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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 8-K
_________________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JANUARY 3, 2000
LONE STAR TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 1-12881 75-2085454
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
15660 NORTH DALLAS PARKWAY,
SUITE 500, DALLAS, TEXAS 75248
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (972) 386-3981
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 16, 1999, Lone Star Technologies, Inc., a Delaware
corporation ("Lone Star"), and its newly-formed and wholly-owned subsidiary
Fintube Technologies, Inc., an Oklahoma corporation ("Purchaser"), executed
an asset purchase agreement for the acquisition (the "Acquisition") by
Purchaser of substantially all of the assets of Fintube Limited Partnership,
a Delaware limited partnership, and its subsidiaries ("FLP"). Certain
liabilities of FLP were excluded. The Acquisition was closed on January 3,
2000 effective as of January 1, 2000 for a base purchase price of $82 million
plus a $2.5 million adjustment for working capital and approximately $1.5
million in acquisition related expenses. The purchase price adjustments were
estimated at the closing and are expected to be adjusted on an actual,
post-closing basis by approximately March 31, 2000. The consideration for the
Acquisition was determined following a competitive bidding process in
arm's-length negotiations between Lone Star and FLP.
The acquired business involves the design and production of finned
tubes and other products used in a variety of heat recovery applications.
Lone Star intends to operate and to use the assets acquired in the
Acquisition in substantially the same manner as they were used by FLP prior
to the Acquisition.
Lone Star and Purchaser utilized three different sources of financing
to pay the purchase price. Lone Star used $20 million of cash that it
received from Lone Star Steel Company, a wholly owned subsidiary of Lone Star
("Lone Star Steel"), in connection with Lone Star Steel's repayment of a $20
million subordinated loan from Lone Star. Lone Star Steel borrowed the $20
million that it repaid to Lone Star under Lone Star Steel's $90 million
revolving line of credit with the CIT Group/Business Credit, Inc., acting on
its own behalf and as agent for other banks. Additionally, Lone Star issued
approximately $20 million of Lone Star common stock directly to the limited
partners or other beneficial owners of FLP. Finally, Purchaser entered into
a new Credit Agreement with Bank of America, acting on its own behalf and as
agent for other banks, in connection with the Acquisition and borrowed (i)
approximately $7 million under the revolving credit facility and (ii) $39
million under the term loan facility.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
It is impractical to provide at this time the financial
statements required by Item 7(a) of Form 8-K. Pursuant to Item
7(a)(4) of Form 8-K, such financial statements will be filed as
soon as they are available and on or before March 18, 2000.
(b) Pro forma financial information.
It is impractical to provide at this time the pro forma financial
information required by Item 7(b) of Form 8-K. Pursuant to Item
7(b)(2) of Form 8-K, such pro forma financial information will be
filed as soon as it is available and on or before March 18, 2000.
(c) Exhibits
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2.1* Asset Purchase Agreement dated as of November 16, 1999 by and
among Lone Star Technologies, Inc., Fintube Technologies, Inc.
and Fintube Limited Partnership.
2.2* First Amendment to Asset Purchase Agreement dated as of January
1, 2000 by and among Lone Star Technologies, Inc., Fintube
Technologies, Inc. and Fintube Limited Partnership.
99.1* Press release dated January 3, 2000.
</TABLE>
____________________
*filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LONE STAR TECHNOLOGIES, INC.
By: /s/ Charles J. Keszler
------------------------------------
Charles J. Keszler
Vice President-Finance and Treasurer
Date: January 18, 2000
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EXHIBIT INDEX
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Exhibit
Number Description
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2.1* Asset Purchase Agreement dated as of November 16, 1999 by and
among Lone Star Technologies, Inc., Fintube Technologies, Inc. and
Fintube Limited Partnership.
2.2* First Amendment to Asset Purchase Agreement dated as of January 1,
2000 by and among Lone Star Technologies, Inc., Fintube Technologies,
Inc. and Fintube Limited Partnership.
99.1* Press release dated January 3, 2000.
</TABLE>
____________________
*filed herewith
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EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
BY AND BETWEEN
LONE STAR TECHNOLOGIES, INC.,
FINTUBE TECHNOLOGIES, INC.
AND
FINTUBE LIMITED PARTNERSHIP
NOVEMBER 16, 1999
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TABLE OF CONTENTS
PAGE
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ARTICLE I -- DEFINITIONS................................................1
1.1 Defined Terms................................................1
1.2 Other Definitional Provisions...............................10
ARTICLE II -- PURCHASE AND SALE........................................10
2.1 Purchase and Sale...........................................10
2.2 Retained Assets.............................................11
2.3 Payment of Purchase Price...................................12
2.4 Base Purchase Price Adjustment..............................13
2.5 Assumption of Liabilities...................................14
2.6 Liabilities Not Assumed by the Purchaser....................16
2.7 Non-Assignable Contracts/Permits............................16
2.8 Delivery of Assets..........................................16
2.9 Instruments of Conveyance and Transfer......................16
2.10 Certain Consents to Assignment..............................17
2.11 Allocation..................................................17
ARTICLE III -- CLOSING.................................................17
3.1 Closing.....................................................17
3.2 Closing Obligations.........................................17
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES...........................19
4.1 Representations and Warranties of Sellers...................19
4.2 Representations and Warranties of Purchaser and Lone Star...34
4.3 Brokers' Fees...............................................36
ARTICLE V -- COVENANTS.................................................37
5.1 Conduct of Business by Fintube Pending Closing..............37
5.2 Access to Assets, Personnel and Information.................39
5.3 Payment of Expenses.........................................40
5.4 Public Announcements........................................40
5.5 No Solicitation.............................................40
5.6 Additional Arrangements.....................................40
5.7 Further Assurances..........................................41
5.8 Employees...................................................41
5.9 Proration of Property Taxes.................................43
5.10 Taxes.......................................................43
5.11 Confidentiality.............................................43
5.12 Amendment of Schedules......................................44
5.13 Noncompetition..............................................44
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5.14 Product Liability/Discontinued Operations Insurance.........44
5.15 Stock Registration Agreement................................44
5.16 NYSE Listing................................................45
5.17 Delivery of Investment Letters..............................45
5.18 Title Insurance and Surveys.................................45
5.19 Stock Options...............................................46
5.20 Consulting Agreement........................................47
5.21 Employment Agreements.......................................47
5.22 Arrangement for Legal Services..............................47
5.23 Survival of Covenants.......................................47
5.24 Change of Name..............................................47
5.25 Correction of Environmental Conditions......................47
5.26 Lone Star Common Stock......................................48
ARTICLE VI -- COOPERATION IN VARIOUS MATTERS...........................48
6.1 Mutual Cooperation..........................................48
6.2 Preservation of Files and Records...........................48
6.3 Preparation of Reports, Etc.................................48
ARTICLE VII -- CONDITIONS..............................................48
7.1 Conditions to Each Party's Obligation to Close..............48
7.2 Conditions to Obligation of Fintube.........................49
7.3 Conditions to Obligation of Purchaser.......................49
ARTICLE VIII TERMINATION............................................51
8.1 Termination Rights..........................................51
8.2 Effect of Termination.......................................52
8.3 Consequential Damages.......................................52
ARTICLE IX -- INDEMNIFICATION AND CLAIMS...............................52
9.1 Indemnification.............................................52
9.2 Pre-Closing Operations......................................53
9.3 Post-Closing Operations.....................................53
9.4 Warranty Claims.............................................53
9.5 WARN Act....................................................54
9.6 Defense of Third Party Claims...............................54
9.7 Limit on Indemnity Obligations..............................55
9.8 Fintube's Escrow............................................56
9.9 Exclusive Remedy............................................56
9.10 Survival....................................................56
ARTICLE X MISCELLANEOUS.............................................57
10.1 Transfers of Lone Star Common Stock.........................57
10.2 Lone Star Guaranty..........................................57
10.3 Governing Law...............................................57
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10.4 Counterparts................................................57
10.5 Assignment; Binding Effect; No Third Party Benefit..........57
10.6 Entire Agreement............................................57
10.7 Notices.....................................................58
10.8 Amendment...................................................58
10.9 Severability................................................59
10.10 Waivers.....................................................59
10.11 Enforcement of Agreement....................................59
10.12 Arbitration.................................................59
10.13 Performance by Sellers......................................60
</TABLE>
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "AGREEMENT") is made and entered
into as of the 16th day of November, 1999, by and among Lone Star Technologies,
Inc., a Delaware corporation ("LONE STAR"), Fintube Technologies, Inc., an
Oklahoma corporation and a wholly owned subsidiary of Lone Star ("PURCHASER"),
and Fintube Limited Partnership, a Delaware limited partnership ("FINTUBE" and
the Subsidiaries (as defined in Section 1.1), collectively the "SELLERS").
RECITALS
A. Sellers are directly engaged in the business of designing,
manufacturing, processing, engineering and selling finned tubes, steel fin
strip, economizers, boiler tubes, extended surface inside diameter tubing and
other products, for use in heat recovery applications; Sellers are also engaged
in the business of steel coil slitting and storage, producing and selling
oscillate wound products, and selling and licensing fintube machinery and
technology (hereinafter collectively referred to as the "BUSINESS").
B. Lone Star desires to acquire, through its wholly owned Oklahoma
subsidiary corporation, the Purchaser, or, in the case of Sellers' foreign
assets, through wholly owned subsidiaries of the Purchaser, and Fintube desires
to sell, the Business and substantially all of the assets of Fintube (excluding
the Retained Assets (as defined in Section 2.2)), and to cause the Subsidiaries
to sell the Business and substantially all of the assets of the Subsidiaries.
C. Lone Star, the Purchaser and Fintube (the "PARTIES") desire to
evidence their agreement to the terms and conditions of the purchase and sale of
said assets as set forth in this Agreement.
NOW, THEREFORE, in consideration of the recitals and the
representations, warranties and covenants set forth in this Agreement, the
Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, each of the following
terms has the meaning specified below:
"AAA" means the American Arbitration Association office in Dallas,
Texas, as specified by Section 10.12(c).
"ACCOUNTS PAYABLE" means any and all trade accounts payable, accrued
expenses and other current liabilities of Sellers, arising in the ordinary
course of the Business.
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"ACCOUNTS RECEIVABLE" means any and all accounts and notes receivable
of Sellers, other than the Employee Notes, arising in the ordinary course of the
Business.
"ACTUAL BASE PURCHASE PRICE ADJUSTMENT" has the meaning set forth in
Section 2.4(c).
"AFFILIATE" means, with respect to any Person, each other Person that
directly or indirectly (through one or more intermediaries or otherwise)
controls, is controlled by, or is under common control with such Person. The
term "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH") means the possession, directly or indirectly, of the actual power to
direct or cause the direction of the management policies of a Person, whether
through the ownership of stock, by contract, credit arrangement or otherwise.
"AGREEMENT" means this Asset Purchase Agreement, as amended,
supplemented or modified from time to time.
"ANCILLARY DOCUMENTS" means each agreement, instrument and document
(other than this Agreement) executed, or to be executed, by Sellers, Lone Star
or Purchaser in connection with the transaction contemplated by this Agreement.
"ASSETS" has the meaning specified in Section 2.1.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means the agreement attached
hereto as EXHIBIT 3.2(b).
"ASSUMED LIABILITIES" has the meaning specified in Section 2.5.
"AYB" means Aletas y Birlos, S.A. de C.V., a corporation organized
under the laws of the United Mexican States.
"BALANCE SHEET DATE" has the meaning specified in Section 4.1(h).
"BANK DEBT" means the unpaid balance as of the Closing Date of all
revolving loans, and term loans of Sellers (excluding the IRB Debt), all of
which loans are identified in the Sellers' Financial Statements.
"BASE PURCHASE PRICE" has the meaning specified in Section 2.3.
"BASE PURCHASE PRICE ADJUSTMENT" has the meaning specified in Section
2.4(a).
"BASKET" has the meaning specified in Section 9.7(b).
"BENCHMARK NET WORKING CAPITAL" means the net working capital of the
Business as of December 31, 1998, as calculated in SCHEDULE 2.4(a).
"BROKERS" has the meaning specified in Section 4.3(a).
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"BROKERS' FEES " has the meaning specified in Section 4.3(a).
"BUSINESS" has the meaning specified in the Recitals to this Agreement.
"CAP" has the meaning specified in Section 9.7(c).
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, or any successor statutes and any
regulations promulgated thereunder.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System List.
"CLAIM" has the meaning specified in Section 9.1.
"CLOSING" means the consummation of the purchase and sale of the Assets
hereunder, which shall occur on the Closing Date.
"CLOSING DATE" has the meaning specified in Section 3.1.
"CLOSING NET WORKING CAPITAL" means current assets transferred to the
Purchaser at Closing less current liabilities assumed by the Purchaser or its
subsidiaries at Closing, determined in accordance with GAAP, consistently
applied, and calculated in the same format used in the calculation of Benchmark
Net Working Capital in SCHEDULE 2.4(a)).
"CLOSING STATEMENT" has the meaning set forth in Section 2.4(c).
"COBRA" has the meaning set forth in Section 5.8(d).
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIALITY AGREEMENT" means the letter agreement between Ceres
Capital Partners and Fintube, dated March 1, 1999, relating to the furnishing of
information to Ceres Capital Partners, its Affiliates or their representatives,
in connection with their evaluation of the possibility of the transaction
contemplated in this Agreement, and to which Lone Star and Purchaser have agreed
to be bound.
"CONSULTING AGREEMENT" means the agreement attached hereto as EXHIBIT
5.20.
"CONTRACTS" means any and all written and oral agreements, contracts,
commitments and understandings to which any of the Sellers is a party, by which
any of the Sellers is directly or indirectly bound, or to which any Assets of
any of the Sellers may be subject, including the agreements and material oral
contracts identified on SCHEDULE 2.1(d); provided, however, in the case of
material oral contracts, all such contracts are described on SCHEDULE 2.1(d).
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"DESIGNATED RECIPIENTS" means the parties identified on SCHEDULE 1.1.
"DISPUTE" has the meaning set forth in Section 10.10(a).
"DISPUTING PERSON" has the meaning set forth in Section 10.12(a).
"DRAFT CLOSING STATEMENT" has the meaning set forth in Section 2.4(c).
"EMPLOYEES" has the meaning specified in Section 5.8(a).
"EMPLOYEE NOTES" means the promissory notes in the approximate
aggregate amount of $2,000,000, payable to Fintube by certain of the management
employees of Fintube in connection with their purchase of equity in Fintube.
"EMPLOYMENT OPTIONS" has the meaning set forth in Section 5.19.
"ENVIRONMENTAL LAW(S)" means any applicable federal, state, provincial,
local or foreign statute, code, ordinance, rule, regulation, policy, guideline,
permit, consent, approval, license, judgment, order, writ, decree, common law,
injunction or other authorization in effect on the date hereof or at a previous
time, relating to: (a) emissions, discharges, releases or threatened releases of
Hazardous Materials into the environment, including into ambient air, soil,
sediments, land surface or subsurface, buildings or facilities, surface water,
groundwater, publicly-owned treatment works, septic systems or land; (b) the
generation, treatment, storage, disposal, use, handling, manufacturing,
transportation or shipment of Hazardous Materials; (c) occupational health and
safety; or (d) the environment, preservation or reclamation of natural
resources, solid waste handling treatment or disposal, operation or reclamation
of oil and gas operations or mines, or protection of environmentally sensitive
areas.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW ACCOUNT" has the meaning specified in Section 9.8.
"ESCROW AGENT" has the meaning specified in Section 9.8
"ESCROW CLAIM" has the meaning specified in Section 9.8.
"ESTIMATED ADJUSTMENT STATEMENT" has the meaning set forth in Section
2.4(b).
"ESTIMATED BASE PURCHASE PRICE ADJUSTMENT" has the meaning set forth in
Section 2.4(b).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FINTUBE PROTECTED PERSONS" has the meaning specified in Section
4.3(b).
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"GAAP" means generally accepted accounting principles, as recognized by
the U.S. Financial Accounting Standards Board (or any generally recognized
successor).
"GOODWILL" means the intangible assets of the Sellers, to which a
portion of the Purchase Price is allocated on SCHEDULE 2.11.
"GOVERNMENTAL ACTION" means any authorization, application, approval,
consent, exemption, filing, license, notice, registration, permit or other
requirement of, to or with any Governmental Authority.
"GOVERNMENTAL AUTHORITY" means any national, state, provincial, county
or municipal government, domestic or foreign, any agency, board, bureau,
commission, court, department or other instrumentality of any such government,
or any arbitrator in any case that has jurisdiction over Fintube or any of the
Subsidiaries, as the case may be, or any of their properties or assets.
"HAZARDOUS MATERIAL(S)" means: (a) any "hazardous substance" defined by
CERCLA; (b) any "hazardous waste" or "solid waste" in either case as defined by
RCRA; (c) any solid, hazardous, dangerous or toxic chemical, material, waste or
substance, within the meaning of and regulated by any Environmental Law; (d) any
radioactive material, including any naturally occurring radioactive material,
and any source, special or byproduct material as defined in 42 U.S.C.
Section2011 et seq. and any amendments or authorizations thereof; (e) any
asbestos-containing materials in any form or condition; (f) any polychlorinated
biphenyls in any form or condition; (g) petroleum, petroleum hydrocarbons, or
any fractions or byproducts thereof; or (h) any contaminant in any form or
condition within the meaning of and regulated by an Environmental Law.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INDEMNIFIED PERSON" has the meaning specified in Section 9.1.
"INDEMNIFYING PARTY" has the meaning specified in Section 9.1.
"INTELLECTUAL PROPERTY RIGHTS" means any and all proprietary and
technical information, trade names (registered and unregistered), trade secrets,
patents and patent rights, patent applications, service marks (registered and
unregistered), trademarks (registered and unregistered), trademark and service
mark registrations and applications, customer and supplier lists, price lists,
advertising and promotional materials, field performance data, research
materials, royalty rights, copyrights, other proprietary intangibles, computer
programs, databases, processes, technical know-how, business know-how, drawings,
plats, surveys, designs, plans, methods, engineering and manufacturing
specifications, technology, inventions, processes, methods, formulas,
procedures, and operating and quality control manuals and data relating to the
Assets or the Business, including the items listed on SCHEDULE 2.1(e) and
SCHEDULE 4.1(r).
"INTERESTS" means the equity ownership interests of Fintube in the
Subsidiaries.
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"INVENTORY" means any and all inventory and other supplies, whether on
hand or on order, including all raw materials and other materials used or
consumed in the course of the Business, work in process, labeling and packaging,
products or goods ordered or held for shipment or in transit and other finished
products and goods.
"INVESTMENT LETTERS" has the meaning specified in Section 5.17.
"IRB DEBT" means the industrial revenue bond obligations of Sellers
having an outstanding principal balance of $1,423,970.23 at October 31, 1999.
"KNOWLEDGE" (whether or not capitalized) means:(a) with respect to the
Sellers or Fintube, the actual knowledge of the four (4) directors (Jerry E.
Ryan, Raymond M. Briggs, Larry Bump and Jerry R. Nichols) of Division Fintube
Corporation, Fintube's general partner, together with the actual knowledge of
David Crowell, Marion Deaton, Michelle LaBelle, Charles Ochinegro, Peggy Peters,
Larry Sims, Parker Strickland and Gary Willis, and; (b) with respect to Lone
Star or the Purchaser, the actual knowledge of any of the managerial employees,
officers and directors of such entity or any Affiliates thereof. Actual
knowledge shall be deemed to include such knowledge as would have been obtained
with a reasonable inquiry into the subject matter in question.
"LIEN" means any lien, mortgage, security interest, pledge,
encumbrance, title defect, restrictive covenant, easement, right-of-way, rights
of a vendor under any title retention or conditional sale agreement, or lease or
other arrangement substantially equivalent thereto.
"LONE STAR BROKERS" has the meaning specified in Section 4.3(b).
"LONE STAR COMMON STOCK" means the common stock of Lone Star
Technologies, Inc., a Delaware corporation, having a $1.00 par value that will,
pursuant to the terms of the Stock Registration Agreement attached hereto as
EXHIBIT 2.3(b), be registered under the Securities Act and approved for listing
on the NYSE.
"MATERIAL ADVERSE EFFECT" means: (a) when used with respect to Sellers,
a result or consequence that would materially adversely affect the condition
(financial or otherwise), results of operations or business of Sellers (taken as
a whole) or the aggregate value of the Assets, or would materially impair the
ability of Sellers (taken as a whole) to own, hold, develop and operate their
Assets, or would materially impair Fintube's ability to perform its obligations
hereunder or consummate the transaction contemplated hereby; (b) when used with
respect to a particular Seller, a result or consequence that would materially
adversely affect the condition (financial or otherwise), results of operations
or business of such Seller or the aggregate value of its Assets, or would
materially impair the ability of such Seller to own, hold, develop and operate
those Assets owned or used by it; and (c) when used with respect to Lone Star, a
result or consequence that would materially adversely affect the condition
(financial or otherwise), results of operations or business of Lone Star and its
subsidiaries, considered as a whole.
"NON-ASSIGNABLE CONTRACTS" has the meaning specified in Section 2.7.
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"NON-COMPETITION AGREEMENT" has the meaning specified in Section 5.13.
"NOTICE OF ARBITRATION" has the meaning specified in Section 10.12.
"OPTIONS" has the meaning specified in Section 5.19.
"PARTIES" has the meaning specified in the Recitals to this Agreement.
"PERMITS" means any and all permits, licenses, variances, exemptions,
orders, franchises, approvals, consents, registrations, certifications and
authorizations of all Governmental Authorities held by any of the Sellers
relating to the ownership, use or operation of the Business or the Assets,
including the items set forth on SCHEDULE 2.1(c).
"PERMITTED LIENS" means: (a) Liens for Taxes, assessments or other
governmental charges or levies if the same shall not at the particular time in
question be due and delinquent; (b) Liens of carriers, warehousemen, mechanics,
laborers, materialmen, landlords, vendors, workmen and operators arising by
operation of law in the ordinary course of business or by a written agreement
existing as of the date hereof for sums not yet due; (c) Liens incurred in the
ordinary course of business in connection with worker's compensation,
unemployment insurance and other social security legislation (other than ERISA)
which would not, individually or in the aggregate, result in a Material Adverse
Effect on Sellers; (d) Liens incurred in the ordinary course of business to
secure the performance of bids, tenders, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance and repayment bonds and other
obligations of a like nature; (e) Liens, easements, rights-of-way, restrictions,
servitudes, permits, conditions, covenants, exceptions, reservations and other
similar encumbrances incurred in the ordinary course of business or existing on
property and not interfering with the ordinary conduct of the business of any of
the Sellers or rights to any of the Assets and having no material adverse effect
on the value of the Real Property; (f) any defects, irregularities or
deficiencies in title to real estate interests that are of record and do not
interfere with the ordinary conduct of the business of Sellers and having no
material adverse effect on the value of the Real Property; and (g) any and all
Liens securing the Bank Debt; provided, however, to the extent Lone Star does
not direct that the Liens securing the Bank Debt be assigned to its lenders, the
Liens securing the Bank Debt shall be released at Closing.
"PERSON" (whether or not capitalized) means any natural person,
corporation, company, limited or general partnership, joint stock company, joint
venture, association, limited liability company, trust, bank, trust company,
business trust or other entity or organization, whether or not a Governmental
Authority.
"POST-CLOSING PAYMENT" has the meaning set forth in Section 2.4(c).
"PROJECTIONS" has the meaning set forth in Section 5.19.
"PROTECTED PERSONS" has the meaning specified in Section 4.3(a).
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"PURCHASE PRICE" means the Base Purchase Price specified in Section
2.3, as adjusted pursuant to Section 2.4.
"PURCHASER" has the meaning specified in the introductory paragraph of
this Agreement.
"PURCHASER CLAIMS" has the meaning specified in Sections 9.7(b).
"PURCHASER REPRESENTATIVE" means any director, officer, manager,
employee, agent, advisor (including legal, accounting and financial advisors,
and environmental engineers or consultants), Affiliate or other representative
of Lone Star or Purchaser, and any similar authorized representatives of Lone
Star's or Purchaser's third party lender or proposed third party lender in
connection with the financing of the transaction contemplated hereby.
"RCRA" means the Resource Conservation and Recovery Act, as amended, or
any successor statutes or regulations promulgated thereunder.
"REAL PROPERTY" means any and all real and immovable property owned by
any of the Sellers, or in which any of the Sellers have acquired an interest,
including buildings, structures, erections, fixtures, easements, rights-of-way,
access rights, licenses, transferable permits and other appurtenances and
improvements erected upon, attached to or used in connection with such real
property, including the items set forth on Schedule 2.1(a). Real Property shall
also mean the two parcels of real estate subleased by the Sellers at the Tulsa
Port of Catoosa, and the warehouse facility leased by the Sellers in downtown
Tulsa, but shall not include any other leased or subleased real property.
"RELATED PERSONS" (whether or not capitalized) has the meaning
specified in Section 9.1.
"REPRESENTATIVE" means any director, officer, manager, employee, agent,
advisor (including legal, accounting and financial advisors), Affiliate or other
representative of such Party.
