Contract
Exhibit
2.1
Section
3.1 The
Closing; Delivery of Membership Interests.
and
thereby, and the performance of this Agreement or the other Documents in
compliance with the terms and conditions hereof and thereof by the Sellers
will
not: (i) violate, conflict with or result in any breach of the Certificate
of
Incorporation, by-laws or similar agreement with respect to any Seller
not an
individual, or any trust agreement, judgment, decree, injunction, order,
writ,
statute, rule or regulation applicable to any Seller; (ii) violate, conflict
with or result in a breach, default or termination (or give rise to any
right of
termination, cancellation or acceleration) of the maturity of any payment
date
of any of the obligations of a Seller under any law, statute, rule, regulation
or any judgment, decree, order, governmental permit, license or order applicable
to Spinwell or any of the terms, conditions or provisions of any mortgage,
indenture, note, license, contract or other instrument or obligation related
to
such Seller or to its/his ability to consummate the transactions contemplated
hereby or thereby, except for such defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or consents
have
been obtained in writing and provided to Purchaser; or (iii) except as
set forth
on Schedule 4.4, require the consent, waiver, authorization, approval of
or
filing with any Governmental Entity or of any Person.
of
the
Company or the business or the Company is bound or otherwise subject; or
(iii)
except as set forth on Schedule 4.4, require the consent, waiver, authorization,
approval of or filing with any Governmental Entity or any other Person,
each of
which shall have been obtained as of the Closing
by
and among
each
of the of the Members of
Spinwell
Holding Co., LLC
and
Spinwell
Holding Co., LLC
and
dated
as of
January
17, 2006
|
ARTICLE
I
|
DEFINITIONS
AND INTERPRETATION
|
1
|
|
Section
1.1
|
Definitions
|
1
|
|
Section
1.2
|
Interpretation
|
5
|
|
ARTICLE
II
|
PURCHASE
AND SALE OF THE MEMBERSHIP INTERESTS
|
5
|
|
Section
2.1
|
Sale
and Transfer of Membership Interests
|
5
|
|
Section
2.2
|
Consideration
for the Membership Interests
|
6
|
|
ARTICLE
III
|
THE
CLOSING
|
8
|
|
Section
3.1
|
The
Closing; Delivery of Membership Interests
|
8
|
|
ARTICLE
IV
|
REPRESENTATIONS
AND WARRANTIES OF SELLERS
|
8
|
|
Section
4.1
|
Organization
and Qualification of Spinwell
|
8
|
|
Section
4.2
|
Authorization;
Validity of Agreement
|
8
|
|
Section
4.3
|
Execution;
Validity of Agreement
|
8
|
|
Section
4.4
|
Consents
and Approvals; No Violations (Spinwell)
|
9
|
|
Section
4.5
|
Ownership
of the Membership Interests
|
9
|
|
Section
4.6
|
Organization
and Qualification of Company; Pitt Pen Oil DISC Company
|
9
|
|
Section
4.7
|
Consents
and Approvals; No Violations (Company)
|
10
|
|
Section
4.8
|
Capitalization
of Spinwell; The Company; Pitt Pen Oil DISC Company
|
10
|
|
Section
4.9
|
Financial
Statements; Books and Records
|
11
|
|
Section
4.10
|
No
Undisclosed Liabilities
|
12
|
|
Section
4.11
|
Real
Property
|
12
|
|
Section
4.12
|
Leases
|
13
|
|
Section
4.13
|
Subsidiaries
|
13
|
|
Section
4.14
|
Litigation
|
13
|
|
Section
4.15
|
Title
to Property, Absence of Encumbrances, etc.
|
13
|
|
Section
4.16
|
Inventories;
Accounts Receivable
|
14
|
|
Section
4.17
|
Intellectual
Property
|
14
|
|
Section
4.18
|
Employee
Remuneration
|
15
|
|
Section
4.19
|
Union
and Employment Agreements
|
15
|
|
Section
4.20
|
Officers,
Directors and Bank Accounts
|
15
|
|
Section
4.21
|
Absence
of Certain Changes
|
16
|
|
Section
4.22
|
Environmental
Matters.
|
16
|
|
Section
4.23
|
Taxes
|
17
|
|
Section
4.24
|
Permits
|
18
|
|
Section
4.25
|
Software
|
18
|
|
Section
4.26
|
Employee
Benefit Plans
|
19
|
|
Section
4.27
|
Absence
of Certain Payments
|
22
|
|
Section
4.28
|
Customers
and Suppliers
|
22
|
|
Section
4.29
|
Insurance
Policies
|
22
|
|
Section
4.30
|
No
Brokers
|
22
|
|
Section
4.31
|
Compliance
with Laws
|
22
|
|
Section
4.32
|
Contracts;
Affiliate Transactions
|
23
|
|
Section
4.33
|
Products
|
23
|
|
Section
4.34
|
Maintenance
and Disclosure of Books and Records
|
24
|
|
Section
4.35
|
Disclosure
|
24
|
|
ARTICLE
V
|
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
|
24
|
|
Section
5.1
|
Organization
|
25
|
|
Section
5.2
|
Consents
and Approvals; No Violations
|
25
|
|
Section
5.3
|
Purchase
Entirely for Own Account
|
25
|
|
Section
5.4
|
Litigation
|
25
|
|
Section
5.5
|
Brokers
or Finders
|
25
|
|
ARTICLE
VI
|
COVENANTS
AND AGREEMENTS
|
26
|
|
Section
6.1
|
Interim
Operations of the Company
|
26
|
|
Section
6.2
|
Efforts
and Actions to Cause Closing to Occur
|
27
|
|
Section
6.3
|
Maintenance
of Books and Records
|
27
|
|
Section
6.4
|
Confidentiality;
Noncompetition; Nonsolicitation ………….
|
28
|
|
ARTICLE
VII
|
CONDITIONS
|
29
|
|
Section
7.1
|
Conditions
to Each Party's Obligation to Effect the Closing
|
29
|
|
Section
7.2
|
Conditions
to Obligations of Purchaser to Effect the Closing
|
30
|
|
Section
7.3
|
Conditions
to Obligations of Seller to Effect the Closing
|
31
|
|
ARTICLE
VIII
|
TERMINATION
|
32
|
|
Section
8.1
|
Termination
|
32
|
|
Section
8.2
|
Effect
of Termination
|
33
|
|
ARTICLE
IX
|
INDEMNIFICATION
|
33
|
|
Section
9.1
|
Survival
of Representations and Warranties
|
33
|
|
Section
9.2
|
Indemnification
by the Seller.
|
34
|
|
Section
9.3
|
Indemnification
by the Purchaser.
|
34
|
|
Section
9.4
|
Notice
and Defense of Claim
|
35
|
|
Section
9.5
|
Limitations
on Amount
|
35
|
|
Section
9.6
|
No
Limitations of Remedies
|
35
|
|
Section
9.7
|
Subrogation.
|
36
|
|
ARTICLE
X
|
MISCELLANEOUS
|
36
|
|
Section
10.1
|
Fees
and Expenses
|
36
|
|
Section
10.2
|
Amendment
and Modification
|
36
|
|
Section
10.3
|
Notices
|
36
|
|
Section
10.4
|
Counterparts
|
37
|
|
Section
10.5
|
Further
Assurances
|
37
|
|
Section
10.6
|
Entire
Agreement; No Third Party Beneficiaries
|
37
|
|
Section
10.7
|
Severability
|
38
|
|
Section
10.8
|
Governing
Law
|
38
|
|
Section
10.9
|
Venue
|
38
|
|
Section
10.10
|
Time
of Essence
|
38
|
|
Section
10.11
|
Extension;
Waiver
|
38
|
|
Section
10.12
|
Jointly
Drafted
|
39
|
|
Section
10.13
|
Assignment
|
39
|
Membership
Interest Purchase Agreement, dated as of January 17, 2006 (this
“Agreement”),
by
and among SPINWELL HOLDING CO., LLC, a limited liability company organized
under
the laws of the State of Ohio (“Spinwell”), each of the entities and individuals
listed on Schedule A hereto (each a “Seller and collectively, the “Sellers”)
and
INDUSTRIAL ENTERPRISES OF AMERICA, INC., a corporation organized under the
laws
of the State of Nevada (the “Purchaser”).
R
E C I T
A L S
A. The
Sellers collectively own all of the issued and outstanding limited liability
company membership interests of Spinwell (the “Membership
Interests”),
each
in the percentage set forth on Exhibit A hereto.
B. Spinwell
owns all of the issued and outstanding limited liability company membership
interests of Pitt Penn Oil Co., LLC, a limited liability company organized
under
the laws of the State of Ohio (the “Company”), and all of the issued and
outstanding stock of Pitt Penn DISC Company .
C. The
Sellers wish to sell to the Purchaser, and the Purchaser wishes to purchase
from
the Seller, all of the Membership Interests, upon the terms, and subject
to the
conditions, set forth herein.
NOW,
THEREFORE, in consideration of the foregoing and the mutual representations,
warranties, covenants and agreements set forth herein, intending to be legally
bound hereby, the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
AND INTERPRETATION
Section
1.1 Definitions.
For all
purposes of this Agreement, except as otherwise expressly provided or unless
the
context clearly requires otherwise:
(a) “Affiliate”,
as applied to any Person, means any other Person directly or indirectly
controlling, controlled by, or under common control with, that Person. The
term
“control” (including, with correlative meanings, the terms “controlling,”
“controlled by” and “under common control with”), as applied to any Person,
includes the possession, directly or indirectly, of 10% or more of the voting
power (or in the case of a Person which is not a corporation, 10% or more
of the
ownership interest, beneficial or otherwise) of such Person or the power
otherwise to direct or cause the direction of the management and policies
of
that Person, whether through voting, by contract or otherwise.
(b) “Agreement”
or “this Agreement” shall mean this Membership Interest Purchase
Agreement.
(c) “Business
Day” shall mean any day other than a Saturday or Sunday, on which commercial
banks in New York State are permitted to be open for the transactions of
customary banking business.
(d) “Closing”
shall mean the date the Sellers and the Purchaser shall consummate the
transactions contemplated by this Agreement.
(e) “Closing
Date” shall mean January 31, 2006, or such other date as agreed to by the
parties hereto on which the Closing occurs.
(f) “Code”
shall mean the Internal Revenue Code of 1986, as amended.
(g) "Confidential
and Proprietary Information" shall mean any and all of the following (regardless
of the medium in which maintained or stored) (i) confidential or proprietary
information or material not in the public domain about or relating to any
aspect
of the Company or its business or any trade secrets thereof, including, without
limitation, financial information and projections, research and development
plans or projects; data
and
reports; computer materials such as programs, instructions, source codes,
object
codes and printouts; formulas; product-testing information; business
improvements, processes, marketing and selling strategies; strategic business
plans (whether pursued or not); budgets; licenses; pricing, pricing strategy
and
cost data; information regarding the skills and compensation of employees;
the
identities of customers and potential customers; the identities of contact
persons at customers and potential customers; the particular pricing, timing,
sales terms, service plans, methods, practices, strategies, forecasts, know-how
and other marketing techniques; the identities of key accounts; the identities
of suppliers and contractors, and all information about those supplier and
contractor relationships such as contact person(s), pricing and other terms;
the
terms of contracts or agreements, product recipes and any other information
or
data which is not public and/or of a confidential nature relating to the
Company
or its business; or (ii) any information, documentation or material not in
the
public domain, the knowledge of which gives or would likely give the Purchaser
or any of its affiliates an advantage with respect to the Company and its
business over any Person not possessing such information.
(h) “Documents”
shall mean this Agreement and the other documents and instruments contemplated
hereby and executed and delivered in connection herewith.
(i) “Encumbrances”
shall mean all pledges, claims, liens, charges, options to purchase, mortgages,
security interests, restrictions on voting or transfer and other
encumbrances.
(j) “Escrow
Agent" shall mean the law firm of Xxxxxx Xxxxxxx & Xxxxxxxxxx.
(k) “Escrow
Agreement” shall mean the Escrow Agreement, dated as of January 17, 2006, among
the Purchaser, the Escrow Agent and the Sellers.
(l) “Environmental
Law” shall mean all federal, state, local or foreign Laws governing health and
safety, pollution or the protection of the environment.
2
(m) “Excluded
Termination” shall have the meaning assigned thereto in Section
8.2(b).
(n) “Financial
Statements” shall have the meaning assigned thereto in Section 4.9.
(o) “GAAP”
shall mean, as in effect from time to time, generally accepted accounting
principles in the United States consistently applied.
(p) “Governmental
Entity” shall mean a court, arbitral tribunal, administrative agency or
commission or other governmental, regulatory authority or agency, federal,
state, local or foreign.
(q) “Holdback”
shall have the meaning assigned thereto in Section 7.2(g).
(r) “Indemnification
Obligations” shall have the meaning assigned thereto in Section 9.2
(s) “Intellectual
Property” shall mean all U.S. and foreign (i) patents, patent applications,
patent disclosures, and all related continuations, continuations-in-part,
divisionals, reissues, re-examinations, substitutions, and extensions thereof
(“Patents”),
(ii)
trademarks, service marks, trade names, domain names, logos, slogans, trade
dress, and other similar designations of source or origin, together with
the
goodwill symbolized by any of the foregoing (“Trademarks”),
(iii)
copyrights and copyrightable subject matter (“Copyrights”),
(iv)
computer programs (whether in source code, object code, or other form)
(“Software”),
(v)
trade secrets and all confidential information, know-how, inventions,
proprietary processes, formulae, models, and methodologies (“Trade
Secrets”),
(vi)
all rights in the foregoing, and (vii) all applications and registrations
for
the foregoing.
(t) "Inventory"
means all of the Company’s inventories of products, whether raw materials,
work-in-process or finished goods, all goods used in the business of the
Company, all merchandising, promotional and packaging supplies and materials
which are held at, or are in transit from or to, any of the locations
at which any aspect of the operations of the Company and/or its business
is
conducted, or which are used by or held for the benefit of the
Company, and any other item of the Company which in accordance with GAAP
would
be characterized as inventory.
(u) “Knowledge
of Sellers” or “Sellers’ Knowledge” shall mean such facts and other information
which as of the date of determination are actually known by, or which could
be
ascertained by any such persons after reasonable investigation, of all or
any of
a Seller (or where such Seller is not an individual, the senior officers
thereof), the Chairperson, the Co-Chairperson, the President, the Treasurer,
the
Secretary and the Controller (or equivalent positions if no such titles exist)
of Spinwell or the Company, or any member of the Management Committee or
similar
governing body thereof.
(v) “Law”
or
“Laws” shall mean any federal, state, local or foreign law, statute, code,
ordinance, rule, judgment, decree, order, writ, injunction or
regulation.
3
(w) “Material
Adverse Effect” shall mean any material adverse change (whether short-term or
long-term) in, or material adverse effect (whether short-term or long-term)
on,
the business, operations, assets, liabilities, actual or contingent, condition
(financial or otherwise.)
