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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): MARCH 31, 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)770-6401
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 March 7, 2000, Lone Star Technologies, Inc., a Delaware
corporation ("Lone Star"), and its newly-formed and wholly-owned subsidiary
Bellville Acquisition, Inc., a Texas corporation ("Purchaser"), executed an
asset purchase agreement for the acquisition (the "Acquisition") by Purchaser
of substantially all of the assets of Bellville Tube Corporation, a
privately held tubular goods manufacturer located near Houston, Texas
("Bellville"). Certain liabilities of Bellville were excluded. The
Acquisition was closed on March 31, 2000 for a base purchase price of $14.8
million less a $0.3 million adjustment for working capital. The purchase
price adjustments were estimated at the closing and are expected to be
adjusted on an actual, post-closing basis in May 2000. The consideration for
the Acquisition was determined through arm's length negotiations between Lone
Star and Bellville.
The acquired business involves the production of high quality, low
cost oil country tubular goods and line pipe between 1.9 inches and 4.5
inches in outside diameter. Lone Star intends to operate and to use the
assets acquired in the Acquisition in substantially the same manner as they
were used by Bellville prior to the Acquisition.
Lone Star and Purchaser financed the Acquisition through cash held
by Lone Star and $5 million of borrowings. In connection with these
borrowings, Lone Star Steel Company, a wholly owned subsidiary of Lone Star
(the "Subsidiary"), borrowed $5 million under its present credit facility to
repay the remaining $5 million of its subordinated loan to Lone Star. Lone
Star guaranteed an additional $5 million of the Subsidiary's credit facility,
pledged the stock of Purchaser as collateral for such guaranty, and used the
loan repayment to fund a portion of the Bellville purchase price.
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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 June 16, 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 June 16, 2000.
(c) EXHIBITS.
2.1* Asset Purchase Agreement dated as of March 7, 2000 by and
among Lone Star Technologies, Inc., Bellville Acquisition,
Inc. and Bellville Tube Corporation.
2.2* First Amendment to Asset Purchase Agreement dated as of March
31, 2000 by and among Lone Star Technologies, Inc., Bellville
Acquisition, Inc. and Bellville Tube Corporation.
2.3* Limited Guaranty dated as of March 31, 2000 by and between the
CIT Group/Business Credit, Inc., as agent, and Lone Star
Technologies, Inc.
2.4* Stock Pledge Agreement dated as of March 31, 2000 by and
between the CIT Group/Business Credit, Inc., as agent, and
Lone Star Technologies, Inc.
99.1* Press release dated March 31, 2000.
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*filed herewith
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SIGNATURES
Pursuant to the requirement 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: April 17, 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 March 8, 2000 by and among
Lone Star Technologies, Inc., Bellville Acquisition, Inc. and
Bellville Tube Corporation.
2.2* First Amendment to Asset Purchase Agreement dated as of March
31, 2000 by and among Lone Star Technologies, Inc., Bellville
Acquisition, Inc. and Bellville Tube Corporation.
2.3* Limited Guaranty dated as of March 31, 2000 by and between the
CIT Group/Business Credit, Inc., as agent, and Lone Star
Technologies, Inc.
2.4* Stock Pledge Agreement dated as of March 31, 2000 by and between
the CIT Group/Business Credit, Inc., as agent, and Lone Star
Technologies, Inc.
99.1* Press release dated March 31, 2000.
</TABLE>
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* filed herewith
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ASSET PURCHASE AGREEMENT
BELLVILLE ACQUISITION, INC.
Buyer
LONE STAR TECHNOLOGIES, INC.
Guarantor
and
BELLVILLE TUBE CORPORATION
Seller
March 7, 2000
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS............................................................................................1
1.1. CROSS-REFERENCE TABLE...........................................................................1
1.2. LISTED DEFINITIONS..............................................................................3
1.2.1. Action.................................................................................3
1.2.2. Affiliate..............................................................................3
1.2.3. Bank Loans. ...........................................................................3
1.2.4. Business...............................................................................3
1.2.5. Bylaws.................................................................................3
1.2.6. Charter................................................................................3
1.2.7. Code...................................................................................4
1.2.8. Contractual Obligations................................................................4
1.2.9. Governmental Authority.................................................................4
1.2.10. Guarantee. ............................................................................4
1.2.11. Investment.............................................................................4
1.2.12. Law....................................................................................4
1.2.13. Liability. ............................................................................4
1.2.14. Lien...................................................................................4
1.2.15. Loss...................................................................................5
1.2.16. Permitted Liens........................................................................5
1.2.17. Person.................................................................................5
1.2.18. Personal Property Leases...............................................................6
1.2.19. [Intentionally Omitted]................................................................6
1.2.20. Subsidiary.............................................................................6
ARTICLE 2. PURCHASE AND SALE OF ASSETS...........................................................................6
2.1. ACQUIRED ASSETS.................................................................................6
2.1.1. Real Property..........................................................................6
2.1.2. Leased Real Property...................................................................6
2.1.3. Equipment..............................................................................6
2.1.4. Inventory..............................................................................6
2.1.5. Intellectual Property..................................................................7
2.1.6. Contract Rights........................................................................7
2.1.7. Permits, Etc...........................................................................7
2.1.8. Air Emissions..........................................................................7
2.1.9. Books and Records......................................................................7
2.1.10. Claims.................................................................................8
2.1.11. Security Deposits......................................................................8
2.1.12. Goodwill...............................................................................8
2.1.13. Unlisted Assets........................................................................8
2.2. EXCLUDED ASSETS.................................................................................8
2.2.1. Cash and Bank Accounts.................................................................8
2.2.2. Receivables............................................................................8
2.2.3. Excluded Contracts.....................................................................8
2.2.4. Minute and Stock Books.................................................................8
2.2.5. Seller's Rights under this Agreement...................................................8
2.2.6. Seller's Rights under the LSS Agreement................................................8
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2.2.7. Rights Against Third Parties...........................................................9
2.3. ASSUMED LIABILITIES.............................................................................9
2.3.1. Ordinary Course of Business Liabilities................................................9
2.3.2. Liabilities Under Assumed Contracts....................................................9
2.3.3. Liabilities Under Permitted Liens......................................................9
2.3.4. Prorated Taxes.........................................................................9
2.3.5. WARN Act...............................................................................9
2.4. EXCLUDED LIABILITIES............................................................................9
2.4.1. Contracts..............................................................................9
2.4.2. Liabilities as Guarantor or Surety.....................................................9
2.4.3. Related Party Liabilities.............................................................10
2.4.4. Post-Closing and Third Party Liabilities..............................................10
2.4.5. Liabilities Not on Closing Date Balance Sheet.........................................10
2.4.6. Litigation/Breach of Warranty.........................................................10
2.4.7. Product Liabilities. .................................................................10
2.4.8. Environmental Liabilities.............................................................10
2.4.9. Taxes.................................................................................10
2.4.10. Employee/Benefit Liabilities..........................................................10
2.4.11. Deferred Compensation Obligation......................................................11
2.4.12. WARN Act..............................................................................11
2.5. NO TRANSFER OF NON-TRANSFERABLE RIGHTS.........................................................11
2.6. PURCHASE PRICE.................................................................................11
ARTICLE 3. REPRESENTATIONS AND WARRANTIES.......................................................................11
3.1. REPRESENTATIONS AND WARRANTIES OF SELLER.......................................................11
3.1.1. Organizational Matters................................................................11
A. Status.......................................................................11
B. Qualification................................................................12
C. Subsidiaries, Affiliate Dealings.............................................12
D. Authority; Effective Agreement...............................................12
E. Owners.......................................................................12
F. Charter......................................................................12
3.1.2. Financial Matters.....................................................................12
A. Financial Statements Delivered...............................................12
B. Preparation of Financial Statements..........................................13
C. Preparation of Closing Date Balance Sheet....................................13
D. Change in Condition..........................................................13
E. Bank Loans...................................................................16
3.1.3. Assets................................................................................16
A. Title to Acquired Assets.....................................................16
B. [Intentionally Omitted.].....................................................16
C. Real Property................................................................16
D. Equipment....................................................................18
E. Personal Property Leases.....................................................18
F. Inventory....................................................................18
G. Intellectual Property........................................................18
H. Insurance....................................................................19
I. Contracts....................................................................20
J. Permits, Etc.................................................................21
3.1.4. Employee Benefit Matters..............................................................22
A. Definitions..................................................................22
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B. Benefit Arrangements.........................................................23
C. Termination/Withdrawal, Etc..................................................23
D. Multiemployer Plans..........................................................23
E. Favorable Determination Letter...............................................23
F. Amendment....................................................................23
G. Claims. ....................................................................23
H. Trigger......................................................................24
I. Reports and Returns. .......................................................24
J. Third Party Contracts. .....................................................24
K. Required Contributions. ....................................................24
L. Terminated Employees. ......................................................24
M. Employer Securities. .......................................................24
N. Unwritten Plans. ...........................................................24
3.1.5. Environmental Matters.................................................................25
A. Definitions..................................................................25
B. Compliance...................................................................26
C. Notice/Investigation.........................................................26
D. Storage Tanks................................................................27
E. OSHA Compliance..............................................................27
F. Listing of Real Property.....................................................27
G. Credits......................................................................27
H. Disposal and Recycling of Waste..............................................27
I. Disclosure...................................................................27
3.1.6. Legal Matters.........................................................................27
A. Operations in Compliance with Law............................................27
B. No Illegal Payments..........................................................28
C. Litigation...................................................................28
D. Product Warranties and Product Claims........................................28
3.1.7. Tax Matters...........................................................................28
A. Effect of Transfer...........................................................28
B. Compliance...................................................................29
3.1.8. Labor and Employment Matters..........................................................29
A. Labor Matters................................................................29
B. Employees....................................................................29
C. Application Outside U.S......................................................30
3.1.9. Miscellaneous Matters.................................................................30
A. Change in Relationship.......................................................30
B. Required Consents............................................................30
C. Transactions with Affiliates.................................................30
D. Brokers or Finders...........................................................30
E. Full Disclosure..............................................................30
F. No Defense...................................................................31
3.1.10. NO FURTHER REPRESENTATIONS............................................................31
3.2. REPRESENTATIONS AND WARRANTIES OF BUYER........................................................31
3.2.1. Organization and Standing of Buyer....................................................31
3.2.2. Corporate Authority; Effective Agreement..............................................31
3.2.3. Full Disclosure.......................................................................31
3.2.4. Brokers or Finders....................................................................32
3.2.5. Qualified Employee Plans..............................................................32
3.2.6. Due Diligence; Reliance on Representations............................................32
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ARTICLE 4. COVENANTS............................................................................................32
4.1. COVENANTS TO BE PERFORMED PRIOR TO CLOSING.....................................................32
4.1.1. Access to Premises and Information. ..................................................32
4.1.2. Conduct of Business Prior to Closing..................................................32
4.1.3. Notices and Consents..................................................................33
4.1.4. Discharge of Liens and Encumbrances...................................................33
4.1.5. Supplemental Disclosure...............................................................33
4.1.6. Other Transactions....................................................................33
4.1.7. Employees.............................................................................33
4.1.8. Preparation for Closing...............................................................33
4.1.9. Press Releases........................................................................33
4.1.10. Notice of Breaches....................................................................34
4.1.11. Insurance.............................................................................34
4.1.12. Intellectual Property.................................................................34
4.1.13. Assumption of Seller's ERISA Plans....................................................34
4.1.14. Assumption of Seller's ERISA Plans....................................................34
4.1.15. Seller Policies.......................................................................34
4.2. COVENANTS CONTINUING BEYOND CLOSING. ..........................................................34
4.2.1. Expenses of Transaction...............................................................34
4.2.2. Non-Competition/Confidentiality.......................................................34
4.2.3. Employees.............................................................................35
4.2.4. Transfer Taxes........................................................................35
4.2.5. Cooperation...........................................................................35
4.2.6. Additional Documents, Etc.............................................................35
4.2.7. Change of Name........................................................................35
4.2.8. Collection of Receivables.............................................................35
4.2.9. Profit Sharing........................................................................36
ARTICLE 5. CLOSING..............................................................................................36
5.1. DATE, TIME AND LOCATION........................................................................36
5.2. TRANSFER AND ASSIGNMENT OF ACQUIRED ASSETS; PRORATIONS.........................................36
5.2.1. Transfer and Assignment of Acquired Assets............................................36
5.2.2. Prorations............................................................................36
5.3. PAYMENT OF ESTIMATED PURCHASE PRICE............................................................36
5.4. PURCHASE PRICE ADJUSTMENT. ....................................................................37
5.4.1. Procedures for Adjustment.............................................................37
5.4.2. Reconciliation of Estimated Purchase Price and Final Purchase Price and Payment of
Purchase Price Adjustment.............................................................37
5.4.3. Cooperation...........................................................................37
5.5. ALLOCATION OF PURCHASE PRICE...................................................................38
5.6. CONDITIONS TO BUYER'S OBLIGATION TO CLOSE......................................................38
5.6.1. Continued Accuracy of Representations and Warranties..................................38
5.6.2. Performance of Agreements.............................................................38
5.6.3. Seller's Certificate..................................................................38
5.6.4. Good Standing Certificate.............................................................38
5.6.5. Bill of Sale..........................................................................38
5.6.6. Owner Agreements......................................................................38
5.6.7. Contract and Lease Assignments........................................................38
5.6.8. Employment Agreements.................................................................39
5.6.9. Required Consents.....................................................................39
5.6.10. Termination Statements and Releases of Liens..........................................39
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5.6.11. Real Property.........................................................................39
A. Title Insurance..............................................................39
B. General Warranty Deed........................................................39
5.6.12. Due Diligence, Etc....................................................................39
5.6.13. Legality; Governmental Authorization; Litigation......................................40
5.6.14. No Change in Law; Etc.................................................................40
5.6.15. Financing.............................................................................40
5.6.16. Delta Tubular.........................................................................40
5.6.17. Profit Sharing........................................................................41
5.6.18. 1999 Audited Statements...............................................................41
5.6.19. Receivables Report....................................................................41
5.6.20. Maintenance of Coverage...............................................................41
5.6.21. Insurance Coverage....................................................................41
5.7. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.....................................................41
5.7.1. Continued Accuracy of Representations and Warranties..................................41
5.7.2. Performance of Agreements.............................................................41
5.7.3. Officer's Certificate.................................................................41
5.7.4. Board Approval........................................................................41
5.7.5. Absence of Litigation.................................................................41
5.7.6. Good Standing Certificate.............................................................42
5.7.7. Delta Tubular.........................................................................42
5.7.8. Legality; Governmental Authorization; Litigation......................................42
5.7.9. No Change in Law; Etc.................................................................42
5.7.10. Contract and Lease Assignments........................................................42
ARTICLE 6. INDEMNIFICATION......................................................................................43
6.1. INDEMNIFICATION OF BUYER.......................................................................43
6.2. INDEMNIFICATION OF SELLER......................................................................43
6.3. LIMITATIONS ON INDEMNIFICATION RIGHTS..........................................................43
6.3.1. Termination of Indemnification Rights.................................................43
6.3.2. Time Limit. .........................................................................44
6.3.3. Dollar Limitations....................................................................44
6.3.4. LSS Agreement.........................................................................44
6.4. PROCEDURES FOR INDEMNIFICATION.................................................................44
6.4.1. General Claims........................................................................45
6.4.2. Defense of Third Party Claims.........................................................45
6.4.3. Payment...............................................................................46
6.5. SPECIAL REFERENCES.............................................................................46
6.6. RELEASE OF ESCROW FUNDS........................................................................46
6.7. SOLE REMEDIES..................................................................................46
ARTICLE 7. TERMINATION..........................................................................................47
7.1. GROUNDS FOR TERMINATION........................................................................47
7.2. EFFECT OF TERMINATION..........................................................................47
ARTICLE 8. DISPUTE RESOLUTION / REMEDIES........................................................................48
8.1. DISPUTE RESOLUTION.............................................................................48
8.1.1. Mediation.............................................................................48
8.1.2. Arbitration...........................................................................48
8.1.3. Injunctive Relief.....................................................................48
8.1.4. Dispute Resolution/Legal Fees.........................................................48
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8.2. REMEDIES.......................................................................................48
ARTICLE 9. NOTICES, CONSTRUCTION AND INTERPRETATION.............................................................49
9.1. NOTICES........................................................................................49
9.2. ENTIRE AGREEMENT; WAIVERS......................................................................49
9.3. LONE STAR GUARANTY.............................................................................49
9.4. AMENDMENT OR MODIFICATION......................................................................49
9.5. HEADINGS.......................................................................................50
9.6. SCHEDULES; ETC.................................................................................50
9.7. SEVERABILITY...................................................................................50
9.8. COUNTERPARTS...................................................................................50
9.9. SUCCESSORS AND ASSIGNS.........................................................................50
9.10. NO THIRD PARTY BENEFICIARY RIGHTS..............................................................50
9.11. GOVERNING LAW..................................................................................50
9.12. CONSTRUCTION OF THE AGREEMENT..................................................................50
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered by and among
BELLVILLE ACQUISITION, INC., a corporation organized and existing under the laws
of Texas ("Buyer"), LONE STAR TECHNOLOGIES, INC., a corporation organized and
existing under the laws of Delaware ("Lone Star"), and BELLVILLE TUBE
CORPORATION, a corporation organized and existing under the laws of Delaware
(including any successor as a result of the conversion of Bellville Tube
Corporation into a Delaware limited partnership, "Seller"), on this 7th day of
March, 2000
BACKGROUND
Seller desires to sell, and Lone Star, through its wholly owned
subsidiary, Buyer, desires to purchase, substantially all of the assets of
Seller used in its Business, as defined herein, upon the terms and conditions
hereinafter set forth.
NOW THEREFORE, the parties hereto, in consideration of the covenants
and agreements set forth herein, and intending to be legally bound hereby, agree
as follows:
AGREEMENT
ARTICLE 1. DEFINITIONS.
Certain terms are used in this Agreement as specifically defined
herein.
