Document:

Exhibit
        10.5

       

      September
        23, 2005

      

      

      

      Sarah
        Cooper

      250
        W. El
        Camino Real      

      Apt.
        2410

      Sunnyvale,
        California 94087-1378

      

      Dear
        Sarah,

      

      We
        are
        pleased to extend to you an offer of employment as the Chief Technology Officer
        of NaturalNano, Inc. (“the company”) effective October 1, 2005. Your annual full
        time salary will be $110,000 which will be paid on a bi-weekly basis at the
        rate
        of $4,230.76 in gross wages every two weeks. You will be entitled to four
        weeks
        vacation (20 days) annually, earned on a pro-rata basis of 1.67 days each
        month.
        You will be eligible for a review of this compensation package effective
        January
        1, 2006. In addition to your base salary, upon acceptance of this offer you
        shall receive a signing bonus in the amount of $7,000.00

      

      In
        addition to the statutory benefits defined by federal and local laws, (FICA,
        FUTA, applicable State Disability Insurance and Workers Compensation) you
        will
        be entitled to the benefits available to other NaturalNano officers and
        employees. Currently this includes employer paid health and dental insurance
        coverage. You will also be eligible for an initial grant of 300,000 stock
        options at grant price of $.10 per share. These shares will vest as follows:
        100,000 on the date of grant; 100,000 on March 1, 2006 and the remaining
        100,000
        on March 1, 2007. Notwithstanding any provision herein to the contrary, any
        unvested portion of the option shall immediately expire upon termination
        of
        employment for any reason. This option grant will be governed pursuant to
        the
“NaturalNano, Inc. 2004 Stock Option Plan.”

      

      Your
        job
        responsibilities will include the development of technology applications
        for the
        use of naturally occurring nanomaterials in medical and non-medical fields
        and
        writing and submitting related patent applications in coordination with the
        strategic plans of the company. You will report directly to me as the President
        of the company and as an officer of the company, will be expected to be
        responsive to the Scientific Advisory Board, the Board of Directors and other
        members of the management team as necessary.

      

      This
        agreement is terminable by you or the company upon ninety (90) days’ written
        notice or by us for cause or upon your death or disability. As a condition
        of
        your employment, you will be required to sign our standard non-disclosure
        agreement regarding confidential proprietary information obtained in the
        course
        of your employment. A copy of this agreement is attached to this letter for
        your
        reference.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      September
        23, 2005

      Page
        Two

      
 

      Please
        indicate your acceptance by signing below and returning a signed copy to
        my
        attention. I look forward to working with you at
        NaturalNano—WELCOME!!

      

      Regards,

      

      

      Michael
        Riedlinger

      President

      NaturalNano,
        Inc.

      

      

      Agreed
        to
        and accepted _________________________________ Date: _________Exhibit 10.1

                        ASSET PURCHASE AND SALE AGREEMENT

     THIS ASSET  PURCHASE AND SALE  AGREEMENT is made this 30th day of November,
2005 by and between  Chattem,  Inc.,  a Tennessee  corporation  ("Chattem")  and
Signal   Investment  &  Management  Co.,  a  Delaware   corporation   ("Signal")
(collectively  the  "Seller"),   and  The  Mentholatum  Co.,  Inc.,  a  Delaware
corporation   ("Mentholatum")   and  The  Mentholatum  Company  of  Canada  Ltd.
("Mentholatum  Canada")  (collectively  the  "Purchaser"),  under the  following
circumstances:

                                    RECITALS:
                                    ---------

     WHEREAS,  the Seller and/or its Affiliates  are engaged either  directly or
through third parties in the business of  developing,  manufacturing,  marketing
and  selling  a line of  products  (the  "Products")  known as the  Phisoderm(R)
product line through the use of the trademarks and trade names  associated  with
the Products (the "Product  Line") that are either licensed by Seller and/or its
Affiliates    from   Valmont   Inc.,   an   Arkansas    corporation    (or   its
successor-in-interest  or  assigns)  (the  "Licensor"),  or owned by the  Seller
and/or its Affiliates;

     WHEREAS,  the  Purchaser  has agreed to acquire  from the  Seller,  and the
Seller has agreed to sell to the Purchaser,  the Acquired Assets (as hereinafter
defined),  subject to and in  accordance  with the terms and  conditions of this
Agreement;

     WHEREAS, the Purchaser has agreed to assume from the Seller, and the Seller
has agreed to assign to the Purchaser,  the Assumed  Liabilities (as hereinafter
defined),  subject to and in  accordance  with the terms and  conditions of this
Agreement;

     NOW,  THEREFORE,  in  consideration  of the  premises  and  of  the  mutual
covenants and agreements contained in this Agreement, the parties agree:

                                    ARTICLE I
                                   DEFINITIONS
                                   -----------

     As used in this Agreement,  unless otherwise defined herein,  the following
words and phrases shall have the following meanings:

          1.1. Acquired Assets. "Acquired Assets" shall mean assets and business
operations acquired by the Purchaser from the Seller pursuant to this Agreement,
as more fully described in Section 2.1 hereof.

          1.2. Affiliate.  "Affiliate"  shall mean any Person that directly,  or
indirectly through one or more  intermediaries,  controls or is controlled by or
is under  common  control  with  the  Person  specified.  For  purposes  of this
definition,  control of a Person means the power, direct or indirect,  to direct
or cause the direction of the  management and policies of such Person whether by
contract or otherwise,  and, in any event and without limitation of the previous
sentence, any Person owning fifty percent (50%) or more of the voting securities
of a second Person shall be deemed to control that second Person

<PAGE>

          1.3. Assumed Contracts. "Assumed Contracts" shall have the meaning set
forth in Section 2.7(b) hereof.

          1.4. Assumed Liabilities. "Assumed Liabilities" shall have the meaning
set forth in Section 2.7 hereof.

          1.5. Claim.  "Claim shall have the meaning set forth in Section 6.6(a)
hereof.

          1.6. Closing.  "Closing"  shall have the  meaning set forth in Section
8.1 hereof.

          1.7. Closing Date.  "Closing Date" shall have the meaning set forth in
Section 8.1 hereof.

          1.8. Damages.  "Damages"  shall have the  meaning set forth in Section
6.2 hereof.

          1.9. Distribution Agreements. "Distribution Agreements" shall have the
meaning set forth in Section 2.6 hereof.

          1.10. Escrow Agent. "Escrow Agent" shall have the meaning set forth in
Section 2.3(a) hereof.

          1.11. Escrow Agreement.  "Escrow Agreement" shall have the meaning set
forth in Section 2.3(a) hereof.

          1.12. Escrow Fund.  "Escrow  Fund" shall have the meaning set forth in
Section 2.3(a) hereof.

          1.13. Estimated  Inventory  Value.  "Estimated  Inventory Value" shall
mean  Sellers'  estimate of the Inventory  Value,  not to exceed One Million One
Hundred Thousand Dollars ($1,100,000.00).

          1.14. Excluded  Assets.  "Excluded  Assets" shall have the meaning set
forth in Section 2.2 hereof.

          1.15. Indemnified  Party.  "Indemnified  Party" shall have the meaning
set forth in Section 6.6(a) hereof.

          1.16. Indemnifying Party.  "Indemnifying Party" shall have the meaning
set forth in Section 6.6(a) hereof.

          1.17. Inventory  Value.  "Inventory  Value" shall have the meaning set
forth in Section 2.4(a) hereof.

          1.18. Licensed  Trademarks.   "Licensed  Trademarks"  shall  have  the
meaning set forth in Section 2.1(a) hereof.

                                       2

<PAGE>

          1.19. Licensor's Consent.  "Licensor's Consent" shall have the meaning
set forth in Section 3.7(a) hereof.

          1.20. Notice of Claim.  "Notice of Claim"  shall have the  meaning set
forth in Section 6.6(a) hereof.

          1.21. Owned Trademarks.  "Owned Trademarks" shall have the meaning set
forth in Section 2.1(a) hereof.

          1.22. Person.  "Person"  shall mean any natural  person,  corporation,
general   partnership,   limited   partnership,   limited   liability   company,
proprietorship,  other  business  organization,  trust,  union,  association  or
governmental or regulatory authority.

          1.23. Product Line. "Product Line" shall have the meaning set forth in
the Recitals to this Agreement.

          1.24. Product  Registrations.  "Product  Registrations" shall mean all
marketing and  manufacturing  permits,  licenses,  approvals and  authorizations
granted by any governmental authority with respect to any Product.

          1.25. Products.  "Products"  shall have the  meaning  set forth in the
Recitals to this Agreement.

          1.26. Purchaser.  "Purchaser"  shall have the meaning set forth in the
preamble to this Agreement.

          1.27. Purchase  Price.  "Purchase  Price"  shall have the  meaning set
forth in Section 2.3 hereof.

          1.28. Purchase Price  Allocation.  "Purchase Price  Allocation"  shall
mean the allocation of the Purchase  Price for the intangible  assets as between
The Mentholatum Co., Inc. and The Mentholatum Company of Canada Ltd.

