-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MfrNffUF9FEj+aJsEjLoDBrS5i37TKHLRe26wzaRkm9oEPGFe3huklk8hvZeXwPg k6SHa92kT74tJ9fobY/WVA== 0001021771-04-000195.txt : 20041217 0001021771-04-000195.hdr.sgml : 20041217 20041217150052 ACCESSION NUMBER: 0001021771-04-000195 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20041214 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041217 DATE AS OF CHANGE: 20041217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: P&F INDUSTRIES INC CENTRAL INDEX KEY: 0000075340 STANDARD INDUSTRIAL CLASSIFICATION: METALWORKING MACHINERY & EQUIPMENT [3540] IRS NUMBER: 221657413 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05332 FILM NUMBER: 041211161 BUSINESS ADDRESS: STREET 1: 300 SMITH ST CITY: FARMINGDALE STATE: NY ZIP: 11735 BUSINESS PHONE: 5166941800 FORMER COMPANY: FORMER CONFORMED NAME: PLASTICS & FIBERS INC DATE OF NAME CHANGE: 19671225 8-K 1 f8k1204.txt FORM 8-K DATED DECEMBER 14, 2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 14, 2004 P & F INDUSTRIES, INC. (Exact Name of Registrant as Specified in Charter) Delaware 1-5332 22-1657413 - ----------------------------- --------------------- ---------------------------- (State or Other Jurisdiction (Commission File No.) (IRS Employer Identification of Incorporation) 300 Smith Street, Farmingdale, New York 11735 --------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (631) 694-1800 -------------- Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01 Entry into a Material Definitive Agreement. The information set forth below in Item 2.01 is hereby incorporated into Item 1.01 by reference. Item 2.01 Completion of Acquisition or Disposition of Assets Pursuant to an Asset Purchase Agreement (the "APA"), dated December 13, 2004, effective as of the close of business on December 10, 2004 (the "Effective Time"), among P&F Industries, Inc. (the "Registrant"), Green Manufacturing, Inc., a wholly owned subsidiary of the Registrant ("Green"), and Rosenboom Machine & Tool, Inc. ("RMT"), Green sold certain of its assets comprising its Hydraulic Cylinder Division to RMT. The assets sold pursuant to the APA include, among others, machinery and equipment, work-in-process inventory and certain intangibles. Certain assets were retained by Green, including, but not limited to, Green's accounts receivable existing at the Effective Time. In consideration for the assets acquired pursuant to the APA, RMT paid Green approximately Two Million Three Hundred Seventy-Eight Thousand Five Hundred Fourteen ($2,378,514) Dollars, agreed to pay additional consideration on a quarterly basis, for the twenty (20) consecutive quarterly periods commencing as of the Effective Time, dependent on certain sales by RMT, subject to certain other conditions. In addition, RMT assumed certain of Green's contractual obligations. Pursuant to a Limited Warranty Deed, dated as of December 8, 2004, delivered on December 14, 2004, Green also sold to RMT the land and building located at 1032 South Maple Street, Bowling Green, Ohio in consideration of RMT's payment of approximately One Million Three Hundred Thousand ($1,300,000) Dollars. Pursuant to a Raw Materials Inventory Purchase Agreement between Green and RMT, Green sold certain raw material inventory to RMT for approximately Six Hundred Eighty-Five Thousand Nine Hundred Twelve ($685,912) Dollars. The purchase price for such raw material inventory is payable pursuant to the terms of a Promissory Note, dated December 10, 2004, payable in various amounts over a one (1) year period commencing as of the Effective Time. The Promissory Note is secured by a stand-by letter of credit issued by a bank on behalf of RMT. The amount of such letter of credit automatically reduces thirty (30) days following each principal payment date under such Promissory Note. Pursuant to an Inventory Put Agreement between Green and RMT, Green has granted RMT the right to resell to Green up to fifteen (15%) percent in value of any remaining raw material inventory during the thirty (30) days following the first anniversary of the Effective Time. Green and RMT also entered into a Finished Goods Inventory Purchase Agreement (the "FGIPA"), pursuant to which Green may sell, and RMT may purchase, certain finished goods during the twelve (12) months following the Effective Time. The aggregate purchase price payable under the FGIPA could be up to approximately Eight Hundred Eighty-Eight Thousand Eight Hundred Thirty-Two ($888,832) Dollars. However, RMT has the right to return any inventory to Green that is not deemed purchased by RMT under the terms of the FGIPA at the end of its one (1) year term. Pursuant to an Interim Lease between Green and RMT (the "Interim Lease"), Green has agreed to lease certain space in connection with the operation of Green's Access Division. The term of the Interim Lease is from the Effective Time until one hundred eighty (180) days thereafter, unless terminated earlier in accordance with the terms of the Interim Lease. Pursuant to a Transitional Services Agreement between Green and RMT (the "TSA"), RMT has agreed to provide certain administrative, accounting, manufacturing, warranty and other services relative to Green and its Agricultural Division and Access Division in consideration of certain amounts to be paid by Green, determined in accordance with the TSA. The term of the TSA is from the Effective Time until One Hundred Eighty (180) days thereafter, unless terminated earlier in accordance with the terms of the TSA. Unless otherwise indicated, all documents referred to herein are dated December 13, 2004, but effective as of the Effective Time. Item 9.01 Financial Statements and Exhibits. (b) The pro forma financial information required by this item is not included in this initial report on Form 8-K but will be filed by amendment not later than 71 days after the date that this initial report on Form 8-K is required to be filed. (c) Exhibits. 2.1 Asset Purchase Agreement, dated December 13, 2004, among Rosenboom Machine & Tool, Inc., Green Manufacturing, Inc. and P&F Industries, Inc.* 2.2 Limited Warranty Deed dated as of December 8, 2004, from Green Manufacturing, Inc. to Rosenboom Machine & Tool, Inc.* 2.3 Raw Materials Inventory Purchase Agreement, dated December 13, 2004, between Green Manufacturing, Inc. and Rosenboom Machine & Tool, Inc.* 2.4 Finished Goods Inventory Purchase Agreement, dated December 13, 2004, between Green Manufacturing, Inc. and Rosenboom Machine & Tool, Inc.* 2.5 Finished Goods Security Agreement, dated December 13, 2004, between Rosenboom Machine & Tool, Inc. and Green Manufacturing, Inc.* 2.6 Promissory Note, dated December 10, 2004, made payable in the original principal amount of Six Hundred Eighty Five Thousand Nine Hundred Twelve ($685,912) Dollars to the order of Green Manufacturing, Inc. 99.1 Press Release, dated December 14, 2004, issued by P & F Industries, Inc. ------------------------------------------------------------------------- * Pursuant to Rule 601(b)(2) of Regulation S-K, certain exhibits and schedules have been omitted from this filing. The Registrant agrees to furnish to the Securities and Exchange Commission on a supplemental basis a copy of any omitted exhibit or schedule. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. P & F INDUSTRIES, INC. Date: December 16, 2004 /s/ Joseph A. Molino, Jr. ------------------------- Joseph A. Molino, Jr. Vice President and Chief Financial Officer EX-2 2 assetpur.txt EXHIBIT 2.1 ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT This ASSET PURCHASE Agreement is executed and delivered on this 13th day of December, 2004, effective as of the close of business on the 10th day of December, 2004 (the "Effective Time") (the "Agreement"), by and among Rosenboom Machine & Tool, Inc., an Iowa corporation with its principal place of business at 1530 Western Avenue, Sheldon, Iowa (the "Buyer"); Green Manufacturing, Inc., a Delaware corporation with its principal place of business at 1032 South Maple Street, Bowling Green, Ohio (the "Seller"); and P & F Industries, Inc., a Delaware corporation with its principal place of business at 300 Smith Street, Farmingdale, New York (the "Parent Company"). WITNESSETH: ---------- WHEREAS, the Seller operates a division, known as the Hydraulic Cylinder Division (the "Division"), which is engaged in the design, manufacture and sale of hydraulic cylinders for commercial and industrial applications; WHEREAS, the Seller desires to sell to the Buyer, and the Buyer desires to purchase from the Seller, certain assets of the Seller comprising the Division, on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements hereinafter set forth, the parties agree as follows: ARTICLE 1. ---------- PURCHASE OF ASSETS 1.1. SALE AND PURCHASE OF ASSETS. The Seller hereby sells, assigns, transfers, and conveys to the Buyer, and the Buyer hereby purchases and accepts from the Seller, on the terms and conditions set forth in this Agreement, all of the Seller's right, title, and interest in and to the following assets of the Seller (the "Assets"): 1.1.1. Machinery, Equipment, and Other Tangible Assets. Certain of the Seller's furniture, machinery, equipment, tools and fixtures, supplies, computer hardware and software, motor vehicles, and other similar miscellaneous tangible assets used by the Seller exclusively in the operation of the Division, each as specifically described on Schedule 1.1.1 attached hereto and made a part hereof; 1.1.2. Records. Copies, in accordance with Section 6.4 hereof, of certain of the Seller's customer lists, sales and purchase records, sales proposals, office records, and other books and records exclusively related to the Division, each as specifically described on Schedule 1.1.2 attached hereto and made a part hereof (the "Division Books and Records"); 1.1.3. Inventories. Certain of the Seller's inventories of work-in-progress of the Division as specifically described on Schedule 1.1.3 attached hereto and made a part hereof (the "Work-In-Progress Inventory"); 1.1.4. Deposit Accounts. Certain amounts previously deposited by the Seller with the following vendors: Yantai Xinghui Machinery and Electronics in Yantai, China; BMG Hydraulics Group in Beijing, China; and Wincent Trading Company in Macua, China (the "Deposit Accounts"), each as more fully described on Schedule 1.1.4 attached hereto and made a part hereof; 1.1.5. Intangibles. Certain of the Seller's trade secrets, product designs, trade names, websites, logos, patents, patent applications, trademarks, or copyrights exclusively used by the Division, each as specifically described on Schedule 1.1.5 attached hereto and made a part hereof; and 1.1.6. Assumed Contracts. Certain of the Seller's contracts, agreements, leases, arrangements, customer orders, supplier and/or vendor orders and invoices, and commitments exclusively used by the Division, each as specifically described on Schedule 1.1.6 attached hereto and made a part hereof (the "Assumed Contracts"). 1.2 EXCLUDED ASSETS. Notwithstanding anything herein to the contrary, the Seller is not selling to the Buyer, and the Buyer is not purchasing from the Seller (i) the accounts receivable of the Seller outstanding at the Effective Time (the "Seller's Accounts Receivable"), including, but not limited to, those generated by the operation of the Division (the "Division Accounts Receivable"); (ii) the cash and cash equivalents of the Seller; (iii) any contract, order, payable, commitment, obligation, agreement, lease, or undertaking, whether oral or written, of the Seller (other than the Assumed Contracts); (iv) any security deposits and bonds (other than the Deposit Accounts"); (v) the name "Green Manufacturing, Inc."; (vi) marketable and other securities; (vii) all rights of the Seller under this Agreement and the Collateral Agreements (as hereinafter defined); (viii) all books, records and other assets of the Seller relating to corporate level activities, including, but not limited to, those relating to filings with the Securities and Exchange Commission and the Internal Revenue Service and those relating to accounting and tax functions; (ix) any corporate minute books, stock ledgers and other corporate books and records of the Seller; (x) all books and records relating, exclusively or non-exclusively, to each and every division and/or line of business and/or each and every aspect of the Seller's business other than copies of the Division Books and Records; (xi) all books and records not relating to the Assets or the Assumed Liabilities (as hereinafter defined); (xii) all claims against third parties for inventory sold prior to the Effective Time, including, but not limited to, rights under any manufacturer's or vendor's warranties and insurance claims and proceeds with respect to such inventory, and all other claims against third parties arising from or in connection with the Division or the Assets prior to the Effective Time; (xiii) all federal, state and local income tax refunds due to the Seller; (xiv) title to any real property owned by the Seller and all buildings and other structures located thereon, and all leasehold interests in and to any real property (except for certain real property owned by the Seller that the Buyer is buying from the Seller pursuant to the Deed, as hereinafter defined); (xv) all prepaid expenses and rentals; (xvi) the Seller's right, title and interest in and to certain equipment identified on Schedule 1.2 attached hereto and made a 2 part hereof; (xvii) the Seller's right, title and interest in and to any and all intangible and tangible assets that relate to, or are used or held in connection with, the business of the Seller (other than those identified on Schedules 1.1.1, 1.1.2, 1.1.3, 1.1.4 and Schedule 1.1.5). 1.3. ASSUMPTION OF LIABILITIES. Except as provided below, the Buyer does not assume any liabilities or obligations of the Seller, including, but not limited to, any and all product liability claims relating to any products manufactured by the Seller prior to Effective Time. (For purposes of this Agreement, the date a product is manufactured shall be determined by the date stamp on said product.) Notwithstanding anything in this Agreement, the Buyer hereby assumes and agrees to pay, perform and/or discharge as and when due the following liabilities and obligations of the Seller (collectively, the "Assumed Liabilities"): 1.3.1. Assumed Contracts. Any and all liabilities and obligations of the Seller under the Assumed Contracts; 1.3.2. Warranty Claims. Any and all Warranty Claims, as hereinafter defined and as provided for in Section 6.3 of this Agreement; and 1.3.3. WARN. Any and all liabilities and obligations arising under the Worker Adjustment and Retraining Notification Act ("WARN"), in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby or referred to herein. 1.4. CONTINUED EMPLOYMENT OF EMPLOYEES. On and after the Effective Time, the Buyer shall offer employment to each of the Seller's employees identified on Schedule 1.4 attached hereto and made a part hereof (the "Division Employees") on substantially the same terms and conditions that each such employee enjoyed up to the Effective Time from the Seller. The Buyer shall offer such employment to the Division Employees at the location where each such employee performed his or her respective duties for the Seller prior to the Effective Time. The starting date of employment of each such employee with the Buyer shall be the start of business on the day immediately following the Effective Time. If the employment of a Division Employee is terminated by the Buyer on or after the Effective Time, the Buyer shall be responsible for payment of the costs of termination, including, but not limited to, under WARN with respect to the Division Employees and any and all other employees of the Seller, and providing each such Division Employee with the health and medical plan coverage (if any) required to be provided to such Division Employee by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. The Seller has, and shall have, no obligation to the Buyer to transfer to the Buyer any Internal Revenue Service Forms W-4 and W-5. The Buyer shall give credit to each Division Employee for all periods worked for the Seller, as if during each period such employee had worked for the Buyer, with respect to the determination of vacation from and after the Effective Time and such other rights to which such employee may be entitled, except for any rights accrued under any pension or retirement plans during their employment by the Seller. A reasonable time following the execution and delivery of this Agreement, the Seller shall pay each of the Division Employees all of his or her accrued and unused vacation time as of the Effective Time with respect to such employee's employment by the Seller. Nothing herein shall be deemed to prevent the Buyer from terminating the 3 employment of any Division Employee following the Effective Time or from altering the compensation, employment terms and benefits of any Division Employee following the Effective Time. None of the provisions of this Section 1.4 shall apply to Dan Craig and Derrill Fowler, each of whom are being employed by the Buyer pursuant to separate respective Employment Agreements. ARTICLE 2. ---------- PURCHASE PRICE 2.1. PURCHASE PRICE FOR ASSETS. The aggregate purchase price (the "Purchase Price") that the Buyer shall pay to the Seller for the Assets is (i) Two Million Three Hundred Seventy-Eight Thousand Five Hundred Fourteen ($2,378,514) Dollars payable by wire transfer to an account designated by the Seller (the "Closing Payment"); plus (ii) the Additional Consideration, as such term is defined in, and as contemplated by, Section 2.2 of this Agreement. It is acknowledged by the parties that contemporaneously herewith, the Buyer has purchased from the Seller certain real property pursuant to separate documentation for a consideration of the Buyer's payment to the Seller in the amount of One Million Three Hundred Thousand ($1,300,000) Dollars. 2.2 ADDITIONAL CONSIDERATION. ------------------------ 2.2.1 Calculation of Additional Consideration. (a) The Buyer shall pay to the Seller an amount equal to (i) one and five-tenths (1.5%) percent of the Buyer's Gross Sales during each of the twenty (20) consecutive quarterly periods commencing as of the Effective Time (each an "Earn-Out Period") of the Seller's Products, as hereinafter defined, that are manufactured outside the United States; (ii) with respect to each Active Customer, as hereinafter defined, six and five-tenths (6.5%) percent (the "Domestic Percentage") of the Buyer's Gross Sales to each such Active Customer during each such Earn-Out Period of the Seller's Products that are manufactured in the United States ("Domestic Products"); provided, however, that with respect to each Active Customer during any Earn-Out Period, the Domestic Percentage applicable to Gross Sales of Domestic Products to such Active Customer shall be reduced, on a one-for-one basis, to the extent the Gross Margin, as hereinafter defined, applicable to Gross Sales to such Active Customer during such Earn-Out Period is less than thirty-one and five-tenths (31.5%) percent (in each case, the "Additional Consideration"). The Additional Consideration for each Earn-Out Period shall be calculated on an Active Customer-by-Active Customer basis. As an illustration of the foregoing, in the event that, with respect to Gross Sales of Domestic Products to a particular Active Customer, the Gross Margin during a particular Earn-Out Period is thirty (30%) percent, then the Domestic Percentage applicable to such Active Customer with respect to such Earn-Out Period shall be five (5%) percent calculated as follows: 6.5 - (31.5-30.0) = 5.0. During the Earn-Out Periods, the Buyer shall not change the selling price of the Seller's Products from the highest amount charged by the Seller to any of its customers, including, but not limited to, Active Customers, for such products prior to the Effective Time (the "Selling Price") without the prior written consent of the Seller. 4 (b) For purposes of this Section 2.2, "Gross Sales" shall mean the aggregate selling price of each of the Seller's Products sold by the Buyer during the Earn-Out Periods from sales of the Seller's Products by the Buyer to customers that had been Active Customers of the Seller at any time prior to the Effective Time, determined in accordance with United States generally accepted accounting principles used by the Seller prior to the Effective Time, on a consistent basis, and consistent with the past practices of the Seller. For purposes of this Agreement, the term "Seller's Products" means those products identified on Schedule 2.2.1 attached hereto and made a part hereof, and all subsequent designs based thereon or related thereto and all replacements thereof. For purposes of this Agreement, the term "Active Customers" means those customers identified on Schedule 2.2.2 attached hereto and made a part hereof. For purposes of this Agreement, the term "Gross Margin" shall mean the Gross Sales of Seller's Products less the cost of goods sold divided by such Gross Sales, on a sale by sale basis, determined in a manner identical to, and consistent with, the past practices of the Seller, which the Buyer acknowledges and agrees are determined based on standard costs. 2.2.2 Determination and Payment. For purposes of this Agreement, the Additional Consideration shall be initially determined by the Buyer. The Buyer shall make such determination and deliver a written report thereof (together with all supporting schedules and details of the calculation, including, but not limited to, a calculation of Gross Sales, Gross Margins with respect to Domestic Products and the Domestic Percentage, on a sale by sale basis, by customer and in total (collectively, the "Earn-Out Report")) to the Seller within thirty (30) days following the end of each Earn-Out Period. Simultaneously with the delivery of each such Earn-Out Report, the Buyer shall pay to the Seller the Additional Consideration by certified check of the Buyer made payable to the order of the Seller, or at the Seller's option, by wire transfer of immediately available funds to an account designated in writing by the Seller. 