(x) “Net
Asset Value” with respect to a balance sheet shall mean total assets less the
total liabilities (as determined in accordance with GAAP and consistent with
past practices) and reflected on such balance sheet.
(y) “Permitted
Encumbrances” shall mean such liens, encumbrances, mortgages and conditions of
record as are set forth on Schedule 4.15 hereto, or on a title insurance
policy
for real property owned by Spinwell or the Company, a true and complete copy
of
which has been delivered to Purchaser.
(z) “Person”
shall mean a natural person, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Entity or other entity or organization.
(aa) “Purchaser”
shall have the meaning assigned thereto in the preamble to this
Agreement.
(bb) “Purchase
Price” shall have the meaning set forth in Section 2.2.
(cc) “Securities
Act” shall mean
the
Securities Act of 1933
(dd) “Sellers”
shall have the meaning assigned thereto in the preamble.
(ee) “Seller
Representative” shall mean Xxxx Xxxxx, in his capacity as representative of the
Sellers.
(ff) “Spinwell
Entities” shall mean, collectively, Spinwell, the Company and Pitt Penn Oil DISC
Company, a Delaware corporation and a wholly owned subsidiary of
Spinwell.
(gg) “Subordinated
Notes” shall have the meaning assigned thereto in Section 7.2 (b).
(hh) “Tax”
or “Taxes” means, with respect to any country, any and all federal, provincial,
regional, state, city, county, possession and local taxes, assessments and
other
governmental charges, duties, impositions and liabilities, including taxes
based
upon or measured by gross or net receipts, income, profits, sales, use,
occupation and volume, quantity or weight of hazardous wastes generated or
disposed of, and value added, ad valorem, transfer, registration,
franchise, withholding, payroll, recapture, employment, windfall profits,
property, capital, severance, premium, customs, duties and excise taxes,
together with all interest, penalties and additions imposed with respect
to such
amounts and any obligations under any agreements or arrangements with any
other
person with respect to such amounts and including any liability for taxes
of a
predecessor entity; including any interest, additions to tax, or penalties
applicable thereto, imposed by any Tax Authority.
4
(ii) “Tax
Authority” means the Internal Revenue Service and any other domestic or foreign
governmental authority responsible for the administration of any
Taxes.
(jj) “Tax
Return (federal, state and local)” shall mean any declaration, report, estimate,
extension request, information statement, withholding statement return or
other
filing or document relating to, or required to be filed in connection with,
any
Tax, including any schedule or attachment thereto, and including any amendment
thereof.
(kk) “Transactions”
shall mean all the transactions provided for or contemplated by this
Agreement.
(ll) “9/30
Balance Sheet” has the meaning set forth in Section 4.9.
Section
1.2 Interpretation.
All
references to dollar(s) or use of the $ symbol in this Agreement refer to
U.S.
dollars.
(a) The
headings contained in this Agreement are for reference purposes only and
shall
not affect in any way the meaning or interpretation of this
Agreement.
(b) When
a reference is made in this Agreement to a section or article, such reference
shall be to a section or article of this Agreement unless otherwise clearly
indicated to the contrary.
(c) Whenever
the words “include”, “includes” or “including” are used in this Agreement they
shall be deemed to be followed by the words “without limitation.”
(d) The
words “hereof”, “herein” and “herewith” and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole
and
not to any particular provision of this Agreement, and article, section,
paragraph, exhibit and schedule references are to the articles, sections,
paragraphs, exhibits and schedules of this Agreement unless otherwise specified.
(e) The
meaning assigned to each term defined herein shall be equally applicable
to both
the singular and the plural forms of such term, and words denoting any gender
shall include all genders. Where a word or phrase is defined herein, each
of its
other grammatical forms shall have a corresponding meaning.
(f) A
reference to any party to this Agreement or any other agreement or document
shall include such party's successors and permitted assigns, as provided
for in
this Agreement.
(g) A
reference to any legislation or to any provision of any legislation shall
include any amendment to, and any modification or re-enactment thereof, any
legislative provision substituted therefor and all regulations and statutory
instruments issued thereunder or pursuant thereto.
5
(h) All
accounting terms used in this Agreement which are not expressly defined in
this
Agreement shall have the meanings given to those terms by GAAP, unless the
context of this Agreement requires otherwise.
ARTICLE
II
PURCHASE
AND SALE OF THE MEMBERSHIP INTERESTS
Section
2.1 Sale
and Transfer of Membership Interests
Subject
to the terms and conditions hereof and in reliance upon the representations,
warranties and covenants contained herein, the Sellers will collectively
sell
all (and not less than all) of the Membership Interests to the Purchaser,
free
and clear of all Encumbrances, and the Purchaser will purchase all (and not
less
than all) of the Membership Interests from the Sellers, on the Closing Date.
Section
2.2 Consideration
for the Membership Interests.
(a) In
consideration for the Membership Interests, Purchaser shall pay to Sellers
an
aggregate amount (the “Purchase
Price”)
equal
to Three Million Five Hundred Thousand Dollars ($3,500,000) as adjusted by
the
Purchase Price Adjustment (defined below), and shall purchase from the Sellers
the Subordinated Notes for an aggregate purchase price for such Subordinated
Notes of $500,000. The Purchase Price shall be payable as follows:
(i) Simultaneously
with the execution and delivery of this Agreement (the “Execution Date”) by the
parties hereto, the Purchaser shall deliver to the Escrow Agent the amount
of
$100,000. Thereafter, subject to Section 8.1(b), on the third Business Day
following the Execution Date, and on each subsequent third Business Day
thereafter (for example, if the Execution Date is January 17, 2006, on January
20, 2006, January 25, 2006, January 30, 2006, and so on) until the Closing
Date,
the Purchaser shall make additional payments of $100,000 towards the Purchase
Price (the initial such $100,000, together with each subsequent payment of
$100,000 pursuant to the foregoing, the “Escrowed Amount”), as an initial
payment of the Purchase Price. The Escrowed Amount shall be held by the Escrow
Agent pursuant to the Escrow Agreement and the terms of this
Agreement.
(ii) On
the
Closing Date, the Purchaser shall pay to the Sellers, in immediately available
funds, to the accounts of Sellers to be provided to Purchaser prior to the
Closing, an aggregate amount of $3,500,000 less the Escrowed Amount (the
“Balance”) less, if applicable, the Holdback; and on the Closing Date the
Purchaser shall purchase the Subordinated Notes from the Sellers for an
aggregate purchase price amount for such Subordinated Notes of
$500,000.
(b) The
Purchase Price Adjustment shall be determined as follows:
(i) Not
later
than 60 days following the Closing, the Purchaser shall cause to be prepared
and
shall furnish to the Seller Representative a balance sheet of the Company
(the
“Closing
Balance Sheet”)
calculated as of the close of business on January 31, 2006, prepared on a
basis
consistent with the preparation of the 9/30 Balance Sheet.
6
(ii) The
Seller Representative shall have fifteen (15) days after receipt thereby
of the
Closing Balance Sheet (the "Dispute
Period")
to
dispute any calculation or amount reflected therein (a "Dispute").
If
the Seller Representative does not give written notice of a Dispute (a "Dispute
Notice") to the Purchaser within the Dispute Period, the Closing Balance
Sheet
furnished by the Purchaser shall be deemed to have been accepted by the Sellers
in the form in which it was delivered and shall be final and binding on the
parties hereto.
(iii) In
the
event that the Seller Representative furnishes a Dispute Notice within the
Dispute Period, the Dispute Notice shall set forth, in reasonable detail,
the
basis of the Sellers’ disagreement, whereupon the Purchaser and the Seller
Representative shall, for a period of fifteen (15) days following the
Purchaser’s receipt of such Dispute Notice, attempt to resolve such Dispute and
agree in writing upon the Closing Balance Sheet. In the event that the Purchaser
and the Seller Representative are unable to resolve any such Dispute within
such
fifteen (15) day resolution period, then the national office of a nationally
recognized certified public accounting firm as may be mutually agreed upon
by
the Purchaser and the Seller Representative shall be employed as the exclusive
arbitrator (the "Arbitrator") hereunder to settle such Dispute as soon as
reasonably practicable. If the Seller Representative and the Purchaser are
unable to mutually agree upon the selection of a nationally recognized certified
public accounting firm to serve as the Arbitrator, then the parties agree
to the
appointment of a nationally recognized certified public accounting firm,
who is
not providing services to the Purchaser or the Seller at the time and has
not
done so within the prior twelve (12) months, by the American Arbitration
Association ("AAA"). The parties agree that the Arbitrator shall decide only
the
matters involved in the Dispute and not any other matters. Any arbitration
pursuant to this Section 2.2(b) shall be conducted in Chicago, Illinois in
accordance with the Commercial Arbitration Rules of the AAA then existing
for
expedited commercial disputes. The Arbitrator's determination with respect
to
any Dispute shall be final and binding on all parties and not subject to
appeal
on any ground, and judgment on the arbitration award may be enforced in any
court of competent jurisdiction. The Sellers on the one hand and the Purchaser
on the other hand shall each pay one-half of the fees and expenses of the
Arbitrator for the services of the Arbitrator. For the purposes hereof, the
term
Net Asset Value shall mean the Net Asset Value, as adjusted, if any adjustment
is required, after resolution of the Dispute by negotiation between the
Purchaser and the Seller Representative or resolution through arbitration
pursuant to this Section 2.2(b)(iii).
(iv) In
the
event that Seller Representative furnishes a Dispute Notice as set forth
above
which reflects a payment due to the Sellers, within three (3) business days
thereafter, Purchaser will pay to the Sellers fifty percent (50%) of the
amount
payable to the Sellers which is not in dispute.
(v) The
Purchase Price shall be adjusted (the “Purchase Price Adjustment”), by the
amount (which may be either a negative or positive amount) of the difference
between the Net Asset Value of the Company reflected on the Closing Balance
Sheet and reflected on the 9/30 Balance Sheet.
(vi) Subject
to the payment referred to in Section 2.2(b)(iv), the amount of the Purchase
Price Adjustment shall be paid by the Purchaser or Sellers, as applicable,
not
later than two Business Days following the termination of the Dispute Period,
by
wire transfer or bank check from the Seller or Purchaser, as applicable,
in
immediately available funds, to such bank account(s) as specified in writing
by
the Purchaser or Sellers, as applicable.
7
(vii) In
the
event of a Purchase Price Adjustment as provided herein, in addition to the
payment of an amount equal to the Purchase Price Adjustment, the party making
the payment shall also pay an amount in respect of interest on such amount,
at a
rate per annum equal to the rate of interest announced from time to time
by
JPMorgan Chase Bank, N.A., to be its prime rate or reference rate, from the
Closing Date to the payment date.
(viii) To
the
extent the parties agree on any items constituting a Purchase Price Adjustment,
Purchaser will not claim that any such adjustment also constitutes a basis
to
assert a claim of a breach of any representation, warranty or covenant under
this Agreement.
(c) Amounts
payable by the Purchaser to the Sellers pursuant to this Agreement shall
be made
to the Sellers pro rata, based on the percentages of Membership Interests
held
thereby on the Closing Date, as reflected on Schedule A hereto.
ARTICLE
III
THE
CLOSING
(a) The
sale
and transfer of the Membership Interests by Seller to Purchaser shall take
place
by facsimile exchange of signatures on documents, followed by delivery of
executed originals within three Business Days, or at the offices of Xxxxx
&
XxXxxxxx, LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx, 00000 at
10:00
AM New York time on January 31, 2006 (the “Closing Date”), unless another date
or place is agreed to by the parties hereto.
On the
Closing Date, subject to the satisfaction of the conditions set forth in
Section
7.2, the (i) Purchaser shall pay the Balance to the Sellers (less the Holdback,
if applicable) and purchase the Subordinated Notes, and (ii) the Escrow Agent
shall release the Escrowed Amount to the Sellers.
(b) At
the
Closing, subject to satisfaction of the conditions set forth in Section 7.3
and
payment to the Sellers of the Balance (less the Holdback, if applicable),
the
Sellers shall deliver to Purchaser all of the certificates representing all
of
the Membership Interests (if any) endorsed in blank or accompanied by duly
executed assignment documents or, if the same are not evidenced by certificates,
a duly executed xxxx of sale and certificate of transfer, in form and substance
acceptable to Purchaser, with respect to the Membership Interests.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF SELLERS
Sellers
hereby represent and warrant to Purchaser as follows:
8
Section
4.1 Organization
and Qualification of Spinwell.
Spinwell is a limited liability company duly formed, validly existing and
in
good standing under the laws of the State of Ohio and has the power and
authority to own and lease its assets and properties and to conduct its business
as it is now being conducted. Spinwell is duly qualified or otherwise authorized
to transact business and is in good standing in each jurisdiction in which
such
qualification is required, except to the extent that the absence of such
qualification, license or good standing would not be reasonably expected
to have
a Material Adverse Effect on Spinwell.
Section
4.2 Authorization;
Validity of Agreement.
Spinwell and each of the Sellers has full power and authority to execute
and
deliver this Agreement and to consummate the transactions hereunder. No other
company, corporate or other action on the part of Spinwell or any Seller
is
necessary to authorize the execution and delivery of this Agreement or the
consummation by it of the transactions contemplated hereby.
Section
4.3 Execution;
Validity of Agreement.
This
Agreement has been duly executed and delivered by Sellers and Spinwell and
constitutes the legal, valid and binding obligation of each Seller and Spinwell,
enforceable against the Sellers and Spinwell in accordance with its
terms.
Section
4.4 Consents
and Approvals; No Violations (Spinwell).
Except
as set forth on Schedule 4.4, the execution and delivery of this Agreement
and
the other Documents, the consummation of the transactions contemplated hereby
and thereby, and the performance of this Agreement or the other Documents
in
compliance with the terms and conditions hereof and thereof by the Sellers
and
Spinwell will not: (i) violate, conflict with or result in any breach of
the
Articles of Organization or the Operating Agreement of Spinwell, or any trust
agreement, judgment, decree, injunction, order, writ, statute, rule or
regulation applicable to Spinwell; (ii) violate, conflict with or result
in a
breach, default or termination (or give rise to any right of termination,
cancellation or acceleration) of the maturity of any payment date of any
of the
obligations of Spinwell under any law, statute, rule, regulation or any
judgment, decree, order, governmental permit, license or order applicable
to
Spinwell or any of the terms, conditions or provisions of any mortgage,
indenture, note, license, contract or other instrument or obligation related
to
Spinwell or to its ability to consummate the transactions contemplated hereby
or
thereby, except for such defaults (or rights of termination, cancellation
or
acceleration) as to which requisite waivers or consents have been obtained
in
writing and provided to Purchaser; or (iii) except as set forth on Schedule
4.4,
require the consent, waiver, authorization, approval of or filing with any
Governmental Entity or of any Person. The Sellers will give any required
notices
to third parties, and the Sellers will obtain any third party consents required
to be obtained due to the consummation of the transactions contemplated
hereby.
Section
4.5 Ownership
of the Membership Interests.