1.1. CROSS-REFERENCE TABLE. The following terms are defined in the
Sections set forth below and will have the respective meanings therein defined:
TERM DEFINITION
"Acquired Assets" Section 2.1
"Agreement" Preamble
"Arbitrator" Section 5.4.2
"Assumed Contracts" Section 2.1.6
"Assumed Liabilities" Section 2.3
"Benefit Arrangement" Section 3.1.4.A
"Books and Records" Section 2.1.9
"Buyer" Preamble
"CERCLA" Section 3.1.5.A
"Claims" Section 2.1.10
"Closing" Section 5.1
"Closing Date" Section 5.1
"Closing Date Balance Sheet" Section 5.4.2
"Deferred Compensation Obligation" Section 2.4.11
"Delta Agreement" Section 5.6.19
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"Effective Time" Section 5.1
"Environmental Laws" Section 3.1.5.A
"Equipment" Section 2.1.3
"ERISA" Section 3.1.4.A
"ERISA Affiliate" Section 3.1.4.A
"Estimated Purchase Price" Section 2.6
"Excluded Contracts" Section 2.1.6
"Excluded Inventory" Section 2.2.8
"Excluded Liabilities" Section 2.4
"Excluded Payables" Section 2.4.13
"Excluded Assets" Section 2.2
"Final Purchase Price Section 2.6
"Financial Statements" Section 3.1.2.A
"First Quarter Bonus" Section 5.6.17
"GAAP" Section 2.6.1
"GAAS" Section 3.1.2.B
"Hazardous Substances" Section 3.1.5.A
"HMO" Section 4.1.14
"Indemnification Claim" Section 6.4
"Indemnification Termination Date" Section 6.3.2
"Indemnitor" Section 6.1
"Indemnitee" Section 6.1
"Intellectual Property" Section 2.1.5
"Inventory" Section 2.1.4
"Leased Personal Property " Section 1.2.17
"Lone Star" Preamble
"LSS Agreement" Section 2.1.6
"Management Employee" Section 3.1.8.B
"Multiemployer Plan" Section 3.1.4.A
"Notice Period" Section 6.4.2.A
"Real Property" Section 2.1.1
"Owners" Section 3.1.E
"PBGC" Section 3.1.4.A
"Pension Plan" Section 3.1.4
"Permits" Section 2.1.7
"Permitted Liens" Section 1.2.16
"PPO" Section 4.1.14
"Purchase Price" Section 2.6
"Purchase Price Adjustment" Section 2.6
"RCRA" Section 3.1.5.A
"Real Property Leases" Section 2.1.2
"Receivables" Section 2.1.11
"Reference Balance Sheet" Section 3.1.2.A
"Reference Date" Section 3.1.2.A
"Release" Section 3.1.5.A
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"Remedial Work" Section 1.2.15
"Required Consents" Section 3.1.9.B
"Reserved Claims" Section 6.3
"Seller" Preamble
"Seller ERISA Plan" Section 3.1.4
"Seller Pension Plan" Section 3.1.4
"Seller Welfare Plan" Section 3.1.4
"Seller's Counsel" Section 5.7.2
"Seller's CPA" Section 3.1.2.A
"Taxes" Section 2.4.9
"Third Party Claim" Section 6.4.2
"Welfare Plan" Section 3.1.4
"1999 Audited Statements" Section 3.1.2.A(ii)
1.2. LISTED DEFINITIONS.
1.2.1. ACTION. The term "Action" means any and all civil, criminal or
administrative actions, causes of action, litigation, suits, arbitrations,
investigations, proceedings, hearings, citations, assessments, audits, and
judgments, and all written charges, complaints, demands, and claims (including
employment-related claims) relating to a Person.
1.2.2. AFFILIATE. The term "Affiliate" means with respect to any
specific Person, as of the date of determination, (a) any Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with the specified Person; (b) any Person who or which is or has been within the
past three years an officer, director, partner or beneficial holder of at least
10% of any class of the outstanding ownership interests of the specified Person;
(c) any Person who or which is or has been within the past three years an
officer, director, partner or beneficial holder of at least 10% of any class of
the outstanding ownership interests of a Person specified in clause (b) above;
(d) the spouse, parents, siblings and children of any Person covered by clauses
(b) or (c) above; and (e) any Person in which the specified Person or a Person
specified in clause (d) above will, directly or indirectly and legally or
beneficially, own at least 10% of the outstanding ownership interests.
1.2.3. BANK LOANS. The term "Bank Loans" means all obligations or
indebtedness of Seller to banks, financial institutions or other financing
companies and all other obligations or indebtedness of Seller to other Persons,
which obligations or indebtedness bear interest.
1.2.4. BUSINESS. The term "Business" means the business of Seller as a
going concern on the Reference Date and presently, including, without
limitation, Seller's business of manufacturing electric resistance welded steel
pipe.
1.2.5. BYLAWS. The term "Bylaws" means the bylaws (or other similar
document) and all amendments thereto adopted by the specified Person, each as
from time to time in effect.
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1.2.6. CHARTER. The term "Charter" means the certificate of
incorporation or partnership (or other similar document) and partnership
agreement and all amendments thereto adopted by the specified Person, each as
from time to time in effect.
1.2.7. CODE. The term "Code" means the federal Internal Revenue Code
of 1986, any successor statute of similar import, and the rules and regulations
thereunder, collectively and as from time to time amended and in effect.
1.2.8. CONTRACTUAL OBLIGATIONS. The term "Contractual Obligations"
means, with respect to any specified Person, all contracts, agreements,
arrangements, deeds, mortgages, options, leases or licenses, written or oral, to
which such Person is a party or otherwise subject, or by which such Person or
any of such Person's assets or properties are legally bound.
1.2.9. GOVERNMENTAL AUTHORITY. The term "Governmental Authority" means
any governmental agency, body or instrumentality (whether federal, state, local
or foreign) including, without limitation, all courts.
1.2.10. GUARANTEE. The term "Guarantee" includes (a) any guarantee of
the payment or performance of any indebtedness or other obligation of any
obligor, and (b) any other arrangement whereby credit is extended to one obligor
on the basis of any promise or undertaking of another Person, whether that
promise or undertaking is expressed in terms of an obligation to pay the
indebtedness of such obligor, or to purchase any obligation owed by such
obligor, or to purchase or lease assets under circumstances that would enable
such obligor to discharge one or more of its obligations, or to maintain the
capital, working capital, solvency or general financial condition of such
obligor, whether or not such arrangement is disclosed in the balance sheet of
such other Person or is referred to in a footnote thereto.
1.2.11. INVESTMENT. The term "Investment" includes any (a) share of
capital stock, evidence of indebtedness or other security issued by any other
Person, (b) loan, advance, or extension of credit to, or contribution to the
capital of, any other Person and (c) purchase of the securities or business or
integral part of the business of any other Person, or commitment or option to
make such a purchase.
1.2.12. LAW. The term "Law" means, at the applicable time, each
provision of any then existing federal, state, local or foreign law, statute,
ordinance, code, order, rule or regulation, (including, without limitation,
Environmental Laws), and each term of any order, judgment or decree or then
currently existing, of any arbitrator or Governmental Authority (including,
without limitation, the United States Patent Office), and each provision of any
license, franchise, permit or similar right granted under any of the foregoing.
1.2.13. LIABILITY. The term "Liability" means, without limitation, any
direct or indirect liability, indebtedness, guaranty, endorsement, loss, damage,
debt, cost, expense, obligation or responsibility, absolute or contingent, fixed
or unfixed, matured or unmatured, known or unknown, asserted or unasserted,
choate or inchoate, liquidated or unliquidated, secured or unsecured (including,
without limitation, attorneys', accountants' consultants' and experts' fees).
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1.2.14. LIEN. The term "Lien" means, with respect to any specified
property or asset, any Contractual Obligation or any Law, which has the
result that there will (a) exist any encumbrance, mortgage, pledge, lien,
equity, claim, charge (floating or fixed), restriction on transfer or other
security interest of any kind upon such property or assets, or upon the
income or profits therefrom; (b) exist any arrangement or agreement which
prohibits the creation of such encumbrances, mortgages, pledges, liens,
claims, charges, restrictions on transfer or other security interests on such
property or assets; (c) have occurred any transfer (absolute or contingent)
of any of such property or assets for the purposes of subjecting the same to
the payment of indebtedness or performance of any other obligation in
priority to payments of its general creditors; or (d) have occurred an
acquisition or exist an agreement or option to acquire such property or
assets upon conditional sale or other title retention device or Contractual
Obligation (including a capitalized lease).
1.2.15. LOSS. The term "Loss" or "Losses" means (a) any and all
damages, deficiencies, assessments, judgments, losses, costs, expenses
(including costs of collection and reasonable experts' and attorneys' fees
and expenses), obligations and liabilities; and (b) (i) any costs to remove,
remediate, treat, dispose of, investigate and sample any and all Hazardous
Substances from all or any portion of the Real Property or off-site
properties to the extent required by applicable Environmental Laws or any
Governmental Authority, (ii) any costs to protect against the release or
threat of release of Hazardous Substances on, in, under or affecting the Real
Property to the extent required by applicable Environmental Laws or any
Governmental Authority, including, without limitation, any costs and expenses
for environmental testing, assessments and investigations, and (iii) with
respect to all or any portion of the Real Property or any off-site
properties, to the extent so required by Applicable Environmental Laws or so
ordered by a Governmental Authority, any costs to comply with all applicable
Environmental Laws including fines, penalties, and administrative costs
rightfully charged by any Governmental Authority (all work referred to in
(i), (ii) and (iii) above is hereinafter collectively called "Remedial
Work"), except that "Loss" and "Losses" will not include the Indemnitee's own
lost revenues, lost profits, lost production time, equipment down time, idled
labor or similar consequential or special damages to the extent those losses
could have been eliminated or mitigated through the reasonable commercial
efforts of Indemnitee.
1.2.16. PERMITTED LIENS. The term "Permitted Liens" means,
collectively, all (a) Liens for current real or personal property taxes not
yet due or due but not yet payable on the Closing Date or that are being
contested in good faith by appropriate proceedings or for which adequate
reserves have been established; (b) worker's, carrier's, materialmen's or
similar liens arising by operation of law or in the ordinary course of
business for obligations not yet due on the Closing Date or that are being
contested in good faith by appropriate proceedings or for which adequate
reserves have been established; and (c) as to the Real Property, (i) rights
reserved to or vested in any local, state or federal governmental bodies,
authorities or agencies to control or regulate the use of real property
interests in any manner, (ii) the reservation of mineral rights by Quanex
Corporation, and (iii) recorded easements, restrictions, reservations,
rights-of-way, covenants, conditions and other similar encumbrances whether
of record, or apparent on the premises including, but not limited to, road,
highway, pipeline, railroad and utility easements which, individually or in
the aggregate, do not adversely affect Buyer's current use of such property.
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1.2.17. PERSON. The term "Person" means an individual, partnership,
limited partnership, limited liability partnership, corporation, limited
liability company, association, trust, joint venture, unincorporated
organization, Governmental Authority or political subdivision thereof, or
other legal entity of any kind.
1.2.18. PERSONAL PROPERTY LEASES. The term "Personal Property
Leases" means the leases, subleases or other agreements with respect to any
personal property used in connection with the Business, including, without
limitation, those listed on SCHEDULES 2.1.6.(a) AND 2.1.6.(b) (such personal
property being referred to herein as the "Leased Personal Property").
1.2.19. [INTENTIONALLY OMITTED].
1.2.20. SUBSIDIARY. The term "Subsidiary" means, at the applicable
time and with respect to any specified Person, any other Person of which a
specified Person owns, directly or indirectly, owns at least a majority of
the outstanding capital stock (or other shares of beneficial interest)
entitled to vote generally.
ARTICLE 2. PURCHASE AND SALE OF ASSETS
2.1. ACQUIRED ASSETS. Except as otherwise provided in SECTION 2.2 and
subject to the terms and conditions of this Agreement, on the Closing Date,
Buyer will purchase and acquire from Seller, and Seller will sell, assign,
transfer and deliver, or cause to be sold, assigned, transferred and
delivered, to Buyer, free and clear of all Liens, other than Permitted Liens,
all of Seller's right, title and interest in, to and under all of the assets,
properties, rights, licenses and business, wherever located, real, personal
or mixed, tangible or intangible, owned, held or used in the conduct of the
Business by Seller on the Closing Date (collectively, the "Acquired Assets"),
including, without limitation, all right, title and interest of Seller in,
to, and under those assets specifically listed in SECTIONS 2.1.1 THROUGH
2.1.13:
2.1.1. REAL PROPERTY. Those parcels of real property (including,
without limitation, all rights of way, easements and other interests) owned
by Seller listed on SCHEDULE 2.1.1 (collectively, the "Real Property").
2.1.2. LEASED REAL PROPERTY. Those leasehold interests and all
claims and rights of Seller under those leases, subleases, and other
agreements listed on SCHEDULE 2.1.2 (collectively, the "Real Property
Leases") under which Seller, as lessor, leases any of the Real Property.
2.1.3. EQUIPMENT. All the fixtures, leasehold improvements,
furnishings, furniture, office supplies, vehicles, tooling, spare parts,
tools, machinery, equipment, and other tangible personal property of every
kind and description, whether located upon or affixed to any of the Real
Property, including, without limitation, Leased Personal Property under
leases set forth on SCHEDULE 2.1.6(a) (collectively, the "Equipment"). Each
item of the Equipment having an original cost or book value in excess of
$1,500.00 is listed on SCHEDULE 2.1.3.
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2.1.4. INVENTORY. All inventory, including, without limitation, all
raw materials, work in process, finished goods, samples, spare parts and
supplies, wherever located, owned or used by Seller in the operation of the
Business except for the Excluded Inventory (the "Inventory").
2.1.5. INTELLECTUAL PROPERTY. All (i) patents, trademarks, service
marks, trade names, copyrights, and registered, assumed or fictitious names
and all applications and registrations therefor, and all of which are listed
on SCHEDULE 2.1.5, including, without limitation, the name(s) "BELLVILLE TUBE
CORPORATION" and the domain name "Bellvilletube.com"; (ii) inventions,
discoveries, processes, trade secrets, methods and other intellectual
property rights and intangible property, whether or not patentable; (iii)
software and computer programs; (iv) useful information relating to the
foregoing items, including, without limitation, technology, engineering,
drawings, reports, design information and practices, flow charts, diagrams,
descriptive texts and programs, underlying tapes, documentation, source
codes, and computer data bases; and (v) confidential business information,
including, without limitation, all price lists, customer lists and business
plans, owned or used in connection with the operation of the Business
(collectively, the "Intellectual Property").
2.1.6. CONTRACT RIGHTS. All rights under the employment and
severance agreements, Benefit Arrangements, leases (including, without
limitation, Real Property Leases and Personal Property Leases) set forth on
SCHEDULE 2.1.6(a), non-governmental licenses, franchise sales agreements,
joint venture agreements, sales and purchase orders, warranties, guarantees
and service agreements, insurance contracts not identified in SECTION 2.2.3,
and any other contracts, specifically including the Amended and Restated
Conversion Agreement between Seller and Lone Star Steel Company dated as of
July 9, 1996, as amended (the "LSS Agreement"), except as provided in SECTION
2.2.6, agreements or instruments of Seller (collectively, the "Assumed
Contracts"), including, without limitation, the Assumed Contracts described
on SCHEDULE 2.1.6(a), but specifically excluding those described on SCHEDULE
2.1.6(b) and any contracts, documents or instruments relating to the
Receivables (the "Excluded Contracts"). Buyer does not expressly or impliedly
assume any obligation under any contract hereunder except to the extent it is
specifically listed on SCHEDULE 2.1.6(a).
2.1.7. PERMITS, ETC. All of Seller's transferable permits,
authorizations, franchises, licenses, registrations, qualifications,
consents, approvals, waivers and all agency listings owned or used by Seller
in the operation of the Business, whether issued by any Governmental
Authority or any other Person (collectively, the "Permits"), including,
without limitation, those identified on SCHEDULE 2.1.7.
2.1.8. AIR EMISSIONS. All air emissions, water quality improvements
and pollution reductions Seller has, is entitled to or applied for, including
any air emissions, water quality improvements and pollution reductions where
Seller has credit for or has banked, applied to bank or agreed to sell or
trade.
2.1.9. BOOKS AND RECORDS. All records, information, files, manuals,
records (including all financial, personnel and payroll records), sales records,
data, databases, plans, books, ledgers, business plans, projections, documents,
lists (including customer, vendor and employee lists
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and files), and any other recorded knowledge (whether in hard copy or on
software or other media) pertaining to the Acquired Assets and/or to the
Business, other than the originals of Seller's tax filings and related
records and any books and records which Seller is required by law to retain
so long as copies of such originals are provided to Buyer.
2.1.10. CLAIMS. All of Seller's rights, claims, credits, causes of
action or rights of set-off against third parties including, without
limitation, unliquidated rights under manufacturers' and vendors' warranties
and rebates, but only to the extent the same relate to the Acquired Assets or
any Assumed Liabilities ("Claims").
2.1.11. SECURITY DEPOSITS. All of Seller's security deposits and
prepaid expenses reflected or included on the Financial Statements or
relating to Acquired Assets or Assumed Liabilities.
2.1.12. GOODWILL. The goodwill of Seller.
2.1.13. UNLISTED ASSETS. All of the other Acquired Assets not
specifically included in SECTIONS 2.1.1 THROUGH 2.1.12 hereof which are owned
on the Closing Date or included on the Closing Date Balance Sheet, together
with any other assets or items of property presently used in the conduct of
the Business and not specifically excluded under the terms of this Agreement.
2.2. EXCLUDED ASSETS. Notwithstanding any provision of SECTION 2.1
hereof, the following assets of Seller (the "Excluded Assets") are not
included in the Acquired Assets and will not be sold or transferred to Buyer
hereunder:
2.2.1. CASH AND BANK ACCOUNTS. All of Seller's cash and cash
equivalents, bank accounts and petty cash, payroll accounts, government
deposit or withholding accounts to the extent relating to periods prior to
the Effective Time, wherever located ("Cash").
2.2.2. RECEIVABLES. All notes receivable, accounts receivable, and
other receivables or amounts of any kind that are payable or due Seller, and
all rights, claims, credits, causes of action or rights of set-off relating
thereto (collectively, the "Receivables"), a true, correct and accurate list
of which, detailing the specific amounts of and items comprising each of the
Receivables, as of February 29, 2000, is attached hereto as SCHEDULE 2.2.2.