2.2.3 Resolution of Disputes. The Seller shall have thirty (30) days from receipt of each such Earn-Out Report (and thirty (30) days from the receipt of the Comprehensive Statement, as hereinafter defined) to object to the Buyer's calculation of the Additional Consideration (and/or the Reimbursement Amount (as hereinafter defined), as the case may be). In the event that, within such thirty (30) day period, the Seller provides a written objection to such calculation, and such objection is not resolved by the parties within fifteen (15) days thereafter, all remaining disagreements with respect to the calculation of the Additional Consideration (and/or the Reimbursement Amount, as the case may be) shall, within five (5) days following a written request from the Seller to the Buyer, be submitted to an accounting firm of national reputation selected jointly by the Seller and the Buyer; if the Seller and the Buyer are unable to agree on an accounting firm, each shall, within five (5) days following a written request from the Seller to the Buyer, select an accounting firm of national reputation and within five (5) days following the selection of both such accounting firms, such firms shall select a third accounting firm of national reputation and such third firm shall resolve all remaining disagreements with respect to the calculation of Additional Consideration (and/or the Reimbursement Amount, as the case may be). The accounting firm so selected shall 5 sometimes hereinafter be referred to as the "Selected Firm". The Seller and the Buyer shall use their respective best efforts to cause the Selected Firm to resolve all submitted disputes within thirty (30) days of submission of such thereto by delivery to the Seller and the Buyer of a statement in writing setting forth the conclusion of the Selected Firm's as to the disputed item or items and the effect of such conclusions on the Additional Consideration (and/or on the Reimbursement Amount, as the case may be). The determination of the Selected Firm with respect to the Additional Consideration (and/or the Reimbursement Amount, as the case may be) shall be final, conclusive and binding, and judgment may be entered thereon in any court of competent jurisdiction. Nothing contained herein shall be deemed a consent to arbitrate any other issue or dispute which may hereafter arise among the parties to this Agreement. The costs and fees of the Selected Firm shall be borne equally by the Seller, on the one hand, and the Buyer, on the other hand. At all times during the Earn-Out Periods and for one year thereafter, the Buyer shall allow the Seller and its representatives full and free access to such books and records of the Buyer related to the calculation and payment of the Additional Consideration (and/or the Reimbursement Amount, as the case may be) as the Seller shall deem necessary, appropriate or advisable, and allow the Seller to make extracts from and copies of any of the same at the Seller's own cost and expense. In connection with its review, the Selected Firm shall have the right to undertake such auditing procedures as it may deem appropriate and to examine all work papers utilized in the accounting and determination of the Additional Consideration (and/or the Reimbursement Amount, as the case may be). 2.2.4 Payment. If any further Additional Consideration ("Further Additional Consideration") is due the Seller under Section 2.2.3, the Buyer shall make payment of such amount within five (5) days following the earlier of settlement or the issuance of the Selected Firm's decision. Any Further Additional Consideration shall bear interest at the rate of two (2%) percent above the prime rate as reported from time to time in The Wall Street Journal from the date the Buyer delivers the report contemplated by Section 2.2.1 until paid. 2.2.5. Change in the Buyer's Business. The parties intend that the business, operations, product and service lines of the Division not be altered, fragmented, dispersed or otherwise changed, having the effect of diminishing the Additional Consideration. In the event of any such change, the parties shall use their best efforts to calculate, and the Buyer shall pay, the Additional Consideration in such amount as would be consistent with the Gross Sales produced by the Buyer's business in keeping with the intent of this Agreement. Without limiting the generality of the foregoing, the Buyer hereby covenants and agrees that it shall not give priority or preference to any of its sales that are not Gross Sales. 2.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price and the Assumed Liabilities (collectively, the "Total Consideration") shall be allocated among the Assets acquired hereunder in accordance with Schedule 2.3 hereof. It is agreed that the apportionments set forth on Schedule 2.3 were arrived at by arm's length negotiation and properly reflect the respective fair market values of the Assets. The Seller and the Buyer each hereby covenants and agrees that 6 it will not) take a position on any income tax return, before any governmental agency charged with the collection of any income tax, or in any judicial proceeding that is in any way inconsistent with the terms of this Section 2.3 or Schedule 2.3. ARTICLE 3. --------- DELIVERIES 3.1. ITEMS TO BE DELIVERED BY THE SELLER. Contemporaneously with the execution and delivery of this Agreement, the Seller is delivering, or causing to be delivered, to the Buyer: 3.1.1. Real Estate. That certain Deed of even date from the Seller to the Buyer (the "Deed"), duly executed by the Seller. 3.1.2. Raw Materials Inventory. That certain Raw Materials Inventory Purchase Agreement of even date between the Seller and the Buyer (the "Raw Materials Inventory Agreement"), duly executed by the Seller. 3.1.3. Finished Goods Inventory. That certain Finished Goods Inventory Purchase Agreement of even date between the Seller and the Buyer (the "Finished Goods Inventory Purchase Agreement"), duly executed by the Seller. 3.1.4. Inventory Put Agreement. That certain Inventory Put Agreement of even date between the Seller and the Buyer (the "Inventory Put Agreement"), duly executed by the Seller. 3.1.5. Finished Goods Security Agreement. That certain Finished Goods Security Agreement of even date between the Seller and the Buyer (the "Finished Goods Security Agreement"), duly executed by the Seller. 3.1.6. Subordination Agreement. That certain Subordination Agreement of even date among the Seller, the Buyer and Security State Bank (the "Bank") (the "Subordination Agreement"), duly executed by the Seller. 3.1.7. Iowa Subordination Agreement. That certain Subordination Agreement (the "Iowa Subordination Agreement") of even date between the Seller and the Iowa Department of Economic Development (the "Iowa D.E.D."), duly executed by the Seller. 3.1.8. Transitional Services. That certain Transitional Services Agreement of even date between the Seller and the Buyer (the "Transitional Services Agreement"), duly executed by the Seller. 3.1.9. Interim Lease. That certain Lease of even date between the Seller and the Buyer (the "Interim Lease"), duly executed by the Seller. 3.1.10. Opinion. The opinion of the Seller's counsel of even date. 7 3.1.11. Certificate of Insurance. That certificate of insurance required by Section 5.3 of this Agreement 3.2. ITEMS TO BE DELIVERED BY THE BUYER. Contemporaneously with the execution and delivery of this Agreement, the Buyer is delivering or causing to be delivered to the Seller: 3.2.1 Closing Payment. The Closing Payment. 3.2.2 Raw Materials Inventory. The Raw Materials Inventory Agreement, duly executed by the Buyer. 3.2.3 Finished Goods Inventory. The Finished Goods Inventory Purchase Agreement, duly executed by the Buyer. 3.2.4 Inventory Put Agreement. The Inventory Put Agreement, duly executed by the Buyer. 3.2.5 Finished Goods Security Agreement. The Finished Goods Security Agreement, duly executed by the Buyer. 3.2.6 Subordination Agreement. The Subordination Agreement, duly executed by the Buyer and the Bank. 3.2.7 Iowa Subordination Agreement. The Iowa Subordination Agreement, duly executed by the Iowa D.E.D. 3.2.8 Transitional Services. The Transitional Services Agreement, duly executed by the Buyer 3.2.9 Interim Lease. The Interim Lease, duly executed by the Buyer. 3.2.10 Craig Employment Agreement. An original counterpart of that certain Employment Agreement of even date between the Buyer and Dan Craig, duly executed by the parties thereto. 3.2.11 Fowler Employment Agreement. An original counterpart of that certain Employment Agreement between the Buyer and Derrill Fowler, duly executed by the parties thereto. 3.2.12 Opinion. The opinion of Buyer's counsel of even date. 3.2.13 Certificate of Insurance. That certificate of insurance required by Section 5.3 of this Agreement. 8 3.3. CHANGE IN NAMES. Promptly following the execution and delivery of this Agreement, the Seller will cooperate with the Buyer in signing and filing such assignments of names, authorizations to use names and other documents as may be necessary to fully transfer to the Buyer all rights and benefits to the name "POWER STROKE" and all other trademarks and trade names, whether or not registered, identified on Schedule 1.1.5. 3.4. FURTHER ASSURANCES. The Seller shall from time to time after the execution and delivery of this Agreement, at the request of the Buyer and without further consideration, execute and deliver such other instruments of sale, assignment, conveyance, and transfer and take such other action as the Buyer may reasonably request to more effectively convey, assign, transfer to and vest in the Buyer ownership and possession of the Assets. ARTICLE 4. ---------- REPRESENTATIONS AND WARRANTIES 4.1. SELLER. The Seller represents and warrants to the Buyer as follows: 4.1.1. Corporate Organization. The Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. The Seller is also authorized to do business and is in good standing in the State of Ohio. 4.1.2. Authorization. This Agreement and all agreements executed and delivered by the Seller pursuant to this Agreement to which the Seller is a party or signatory and contemplated hereby (collectively, the "Collateral Agreements") have been duly authorized, executed, and delivered by the Seller, and constitute the legal, valid and binding obligations of the Seller, enforceable in accordance with their respective terms. 4.1.3. Title to Assets. The Seller owns the Assets, free and clear of any and all options, rights, pledges, mortgages, security interests, liens, charges, burdens, servitudes and other encumbrances whatsoever (individually an "Encumbrance" and collectively, the "Encumbrances"), except as set forth in Schedule 4.1.3. 4.1.4. Description of Assets. The Assets that the Seller is assigning, transferring, and conveying to the Buyer pursuant to the terms of this Agreement constitute the material assets necessary for the Seller's operation of the Division, and are adequate to permit the Buyer to conduct the operation of the Division as now conducted in all material respects. No employee of the Seller has or claims any right or interest in any assets used or usable by the Seller in the operation of the Division. Moreover, no third parties are in possession of any portion of the Assets as lessees or otherwise, except as reflected on the applicable schedules listing such Assets. 4.1.5. Condition of Assets. All of the tangible Assets are in good order, repair, and operating condition, subject, however, to the effect of ordinary wear and tear and depreciation arising from lapse of time or use with appropriate maintenance, except as noted on the applicable schedules listing such Assets. 9 4.1.6. Assumed Contracts. True, correct, and complete copies of the Assumed Contracts have been provided by the Seller to the Buyer, and all such documents are genuine. Each of the Assumed Contracts is valid and enforceable in accordance with its terms. Except as set forth on Schedule 4.1.13 attached hereto and made a part hereof, the Seller is not in material default in the performance, observance, or fulfillment of any material obligation, material covenant, or material condition contained in the Assumed Contracts, and no event has occurred which with the giving of notice or lapse of time would constitute a material default thereunder. 4.1.7. Employees. A true, correct, and complete list of all persons employed by the Seller exclusively in the operation of the Division is contained in Schedule 4.1.7, which schedule sets forth true and correct information as to the positions, hire date, and the annual salary or hourly rate, as applicable, of all such persons. The Seller has delivered to the Buyer true, correct, and complete copies of each written agreement, plan, or obligation, if any, providing for sick leave, salaries, wages, vacations, pensions, retirement benefits, profit-sharing, insurance, incentive, deferred compensation, bonus, or other benefits or compensation for employees who are employed by the Seller exclusively in the operation of the Division. 4.1.8. Absence of Litigation. To the Seller's knowledge, except as set forth on Schedule 4.1.8, there is no litigation, action, claim, proceeding, or governmental investigation pending or threatened against the Seller that, if determined adversely to the Seller, could have a material adverse effect upon the Assets, the business conducted by the Division, the transactions contemplated by this Agreement, or the ability of the Seller to perform its obligations under said Agreement or under the Collateral Agreements; nor to the Seller's knowledge is there any basis for any such litigation, action, claim, proceeding, or governmental investigation; nor has the Seller been a party to any litigation, action, claim, proceeding, or governmental investigation during the two years prior to the Effective Time that involved a judgment against the Seller of one thousand dollars ($1,000.00) or more or a payment in settlement or otherwise by the Seller of one thousand dollars ($1,000.00) or more (excluding counsel fees and related disbursements), each of the foregoing to the extent exclusively related to the operation of the Division. 4.1.9. Taxes. Solely with respect to the operation of the Division, the Seller has filed all federal, state, and local tax returns and reports required to be filed by the Seller with respect to any federal, state, or local taxes, assessments, interest, or penalties, and all such returns and reports are true, complete, and accurate. Solely with respect to the operation of the Division, the Seller has also paid all applicable federal, state, and local taxes, assessments, interest, and penalties, including, but not limited to, ad valorem, sales, use, excise, franchise, income, social security, payroll (including, but not limited to, FUTA, SUTA, and FICA), real property, and personal property taxes required to have been paid to date. 4.1.10. Financial Statements. Attached hereto as Schedule 4.1.10 is a statement of operations for the nine (9) months ended September 30, 2004 for the Division (the 10 "Financial Statements"). The Financial Statements fairly present the results of operations for the Division for the period therein referred to and have been prepared in accordance with United States generally accepted accounting principles consistently applied. 4.1.11. Licenses and Permits. The Seller has obtained all material licenses, material permits and material governmental approvals required by applicable law or governmental regulations necessary or appropriate in the conduct of the Division. The Seller has in all material respects complied with, and has not in any material respect violated, any law or regulation applicable to the conduct of the Division. 4.1.12. Ability to Carry Out Agreement. Except as set forth in Schedule 4.1.13, the execution and performance of this Agreement and the Collateral Agreements will not violate the provisions of the Certificate of Incorporation or Bylaws of the Seller or any note, indenture, mortgage, lease, or other agreement or instrument which is material to the operation of the Division and to which the Seller is a party or by which the Seller is bound, and will not result in the creation of any Encumbrance upon the Assets. 4.1.13. Consents. Except as set forth in Schedule 4.1.13, the Seller has obtained in writing all material consents of third persons and governmental agencies necessary to permit the valid and effective sale, assignment, transfer, and conveyance of the Assets to the Buyer. 4.1.14. Warranty and Similar Claims. All warranty claims with respect to products sold by the Division that have been made against the Seller during the past two years and all such claims that have ever been made against the Seller and that remain outstanding are listed on Schedule 4.1.14. 4.1.15 Brokers. Neither the Seller nor the Parent Company has engaged, consented to, or authorized any broker, finder, investment banker or other third party to act on its behalf, directly or indirectly, as a broker or finder in connection with the transactions contemplated by this Agreement. 4.2. BUYER. The Buyer represents and warrants to the Seller as follows: 4.2.1. Corporate Organization. The Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Iowa. The Buyer is also qualified to do business and is in good standing in the State of Ohio. 4.2.2. Power and Authority. The Buyer has the requisite power and authority to acquire the Assets, and the Buyer has the requisite power and authority to consummate the transactions provided for in this Agreement and all agreements executed and delivered by the Buyer pursuant to this Agreement or to which the Buyer is a party or signatory and contemplated hereby, (collectively, the "Buyer Collateral Agreements"). This Agreement and the Buyer Collateral Agreements have been duly authorized, executed, and delivered by the Buyer and constitute the legal, valid, and binding obligation of the Buyer enforceable in accordance with their respective terms. All 11 necessary corporate proceedings of the Buyer have been taken to authorize this Agreement, the Buyer Collateral Agreements and the agreements, instruments, and transactions contemplated by this Agreement. 4.2.3. Absence of Litigation. There is no litigation, action, claim, proceeding, or governmental investigation pending, or to the Buyer's knowledge, threatened against the Buyer that may have a materially adverse effect upon the transactions contemplated by this Agreement or the ability of the Buyer to perform its obligations under this Agreement; nor to the Buyer's knowledge is there any basis for any such litigation, action, claim, proceedings or governmental investigation. 4.2.4. Ability to Carry Out Agreement. The execution and delivery of this Agreement and the Buyer Collateral Agreements and the consummation of the transactions contemplated by this Agreement and the Buyer Collateral Agreements will not violate the provisions of the Articles of Incorporation or Bylaws of the Buyer or any note, indenture, mortgage, lease, or other agreement or instrument to which the Buyer is a party or by which the Buyer is bound. 4.2.5 Consents. The Buyer has obtained in writing all material consents of third persons and governmental agencies necessary to permit the valid and effective purchase of the Assets from the Seller. 4.2.6. Brokers. The Buyer has not engaged, consented to, or authorized any broker, finder, investment banker or other third party to act on its behalf, directly or indirectly, as a broker or finder in connection with the transactions contemplated by this Agreement. 4.2.7 Financial Statements. Attached hereto as Schedule 4.2.7 are the balance sheets for the Buyer as of June 30, 2003 and June 30, 2004 and statements of operations for each of the respective twelve (12) months ended as of each such date (the "Buyer Financial Statements"). The Buyer Financial Statements fairly present the financial condition of the Buyer as of the dates thereof and the results of operations for period thereby referred to, in each case, have been prepared in accordance with United States generally accepted accounting principles consistently applied and have been audited by Van Bruggen & Vande Vegte, P.C., whose audit report thereon is included therein. ARTICLE 5. ---------- SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION 5.1 SURVIVAL. Any and all covenants and obligations of the Buyer in this Agreement, including, but not limited to, those relating to any and all indemnification obligations of the Buyer relating to product liability claims and/or the Cancelled Purchase orders, as herein-after defined, any and all payments due to the Seller and/or with respect to the Assumed Liabilities (collectively, the "Obligations") and any and all indemnification obligations of the Seller relating to product liability claims, shall survive indefinitely. Notwithstanding the foregoing, the parties agree that any and all claims which arise in connection with this 12 Agreement relating to their respective representations and warranties contained in this Agreement shall survive the execution and delivery of this Agreement for a period of two (2) years, and the right to commence any action, proceeding, claim, suit, demand, litigation and the like (collectively, "Actions") under and/or relating to this Agreement with respect to the foregoing shall expire on the second anniversary of the Effective Time (except (i) for Actions commenced prior to such date which shall continue until finally resolved, (ii) that the Obligations shall survive indefinitely, and any Action relative thereto may be brought at any time, and (iii) the Seller's indemnification obligations relating to product liability claims shall also survive indefinitely, and any Action thereunder may be brought at any time). 5.2 INDEMNIFICATION. 5.2.1. General Indemnification Obligation of the Seller. From and after the Effective Time, the Seller will reimburse, indemnify and hold harmless the Buyer, against and in respect of any and all damages, losses, deficiencies, liabilities, costs and expenses incurred or suffered by the Buyer that result from, relate to or arise out of (i) any misrepresentation, breach of warranty or nonfulfillment of any agreement or covenant on the part of the Seller under this Agreement; and/or (ii) any product liability claims relating to products manufactured by the Seller prior to the Effective Time; and any and all Actions, assessments, audits, fines, judgments, costs and other expenses (including, but not limited to, reasonable legal fees and other costs of litigation and any amounts paid in settlement or compromise) incident to any of the foregoing or to the enforcement of this Section 5.2.1. 5.2.2. General Indemnification Obligation of the Buyer. From and after the Effective Time, the Buyer will reimburse, indemnify and hold harmless the Seller and the Parent Company against and in respect of any and all damages, losses, deficiencies, liabilities, costs and expenses incurred or suffered by the Seller that result from, relate to or arise out of (i) any misrepresentation, breach of warranty or nonfulfillment of any agreement or covenant on the part of the Buyer under this Agreement, (ii) the Assumed Liabilities and/or the Cancelled Purchase Orders, and/or (iii) any product liability claims relating to products manufactured by the Buyer; and any and all Actions, assessments, audits, fines, judgments, costs and other expenses (including, but not limited to, reasonable legal fees and other costs of litigation and any amounts paid in settlement or compromise) incident to any of the foregoing or to the enforcement of this Section 5.2.2. 