising under lease financing
arrangements existing as of the Balance Sheet Date and Permitted Liens;

(h)                                 Seller
has not entered into, amended, modified, canceled or waived any rights under,
any Material Contract and no Material Contract has been terminated or
cancelled;

(i)                                     Seller
has not taken any action outside the ordinary course of the Business;

(j)                                     there
has not been any labor dispute, other than individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of the Business;

 

(k)                                  there
has not been any violation of, or conflict with, any applicable Law or any Business
Authorization;

(l)                                     Seller
has not agreed, or entered into any arrangement, to take any action which, if
taken prior to the date hereof, would have made any representation or warranty
set forth in this Article IV untrue or incorrect as of the date when made;

(m)                               there
has not been any material damage, destruction or loss with respect to the
assets, properties and rights of the Business, whether or not covered by
insurance;

(n)                                 Seller
has not made any change in the accounting practices Related to the Business;

(o)                                 Seller
has not made any Tax election, changed its method of Tax accounting or settled
any claim for Taxes, in each case Related to the Business; and

(p)                                 Seller
has not agreed, whether in writing or otherwise, to do any of the foregoing.

4.16                           Contracts.

(a)                                  Except
as set forth in Section 4.16 of the Seller Disclosure Schedule, Seller is not
party to, or bound by, in each case Related to the Business:

(i)                                     any
Contract or series of related Contracts for the purchase of materials,
supplies, goods, services, equipment or other assets that involves annual
payments by Seller of $50,000 or more;

(ii)                                  any
Contract or series of related Contracts for the sale by Seller of (A)
materials, supplies, goods, services, equipment or other assets, that involves
a specified annual minimum dollar sales amount of $50,000 or more, or (B)
pursuant to which Seller received payments of more than $50,000.

(iii)                               any
Contract that requires Seller to purchase its total requirements of any product
or service from a third party or that contains “take or pay” provisions;

(iv)                              any
Contract or series of related Contracts that (A) continues n over a period of
more than six months from the date hereof or a (B) involves payments to or by
Seller exceeding $50,000, other than arrangements disclosed pursuant to the
preceding paragraphs (i) and (ii);

(v)                                 any
partnership, joint venture or similar Contract;

(vi)                              any
distribution, dealer, representative or sales agency Contract;

(vii)                           any
Lease;

 

(viii)                        any
Contract for the lease of personal property which provides for payments to or
by Seller;

(ix)                                any
Contract which provides for the indemnification by Seller of any Person, the
undertaking by Seller to be responsible for consequential damages, or the
assumption by Seller of any Tax, environmental or other Liability;

(x)                                   any
Contract with any Governmental Entity;

(xi)                                any
note, debenture, bond, equipment trust, letter of credit, loan or other
Contract for Indebtedness or lending of money (other than to employees for
travel expenses in the ordinary course of the Business) or Contract for a line
of credit or guarantee, pledge or undertaking of the Indebtedness of any other
Person;

(xii)                             any
Contract for any capital expenditure or leasehold improvement in excess of
$50,000;

(xiii)                          any
Contract which restrains the ability of Seller to engage or compete in any
manner or in any business;

(xiv)                         any
Out-Bound License or In-Bound License;

(xv)                            any
Contract relating to the acquisition or disposition of any material business
(whether by merger, sale of stock, sale of assets or otherwise);

(xvi)                         any
collective bargaining Contract or other Contract with any labor organization,
union or association;

(xvii)                      that
is an employment, consulting, termination or severance Contract other than
those that are terminable at-will by Seller on less than 30 days’ notice; and

(xviii)                   any
Contract that is otherwise material to Seller and not previously disclosed
pursuant to this Section 4.16.

(b)                                 Each
Contract required to be listed in Section 4.16 of the Seller Disclosure
Schedule (collectively, the “Material Contracts”) is valid and enforceable in
accordance with its terms. Seller party to such Material Contract has complied
with and is in compliance in all material respects with, and to Seller’s
Knowledge, all other parties thereto have complied with and are in compliance
with, the provisions of each Material Contract.

(c)                                  Seller
is not, and to Seller’s Knowledge, no other party thereto is, in material
default in the performance, observance or fulfillment of any obligation,
covenant, condition or other term contained in any Material Contract, and
Seller has not given or received notice to or from any Person relating to any
such alleged or potential 

 

default that has not been cured. No event has occurred which with or
without the giving of notice or lapse of time, or both, may conflict with or
result in a violation or breach of, or give any Person the right to exercise
any remedy under or accelerate the maturity or performance of, or cancel,
terminate or modify, any Material Contract.

(d)                                 Seller
has delivered accurate and complete copies of each Material Contract to Buyer.

(e)                                  All
Contracts other than Material Contracts Related to the Business (collectively,
the “Minor Contracts”) are in all material respects valid and enforceable in
accordance with their terms. Seller is not and, to Seller’s Knowledge, no other
party thereto is, in default in the performance, observance or fulfillment of
any obligation, covenant or condition contained therein, and Seller has not
given or received notice to or from any Person relating to any such alleged or
potential default that has not been cured, except in either case where such
default would not and would not reasonably be expected to have, individually or
in the aggregate, a material adverse effect on the Purchased Assets or the
condition (financial or otherwise), operations, prospects or results of
operations of the Business or Seller. No event has occurred which with or
without the giving of notice or lapse of time, or both, may conflict with or
result in a violation or breach of, or give any Person the right to exercise
any remedy under or accelerate the maturity or performance of, or cancel,
terminate or modify, any Minor Contract, except where such violation, breach,
remedy, acceleration, cancellation, termination or modification could not and
could not reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the Purchased Assets or the condition (financial or
otherwise), operations, prospects or results of operations of the Business or
Seller.

4.17                           Sufficiency of Purchased Assets.

(a)                                  The
Purchased Assets include as of the Closing Date all assets, properties and
rights reflected on the Audited Financial Statements other than (i) Inventory
sold, (ii) Accounts Receivable collected, (iii) prepaid expenses realized, (iv)
items of obsolete Equipment disposed of and (v) the Excluded Assets, in the
case of each of (i)-(iv) in the ordinary course of the Business consistent with
past practice.

(b)                                 The
Purchased Assets will be sufficient for the conduct and operation of the
Business by Buyer following the Closing in the same manner as conducted and
operated by Seller on the Balance Sheet Date and Interim Balance Sheet Date and
as currently conducted.

(c)                                  None
of the Excluded Assets is material to the Business.

4.18                           Litigation.

(a)                                  Except
as listed in Section 4.18 of the Seller Disclosure Schedule, there is no
action, suit or proceeding, claim, arbitration, litigation or investigation
(each, an “Action”), in each case Related to the Business, (i) pending or, to
Seller’s Knowledge, threatened against or affecting Seller, or (ii) that
challenges or seeks to prevent, enjoin or 

 

otherwise delay the transactions contemplated by this Agreement or the
Ancillary Agreements.  No event has
occurred or circumstances exist that may give rise or serve as a basis for any
such Action.  There is no Action against any
current or, to Seller’s Knowledge, former director or employee of the Business
with respect to which Seller has or is reasonably likely to have an
indemnification obligation.