2.2.3. EXCLUDED CONTRACTS. The Excluded Contracts, specifically
including the contracts of Seller for general liability, casualty and
property damage insurance, and all rights, claims, credits, causes of action
or rights of set-off relating thereto, and all agreements and contracts
between Seller and its Affiliates or its Owners.
2.2.4. MINUTE AND STOCK BOOKS. Seller's corporate franchise, minute
and stock record books, corporate seals, tax returns or other records having
to do with the corporate organization of Seller.
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2.2.5. SELLER'S RIGHTS UNDER THIS AGREEMENT. The rights which accrue
or will accrue to Seller under this Agreement.
2.2.6. SELLER'S RIGHTS UNDER THE LSS AGREEMENT. Seller's claims,
rights and remedies existing as of, or based upon facts or events occurring
prior to, the Effective Time against Lone Star Steel Company for, and only
for, payments due and indemnification obligations under the LSS Agreement.
2.2.7. RIGHTS AGAINST THIRD PARTIES. All rights of indemnification,
claims, counterclaims or other rights or actions relating to the Assumed
Contracts which arise with respect to periods on or before the Closing Date
or Losses (including indemnity payments) of Seller thereunder or in relation
thereto.
2.2.8. EXCLUDED INVENTORY. All of the inventory, including, without
limitation, all raw materials, work in process and finished goods, wherever
located, acquired by Seller pursuant to Purchase Order No. B-28298 from
Seller to Nucor Steel, dated December 13, 1999, and the related Sales
Acknowledgment issued by Nucor Steel dated December 14, 1999 (the "Excluded
Inventory").
2.3. ASSUMED LIABILITIES. As of the Effective Time, Buyer will assume
the following, and only the following, Liabilities of Seller (collectively
the "Assumed Liabilities").
2.3.1. ORDINARY COURSE OF BUSINESS LIABILITIES. Seller's
obligations for accounts payable and other accrued current Liabilities
incurred in the ordinary course of business and reflected on the Financial
Statements of Seller or incurred in the ordinary course of business after the
date of the last Financial Statement delivered to Buyer prior to the Closing
Date, but specifically excluding the Excluded Payables.
2.3.2. LIABILITIES UNDER ASSUMED CONTRACTS. Seller's obligations
under (a) the Assumed Contracts and (b) Benefit Arrangements, if any, assumed
by Buyer, but in each case only if such obligations arise with respect to
periods beginning after the Closing Date (other than Liabilities attributable
to any failure by Seller to comply with the terms thereof on or prior to the
Closing Date).
2.3.3. LIABILITIES UNDER PERMITTED LIENS. Seller's obligations
under the Permitted Liens.
2.3.4. PRORATED TAXES. Seller's obligation for ad valorem and other
property taxes assessed on the Acquired Assets for the calendar year 2000.
2.3.5. WARN ACT. Seller's notification duties under the WARN Act,
and all liabilities relating thereto, for events occurring on or after the
Closing Date.
2.4. EXCLUDED LIABILITIES. Notwithstanding any provision in this Agreement
or any other writing to the contrary, Buyer is assuming only the Assumed
Liabilities and is not
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assuming any other Liability of Seller (or any predecessor owner of all or
part of its business and assets) including, without limitation, Liabilities
arising out of events, facts and circumstances existing prior to Closing and
those Liabilities specifically listed in the subsections to this SECTION 2.4
(collectively the "Excluded Liabilities"):
2.4.1. CONTRACTS. (i) Liabilities arising under the Excluded
Contracts, and (ii) obligations under the Assumed Contracts which arise with
respect to periods on or before the Closing Date.
2.4.2. LIABILITIES AS GUARANTOR OR SURETY. Liabilities of Seller as
a guarantor or surety with respect to any obligation of any other Person.
2.4.3. RELATED PARTY LIABILITIES. Liabilities or other financial
obligations owing from Seller to any Affiliate, Subsidiary, or Owner of
Seller.
2.4.4. POST-CLOSING AND THIRD PARTY LIABILITIES. Liabilities of
Seller relating to its affairs after the Closing Date and Liabilities of any
kind of the Owners or any other party other than Seller.
2.4.5. LIABILITIES NOT ON CLOSING DATE BALANCE SHEET. Liabilities
of Seller not reflected and accrued on the Closing Date Balance Sheet,
whether or not reflected on the Reference Date Balance Sheet.
2.4.6. LITIGATION/BREACH OF WARRANTY. Liabilities of Seller (i) for
Actions pending (or threatened), or judgments, against Seller (INCLUDING the
Acquired Assets), (ii) resulting from, arising out of, relating to or caused
by Seller's breach of contract, breach of warranty or tort, and (iii)
resulting from, arising out of, relating to or caused by Seller's violation
of any Law (other than an Environmental Law which is addressed in SECTION
2.4.8 below).
2.4.7. PRODUCT LIABILITIES. All product Liabilities related to the
Business as conducted by Seller prior to the Closing Date, including, without
limitation, all product Liabilities arising out of the manufacture or sale of
products by Seller.
2.4.8. ENVIRONMENTAL LIABILITIES. Liabilities of Seller or any
Affiliate of Seller, predecessor of Seller or other Person (i) under any
Environmental Laws, (ii) arising out of the generation, use, manufacture,
treatment, transportation, storage, disposal or Release of any Hazardous
Substances on, in, at or about the Real Property, or (iii) arising in
connection with Seller's failure to secure required environmental permits.
2.4.9. TAXES. Liabilities of Seller, any Affiliate of Seller and any
Owner for all taxes, fees, levies, duties, charges or other like assessments of
any kind whatsoever, including, without limitation, profits, income,
withholding, gross receipts, excise, real or personal property, property
transfer, asset, capital stock, sales, use, license, ad valorem, stamp,
occupation, employment, payroll, transaction, capital gains, net worth, customs,
and franchise taxes imposed by or payable to any Governmental Authority,
including interest, penalties, deficiencies, additions to
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tax or additional amounts thereto other than ad valorem and other property
taxes assessed on the Acquired Assets for the calendar year 2000 and items
pro-rated pursuant to SECTION 5.2.2 (collectively, "Taxes").
2.4.10. EMPLOYEE/BENEFIT LIABILITIES. Liabilities for any employee
of Seller whom Buyer hires, or attempts to hire, or for any other employee of
Seller, for any wages, salaries, bonuses or withholding taxes earned or
accrued in respect of their employment with Seller, through and including the
Closing Date, including, without limitation, any Liabilities relating to any
Benefit Arrangements, and for payments, taxes, fines or penalties that are
payable to the Internal Revenue Service or the PBGC.
2.4.11. DEFERRED COMPENSATION OBLIGATION. The deferred compensation
obligations of Buyer as reflected on its Financial Statements (the "Deferred
Compensation Obligation").
2.4.12. WARN ACT. All of Seller's liabilities under the WARN Act for
events occurring before the Closing Date.
2.4.13. EXCLUDED PAYABLES. All of Seller's liabilities for payables
arising from or related to the Excluded Inventory.
2.5. NO TRANSFER OF NON-TRANSFERABLE RIGHTS. Notwithstanding anything in
this Agreement to the contrary, this Agreement will not constitute an
agreement to assign any contract, commitment, license, lease or permit, or
any claim, right or benefit arising thereunder if an attempted assignment
thereof, without the consent of a third party, would constitute a breach or
other contravention thereof or in any way adversely affect the rights of
Buyer or Seller thereunder. Seller will use its best efforts to obtain the
consent of the other parties to any such Acquired Asset or any claim or right
or any benefit arising thereunder for the assignment to Buyer, as Buyer may
request. If such consent is not obtained, Seller agrees to cooperate with
Buyer in any reasonable arrangement designed to provide Buyer with the
benefits under the contract as if such consent had been obtained.
2.6. PURCHASE PRICE. The purchase price to be paid by Buyer to Seller for
the Acquired Assets and the other consideration set forth herein, including,
without limitation, the non-competition agreements referred to in SECTION 4.2.2,
will be an amount equal to (i) $14,788,000 PLUS (or MINUS if a negative number)
(ii) the Adjusted Net Working Capital of Seller as of the Closing Date (the
"Final Purchase Price"). For purposes of this Agreement "Adjusted Net Working
Capital" means, as of the date of determination, the sum of the "current
assets", other than Cash, Receivables, and Excluded Inventory of Seller LESS
"current liabilities," other than the amount of the Deferred Compensation
Obligation and the Excluded Payables, of Seller, in all cases as determined
pursuant to United States generally accepted accounting principles, consistently
applied ("GAAP"). Not later than ten (10) days prior to the Closing Date, Seller
and Buyer will make their best estimate of the Purchase Price (the "Estimated
Purchase Price") by adding (or subtracting from if a negative number) their best
estimate of the Adjusted Net Working Capital as of the Closing Date to
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$14,788,000. The Estimated Purchase Price will be subject to adjustment
post-Closing, as provided in SECTION 5.4 hereof (the "Purchase Price
Adjustment").
ARTICLE 3. REPRESENTATIONS AND WARRANTIES.
3.1. REPRESENTATIONS AND WARRANTIES OF SELLER. In order to induce Buyer
to enter into this Agreement and to purchase the Acquired Assets, Seller
represents and warrants to Buyer as follows (it being understood and agreed
that with respect to representations and warranties based on the knowledge or
belief of Seller, Seller will be deemed to have, collectively, the actual
knowledge and beliefs of those persons listed on SCHEDULE 3.1 to this
Agreement).
3.1.1. ORGANIZATIONAL MATTERS.
A. STATUS. Seller is a corporation, and at Closing Seller will be a
limited partnership, duly organized, validly existing and in good standing
under the laws of the State of Delaware with full power and authority to
enter into this Agreement, own its properties and to carry on the Business
as presently conducted by it. Seller has delivered or will deliver a
complete and correct copy of its Charter, agreement of limited partnership
and the documents relating to its conversion to a Delaware limited
partnership to Buyer.
B. QUALIFICATION. Seller is duly qualified as a foreign corporation,
and Seller will be duly qualified as a foreign limited partnership at
Closing, and in good standing as such, in all jurisdictions listed on
SCHEDULE 3.1.1.B which comprise every jurisdiction in which the nature of
the business conducted or property owned by Seller makes such qualification
necessary.
C. SUBSIDIARIES, AFFILIATE DEALINGS. Seller has no Subsidiaries.
Seller has no Affiliates with which it has any agreement, dealings, or
commercial relationship of any kind that will not be canceled as of the
Closing, except those governing partners' rights with respect to each
other.
D. AUTHORITY; EFFECTIVE AGREEMENT. Seller has duly authorized and
approved the execution and delivery of this Agreement and the performance
of the transactions provided for herein. No other corporate or partnership
action is required in connection with the foregoing. This Agreement is a
legal, valid and binding obligation of Seller and is enforceable against
Seller in accordance with its terms, except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and similar laws in effect now or hereafter relating
to creditors' rights generally and by equitable principles, whether
considered in a proceeding at law or in equity. The execution, delivery and
performance of this Agreement by Seller, and the consummation of the
transactions provided for herein, do not and will not, with or without the
giving of notice, the passage of time, or both: (i) conflict with, violate
or result in the breach of any of the terms or conditions of, or constitute
a default under (a) the Charter of Seller, (b) any Contractual Obligation,
including rights of termination or cancellation, to which Seller is a party
or by which Seller or any of its properties is bound, or (c) any Law
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to which Seller is subject; or (ii) result in the creation or imposition
of any Lien affecting any of the Acquired Assets, or otherwise
materially and adversely affect Seller, the Business or any of the
Acquired Assets.
E. OWNERS. The owners of Seller, and their respective ownership
interests in Seller (expressed in percentage terms) and addresses, are
identified on SCHEDULE 3.1.1.E (the "Owners").
F. CHARTER. At Closing, Seller will not be in violation of, or in
default under, any provision of its Charter.
3.1.2. FINANCIAL MATTERS.
A. FINANCIAL STATEMENTS DELIVERED. Seller has delivered, or will
deliver when prepared, to Buyer true, complete and correct copies of the
following financial statements (which are collectively referred to herein
as the "Financial Statements"):
(i) The audited balance sheet of Seller as of December 31, 1998
(the "Reference Balance Sheet" and the "Reference Date", respectively)
and the related statements of income and retained earnings and
statement of cash flows for the year then ended, accompanied by the
report thereon of Harper & Pearson Company, Certified Public
Accountants (hereinafter "Seller's CPA") and similar audited financial
statements as of the end of and for each of the preceding two (2)
fiscal years.
(ii) The audited balance sheet of Seller as of December 31, 1999,
and the related statements of income and retained earnings and
statement of cash flows for the year then ended, accompanied by the
report thereon of Seller's CPA (the "1999 Audited Statements"); and
(iii) the internally prepared, unaudited balance sheet of Seller
as of the end of each calendar month, and the related statements of
income and retained earnings and statement of cash flow, within 20
days of the end of each calendar month prior to the Closing.
B. PREPARATION OF FINANCIAL STATEMENTS. Except as otherwise stated in
the Financial Statements, the Financial Statements (including the notes, if
any, thereto) (a) accurately and fairly present the financial condition and
results of operations of Seller as of and for the periods ending on their
respective dates; (b) have been prepared based on audits conducted in
accordance with generally accepted auditing standards applied on a
consistent basis ("GAAS"); and (c) have been prepared in accordance with
GAAP. Seller has no Liabilities not reflected in or reserved against on the
Financial Statements which, under GAAP, should have been reflected or
reserved against thereon. Seller has made available to Buyer all existing
work papers (including those of Seller's CPA) relating to the preparation
and audit of the Financial Statements.
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C. PREPARATION OF CLOSING DATE BALANCE SHEET. The Closing Date Balance
Sheet when prepared, will (a) accurately and fairly present the financial
condition and results of operations of the Business as of the date shown;
(b) be prepared based on an audit conducted in accordance with GAAS; and
(c) be prepared in accordance with GAAP. Seller will have no Liabilities
not reflected or reserved against on the Closing Date Balance Sheet which,
under GAAP, should have been reflected or reserved against thereon. Seller
will make available to Buyer all existing work papers (including those of
Seller's CPA) relating to the preparation and audit of the Closing Date
Balance Sheet.
D. CHANGE IN CONDITION. Except as listed on SCHEDULE 3.1.2.D, since
the Reference Date, Seller has not with respect to the Business:
(i) sold, leased, encumbered, assigned, transferred, or otherwise
disposed of any assets or properties, tangible or intangible, which
would have been included in the Acquired Assets if the Closing had
been held on the Reference Date or on any date since then, for an
aggregate amount in excess of $50,000 (except for the sale of
Inventory in the ordinary course of business) or outside the ordinary
course of business;
(ii) issued any note, bond or other debt security, or created,
incurred, assumed, or guaranteed any Liabilities; created or suffered
to exist any Lien on any of the Acquired Assets (other than Permitted
Liens), or increased the amount of any Liability outstanding under any
loan agreement, mortgage, equipment lease or other borrowing
arrangement;
(iii) made or suffered any amendment or termination of any
Contractual Obligation to which it is a party or by which it is bound,
or canceled, released, compromised, modified or waived any material
rights, debts or claims held by it;
(iv) delayed or postponed the payment of any Liabilities in a
manner not consistent with past practice and custom, or failed to pay
or discharge when due any Liabilities which failure has caused or will
cause any material damage or risk of loss to the Business or any of
the Acquired Assets;
(v) discharged or satisfied any Lien, or paid any Liabilities,
other than in the ordinary course of business;
(vi) issued, sold or otherwise disposed of any of its capital
stock, or granted any options, warrants, or other rights to purchase
or obtain (including upon conversion, exchange or exercise) any of its
capital stock;
(vii) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting the
Business or its operations, assets, properties or prospects or (ii) of
any item or items carried on its
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books of account individually at more than $25,000 or, in the
aggregate, more than $100,000; or suffered any repeated, recurring
or prolonged shortage, cessation or interruption of supplies or
utility or other services required to conduct its business and
operations;
(viii) suffered any material adverse change in the Business or
its operations, assets, properties, prospects or condition (financial
or otherwise) nor, to Seller's knowledge, has there been any event
which has had or may reasonably be expected to have a material adverse
effect on any of the foregoing;
(ix) entered into or modified the terms of any employment
contract or any collective bargaining or labor agreement (oral or
written), or experienced any Labor Dispute;
(x) failed to maintain, repair and replace the Equipment and any
improvements and fixtures included on or within the Real Property in
accordance with the past practices of Seller;
(xi) purchased or leased any assets (other than Inventory in the
ordinary course of business), or made any capital expenditures, or
commitments or agreements for capital expenditures or capital
additions or betterments to the Acquired Assets either exceeding
$50,000 in the aggregate or outside the ordinary course of business;
(xii) increased the salaries or other compensation of, or made
any advance (excluding advances for ordinary and necessary business
expenses) or loan to, or paid any bonuses to or made any changes in
the terms of employment of any of its employees, officers or
directors, or made any changes in its senior management, other than
salary or other compensation increases which did not exceed three
percent (3%) per annum or bonuses paid in the ordinary course of
business consistent with past practices;
(xiii) changed any of the accounting principles, practices or
policies followed or the methods of applying such principles,
practices or policies;
(xiv) written down or written up the value of any Inventory
(including write-downs by reason of shrinkage or markdowns);
(xv) made or authorized any amendment to its Charter or Bylaws
except as may be necessary to carry out this Agreement or as required
by Law;
(xvi) granted any license or sublicense of any right under or
with respect to any Intellectual Property or permitted the use of its
corporate name by any other Person;
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(xvii) made any Investment in, merged or consolidated with, or
acquired or agreed to acquire or be acquired by, any other Person;
(xviii) adopted, terminated, amended, modified, extended, or
otherwise changed any Benefit Arrangement, or made, caused to be made,
or agreed to make any contribution, award or payment under any Benefit
Arrangement, except at the time and to the extent required by the
written terms thereof;
(xix) made or pledged to make any charitable or other capital
contribution exceeding, in the aggregate, $10,000 per year or made or
pledged to make any political contribution;
(xx) agreed, so as to legally bind Seller, whether in writing or
otherwise, to take any of the actions set forth in this SECTION
3.1.2.D and not otherwise permitted by this Agreement;
(xxi) entered into or engaged in any other material course of
conduct, occurrence, event, incident, action, failure to act, or
transaction other than in the ordinary course of business; or
(xxii) delayed or postponed the filing of applications and/or
oppositions or payment of fees relative to the issuance or maintenance
of any Intellectual Property, including without limitation, patent and
trademark/service mark applications and/or renewals thereof.