          1.29. Regulatory  Approvals.  "Regulatory  Approvals"  shall  have the
meaning set forth in Section 2.9(a) hereof.

          1.30. Seller.  "Seller"  shall  have  the  meaning  set  forth  in the
preamble to this Agreement.

          1.31. Seller's Marks.  "Seller's Marks" shall mean any of the Seller's
trademarks,  trade names,  trade dress,  service marks,  Internet  domain names,
metatags,  keywords, or similar electronic designation of addresses or corporate
names other than the Licensed  Trademarks and the Owned  Trademarks,  whether or
not Seller or its  Affiliates  have applied for,  registered or previously  used
such trademark, service mark or corporate name.

          1.32. Third Party  Claim.  "Third  Party Claim" shall have the meaning
set forth in Section 6.6(b) hereof.

                                       3

<PAGE>

          1.33. Trademark License Agreement. "Trademark License Agreement" shall
have the meaning set forth in Section 2.7(a) hereof.

                                   ARTICLE II
                                PURCHASE AND SALE
                                -----------------

          2.1. Transfer  of Assets.  At the  Closing,  which  shall occur on the
Closing Date, and in accordance with the terms and conditions of this Agreement,
the Seller  shall  sell,  convey,  assign and  deliver to the  Purchaser  or its
Affiliates, all right, title and interest of the Seller and/or its Affiliates in
and to the following assets (the "Acquired Assets"):

               (a)  (i) Seller's license to the trademarks,  trade names and all
applications  and  registrations  of the  foregoing  as set  forth  on  Schedule
2.1(a)(i) attached hereto (the "Licensed Trademarks"),  pursuant to the terms of
the Trademark  License  Assignment and Assumption  Agreement  attached hereto as
Exhibit  A,  and (ii) The  trademarks,  trade  names  and all  applications  and
registrations  of the  foregoing  that are owned by the  Seller  related  to the
Product  Line as set forth on Schedule  2.1(a)(ii),  together  with the goodwill
associated  therewith  (the  "Owned  Trademarks"),  pursuant to the terms of the
Trademark Assignment attached hereto as Exhibit B;

               (b)  All inventory of the Product Line,  including raw materials,
goods  in  process,   finished  goods,  packaging,   supplies  and  labels  (the
"Inventory"), subject to Sections 2.3 and 2.4;

               (c)  Copies  of all  product  information  files  and  sales  and
marketing  information  files  (including  distribution  and sales promotion and
market research studies,  if any) of Seller relating  exclusively to the Product
Line; and

               (d)  Copies of all customer  and supplier  lists and all business
files  in  possession  of the  Seller  for  the  last  two  (2)  years  relating
exclusively to the Acquired Assets.

          2.2. Excluded  Assets.  Notwithstanding  the  foregoing,  the Acquired
Assets  shall not  include,  and Seller does not sell,  transfer or convey,  and
Purchaser does not purchase or acquire any assets,  rights, or interest in or to
any  assets not  expressly  listed or  described  in  Section  2.1  hereof  (the
"Excluded  Assets").  By way of example,  and not to limit the generality of the
foregoing, Excluded Assets shall include:

               (a)  all  accounts  receivable  relating to the  Acquired  Assets
accrued on or prior to the Closing Date;

               (b)  all cash on hand in bank accounts;

               (c)  the rights to any of the  Seller's  claims for any  federal,
state, local or foreign tax refunds;

               (d)  all  insurance  policies  of the  Seller  pertaining  to the
Acquired  Assets  and all  rights of the  Seller  under or  arising  out of such
insurance policies;

                                       4

<PAGE>

               (e)  the rights of the Seller under (i) this  Agreement;  or (ii)
the other instruments  delivered to the Seller or the Purchaser pursuant to this
Agreement;

               (f)  the  name  "Chattem"  and  related  logos,  and any  related
materials (including, without limitation, packaging designs and colors);

               (g)  any interest in any of the Seller's trademarks,  trade names
and service  marks that are not  specifically  listed on Schedule  2.1(a)(i)  or
Schedule  2.1(a)(ii)  to this  Agreement,  including,  but not  limited  to, the
Seller's Marks; or

               (h)  any and all other assets, properties or rights of the Seller
and/or  its  Affiliates  other  than those  specifically  listed in Section  2.1
hereof.

          2.3. Purchase Price.  The total Purchase Price for the Acquired Assets
shall be the sum of Eight Million Five Hundred Thousand Dollars  ($8,500,000.00)
plus the Estimated  Inventory Value (the "Purchase Price").  The Seller will pay
the Purchase Price at the Closing in the following manner:

               (a)  Three Million Dollars  ($3,000,000.00) of the Purchase Price
(the "Escrow  Fund")  shall be paid by wire  transfer of  immediately  available
funds to a mutually agreed upon financial  institution  (the "Escrow Agent" ) to
be held pursuant to the terms and conditions of an escrow agreement (the "Escrow
Agreement") in the form attached hereto as Exhibit F;

               (b)  the remaining balance of the Purchase Price shall be paid at
Closing in immediately available funds.

          2.4. Inventory Value.

               (a)  Within five (5) business  days after the Closing  Date,  the
Seller and the Purchaser shall jointly conduct a physical count of the Inventory
as of the  Closing  Date  and the  Purchaser  shall  make or  cause to be made a
calculation of the value of the Inventory as of the Closing Date (the "Inventory
Value")  in  accordance  with the  Seller's  accounting  policies  applied  on a
consistent basis for determining standard costs (the "Calculation"), except that
unmerchantable or obsolete  Inventory  ("Obsolete  Inventory") shall be excluded
from the Calculation.  Any finished goods Inventory with a shelf life expiration
date of less than twelve (12) months from the Closing  Date shall be  considered
unmerchantable and obsolete for purposes of determining Obsolete Inventory.  Any
finished  goods  Inventory  not in full  unopened  case  cartons  shall  also be
considered  unmerchantable.  The Seller will retain the Obsolete Inventory which
the Seller shall destroy  within  ninety (90) days after the Closing  Date.  Any
non-finished  goods Inventory that exceeds a 12 month supply (as measured on the
basis of the  Seller's  shipment  production  forecast  for the 12 month  period
following  the Closing  Date),  to the extent of such excess,  shall be excluded
from the Calculation and shall be retained by the Seller. Any Inventory that has
been ordered by the Seller but not received  prior to the Closing Date shall not
be included in the  Calculation  but will be accepted by the Purchaser and shall
be  considered  to have been  purchased by the Seller to support  firm  purchase
orders in  accordance  with Section 4.1 of the Supply  Agreement.  The Purchaser
shall also provide the Seller with copies of the Calculation and all work papers

                                       5

<PAGE>

associated  therewith  within  thirty  (30) days  after the  Closing  Date.  The
Purchaser  may not  assert  a claim  for  indemnification  with  respect  to any
Inventory that is not included in the Calculation.

               (b)  Thereafter,  the Seller  shall have a period of thirty  (30)
days in which to review the Calculation and the work papers associated therewith
provided by the Purchaser.  If the Seller  disagrees with all or any part of the
Calculation,  the Seller shall have the right to notify the Purchaser in writing
of such  disagreement  and their reasons for so  disagreeing,  in which case the
Seller and the Purchaser  shall attempt to resolve the  disagreement.  If within
fifteen  (15) days after  receipt of such  notice by Seller,  the Seller and the
Purchaser are unable to resolve the differences,  if any, arising as a result of
the  Calculation,  they or  either  of them  shall  submit  a  statement  of all
unresolved  differences  together with copies of the  Calculation to KPMG LLP or
such  other  independent  accounting  firm as  shall  be  mutually  agreed  (the
"Accountants")  for a binding and  non-appealable  determination  to be rendered
within  thirty  (30) days after such  submission.  All fees and  expenses of the
Accountants  incurred  in this  capacity  shall be billed  to and  shared by the
Seller and the Purchaser equally.

               (c)  If the  Calculation  reflects  an  Inventory  Value  that is
either less than or in excess of the  Estimated  Inventory  Value,  the Purchase
Price will be reduced or increased dollar-for-dollar, as the case may be, by the
amount of such  difference,  and the  Purchaser  will pay the amount of any such
increase to the Seller or the Seller will pay the amount of any such decrease to
the Purchaser,  in immediately  available  funds,  within five (5) business days
after the final  determination of the Inventory Value provided,  however,  in no
event shall the purchase  value of the Inventory  exceed One Million One Hundred
Thousand Dollars ($1,100,000.00).

          2.5. Allocation  of  Purchase  Price.  The  Purchase  Price  shall  be
allocated  among the various  Acquired Assets as provided by Section 1060 of the
Internal  Revenue Code at or prior to Closing in  accordance  with  Schedule 2.5
attached  hereto with an allocation  of a portion of the Purchase  Price for the
intangible assets pursuant to the Purchase Price  Allocation.  The parties agree
that any tax returns or other tax information they may file or cause to be filed
with any governmental  agency shall be prepared and filed  consistently with the
Purchase Price Allocation. In this regard, the parties agree that, to the extent
required,  they  will  each  properly  prepare  and  timely  file  Form  8594 in
accordance  with  Section  1060 of the Code and such other  documents  as may be
required by Canadian or other authorities.