(b)                                 There
is no unsatisfied judgment, penalty or award, in each case Related to the
Business, against or affecting Seller or any of their respective assets,
properties or rights.

4.19                           Employee Benefits.

(a)                                  The
Seller Disclosure Schedule sets forth a complete and accurate list of all
Benefit Plans maintained or contributed to by Seller for the benefit of any
present or former directors, employees or contractors of the Business or with
respect to which Seller otherwise has any present or future Liability
(collectively, “Seller Benefit Plans”). A current, accurate and complete copy
of Seller Benefit Plans have been provided to Buyer. Seller has no intent or
commitment to create any additional Seller Benefit Plan or amend any Seller
Benefit Plan.

(b)                                 Each
Seller Benefit Plan has been and is currently administered in compliance with
all reporting, disclosure and other requirements of ERISA and the Code
applicable to such Seller Benefit Plan. Seller Benefit Plans that are employee
pension benefit plans (as defined in Section 3(2) of ERISA) and which are
intended to be qualified under Section 401 (a) of the Code (a “Pension Plan”),
have been determined by the Internal Revenue Service to be so qualified and no
condition exists that would adversely affect any such determination. No Seller
Benefit Plan is a “defined benefit plan” as defined in Section 3(35) of ERISA.

(c)                                  Seller
nor any ERISA Affiliate nor any trustee or agent of any Seller’s Benefit Plans
has not been or are currently engaged in any prohibited transactions as defined
by Section 406 of ERISA or Section 4975 of the Code for which an exemption is
not applicable which could subject Seller, any ERISA Affiliate or any trustee
or agent of any Seller Benefit Plan to the Tax or penalty imposed by Section
4975 of the Code or Section 502 of ERISA.

(d)                                 Seller
nor any ERISA Affiliate has not been or is currently party to any “multi-employer
plan,” as that term is defined in Section 3(37) of ERISA.

(e)                                  True
and correct copies of the most recent annual report on Form 5500 and any
attached schedules for each Seller Benefit Plan (if any such report was
required by applicable Law) and a true and correct copy of the most recent
determination letter issued by the Internal Revenue Service for each Pension
Plan have been provided to Buyer.

(f)                                    There
are no actions, suits or claims (other than routine claims for benefits in the
ordinary course) pending or, to Seller’s Knowledge, threatened against any
Seller 

 

Benefit Plan, Seller, any ERISA Affiliate or any trustee or agent of
any Seller Benefit Plan.

(g)                                 With
respect to each Seller Benefit Plan to which Seller or any ERISA Affiliate is a
party which constitutes a group health plan subject to Section 4980B of the
Code, each such Seller Benefit Plan complies, and in each case has complied,
with all applicable requirements of Section 4980B of the Code.

(h)                                 Full
payment has been made of all amounts which Seller or any ERISA Affiliate was
required to have paid as a contribution to any Seller Benefit Plan as of the
last day of the most recent fiscal year of each of the Benefit Plans and prior
to the date of this Agreement.

(i)                                     Each
Seller Benefit Plan is, and its administration is and has been during the
six-year period preceding the date of this Agreement, in compliance with, and
neither Seller nor any ERISA Affiliate has received any claim or notice that
any such Seller Benefit Plan is not in compliance with, all applicable Laws and
Orders and prohibited transaction exemptions, including to the extent
applicable, the requirements of ERISA.

(j)                                     Seller
nor any ERISA Affiliate is not in default in performing any of its contractual
obligations under any of the Seller Benefit Plans or any related trust
agreement or insurance contract.

(k)                                  There
are no material outstanding Liabilities of any Seller Benefit Plan other than
Liabilities for benefits to be paid to participants in any Seller Benefit Plan
and their beneficiaries in accordance with the terms of such Seller Benefit
Plan.

(1)                                  Subject
to ERISA and the Code, each Seller Benefit Plan may be amended, modified,
terminated or otherwise discontinued by Seller or an ERISA Affiliate at any
time without liability.

(m)                               No
Seller Benefit Plan other than a Pension Plan, retiree medical plan or
severance plan provides benefits to any individual after termination of
employment.

(n)                                 The
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former director, employee or contractor of the Business
to severance pay, unemployment compensation, deferral compensation or any other
payment, (ii) accelerate the time of payment or vesting, or increase the amount
of, compensation due to any such director, employee, contractor or consultant,
or result in the payment of any other benefits to any Person or the forgiveness
of any Indebtedness of any Person, (iii) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which an exemption
is not available or (iv) result (either alone or in conjunction with any other
event) in the payment or series of payments by Seller or any of their
Affiliates to any Person of an “excess parachute payment” within the meaning of
Section 280G of the Code.

(o)                                 With
respect to each Seller Benefit Plan that is funded wholly or partially through
an insurance policy, all premiums required to have been paid to date under the 

 

insurance policy have been paid, all premiums required to be paid under
the insurance policy through the Closing will have been paid on or before the
Closing and, as of the Closing, there will be no liability of Seller or any
ERISA Affiliate under any insurance policy or ancillary agreement with respect
to such insurance policy in the nature of a retroactive rate adjustment, loss
sharing arrangement or other Liability arising wholly or partially out of
events occurring prior to the Closing.

(p)                                 Each
Seller Benefit Plan that constitutes a “welfare benefit plan,” within the
meaning of Section 3(1) of ERISA, and for which contributions are claimed by
Seller or any ERISA Affiliate as deductions under any provision of the Code, is
in compliance with all applicable requirements pertaining to such deduction.
With respect to any welfare benefit fund (within the meaning of Section 419 of
the Code) related to a welfare benefit plan, there is no disqualified benefit
(within the meaning of Section 4976(b) of the Code) that would result in the
imposition of a Tax under Section 4976(a) of the Code. All welfare benefit
funds intended to be exempt from Tax under Section 501 (a) of the Code have
been determined by the Internal Revenue Service to be so exempt and no event or
condition exists which would adversely affect any such determination.

(q)                                 Each
Seller Benefit Plan that is a deferred compensation plan subject to section
409A of the Code has been operated in compliance with section 409A and the IRS
guidance and proposed regulations issued pursuant thereto.

4.20                           Labor and Employment Matters.

(a)                                  The
Seller Disclosure Schedule sets forth (i) a list of all Business Employees
(including title and position) and contractors of the Business as of the date
hereof, (ii) the compensation and benefits of each such Business Employee and
contractor, (iii) the length of service for each Business Employee, (iv) the
location of employment for each Business Employee, and (v) the hours of
vacation pay, holiday pay and other paid leave time earned or accrued based
upon services performed prior to Closing. 
The employment of all Business Employees, except those that Seller has
designated as employed in Ireland, and contractors may be terminated at any
time with or without cause and without any severance or other Liability to
Seller.