The
Sellers each owns, beneficially and of record, free and clear of any and
all
Encumbrance, and each has full power and authority to convey, free and clear
of
any and all Encumbrance, all of the Membership Interests owned thereby. The
Membership Interests being conveyed to the Purchaser pursuant to this Agreement
constitute 100% of the outstanding equity of Spinwell and, upon delivery
of and
payment for the Membership Interests as herein provided, the Purchaser will
acquire good and valid title thereto, free and clear of any Encumbrance.
The
execution and delivery of this Agreement and the other Documents, the
consummation of the transactions contemplated hereby
9
Section
4.6 Organization
and Qualification of Company; Pitt Penn Oil DISC Company .
(a) The
Company is a limited liability company duly formed, validly existing and
in good
standing under the laws of the State of Ohio and has the power and authority
to
own and lease its assets and properties and to conduct its business as it
is now
being conducted . The Company is duly qualified or otherwise authorized to
transact business and is in good standing in every jurisdiction in which
such
qualification is required, except to the extent that the absence of such
qualification, license or good standing would not be reasonably expected
to have
a Material Adverse Effect on the Company; (b) Pitt Penn Oil DISC Company
is a
Delaware corporation, duly formed, validly existing and in good standing
under
the laws of the State of Delaware, and has the power and authority to own
and
lease its assets and properties and to conduct its business as it is now
being
conducted (provided that it presently conducts no business and has minimal
assets and no liabilities.)
Section
4.7 Consents
and Approvals; No Violations (Company).
Except
as set forth on Schedule 4.7, the execution and delivery of the Documents
and
the consummation of the Transactions contemplated hereby, in compliance with
the
terms and conditions thereof will not: (i) violate, conflict with or result
in
any breach of the Articles of Organization or the Operating Agreement of
the
Company, or any trust agreement, judgment, decree, injunction, order, writ,
statute, rule or regulation applicable to the Company; (ii) violate, conflict
with or result in a breach, default or termination (or give rise to any right
of
termination, cancellation or acceleration) of the maturity of any payment
date
of any of the obligations of the Company under any law, statute, rule,
regulation or any judgment, decree, order, governmental permit, license or
order
applicable to the Company or any of the terms, conditions or provisions of
any
mortgage, indenture, note, license, contract or other instrument or obligation
related to the Company or a Seller’s ability to consummate the Transactions,
except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained
in
writing and provided to Purchaser; (iii) violate, conflict with, result in
a
breach of or constitute (with or without notice or lapse of time or both)
a
default under, give rise to a right of termination, amendment or cancellation
of, accelerate the performance required by, or result in any payment under,
any
contract or agreement, instrument or other writing of any nature whatsoever
to
or by which the Company is a party or is bound, or by which any of the assets
or
10
Section
4.8 Capitalization
of Spinwell; The Company;
Pitt
Penn Oil DISC Company
(a)
Spinwell
has authorized capital consisting solely of the Membership Interests, all
of
which are of one class. The Membership Interests being sold to the Purchaser
hereunder constitute all of the issued outstanding membership interests of
Spinwell, and all of the Membership Interests have been duly authorized and
validly issued and are fully paid and nonassessable, and such Membership
Interests have been so issued pursuant to an appropriate exemption from federal
and state securities laws. None of the Membership Interests have been issued
in
violation of any preemptive right. Spinwell has no other equity securities
or
other evidence of ownership outstanding other than the Membership Interests.
There are no outstanding subscriptions, options, warrants, rights, calls,
commitments, conversion rights, rights of exchange, plans or other agreements
of
any character providing for the purchase, issuance, transfer or sale of any
of
the Membership Interests or any equity securities of Spinwell or other evidence
of ownership in Spinwell. There are no outstanding or authorized membership
interest appreciation, phantom membership interest, or similar rights with
respect to Spinwell. There are no voting trusts, proxies or other agreements
or
understandings with respect to the Membership Interests of Spinwell.
(b) The
Company has authorized capitalization consisting solely of membership interests,
all of which are of one class, and 100% of which are owned by Spinwell, all
of
which have been duly authorized and validly issued and are fully paid and
nonassessable, and which have been so issued pursuant to an appropriate
exemption from federal and state securities laws. None of the membership
interests held by Spinwell in the Company have been issued in violation of
any
preemptive right. The Company has no other equity securities or other evidence
of ownership outstanding other than the membership interests owned by Spinwell.
There are no outstanding subscriptions, options, warrants, rights, calls,
commitments, conversion rights, rights of exchange, plans or other agreements
of
any character providing for the purchase, issuance, transfer or sale of any
membership interests or any equity securities of the Company or other evidence
of ownership in the Company. There are no outstanding or authorized membership
interest appreciation, phantom membership interest, or similar rights with
respect to the Company. There are no voting trusts, proxies or other agreements
or understandings with respect to the membership interests of the Company.
(c)
Pitt Penn Oil DISC Company has authorized capitalization of 2,500 shares
of
common stock $1.00 per share par value, 2,500 of which are issued and
outstanding and all of which are issued to and are owned by Spinwell. Such
shares have been duly authorized and validly issued and are fully paid and
nonassessable, and which have been so issued pursuant to an appropriate
exemption from federal and state securities laws. None of the shares in Pitt
Penn Oil DISC Company held by Spinwell in the Company have been issued in
violation of any preemptive right., and Pitt Penn Oil DISC Company has no
other
equity securities or other evidence of ownership outstanding other than shares
owned by Spinwell. There are no outstanding subscriptions, options, warrants,
rights, calls, commitments, conversion rights, rights of exchange, plans
or
other agreements of any character providing for the purchase, issuance, transfer
or sale of any membership interests or any equity securities of Pitt Penn
Oil
DISC Company or other evidence of ownership in Pitt Penn Oil DISC Company.
There
are no outstanding or authorized membership interest appreciation, phantom
membership interest, or similar rights with respect to Pitt Penn Oil
DISC
11
Company.
There are no voting trusts, proxies or other agreements or understandings
with
respect to the stock or other equity of Pitt Penn Oil DISC Company.
Section
4.9 Financial
Statements; Books and Records.
(a) The
Sellers have previously delivered to the Purchaser the financial statements
listed on Schedule 4.9 hereto (collectively the “Financial
Statements”),
which
include, without limitation : (i) the balance sheet (the “9/30
Balance Sheet”)
of the
Spinwell Entities for the period ending of September 30, 2005 (the “9/30
Balance Sheet Date”);
(ii)
the audited statements of income and expenses, changes in membership
capitalization and cash flow for the three fiscal years then ended (with
the
first such year being less than a full calendar year); (iii) the compiled
balance sheet of the Spinwell Entities as of September 30, 2004 and the compiled
statements of income and the expenses, changes in membership capitalization
and
cash flow for the twelve (12) months then ended. The Financial Statements
have
been prepared in accordance with GAAP, (except for, with respect to the
unaudited statements, footnotes and other disclosures which are by practice
omitted ) applied on a consistent basis and were prepared from the books
and
records of the Spinwell Entities, and books and records of the Spinwell Entitles
are complete and correct in all material respects, accurately reflect all
transactions of any of the Spinwell Entities, and have been made available
to
Purchaser for examination . The Financial Statements fairly present the
financial position of the Spinwell Entities as of the dates thereof and the
results of its operations for the periods ended on the dates thereof. Since
the
9/30 Balance Sheet Date: (i) there has been no material change in the assets,
liabilities or financial condition of the business of the Company or Spinwell
(the “Business”) other than in the ordinary course of business; and (ii) none of
the business, prospects, financial condition, operations, property or affairs
of
the Company or Spinwell have been materially adversely affected by any
occurrence or development, individually or in the aggregate, whether or not
insured against. The 9/30 Balance Sheet reflects, as of the 9/30 Balance
Sheet
Date, all liabilities of Spinwell, to the extent such items are required
to be
reflected on the 9/30 Balance Sheet under GAAP.
Section
4.10 No
Undisclosed Liabilities.
(a) Except
as
and to the extent of the amounts specifically reflected or reserved against
as
reflected on the 9/30 Balance Sheet, the Spinwell Entities have no liabilities,
except for liabilities incurred since the date thereof in the ordinary course
of
business
(b) None
of
the Spinwell Entities is bound by any agreement, or subject to any charter
or
other corporate restriction or any unusual legal requirement, which has,
or in
the future can reasonably be expected to have, a Material Adverse Effect
thereon.
Section
4.11 Real
Property.
(a) The
Company and Spinwell have good and marketable indefeasible fee simple title
of
each parcel of real property thereof , free and clear of all Encumbrances
except
for Permitted Encumbrances, such real property which is listed on Schedule
4.11
hereto. True and complete copies of (i) any deeds, title insurance policies
and
surveys relating to the real property and (ii) any documents evidencing
Encumbrances upon the real property of the Company have heretofore been made
available to Purchaser. There are no proceedings, claims, disputes or conditions
affecting any real property of the Company or Spinwell that might materially
curtail or
12
interfere
with the use of such property. Neither the whole nor any portion of the
Company’s or Spinwell’s real property is subject to any governmental decree or
order to be sold or is being condemned, expropriated or otherwise taken by
any
public authority with or without payment of compensation therefore, nor,
to the
knowledge of Sellers, has any such condemnation, expropriation or taking
been
proposed. Neither Spinwell nor the Company is a party to any lease, assignment
or similar arrangement under which such entity is a lessor, assignor or
otherwise makes available for use by any third party any portion of the such
entity’s real property. There are no outstanding options, rights of first
refusal to purchase such entity’s real property or any portion thereof or
interest thereon. Neither Spinwell nor the Company is a party to any contract
or
agreement relating to the sale of any of its real property.
(b) Neither
Spinwell nor the Company not received any notice of, or other writing referring
to, any requirements or recommendations by any insurance company that has
issued
a policy covering any part of its real property or by any board of fire
underwriters or other body exercising similar functions, requiring or
recommending any material repairs or work to be done on any part of its real
property, which repair or work has not been completed.
(c) The
Company and Spinwell has each obtained all appropriate certificates of
occupancy, licenses, easements and rights of way, including proofs of
dedication, required to use and operate the real property in the manner in
which
the real property is currently being used and operated. The Company has all
approvals, permits and licenses (including any and all environmental permits)
necessary to own or operate its real property as currently owned and operated;
and no such approvals, permits or licenses will be required, as a result
of the
transactions hereunder, to be issued after the date hereof in order to permit
the Company, following the Closing, to continue to own or operate the real
property in the same manner as heretofore, other than any such approvals,
permits or licenses that are ministerial in nature and are normally issued
in
due course upon application therefore without further action by the
applicant.
Section
4.12 Leases.
Each
lease pursuant to which the Company or Spinwell leases any real or other
tangible property used in the conduct of the business, or acts in the capacity
as a lessor (a “Lease”)
is
valid, binding and enforceable in accordance with its terms. There are no
material existing defaults thereunder by, as applicable the Company or Spinwell,
or to Sellers' Knowledge, any other Person, under any of the Leases. No event
has occurred that (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default under
any
Lease. The transactions contemplated by this Agreement do not require the
consent of any other party to any Lease, will not result in a breach of or
default under any Lease, and will not otherwise cause any Lease to cease
to be
legal, valid, binding, enforceable and in full force and effect on identical
terms following the Closing. There are no disputes with respect to any
Lease.
Section
4.13 Subsidiaries.
Spinwell’s
only direct and indirect subsidiaries are the Company and Pitt Penn Oil DISC
Company.
Section
4.14 Litigation.
Except
with respect to the matters set forth on Schedule 4.14, none of which could
result in a Material Adverse Effect on any Spinwell Entity, there is (a)
no
action, suit or proceeding, at law or in equity, which could result in a
judgment or award in excess of $5,000 or in the aggregate in excess of $50,000,
(i) pending against any of the Spinwell
13
Entities,
or to the Knowledge of Sellers, threatened against any of the Spinwell Entities
or (ii) pending or, to the Knowledge of Sellers, threatened against any present
or former officer, director or other Person for which any of the Spinwell
Entities may be liable or to which any of their respective properties, assets
or
rights are reasonably likely to be subject before any court or other
Governmental Entity, (b) no action, suit, inquiry, proceeding or investigation
by or before any court or Governmental Entity pending or, to the Knowledge
of
Sellers, threatened, against or involving any of the Spinwell Entities or
a
Seller which questions or challenges the validity of this Agreement or any
action taken or to be taken by any of the Sellers or Spinwell pursuant to
this
Agreement or in connection with the transactions hereunder, or (c) any order
of
a court or other Governmental Entity outstanding against any of the Spinwell
Entities.
Section
4.15 Title
to Property, Absence of Encumbrances, etc.
Except
for Permitted Encumbrances, each of the Spinwell Entities have good and
marketable title to all material assets, real or personal, tangible or
intangible, owned or used by them, including, without limitation, all assets
reflected in the 9/30 Balance Sheets (other than any assets sold or otherwise
disposed of in the ordinary course of business since the date of the Balance
Sheets), free and clear of all mortgages, pledges, liens, security interests
or
Encumbrances of any nature (other than liens for taxes, assessments or other
governmental charges not yet due and payable, or presently payable without
penalty or interest) including, without limitation, any governmental
restrictions on the operation of such assets, and all machinery, equipment,
tools, furniture and fixtures owned or leased by the Company or Spinwell
are in
operating condition and repair, except for reasonable wear and tear, provided
that no representation is made as to the assets located at the Company’s
“Springdale” facility, such assets which are in AS IS condition.. All real
property owned or leased by the Company or Spinwell has been constructed
and
operated in material compliance with all applicable Federal, state, county,
municipal and foreign laws, regulations, ordinances, standards and orders,
including, without limitation, all zoning and Environmental Laws, regulations,
ordinances, standards and orders. There are no outstanding enforcement actions
or notices of violation issued by any Federal, state, county, municipal or
foreign authority having jurisdiction over any such property.
Section
4.16 Inventories;
Accounts Receivable.
(a) Except
as
reflected on the 9/30 Balance Sheet as a reserve for obsolete, damaged or
slow
moving inventory, Schedule 4.16 attached hereto contains a list of the Inventory
of the Company as at the Closing Date, setting forth a brief description
of each
item including, but not limited to, the number of units, cost and extended
value. All such Inventory arose, and as of the Closing Date will have arisen,
from bona
fide
transactions in the ordinary course of business consistent with past practice.
None of the Inventory is, or at the Closing Date, will be, subject to, any
write-down or write-off. Except as set forth on Schedule 4.16 attached hereto,
the Company is not under any obligation to return any of the Inventory in
its
possession to any other Person. All of the Inventory of the Company was and
at
the Closing Date will be: (i) in good, saleable, merchantable and marketable
condition; (ii) not obsolete, damaged, soiled, infested or slow moving
(determined in a manner consistent with the Company’s past practice); and (iii)
saleable in the ordinary course of business at current applicable prices.