"RESPONSIBLE OFFICER" means, with respect to any Party, the Chief
Executive Officer, Chief Operating Officer or President of such Party.
"RETAINED ASSETS" has the meaning specified in Section 2.2.
"RETAINED LIABILITIES" has the meaning specified in Section 2.6.
"SCHEDULES" mean the schedules attached hereto, together with any
documents listed on such schedules.
"SEC" has the meaning specified in Section 5.15.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES LAW EXEMPTION" has the meaning specified in Section 2.3.
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"SELLERS" has the meaning specified in the introductory paragraph of
this Agreement.
"SELLERS' EMPLOYEE BENEFIT PLANS" means "employee benefit plans" as
defined in Section 3(3) of ERISA, including the 401(k) Profit Sharing Plan,
Section 125 cafeteria plan, health plan, short term disability plan, dental
plan, co-pay program, severance pay, sick leave, vacation pay, salary
continuation for disability, retirement, deferred compensation, bonus, long-term
incentive, hospitalization, medical insurance, life insurance program,
dismemberment program, and scholarship program, maintained by Sellers or any
Subsidiary or to which Sellers or any Subsidiary has contributed or is obligated
to contribute, which are described on SCHEDULE 4.1(y) to this Agreement.
"SELLERS' FINANCIAL STATEMENTS" has the meaning specified in Section
4.1(h).
"SELLERS0 MATERIAL CONTRACTS" means the Contracts or the series of
related Contracts of any of the Sellers involving total value or consideration
in excess of $250,000.
"STOCK CONSIDERATION" has the meaning specified in Section 2.3.
"STOCK REGISTRATION AGREEMENT" means the agreement attached hereto as
EXHIBIT 2.3(b).
"SUBSIDIARIES" means the entities in which Fintube has an equity
ownership interest, listed on SCHEDULE 4.1(f).
"SURVEYS" has the meaning specified in Section 5.18(e).
"TANGIBLE PERSONAL PROPERTY" means all plant, equipment, vehicles,
machinery, manufacturing and laboratory equipment, testing equipment, gauges,
valves, compressors, tanks, motors, parts, tools, pumps, controls, materials and
supplies, computers, communications and office equipment, furnishings, furniture
and other tangible property owned, leased or used by Sellers, including the
items set forth on SCHEDULE 2.1(b).
"TAX RETURNS" has the meaning specified in Section 4.1(dd).
"TAXES" means taxes of any kind, levies or other like assessments,
customs, duties, imposts, charges or fees, including income, gross receipts, ad
valorem, value added, excise, real or personal property, asset, sales, use,
federal royalty, license, payroll, transaction, capital, net worth and franchise
taxes, estimated taxes, withholding, employment, social security, workers
compensation, utility, severance, production, unemployment compensation,
occupation, premium, windfall profits, transfer and gains taxes or other
governmental taxes imposed or payable to the United States or any state,
provincial, local or foreign governmental subdivision or agency thereof, and in
each instance such term shall include any interest, penalties or additions to
tax attributable to any such Tax, including penalties for the failure to file
any Tax Return or report.
"THIRD PARTY CONSENT" means the consent or approval of any Person other
than any of Sellers, Lone Star, Purchaser or any Governmental Authority.
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"TITLE BINDERS" has the meaning specified in Section 5.18(a).
"TITLE COMPANY" has the meaning specified in Section 5.18(a).
"TITLE INSURANCE" has the meaning specified in Section 5.18(a).
"TITLE OPINIONS" has the meaning specified in Section 5.18(f).
"TITLE OBJECTION" has the meaning specified in Section 5.18(g).
"VALUATION PRICE" has the meaning specified in Section 2.3.
"WARN ACT" means the Worker Adjustment and Retraining Notification Act,
as amended.
"WARRANTY CLAIM" has the meaning specified in Section 9.4.
"YEAR 2000 COMPLIANCE" has the meaning specified in Section 4.1(hh).
"2000 PERIOD" has the meaning specified in Section 9.4(a).
"2001 PERIOD" has the meaning specified in Section 9.4(a).
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) All references in this Agreement to Exhibits, Schedules,
Articles, Sections, subsections and other subdivisions refer to the
corresponding Exhibits, Schedules, Articles, Sections, subsections and other
subdivisions of or to this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any Articles, Sections, subsections or other
subdivisions of this Agreement are for convenience only, do not constitute any
part of this Agreement, and shall be disregarded in construing the language
hereof.
(b) Exhibits and Schedules to this Agreement are attached
hereto and by this reference incorporated herein for all purposes.
(c) The words "THIS AGREEMENT," "HEREIN," "HEREBY," "HEREUNDER"
and "HEREOF," and words of similar import, refer to this Agreement as a whole
and not to any particular subdivision unless expressly so limited. The words
"THIS ARTICLE," "THIS SECTION" and "THIS SUBSECTION," and words of similar
import, refer only to the Article, Section or subsection hereof in which such
words occur. The word "OR" is not exclusive, and the word "INCLUDING" (in its
various forms) means "INCLUDING WITHOUT LIMITATION."
(d) Pronouns in masculine, feminine or neuter genders shall be
construed to state and include any other gender, and words, terms and titles
(including terms defined herein) in the singular form shall be construed to
include the plural and vice versa, unless the context otherwise requires.
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ARTICLE II
PURCHASE AND SALE
2.1 PURCHASE AND SALE. At the Closing, upon the terms and subject to
the conditions contained herein, Fintube shall, and shall cause the Subsidiaries
to, sell, transfer, assign, convey and deliver to Purchaser, and Purchaser shall
purchase, accept and acquire from Sellers, in exchange for Purchaser's payment
to Fintube of the Purchase Price and assumption of the Assumed Liabilities, (or,
with respect to the assets of AyB, the payment of the cash portion of the
Purchase Price directly to said corporation), all of Sellers' right, title and
interest in and to all of the assets, properties and rights of Sellers,
including all of the assets, properties and rights described in this Section
2.1, but excluding the Retained Assets, (collectively and individually, the
"ASSETS"); provided, however, Purchaser may at its election require Fintube: (i)
to cause AyB to convey those Assets owned or used by it to a subsidiary of
Purchaser; and (ii) to convey those Assets owned or used by its Biraghi Canada
division to another subsidiary of Purchaser:
(a) all Real Property, including the items set forth on
SCHEDULE 2.1(a);
(b) all Tangible Personal Property, including the items set
forth on SCHEDULE 2.1(b);
(c) all Permits, including the items set forth on SCHEDULE
2.1(c), to the extent transferrable;
(d) all Contracts, including the items set forth on SCHEDULE
2.1(d);
(e) all of Sellers' Intellectual Property Rights, including the
items set forth on SCHEDULE 2.1(e);
(f) all Inventory of Sellers, including the items set forth on
SCHEDULE 2.1(f);
(g) all Accounts Receivable, deposits, and prepaid expenses of
Sellers, including the items set forth on SCHEDULE 2.1(g);
(h) all rights of Sellers under warranties and guarantees,
express and implied;
(i) all software and computer programs and documentation,
including flow charts, diagrams, descriptive texts and programs, computer
printout tapes and databases of Sellers;
(j) all rights (including indemnification rights) and choses in
action of Sellers: (i) against third parties which affect the use of, or title
to, any of the Assets after the Closing; or (ii) which may be asserted as
counterclaims, rights of setoff or defenses in any action brought by a Third
Party against Purchaser which relate to any of the Assets or Assumed
Liabilities;
(k) all other property of any kind, tangible and intangible,
real, personal and mixed (including those items set forth in the books and
records of Sellers) and all other rights and benefits to which Sellers may be
entitled relating to the Assets or the Business;
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(l) all books, records, files, documents, papers and agreements
of Sellers which relate to the Assets or the Business, including all operating,
maintenance, vendor, landowner, computer, employee and environmental records and
files;
(m) all Goodwill of the Sellers; and
(n) all bank accounts of the Sellers including the accounts set
forth on SCHEDULE 2.1(n) (other than a new bank account created specifically for
the receipt of the cash portion of the Purchase Price) including all cash on
deposit in such accounts and all uncleared deposits in such accounts, the petty
cash of Sellers, all temporary cash investments of Sellers and instruments
representing same (including without limitation marketable securities), and all
other cash and cash equivalents of Sellers on hand, in transit, or in
depositories, as of the Closing Date.
2.2 RETAINED ASSETS. Notwithstanding the provisions of Section 2.1,
Fintube shall retain the following assets, and such assets shall not be included
in the term "Assets" (the "RETAINED ASSETS"):
(a) all rights in and to the Employee Notes;
(b) all rights in the Interests;
(c) the promissory note of AyB to Fintube; and
(d) all other items listed on SCHEDULE 2.2.
2.3 PAYMENT OF PURCHASE PRICE. As consideration for the purchase of the
Assets, Purchaser will pay to Fintube, for the account of all of the Sellers, at
Closing, the sum of $82,000,000 (the "BASE PURCHASE Price"), plus or minus the
Estimated Base Purchase Price Adjustment specified by Section 2.4 (hereinafter
collectively referred to as the "PURCHASE PRICE"), payable as follows: either
(a) by delivery of: (i) twenty million dollars ($20,000,000) of Lone Star Common
Stock (the "STOCK CONSIDERATION"), valued at the Valuation Price (as hereafter
defined); and (ii) the balance of the Purchase Price by cashier's check or wire
transfer acceptable to Fintube (or to AyB as provided in Section 2.1); or (b) if
a Material Adverse Effect has occurred with respect to Lone Star pursuant to
Section 7.2(c), by cashier's check or wire transfer acceptable to Fintube in the
full amount of the Purchase Price; provided, however, if the issuance of the
Stock Consideration pursuant to clause (i) above would result in a Material
Adverse Effect on Lone Star for 1999 or any subsequent taxable years (such
determination to be based on a reasoned opinion of Lone Star's legal counsel or
independent public accountants), Lone Star may, at its option: (A) reduce the
Stock Consideration by removing such number of shares of Lone Star Common Stock
therefrom as is reasonably necessary to avoid the occurrence of such Material
Adverse Effect and (B) correspondingly increase the cash portion of the Purchase
Price by the Valuation Price multiplied by that number of shares of Lone Star
Common Stock removed from the Stock Consideration pursuant to this proviso. The
value of each of the shares of Lone Star Common Stock to be delivered by the
Purchaser at Closing, if any, shall be computed by dividing the sum of the
closing price of Lone Star Common Stock for thirty (30) trading days ending on
the third trading day immediately
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preceding the Closing Date, by thirty (30) (the "VALUATION PRICE"). The closing
price of Lone Star Common Stock on a trading day, for purposes of this
calculation, shall be the day's last trade price as reported under New York
Stock Exchange Composite Transactions in The Wall Street Journal. Any shares of
Lone Star Common Stock issued as a part of the Purchase Price shall be delivered
to Fintube at the Closing, in the form of a Lone Star stock certificate or
certificates, registered in the name of Fintube or the Designated Recipients (as
herein defined) bearing the restrictive legends in the form of EXHIBIT 2.3(a)
attached hereto. None of the shares, if any, of Lone Star Common Stock issued as
part of the Purchase Price shall be issued in consideration of those Assets
purchased by a subsidiary of Purchaser from AyB, and all of such Assets shall be
deemed to be purchased for the cash portion of the Purchase Price. The shares of
Lone Star Common Stock to be issued as a part of the Purchase Price shall be
registered by Lone Star under the Securities Act and approved for listing on the
NSYE, pursuant to the terms of the stock registration agreement attached hereto
as EXHIBIT 2.3(b) (the "STOCK REGISTRATION AGREEMENT").
(a) If there is a Securities Law Exemption (as herein defined),
Lone Star will issue the Stock Consideration: (i) to those persons
designated by Fintube on SCHEDULE 1.1 hereto (the "DESIGNATED
RECIPIENTS"), as the persons to whom Fintube is directing the Stock
Consideration be paid; and(ii) in such proportions among the Designated
Recipients as Fintube shall designate not less than five (5) business
days prior to the Closing Date;
(b) If there is not a Securities Law Exemption, Lone Star will
so advise Fintube and Fintube will remove such number of "unaccredited
investors" (as contemplated by Rule 501 of Regulation D of the SEC)
from the list of Designated Recipients so that Lone Star may reasonably
determine there is a Securities Law Exemption (in which event Lone Star
will issue the Stock Consideration to those persons on the revised list
of Designated Recipients);
provided, however, Lone Star may: (i) round that portion of the Stock
Consideration issuable to any Designated Recipient down to the nearest whole
share to avoid the issuance of fractional shares ; and (ii) correspondingly
increase the cash portion of the Purchase Price payable to Fintube by an amount
equal to (x), the total fractional shares multiplied by (y), the Valuation
Price. For purposes hereof, there will be a Securities Law Exemption unless Lone
Star, based upon legal authority set forth in a reasoned legal opinion of Lone
Star's counsel delivered to Fintube, determines that based on the list of
Designated Recipients and the properly completed and executed Investment
Letters, as defined below, obtained by Fintube from Designated Recipients and
forwarded to Lone Star at least five (5) business days prior to the Closing
Date, that the issuance of the Stock Consideration to each such Designated
Recipient is not exempt from registration under: (i) the Securities Act of 1933
by virtue of Rule 506 of Regulation D of the SEC and (ii) any applicable state
securities law (the "SECURITIES LAW EXEMPTION").
2.4 BASE PURCHASE PRICE ADJUSTMENT.
(a) The Working Capital Base Purchase Price Adjustment shall be
either: (i) the amount, if any, by which the Closing Net Working Capital exceeds
the Benchmark Net Working
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Capital calculated in SCHEDULE 2.4(a), which amount will increase the Base
Purchase Price, or (ii) the amount, if any, by which Benchmark Net Working
Capital exceeds Closing Net Working Capital, which amount will decrease the Base
Purchase Price. Fintube's methodology in computing its reserves and accruals has
been reviewed by Purchaser and is acceptable to Purchaser. The IRB Debt Base
Purchase Price Adjustment shall be the amount, if any, of the IRB Debt assumed
by Purchaser on the Closing Date, which amount will decrease the Base Purchase
Price. The Working Capital Base Purchase Price Adjustment and the IRB Debt Base
Purchase Price Adjustment are collectively called the Base Purchase Price
Adjustment ("BASE PURCHASE PRICE ADJUSTMENT").
(b) At least four (4) business days prior to the Closing Date,
Fintube shall deliver to Lone Star a statement (the "ESTIMATED ADJUSTMENT
STATEMENT") reflecting the Sellers' best good faith estimate, after consultation
with Lone Star, of: (i) the Closing Net Working Capital; and (ii) the amount of
the Base Purchase Price Adjustment. The Estimated Adjustment Statement shall set
forth in reasonable detail the calculation of the Sellers' estimates of the
amounts referred to in clauses (i) and (ii) above and, based thereon, a
calculation of the estimated Base Purchase Price Adjustment (the "ESTIMATED BASE
PURCHASE PRICE ADJUSTMENT"). The payment to be made by the Purchaser pursuant to
Section 2.3 hereof at the Closing shall be an amount equal to the Base Purchase
Price ($82,000,000) plus or minus the Estimated Base Purchase Price Adjustment,
as the case may be.
(c) Within fifteen (15) days after the Closing Date, Fintube
and its independent public accountants shall prepare and deliver to all Parties
a draft of a statement (the "DRAFT CLOSING STATEMENT") consisting of the audited
balance sheet of the Business as of the Closing Date, prepared in accordance
with GAAP. The Draft Closing Statement shall set forth the Closing Net Working
Capital, as of the Closing Date. The Draft Closing Statement shall also set
forth in reasonable detail a calculation of the actual Base Purchase Price
Adjustment (the "ACTUAL BASE PURCHASE PRICE ADJUSTMENT"); and a calculation of
the post-closing payment to be paid by Purchaser to Fintube, or by Fintube to
Purchaser, as the case may be, resulting from the foregoing calculations, after
consideration of the Estimated Base Purchase Price Adjustment paid at Closing,
(the "POST-CLOSING PAYMENT"). The fees and expenses of Fintube's independent
public accountants in connection with the Draft Closing Statement shall be borne
by Fintube. Promptly after its receipt of the Draft Closing Statement, Purchaser
shall engage a "Big Five" firm of independent public accountants to review the
Draft Closing Statement and, within thirty (30) days after Purchaser's receipt
of the Draft Closing Statement, to propose such revisions therein as are
required by GAAP. Within the fifteen (15) day period immediately following
Fintube's receipt of the proposed revisions from Purchaser's independent public
accountants, Fintube and Purchaser shall meet and endeavor in good faith to
agree on the final closing statement (the "CLOSING STATEMENT"). The fees and
expenses of Purchaser's independent public accountants shall be borne by
Purchaser. If Fintube and Purchaser are unable to agree on and finalize the
Closing Statement within such fifteen (15) day period, Fintube and Purchaser
shall on such fifteenth (15th) day agree on another "Big Five" firm of
independent public accountants to review the Draft Closing Statement and the
proposed revisions thereto and, within thirty (30) days after the engagement of
such firm, to issue the Closing Statement. Such Closing Statement shall be final
and binding on Fintube and Purchaser and shall not be subject to arbitration or
further appeal. The fees and expenses of the third, mutually engaged firm of
independent public accountants shall be borne equally by Fintube and Purchaser.
Both Fintube and
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Purchaser will cooperate with each of the independent public accountants and
provide such accountants with the information necessary to prepare the Closing
Statement together with the information relating thereto. Sellers and Purchaser
shall use their individual and collective best efforts to cause all such
independent public accountants to determine the Closing Statement as soon as is
reasonably practicable after the Closing. The Party owing the Post-Closing
Payment shall deliver the Post-Closing Payment by wire transfer of immediately
available funds or by any other manner reasonably acceptable to the other Party,
no later than ten (10) days after the date on which the determination of the
Post-Closing Payment is finally made.
(d) The Post-Closing Payment, or any unpaid portion thereof,
payable pursuant to clause (c) of this Section 2.4, shall be increased by an
amount equal to interest thereon at a rate equal to 8% per annum, compounded
annually, from the Closing Date until actually paid.
(e) In connection with the preparation of the Estimated
Adjustment Statement and the Draft Closing Statement, the preparing Party shall
provide the other Party (and its respective advisors and representatives), prior
to the delivery of the relevant statement, with reasonable access (in each case
subject to receipt of reasonable advance notice and during normal business
hours) to work papers related to the calculation of Estimated Base Purchase
Price Adjustment and the Actual Base Purchase Price Adjustment, and to all books
and records that are required to verify the same, and with an opportunity to
comment on the same prior to the finalization of the statement. With respect to
the Estimated Adjustment Statement, Fintube will provide such access and
opportunity to comment no later than four (4) business days prior to the Closing
Date. At all times prior to the final determination of the Post-Closing Payment,
Purchaser and Fintube will cooperate with each other in connection with matters
contemplated by this Section 2.4.
(f) Except to the extent Purchaser, at its option, elects to
assume the IRB Debt, Purchaser's assumption of the Assumed Liabilities (defined
below) shall not reduce the Purchase Price.
2.5 ASSUMPTION OF LIABILITIES. On the terms and subject to the
conditions set forth herein, the Purchaser shall assume and satisfy or perform
when due, the following liabilities and obligations of Sellers (the "ASSUMED
LIABILITIES"):
(a) the IRB Debt, if Purchaser, at its option, elects to assume
the IRB Debt;
(b) all liabilities and obligations of Sellers to the extent a
reserve or accrual has been established on the books of the Sellers as of the
Closing Date and such reserve or accrual is reflected as a current liability on
the Closing Statement;
(c) all Accounts Payable and other current liabilities of
Sellers reflected in the Closing Statement and incurred prior to Closing in the
ordinary course of business, together with all accounts payable of the Business
incurred as of and after the Closing;
(d) all Contracts of Sellers entered into in the ordinary
course of the Business and described on SCHEDULE 2.1 (d);
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(e) all other contracts of Sellers entered into in the ordinary
course of the Business, including:
(i) all purchase orders, all customer contracts, all
equipment contracts and all service contracts;
(ii) all warranty obligations of the Sellers, subject,
however, to the right of Purchaser to
reimbursement for such obligations pursuant to
Section 9.4; and
(iii) the obligations represented by those certain
stand-by letters of credit and performance bonds
described on Schedule 2.5, including the
obligation to obtain the release at Closing of
Sellers' banks and bonding companies pursuant to
said stand-by letters of credit and bonds.
(f) all obligations of Sellers and Purchaser to offer benefits
under Sections 601, ET. SEQ. of ERISA, or COBRA (as herein defined) pursuant to
Section 5.8(c) with respect to participants and qualified beneficiaries who
experience a COBRA qualifying event under any Sellers' Employee Benefit Plan;
(g) all obligations to pay the amounts required to be paid by
Purchaser pursuant to Section 5.8 hereof;
(h) all post-closing obligations of Sellers under the Sellers'
Employee Benefit Plans that Purchaser assumes at Closing, including: (i) duties
with respect to plan administration after the Closing (including filing of forms
5500 for Plan year 1999 and thereafter in the post-closing period, performance
of discrimination testing, processing of claims, etc.); (ii) payment of employer
premiums due under welfare plans for periods after the Closing; and (iii)
payment of any required contributions to the 401(k) plan for periods after the
Closing; and
(i) those other liabilities or obligations of the Sellers
included on SCHEDULE 2.5 (including the amount of such liabilities), but only to
the extent of the amount of such liabilities described on such schedule.
2.6 LIABILITIES NOT ASSUMED BY THE PURCHASER. Neither Lone Star nor the
Purchaser will assume any of the following liabilities (the "RETAINED
LIABILITIES") and the Sellers will satisfy or perform when due, the Retained
Liabilities (it being agreed that if there is a conflict between Section 2.5 and
this Section 2.6, this Section 2.6 shall govern, and neither Lone Star nor
Purchaser will assume or perform any of the liabilities set forth in this
Section 2.6):
(a) any liabilities of the Sellers or any of their Affiliates
that were incurred prior to the Closing (including claims asserted after the
Closing that relate to events occurring prior to the Closing) that are not
Assumed Liabilities, subject to the terms of Section 9.2;
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(b) any and all liabilities with respect to fees and expenses
incurred by Sellers or any of their Affiliates in connection with the
transaction described by this Agreement, (including the fees and expenses of any
legal or financial advisors, accountants or brokers of the Sellers, as well as
any travel or other expenses incurred or payable in connection with the
transaction);
(c) any liability of Sellers or any of their Affiliates arising
out of this Agreement;
(d) the Bank Debt;
(e) the IRB Debt (unless Purchaser at its option elects to
assume the IRB Debt);
(f) any litigation filed against any of the Sellers or any of
their Affiliates prior to the Closing;
(g) any penalty or other liability relating to an IRS Form 5500
series return filed (or required to be filed) prior to Closing for any Sellers'
Employee Benefit Plan;
(h) any liabilities for which Sellers have agreed to indemnify
Lone Star and Purchaser pursuant to Sections 9.1 and 9.2; and
(i) any liability of Sellers or any of their Affiliates related
to Taxes for any period (or portion thereof) ending on or before the Closing
Date, except as otherwise provided in Sections 5.9 and 5.10.
2.7 NON-ASSIGNABLE CONTRACTS/PERMITS. In the case of any Contracts or
Permits which are by their terms, by virtue of their subject matter or by
operation of law, not assignable to Purchaser without the consent of a third
party or a Governmental Authority (the "NON-ASSIGNABLE CONTRACTS"), Sellers,
Lone Star and Purchaser shall use reasonable efforts before and after the
Closing to obtain any consents necessary to convey to Purchaser the
Non-Assignable Contracts.
2.8 DELIVERY OF ASSETS. Title to and possession of the Assets shall be
delivered and transferred by Sellers to Purchaser at the Closing.
2.9 INSTRUMENTS OF CONVEYANCE AND TRANSFER. At the Closing, Sellers
shall execute and deliver to Purchaser, as appropriate, one or more general
warranty deeds, bills of sale, instruments of assignment, certificates of title,
registrations, licenses and other documents, as may be reasonably satisfactory
to Purchaser: (a) to vest in Purchaser good and marketable title to all of the
Assets, including without limitation the names of the Sellers and the
Intellectual Property Rights, free and clear of any and all Liens (other than
Permitted Liens); and (b) to carry out the transaction contemplated by this
Agreement. Fintube will, and will cause Sellers to assist Purchaser, as
reasonably required after the Closing Date, in registering and recording with
appropriate Governmental Authorities the conveyance and transfer documents.
2.10 CERTAIN CONSENTS TO ASSIGNMENT. To the extent that the assignment
of any right or agreement the benefit of which is to be acquired by Purchaser
pursuant to this Agreement requires
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any Third Party Consent or consent by a Governmental Authority, Purchaser and
Fintube shall (and Fintube will cause Sellers to) use reasonable efforts to
obtain any consents necessary to any such assignment. Fintube shall (and Fintube
shall cause Subsidiaries to) cooperate with Purchaser, in any reasonable
arrangement requested by Purchaser designed to provide to Purchaser the benefit
of Sellers' rights under such right or agreement, including enforcement of any
and all rights of Sellers against the other party thereto arising out of a
breach or cancellation thereof by such third party.