(b)                                 Seller
is not a party or subject to any labor union or collective bargaining agreement
in connection with the Business. There have not been and there are not pending
or, to Seller’s Knowledge, threatened, any labor disputes, work stoppages,
requests for representation, pickets, work slow-downs due to labor
disagreements or any actions or arbitrations that involve Business Employees.
There is no unfair labor practice, charge or complaint pending, unresolved or,
to Seller’s Knowledge, threatened before the National Labor Relations Board. No
event has occurred or circumstance exist that may provide the basis of any work
stoppage or other labor dispute in connection with the Business.

(c)                                  Seller
has complied in all material respects with each, and is not in violation in any
material respect of any, Law relating to anti-discrimination and equal
employment opportunities in connection with the Business. There are, and have
been, no 

 

violations of any other
Law respecting the hiring, hours, wages, occupational safety and health,
employment, promotion, termination or benefits of any Business Employee or
other Person in connection with the Business. Seller has filed all reports,
information and notices required under any Law respecting the hiring, hours,
wages, occupational safety and health, employment, promotion, termination or
benefits of any Business Employee or other Person in connection with the
Business, and will timely file prior to Closing all such reports, information
and notices required by any Law to be given prior to Closing.

(d)                                 Seller
has paid or properly accrued in the ordinary course of the Business all wages
and compensation due to Business Employees, including all vacations or vacation
pay, holidays or holiday pay, sick days or sick pay, and bonuses.

(e)                                  Seller
is not a party to any Contract which restricts Seller from relocating, closing
or terminating any of its operations or facilities or any portion thereof.  Seller has never effectuated a “plant closing”
(as defined in the WARN Act) or (ii) a “mass lay-off’ (as defined in the WARN
Act), in either case affecting any site of employment or facility of Seller,
except in accordance with the WARN Act. The consummation of the transactions
contemplated by this Agreement will not create liability for any act by Seller
on or prior to the Closing under the WARN Act or any other Law respecting
reductions in force or the impact on employees of plant closings or sales of
businesses.  To the extent that liability
should arise in this context, said liability shall be Seller’s sole
responsibility.

(f)                                    Seller
has complied and is in compliance in all material respects with the
requirements of the Immigration Reform and Control Act of 1986.  The Seller’s Disclosure Schedule sets forth a
true and complete list of all Employees working in the United States who are
not U.S. citizens and a description of the legal status under which each such
Employee is permitted to work in the United States.  All Employees who are performing services for
Seller in the United States are legally able to work in the United States and
will be able to continue to work in the Business in the United States following
the consummation of the transactions contemplated by this Agreement.

4.21                           Environmental.

(a)                                  As
used in this Agreement, the following words and terms have the following definitions:

(i)                                     The
term “Environment” means all indoor or outdoor air, surface water, groundwater,
surface or subsurface land, including all fish, wildlife, biota and all other
natural resources.

(ii)                                  The
term “Environmental Action” means any claim, proceeding or other Action brought
or threatened under any Environmental Law or the assertion of any claim with
respect to Pre-Closing Environmental Liabilities.

(iii)                               The
term “Environmental Clean-up Site” means any location which is listed on the
National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System, or on any similar 

 

state or foreign list of sites requiring investigation or cleanup, or
which is the subject of any pending or threatened Action related to or arising
from any alleged violation of any Environmental Law, or at which there has been
a threatened or actual Release of a Hazardous Substance.

(iv)                              The
term “Environmental Laws” means any and all applicable Laws and Authorizations
issued, promulgated or entered into by any Governmental Entity relating to the
Environment, worker health and safety, preservation or reclamation of natural
resources or to the management, handling, use, generation, treatment, storage,
transportation, disposal, manufacture, distribution, formulation, packaging,
labeling, Release or threatened Release of or exposure to Hazardous Substances,
whether now existing or subsequently amended or enacted, including but not
limited to: the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq. (“CERCLA”), the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Clean Air Act, 42
U.S.C. Section 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; the Occupational Safety and Health Act, 29 U.S.C. Section
651 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. Section 11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section
300f et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C.
Section 136 et seq.; the Resource Conservation and Recovery Act of 1976 (“RCRA”),
42 U.S.C. Section 6901 et seq.; the Oil Pollution Act of 1990, 33 U.S.C.
Section 2701 et seq.; and any similar or implementing state or local Law, and
any non-United States Law of similar import, and all amendments or regulations
promulgated thereunder; and any common law doctrine, including but not limited
to, negligence, nuisance, trespass, personal injury, or property damage related
to or arising out of the presence, Release, or exposure to Hazardous
Substances.

(v)                                 The
term “Environmental Permit” means any Authorization under Environmental Law and
includes any and all Orders issued or entered into by a Governmental Entity
under Environmental Law.

(vi)                              The
term “Hazardous Substances” means all explosive or regulated radioactive
materials or substances, hazardous or toxic materials, wastes or chemicals,
petroleum and petroleum products (including crude oil or any fraction thereof),
asbestos or asbestos containing materials, and all other materials, chemicals
or substances which are regulated by, form the basis of liability or are
defined as hazardous, extremely hazardous, toxic or words of similar import,
under any Environmental Law, including without limitation materials listed in
49 C.F.R. Section 172.101 and substances defined as hazardous pursuant to
Section 101(14) of CERCLA.

(vii)                           The
term “Release” means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of
Hazardous Substances into the Environment.

 

(b)                                 To
Seller’s Knowledge, Seller has obtained, and is in compliance with, all
Environmental Permits required in connection with the Business and the Real
Property. Each Environmental Permit, together with the name of the Governmental
Entity issuing such Environmental Permit, is set forth in the Seller Disclosure
Schedule. All such Environmental Permits are valid and in full force and effect
and all renewal applications for such Environmental Permits have been timely
filed with the appropriate Governmental Entity. None of such Environmental
Permits will be terminated or impaired or become terminable as a result of the
consummation of the transactions contemplated by this Agreement. Seller has
been, and is currently, in compliance with all Environmental Laws and Seller
has not received notice alleging that Seller is not in such compliance with
Environmental Laws, in each case in connection with the Business.

(c)                                  There
are no past, pending or, to Seller’s Knowledge, threatened Environmental
Actions against or affecting Seller in connection with the Business, and Seller
is not aware of any facts or circumstances which could be expected to form the
basis for any such Environmental Action.

(d)                                 Seller
has not entered into or agreed to any Order, and Seller is not subject to any
Order, relating to compliance with any Environmental Law or to investigation or
cleanup of a Hazardous Substance under any Environmental Law, in each case in
connection with the Business.

(e)                                  No
Lien has been attached to, or asserted against, any assets, Real Property or
rights in connection with the Business pursuant to any Environmental Law, and,
to Seller’s Knowledge, no such Lien has been threatened. To Seller’s Knowledge,
there are no facts, circumstances or other conditions that could be expected to
give rise to any Liens on or affecting the Real Property under Environmental
Law.