E. BANK LOANS. Seller has no Liabilities for Bank Loans.
3.1.3. ASSETS.
A. TITLE TO ACQUIRED ASSETS. Seller has, and will deliver to
Buyer at the Closing, good and marketable title to the Acquired Assets
(or with respect to the Leased Personal Property or any Acquired
Assets held under license only, a valid and enforceable leasehold
interest in or right to use such Acquired Assets) and the rights of
Seller under all Assumed Contracts assigned to Buyer hereunder, free
and clear of all Liens, other than the Permitted Liens. All Permitted
Liens are listed and described on SCHEDULE 3.1.3.A.
B. [INTENTIONALLY OMITTED.]
C. REAL PROPERTY.
(i) Seller has good and marketable, fee
simple title to the Real Property, free and clear of all Liens
except Permitted Liens.
(ii) SCHEDULE 2.1.1 identifies all of the
Real Property. SCHEDULE 2.1.2 identifies the subject of, term
of (including renewal terms, whether or not
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exercised), and parties to, each Real Property Lease, and
any amendment, modification and supplement thereto. Seller
has provided true and complete copies of all Real Property
Leases (including all modifications, amendments and
supplements) to Buyer. Seller does not lease any real
property as a lessee.
(iii) Except as listed on SCHEDULE 3.1.3.C,
there is no underlying mortgage, deed or trust, lease, or
other estate in or interest affecting any Real Property which
is superior to the interest of Seller.
(iv) Except as listed on SCHEDULE 3.1.3.C,
to the knowledge of Sellers, the buildings and structures
constituting part of the Real Property, including fixtures
leased or owned by Seller, do not contain any asbestos or
asbestos-containing material.
(v) The buildings and structures
constituting part of the Real Property currently have access
to (a) public roads or valid easements over private streets or
private property for ingress to and egress from such Real
Property, and (b) water supply, storm and sanitary sewer
facilities, telephone, gas and electrical connections, fire
protection, drainage and other public utilities, in each case
as is necessary for the present use of such Real Properties.
(vi) [Intentionally Omitted.]
(vii) To Seller's knowledge, the use and
operation of each parcel of Real Property, and the buildings
and structures comprising part of the Real Property, by Seller
comply with all applicable Laws including, without limitation,
zoning laws. All building permits, certificates of occupancy,
licenses and other authorizations required for present or
intended uses of the Real Property or any part thereof have
been obtained, and true and complete copies thereof have been
provided to Buyer.
(viii) Seller owes no money to any
architect, contractor, subcontractor or materialman for labor
or materials performed, rendered or supplied to or in
connection with any Real Property within the past nine months.
There is no work being done at, or materials being supplied
to, any of the Real Properties at the date hereof other than
routine maintenance projects having an aggregate cost through
completion of not more than $25,000.
(ix) Since the Reference Date, Seller has
not received any notice, oral or written, of any increase or
proposed increase in the assessed valuation of any parcel of
the Real Property.
(x) To Seller's knowledge, the transfer of
the Real Property to Buyer will not result in the loss of any
exemptions from ad valorem or real property taxes that are
currently claimed by Seller.
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(xi) There are not pending, nor to Seller's
knowledge, threatened, any material adverse claims or demands
relating to Seller's interest in the Real Properties, and
Seller has no knowledge of, any pending or contemplated
condemnation, eminent domain or other similar proceedings
(whether material or not) pursuant to which any part of the
Real Properties would be acquired for a public purpose or any
purpose precluding the full use or enjoyment of the Real
Properties (or any part thereof) by Buyer.
(xii) No notices or restrictions relating to
Hazardous Substances have been or are required to be placed in
any deed to any real Property.
(xiii) Where Seller is a lessor under a Real
Property Lease, the lessee has paid all amounts due and
payable under such Real Property Lease. With respect to all
Real Property Leases, no conditions or events exist which, but
for the giving of notice or the passage of time, would
constitute a default by Seller under the Real Property Leases,
nor to Seller's knowledge is any other party to the Real
Property Leases in default thereunder. No Real Property Lease
listed on SCHEDULE 2.1.2 has been canceled nor to Seller's
knowledge are there pending any threatened claims seeking to
cancel or not renew the Real Property Leases, nor does Seller
have knowledge of any grounds therefor by the other parties
thereto. Except as listed on SCHEDULE 2.1.2, all of the Real
Property Leases listed on SCHEDULE 2.1.2 are assignable and
assumable without the consent of the other party thereto.
D. EQUIPMENT. To the knowledge of Seller, the Equipment is in
good working order (ordinary wear and tear excepted) and is
functioning in substantially the manner as it has since the Reference
Date. All of the Equipment is either owned by Seller or leased by
Seller under one of the Personal Property Leases listed and described
on SCHEDULES 2.1.6.(a) OR 2.1.6.(b). All Equipment is located on the
Real Property.
E. PERSONAL PROPERTY LEASES. SCHEDULES 2.1.6.(a) AND 2.1.6.(b)
list all of the Personal Property Leases under which Seller is a
lessee or lessor of any personal property. All Personal Property
Leases are in full force and effect. Where Seller is lessee, Seller
has paid all amounts due and payable thereunder. With respect to all
Personal Property Leases, no conditions or events exist which, but for
the giving of notice or the passage of time, would constitute a
default by Seller thereunder, nor to Seller's knowledge is any other
party to such instrument in default thereunder. No Personal Property
Lease listed on SCHEDULE 2.1.6(a) has been canceled nor to Seller's
knowledge are there pending any threatened claims seeking to cancel or
not renew such leases, nor does Seller have knowledge of any grounds
therefor by the other parties thereto.
F. INVENTORY. All Inventory is usable, in existence, under the
control of Seller and to Seller's knowledge is free from any physical
defects which would impair Buyer's ability to use such Inventory in
the normal course of the Business. The Inventory is located on the
Real Property.
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G. INTELLECTUAL PROPERTY.
(i) Seller owns or possesses adequate
licenses, sublicenses or other rights to use all Intellectual
Property, necessary to permit Seller to conduct the Business
as now operated.
(ii) Seller is the sole owner and has the
full legal right to use the Intellectual Property owned by it.
(iii) Except as set forth in shrinkwrap or
other standard license forms for software, all of the
Intellectual Property owned or licensed by Seller is
assignable to Buyer as contemplated herein, or if the consent
of any third party is required, such consent has been obtained
in writing. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions
contemplated hereby will alter or impair Buyer's or Seller's
rights with respect to the Intellectual Property.
(iv) To Seller's knowledge, the use by
Seller of any Intellectual Property has not in the past and
does not currently infringe upon or conflict with any patent,
trademark, trade name, brand name, service mark or copyright
of any other Person. No claim is pending, or to Seller's
knowledge threatened, to the effect that the present or past
operations of Seller infringe upon or conflict with the rights
of any other Person in respect of any Intellectual Property,
and no claim is pending, or to Seller's knowledge threatened,
to the effect that any Intellectual Property is invalid or
unenforceable. Except as set forth in shrinkwrap or other
standard license for software, no contract, agreement or
understanding between Seller and any party exists that would
impede or prevent the transfer to (or the continued use by)
Buyer of the entire right, title and interest of Seller in and
to the Intellectual Property.
(v) Seller has not charged or threatened any
other Person, wherever located, with infringement of the
Intellectual Property and has no knowledge of facts which
would support any such claim of infringement.
(vi) None of the processes and formulae,
research and development results and other knowledge of
Seller, the value of which to Seller is contingent upon
maintenance of the confidentiality thereof, has been disclosed
by Seller to any person other than employees, suppliers,
customers, representatives or agents of Seller.
(vii) There are not pending or, to Seller's
knowledge, threatened any material adverse claims or demands
relating to Seller's interest in the Intellectual Property,
and Seller does not have knowledge of any pending or
contemplated oppositions, interferences, re-examinations or
other similar proceedings (whether material or not) pursuant
to which any part of the Intellectual Property would be
acquired by another party or reduced in scope so as to
preclude the full use or enjoyment of the Intellectual
Property (or any part thereof) by Buyer.
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H. INSURANCE. Seller has insurance contracts in full force and
effect which provide for coverages that are usual and customary in its
business as to amount and scope including, without limitation, all
risk property, commercial general liability (including products and
completed operations) and worker's compensation insurance contracts.
All premiums with respect to such insurance contracts are paid up in
full and no notice of cancellation or termination has been received
with respect to any of such insurance contracts. Neither Seller, nor
any party acting on behalf of Seller, has ever had any insurance
policy or coverage involuntarily canceled for reasons other than a
decision by Seller to discontinue premium payments and cancel the
policy nor has Seller had an application for any insurance rejected or
declined. All of the insurance contracts or coverages of Seller are
listed on SCHEDULE 3.1.3.H, and disclosed in each case are the risks
covered, the policy number and the insurer. Seller has provided a
true, complete and accurate history of all claims under such policies,
and any similar predecessor policies, during the past five (5) years
to Buyer. Seller has supplied true, correct and complete copies of all
current insurance policies to Buyer.
I. CONTRACTS.
(i) Except for the contracts listed on SCHEDULES
2.1.6.(a) AND 2.1.6.(b), with respect to the Business, Seller is
not a party to or bound by:
(a) any Contractual Obligation to lease (as lessee)
any real or personal property);
(b) any Contractual Obligations to sell or lease (as
lessor) any of the Acquired Assets of Seller, other than Inventory
in the ordinary course of business;
(c) any Contractual Obligations for the purchase of
materials, supplies, goods, services, equipment or other assets in
excess of $50,000 in the aggregate;
(d) any option, license, franchise or similar
agreement;
(e) any Contractual Obligation for any distribution,
dealer, sales representative, marketing or other similar
arrangements with respect to the promotion or sale of the Inventory;
(f) except as described in item 1 of SCHEDULE
3.1.2.D any Contractual Obligation for partnership, joint venture,
strategic alliance or other similar arrangements;
(g) any Contractual Obligation relating to Bank
Loans or the deferred purchase price of property (in either case,
whether incurred, assumed, guaranteed or secured by any asset);
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(h) any Contractual Obligation that limits the
freedom of Seller with respect to the Business to (x) compete in
any line of business or with any person or in any area or (y) own,
operate, sell, transfer, pledge or otherwise dispose of or encumber
any Acquired Asset, or which would so limit the freedom of Buyer
after the Closing Date;
(i) any Contractual Obligation with or for the
benefit of any Affiliate of Seller;
(j) any secrecy, confidentiality, non-disclosure or
similar agreement;
(k) any other material agreement, commitment,
arrangement or plan not made in the ordinary course of business; or
(l) any Guarantee by Seller of any Liability of any
Person. As to each contracted listed on SCHEDULE 2.1.6(a), Seller
has identified which of the foregoing subsections covers the
contract.
(ii) Each Assumed Contract is a valid and binding agreement of
Seller, is in full force and effect and is, and will be when assigned
to Buyer in accordance with this Agreement, enforceable in accordance
with its terms, except to the extent that the enforceability of the
rights and remedies created thereby may be subject to bankruptcy,
insolvency, moratorium and other laws of general application affecting
the rights and remedies of creditors and to general principles of
equity, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(iii) To Seller's knowledge, no event has occurred which through
the passage of time or the giving of notice, or both, would (a)
constitute a breach or default by any party to any Assumed Contract,
or (b) cause the acceleration of any obligation of any party thereto
or the creation of a Lien upon any of the Acquired Assets.
(iv) Except as listed on SCHEDULE 3.1.3.I, all of the Assumed
Contracts are transferable to Buyer without the consent or approval of
any other party thereto.
(v) True and complete copies (or in respect of oral agreements, a
description of material terms) of each Assumed Contract have been
delivered to Buyer.
J. PERMITS, ETC. SCHEDULE 2.1.7 is a complete and accurate list
of all Permits owned or held by Seller that are necessary to conduct
the Business as presently conducted, all of which are valid, effective
and in good standing. Seller is not in default, and
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Seller has no knowledge of any claim of default, or of any other
claim, proceeding or threatened proceeding with respect to any of
the Permits. Except as listed on SCHEDULE 3.1.3.J, none of the
Permits will be adversely affected by the consummation of the
transactions contemplated hereby, and all of the Permits are
transferable to Buyer, and renewable by their terms or in the
ordinary course of business without the need to comply with any
special qualification procedure or to pay amounts other than
routine filing fees.
3.1.4. EMPLOYEE BENEFIT MATTERS.
A. DEFINITIONS. For purposes of this Section, the
following terms will have the meanings set forth below:
(i) "Benefit Arrangement" means any
employment, severance or similar contract or arrangement
(whether or not written) or any plan (including, without
limitation, any "employee benefit plan," as defined in Section
3(3) of ERISA, that is maintained, administered or contributed
to by Seller or its ERISA Affiliates), policy, practice, fund,
program or contract or arrangement (whether or not written)
providing for compensation, bonus, profit-sharing, stock
option, or other stock related rights or other forms of
incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements),
health or medical benefits, disability benefits, worker's
compensation, supplemental unemployment benefits, severance
benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance or
other benefits) that is, or was during the preceding seven
years, sponsored by Seller or any ERISA Affiliate and covers
any employee or former employee of Seller or any ERISA
Affiliate.
(ii) "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder.
(iii) "ERISA Affiliate" means any other
entity which, during the current calendar year or at any
other time during the seven preceding calendar years (a)
together with Seller, would be treated as a single employer
under Section 414 of the Code or (b) merged with or, other
than in connection with Seller's purchase of assets from
Quanex Corporation on April 15, 1993, liquidated into
Seller.
(iv) "Multiemployer Plan" means any plan
that is a multiemployer plan, as defined in Section 3(37)
or Section 4001(a)(3) of ERISA.
(v) "Seller ERISA Plan" means any Seller
Pension Plan or Seller Welfare Plan.
(vi) "Seller Pension Plan" means any
Pension Plan maintained by Seller or any ERISA Affiliate or
to which Seller or any ERISA Affiliate is required to
contribute for any current or former employees or that was
maintained by Seller
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or any ERISA Affiliate, or with respect to which Seller or
any ERISA Affiliate has or had an obligation to contribute,
at any time during the current calendar year or any of the
seven preceding calendar years.
(vii) "Seller Welfare Plan" means any
Welfare Plan maintained by Seller or any ERISA Affiliate or
to which Seller or any ERISA Affiliate is required to
contribute for any current or former employees, or that was
maintained by Seller or any ERISA Affiliate, or with
respect to which Seller or any ERISA Affiliate has or had
an obligation to contribute, at any time during the current
calendar year or any of the seven preceding calendar years.
(viii) "Pension Plan" means any pension
plan within the meaning of ERISA Section 3(2).
(ix) "Welfare Plan" means any welfare
plan within the meaning of ERISA Section 3(1).
(x) "PBGC" means the Pension Benefit
Guaranty Corporation.
B. BENEFIT ARRANGEMENTS. SCHEDULE 3.1.4.B
identifies each Benefit Arrangement currently maintained by Seller
or any ERISA Affiliate to which Seller or any ERISA Affiliate has a
contribution obigation. Each Benefit Arrangement is being and has
been maintained in compliance with its terms and with the
requirements prescribed by any and all applicable Laws, including,
without limitation, ERISA and the Code.
C. TERMINATION/WITHDRAWAL, ETC. Neither
Seller nor any of its ERISA Affiliates has any Benefit Arrangement
subject to ERISA Section 302 or Code Section 412.
D. MULTIEMPLOYER PLANS. None of the Benefit
Arrangements is a Multiemployer Plan. Neither Seller nor any ERISA
Affiliate has, or had at any time during the preceding seven
calendar years, a contribution obligation to a Multiemployer Plan.
E. FAVORABLE DETERMINATION LETTER. Each
Benefit Arrangement which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service that it is so qualified and, to
Seller's knowledge, no event has occurred since the date of such
determination letter to adversely affect the qualified status of
such Benefit Arrangement.
F. AMENDMENT. Except as disclosed by Seller
in writing to Buyer prior to the date hereof, there has been no
amendment to, written interpretation of or announcement (whether
written or oral) by Seller or any of its ERISA Affiliates relating
to, or change in employee participation or coverage under, any
Benefit Arrangement which would materially increase the expense of
maintaining such Benefit Arrangement above the level of the expense
incurred by Seller in respect thereof for the most recent fiscal
year.
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G. CLAIMS. No Actions are pending or, to the knowledge of Seller,
threatened, with respect to any Benefit Arrangement (other than claims
for benefits in the ordinary course), and to the knowledge of Seller,
no fact or event exists that could reasonably be expected to give rise
to any such Action.
H. TRIGGER. Except as disclosed on SCHEDULE 3.1.4.H, no employee
of Seller will become entitled to any retirement, severance or other
benefit solely as a result of the transactions contemplated hereby.
I. REPORTS AND RETURNS. All reports and returns due to
Governmental Authorities (including, but not limited to, annual
IRS/DOL 5500-series information returns /reports) required to be filed
in connection with all Benefit Arrangements have been timely filed and
were true and correct when filed.
J. THIRD PARTY CONTRACTS. All insurance contracts and/or
agreements with HMOs, PPOs or similar organizations currently
providing insurance or healthcare services in connection with any
Seller Welfare Plan, including any "stop loss" or "excess loss"
contract, and any obligation to provide conversion coverage, are
currently in force. To the knowledge of Seller, no insurance company,
HMO, PPO or similar organization currently providing insurance or
healthcare services in connection with any Seller Welfare Plan has
indicated to Seller or any ERISA Affiliate that it plans to cancel any
contract or other agreement for coverage, or at any time during the
next 12 months increase premiums, membership fees or any other charges
by more than 10 percent.
K. REQUIRED CONTRIBUTIONS. All required contributions to any
Seller Plan and all premiums, fees or other payments required to be
made in connection with any Seller Plan have either been timely made
or are reflected in the Financial Statements on an accrual basis,
whether or not Seller generally prepares its Financial Statements on
an accrual basis.