2.11 ALLOCATION. The Purchase Price shall be allocated to the Assets
for federal and state income tax purposes, as set forth on SCHEDULE 2.11, and
Purchaser and Fintube shall (and Fintube shall cause the Sellers to) file all
returns and forms (including form 8594) consistent with such allocation.
ARTICLE III
CLOSING
3.1 CLOSING. The Closing will take place at the offices of NICHOLS,
WOLFE, STAMPER, NALLY, FALLIS & ROBERTSON, INC., 124 East Fourth Street, Tulsa,
Oklahoma, on DECEMBER 14, 1999, at 10:00 o'clock a.m., C.S.T., or, if one or
more of the conditions to Closing set forth in Article VII shall not have
occurred as of such date, then on January 4, 2000, at 10:00 o'clock a.m.,
C.S.T., unless the Parties mutually agree on another date, time and place (the
"CLOSING DATE"). For all purposes, the Closing shall be deemed to have occurred
as of 5:00 o'clock p.m., C.S.T., on the Closing Date.
3.2 CLOSING OBLIGATIONS. At the Closing:
(a) Fintube shall deliver to Purchaser:
(i) the instruments of conveyance and transfer described
in Section 2.9;
(ii) a certificate or certificates, dated as of the
Closing Date and executed on behalf of Fintube by one of its
Responsible Officers, to the effect that: (i) Fintube's
representations, warranties and covenants contained herein are true and
correct as of the Closing Date (except to the extent set forth in such
certificate) as if made on and as of the Closing Date; and (ii) that
all conditions to Lone Star's and Purchaser's obligation to close the
transaction contemplated hereby relating to or within the control of
Sellers have been satisfied;
(iii) all Third Party Consents identified on SCHEDULE 3.2
(a)(iii) except for those Third Party Consents that Purchaser and
Fintube mutually agree within ten (10) days after the date hereof to
exclude from the schedules of Third Party Consents (such action to be
reflected on a substitute SCHEDULE 3.2(a)(iii) to be mutually agreed
within such ten (10) day period);
(iv) a full and complete release of all Bank Debt Liens
and other Liens (other than Permitted Liens) on any of the Assets,
including the delivery of executed releases of mortgages and releases
on Form UCC-3 for each Bank Debt Lien and other Lien (other than
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Permitted Liens) filed of record; provided, however, Purchaser may
instead elect to have Fintube cause such Bank Debt lenders to assign
all Liens relating to the Bank Debt to a financial institution
providing financing to Purchaser for its acquisition of the Assets in
connection with such financial institution's payment of the Bank Debt;
(v) the consents and Permits from the Governmental
Authority(s) identified on SCHEDULE 3.2(a)(v);
(vi) an opinion of Nichols, Wolfe, Stamper, Nally, Fallis
& Robertson, Inc. reasonably acceptable to Purchaser; and
(vii) such other certificates and documents as may be
required by this Agreement.
(b) Purchaser shall deliver to Fintube:
(i) the Purchase Price payable as follows: (i) an amount
required to repay the Bank Debt in full, and, if Purchaser at its
option elects not to assume the IRB Debt, the IRB Debt in full, in each
case as directed by Fintube, by wire transfer or by certified check,
made payable jointly to Fintube and the respective secured creditors in
an amount equal to the "payoff amount" for each of the Bank Debt and
IRB Debt obligations; (ii) the amount necessary to fund the Escrow
Account described in Section 9.8; and (iii) the remainder of the
Purchase Price by cashiers check or by wire transfer to the accounts
designated by Fintube, in immediately available funds;
(ii) the shares of Lone Star Common Stock described in
Section 2.3;
(iii) a duly executed Assignment and Assumption Agreement
between the Sellers and the Purchaser, whereby Purchaser agrees to
assume the Assumed Liabilities, in the form of EXHIBIT 3.2(b) attached
hereto, (the "ASSIGNMENT AND ASSUMPTION AGREEMENT");
(iv) the duly executed Stock Registration Agreement in
the form of EXHIBIT 2.3(b) attached hereto;
(v) a certificate or certificates, dated as of the
Closing Date and executed on behalf of Purchaser by one of its
Responsible Officers, to the effect that: (i) Purchaser's
representations, warranties and covenants contained herein are true and
correct as of the Closing Date (except to the extent set forth in such
certificate) as if made on and as of the Closing Date; and (ii) that
all conditions to Fintube's obligation to close the transaction
contemplated hereby relating to or within the control of Purchaser have
been satisfied;
(vi) an opinion of Thompson & Knight L.L.P. reasonably
acceptable to Fintube; and
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(vii) such other certificates and documents as may be
required by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF SELLERS. Fintube hereby
represents and warrants to Purchaser as follows:
(a) ORGANIZATION. Fintube is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite power and authority to own, lease and operate
its properties, to conduct the Business as it is presently being conducted, and
to enter into and perform its obligations under this Agreement. Fintube is duly
qualified to do business as a foreign limited partnership, and is in good
standing, in the State of Oklahoma and Canada, which are the only jurisdictions
where the character of the properties owned or leased by it or the nature of its
activities makes such qualification necessary. Copies of the Certificate and
Agreement of Limited Partnership of Fintube have heretofore been delivered to
Purchaser, and such copies are accurate and complete as of the date hereof.
Subsidiaries are duly organized, validly existing and in good standing under the
laws of the jurisdiction of their organization, and have the requisite power and
authority to own, lease and operate their respective properties, to conduct the
Business as it is presently being conducted, and to enter into and perform their
respective obligations under this Agreement. Each of the Subsidiaries (other
than AyB) is duly qualified to do business, and is in good standing in Oklahoma,
which is the only jurisdiction where the character of the properties owned or
leased by them or the nature of their respective activities makes such
qualification necessary.
(b) AUTHORITY. Fintube has full power and authority to execute
and deliver this Agreement and the Ancillary Documents, and to perform Fintube's
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement by Fintube and the Ancillary Documents by Fintube or the
Subsidiaries has been duly authorized by all necessary partnership and other
action, and no further partnership or other action is necessary on the part of
Fintube or Sellers for Fintube or the Sellers to execute and deliver this
Agreement or the Ancillary Documents, and to consummate and perform the
obligations hereunder and thereunder.
(c) VALIDITY AND BINDING EFFECT. This Agreement has been duly
executed and delivered on behalf of Fintube and constitutes, and each Ancillary
Document executed or to be executed by Fintube or its Subsidiaries has been, or
when executed will be, duly executed and delivered by Fintube or its
Subsidiaries, and constitutes, or when executed and delivered will constitute,
the legal, valid and binding obligation of Fintube or its Subsidiaries,
enforceable against Fintube or its Subsidiaries in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles, regardless of
whether enforceability is considered a proceeding at law or in equity.
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(d) NO VIOLATIONS. Except as set forth in SCHEDULE 4.1(d), the
execution and delivery of this Agreement and the Ancillary Documents does not,
and the consummation of the transaction contemplated hereby and thereby and
compliance by Fintube with the provisions hereof and thereof will not, conflict
with, result in any violation of or default (with or without notice or lapse of
time or both) under, give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit under, or
result in the creation of any Lien on any of the Assets under any provision of:
(i) the Certificate or Agreement of Limited Partnership of Fintube or any
analogous documents regarding corporate governance of each of the respective
Subsidiaries; (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease, permit, concession, franchise, license or other contract,
agreement or instrument applicable to Fintube or to any of the Subsidiaries,
other than the Bank Debt; or (iii) any United States (or to the knowledge of
Sellers, any Mexican or Canadian) judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Sellers, or any of their respective
properties or assets.
(e) CONSENTS AND APPROVALS. Except as set forth in SCHEDULE
4.1(e): (i) no consent, approval, order or authorization of, registration,
declaration or filing with, or permit from, any Governmental Authority is
required by or with respect to Sellers in connection with the execution and
delivery of this Agreement or any Ancillary Document by Fintube or the
consummation by Fintube or any Sellers of the transaction contemplated hereby or
thereby, except for the filing of a pre-merger notification report by Sellers
under the HSR Act and the expiration or termination of the applicable waiting
period thereunder; and (ii) no Third Party Consent is required by or with
respect to any of the Sellers in connection with the execution and delivery of
this Agreement or any Ancillary Documents or the consummation of the transaction
contemplated hereby or thereby.
(f) INVESTMENTS. Except as set forth in SCHEDULE 4.1(f),
Fintube owns a 100% equity interest in each of the entities listed on SCHEDULE
4.1(f). Except as set forth in SCHEDULE 4.1(f), none of the Sellers own any
equity interest in any other corporation, general or limited partnership, joint
venture, limited liability company or other business entity. None of the Sellers
have conducted any business other than the Business.
(g) ASSETS. Except as set forth in SCHEDULE 4.1(g): the Sellers
have good and marketable title to all of the Assets, and the Assets are being
conveyed to Purchaser, free and clear of any Liens (other than Permitted Liens).
The Assets (a) in the case of Tangible Personal Property, are in good operating
condition (ordinary wear and tear excepted); and (b) constitute all of the
property, rights and assets necessary for Purchaser to own, operate, use and
enjoy the Assets and the Business for the same or similar purposes for which,
and in the same or similar manner in which, the Assets and the Business have
been owned, operated and used and enjoyed by Sellers prior to the transaction
contemplated by this Agreement. To the knowledge of the Sellers, the Assets
conform in all material respects to all applicable laws and regulations and
Sellers have not received any notice to the contrary. Except as disclosed on
SCHEDULE 4.1(g), no financing statement (or other instrument sufficient or
effective as a financing statement) under the Uniform Commercial Code with
respect to any of the Assets has been filed and is effective in any
jurisdiction, and none of the Sellers have signed any such financing statement
(or other instrument) or any mortgage or security agreement authorizing any
secured party thereunder to file any such financing statement (or other
instrument).
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EXCEPT AS MAY BE EXPRESSLY STATED IN THIS SECTION 4.1(g), THE ASSETS ARE BEING
SOLD WITHOUT WARRANTY, EXPRESS OR IMPLIED, REGARDING THE OPERATION, FITNESS FOR
A PARTICULAR PURPOSE, OR MERCHANTABILITY OF THE ASSETS. PURCHASER IS BUYING THE
ASSETS IN AN "AS IS" CONDITION AND ON A "WHERE IS" BASIS.
(h) FINANCIAL STATEMENTS. Fintube has provided to Purchaser
true and correct copies of: (i) the audited consolidated or combined balance
sheet of Fintube as of December 31, 1998, (the "BALANCE SHEET Date"), December
31, 1997 and December 31, 1996 and the related audited consolidated or combined
statements of income and cash flows for Sellers for the years ended December 31,
1998, December 31, 1997 and December 31,1996; and (ii) the unaudited
consolidated or combined balance sheet of Sellers for the eight months ended
August 31, 1999, and the unaudited consolidated or combined statements of income
and cash flows for Sellers for the eight months ended August 31, 1999
(collectively, the "SELLERS FINANCIAL STATEMENTS"). Fintube has also provided to
Purchaser true and correct copies of unaudited balance sheets of each of the
Subsidiaries for the eight months ended August 31, 1999, and unaudited
statements of income and cash flows for the Subsidiaries for the eight months
ended August 31, 1999, (collectively the "SUBSIDIARY FINANCIAL STATEMENTS").
Except as set forth on SCHEDULE 4.1(h), and except for the omission of footnotes
and routine annual adjustments consistent with past practices that are not
material, the Sellers' Financial Statements and the Subsidiary Financial
Statements were prepared in accordance with GAAP applied on a consistent basis
during the period involved, and fairly present in all material respects the
financial position and results of operations of Fintube and the Subsidiaries as
of the date specified and the results of operations and the cash flows of
Fintube and the Subsidiaries for the period presented therein. Except as set
forth on SCHEDULE 4.1(h), or in the Sellers' Financial Statements or the
footnotes attached thereto, the statements of income included in the Sellers
Financial Statements do not contain any items of special or nonrecurring income,
and the balance sheets included in the Sellers Financial Statements do not
reflect any write-up or revaluation increasing the book value of any assets, nor
have there been any transactions since August 31, 1999 giving rise to special or
nonrecurring income or any such write-up or revaluation. Except as set forth on
SCHEDULE 4.1(h), as of the date of this Agreement, to their knowledge, none of
the Sellers have any liability or obligation of any nature (whether absolute,
accrued, contingent or otherwise) which should be reflected as a liability on
Fintube's or such Sellers' balance sheet as of the Balance Sheet Date under
GAAP, except as and to the extent: (i) reflected or reserved against in the
Sellers' Financial Statements or the Subsidiary Financial Statements; (ii)
disclosed in one or more Schedules to this Agreement; (iii) of liabilities and
obligations under this Agreement; or (iv) of liabilities and obligations
incurred in the ordinary course of the Business (none of which is a material
liability for breach of contract, breach of warranty, tort or intellectual
property right infringement) since the Balance Sheet Date. Except for the
Subsidiaries' obligations pursuant to the Bank Debt, neither Fintube nor any
Subsidiary is a guarantor, surety, co-maker or other obligor with respect to the
debt or liability of any other Person (including Fintube). All receivables
(including accounts and notes receivable, employee advances and accrued interest
receivables) of the Sellers, as reflected on the Sellers Financial Statements as
of the Balance Sheet Date or arising since the date thereof up to and including
the Closing Date, are valid obligations of the respective makers thereof, have
arisen in the ordinary course of business for goods or services delivered or
rendered, are not subject to any valid defenses, counterclaims or set offs and
have been collected or are collectible in full at their recorded
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amounts in the ordinary course of business without resort to litigation or other
extraordinary collection efforts, net of all cash discounts and reserves for
doubtful accounts reflected on the Sellers Financial Statements (in the case of
receivables so reflected) or on the books of the Fintube or the applicable
Subsidiary (in the case of receivables arising since the date thereof).
(i) CAPITAL STRUCTURE OF THE SUBSIDIARIES. Except as set forth
in SCHEDULE 4.1(i), all of the Interests are owned of record and beneficially by
Fintube, free and clear of any and all Liens. Except as set forth in the
SCHEDULE 4.1(i), the Interests constitute all of the ownership interests in the
Subsidiaries, and there are no options or any other securities outstanding that
are convertible into, are exchangeable for, or represent a right to acquire,
interests in the Subsidiaries.
(j) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in SCHEDULE 4.1(j), since the Balance Sheet Date, none of the Sellers has done
any of the following:
(i) discharged or satisfied any Lien or paid any
obligation or liability, absolute or contingent, other than current
liabilities incurred and paid in the ordinary course of business,
consistent with past practices;
(ii) paid or declared any distributions or purchased,
redeemed, acquired or retired any indebtedness or securities from its
partners or members;
(iii) except for Permitted Liens, suffered or permitted
any Lien to arise or be granted or created against or upon any of the
Assets;
(iv) amended its Certificate or Agreement of Limited
Partnership or Limited Liability Company or other governing documents;
(v) made or permitted any amendment, supplement,
modification or termination of any of the Sellers' Material Contracts,
other than in the ordinary course of business;
(vi) sold, leased, transferred, assigned or otherwise
disposed of any assets that, individually or in the aggregate, had a
value at the time of such sale, lease, transfer, assignment or
disposition of $100,000 or more; provided, however, that this Section
4.1(j)(vi) shall not apply to products sold, leased, transferred,
assigned or otherwise disposed of in the ordinary course of business,
consistent with past practices;
(vii) made any investment in or contribution, payment,
advance or loan to any Person, other than investments, contributions,
payments or advances, or commitments made in the ordinary course of
business, consistent with past practices;
(viii) paid, loaned or advanced (other than payments,
advances or reimbursements of expenses in the ordinary course of
business, which include transactions with their Affiliates), any
amounts to, or sold, transferred or leased any of its assets to, or
entered into any other transaction with any Person;
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(ix) made any material change in any of the accounting
principles followed by any of the Sellers;
(x) increased benefits or benefit plan costs or changed
bonus, insurance, pension, compensation or other benefit plans or
arrangements or granted any bonus or increase in wages, salary or other
compensation or made any other change in employment terms to any
officers, directors or employees of the Sellers (except in the ordinary
course of business, consistent with past practices);
(xi) issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or capitalized lease obligations involving more than $100,000 in
the aggregate;
(xii) canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) involving more
than $100,000;
(xiii) issued, sold, or otherwise disposed of any equity
interest in any of the Subsidiaries or granted any options, warrants,
or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any equity interest in any of the Subsidiaries;
(xiv) made any loan to, or entered into any other
transaction with, any of its partners, directors, officers, managers or
employees, outside the ordinary course of business;
(xv) made any capital expenditures in excess of $250,000
individually, or $500,000 in the aggregate;
(xvi) suffered any material adverse change in, or any
event or condition that might reasonably be expected to result in any
material adverse change in its respective financial conditions
(including changes in working capital, assets, properties, liabilities,
obligations or reserves) or experienced any event or failed to take any
action which reasonably could be expected to result in a Material
Adverse Effect;
(xvii) suffered any loss, damage, destruction or other
casualty (whether or not covered by insurance) or loss of officers,
employees, dealers, distributors, independent contractors, customers,
or suppliers or other favorable business relationships which reasonably
could be expected to result in a Material Adverse Effect;
(xviii) conducted its business outside the ordinary
course consistent with past practice; or
(xix) agreed, whether in writing or otherwise, to do any
of the foregoing.
(k) COMMITMENTS. Sellers have not entered into, and the Assets
are not bound by, any commitment (whether or not in writing) which may, in any
material respect, prevent the transaction contemplated by this Agreement.
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(l) COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE
4.1(L), to the knowledge of the Sellers, none of the Sellers is in violation of,
or in default under, and no event has occurred that (with notice or the lapse of
time or both) would constitute a violation of or default under any applicable
law, rule, regulation, order, writ, decree or judgment of any Governmental
Authority. Except as set forth in SCHEDULE 4.1(l), to the knowledge of the
Sellers, no investigation or review by any Governmental Authority is pending or
threatened with respect to any of the Sellers, the Business, or the Assets.
(m) PERMITS. One or more of the Sellers has obtained and holds
each of the Permits listed in SCHEDULE 2.1(c). To Sellers' knowledge, except as
set forth in SCHEDULE 4.1(m): (i) Sellers are in compliance with the terms of
the Permits; and (ii) the Permits are adequate for the lawful ownership, use and
operation of the Business and the Assets as currently owned, used and operated.
(n) GOVERNMENTAL REGULATION. Fintube is not regulated under the
Public Utility Holding Company Act of 1935, as amended, or the Investment
Company Act of 1940, as amended.
(o) LITIGATION. Except as otherwise set forth in SCHEDULE
4.1(o): (i) no litigation, arbitration, other proceeding, or, to the knowledge
of Fintube, investigation by any Governmental Authority is pending or, to the
knowledge of Fintube, threatened against any of the Sellers with respect to any
matter whatsoever; (ii) none of the Sellers is subject to any outstanding
injunction, judgment, order, decree or ruling; and (iii) none of the Sellers has
been notified that any of their products contain any actual or alleged defect of
any nature or that any Person has suffered any personal injury or damage to his,
her or its property as a result of the sale, use, distribution or existence of
any such products. There is no litigation, proceeding or investigation pending
or to the knowledge of Fintube, threatened against or affecting any of the
Sellers that questions the validity or, enforceability of this Agreement or any
other document, instrument or agreement to be executed and delivered by the
Sellers in connection with the transaction contemplated hereby.
(p) NO RESTRICTIONS. Except as set forth in SCHEDULE 4.1(p),
none of the Sellers is a party to any agreement, contract or commitment limiting
in any respect its ability to compete with any Person or otherwise conduct
business of any line or nature or in any geographical area.
(q) ENVIRONMENTAL MATTERS. For purposes of this Section 4.1(q),
the term "Assets" shall mean, in addition to the Real Property, any other real
property and improvements thereon at any time owned, leased, used or operated in
connection with the Business, whether or not acquired by Purchaser pursuant to
this Agreement. Except as set forth in SCHEDULE 4.1(q):
(i) to their knowledge, Sellers have conducted the
Business and owned and operated the Assets, and are using and operating
the Assets and conducting the Business, in material compliance with all
Environmental Laws;
(ii) none of the Sellers has been notified by any
Governmental Authority that any of the Assets are the subject of any
investigation or inquiry by any Governmental Authority evaluating
whether any release of any Hazardous Material has occurred or whether
any investigation or material remedial action is needed to respond to a
release of any
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Hazardous Material or to the use, treatment, release, storage or
disposal (including storage or disposal at off-site locations) of any
Hazardous Material;
(iii) none of the Sellers, nor, to the knowledge of
Sellers, any other Person, has filed any notice under any federal,
state or local law, nor is any such notice required to be filed,
indicating that: (a) the Sellers are responsible for conditions
attributable to the release into the environment, or the use, storage
or disposal of, or exposure of any person to, any Hazardous Material;
or (b) any Hazardous Material is or has been used, stored or disposed
of upon any of the property included in the Assets in a manner contrary
to applicable Environmental Laws; and no such notice is required to be
filed under any Environmental Laws;
(iv) to the knowledge of the Sellers, none of the Sellers
is subject to any liability, contingent or otherwise, in connection
with the release into the environment, or the storage, or disposal of,
or the exposure of any person to, any Hazardous Material relating to,
or in connection with the operation of the Assets.
(v) to the knowledge of Fintube, there has not been any
release of any Hazardous Material or any use, treatment, release,
storage, or disposal (including storage or storage at offsite
locations) of any Hazardous Materials for which investigation or
remediation is required by Environmental Laws or which, if known to any
Governmental Authority, could reasonably be expected to be made the
basis of an action to compel the investigation or remediation of the
condition;
(vi) none of the Sellers has received any claim,
complaint, notice, letter of violation, inquiry or request for
information involving any matter which remains unresolved as of the
date hereof (or, if resolved, was resolved during the five (5) year
period preceding the date of this Agreement) with respect to any
alleged violation of any Environmental Law or regarding potential
liability under any Environmental Law relating to or in connection with
the operation of the Assets or on any property included in the Assets
or relating to operations or conditions of any facilities (including
off-site storage or disposal of any Hazardous Material from such
facilities);
(vii) no Asset is listed on the National Priorities List
pursuant to CERCLA or on the CERCLIS or on any other federal or state
list as sites requiring investigation or cleanup;
(viii) none of the Sellers has been notified or, to the
knowledge of Fintube, is liable, or considered potentially liable,
under CERCLA or any similar state law.
(ix) none of the Sellers is currently undertaking, or has
completed, any remedial or response action relating to any disposal or
release referred to in clause (iv) above, whether or not required by
Environmental Laws, and no such remedial or response action is
currently required or reasonably expected to be required by
Environmental Laws;
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(x) none of the Sellers has arranged for or is arranging
for the transportation and disposal, of any Hazardous Material to any
location which is listed on the National Priorities List pursuant to
CERCLA, or on the CERCLIS, or on any similar federal or state list or
which is the subject of federal, state or local enforcement actions or
other investigations, that may lead to claims against any of the
Sellers for removal or remedial work, contribution for removal or
remedial work, damage to natural resources or personal injury,
including claims under CERCLA;
(xi) the Assets do not include, and none of the Sellers
owns or operates, any underground storage tank, treatment, storage or
disposal facility under RCRA, or any solid waste disposal facility;
(xii) since the effective date of the requirements of all
applicable Environmental Laws, all Hazardous Materials generated by any
of the Sellers or used in connection with the Assets or the operation
or activities of the Business have been transported only by carriers
authorized under applicable Environmental Laws to transport such
materials, and have been disposed of only at treatment, storage and
disposal facilities authorized under applicable Environmental Laws to
treat, store or dispose of such materials, and, to Fintube's knowledge,
such carriers and facilities have been and are operating in compliance
with such authorizations and are not the subject of any existing,
pending or threatened proceeding in connection with any applicable
Environmental Laws;
(xiii) to the knowledge of the Sellers, there are no
conditions existing on any Asset or offsite, resulting from any of the
Sellers' operations or activities, past or present, at any location,
that now or with the passage of time could reasonably be expected to
give rise to any obligation to investigate or remediate such conditions
under any Environmental Laws; and
(xiv) Fintube has provided to Purchaser all available
internal and available external environmental audits and studies and
all correspondence on substantial environmental matters in the
possession of any of the Sellers or any of their respective Affiliates
relating to any of the current or former properties, assets, operations
or activities of any of the Sellers.
(r) INTELLECTUAL PROPERTY. SCHEDULE 2.1(E) sets forth a
complete and accurate list of all Intellectual Property Rights that are owned by
the Sellers. Except as set forth in SCHEDULE 4.1(R), Sellers hold valid and
continuing authority in connection with the use of such Intellectual Property
Rights. To Fintube's knowledge, the conduct of the businesses of Sellers, and
any Intellectual Property Right of Sellers, do not infringe any intellectual
property or any other proprietary right of any Person. None of the Sellers has
received any written notice from any other Person pertaining to or challenging
the right of Sellers to use any of the Intellectual Property Rights. To Sellers'
knowledge, there are no material Intellectual Property Rights that are necessary
for the operation or continued operation of the Assets, for which Sellers do not
hold valid and continuing authority in connection with the use thereof and that
is not included in the Assets. Except as set forth in SCHEDULE 4.1(R), none of
the Sellers owns or uses any Intellectual Property Right pursuant to a
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license, or has granted any Person any rights to use the Intellectual Property
Rights. Except as set forth in SCHEDULE 4.1(R), all current employees of the
Sellers have executed written agreements with one or more of Sellers, that
assign to one or more of Sellers all rights to any inventions, improvements,
discoveries, information or other Intellectual Property Rights relating to the
Business, and none of the Sellers has cause to believe such agreements would not
be enforceable. To Fintube's knowledge, no employee of Sellers is subject to any
agreement with a prior employer or other Person that in any way adversely
affects or will adversely affect the Business or the performance of the
employee's duties as an employee. Sellers have taken reasonable precautions to
protect the secrecy, confidentiality and value of their trade secrets and other
confidential intellectual property rights.