(f)                                    To
Seller’s Knowledge, there has been no treatment, storage, disposal or Release
of any Hazardous Substance at, from, into, on or under any Real Property or any
other property currently or formerly owned, operated or leased by Seller in
connection with the Business. No Hazardous Substances are present in, on, about
or migrating to or front any Real Property that could be expected to give rise
to an Environmental Action against Seller.

(g)                                 Seller
has not received a CERCLA 104(e) information request nor has Seller been named
a potentially responsible party for any National Priorities List site under
CERCLA or any other site under analogous state Law, in each case in connection
with the Business. Seller has not received any analogous notice or request from
any non-United States Governmental Entity.

(h)                                 To
Seller’s Knowledge, there are no aboveground tanks or underground storage tanks
on, under or about the Real Property. Any aboveground or underground tanks
previously situated on the Real Property or any other real property currently
or formerly owned, operated or leased by Seller in connection with the Business
have been removed in accordance with all Environmental Laws and no residual
contamination, if any, remains at such sites in excess of applicable standards.

 

(i)                                     To
Seller’s Knowledge, there are no polychlorinated biphenyls (“PCBs”) leaking
from any article, container or equipment on, under or about the Real Property
and there are no such articles, containers or equipment containing PCBs in, at,
on, under or within the Real Property.

(j)                                     To
Seller’s Knowledge, there is no asbestos containing material or lead-based
paint containing materials in at, on, under or within the Real Property.

(k)                                  To
Seller’s Knowledge, Seller has not in connection with the Business transported
or arranged for the treatment, storage, handling, disposal, or transportation
of any Hazardous Material to any off-site location which is an Environmental
Clean-up Site.

(1)                                  None
of the Real Property is an Environmental Clean-up Site.

(m)                               Seller
has provided to Buyer true and complete copies of, or access to, all written
environmental assessments, materials, reports, data, analyses and compliance audits
that have been prepared by or on behalf of Seller with respect to the Real
Property or any other real property formerly owned, operated or leased by
Seller in connection with the Business.

4.22                           Insurance.

(a)                                  The
Seller Disclosure Schedule sets forth (i) an accurate and complete list of each
insurance policy and fidelity bond which covers the Business and Seller with
respect to the Business (the “Policies”) and (ii) with respect to the Business,
a list of all pending claims and the claims history for Seller during the
current year and the preceding three years (including with respect to insurance
obtained but not currently maintained). There are no pending claims under any
of such Policies with respect to the Business as to which coverage has been questioned,
denied or disputed by the insurer or in respect of which the insurer has
reserved its rights.

(b)                                 The
Seller Disclosure Schedule describes any self-insurance arrangement by or
affecting the Seller with respect to the Business, including any reserves
thereunder, and describes the loss experience for all claims that were
self-insured in the current year and the preceding three years.

(c)                                  All
Policies are issued by an insurer that is financially sound and reputable, are
in full force and effect and are enforceable in accordance with their terms.
Such Policies provide adequate insurance coverage for the Business, and are
sufficient for compliance with all Laws and Contracts to which Seller is a
party or by which it is bound in connection with the Business.

(d)                                 All
premiums due under the Policies have been paid in full or, with respect to
premiums not yet due, accrued.  Seller
has not received a notice of cancellation of any Policy or of any material
changes that are required in the conduct of the Business as a condition to the
continuation of coverage under, or renewal of, any such Policy. There is no
existing default or event which, with the giving of notice or lapse of time or
both, would constitute a default under any Policy or entitle any insurer to terminate
or cancel 

 

any Policy with respect to the Business.  Seller has no Knowledge of any threatened
termination of any Policy.

(e)                                  Seller
will keep in place all existing policies thought the date of closing.

4.23                           Product Warranty.

(a)                                  To
Seller’s Knowledge, there are no warranties (express or implied) outstanding
with respect to any products currently or formerly manufactured, sold,
distributed, shipped or licensed (“Products”), or any services rendered, by
Seller in connection with the Business, beyond that set forth in the standard
conditions of sale or service, copies of which are included in the Seller
Disclosure Schedule.

(b)                                 To
Seller’s Knowledge, each Product manufactured, sold, distributed, shipped or
licensed, or service rendered, by the Seller in connection with the Business
has been in conformity with all applicable contractual commitments and
warranties. There are no material design, manufacturing or other defects,
latent or otherwise, with respect to any Products and such Products are not toxic
when used in accordance with their intended use. Each Product that has been
manufactured, sold, distributed, shipped or licensed prior to Closing contains
all, warnings required by applicable Law and such warnings are in accordance
with reasonable industry practice.

(c)                                  The
Interim Balance Sheet reflects adequate reserves (in accordance with GAAP) for
product design and warranty claims and other damages in connection with any
Product manufactured, sold, distributed, shipped or licensed, or service rendered,
by the Seller in connection with the Business on or prior to the Interim
Balance Sheet Date. The accounting records of the Business will reflect
adequate reserves (in accordance with GAAP) for all such claims in connection
with Products manufactured, sold, distributed, shipped or licensed, or services
rendered by, Seller in connection with the Business on or prior to the Closing.

4.24                           Suppliers and Customers.

(a)                                  Section
4.24 of the Seller Disclosure Schedule sets forth with respect to the Business:

(i)                                     the
Seller’s 20 largest suppliers;

(ii)                                  each
supplier who constitutes a sole source of supply to the Business; and

(iii)                               the
Seller’s 20 largest customers.

(b)                                 The
relationships of the Business with each supplier and customer required to be
listed in Section 4.24 of the Seller Disclosure are good commercial working
relationships. No such supplier or customer has canceled or otherwise
terminated, or threatened to cancel or otherwise terminate, its relationship
with the Business. Seller has not received notice that any such supplier or
customer may cancel, 

 

terminate or otherwise materially and adversely modify its relationship
with the Business or limit its services, supplies or materials to the Business,
either as a result of the consummation of the transactions contemplated by this
Agreement or otherwise.

4.25                           Solvency.  Seller is
not insolvent or will be rendered insolvent by any of the transactions
contemplated by this Agreement and the Ancillary Agreements. “Insolvent” means,
with respect to any Person, that the sum of the debts and other probable
Liabilities of such Person exceeds the present fair saleable value of such
Person’s assets.

4.26                           Brokers or Finders. 
Seller represents, as to itself and its Affiliates, that no agent,
broker, investment banker or other firm or Person is or will be entitled to any
broker’s or finder’s fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement and the Ancillary
Agreements, except whose fees and expenses will be paid by Seller.

4.27                           Completeness of Disclosure. 
No representation or warranty by Seller in this Agreement, and no
statement made by Seller in the Seller Disclosure Schedule, the Ancillary
Agreements or any certificate or other document furnished or to be furnished to
Buyer pursuant hereto, or in connection with the negotiation, execution or
performance of this Agreement and the Ancillary Agreements contains or will at
the Closing contain any untrue statement of a material fact or omits or will
omit to state a material fact required to be stated herein or therein or
necessary to make any statement herein or therein not misleading. Except as
specifically set forth in this Agreement or the Seller Disclosure Schedule,
there are no facts or circumstances of which Seller is aware that have had or
could be expected to have, individually or in the aggregate, a material adverse
effect on the Purchased Assets or the condition (financial or otherwise),
operations, prospects or results of operations of the Business or Seller.