None
of such Inventory net of reserves does, or at the Closing, will, include
any
quantity of any product item that, based upon the sales volume for such product
items during the prior six (6) months will not be able to be sold by the
Purchaser in the ordinary course of the business consistent with the
14
Company’s
past practices and which, at the time of sale, would not be acceptable to
customers (based upon customary industry practices) and none of the Inventory
constitutes, or contains any items that are part of, any discontinued line
of
products or goods.
(b) Except
as
reflected in the reserve for doubtful accounts as set forth on the 9/30 Balance
Sheet, all accounts receivable of the Company and Spinwell as of the date
of
such 9/30 Balance Sheets and uncollected on the date hereof are collectible
in
the full aggregate face amount thereof in the ordinary course of business.
All
accounts receivable created subsequent to the date through the Closing Date
will
have been collected in full prior to the Closing Date or are collectible
thereafter in the full aggregate face amount thereof in the ordinary course
of
business, less an applicable reserve for doubtful accounts established in
a
manner consistent with the Company’s and Spinwell’s prior practices and not
greater, as a percentage of such accounts receivable, than the reserve for
doubtful accounts stated in such 9/30 Balance Sheets, or reflected as in
the
Closing Balance Sheets.
Section
4.17 Intellectual
Property.
Schedule 4.17 contains a complete and correct list of all Intellectual Property
registered, claimed or used by the Company. Except as otherwise indicated
on
Schedule 4.17, the Company is the registered and beneficial owner of all
such
Intellectual Property, free and clear of any material license, royalty, lien,
encumbrance or other interest of a third party. The Company has a right to
use
all patents, patent applications, trademarks, trade names, copyrights and
other
Intellectual Property rights, including, without limitation, inventions,
processes, designs, formulae, data bases, trade secrets, lists of suppliers
and
customers, technology and know-how necessary for the conduct of its business.
There is no pending or, to the Sellers’ knowledge, threatened claim by the
Company against any third party for infringement, misuse or misappropriation
of
any patent, trademark, trade name, copyright or other Intellectual Property
(including, without limitation, any trade secrets or know-how), owned by
the
Company or in which the Company has an interest, whether as licensee or
otherwise. There is no pending or, to the Sellers’ knowledge, threatened action,
suit or proceeding against the Company for infringement, misuse or appropriation
by it of any patent, trademark, trade name, copyright or other Intellectual
Property (including, without limitation, any trade secrets or know-how) owned
by
any third party.
Section
4.18 Employee
Remuneration.
Schedule 4.18 lists the current salaries and bonuses (together with pending
or
anticipated increases therein) of each director, officer, employee, consultant
or agent of Spinwell Entities currently paid at a rate in excess of $60,000
per
year. Except as set forth on Schedule 4.18, no officer or other key employee
of
any Spinwell Entity has indicated to Spinwell, the Company or any Seller
that
such officer or key employee will, and to the Seller’s Knowledge no such officer
or key employee has an intention to, terminate his or her employment with
such
Spinwell Entity.
Section
4.19 Union
and Employment Agreements.
Except
as disclosed in Schedule 4.19, none of the Spinwell Entities are a party
to any
collective bargaining agreement, or to any written agreement, with any of
its
officers, directors, employees, consultants or agents. Copies of any written
agreements disclosed in Schedule 4.19 have been delivered to the Purchaser.
Except as disclosed on Schedule 4.19, to the Sellers Knowledge no attempts
to
organize the employees of the Spinwell Entities have been made, nor are any
such
attempts now threatened or, to the knowledge of Sellers, being planned. The
Spinwell Entities are in material
15
compliance
with all applicable Federal, state, local and foreign laws, rules and
regulations regarding employment conditions and practices, and each has withheld
all amounts required by law or agreement to be withheld from the wages or
salaries of their employees and are not liable for any arrears of wages or
any
taxes or penalties for failure to comply with any of the foregoing. None
of the
Spinwell Entities has engaged in any unfair labor practices or has discriminated
on the basis of age, sex, race or other discrimination prohibited by law
in its
employment conditions or practices. There are no unfair labor practices or
age,
sex or race discrimination charges or complaints or other charges or complaints
alleging illegal discriminatory practices pending or threatened against any
of
the Spinwell Entities before any Federal, state, local or foreign board,
department, commission or agency. There are no existing or, to the Sellers’
knowledge, threatened labor strikes affecting any of the Spinwell Entities.
There are no pending, or to the Seller’s Knowledge, threatened union
representation questions respecting the employees of the Company or Spinwell
or
any pending arbitration proceedings. None of the Spinwell Entities are not
obligated to pay, or has granted or promised in writing to pay, to any employee,
officer, director or provider of services any monies or benefits in the event
of, or as a consequence of, the severance of their employment or relationship
with the Company or Spinwell, or a change in control of such Spinwell
Entity.
Section
4.20 Officers,
Directors and Bank Accounts.
Schedule 4.20 lists (a) the names of all managers, directors and officers
of
each of the Spinwell Entities, and (b) the name and location of each bank
or
other institution in which the same has any account or safe deposit box (the
“Bank Accounts”), the number or other identification thereof and the names of
all persons authorized to draw thereon or have access thereto.
Section
4.21 Absence
of Certain Changes.
Except
as set forth on Schedule 4.21, since the date of formation or creation thereof,
as applicable, none of the Spinwell Entities has (a) issued, sold or delivered
or agreed to issue, sell or deliver any stock, membership interests or any
options or rights to acquire any such stock or membership interests or
securities convertible into or exchangeable therefor (and as set forth on
Schedule 4.21, such agreements to so issue membership interests are no longer
in
effect), (b) incurred any obligations or liabilities, whether absolute, accrued,
contingent or other, other than obligations and liabilities incurred in the
ordinary course of business, (c) mortgaged, pledged or subjected to any material
lien, lease, security interest or other material encumbrance (other than
liens
for taxes, assessments or other governmental charges not yet due and payable,
or
presently payable without penalty or interest) any of its material assets,
real
or personal, tangible or intangible, except in the ordinary course of business,
(d) acquired or disposed of any assets or properties, or entered into any
agreement for any such acquisition or disposition, except in the ordinary
course
of business, (e) declared, made, paid or set apart any sum for any other
distribution to its member, except in the ordinary course of business, or
purchased or redeemed any of its membership interests or granted any option,
warrant or right to purchase any membership interests, (f) forgiven or canceled
any debts or claims or waived any rights of material value not previously
accrued for, (g) adopted, amended or entered into any collective bargaining,
bonus, profit sharing, compensation, stock option, pension, retirement, deferred
compensation or other plan, agreement or arrangement for the benefit of
employees, (h) granted any rights or licenses under any of its patents,
trademarks, trade names, copyrights or other industrial property rights,
(i)
suffered any material loss of, or material adverse change in its relationship
with, any material supplier or customer, and the Seller has no knowledge
that
any such supplier or customer intends or is contemplating any
16
action
which would constitute or lead to such a loss or adverse change, (j) suffered
any damage, destruction or loss (whether or not covered by insurance) which
has
a Material Adverse Effect on its business, (k) suffered any strike or other
labor trouble which has materially affected its operations, (l) terminated
or
made any substantial revision of, or engaged in any renegotiation of, any
material contract, (m) materially decreased, in the aggregate, the level
of
maintenance on, or its expenditures for maintenance of, the real property,
machinery, equipment, tools, furniture and fixtures owned or leased by it,
(n)
made any change in accounting principles or methods or in classification,
depreciation or amortization policies or rates, (o) settled any dispute
involving payment by the Company or Spinwell in excess of $25,000 or canceled,
forgiven or reduced any obligation of any person or entity in an amount in
excess of $25,000, or (p) made any loan or advances in excess of $25,000
to any
person or entity other than travel or expense advances in accordance with
its
normal policies which have been accounted for or repaid in accordance with
its
normal business practices.
Section
4.22 Environmental
Matters.
Except
as set forth in Schedule 4.22 there are not, nor to the Sellers Knowledge
is
there any basis for, (a) any proceedings or governmental investigations
concerning or against any of the Spinwell Entities, pending or threatened,
before any court or tribunal or governmental instrumentality, (b) any citation,
summons, directive, order or notice of violation of any law, decree, rule,
regulation, permit or order by or against, any of the Spinwell Entities,
(c) any
lien, or any governmental actions resulting or which are likely to result
in the
imposition of any such lien, on any of the properties owned or leased by
any of
the Spinwell Entities, (d) any claim for bodily injury, property damage,
personal injury, consequential damages or clean-up costs, or (e) any obligation
to perform or contribute to remediation or to make capital expenditures,
which
in each case is based upon or related in any way to Environmental Matters
(as
defined below). Except in compliance with applicable law, no toxic or hazardous
substances have been generated, treated, released, stored, discharged or
deposited on any of the premises of any of the Spinwell Entities, or by any
of
the Spinwell Entities, (whether directly or indirectly through a third party)
at
any other location except in material compliance with applicable laws. There
are
no underground storage tanks or friable asbestos-containing material on any
of
the premises leased by the Company or Spinwell. As used herein, the term
“Environmental Matters” refers to all maters relating to ground, air and water
pollution or discharge, solid or hazardous wastes, toxic, hazardous or polluting
substances, the transport, storage, recycling or disposal of waste (including,
without limitation, garbage, refuse, sludge and other discarded materials,
whether solid, liquid, semisolid or gaseous and whether on-site or off-site),
ground water and soil monitoring, and discharge or emission of pollutants,
contaminants or by-products (including, without limitation, dredged soil,
solid
wastes, incinerator residue, sewage, garbage, sewage sludge, chemical wastes,
biological materials, radioactive materials, heat, wrecked or discarded
equipment, industrial waste, chemicals, metals or other substances), whether
such pollution or discharge was caused by (i) the Company or Spinwell, or
(ii)
any third party arising from off-site hazardous waste transport, storage,
disposal or treatment on behalf of the Company or Spinwell.
Section
4.23 Taxes.
(a) For
U.S.
federal and state income tax purposes, the Company and Spinwell, during the
entire existence of each, have been disregarded as an entity separate from
its
owner in the case of the Company or treated as a partnership in the case
of
Spinwell, and each will
17
continue
to be so classified through the Closing Date. All Taxes due and payable or
accruable by any Spinwell Entity on or before the Closing Date (including
Taxes
attributable to any period beginning on or before and ending after this date)
have been, and will be, paid or adequately reserved in the books and records
thereof, as reflected on the 9/30 Balance Sheet. Each Spinwell Entity has
filed
all Tax Returns and reports required to be filed by it with all taxing
authorities (and will file all such returns due on or before the Closing
Date)
giving due regard to permitted extensions, and such returns are, or will
be,
true, correct and complete in all material respects. All liabilities for
Taxes
reflected in such Spinwell Entity’s books and records have been, or will be,
computed in accordance with all applicable laws and regulations and represent
adequate provision for the payment of all accrued or unpaid or deferred taxes
thereof for all periods through the Closing Date. There are no Tax liens
upon
any of property or assets of any Spinwell Entity, except real estate and
other
taxes not yet due and payable.
(b) (i)
The
Tax Returns of the Company are closed for all years ended on or prior to
the end
of the taxable year ended September 30, 2001; (ii) there are no outstanding
proposed adjustments to Tax Returns of any of the Spinwell Entities since
their
organization as limited liabilities companies or a corporation, as applicable;
(iii) all Tax Returns for taxable years ended through September 30, 2005,
have
been filed; and (iv) there are no pending audits.
(c) No
deficiency for any Tax has been asserted or assessed against the any Spinwell
Entity, and there are neither unresolved claims concerning, proceedings nor
actions pending which relate to, either the tax liability a Spinwell Entity
or
the collection or assessment of Tax for any period for which returns covering
the Spinwell Entities have been filed or were due.
(d) There
are
no outstanding agreements, extensions or waivers extending the statutory
period
of limitation applicable to any Tax Return filed by a Spinwell
Entity.
(e) Each
of
the Spinwell Entities has duly and timely withheld from all salaries, wages
and
other compensation of their respective employees and all other amounts for
which
withholding is required by law and has duly and timely paid over to the
appropriate governmental authorities all amounts required to be so withheld
and
paid over for all periods under all applicable laws.
(f) None
of
the Spinwell Entities, is not a party to or otherwise bound by any agreement
or
understanding (including without limitation an indemnity agreement) providing
for the allocation or sharing of Taxes or has any obligation or liability
under
any such agreement or understanding to which it was once a party or otherwise
bound. The Company and Spinwell are not liable for the Taxes of any other
Person
under any applicable law (other than by withholding).
(g)
In
accordance with Revenue Ruling 99-6, 1999-1 C.B. 432, the purchase of 100%
of
the Membership Interests shall be treated as a termination of Spinwell and
Pitt
Penn for Federal Income Tax purposes.
Section
4.24 Permits.
Attached hereto as Schedule 4.24, are true, correct and complete copies of
all
licenses, permits, franchises, approvals, authorizations, qualifications,
concessions or the like (“Licenses and Permits”), issued or granted by any
federal, state, local or foreign Governmental Entity or by any nongovernmental
entity to any Person or which in any way
18
relate
to
the business of any of the Spinwell Entities. The Spinwell Entities each
owns,
holds, or possesses and lawfully uses all Licenses and Permits which are
in any
manner necessary or useful to the operation of the business thereof as presently
conducted, free and clear of any and all Encumbrances. No Spinwell Entity
is in
default, nor does any Seller have any knowledge, after due inquiry, of any
claim
of default with respect to any License or Permit and, to the knowledge of
the
Sellers, no event has occurred, which with the giving of notice or passage
of
time or both, would cause or give rise to any default with respect to any
Authorization. All such Authorizations are renewable by their terms or in
the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing
fees,
and will not be adversely affected or terminated by consummation of the
transactions contemplated hereby. None of the Authorizations have been amended,
assigned, pledged or otherwise transferred. All of the Permits are validly
issued and are in full force and effect, and the relevant entity is in material
compliance therewith. No proceeding is pending or, to the Sellers’ knowledge,
threatened which seeks or may result in canceling, suspending, restricting
or
modifying any Permit. The businesses of the Company and Spinwell are being
operated in accordance with the terms and conditions of the
Permits.
Section
4.25 Software.
(a) Owned
Software.
No
Software applications currently used by the Company or Spinwell are owned
thereby.
(b) Licensed
Software.
The
Software, to the extent it is licensed from any third party licensor or
constitutes “off-the-shelf” software, is held by the Company or Spinwell
legitimately and is transferable AS IS. To the Seller’s Knowledge, all of the
Company’s and Spinwell’s computer hardware has legitimately licensed software
installed therein.
(c) No
Errors; Nonconformity.
To the
Seller’s knowledge, the Software is free from any significant defect or
programming or documentation error, operates and runs in a reasonable and
efficient business manner, conforms to the stated specifications thereof,
and,
with respect to owned Software, the applications can be recreated from their
associated source codes.
(d) No
Bugs or Viruses.
Neither
the Company nor Spinwell have knowingly altered their data, or any Software
or
supporting software which may, in turn, damage the integrity of the data,
stored
in electronic, optical, or magnetic or other form. Sellers have no knowledge
of
the existence of any bugs or viruses with respect to the Software.