(s) INSURANCE. Fintube maintains insurance with financially
sound and reputable insurers, covering the Sellers, in such amounts and covering
such risks as are in accordance with normal industry practice for companies
engaged in businesses similar to those of Sellers relating to the Assets and
owning properties in the same general area in which Sellers conduct the
Business. SCHEDULE 4.1(S) sets forth a complete and accurate list of all
insurance policies that are maintained by Fintube. There is no material default
with respect to any provision contained in any policy or binder with respect to
such insurance. There are no billed but unpaid premiums past due under any such
policy or binder.
(t) SELECTED CONTRACTS. SCHEDULE 4.1(T) sets forth a list
(including a reference to the applicable subsection listed below pursuant to
which such agreement is listed) of the following agreements (written and oral)
to which one or more of the Sellers are bound:
(i) collective bargaining agreements and similar
agreements with employees as a group;
(ii) employee benefit agreements, trusts, plans, funds,
or other arrangements of any nature;
(iii) agreements with any director, officer, employee,
consultants, or advisor of Sellers, or any of their affiliates,
including, without limitation, any bonus or incentive agreement;
(iv) any current agreement, other than the Fintube
Limited Partnership Agreement and the Shareholders Agreement, between
or among any of the Sellers, and any current agreement between or among
any of the Sellers and any present or former officer, director,
partner, member, stockholder or Affiliate of any Seller, any present or
former known spouse or any relative of a degree no more remote than
first cousin of any of the aforementioned persons, or any trust or
other similar entity for the benefit of any of the foregoing persons,
including, without limitation, any tax-sharing agreements;
(v) other than the Bank Debt, indentures, mortgages,
security agreements, notes, loan or credit agreements, or other
agreements relating to the borrowing of money by any of the Sellers or
to the direct or indirect guarantee or assumption by any of the Sellers
of
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any obligation of others, including any agreement that has the economic
effect although not the legal form of any of the foregoing;
(vi) agreements relating to the acquisition or
disposition of assets (other than in the ordinary course of business);
(vii) agreements with respect to the lease of real or any
material personal property;
(viii) agreements concerning the management or operation
of any real property;
(ix) broker, distributor, dealer, manufacturer's
representative, sales, agency, sales promotion, advertising, marketing,
consulting, research and development, maintenance, service, and repair
agreements;
(x) license, royalty, or other agreements relating to
Intellectual Property Rights;
(xi) partnership, joint venture, and profit sharing
agreements;
(xii) agreements with any Governmental Entity other than
in the ordinary course of business;
(xiii) agreements relating to the release or disposal of
Hazardous Material;
(xiv) agreements in the nature of a settlement or a
conciliation agreement arising out of any claim asserted by any other
person to the extent still applicable to the Business;
(xv) agreements containing any covenant limiting the
freedom of any of the Sellers to engage in any line of business or
compete with any other person in any geographic area or during any
period of time;
(xvi) powers of attorney granted by any of the Sellers in
favor of any person;
(xvii) agreements of Sellers entered into within the
eighteen (18) months preceding November 1, 1999, and involving total
consideration to Sellers of more than $250,000: (i) providing for a
warranty by Sellers on products or services having a duration in excess
of eighteen (18) months; (ii) providing payment terms for the party
other than any of the Sellers of more than one hundred and twenty (120)
days after the date of sale by Sellers; (iii) providing for potential
liquidated damages payable by Sellers of more than 10% of the monetary
value of the agreement; (iv) containing delivery dates that are not
attainable by Sellers in the ordinary course of business; or (v) fixing
the price to be received by Sellers for a period exceeding twelve (12)
months from November 1, 1999;
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(xviii) Sellers' open purchase orders to vendors
involving total consideration paid to be paid by Sellers of more than
$250,000: (i) that can not be terminated without penalty by the Sellers
on six (6) months or less prior notice to the respective vendors; or
(ii) fixing the price to be paid by Sellers for a period exceeding
twelve (12) months from November 1, 1999; and
(xix) any agreements not made in the ordinary course of
Business.
Fintube has made accurate and complete copies of the Contracts listed
on SCHEDULE 2.1(D) and the selected Contracts described in SCHEDULE 4.1(T),
available to the Purchaser. To the knowledge of the Sellers, each of the
Contracts is a valid and binding agreement of the parties thereto, enforceable
against them in accordance with its terms. None of the Sellers are in breach or
in default of the Contracts, and to the knowledge of the Sellers, no breach or
default exits with respect to any of the other Parties to such Contracts, and no
event has occurred which, after the giving of notice or the passage of time or
otherwise, will result in any such breach or default. Except as described on
SCHEDULE 4.1(T), Fintube has not received notice of any plan or intention of any
other party to any of Contracts to exercise any right of off set with respect
to, or any right to cancel or terminate any of the Contracts, and Fintube does
not know of any fact or circumstance that would justify the exercise by any such
other party of such a right other than the automatic termination of such
Contracts in accordance with their terms. Fintube does not currently
contemplate, or have reason to believe any other Person currently contemplates
any amendment or change to any of the Contracts, which amendment or change could
have a Material Adverse Effect on Fintube.
(u) CUSTOMERS AND SUPPLIERS. SCHEDULE 4.1(U) contains a
complete and accurate list of: (i) the seventeen (17) largest customers of the
Sellers (considered as a whole), together with the volume of the sales made to
each such customer during 1998 and the first nine months of 1999; and (ii) the
twenty (20) largest suppliers of the Sellers (considered as a whole), together
with the volume of purchases made from each such supplier, during 1998 and the
first nine months of 1999. To Fintube's knowledge, none of such customers or
suppliers intends to cease purchasing from, or selling to the successor to the
Business of Sellers, or to materially alter the amount of such purchases or
sales as a result of the transaction contemplated hereby or otherwise.
(v) REAL PROPERTY. Set forth on SCHEDULE 2.1(A) is a list, by
street address, of the Real Property and a summary description of the principal
facilities and structures (if any) located thereon. Except as set forth on
SCHEDULE 4.1(V), there are no persons (other than the Sellers) in possession of
any portion of the Real Property as lessees, tenants at sufferance, or
trespassers, nor does any person (other than the Sellers) have a lease, tenancy,
or other right of occupancy or use of any portion of the Real Property. The Real
Property has full and free access to and from public highways, streets, and
roads, and Fintube has no knowledge of any pending or threatened legal or
administrative proceeding or any other fact or condition which would limit or
result in the termination of such access. To Fintube's knowledge, there exists
no legal or administrative proceeding or court order which might in any way
impede or adversely affect the continued use of the Real Property in the manner
it is currently used by any of the Sellers.
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(i) To the knowledge of the Sellers, all buildings,
improvements, and fixtures situated on the Real Property conform to all
applicable laws, regulations and ordinances, except for any
nonconformance which does not and will not have a Material Adverse
Effect. All the Real Property is zoned for the various purposes for
which such Real Property is being used, and there exists no pending or,
to the knowledge of Fintube, threatened legal or administrative
proceeding which might adversely affect the validity of such zoning.
(ii) The Real Property is connected to and serviced by
water, sewage disposal, gas, telephone, and electric facilities which
are adequate for the current use of the Real Property and, to the
knowledge of Fintube, are in compliance with all applicable laws,
regulations or ordinances.
(iii) Neither the whole nor any part of the Real Property
is subject to any pending legal or administrative proceeding for
condemnation or other taking by any Governmental Authority, and, to the
knowledge of Fintube, no such condemnation or other taking is
contemplated or threatened.
(iv) Other than possible Liens incurred by the owners of
the downtown Tulsa warehouse facility, there are no unpaid charges,
debts, liabilities, claims, or obligations arising from the
construction, occupancy, ownership, use, or operation of the Real
Property, or the buildings, improvements, or fixtures situated thereon,
or the business operated thereon, which could give rise to any
mechanic's or materialmen's or other statutory lien against the Real
Property, or the buildings, improvements, or fixtures situated thereon,
or any part thereof, for which any of the Sellers will be responsible.
(v) To Sellers' knowledge, the buildings, improvements,
and fixtures situated on the Real Property are in good condition and
repair (ordinary wear and tear excepted).
(vi) Except as disclosed on SCHEDULE 4.1(V), to Sellers'
knowledge, the Real Property is not within any area determined by the
Department of Housing and Urban Development to be flood prone under the
Federal Flood Disaster Protection Act of 1973.
(w) LEASES. SCHEDULE 4.1(W) contains a true and complete list
of all leases of real and personal property to which any of the Sellers are a
party. Each such lease is valid, binding and enforceable in accordance with its
terms and is in full force and effect.
(x) INVENTORY. The Inventory reflected on the balance sheet of
the Sellers included in the Sellers' Financial Statements, and all other
inventory acquired by or for the Sellers since the date thereof, consists of
items of a quality, quantity and condition usable or salable in the ordinary
course of business by the Sellers, except for obsolete, unusable, not readily
salable or below-standard quality items, all of which have been either written
off or written down to net realizable value in the Sellers Financial Statements.
Finished goods in such inventories conform to the applicable specifications, all
Sellers' warranties given in connection with the sales of such goods, and under
applicable laws, and are free from defects in workmanship and material.
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(y) SELLERS' EMPLOYEE BENEFIT PLANS.
(i) SCHEDULE 4.1(Y) sets forth a complete and accurate
list of all Sellers' Employee Benefit Plans. Except for the Sellers'
Employee Benefit Plans, neither Sellers nor any of the Subsidiaries has
any employee benefit plans that are subject to ERISA.
(ii) There is no material violation of ERISA with respect
to the filing of applicable reports, documents and notices regarding
any Sellers' Employee Benefit Plan with any Governmental Authority or
the furnishing of such documents to the participants or beneficiaries
of the Sellers' Employee Benefit Plans.
(iii) With respect to the Sellers' Employee Benefit
Plans, there exists no condition or set of circumstances that could
reasonably be expected to result in liability that is reasonably likely
to have a Material Adverse Effect on Sellers or any of the Subsidiaries
under ERISA, the Code or any applicable law.
(iv) With respect to the Sellers' Employee Benefit Plans,
individually and in the aggregate, there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise
properly footnoted in accordance with GAAP, on the Sellers Financial
Statements, that are reasonably likely to have a Material Adverse
Effect on Sellers or any of the Subsidiaries.
(v) Neither Sellers nor any other Person that together
with Sellers would be treated as a single employer under Section 414 of
the Code, is a participant in or has ever contributed to any
multi-employer plan within the meaning of ERISA. Sellers and all such
other Persons have paid and discharged promptly when due all
liabilities and obligations arising under ERISA or any provision of the
Code of a character which if unpaid or unperformed might result in the
imposition of a lien on the Assets.
(vi) The Sellers' Employee Benefit Plans have been
maintained, in all material respects, in accordance with their terms
and in accordance with all applicable federal and state laws, and
neither Sellers, nor any "party in interest" or "disqualified person"
with respect to the Sellers' Employee Benefit Plans, has engaged in any
"prohibited transaction" within the meaning of Section 4975 of the Code
or Section 406 of ERISA, which has or will result in any penalty or
tax.
(vii) Neither the execution and delivery of this
Agreement nor the consummation of the transaction contemplated hereby
will result in any payment becoming due to any employee or group of
employees of Sellers or any of the Subsidiaries.
(viii) Seller has made available to Purchaser accurate
and complete copies of the Sellers' Employee Benefit Plans (and, if
applicable, the related trust agreements) and all amendments thereto
and any written interpretations thereof distributed to plan
participants together with (i) the three most recent annual reports
(Form 5500 including, if applicable, Schedule B thereto) prepared in
connection with any Sellers' Employee Benefit Plan and (ii)
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the most recent actuarial valuation report prepared in connection with
any Sellers' Employee Benefit Plan.
(ix) Except as otherwise identified in SCHEDULE 4.1(Y),
(i) no Sellers' Employee Benefit Plan is maintained in connection with
any trust described in Section 501(c)(9) of the Code, (ii) no Sellers'
Employee Benefit Plan is subject to Title IV of ERISA or to the minimum
funding standards of ERISA and the Code, and (iii) no Sellers' Employee
Benefit Plan provides post-retirement medical or health coverage except
to the extent required by COBRA.
(x) Each Sellers' Employee Benefit Plan which is intended
to be qualified under Section 401(a) of the Code is so qualified, and
each trust forming a part thereof is exempt from federal income taxes
pursuant to Section 501(a) of the Code. Sellers have made available to
Purchaser accurate and complete copies of the most recent IRS
determination letters with respect to each such Sellers' Employee
Benefit Plan.
(xi) There are no pending, or to the knowledge of
Sellers, threatened claims against any Sellers' Employee Benefit Plan
by any current or former employee or beneficiary covered under any
Sellers' Employee Benefit Plan (other than routine claims for benefits
in the ordinary course).
(z) EMPLOYMENT CONTRACTS. Except as set forth in SCHEDULE
4.1(Z):
(i) none of the Sellers is subject to or obligated under
any consulting, employment, severance, termination or similar
arrangement, or any bonus, stock option, stock purchase or similar plan
or other arrangement for the benefit of its employees or any other
Person; and
(ii) no employee of any of the Sellers, or any other
Person, owns, or has any right granted by Fintube, to acquire any
interest in any of the Assets.
(aa) LABOR MATTERS.
(i) Sellers have previously provided to Purchaser a
complete and accurate list of all of the employees of the Sellers
showing each such employee's total compensation paid to such employee
during 1998 and 1999.
(ii) SCHEDULE 4.1(AA) contains a true and correct list of
all collective bargaining agreements and other labor agreements
affecting any of the Sellers. Except as set forth in SCHEDULE 4.1(AA):
(a) such agreements are in full force and effect; (b) none of the
Sellers is in breach or default under any of such agreements; and (c)
there is no pending or, to Fintube's knowledge, threatened labor
dispute, grievance, strike, work slowdown, or work stoppage by the
employees of any of the Sellers.
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(iii) Except as set forth in SCHEDULE 4.1(AA), the
Sellers are in material compliance with all laws, rules, regulations
and orders relating to the employment of labor, including all such
laws, rules, regulations and orders relating to wages, hours,
discrimination, sexual harassment, civil rights, safety and health,
workers' compensation and the collection and payment of withholding
taxes, Social Security taxes, and similar Taxes.
(iv) Except as set forth in SCHEDULE 4.1(AA), there is no
pending or, to the knowledge of Fintube, threatened administrative or
legal proceeding against or involving any of the Sellers by or before,
and the Sellers are not subject to any judgment, order, writ,
injunction, or decree of or inquiry from, the National Labor Relations
Board, the Equal Employment Opportunity Commission, the Department of
Labor, or any other Governmental Authority in connection with any
current, former, or prospective employee of any of the Sellers.
(v) Management of the Sellers believes that relations
with the employees of the Sellers are satisfactory.
(vi) All employees of any of the Sellers who have or who
have had reasonable access to any secret, confidential, or proprietary
information relating to the Assets or the Business have executed
written confidentiality agreements with Fintube pursuant to which such
employees have agreed to maintain in confidence secret, confidential,
or proprietary information learned or acquired in the scope of their
employment.
(vii) Since the enactment of the WARN Act, Seller has not
effectuated a "plant closing" or "mass layoff," as defined in the WARN
Act, at any site of employment.
(bb) SALES REPRESENTATIVES, DEALERS AND DISTRIBUTORS. Except as
set forth in SCHEDULE 2.1(D), none of the Sellers is a party to any contract or
agreement with any Person under which such other Person is a sales agent,
representative, dealer or distributor of any of the products or services of the
Sellers.
(cc) ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE
4.1(CC), all of the accounts, notes and loans receivable that have been recorded
on the books of the Sellers are bona fide, have arisen in the ordinary course of
business, and represent accounts, notes and loans receivable validly due for
goods sold or services rendered, and are not subject to any valid defense,
counterclaim or set off. Such accounts, notes and loans receivable, taken as a
whole, are good and collectible in all material respects in the ordinary course
of business, without resort to litigation, at the aggregate recorded amounts
thereof, net of any applicable allowances for doubtful accounts reflected in the
Sellers Financial Statements.
(dd) TAXES. The Sellers have: (i) timely filed all foreign,
federal, state, provincial and local returns, declarations, reports, estimates,
information returns and statements required to be filed by them or on their
behalf with respect to any Taxes ("TAX RETURNS"); (ii) timely paid all Taxes
that are due and payable for which any of the Sellers may be liable, including
any applicable sales taxes in Oklahoma and any other states in which any of the
Sellers are required to pay sales taxes; (iii)
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complied with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes; and (iv) timely withheld from employee wages and paid
over to the proper Governmental Authorities all amounts required to be so
withheld and paid over. Except as set forth in SCHEDULE 4.1(DD): (i) there are
no Liens on any of the Assets for unpaid Taxes, other than Liens for Taxes not
yet due and payable; (ii) no audits or other administrative or court proceedings
are presently pending with regard to any foreign, federal, state, provincial or
local Taxes for which Sellers may be liable; (iii) there are no outstanding
subpoenas or requests for information by any taxing authority with respect to
any Taxes and no agreements in effect to extend the time to file any material
Tax Return or the period of limitations for the assessment or collection of any
Taxes for which any of the Sellers may be liable; (iv) Fintube has made
available to Purchaser complete copies of all material Tax Returns filed by any
of the Sellers with respect to any Taxes and all tax audit reports, work papers,
statements of deficiencies, and closing or other agreements with respect thereto
with respect to tax years 1998, 1997, 1996 and 1995; and (v) the books and
records of any of the Sellers, including the material Tax Returns, contain
accurate and complete information with respect to: (A) all material tax
elections in effect with respect to the Sellers; and (B) the current tax basis
of the Assets of any of the Subsidiaries.
(ee) WARRANTIES, ORDERS, COMMITMENTS AND RETURNS. SCHEDULE
4.1(EE) contains true and correct copies of Sellers' general terms and
conditions of sale since September 1, 1994, including the warranties contained
in Sellers' general terms and conditions. Except as set forth in SCHEDULE
4.1(EE), all accepted and unfilled orders for the sale of products and the
performance of services entered into by the Sellers and all outstanding
contracts or commitments for the purchase of supplies, materials and services
were made in bona fide transactions in the ordinary course of business. Except
as set forth in SCHEDULE 4.1(EE), to the knowledge of Fintube, there are no
claims against any of the Sellers to return any products by reason of alleged
over-shipments, defective products or otherwise, or of products in the hands of
customers, retailers or distributors under an understanding that such products
would be returnable.
(ff) POWER OF ATTORNEY; AUTHORIZED SIGNATORS. SCHEDULE 4.1(FF)
lists: (i) the names and addresses of all persons holding powers of attorney on
behalf of any of the Subsidiaries; and (ii) the names of all banks and other
financial institutions in which any of the Sellers currently have one or more
bank accounts or safe deposit boxes, along with the account numbers and the
names of all persons authorized to draw on such accounts or to have access to
such safe deposit boxes.
(gg) BOOKS AND RECORDS. All books, records and files of the
Sellers relating to the Assets: (i) have been prepared, assembled and maintained
in accordance with usual and customary policies and procedures; and (ii) fairly
and accurately reflect the ownership, use, enjoyment and operation by the
Sellers of the Assets and the Business.
(hh) YEAR 2000 COMPLIANCE. None of the Sellers nor the Business
will suffer a Material Adverse Effect attributable to a lack of Year 2000
Compliance in any system, process or equipment licensed or owned by any of the
Sellers. For purposes of this subsection,"YEAR 2000 COMPLIANCE" means a computer
will read and correctly interpret the year "00" as the year "2000", thus
avoiding any material failure in the computer systems of any of the Sellers due
to the inability to correctly interpret "00" or "2000". Sellers have a Year 2000
Compliance Plan which sets forth the
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inventory, assessment and remediation of all hardware, software, processes and
embedded systems used by Sellers in connection with the Assets and the Business.
Sellers' Year 2000 Compliance Plan (i) encompasses the three primary areas:
business systems (both hardware and software), communications equipment and
manufacturing equipment; (ii) includes assessment (identifying systems which
need change), remediation (making changes in the software or hardware),
verification (testing the changes) and implementation of Year 2000 compliant
systems. Sellers have received written responses from each of their significant
suppliers regarding the state of their Year 2000 compliance readiness. With
respect to any significant suppliers who have identified a concern, Sellers have
addressed such concerns. None of the Sellers will suffer a Material Adverse
Effect attributable to a lack of Year 2000 compliance by any of Sellers'
significant suppliers.
(ii) ILLEGAL PAYMENTS. To the knowledge of Fintube, none of the
Sellers nor any director, officer, employee, or agent of any of the Sellers has,
directly or indirectly, paid or delivered any fee, commission, or other sum of
money or item of property, however characterized, to any broker, finder, agent,
government official, or other person, in the United States or any other country,
in any manner related to the Assets, or the Business, which any of the Sellers
or any such director, officer, employee, or agent knows or has reason to believe
to have been illegal under any applicable law, including the Foreign Corrupt
Practices Act and the Israeli Anti Boycott Law.
(jj) NOT A FOREIGN PERSON. Except as set forth on SCHEDULE
4.1(JJ), none of the Sellers is a "foreign person" within the meaning of the
Internal Revenue Code, as amended (hereinafter called the "CODE"), Sections 1445
and 7701 (i.e. none of the Sellers is a non-resident alien, foreign corporation,
foreign partnership, foreign trust or foreign estate as those terms are defined
in the Code and regulations promulgated thereunder).
4.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND LONE STAR.
Purchaser and Lone Star hereby represent and warrant to Fintube as follows:
(a) ORGANIZATION OF PURCHASER. Lone Star: (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware; and (ii) has the requisite power and authority to own, lease
and operate its properties and to conduct its business as it is presently being
conducted. Purchaser: (i) is a corporation duly organized, validly existing and
in good standing under the laws of the State of Oklahoma; and (ii) has the
requisite power and authority to own, lease and operate its properties and to
conduct its business as it is presently being conducted.
(b) AUTHORITY. Lone Star and Purchaser have full power and
authority to execute and deliver this Agreement and the Ancillary Document and
to perform their respective obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement and the Ancillary Documents by Lone
Star and Purchaser have been duly authorized by all necessary corporate and
other action, and no further corporate or other action is necessary on the part
of Lone Star and Purchaser for Lone Star and Purchaser to execute and deliver
this Agreement and the Ancillary Documents, and to consummate and perform their
obligations hereunder and thereunder.
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(c) VALIDITY AND BINDING EFFECT. This Agreement has been duly
executed and delivered on behalf of Lone Star and Purchaser and constitutes, and
each Ancillary Document executed or to be executed by Lone Star and Purchaser
has been, or when executed will be, duly executed and delivered by Lone Star and
Purchaser (as applicable) and constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of Lone Star and Purchaser
(as applicable), enforceable against Lone Star and Purchaser (as applicable) in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles,
regardless of whether enforceability is considered a proceeding at law or in
equity.
(d) NO VIOLATIONS. The execution and delivery of this Agreement
and the Ancillary Documents do not, and the consummation of the transaction
contemplated hereby and thereby and compliance by Lone Star and Purchaser with
the provisions hereof and thereof will not, conflict with, result in any
violation of or default (with or without notice or lapse of time or both) under,
give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a material benefit under, any provision of: (i) the
Certificate of Incorporation or Bylaws of Lone Star or the Purchaser; (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or other contract, agreement or instrument
applicable to Lone Star or the Purchaser; or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Lone Star or the
Purchaser or any of its properties or assets.
(e) CONSENTS AND APPROVALS. No consent, approval, order or
authorization of, registration, declaration or filing with, or permit from, any
Governmental Authority is required by or with respect to Lone Star or Purchaser
in connection with the execution and delivery of this Agreement or the Ancillary
Document by Lone Star and Purchaser or the consummation by Lone Star and
Purchaser of the transaction contemplated hereby or thereby, except for the
filing of a pre-merger notification report by Lone Star under the HSR Act and
the expiration or termination of the applicable waiting period thereunder. No
Third Party Consent is required by or with respect to Lone Star or Purchaser in
connection with the execution and delivery of this Agreement or the consummation
of the transaction contemplated hereby.
(f) LITIGATION. There is no litigation, proceeding or
investigation pending or, to the knowledge of Lone Star, threatened against or
affecting Lone Star or Purchaser that questions the validity or enforceability
of this Agreement or any other document, instrument or agreement to be executed
and delivered by Lone Star or Purchaser in connection with the transaction
contemplated hereby.