ARTICLE V

REPRESENTATIONS
AND WARRANTIES OF BUYER

Buyer represents
and warrants to Seller that each statement contained in this Article V is
true and correct as of the date hereof.

5.1                                 Organization and Good Standing.  Buyer is a corporation duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
incorporation and has the requisite corporate power to own, lease and operate
its properties and to carry on its business as now being conducted.

5.2                                 Authority and Enforceability.  Buyer has the requisite corporate power and
authority to enter into this Agreement and the Ancillary Agreements to which it
is a party and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Ancillary Agreements to
which Buyer is a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Buyer. This Agreement has been, and the Ancillary Agreements to
which Buyer is a party will be, duly executed and delivered by Buyer and,
assuming due authorization, execution and delivery by Seller, constitutes the
valid and binding obligations of Buyer, enforceable against it in accordance with
their respective terms, except as such 

 

enforceability may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar Laws affecting or relating to creditors’ rights generally, and (b) the
availability of injunctive relief and other equitable remedies.

5.3                                 Litigation.  There is
no Action pending or, to the Knowledge of Buyer, threatened against, Buyer
which (a) challenges or seeks to enjoin, alter or materially delay the
consummation of the transactions contemplated by this Agreement, or (b) would
reasonably be expected to have a material adverse effect on Buyer.

5.4                                 Brokers or Finders. 
Buyer represents, as to itself and its Affiliates, that no agent,
broker, investment banker or other firm or Person is or will be entitled to any
broker’s or finder’s fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement and the Ancillary
Agreements.

ARTICLE VI

COVENANTS
OF BUYER AND SELLER

6.1                                 Regulatory Approvals.

(a)                                  Buyer
and Seller shall each promptly apply for, and take all reasonably necessary
actions to obtain or make, as applicable, all Orders and Authorizations of, and
all filings with, any Governmental Entity or other Person required to be
obtained or made by it for the consummation of the transactions contemplated by
this Agreement. Each party shall cooperate with and promptly furnish
information to the other party necessary in connection with any requirements
imposed upon such other party in connection with the consummation of the
transactions contemplated by this Agreement.

(b)                                 Seller
shall assist Buyer in identifying the Authorizations required by Buyer to
operate and conduct the Business from and after the Closing Date and will
either transfer current Business Authorizations of Seller to Buyer or assist
Buyer in obtaining new Authorizations.

6.2                                 Public Announcements. 
Neither Buyer nor Seller shall issue any press releases or otherwise
make any public statements with respect to the transactions contemplated by
this Agreement; provided, however, that Buyer may, without such approval, make
such press releases or other public announcement as it believes are required
pursuant to any listing agreement with any national securities exchange or
stock market or applicable securities Laws.

6.3                                 Names.  On the Closing
Date, Seller shall deliver to Buyer all such executed documents as may be
required to change the name of Seller on that date to another name or names
bearing no similarity to any of the Names, including, where applicable, name
change amendments and appropriate name change notices for each state where
Seller is qualified to do business. Seller hereby appoints Buyer as its
attorney-in-fact to file all such documents on or after the Closing Date.
Seller will terminate the use of any and all d/b/as currently or formerly used
by it Related to the Business. “Names” means “Everest Metal Finishing, LLC,” “Everest
Metal Finishing,” “Everest Finishing,” “Everest Metal,” or any name, logo or
trademark that includes “Everest Metal Finishing, LLC,” “Everest Metal
Finishing,” “Everest Finishing,” 

 

“Everest Metal,” any
variation and derivatives thereof and any other logos or trademarks of the
Business transferred to Buyer pursuant to this Agreement and the Ancillary
Agreements.

6.4                                 Employees.

(a)                                  Buyer
shall not be obligated to offer employment to any Business Employee.

(b)                                 Buyer
may offer employment to any Business Employee on such terms and conditions as
it deems appropriate in its sole discretion, such employment to be contingent
upon and effective immediately following the Closing.  The Business Employees who accept Buyer’s
offer of employment and commence employment with Buyer shall be referred to,
collectively, as “Transferred Employees.” 
Seller shall terminate the employment of all Transferred Employees
immediately prior to the Closing.

(c)                                  Any
and all Liabilities relating to or arising out of the employment, or cessation
of employment, of any Business Employee (whether or not a Transferred Employee)
on or prior to the close of business on the Closing Date shall be the sole
responsibility of Seller including wages and other remuneration due through the
close of business on the Closing Date.

(d)                                 From
and after the Closing Date, Buyer shall offer to Transferred Employees such
Benefit Plans and arrangements as it deems appropriate in its sole
discretion.  Buyer shall not assume any
Liability under any of the Seller Benefit Plans or Foreign Plans.

(e)                                  All
Transferred Employees who are participants in a Seller Benefit Plan that is an
employee pension benefit plan shall retain their accrued benefits under such
plans as of the Closing Date, and Seller shall retain Liability for the payment
of benefits as and when such Transferred Employees become eligible therefor
under such plans.  All Transferred
Employees shall become fully vested in their accrued benefits under Seller’s
pension benefit plans as of the Closing Date.

(f)                                    Seller
shall be liable for any severance, separation, deferred compensation or similar
benefits that are payable under the WARN Act or other applicable law (i) to any
Person who is or was an employee of Seller and who is not a Transferred
Employee, including any Person whose employment with the Business was
terminated prior to the Closing (“Seller Employees”), and (ii) to Transferred
Employees, to the extent that such Transferred Employee’s right to severance,
separation, deferred compensation or similar benefits arises as a result of the
transactions contemplated by this Agreement and the Ancillary Agreements.

(g)                                 Seller
shall be liable for the administration and payment of all workers’ compensation
Liabilities and benefits with respect to (i) Transferred Employees to the
extent resulting from claims, events, circumstances, exposures, conditions or
occurrences occurring on or prior to the Closing, and (ii) Seller Employees.
Buyer shall be liable for the administration and payment of all workers’
compensation Liabilities and benefits 

 

with respect to Transferred Employees to the extent resulting from
claims, events, circumstances, exposures, conditions or occurrences occurring
after the Closing Date.

(h)                                 Seller
shall be liable for the administration and payment of all health and welfare
Liabilities and benefits under the Seller Benefit Plans with respect to (i)
Transferred Employees to the extent resulting from claims, events,
circumstances, exposures, conditions or occurrences occurring on or prior to
the Closing, and (ii) Seller Employees. Buyer shall be liable for the
administration and payment of all health and welfare Liabilities and benefits
under Buyer’s Benefit Plans with respect to Transferred Employees participating
therein to the extent resulting from claims, events, circumstances, exposures,
conditions or occurrences occurring after the Closing Date.