L. TERMINATED EMPLOYEES. No Seller Welfare Plan provides benefits
to any employee after termination of employment, or to a director or
independent contractor after he or she ceases to be a director or
perform services to Seller or any ERISA Affiliate, except on a basis
that will at all times require that the former employee, director or
independent contractor pay all costs of his or her coverage.
M. EMPLOYER SECURITIES. No Seller ERISA Plan holds any "employer
securities" within the meaning of ERISA Section 407(d)(1) or any
"employer real property" within the meaning of ERISA Section407(d)(2).
Except to the extent Seller Pension Plan is an "ERISA Section 404(c)
Plan" within the meaning of 29 C.F.R. Section 2550.404c-1(b)(1), no
Seller Pension Plan has any investment that, (i) except in the case of
any contract issued by an insurance company, is not publically traded
and (ii) in the case of any contract issued by an insurance company,
is not issued by a carrier rated AAA by Standard & Poor's Corporation
or the equivalent by another nationally recognized rating agency.
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N. UNWRITTEN PLANS. Seller does not maintain any unwritten
agreements, Benefit Arrangements, policies and/or understandings with
any employee or group of employees (including an indeterminate group
of employees or all employees generally) concerning any Seller ERISA
Plan, whether or not Seller or any ERISA Affiliate considers such
unwritten agreements, policies or understandings to be binding on it,
other than its plan for the payment of semi-annual discretionary
"profit sharing bonuses".
3.1.5. ENVIRONMENTAL MATTERS.
A. DEFINITIONS. For purposes of this Agreement, the following
terms will have the meanings set forth below:
(i) "Environmental Laws" means any and all
applicable treaties, laws, regulations, ordinances, statutes,
enforceable requirements, binding determinations, orders,
decrees, judgments, injunctions, permits, approvals,
authorizations, licenses or variances, promulgated or entered
into by any Governmental Authority applicable to Seller or to
which Seller is a party or is bound, relating to safety or
health, pollution or the protection, clean-up or restoration
of the environment, conservation, preservation or reclamation
of natural resources, or to the management, Release or
threatened Release of Hazardous Substances, including, without
limitation, the Resource Conservation and Recovery Act, 42
U.S.C. SectionSection 6901, ET SEQ. ("RCRA"), the Oil
Pollution Act of 1990, 33 U.S.C. Sections 2701 ET SEQ.,
the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. Sections 9601
ET SEQ. ("CERCLA"), the Federal Water Pollution Control Act,
as amended by the Clean Water Act of 1977, 33 U.S.C.
Sections 1251 ET SEQ., the Clean Air Act of 1970, as
amended, 42 U.S.C. Sections 7401 ET SEQ., the Toxic
Substances Control Act of 1976, 15 U.S.C. Sections 2601
ET SEQ., the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. Sections 651 ET SEQ., the Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Sections 11001 ET SEQ., the Safe Drinking Water Act of
1974, as amended, 42 U.S.C. Sections 300(f) ET SEQ., the
Hazardous Materials Transportation Act, 49 U.S.C.
Sections 1801 ET SEQ., and any similar or implementing
state or local law, and all amendments or regulations
promulgated thereunder.
(ii) "Hazardous Substances" means all
explosive or regulated radioactive materials or substances,
hazardous or toxic substances, wastes or chemicals, petroleum
(including crude oil or any faction thereof) or petroleum
distillates, insecticides, pesticides, special wastes,
industrial substances or wastes, PCBs, or any constituent of
any such substances or wastes, asbestos or asbestos containing
materials, and any materials defined by or pursuant to any
Environmental Laws as hazardous, including, without
limitation, materials listed in 49 C.F.R. Section 172.101 and
materials defined as hazardous substances pursuant to Section
101(14) of CERCLA.
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(iii) "Release" means any spilling,
emitting, leaking, pumping, pouring, emptying, injecting,
escaping, dumping, depositing, disposing, discharging,
dispersing, leaching, emanating or migrating of any Hazardous
Substances (including the abandoning or discarding of barrels,
containers and other closed receptacles containing any
Hazardous Substance) in, into, onto, or through the
environment (including ambient air, surface water,
groundwater, soils, land surface, subsurface strata, workplace
or structure).
B. COMPLIANCE. Except as disclosed on
SCHEDULE 3.1.5.B:
(i) Seller has, with respect to the
Business, complied in all respects with all Environmental Laws
and, has not been cited for or received a notice of violation
or notice of noncompliance with respect to violation of any
Environmental Law. Seller is not aware, with respect to any of
the Real Properties, of any audit conducted by or on behalf of
any third party or Governmental Authority with respect to: (a)
any media, including groundwater, soil, or air; (b) the
storage, burial, Release, transportation, or disposal of any
solid waste, special waste or Hazardous Substances; or (c) the
use of underground storage tanks by Seller. Seller has no
formal or informal agreement of any kind with any third party
or Governmental Authority relating to any environmental
cleanup, investigation, audit, study or Remedial Work.
(ii) To Seller's knowledge, the Real
Property is in full compliance with all applicable
Environmental Laws. Neither Seller, nor, to Seller's
knowledge, any third party has engaged in the generation, use,
manufacture, treatment, transportation, storage, disposal or
Release of any Hazardous Substances on, in, at or about the
Real Property that is in violation of applicable Environmental
Laws and/or that could reasonably be expected to subject Buyer
to Losses.
(iii) Seller has secured and maintained
compliance with all Permits and non-transferable Permits
required for the conduct of the Business under Environmental
Laws.
(iv) The Seller has no knowledge of any
existing conditions that will substantially affect Buyer's
ability to comply with Environmental Laws following the
Closing hereunder or to obtain and maintain in effect the
permits and authorizations from any Governmental Authority
which are necessary to permit the continued operation of the
Real Property as currently operated.
(v) Except as set forth on SCHEDULE 3.1.3.J,
Seller has no knowledge of any site investigation or clean-up
of any Real Property, nor any consent of any Governmental
Authority or other Person, that will be required pursuant to
any Environmental Laws in connection with the transfer of
ownership of the Acquired Assets to Buyer.
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C. NOTICE/INVESTIGATION. No written notice, citation,
summons, complaint, order or written request for information pursuant
to any Environmental Law has been received by Seller (including,
without limitation, a CERCLA Section104(e) Information Request or state
equivalent, requesting information regarding Seller's potential
involvement in a waste disposal facility), and no penalty has been
assessed and to Seller's knowledge no investigation or review is
pending or threatened by any Governmental Authority or other Person
with respect to Seller, the Business, the Acquired Assets or the Real
Property (other than those relating to any matter which has been
resolved by such Governmental Authority or other Person and Seller)
regarding (i) any alleged violation by Seller of any Environmental Law,
(ii) any alleged failure by Seller to have any Permit or
non-transferable Permit required under any Environmental Law, or (iii)
any use, possession, Release, threatened Release, storage, generation,
manufacture, treatment, transportation, disposal or recycling by or on
behalf of Seller of any Hazardous Substance, including, without
limitation, a written request for information or notification that
Seller is a potentially responsible party under CERCLA or any other
Environmental Law.
D. STORAGE TANKS. Except as disclosed on SCHEDULE
3.1.5.D, there are no, and have not been during Seller's ownership
or use of the Real Property, any aboveground or underground storage
tanks on the Real Property.
E. OSHA COMPLIANCE. Seller has not received any
written notice of and does not have any knowledge of any soon to be
issued notice of non-compliance with any applicable Environmental Laws
or any other Laws relating to occupational health and safety, other
than a notice relating to any matter that has been resolved by such
Governmental Authority and Seller.
F. LISTING OF REAL PROPERTY. None of the Real
Property is listed or, to the knowledge of Seller, proposed for listing
on the National Priorities List under CERCLA, or on the Comprehensive
Environmental Response, Compensation and Liability Information System
maintained by the United States Environmental Protection Agency, as
updated through the date hereof, or any similar state list of sites
requiring investigation or clean up.
G. CREDITS. Other than pursuant to this Agreement,
Seller has not agreed or applied to trade, bank or sell any air
emission, water improvement or pollution reduction credits it has, had
or may have for the Real Property or Business.
H. DISPOSAL AND RECYCLING OF WASTE. Seller has at all
times transported, disposed and/or recycled its waste in compliance
with Environmental Laws or arranged for the transportation, disposal
and/or recycling of any of its waste with a transporter or disposal
and/or recycling facility licensed and permitted to transport or accept
such waste, including, without limitation, solid, special, and
hazardous waste.
I. DISCLOSURE. Seller has provided Buyer with copies
of any (i) environmental, and of any occupational health and safety,
investigation, study or audit in the possession of Seller which was
conducted in the past seven years in relation to any of the
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Acquired Assets or Real Property, and (ii) any environmental
disclosure statements for the Real Property required by any Law.
3.1.6. LEGAL MATTERS.
A. OPERATIONS IN COMPLIANCE WITH LAW. Except as
listed on SCHEDULE 3.1.6.A, the operations of the Business by Seller,
as previously or now conducted, were not and are not in violation of
any Law, which violation would have an adverse affect on the Business
or the Acquired Assets. Seller does not know of any basis on which the
operations of the Business as currently conducted would be held to
violate or to give rise to any such violation. Seller has not received
any written notice from any Governmental Authority, any insurance or
inspection body or any other Person, that any of the properties,
facilities, equipment or business procedures or practices of the
Business fail to comply with any applicable Law. To Seller's knowledge,
there are no regulations or legislation pending before any Governmental
Authority which, if adopted, would have a material adverse effect on
the Business, as currently conducted, or the Acquired Assets.
B. NO ILLEGAL PAYMENTS. Seller has not at any time
made or received any illegal payment for political contributions, or
any bribe, kickback or other illegal payment.
C. LITIGATION. There are no Actions, at law or in
equity, pending, or to the knowledge of Seller, threatened, against or
affecting Seller, the Acquired Assets, or the Business before or by any
Governmental Authority or other Person, or any arbitration tribunal,
wherever located. There are no judgments, orders, decrees, awards or
settlement agreements before or of any Governmental Authority or
arbitrator which affect the Acquired Assets, Seller or the Business
that remain unsatisfied or unperformed.
D. PRODUCT WARRANTIES AND PRODUCT CLAIMS. Seller has
not made any oral or written warranties in connection with the sale of
the products of the Business, except in the LSS Agreement or as
described on SCHEDULE 3.1.6.D. Other than with respect to products made
under the LSS Agreement, there are no claims pending or, to Seller's
knowledge, threatened against Seller that relate to any products sold
by Seller with respect to the Business, including, without limitation,
claims in respect of the quality or defects in such products. Other
than with respect to products made under the LSS Agreement, SCHEDULE
3.1.6.D accurately summarizes all returns of defective products from
and after January 1, 1996, and all credits, allowances and payments
made under any applicable warranty to customers for defective products
during such period. Except for non-material claims, Seller has not been
required to pay direct, incidental or consequential damages to any
person or entity in connection with any of such products.
3.1.7. TAX MATTERS.
A. EFFECT OF TRANSFER. After giving effect to the
transfer to Buyer on the Closing Date, neither the Business nor the
Acquired Assets will be subject to, nor will Buyer have, any Liability
in respect of any Taxes (i) arising from or relating to the ownership
or
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operation of the Business or the Acquired Assets on or prior to the
Closing Date, other than as reflected on the Closing Date Balance Sheet
that had been set forth and accrued on the Reference Balance Sheet and
the subsequent interim financial statements of Seller, as they may have
been adjusted for Taxes arising in the ordinary course of business in
the period from the Reference Date to the Closing Date or (ii) arising
from or relating to the consummation of the transactions contemplated
hereby, in each case except to the extent Buyer has assumed
responsibility therefor under this Agreement.
B. COMPLIANCE.
(i) Seller has timely filed, all federal and
foreign income tax returns, and all state, county and local
income, franchise, property, sales, use, unemployment and
other tax returns in each state and jurisdiction where such
returns are required to be filed, and such returns are true
and correct in all respects. Seller has paid all Taxes
required to be paid in respect of such returns.
(ii) All Taxes required to be withheld from
employees or independent contractors of Seller have been
properly withheld, and, if required, have been deposited with
the appropriate Governmental Authority.
(iii) No claim or investigation is pending,
or to the knowledge of Seller, threatened, by any Governmental
Authority alleging that Seller has a duty to file tax returns
and pay Taxes or is otherwise subject to the taxing authority
of any Governmental Authority to which Seller does not
currently file returns and pay Taxes, and Seller has not
received any notice or questionnaire from any such
Governmental Authority which suggests or asserts that Seller
may have a duty to file such returns and pay such taxes, or
otherwise be subject to such taxing authority.
(iv) Seller has not extended, or waived the
application of, any statute of limitations of any Governmental
Authority regarding the assessment or collection of any Taxes.
3.1.8. LABOR AND EMPLOYMENT MATTERS.
A. LABOR MATTERS. With respect to the Business,
except as set forth on SCHEDULE 3.1.8.A, (i) there are no controversies
pending or, to the knowledge of Seller, threatened, between Seller and
any employee thereof; (ii) Seller is not a party to any collective
bargaining agreement or other labor contract applicable to any of its
employees; (iii) there are no grievances outstanding against Seller
under any such agreement or contract; (iv) there are no unfair labor
practice charges or complaints pending against Seller before the
National Labor Relations Board or any similar state agency; and (v)
during the preceding three (3) years, there have been no strikes,
slowdowns, work stoppages, lockouts, union organizational campaigns or
other protected concerted activity under the National Labor Relations
Act or, to Seller's knowledge, threats thereof, by or with respect to
any employees of Seller.
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B. EMPLOYEES. Set forth on SCHEDULE 3.1.8.B is a true
and correct list of all the employees of the Business, along with the
title and compensation of each of Seller's employees who during
Seller's last fiscal year was paid or is expected in the current fiscal
year to be paid compensation of more than $50,000 ("Management
Employee"). Since the Reference Date, no Management Employee has
received any increase in compensation except as set forth on SCHEDULE
3.1.8.B. No Management Employee of Seller has terminated or to Seller's
knowledge threatened to terminate his or her employment with Seller or
given notice of such termination.
C. APPLICATION OUTSIDE U.S. The Business does not
employ any person outside the United States, and no Benefit Arrangement
is maintained for employees outside the United States.
3.1.9. MISCELLANEOUS MATTERS.
A. CHANGE IN RELATIONSHIP. Seller has no knowledge,
whether on account of the transactions contemplated hereby or
otherwise: that (i) any material customer, agent, or representative of
the Business intends to discontinue or substantially diminish or change
its relationship in any materials respect with the Business or the
terms thereof or reduce the amount of its purchase of goods or services
from the Business; (ii) the ability and opportunity of the Business to
purchase supplies and materials in quantities adequate to its business
as now conducted will be impaired in any material respect; (iii) any
supplier intends to increase prices or charges for goods or services
presently supplied and material to the Business; or (iv) any officer or
key employee of the Business intends to terminate his or her
employment.
B. REQUIRED CONSENTS. Except for the consents
required for the transfer to Buyer of the Assumed Contracts and
Permits, the requirements for which are set forth on SCHEDULES 3.1.3.I
AND 3.1.3.J hereof (the "Required Consents"), no approval, consent,
authorization or other order of, any Governmental Authority or any
other Person, including, without limitation, any party to any
Contractual Obligation of Seller, is required to be obtained by or on
behalf of Seller in connection with the execution, delivery or
performance of this Agreement and the transactions contemplated hereby.
C. TRANSACTIONS WITH AFFILIATES. Since the Reference
Date, Seller has not made any payments to its Affiliates, nor received
any advances from its Affiliates, except for payments or advances made
in the ordinary course of Seller's business and on terms no less
favorable to Seller than those that would result from arm's length
negotiations with unrelated third parties. All of Seller's payments to
its Affiliates since the Reference Date, excluding distributions to
Owners, are shown on SCHEDULE 3.1.9.C.
D. BROKERS OR FINDERS. Seller has not incurred any
Liability, contingent or otherwise, for brokerage or finders' fees or
agents' commissions or other similar payments in connection with this
Agreement or the transactions contemplated hereunder.
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E. FULL DISCLOSURE. All documents furnished by Seller
to Buyer or its agents or representatives, including, without
limitation, those documents listed on any Schedule hereto, are true and
correct originals or copies of originals and are complete in all
material respects, any amendments thereto having been identified and
furnished to Buyer by Seller.
F. NO DEFENSE. The fact that some or all of Seller's
employees, including certain of Seller's officers or Management
Employees, will or may be employed by Buyer after the Closing will not
be deemed (i) to constitute or impute to Buyer any knowledge which such
employee or Seller has; (ii) to relieve or diminish the Liability of
Seller for any breaches of its representations and warranties
hereunder; or (iii) to affect in any way the other duties and
obligations that Seller has or would otherwise have hereunder.
3.1.10. NO FURTHER REPRESENTATIONS. EXCEPT AS SET FORTH ABOVE
IN THIS SECTION 3.1, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES AS TO THE
BUSINESS OR THE CONDITION, SUITABILITY OR OTHER PHYSICAL ASPECT OF THE ACQUIRED
ASSETS AND BUYER IS PURCHASING THE ACQUIRED ASSETS ON AN "AS IS, WHERE IS"
BASIS. EXCEPT AS SET FORTH HEREIN, SELLER HEREBY DISCLAIMS ANY AND ALL SUCH
OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
3.2. REPRESENTATIONS AND WARRANTIES OF BUYER. To induce Seller
to enter into this Agreement, Buyer represents and warrants as follows.
3.2.1. ORGANIZATION AND STANDING OF BUYER. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Buyer has all requisite power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby.
3.2.2. CORPORATE AUTHORITY; EFFECTIVE AGREEMENT. The Board of
Directors of Buyer has duly authorized and approved the execution and delivery
of this Agreement and the performance of the transactions provided for herein.