(e) Pass-Through
Warranties.
The
Company and Spinwell shall to the maximum possible extent, pass through or
cause
to be passed through to the Purchaser, all manufacturer’s and supplier’s
warranties and support contracts held thereby, and the Company and Spinwell
shall, upon the Purchaser’s reasonable request, execute each and every document
that is necessary or appropriate to effectuate the Purchaser’s obtaining and
enjoying the benefit of any such pass-through warranty. Sellers make no
warranties that such are transferable.
(f) Documentation.
The
Seller and the Company have furnished the Purchaser with true and accurate
copies of all documentation (end user or otherwise) relating to the use,
maintenance and operation of the Software which are in its
possession.
19
Section
4.26 Employee
Benefit Plans.
(a) Employee
Benefit Plans.
Pitt
Penn DISC Company has no employees and is not a party to, or otherwise subject
to, any employee benefit plans. Schedule 4.26 contains a list setting forth
each
(i) written or, to the Seller’s Knowledge, oral employment or consulting
agreements to or under which the Company or Spinwell is a party or has or
may
have any actual or contingent liability or obligation, and (ii) employee
benefit
plan or arrangement sponsored, maintained or contributed to by the Company
or
Spinwell (including any terminated plan or arrangement) with respect to which
the Company or Spinwell has or may have any actual or contingent liability
or
obligation, including but not limited to employee pension benefit plans,
as
defined in Section 3(2) of the Employee Retirement Income Security Act of
1974,
as amended (“ERISA”),
multi-employer plans, as defined in Section 3(37) of ERISA, employee welfare
benefit plans, as defined in Section 3(1) of ERISA, deferred compensation
plans,
stock option plans, bonus plans, stock purchase plans, fringe benefit plans,
life, hospitalization, disability and other insurance plans, severance or
termination pay plans and policies, sick pay plans, and vacation plans or
arrangements, whether or not described in Section 3(3) of ERISA. Each and
every
such plan, program, agreement or arrangement is hereinafter referred to as
an
“Employee Benefit Plan.”
(b) Provision
of Documents.
With
respect to each Employee Benefit Plan, Sellers have delivered to Purchaser
(i)
current, accurate and complete copies of each such Employee Benefit Plan
(including all trust agreements, insurance or annuity contracts, descriptions,
agreements, participant records and any other material documents or instruments
relating thereto); (ii) copies of the most recent Internal Revenue Service
determination letter (including copies of any outstanding requests for
determination letters) with respect to each such Employee Benefit Plan, which
is
an employee pension benefit plan (as such term is defined in Section 3(2)
of
ERISA) intended to qualify under Section 401(a) of the Code; (iii) copies
of the
most recent Form 5500 annual report and accompanying schedules, the most
recent
actuarial report (to the extent applicable), and the most recent summary
plan
descriptions; and (iv) Form 5310 and any relating filings with the Pension
Benefit Guaranty Corporation (“PBGC”) with respect to the last 6 plan years for
each Employee Benefit Plan subject to Title IV of ERISA.
(c) Compliance
with Plan Terms and Law.
With
respect to each Employee Benefit Plan: (i) each has been administered in
all
material respects in compliance with its terms and with all applicable laws,
including, but not limited to, ERISA and the Code; (ii) no actions, suits,
claims or disputes are pending, or to Seller’s Knowledge threatened; (iii) no
audits, inquiries, reviews, proceedings, claims, or demands are pending with
any
governmental or regulatory agency; (iv) there are no facts which could give
rise
to any material liability in the event of any such investigation, claim,
action,
suit, audit, review, or other proceeding; (v) all premiums, contributions,
or
other payments required to have been made by law or under the terms of any
contract, agreement or Employee Benefit Plan as of the Closing Date have
been
made; (vi) all material reports, returns and similar documents required to
be
filed with any governmental agency or distributed to any plan participant
have
been duly or timely filed or distributed; and (vii) no “prohibited transaction”
has occurred within the meaning of the applicable provisions of ERISA or
the
Code.
(d) Qualified
Plans.
With
respect to each Employee Benefit Plan intended to qualify under Section 401(a)
of the Code: (i) the Internal Revenue Service has issued a
20
favorable
determination letter, true and correct copies of which have been furnished
to
Purchaser, that such plans are qualified and exempt from federal income taxes;
(ii) no such determination letter has been revoked nor has revocation been
threatened, nor has any amendment or other action or omission occurred with
respect to any such plan since the date of its most recent determination
letter
or application therefor in any respect which would adversely affect its
qualification or materially increase its costs; (iii) no such plan has been
amended in a manner that would require security to be provided in accordance
with Section 401(a)(29) of the Code; (iv) no reportable event (within the
meaning of Section 4043 of ERISA) has occurred, other than one for which
the
30-day notice requirement has been waived; (v) as of the Closing Date, the
present value of all liabilities that would be “benefit liabilities” under
Section 4001(a) of ERISA if benefits described in Section 411(d)(6)(B) of
the
Code were included will not exceed the then current fair market value of
the
assets of such plan (determined using the actuarial assumptions used for
the
most recent actuarial valuation for such plan); (vi) all contributions to,
and
payments from and with respect to such plans, which may have been required
to be
made in accordance with such plans and, when applicable, Section 302 of ERISA
or
Section 412 of the Code, have been timely made; and (vii) all such contributions
to the plans and all payments under the plans (except those to be made from
a
trust qualified under Section 401(a) of the Code) and all payments with respect
to the plans (including without limitation PBGC (as defined below) and insurance
premiums) for any period ending before the Closing Date that are not yet,
but
will be, required to be made are properly accrued and reflected on the Financial
Statements.
(e) Multi-employer
Plans.
With
respect to any Employee Benefit Plan that is a multiemployer plan as described
in Section 4001(a)(3) of ERISA (“MMPA
Plan”):
(i)
all contributions required to be made with respect to employees of the Company
have been timely paid; (ii) The Company and Spinwell have not incurred or
is
expected to incur, directly or indirectly, any withdrawal liability under
ERISA
with respect to any such plan (whether by reason of the transactions
contemplated by the Agreement or otherwise); (iii) Schedule 4.26 sets forth
(A)
the withdrawal liability under ERISA to each MMPA Plan, (B) the date as of
which
such amount was calculated, and (C) the method for determining the withdrawal
liability; and (iv) no such plan is (or is expected to be) insolvent or in
reorganization and no accumulated funding deficiency (as defined in Section
302
of ERISA and Section 412 of the Code), whether or not waived, exists or is
expected to exist with respect to any such plan.
(f) Welfare
Plans.
(i) The
Company and Spinwell are not obligated under any employee welfare benefit
plan
as described in Section 3(1) of ERISA (“Welfare
Plan”)
to
provide medical or death benefits with respect to any employee or former
employee of the Company or its predecessors after termination of employment,
except as required under Section 4980B of the Code or Part 6 of Title I of
ERISA; (ii) the Company has complied with the notice and continuation coverage
requirements of Section 49809B of the Code and Parts 6 and 7 of Title I of
ERISA, and the regulations thereunder with respect to each Welfare Plan that
is,
or was during any taxable year for which the statute of limitations on the
assessment of federal income taxes remains open, by consent or otherwise,
a
group health plan within the meaning of Section 5000(b)(1) of the Code; and
(iii) there are no reserves, assets, surplus or prepaid premiums under any
Welfare Plan which is an Employee Benefit Plan. The consummation of the
transactions contemplated by this Agreement will not entitle any individual
to
severance pay, and, will not accelerate the time of payment or vesting, or
increase the amount of compensation due to any individual.
21
(g) Controlled
Group Liability.
Neither
the Company, Spinwell, nor any entity that would be aggregated with them
under
Section 414(b), (c), (m) or (o) of the Code (a “Controlled
Group Member”):
(i)
has ever has terminated or withdrawn from an Employee Benefit Plan under
circumstances resulting (or expected to result) in liability to the Pension
Benefit Guaranty Corporation (“PBGC”),
the
fund by which the Employee Benefit Plan is funded, or any employee or
beneficiary for whose benefit the plan is or was maintained (other than routine
claims for benefits); (ii) has any assets subject to (or expected to be subject
to) a lien for unpaid contributions to any Employee Benefit Plan; (iii) has
failed to pay premiums to the PBGC when due; (iv) is subject (or expected
to be
subject) to an excise tax under Code Section 4971; (v) has engaged in any
transaction which would give rise to liability under Section 4069 or Section
4212(c) of ERISA; (vi) has violated Section 4980B of the Code or Section
601
through 608 of ERISA; (vii) ever maintained, sponsored, contributed to or
had
any obligation to contribute to any voluntary employees’ beneficiary association
described under Section 501(c)(9) of the Code or any other welfare benefit
fund
described under Section 419 or 419A of the Code; or (viii) has any actual
or
contingent liability or obligation for, under or with respect to any Employee
Benefit Plan or arrangement sponsored, maintained or contributed to by a
Controlled Group Member.
(h) Other
Liabilities.
(i) The
Company and Spinwell are not and shall not be obligated to pay separation,
severance, termination or similar benefits as a result of any transaction
contemplated by this Agreement or as a result of a “change of control” (as such
term is defined in Section 280G of the Code); (ii) all required or discretionary
(in accordance with historical practices) payments, premiums, contributions,
reimbursements, or accruals for all periods ending prior to or as of the
Closing
Date shall have been made or properly accrued on the Financial Statements
prior
to the Closing Date; and (iii) none of the Employee Benefit Plans has any
unfunded actual or contingent liabilities or obligations which are not reflected
on the Financial Statements.
Section
4.27 Absence
of Certain Payments.
Neither
the Sellers, the Company, Spinwell nor, to the best of the Sellers’ knowledge,
any officers, directors, employees, agents, representatives, or independent
contractors of them has made, or arranged for the making of, any unlawful
payment to any official, officer or employee of any Federal, state, county,
municipal, foreign or other governmental or regulatory body or authority
of any
self-regulatory body or authority, or made any payment to any customer or
supplier of the Company or Spinwell, or any officer, director, partner, employee
or agent of any customer or supplier, for the unlawful sharing of fees or
to any
such customer or supplier or any such officer, director, partner, employee
or
agent for the unlawful rebating of charges, or engaged in any other unlawful
reciprocal practice, or made any other unlawful payment or given any other
unlawful consideration to any such customer or supplier or any such officer,
director, partner, employee or agent, in respect of the Company or
Spinwell.
Section
4.28 Customers
and Suppliers.
Schedule 4.28 attached hereto contains a list of each of the ten (10) largest
customers and suppliers (measured by dollar volume of purchases or sales,
as
applicable) of the Company for calendar year 2004 and for the nine (9) months
ended September 30, 2005. Except as set forth on such Schedule 4.28, neither
a
Seller, Spinwell, nor the Company is engaged in any material (i.e. regarding
amounts in excess of $5,000 or, in the aggregate, in excess of $25,000) dispute
with any customer, supplier or manufacturer with respect to the assets or
the
business of the Company or Spinwell, nor does any
22
Seller
have knowledge of any matter or fact which could reasonably be expected to
result in a material dispute with any customer, supplier or manufacturer
with
respect to the Company or Spinwell or the assets or the business thereof.
To the
knowledge of the Sellers, after due inquiry, no customer, supplier or
manufacturer is considering termination, non-renewal or any modification
of its
arrangements with the Company or Spinwell, prior to the Closing or the Purchaser
following the Closing other than in the ordinary course of
business.
Section
4.29 Insurance
Policies.
Schedule 4.29 contains a true and correct list of all insurance coverage
held by
the Company or Spinwell concerning its business and properties, including
the
names of insurers, policy limits and deductibles. The types and levels of
such
insurance coverages are reasonable and customary for businesses of comparable
type, size and location.
Section
4.30 No
Brokers.
Except
for the contract with Chartwell Group, Inc., neither a Seller, the Company
nor
Spinwell or any of its officers, directors, employees or stockholders has
employed any broker or finder, nor incurred any liability for any investment
banking fees, brokerage fees, commissions or finder’s fees in connection with
the transactions contemplated by this Agreement.
Section
4.31 Compliance
with Laws.
The
Company and Spinwell are not in default or violation of any term, condition
of
provision of (i) its Articles of Organization, Operating Agreement or equivalent
organizational documents, or (ii) any laws, permits or licenses or other
governmental authorization or approval applicable to the Company or Spinwell
in
respect of the business, excluding any defaults or violations which would
not be
reasonably expected to have a Material Adverse Effect.
Section
4.32 Contracts;
Affiliate Transactions.
(a)
All
contracts and agreements necessary and useful to the business of the Company
and
Spinwell are in full force and effect in all material respects. The Company
and
Spinwell are not in material default thereunder and no event has occurred
which,
whether with notice, lapse or time or otherwise, would constitute a default
thereunder. Schedule 4.32 (a) contains a complete and correct list of all
agreements, contracts, arrangements, understandings, transfers of assets
or
liabilities or other commitments or transactions to which the Company or
Spinwell is a party or to which a Seller is a party which otherwise relate
to
the Company or Spinwell and/or the business thereof which either (x) involves
performance of services or delivery of goods or materials by the Company
or
Spinwell of an amount or value in excess of $50,000; (y) involves performance
of
services or delivery of goods or materials to the Company or Spinwell of
an
amount or value in excess of $50,000 or (x) that was not entered into in
the
ordinary course of business and that involves expenditures or receipts of
the
Company or Spinwell in excess of $50,000;
(b) Schedule
4.32(b) contains a complete and correct list of all agreements, contracts,
arrangements, understandings, transfers of assets or liabilities or other
commitments or transactions, whether or not entered into in the ordinary
course
of business, to or by the Company or Spinwell, on the one hand, and a Seller,
on
the other hand, are or have been a party or otherwise bound or affected,
and
that are currently pending or in effect or involve
23
continuing
liabilities and obligations except as disclosed in Schedule 4.32(b), each
agreement, contract, arrangement, understanding, transfer of assets or
liabilities or other commitment or transaction set forth or required to be
set
forth in Schedule 4.32(b)was on terms and conditions as favorable to the
Company
or Spinwell as would have been obtainable by it at the time in a comparable
arm’s-length transaction with a Person other than a Seller.
(c) Except
as
set forth on Schedule 4.32(b), no member, officer, director or employee of
any
member of the Company or Spinwell, or any family member, relative or affiliate
of any such officer, director or employee: (i) owns, directly or indirectly,
and
whether on an individual, joint or other basis, any interest in (A) any property
or asset, real or personal, tangible or intangible, used in or held for use
in
connection with or pertaining to the business, or (B) any Person, that is
a
supplier, customer or competitor of the Company; (ii) serves as an officer,
director or employee of any Person that is a supplier, customer or competitor
of
the Company; or (iii) has received any loans from or is otherwise a debtor
of,
or made any loans to or is otherwise a creditor of, the Company or
Spinwell.