(g) LONE STAR COMMON STOCK. Subject to the accuracy of the
representations made by the Designated Recipients in their respective Investment
Letters, all of the shares of Lone Star Common Stock to be issued to Fintube or
to the Designated Recipients in accordance herewith will be offered, issued,
sold by Lone Star and delivered by Purchaser to Fintube or to the Designated
Recipients in compliance with all applicable state and federal laws concerning
the issuance of securities. All of the shares of Lone Star Common Stock to be
issued to Fintube or to the Designated Recipients, at Closing, shall be freely
tradeable by the Designated Recipients within one hundred and twenty (120) days
after Closing (subject to possible extension if the applicable registration
statement
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is reviewed by the SEC), as more fully set out in the Stock Registration
Agreement attached hereto as EXHIBIT 2.3(B).
(h) SECURITIES LAWS REQUIREMENTS. Lone Star meets, and shall at
the Closing meet, all of the "Registrant Requirements" and "Transaction
Requirements" under Registration Statement Form S-3 under the Securities Act for
the registration for resale by Fintube or the Designated Recipients of the
shares of Lone Star Common Stock issued at the Closing to Fintube or the
Designated Recipients.
4.3 BROKERS' FEES.
(a) With the exception of any Brokers' Fees (as herein defined)
which will be due to Prudential Securities Incorporated with respect to the
transaction contemplated hereby, whether or not consummated (the cost of which
shall be borne by Sellers), Sellers represent and warrant to Purchaser that
neither Sellers nor any of their Affiliates or Representatives have incurred any
liability for brokerage fees, finder's fees, agent's commissions, or other
similar forms of compensation and related expense reimbursement (collectively,
"BROKERS' FEES") in connection with or in any way related to the transaction
contemplated by this Agreement. Sellers agree to indemnify, defend and hold
Purchaser, Lone Star and their respective Affiliates and Representatives
(collectively, the "PROTECTED PERSONS") harmless from any claim or demand for
any Brokers' Fees or other compensation by any broker, finder, agent or similar
intermediary claiming to have been employed by or on behalf of any of the
Sellers or any of their respective Affiliates (collectively, the "BROKERS"), and
to bear the cost of attorneys' fees and expenses incurred by any Protected
Person in defending against any such claim. Sellers' agreement to indemnify,
defend and hold harmless the Protected Persons and to bear the cost of
attorneys' fees and expenses pursuant to this Section 4.3(a) for any Brokers'
Fees relating to any Brokers employed by or purportedly employed by Sellers or
any of their respective Affiliates (i) shall not be diminished by any financial,
business or other relationship between any Protected Person and any Broker and
(ii) may be asserted by any Protected Person as a Escrow Claim against the
Escrow without regard to the Basket.
(b) Purchaser and Lone Star represent and warrant to Fintube
that none of Purchaser, Lone Star nor any of their Affiliates or Representatives
have incurred any liability for Brokers' Fees in connection with or in any way
related to the transaction contemplated by this Agreement. Purchaser and Lone
Star agree to indemnify, defend and hold Sellers and their respective Affiliates
and Representatives (collectively, the "FINTUBE PROTECTED PERSONS") harmless
from any claim or demand for any Brokers' Fees or other compensation by any
broker, finder, agent or similar intermediary claiming to have been employed by
or on behalf of any of Purchaser, Lone Star or any of their respective
Affiliates (collectively, the "LONE STAR BROKERS"), and to bear the cost of
attorneys' fees and expenses incurred by any Fintube Protected Person in
defending against any such claim. Purchaser's and Lone Star's agreement to
indemnify, defend and hold harmless the Fintube Protected Persons and to bear
the cost of attorneys' fees and expenses pursuant to this Section 4.3(b) for any
Lone Star Brokers' Fees relating to any Brokers employed by or purportedly
employed by Purchaser, Lone Star or any of their respective Affiliates (i) shall
not be diminished by any financial, business or other relationship between any
Fintube Protected Person and any Broker and (ii) may be
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asserted by any Fintube Protected Person as an Escrow Claim against the Escrow
without regard to the Basket.
ARTICLE V
COVENANTS
5.1 CONDUCT OF BUSINESS BY FINTUBE PENDING CLOSING. Fintube covenants
and agrees with Purchaser that, from the date of this Agreement until the
Closing Date, Fintube: (i) will conduct the Business, and will cause each of the
Sellers to conduct their businesses, in the ordinary and usual course consistent
with past practices; (ii) will use its reasonable best efforts to preserve,
maintain, and protect the Assets; and (iii) will use its reasonable best efforts
to preserve intact the Business, to keep available the services of the employees
of the Business, and to maintain existing relationships with licensors,
licensees, suppliers, contractors, distributors, customers, and others having
business relationships with the Business. Notwithstanding the preceding
sentence, Fintube covenants and agrees with Purchaser that, except as
specifically contemplated in this Agreement, from the date of this Agreement
until the Closing Date, without the prior written consent of Purchaser:
(a) Fintube will not, and will not permit any of the Sellers
to: (i) amend its Certificate of Limited Partnership or Operating (or LLC)
Agreement or other governing documents; (ii) issue, sell or agree to issue or
sell any securities or any rights, options or warrants to acquire any
securities; (iii) purchase, cancel, retire, redeem or otherwise acquire any of
its outstanding securities; (iv) merge or consolidate with, or transfer all or
substantially all of its assets to, another business entity; (v) liquidate,
wind-up or dissolve (or suffer any liquidation or dissolution); (vi) declare,
set aside or pay any non-cash distributions with respect to its equity capital;
or (vii) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing.
(b) Fintube will not, and will not permit any of the Sellers
to: (i) acquire any corporation, partnership or other business entity or any
interest therein; (ii) sell, lease or sublease, transfer or otherwise dispose
of, mortgage, pledge or otherwise encumber any assets that have a value at the
time of such sale, lease, sublease, transfer, disposition or encumbrance in
excess of $50,000 individually, or $100,000 in the aggregate (other than sales
of products in the ordinary course of business); (iii) make any material loan,
advance or capital contribution to, or investment in, any Person (other than
loans or advances in the ordinary course of business); (iv) enter into any
Contracts not terminable by one of the Sellers upon notice of 30 days or less
without penalty or other obligation (other than agreements relating to the sale
or purchase of goods, entered into in the ordinary course of business,
consistent with past practice); (v) enter into any lease, contract, agreement,
commitment, arrangement, or transaction relating to the Business, except in the
ordinary course of business consistent with past practice; (vi) amend, modify,
or change any existing lease, contracts or agreement relating to the business,
other than in the ordinary course of business consistent with past practice;
(vii) make any capital expenditures in excess of $50,000, or total capital
expenditures in excess of $100,000 in the aggregate, except as set forth in
SCHEDULE 5.1(B); or (viii) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing.
(c) Fintube will not, and will not permit any of the Sellers
to: (i) incur any indebtedness for borrowed money, except in the ordinary course
of business; (ii) incur any other
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obligation or liability (other than liabilities incurred in the ordinary course
of business); (iii) assume, endorse (other than endorsements of negotiable
instruments in the ordinary course of business), guarantee or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
liabilities or obligations of any Person; or (iv) enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing.
(d) Except with the consent of Purchaser (which consent shall
not be unreasonably withheld), Fintube will not, and will not permit any of the
Sellers to enter into, or otherwise become liable or obligated under or pursuant
to: (i) any employee benefit, pension or other plan (whether or nor subject to
ERISA); (ii) any incentive or deferred compensation plan or arrangement or other
fringe benefit plan; or (iii) any consulting, employment, severance, termination
or similar agreement with any Person, or amend, extend or terminate any such
plan, arrangement or agreement. Except for payments made pursuant to any
Sellers' Employee Benefit Plan or any plan, agreement or arrangement described
in SCHEDULE 4.1(Y), Fintube will not permit any of the Sellers to grant or
otherwise become liable for or obligated to pay, any severance or termination
payments, bonuses or increases in compensation or benefits (other than payments,
bonuses or increases that are mandated by the terms of agreements existing as of
the date hereof which are described in SCHEDULE 4.1(Z) or that are paid in the
ordinary course of business, consistent with past practices), or to forgive any
indebtedness of any employee, representative, dealer, distributor or consultant,
or enter into any contract, agreement, commitment or arrangement to do any of
the foregoing.
(e) Fintube will, and will cause the Sellers to, keep and
maintain accurate books, records and accounts in accordance with GAAP.
(f) Fintube will not create, and will not permit any of the
Sellers to incur or assume any Lien on any of the Assets, except for Permitted
Liens.
(g) Fintube will, and will cause the Sellers to: (i) pay all
Taxes, assessments and other governmental charges imposed upon any of their
assets or with respect to their franchises, business, income or assets before
any penalty or interest accrues thereon; (ii) pay all claims (including claims
for labor, services, materials and supplies) that have become due and payable
and which by law have or may become a Lien upon any of their assets prior to the
time when any penalty or fine shall be incurred with respect thereto or any such
Lien shall be imposed thereon; and (iii) comply in all material respects with
the requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority, obtain or take all Governmental Actions necessary in the
operation of their businesses, and comply with and enforce the provisions of all
Contracts, including paying when due all rentals, royalties, expenses and other
liabilities relating to their business or assets; provided, however, that the
Sellers may contest the imposition of any such Taxes, assessments and other
governmental charges, any such claim, or the requirements of any applicable law,
rule, regulation or order or any Contracts, if done in good faith by appropriate
proceedings and if adequate reserves are established in accordance with GAAP or
as may be determined as sufficient by Fintube's general partner.
(h) Fintube will, and will cause each of the Sellers at all
times to preserve and keep in full force and effect its legal existence and all
material rights and franchises.
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(i) Fintube will maintain in full force and effect the policies
or binders of insurance referred to in SCHEDULE 4.1(S).
(j) Fintube will not and will not permit any of the Sellers to
engage in any practice, take any action or permit by inaction any of the
representations and warranties contained in Section 4.1 to become untrue or that
might result in any of the conditions set forth in this Agreement not being
satisfied.
5.2 ACCESS TO ASSETS, PERSONNEL AND INFORMATION.
(a) From the date hereof until the Closing Date, Fintube will
afford to Purchaser and the Purchaser Representatives, at Purchaser's sole risk
and expense, reasonable access to any of the assets, books and records,
contracts, employees, representatives, agents, consultants and facilities of the
Sellers, and shall, upon request, furnish to Purchaser, at Purchaser's expense,
a copy of any file, book, record, report, contract, permit, correspondence, or
other written information, document or data concerning the Assets, the Business,
or any of the Subsidiaries that is within the possession or control of any of
the Sellers.
(b) Purchaser and the Purchaser Representatives shall have the
right to make an environmental and physical assessment of the assets of the
Sellers and, in connection therewith, shall have the right to enter and inspect
such assets and all buildings and improvements thereon and conduct such tests,
examinations, investigations and studies as Purchaser and Fintube deem
necessary, desirable or appropriate for the preparation of engineering or other
reports relating to such assets, their condition and the presence of Hazardous
Materials. Fintube shall be provided not less than 48 hours prior notice of such
activities, and the Representatives shall have the right to witness all such
tests and investigations. Notice to Fintube shall contain a written description
of the test, examination, assessment or study contemplated by Purchaser. Fintube
shall use reasonable efforts to assist Purchaser in obtaining permission to
conduct such an assessment with respect to any property or facility which is
leased by Sellers. Purchaser shall (and shall cause the Purchaser
Representatives to) keep any data or information acquired by any such
examinations and the results of any analyses of such data and information
strictly confidential prior to the Closing Date, and prior to the Closing Date
will not (and will cause the Purchaser Representatives not to) disclose any of
such data, information or results to any Person unless otherwise required by law
or regulation, and then only after written notice to Fintube of the
determination of the need for disclosure. Purchaser shall indemnify, defend and
hold Fintube and the Sellers' Representatives harmless from and against any and
all claims to the extent arising out of or as a result of the activities of
Purchaser and the Purchaser Representatives with respect to the Assets in
connection with conducting such environmental and physical assessment, except to
the extent of and limited by the gross negligence or willful misconduct of
Fintube or any Sellers' Representative.
(c) Fintube will cause the Sellers' Representatives to
cooperate in all reasonable respects with Purchaser and the Purchaser
Representatives in connection with Purchaser's examinations, evaluations and
investigations described in this Section 5.2.
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(d) Except as required by law or regulation, Purchaser will not
(and will cause the Purchaser Representatives not to) use any information
obtained pursuant to this Section 5.2 for any purpose unrelated to the
consummation of the transaction contemplated by this Agreement.
5.3 PAYMENT OF EXPENSES. Except as otherwise set forth in this
Agreement, each of Purchaser and Sellers shall bear its own expenses, including
fees of agents, representatives, counsel, financial advisors and accountants
incurred in connection with the transaction contemplated herein, whether or not
the Closing occurs. To the extent any provision of this Agreement refers to any
fee, expense or other cost to be borne by Fintube or Sellers, such expense shall
not be paid out of or credited against the cash accounts of Fintube being
acquired by Purchaser pursuant to this Agreement, but shall instead be borne out
of the proceeds receivable by Fintube from the sale of the Assets pursuant to
this Agreement.
5.4 PUBLIC ANNOUNCEMENTS. Prior to the Closing, Fintube and Purchaser
shall consult with each other before issuing any press release or otherwise
making any public statement with respect to the transaction contemplated by this
Agreement and shall not issue any press release or make any such public
statement prior to obtaining the approval of the other Party, unless required by
applicable law or the regulations of any stock exchange on which the securities
of the disclosing Party are then listed, but only after prior notice of such
proposed publication to the other Party.
5.5 NO SOLICITATION.
(a) Immediately following the execution of this Agreement,
Fintube will, and will cause the Subsidiaries and the Representatives to,
terminate any and all existing activities, discussions and negotiations with
third parties (other than Lone Star, the Purchaser and the Purchaser
Representatives) with respect to any possible transaction involving the sale of
any material portion of assets or the merger or other business combination of
any of the Sellers with or into any such third party or the sale of any of the
partnership interests in Fintube (Any existing or future proposal for any such
transaction, an "ACQUISITION PROPOSAL").
(b) From the date of this Agreement to the Closing Date,
Fintube will not, and will not permit the Subsidiaries or the Sellers'
Representatives to, solicit, initiate or knowingly encourage the submission of
any offer or proposal to acquire all or any material portion of the Business,
Assets (other than the transaction contemplated by this Agreement).
(c) From the date of the Agreement to the Closing Date, or the
date this Agreement is terminated, whichever date first occurs, Fintube will
not, and will not permit the Sellers or their Representatives to disclose any
information relating to Sellers or the Assets to any third party (other than
Purchaser, Lone Star and the Purchaser Representatives) that is considering
making or has made an Acquisition Proposal.
5.6 ADDITIONAL ARRANGEMENTS. Subject to the terms and conditions herein
provided, each of Fintube and Purchaser shall take, or cause to be taken, all
action and shall do, or cause to be done, all things necessary, appropriate or
desirable under the HSR Act and any other applicable laws and regulations or
under applicable governing agreements, to consummate and make effective the
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transaction contemplated by this Agreement, including using such Party's
reasonable efforts to obtain all necessary waivers, consents and approvals and
effecting all necessary registrations and filings. Each of Fintube and Purchaser
shall take, or cause to be taken, all action or shall do, or cause to be done,
all things necessary, appropriate or desirable to cause the covenants and
conditions applicable to the transaction contemplated hereby, to be performed or
satisfied as soon as practicable. In addition, if any Governmental Authority
shall have issued any order, decree, ruling or injunction, or taken any other
action that would have the effect of restraining, enjoining or otherwise
prohibiting or preventing the consummation of the transaction contemplated
hereby, each of Fintube and Purchaser shall use all reasonable efforts to have
such order, decree, ruling or injunction or other action declared ineffective as
soon as practicable.
5.7 FURTHER ASSURANCES. From time to time after the Closing, each of
the Parties will execute and deliver such further instruments of conveyance and
transfer and take such other action as the other Party may reasonably request in
order more effectively to convey and transfer the Assets and to assist in
completing the transaction contemplated by this Agreement.
5.8 EMPLOYEES.
(a) On the Closing Date, Sellers shall terminate each Person
who is an employee of any of the Sellers immediately prior to the Closing Date
(collectively, the "EMPLOYEES"). On the Closing Date, Purchaser shall hire each
of such terminated Employees, at the same or higher level of compensation as
paid by Sellers immediately prior to Closing. Purchaser shall not be required to
continue the employment of any such Person for any particular time period.
Sellers and Purchaser agree that as of the Closing Date, Purchaser shall assume
each Sellers' Employee Benefit Plan maintained by Sellers, including Sellers'
401(k) profit sharing plan, subject to the approval of any insurance company or
other third-party provider of the Sellers' Employee Benefit Plans. Purchaser
shall not be required to continue any Sellers' Employee Benefit Plan for any
particular time period.
(b) Purchaser further agrees that the Employees shall be
credited for their service with the Sellers before the Closing Date for purposes
of eligibility and vesting in the employee plans provided by Purchaser on and
after the Closing Date, including vacation, severance pay, 401(k), pension and
disability, health insurance plans, and other employee welfare benefit plans. In
determining the number of days of vacation to which Employees will be entitled,
service with the Sellers before the Closing Date shall be combined with service
with Purchaser and its Affiliates on and after the Closing Date. Purchaser shall
credit the Employees as of the Closing Date with the number of sick days which
each of such Employees would have earned as an employee of Purchaser having the
same amount of service as each of such Employees shall have with the Sellers as
of the Closing Date. The Employees' benefits under the group health plans
provided by Purchaser on and after the Closing Date shall not subject the
Employees to any new exclusions for pre-existing conditions or waiting periods,
but Purchaser may continue to impose any such exclusions and waiting periods in
effect on the Closing Date on those Employees then subject to them.
(c) Purchaser shall fulfill all coverage continuation
obligations imposed by Section 4980B of the Code and Section 601 of ERISA with
respect to all Employees and all former employees of Sellers who terminate
employment with Sellers on, before, or immediately after the
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Closing Date, and all other individuals covered by Sellers' group health plans
who are entitled to continuation rights under the Code or ERISA, but only with
respect to claims incurred after the Closing (within the meaning of Section
5.8(e)).
(d) Upon adoption of Sellers' group health plans, Purchaser:
(i) shall cover all Employees covered under Sellers' group health plans and
Sellers' former employees, with continuation coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), and their
dependents (if applicable); (ii) shall provide such coverage effective as of the
Closing; (iii) shall provide benefits and reimbursements which as of the Closing
Date are no less favorable than the benefits and reimbursements afforded under
Sellers' group health plans; and (iv) shall otherwise ensure that there will be
no loss of coverage (as such term is used in COBRA) by any such employee covered
by Seller's group health plans as of the Closing or by any former employee of
Sellers with COBRA continuation coverage. Purchaser shall not be required to
continue any Sellers' group health plan for any particular time period. SCHEDULE
5.8(D) contains a list of: (i) all individuals who have elected or who are
eligible to elect COBRA continuation coverage under any of the Sellers' group
health plans; and (ii) the dates of each qualifying event and COBRA continuation
coverage periods for each such individual. Purchaser shall comply with all
provisions of federal and state law relating to the continuation of group health
plan benefits for Employees and former employees of Sellers (if applicable),
including, without limitation, provisions of COBRA continuation coverage notices
to those Employees and "qualified beneficiaries" (as defined under Code Section
4980B) who are entitled to such notices as a result of the transaction
contemplated hereby.
(e) Sellers will be responsible for all premiums, contributions
and other liabilities for benefits accrued and claims incurred but not yet paid
as of Closing under any employee welfare plan (as defined in Section 3(1) of
ERISA), any employee pension plan (as defined in Section 3(2) of ERISA) or any
other employee benefit plan, program or arrangement of Sellers which provides
benefits for Employees, their eligible dependents or their beneficiaries, and
for the payment of any wages and benefits accrued prior to or as of Closing
(excluding Sellers' 401(k) profit sharing plan, COBRA compliance obligations
with respect to Employees and former employees as set forth in Sections 5.8(c)
and 5.8(d) above, employee bonus plans, vacation benefits, sick leave benefits,
personal days and similar paid time off, in each such case accrued prior to
Closing and included on the Closing Statement as a current liability, which will
be assumed by Purchaser at Closing). A claim will be deemed incurred, in the
case of medical (other than hospitalization), dental or other group health plan
benefits, when the services that are the subject of the claim are performed. In
the case of hospitalization benefits, a claim will be deemed incurred on the
date that hospitalization begins, and claims for hospitalization which began
before the Closing will be the responsibility of Sellers even if such
hospitalization continues after the Closing. After the Closing and arising
solely from the employment relationship of the Employees by Purchaser, Purchaser
will be responsible with respect to all liabilities which accrue after the
Closing with respect to the Employees, including liabilities for benefits which
accrue or which become payable after the Closing pursuant to the terms of
Purchaser's benefit plans with respect to any of the Employees and which relate
to or arise from the employment of the Employees by Purchaser, which shall
include any obligation which Purchaser may have with respect to payment of any
benefits which become payable under Purchaser's benefit plans after the Closing,
and for the payment of any wages which accrue after the Closing, all severance
or other
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termination related obligations to Employees which accrue after the Closing as
may be required by applicable law or otherwise, and all other obligations of any
kind whatsoever to Employees with respect to their services as employees of
Purchaser. After the Closing, Purchaser will also be responsible for all
liabilities for employee bonus plans, vacation benefits, sick leave benefits,
personal days and similar paid time off of the Employees and Sellers' former
employees, accrued prior to Closing and included on the Closing Statement as a
current liability.
(f) Sellers will bear the entire cost and expense of all
worker's compensation claims made by Employees related to events occurring
before the Closing Date. Purchaser will bear the entire cost and expense of all
worker's compensation claims made by Employees related to events occurring on or
after the Closing Date. From and after the Closing Date, Purchaser will allow
the return to work of any Employees who were on disability leave on the Closing
Date as a result of a work related injury or illness, in a manner consistent
with Purchaser's treatment of other similarly situated Employees, provided that
such Employees are able to perform the essential functions of their respective
jobs (with or without reasonable accommodation).
5.9 PRORATION OF PROPERTY TAXES. Fintube and Purchaser shall adjust and
apportion all ad valorem taxes on real and personal property or other like
charges levied, assessed or imposed upon any of the Assets, all as of the
Closing Date (prorated based upon the number of days during the applicable
taxing period such Assets were owned by: (i) any of the Sellers; and (ii)
Purchaser, respectively). Should any such tax, assessment or charge be
undetermined on the Closing Date, the last determined tax, assessment or charge
shall be used for the purpose of adjustment. All adjustments shall be made at
the Closing; provided, however, if such estimated adjustment relating to ad
valorem taxes is based on the last determined tax, assessment or charge for a
prior taxing period and the actual amount of ad valorem taxes for the current
period would result in an adjustment that is greater or less than the estimated
adjustment, Purchaser may withdraw from the Escrow Account, or promptly pay to
Fintube, as appropriate, an amount equal to the difference between the estimated
amount and the actual amount of such adjustment.
5.10 TAXES. Purchaser shall bear and pay to Fintube one half of all
applicable Mexican, Canadian, Oklahoma sales and/or use taxes (whether national,
federal, state, provincial or local) payable in connection with this Agreement.
Seller shall be responsible for remitting all applicable sales and/or use taxes
and other transfer taxes collected from Purchaser to the appropriate state
agencies. In addition, Fintube shall be responsible for any federal or state
income taxes resulting from the transaction contemplated in this Agreement.
Purchaser shall pay any Taxes or fees required to register the change of
ownership of Assets from Fintube to Purchaser. Each Party shall prepare and file
with the Internal Revenue Service, along with its federal income tax return,
Form 8594, Asset Acquisition Statement, allocating the value to the Assets,
pursuant to SCHEDULE 2.11.
5.11 CONFIDENTIALITY. The Confidentiality Agreement shall remain in
full force and effect following the execution of this Agreement until terminated
as described therein, and is hereby incorporated herein by reference and shall
constitute a part of this Agreement for all purposes. Lone Star and Purchaser
agree to be bound by the terms of the Confidentiality Agreement. Any and all
information received by Lone Star or Purchaser pursuant to the terms and
provisions of this Agreement shall be governed by the applicable terms and
provisions of the Confidentiality
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Agreement. Fintube will, and will cause the Subsidiaries and the Representatives
to, maintain the confidentiality of, and not disclose to any third party (other
than the Subsidiaries and the Representatives) any proprietary or confidential
information of any nature whatsoever provided by Lone Star, Purchaser or the
Purchaser Representatives without the disclosing party's prior written consent.
Fintube, Lone Star and Purchaser may, however, disclose any confidential or
proprietary information to the extent (i) such information is, or becomes part
of, the public domain other than by reason of disclosure by the receiving party;
(ii) such information is or becomes available from a third party source with the
right to disclose such information; and/or (iii) disclosure is required by
applicable law or stock exchange regulation.