No other corporate or stockholder action is required in connection with the
foregoing. This Agreement is a legal, valid and binding obligation of Buyer and
is enforceable against Buyer in accordance with its terms, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and similar laws in effect now
or hereafter relating to creditors' rights generally and by equitable
principles, whether considered in a proceeding at law or in equity. The
execution, delivery and performance of this Agreement by Buyer and the
consummation of the transactions provided for herein do not and will not, with
or without the giving of notice, the passage of time, or both, conflict with,
violate or result in the breach of any of the terms or conditions of, or
constitute a default under (a) the Charter or Bylaws of Buyer, (b) any
Contractual Obligation of Buyer, or (c) any Law to which Buyer is subject.
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3.2.3. FULL DISCLOSURE. No statement herein by Buyer contains
or will contain any untrue statement of a material fact or omits or will omit to
state any material fact required to be stated to make the statements contained
herein not misleading.
3.2.4. BROKERS OR FINDERS. Buyer has not incurred any
Liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement or the
transactions contemplated hereunder.
3.2.5. QUALIFIED EMPLOYEE PLANS. Either Buyer will assume the
401(k) Plan of Seller (if same is fully funded) or Buyer or one of its
Affiliates will maintain one or more plans qualified under Section 401(a) of the
Code that will permit rollover contributions of 401(k) plan funds to be made to
it by any former employees of Seller hired by Buyer, and any such plans will, as
of the Closing Date, make any former employees of Seller hired by Buyer eligible
to participate therein immediately following the Closing Date.
3.2.6. DUE DILIGENCE; RELIANCE ON REPRESENTATIONS. Buyer
acknowledges that it is relying solely on its own due diligence investigation
and the representations and warranties of Seller set forth in SECTION 3.1, and
not any other representations or warranties made or alleged to have been made by
Seller or any of its officers, directors, Owners, employees, representatives,
attorneys or agents.
ARTICLE 4. COVENANTS
4.1. COVENANTS TO BE PERFORMED PRIOR TO CLOSING.
4.1.1. ACCESS TO PREMISES AND INFORMATION. On and prior to the
Closing Date, during normal business hours and upon reasonable prior notice,
Seller will permit Buyer and its representatives to (A) have full access to the
Acquired Assets, the Real Property, all of Seller's key employees and the Books
and Records; and (B) make copies of such Books and Records as Buyer or any of
its representatives will reasonably request; provided that any third party
entering upon Seller's premises shall execute, upon demand, Seller's form of
Site Entry Agreement and provided further that all such persons shall comply
with Seller's health and safety regulations and be made aware by Buyer of the
obligations of confidentiality in the letter agreement dated November 19, 1999.
Seller will deliver such additional information relating to the Business and the
Acquired Assets as may be reasonably requested by Buyer or its representatives.
4.1.2. CONDUCT OF BUSINESS PRIOR TO CLOSING. Seller covenants
that from the date of this Agreement until the Closing, it will carry on the
Business in the ordinary course and in the same manner as heretofore carried on.
To that end, Seller will use its good faith efforts and diligence to preserve
Seller's present business organization intact (other than effecting the
contemplated statutory conversion to a Delaware limited partnership); keep
available the services of the employees of Seller; and preserve business
relationships with customers, suppliers, and others having business dealings
with Seller. Without limiting the generality of the foregoing, unless Seller
acts with the written consent of Buyer (which shall not be unreasonably withheld
or delayed) or except as otherwise specifically contemplated by this Agreement,
Seller will not, with respect to the Business, between
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the date of this Agreement and the Closing, take any of the actions set forth
in SECTION 3.1.2.D(i) THROUGH (xxi) hereof.
4.1.3. NOTICES AND CONSENTS. Prior to the Closing Date, Seller
and Buyer will cooperate to obtain all Required Consents deemed necessary by
Buyer and to give all notices which are required to be given to consummate the
transactions provided for herein, and as each is given or obtained, the
appropriate party will promptly deliver a copy of such instrument to the other
party.
4.1.4. DISCHARGE OF LIENS AND ENCUMBRANCES. All Liens relating
to the Acquired Assets will be satisfied, terminated and discharged on or prior
to the Closing Date (except for the Permitted Liens), and evidence reasonably
satisfactory to Buyer and its counsel of such satisfaction, termination and
discharge will be delivered to Buyer at or prior to the Closing.
4.1.5. SUPPLEMENTAL DISCLOSURE. Seller will have the
continuing obligation up to and including the Closing Date to promptly
supplement or amend the Schedules with respect to any matter hereafter arising
or discovered which, if existing or known at the date of this Agreement, should
have been set forth on the Schedules; provided, however, that for purposes of
the rights and obligations of the parties hereunder, any such supplemental
disclosure will not be deemed to have been disclosed as of the date of this
Agreement unless so agreed to in writing by Buyer.
4.1.6. OTHER TRANSACTIONS. While this Agreement remains in
effect, Seller will deal exclusively and in good faith with Buyer with regard to
the sale of the Acquired Assets to Buyer, and Seller, and its Affiliates and
Owners will not, directly or indirectly, solicit, initiate, encourage the
submission of or provide any information or other assistance to, any party other
than Buyer relating to the acquisition of any capital stock, other securities,
the Acquired Assets or any substantial portion of Seller's assets (including any
acquisition structured as a merger, consolidation or share exchange). If,
notwithstanding the foregoing, Seller, or any of its Affiliates or Owners,
receive any acquisition proposal or inquiry from any other party, Seller will
promptly inform Buyer thereof.
4.1.7. EMPLOYEES. Buyer intends to make offers of employment
to each of the employees of Seller and will advise Seller, at least ten (10)
days prior to the Closing Date, of any such employees of Seller who will not
receive an offer of employment. Seller will cooperate with Buyer in Buyer's
efforts to hire such persons on terms acceptable to Buyer.
4.1.8. PREPARATION FOR CLOSING. Seller and Buyer each agree to
use its commercially reasonable efforts to bring about the fulfillment of the
conditions precedent to Closing contained in this Agreement.
4.1.9. PRESS RELEASES. Between the date hereof and the Closing
Date, neither Seller or Buyer will issue any press release or make any public
statements regarding this Agreement or the transactions contemplated hereby
without the prior approval of the other party, which approval will not be
unreasonably withheld, except when such statement or press release is required
by Law, in which event the other party will have the right to review and comment
upon any such statement or press release prior to its issuance.
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4.1.10. NOTICE OF BREACHES. Seller will notify Buyer promptly of
any breaches or violations by Seller, whether intentional or unintentional, of
the representations, warranties, covenants or other terms, conditions or
restrictions of this Agreement applicable to Seller.
4.1.11. INSURANCE. Seller will keep in effect and maintain all
of its insurance policies covering the Acquired Assets and the Business
through the Closing Date.
4.1.12. INTELLECTUAL PROPERTY. Seller will keep in effect and
maintain all of its pending and issued or granted Intellectual Property
through the Closing Date.
4.1.13. ASSUMPTION OF SELLER'S ERISA PLANS. At Closing, Buyer
will adopt Seller's ERISA Plans, other than any such plans relating to
workers' compensation insurance. Seller shall take all necessary steps prior
to Closing, including the adoption of any amendments to such ERISA Plans and
obtaining all necessary consents, waivers or endorsements of insurers, to
enable Buyer to adopt such Seller's ERISA Plans without loss or interruption
of coverage of such Seller's ERISA Plans or any covered employees or
dependents of any insurance coverage or benefit.
4.1.14. ASSUMPTION OF SELLER'S ERISA PLANS. At least ten days
prior to Closing, Seller shall deliver to Buyer true, correct and complete
copies of all of the following items with respect to any and all Seller ERISA
Plans: (i) the current plan document, including any and all current amendments
thereto; (ii) the current trust agreement, and all current amendments thereto,
and all other current agreements between Seller and the trustee or any other
plan fiduciary; (iii) the current summary plan description and all summaries
of material modifications; (iv) all individual or group insurance or annuity
contracts, including any "stop loss", "excess loss" or similar insurance
contracts; (v) all agreements with any health maintenance organizations
("HMOs"), preferred provider organizations ("PPOs"), or other providers of
healthcare services; and (vi) all agreements with all Persons for the
provision of administrative, record keeping, claims handling or review,
consulting and/or investment management services.
4.1.15. SELLER POLICIES. At least ten days prior to Closing,
Seller shall make available to Buyer written descriptions of its grant, award,
and contribution policies under all Seller ERISA Plans and any profit sharing
plans of Seller.
4.2. COVENANTS CONTINUING BEYOND CLOSING.
4.2.1. EXPENSES OF TRANSACTION. Seller and Buyer will each bear
all of their respective expenses incurred in connection with this Agreement
and the transactions contemplated. Such expenses will include, without
limitation, legal, accounting, investment advisor fees and travel expenses.
4.2.2. NON-COMPETITION/CONFIDENTIALITY. Seller acknowledges that
(a) the success of the Business after the Closing Date will depend upon both
the reasonable limitation of competition from Seller and the Owners and the
continued preservation of the confidentiality of certain information regarding
the Business; (b) the reasonable limitation of such competition and the
preservation of the confidentiality of such information is an essential
premise of the bargain between
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and among Seller, the Owners and Buyer; and (c) Buyer would be unwilling to
enter into this Agreement in the absence of this SECTION 4.2.2. Accordingly,
at Closing, each of the Owners and Seller will execute and deliver to Buyer a
Non-Competition Agreement in the form attached hereto as EXHIBIT A.
4.2.3. EMPLOYEES. Except as otherwise provided in SECTION 2.3.5,
Seller will be responsible for and will comply with any and all requirements,
contractual or otherwise, concerning the discharge of its employees,
including, without limitation, employee benefits (including COBRA) and
severance compensation. Nothing in this Agreement is intended to confer upon
any employee of Seller any rights or remedies, including, without limitation,
any rights of employment by Buyer, of any nature or kind whatsoever.
4.2.4. TRANSFER TAXES. Any sales, use or transfer taxes imposed
by any Governmental Authority on either Seller or Buyer as a result of the
consummation of the transactions contemplated hereby will, when finally
determined to be due and payable, be divided between and paid equally by
Seller and Buyer.
4.2.5. COOPERATION. Buyer and Seller agree to execute and
deliver all other instruments and take all such other actions as either party
may reasonably request from time to time, before or after Closing and without
payment of further consideration, to effectuate the transactions provided
herein and to confer to Buyer the benefits intended by such transactions. The
parties will cooperate fully with each other and with their respective counsel
and accountants in connection with any steps required to be taken as part of
their respective obligations under this Agreement.
4.2.6. ADDITIONAL DOCUMENTS, ETC. At Closing and at any time
thereafter, Seller covenants and agrees to execute and/or file any documents
of transfer, powers of attorney and assignments reasonably required in the
opinion of Buyer's counsel, or to furnish testimony or documentation, if any,
evidencing, without limitation, past use of the Intellectual Property, in
order to perfect or protect Buyer's right, title and interest in the Acquired
Assets.
4.2.7. CHANGE OF NAME. Seller agrees that as of the time of
Closing, Seller will cease to use its present name and any similar names, and
will permit and facilitate the use thereof, in whole or in part, by Buyer or
by any division or Affiliate of Buyer. Within five (5) business days after the
Closing, Seller will cause to be filed with the appropriate state authorities
in Seller's state of incorporation and other states in which Seller in
authorized to transact business, an amendment to the Charter of Seller
changing Seller's present name to a new name bearing no resemblance to
Seller's present name and a written consent and whatever other documents are
required to permit Buyer (or any Affiliate of Buyer) to incorporate, qualify
or register using Seller's present name or any similar name as of the date
hereof.
4.2.8. COLLECTION OF RECEIVABLES. Buyer will have no
responsibility for the collection of the Receivables, but Buyer agrees to use
commercially reasonable efforts to cooperate with Seller's efforts to collect
the Receivables. In the event that Buyer or any of its Affiliates receives
payment or other property in respect of the Receivables, Buyer (or its
Affiliate) shall hold such
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payment or property in trust for Seller and shall immediately provide notice
and pay or turn over the same to Seller or its designated representative.
4.2.9. PROFIT SHARING. Seller will pay the First Quarter
Bonus to its employees within thirty (30) days of the Closing Date.
4.2.10. PROCESSING OF EXCLUDED INVENTORY. Buyer will process the
Excluded Inventory for Seller under the terms and conditions of the LSS
Agreement, read as if Buyer were Seller and Seller were Lone Star Steel
Company thereunder.
ARTICLE 5. CLOSING
5.1. DATE, TIME AND LOCATION. The closing under this Agreement (the
"Closing") will take place at the offices of Strasburger & Price, L.L.P., 901
Main Street, Suite 4300, Dallas, Texas 75202 at 10:00 a.m. on March 31, 2000,
or such other date, time or place as may be mutually agreed upon by the
parties hereto (the "Closing Date"). The effective time of the Closing will be
at 12:01 a.m. on the next day following the Closing Date ("Effective Time").
5.2. TRANSFER AND ASSIGNMENT OF ACQUIRED ASSETS; PRORATIONS.
5.2.1. TRANSFER AND ASSIGNMENT OF ACQUIRED ASSETS. On the
Closing Date, subject to the terms and conditions set forth in this Agreement,
Seller will convey, transfer, assign and deliver to Buyer all of the Acquired
Assets free and clear of any Liens, except the Permitted Liens. The form of
the deeds, assignments, the bill of sale, Seller's certificates and FIRPTA
affidavits for the Acquired Assets, and all other documents of transfer will
be in a form satisfactory to Buyer and Seller and as deemed necessary by Buyer
in order to perfect Buyer's right, title and interest therein. Delivery of
such transfer documents will be made against delivery of the Estimated
Purchase Price, in accordance with the terms of this Agreement.
5.2.2. PRORATIONS. Except as provided elsewhere in this
Agreement, all property and ad valorem Taxes, assessments, rental payments,
utilities, and other similar expenses of or relating to the Real Property will
be prorated between Buyer and Seller as of the Closing Date (the net portion
payable or receivable by Seller hereafter being called the "Proration
Amount"). Amounts due Buyer and Seller as a result of the application of this
proration procedure will be offset against each other and the resulting
balance will be taken into account in determining the Estimated Purchase
Price. If any statement or invoice necessary to make the foregoing
determination has not yet been received and the amount due thereunder is not
otherwise ascertainable, then proration and payment therefor will be deferred
until such statement or invoice has been received.
5.3. PAYMENT OF ESTIMATED PURCHASE PRICE. The Estimated Purchase
Price MINUS $1,000,000.00 (the "Escrow Amount"), which Escrow Amount will be
placed by Buyer in an interest bearing account pursuant to the terms of the
Escrow Agreement attached hereto as EXHIBIT B, MINUS the Proration Amount (or
plus the Proration Amount if the net thereof is a receivable due Seller) for
that portion of the year 2000 prior to the Closing Date will be paid to Seller
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on the Closing Date by wire transfer in immediately available funds to an
account designated by Seller to Buyer in writing at least five (5) days prior
to Closing.
5.4. PURCHASE PRICE ADJUSTMENT.
5.4.1. PROCEDURES FOR ADJUSTMENT. To determine the Purchase
Price Adjustment, if any, an audited balance sheet for Seller will be prepared
by Seller's CPA as of the Closing Date, in accordance with GAAP, without
regard to the sale of the Acquired Assets by Seller and the payment or
assumption of the Assumed Liabilities by Buyer as contemplated by this
Agreement (the "Closing Date Balance Sheet"). The Closing Date Balance Sheet
will include a schedule showing the difference, if any, between the Estimated
Purchase Price and the Final Purchase Price, as determined from the Closing
Date Balance Sheet. Within thirty (30) days following the Closing Date,
Seller, at Seller's sole expense, will cause the Closing Date Balance Sheet to
be delivered to Buyer. Within fifteen (15) days of Buyer's receipt of the
Closing Date Balance Sheet, Buyer or Buyer's certified public accountant will,
in writing, either (A) advise Seller that Buyer agrees with the Closing Date
Balance Sheet; or (B) advise Seller, in reasonable detail, of the nature and
extent of any disagreement with the Closing Date Balance Sheet. If Buyer does
not agree with the Closing Date Balance Sheet, the parties will negotiate in
good faith for fifteen (15) days to resolve any such disagreement and, failing
a resolution, on the fifteenth (15th) day will agree on a "Big Five" firm of
independent public accountants (that does not provide services to Buyer,
Seller or any of their Affiliates) to resolve any remaining disputes, which
resolution shall be final, binding upon Buyer and Seller, and not subject to
arbitration or further appeal. The fees and expenses of this firm of
independent public accountants will be borne equally by Buyer and Seller.
Buyer and Seller will cooperate with each of the independent public
accountants and provide such accountants with such information as is
reasonably necessary to prepare the Closing Date Balance Sheet. Buyer and
Seller will use their individual and collective best efforts to cause such
accountants to determine the Closing Date Balance Sheet as soon as is
reasonably practicable after the Closing.
5.4.2. RECONCILIATION OF ESTIMATED PURCHASE PRICE AND FINAL
PURCHASE PRICE AND PAYMENT OF PURCHASE PRICE ADJUSTMENT. If the Final Purchase
Price is greater than the Estimated Purchase Price, Buyer will pay the
difference between such amounts, together with interest thereon (as provided
below) to Seller. If the Final Purchase Price is less than the Estimated
Purchase Price, then Seller will pay the difference between such amounts,
together with interest thereon (as provided below), to Buyer. Such payment
will be made by wire transfer in immediately available funds to an account
designated by the recipient. The payment of the Purchase Price Adjustment will
be made within ten (10) days following the earlier of (A) Seller's notice that
it agrees with the Closing Date Balance Sheet; (B) a resolution by Buyer and
Seller of any disagreement regarding the Closing Date Balance Sheet; and (C) a
final determination by the "Big Five" accounting firm selected pursuant to
SECTION 5.4.1. The payment of the Purchase Price Adjustment, whether to or
from Seller, will bear interest from the Closing Date to the date of payment
at an annual interest rate of ten percent.
5.4.3. COOPERATION. Buyer and Seller agree to cooperate in the
preparation of the Closing Date Balance Sheet and the determination of the
Purchase Price Adjustment. Seller and Seller's CPA will be permitted to
participate with Buyer and Buyer's CPA in all phases of its auditing
procedures. The parties will also make available to each other and to their
respective CPA's
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for review and audit all Books and Records of Seller relevant to the
preparation of the Closing Date Balance Sheet or the financial condition of
Seller as of the Closing Date, including their respective CPA's workpapers.