(i)                                     Seller
shall retain and perform all Liabilities and maintain all insurance under the
Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) with respect
to Seller Employees and their covered dependents; provided that Buyer shall
perform all of its obligations under COBRA with respect to Transferred
Employees that become covered by any group health insurance plan of Buyer.

(j)                                     Except
as expressly set forth in this Section 6.4A with respect to Transferred
Employees, Buyer shall have no obligation with respect to any Business Employee
or any other employee of Seller.

(k)                                  Nothing
in this Agreement confers upon any Business Employee or Transferred Employee
any rights or remedies of any nature or kind whatsoever under or by reason of
this Section 6.4. Nothing in this Agreement shall limit the right of Buyer to
terminate or reassign any Transferred Employee after the Closing or to change
the terms and conditions of his or employment in any manner.

6.5                                 Taxes.

(a)                                  Seller
shall pay all federal, state, local and foreign sales, stamp, documentary and
real estate and other transfer Taxes, if any, due as a result of the purchase,
sale or transfer of any of the Purchased Assets in accordance herewith whether
imposed by Law on Seller or Buyer.

(b)                                 All
real property Taxes, personal property Taxes and similar ad valorem obligations
levied with respect to the Purchased Assets for a taxable period that includes
(but does not end on) the Closing Date shall be apportioned between Seller and
Buyer as of the Closing Date based on the number of days of such taxable period
included in the period ending with and including the Closing Date (with respect
to any such taxable period, the “Pre-Closing Tax Period”), and the number of
days of such taxable period beginning after the Closing Date (with respect to
any such taxable period, the “Post-Closing Tax Period”). Seller shall be liable
for the proportionate amount of such Taxes that is attributable to the
Pre-Closing Tax Period, and Buyer shall be liable for the proportionate amount
of such Taxes that is attributable to the Post-Closing Period. If bills for
such Taxes have not been issued as of the Closing Date, and, if the amount of
such Taxes for the period including the Closing Date is not then known, the
apportionment of 

 

such Taxes shall be made at Closing on the basis of the prior period’s
Taxes. After Closing, upon receipt of bills for the period including the
Closing Date, adjustments to the apportionment shall be made by the parties, so
that if either party paid more than its proper share at the Closing, the other
party shall promptly reimburse such party for the excess amount paid by them.

(c)                                  Buyer
and Seller agree to furnish or cause to be furnished to each other, upon
request, as promptly as practicable, such information and assistance relating
to the Business, the Purchased Assets and Assumed Liabilities (including access
to books and records) as is reasonably necessary for the filing of all Tax
Returns, the making of any election relating to Taxes, the preparation for any
audit by any Taxing Authority, and the prosecution or defense of any Action
relating to any Tax. Any expenses incurred in furnishing such information or
assistance shall be borne by the party requesting it.

6.6                                 Bulk Sales Laws. 
Buyer and Seller hereby waive compliance by Buyer and Seller with the
bulk sales Law and any other similar Laws in any applicable jurisdiction in
respect of the transactions contemplated by this Agreement and the Ancillary
Agreements; provided, however, that Seller shall pay and discharge when due all
claims of creditors asserted against Buyer or the Purchased Assets by reason of
such noncompliance and shall take promptly all necessary actions required to
remove any Lien which may be placed upon any of the Purchased Assets by reason
of such noncompliance.

6.7                                 Discharge of Business Obligations After Closing.

(a)                                  From
and after the Closing, Seller shall pay and discharge on a timely basis all of
the Excluded Liabilities.

(b)                                 From,
and after the Closing, Seller or any of its respective Affiliates receives or
collects any funds relating to any Accounts Receivable or any other Purchased
Asset, Seller or its Affiliate shall remit such funds to Buyer within five
Business Days after its receipt thereof. From and after the Closing, if Buyer
receives or collects any funds relating to any Excluded Asset, Buyer shall
remit any such funds to Seller within five Business Days after its receipt
thereof.

(c)                                  Effective
upon the Closing, Seller shall appoint Buyer as its true and lawful
attorney-in-fact, in Seller’s name, but on behalf of Buyer to (i) receive and
open all mail, packages and other communications addressed to Seller Related to
the Business, and (ii) demand and receive all Accounts Receivable and endorse
without recourse the name of Seller on any check or any other evidences of
Indebtedness received by Buyer on account of the Business and the Purchased
Assets transferred to Buyer hereunder. Seller agrees that the foregoing
appointment shall be coupled with an interest and shall be irrevocable.

6.8                                 Access to Books and Records. 
Seller and Buyer shall preserve until the tenth anniversary of the
Closing Date all records possessed or to be possessed by such party relating to
any of the assets, Liabilities or business of the Business prior to the
Closing. After the Closing Date, where there is a legitimate business purpose,
such party shall provide the other party with 

 

access, upon prior
reasonable written request specifying the need therefor, during regular
business hours, to (i) the officers and employees of such party and (ii) the
books of account and records of such party, but, in each case, only to the
extent relating to the assets, Liabilities or business of the Business prior to
the Closing, and the other party and its representatives shall have the right to
make copies of such books and records at their sole cost; provided, however,
that the foregoing right of access shall not be exercisable in such a manner as
to interfere unreasonably with the normal operations and business of such
party. Such records may nevertheless be destroyed by a party if such party
sends to the other party written notice of its intent to destroy records,
specifying with particularity the contents of the records to be destroyed. Such
records may then be destroyed after the 30th day after such notice is given
unless the other party objects to the destruction in which case the party
seeking to destroy the records shall deliver such records to the objecting
party at the objecting party’s cost.

6.9                                 Further Assurances. 
Buyer and Seller shall execute such documents and other instruments, and
take such further actions as may be reasonably required or desirable to carry
out the provisions of this Agreement and the Ancillary Agreements and to
consummate the transactions contemplated hereby and thereby. Upon the terms and
subject to the conditions hereof, Buyer and Seller shall each use its
respective reasonable best efforts to (a) take or cause to be taken all actions
and to do or cause to be done all other things necessary, proper or advisable
to consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement and the Ancillary Agreements and (b) obtain in a
timely manner all Consents and Authorizations and effect all necessary
registrations and filings. From time to time after the Closing, at Buyer’s
request, Seller shall execute, acknowledge and deliver to Buyer such other
instruments of conveyance and transfer and will take such other actions and
execute and deliver such other documents, certifications and further assurances
as Buyer may reasonably require in order to vest more effectively in Buyer, or
to put Buyer more fully in possession of, any of the Purchased Assets.

ARTICLE VII

MISCELLANEOUS

7.1                                 Notices.  Any notice,
request, demand, waiver, consent, approval or other communication which is
required or permitted hereunder shall be in writing and shall be deemed given
(a) on the date established by the sender as having been delivered personally,
(b) on the date delivered by a private courier as established by the sender by
evidence obtained from the courier, (c) on the date sent by facsimile, with
confirmation of transmission, if sent during normal business hours of the
recipient, if not, then on the next business day, or (d) on the fifth day after
the date mailed, by certified or registered mail, return receipt requested,
postage prepaid. Such communications, to be valid, must be addressed as
follows:

If to Buyer, to:

Symmetry Medical USA Inc.