5.2.3. Method of Asserting Claims, Etc. (a) In the event that any claim or demand for which the Seller would be liable to the Buyer hereunder is asserted against or sought to be collected from the Buyer by a third party, or the Buyer has a claim against the Seller hereunder that does not involve a claim or demand being asserted or sought to be collected from a third party, the Buyer shall notify the Seller of such claim or demand within ten (10) days of receiving notice of, or discovery of facts related to, such claim (but the failure to so notify within such time shall not relieve the Seller from any liability it may have under this Article 5 except to the extent it has been prejudiced in any material respect by such failure), 13 specifying the nature of such claim or demand and the amount or the estimated amount thereof to the extent then feasible, which estimate shall not be conclusive of the final amount of such claim and demand (the "Claim Notice"). The Seller shall thereupon, at its sole cost and expense, defend the Buyer against such claim or demand with counsel reasonably satisfactory to the Buyer. (b) The Seller shall not, without the prior written consent of the Buyer, consent to the entry of any judgment against the Buyer or enter into any settlement or compromise which does not include, as an unconditional term thereof (i.e., there being no requirement that the Buyer pay any amount of money or give any other consideration), the giving by the claimant or plaintiff to the Buyer of a release, in form and substance reasonably satisfactory to the Buyer, from all liability in respect of such claim or litigation. If the Buyer desires to participate in, but not control, any such defense or settlement, it may do so at its sole cost and expense. If, in the reasonable opinion of the Buyer, any such claim or demand or the litigation or resolution of any such claim or demand involves an issue or matter which could have a materially adverse effect on the business, operations, assets, properties or prospects of the Buyer, then the Buyer shall have the right to control the defense or settlement of any such claim or demand and its costs and expenses shall be included as part of the indemnification obligation of the Seller hereunder; provided, however, that the Buyer shall not, settle any such claim or demand without the prior written consent of the Seller, which consent shall not be unreasonably withheld or delayed. If the Buyer should elect to exercise such right, the Seller shall have the right to participate in, but not control, the defense or settlement of such claim or demand at its sole cost and expense. (c) All claims for indemnification by the Seller and/or the Parent Company under this Agreement shall be asserted and resolved under the procedures set forth hereinabove by substituting in the appropriate place, the "Seller" and the "Parent Company" for the "Buyer" or the "Buyer" for the "Seller" and the "Parent Company", as the case may be. 5.2.4. Limitations. (a) Notwithstanding anything herein to the contrary, as to matters which are subject to indemnification pursuant to this Article 5, the Seller, shall not be liable unless and until the aggregate damages, losses, deficiencies, liabilities, costs and expenses to the Buyer resulting from such otherwise indemnifiable matters shall exceed a cumulative aggregate of Thirty-Two Thousand Five Hundred ($32,500.00) Dollars (the "Indemnification Threshold") and then shall only be liable for the excess above the Indemnification Threshold. (b) The total indemnification to which the Buyer shall be entitled under this Article 5 (inclusive of legal fees and expenses) shall be limited to an amount not to exceed One Million ($1,000,000) Dollars, less any and all amounts paid by the Seller on account of Actions subject to indemnification hereunder and all related costs; provided, however, nothing in this Section 5.2.4 shall be deemed to limit the insurance 14 proceeds and/or legal fees and expenses to which the Buyer may be entitled as an additional named insured on the policies the Seller is obligated to secure and maintain pursuant to Section 5.3 of this Agreement. (c) All amounts payable by the Seller hereunder on account of any and all matters subject to indemnification shall be net of all insurance proceeds and/or tax benefits received by the Buyer with respect to such Action (less the present value of any premium increases occurring as a result of such claim). 5.3 INSURANCE. The Buyer and the Seller shall, at their own expense, secure and at all times maintain, with financially sound and reputable companies, products liability insurance for twenty (20) years from the Effective Time to protect the other party from product liability claims that may arise before or after the Effective Time. Throughout said twenty-year period of time, such policies shall be in such form and in such amounts and coverage as would be deemed prudent by companies engaged in the same or similar businesses as the parties hereto (but in no event less than Ten Million Dollars ($10,000,000.00) per occurrence) and shall name the other party as an additional named insured. Each party shall, contemporaneously with the execution and delivery of this Agreement, and from time to time thereafter, provide to the other party a certificate of insurance confirming that such policies are in effect. 5.4 EXCLUSIVE RIGHTS AND REMEDIES. Except as provided in Section 6.1 below, the indemnification rights of the parties under this Article 5 shall be the exclusive rights and remedies the parties may have at law or in equity or otherwise with regard to matters subject to indemnification for any misrepresentation, breach of warranty or failure to fulfill any agreement or covenant hereunder on the part of any party hereto, including, but not limited to, the right to seek specific performance, rescission or restitution. ARTICLE 6. --------- POST CLOSING MATTERS 6.1 COVENANT NOT TO COMPETE. From and after the Effective Time for a period of five (5) years, the Seller and the Parent Company shall not compete with the Buyer in any business of the type carried on by the Division prior to the Effective Time in any geographic area where the Seller conducted the business of the Division prior to the Effective Time. The term "compete", as used in this paragraph, means to engage in competition, directly or indirectly (including, but not limited to, soliciting or selling any products competitive with those produced by the Division as of the Effective Time to any customer that was a customer of the Division as of the Effective Time) either as a proprietor, partner, employee, agent, consultant, stockholder, or in any capacity or manner whatsoever. The parties hereby acknowledge that remedies at law for violations of this paragraph are inadequate and that only injunctive relief is an adequate remedy for such violations. The provisions of this paragraph are severable; if any provision of this paragraph or application thereof to any circumstance is held invalid, such invalidity shall not affect the provisions or applications of this paragraph that can be given effect without the invalid provision or application. Notwithstanding anything contained in this Agreement, the Seller shall not be deemed to have violated this Section if it sells, transfers or liquidates any property received by or obtained by the Seller under, pursuant to, or in connection with the Finished 16 Goods Inventory Purchase Agreement, the Finished Goods Security Agreement and/or the Inventory Put Agreement. 6.2 COLLECTION AND REMITTANCE OF THE SELLER'S ACCOUNTS RECEIVABLE. Schedule 6.2 attached hereto and made a part hereof sets forth the name, address, amount owed and time outstanding through and including the Effective Time (the "Accounts Receivable Schedule") with respect to Division Accounts Receivable. From and after the Effective Time, the Buyer shall, at its own expense, collect, on behalf of the Seller, the Division Accounts Receivable in a manner consistent with the past business practices of the Seller. In the event that the Buyer receives any checks made payable to the order of the Seller, the Buyer shall deposit such check on behalf of the Seller to an account or accountants designated by the Seller in writing from time to time (in any case, the "Account") within one (1) day of the Buyer's receipt thereof. In the event that the Buyer receives any monies on account of the Division Accounts Receivable, such amounts shall be held in trust for the Seller by the Buyer in a segregated bank account maintained by the Buyer for such purpose. Promptly, (but in no event beyond five (5) days) following receipt of such payment the Buyer shall deposit same in the Account, or upon the written request of the Seller, deliver same to the Seller. Any amounts received by the Buyer from any person or entity identified on the Accounts Receivable Schedule shall be applied to the oldest of the Division Accounts Receivable with regard to such person or entity, notwithstanding any amounts due from such person or entity to the Buyer and regardless of whether such payment is made to or for the account of the Buyer or the Seller. The Buyer shall not, (i) settle, negotiate or otherwise compromise any of the Division Accounts Receivable without written authorization with respect thereto from the Seller, or (ii) suggest to or influence any account debtor of the Seller or offer any incentive to any account debtor of the Seller or otherwise take any action that would or does cause any such account debtor to fail to pay an amount due the Seller, or pay an amount due the Buyer in lieu thereof. Notwithstanding anything contained herein, the Seller shall have the right to collect the Division Accounts Receivable. Any amount received by the Seller shall be applied to the Division Accounts Receivable in accordance with the Seller's sole discretion, which shall be final, conclusive and binding. The parties acknowledge and agree that the Buyer is collecting the Seller's Accounts Receivables other than the Division Accounts Receivables on behalf of the Seller pursuant to the Transitional Services Agreement. 6.3 WARRANTY CLAIMS. ---------------- (a) The Buyer hereby assumes and agrees to pay, perform and/or discharge when due any and all liabilities and obligations of the Seller with respect to warranty claims arising out of any and all products of the Division manufactured, sold and/or shipped by the Seller prior to the Effective Time ("Warranty Claims"). The Seller shall reimburse the Buyer for its actual, direct out-of-pocket cost of repair or replacement ("Warranty Costs") with respect to each Warranty Claim (a "Product Defect Claim") based exclusively upon a Product Defect, as hereinafter defined, but only to the extent that the aggregate of such Warranty Costs, calculated in a manner identical to, and consistent with the past practices of the Seller ("Product Defect Warranty Costs"), during the Reimbursement Period, as hereinafter defined, exceeds the Claim Threshold, as hereinafter defined; provided, however, that the Buyer shall be entitled to such 16 reimbursement only if (i) the Buyer notifies the Seller in writing at least thirty (30) days prior to any such repair or replacement of its receipt of any such Product Defect Claim, specifying the relevant information with respect thereto, including, but not limited to, the nature thereof, (ii) the Buyer provides a binding written quote (the "Binding Quote") to the Seller in advance of any such repair or replacement, itemizing the proposed cost of repair or replacement, as applicable, (iii) the Buyer receives from the Seller a written authorization of the proposed repair or replacement pursuant to such Binding Quote, (iv) pursuant to such written authorization, the Buyer promptly performs the relevant repair or replacement, and (v) the Buyer's response to such Product Defect Claim shall in all respects be in accordance with the warranty policy in effect with respect to the relevant product as of the Effective Time. (b) Within sixty (60) days following the end of the twelve (12) month period commencing on the Effective Time (such twelve (12) month period, the "Reimbursement Period"), the Buyer shall deliver to the Seller a comprehensive itemized written statement (the "Comprehensive Statement") setting forth a full and complete accounting of all Product Defect Claims received and processed during such Reimbursement Period, including, but not limited to, the remedial action taken with respect to each such Product Defect Claim, and the extent to which the aggregate Product Defect Warranty Costs have exceeded the Claim Threshold (any such excess, the "Reimbursement Amount"). The Seller shall remit the Reimbursement Amount to the Buyer within thirty (30) days following the earlier of (i) the Seller's written notice to the Buyer indicating that the Seller agrees with the Buyer's calculation of the Reimbursement Amount, or (ii) the issuance of the decision of the Selected Firm with respect thereto pursuant to the terms of Section 2.2.3 hereof. (c) The Seller may, in its sole and absolute discretion, which shall be final, conclusive and binding, make alternate arrangements with respect to any and all Product Defect Claims, in which event the Buyer shall cooperate with the Seller with respect thereto. In no event shall the Seller be required to make any such alternate arrangements. Neither the Seller nor the Parent Company shall have any liability or obligation with respect to any Product Defect Claim made or processed, or any other warranty or repair matter, after the end of the Reimbursement Period. (d) For purposes of this Agreement, "Product Defect" shall mean any Warranty Claim based exclusively on a product design defect, material defect, and/or workmanship defect in any particular product; and "Claim Threshold" shall mean four tenths of one (.4%) percent of the Buyer's revenue from the sale of the products identified on Schedule 2.2.1 attached hereto and made a part hereof during the Reimbursement Period, determined in a manner consistent with the past practice of the Seller. 6.4 BOOKS AND RECORDS. Within thirty (30) days following the execution and delivery of this Agreement, the Buyer shall grant the Seller, upon the Seller's reasonable request, access to the Division Books and Records to appropriately organize, pack, and ship, at the Seller's expense, all such books and records on any media (including, but not limited to, paper and electronic media) to the Seller c/o P&F Industries, Inc., 300 Smith Street, Farmingdale, NY 11735-1114. At such time, the Seller shall provide the Buyer, at the Buyer's request, copies of 17 any such books and records it may desire. The cost of photocopying shall be shared equally by the Seller and the Buyer. In the event the Buyer desires additional copies of any such books and records after the Seller has shipped them to New York, the Seller shall, at the Buyer's expense, provide such copies to the Buyer. If the Buyer has not previously obtained copies as provided herein, if at any time the Seller desires to dispose of the books and records it has shipped to New York pursuant to this Section 6.4, it shall first give reasonable (but no less than thirty (3) days' written notice thereof) to the Buyer, which may obtain copies of the same at its expense. 6.5 COOPERATION. With respect to the litigation described on Schedule 4.1.8 attached hereto and made a part hereof, and with respect to any and all actions, proceedings, claims, investigations, arbitrations and the like that may be commenced against the Seller or the Parent Company, the Buyer shall cooperate with the Seller or the Parent Company (as the case may be) in the defense thereof, which cooperation shall include, but not be limited to, making employees of the Buyer available to the Seller or the Parent Company (as the case may be) and its representatives on a mutually convenient basis and to provide additional information and explanation of any materials provided under this Agreement, including, but not limited to, providing such employees to serve as witnesses, and the Seller or the Parent Company (as the case may be) shall reimburse the Buyer for any reasonable out-of-pocket expenses incurred by the Buyer in connection therewith. 6.6 CANCELLED PURCHASED ORDERS. -------------------------- (a) Contemporaneously with the execution and delivery of this Agreement, the Seller shall issue on its letterhead a letter in, or substantially in, the form attached hereto as Exhibit A to the vendors identified on Schedule 6.6 attached hereto and made a part hereof. (b) Contemporaneously with the execution and delivery of this Agreement, the Buyer shall issue on its letterhead a letter in, or substantially in, the form attached hereto as Exhibit B to the vendors identified on Schedule 6.6 attached hereto and made a part hereof. (c) For purposes of this Agreement, the term "Cancelled Purchase Orders" shall mean those purchase orders of Green described on Schedule 6.6. ARTICLE 7. --------- MISCELLANEOUS 7.1. EXPENSES. Each party to this Agreement shall pay its own expenses incidental to the negotiation, preparation, execution, and performance of this Agreement and the transactions contemplated hereby, including, but not limited to, the fees and expenses of their respective legal counsel and accountants. 7.2. NOTICES. Any and all notices, demands or other communications or deliveries permitted or required to be given pursuant to this Agreement shall be in writing and deemed given when personally delivered or three days after deposited in the United States mail, postage prepaid, sent certified or registered and addressed as follows: 18 A. If to the Buyer to: Rosenboom Machine & Tool, Inc. 1530 Western Avenue Sheldon, Iowa 51201; B. If to the Seller, to: Green Manufacturing, Inc. c/o P&F Industries, Inc. 300 Smith Street Farmingdale, New York 11735 Attention: President; C. If to the Parent Company, to P&F Industries, Inc. 300 Smith Street Farmingdale, New York 11735; or to such other address or person as hereafter shall be designated in writing by the applicable party in accordance with this Section 7.2. 7.3. ENTIRE AGREEMENT. This Agreement and the exhibits and schedules hereto, together with the Collateral Agreements and Buyer Collateral Agreements, constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof, and supersedes all negotiations, preliminary agreements, and all prior and contemporaneous discussions and understandings of the parties in connection with the subject matter hereof. All exhibits and schedules hereto are hereby incorporated into and made a part of this Agreement. 7.4. AMENDMENTS; WAIVER. No amendment, waiver, change, or modification of any of the terms, provisions, or conditions of this Agreement shall be effective unless made in writing and signed by the parties to be charged. Waiver of any provision of this Agreement shall not be deemed a waiver of future compliance therewith, and such provision shall remain in full force and effect. 7.5. SEVERABILITY. In the event any provision of this Agreement is held invalid, illegal, or unenforceable, in whole or in part, the remaining provisions of this Agreement shall not be affected thereby and shall continue to be valid and enforceable, and, if, for any reason, a court finds that any provision of this Agreement is invalid, illegal, or unenforceable as written, but that by limiting such provision it would become valid, legal, and enforceable, then such provision, shall be deemed to be written and shall be construed and enforced as so limited. 7.6. CHOICE OF LAW. This Agreement shall be construed in accordance with, and governed by, the laws of the State of Ohio, excluding choice of law principles thereof. The 19 Buyer hereby irrevocably and unconditionally: (i) consents and submits for itself and its property in any action relating to this Agreement, or for recognition and enforcement of any judgment in respect thereof, to the exclusive jurisdiction of the federal courts located within the Northern District of Ohio and state courts located within the County of Wood in the State of Ohio; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it or he may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Buyer at its respective address set forth in Section 7.2 of this Agreement or at such other address of which the sender shall have been previously notified in writing and in accordance with Section 7.2; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law. 7.7. COUNTERPARTS. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. It shall not be necessary that any single counterpart hereof be executed by all parties hereto so long as at least one counterpart is executed by each party. 7.8. HEADINGS AND CAPTIONS. The titles or captions of paragraphs and/or sections in this Agreement are provided for convenience of reference only, and shall not be considered a part hereof for purposes of interpreting or applying this Agreement, and such titles or captions do not define, limit, extend, explain or describe the scope or extent of this Agreement or any of its terms or conditions. 7.9. GENDER AND NUMBER. Words and phrases herein shall be construed as in the singular or plural number and as masculine, feminine, or neuter gender, according to the context. 7.10. BINDING EFFECT ON SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors, and assigns; provided, however, that the Buyer may not assign its rights or obligations hereunder without the prior written consent of the Seller, and in the event of any such permitted assignment, all of the terms, covenants, agreements and conditions of this Agreement shall continue to be in full force and effect and the Buyer shall continue to remain liable and responsible for the due performance of all of the terms, covenants, agreements and conditions of this Agreement that it is obligated to observe and perform. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto (and their respective legal representatives, heirs, successors, and permitted assigns), any rights, remedies, obligations, or liabilities. 7.11. CONFIDENTIAL INFORMATION. Each party agrees that such party and its representatives at all times hereafter will hold in a fiduciary capacity and in strict confidence all information, data and documents received from the other parties (collectively, "Information") 20 and will not, without the consent of the disclosing party, use or disclose, directly or indirectly, the Information in any manner whatsoever, in whole or in part. Notwithstanding the foregoing, the obligations under this Section 7.11 to maintain such confidentiality shall not apply to any Information (a) that is in the public domain at the time furnished by the disclosing party, (b) that becomes in the public domain thereafter through any means other than as a result of any act of the receiving party or of its agent, officers, or directors which constitutes a breach of this Agreement, or (c) that is required by applicable law to be disclosed and/or the rules of any securities exchange or inter-dealer quote system. 7.12. SALES, TRANSFER AND DOCUMENTARY TAXES. The Seller and the Buyer shall pay one half (1/2) of all federal, state and local sales, documentary and other transfer taxes, if any, due as a result of the purchase, sale and transfer of the Assets in accordance herewith, whether imposed by law on the Seller or the Buyer. 