5.5. ALLOCATION OF PURCHASE PRICE. For federal income tax purposes,
the Final Purchase Price as determined pursuant to SECTION 5.4 will be
allocated among the Acquired Assets and the covenants not to compete in
accordance with SCHEDULE 5.5. The allocation will be binding upon Buyer and
Seller, and neither Buyer nor Seller will take any position with any taxing
authority which is inconsistent with such allocation.
5.6. CONDITIONS TO BUYER'S OBLIGATION TO CLOSE. The obligations of
Buyer under this Agreement are subject to the satisfaction, on or prior to the
Closing Date, of all the following conditions, compliance with which, or the
occurrence of which, may be waived in writing, in whole or in part, by Buyer:
5.6.1. CONTINUED ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Seller contained in this Agreement will be
materially true and correct in all respects as of the Closing Date with the
same force and effect as if made on and as of the Closing Date.
5.6.2. PERFORMANCE OF AGREEMENTS. Seller will have performed and
satisfied all covenants and conditions required by this Agreement to be
performed or satisfied by it in all material respects on or prior to the
Closing Date.
5.6.3. SELLER'S CERTIFICATE. On the Closing Date, Seller will
furnish to Buyer a certificate (or certificates) signed by Seller, and dated
the Closing Date, to the effect that (i) the conditions specified in SECTIONS
5.6.1 AND 5.6.2. hereof have been satisfied and (ii) there has been no
material adverse change with respect to the Acquired Assets, the Business or
Seller since the Reference Date.
5.6.4. GOOD STANDING CERTIFICATE. At Closing Seller will provide
to Buyer a certificate of good standing dated on or about the Closing Date
stating that Seller is a corporation or limited partnership in good standing
under the laws of the State of Delaware.
5.6.5. BILL OF SALE. Seller will have executed and delivered to
Buyer a Bill of Sale evidencing the transfer to Buyer of title to the personal
property, including the Acquired Assets, free and clear of any Liens, except
the Permitted Liens, in the form of EXHIBIT C attached hereto.
5.6.6. OWNER AGREEMENTS. Each Owner (a) and Seller will have
executed and delivered to Buyer a Non-Competition Agreement, in the form of
EXHIBIT A attached hereto, and (b) a Guaranty Agreement, in the form of
EXHIBIT D attached hereto.
5.6.7. CONTRACT AND LEASE ASSIGNMENTS. Seller will have executed
and delivered to Buyer an Assignment and Assumption Agreement in the form of
EXHIBIT E attached hereto with respect to the Permits and the Assumed
Contracts, including, without limitation, the Real Property
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Leases and the Personal Property Leases. With respect to the Real Property
Leases and the Personal Property Leases, such assignment will be at no cost to
Buyer and Seller will have obtained any and all consents required for such
assignments, together with estoppel certificates in form satisfactory to
Buyer, with no change in rent or other terms, except in accordance with the
terms of such Real Property Leases or Personal Property Leases.
5.6.8. EMPLOYMENT AGREEMENTS. Kenneth Beil and Bentley Munson
will have entered into employment agreements with Buyer in the general form of
EXHIBIT F attached hereto.
5.6.9. REQUIRED CONSENTS. Seller will have furnished to Buyer
all Required Consents, in form and substance reasonably satisfactory to Buyer,
identified in writing by Buyer to Seller not less than ten (10) days prior to
the Closing Date.
5.6.10. TERMINATION STATEMENTS AND RELEASES OF LIENS. Seller
will have delivered to Buyer duly executed termination statements under the
Uniform Commercial Code which, when filed with the appropriate Governmental
Authorities, will terminate all financing statements on the Acquired Assets,
other than the Permitted Liens.
5.6.11. REAL PROPERTY. Buyer, at its own expense, will have
received for each parcel of Real Property:
A. TITLE INSURANCE. An owner's extended coverage policy of
title insurance issued by a title company satisfactory to Buyer and
dated as of the Closing Date insuring title to such Real Property in
an amount at least equal to the allocated portion of the Purchase
Price applicable thereto and free and clear of all Liens and other
exceptions to or exclusions from coverage, other than the Permitted
Liens (and with the survey exception deleted). Without limiting the
foregoing, no such title insurance policy will create an exception
for or exclusion from the coverage of such policy or from the
liability of the title company on account of acts or omissions of
Seller or facts known to the insured (or to its or their current or
former directors, stockholders, partners, officers, agents or
employees) where such acts or omissions occurred prior to the Closing
Date. In connection with each such title insurance policy, Buyer will
have the opportunity to receive, if obtainable in the particular
jurisdiction, zoning, comprehensive, survey, contiguity (where
appropriate), nonimputation and public-street access endorsements, in
form and substance reasonably satisfactory to Buyer, except that it
will not be a condition to closing that Buyer determines not to
purchase any such endorsements (whether because of cost or otherwise)
if available.
B. GENERAL WARRANTY DEED. A General Warranty Deed, in form
and substance reasonably satisfactory to Buyer, duly executed by
Seller, evidencing the transfer to Buyer of such Real Property free
and clear of any Liens, except Permitted Liens.
5.6.12. DUE DILIGENCE, ETC. Buyer will have completed its due
diligence inquiry to its reasonable satisfaction, including its reasonable
satisfaction (i) with Seller's audited Financial Statements for 1999 and the
most recent interim period, (ii) that there are no contingent or reasonably
possible claims or liabilities that can reasonably be viewed to adversely
affect in any
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material respect the Business or condition, financial or otherwise, of Seller
and (iii) that there has been no material adverse change in the Business or
condition, financial or otherwise, of Seller prior to Closing. Buyer's
opportunity to conduct due diligence and its decision to close based thereon
will not limit or diminish any representation, warranty, indemnity obligation
or other duty of Seller hereunder.
5.6.13. LEGALITY; GOVERNMENTAL AUTHORIZATION; LITIGATION.
Buyer's purchase of and payment for the Acquired Assets, and Buyer's purchase
or any payment for Seller's and the Owners' covenants not to compete will not
be prohibited by any Law and will not subject it to any penalty, tax, or
liability to any Governmental Authority except for transfer taxes, ad valorem
or other property taxes as contemplated herein. The Required Consents and all
necessary consents, approvals, orders and authorizations of, or registrations,
declarations and filings with, any Governmental Authority or of any other
Person with respect to any of the transactions contemplated by this Agreement
will have been obtained or made and will be in full force and effect. No
action or proceeding will have been instituted or threatened in writing prior
to or at the Closing Date by or before any arbitrator or Governmental
Authority, pertaining to the purchase by Buyer of the Acquired Assets, the
covenants not to compete of Seller or the Owners or the enforcement of this
Agreement, the result of which could (i) prevent or render illegal the
consummation of same or (ii) have a material adverse effect on the business,
operations, assets or prospects of Seller or the Business, or as a result of
the consummation of the transactions contemplated hereby, of Buyer, in each
case determined in Buyer's reasonable judgment. All waiting periods required
by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the rules and
regulations promulgated thereunder (collectively "HSR"), shall have expired
with respect to the transactions contemplated by this Agreement, or early
termination with respect thereto shall have been obtained without regard to
the imposition or implementation of any governmental request or order
requiring the sale or disposition or holding separate (through a trust or
otherwise) of particular assets or business of Buyer, its affiliates or any
component of Seller or other actions as a pre-condition to the expiration of
any waiting period or the receipt of any necessary governmental approval or
consent. In addition, any approvals required under state laws comparable to
HSR shall have been obtained on a like basis.
5.6.14. NO CHANGE IN LAW; ETC. No Law will have been enacted or
made by or on behalf of any Governmental Authority, nor will any legislation
have been introduced and favorably reported for passage to either house of
Congress or to either house of any state legislature by any committee thereof,
nor will any investigation by any Governmental Authority have been commenced,
nor will any decision of any court of competent jurisdiction have been
rendered, which, could (i) materially and adversely affect, restrain, prevent
or change the transactions contemplated by this Agreement, or (ii) have a
material adverse effect on the Business or the operations, assets or prospects
of Seller or, as a result of the consummation of the transactions contemplated
hereby, of Buyer, in each case as determined in Buyer's reasonable judgment.
5.6.15. FINANCING. Buyer will have obtained financing in an
amount and on terms, provisions and conditions satisfactory to Buyer, in its
sole discretion, sufficient to consummate the transactions contemplated by
this Agreement. Buyer represents and warrants that it (or one of its
Affiliates) has obtained a binding commitment letter to supply such financing.
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5.6.16. DELTA TUBULAR. Buyer, Lone Star Steel Company and CHC
d/b/a Delta Tubular Processing, a Pennsylvania general partnership ("Delta
Tubular") will have entered into a letter of understanding in the form of
EXHIBIT G attached hereto (the "Delta Agreement").
5.6.17. PROFIT SHARING. Seller shall have made adequate
provision for the payment of "profit sharing bonuses" for the first calendar
quarter of 2000 to its employees (the "First Quarter Bonus"), with such
payments to have been calculated substantially in accordance with Seller's
practices in calculating discretionary profit sharing bonuses since the
Reference Date (except that Seller shall pay the bonus for the first calendar
quarter rather than the first half of the year).
5.6.18. 1999 AUDITED STATEMENTS. Seller will have delivered
the 1999 Audited Statements to Buyer.
5.6.19. RECEIVABLES REPORT. Seller will have delivered to Buyer
a true and correct list of the Receivables, detailing the specific amounts of
and items comprising each of the Receivables, as of March 31, 2000.
5.6.20. MAINTENANCE OF COVERAGE. None of the transactions
contemplated by, or incident to, this Agreement, or any combination (or all)
of such transactions, will result in any cancellation or loss of, or a
reduction in coverage under, any insurance policy including any "stop loss" or
"excess loss" policy, or any obligation to provide conversion coverage, or
HMO, PPO or other heathcare contract in connection with any Seller Welfare
Plan.
5.6.21. INSURANCE COVERAGE. Seller shall cause Buyer to be named
as an additional insured under its commercial general liability insurance
policies.
5.7. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The obligation of
Seller hereunder are subject to the satisfaction, on or prior to the Closing
Date, of all of the following conditions, compliance with which, or the
occurrence of which, may be waived, in writing, in whole or in part by Seller.
5.7.1. CONTINUED ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Buyer contained in this Agreement will be
true in all material respects as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
5.7.2. PERFORMANCE OF AGREEMENTS. Buyer will have performed and
satisfied all covenants and conditions required by this Agreement to be
performed or satisfied by it in all materials respects on or prior to the
Closing Date.
5.7.3. OFFICER'S CERTIFICATE. On the Closing Date, Buyer will
furnish to Seller a certificate signed by an officer or duly authorized
representative of Buyer, dated the Closing Date, to the effect that the
conditions specified in SECTIONS 5.7.1 AND 5.7.2 hereof have been satisfied.
5.7.4. BOARD APPROVAL. The Board of Directors of Buyer shall
have approved the entry into, and consummation of the transactions
contemplated by, this Agreement.
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5.7.5. ABSENCE OF LITIGATION. No action or proceeding will have
been instituted prior to or at the Closing Date before any court, arbitrator
or other Governmental Authority, or instituted or threatened in writing by any
public authority, pertaining to the purchase by Buyer of the Acquired Assets,
the results of which could prevent or make illegal the consummation of such
purchase.
5.7.6. GOOD STANDING CERTIFICATE. At Closing Buyer will provide
to Seller a certificate of good standing dated on or about the Closing Date
stating that Buyer is a corporation in good standing under the laws of the
State of Delaware.
5.7.7. DELTA TUBULAR. Buyer, Lone Star Steel Company and
Delta Tubular will have entered into the Delta Agreement.
5.7.8. LEGALITY; GOVERNMENTAL AUTHORIZATION; LITIGATION.
Seller's sale of the Acquired Assets, and Seller's and the Owners' execution
of covenants not to compete, will not be prohibited by any Law and will not
subject Seller to any penalty, tax, or liability to any Governmental Authority
except for transfer taxes, income, ad valorem or other property taxes as
contemplated herein. All necessary consents, approvals, orders and
authorizations of, or registrations, declarations and filings with, any
Governmental Authority with respect to any of the transactions contemplated by
this Agreement will have been obtained or made and will be made in full force
and effect. No action or proceeding will have been instituted or threatened in
writing prior to or at the Closing Date by or before any arbitrator or
Governmental Authority pertaining to the sale by Seller of the Acquired
Assets, the covenants not to compete of Seller or its Owners or the
enforcement of this Agreement, the result of which could prevent or render
illegal the consummation of same, as determined in Seller's reasonable
judgment. All waiting periods required by HSR shall have expired with respect
to the transactions contemplated by this Agreement, or early termination with
respect thereto shall have been obtained without regard to the imposition or
implementation of any governmental request or order requiring the sale or
disposition or holding separate (through a trust or otherwise) of particular
assets or business of Buyer, its affiliates or any component of Seller or
other actions as a pre-condition to the expiration of any waiting period or
the receipt of any necessary governmental approval or consent. In addition,
any approvals required under state laws comparable to HSR shall have been
obtained on a like basis.
5.7.9. NO CHANGE IN LAW; ETC. No Law will have been enacted or
made by or on behalf of any Governmental Authority, nor will any legislation
have been introduced and favorably reported for passage to either house of
Congress or to either house of any state legislature by any committee thereof,
nor will any investigation by any Governmental Authority have been commenced,
nor will any decision of any court of competent jurisdiction have been
rendered, which could materially and adversely affect, restrain, prevent or
change the transactions contemplated by this Agreement, as determined in
Seller's reasonable judgment.
5.7.10. CONTRACT AND LEASE ASSIGNMENTS. Buyer will have executed
and delivered to Seller an Assignment and Assumption Agreement in the form of
EXHIBIT E hereto with respect to the Permits and the Assumed Contracts,
including, without limitation, the Real Property Leases and the Personal
Property Leases.
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ARTICLE 6. INDEMNIFICATION
6.1. INDEMNIFICATION OF BUYER. Subject to the limitations hereinafter
set forth, Seller (in its capacity as indemnifying party, an "Indemnitor")
hereby agrees to indemnify, defend and hold harmless Buyer (in its capacity as
indemnified party, an "Indemnitee") from, against and in respect of any Losses
to the extent caused by:
A. any breach or inaccuracy in any representation or warranty
of Seller set forth herein (as such representation or warranty would
read if all qualifications as to materiality were deleted from it);
B. the failure of Seller to perform any covenant or agreement
to be performed by it hereunder; or
C. under this SECTION 6.1.C, any or all of the Excluded
Liabilities specifically listed in SECTIONS 2.4.1, 2.4.2, 2.4.3, 2.4.4,
2.4.6(i), 2.4.6(iii), 2.4.7, 2.4.9, 2.4.10, 2.4.11 AND 2.4.12, and the
Excluded Liabilities listed in Section 2.4.6(ii) but only to the extent
covered by insurance of Seller, regardless of (i) when such Excluded
Liabilities arose, (ii) when and by whom such Excluded Liabilities are
asserted, (iii) when the facts underlying such Excluded Liability
occurred, and (iv) whether any such Excluded Liabilities are
specifically referred to or provided for in the Financial Statements or
on any of the Schedules attached hereto; PROVIDED, HOWEVER, that Seller
will have no obligation to indemnify Buyer for that portion of any Loss
to the extent caused by an act or omission of Buyer with respect to the
Acquired Assets or the operation of the Business after the Effective
Time.
6.2. INDEMNIFICATION OF SELLER. Buyer (in its capacity as indemnifying
party, an "Indemnitor") hereby agrees to indemnify, defend and hold harmless
Seller (in its capacity as indemnified party, an "Indemnitee") from, against and
in respect of any Losses to the extent caused by:
A. any breach or inaccuracy in any representation or
warranty by Buyer (as such representation or warranty would read if
all qualifications as to materiality were deleted from it);
B. the failure of Buyer to perform any covenant or agreement
hereunder to be performed by it; or
C. Buyer's failure to pay or honor any or all of the Assumed
Liabilities.
6.3. LIMITATIONS ON INDEMNIFICATION RIGHTS.
6.3.1. TERMINATION OF INDEMNIFICATION RIGHTS. All
representations, warranties, covenants and agreements made by any party in
this Agreement (including all Schedules hereto) or pursuant to any document,
statement, certificate or other instrument referred to herein or delivered
hereunder in connection with the transactions contemplated hereby, will be
deemed to have been
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material and relied upon by the other parties hereto, notwithstanding any
investigation made by or on behalf of any of the parties hereto, and will
survive the execution and delivery of this Agreement and the Closing.
6.3.2. TIME LIMIT. Notwithstanding the foregoing, no claims
may be made or suit instituted under any provision of this Article 5 after
the earlier of (a) April 15, 2002 and (b) the 15th day following the
completion of the audit of the financial statements of the Business for
calendar year 2001 (the "Indemnification Termination Date"), except for
Reserved Claims which will survive indefinitely. The term "Reserved Claims"
means all claims (i) as to which the Indemnitee has given any Indemnitor
notice specifying the factual, legal and contractual basis for same in
reasonable detail prior to the Indemnification Termination Date, (ii) based
upon a fraudulent misrepresentation of a material fact made by the Indemnitor
at or prior to Closing with the intent to deceive Indemnitee, or (iii)
arising in connection with the allocation of the purchase price for tax
purposes pursuant to SECTION 5.5.
6.3.3. DOLLAR LIMITATIONS.
A. Seller will not be liable to Buyer for
indemnification under SECTION 6.1 (A) or (B) for claims where Losses
are less than $1,000 individually, and for those claims where Losses
exceed $1,000 individually, only after the aggregate Losses of Buyer on
such claims exceed $100,000.00, and then only to the extent that such
Losses exceed that amount.
B. The total amount payable pursuant to this Article
5 by Seller with respect to all Indemnification Claims brought by Buyer
hereunder will not exceed 40 percent of the Final Purchase Price
("Indemnification Ceiling"). In determining whether the Indemnification
Ceiling has been reached, claims by Buyer for Losses based upon a
fraudulent misrepresentation of a material fact made by Seller at or
prior to Closing with the intent to deceive Seller or based upon
Excluded Liabilities (as limited by SECTION 6.1.C ) will not be
considered.