220 West Market Street

Warsaw, IN  46580

Attn:  Fred L. Hite, CFO

Facsimile:  574-267-4551

 

With a required copy to:

Barrett & McNagny LLP

215 East Berry Street

Fort Wayne, IN  46802

Attn:  Samuel J. Talarico, Jr.

Facsimile:  260-423-8920

If to Seller, to:

Everest Metal Finishing,
LLC

382 Route 59

Monsey, New York

Attn: Levi Citarella

Facsimile: 845-369-8947

With a required copy to:

Huntington Bailey,
L.L.P. 

312 Kinderkamack Road 

Westwood, New Jersey 07675 

Attn: Russell R. Huntington, Esq.

Fax (201) 666-9625

or to such other address
or to the attention of such Person or Persons as the recipient party has
specified by prior written notice to the sending party (or in the case of
counsel, to such other readily ascertainable business address as such counsel
may hereafter maintain). If more than one method for sending notice as set
forth above is used, the earliest notice date established as set forth above
shall control.

7.2                                 Amendments and Waivers.

(a)                                  Any
provision of this Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and is signed, in the case of an amendment,
by each party to this Agreement, or in the case of a waiver, by the party
against whom the waiver is to be effective.

(b)                                 No
failure or delay by any party in exercising any right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.

(c)                                  To
the maximum extent permitted by Law, (i) no waiver that may be given by a party
shall be applicable except in the specific instance for which it was given and
(ii) no notice to or demand on one party shall be deemed to be a waiver of any
obligation of such party or the right of the party giving such notice or demand
to take further action without notice or demand.

 

7.3                                 Expenses.  Each party
shall bear its own costs and expenses in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated hereby and thereby,
including all legal, accounting, financial advisory, consulting and all other fees
and expenses of third parties, whether or not the transactions contemplated by
this Agreement are consummated.

7.4                                 Successors and Assigns. 
This Agreement may not be assigned by any party hereto without the prior
written consent of the other parties; provided that, without such consent,
Buyer may transfer or assign this Agreement, in whole or in part or from time
to time, to one or more of its Affiliates, but no such transfer or assignment
will relieve Buyer of its obligations hereunder. Subject to the foregoing, all
of the terms and provisions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective executors, heirs,
personal representatives, successors and assigns.

7.5                                 Governing Law.  This
Agreement and Schedules hereto shall be governed by and interpreted and
enforced in accordance with the Laws of the State of Indiana, without giving
effect to any choice of Law or conflict of Laws rules or provisions (whether of
the State of Indiana or any other jurisdiction) that would cause the
application of the Laws of any jurisdiction other than the State of Indiana.

7.6                                 Consent to Jurisdiction.  Each party irrevocably submits to the
exclusive jurisdiction of (a) United States District Court of the Northern
District of Indiana, Fort Wayne Division, and (b) the Allen County Superior
Court for the purposes of any Action arising out of this Agreement or any
transaction contemplated hereby. Each party agrees to commence any such Action
either in the United States District Court of the Northern District of Indiana,
Fort Wayne Division or if such Action may not be brought in such court for
jurisdictional reasons, in the Allen County Superior Court. Each party further
agrees that service of any process, summons, notice or document by registered
mail to such party’s respective address set forth above shall be effective
service of process for any Action in both the United States District Court of
the Northern District of Indiana, Fort Wayne Division, and the Allen County Superior
Court with respect to any matters to which it has submitted to jurisdiction in
this Section 7.6. Each party irrevocably and unconditionally waives any
objection to the laying of venue of any Action arising out of this Agreement or
the transactions contemplated hereby in (i) the United States District Court of
the Northern District of Indiana, Fort Wayne Division, or (ii) the Allen County
Superior Court, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such Action brought in
any such court has been brought in an inconvenient forum. EACH PARTY HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT AND
THE ANCILLARY AGREEMENTS OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF AND THEREOF.

7.7                                 Counterparts.  This
Agreement may be executed in any number of counterparts, and any party hereto
may execute any such counterpart, each of which when executed and delivered
shall be deemed to be an original and all of which counterparts taken together
shall constitute but one and the same instrument. This Agreement shall become
effective when each party hereto shall have received a counterpart hereof
signed by the other party hereto. The parties 

 

agree that the
delivery of this Agreement, and the delivery of the Ancillary Agreements and
any other agreements and documents at the Closing, may be affected by means of
an exchange of facsimile signatures with original copies to follow by mail or
courier service.

7.8                                 Third Party Beneficiaries. 
No provision of this Agreement is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder; except that in
the case of the Indemnification Agreement, the other Indemnitees and their
respective heirs, executors, administrators, legal representatives, successors
and assigns, are intended third party beneficiaries of such sections and shall
have the right to enforce such sections in their own names.

7.9                                 Entire Agreement. 
This Agreement, the Indemnification Agreement, and all the Ancillary
Agreements, the Schedules and the other documents, instruments and agreements
specifically referred to herein or therein or delivered pursuant hereto or
thereto set forth the entire understanding of the parties hereto with respect
to the transactions contemplated by this Agreement. All Schedules referred to
herein are intended to be and hereby are specifically made a part of this
Agreement. Any and all previous agreements and understandings between or among
the parties regarding the subject matter hereof, whether written or oral, are
superseded by this Agreement, except for the Confidentiality Agreement dated
June 7, 2006 which shall continue in full force and effect in accordance with
its terms.

7.10                           Captions.  All
captions contained in this Agreement are for convenience of reference only, do
not form a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.

7.11                           Severability.  Any
provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall be ineffective to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

7.12                           Specific Performance. 
Buyer and Seller each agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed by them
in accordance with the terms hereof and that each party shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at
Law or equity.

7.13                           Interpretation.

(a)                                  The
meaning assigned to each term defined herein shall be equally applicable to
both the singular and the plural forms of such term and vice versa, and words
denoting either gender shall include both genders as the context requires.
Where a word or phrase is defined herein, each of its other grammatical forms
shall have a corresponding meaning.

(b)                                 The
terms “hereof,” “herein” and “herewith” and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole and
not to any particular provision of this Agreement.

 

(c)                                  When
a reference is made in this Agreement to an Article, Section, paragraph,
Exhibit or Schedule, such reference is to an Article, Section, paragraph,
Exhibit or Schedule to this Agreement unless otherwise specified.

(d)                                 The
word “include”, “includes”, and “including” when used in this Agreement shall
be deemed to be followed by the words “without limitation”, unless otherwise specified.

(e)                                  A
reference to any party to this Agreement or any other agreement or document
shall include such party’s predecessors, successors and permitted assigns.

(f)                                    Reference
to any Law means such Law as amended, modified, codified, replaced or reenacted,
and all rules and regulations promulgated thereunder.