7.13. PUBLICITY. The Buyer agree that no publicity, release or other public announcement concerning the transactions contemplated by this Agreement shall be issued by it without the advance approval of both the form and substance of the same by the Seller and its counsel, which approval, in the case of any publicity, release or other public announcement required by applicable law, shall not be unreasonably withheld or delayed. The parties agree further that the terms of this Agreement shall be divulged only to such of their employees and representatives who shall have a "need to know", unless such terms have been publicly released in accordance with the provisions hereof. 7.14 DISCLOSURE SCHEDULES. Unless otherwise specified, each reference in this Agreement to any numbered schedule is a reference to that numbered schedule, however, for all purposes herein, disclosure made in any one schedule shall be deemed made in all schedules to the extent applicable. 7.15 DISCLAIMER; DAMAGES. THE BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE STATED IN ARTICLE 4, NEITHER THE SELLER NOR THE PARENT COMPANY MAKES ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER RELATING TO THE ASSETS TO BE TRANSFERRED TO THE BUYER HEREUNDER, THE DIVISION OR ANY OTHER MATTER. EXCEPT AS PROVIDED IN ARTICLE 4, THE ASSETS ARE BEING SOLD AS IS, WHERE IS, WITH ALL FAULTS, AND NEITHER THE SELLER NOR THE PARENT COMPANY MAKES ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER, INCLUDING, BUT NOT LIMITED TO, AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE BUYER EXPRESSLY REPRESENTS AND WARRANTS THAT IT HAS NOT RELIED ON ANY FINANCIAL DATA, PROJECTIONS OR REPRESENTATIONS OR WARRANTIES WHICH IT HAS OBTAINED FROM THE SELLER, THE PARENT COMPANY OR ANY OTHER PARTY, AND THAT THE BUYER HAS CONDUCTED ITS OWN DUE DILIGENCE INVESTIGATION OF THE SELLER AND FORMED ITS INDEPENDENT JUDGMENT AS TO THE FUTURE PROSPECTS OF THE ASSETS AND DIVISION. IN NO EVENT SHALL THE SELLER OR THE PARENT COMPANY BE LIABLE FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES RELATING TO OR BASED ON LOSS OF PROFITS OR SALES, WHETHER SUCH DAMAGES ARE ALLEGED IN TORT, CONTRACT OR INDEMNITY, EVEN IF THE SELLER OR THE PARENT COMPANY HAS BEEN ADVISED OF THE POSSIBILITY THEREOF. 21 1 THE SELLER AND THE BUYER HEREBY IRREVOCABLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THIS AGREEMENT AND THE RELATIONSHIPS THEREBY ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this Agreement, including, without limitation, contract claims, tort claims, breach of duty claims, and all other statutory and common law claims. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS AGREEMENT. In the event of litigation, this provision may be filed as a written consent to a trial by the court. [Signatures appear on following page] IN WITNESS WHEREOF, the parties hereto have executed this Agreement and cause the same to be delivered on their behalf as of the date first above written. BUYER ROSENBOOM MACHINE & TOOL, INC. By:/s/ Brian Rosenboom --------------------------------- Brian Rosenboom, Vice President SELLER GREEN MANUFACTURING, INC. By:/s/ Joseph A. Molino, Jr. ------------------------ Joseph A. Molino, Jr., Vice President PARENT COMPANY P&F INDUSTRIES, INC. By: /s/ Joseph A. Molino, Jr. ------------------------- Joseph A. Molino, Jr., Vice President 23 Index to Schedules Schedule 1.1.1 - Machinery, Equipment and Other Assets Schedule 1.1.2 - Division Books and Records Schedule 1.1.3 - Work-In-Progress Inventory Schedule 1.1.4 - Deposit Accounts Schedule 1.1.5 - Division Intangibles List Schedule 1.1.6 - Assumed Contracts Schedule 1.2 - Certain Excluded Assets Schedule 1.4 - Division Employees Schedule 2.2.1 - Seller's Products Schedule 2.2.2 - Active Customers Schedule 2.3 - Allocation of Purchase Price Schedule 4.1.3 - Encumbrances Schedule 4.1.7 - Employees Schedule 4.1.8 - Litigation Schedule 4.1.10 - Financial Statements Schedule 4.1.13 - Consents Not Obtained Schedule 4.1.14 - Warranty Claims Schedule 4.2.7 - Balance Sheets of the Buyer Schedule 6.2 - Cylinder Accounts Receivable Schedule 6.6 - Vendors 24 Index to Exhibits Exhibit A - Seller's Letter to Vendors Exhibit B - Buyer's Letter to Vendors 25 EX-2 3 warrantydeed.txt EXHIBIT 2.2 LIMITED WARRANTY DEED LIMITED WARRANTY DEED --------------------- GREEN MANUFACTURING, INC. a Delaware corporation having an address at 1032 South Maple Street, Bowling Green, Ohio, for valuable consideration paid, grants, with limited warranty covenants to ROSENBOOM MACHINE & TOOL, INC., an Iowa corporation, whose tax mailing address is 1530 Western Avenue, Sheldon, Iowa 51201, the real property located in Wood County, Ohio, which is more fully described in Exhibit A attached hereto and made a part hereof. This conveyance is SUBJECT TO the following: a. Zoning ordinances and regulations, if any; b. Real estate taxes and assessments, both general and special, which are a lien but are not yet due and payable; c. All easements, covenants, conditions, reservations and restrictions of record affecting the above-described property. d. Rights of tenants in possession as tenants only; and e. Any state of facts that would be revealed by a survey of the property. Prior Instrument Reference: Volume 739, Page 607 of Deed Records of Wood County, Ohio records. Parcel No. B-08-510-25-4-1-28000 This instrument has been executed by the duly authorized officer of Green Manufacturing, Inc. as of the 8th day of December, 2004. GREEN MANUFACTURING, INC. By: /s/ Joseph A. Molino, Jr. ------------------------------------- Joseph A. Molino, Jr., Vice President STATE OF FLORIDA : : SS: COUNTY OF HILLSBOROUGH : The foregoing instrument was acknowledged before me this 8th day of December, 2004, by Joseph A. Molino, Jr., Vice President of Green Manufacturing, Inc., a Delaware corporation. /s/ Julie C. Ramga ------------------------------- (Notarial Seal) Notary Public My Commission Expires: July 21, 2006 ------------- This instrument was prepared by: Samuel S. Pearlman, Esq. Squire, Sanders & Dempsey L.L.P. 4900 Key Tower 127 Public Square Cleveland, Ohio 44114-1304 Index to Exhibits Exhibit A - Real Property Description EX-2 4 rawinventorypa.txt EXHIBIT 2.3 RAW MATERIALS INVENTORY PURCHASE AGR. RAW MATERIALS INVENTORY PURCHASE AGREEMENT (the "Agreement"), dated this 13th day of December, 2004, effective as of the close of business on the 10th day of December, 2004 (the "Effective Time"), by and between GREEN MANUFACTURING, INC., a Delaware corporation ("Green") and ROSENBOOM MACHINE & TOOL, INC., an Iowa corporation ("RMT"). R E C I T A L S: --------------- WHEREAS, Green and RMT have executed and delivered that certain Asset Purchase Agreement, of even date, effective as of the Effective Time, among each of Green, RMT and P&F Industries, Inc. (the "APA"), pursuant to which, among other things, RMT has acquired certain assets from Green previously used by Green in the operation of Green's Hydraulic Cylinder Division (the "Division"). WHEREAS, Green desires to sell, and RMT desires to purchase, certain inventory of Green on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and intending to be legally bound, Green and RMT hereby agree as follows: 1. Inventory. For and in consideration of the payment of the Purchase Price, and the delivery of the Note and the Letter of Credit, as such terms are defined in Section 3 below, Green hereby sells, assigns, transfers, conveys and delivers to RMT, and RMT hereby purchases and accepts from Green, on the terms and conditions set forth in this Agreement (the "Sale"), all of Green's right, title and interest in and to certain Inventory, as hereinafter defined. For purposes of this Agreement, "Inventory" shall mean certain items of inventory used in connection with the operation of the Division, consisting of raw materials, components, supplies, manufactured products and other goods as set forth on Schedule 1 attached hereto and made a part hereof. Schedule 1 sets forth an itemized listing of the Inventory, including, but not limited to, item description, quantity available, part number and purchase price with respect to each unit of Inventory. 2. Possession; Condition. RMT acknowledges that, as of the Effective Time, it has taken exclusive possession of the Inventory from Green at RMT's Bowling Green, Ohio facility, located at 1032 South Maple Street, and RMT has accepted possession thereof. RMT further acknowledges that it has inspected the Inventory, and that each item of Inventory conforms in all respects to the description thereof set forth on Schedule 1, and meets the Inventory Condition Standard, as hereinafter defined. For purposes of this Agreement, the "Inventory Condition Standard" means that the subject Inventory is merchantable and in good condition and in all respects satisfactory. 3. Payment. ------- (a) The purchase price for the Inventory conveyed hereunder is Six Hundred Eighty-Five Thousand Nine Hundred Twelve and Fifty-Seven One-Hundredths ($685,912.57) Dollars (the "Purchase Price"). The Purchase Price is being paid by the execution and delivery by RMT to Green, simultaneously with the execution and delivery of this Agreement, of a promissory note in the original principal amount of the Purchase Price, in the form attached as Exhibit A hereto (the "Note"). (b) To secure the full and timely payment of the Note pursuant to the terms and conditions thereof, RMT is delivering to Green, simultaneously with the execution and delivery of this Agreement, an irrevocable standby letter of credit in favor of Green, issued by Security State Bank, in the form attached as Exhibit B hereto (the "Letter of Credit"). 4. NO WARRANTY; LIMITATION OF LIABILITY. ------------------------------------ (a) GREEN HAS NOT MADE AND DOES NOT MAKE ANY GUARANTEES, REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, IN LAW OR IN FACT, ORAL OR IN WRITING, AS TO ANY MATTER WHATSOEVER, INCLUDING, BUT NOT LIMITED TO, NON-INFRINGEMENT, OR THE DESIGN, QUALITY, CAPACITY OR CONDITION OF THE INVENTORY. GREEN EXPRESSLY DISAVOWS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, IT BEING AGREED THAT NO DEFECT, EITHER PATENT OR LATENT, SHALL RELIEVE RMT OF ITS OBLIGATIONS HEREUNDER. EXCEPT AS SPECIFICALLY PROVIDED HEREIN, RMT AGREES THAT GREEN AND ANY SUCCESSOR OR ASSIGNEE OF GREEN SHALL NOT BE LIABLE FOR SPECIFIC PERFORMANCE OR ANY LIABILITY, LOSS, DAMAGE OR EXPENSE OF ANY KIND IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, INDIRECT, INCIDENTAL, PUNITIVE, CONSEQUENTIAL OR SPECIAL DAMAGES OF ANY NATURE, LOST PROFITS, LOSS OF USE, INTERRUPTION OF BUSINESS, OR FOR ANY CLAIM OR DEMAND REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, OR OTHERWISE, EVEN IF GREEN HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN THE EVENT THAT THE LIMITATION OF LIABILITY SET FORTH IN THE FOREGOING SENTENCE SHALL, FOR ANY REASON, BE FOUND BY A COURT OF COMPETENT JURISDICTION TO BE UNENFORCEABLE, THE PARTIES AGREE THAT IN SUCH EVENT THE AGGREGATE LIABILITY IN DAMAGES OR OTHERWISE OF GREEN, OR ANY SUCCESSOR OR ASSIGNEE OF GREEN, IN CONNECTION WITH THIS AGREEMENT SHALL NOT EXCEED THE PAYMENT, IF ANY, RECEIVED BY GREEN (OR ANY SUCCESSOR OR ASSIGNEE OF GREEN, AS APPLICABLE) FOR THE UNIT OF INVENTORY SUPPLIED OR TO BE SUPPLIED HEREUNDER WHICH IS THE SUBJECT OF THE RELEVANT CLAIM OR DISPUTE. (b) Nothing in this Section 4 shall limit, in any way, Green's obligation, pursuant to the APA and any and all other documents, instruments and agreements to be executed by the parties hereto in connection with said APA, to fully reimburse, indemnify, and hold harmless RMT from any and all product liability claims relating to products manufactured by Green, but only to the extent expressly set forth therein. 5. Compliance. RMT shall be solely responsible for complying with all applicable law, ordinances, rules and regulations (individually and collectively, "Applicable Law") relating to the operations of the Division, the terms of, and the transactions contemplated by, this Agreement, and 2 the obligations of RMT in connection therewith, including, but not limited to, Applicable Law with respect to the possession, storage, sale, distribution, shipment, export, use, modification, maintenance, repair or warranty of the Inventory and any products thereof, and invoicing, payment and collections with respect thereto. 6. Representations and Warranties of RMT. RMT hereby represents and warrants to Green as follows: (a) It is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and it has qualified to do business as a foreign corporation in the jurisdictions, if any, outside of such state, in which it does business and is required to so qualify. (b) It has full corporate power and authority to execute and deliver this Agreement, and to perform the duties and responsibilities contemplated hereby. (c) The execution, delivery and performance of this Agreement has been duly authorized by its Board of Directors, and no other corporate approvals are necessary. (d) Neither the execution of this Agreement nor performance hereunder will (i) violate, conflict with or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under the terms, conditions or provisions of its Articles of Incorporation or By-Laws or any contract, agreement or other instrument or obligation to which it is a party, or by which it may be bound, or (ii) violate any order, judgment, writ, injunction or decree applicable to it. 7. Representations and Warranties of Green. Green hereby represents and warrants to RMT as follows: (a) It is a company duly organized, validly existing and in good standing under the laws of the state or jurisdiction of its formation, and it has qualified to do business as a foreign company in the jurisdictions, if any, outside of such state or jurisdiction, in which it does business and is required to so qualify. (b) It has full corporate power and authority to execute and deliver this Agreement and to perform the duties and responsibilities contemplated hereby. (c) The execution, delivery and performance of this Agreement has been duly authorized by its Board of Directors, and no other corporate approvals are necessary. (d) Neither the execution of this Agreement nor performance hereunder will (i) violate, conflict with or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under the terms, conditions or provisions of its charter documents or any contract, agreement or other instrument or obligation to which it is a party, or by which it may be bound, or (ii) violate any order, judgment, writ, injunction or decree applicable to it. 3 (e) Green owns the Inventory, free and clear of any and all options, rights, pledges, mortgages, security interests, liens, charges, burdens, servitudes and other encumbrances (collectively, an "Encumbrance") whatsoever, other than the Encumbrance of Citibank, N.A., which is being released contemporaneously herewith. 8. Term; Survival. The provisions of this Agreement shall expire upon the full and complete performance of the obligations of the parties hereunder and under the Note. Notwithstanding any other provision of this Section 8 to the contrary, any provision of this Agreement that by its terms is to be performed by RMT after the term of this Agreement shall survive the expiration of this Agreement, including, but not limited to, Section 9 hereof. 9. Indemnification. From and after the Effective Time, RMT, will reimburse, indemnify and hold harmless Green and its officers, directors, employees, consultants, representatives and its and their respective successors and assigns (an "Indemnified Party") against and in respect of: (a) any and all damages, losses, deficiencies, liabilities, costs and expenses incurred or suffered by an Indemnified Party that result from, relate to or arise out of: (i) any and all liabilities and obligations of RMT of any kind, nature and description whatsoever, fixed or contingent, inchoate or otherwise; (ii) any and all actions, suits, claims, or legal, administrative, arbitration, governmental or other proceedings or investigations against any Indemnified Party that relate to RMT, and/or which result from or arise out of any action or inaction of RMT or any director, officer, employee, shareholder, agent or representative of RMT and/or relate to the performance of any of the foregoing under this Agreement and/or with respect to the transactions contemplated hereunder; provided, however, that RMT shall not be liable to any Indemnified Party unless and until the amounts due such party under this Section 9(a)(ii) exceed Ten Thousand ($10,000) Dollars, and then only for amounts in excess thereof; and (iii) any misrepresentation, breach of warranty or nonfulfillment of any agreement or covenant on the part of RMT under this Agreement, or from any misrepresentation in or omission from any certificate, schedule, statement, document or instrument furnished to Green pursuant hereto or in connection with the negotiation, execution or performance of this Agreement; and (b) any and all actions, suits, claims, proceedings, investigations, demands, assessments, audits, fines, judgments, costs and other expenses (including, but not limited to, reasonable legal fees) incident to any of the foregoing or to the enforcement of this Section 9. (c) this Section 9 shall survive the expiration or termination of this Agreement. 4 10. WAIVER OF JURY TRIAL. THE PARTIES HEREBY IRREVOCABLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THIS AGREEMENT AND THE RELATIONSHIPS THEREBY ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this Agreement, including, without limitation, contract claims, tort claims, breach of duty claims, and all other statutory and common law claims. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS AGREEMENT. In the event of litigation, this provision may be filed as a written consent to a trial by the court. 11. Miscellaneous. ------------- (a) Each party to this Agreement shall pay its own expenses incidental to the negotiation, preparation, execution, and performance of this Agreement and the transactions contemplated hereby, including, but not limited to, the fees and expenses of their respective legal counsel and accountants. (b) Any and all notices, demands or other communications or deliveries permitted or required to be given pursuant to this Agreement shall be in writing and deemed given when personally delivered or three days after deposit in the United States mail, postage prepaid, sent certified or registered and addressed as follows: (i) If to RMT: Rosenboom Machine & Tool, Inc. 1530 Western Avenue Sheldon, Iowa 51201 (ii) If to Green: Green Manufacturing, Inc. c/o P&F Industries, Inc. 300 Smith Street Farmingdale, New York 11735 Attention: Chief Financial Officer or to such other address or person as hereafter shall be designated in writing by the applicable party in accordance with this Section 11(b). (c) This Agreement and the exhibits and schedules hereto constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and supersede all negotiations, preliminary agreements, and all prior and contemporaneous discussions and understandings of the parties in connection with the subject matter hereof. All exhibits and schedules hereto are hereby incorporated into and made a part of this Agreement. 5 (d) No amendment, waiver, change, or modification of any of the terms, provisions, or conditions of this Agreement shall be effective unless made in writing and signed by the parties to be charged. Waiver of any provision of this Agreement shall not be deemed a waiver of future compliance therewith, and such provision shall remain in full force and effect. (e) In the event any provision of this Agreement is held invalid, illegal, or unenforceable, in whole or in part, the remaining provisions of this Agreement shall not be affected thereby and shall continue to be valid and enforceable, and, if, for any reason, a court finds that any provision of this Agreement is invalid, illegal, or unenforceable as written, but that by limiting such provision it would become valid, legal, and enforceable, then such provision shall be deemed to be written and shall be construed and enforced as so limited. (f) This Agreement shall be construed in accordance with, and governed by, the laws of the State of Ohio, excluding choice of law principles thereof. RMT hereby irrevocably and unconditionally: (i) consents and submits for itself and its property in any action relating to this Agreement, or for recognition and enforcement of any judgment in respect thereof, to the exclusive jurisdiction of the federal courts located within the Northern District of Ohio and state courts located within the County of Wood in the State of Ohio; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court, and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to RMT at its address set forth in Section 11(b) of this Agreement or at such other address of which the sender shall have been previously notified in writing and in accordance with Section 11(b), and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law. (g) This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. It shall not be necessary that any single counterpart hereof be executed by all parties hereto so long as at least one counterpart is executed by each party. (h) The titles or captions of paragraphs and/or sections in this Agreement are provided for convenience of reference only, and shall not be considered a part hereof for purposes of interpreting or applying this Agreement, and such titles or captions do not define, limit, extend, explain or describe the scope or extent of this Agreement or any of its terms or conditions. (i) Words and phrases herein shall be construed as in the singular or plural number and as masculine, feminine, or neuter gender, according to the context. (j) This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto (and their respective legal representatives, heirs, successors and assigns), any rights, remedies, obligations, or liabilities. 