          2.6. Assumption of  Distribution  Agreements.  At the Closing,  Seller
shall assign (and, as  applicable,  require its  Affiliates to assign),  and the
Purchaser shall assume all rights, benefits, obligations, and liabilities of the
Seller  and/or  its  Affiliates  arising  under the  agreements  with  Farmasa -
Laboratorio  Americano de  Farmacoterapia  S.A.  related to the Acquired  Assets
listed on Schedule  2.6 (the  "Distribution  Agreements"),  if and to the extent
assignable.  Seller  shall use  commercially  reasonable  efforts  to obtain the
written consent of Farmasa - Laboratorio Americano de Farmacoterapia S.A. to the
assignment and assumption of the  Distribution  Agreements as soon as reasonably
practicable  after the Closing;  provided,  however that until Seller is able to
obtain  the  consent  required  to  make  the  assignment  of  the  Distribution
Agreements effective,  Seller shall provide Purchaser with the economic benefits
of such  Distribution  Agreements  until such  consent is  obtained or until the
Distribution Agreements terminate or expire.

                                       6

<PAGE>

          2.7. Assumed Liabilities.  On the Closing Date, Purchaser shall assume
the  liabilities  of Seller and  Seller's  Affiliates  identified  below in this
Section 2.7 (the "Assumed Liabilities"), including:

               (a)  All  obligations  and  liabilities  of the Seller  under the
Trademark  License  Agreement  with Valmont Inc.  dated June 17, 1994, a copy of
which has been provided to the Purchaser (the "Trademark License Agreement"), in
accordance  with the terms of the Trademark  License  Assignment  and Assumption
Agreement;

               (b)  All  obligations  and  liabilities  of the Seller  under the
contracts set forth in Schedule 2.7(b) (the "Assumed Contracts");

               (c)  All  obligations  and  liabilities  of the Seller  under the
Distribution Agreements;

               (d)  Taxes that are the  responsibility of Purchaser  pursuant to
Section  5.11 of this  Agreement  and all taxes  relating  to the  Product  Line
attributable to any period or partial period beginning on or after the Closing;

               (e)  All product  liability  and warranty  claims  involving  the
Product Line arising on or after the Closing Date;

               (f)  Seller's  commitments  for  promoting  and  advertising  the
Product  Line  existing  as of the  Closing  Date,  which  consist of the coupon
redemptions,  trade promotions and promotional  allowances set forth in Schedule
2.7(f);

          2.8. Product Returns

               (a)  Seller shall be responsible for and shall indemnify and hold
harmless Buyer from and against the actual cost of reasonable return obligations
(i.e.,  customer or wholesaler  returns of expired and short-dated  (i.e.,  less
than  three (3)  months  remaining  shelf  life,  damaged,  defective,  or other
unsaleable  Phisoderm  Products)  for returns  made during the first twelve (12)
months  after the  Closing  Date (the  "Product  Return  Period"),  relating  to
Phisoderm  Products  shipped  and  sold by  Seller  prior to the  Closing  Date;
provided,  however,  Seller's  obligations  for all such  returns  of  Phisoderm
Products  for the Product  Return  Period  shall not exceed an  aggregate of Six
Hundred Fifty Thousand Dollars  ($650,000.00)  in any event,  including costs of
processing  such  returns  consistent  with  Seller's  past  practice.  For  the
avoidance  of doubt,  Seller  shall  have no  obligations  with  respect  to, or
liability for, any Phisoderm Product shipped or sold by Buyer.  Buyer agrees not
to issue return credits for Phisoderm  Products sold and shipped by Seller prior
to the  effective  time of the Closing  Date until it has  received the returned
Phisoderm Product from the customer,  unless Seller agrees to waive the customer
return  of the  Phisoderm  Product,  which  waivers  shall  not be  unreasonably
withheld.

               (b)  Within sixty (60) days after the  termination of the Product
Return  Period,   Buyer  shall  submit  to  Seller  an  invoice  and  supporting
documentation setting forth all such return obligations individually detailed as
follows:  (i) the name and type of the Phisoderm Product returned (including the
applicable SKU number) and the date the returned  Phisoderm Product was received

                                       7

<PAGE>

by Buyer from such customer;  (ii) the name, address and telephone number of the
customer  returning  such  Phisoderm  Product;  (iii) the  reason  given by such
customer for such return;  (iv) the cost of  performing  such return,  provided,
however,  such cost shall include only the cost of  replacing,  or refunding the
allegedly  defective  Phisoderm  Product  plus  any  reasonable  shipping  costs
associated  with such return.  If Seller agrees with such invoice,  Seller shall
remit the appropriate payment to Buyer within thirty (30) days after its receipt
of such invoice.  In the event Seller in good faith disagrees with such invoice,
the Parties  shall  negotiate in good faith to resolve such  dispute;  provided,
however if the Parties cannot resolve such dispute within thirty (30) days after
Seller's  receipt of such  invoice,  the  dispute  shall be settled  pursuant to
Section 9.7. At least once per month during the Product Return Period, Buyer and
Seller  shall in good faith  provide each other with a  non-binding  estimate of
their respective return  obligations  related to Phisoderm  Products shipped and
sold by  Seller  prior to the  effective  time of the  Closing  Date.  After the
earlier  of (i) the end of the  Product  Return  Period,  or (ii) such  customer
return  obligations  reach the  foregoing  Six Hundred  Fifty  Thousand  Dollars
($650,000.00)  maximum,  Seller  shall no longer  accept  returns  of  Phisoderm
Products and have no further liability with respect thereto,  and,  accordingly,
Seller  shall  then  direct  all  returns  to Buyer  and  Buyer  shall  bear all
responsibility  therefore as part of the Assumed Liabilities regardless of which
Party manufactured,  shipped, or sold such Phisoderm Products. Each Party agrees
it will not take any action that would provide any incentive or otherwise induce
customers to return Phisoderm Products.

          2.9. Regulatory  Approvals.  The Seller and the Purchaser  acknowledge
that  Brazil is the only  country  in which  Seller  has  effected  any  Product
Registrations  related to the Product Line and that such  registrations are held
by Farmasa - Laboratorio  Americano de Farmacoterapia  S.A. on behalf of Seller.
Seller and Purchaser further acknowledge that in certain countries the Purchaser
shall be required to obtain and  maintain  in effect all  applicable  regulatory
approvals,  required  filings  pursuant to applicable  competition  or antitrust
laws, and  assignments and recordings of Product  Registrations,  at Purchaser's
sole  cost,  in the name of the  Purchaser,  the  Purchaser's  Affiliate  or the
Purchaser's  designee,   whether  by  transfer  or  otherwise  (the  "Regulatory
Approvals"),  for the  Purchaser  and/or its  Affiliates  to operate the Product
Line.  The Seller  shall,  at the  Purchaser's  cost and expense,  cooperate and
furnish the Purchaser or its designee with  assistance from the employees of the
Seller or the Seller's  Affiliates  in  connection  with the  assignment  of the
Brazilian  Product  Registrations  held by Farmasa -  Laboratorio  Americano  de
Farmacoterapia S.A. to the Purchaser or its designee

          2.10. Post Closing Obligations of Seller

               (a)  At or following the Closing,  the pH20 trademark  shall have
cleared any opposition as evidenced by the absence of any opposition filing with
the U.S.  Patent and  Trademark  Office prior to  expiration  of the  opposition
period  ending  December 1, 2005 and Seller  shall have  secured the  Licensor's
consent to assignment of the Trademark License Agreement or transferred outright
ownership  of the pH20  trademark  to  Purchaser.  Upon the  completion  of this
obligation,  Seller and Purchaser shall,  within two (2) business days,  jointly
notify the Escrow Agent in writing to release and pay to Seller Two Million Five
Hundred Thousand Dollars ($2,500,000.00) from the Escrow Fund.

                                       8

<PAGE>

               (b)  At or following the Closing,  Seller shall use  commercially
reasonable efforts to:

                    (i)  acquire all the Licensed Trademarks from GSK;

                    (ii) obtain the consent of Farmasa -  Laboratorio  Americano
          de   Farmacoterapia   S.A.  to  the  assignment  of  the  Distribution
          Agreements;

                    (iii) obtain the consent of Zila Nutraceuticals, Inc. to the
          assignment of the Assumed Contracts; and

                    (iv) obtain  from  Bank  of  America  documents   reasonably
          necessary  to  release  the  liens on the  Acquired  Assets of Bank of
          America.

Upon the separate  completion  of any  obligation  set forth in (i) through (iv)
above,  Seller and Purchaser shall, within two (2) business days, jointly notify
the Escrow Agent in writing to release and pay to Seller One Hundred Twenty-Five
Thousand  Dollars  ($125,000.00)  from the Escrow Fund. In the event that one or
more of the  foregoing  occurs  at the  Closing,  then  the  amount  that  would
otherwise  be released  from the Escrow Fund shall  instead be paid by Seller at
the Closing and the Escrow Fund shall be reduced by such amount.

                                  ARTICLE III
                    REPRESENTATIONS AND WARRANTEES OF SELLER
                    ----------------------------------------

     The Seller represents and warrants to the Purchaser as follows:

          3.1. Organization.  Chattem is a corporation  duly organized,  validly
existing and in good  standing  under the laws the State of Tennessee and Signal
is a corporation duly organized, validly existing and in good standing under the
laws the  State of  Delaware  and each has all  requisite  corporate  power  and
authority to own the Acquired Assets and carry on its business as now conducted.