(g)                                 The
parties have participated jointly in the negotiation and drafting of this
Agreement and the Ancillary Agreements. Any rule of construction or
interpretation otherwise requiring this Agreement or the Ancillary Agreements
to be construed or interpreted against any party by virtue of the authorship of
this Agreement or the Ancillary Agreements shall not apply to the construction
and interpretation hereof and thereof.

(h)                                 All
accounting terms used and not defined herein shall have the respective meanings
given to them under GAAP.

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 

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

	
  

  	
    SYMMETRY MEDICAL USA INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    By:

  	
  /s/ Fred L. Hite

  
	
   

  	
   

  	
  Fred L. Hite

  
	
   

  	
    Its:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    EVEREST METAL FINISHING LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    By:

  	
  /s/ Levi Citarella

  
	
   

  	
   

  	
   

  
	
   

  	
    Its:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    SELLER’S STOCKHOLDERS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    /s/ Christopher W. Huntington

  
	
   

  	
    Christopher W. Huntington Esq.,
  Individually

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    /s/ Phillip Milidantri

  
	
   

  	
    Phillip Milidantri, Individually

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    /s/ Levi Citarella

  
	
   

  	
    Levi Citarella, Individually

  

 

 

ASSET PURCHASE AGREEMENT

EXHIBITS AND SCHEDULES

 

	
  Exhibits

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Bill of Sale

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  IP License and
  Assumption Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Earn-Out Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
   

  	
  Escrow Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit E

  	
   

  	
  Indemnification
  Agreement

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedules

  	
   

  	
   

  	
   

  	
   

  
	
  2.1(d)

  	
   

  	
  Assigned Contracts

  
	
   

  	
   

  	
   

  
	
  2.2(d)

  	
   

  	
  Excluded Assets

  
	
   

  	
   

  	
   

  
	
  4.3(a)

  	
   

  	
  Consents

  
	
   

  	
   

  	
   

  
	
  4.4(a)(i)

  	
   

  	
  Financial Statements:
  Annual

  
	
   

  	
   

  	
   

  
	
  4.4(a)(ii)

  	
   

  	
  Financial Statements:
  Interim

  
	
   

  	
   

  	
   

  
	
  4.8(d)

  	
   

  	
  Taxes

  
	
   

  	
   

  	
   

  
	
  4.10(a)

  	
   

  	
  Business Authorizations

  
	
   

  	
   

  	
   

  
	
  4.11

  	
   

  	
  Personal Property:
  Owned & Leased

  
	
   

  	
   

  	
   

  
	
  4.13

  	
   

  	
  Real Property: Owned
  & Leased

  
	
   

  	
   

  	
   

  
	
  4.14(b)

  	
   

  	
  Intellectual Property

  
	
   

  	
   

  	
   

  
	
  4.14(c)

  	
   

  	
  In-Bound Licenses

  
	
   

  	
   

  	
   

  
	
  4.14(d)

  	
   

  	
  Out-Bound Licenses

  
	
   

  	
   

  	
   

  
	
  4.14(g)

  	
   

  	
  IP Litigation/Previously
  Held

  
	
   

  	
   

  	
   

  
	
  4.16(a)(i)

  	
   

  	
  Contracts: Purchases

  
	
   

  	
   

  	
   

  
	
  4.16(a)(ii)

  	
   

  	
  Contracts: Sales

  
	
   

  	
   

  	
   

  
	
  4.16(a)(iii)

  	
   

  	
  Contracts: Requirements

  
	
   

  	
   

  	
   

  
	
  4.16(a)(iv)

  	
   

  	
  Contracts: 6+ Months

  
	
   

  	
   

  	
   

  
	
  4.16(a)(v)

  	
   

  	
  Contracts:
  Partnership/Joint Venture

  
	
   

  	
   

  	
   

  
	
  4.16(a)(vi)

  	
   

  	
  Contracts: Distribution/Dealer

  
	
   

  	
   

  	
   

  
	
  4.16(a)(vii)

  	
   

  	
  Contracts: Lease

  
							

 

 

 

	
  4.16(a)(viii)

  	
   

  	
  Contracts: Personal Property Leases

  
	
   

  	
   

  	
   

  
	
  4.16(a)(ix)

  	
   

  	
  Contracts: Indemnification

  
	
   

  	
   

  	
   

  
	
  4.16(a)(x)

  	
   

  	
  Contracts: Government

  
	
   

  	
   

  	
   

  
	
  4.16(a)(xi)

  	
   

  	
  Contracts: Indebtedness

  
	
   

  	
   

  	
   

  
	
  4.16(a)(xii)

  	
   

  	
  Contracts: Capital Expenditure

  
	
   

  	
   

  	
   

  
	
  4.16(a)(xiii)

  	
   

  	
  Contracts: Non-Competition

  
	
   

  	
   

  	
   

  
	
  4.16(a)(xiv)

  	
   

  	
  Contracts: Licenses

  
	
   

  	
   

  	
   

  
	
  4.16(a)(xv)

  	
   

  	
  Contracts: Acquisition or Disposition

  
	
   

  	
   

  	
   

  
	
  4.16(a)(xvi)

  	
   

  	
  Contracts: Collective Bargaining

  
	
   

  	
   

  	
   

  
	
  4.16(a)(xvii)

  	
   

  	
  Contracts: Employment

  
	
   

  	
   

  	
   

  
	
  4.16(a)(xviii)

  	
   

  	
  Contracts: Other Material

  
	
   

  	
   

  	
   

  
	
  4.18

  	
   

  	
  Litigation

  
	
   

  	
   

  	
   

  
	
  4.19(a)

  	
   

  	
  Employee Benefits

  
	
   

  	
   

  	
   

  
	
  4.20(a)

  	
   

  	
  Employees & Independent Contractors

  
	
   

  	
   

  	
   

  
	
  4.20(f)

  	
   

  	
  Employee Citizenship

  
	
   

  	
   

  	
   

  
	
  4.21(b)

  	
   

  	
  Environmental Permits

  
	
   

  	
   

  	
   

  
	
  4.22(a)(i)

  	
   

  	
  Insurance Policies

  
	
   

  	
   

  	
   

  
	
  4.22(a)(ii)

  	
   

  	
  Insurance Claims

  
	
   

  	
   

  	
   

  
	
  4.22(b)

  	
   

  	
  Self Insurance Arrangements

  
	
   

  	
   

  	
   

  
	
  4.23

  	
   

  	
  Warranties

  
	
   

  	
   

  	
   

  
	
  4.24(a)(i)

  	
   

  	
  Material Suppliers

  
	
   

  	
   

  	
   

  
	
  4.24(a)(ii)

  	
   

  	
  Sole Source Suppliers

  
	
   

  	
   

  	
   

  
	
  4.24(a)(iii)

  	
   

  	
  Material Customers

  
	
   

  	
   

  	
   

  
	
  4.27

  	
   

  	
  Material Adverse Effect

  

*All exhibits and schedules have been omitted pursuant to Item
601(b)(2) of regulation S-K, but will be furnished to staff upon request.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}]]