6 (k) RMT agrees that no publicity, release or other public announcement concerning the transactions contemplated by this Agreement shall be issued without the advance approval of both the form and substance of the same by Green and its counsel, which approval, in the case of any publicity, release or other public announcement required by applicable law, shall not be unreasonably withheld or delayed. The parties agree further that the terms of this Agreement shall be divulged only to such of their employees and representatives who shall have a "need to know", unless such terms have been publicly released in accordance with the provisions hereof. (l) The rights of Green under the various provisions of this Agreement, including, but not limited to the indemnification provisions of Section 9, are independent and nonexclusive, and shall not in any way limit any right or remedy available to Green under any other provision of this Agreement, at law, in equity or otherwise, with respect to the breach of any provision of this Agreement by RMT, including, but not limited to, any representation, warranty, agreement or covenant of RMT contained herein. [Signatures appear on following page] ----------------------------------- 7 IN WITNESS WHEREOF, the parties hereto have executed this Agreement and cause the same to be delivered on their behalf as of the date first above written. ROSENBOOM MACHINE & TOOL, INC. By: /s/ Brian Rosenboom -------------------------------- Brian Rosenboom, Vice President GREEN MANUFACTURING, INC. By: /s/ Joseph A. Molino, Jr. --------------------------------- Joseph A. Molino, Jr., Vice President 8 Index to Schedules and Exhibits Schedule 1 - Raw Material Inventory Exhibit A - Promissory Note Exhibit B - Letter of Credit 9 EX-2 5 inventorypuragr.txt EXHIBIT 2.4 FINISHED GOODS INVENTORY PURCHASE AGR FINISHED GOODS INVENTORY PURCHASE AGREEMENT, dated December 13, 2004, effective as of the close of business on December 10, 2004 (the "Effective Date") (the "Agreement"), by and between GREEN MANUFACTURING, INC., a Delaware corporation ("Green") and ROSENBOOM MACHINE & TOOL, INC., an Iowa corporation ("RMT"). R E C I T A L S: --------------- WHEREAS, Green and RMT have executed and delivered that certain Asset Purchase Agreement, of even date, among each of Green, RMT and certain other parties (the "APA"), pursuant to which, among other things, RMT has acquired certain assets from Green previously used by Green in the operation of Green's Hydraulic Cylinder Division (the "Division"). WHEREAS, Green agreed to make available for purchase by RMT, and to sell to RMT, and RMT has agreed to purchase, certain inventory of Green on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and intending to be legally bound, Green and RMT hereby agree as follows: 1. Inventory. Simultaneously with the execution and delivery, and subject to the terms, of this Agreement, RMT is licensing and making available to Green, at no cost and expense to Green, a fenced and segregated area (the "Green Area") within the main factory building at RMT's Bowling Green, Ohio facility, located at 1032 South Maple Street, Bowling Green, Ohio (the "Facility"), which Green Area Green will use to store certain Inventory, as hereinafter defined, which Inventory is, and subject to the terms and conditions of this Agreement shall remain, the sole and exclusive property of Green until purchased by RMT pursuant to the terms and conditions of this Agreement. For purposes of this Agreement, "Inventory" shall mean certain items of inventory used in connection with the operation of the Division, consisting of manufactured products and other goods as set forth on Schedule 1 attached hereto and made a part hereof. Schedule 1 sets forth an itemized listing of the Inventory, including, but not limited to, item description, quantity available, part number and purchase price with respect to each unit of Inventory. 2. Agreements to Purchase and Sell. (a) Upon and subject to the terms and conditions of this Agreement, RMT agrees that it shall purchase from Green, and Green agrees that it shall sell to RMT, 100% of RMT's requirements for products of the type that constitute part of the Inventory for so long as a supply thereof remains part of the Inventory. The purchase price for items of Inventory shall be as set forth on Schedule 1. (b) The parties agree that, upon any use, sale or shipping of an item of Inventory or the issuance of any invoice with respect thereto, by RMT, or upon removal of any item of Inventory from the Green Area, whether or not such item is subsequently returned, such item shall be deemed to have been purchased by RMT from Green (individually and collectively, "Purchased Inventory"), at the price set forth on Schedule 1 and upon the terms and conditions set forth in this Agreement. For purposes of this Agreement, Purchased Inventory shall also include Comparable Inventory Items. Purchased Inventory shall, upon purchase by RMT hereunder, no longer constitute Inventory for purposes of this Agreement, but shall constitute "Collateral", as hereinafter defined. Any purchase by RMT under the terms of this Agreement shall be binding upon RMT and non-cancelable. (c) Without limiting the generality of the provisions of paragraphs (a) and (b) of this Section 2, RMT covenants and agrees that, to the extent that any items which are identical or similar to Inventory or which could be used by RMT in place thereof (collectively, "Comparable Third Party Items"), are purchased, sold, shipped or used by RMT or RMT issues any invoice with respect thereto (a "Comparable Purchase") during the Term (defined below), RMT shall be deemed to have purchased, as of the date of the Comparable Purchase, such items from Inventory ("Comparable Inventory Items") that RMT could have used in lieu of such Comparable Third Party Items. Such purchase by RMT of Comparable Inventory Items shall be (i) at the price set forth on Schedule 1, and upon the terms and conditions set forth in this Agreement, and (ii) made as a result of, and notwithstanding, such Comparable Purchase. 3. Location, Labeling and Segregation. ---------------------------------- (a) RMT acknowledges and agrees that until such time as it purchases Inventory hereunder, and notwithstanding the Green Area's being located in the Facility, it has not taken ownership or possession of the Inventory from Green. RMT further acknowledges and agrees that it has inspected the Inventory, and that each item of Inventory conforms in all respects to the description thereof set forth on Schedule 1, and meets the Inventory Condition Standard, as hereinafter defined. (b) Green covenants and agrees that during the term of this Agreement (i) it will maintain the Inventory exclusively at the Green Area and (ii) will label the Inventory as being the property of Green. RMT covenants and agrees that, at its own cost and expense, it will (a) maintain the Green Area as a fenced and self-contained space within the Facility and (b) maintain the Facility so as to prevent any deterioration of or damage or loss with respect to the Inventory. For purposes of this Agreement, the "Inventory Condition Standard" means that the subject Inventory is merchantable and in good condition and in all respects satisfactory. (c) Dan Craig and Derrill Fowler (each a "Custodian" and, collectively, the "Custodians", which terms shall include any replacement or successor custodians from time to time designated by Green to RMT in writing) are appointed by Green to be its custodians of the Inventory. The Custodians are not employees of Green but, instead are independent contractors. Only Green's officers and employees and the Custodians shall have access to the Inventory and the Green Area; and except in the case of emergency causing or threatening injury or death to persons or damage or destruction to property, RMT shall have no access to the Green Area. (d) Green shall pay to each Custodian a total one-time fee in the aggregate amount of Five Hundred ($500) Dollars for all periods during which such Custodian is caring for, removing counting, or otherwise performing services in connection with the Inventory and the Green Area. Green shall deliver to each Custodian as and when required by law such IRS Form 1099 or other applicable tax form in respect of all such fees paid by Green to the Custodians. It is acknowledged that the Custodians are employees of RMT; however, that fact shall not impair their duties and 2 responsibilities to Green during such periods as they are serving as Custodians (during which periods they shall not be deemed to providing work for or other employee services to RMT). (d) The Green Area shall at all times be enclosed by a wire fence and shall be labeled prominently as being licensed to Green and containing property owned by Green. Only Green's officers and employees and the Custodians shall withdraw Inventory from the Green Area. 4. Title; UCC Filing. ----------------- (a) Subject to the terms and conditions of this Agreement, the Inventory shall remain the sole and exclusive property of Green. RMT hereby covenants and agrees that RMT shall have no right or interest in the Inventory except as provided in this Agreement. RMT agrees to execute and deliver to Green Uniform Commercial Code ("UCC") financing statements, and/or other statements, including, but not limited to, protective UCC financing statements, as and when requested by Green, and hereby authorizes Green to file, without the signature of RMT, one or more financing, continuation and/or other statements, and amendments thereto, under the UCC reflecting Green's ownership of, and other rights in, the Inventory. (b) RMT shall, at its sole cost and expense, keep the Inventory free and clear from any and all liens or encumbrances of any kind (except any caused by Green) and shall indemnify and hold Green harmless from and against any and all losses or expenses caused by RMT's failure to do so. RMT shall give Green immediate written notice of any attachment or judicial process affecting the Inventory or Green's ownership thereof. 5. Insurance, Loss or Damage. ------------------------- (a) RMT shall, at its own cost and expense, for the benefit of Green, secure and at all times maintain, with financially sound and reputable companies, insurance policies insuring the Inventory, for the full replacement value thereof, while the Inventory is located in the Facility or at any other location, or while the Inventory is in transit (including, but not limited to, as set forth in Section 7 hereof) against loss or damage by fire, explosion, theft and such other casualties as are usually insured against by companies engaged in the same or similar businesses. Such policies shall be in such form and in such amounts and coverage as may be satisfactory to Green, naming Green as the insured with respect to the Inventory, with losses payable to Green. All such insurance shall (i) contain a clause which provides that Green's interest under the policy will not be invalidated by any act or omission of, or any breach of warranty by, RMT, or by any change in the title, ownership or possession of the insured property, or by the use of the property for purposes more hazardous than is permitted in the policy, and (ii) provide that no cancellation, reduction in amount or change in coverage thereof shall be effective until at least thirty (30) days after receipt by Green of written notice thereof. RMT shall contemporaneously with the execution and delivery of this Agreement, and from time to time thereafter, provide to Green a certificate of insurance confirming that such coverage is in effect. (b) RMT shall bear the entire risk of loss, theft, destruction of or damage to any item of Inventory, from the date hereof until the Inventory is either purchased by RMT or the earlier expiration of the term of this Agreement, including, but not limited to, while the Inventory is at 3 RMT's Facility or in transit. In the event of loss, theft, destruction of or damage to any item of Inventory (such Inventory, "Lost Inventory"), RMT shall be deemed to have purchased from Green, at the price set forth on Schedule 1 and upon the terms and conditions set forth in this Agreement, any such Lost Inventory; provided, however, that in the event that there is a payment to Green under any policy of insurance pursuant to the foregoing paragraph (a) of this Section 5, and as a result of such insurance payment (whether occurring before or after a payment for Lost Inventory by RMT pursuant to this paragraph) Green has received a duplicate payment for any item of Lost Inventory, Green shall, within fifteen (15) days after receipt of any such duplicative payment, forward the amount of such duplicative payment to RMT. 6. Books and Records; Payment. -------------------------- (a) RMT shall maintain true, complete and accurate books and records with respect to the Inventory purchased by RMT hereunder by month and in total (in both paper and electronic media) ("Monthly Books and Records"), including, but not limited to, with respect to date of purchase of Purchased Inventory (including, but not limited to, Comparable Inventory Items), calculation of purchase price based upon the purchase price with respect to each unit of Inventory as set forth on Schedule 1 hereto ("Monthly Purchase Price"), Comparable Purchases and the related Comparable Third Party Items and Comparable Inventory Items, remaining Inventory and such other matters and in such form and format as Green may request from time to time. RMT shall deliver a copy of such Monthly Books and Records to Green on a monthly basis within fifteen (15) days following the end of each month any part of which falls during the Term. All Monthly Books and Records maintained and/or furnished by RMT hereunder shall be in a format and on media (e.g., CD-ROM, DVD-ROM, tape, electronic transmission, etc.) designated in writing by Green as acceptable to it from time to time. (b) For purposes of this Agreement, the amount of the payment due to Green for Purchased Inventory, including, but not limited to, Comparable Inventory Items, shall be initially determined based upon the accounting set forth in the Monthly Books and Records delivered to Green pursuant to paragraph (a) of this Section 6. Simultaneously with the delivery of each such Monthly Books and Records, RMT shall pay to Green the purchase price for Purchased Inventory, including, but not limited to, Comparable Inventory Items, purchased by RMT during the prior month as set forth in the Monthly Books and Records. Payment shall be made in U.S. dollars, by certified check of RMT made payable to the order of Green, or at Green's option, by wire transfer of immediately available funds to an account designated in writing by Green. All prices set forth on Schedule 1 are exclusive of any tax, duty, or other fee of any nature, imposed upon the transactions contemplated hereunder by any federal, state or local government authority or agency. All such taxes, duties, customs and other fees shall be paid by RMT (unless RMT shall present an exemption certificate acceptable to the taxing authorities). In the event that Green is required to prepay any such tax, duty, custom or other fee, RMT will reimburse Green therefor promptly upon request. (c) At any time during the Term, and for forty-five (45) days thereafter, Green may object to RMT's calculation of the Monthly Purchase Price set forth in any Monthly Books and Records delivered to Green. In such an event, Green shall deliver to RMT a written objection to such calculation, reporting and/or accounting. If such objection is not resolved by the parties within fifteen (15) days after delivery thereof to RMT, all remaining disagreements with respect thereto 4 shall, within five (5) days following a written request from Green to RMT, be submitted to an accounting firm of national reputation selected jointly by Green and RMT; if Green and RMT are unable to agree on an accounting firm, each shall, within five (5) days following a written request from Green to RMT, select an accounting firm of national reputation and within five (5) days following the selection of both such accounting firms, such firms shall select a third accounting firm of national reputation and such third firm shall resolve all remaining disagreements with respect to the calculation of such Monthly Purchase Price. The accounting firm so selected shall hereinafter be referred to as the "Selected Firm". Green and RMT shall use their respective best efforts to cause the Selected Firm to resolve all submitted disputes within thirty (30) days of submission of such thereto by delivery to Green and RMT of a statement in writing setting forth the conclusion of the Selected Firm's opinion of the disputed item or items and the effect of such conclusions on the Monthly Purchase Price. The determination of the Selected Firm with respect to the Monthly Purchase Price shall be final, conclusive and binding, and judgment may be entered thereon in any court of competent jurisdiction. Nothing contained herein shall be deemed a consent to arbitrate any other issue or dispute which may hereafter arise among the parties to this Agreement. The costs and fees of the Selected Firm shall be borne equally by Green on the one hand, and RMT, on the other hand. At all times during the Term, and for forty-five (45) days thereafter, RMT shall allow Green and its representatives full and free access to such books and records of RMT related to the calculation and payment of each Monthly Purchase Price as Green shall deem necessary, appropriate or advisable, and allow Green to make extracts therefrom and copies thereof of any of the same at Green's own cost and expense. In connection with its review, the Selected Firm shall have the right to undertake such auditing procedures as it may deem appropriate and to examine all work papers utilized in the accounting and determination of the Monthly Purchase Price. (d) If any further payment ("Further Purchase Price") is due Green under paragraph (c) of this Section 6, RMT shall make payment of such amount within five (5) days following the earlier of settlement or the issuance of the Selected Firm's decision. Any Further Purchase Price shall bear interest at the rate of two percent (2%) above the prime rate as reported from time to time in The Wall Street Journal from the date RMT delivers the relevant Monthly Books and Records until due pursuant to the terms of the foregoing sentence. (e) If at any time RMT is delinquent in the payment of any amount due to be paid to Green under this Agreement, late charges of one and one-half percent (1.5%) per month or the maximum amount permitted by law, whichever is less, shall be due and payable on any sums not paid by RMT when due. 7. Return of Inventory. ------------------- (a) Within five (5) days following the expiration of the Term, or the earlier termination of this Agreement pursuant to the terms hereof, RMT shall send written notice to Green identifying all items of Unpurchased Inventory, as hereinafter defined. Green shall engage RMT, at Green's expense and as directed in writing by Green, within five (5) days following receipt of the aforementioned notice, to pack and ship all items of the Inventory not purchased by RMT pursuant to the terms of this Agreement (the "Unpurchased Inventory") to a U.S. location (the "Green Destination") identified by written notice received from Green pursuant to the terms of Section 19(b) hereof. RMT shall ensure that all packaging of the Unpurchased Inventory is suitable, including, but 5 not limited to, with respect to construction, design, materials and assembly, to ensure delivery of such Unpurchased Inventory to Green in undamaged condition that is satisfactory to Green. Not later than the date of shipment of any Unpurchased Inventory pursuant to the terms of the first sentence of this Section 7, RMT shall deliver to Green a complete written accounting of all Purchased Inventory and Unpurchased Inventory. RMT shall bear the risk of loss, theft, destruction of or damage to the Unpurchased Inventory or any component thereof until such Unpurchased Inventory is received at the Green Destination. RMT covenants and agrees that each item of Unpurchased Inventory returned to Green will meet the Inventory Condition Standard. RMT shall be deemed to have purchased from Green, at the price set forth on Schedule 1 and upon the terms and conditions set forth in this Agreement, any Unpurchased Inventory that is either (i) not returned to Green pursuant to the terms of this Section 7, or (ii) not in the condition specified in the foregoing sentence. RMT hereby represents and warrants to Green that all Unpurchased Inventory returned to Green shall be free and clear of any and all Encumbrances, as hereinafter defined. (b) RMT hereby grants to Green (and its agents, representatives or assigns) a fully-paid, royalty-free, worldwide right and license to, upon either or both of the expiration of the Term and the occurrence of an RMT Breach (unless appropriately waived in writing in accordance with this Agreement) as more fully provided in Section 14, below, use, or sell or otherwise transfer, any and all of the Inventory which may bear or utilize any of RMT's or the Division's names, tradenames, trademarks, patents or other intellectual property. 8. Inspection; Audit. Green and its representatives shall have the right, during the Term and at any time until the Unpurchased Inventory has been received by Green pursuant to the terms of Section 7 hereof, to enter RMT's property and facilities on reasonable notice during RMT's normal business hours and, subject to RMT's normal and reasonable security requirements, to physically inspect the Inventory, conduct physical inventories, and audit stock-handling procedures (including, but not limited to, storage and distribution). Green and its representatives shall have the right, during the Term and for forty-five (45) days thereafter, to examine and audit the books and records of RMT relevant or related to the Inventory, the Purchased Inventory and the Unpurchased Inventory, including, but not limited to, the Monthly Books and Records, at any time upon reasonable notice. RMT shall allow Green and its representatives full and free access to such books and records as Green shall deem necessary, appropriate or advisable, and shall allow Green and its representatives to make extracts therefrom and copies thereof at Green's own cost and expense. In connection with any such examination and audit, Green and its representatives shall have the right to undertake such auditing procedures as it or they, as the case may be, may deem appropriate. 9. Security. -------- (a) As security for the due and punctual performance of any and all of the present and future obligations of RMT under this Agreement, including, but not limited to, payment to Green for any and all Purchased Inventory and the delivery of the Unpurchased Inventory to Green pursuant to Section 7 hereof, RMT hereby assigns, mortgages, pledges, hypothecates, transfers, sets over and grants to Green a first lien on and security interest in the following collateral (the "Collateral"): (i) all of the Purchased Inventory, whether now or hereafter existing or acquired, (ii) all accounts (as defined in the UCC) of RMT arising out of the sale of Purchase Inventory on or after the date of this Agreement, (iii) all insurance proceeds payable in respect thereof and (iv) all other present and future 6 products and proceeds of the foregoing, all as more fully set forth in the Finished Goods Security Agreement of even date herewith between RMT and Green (the "Security Agreement"), the terms and conditions of which are hereby incorporated herein by reference as if fully restated herein. In connection with the foregoing, RMT agrees to execute and deliver to Green UCC financing statements, as and when requested by Green, and hereby authorizes Green to file, without the signature of RMT, one or more financing and continuation statements, and amendments thereto, in order to secure RMT's interest in the Collateral. (b) Green shall retain such security interest in addition to all other remedies available to Green. In the event of a failure by RMT to perform in a timely manner any obligation of RMT to Green hereunder, RMT hereby agrees to assemble all such secured Collateral for the defaulted obligation and make such Collateral available to Green at a place reasonably convenient to both parties. In the event that RMT disposes of any such Collateral, any proceeds from any such disposition shall be applied to the amount of RMT's outstanding obligations hereunder. (c) All security interests and the related rights and remedies granted to Green hereunder or under any other instrument, document or writing delivered to Green by RMT shall be cumulative; provided, however, that, in the event of an inconsistency between the terms of the security interest and the related rights and remedies granted hereunder and the terms of the security interest and the related rights and remedies granted to Green under any other instrument, document or writing, the grant most favorable to Green shall control. (d) If, notwithstanding the intentions of both RMT and Green that true and full ownership of all of the Inventory remain with Green unless and until it is purchased by RMT pursuant to this Agreement, the transactions contemplated by this Agreement are nonetheless deemed to represent a present sale of the Inventory by Green to RMT, then Green shall be deemed hereby to have retained, and RMT shall be deemed hereby to have granted to Green, a purchase money security interest in and to any and all of the Inventory and all products and proceeds thereof, including, without limitation, all accounts and insurance proceeds arising therefrom or in connection therewith. The terms and conditions of such security interest, and Green's rights and remedies in respect thereof, shall be upon the terms and conditions set forth in this Section 9, including, without limitation, the incorporation by reference of the terms and conditions of the Security Agreement. 