          3.2. Authority.  The  Seller  has all  requisite  corporate  power and
authority  to enter  into this  Agreement  and to  consummate  the  transactions
provided for herein.  All actions on the part of the Seller necessary to approve
the transactions  contemplated by this Agreement have been duly taken or will be
taken by the Closing Date as required by  applicable  law.  This  Agreement  has
been,  and the other  agreements,  documents  and  instruments,  required  to be
delivered by the Seller in accordance with the provisions  hereof will have been
by the Closing Date,  duly executed by the Seller and  constitute  the valid and
binding agreement of the Seller, enforceable in accordance with their respective
terms,  except that (i)  enforcement  may be subject to bankruptcy,  insolvency,
moratorium or other similar laws relating to creditors rights generally and (ii)
the remedy of  specific  performance  and  injunctive  relief and other forms of
equitable  relief may be subject to equitable  defenses and to the discretion of
the court before which any proceeding may be brought.

          3.3. Absence  of  Violation  or  Conflicts.  Except  as set  forth  in
Schedule  3.3, the  execution,  delivery  and  performance  of the  transactions
contemplated  by this  Agreement  by the Seller  does not and will not  violate,
conflict with or result in the breach of any term, condition or provision of (a)

                                       9

<PAGE>

any existing  law,  ordinance or  governmental  rule or  regulation to which the
Seller is subject, (b) any judgment, order, writ, injunction, decree or award of
any court,  arbitrator or governmental or regulatory official, body or authority
which is applicable  to the Seller,  (c) the  certificate  of  incorporation  or
by-laws of the Seller, or (d) other than the Licensor's Consent, require consent
of any third party,  which  violation,  conflict or breach would have a material
adverse effect on the Product Line.

          3.4. Title to Acquired  Assets.  Except as set forth in Schedule  3.4,
Seller has good and valid title to all of the Acquired Assets, free and clear of
all liens and encumbrances  other than exceptions to title that do not interfere
with its ability to operate  the  Product  Line as  currently  conducted.  It is
understood that this  representation  shall not apply to the Owned Trademarks or
the Licensed Trademarks, the titles of which is addressed exclusively in Section
3.6 and 3.7 hereof, respectively.

          3.5. Financial  Information.  The financial  information  set forth in
Schedule 3.5 with respect to the Acquired Assets has been prepared in accordance
with the books  and  records  of the  Seller  consistently  applied  with  prior
periods. The financial  information fairly presents in all material respects the
results of operations of the Acquired Assets for the periods indicated.

          3.6. Owned Trademarks.

               (a)  The Seller or its  Affiliates  have the  authority  to sell,
transfer  and assign all of  Seller's  or its  Affiliate's  rights,  title,  and
interest in and to the Owned Trademarks.  The Seller has not been notified about
any pending or threatened adverse claim, judgment,  injunction, order, decree or
agreement  restricting  its use of the Owned  Trademarks in connection  with the
Products  or the sale of the  Owned  Trademarks  or of any  pending  or,  to the
Seller's knowledge, threatened litigation.

               (b)  Schedule  2.1(a)(ii)  lists  all  of the  Owned  Trademarks.
Except as set forth in Schedule  2.1(a)(ii),  the Seller or its Affiliates  have
good and, in the United States and Canada,  valid title to the Owned Trademarks,
and  the  goodwill  associated  therewith,  free  and  clear  of all  liens  and
encumbrances. As of the date hereof, the Seller has not received notice claiming
that any Owned Trademark infringes upon the rights of any Person.

               (c)  To the  Seller's  knowledge,  except  pursuant  to the third
party Distribution Agreements or existing manufacturing agreements: (i) no other
Person has a right to use the Owned Trademarks;  and (ii) except as set forth in
Schedule 2.1(a)(ii),  no other Person is manufacturing,  selling or distributing
any product or service which infringes any of the Owned Trademarks.

          3.7. Licensed Trademarks.

               (a)  The Purchaser  acknowledges that the Seller is not the owner
of the Licensed  Trademarks and that the Seller and its Affiliates only have the
authority to sell, transfer and assign their rights,  title, and interest in and
to the Licensed  Trademarks  with the consent of the Licensor  (the  "Licensor's
Consent").  The Seller has not been  notified  about any  pending or  threatened
adverse claim, judgment,  injunction, order, decree or agreement restricting its

                                       10

<PAGE>

use of the Licensed  Trademarks in  connection  with the Products or the sale or
license  of the  Licensed  Trademarks  or of any  pending  or,  to the  Seller's
knowledge, threatened litigation.

               (b)  Schedule  2.1(a)(i)  lists all of the  Licensed  Trademarks.
Except as set forth in Schedule  2.1(a)(i),  the Seller or its Affiliates have a
good and valid license to the Licensed  Trademarks.  As of the date hereof,  the
Seller has not received  notice claiming that any Licensed  Trademark  infringes
upon the rights of any Person.

               (c)  To the  Seller's  knowledge:  (i) no other Person other than
the Licensor has a right to use the Licensed Trademarks;  and (ii) except as set
forth in  Schedule  2.1(a)(i),  no other  Person is  manufacturing,  selling  or
distributing  any  product  or  service  which  infringes  any of  the  Licensed
Trademarks.

          3.8. Litigation.  The Seller has not been notified  about,  and is not
aware of, any  litigation,  including any  arbitration,  investigation  or other
proceeding  of or before any court,  arbitrator  or  governmental  or regulatory
official,  body or  authority,  that is pending nor has the Seller been notified
about, and Seller is not aware of, any litigation  threatened against the Seller
(i) in respect of this Agreement or any of the transactions  contemplated hereby
that could  reasonably be expected to prevent a  consummation  of, or materially
adversely affect, any of the transactions contemplated hereby, or (ii) except as
set forth in Schedule  3.8, in respect of,  involving or related to the Acquired
Assets that could  reasonably be expected to have a material  adverse  effect on
the Product Line.

          3.9. Compliance  with Law. To the  knowledge  of the Seller,  it is in
material compliance with and is not in material violation of any law, ordinance,
or governmental or regulatory rule or regulation,  whether federal, state, local
or foreign, to which the Acquired Assets are subject.

          3.10. Brokers,  Etc. No broker,  investment banker,  agent,  finder or
other  intermediary  acting on behalf of Seller or under the authority of Seller
is or will be entitled to any broker's or finder's  fee or any other  commission
or similar fee directly or indirectly in connection with any of the transactions
contemplated hereby.

          3.11. Disclaimer.  EXCEPT  AS  OTHERWISE  EXPRESSLY  PROVIDED  IN THIS
ARTICLE III, SELLER IS MAKING NO  REPRESENTATION  OR WARRANTY AS TO THE ACQUIRED
ASSETS OR THE PRODUCT LINE AND PURCHASER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS
OTHERWISE  PROVIDED HEREIN,  SELLER IS SELLING AND CONVEYING THE ACQUIRED ASSETS
ON AN "AS IS" AND "WITH ALL FAULTS"  BASIS.  EXCEPT TO THE EXTENT OF THE EXPRESS
REPRESENTATIONS,   WARRANTIES,   AGREEMENTS  AND  COVENANTS  CONTAINED  IN  THIS
AGREEMENT,  PURCHASER  IS ACQUIRING  THE ACQUIRED  ASSETS IN RELIANCE ON ITS OWN
INVESTIGATION AND ON AN "AS IS" AND "WITH ALL FAULTS" BASIS AND WITHOUT RECOURSE
AND WITHOUT ANY REPRESENTATION OR WARRANTY OF  MERCHANTABILITY,  FITNESS FOR ANY
PARTICULAR PURPOSE,  NON INFRINGEMENT OR ANY OTHER IMPLIED OR EXPRESS WARRANTIES
WHATSOEVER.   Purchaser   acknowledges  and  agrees  that  neither  Seller,  its
Affiliates  nor any of their  representatives  has made  any  representation  or

                                       11

<PAGE>

warranty,  express  or  implied,  as to  the  accuracy  or  completeness  of any
memoranda, charts, summaries, projections or schedules heretofore made available
by Seller, Seller's Affiliates or their representatives to Purchaser, any of its
Affiliates or their  representatives  or any information that is not included in
this Agreement or the Schedules hereto, and neither Seller,  Seller's Affiliates
nor any of their  representatives  will have or be subject to any  liability  to
Purchaser,  any of its  Affiliates or their  representatives  resulting from the
distribution of any such  information to, or the use of any such information by,
Purchaser, any of its Affiliates or any of their representatives.

                                   ARTICLE IV
                   REPRESENTATIONS AND WARRANTIES OF PURCHASER
                   -------------------------------------------

     The Purchaser hereby represents and warrants to the Seller as follows:

          4.1. Organization.   Mentholatum  is  a  corporation  duly  organized,
validly  existing and in good  standing  under the laws of the State of Delaware
and Mentholatum Canada is a corporation duly organized,  validly existing and in
good standing under the laws of the Province of Ontario, Canada.