5.12 AMENDMENT OF SCHEDULES. Fintube agrees that, with respect to the
representations and warranties of Fintube contained in this Agreement, Fintube
shall have the continuing obligation until the Closing to supplement or promptly
amend the Schedules with respect to any matter hereafter arising or discovered
which, if existing or known at the date of this Agreement, would have been
required to be set forth or described in the Schedules. For all purposes of this
Agreement, including without limitation for purposes of determining whether the
condition set forth in Section 7.3(a) has been fulfilled, the Schedules hereto
shall be deemed to include only that information contained therein on the date
of this Agreement, and shall be deemed to exclude all information contained in
any supplement or amendment thereto; provided, however, that if the Closing
shall occur, then all matters disclosed pursuant to any such supplement or
amendment at or prior to the Closing shall be waived, and no party shall be
entitled to make a claim thereon pursuant to the terms of this Agreement.
Without limiting any of the foregoing, Sellers shall deliver at Closing a
supplemental schedule listing all contracts entered into on or after November 1,
1999, which would have been required to be scheduled on Schedule 4.1(t) under
paragraphs (xvii) and (xviii) of Section 4.1(t) had such contracts been entered
into prior to such date.
5.13 NONCOMPETITION. Fintube and Purchaser shall enter into a
non-competition agreement (the "NON-COMPETITION AGREEMENT") at the Closing,
pursuant to which Fintube shall agree not to compete, directly or indirectly,
with Purchaser in the Business for a period of sixty (60) months from the
Closing Date in the area of interest and subject to the terms set forth therein,
for no consideration other than the Purchase Price. The Non-Competition
Agreement shall be in substantially the form set forth as EXHIBIT 5.13. Nothing
herein shall prevent Fintube from owning up to five percent of the outstanding
stock of any publicly traded entity, regardless of the business in which such
entity might be engaged.
5.14 PRODUCT LIABILITY/DISCONTINUED OPERATIONS INSURANCE. For up to
three (3) years following the Closing Date, Fintube, at its option, shall have
the right to acquire and maintain product liability/discontinued operations
insurance, to cover any claims which may be made against the Sellers relating to
events occurring prior to the Closing Date. The cost of any such insurance shall
be borne solely by Fintube. Purchaser shall reasonably assist Fintube with its
insurance requirement.
5.15 STOCK REGISTRATION AGREEMENT. The shares of Lone Star Common Stock
to be delivered pursuant to this Agreement will be registered by Lone Star, at
its sole expense, with the Securities and Exchange Commission ( the "SEC"), as
more fully set out in the Stock Registration Agreement attached hereto as
EXHIBIT 2.3(B), to be executed at Closing, by Lone Star in favor of
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Fintube and the Designated Recipients. Lone Star shall, prior to Closing,
provide Fintube with a draft of a registration statement on Form S-3 for the
registration for resale by Fintube and the Designated Recipients of the shares
of Lone Star Common Stock to be issued at the Closing. Lone Star shall file the
registration statement on Form S-3 with the SEC, seeking to register the shares
of Lone Star Common Stock with the SEC, as set forth in the Stock Registration
Agreement.
5.16 NYSE LISTING. From the date of Closing:
(a) Lone Star shall file in a timely manner the reports
required to be filed by it under the Securities Act and the Exchange Act, and
the rules and regulations adopted by the SEC thereunder, and shall use all
reasonable efforts to take such further action as Fintube may reasonably
request, all to the extent required from time to time to enable Fintube, its
Partners and their respective owners to sell the shares of Lone Star Common
Stock they receive hereunder.
(b) Lone Star shall avoid taking any action which would cause
the Lone Star Common Stock to cease to be listed on the NYSE, or at Lone Star's
election, on another national exchange from and after the effective date of the
registration statement relating to such stock under the Securities Act and
continuing for so long as such registration statement is effective.
5.17 DELIVERY OF INVESTMENT LETTERS. At least five (5) business days
prior to the Closing Date, Fintube shall deliver to Purchaser the investment
letters and questionnaires in the form attached hereto as EXHIBIT 5.17 (the
"INVESTMENT LETTERS") signed by each of the Designated Recipients who will be
issued Lone Star Common Stock pursuant to SECTION 2.3. Subject to the procedures
set forth in SECTION 2.3, such Investment Letters shall include a sufficient
number of Investment Letters from those Designated Recipients who are accredited
investors under Rule 501 of Regulation D under the Securities Act to establish
that the number of the Designated Recipients that would be classified as
unaccredited investors under Rule 501 would be less than thirty-five (35).
5.18 TITLE INSURANCE AND SURVEYS.
(a) At least fifteen (15) days before Closing, Fintube shall
obtain and furnish at Fintube's expense to Purchaser (or, if so requested, its
subsidiary) a commitment for title insurance ("TITLE INSURANCE") from a title
insurance company mutually acceptable to Fintube and Purchaser, (the "TITLE
COMPANY") with respect to each parcel of Real Property described on SCHEDULE
2.1(A), ("TITLE BINDERS") showing fee title, or a leasehold, as the case may be,
to such Real Property in the applicable Seller and committing to issue the Title
Insurance with respect to such Real Property. Such Title Binders shall show all
Liens with respect to such Real Property. Fintube shall also deliver to
Purchaser (or, if so requested, its subsidiary) legible copies of all documents
referred to as exceptions to title in the Title Binders.
(b) Fintube shall obtain and furnish, at Fintube's expense, to
Purchaser (or, if so requested, its subsidiary) at the Closing an owner's policy
of Title Insurance in a form and amount and from the Title Insurance Company,
relating to each parcel of Real Property described on SCHEDULE 2.1(A), which
Title Insurance shall insure at regular rates, in an amount consistent with
SCHEDULE 2.11, Purchaser's or its subsidiary title to such Real Property, free
and clear of all Liens
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except for the Permitted Liens, and providing by way of appropriate endorsements
and supplemental coverages, insurance which is available under the title
insurance regulations of the State of Oklahoma.
(c) If title insurance is not legally or customarily available
in a particular jurisdiction, Fintube shall obtain and furnish at Fintube's
expense to Purchaser (or, if so requested, its subsidiary) at the Closing a
title opinion in such form as is customary in such jurisdiction and reasonably
satisfactory to Purchaser (or its subsidiary).
(d) At least fifteen (15) days before Closing, Fintube shall
deliver to Purchaser a consent to assignment (including customary estoppel
provisions), or an estoppel letter, from the Port of Catoosa (which may be
included in the form of assignment used by the Port of Catoosa) and the landlord
of the downtown Tulsa warehouse location, consenting to the assignment of the
leased Port of Catoosa real estate and the downtown Tulsa warehouse location of
the Sellers to Purchaser and, to the extent the landlord is agreeable, providing
reasonable notice of default and an opportunity to cure to Purchaser's lender,
together with a certificate of the annual rent, security deposit and term of the
lease relating to such Real Property, and the existence of no default.
(e) At least fifteen (15) days before Closing, Fintube shall
deliver at Fintube's expense to Purchaser current surveys (the "SURVEYS" ) of
each parcel of Real Property described in SCHEDULE 2.1(A) (other than the Real
Property in Mexico, for which the Purchaser shall obtain a current survey). Each
Survey shall be prepared by a licensed professional engineer or surveyor
acceptable to Purchaser and to the Title Company. The Surveys (including
specifically the certificate of the engineer or surveyor forming a part thereof)
shall be in form and substance acceptable to Purchaser and to the Title Company.
(f) At least fifteen (15) days before Closing, Fintube shall
deliver to Purchaser a title opinion, in conformance with standard legal
practices of Mexico, and in form and substance acceptable to Purchaser, as to
the parcels of Real Property located in Mexico. At least fifteen (15) days
before Closing, Purchaser may obtain from Quebec counsel a title opinion, in
conformance with standard legal practices of Quebec, and in form and substance
acceptable to Purchaser, as to the parcels of Real Property located in Quebec.
The title opinion covering the Real Property located in Mexico and the title
opinion covering the Real Property located in Quebec are collectively called the
"TITLE OPINIONS."
(g) In the event any Liens appear in the Title Binders, the
Title Opinions or the Surveys, other than the Permitted Liens, that would
unreasonably interfere with the Purchaser's use of the Real Property or
materially adversely affect its value, Purchaser shall, within seven (7) days
after receipt of the Title Binder or Title Opinion and the Survey of the Real
Property covered by such Title Binder or Title Opinion and copies of all
documents referred to therein as exceptions to title, notify Sellers in writing
of such fact (the "TITLE OBJECTION") in which event Sellers shall have seven (7)
days after receipt of such notice to cure such Title Objection. Upon the
expiration of said seven (7) day period, Purchaser shall be deemed to have
accepted all exceptions to title shown on the Title Binder, the Title Opinions
or the Surveys, except for matters which are the subject of a notification
permitted under the preceding sentence, and such exceptions shall be included in
the term "Permitted Liens" as used herein.
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5.19 STOCK OPTIONS. Lone Star will make available under its 1985
Long-Term Incentive Plan, an initial grant of options (the "OPTIONS") covering
an aggregate of 200,000 shares of Lone Star Common Stock, to be awarded on the
Closing Date to the Executives and Jerry E. Ryan, in such proportions as
Purchaser shall determine in consultation with Ryan, as more fully set out in
EXHIBIT 5.19 attached hereto. All of the Options will be for a ten-year term and
will have an exercise price equal to the fair market value of the Lone Star
Common Stock on the date of the grant. One-half of the Options (the "EMPLOYMENT
OPTIONS") will vest 25% per year over four years. The remaining one-half of the
Options (the "PERFORMANCE OPTIONS") will vest: (i) 50% on the 10th day after the
completion of an audit of the Purchaser's financial statements for the year
ended December 31, 2000, if such audit establishes that the Business achieved
EBITDA of $21,100,000 for calendar year 2000, as set forth on page 91 of the
Confidential Information Memorandum, dated February 1999 (the "PROJECTIONS");
and (ii) 50% on the 10th day after completion of an audit of the Purchaser's
financial statements for the year ended December 31, 2001, if such audit
establishes that the Business achieved EBITDA of $26,700,000 for calendar year
2001, as set forth in the Projections. If the Projections are not met by the
specified dates, the Performance Options will lapse.
5.20 CONSULTING AGREEMENT. Purchaser and Jerry E. Ryan shall enter into
a consulting agreement in the form of EXHIBIT 5.20 hereto (the "CONSULTING
AGREEMENT");
5.21 EMPLOYMENT AGREEMENTS. Purchaser and each of the executives
designated on SCHEDULE 5.21, (the "EXECUTIVES") shall have entered into
employment agreements in the form of EXHIBIT 5.21 hereto.
5.22 ARRANGEMENT FOR LEGAL SERVICES. Purchaser and either Jerry R.
Nichols or Nichols, Wolfe, Stamper, Nally, Fallis & Robertson, Inc., as
appropriate, shall have reached a mutually acceptable arrangement satisfactory
to Purchaser whereby Mr. Nichols or such law firm would continue to provide
certain legal services to Purchaser with respect to the Business after the
Closing, at customary rates.
5.23 SURVIVAL OF COVENANTS. Except for any covenant or agreement which
by its terms expressly terminates as of the date of Closing, the covenants and
agreements of the parties hereto contained in this Agreement shall survive the
Closing, but shall expire as of the date set out in Section 9.10.
5.24 CHANGE OF NAME. Fintube and each of the Sellers agrees to change
their respective company name within thirty (30) days from the date of Closing
to names bearing no resemblance to "Fintube", "Kentube", "Escoa", "Tektube",
"Altetas y Birlos, S.A. de C.V.", "Biraghi" and "Steel Coil Services".
5.25 CORRECTION OF ENVIRONMENTAL CONDITIONS. Between the date hereof
and the Closing Date, Sellers shall endeavor in good faith to correct fully, in
accordance with applicable law, (i) those environmental conditions requiring
short term action set forth in the interim report of ERM Southwest dated
November 10, 1999 (the "ERM REPORT") and (ii) those environmental conditions
identified by Purchaser as a result of its conducting further environmental due
diligence prior to the Closing Date that Purchaser, in consultation with ERM,
hereinafter identifies as also requiring short term
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action (those environmental conditions described in clauses (i) and (ii) hereof
being herein called "ENVIRONMENTAL DEFICIENCIES"). To the extent any such
Environmental Deficiency is not so corrected to the reasonable satisfaction of
Purchaser by the third business day immediately preceding the Closing Date, a
current liability reserve will be established on the financial statements of
Fintube as of the Closing Date and reflected on the Closing Statement in an
amount mutually agreed by Fintube and Purchaser to be sufficient to correct the
Environmental Deficiencies in accordance with applicable law. Notwithstanding
the foregoing, if not less than three (3) business days prior to the Closing
Date, Fintube determines that the cost of correcting the Environmental
Deficiencies and/or establishing a current liability reserve therefor is not
reasonably acceptable to Fintube, Fintube may at its option elect not to close
the transaction contemplated by this Agreement without liability to Purchaser or
Lone Star.
5.26 LONE STAR COMMON STOCK. Within three (3) days from the date
hereof, Fintube shall instruct the Designated Recipients that prior to the
Closing Date, the Designated Recipients shall not purchase or sell Lone Star
Common Stock or any puts or options relating thereto, or create any short
positions in connection with such Lone Star Common Stock.
ARTICLE VI
COOPERATION IN VARIOUS MATTERS
6.1 MUTUAL COOPERATION. Each Party shall cooperate with the other
Party, which cooperation shall include the furnishing of testimony and other
evidence, permitting reasonable access to employees and providing information
regarding the whereabouts of former employees, as reasonably requested by the
other Party in connection with the prosecution or defense of any claims or other
matters relating to the Assets.
6.2 PRESERVATION OF FILES AND RECORDS. Notwithstanding the provisions
of Section 9.10, for a period of five (5) years after the Closing Date: (a)
Purchaser shall preserve all files and records relating to Fintube that are
transferred to Purchaser, shall allow Fintube or its designee reasonable access
to such files and records and the right to make copies and extracts therefrom at
any time during normal business hours, and shall not dispose of any such files
and records; and (b) Fintube shall allow Purchaser or its designee reasonable
access to any files and records relating to the Assets that may be in Fintube's
possession, together with the right to make copies and extracts therefrom at any
time during normal business hours and shall not dispose of any such files and
records without first offering in writing to transmit them to Purchaser.
6.3 PREPARATION OF REPORTS, ETC. Lone Star shall cooperate and cause
its employees to cooperate with Fintube in the preparation, in accordance with
Fintube's reasonable instructions, of financial and other reports and statements
relating to Fintube for periods ending on or prior to the Closing Date.
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ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO CLOSE. The respective
obligations of each Party to be performed at the Closing shall be subject to the
satisfaction, on or prior to the Closing Date, of the following conditions:
(a) FILINGS; WAITING PERIODS; APPROVALS. The waiting period
applicable to the consummation of the transaction contemplated herein under the
HSR Act shall have expired or been terminated, and all filings required to be
made prior to the Closing Date with, and all consents, approvals, permits and
authorizations required to be obtained prior to the Closing Date from any
Governmental Authority or other Person in connection with the execution and
delivery of this Agreement, and the consummation of the transaction contemplated
hereby by Fintube and Purchaser, shall have been made or obtained (as the case
may be), except where the failure to obtain such consents, approvals, permits
and authorizations would not be reasonably likely to result in a Material
Adverse Effect on the Assets or the Business.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition, including
legislation, preventing the consummation of the transaction contemplated herein
shall be in effect; provided, however, that prior to invoking this condition,
each Party shall have complied fully with its obligations under Section 5.6 and,
in addition, shall have used all reasonable efforts to have any such decree,
ruling, injunction or order vacated, except as otherwise contemplated by this
Agreement.
7.2 CONDITIONS TO OBLIGATION OF FINTUBE. The obligation of Fintube to
effect the Closing is subject to the satisfaction of the following conditions,
any or all of which may be waived in whole or in part by Fintube:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser set forth in Section 4.2 shall be true and correct in
all material respects as of the Closing Date as though made on and as of the
Closing Date, and Fintube shall have received a certificate signed by a
Responsible Officer of Purchaser to such effect.
(b) COVENANTS AND AGREEMENTS. Purchaser shall have performed in
all material respects all covenants and agreements required to be performed by
it under this Agreement on or prior to the Closing Date, and Fintube shall have
received a certificate signed by a Responsible Officer of Purchaser to such
effect.
(c) NO MATERIAL ADVERSE CHANGE. From the date of this Agreement
through the Closing, there shall not have occurred any event having a Material
Adverse Effect on Lone Star; provided, however, if an event having a Material
Adverse Effect on Lone Star has occurred, Fintube shall give Purchaser notice of
such event, and the Closing Date will be postponed for fifteen (15) days and
Purchaser will pay the entire Purchase Price by cashier's check or wire transfer
acceptable to Fintube.
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(d) ENVIRONMENTAL CONDITIONS. Fintube shall not have elected to
terminate this Agreement pursuant to the last sentence of Section 5.25 hereof at
least three (3) business days prior to the Closing Date.
(e) TITLE OBJECTIONS. Fintube shall have elected at least three
(3) business days prior to the Closing Date to terminate this Agreement because
the action required to cure one or more Title Objections is not reasonably
acceptable to Fintube.
(f) OTHER CLOSING DOCUMENTS. Fintube shall have received the
items required by Section 3.2(b).
7.3 CONDITIONS TO OBLIGATION OF PURCHASER. The obligation of Purchaser
to effect the Closing is subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by Purchaser:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Fintube set forth in Section 4.1 shall be true and correct in all
material respects as of the Closing Date as though made on and as of the Closing
Date, and Purchaser shall have received a certificate signed by a Responsible
Officer of Seller to such effect.
(b) COVENANTS AND AGREEMENTS. Fintube shall have performed in
all material respects all covenants and agreements required to be performed by
it under this Agreement on or prior to the Closing Date, and Purchaser shall
have received a certificate signed by a Responsible Officer of Fintube to such
effect.
(c) NO MATERIAL ADVERSE CHANGE. From the date of this Agreement
through the Closing, there shall not have occurred any change in the condition
of the Business or Assets, that would have or would be reasonably likely to have
a Material Adverse Effect.
(d) RELEASE OR ASSIGNMENT OF LIENS. Fintube shall have provided
to Purchaser satisfactory evidence that all Liens against the Assets, other than
Permitted Liens, will be released at or prior to Closing, or, if Lone Star so
elects, the Liens securing the Bank Debt shall be assigned to Lone Star's
lenders.
(e) FIRPTA AFFIDAVIT. Fintube shall have provided to Purchaser
a non-foreign affidavit in compliance with United States Treasury Regulation
Section 1.1445-2(b)(2).
(f) SALES TAX MATTERS. Fintube shall have surrendered its sales
tax permit to the Oklahoma Tax Commission along with payment for any unpaid or
accrued Taxes such that Purchaser can receive a sales tax permit.
(g) TITLE INSURANCE AND SURVEYS. Purchaser shall have received
the Title Insurance and Surveys described in Section 5.18, and Sellers shall
have cured all Title Objections made by Purchaser.
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(h) CONSULTING AGREEMENT. Purchaser and Jerry E. Ryan shall
have entered into the Consulting Agreement described in Section 5.20.
(i) EMPLOYMENT AGREEMENTS. Purchaser and each of the Executives
shall have entered into the employment agreements described in Section 5.21.
(j) NONCOMPETITION AGREEMENTS. Each of those certain partners
of Seller (or in the event any such partner is not a natural person, the natural
person or persons affiliated with such partner as listed with respect thereto)
as listed on SCHEDULE 7.3(j)(1) shall have entered into a non-competition
agreement with Purchaser or a Subsidiary dated as of the Closing Date
substantially in the form as attached hereto as EXHIBIT 7.3(j)(2).
(k) FINANCING. Purchaser shall have obtained financing for the
purchase of the Assets on terms and conditions reasonably acceptable to
Purchaser. Purchaser shall advise Sellers of the status of its financing not
less than three (3) business days prior to the Closing Date.
(l) THIRD PARTY CONSENTS. Purchaser shall have received from
Sellers not less than three (3) business days prior to the Closing Date copies
of written Third Party Consents allowing the assignment by Sellers to Purchaser
of the Non-Assignable Contracts identified in SCHEDULE 3.2(a)(iii).
(m) FOREIGN APPROVAL. Purchaser shall have received evidence of
satisfaction of all required consents or approvals from any foreign governmental
entity as may be required to effect the transactions contemplated by this
Agreement.
(n) YEAR 2000 COMPLIANCE. Purchaser shall be satisfied, in its
reasonable discretion, not less than three (3) business days prior to the
Closing Date as to the proper operation of the information technology systems,
the Year 2000 Compliance of the Assets and the Business, and the absence of any
material risk to the Assets or the Business resulting from any Year 2000
Non-Compliance with respect to the Assets or the Business, as a result of
Purchaser's due diligence investigation of such matters.
(o) INVESTMENT LETTERS. Purchaser shall have received the
Investment Letters described in Section 5.17, duly completed and duly executed.
(p) PERMITS. Purchaser shall have obtained not less than three
(3) business days prior to the Closing Date the Permits and consents from
Governmental Authorities identified in SCHEDULE 3.2(a)(v).
(q) TITLE OPINIONS. Purchaser shall have received the Title
Opinions for the Mexico Real Property and the Quebec Real Property contemplated
by Section 5.18, and Sellers shall have cured all Title Objections made by
Purchaser.
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(r) OTHER DOCUMENTS. Purchaser shall have received the items
required by Section 3.2(a).
ARTICLE VIII
TERMINATION
8.1 TERMINATION RIGHTS. This Agreement may be terminated at any time
prior to the Closing Date:
(a) By mutual written consent of Purchaser and Fintube;
(b) By either Fintube or Purchaser if: (i) the Closing has not
occurred by January 4, 2000 (provided, however, that the right to terminate this
Agreement pursuant to this clause (i) shall not be available to any Party whose
breach of any representation or warranty or failure to perform any covenant or
agreement under this Agreement has been the cause of or resulted in the failure
of the Closing to occur on or before such date); or (ii) any Governmental
Authority shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the Closing and such
order, decree, ruling or other action shall have become final and nonappealable
(provided, however, that the right to terminate this Agreement pursuant to this
clause shall not be available to any Party until such Party has used all
reasonable efforts to remove such injunction, order, decree or ruling);
(c) By Purchaser if: (i) there has been a material breach of
the representations and warranties made by Fintube in Section 4.1 (provided,
however, that Purchaser shall not be entitled to terminate this Agreement
pursuant to this clause unless Purchaser has given Fintube at least thirty (30)
days prior written notice of such breach, and Fintube has failed to cure such
breach within said 30 day period); or (ii) Fintube has failed to comply in any
material respect with any of its covenants or agreements contained in this
Agreement, and such failure has not been, or cannot be, cured within a
reasonable time after notice and a demand for cure thereof; or
(d) By Fintube if: (i) there has been a material breach of the
representations and warranties made by Lone Star or the Purchaser in Section 4.2
(provided, however, that Fintube shall not be entitled to terminate this
Agreement pursuant to this clause unless Fintube has given Lone Star or
Purchaser at least 30 days prior written notice of such breach, and Purchaser or
Lone Star has failed to cure such breach within said 30 day period); or (ii)
Lone Star or Purchaser has failed to comply in any material respect with any of
its covenants or agreements contained in this Agreement, and such failure has
not been, or cannot be, cured within a reasonable time after notice and a demand
for cure thereof.
8.2 EFFECT OF TERMINATION. If this Agreement is terminated by either
Fintube or Purchaser pursuant to the provisions of Section 8.1, this Agreement
shall forthwith become void, and there shall be no further obligation under this
Agreement on the part of any Party or its respective Affiliates, directors,
officers, or stockholders to the other Party, except pursuant to the provisions
of Sections 5.2(d), 5.3, 5.11, 8.3 and Article X, which provisions shall remain
in full force and effect; provided, however, that the termination of this
Agreement shall not relieve either Party from any
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liability for damages incurred as a result of a breach by such Party of its
representations, warranties, covenants, agreements or other obligations
hereunder, occurring prior to such termination.
8.3 CONSEQUENTIAL DAMAGES. If this Agreement is terminated for any
reason whatsoever, neither Fintube, Lone Star or the Purchaser shall recover any
consequential, incidental or special damages from the other Party.
ARTICLE IX
INDEMNIFICATION AND CLAIMS
9.1 INDEMNIFICATION. After the Closing, both Fintube and Purchaser
(each an "INDEMNIFYING PARTY") hereby agrees to indemnify, defend and hold
harmless the other Party, and its directors, officers, employees and controlled
and controlling persons (hereinafter collectively "RELATED PERSONS"), from and
against all Claims asserted against, resulting to, imposed upon or incurred by
such Party or such Party's Related Persons (an "INDEMNIFIED PERSON"), subject to
all of the provisions and limitations contained in this Article IX, to the
extent resulting from: (a) the inaccuracy or breach of any representation or
warranty of the Indemnifying Party contained in or made pursuant to this
Agreement; or (b) the breach of any covenant of the Indemnifying Party contained
in or made pursuant to this Agreement. For purposes of determining whether an
Indemnified Person is entitled to indemnification under this Article IX due to
the breach of an Indemnifying Party's representation or warranty, the
materiality qualification in such representation or warranty shall be
disregarded and such representation or warranty shall be read for purposes of
this Article IX as though such qualification was not included therein (it being
agreed by the Parties that the Basket described in Section 9.7(b) hereof was
intended to supplant such materiality qualification). As used in this Article
IX, the term "CLAIM" shall include, (x) all debts, liabilities and obligations,
(y) all losses, damages, costs and expenses, including pre- and post-judgment
interest, penalties, court costs and attorneys' fees and expenses, and (z) all
demands, claims, actions, costs of investigation causes of action, proceedings,
arbitrations, judgments, settlements and assessments.