10. NO WARRANTY; LIMITATION OF LIABILITY. ------------------------------------ (a) GREEN HAS NOT MADE AND DOES NOT MAKE ANY GUARANTEES, REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, IN LAW OR IN FACT, ORAL OR IN WRITING, AS TO ANY MATTER WHATSOEVER, INCLUDING, BUT NOT LIMITED TO, NON-INFRINGEMENT, OR THE DESIGN, QUALITY, CAPACITY OR CONDITION OF THE INVENTORY. GREEN EXPRESSLY DISAVOWS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, IT BEING AGREED THAT NO DEFECT, EITHER PATENT OR LATENT, SHALL RELIEVE RMT OF ITS OBLIGATIONS HEREUNDER. EXCEPT AS SPECIFICALLY PROVIDED HEREIN, RMT AGREES THAT GREEN AND ANY SUCCESSOR OR ASSIGNEE OF GREEN SHALL NOT BE LIABLE FOR SPECIFIC PERFORMANCE OR ANY LIABILITY, LOSS, DAMAGE OR EXPENSE OF ANY KIND IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED 7 BY THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, INDIRECT, INCIDENTAL, PUNITIVE, CONSEQUENTIAL OR SPECIAL DAMAGES OF ANY NATURE, LOST PROFITS, LOSS OF USE, INTERRUPTION OF BUSINESS, OR FOR ANY CLAIM OR DEMAND REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, OR OTHERWISE, EVEN IF GREEN HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN THE EVENT THAT THE LIMITATION OF LIABILITY SET FORTH IN THE FOREGOING SENTENCE SHALL, FOR ANY REASON, BE FOUND BY A COURT OF COMPETENT JURISDICTION TO BE UNENFORCEABLE, THE PARTIES AGREE THAT IN SUCH EVENT THE AGGREGATE LIABILITY IN DAMAGES OR OTHERWISE OF GREEN, OR ANY SUCCESSOR OR ASSIGNEE OF GREEN, IN CONNECTION WITH THIS AGREEMENT SHALL NOT EXCEED THE PAYMENT, IF ANY, RECEIVED BY GREEN (OR ANY SUCCESSOR OR ASSIGNEE OF GREEN, AS APPLICABLE) FOR THE UNIT OF INVENTORY SUPPLIED OR TO BE SUPPLIED HEREUNDER WHICH IS THE SUBJECT OF THE RELEVANT CLAIM OR DISPUTE. (b) Nothing in this Section 10(b) shall limit, in any way, Green's obligation, pursuant to the APA and any and all other documents, instruments and agreements to be executed by the parties hereto in connection with said APA, to fully reimburse, indemnify, and hold harmless RMT from any and all product liability claims relating to products manufactured by Green, but only to the extent expressly set forth therein. 11. Compliance. RMT shall be solely responsible for complying with all applicable law, ordinances, rules and regulations (individually and collectively, "Applicable Law") relating to the operations of the Division, the terms of, and the transactions contemplated by, this Agreement, and the obligations of RMT in connection therewith, including, but not limited to, Applicable Law with respect to the possession, sale, distribution, shipment, export, use, modification, maintenance, repair or warranty of the Inventory and any products thereof, and invoicing, payment and collections with respect thereto. 12. Representations and Warranties of RMT. RMT hereby represents and warrants to Green as follows: (a) It is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and it has qualified to do business as a foreign corporation in the jurisdictions, if any, outside of such state, in which it does business and is required to so qualify. (b) It has full corporate power and authority to execute and deliver this Agreement, and to perform the duties and responsibilities contemplated hereby. (c) The execution, delivery and performance of this Agreement has been duly authorized by its Board of Directors, and no other corporate approvals are necessary. (d) Neither the execution of this Agreement nor performance hereunder will (i) violate, conflict with or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under the terms, conditions or 8 provisions of its Articles of Incorporation or By-Laws or any contract, agreement or other instrument or obligation to which it is a party, or by which it may be bound, or (ii) violate any order, judgment, writ, injunction or decree applicable to it. 13. Representations and Warranties of Green. Green hereby represents and warrants to RMT as follows: (a) It is a company duly organized, validly existing and in good standing under the laws of the state or jurisdiction of its formation, and it has qualified to do business as a foreign company in the jurisdictions, if any, outside of such state or jurisdiction, in which it does business and is required to so qualify. (b) It has full corporate power and authority to execute and deliver this Agreement and to perform the duties and responsibilities contemplated hereby. (c) The execution, delivery and performance of this Agreement has been duly authorized by its Board of Directors, and no other corporate approvals are necessary. (d) Neither the execution of this Agreement nor performance hereunder will (i) violate, conflict with or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under the terms, conditions or provisions of its charter documents or any contract, agreement or other instrument or obligation to which it is a party, or by which it may be bound, or (ii) violate any order, judgment, writ, injunction or decree applicable to it. (e) Green owns the Inventory, free and clear of any and all options, rights, pledges, mortgages, security interests, liens, charges, burdens, servitudes and other encumbrances (collectively, an "Encumbrance") whatsoever, other than the Encumbrance of Citibank, N.A., which is being released contemporaneously herewith. 14. Breach by RMT. ------------- (a) In the event that RMT fails to perform any of its obligations under this Agreement, or in any way breaches or defaults under any of the provisions hereof (any such event, an "RMT Breach"), or Green terminates this Agreement, Green or its representatives will have an irrevocable right to enter RMT's Facility at any time during RMT's normal business hours for the purpose of removing the Unpurchased Inventory. RMT expressly waives any right or remedies that RMT has or may have with regard to the Unpurchased Inventory, including, but not limited to, any right that RMT has or may have to notice and a hearing or to a bond, undertaking or surety before a writ of replevin, order of seizure, or similar writ or order will issue or become enforceable. (b) In the event of an RMT Breach, Green may, at its option, take one or more of the following actions: (i) require RMT to return immediately all of the Unpurchased Inventory under the provisions of Section 7 above, (ii) declare all sums due and to become due under this Agreement immediately due and payable, (iii) without breach of the peace, take immediate possession of and remove the Unpurchased Inventory, including, but not limited to, pursuant to paragraph (a) of this 9 Section 14, (iv) sell any or all of the Unpurchased Inventory at public or private sale, or otherwise dispose of, hold, use or transfer to others any or all of such Unpurchased Inventory, or (v) exercise any and all rights and/or remedies which may be available to Green under applicable law, including, but not limited to, the rights of a secured creditor (under the UCC and otherwise) and the right to recover damages for the breach of this Agreement. In addition, RMT shall be liable for reasonable attorneys' fees and other costs and expenses resulting from any RMT Breach, and the exercise of Green's remedies in connection therewith. Each remedy shall be cumulative, nonexclusive and in addition to any other remedy otherwise available to Green at law or in equity. No express or implied waiver of any RMT Breach shall constitute a waiver of any of Green's other rights, nor shall any such waiver constitute a waiver of any other RMT Breach, whether of the same nature or otherwise. (c) Notwithstanding anything contained herein, RMT shall not be deemed to be in breach of its obligations under subclause (a) of the second sentence of Section 3(b) hereof unless it fails to cure any such breach within ten (10) days following written notice thereof from Green. 15. Expenses. Except as expressly set forth in this Agreement, RMT shall not be reimbursed by Green for any expenses incurred by it unless it shall have received Green's prior written approval thereof and acknowledgement of responsibility therefor. 16. Term; Survival. The term of this Agreement shall be the one-year period commencing as of the date hereof (the "Term") unless earlier terminated pursuant to the terms of this Agreement. Notwithstanding the foregoing, this Agreement may be terminated by Green at any time and for any reason upon ten (10) days' prior written notice to RMT. Notwithstanding any other provision of this Section 16 to the contrary, any provision of this Agreement that by its terms is to be performed by RMT after the Term or termination of this Agreement shall survive any expiration or termination of this Agreement, including, but not limited to, Sections 6, and 18 hereof, and the provisions of this Agreement with respect to shipment and delivery of the Unpurchased Inventory to Green, together with the provisions of this Agreement governing risk of loss and insurance in connection therewith. 17. No Authority. It is expressly acknowledged and agreed that, except as expressly set forth herein, RMT shall have no authority to bind Green to any agreement or obligation with any third party. 18. Indemnification. From and after the date hereof, RMT, will reimburse, indemnify and hold harmless Green and its officers, directors, employees, consultants, representatives and its and their respective successors and assigns (an "Indemnified Party") against and in respect of: (a) any and all damages, losses, deficiencies, liabilities, costs and expenses incurred or suffered by an Indemnified Party that result from, relate to or arise out of: (i) any and all liabilities and obligations of RMT of any kind, nature and description whatsoever, fixed or contingent, inchoate or otherwise; (ii) any and all actions, suits, claims, or legal, administrative, arbitration, governmental or other proceedings or investigations against any Indemnified Party that relate to 10 RMT, and/or which result from or arise out of any action or inaction of RMT or any director, officer, employee, shareholder, agent or representative of RMT and/or relate to the performance of any of the foregoing under this Agreement and/or with respect the transactions contemplated hereunder; provided, however, that RMT shall not be liable to any Indemnified Party unless and until the amounts due such party under this Section 18(a)(ii) exceed Ten Thousand ($10,000) Dollars, and then only for amounts in excess thereof; and (iii) any misrepresentation, breach of warranty or nonfulfillment of any agreement or covenant on the part of RMT under this Agreement, or from any misrepresentation in or omission from any certificate, schedule, statement, document or instrument furnished to Green pursuant hereto or in connection with the negotiation, execution or performance of this Agreement; and (b) any and all actions, suits, claims, proceedings, investigations, demands, assessments, audits, fines, judgments, costs and other expenses (including, but not limited to, reasonable legal fees) incident to any of the foregoing or to the enforcement of this Section 18. (c) this Section 18 shall survive the termination or expiration of this Agreement. 19. Miscellaneous. ------------- (a) Each party to this Agreement shall pay its own expenses incidental to the negotiation, preparation, execution, and performance of this Agreement and the transactions contemplated hereby, including, but not limited to, the fees and expenses of their respective legal counsel and accountants. (b) Any and all notices, demands or other communications or deliveries permitted or required to be given pursuant to this Agreement shall be in writing and deemed given when personally delivered or three days after deposit in the United States mail, postage prepaid, sent certified or registered and addressed as follows: (i) If to RMT: Rosenboom Machine & Tool, Inc. 1530 Western Avenue Sheldon, Iowa 51201 (ii) If to Green: Green Manufacturing, Inc. c/o P&F Industries, Inc. 300 Smith Street Farmingdale, New York 11735 Attention: Chief Financial Officer or to such other address or person as hereafter shall be designated in writing by the applicable party 11 in accordance with this Section 19(b). (c) This Agreement and the exhibits and schedules hereto constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and supersede all negotiations, preliminary agreements, and all prior and contemporaneous discussions and understandings of the parties in connection with the subject matter hereof. All exhibits and schedules hereto are hereby incorporated into and made a part of this Agreement. (d) No amendment, waiver, change, or modification of any of the terms, provisions, or conditions of this Agreement shall be effective unless made in writing and signed by the parties to be charged. Waiver of any provision of this Agreement shall not be deemed a waiver of future compliance therewith, and such provision shall remain in full force and effect. (e) In the event any provision of this Agreement is held invalid, illegal, or unenforceable, in whole or in part, the remaining provisions of this Agreement shall not be affected thereby and shall continue to be valid and enforceable, and, if, for any reason, a court finds that any provision of this Agreement is invalid, illegal, or unenforceable as written, but that by limiting such provision it would become valid, legal, and enforceable, then such provision, shall be deemed to be written and shall be construed and enforced as so limited. (f) This Agreement shall be construed in accordance with, and governed by, the laws of the State of Ohio, excluding choice of law principles thereof, except where the law of another jurisdiction is applicable to the perfection of any security interest contemplated hereby. RMT hereby irrevocably and unconditionally: (i) consents and submits for itself and its property in any action relating to this Agreement, or for recognition and enforcement of any judgment in respect thereof, to the exclusive jurisdiction of the federal courts located within the Northern District of Ohio and state courts located within the County of Wood in the State of Ohio; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court, and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to RMT at its address set forth in Section 19(b) of this Agreement or at such other address of which the sender shall have been previously notified in writing and in accordance with Section 19(b), and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law. (g) This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. It shall not be necessary that any single counterpart hereof be executed by all parties hereto so long as at least one counterpart is executed by each party. (h) The titles or captions of paragraphs and/or sections in this Agreement are provided for convenience of reference only, and shall not be considered a part hereof for purposes of interpreting or applying this Agreement, and such titles or captions do not define, limit, extend, explain or describe the scope or extent of this Agreement or any of its terms or conditions. 12 (i) Words and phrases herein shall be construed as in the singular or plural number and as masculine, feminine, or neuter gender, according to the context. (j) Green may assign its rights and obligations hereunder at its sole discretion. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors, and permitted assigns; provided, however, that RMT may not assign its rights or obligations hereunder without the prior written consent of Green, and in the event of any such permitted assignment, all of the terms, covenants, agreements, and conditions of this Agreement shall continue to be in full force and effect and RMT shall continue to remain fully liable and responsible for the due performance of all of the terms, covenants, agreements, and conditions of this Agreement that it is obligated to observe and perform. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto (and their respective legal representatives, heirs, successors and permitted assigns), any rights, remedies, obligations, or liabilities. (k) RMT agrees that no publicity, release or other public announcement concerning the transactions contemplated by this Agreement shall be issued without the advance approval of both the form and substance of the same by Green and its counsel, which approval, in the case of any publicity, release or other public announcement required by applicable law, shall not be unreasonably withheld or delayed. The parties agree further that the terms of this Agreement shall be divulged only to such of their employees and representatives who shall have a "need to know", unless such terms have been publicly released in accordance with the provisions hereof. (l) The rights of Green under the various provisions of this Agreement, including, but not limited to the indemnification provisions of Section 18, are independent and nonexclusive, and shall not in any way limit any right or remedy available to Green under any other provision of this Agreement, at law, in equity or otherwise, with respect to the breach of any provision of this Agreement by RMT, including, but not limited to, any representation, warranty, agreement or covenant of RMT contained herein. (m) GREEN AND RMT HEREBY IRREVOCABLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THIS AGREEMENT AND THE RELATIONSHIPS THEREBY ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this Agreement, including, without limitation, contract claims, tort claims, breach of duty claims, and all other statutory and common law claims. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS AGREEMENT. In the event of litigation, this provision may be filed as a written consent to a trial by the court. [Signatures appear on following page] ----------------------------------- 13 IN WITNESS WHEREOF, the parties hereto have executed this Agreement and cause the same to be delivered on their behalf, as of the Effective Time. ROSENBOOM MACHINE & TOOL, INC. By:/s/ Brian Rosenboom ------------------------------------ Brian Rosenboom, Vice President GREEN MANUFACTURING, INC. By:/s/ Joseph A. Molino, Jr. ------------------------------------ Joseph A. Molino, Jr., Vice President 14 Index to Schedules Schedule 1 - Finished Goods Inventory 15 EX-2 6 securityagr.txt EXHIBIT 2.5 FINISHED GOODS SECURITY AGREEMENT FINISHED GOODS SECURITY AGREEMENT, dated December 13, 2004, effective as of December 10, 2004 (the "Effective Time") (the "Agreement"), by and between ROSENBOOM MACHINE & TOOL, INC., an Iowa corporation (the "Debtor"), and GREEN MANUFACTURING, INC., a Delaware corporation (the "Secured Party"). R E C I T A L S: --------------- WHEREAS, the Debtor and the Secured Party have executed and delivered that certain Asset Purchase Agreement of even date among each of the Debtor and the Secured Party and certain other parties (the "APA"), pursuant to which, among other things, the Debtor has acquired certain assets from the Secured Party previously used by the Secured Party in the operation of the Secured Party's Hydraulic Cylinder Division (the "Division"); WHEREAS, the Debtor and the Secured Party have entered into a Finished Goods Inventory Purchase Agreement of even date (the "Inventory Purchase Agreement"); WHEREAS, the Secured Party desires to obtain security for the Debtor's obligations now existing, or hereafter arising, under the Inventory Purchase Agreement. NOW, THEREFORE, in consideration of the execution and delivery of the Inventory Purchase Agreement by the Secured Party, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Debtor, the Debtor hereby agrees with the Secured Party that, during such time as the Debtor shall be directly or contingently indebted, liable or obligated to the Secured Party under Inventory Purchase Agreement in any manner whatsoever, the Secured Party shall have the following rights, and the Debtor shall have the following obligations: 1. As security for the due and punctual payment of any and all of the present and future Obligations of the Debtor (as defined in Section 2 below), the Debtor hereby assigns, mortgages, pledges, hypothecates, transfers, sets over and grants to the Secured Party a first lien on and security interest in (a) all of the Collateral (as defined in Section 3 below), whether now or hereafter existing or acquired, and (b) all present and future products and proceeds of the Collateral. 2. As used herein, the term "Obligations" means any and all indebtedness, obligations, agreements, liabilities and guarantees of any kind of the Debtor to the Secured Party, howsoever evidenced, now existing or hereafter arising, and whether direct or indirect, acquired outright or conditionally, absolute or contingent, joint, several or independent, secured or unsecured, due or not due, held or to be held, contractual or tortious, relating to the payment of money or to non-monetary performance, liquidated or unliquidated, arising by operation of law or otherwise, and whether or not of a nature presently contemplated by the parties or subsequently agreed to by them arising under the Inventory Purchase Agreement. 3. As used herein, the term "Collateral" means all of the assets and property of any kind sold, assigned, transferred or conveyed, or to be sold, assigned, transferred or conveyed, to the Debtor pursuant to the terms of the Inventory Purchase Agreement, as more fully set forth therein, Accounts, as hereinafter defined, and all present and future products and proceeds of the foregoing. 