Section
4.33 Products.
(a) The
Sellers have delivered to the Purchaser complete and correct copies of the
standard terms and conditions of sale or lease for each of the products or
services of the Company (containing applicable guaranty, warranty and indemnity
provisions). Except as required by law and as provided by the Company, no
product manufactured, sold, leased or delivered by, or service rendered by
or on
behalf of, the Company is subject to any guaranty, warranty or other indemnity,
express or implied, beyond such standard terms and conditions.
(b) the
Company has no liability or obligation of any nature (whether known or unknown,
accrued, absolute, contingent or otherwise, and whether due or to become
due),
whether based on strict liability, negligence, breach of warranty (express
or
implied), breach of contract or otherwise, in respect of any product, component
or other item manufactured, sold, designed or produced prior to the Closing
by,
or service rendered prior to the Closing by or on behalf of, the Company
or any
predecessor thereto, that (i) is not fully and adequately covered by policies
of
insurance or by indemnity, contribution, cost sharing or similar agreements
or
arrangement by or with other Persons, (ii) is not otherwise fully and adequately
reserved against as reflected on the 9/30 Balance Sheet and (iii) will
not
otherwise be fully and adequately reserved against as reflected in the Closing
Balance Sheet.
Section
4.34 Maintenance
and Disclosure of Books and Records.
The
books of account, record of membership interest and other records of or with
respect to the Company and Spinwell and the equity thereof, including without
limitation the Operating Agreement of the Company and Spinwell, together
with
any and all other contracts, agreements and instruments of or relating to
the
Company which have been made available to the Purchaser, are and have been
delivered or otherwise made available to the Purchaser in, true, complete
and
correct in form, and the books and records of the Company and Spinwell have
been
maintained in accordance with sound business practices, including the
maintenance of an adequate system of internal controls. The minute books
of the
Company and Spinwell contains accurate and complete records of all meetings
held
of, and all company action taken by Spinwell, as sole member of the
24
Company
and by the Sellers, as members of Spinwell and, if applicable, the management
committee of the Company and Spinwell.
Section
4.35 Disclosure.
This
Agreement, the Schedules hereto and the Financial Statements do not contain
any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements contained therein not false or misleading. The Seller’s
representations and warranties herein shall not be affected by any information
which may come to the attention of the Purchaser during the course of any
investigation heretofore or hereafter made.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
Purchaser
represents and warrants to Seller that all of the statements contained in
this
Article IV are true and correct as of the date hereof or, if made as of a
specified date, as of such date, and will be true and correct as of the date
of
the Closing (as though made then and as though the date of the Closing were
substituted for the date of this Agreement throughout this Article IV). For
purposes of the representations and warranties of Purchaser contained herein,
disclosure of any facts or circumstances shall be deemed to be an adequate
response and disclosure of such facts or circumstances with respect to all
representations or warranties by Seller calling for disclosure of such
information, if such disclosure identifies the exception with particularity
and
describes the relevant facts or circumstances in detail.:
Section
5.1 Organization.
Purchaser (a) is a corporation duly organized, validly existing and in good
standing under the laws of Nevada.
Purchaser has the full corporate power and authority to execute and deliver
this
Agreement and to consummate the transactions contemplated hereunder. No other
corporate action on the part of Purchaser is necessary to authorize the
execution and delivery by Purchaser of this Agreement or the consummation
of the
Transactions. This Agreement has been duly executed and delivered by Purchaser
and, assuming due and valid authorization, execution and delivery hereof
by
Sellers and Spinwell, is a valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms.
Section
5.2 Consents
and Approvals; No Violations.
None of
the execution, delivery or performance of this Agreement by Purchaser or
the
consummation by Purchaser of any of the transactions will (a) conflict with
or
result in any breach of any provision of the Articles of Formation (or
equivalent organizational document) of Purchaser, (b) require any consent,
approval or notice, or result in a violation or breach of, or constitute
(with
or without due notice or lapse of time or both) a default (or give rise to
any
right of termination, cancellation, acceleration or vesting or any increased
rights or decreased obligations) under any of the terms, conditions or
provisions of any Contract to which Purchaser is a party or by which Purchaser,
or any of its respective properties, assets or rights are bound, (c) such
violations, breaches or defaults which would not be reasonably expected to,
individually or in the aggregate, have a material adverse effect on Purchaser’s
ability to consummate the Transactions hereunder or which would reasonably
be
expected to have a Material Adverse Effect, (d) violate or require any consent,
approval, notice, filing or registration under any provision of any Law
applicable to
25
Purchaser;
or (e) result in the imposition or creation of an encumbrance upon or with
respect to the Membership Interests.
Section
5.3 Purchase
Entirely for Own Account.
The
Membership Interests will be acquired for investment for Purchaser’s own account
and not with a view to the distribution of any part thereof in violation
of the
Securities Act.
Section
5.4 Litigation.
There
is no claim, action, suit, proceeding or, to the knowledge of Purchaser,
governmental investigation pending or, to the knowledge of Purchaser, threatened
against Purchaser by or before any court or Governmental Entity that (a)
questions or challenges the validity of this Agreement or any action taken
or to
be taken by Purchaser pursuant to this Agreement or in connection with the
Transactions, or (b) individually or in the aggregate, would have or would
reasonably be expected to impede the ability of Purchaser to effect the
Transactions.
Section
5.5 Brokers
or Finders.
No
agent, Person or firm acting on behalf of Purchaser is, or will be, entitled
to
any commission or broker's or finder's fees from Purchaser or from any Person
controlling, controlled by or under common control with Purchaser in connection
with the transactions contemplated herein, for which the Sellers will have
any
obligation.
ARTICLE
VI
COVENANTS
AND
AGREEMENTS
Section
6.1 Interim
Operations of the Company.
Except
as expressly provided in this Agreement, during the period from the date
of this
Agreement to the Closing (the “Interim Period”):
(a) Sellers
shall (i) cause the business of the Spinwell Entities to be conducted only
in
the ordinary course consistent with past practice (including, without
limitation, paying or otherwise satisfying obligations and liabilities on
a
timely basis as they become due) (ii) use, and cause the Company to use,
commercially reasonable efforts to preserve the present business organizations
and relationships of the Company (including, without limitation, with
distributors,
customers, vendors, suppliers, manufacturers, employees and others) with
respect
to its business, and to maintain all of the goodwill associated therewith;
(iii)
use, and cause Spinwell Entities to use, commercially reasonable efforts
to keep
available the services of the present employees of the Spinwell Entities
who are
actively involved in the business thereof ; (iv) to preserve the material
rights
and franchises of the Spinwell Entities; (v) not take any action that could
reasonably be expected to or would have an adverse effect on the business
of any
of the Spinwell Entities or adversely affect the ability of the Sellers to
consummate the Transactions
(b) Sellers
shall deliver to the Purchaser a copy of each written notice or communication
from any Governmental Entity relating to a Spinwell Entity;
(c) Sellers
will not cause or permit a Spinwell Entity to: (i) to amend its Certificate
of
Incorporation, Articles of Formation, Bylaws or Operating Agreement; (ii)
issue
any Membership Interests or stock; (iii) or issue or create any warrants,
obligations, subscriptions,
26
options,
convertible securities, or other commitments under which any additional
Membership Interests or stock, as applicable, or any other equity interest
might
be directly or indirectly authorized, issued or transferred from
treasury;
(d) Sellers
shall not cause or permit any of the Spinwell Entities to: (i) incur or assume
any long-term or short-term debt or issue any debt securities except for
borrowing under existing lines of credit in the ordinary course of business
consistent with past practice; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for
the obligations of any other Person in an amount material to the Business
of the
Spinwell Entities taken individually; (iii) make any loans, advances or capital
contributions to, or investments in, any other Person; or (iv) mortgage or
pledge any assets that, individually or in the aggregate, are material to
the
Company or Spinwell or create any material encumbrance of any kind with respect
to any such assets;
(e) Sellers
shall not cause or permit any of the Spinwell Entities to: (i) adopt any
new
Employee Benefit Plan or amend any existing Employee Benefit Plan except
as may
be required by applicable Law or make any material increase in the compensation
of employees of the Business payable or to become payable to any such employees
or enter into or amend any employment, severance, compensation, termination
or
similar agreement with any of its present or future officers or directors,
except for the payment of cash bonuses to employees pursuant to and consistent
with existing employee arrangements, to the extent that doing so would be
reasonably likely to adversely affect the Business;
(f) Sellers
shall not voluntarily permit any insurance policy relating to the Business
naming any of the Spinwell Entities as a beneficiary or a loss payable payee
to
be cancelled or terminated prior to the Closing Date without notice to
Purchaser;
(g) Sellers
shall not take, or agree to or commit to take, any action that would result
in
any of the conditions to the Closing set forth in Article VI not being satisfied
or that would materially impair the ability of Sellers to consummate the
Closing
in accordance with the terms hereof or materially delay such consummation;
(h) Sellers
will cause the Company and Spinwell to keep its business and properties
substantially intact, including its present operations, physical facilities,
working conditions and insurance policies;
(i) Sellers
shall not cause or permit or Spinwell to enter into any contract or agreement
for the sale or transfer of any real property held by the Company without
the
prior review by the Purchaser thereof and the consent by the Purchaser to
the
terms and provisions thereof, and, subject to the foregoing, if the Company
or
Spinwell shall so enter into and consummate the sale thereof, the Sellers
shall
cause the Company or Spinwell to retain the net proceeds of such sale or
other
transfer;
(j) Sellers
will give prompt written notice to Purchaser of any material adverse development
causing a breach of any of the representations and warranties of a Seller
set
forth in this Agreement.
27
Section
6.2 Efforts
and Actions to Cause Closing to Occur.
Prior
to the Closing, upon the terms and subject to the conditions of this Agreement,
Purchaser and Sellers shall use their respective reasonable best efforts
to
take, or cause to be taken, all actions, and to do, or cause to be done and
cooperate with each other in order to do, all things necessary, proper or
advisable (subject to any applicable Laws) to consummate the Closing as promptly
as practicable, including the preparation and filing of all forms, registrations
and notices required to be filed to consummate the Closing and the other
Transactions and the taking of such actions as are necessary to obtain any
requisite approvals, authorizations, consents, orders, licenses, permits,
qualifications, exemptions or waivers by any third party or Governmental
Entity.
In addition, no party hereto shall take any action after the date hereof
that
could reasonably be expected to materially delay the obtaining of, or result
in
not obtaining, any permission, approval or consent from any Governmental
Entity
or other Person required to be obtained prior to Closing.
Section
6.3 Maintenance
of Books and Records.
Except
as may be required by Law, Sellers shall preserve, until at least the third
anniversary of the Closing Date, all pre-Closing Date records relating to
the
Spinwell Entities which are not retained on the Company business premises
after
Closing. After the Closing Date and up until at least the third anniversary
of
the Closing Date, upon any reasonable request the Purchaser party or its
representatives, Sellers shall (a) provide to the Purchaser or its
representatives reasonable access to such records during normal business
hours
and (b) permit the Purchaser or its representatives to make copies of such
records, in each case at no cost to the requesting party or its representatives
(other than for reasonable out-of-pocket expenses). Such records may be sought
under this Section for any reasonable purpose, including to the extent
reasonably required in connection with the audit, accounting, litigation,
federal securities disclosure or other similar needs of the Purchaser.
Section
6.4 Confidentiality;
Noncompetition; Nonsolicitation.
(a) After
the
Closing Date, neither the Sellers nor (where a Seller is not an individual)
any
Affiliate thereof, shall, directly or indirectly, under any circumstance:
(i)
disclose to any other Person any Confidential or Proprietary Information;
(ii)
act or fail to act so as to impair the confidential or proprietary nature
of any
such Confidential or Proprietary Information or the benefits thereof to the
Purchaser; (iii) use any such Confidential or Proprietary Information or
trade
secret in any manner, other than for the sole and exclusive benefit of the
Purchaser and only after obtaining the Purchaser's prior written consent
to such
use; or (iv) offer or agree to, or cause or assist in the inception or
continuation of, any such disclosure, impairment or use of any such Confidential
or Proprietary Information or trade secret. All Confidential and Proprietary
Information is and shall remain the sole and exclusive property of the
Purchaser. Each of the Sellers hereby represents and warrants that as of
the
Closing Date the Purchaser shall have been furnished all documents, instruments
and materials (regardless of the medium in which stored) which constitute
or
contain or are based upon any Confidential and Proprietary Information, without
the Sellers retaining any copies, notes or excerpts thereof.
(b) No
Seller
nor (where Seller is not an individual) any Affiliate thereof shall (i) at
any
time during the five (5) years following the Closing Date directly or
indirectly, engage or be interested (whether as owner, partner, member, lender,
shareholder, consultant,
28
employee.
agent, supplier, distributor or otherwise) in any business, activity or
enterprise which competes in the automotive aftermarket fluid product packaging
business; or (ii) directly or indirectly, induce or influence any customer,
supplier, distributor, consultant or any other Person that had a business
relationship with the Company prior to the Closing to discontinue, modify
or
reduce the extent of its relationship with the Purchaser or to terminate
said
relationship. For purposes of this Agreement, neither the Sellers nor any
of
their members or other affiliates shall be deemed to be directly or indirectly
interested in a business if their interest, individually or in the aggregate
with each other, is limited solely to the ownership of not more than two
percent
(2%) on an individual basis or five percent (5%) in the aggregate (taking
into
account all of the Sellers, all of their members/shareholders and their
respective affiliates) of the securities of any class of corporation whose
shares are listed or admitted to trade on a national securities exchange
or are
quoted on Nasdaq or a similar means if Nasdaq is no longer providing such
information.
(c) Except
for the individuals listed on Schedule 6.4(c), no Seller nor (where Seller
is
not an individual) any Affiliate thereof shall at any time during the three
(3)
year period following the Closing Date, (i) directly or indirectly, employ
or
solicit to employ or engage for any other Person, any employee of the Purchaser
or a Spinwell Entity who was an employee thereof within two (2) years of
the
date of such employment, solicitation or engagement or who was or is an employee
of the Purchaser or a Spinwell Entity, or solicit any such individual to
leave
such individual's employment or join the employ of another.
(d) The
parties agree that nothing in this Agreement shall be construed to limit
or
negate the common law of torts or trade secrets where it provides the Purchaser
with any broader, further or other remedy or protection than those provided
in
this Section 6.4.
(e) Each
of
the Sellers acknowledges, individually and on behalf of its Affiliates, where
such Seller is not an individual, that because the breach or attempted or
threatened breach of any of the provisions of the Section 6.4 will result
in
immediate and irreparable injury to the Purchaser for which the Purchaser
will
not have an adequate remedy at law and for which monetary damages are not
readily calculable, the Purchaser shall be entitled to obtain injunctive
or
other equitable relief restraining and prohibiting such breach or threatened
breach, including, without limitation, a temporary and permanent injunction,
enjoining any such breach or attempted or threatened breach (without being
required to post a bond or other security or to show any actual damages).
In
addition, in the event of a breach of any such provision or of any other
provisions contained herein, the Purchaser shall not be limited in its recovery
to actual or other damages. The right to an injunction and other equitable
relief shall be in addition to, and cumulative
with, all other rights and remedies available to the Purchaser at law, in
equity
or otherwise.