9.2 PRE-CLOSING OPERATIONS. Fintube further hereby agrees to indemnify,
defend and hold Purchaser and Purchaser's Related Persons harmless from and
against all Claims asserted against, resulting to, imposed upon or incurred by
Purchaser with respect to any liabilities of any of the Sellers, which are not
Assumed Liabilities, (including, but not limited to, Taxes accrued by any of the
Sellers for periods (or portions thereof) ending on or before the Closing Date);
provided however, that Fintube shall have no obligation to Purchaser until the
total amount of all Purchaser Claims exceeds the Basket set forth in Section
9.7(b), except for Fintube's obligations pursuant to Section 5.9, which shall
not be subject to the Basket.
9.3 POST-CLOSING OPERATIONS. Purchaser further hereby agrees to
indemnify, defend and hold Fintube and Fintube's Related Persons harmless from
and against all Claims asserted against, resulting to, imposed upon or incurred
by Fintube with respect to: (a) any of the Assumed Liabilities; and (b) the
ownership, operation, use or enjoyment of the Assets or the Business by
Purchaser after the Closing.
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9.4 WARRANTY CLAIMS. Product or service warranty claims (whether
arising by contract or operation of law, including any implied warranties of
merchantability or fitness for a particular purpose) relating to products or
services provided by the Business on or after the Closing Date, shall be the
sole responsibility of the Purchaser. Product or service warranty claims
(whether arising by contract or operation of law, including any implied
warranties of merchantability or fitness for a particular purpose) that relate
to products or services provided by the Business before the Closing Date shall
be the responsibility of the Purchaser (the "WARRANTY CLAIMS"); provided,
however, the Purchaser shall have the right to recover any amounts that the
Purchaser pays for such Warranty Claims, by reimbursement from the Escrow
Account, on the terms and conditions set forth below:
(a) The first $200,000 of Warranty Claims incurred during each of
the periods: (i) from the Closing Date through December 31,
2000 (the "2000 PERIOD"); and (ii) from January 1, 2001
through the date described in Section 9.10 (the "2001
PERIOD"), shall be the sole responsibility of the Purchaser,
and the Purchaser agrees to satisfy and pay said Warranty
Claims without reimbursement from the Escrow Account, as and
when the Purchaser determines, in good faith, that said
Warranty Claims are valid.
(b) Any Warranty Claims over $200,000 but less than $400,000
incurred during each of (i) the 2000 Period and (ii) the 2001
Period, shall be satisfied by the Purchaser, as and when the
Purchaser determines, in good faith, that said Warranty Claims
are valid; and Purchaser shall be entitled to assert Warranty
Claims against the Escrow Account for the amount of such
Warranty Claims, without regard to the Basket, but only to the
extent such Warranty Claims are agreed to be valid Warranty
Claims by Fintube, or if the Purchaser and Fintube are unable
to agree upon the validity of said Warranty Claims, the
arbitrator described in Section 10.12(c) shall determine the
validity of such Warranty Claims.
(c) Any Warranty Claims over $400,000 but less than $600,000
incurred during each of (i) the 2000 Period and (ii) the 2001
Period, shall be satisfied by the Purchaser, as and when the
Purchaser determines, in good faith, that said Warranty Claims
are valid; and Purchaser shall be entitled to assert such
Warranty Claims against the Escrow Account for one-half of the
amount of such Warranty Claims, without regard to the Basket,
but only to the extent such claims are agreed to be valid
Warranty Claims by Fintube, or if the Purchaser and Fintube
are unable to agree upon the validity of said Warranty Claims,
the arbitrator described in Section 10.12(c) shall determine
the validity of such Warranty Claims.
(d) Any Warranty Claims over $600,000 incurred during each of (i)
the 2000 Period and (ii) the 2001 Period, shall be satisfied
by the Purchaser, as and when the Purchaser determines, in
good faith, that said Warranty Claims are valid; and Purchaser
shall be entitled to assert such Warranty Claims against the
Escrow Account for the amount of such Warranty Claims, without
regard to the Basket, but only to the extent such claims are
agreed to be valid Warranty Claims by Fintube, or if the
Purchaser and Fintube are unable to agree upon the validity of
said Warranty Claims, the arbitrator described in Section
10.12(c) shall determine the validity of such Warranty Claims.
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(e) On the date described in Section 9.10, the ability of the
Purchaser to seek reimbursement from the Escrow Account for
Warranty Claims shall forever terminate (other than with
respect to any claims for reimbursement made, but not
resolved, prior to such date), and after said date, the
Purchaser shall pay any and all Warranty Claims, without
reimbursement, and shall indemnify and hold Fintube harmless
from and against all such Warranty Claims.
The Purchaser's sole right to recover any amounts that the Purchaser
pays for Warranty Claims shall be to seek reimbursement for such claims from the
Escrow Account.
Purchaser and Fintube agree that after the Closing Date, Purchaser
shall handle and resolve all Warranty Claims relating to the Business, whether
occurring before or after the Closing Date. Purchaser agrees to handle and
resolve said Warranty Claims in good faith, and to use its best efforts to
minimize the expense of said Warranty Claims to the extent consistent with
reasonable business practices. Purchaser further agrees that for any Warranty
Claims, it shall not assert any charge for any employee time or corporate
overhead of the Purchaser or Lone Star in administering the Warranty Claims.
Purchaser also agrees that the expense of resolving any valid Warranty Claim
shall be limited to actual cost to the Purchaser of resolving said Warranty
Claims.
9.5 WARN ACT. Purchaser hereby agrees that for purposes of the WARN
Act, the Closing Date shall be the "effective date" as such term is used in the
WARN Act. Purchaser acknowledges and represents that it has no present intent to
engage in a "mass layoff" or "plant closing" with respect to the Business, as
defined in the WARN Act. Purchaser agrees that the Purchaser shall be
responsible for any notification required under the WARN Act with respect to the
Business in connection with any "employment loss," as defined in the WARN Act,
that may occur on or after the Closing Date, and shall indemnify the Fintube and
Fintube's Related Persons, and shall hold the Fintube and Fintube's Related
Persons harmless from and against all fines and other payments which may become
due under the WARN Act with respect to the Business in connection with any
"employment loss," as defined in the WARN Act, that may occur on or after the
Closing Date.
9.6 DEFENSE OF THIRD PARTY CLAIMS. In the event any Claim is asserted
against any Indemnified Person by a third party, the Indemnified Person shall
with reasonable promptness notify the Indemnifying Party of such Claim. If the
Indemnified Person does not so notify the Indemnifying Party within fifteen (15)
days after becoming aware of such Claim, then the Indemnifying Party shall, if
such delay materially prejudices the Indemnifying Party with respect to the
defense of such Claim, be relieved of liability hereunder in respect of such
Claim to the extent of the damage caused by such delay. In any such proceeding,
following receipt of notice properly given, the Indemnifying Party shall be
entitled, at its sole discretion, to assume the entire defense of such Claim
(with counsel selected by it which is reasonably satisfactory to the Indemnified
Person or Persons), and the Indemnifying Party shall bear the entire cost of
defending such Claim. The Indemnifying Party shall not have the right to settle
any such Claim without the written consent of the Indemnified Person or Persons.
In the event of the assumption of the defense by the Indemnifying Party, the
Indemnifying Party shall not be liable for any further legal or other expenses
subsequently incurred by the Indemnified Persons in connection with such defense
unless otherwise agreed to in writing by the
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Indemnifying Party or as herein provided; provided, however, the Indemnified
Persons shall have the right to participate in such defense, at their own cost,
and the obligation to cooperate therewith.
9.7 LIMIT ON INDEMNITY OBLIGATIONS.
(a) No Indemnified Person shall be entitled to seek
indemnification from any Indemnifying Party pursuant to this Article IX with
respect to any Claim, unless such Indemnified Person notifies such Indemnifying
Party of such Claim in writing, on or before the 15th day after the completion
of the audit of the calendar year 2001 financial statements of the Business.
Purchaser hereby agrees to use reasonable best efforts to cause the audit of the
calendar year 2001 financial statements of the Business to be completed on or
before MARCH 31, 2002. The foregoing notwithstanding, no Indemnified Person
shall be entitled to seek indemnification from any Indemnifying Party pursuant
to this Article IX, unless such claim is presented to the Indemnifying Party on
or before APRIL 15, 2002.
(b) If the total amount of all Claims which Purchaser, Lone
Star or any of their respective Related Persons have the right to assert against
Fintube under this Article IX (the "PURCHASER CLAIMS") does not exceed
seventy-five hundredths of one percent (.75%) of the Purchase Price (the
"BASKET"), then Fintube shall have no obligation under this Article IX with
respect to any such Purchaser Claims. If the total amount of all Purchaser
Claims exceeds the Basket, then Fintube's obligations under this Article IX
shall be limited to the amount by which the aggregate amount of all Purchaser
Claims exceeds seventy five hundredths of one percent (.75%) of the Purchase
Price, but such excess amount shall not exceed the Cap. Notwithstanding anything
in this Section 9.7 to the contrary, Purchaser Claims made pursuant to Sections
4.3(a), 5.9, 5.25 and 9.4 shall not be subject to the Basket.
(c) The total amount of Fintube's obligations with respect to
Purchaser Claims, under this Article IX shall not exceed forty percent (40%) of
the Purchase Price (the "CAP").
(d) The amount which an Indemnifying Party is required to pay
to, for, or on behalf of any other party pursuant to this Section 9.7 shall be
reduced (including, without limitation, retroactively): (i) by any insurance
proceeds actually recovered by or on behalf of any Indemnified Person; and (ii)
by any net tax benefit actually realized as a result of any indemnifiable loss.
If an Indemnified Person shall have incurred or shall have paid on its behalf an
indemnifiable loss, and shall subsequently receive insurance proceeds in respect
of such indemnifiable loss, or shall realize any net tax benefit as a result of
such indemnifiable loss, then the Indemnified Person shall promptly pay to the
Indemnifying Party such amount. Each Indemnified Person agrees to use reasonable
efforts (so long as such efforts would not have an adverse effect on such
Person) to obtain any such tax benefit and any such insurance proceeds.
(e) Purchaser agrees that Fintube, at Fintube's option and
expense, may obtain an insurance policy satisfactory to both Purchaser and
Sellers, with a coverage limit of not less than $27,800,000 and no deductible
other the Escrow Account, naming Purchaser (and any Indemnified Persons) as the
insured, to satisfy any and all Claims against Sellers under this Article IX, to
the extent such Claims have exceeded the amount of the Escrow Account. In the
event Sellers obtain
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such insurance, after first exhausting the funds in the Escrow Account, the
Purchaser will look, and will cause all Indemnified Persons to look, solely to
such insurance policy for satisfaction of any and all Claims against Sellers in
excess of the amount of the Escrow Account. To the extent Sellers elect to
obtain the above described insurance, Sellers shall have no further liability to
Purchaser under this Article IX after the Closing in excess of the amount of the
Escrow Account.
9.8 FINTUBE'S ESCROW. To satisfy any Purchaser Claim, Warranty Claim to
be paid by Fintube, any claim for any adjustment owed by Fintube for payment of
real property taxes or Brokers' Fees pursuant to Section 4.3(a) (any of such
Claims shall be an "ESCROW CLAIM") that the Purchaser has the right to recover
against Fintube hereunder, Fintube agrees that Purchaser shall transfer at
Closing, Five Million Dollars ($5,000,000) of the Purchase Price, directly to an
escrow account in the name of Fintube (the "ESCROW ACCOUNT"), at a mutually
agreed bank or other suitable financial institution in Tulsa, Oklahoma, (the
"ESCROW AGENT"). After the amount of Purchaser Claims has exceeded the Basket,
or upon the occurrence of other Escrow Claims without regard to the Basket, the
Purchaser shall be entitled to assert such Escrow Claims against the Escrow
Account, by written notice to Fintube and Escrow Agent. Such claims shall be
paid by the Escrow Agent within twenty (20) days of the date said written claims
are received by Fintube and Escrow Agent, unless Fintube objects to such claims
in writing within said twenty (20) day period. If there is a Fintube objection
to a an Escrow Claim, the claim shall be resolved by negotiation between Fintube
and the Purchaser within thirty (30) days from the date of Fintube's objection.
If not so resolved, either party may submit the Escrow Claim to arbitration
pursuant to Section 10.12. One-half of the balance of the Escrow Account, less
any unresolved Escrow Claims, will be disbursed to Fintube on the 15th day after
the completion of the audit of the calendar year 2000 financial statements of
the Business. Purchaser hereby agrees to use its reasonable best efforts to
cause the audit of the calendar year 2000 financial statements of the Business
to be completed on or before March 31, 2001. The balance of the Escrow Account,
less any unresolved Escrow Claims, will be disbursed to Fintube on or before the
15th day after the completion of the audit of the calendar year 2001 financial
statements of the Business. The funds in the Escrow Account shall be invested in
income producing securities to be selected by Fintube, and all income produced
thereby shall be distributed to Fintube on a quarterly basis. The terms of the
escrow arrangement shall be specified in the Escrow Agreement attached hereto as
EXHIBIT 9.7.
9.9 EXCLUSIVE REMEDY. Purchaser's and Fintube's sole remedy for any
breach of any of the provisions of this Agreement shall be to exercise their
rights under Articles IX and X, subject to the procedures and limitations set
forth in Articles IX and X.
9.10 SURVIVAL. The representations, warranties, covenants and
agreements made in this Agreement or in any certificate or instrument delivered
in connection herewith shall be in full force and effect, notwithstanding any
investigation made by or disclosure made to any Party, whether before or after
the date hereof, shall survive the execution and delivery of this Agreement, and
shall survive the Closing and continue to be applicable and binding, until the
15th day after the completion of the audit of the calendar year 2001 financial
statements of the Business, at which time said representations, warranties,
covenants and agreements shall forever terminate. The foregoing notwithstanding,
the representations, warranties, covenants and agreements made in this
Agreement, or in any certificate delivered in connection herewith, shall forever
terminate on April 15, 2002.
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ARTICLE X
MISCELLANEOUS
10.1 TRANSFERS OF LONE STAR COMMON STOCK. At all times after the
Closing Date, Lone Star shall cooperate in all respects with Fintube and the
Designated Recipients in permitting the transfer of the shares of the Lone Star
Common Stock to be delivered pursuant to this Agreement if such transfer can be
made in accordance with the Securities Act and applicable state securities laws.
10.2 LONE STAR GUARANTY. Lone Star is the immediate parent of the
Purchaser and has significant interest in ensuring that Lone Star and the
Purchaser receive the benefit of the terms of this Agreement. As an inducement
to the Sellers to enter into this Agreement, Lone Star has agreed to guarantee,
and does hereby absolutely and unconditionally guarantee, the full and prompt
performance of all of the covenants, agreements, and obligations of Purchaser
under this Agreement.
10.3 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the substantive law of the State of Oklahoma without giving
effect to the principles of conflicts of law thereof.
10.4 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
10.5 ASSIGNMENT; BINDING EFFECT; NO THIRD PARTY BENEFIT. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party (whether by operation of law or otherwise) without the
prior written consent of the other Parties, except that the rights and
obligations of Purchaser under this Agreement may be assigned in whole or in
part to an acquisition subsidiary of Purchaser or an Affiliate thereof; provided
that Lone Star shall fully guarantee all of any such assignee's assumed
obligations hereunder. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the Parties and
their respective successors and assigns. Except as provided in Article IX,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any person other than the parties hereto, and their respective successors
and permitted assigns, any rights, benefits, or remedies of any nature
whatsoever under or by reason of this Agreement.
10.6 ENTIRE AGREEMENT. This Agreement (including the Exhibits,
Schedules, and any documents referred to herein), together with the Ancillary
Documents constitute the entire agreement between the Parties, and supersede all
prior understandings, agreements, arrangements and representations between the
Parties, written or oral, to the extent they relate in any way to the subject
matter hereof.
10.7 NOTICES. All notices, requests, demands, claims and other
communications required or permitted to be given hereunder shall be in writing
and shall be sent by: (a) personal delivery (effective upon delivery); (b)
facsimile (effective on the next day after confirmed transmission); or (c)
registered or certified mail, return receipt requested and postage prepaid
(effective on the third day after being so mailed), in each case addressed to
the intended recipient as set forth below:
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IF TO PURCHASER OR LONE STAR:
Fintube Technologies, Inc.
c/o Lone Star Technologies, Inc.
15660 N. Dallas Parkway
Suite 500
Dallas, Texas 75248
Attention: Robert F. Spears
Vice President, General Counsel and Secretary
Facsimile: (972) 770-6471
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Thompson & Knight L.L.P.
1700 Pacific Ave.
Suite 3300
Dallas, Texas 75201
Attention: David E. Morrison
Facsimile: (214) 969-1751
IF TO FINTUBE:
Fintube Limited Partnership
c/o Jerry E. Ryan
3201 E. 65th
Tulsa, Oklahoma 74136
Facsimile: (918) 495-1374
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
Nichols, Wolfe, Stamper, Nally, Fallis & Robertson, Inc.
124 E. Fourth Street, Suite 400
Tulsa, Oklahoma 74103
Attention: Jerry R. Nichols, Esq. and Thomas P. Nally, Esq.
Facsimile: (918) 582-9321
Any Party may change its name or address for receiving notices by giving written
notice of such change to the other Parties in accordance with this Section 10.7.
10.8 AMENDMENT. Except as allowed by Section 5.12, this Agreement may
be amended by the Parties hereto, only by a written instrument signed by all of
the Parties hereto.
10.9 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability, without
rendering invalid or unenforceable the remaining terms and provisions of
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this Agreement or affecting the validity or enforceability of any of the terms
or provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
10.10 WAIVERS. The Parties hereto may, by mutual agreement, to the
extent legally allowed: (a) extend the time for the performance of any of the
obligations or other acts required herein; (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto; and (c) waive performance of any of the covenants or
agreements, or satisfaction of any of the conditions contained herein. Any
agreement on the part of a Party to any such extension or waiver shall be valid
only if set forth in a written instrument signed on behalf of any Party. Except
as provided in this Agreement, no action taken pursuant to this Agreement,
including any investigation by or on behalf of either Party, shall be deemed to
constitute a waiver by the Party taking such action of compliance with any
representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any Party of a breach of any provision hereof shall not
operate or be construed as a waiver of any prior or subsequent breach of the
same or any other provisions hereof.
10.11 ENFORCEMENT OF AGREEMENT. The Parties agree that irreparable
damage would occur in the event that any provision of this Agreement was not
performed in accordance with the terms hereof or was otherwise breached.
Accordingly, irrespective of the provisions of Section 10.12, the Parties hereto
agree that each Party shall be entitled to seek an injunction to prevent a
breach of this Agreement, and shall be entitled to specific performance of the
terms and provisions hereof.
10.12 ARBITRATION.
(a) GOOD FAITH NEGOTIATION. Except as provided in Section
10.11, in the event that any Party asserts that there exists any disagreement,
dispute, controversy or claim arising out of or relating to this Agreement (a
"DISPUTE"), such Party shall deliver a written notice to each other Party
involved therein specifying the nature of the asserted Dispute and requesting a
meeting of the Responsible Officers of both Parties to attempt to resolve the
same. A face to face meeting of the Responsible Officers and their
representatives shall be held within twenty (20) days of delivery of the written
notice, and shall last for a minimum of three (3) hours. If no such resolution
is reached within fifteen (15) days after such face to face meeting, the Party
delivering such notice of Dispute (the "DISPUTING PERSON") may, within thirty
(30) days after such face to face meeting, commence arbitration hereunder by
delivering to the other Party a notice of arbitration (a "NOTICE OF
ARBITRATION"). Such Notice of Arbitration shall specify the matters as to which
arbitration is sought, the nature of any Dispute, the claims of each Party to
the arbitration and shall specify the amount and nature of any damages, if any,
sought to be recovered as a result of any alleged claim, and any other matters
required by the Commercial Arbitration Rules of the American Arbitration
Association as in effect from time to time to be included therein, if any.
Except for the enforcement provisions contained in Section 10.11 arbitration
shall be the sole remedy for the resolution of a Dispute.
(b) ARBITRATION RULES; LOCATION. The arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, except as those rules conflict with the provisions of
this Section 10.12, in which event the provisions of this Section 10.12
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shall control. Any arbitration hereunder shall be conducted at Tulsa, Oklahoma,
or at such other location as shall be agreed to by the Parties hereto in
writing.
(c) ONE NEUTRAL ARBITRATOR. The Dispute shall be resolved by
one neutral arbitrator who shall: (i) have general knowledge and experience in
the manufacturing industry and in the matters addressed in the Dispute; (ii)
have no affiliation with any Party; and (iii) be selected by the American
Arbitration Association office in Dallas, Texas ("AAA"); provided, that with
respect to the Dispute submitted to arbitration pursuant to a Notice of
Arbitration, each Party shall have the absolute right to reject one (but no more
than one) arbitrator selected by the AAA within fifteen (15) days of being
notified by the AAA as to the identity of the arbitrator, in which event such
person shall be de-selected and the AAA shall select another neutral arbitrator.
(d) DECISION OR AWARD. Any decision or award of the arbitrator
shall be final and binding upon the parties to the arbitration proceeding. The
Parties agree that the arbitration award may be enforced against the Parties to
the arbitration proceeding or their assets wherever they may be found, and that
a judgment upon the arbitration award may be entered in any court having
jurisdiction thereof.
(e) COSTS AND EXPENSES. All out of pocket costs and expenses
incurred by any Party in connection with an arbitration resolution of any
disagreement, dispute, controversy or claim pursuant to this Section 10.12,
including but not limited to reasonable attorney's fees and disbursements, shall
be borne by the Party incurring the same; provided, however, that the arbitrator
shall have the discretion to declare any Party to the arbitration proceeding as
the "prevailing party" with respect to one or more of the issues that were the
subject of the arbitration, and to require the other Party to the arbitration to
reimburse such "prevailing party" for the some or all of its costs and expenses
incurred in connection with such proceeding.
10.13 PERFORMANCE BY SELLERS. Fintube agrees to cause each of the other
Sellers, not included as parties to this Agreement, to perform any obligations
of such Sellers described in this Agreement.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by one of their duly authorized Responsible Officers, as of the date
first above written.
"LONE STAR" "FINTUBE"
LONE STAR TECHNOLOGIES, INC. FINTUBE LIMITED PARTNERSHIP
BY: DIVISION FINTUBE CORPORATION,
ITS GENERAL PARTNER
By: /S/ RHYS J. BEST By: /S/ JERRY E. RYAN
--------------------------- -----------------------------------
Rhys J. Best, Chairman of Jerry E. Ryan, Chairman of the Board
the Board, Chief Executive
Officer and President
"PURCHASER"
FINTUBE TECHNOLOGIES, INC.
By: /s/ RHYS J. BEST
-------------------------
Rhys J. Best, Chairman
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EXHIBIT 2.2
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this "AGREEMENT") is
made and entered into as of the 1st day of January, 2000, by and among Lone Star
Technologies, Inc., a Delaware corporation ("LONE STAR"), Fintube Technologies,
Inc., an Oklahoma corporation and a wholly owned subsidiary of Lone Star
("PURCHASER"), and Fintube Limited Partnership, a Delaware limited partnership
("FINTUBE", together with Subsidiaries (as defined in Section 1.1 of the Asset
Purchase Agreement) hereinafter collectively referred to as the "SELLERS");
WHEREAS, on the 16th day of November, 1999, the parties hereto entered
into that certain Asset Purchase Agreement, whereby the Purchaser agreed to
acquire substantially all of the assets of the Sellers (the "ASSET PURCHASE
AGREEMENT"), and in connection therewith, the parties hereto have agreed that
certain amendments specified herein need to be made to the Asset Purchase
Agreement; and
WHEREAS, the partes hereto desire to amend the Asset Purchase
Agreement, as set forth herein.
NOW THEREFORE, in consideration of the mutual promises contained
herein, and for the exchange of TEN DOLLARS ($10.00), and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. Section 1.1 of the Asset Purchase Agreement is hereby amended to add
the following definitions in alphabetical order:
""AyB INDEMNIFIED LIABILITIES" has the meaning specified in
Section 9.1."
""AyB MEXICANA" means Aletas y Birlos Mexicana, S.A. de C.V., a
corporation organized under the laws of the United Mexican
States and wholly owned by the Purchaser and Lone Star ST
Holdings, Inc."
""BANK" has the meaning specified in Section 5.27."
""GOMEZ SHARES" means the three (3) shares of Series "A"
Minimum Capital stock, and the 1,160 shares of the Series "B"
Variable Capital stock, of AyB that is owned by Roberto Gomez
Portugal."