          4.2. Authority.  The Purchaser has all requisite  corporate  power and
authority  to enter  into this  Agreement  and to  consummate  the  transactions
provided  for herein.  All  actions on the part of the  Purchaser  necessary  to
approve the transactions  contemplated by this Agreement have been duly taken or
will be taken by the Closing Date as required by applicable  law. This Agreement
has been, and the other  agreements,  documents and instruments,  required to be
delivered by the Purchaser in accordance  with the  provisions  hereof will have
been by the Closing Date,  duly executed by the  Purchaser  and  constitute  the
valid and binding  agreement of the Purchaser,  enforceable  in accordance  with
their  respective  terms,   except  that  (i)  enforcement  may  be  subject  to
bankruptcy,  insolvency,  moratorium or other similar laws relating to creditors
rights  generally  and (ii) the remedy of specific  performance  and  injunctive
relief and other forms of equitable relief may be subject to equitable  defenses
and to the discretion of the court before which any proceeding may be brought.

          4.3. Absence of  Violation or Conflict.  The  execution,  delivery and
performance of the transactions  contemplated by this Agreement by the Purchaser
does not and will not  violate,  conflict  with or result  in the  breach of any
term,  condition or provision of (a) any existing law, ordinance or governmental
rule or regulation to which the Purchaser is subject,  (b) any judgment,  order,
writ,  injunction,  decree or award of any court,  arbitrator or governmental or
regulatory official, body or authority which is applicable to the Purchaser, (c)
the  certificate  of  incorporation  or  by-laws  of the  Purchaser,  or (d) any
mortgage,  indenture,  or other instrument,  document or understanding,  oral or
written,  to which the  Purchaser  is a party.  No  authorization,  approval  or
consent of, and no registration  or filing with, any  governmental or regulatory
official,  body or  authority  is required  in  connection  with the  execution,
delivery or performance of this Agreement by the Purchaser,  except as have been
made or obtained.

          4.4. Litigation.    No   litigation,    including   any   arbitration,
investigation  or  other  proceeding  of or  before  any  court,  arbitrator  or
governmental or regulatory  official,  body or authority,  is pending or, to the

                                       12

<PAGE>

best knowledge of the Purchaser,  threatened against the Purchaser in respect of
this  Agreement  or any of  the  transactions  contemplated  hereby  that  could
reasonably be expected to prevent a  consummation  of, or  materially  adversely
affect, any of the transactions contemplated hereby.

          4.5. Brokers.  No broker,  investment banker,  agent,  finder or other
intermediary  acting on behalf of Purchaser or under the  authority of Purchaser
is or will be entitled to any broker's or finder's  fee or any other  commission
or similar fee directly or indirectly in connection with any of the transactions
contemplated hereby.

          4.6. Independent  Investigation and Valuation.  In making the decision
to enter into this  Agreement and to consummate  the  transactions  contemplated
hereby,  other than reliance on the representations,  warranties,  covenants and
obligations of Seller set forth in this  Agreement,  Purchaser has relied solely
on its own  independent  investigation,  analysis and  evaluation of the Product
Line and the Acquired Assets (including  Purchaser 's own estimate and appraisal
of the value of the financial condition, assets, operations and prospects of the
Product  Line and the  Acquired  Assets).  Purchaser  confirms  to  Seller  that
Purchaser is sophisticated and knowledgeable in the business of the Product Line
and is capable of  evaluating  the matters set forth above.  The  Purchaser  has
sufficient  funds  available to complete the  acquisition  contemplated  by this
Agreement on a timely basis.

                                   ARTICLE V
                                OTHER AGREEMENTS
                                ----------------

          5.1. Manufacturing/Supply.  Seller  agrees to  manufacture  and supply
Purchaser  with the Products for a period of eighteen  (18) months from the date
of this  Agreement  pursuant  to the terms of the Supply  Agreement  in the form
attached  hereto as Exhibit C; provided,  however,  that Seller's  obligation to
manufacture  and supply the  Products  shall not include the  Phisoderm(R)  Skin
Cleansing  Bar, and shall be limited to countries in which the Seller  currently
has the requisite Product  Registrations and Regulatory Approvals to manufacture
and sell the Product. Thereafter,  Seller shall have no obligation whatsoever to
manufacture and supply Purchaser with the Products.  Purchaser may terminate the
Manufacturing/Supply  by Seller with ninety (90) days  written  notice  provided
Purchaser agrees to purchase all finished product,  materials in production, and
raw materials from Seller. Seller's Supply pricing shall not change for a period
of twelve (12) months from the date of Closing.

          5.2. Technical  Assistance.  The Seller shall  provide such  technical
assistance  as the  Purchaser  may  reasonably  request in  connection  with the
manufacture,  sale, distribution or promotion of the Products from and after the
Closing  for a period of  eighteen  (18)  months,  at the  Purchaser's  expense,
provided that the obligation to provide  technical  assistance shall not require
Seller to expend  significant  time,  resources,  incur any  economic  burden or
disclose any confidential  information  related to Sellers' other Products.  The
Seller  and  the  Purchaser   agree  that  in  all  cases  such  assistance  and
consultation shall be subject to prior notice to the Seller and the availability
of appropriate representatives of the Seller.

          5.3. Payments of Accounts  Receivable.  In the event that either party
shall  receive  any  instrument  or other  payment  in  respect  of any  account
receivable  belonging to the other party, such party shall forthwith deliver the

                                       13

<PAGE>

same to the Seller if the accounts  receivable  arose prior to the Closing Date,
or to the  Purchaser if it arose on or after the Closing  Date,  endorsed  where
necessary,  without recourse,  in favor of the other party. Each party agrees to
exercise good faith and to cooperate in resolution and documentation of any such
accounts receivable.  The Purchaser agrees to give the Seller such assistance as
Seller may reasonably request in collecting pre-Closing Date receivables.

          5.4. Commercially  Reasonable  Efforts.   Subject  to  the  terms  and
conditions  of  this  Agreement,  each  of  the  parties  hereto  will  use  its
commercially  reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done,  all things  necessary,  proper or  advisable  under
applicable   laws  and   regulations   to  consummate  and  make  effective  the
transactions  contemplated  by this  Agreement.  In case at any time  after  the
Closing Date any further  action is  reasonably  necessary or desirable to carry
out the  purposes  of this  Agreement,  including  action  to fully  vest in the
Purchaser its rights in the Acquired  Assets,  the proper officers of the Seller
and the Purchaser  shall on the written  request of either of them take all such
reasonably necessary desirable action.

          5.5. Public  Announcements.  The Seller and the Purchaser will consult
with each other before issuing any press releases or otherwise making any public
statements  or  statements  to the trade with respect to this  Agreement and the
transactions  contemplated hereby and neither of them shall issue any such press
release or make any such public or trade statement prior to such  consultations,
except as may be  required  by law or by  obligations  pursuant  to any  listing
agreement with any national securities exchange.

          5.6. Records.

               (a)  After the Closing,  the Seller and the Purchaser  shall make
available to each other and their  Affiliates , agents and  representatives  all
books, records,  returns,  schedules and work papers and all material records or
other documents  relating to the Acquired Assets and shall keep and preserve all
such books and  records  until the later of (i) six (6) years  from the  Closing
Date, or (ii) period required by applicable  governmental statute or regulation.
Until such  expiration,  duly authorized  representatives  of the Seller and the
Purchaser  shall,  upon  reasonable  notice,  have access  thereto during normal
business hours to examine,  inspect and copy such books and records,  subject to
the confidentiality obligations set forth in Section 5.7.

               (b)  Subject to the  confidentiality  obligations as set forth in
Section 5.7 below,  the Seller and the  Purchaser  will  provide each other with
cooperation  and  information  as either of them may  reasonably  request of the
other in filing any tax return, amended return or claim for refund,  determining
a  liability  for taxes or a right to a refund of taxes,  or in  conducting  any
audit or other  proceeding  in respect  of taxes at the cost and  expense of the
requesting party.

               (c)  If in order  properly  to prepare  documents  required to be
filed with governmental authorities or its financial statements, it is necessary
that any party hereto be furnished with additional  information  relating to the
Acquired  Assets and such  information  is in the hands of another  party,  such
party agrees to use reasonable efforts to furnish such information to such other
party, at the cost and expense of the party being furnished such information.

                                       14

<PAGE>

          5.7. Confidentiality.  Except  as  required  by  applicable  law,  all
confidential or proprietary  information related to the Product Line supplied to
Purchaser by Seller  shall be  maintained  in strict  confidence  by  Purchaser,
Purchaser's  Affiliates and their employees,  advisors and agents.  In the event
that this Agreement is terminated,  all written materials relating thereto shall
be  returned  to Seller or  destroyed  as  directed  in writing  by Seller,  and
Purchaser shall deliver an officer's certificate to Seller certifying as to such
return or destruction. In such event, Purchaser and its employees,  advisors and
agents  shall  make no  further  use of such  information  whatsoever.  However,
Purchaser  will be allowed to retain one copy of the  Confidential  documents in
its vault for reference.

          5.8. Non-Solicitation.  For a  period  of one (1) year  following  the
Closing,  the Purchaser shall not actively  solicit any current  employee of the
Seller or any of its Affiliates to leave such employment and become any employee
of Purchaser or any of its Affiliates, except with the consent of the Seller.

          5.9. Inspection and Due Diligence.  Except as prohibited or limited by
law or  regulation,  the Seller  shall allow the  Purchaser  and its  authorized
representatives  or designees access after the date hereof with reasonable prior
notification  during  normal  business  hours in such a manner  as not to unduly
disrupt  normal  business  activities to the Acquired  Assets and furnish to the
Purchaser and its representatives with all such information reasonably requested
by the Purchaser and concerning the affairs of the Product Line.