(f) The
provisions of this Section 6.4 are in addition to and independent of any
agreements or covenants contained in any employment, consulting
or other agreement.
(g) Each
of
the Sellers acknowledges individually and on behalf of its Affiliates, where
such Seller is not an individual, that, without the provisions of this Section
6.4, the Purchaser would not enter into this Agreement or consummate the
Transactions. Accordingly, the Sellers shall be bound by the provisions hereof
to the maximum extent permitted by applicable law, it being the intent and
spirit of the parties that such provisions shall be enforced to the fullest
extent permitted by applicable law. Notwithstanding anything to the contrary
set
forth herein, if
29
any
provision of this Section 6.4 hereof shall be held by any court of competent
jurisdiction or another competent authority to be illegal, invalid or
unenforceable, such provision shall be reformed so that it will be construed
and
enforced as if it had been more narrowly drawn so as not to be illegal, invalid
or unenforceable, and such illegality, invalidity or unenforceability shall
have
no effect upon and shall not impair the enforceability of any other provision
of
this Agreement.
Section
6.5 Termination
For Tax Purposes.
In
accordance with Revenue Ruling 99-6, 1999-1 C.B. 432, the purchase of 100%
of
the Membership Interests shall be treated as a termination of Spinwell and
Pitt
Penn for Federal Income Tax purposes.
Section
6.6 Tax
Returns After Closing Date.
Items
to be taken into account for the tax returns of any Spinwell Entity for the
short period ending on the Closing Date will be determined in accordance
with
the "closing of the books" method described in Treasury Regulation
§1.1502-76(b)(2)(i)(or similar provision of state, local or foreign law) and
in
accordance with the accounting methods and other practices that are consistent
with those used by the relevant Spinwell Entity in its prior Tax
Return. Sellers (i) will prepare and file (x) any such tax returns
consistent with such allocations and (y) any tax return of any Spinwell
Entity for any period ending before the Closing Date that has not been filed
by
the Closing Date and (y) will pay any Taxes with respect to such returns
unless
such Taxes were properly reflected or accrued on the Closing Balance
Sheets. Notwithstanding the foregoing sentence, Purchaser, and not
Sellers, shall prepare and file the Tax Returns of Pitt Penn DISC
Company for the periods ending on or before the Closing Date that have
not been filed by the Closing Date and Sellers shall pay any Taxes owing
on such
Tax Returns unless such Taxes were properly reflected or accrued on the Closing
Balance Sheet. Sellers will prepare and file their returns for the
taxable year that includes the Closing Date by including therein
such Seller's distributive share of Spinwell's income, expenses and other
items as described in Section 702 of the Code, through the Closing Date as
determined in the first sentence of this Section 6.6.
ARTICLE
VII
CONDITIONS
Section
7.1 Conditions
to Each Party's Obligation to Effect the Closing.
The
respective obligation of each party to effect the Closing shall be subject
to
the satisfaction or waiver at or prior to the Closing Date of each of the
following conditions:
(a) Consents.
All
consents of Governmental Entities and other Persons that are required to
be
obtained in connection with the execution, delivery and performance of this
Agreement, and the other Documents shall have been obtained, including, without
limitation, the consent of (i) the Board of Directors and, if required, the
shareholders of the Purchaser and; (ii) to the extent so required, third
party
lenders of Spinwell or the Company.
Section
7.2 Conditions
to Obligations of Purchaser to Effect the Closing.
The
obligations of Purchaser to consummate the Closing shall be subject to the
satisfaction, or waiver by Purchaser, on or prior to the Closing Date, of
each
of the following conditions:
30
(a) The
representations and warranties of Sellers contained in this Agreement and
in any
certificate or instrument delivered by Sellers pursuant hereto (i) shall
be true
and correct in all respects as of the date hereof and (ii) shall be true
and
correct as of the Closing Date as if made as of such date (other than
representations and warranties that expressly speak as of a specific date
or
time, which need only be true and correct as of such date or time), with
only
such exceptions in the case of clause (ii) as would not, individually or
in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(b) On
the
Closing Date, each of the Sellers shall have sold to the Purchaser the Cognovit
Promissory Note, dated May 24, 2005, in the original principal amount of
$125,000, made by Spinwell in favor of the relevant Seller (each such promissory
note a “Subordinated Note” and collectively, the “Subordinated Notes”), for a
purchase price, payable by the Purchaser to each Seller of $125,000 and in
the
aggregate of $500,000.
(c) Sellers
shall have performed in all material respects the obligations and covenants
of
Sellers to be performed or complied with under this Agreement.
(d) No
event,
occurrence, change, development or effect shall have occurred or come to
exist
since September 30, 2005 that, individually or in the aggregate, has resulted
in
(or would reasonably be expected to have or result in) a Material Adverse
Effect;
(e) all
corporate or other proceedings of any Seller not an individual in connection
with the transactions contemplated by this Agreement and the other agreements
contemplated hereby shall be reasonably satisfactory to Purchaser and its
counsel, and Purchaser and its counsel shall have received copies of all
documents and instruments incident thereto,
as may
be reasonably requested;
(f) No
action, suit or proceeding, by or before any court or any governmental body
or
authority, against any Spinwell Entity, or pertaining to the Transactions
or
their consummation, shall be pending or threatened on the Closing Date, which
action, suit or proceeding would, if determined adversely, have a Material
Adverse Effect on the Company, Spinwell, or impair the ability of the Sellers
to
transfer and deliver to the Purchaser all of the Membership Interests free
and
clear of all Encumbrances.
(g) The
Purchaser shall have been delivered, at Closing:
(i) a
one
year surety bond (the “Surety Bond”), payable to and drawable by the Purchaser
upon the occurrence of an Indemnification Obligation hereunder, and otherwise
in
all respects acceptable to the Purchaser, in the amount of $300,000, in the
event that the Sellers elect not to so deliver such Surety Bond, the Purchaser
shall not pay to the Sellers at Closing, but shall instead withhold from
the
Balance, an amount equal to $300,000 (the “Holdback”), until the one year
anniversary of the Closing Date, at which time, subject to any Purchase Price
Adjustment and to any Indemnification Obligations or pending indemnification
claims, the Holdback shall be paid to the Sellers.
(ii) an
opinion of counsel to the Spinwell Entities and the Sellers, dated the Closing
Date, in form and substance reasonably acceptable to the Purchaser;
31
(iii) a
certificate, issued by the Secretary of State of the State of Ohio, evidencing
the good standing of the Company and Spinwell in such jurisdiction and in
each
other jurisdiction where the same is authorized to do business, as of a date
not
more than three (3) calendar days prior to the Closing Date and a certificate,
issued by the Secretary of State of the State of Delaware and in each other
jurisdiction where the same is authorized to do business, evidencing the
good
standing of Pitt Penn DISC Company;
(iv) appropriate
documentation pursuant to which each of the signatories on the Bank Accounts,
as
reflected on Schedule 4.20, shall be removed as a signatory thereof;
(v) a
copy of
the originally executed copy of the Operating Agreement of the Company and
Spinwell, and the written resignation by the Sellers as to the Spinwell
Operating Agreement;
(vi) the
corporate minute book and stock book of Pitt Penn DISC Company, and the stock
certificate(s) issued to Spinwell thereby;
(vii) a
written
resignation of each manager, board member (if applicable), and officer of
each
of the Spinwell Entities, such resignations to be effective as of the Closing
Date;
(viii) the
certificates evidencing the Membership Interests, if any, or in lieu thereof,
a
duly executed certificate of assignment pursuant to which the Membership
Interests shall be transferred to the Purchaser; and
(ix) such
other instruments, documents and agreements as shall be reasonably requested
by
the Purchaser.
Section
7.3 Conditions
to Obligations of Sellers to Effect the Closing.
The
obligations of Sellers to consummate the Closing shall be subject to the
satisfaction, or waiver by the Seller Representative, on or prior to the
Closing
Date, of each of the following conditions:
(a) The
representations and warranties of Purchaser contained in this Agreement and
in
any certificate or instrument delivered by Purchaser pursuant hereto (i)
shall
be true and correct in all respects as of the date hereof and (ii) shall
be true
and correct as of the Closing Date as if made as of such date (other than
representations and warranties that expressly speak as of a specific date
or
time, which need only be true and correct as of such date or time), with
only
such exceptions in the case of clause (ii) as would not, individually or
in the
aggregate, reasonably be expected to have a Purchaser Material Adverse
Effect;
(b) Purchaser
shall have performed in all material respects all of the covenants and
obligations hereunder required to be performed by Purchaser, at or prior
to the
Closing Date;
(c) No
event,
occurrence, change, development or effect shall have occurred or come to
exist
since the date of this Agreement that, individually or in the aggregate,
has
32
had
or
resulted in (or would reasonably be expected to have or result in) a Purchaser
Material Adverse Effect;
(d) All
corporate or other proceedings of Purchaser in connection with the transactions
contemplated by this Agreement shall be reasonably satisfactory to Seller
and
its counsel, and Seller and its counsel shall have received copies of all
documents and instruments incident thereto, as may be reasonably requested;
and
(e) On
the
Closing Date, the Purchaser shall have acquired from each Seller the
Subordinated Note made in favor thereof, for a purchase price of $125,000
per
Subordinated Note.
ARTICLE
VIII
TERMINATION
Section
8.1 Termination.
This
Agreement may be terminated at any time prior to the Closing Date:
(a) By
the
mutual written consent of Purchaser and Seller Representative;
(b) By
Purchaser or Seller Representative on or after the date that is ten (10)
Business Days following January 31, 2006, if the Closing shall not have
theretofore occurred, provided that the party seeking to terminate this
Agreement shall not be the party which caused such breach of a representation,
warranty or covenant in respect of which the Closing so failed to occur;
(c) By
Purchaser or Seller Representative if any Governmental Entity shall have
issued
an order, decree or ruling or taken any other action (which order, decree,
ruling or other action the parties hereto shall use all reasonable efforts
to
lift) that permanently restrains, enjoins or otherwise prohibits the
consummation of the Transactions and such order, decree, ruling or other
action
shall have become final and non-appealable;
(d) By
Purchaser, (i) if any Seller shall have breached in any material respect
any of
its representations, warranties, covenants or other agreements contained
in this
Agreement, which breach cannot be or has not been cured within thirty (30)
days
after the giving of written notice by Purchaser to Seller Representative
specifying such breach, or (ii) an event, occurrence, change, development
or
effect shall have occurred or come to exist since September 30, 2005 that,
individually or in the aggregate, has had or resulted in (or would reasonably
be
expected to have or result in) a Material Adverse Effect;
(e) By
Seller
Representative, if Purchaser shall have breached in any material respect
any of
its representations, warranties, covenants or other agreements contained
in this
Agreement, which breach cannot be or has not been cured within thirty (30)
days
after the giving of written notice by Seller Representative to Purchaser
specifying such breach; or
33
(f) If
any
event, fact or condition shall occur or exist that shall have made it impossible
to satisfy a condition precedent to the terminating party’s obligations to
consummate the Transactions contemplated by this Agreement, unless the
occurrence or existence of such event, fact or condition shall be due to
the
failure of the terminating party to perform or comply with any of the
agreements, covenants or conditions hereof to be performed or complied with
by
such party prior to the Closing.
Section
8.2 Effect
of Termination.
In the
event of the termination of this Agreement by any party hereto pursuant to
the
terms of this Agreement:
(a) Written
notice thereof shall forthwith be given to the other party or parties specifying
the provision hereof pursuant to which such termination is made;
(b) If
such
termination is (each of the following, an “Excluded Termination”:
(i)
by
the Purchaser pursuant to Section 8.1 (c) or 8.1 (d) above; or
(ii)
by
the Purchaser due to any (x) fraud, (y) willful breach or (z) failure to
satisfy
any condition to Closing on the part of any Seller or Spinwell Entity subject
to
the expiration of the relevant cure period, or
(iii)
by
the Sellers other than as a result of the Purchaser’s failure to satisfy the
conditions to Closing on the part of the Purchaser, subject to the expiration
of
the relevant cure period or passage of time, or
(iv)
upon
the mutual consent of the Purchaser and the Sellers pursuant to Section 8.1
(a)
or by either the Sellers or the Purchaser pursuant to Section 8.1(f),
the
Escrowed Amount, together with accrued interest thereon, if any, shall be
remitted to the Purchaser;
(c) If
such
termination is otherwise by Purchaser or Seller (i.e., is not an Excluded
Termination), the Escrowed Amount, together with accrued interest thereon,
if
any, shall be paid to and retained by Sellers upon such termination, such
payment which shall constitute the sole remedy to which the Sellers shall
be
entitled.
(d) Except
as
set forth in 8.2(c), there shall be no liability or obligation thereafter
on the
part of Purchaser or Seller as a result of any termination thereby, provided
that, if Purchaser so terminates pursuant to the terms hereof as a result
of any
fraud or willful breach of any Seller, or as a result of the breach of any
of
representations, warranties, covenants or other agreements contained in this
Agreement, Purchaser shall be entitled to receive from the Seller, upon
submission of written evidence thereof, the fees and expenses (including,
without limitation, legal fees and other advisors and experts) incurred thereby
in connection with the negotiation and preparation of this Agreement and
related
documents and the due diligence relating to this Agreement;
34
(e) Each
party will redeliver all documents, work papers and other material of any
other
party relating to the transactions contemplated hereby, whether so obtained
before or after the execution hereof, to the party furnishing the same;
and
(f) All
confidential information received by any party hereto with respect to the
business of any other party shall be treated in accordance with the provisions
of the Confidentiality Agreement, which shall survive the termination of
this
Agreement.
ARTICLE
IX
INDEMNIFICATION
Section
9.1 Survival
of Representations and Warranties.
The
representations and warranties of the Sellers contained in this Agreement
shall
survive the Closing Date for a period of 18 months following the Closing
Date
(the “Survival
Period”),
provided that the representations and warranties of the Sellers set forth
in
Sections 4.5 and 4.23 shall survive for the period of the applicable statute
of
limitations with respect thereto. If written notice of a claim has been given
prior to the expiration of the Survival Period by the Purchaser to any Seller
or
the Seller Representative in accordance with this Section 9, then the relevant
representations and warranties shall survive as to such claim until such
claim
has been finally resolved.
Section
9.2 Indemnification
by the Sellers.
(a) Subject
to Sections 9.1 and 9.5, Sellers each hereby agree to indemnify (the
“Indemnification Obligations”) the Purchaser and its shareholders, subsidiaries,
officers, directors, employees and agents (each a “Purchaser Indemnified Party”
and collectively, the “Purchaser Indemnified Parties”) from and against any and
all liabilities, losses, damages costs, expenses, penalties and fees and
expenses (collectively, “Losses”) arising out of or resulting from, directly or
indirectly, (i) any breach or inaccuracy of any representation or warranty
of
the Seller contained in this Agreement or in any agreements, exhibits and
schedules to this Agreement delivered or to be delivered by or on behalf
of a
Seller or the Company, or (ii) any breach of any covenant, agreement or
undertaking made by any of Sellers in this Agreement.