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""MEXICAN LIENS" has the meaning specified in Section 5.27"
""MEXICAN RETAINED LIABILITIES" has the meaning specified in
Section 5.27"
""PROFEPA" has the meaning specified in Section 5.27"
2. Section 2.1 of the Asset Purchase Agreement is hereby amended and
replaced with the following:
"2.1 PURCHASE AND SALE. At the Closing, upon the terms and
subject to the conditions contained herein, Fintube shall,
and shall cause the Subsidiaries to, sell, transfer, assign,
convey and deliver to Purchaser, and Purchaser shall
purchase, accept and acquire from Sellers, in exchange for
Purchaser's payment to Fintube of the Purchase Price and
assumption of the Assumed Liabilities, (or, with respect to
the stock of AyB, the payment of the cash portion of the
Purchase Price for said stock), all of Sellers' right, title
and interest in and to all of the asset, properties and
rights of Sellers, including all of the assets, properties
and rights described in this Section 2.1, but excluding the
Retained Asset (collectively and individually, the
"ASSETS"); provided, however, Purchaser may at its election
require Fintube: (i) to transfer the stock of AyB to a
subsidiary of Purchaser; and (ii) to convey those Assets
owned or used by its Biraghi Canada division to another
subsidiary of Purchaser:
(a) all Real Property set forth on SCHEDULE 2.1(a);
(b) all Tangible Personal Property, including the items set
forth on SCHEDULE 2.1(b);
(c) all Permits, including the items set forth on SCHEDULE
2.1(c), to the extent transferrable;
(d) all Contracts, including the items set forth on SCHEDULE
2.1(d);
(e) all of Sellers' Intellectual Property Rights, including the
items set forth on SCHEDULE 2.1(e);
(f) all Inventory of Sellers, including the items set forth on
SCHEDULE 2.1(f);
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(g) all Accounts Receivable, deposits, and prepaid expenses of
Sellers, including the items set forth on SCHEDULE 2.1(g);
(h) all rights of Sellers under warranties and guarantees,
express and implied;
(i) all software and computer programs and documentation,
including flow charts, diagrams, descriptive texts and
programs, computer printout tapes and databases of Sellers;
(j) all rights (including indemnification rights) and choses in
action of Sellers: (i) against third parties which affect
the use of, or title to, any of the Assets after the
Closing; or (ii) which may be asserted as counterclaims,
rights of setoff or defenses in any action brought by a
Third Party against Purchaser which relate to any of the
Assets or Assumed Liabilities;
(k) all other property of any kind, tangible and intangible,
real, personal and mixed (including those items set forth in
the books and records of Sellers) and all other rights and
benefits to which Sellers may be entitled relating to the
Assets or the Business;
(l) all books, records, files, documents, papers and agreements
of Sellers which relate to the Assets or the Business,
including all operating, maintenance, vendor, landowner,
computer, employee and environmental records and files;
(m) all Goodwill of the Sellers;
(n) all bank accounts of the Sellers, including the accounts set
forth on Schedule 2.1(n) (other than a new bank account
created specifically for the receipt of the cash portion of
the Purchase Price) including all cash on deposit in such
accounts and all uncleared deposits in such accounts, the
petty cash of Sellers, all temporary cash investments of
Sellers and instruments representing same (including without
limitation marketable securities), and all other cash and
cash equivalents of Sellers on hand, in transit, or in
depositories, as of the Closing Date; and
(o) all of the outstanding capital stock of AyB except for the
Gomez Shares, together with all of Fintube's right, title
and interest in and to the promissory note of AyB payable to
Fintube."
3. Section 2.2 of the Asset Purchase Agreement is hereby amended and
replaced with the following:
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"2.2 RETAINED ASSETS. Notwithstanding the provisions of Section
2.1, Fintube shall retain the following assets, and such
assets shall not be included in the term "Assets" (the
"RETAINED ASSETS")
(a) all rights in and to the Employee Notes;
(b) all rights in the Interests (other than the Interests
in AyB); and
(c) all other items listed on Schedule 2.2."
4. The restrictive legend described in Section 2.3 of the Asset
Purchase Agreement is attached hereto as EXHIBIT 2.3(a).
5. The next to last sentence of the first paragraph of Section 2.3 of
the Asset Purchase Agreement is hereby amended and replaced with the
following:
"None of the shares, if any, of Lone Star Common Stock
issued as part of the Purchase Price shall be issued in
consideration of the stock of AyB, and all such stock shall
be deemed to be purchased for the cash portion of the
Purchase Price."
6. Section 2.3(a) of the Asset Purchase Agreement is hereby amended and
replaced with the following:
"(a) If there is a Securities Law Exemption (as herein defined),
Lone Star will issue the Stock Consideration: (i) to those
persons designated by Fintube on Schedule 1.1 hereto (the
"DESIGNATED RECIPIENTS"), as the persons to whom Fintube is
directing the Stock Consideration be paid; and (ii) in such
proportions among the Designated Recipients as Fintube shall
designate not less than five (5) business days prior to the
Closing Date; provided, however, that Lone Star will use its
best efforts to obtain a "discretionary exemption" under the
Canadian/Quebec securities laws for Michel Labelle as a
resident of Quebec, Canada. To the extent Lone Star is
unsuccessful in obtaining such exemption by February 1,
2000, Lone Star will pay in cash to
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Michel Labelle, by February 5, 2000, the sum of U.S.
$54,800, in lieu of delivering any Stock Consideration to
Michel Labelle."
7. Attached to this Agreement as EXHIBIT "A" is the Estimated Base
Purchase Price Adjustment delivered by Fintube to Lone Star.
8. The first sentence of Section 2.4(c) of the Asset Purchase Agreement
is hereby amended and replaced with the following:
"(c) Within forty-five (45) days after the Closing Date, Fintube
and its independent public accountants shall prepare and
deliver to all Parties a draft of a statement (the "DRAFT
CLOSING STATEMENT") consisting of the audited balance sheet
of the Business as of the Closing Date, prepared in
accordance with GAAP."
9. The following is added as a new paragraph after Section 2.6(i):
"Notwithstanding the foregoing, Fintube will assume all of
the AyB Indemnified Liabilities, subject to the limitations
set forth in Section 9.7(c), and all such AyB Indemnified
Liabilities shall be satisfied as a Purchaser Claim against
the Escrow Account, as described in Section 9.8."
10. Section 3.1 of the Asset Purchase Agreement is hereby amended and
replaced with the following:
"3.1 CLOSING. The Closing will take place at the offices of
NICHOLS, WOLFE, STAMPER, NALLY, FALLIS & ROBERTSON, INC.,
124 E. 4th Street, Tulsa, Oklahoma, on JANUARY 3, 2000, at
10:00 a.m., C.S.T., unless the parties mutually agree on
another date, time and place. To the extent the Closing
takes place on January 3, 2000, the Closing shall be deemed,
for all purposes, to have occurred as of 12:01 a.m., C.S.T.,
on January 1, 2000 (the "CLOSING DATE")."
11. Section 3.2(a) of the Asset Purchase Agreement is hereby amended to
delete the "and" after clause (vi), to add "and" after clause (vii)
and to add the following clause (viii):
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"(viii) to the extent available, stock certificates
evidencing all of the outstanding capital stock of
AyB, except for the Gomez Shares, together with the
promissory note of AyB payable to Fintube."
12. Purchaser affirms to Sellers that the Purchaser declines to assume
the IRB Debt. Accordingly, the IRB Debt shall be paid and
discharged by the Sellers at Closing, as set forth in Section
3.2(b)(i).
13. The third sentence of Section 5.10 of the Asset Purchase Agreement
is hereby amended and replaced with the following:
"In addition, Fintube shall be responsible for any
United States, Canadian or Mexican federal, state or
provincial income taxes of the Sellers, resulting
from the transaction contemplated in this Agreement;
and Fintube shall cause the Designated Recipients to
be responsible for any United States, Canadian or
Mexican federal, state or provincial income taxes of
the Designated Recipients resulting from the
transaction contemplated in this Agreement."
14. Purchaser confirms to Sellers that all Environmental
Deficiencies identified in Section 5.25 of the Asset Purchase
Agreement have been satisfied, corrected or resolved to the
satisfaction of Purchaser. The foregoing notwithstanding,
nothing contained in this Agreement will modify or amend the
Sellers' representations and warranties contained in Section
4.1(q) of the Asset Purchase Agreement.
15. A new SECTION 5.27, "COVENANTS REGARDING AyB", shall be added
to the Asset Purchase Agreement, and shall state as follows:
"5.27 COVENANTS REGARDING AyB. Fintube covenants and agrees
that, at its own cost and expense, it will pay,
perform or otherwise discharge, as appropriate, those
known AyB liabilities listed below in clauses (i)
through (vii) inclusive (collectively the "MEXICAN
RETAINED LIABILITIES"), to be accomplished by the
respective target dates indicated below:
(i) Fintube will transfer the stock certificates
described in Section 3.2(a)(viii) of this Agreement
and not available at the Closing to AyB Mexicana,
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within one hundred and twenty (120) days of the
Closing and, to the extent necessary, will commence
and complete any Mexican judicial proceeding within
said period to effect said transfer;
(ii) Fintube will effect a recapitalization or other
mutually acceptable corporate reorganization of AyB
by February 15, 2000 that will: (a) cancel the Gomez
Shares; and (b) terminate any and all rights Roberto
Gomez Portugal may have in any of the equity of AyB,
except for his right to receive a pro rata share of
the purchase price of AyB;
(iii) Fintube will negotiate with, and make any
required payment to, Banco Internacional, S.A. (the
"BANK") to secure the complete and final release of
the three (3) liens (collectively the "MEXICAN
LIENS") against AyB or its assets in favor of the
Bank and securing credits in the respective amounts
of P$100,939 (recorded March 16, 1984), P$23,631
(recorded November 27, 1984) and P$15,542 (recorded
February 4, 1986). If through negotiation Fintube
does not obtain the complete and final release of the
Mexican Liens by February 15, 2000, Fintube will
initiate and prosecute a judicial proceeding on
behalf of AyB against the Bank to obtain the complete
and final release of the Mexican Liens by a date no
later than December 31, 2000;
(iv) Fintube will: (a) cooperate with Lone Star and
AyB, and will promptly review, in good faith, AyB's
records to determine whether AyB owes any unpaid
import duties or other payments in connection with
the Pitex program, with respect to any period
occurring prior to the Closing Date; and (b) pay any
duties or other payments due in connection therewith,
by January 31, 2000;
(v) Fintube will: (a) cooperate with Lone Star and
AyB, and will promptly review, in good faith, AyB's
records to determine whether AyB owes any unpaid
social security taxes or related payments due with
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respect to any period occurring prior to the Closing
Date; and (b) pay any such social security taxes or
related payments due in connection therewith, by
January 31, 2000;
(vi) Fintube will use its best efforts on behalf of
AyB to successfully litigate to a conclusion by June
30, 2000, all environmental fines, penalties and
other payments due the Mexican Federal Environmental
Protection Office ("PROFEPA") to eliminate AyB being
categorized as a habitual offender by PROFEPA. If
Fintube has not succeeded in its litigation with
PROFEPA by June 30, 2000, Fintube will on such date
pay all fines, penalties and other payments due
PROFEPA; and
(vii) Fintube will respond in good faith on behalf of
AyB to the Hacienda tax audit of AyB for 1995, and
will pay any additional taxes, interest or penalties
required to be paid as a result of such audit.
To the extent Fintube does not pay, perform or discharge any of the
Mexican Retained Liabilities, Purchaser may assert any such Mexican
Retained Liabilities against the Escrow Account, without regard to
the Basket."
16. A new SECTION 7.3(s), "MEXICAN OPINION", shall be added to the
Asset Purchase Agreement, and shall state as follows:
"(s) MEXICAN OPINION. Lone Star and Purchaser shall have
received the legal opinion(s) of Martinez, Rodriquez y
Asociados, S.C. and Rivadeneyra y Trevio, S.C. in form
and substance reasonably satisfactory to Lone Star and
Purchaser."
17. Section 9.1 of the Asset Purchase Agreement is hereby amended and
replaced with the following:
"9.1 INDEMNIFICATION. After the Closing, both Fintube and
Purchaser (each an "INDEMNIFYING PARTY") hereby agree to
indemnify, defend and hold harmless the other Party, and its
directors, officers, employees and controlled and
controlling persons (hereinafter collectively "RELATED
PERSONS"), from and against all Claims asserted against,
resulting to, imposed upon or
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incurred by such Party or such Party's Related Persons
(collectively an "INDEMNIFIED PERSON"), subject to all of
the provisions and limitations contained in this Article IX,
to the extent resulting from: (a) the inaccuracy or breach
of any representation or warranty of the Indemnifying Party
contained in or made pursuant to this Agreement; (b) the
breach of any covenant of the Indemnifying Party contained
in or made pursuant to this Agreement; or (c) in the
circumstance where Fintube is the Indemnifying Party, the
AyB Indemnified Liabilities (as defined below); provided,
however, the AyB Indemnified Liabilities shall not be
subject to the limitations of Section 9.7(b), but will be
subject to the other provisions and limitations of Article
IX. For purposes of determining whether an Indemnified
Person is entitled to indemnification under this Article IX
due to the breach of an Indemnifying Party's representation
or warranty, the materiality qualification in such
representation or warranty shall be disregarded and such
representation or warranty shall be read for purposes of
this Article IX as though such qualification was not
included therein (it being agreed by the Parties that the
Basket described in Section 9.7(b) hereof was intended to
supplant such materiality qualification). As used in this
Article IX, the term "CLAIM" shall include, (x) all debts,
liabilities and obligations, (y) all losses, damages, costs
and expenses, including pre- and post-judgment interest,
penalties, court costs and attorneys' fees and expenses, and
(z) all demands, claims, actions, costs of investigation
causes of action, proceedings, arbitrations, judgments,
settlements and assessments.
"AyB INDEMNIFIED LIABILITIES" shall consist of any and all Claims
related to or resulting from the following:
(a) The operation, management or conduct of the Business by
AyB, or the ownership or use of the assets of AyB, prior
to the Closing Date and any Retained Liabilities
applicable to AyB; provided, however, AyB Indemnified
Liabilities shall not include : (i) any Claims to the
extent of reserves established in Sellers Financial
Statements with respect to AyB, or in the Subsidiary
Financial Statements for AyB; (ii) the Assumed
Liabilities; (iii) the obligations of AyB under its
collective bargaining agreements or otherwise to its
labor union; (iv) trade payables of AyB; (v) accrued
expenses and obligations of AyB incurred in the ordinary
course of business,
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including ongoing contractual obligations; and (vi)
liabilities of AyB, the factual basis of which is
disclosed in the Schedules to Article IV of this
Agreement; or
(b) Subject to the provisions of Section 9.4 hereof, any
defective products manufactured, designed, distributed
or sold by AyB on or prior to the Closing Date,
including any damages, costs and losses related to
product recalls; provided, however, AyB Indemnified
Liabilities shall not include: (i) any Claims to the
extent of reserves established in Sellers Financial
Statements with respect to AyB, or in the Subsidiary
Financial Statements for AyB; and (ii) liabilities of
AyB, the factual basis of which is disclosed in the
Schedules to Article IV of this Agreement."
18. The last sentence of Section 9.7(b) of the Asset Purchase Agreement
is hereby amended and replaced with the following:
"Notwithstanding anything in this Section 9.7 to the
contrary, Purchaser Claims made pursuant to Sections 4.3(a),
5.9, 5.10 (but only with respect to United States, Canadian
or Mexican federal, state or provincial income taxes of the
Sellers or the Designated Recipients resulting from the
transaction contemplated in this Agreement), 5.25, 5.27, 9.1
(but only with respect to the AyB Indemnified Liabilities),
and 9.4 shall not be subject to the Basket."
19. Section 9.7(c) of the Asset Purchase Agreement is hereby amended
and replaced with the following:
"(c) The total amount of Fintube's obligations with respect
to Purchaser Claims under this Article IX shall not exceed
forty percent (40%) of the Purchase Price (the "CAP");
provided, however, the total amount of Fintube's obligations
with respect to the Mexican Retained Liabilities and the AyB
Indemnified Liabilities shall not exceed U.S. $918,000
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20. The first sentence of Section 9.8 of the Asset Purchase Agreement
is hereby amended and replaced with the following:
"To satisfy any Purchaser Claim, any Warranty Claim to be
borne by Fintube, any amount due to Purchaser on account of
the Mexican Retained Liabilities, any claim for any
adjustment owed by Fintube for payment of real property
taxes, or any Brokers' Fees pursuant to Section 4.3(a) (any
of such Claims shall be an "ESCROW CLAIM") that the
Purchaser has the right to recover against Fintube
hereunder, Fintube agrees that Purchaser shall transfer at
Closing FIVE MILLION FORTY THOUSAND DOLLARS ($5,040,000) of
the Purchase Price, directly to an escrow account in the
name of Fintube (the "ESCROW ACCOUNT"), at a mutually agreed
bank or other suitable financial institution in Tulsa,
Oklahoma (the "ESCROW AGENT")."
21. The sixth sentence of Section 9.8 of the Asset Purchase
Agreement is hereby amended and replaced with the following
three (3) sentences:
"$15,000 of the Escrow Account will be disbursed to Fintube
from the Escrow Account when the Mexican Liens are
completely and finally released. An additional $25,000 of
the Escrow Account will be disbursed to Fintube from the
Escrow Account when the other Mexican Retained Liabilities,
described in clauses (i) through (vi) inclusive of Section
5.27 hereof have been paid, performed or discharged. Except
with respect to the $40,000 of the Escrow Account described
in the two preceding sentences, one-half of the balance of
the Escrow Account, less any unresolved Escrow Claims, will
be disbursed to Fintube on the 15th day after completion of
the audit of the calendar year 2000 financial statements of
the Business."
22. The last two sentences of Section 9.8 of the Asset Purchase
Agreement are hereby amended and replaced with the following:
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"The funds in the Escrow Account shall be invested in income
producing investments or securities to be selected by
Fintube, and all income produced thereby shall be
distributed to the Designated Recipients by the Escrow Agent
on a quarterly or other basis designated by Fintube. All
income produced by the Escrow Account shall be the sole and
exclusive property of Fintube, and shall not be subject to
any claim by Lone Star or the Purchaser. The terms of the
escrow arrangement shall be specified in the Escrow
Agreement attached hereto as EXHIBIT 9.8, and the former
EXHIBIT 9.7 shall be renumbered EXHIBIT 9.8."
23. Section 10.2 of the Asset Purchase Agreement is hereby amended and
replaced with the following:
"10.2 LONE STAR GUARANTY. Lone Star is the indirect parent of the
Purchaser, which is in turn the direct parent of both
Fintube Canada, Inc. and AyB Mexicana, and has significant
interest in ensuring that Lone Star, Purchaser, Fintube
Canada, Inc. and AyB Mexicana receive the benefit of the
terms of this Agreement. As an inducement to the Sellers to
enter into this Agreement, Lone Star has agreed to
guarantee, and does hereby absolutely and unconditionally
guarantee, the full and prompt performance of all of the
covenants, agreements, and obligations of Purchaser under
this Agreement. In addition, Lone Star hereby absolutely and
unconditionally guarantees the full and prompt performance
of all of the covenants, agreements and obligations of
Fintube Canada, Inc. in connection with the Sellers'
Canadian assets and liabilities under the Asset Purchase and
Sale Agreement, Biraghi-Canada, the Deed of Transfer and
Assignment of Lease, together with the full and prompt
performance of all of the covenants, agreements and
obligations of AyB Mexicana in connection with its purchase
of the AyB stock pursuant to the Stock Purchase and Sale
Agreement (Mexico), and of Purchaser in connection with the
purchase of AyB stock pursuant to the Individual Stock
Purchase Agreement (Mexico)."
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24. Section 10.5 of the Asset Purchase Agreement is hereby amended and
replaced with the following:
"10.5 ASSIGNMENT; BINDING EFFECT; NO THIRD PARTY BENEFIT. Neither
this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any Party
(whether by operation of law or otherwise) without the prior
written consent of the other Parties, except that the rights
and obligations of Purchaser under this Agreement may be
assigned in whole or in part to an acquisition subsidiary of
Purchaser or an Affiliate thereof; and as a part thereof,
Purchaser does hereby assign to Fintube Canada, Inc. all of
the covenants, agreements and obligations of Purchaser
hereunder in connection with the Sellers' Canadian assets
and liabilities, and Purchaser does hereby assign to AyB
Mexicana all of the covenants, agreements and obligations of
Purchaser hereunder in connection with its purchase of the
AyB stock; provided, however, in no event shall such
assignment reduce Purchaser's duty to satisfy such
obligations. Subject to the preceding sentence, this
Agreement will be binding upon, and inure to the benefit of
and be enforceable by the Parties and their respective
successors and assigns. Except as provided in Article IX,
nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the Parties
hereto, and their respective successors and permitted
assigns, any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement."
25. A new SECTION 10.14 PERFORMANCE BY PURCHASER SUBSIDIARIES, shall be
added to the Asset Purchase Agreement, and shall state as follows:
"10.14 PERFORMANCE BY PURCHASER SUBSIDIARIES. Lone Star and
Purchaser agree to cause Fintube Canada, Inc. and AyB
Mexicana to fully and promptly perform all of the covenants,
agreements and obligations of the Purchaser described in
this Agreement."
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<PAGE>
26. Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Asset Purchase Agreement.
27. All other terms and conditions of the Asset Purchase Agreement
shall remain unchanged, and are hereby ratified and affirmed by the
Parties hereto.
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Executed and delivered as of the date set forth above.
"LONE STAR" "FINTUBE"
LONE STAR TECHNOLOGIES, INC. FINTUBE LIMITED PARTNERSHIP
BY: DIVISION FINTUBE CORPORATION,
ITS GENERAL PARTNER
By: /s/ Rhys J. Best By: /s/ Jerry E. Ryan
---------------------------------- ---------------------
Rhys J. Best, Chairman of the Board, Jerry E. Ryan,
Chief Executive Officer and President Chairman of the Board
"PURCHASER"
FINTUBE TECHNOLOGIES, INC.
By: /s/ Rhys J. Best
---------------------------
Rhys J. Best, President and
Chairman of the Board
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Exhibit 99.1
[LOGO] LONE STAR NEWS RELEASE
TECHNOLOGIES, INC.
CONTACT: CHARLES J. KESZLER
(972) 770-6495
Fax: (972) 770-6471
LONE STAR TECHNOLOGIES, INC. COMPLETES THE
PURCHASE OF FINTUBE LIMITED PARTNERSHIP
Dallas, TX, January 3, 2000 ..... Lone Star Technologies, Inc. (Lone Star),
NYSE:LSS, announced that it has completed the purchase of Fintube Limited
Partnership's assets, a privately held, Tulsa-based manufacturer of finned
tubes used in a variety of heat recovery applications.
The purchase price was approximately $86 million which included the issuance
of 760,000 shares of Lone Star common stock valued at $20 million. The
assets were purchased by Fintube Technologies, Inc., (Fintube) a new
wholly-owned subsidiary of Lone Star. Fintube also executed a new $59
million credit agreement with a bank group. The initial funding under the
credit agreement was approximately $46 million with the balance available for
working capital, and new capital investments subject to borrowing base
limitations. The balance of the purchase price was provided by Lone Star
from additional borrowings.
Fintube is the leader in the design and production of finned tubes which are
used in a variety of heat recovery applications. For the past five years,
Fintube has invested in additional capacity and research and development of
new products to better serve the growing world demand for heat recovery
systems. Its share of domestic Heat Recovery Steam Generation (HRSG)
manufacturing capacity for finned tubes is approximately 70% and its share of
world HRSG capacity, including licensees of its manufacturing technology in
Japan, Korea, Italy and India, is estimated to be 50%. Its customers include
suppliers of heat recovery boiler sections used in gas-fired, combined cycle
power generating plants. Fintube anticipates this market will grow rapidly
in the near future. Fintube also designs and manufactures other products,
such as boiler economizers, boiler tubing and enhanced-surface tubing. Some
of these products will be marketed through the same distribution channels as
Lone Star's specialty tubing products.
Fintube's revenues and EBITDA for the 1998 calendar year were $61.2 million
and $9.1 million, respectively, and for the first nine months of 1999 were
$60.7 million and $14.8 million, respectively. The acquisition is expected to
be accretive to Lone Star's earnings per share.
Rhys J. Best, Chairman, President and Chief Executive Officer of Lone Star,
stated, "Fintube is a remarkable success story. We are pleased to combine
its market leadership position in the design and production of finned tubes
for the power generation industry and other applications with Lone Star's
widely respected tubular expertise and leadership in oilfield and specialty
tubing products. Fintube will operate with current management and the
employment is anticipated to continue at present levels."
Lone Star Technologies, Inc. is a holding company whose principal operating
subsidiaries are Lone Star Steel Company, which manufactures and markets
oilfield casing, tubing, and line pipe, specialty tubing products, flat
rolled steel and other tubular products and services, and Fintube
Technologies, Inc.
This release contains forward looking statements based on
assumptions that are subject to a wide range of business
risks. There is no assurance that the estimates and
expectations in this release will be realized. Important
factors that could cause actual results to differ materially
from the forward looking statements are described in the
periodic filings of Lone Star Technologies, Inc. with the
Securities and Exchange Commission, including its Annual Report
on Form 10-K for the year ended December 31, 1998.