          5.10. Inventory and Packaging.  The Purchaser  shall have the right to
use and sell all of the Inventory and all packaging materials existing as of the
Closing Date or  manufactured  by Seller  using the  Seller's  name or UPC codes
until  all  such  Inventory  shall  have  been  disposed  of by  the  Purchaser.
Notwithstanding  the foregoing,  the Purchaser  shall use their  reasonable best
efforts to cause all such  inventory to be disposed of within twelve (12) months
following the Closing Date.

          5.11. Expenses. Except as otherwise provided herein, each party hereto
shall pay its own expenses and costs incurred in connection with the negotiation
and consummation of this Agreement and the transactions contemplated hereby. All
transfer,  sales or related taxes related to the  transactions  contemplated  by
this Agreement shall be paid by the Purchaser.

          5.12. Seller's Marks. Purchaser hereby acknowledges and agrees that as
between Seller and Purchaser,  Seller or its Affiliates are the exclusive owners
of the Seller's Marks.  Purchaser now asserts no claim and will hereafter assert
no claim to any goodwill,  reputation or ownership of any of the Seller's Marks.
Purchaser  agrees  that it will not do or  permit to be done any act or thing in
derogation  of the rights of the Seller or its  Affiliates  with  respect to the
Seller's Marks at any time hereafter.

          5.13. Supplemental  Disclosure.  The Seller  shall have the right from
time to  time  prior  to the  second  business  day  preceding  the  Closing  to
supplement  or amend the  Schedules  attached  hereto with respect to any matter
hereafter  arising or discovered  which if existing or known at the date of this
Agreement  would have been  required  to be set forth or  described  in any such

                                       15

<PAGE>

Schedule.  Any such  supplemental or amended  disclosure  shall not be deemed to
have cured any breach of any  representation  or warranty made in this Agreement
for purposes of  determining  whether or not the conditions set forth in Article
VIII have been  satisfied,  but will be deemed to have cured any such  breach of
representation  or warranty made in this Agreement and to have been disclosed as
of the date of this Agreement for purposes of Article VI hereof.

          5.14 Non-Competition. As an inducement of Purchaser to enter into this
Agreement,  Seller covenants and agrees that for a period of five (5) years from
the Closing Date,  neither  Seller not Seller's  Affiliates  shall,  directly or
indirectly,  control  or  manage,  or  otherwise  participate  or  engage in any
business,  or own any interest in (other than  ownership of five percent (5%) or
less of the  outstanding  equity  interests of any entity listed on the New York
Stock  Exchange,  the American  Stock  Exchange or any foreign stock exchange or
included in the National  Association of Securities Dealers Automated  Quotation
System), any partnership, corporation, limited liability company, joint venture,
trust  or  any  other  form  of  entity,  whether  as  a  proprietor,   partner,
shareholder, joint venture, trustee or in any other capacity whatsoever, if such
business or entity is engaged in developing, manufacturing, marketing or selling
acne  related  products  competitive  with  the  Product  Line.  Notwithstanding
anything to the contrary  herein  contained,  Seller may acquire a business that
otherwise  would violate the foregoing  restrictions as long as no more than ten
percent (10%) of the annual sales of the acquired business is in businesses that
violate the foregoing restrictions.

          5.15 Notification of Certain Events.  For the transition period during
which Seller's  products remain in the stream of commerce,  Seller and Purchaser
agree that each will  notify the other if either  party is  notified  or becomes
aware of an adverse medical, safety, or health event involving any aspect of the
Product Line. Any report shall contain: (i) the date the  report/information was
received by the receiving party; (ii) the name,  address and telephone number of
the  representative  reporting  the  event;  (iii)  consumer  details,  product,
description of the event,  and any other relevant  information.  Each party will
fax the  information  to the other  within  seven (7)  working  days for serious
adverse  events and thirty (30) calendar days for other adverse  reactions.  The
notifying  party will  endeavor  to obtain  any  additional  information  on the
reports as requested by the other party. Seller will inform the Purchaser of any
medical,  safety,  or health issues with any aspect of the Product Line of which
it becomes aware.

                                   ARTICLE VI
                                 INDEMNIFICATION
                                 ---------------

          6.1. Survival  The  parties   agree  that  the   representations   and
warranties  contained in this  Agreement  shall  survive the Closing for one (1)
year after the Closing Date except for Sections 3.4 and 3.6 which shall  survive
indefinitely.  The covenants and other  agreements  set forth in this  Agreement
shall  survive for the specific  applicable  period or  indefinitely  if no time
period has been expressed.

          6.2. Indemnification  by Seller.  The  Seller  shall  indemnify,  hold
harmless and defend  Purchaser and its Affiliates after the Closing Date against
and in respect of any and all claims,  damage, loss,  liability,  costs, levies,
penalties, expenses (including, without limitation, reasonable legal, accounting
and other  expenses)  (collectively,  "Damages")  suffered  or  incurred  by the
Purchaser or its Affiliates in connection with, resulting from or relating to:

                                       16

<PAGE>

               (a)  any  breach of the  warranties  and  representations  of the
Seller set forth in Article III hereof;

               (b)  any  breach of the  covenants  or  agreements  of the Seller
contained herein;

               (c)  any Excluded Assets; or

               (d)  the  ownership or  operation  of the Acquired  Assets or the
Product Line prior to the Closing Date,  except for the Assumed  Liabilities and
the Product Returns.

          6.3. Limitations on Indemnification by the Seller.

               (a)  With the  exception  of  Section  2.8 above,  the  Purchaser
and/or its Affiliates  shall not seek, or be entitled to,  indemnification  from
the Seller and/or its Affiliates for any Damages, unless and until the aggregate
amount of all such Damages  incurred  exceeds Two Hundred Fifty Thousand Dollars
($250,000.00) in which event such Damages may be claimed only to the extent that
they exceed Two Hundred Fifty Thousand Dollars ($250,000.00).

               (b)  The  maximum  aggregate  amount of Damages  incurred  by the
Purchaser  and/or its Affiliates for which the Seller shall be liable under this
Article VI shall be limited to twenty-five percent (25%) of the Purchase Price.

               (c)  The calculation of Damages shall be net of (i) payments that
the Purchaser has received or is entitled to receive under any insurance policy,
(ii) any prior or  subsequent  recovery  by the  Purchaser  from any other third
party, and (iii) any tax benefit to the Purchaser with respect to such Damages.

          6.4. Indemnification by Purchaser. The Purchaser shall indemnify, hold
harmless and defend the Seller and its Affiliates after the Closing Date against
and in respect of any Damages  suffered or incurred by Seller or its  Affiliates
in connection with, resulting from or relating to:

          (a)  any breach of the warranties and representations of the Purchaser
set forth in Article IV hereof;

          (b)  any  breach  of the  covenants  or  agreements  of the  Purchaser
contained herein;

          (c)  any Assumed Liability; or

          (d)  the ownership or operation of the Acquired  Assets or the Product
Line on or after the Closing Date.

          6.5. Limitation on Indemnification by the Purchaser.

               (a)  The  Seller  and/or  its  Affiliates  shall not seek,  or be
entitled to,  indemnification  from the Purchaser  and/or its Affiliates for any

                                       17

<PAGE>

Damages,  unless and until the  aggregate  amount of all such  Damages  incurred
exceeds Two Hundred Fifty  Thousand  Dollars  ($250,000.00)  in which event such
Damages may be claimed  only to the extent  that they  exceed Two Hundred  Fifty
Thousand Dollars ($250,000.00).

               (b)  The  maximum  aggregate  amount of Damages  incurred  by the
Seller and/or its Affiliates for which the Purchaser  shall be liable under this
Article VI shall be limited to twenty-five percent (25%) of the Purchase Price.

               (c)  The calculation of Damages shall be net of (i) payments that
the Seller has received or is entitled to receive  under any  insurance  policy,
(ii) any prior or subsequent  recovery by the Seller from any other third party,
and (iii) any tax benefit to the Seller with respect to such Damages.

          6.6. Resolution of Claims.

               (a)  Upon  obtaining   knowledge  thereof,   the  Seller  or  the
Purchaser,  as the case may be  ("Indemnified  Party"),  shall  notify the other
party  (the  "Indemnifying  Party")  in  writing  of any  damage,  claim,  loss,
liability or expense which the  Indemnified  Party has  determined  has given or
could give rise to a claim (each, a "Claim") under this Article VI (such written
notice being hereinafter  referred to as a "Notice of Claim"). A Notice of Claim
shall contain a brief description of the nature and estimated amount of any such
claim  giving  rise to a right of  indemnification.  If the  Indemnifying  Party
desires to dispute such claim,  it shall,  within thirty (30) days after receipt
of the  Notice  of  Claim,  give  counter  notice,  setting  forth the basis for
disputing such claim,  to the  Indemnified  Party.  If no such counter notice is
given  within  such  thirty  (30)  day  period  or  if  the  Indemnifying  Party
acknowledges  liability for  indemnification,  then such claim shall be promptly
satisfied.