(b) Subject
to Section 9.5, the Sellers shall all further indemnify and hold the Purchaser
Indemnified Parties harmless from and against: (i) any Taxes imposed on the
Company, Xxxxxxxx Xxxx Penn DISC Company or the Purchaser with respect to
any
taxable year ending on or before the Closing Date (other than Taxes reflected
or
accrued for in the Closing Balance Sheets), (ii) any Taxes of the Company,
Pitt
Penn DISC Company, Spinwell or the Seller imposed with respect to any taxable
year beginning before and ending after the Closing Date, to the extent such
Taxes are allocable to the portion of such period ending on or prior to the
Closing Date, (iii) any Taxes of any Person (other than Company, Xxxxxxxx
Xxxx
Penn DISC Company or any of its Affiliates) for which the same or any of
its
Affiliates may be liable under any provision of U.S. state or local or foreign
law or regulations, as a transferee or successor, by contract or otherwise,
with
respect to any taxable year ending on or before the Closing Date or beginning
before and ending after the Closing Date, and (iv) any other Loss incurred
in
connection with any such claim for Taxes. The parties acknowledge and agree
that
the indemnification obligation set forth in this Section 9.2(b) constitutes
an
affirmative indemnity which shall not be dependent upon the existence
35
of
any
misrepresentation or other breach of this Agreement by a Seller and which
shall
be enforceable notwithstanding any disclosures in this Agreement.
With
respect to taxable years beginning before and ending after the Closing Date,
the
portion of Taxes allocable to the portion of such taxable year ending on
the
Closing Date shall (x) in the case of any Taxes other than Taxes based upon
or
related to income or receipts, be deemed to be the amount of such Taxes for
the
entire taxable year multiplied by a fraction, the numerator of which is the
number of days in the taxable year ending on the Closing Date and the
denominator of which is the number of days in the entire taxable year, and
(y)
in the case of any Taxes based upon or related to income or receipts be deemed
to be the amount of Taxes which would be payable if the relevant taxable
year
ended on the Closing Date.
Section
9.3 Notice
and Defense of Claim.
(a)
Whenever
any claim shall arise for indemnification hereunder, the party entitled to
indemnification (the “Indemnified
Party”)
shall
provide written notice (“Indemnification Notice”) to the Seller Representative
regarding the indemnification obligation of the Sellers or, if applicable,
the
relevant Seller (in either case the “Indemnifying
Party or Parties”),
by
delivery of such notice to the Seller Representative, within sixty (60) days
of
becoming aware of the right to indemnification and, as expeditiously as possible
thereafter, the facts constituting the basis for such claim (provided that
failure to give such notice shall not affect the indemnification obligations
of
the Indemnifying Parties hereunder, except to the extent such failure materially
prejudices such party’s ability to successfully defend the matter giving rise to
the indemnification claim), together with the amount of such claim and wire
transfer instructions for satisfaction of the same. Simultaneously,
a copy of such notice shall be provided to the surety under the Surety Bond.
The
Indemnifying Parties shall have ten (10) Business Days following the date
of the
Indemnification Notice to satifsy such claim for indemnifcation, by delivery
to
the Indemnified Party of immediately available funds unelss the Indemnifying
Parties shall, prior to the end of such ten (10) Business Days, dispute such
indemnification claim, by delivery of a written notice to the Indemnified
Party
(with a copy to the surety) setting forth the amount so disputed and the
rationale for such determination (which shall be made in a commercially
reasonable manner).
(b) In
connection with any claim giving rise to indemnity hereunder resulting from
or
arising out of any claim or legal proceeding by a person who is not a party
to
this Agreement, the Indemnifying Party, at its sole cost and expense and
upon
written notice to the Indemnified Party, may assume the defense of any such
claim or legal proceeding with counsel reasonably satisfactory to the
Indemnified Party (but in no event shall the Indemnifying Party enter into
a
settlement of any such claim or proceeding where the result is an admission
of
liability or cause on the part of the Indemnified Party or any Spinwell Entity,
without the prior written consent of the Indemnified Party.). The Indemnified
Party shall be entitled to participate in the defense of any such action,
with
its counsel and at its own expense. If the Indemnifying Party does not assume
the defense of any such claim or litigation resulting therefrom, the Indemnified
Party may, but shall not be obligated to, defend against such claim or
litigation in such manner as it may deem appropriate including, but not limited
to, settling such claim or litigation, after giving notice thereof to the
Indemnifying Party, on such terms as the Indemnified Party may deem appropriate
(subject to the foregoing) and no action taken by the Indemnified Party in
accordance with such defense and
36
settlement
shall relieve the Indemnifying Party of its indemnification obligations herein
provided with respect to any Damages resulting therefrom.
Section
9.4 Limitations
on Amount.
If the
Closing occurs, in addition to the limitations set forth in Section 9.1,
no
party shall have liability for indemnification with respect to any Loss until
the aggregate of all Losses exceeds $150,000 (the "Liability Threshold"),
and
then after the Liability Threshold has been exceeded the Sellers shall be
responsible for all Losses based thereon from and after the first $150,000
of
Loss. The
indemnification obligation of the Sellers is several (and not joint) among
the
four (4) Sellers and shall be limited with respect to each Seller to the
amount
of One Hundred and Twenty Five Thousand ($125,000.00) Dollars (“Maximum
Liability”). Purchaser shall not seek to recover damages against a Seller for
indemnification claims in excess of the amount of the Maximum Liability.
The
Indemnification Limitation set forth in this Section 9.5 shall not apply
to any
claim by the Purchaser or other Purchaser Indemnified Person with respect
to a
claim for indemnification with respect to (i) the representations or warranties
set forth in Section 4.5 or Section 4.23; (ii) any claim for indemnification
based upon a breach or failure to perform any covenant, agreement or obligation
of the Sellers or its members (or Affiliates, as applicable) to be observed
or
performed thereby following the Closing, in whole or in part, including,
without
limitation, with respect to the filing of Tax Returns and the payment of
Taxes,
as set forth in Section 6.6.
Section
9.5 No
Limitation of Remedies.
Except
as set forth in Section 9.5 above, the rights and remedies of any party
(including, without limitation, the indemnification provisions set forth
in this
Section 9) based upon, arising out of or otherwise in respect of any inaccuracy
or breach of any representation, warranty, covenant or agreement or failure
to
fulfill any condition shall in no way be limited by the fact that the act,
omission, occurrence or other state of facts upon which any claim of any
such
inaccuracy or breach is based may also be the subject matter of any other
representation, warranty, covenant or agreement as to which there is no
inaccuracy or breach. The representations and warranties of Sellers shall
not be
affected or deemed waived by reason of any investigation made by or on behalf
of
Purchaser (including, but not limited to, by any of its advisors, consultants
or
representatives) or by reason of the fact that Purchaser or any of such
advisors, consultants or representatives knew or should have known that any
such
representation or warranty is or might be inaccurate.
Section
9.6 Subrogation.
Upon
making any payment to an Indemnified Party for any indemnification claim
pursuant to this Article IX, the Indemnifying Party shall be subrogated,
to the
extent of such payment, to any rights which the Indemnified Party may have
against any other Persons with respect to the subject matter underlying such
indemnification claim, and the Indemnified Party shall take such actions
as the
Indemnifying Party may reasonably require to perfect such subrogation or
to
pursue such rights against such other Persons as the Indemnified Party may
have.
ARTICLE
X
MISCELLANEOUS
Section
10.1 Fees
and Expenses.
All
costs and expenses incurred in connection with this Agreement and the
consummation of the Transactions shall be paid by the party
37
incurring
such expenses, except as specifically provided to the contrary in this
Agreement; and provided further that Seller shall pay all costs and expenses
on
behalf of the Business in connection with (i) this Agreement and (ii) the
consummation of the Transaction.
Section
10.2 Amendment
and Modification.
This
Agreement may be amended, modified and supplemented in any and all respects,
but
only by a written instrument signed by all of the parties hereto expressly
stating that such instrument is intended to amend, modify or supplement this
Agreement.
Section
10.3 Notices.
All
notices and other communications hereunder shall be in writing and shall
be
deemed given when mailed, e-mailed, delivered personally, faxed (which is
confirmed) or sent by an overnight courier service, such as Federal Express,
to
the parties at the following addresses (or at such other address for a party
as
shall be specified by such party by like notice):
if
to
Purchaser, to:
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxx Xxxxxxx
Telephone:
0-000-000-0000
Telecopy:
(000) 000-0000
E-mail:
Xxxx@Xxxxxxx.xxx
with
a
copy to:
Xxxxx
& XxXxxxxx LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxx X. Xxxxxxxx
Telephone:
000-000-0000
E-mail:
xxxxxx.x.xxxxxxxx@xxxxxxxx.xxx
Telecopy:
(000) 000-0000
if
to
Sellers, to:
c/o
Xxxx
Xxxxx
Seller
Representative
0000
Xxxxx Xxxxxxxxx
Xxxxxx,
XX 00000
Telephone:
000-000-0000
E-mail:
xxxxx@xxxxxxxxxxxxxxxxxxxxx.xxx
Telecopy:
000-000-0000
with
a
copy to:
38
Xxxxxx,
Xxxxxxx & Xxxxxxxxxx
0000
Xxxxxxxx Xxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxxxxx,
XX 00000
Telephone:
000-000-0000
E-mail:
xxxxxxxxxxxx@xxxxxxxxx.xxx
Telecopy:
000-000-0000
Section
10.4 Counterparts.
This
Agreement may be executed in two or more counterparts, all of which shall
be
considered one and the same agreement and shall become effective when two
or
more counterparts have been signed by each of the parties and delivered to
the
other parties.
Section
10.5 Further
Assurances.
The
parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents,
and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
Section
10.6 Entire
Agreement; No Third Party Beneficiaries.
This
Agreement, the other agreements delivered pursuant hereto and the
Confidentiality Agreement (a) constitute the entire agreement and supersede
all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof and thereof and (b) are not intended
to confer upon any Person other than the parties hereto any rights or remedies
hereunder, except to the extent provided for in Section 10.13 below.
Section
10.7 Severability.
Any
term or provision of this Agreement that is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of
the remaining terms and provisions hereof or the validity or enforceability
of
the offending term or provision in any other situation or in any other
jurisdiction. If the final judgment of a court of competent jurisdiction
or
other authority declares that any term or provision hereof is invalid, void
or
unenforceable, the parties agree that the court making such determination
shall
have the power to reduce the scope, duration, area or applicability of the
term
or provision, to delete specific words or phrases, or to replace any invalid,
void or unenforceable term or provision with a term or provision that is
valid
and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision.
Section
10.8 Governing
Law.
THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE
STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF
LAW
THEREOF THAT WOULD REQUIRE THE APPLICATION OF ANY OTHER
LAW.
Section
10.9 Venue
. Except
as set forth in Paragraph 2.3(b) hereof, any claim or controversy arising
out of
or related to this Agreement or the making, performance, or interpretation
of
this Agreement or any related agreement shall be finally settled under the
39
Arbitration
Rules of the American Arbitration Association then in force, by one arbitrator
appointed by the American Arbitration Association in accordance with said
rules.
The place of arbitration shall be in the City of Chicago, Illinois, and the
law
applicable to the arbitration procedure shall be internal laws of the State
of
New York without giving effect to the principles of conflicts of law that
would
require the application of any other law. The English language shall be used
throughout the arbitral proceedings. All cost of arbitration, including the
arbitrator’s fee, shall be borne by the losing party. The parties agree that the
award of the arbitrator shall be the sole and exclusive remedy between them
regarding any claims, counterclaims, issues, or accountings presented or
pled to
the arbitrator; that it shall be made and shall promptly be payable in U.S.
dollars free of any tax, deduction or offset, and that any costs, fees, or
taxes
incident to enforcing the award shall, to the maximum extent permitted by
law,
be charged against the party resisting such enforcement. The award shall
include
interest from the date of any damages incurred for breach or other violation
of
the contract, and from the date of the award until paid in full, at a rate
to be
fixed by the arbitrator, but in no event less than one and one-half percent
(1.5%) per month, or part of a month, from the date until paid.
Section
10.10 Time
of Essence.
Each of
the parties hereto hereby agrees that, with regard to all dates and time
periods
set forth or referred to in this Agreement, time is of the essence.
Section
10.11 Extension;
Waiver.
At any
time prior to the Closing Date, either party hereto may (a) extend the time
for
the performance of any of the obligations or other acts of the other party,
(b)
waive any inaccuracies in the representations and warranties of the other
party
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) waive compliance by the other parties with any of the
agreements or conditions contained in this Agreement. Any agreement on the
part
of a party to any such extension or waiver shall be in writing. The failure
of
any party to this Agreement to assert any of its rights under this Agreement
or
otherwise shall not constitute a waiver of those rights.
Section
10.12 Jointly
Drafted.
The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties,
and no presumption or burden of proof shall arise favoring or disfavoring
any
party by virtue of the authorship of any provisions of this
Agreement.
Section
10.13 Assignment.
Neither
this Agreement nor any of the rights, interests or obligations hereunder
shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject
to
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and
assigns. Notwithstanding the forgoing, Purchaser may assign this Agreement
to
any Affiliate or subsidiary of Purchaser, or to any lender to Purchaser or
any
Affiliate or subsidiary thereof as security for obligations to such lender;
provided,
that no
such assignment shall in any way affect Purchaser’s obligations or liabilities
under this Agreement.
[SIGNATURE
PAGE FOLLOWS]
40
IN
WITNESS WHEREOF, Purchaser and Seller have executed this Agreement or caused
this Agreement to be executed by their respective officers thereunto duly
authorized as of the date first written above.
|
Sellers:
|
Purchaser:
|
|
|
/s/
Xxxx X. Small
|
Industrial
Enterprise of America, Inc.
|
|
|
Xxxx
X. Small
|
||
|
By:
/s/
Xxxx Xxxxxxx
|
||
|
/s/
Xxxxxxx X. XxXxxxx
|
Xxxx
Xxxxxxx
Its:
________________________________
|
|
|
Xxxxxxx
X. XxXxxxx
|
||
|
Spinwell:
|
||
|
/s/
Xxx Xxxxx
|
Spinwell
Holding Co., LLC
|
|
|
Xxx
Xxxxx
|
||
|
By:
/s/
Xxxx X. Small
|
||
|
Xxxxxxx
Investments, Ltd.
|
Xxxx
X. Small
|
|
|
By:
/s/
Xxxx Xxxxx Xxxxxxx
|
Its:
/s/
Chairman
|
|
|
Xxxx
Xxxxx Xxxxxxx
|
41
SCHEDULE
A
|
Seller
|
%Membership
Interests
|
|
Xxxx
X. Small
|
25%
|
|
Xxxxxxx
X. XxXxxxx
|
25%
|
|
Xxx
Xxxxx
|
25%
|
|
Xxxxxxx
Investments, Ltd.
|
25%
|