4. The Debtor represents and warrants that: (a) no financing statement (other than any which may have been filed on behalf of the Secured Party or which evidences a security interest that is validly, and will continually be validly, subordinated to that of the Secured Party) relating to any of the Collateral is on file in any public office; (b) the chief executive office of the Debtor (if any), and the Collateral are respectively located at the address(es) set forth at the end of this Agreement, and the Debtor will not change such location without prior written notice to and consent of the Secured Party; (c) the Debtor's type of entity, jurisdiction of organization, and identification number (if assigned by the Secretary of State of the Debtor's state of organization) are set forth at the end of this Agreement; and (d) the Debtor has not created, and is not aware of, any security interest, lien or encumbrance on or affecting the Collateral other than created hereby or expressly referred to in the parenthetical clause in subclause 4(a) hereof. 5. The Debtor assumes all liability and responsibility in connection with all Collateral acquired by the Debtor; and the obligation of the Debtor to pay all Obligations shall in no way be affected or diminished by reason of the fact that any such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to the Debtor. 6. As long as this Agreement shall remain in effect, the Debtor agrees: (a) that if the Secured Party so demands in writing at any time following an Event of Default, as hereinafter defined, (i) all proceeds of the Collateral shall be delivered to the Secured Party promptly upon their receipt in a form satisfactory to the Secured Party, and (ii) all chattel paper, instruments and documents pertaining to the Collateral shall be delivered to the Secured Party at the time and place and in the manner in which specified in the Secured Party's demand; (b) in order to enable the Secured Party to comply with the law of any jurisdiction, including state, federal and foreign, applicable to any security interest granted hereby or to the Collateral, to execute and deliver upon request, in form acceptable to the Secured Party, any financing statement, notice, statement, instrument, document, agreement or other paper and/or to perform any act requested by the Secured Party which may be necessary to create, perfect, preserve, validate or otherwise protect such security interest or to enable the Secured Party to exercise and enforce the Secured Party's rights hereunder or with respect to such security interest; (c) promptly to pay any filing fees or other costs in connection with (i) the filing or recordation of such financing statements or any other papers described above, and (ii) such searches of the public records as the Secured Party in its sole discretion shall require; (d) that the Secured Party is authorized to file or record any such financing statements or other papers without the signature of the Debtor if permitted by applicable law; (e) that the Secured Party may file a photographic or other reproduction of this Agreement in lieu of a financing statement in any filing office where it is permissible to do so; (f) except for the security interest granted hereby, the Debtor shall keep the Collateral and proceeds and products thereof free and clear of any security interests, liens or encumbrances of any kind, the Debtor shall promptly pay, when due, all taxes and transportation, 2 storage and warehousing charges and fees affecting or arising out of the Collateral and shall defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein adverse to the Secured Party; (g) at all times to keep all insurable Collateral insured at the expense of the Debtor to the Secured Party's satisfaction against loss by fire, theft and any other risk to which the Collateral may be subject; all policies shall be endorsed in favor of the Secured Party, with losses payable to the Secured Party, and, if the Secured Party so requests, shall be deposited with the Secured Party; and in any event, such policies will provide that each insurer will give the Secured Party not less than thirty (30) days' notice in writing prior to the exercise of any right of cancellation; in the event the Debtor fails to maintain any insurance, the Secured Party may (but shall not be obligated to) place such insurance and pay the premium therefor, in which event the Debtor will pay the Secured Party such premium with interest; the Secured Party may apply any proceeds of such insurance which may be received by it toward payment of the Obligations, whether or not due, in such order of application as the Secured Party may determine; (h) that the Secured Party's duty with respect to the Collateral shall be solely to use reasonable care in the custody and preservation of Collateral in its possession; the Secured Party shall not be obligated to take any steps necessary to preserve any rights in any of the Collateral against prior parties, and the Debtor hereby agrees to take such steps; the Debtor shall pay to the Secured Party all costs and expenses, including filing and reasonable attorneys' fees, incurred by the Secured Party in connection with the custody, care, preservation or collection of the Collateral; the Secured Party may, but is not obligated to, exercise any and all rights of conversion or exchange or similar rights, privileges and options relating to the Collateral; the Secured Party shall have no obligation to sell or otherwise realize upon any of the Collateral as herein authorized, and shall not be responsible for any failure to do so or for any delay in so doing. IN THE EVENT OF ANY LITIGATION WITH RESPECT TO ANY MATTER CONNECTED WITH THIS AGREEMENT, THE OBLIGATIONS, THE COLLATERAL, OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT APPLICABLE HERETO OR TO ANY ONE OR MORE OF THEM IN ANY RESPECT, THE DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN RESPECT TO ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, BUT NOT LIMITED TO, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE SECURED PARTY RELATING TO THE ADMINISTRATION OF THE OBLIGATIONS OR ENFORCEMENT OF THE INVENTORY PURCHASE AGREEMENT, AND THE DEBTOR AGREES THAT IT WILL NOT SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE DEBTOR CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE SECURED PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE SECURED PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; 3 (i) that the Debtor will permit the Secured Party, by its officers and agents, to have access to and examine at all reasonable times the properties, minute books and other corporate records, and books of account and financial records of the Debtor in any way relevant to the Collateral, the Obligations, the Inventory Purchase Agreement, and this Agreement and the transactions contemplated hereby; (j) that the Debtor will promptly notify the Secured Party upon the occurrence of any default, as provided in this Agreement, of which the Debtor has knowledge, and will promptly provide to the Secured Party all other information reasonably requested by the Secured Party; (k) that the Debtor will not sell, transfer, lease or otherwise dispose of any of the Collateral or any interest therein, or offer to do so, or permit anything to be done to impair the value of the Collateral or the security interest granted to the Secured Party hereunder, provided, however, that the Debtor may sell products in the ordinary course of its business to unaffiliated third parties. The Secured Party shall have the right, by written notice to the Debtor, to terminate the Debtor's authority to sell, lease, otherwise transfer, manufacture, process or assemble, or furnish under contracts of service, any or all of the products of the Debtor. 7. (a) Upon the occurrence of an Event of Default as defined in Section 8 hereof, the Debtor agrees as follows: (i) the Debtor will not, without first obtaining the written consent of the Secured Party, renew or extend the time of payment of any Account; (ii) the Debtor will promptly notify the Secured Party in writing of any compromise, settlement or adjustment with respect to an Account and will forthwith account therefor to the Secured Party in cash for the amount thereof without demand or notice; (iii) the Debtor will stamp, in form and manner satisfactory to the Secured Party, its accounts receivable ledger and other books and records pertaining to the Accounts, with an appropriate reference to the security interest of the Secured Party in the Accounts; (iv) upon request, the Debtor will furnish to the Secured Party original or other papers relating to the sale of merchandise or the performance of labor or services which created any Account; (v) the Debtor may collect the Accounts, subject to the discretion and control of the Secured Party, but the Secured Party may, without cause or notice, curtail or terminate such authority at any time; (vi) the proceeds of the Accounts, when collected by the Debtor, whether consisting of cash, checks, notes, drafts, money orders, commercial paper of any kind whatsoever, or other documents, received in payment of the Accounts shall be promptly remitted by the Debtor to the Secured Party, in precisely the form received, except for endorsement by the Debtor when required; (vii) such proceeds until remitted to the Secured Party, as aforesaid, shall be held in trust by the Debtor for, and as the property of, the Secured Party and shall not be commingled with other funds, money or property; (viii) proceeds of the Accounts will be received by the Secured Party subject to final collection and receipt of proceeds in cash or by unconditional credit to and acceptance by the Secured Party; (ix) the Secured Party shall apply, in its absolute discretion, all collections received by it on the Accounts toward the payment of any of the Obligations whether due or not due; (x) the Debtor will promptly notify the Secured Party in writing of the return or rejection of any merchandise represented by the Accounts, and the Debtor shall forthwith account therefor to the Secured Party in cash without demand or notice and until such payment has been received by the Secured Party, the Debtor will receive and hold all such merchandise separate and apart, in trust for and subject to the security interest in favor of the Secured Party; (xi) the Secured Party is authorized to sell, for the Debtor's account and sole risk, all or any part of such merchandise in the manner and under the terms and conditions hereinafter set forth. 4 (b) The Debtor represents and warrants to the Secured Party that the Debtor is the sole owner of the Accounts, and no one has or claims to have an interest of any kind therein or thereto; each of the debtors named in every such Account is indebted to the Debtor in the amount and on the terms indicated in the invoice and schedule of Accounts; each Account is bona fide and arises out of the performance of labor or services or the sale and delivery or lease of merchandise or both, and none of the Accounts is now, nor will at any time in the future become, contingent upon the fulfillment of any contract or conditions whatsoever, nor subject to any defense, offset or counterclaim. (c) The Debtor will maintain accurate and complete records of the Accounts and will make the same available to the Secured Party at any time upon demand. The Secured Party is entitled, at any time in its sole discretion, to notify the account debtors of the Debtor to make payment upon the Accounts directly to the Secured Party. (d) For purposes of this Agreement, an "Account" or "Accounts" of the Debtor shall mean (i) all accounts (as defined in the UCC) of the Debtor arising out of the sale of Purchased Inventory, as defined in the Inventory Purchase Agreement, on or after the date of this Agreement; and (ii) with respect to the Collateral or any part thereof, all of the Debtor's present and future accounts, contract rights, general intangibles and chattel paper and all other rights to the payment of money arising out of the sale (or lease) of goods that are Collateral, all proceeds thereof and all liens, securities, guarantees, remedies, and privileges pertaining thereto, together with all rights and liens of the Debtor in and to such goods, including returned or repossessed goods, and all rights and property of any kind forming the subject matter of any of the Accounts, including the right of stoppage in transit. 8. Upon non-payment or non-performance when due of any of the Obligations, or upon the failure of the Debtor to perform any agreement on its part to be performed hereunder, or by the terms of any other related agreement covering the Obligations, including, but not limited to, the Inventory Purchase Agreement, or in case the Secured Party deems itself insecure, or it appears at any time that any representation in any financial or other statement of the Debtor (delivered to the Secured Party by or on behalf of the Debtor) is untrue or omits any material fact, or if a material adverse change shall occur in the financial condition of the Debtor, or if the Debtor (or any endorser, guarantor or surety of or upon any of the Obligations) shall die or (being a partnership, limited liability company or corporation) shall be dissolved or shall become insolvent (however evidenced), or upon the suspension of the Debtor, or upon the issuance of any warrant, process, or order of attachment, garnishment or lien and/or the filing of a lien as a result thereof against any of the property of the Debtor (or any endorser, guarantor or surety of or upon any of the Obligations), or upon the making by the Debtor (or any endorser, guarantor or surety) of an assignment for the benefit of creditors under any bankruptcy, reorganization, arrangement of debt, insolvency, readjustment of debt, composition, receivership, liquidation or dissolution law or statute of any jurisdiction, then in any such event (each an "Event of Default"), (a) all Obligations shall become at once due and payable, without notice, presentment, demand for payment or protest, which are hereby expressly waived; (b) the Secured Party is authorized to take possession of the Collateral and, for that purpose may enter, with the aid and assistance of any person or persons, any premises where the Collateral, or any part thereof is, or may be, placed and remove same; (c) the Secured Party may require the Debtor 5 to assemble the Collateral and to make it available to the Secured Party at a place designated by the Secured Party which is reasonably convenient to the Secured Party and the Debtor; (d) the Secured Party shall have the right from time to time to sell, resell, assign, transfer and deliver all or any part of the Collateral, at any broker's board or exchange, or at public or private sale or otherwise, at the option of the Secured Party, for cash or on credit for future delivery, in such parcel or parcels and at such time or times and at such place or places, and upon such terms and conditions as the Secured Party may deem proper, and in connection therewith may grant options and may impose reasonable conditions such as requiring any purchaser to represent that any stock constituting part of the Collateral is being purchased for investment purposes only, all without (except as shall be required by applicable statute and cannot be waived) advertisement or demand upon the Debtor or right of redemption to the Debtor, which are hereby expressly waived; unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Secured Party will give the Debtor reasonable notice of the time and place of any such public sale or of the time after which any private sale or any other intended disposition thereof is to be made, and the Debtor agrees that ten (10) days' prior notice shall be deemed reasonable notice; (e) upon each such sale, the Secured Party may, unless prohibited by applicable statute which cannot be waived, purchase all or any part of the Collateral being sold, free from and discharged of all trusts, claims, rights of redemption and equities of the Debtor, which are hereby waived and released; provided, however, that the Secured Party at any time, before or after the occurrence of any Event of Default, may, but shall not be obligated to, transfer into or out of its own name or that of its nominee all or any of the Collateral which is instruments, stocks, bonds, and other securities, and the Secured Party or its nominee may demand, sue for, collect, receive and hold as like Collateral any or all interest, dividends and income thereon, and if any securities are held in the name of the Secured Party or its nominee, the Secured Party may, after the occurrence of any such events, exercise all voting and other rights pertaining thereto as if the Secured Party were the absolute owner thereof; but the Secured Party shall not be obligated to demand payment of, protest, or take any steps necessary to preserve any rights in any such Collateral against prior parties, or take any action whatsoever in regard to any such Collateral, all of which the Debtor assumes and agrees to do. Without limiting the generality of the foregoing, the Secured Party shall not be obligated to take any action in connection with any conversion, call, redemption, retirement or any other event relating to any of such Collateral, unless the Debtor gives written notice to the Secured Party that such action shall be taken not more than thirty (30) days prior to the time such action may first be taken and not less than ten (10) days prior to the expiration of the time during which such action may be taken; (f) the Secured Party's obligations, if any, to give additional (or to continue) financial accommodations of any kind to the Debtor shall immediately terminate; and (g) in addition to the rights and remedies given to the Secured Party hereunder or otherwise, the Secured Party shall have all of the rights and remedies of a secured party under the Uniform Commercial Code of the Governing State. As used in this Agreement, "Governing State" shall mean the state indicated as such below. 9. In the case of each such sale or of any proceedings to collect any of the Obligations, the Debtor shall pay all costs and expenses of every kind for collection, sale or delivery, including, but not limited to, reasonable attorneys' fees, and after deducting such costs and expenses from the proceeds of sale or collection, the Secured Party may apply any residue to pay any of the Obligations, and the Debtor will continue to be liable to the Secured Party for any deficiency with interest. The Secured Party shall have the right, exercisable in its sole and absolute discretion, to retain any surplus 6 from any such sale or collection as additional security until the expiration and complete satisfaction of all of the Obligations, whether then existing or thereafter arising. 10. The Secured Party may, but is not obligated to, (a) demand, sue for, collect or receive any money or property at any time due, payable or receivable on account of or in exchange for any obligations securing any of the Obligations; (b) compromise and settle with any person liable on such obligation, and/or (c) extend the time of payment of, or otherwise change, the terms thereof, as to any party liable thereon; all without incurring responsibility to the Debtor or affecting any of the Obligations. 11. (a) In order to effectuate the terms and provisions hereof, the Debtor hereby designates and appoints the Secured Party and its designees or agents as attorney-in-fact of the Debtor, irrevocably and with power of substitution, with authority to receive, open and dispose of all mail addressed to the Debtor, to notify the Post Office authorities to change the address for delivery of mail addressed to the Debtor to such address as the Secured Party may designate; to endorse the name of the Debtor on any notes, acceptances, checks, drafts, money orders, instruments or other evidence of payment or proceeds of the Collateral that may come into the Secured Party's possession; to sign the name of the Debtor on any invoices, documents, drafts against, and notices (which also may direct, among other things, that payment be made directly to the Secured Party) to Account debtors or obligors of the Debtor, assignments and requests for verification of Accounts; to execute proofs of claim and loss; to execute any endorsements, assignments, or other instruments of conveyance or transfer; to adjust and compromise any claims under insurance policies; to execute releases; and to do all other acts and things necessary and advisable in the sole discretion of the Secured Party to carry out and enforce this Agreement. All acts of said attorney or designee are hereby ratified and approved, and said attorney or designee shall not be liable for any acts of commission or omission, nor for any error of judgment or mistake of fact or law. This power of attorney, being coupled with an interest, is irrevocable while any of the Obligations shall remain unpaid. (b) The Debtor hereby grants to the Secured Party (and its agents, representatives or assigns) a fully-paid, royalty-free, worldwide right and license to, upon and during the continuance of an Event of Default (unless appropriately waived in writing in accordance with this Agreement), use, or sell or otherwise transfer, any and all of the Collateral which may bear or utilize any of the Debtor's or any of its divisions' names, tradenames, trademarks, patents or other intellectual property. 12. All options, powers and rights granted to the Secured Party hereunder or under any promissory note, instrument, document or other writing delivered to the Secured Party shall be cumulative and shall be in addition to any other options, powers or rights which the Secured Party may now or hereafter have as a secured party under the Uniform Commercial Code of the Governing State or under any other applicable law or otherwise. All security interests and the related rights and remedies granted to the Secured Party hereunder or under any other instrument, document or writing delivered to the Secured Party by the Debtor shall be cumulative; provided, however, that, in the event of an inconsistency between the terms of the security interest and the related rights and remedies granted hereunder and the terms of the security interest and the related rights and remedies granted to the Secured Party under any other instrument, document or writing, the grant most favorable to the Secured Party shall control. 7 13. No delay on the part of the Secured Party in exercising any of its options, powers, or rights, or partial or single exercise thereof, shall constitute a waiver thereof. Neither this Agreement nor any provision hereof may be modified, changed, waived, discharged or terminated orally, but only by an instrument in writing, signed by the party against whom enforcement of the modification, change, waiver, discharge or termination is sought. The Secured Party shall have the right, for and in the name, place and stead of the Debtor, to execute endorsements, assignments or other instruments of conveyance or transfer with respect to any of the Collateral. 