               (b)  With respect to any claim or demand set forth in a Notice of
Claim  relating to a third party claim ("Third Party Claim"),  the  Indemnifying
Party may defend,  in good faith and at its  expense,  any such claim or demand,
and the Indemnified  Party, at its expense,  shall have the right to participate
in, but not control,  the defense of any such Third Party Claim.  So long as the
Indemnifying  Party is defending  in good faith any such Third Party Claim,  the
Indemnified  Party shall not settle or  compromise  such Third Party Claim.  The
Indemnifying Party may, in its discretion, settle any Third Party Claim which it
is defending,  so long as such settlement includes (i) an unconditional  release
of the  Indemnified  Party from all  liability  in  respect of such Third  Party
Claim, and (ii) does not subject the Indemnified  Party to any injunctive relief
or  other  equitable  remedy.  If  requested  by  the  Indemnifying  Party,  the
Indemnified  Party  agrees,  at the cost and expense of the  Indemnifying  Party
(excluding  costs and  expenses  not owed to third  parties  by the  Indemnified
Party),  to cooperate with the Indemnifying  Party and its counsel in contesting
any Third Party Claim which the  Indemnifying  Party  elects to contest.  If the
Indemnifying Party fails to notify the Indemnified Party within thirty (30) days
after  receipt of a Notice of Claim with respect to a Third Party Claim that the
Indemnifying  Party  elects to defend the  Indemnified  Party  pursuant  to this
Section 6.6, or if the Indemnifying Party elects to defend the Indemnified Party
but fails to prosecute or settle the Third Party Claim  diligently and promptly,
then the Indemnified  Party shall have the right to defend, at the sole cost and
expense of the  Indemnifying  Party,  the Third Party  claim by all  appropriate
proceedings.

                                       18

<PAGE>

          6.7. Other Matters.

               (a)  If the Closing shall occur, the  indemnification  provisions
of this Article VI shall be the sole and exclusive  remedy of the Seller and the
Purchaser for any breach of any covenants, representations or warranties made by
the other party in this  Agreement and each party hereby  waives all  statutory,
common  law and other  claims  with  respect  thereto,  other  than  claims  for
indemnification pursuant to this Article VI.

               (b)  Indemnification  hereunder  shall include  liability for any
special,  incidental,  punitive  or  consequential  damages  to the  extent  the
Indemnified  Party is required to pay such amount to a third party in respect of
a final,  non-appealable  judgment or order obtained by such third party. Except
as  expressly   provided  in  the   preceding   sentence,   there  shall  be  no
indemnification  by the Seller or the  Purchaser  for any  special,  incidental,
punitive or consequential damages.

               (c)  Upon  making  any  payment to an  Indemnified  Party for any
indemnification  claim pursuant to this Article VI, the Indemnifying Party shall
be  subrogated,  to the  extent  of  such  payment,  to  any  rights  which  the
Indemnified  Party or its  affiliates  may have  against any other  Persons with
respect to the subject  matter  underlying  such  indemnification  claim and the
Indemnified  Party  shall  take  such  actions  as the  Indemnifying  Party  may
reasonably  require to perfect such subrogation or to pursue such rights against
such other Persons as the Indemnified Party or its affiliates may have.

               (d)  If and to the extent  that prior to the  Closing a party has
actual  knowledge of the breach of or  inaccuracy in or of facts that such party
should  reasonably  have known would  constitute a breach of or  inaccuracy in a
representation,  warranty or covenant  made by the other party,  and the Closing
nonetheless  occurs,  then such party shall not have the right to assert a claim
for  indemnification  in respect  to such  breach or  inaccuracy,  and the party
against whom such claim could  otherwise be asserted  shall have no liability or
obligation in respect thereof.

                                  ARTICLE VII
                           TERMINATION AND ABANDONMENT
                           ---------------------------

          7.1. Termination and Abandonment. This Agreement may be terminated and
the purchase and sale of the Acquired Assets  abandoned at any time prior to the
Closing:

               (a)  by mutual agreement of the Seller and the Purchaser;

               (b)  by the Purchaser if the  conditions set forth in Section 8.2
and the deliveries required by Section 8.4 shall not have been complied with and
performed in any material respect and such noncompliance or nonperformance shall
not  have  been  cured  or  eliminated  (or by its  nature  cannot  be  cured or
eliminated) on or before the Closing Date;

               (c)  by the Seller,  if the  conditions  set forth in Section 8.3
and the deliveries required by Section 8.5 shall not have been complied with and
performed in any material respect and such noncompliance or nonperformance shall
not  have  been  cured  or  eliminated  (or by its  nature  cannot  be  cured or
eliminated) on or before the Closing Date; or

                                       19

<PAGE>

               (d)  by either  Purchaser or Seller if the Closing shall not have
occurred on or before  February 3, 2006, for any reason  whatsoever,  other than
such party's breach of or failure to perform or comply with any agreement herein
or provision  hereof to be performed or complied  with by such party on or prior
to the Closing Date.

                                  ARTICLE VIII
                                   THE CLOSING
                                   -----------

          8.1. Time,  Date  and  Place of  Closing.  Subject  to the  provisions
hereof, the deliveries  contemplated by this Agreement to be made at the Closing
shall be made at the offices of the Seller,  at 10:00  A.M.,  local time,  on or
before  November 30, 2005, or at such later date and location as may be mutually
agreeable.  The date on which the last of such deliveries  occurs is hereinafter
referred to as the "Closing Date", and the events comprising such deliveries are
hereinafter  referred to as the "Closing".  The "Effective  Time" of the Closing
shall be 5:00 p.m. Eastern Time on the Closing Date.

          8.2. Conditions to Obligations of Purchaser. All of the obligations of
the Purchaser under this Agreement are subject to the fulfillment prior to or at
the Closing Date of each of the following  conditions,  any one or more of which
may be waived by the Purchaser:

               (a)  Except  as  otherwise  permitted  or  contemplated  by  this
Agreement  and except for  representations  and  warranties  that by their terms
speak only as of a specified date, each of the representations and warranties of
the Seller contained  herein shall be true and correct in all material  respects
as of the date when  made,  shall be  deemed  to be made  again at and as of the
Closing Date and shall be true and correct in all material respects at and as of
the Closing Date;

               (b)  The  Seller  shall  have  performed  and  complied  with all
covenants and agreements  required by this Agreement to be performed or complied
with by Seller prior to or at the Closing Date;

               (c)  The Licensor  shall have  consented to the assignment of the
Seller's license of the Licensed Trademarks to the Purchaser or the Seller shall
have acquired the Licensed Trademarks from GSK; and

               (d)  No federal,  state or local governmental unit, agency,  body
or authority  with  competent  jurisdiction  over the subject  matter shall have
given  official  written  notice of its  intention to institute  proceedings  to
prohibit  the  transactions  contemplated  by this  Agreement,  or  which  would
interfere  with the use of the Acquired  Assets or the operation of the Acquired
Assets.

          8.3. Conditions to  Obligations of Seller.  All of the  obligations of
the Seller under this  Agreement are subject to the  fulfillment  prior to or at
the Closing Date of each of the following  conditions,  any one or more of which
may be waived by the Seller:

               (a)  Except  as  otherwise  permitted  or  contemplated  by  this
Agreement  and except for  representations  and  warranties  that by their terms
speak only as of a specified date, each of the representations and warranties of
the Purchaser  contained herein shall be true as of the date when made, shall be

                                       20

<PAGE>

deemed  to be made  again at and as of the  Closing  Date and  shall be true and
correct in all material respects at and as of the Closing Date;

               (b)  The  Purchaser  shall have  performed  and complied with all
covenants and agreements  required by this Agreement to be performed or complied
with by Purchaser prior to or at the Closing Date; and

               (c)  No federal,  state or local governmental unit, agency,  body
or authority  with  competent  jurisdiction  over the subject  matter shall have
given  official  written  notice of its  intention to institute  proceedings  to
prohibit the transactions contemplated by this Agreement.

          8.4. Deliveries  by Seller at the  Closing.  Delivery by the Seller of
the following at the Closing  shall be a condition of the  Purchaser  under this
Agreement:

               (a)  a  certificate  dated  the  Closing  Date  executed  by  the
President of Seller  certifying that (i) the  representations  and warranties of
Seller  hereunder  are true and correct in all material  respects on the Closing
Date as if made on and as of such  date,  and  (ii)  Seller  has  performed  and
complied in all material respects with all agreements, covenants, and conditions
required by this Agreement to be performed or complied with by it prior to or at
the Closing;

               (b)  the Trademark License  Assignment and Assumption  Agreement,
substantially  in the form of  Exhibit  A,  executed  by the  Seller  and/or  an
Affiliate of Seller owning the Owned Trademarks;

               (c)  the  Trademark  Assignment,  substantially  in the  form  of
Exhibit B,  executed  by the Seller  and/or an  Affiliate  of Seller  owning the
license to the Licensed Trademarks;  (d) the Supply Agreement,  substantially in
the form of Exhibit C, executed by Seller and/or its Affiliates;

               (e)  the Bill of Sale,  substantially  in the form of  Exhibit D,
conveying all of the tangible property included in the Acquired Assets;

               (f)  the  Distribution  Agreement,  substantially  in the form of
Exhibit G, executed by the Seller and/or its Affiliates; and

               (g)  the Escrow  Agreement,  substantially in the form of Exhibit
F, executed by Seller and/or its Affiliates.