14. Notice of acceptance of this Agreement by the Secured Party is hereby waived. This Agreement shall be immediately binding upon the Debtor and its successors and assigns, whether or not the Secured Party signs this Agreement. 15. It is the intention of the parties that the security interest provided for herein shall attach to after-acquired as well as existing Collateral, and the Obligations covered by this Agreement shall include any other obligation, indebtedness, agreement, guarantee or liability of any kind of the Debtor to the Secured Party, whether now existing or hereafter arising, whether monetary or non-monetary, whether or not similar to prior or existing obligations or liabilities, and howsoever evidenced, all to the maximum extent permitted by the Uniform Commercial Code of the Governing State. 16. Unless the context otherwise requires, or unless otherwise defined herein all terms used herein which are defined in the Uniform Commercial Code of the Governing State shall have the meanings therein stated. 17. For the purpose of Section 9.402(1) of the Uniform Commercial Code, the address of the Debtor specified below under the caption "Chief Executive Office" may be designated as the Debtor's mailing address. 18. This Agreement shall be construed in accordance with, and be governed by, the law of the Governing State (excluding the laws applicable to conflicts or choice of law). 19. GOVERNING STATE: Ohio, except for perfection, as appropriate. 20. Upon receipt of an affidavit of an officer of the Secured Party as to the loss, theft, destruction or mutilation of this Agreement or any other security document which is not of public record, and, in the case of any such loss, theft, destruction or mutilation, upon cancellation of such agreement or other security document, the Debtor will issue, in lieu thereof, a replacement agreement or other security document. 21. The Secured Party shall have the unrestricted right at any time or from time to time, and without the Debtor's consent, to assign all or any portion of its rights and obligations hereunder to one or more other persons or entities (each, an "Assignee"), and the Debtor agrees that it shall execute, or cause to be executed, such documents, including but not limited to, amendments hereto and to any other documents executed in connection herewith or pursuant hereto (collectively the "Collateral And Security Documents") as the Secured Party shall deem necessary to effect the 8 foregoing. Upon the execution and delivery of appropriate assignment documentation, amendments and any other documentation required by the Secured Party in connection with such assignment, and the payment by the Assignee of the purchase price agreed to by the Secured Party and such Assignee, such Assignee shall have all of the rights and obligations of the Secured Party hereunder (and under any and all other Collateral And Security Documents) to the extent that such rights and obligations have been assigned by the Secured Party pursuant to the assignment documentation between the Secured Party and such Assignee, and the Secured Party shall be released from its obligations hereunder and thereunder to a corresponding extent. 22. The Debtor and the Secured Party acknowledge and agree to the following provisions in anticipation of the possible application, in one or more jurisdictions, to the transactions contemplated hereby, of the Revised Article 9 of the Uniform Commercial Code in the form or substantially in the form approved in 1998 by the American Law Institute and the National Conference of Commissioners on Uniform State Law ("Revised Article 9"). (a) In applying the law of any jurisdiction in which Revised Article 9 is in effect, the Collateral consists of the assets of the Debtor as described in Section 3 hereinabove, whether or not within the scope of Revised Article 9. The Collateral shall include, but not be limited to, the following categories of assets as defined in Revised Article 9: goods (including inventory, equipment and any accessions thereto), instruments (including promissory notes), documents, accounts (including health-care-insurance receivables), chattel paper (whether tangible or electronic), deposit accounts, letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), commercial tort claims, securities and all other investment property, general intangibles (including payment intangibles and software), supporting obligations and any and all proceeds of any thereof, wherever located, whether now owned and hereafter acquired. If the Debtor shall at any time, whether or not Revised Article 9 is in effect in any particular jurisdiction, acquire a commercial tort claim, as defined in Revised Article 9 and such commercial tort claim is a component of the Collateral as described in Section 3 hereinabove, the Debtor shall immediately notify the Secured Party in a writing signed by the Debtor of the brief details thereof and grant to the Secured Party in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Secured Party. (b) The Secured Party may at any time and from time to time, file financing statements, continuation statements and amendments thereto that describe the Collateral and the assets included therein, and which contain any other information required by Part 5 of Revised Article 9 for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including whether the Debtor is an organization, the type of organization and any organization identification number issued to the Debtor. The Debtor agrees to furnish any such information to the Secured Party promptly upon request. Any such financing statement, continuation statements or amendments may be signed by the Secured Party on behalf of the Debtor, and may be filed at any time in any jurisdiction whether or not Revised Article 9 is then in effect in that jurisdiction. (c) The Debtor shall at any time from time to time, whether or not revised Article 9 is in effect in any particular jurisdiction, take such steps as the Secured Party may reasonably request for the Secured Party (i) to obtain an acknowledgment, in form and substance satisfactory to 9 the Secured Party, of any bailee having possession of any of the Collateral that the bailee holds such Collateral for the Secured Party, (ii) to obtain "control" of any investment property, deposit accounts, letter-of-credit rights or electronic chattel paper (as such terms are defined in Revised Article 9 with corresponding provisions in Rev. ss.ss. 9-104, 9-105, 9-106 and 9-107 relating to what constitutes "control" for such items of Collateral), with any agreements establishing control to be in form and substance satisfactory to the Secured Party, and (iii) otherwise to insure the continued perfection and priority of the Secured Party's security interest in any of the Collateral, and of the preservation of its rights therein, whether in anticipation, and following, the effectiveness of Revised Article 9 in any jurisdiction. (d) Nothing contained in this Section 22 shall be construed to narrow the scope of the Secured Party's security interest in any of the Collateral or the perfection or priority thereof or to impair or otherwise limit any of the rights, powers, privileges or remedies of the Secured Party hereunder except (and then only to the extent) mandated by Revised Article 9 to the extent then applicable. [Signatures appear on following page] 10 IN WITNESS WHEREOF, the undersigned have executed this Agreement or have caused these presents to be executed and delivered by their proper corporate officer or officers and caused their proper corporate seal to be hereto affixed, as of the Effective Time. ROSENBOOM MACHINE & TOOL, INC. By:/s/ Brian Rosenboom ------------------------------------------ Brian Rosenboom, Vice President GREEN MANUFACTURING, INC. By:/s/ Joseph A. Molino, Jr. ------------------------------------------ Joseph A. Molino, Jr., Vice President Chief Executive Office of Debtor: Address: Rosenboom Machine & Tool, Inc. 1530 Western Avenue Sheldon, Iowa 51201 Other Business Addresses of Debtor: - ---------------------------------- (if none, state "None") None Location of Collateral: - ---------------------- 1032 South Maple Street Bowling Green, Ohio 43402 Type of Entity of Debtor: - ------------------------ Corporation Jurisdiction of Organization of Debtor: - -------------------------------------- Iowa Organization Identification Number of Debtor (if any): - ----------------------------------------------------- 103648 EX-2 7 promissorynote.txt EXHIBIT 2.6 PROMISSORY NOTE Executed at Bowling Green, Ohio, December 10, 2004 Delivered at Bowling Green, Ohio $685,912.57 PROMISSORY NOTE FOR VALUE RECEIVED, ROSENBOOM MACHINE & TOOL, INC., an Iowa corporation (the "Maker"), having an address as indicated under its name, hereby promises to pay to the order of GREEN MANUFACTURING, INC., a Delaware corporation (the "Payee"), at c/o P&F Industries, Inc. 300 Smith Street, Farmingdale, New York 11735 or at such other place as the holder hereof may from time to time designate in writing, in immediately available funds, the principal sum of SIX HUNDRED EIGHTY-FIVE THOUSAND NINE HUNDRED TWELVE AND FIFTY-SEVEN ONE-HUNREDTHS ($685,912.57) DOLLARS, together with interest on the outstanding principal balance from the date hereof at a rate per annum from time to time equal to the One Month LIBOR Rate (as hereinafter defined) plus one and sixty-five one-hundredths percent (1.65%). The term "One Month LIBOR Rate" shall mean the London interbank offered rate for U.S. dollar deposits for one month established on the date hereof and thereafter two business days prior to the first day of each month during the term of this Note based on an annualized 30-day interest rate (calculated on the basis of actual days elapsed over a 360-day year) equal to (a) the offered rate that appears on page 3750 of the Telerate Service for U.S. dollar deposits of amounts and in funds comparable to the principal amount of this Note, or (b) at any time the offered rate is not available on page 3750 of the Telerate Service, the offered rate that appears in the Wall Street Journal for U.S. dollar deposits of amounts and in funds comparable to the principal amount of this Note. The principal amount of the Note shall be payable as follows: - ------------------------------------- --------------------------------------- DUE DATE AMOUNT OF PRINCIPAL - ------------------------------------- --------------------------------------- January 25, 2005 $144,041.64 - ------------------------------------- ------------------------------------------ February 25, 2005 $130,323.39 - ------------------------------------- ------------------------------------------ March 25, 2005 $109,746.01 - ------------------------------------- ------------------------------------------ April 25, 2005 $61,732.14 - ------------------------------------- ------------------------------------------ May 25, 2005 $41,154.75 - ------------------------------------- ------------------------------------------ June 25, 2005 $27,436.50 - ------------------------------------- ------------------------------------------ July 25, 2005 $13,718.25 - ------------------------------------- ------------------------------------------ August 25, 2005 $13,718.25 - ------------------------------------- ------------------------------------------ September 25, 2005 $13,718.25 - ------------------------------------- ------------------------------------------ October 25, 2005 $13,718.25 - ------------------------------------- ------------------------------------------ November 25, 2005 $13,718.26 - ------------------------------------- ------------------------------------------ December 25, 2005 $102,886.88 (the "Final Principal Payment Amount") - ------------------------------------- ------------------------------------------ Accrued interest on the outstanding principal balance of this Note shall be payable on a monthly basis with each principal payment. The payment of all amounts due under this Note is secured by a letter of credit of even date in the amount of Six Hundred Eighty-Five Thousand Nine Hundred Twelve and Fifty-Seven One-Hundredths ($685,912.57) Dollars issued by Security State Bank for the benefit of the Payee. In the event the Maker shall (a) fail to make any payment hereunder when due; (b) admit in writing its inability to pay its debts as they mature; (c) make a general assignment for the benefit of creditors; (d) be adjudicated a bankrupt or insolvent; (e) file a voluntary petition in bankruptcy or a petition or an answer seeking an arrangement with creditors; (f) take advantage of any bankruptcy, insolvency or readjustment of debt law or statute or file an answer admitting the material allegations of a petition filed against it in any proceeding under any such law; or (g) have entered against it a court order approving a petition filed against it under the Federal Bankruptcy Act, then and in each and every such event (an "Event of Default"), the Payee may, by written notice to the Maker, declare the entire unpaid principal amount of this Note then outstanding plus accrued interest to be forthwith due and payable whereupon the same shall become forthwith due and payable. The Maker may prepay the principal amount of this Note, in whole or in part, from time to time, without premium or penalty, provided that the Maker pays all interest accrued with regard to the principal prepaid to the date of prepayment. All prepayments shall be applied in the inverse order of the due dates under this Note. If the Maker shall fail to pay when due, whether by acceleration or otherwise, all or any portion of the principal amount hereof, any such unpaid amount shall bear interest for each day from the date it was so due until paid in full at the rate of two percent (2%) above the prime rate as reported from time to time in The Wall Street Journal, payable on demand. Notwithstanding anything to the contrary contained in this Note, the rate of interest payable on this Note shall never exceed the maximum rate of interest permitted under applicable law. This Note may not be waived, changed, modified or discharged orally, but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. Should the indebtedness represented by this Note or any part thereof be collected at law or in equity, or in bankruptcy, receivership or any other court proceedings (whether at the trial or appellate level), or should this Note be placed in the hands of any agent or attorneys for collection upon default or maturity, the Maker agrees to pay, in addition to all other amounts due and payable hereunder, all reasonable costs and expenses of collection or attempting to collect this Note, including reasonable attorneys' fees. The Maker and any endorsers hereof, for themselves and their respective representatives, 2 successors and assigns, expressly (a) waive presentment, protest, notice of dishonor, notice of non-payment, notice of maturity, notice of protest, diligence in collection, and the benefit of any applicable exemptions, including, but not limited to, exemptions claimed under insolvency laws, and (b) consent that the Payee may release or surrender, exchange or substitute any property or other collateral or security now held or which may hereafter be held as security for the payment of this Note, and/or may release any guarantor, and/or may extend the time for payment and/or otherwise modify the terms of payment of any part or the whole of the debt evidenced hereby. Any notice, demand or request relating to any matter set forth herein shall be in writing and shall be deemed effective when hand delivered, when mailed, postage prepaid, by registered or certified mail, return receipt requested, or by a nationally recognized overnight mail or courier service, or when sent by facsimile transmission to the Maker or the Payee at its address stated herein or at such other address of which it shall have notified the party giving such notice in writing as aforesaid. The Payee shall be entitled to assign all or any portion of its right, title and interest in and to this Note at is sole discretion without notice to the Maker, provided that the Maker shall continue to make payments required hereunder to the Payee until it has received notice of change of payee for payments as provided herein. Notwithstanding any other provision of this Note, all payments made hereunder shall be applied first to payment of sums payable hereunder other than interest and principal, secondly, interest on the principal balance outstanding hereunder from time to time, and thirdly to principal. The Maker acknowledges and agrees that the obligations under this Note are unconditional and are not subject to any defense, counterclaim, or right of offset or setoff; provided, however, that, in the event that (a) no Event of Default shall have occurred, and (b) the Maker shall have duly exercised its put option in accordance with the terms and conditions of the Inventory Put Agreement of even date between the Maker and the Payee (the "Put Agreement"), then the Maker shall have the right, by written notice to the Payee, to offset, against the final payment(s) due under this Note, the amount then due and payable by the Payee to the Maker pursuant to the Put Agreement. In no event shall the Maker have the right to offset more than the Final Principal Payment Amount. This Note shall be governed by, and construed in accordance with, the laws of the State of Ohio, excluding conflict of law principles thereof. The Maker acknowledges that it has been represented by counsel in connection with this Note. Accordingly, any rule or law or any legal decision that would require the interpretation of any claimed ambiguities in this Note against the party that drafted it has no application and is expressly waived by the Maker. The provisions of this Note shall be interpreted in a reasonable manner to give effect to the intent of the Maker and the Payee. Waiver of Jury Trial - -------------------- 3 Without limiting the effect or intentions of the warrant of attorney contained in the following paragraph, THE MAKER AND, BY ITS ACCEPTANCE OF THIS NOTE, THE PAYEE HEREBY IRREVOCABLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY DEALINGS BETWEEN THEM RELATING TO THIS NOTE AND THE RELATIONSHIPS THEREBY ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this Note, including, without limitation, contract claims, tort claims, breach of duty claims, and all other statutory and common law claims. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS NOTE. In the event of litigation, this provision may be filed as a written consent to a trial by the court. Warrant of Attorney - -------------------- The Maker and any guarantor hereof authorizes any attorney at law to appear in any Court of Record in the State of Ohio or in any other state or territory of the United States of America after the above indebtedness becomes due, whether by acceleration or otherwise, to waive the issuance and service of process, and to confess joint and several judgment against the Maker in favor of the Payee for the amount then appearing due together with costs of suit, and thereupon to waive all errors and all rights of appeal and stays of execution. The foregoing warrant of attorney shall survive any such judgment and should any such judgment be vacated for any reason, the foregoing warrant of attorney nevertheless may thereafter be utilized for obtaining judgment or judgments. {Remainder of page intentionally left blank. Signature page follows.} 4 - -------------------------------------------------------------------------------- WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE, AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. - -------------------------------------------------------------------------------- ROSENBOOM MACHINE & TOOL, INC. By:/s/ Brian Rosenboom ------------------------------ Name: Brian Rosenboom Title: Vice President Address: 1530 Western Avenue Sheldon, Iowa 51201 Fax Number: (712) 324-4522 5 EX-99 8 pressrelease.txt EXHIBIT 99.1 PRESS RELEASE P & F Industries, Inc. Subsidiary Sells Cylinder Division to Rosenboom Machine & Tool, Inc. FARMINGDALE, N.Y., December 14, 2004, - P & F Industries, Inc. (Nasdaq NM: PFIN) announced today that it has entered into a definitive Asset Purchase Agreement dated December 13, 2004, and effective as of the close of business on December 10, 2004. Under this Agreement, Green Manufacturing, Inc., a wholly-owned subsidiary of P&F Industries, sold certain of its assets comprising its Hydraulic Cylinder Division to Rosenboom Machine & Tool, Inc. ("RMT"). RMT is a major manufacturer of hydraulic cylinders based in Sheldon, Iowa. The assets sold pursuant to the Agreement include, among others, property, machinery and equipment, raw materials, work-in-process inventory and certain intangibles. Green received net cash proceeds of approximately $3,650,000 and a promissory note of approximately $686,000 at the closing. In addition, Green may receive additional consideration based upon certain future sales by RMT. In addition, RMT has agreed to hire all Green Hydraulic Cylinder Division employees in Bowling Green, Ohio. Green has retained its Access Division and Agricultural Division and RMT has agreed to lease certain space and provide certain services in connection with those operations to Green. As a result of the transaction, Green has effectively exited the hydraulic cylinder business. Richard Horowitz, President and CEO of P&F Industries commented, "P & F management believes that the Hydraulic Cylinder Division is no longer a strategic fit with the remainder of P & F's operations and it was in the best interest of the Company to use the proceeds from the transaction for other corporate purposes. We remain committed to identifying potential opportunities to create greater value for our shareholders, customers and employees". P & F Industries, Inc., through its four wholly-owned subsidiaries, Florida Pneumatic Manufacturing Corporation, Countrywide Hardware Inc., Green Manufacturing, Inc. and Embassy Industries, Inc., manufactures and/or imports air-powered tools, various residential hardware such as staircase components, kitchen and bath hardware, fencing hardware and door and window hardware, and baseboard and radiant heating products. P & F's products are sold under their own trademarks, as well as under the private labels of major manufacturers and retailers. This is a "Safe-Harbor" statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including those related to the Company's future performance, are based upon the Company's historical performance and on current plans, estimates and expectations, which are subject to various risks and uncertainties, including, but not limited to, the impact of competition, product demand and pricing. These risks could cause the Company's actual results for the 2004 fiscal year and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. P & F Industries, Inc. Lippert/Heilshorn & Assoc., Inc. Joseph A. Molino, Jr. Jody Burfening/Seema Brin Chief Financial Officer Investor Relations 631-694-1800 212-838-3777 jmolino@pfina.com jburfening@lhai.com/sbrin@lhai.com www.pfina.com www.lhai.com - ------------- ------------ -----END PRIVACY-ENHANCED MESSAGE-----