          8.5. Deliveries by Purchaser at the Closing.  Delivery by Purchaser of
the  following  at the Closing  shall be a condition  to the  obligation  of the
Seller under this Agreement:

               (a)  a wire transfer of immediately  available  federal funds, in
the amount of the  Purchase  Price,  less the agreed  holdback of Three  Million

                                       21

<PAGE>

Dollars ($3,000,000.00), to an account designated by Seller with the holdback to
be released  upon Seller's  completion  of conditions  set forth in Section 2.10
above;

               (b)  a  certificate  dated  the  Closing  Date  executed  by  the
President of Purchaser certifying that (i) the representations and warranties of
Purchaser in this Agreement are true and correct in all material respects on the
Closing Date as if made on and as of such date, and (ii) Purchaser has performed
and  complied  in all  material  respects  with all  agreements,  covenants  and
conditions  required by this  Agreement to be  performed or complied  with by it
prior to or at the Closing;

               (c)  the Trademark License  Assignment and Assumption  Agreement,
substantially  in the  form  of  Exhibit  A,  executed  by the  Purchaser  or an
Affiliate of Purchaser;

               (d)  the  Trademark  Assignment,  substantially  in the  form  of
Exhibit B, executed by the Purchaser;

               (e)  the Supply  Agreement,  substantially in the form of Exhibit
C, executed by the Purchaser;

               (f)  the Bill of Sale,  substantially  in the form of  Exhibit D,
executed by the Purchaser;

               (g)  the  Distribution  Agreement,  substantially  in the form of
Exhibit G, executed by the Purchaser and/or its Affiliates; and

               (h)  the Escrow  Agreement,  substantially in the form of Exhibit
F, executed by the Purchaser.

                                   ARTICLE IX
                            MISCELLANEOUS PROVISIONS
                            ------------------------

          9.1. Good Faith; Further Assurances;  Further Cooperation. The parties
to this  Agreement  shall in good faith  undertake to perform their  obligations
under this  Agreement,  to satisfy all conditions and to cause the  transactions
contemplated by this Agreement to be carried out promptly in accordance with the
terms of this  Agreement.  Upon the execution of this Agreement and  thereafter,
each party shall do such things as may be reasonably  requested by another party
hereto in order more  effectively  to  consummate  or document  the  transaction
contemplated by this Agreement.

          9.2. Notices.  All notices,  communications  and deliveries under this
Agreement shall be made in writing,  signed by the party making the same,  shall
specify the Section of this Agreement  pursuant to which it is given,  and shall
be deemed  given on the date  delivered  if  delivered in person or on the third
business  day after  mailed if mailed  certified  mail (with  postage  prepaid),
return receipt requested, as follows:

                                       22

<PAGE>

                        To Seller:

                        Chattem, Inc.
                        1715 West 38th Street
                        Chattanooga, TN 37409
                        Attention:  Theodore K. Whitfield, Jr., General Counsel

                        With a copy to:

                        Miller & Martin PLLC
                        1000 Volunteer Building
                        832 Georgia Avenue
                        Chattanooga, TN 37402
                        Attention: Hugh F. Sharber, Esq.

                        To Purchaser:

                        The Mentholatum Co., Inc.
                        707 Sterling Drive
                        Orchard Park, NY 14127
                        Attention: Francis Chan, President International

                        With a copy to:

                        Magavern, Magavern & Grimm, LLP
                        1100 Rand Building
                        14 Lafayette Square
                        Buffalo, NY 14203
                        Attention: Thomas E. Schofield

or to such other  representative  or to such other address as the parties hereto
may furnish to the other parties in writing. If notice is given pursuant to this
section of a permitted  successor or assign of a party of this  Agreement,  then
notice  shall be given as set forth  above to such  successor  or assign of such
party.

          9.3. Successors;  Assignment.  This Agreement may not be  transferred,
assigned,  pledged or  hypothecated  by any party hereto,  except with the prior
written  consent  of  the  other  parties  hereto,  which  consent  will  not be
unreasonably  withheld.  This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto, and their respective successors and permitted
assigns.

          9.4. Captions;  Definitions.  The  titles  or  captions  of  articles,
sections and  subsections  contained in this  Agreement  are inserted  only as a
matter of convenience and for reference and in no way define,  limit,  extend or
describe the scope of this Agreement or the intent of any provision hereof.  The
parties agree to all  definitions  in the statement of parties to this Agreement
and in the other introductory language to this Agreement.

                                       23

<PAGE>

          9.5. Amendment; Waiver.

               (a)  This  Agreement  may not be  altered  or  amended  except in
writing signed by the Purchaser and the Seller.

               (b)  The  failure  of any  party  hereto  at any time to  require
performance  of any  provisions  hereof  shall in no manner  affect the right to
enforce  the same.  No waiver by any party  hereto of any  condition,  or of the
breach of any term, provision, warranty,  representation,  agreement or covenant
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed or construed as a further or continuing  waiver of any
such condition or breach or a waiver of any other  condition or of the breach of
any other  terms,  provision,  warranty,  representation,  agreement or covenant
herein contained.

          9.6. Controlling  Law. This Agreement  shall be governed and construed
in  accordance  with the laws of the State of  Delaware,  without  regard to any
applicable principles of conflicts of law.

          9.7. Dispute Resolution.

               (a)  In the event that any dispute  arises  with  respect to this
Agreement  and the parties are unable to resolve such dispute after a good faith
effort to do so,  either  party may send the other  party a written  demand  for
arbitration at any time within time limitations set forth for such claim in this
Agreement,  which written demand shall contain a brief description of the nature
of such  dispute and a good faith  estimate  of the  damages  (if  quantifiable)
incurred  by the party  sending  the  written  demand.  The issue  shall then be
submitted to and settled by,  arbitration in Atlanta,  Georgia,  pursuant to the
commercial  arbitration  rules  then  in  effect  of  the  American  Arbitration
Association  (or at any time or at any other  place or under  any other  form of
arbitration  mutually  acceptable to the parties so involved).  The  arbitration
shall be conducted as follows:

               (b)  Seller and  Purchaser  shall each select one (1)  arbitrator
and the two (2) arbitrators shall select a third arbitrator. In the event of the
death, resignation or disability of any such arbitrator,  his successor shall be
chosen in the same manner as the arbitrator so succeeded.

               (c)  The arbitrators  shall have full power to determine  whether
either party is responsible and obligated to pay damages under this agreement in
accordance with the terms of this Agreement.  Their determination shall be final
and conclusive upon the parties.  Any  determination  of an issue of fact or law
made by the arbitrators, shall be binding upon the parties only with respect to,
and in connection with, the particular  arbitration  proceeding and the specific
final decision or award of the arbitrators made therein and shall not be binding
upon the  parties nor shall it be  admissible  in any other  proceeding  for any
other  purpose;  provided  that  nothing  herein  shall  prevent  any party from
enforcing the specific decision or award of the arbitrators  through appropriate
and lawful means.

               (d)  The cost of  arbitration  (not  including  attorneys'  fees)
shall be borne equally by Seller and Purchaser

                                       24

<PAGE>

               (e)  The  arbitrators  shall not have the power to determine  any
issue or matter other than those  expressly set forth in the written  demand and
shall in no  event  have any  right  or  power  to  award  or  assess  punitive,
incidental, or consequential damages to or against either party.

               (f)  The  provisions  of this  Section 9.7 may be enforced by any
court of competent  jurisdiction,  and the party  seeking  enforcement  shall be
entitled to an award of all costs, fees and expenses, including attorneys' fees,
to be paid by the party against whom enforcement is ordered.

          9.8. Entire  Agreement.  This  Agreement,   together  with  the  other
agreements,   documents,   certificates  and  instruments   referenced   herein,
constitutes  the entire  agreement  among the parties hereto with respect to the
transactions  contemplated and supersedes all prior agreements,  understandings,
and negotiations, both written and oral, among the parties with respect thereto.

          9.9. Counterparts.  This  Agreement may be executed in two (2) or more
counterparts,  each of which  shall be deemed an  original,  and it shall not be
necessary  in making proof of this  Agreement or the terms of this  Agreement to
produce or account for more than one (1) of such counterparts.

                                       25

<PAGE>

     IN WITNESS WHEREOF, this Asset Purchase and Sale Agreement is duly executed
by the parties hereto as of the date and year first above written.

                                  PURCHASER:

                                  THE MENTHOLATUM CO., INC.

                                  By:
                                     -------------------------------------------
                                  Name:  Akiyoshi Yoshida, Ph.D.
                                  Title:  President and Chief Executive Officer

                                  THE MENTHOLATUM COMPANY OF CANADA LTD.

                                  By:
                                     -------------------------------------------
                                  Name:    James W. Ingham
                                  Title:   Treasurer

                                  SELLER:

                                  CHATTEM, INC.

                                  By:
                                     -------------------------------------------
                                  Name:
                                       -----------------------------------------
                                  Title:
                                        ----------------------------------------

                                  SIGNAL INVESTMENT
                                  & MANAGEMENT CO.

                                  By:
                                     -------------------------------------------
                                  Name:
                                       -----------------------------------------
                                  Title:
                                        ----------------------------------------

                                       26

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