6.3.4. LSS AGREEMENT. Notwithstanding anything to the contrary
contained in this Agreement, Buyer's rights and remedies against Seller shall
not exceed in scope, duration or amount the remedies of Lone Star Steel
Company under the LSS Agreement with respect to warranty and commercial
liability for products and conversion services provided by Seller thereunder.
6.4. PROCEDURES FOR INDEMNIFICATION. An Indemnitee will make a claim
for indemnification hereunder ("Indemnification Claim") by delivering a written
notice to the Indemnitor requesting indemnification and specifying the basis on
which indemnification is sought and the amount of the Losses incurred (if known)
or to be incurred and, in the case of a Third Party Claim, containing (by
attachment or otherwise) such other information as the Indemnitee will have
concerning such Third Party Claim. If the Indemnification Claim involves a Third
Party Claim the procedures set forth in SECTION 6.4.2 hereof will be observed by
the Indemnitee and the Indemnitor.
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6.4.1. GENERAL CLAIMS. If the Indemnification Claim involves a
matter other than a Third Party Claim, the Indemnitor will have thirty (30)
days to object to such Indemnification Claim by delivery of a written notice
of such objection. Failure to timely object will constitute a final and
binding acceptance of the Indemnification Claim by the Indemnitor. If an
objection is timely made by the Indemnitor, creating a Dispute, then the
Indemnitee and the Indemnitor will resolve the Dispute pursuant to Article 8
of this Agreement.
6.4.2. DEFENSE OF THIRD PARTY CLAIMS. Should any claim be made,
or suit or proceeding (including, without limitation, a binding arbitration or
an audit by any taxing authority) be instituted against the Indemnitee which,
if prosecuted successfully, would be a matter for which the Indemnitee is
entitled to indemnification under this Agreement (a "Third Party Claim"), the
obligations and liabilities of the parties hereunder with respect to such
Third Party Claim will be subject to the following terms and conditions:
A. The Indemnitor will have fifteen (15) days from receipt
of the Indemnification Claim (the "Notice Period") to notify the
Indemnitee, whether or not the Indemnitor disputes its liability to
the Indemnitee with respect to such claim, and notwithstanding any
such dispute, whether or not the Indemnitor desires, at its sole cost
and expense, to defend the Indemnitee against such claim.
B. If the Indemnitor does not elect to assume the defense
of such claim, the Indemnitee may engage counsel of its choosing and
proceed to defend the claim and reserve its right to recover its
Losses from the Indemnitor if the Indemnitor wrongfully refused to
defend such claim.
C. If the Indemnitor notifies the Indemnitee that it elects
to assume the defense of such claim, it will engage counsel of its
own choosing reasonably satisfactory to the Indemnitee. Further in
such case, the Indemnitee may elect to retain independent counsel and
participate with respect to such claim; provided, however, that the
fees and expenses of such counsel incurred after the Indemnitee has
been so notified by the Indemnitor that it will assume the defense
will be borne solely by the Indemnitee. No settlement or compromise
of any Indemnification Claim which may result in Losses for which the
Indemnitee may be liable may be made by the Indemnitor without the
prior written consent of the Indemnitee (which will not unreasonably
be withheld or delayed) unless (a) prior to such settlement or
compromise an insurer and/or the Indemnitor acknowledges in writing
its obligation to pay in full the amount of the settlement or
compromise and all associated expenses, and (b) the Indemnitee is
furnished with security reasonably satisfactory to the Indemnitee
that the Indemnitor or an insurer will in fact pay such amount and
expenses. The Indemnitor will not be entitled to assume the defense
of any claim (x) brought by or on behalf of the Indemnitor or (y) as
to which the Indemnitee's counsel will have determined, as set forth
in clause D below, that there may be a conflict of interest as a
result thereof.
D. Notwithstanding the assumption by the Indemnitor of the
defense of any claim, the Indemnitee will be entitled to
indemnification under this Section for fees and expenses incurred in
the defense of such claim if (a) such indemnification is otherwise
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authorized by the Indemnitor; (b) such Indemnitee's counsel will have
reasonably determined and notified the Indemnitor in writing that
there may be a conflict of interest between the Indemnitor and the
Indemnitee in the conduct of the defense of such claim; or (c) the
Indemnitor has not in fact employed counsel to assume the defense of
such claim within ten (10) days after the Indemnitor received written
notice of such claim from the Indemnitee.
E. Except where the Indemnitor (a) timely elects to defend
the Indemnitee against such claim or demand (in which case SECTION
6.4.2.(C) will govern), or (b) the Indemnitor disputes its liability
in a timely manner under this SECTION 6.4, the Indemnitor will be
conclusively liable for the amount of any such claim or defense.
F. The Indemnitee and Indemnitor will cooperate with each
other in all reasonable respects in connection with the defense of
any Third Party Claim, including making available records relating to
such claim and furnishing, without expense to the Indemnitor and/or
its counsel, such employees of the Indemnitee as may be reasonably
necessary for the preparation of the defense of any such claim or for
testimony as witnesses in any proceeding relating to such claim.
6.4.3. PAYMENT. Payments of any Losses will be paid to the
Person entitled thereto within ten (10) days following the quantification of
the Losses, and, to the extent funds are available, with any Losses suffered
by Buyer to be paid from the Escrowed Funds. Any amounts not paid when due
will bear interest from the due date thereof until the date paid at a rate
equal to ten percent (10%) per annum.
6.5. SPECIAL REFERENCES. Solely for purposes of SECTIONS 6.1 AND 6.2,
references to Buyer and Seller as "Indemnitees" will be deemed to include
their respective Affiliates and the officers, directors, employees, agents,
attorneys, representatives, transferees and assigns of Buyer and Seller and
their respective Affiliates.
6.6. RELEASE OF ESCROW FUNDS. On the fifteenth (15th) day after the
completion of the audit of the year 2000 financial statements of the Business
(but not later than April 15, 2001), an amount equal to $500,000.00 LESS the
sum of (i) any pending unresolved Indemnification Claims (as to which notice
has been provided by Buyer as required hereunder) PLUS (ii) any amounts
disbursed from the Escrow Funds to Buyer prior to that date will be released
from the Escrow Funds to Seller. On the Indemnification Termination Date, any
Escrow Funds still being held pursuant to the Escrow Agreement LESS any
pending unresolved Indemnification Claims (as to which notice has been
provided by Buyer as required hereunder) will be released to Seller, with any
remaining amounts being released to Buyer or Seller as the pending
Indemnification Claims re resolved based upon such resolutions.
6.7. SOLE REMEDIES. Except in the case of injunctive or other
equitable relief, including specific performance, authorized by a court of
competent jurisdiction, the sole liability of the parties to each other for
Losses arising under this Agreement shall be the indemnification rights,
duties and liabilities set forth in this ARTICLE 6. Buyer and Seller hereby
forever waive, release, relinquish and discharge the other party, and its
respective officers, directors, owners, employees,
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agents, representatives, transferees and assigns, from any Losses arising
under this Agreement except to the extent indemnity therefor is expressly
granted in this ARTICLE 6, including, without limitation, any Losses or
responsibility for contribution arising under CERCLA or any other
Environmental Law for which Seller is not liable for indemnification pursuant
to this Article 6. Notwithstanding the foregoing, this SECTION 6.7 shall not
limit the legal or equitable remedies of Buyer with respect to a breach of the
agreements, the forms of which are attached hereto as Exhibits A and D,
between Buyer and Owners and Seller, as applicable.
ARTICLE 7. TERMINATION.
7.1. GROUNDS FOR TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(i) by mutual written agreement of Seller and Buyer;
(ii) by either Seller or Buyer, immediately, upon notice
to the other party, if the Closing has not been
consummated on or before May 1, 2000;
(iii) by either Seller or Buyer, immediately, upon notice
to the other party, if there will be any law or
regulation that makes the consummation of the
transactions contemplated hereby illegal or otherwise
prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable
final order, decree or judgment of any Governmental
Authority having competent jurisdiction; or
(iv) by either Seller or Buyer, upon notice of such
termination to the other party, if the other party
has breached any material representation, warranty or
covenant contained in this Agreement, and the breach
has continued for a period of fifteen (15) days after
written notice of the breach is received by the
breaching party.
7.2. EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by SECTION 7.1, such termination will be without liability of any
party (or any stockholder, director, officer, employee, agent, member,
consultant or representative of such party) to the other parties to this
Agreement; PROVIDED that if such termination will result from the willful and
deliberate failure of any party to fulfill a condition to the performance of
the obligations of any other party, or the willful and deliberate failure to
perform a covenant of this Agreement or willful and deliberate breach by any
party to this Agreement of any representation or warranty or agreement
contained herein, such party will be fully liable for any and all Losses
incurred or suffered by the other parties as a result of such failure or
breach.
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ARTICLE 8. DISPUTE RESOLUTION / REMEDIES
8.1. DISPUTE RESOLUTION.
8.1.1. MEDIATION. In the event of any dispute, controversy or
claim between Buyer and Seller under this Agreement (a "Dispute"), other than
a Dispute arising under SECTION 5.4, Buyer and Seller agree (i) to negotiate
in good faith so as to use their best efforts for a period of thirty (30) days
to settle any Dispute without mediation, arbitration or litigation, and (ii),
if such Dispute is not settled within such thirty (30) day period, to retain a
professional mediator who will be afforded sixty (60) days to resolve any
Dispute by mediation in the Houston metropolitan area, and whose fees will be
borne equally by Buyer and Seller. Failing a harmonious resolution, Buyer and
Seller may (i) agree to arbitrate the Dispute pursuant to the arbitration
procedure set forth in SECTION 8.1.2 hereof or (ii) litigate the Dispute.
8.1.2. ARBITRATION. Any Dispute to be arbitrated under this
Agreement will be settled solely by a panel of three arbitrators by
arbitration in the Houston metropolitan area, in accordance with the Rules for
Commercial Arbitration of the American Arbitration Association (the "AAA
Rules") as amended from time to time and as modified by this Agreement, unless
the parties agree, in writing, to arbitrate the Dispute in a different
location or before a different number of arbitrators. The arbitrator will
apply Texas law and issue a written decision explaining the factual and legal
basis for any award. The arbitrators will be selected by the parties in
accordance with the AAA Rules. The arbitrators will possess substantive legal
experience in the principal issues in Dispute.
8.1.3. INJUNCTIVE RELIEF. Nothing in this SECTION 8.1 will limit
any right that the parties may otherwise have to seek to obtain preliminary
injunctive relief in order to preserve the status quo pending the disposition
of any mediation process or arbitration proceeding. For purposes of injunctive
relief only, each of the parties hereby consents to the exclusive jurisdiction
of the United States District Court for the Southern District of Texas and any
court of general jurisdiction in and for Harris County, Texas (and of the
appropriate appellate courts therefrom) and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to
the laying of venue in any such court or that any such proceeding which is
brought in any such court has been brought in an inconvenient forum. Subject
to applicable law, process in any such proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Nothing herein will affect the right of any party to serve legal
process in any other manner permitted by law or at equity.
8.1.4. DISPUTE RESOLUTION/LEGAL FEES. If legal proceedings,
including mediation and/or arbitration, are commenced in connection with this
Agreement, Buyer and Seller will share equally in the fees charged by any
mediator or arbitrators and each party will pay its own attorneys' fees and
other costs and expenses, including expert witness costs, incurred by it in
such proceedings.
8.2. REMEDIES. Other than as provided in ARTICLES 6 AND 8, nothing in
this Agreement will be construed to waive or otherwise limit any remedies that
either party may have at law or in equity.
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ARTICLE 9. NOTICES, CONSTRUCTION AND INTERPRETATION
9.1. NOTICES. All notices and other communications hereunder will be in
writing and will be sent either by (i) certified mail, postage prepaid, return
receipt requested or (ii) an overnight express courier service that provides
written confirmation of delivery, addressed as follows:
If to Seller: With a copy to:
Bellville Tube Corporation Richard J. Colella, Esq.
c/o Robert M. Campana Colella & Kolczun, P.L.L.
2115 West Park Drive 5750 Cooper Foster Park Road, Suite 101
Lorain, OH 44053 Lorain, OH 44053
Telecopy No: (440) 282-7079 Telecopy No: (440) 988-9002
If to Buyer: With a copy to:
Bellville Acquisition, Inc. Strasburger & Price, L.L.P.
15660 N. Dallas Parkway, Suite 500 901 Main Street, Suite 4300
Dallas, Texas 75248 Dallas, Texas 75202
Attn: Robert F. Spears, Esq. Attn: Elmer Murphey, III, Esq.
Telecopy No: 972-770-6471 Telecopy No: (214) 651-4330
Any party may change its address for receiving notice by giving notice of a new
address in the manner provided herein. Any notice given under this Article 9,
will be deemed to be delivered on the third business day after the same is
deposited in the United States Mail, on the next business day if sent by
overnight courier.
9.2. ENTIRE AGREEMENT; WAIVERS. Except as provided otherwise herein
with respect to the LSS Agreement, and the other agreements identified herein,
this Agreement constitutes the entire agreement between the parties hereto
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. No waiver of any provision of this
Agreement will be deemed or will constitute a waiver of any other provision
hereof (whether or not similar), nor will such waiver constitute a continuing
waiver unless otherwise expressly provided.
9.3. LONE STAR GUARANTY. Lone Star directly or indirectly owns all of
the issued and outstanding stock of Buyer and has a significant interest in
ensuring that Lone Star and Buyer receive the benefit of the terms of this
Agreement. As an inducement to Seller 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 Buyer under this Agreement.
9.4. AMENDMENT OR MODIFICATION. The parties hereto may amend or modify
this Agreement in such manner as may be agreed upon by a written instrument
executed by all parties.
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9.5. HEADINGS. Article, Section and subsection headings are not to be
considered part of this Agreement, are included solely for convenience and are
not intended to be full or accurate descriptions of the content thereof.
9.6. SCHEDULES; ETC. Schedules and Exhibits referred to in this
Agreement are an integral part of this Agreement.
9.7. SEVERABILITY. The provisions of this Agreement are severable,
and if any provision should, for any reason, be held invalid or unenforceable
in any respect, it will not invalidate, render unenforceable or otherwise
affect any other provision, and such invalid or unenforceable provision will
be construed by limiting it so as to be valid and enforceable to the maximum
extent compatible with, and possible under, applicable law.
9.8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute but one and the same instrument.
9.9. SUCCESSORS AND ASSIGNS. All of the terms and provisions of this
Agreement will be binding upon and will inure to the benefit of the parties
hereto and their respective transferees, successors and assigns (each of which
transferees, successors and assigns will be deemed to be a party hereto for all
purposes hereof). Seller covenants and agrees that Buyer may assign all or any
of its rights and obligations hereunder to an Affiliate of Buyer and that any
such assignment shall not affect the obligations of Lone Star Technologies, Inc.
as guarantor hereunder.
9.10. NO THIRD PARTY BENEFICIARY RIGHTS. This Agreement is not intended
to and will not be construed to give any person or entity other than the parties
signatory hereto any interests or rights (including, without limitation, any
third party beneficiary rights) with respect to or in connection with any
agreement or provision contained herein or contemplated hereby except as
otherwise expressly stated herein.
9.11. GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the laws of the State of Texas without giving effect to any
choice or conflict of law provision or rule that would cause the application of
the laws of any other jurisdiction.
9.12. CONSTRUCTION OF THE AGREEMENT. Each of the parties hereto, after
appropriate consultation with counsel, has participated in drafting this
Agreement. The language of this Agreement will not be preemptively construed
against any of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
by the terms hereof, have hereunto set their hands under seal, as of the date
first above written.
BUYER:
BELLVILLE ACQUISITION, INC.
By: /s/ Robert Campana
--------------------------------
Its: Executive Vice President
-------------------------------
GUARANTOR:
LONE STAR TECHNOLOGIES, INC.
By: /s/ Rhys J. Best
--------------------------------
Its: Chief Executive Officer
-------------------------------
SELLER:
BELLVILLE TUBE CORPORATION
By: /s/ Rhys J. Best
--------------------------------
Its: Chief Executive Officer
-------------------------------
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EXHIBIT 2.2
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
This First Amendment to Asset Purchase Agreement (the "Amendment") is
entered into by and between Bellville Acquisition, Inc., a corporation organized
and existing under the laws of the State of Texas ("Buyer"), Lone Star
Technologies, Inc., a corporation organized and existing under the laws of
Delaware ("Lone Star"), and Bellville Tube Co., L.P., a limited partnership
organized and existing under the laws of Delaware, formerly known as Bellville
Tube Corporation, a corporation organized and existing under the laws of
Delaware ("Seller") on this 31st day of March, 2000.
BACKGROUND
WHEREAS, Buyer, Lone Star and Bellville Tube Corporation entered into an
Asset Purchase Agreement dated March 7, 2000 (the "Agreement") whereby Seller
agreed to sell, and Buyer agreed to buy, substantially all of the assets of
Seller used in its Business (as defined in the Agreement) upon the terms and
conditions set forth therein; and
WHEREAS, the parties hereto wish to amend the Agreement as set forth
herein.
NOW THEREFORE, the parties hereto, in consideration of the covenants and
agreements set forth herein, intending to be legally bound hereby agree as
follows:
1. All initially capitalized terms used but not defined in this Amendment
will have the same meaning as in the Agreement.
2. Bellville Tube Co., L.P. hereby adopts and ratifies the Agreement, as
amended hereby.
3. Sections 6.3.2 and 6.3.3 of the Agreement shall be, and hereby are,
amended such that all references to "Article 5" in such Sections are deleted and
replaced with "Article 6".
4. Attached hereto as Exhibit A and incorporated herein by reference for
all purposes is a true and correct list of the Accounts Receivables of Seller as
of the Closing Date.
5. Schedule 3.1.4.B to the Agreement shall be, and hereby is, revised to
change the name of the managed health care plan provider to Phoenix Group
Services, Inc.
6. Attached hereto as Exhibit B is Schedule 3.1.8.B to the Agreement,
revised to reflect the employees of Seller as of the Closing Date.
7. This Amendment may be executed in multiple counterparts and each such
counterpart shall be deemed to be an original instrument but all of such
counterparts taken together shall constitute only one instrument.
8. The Agreement shall remain in full force and effect without modification
except as expressly stated in this Amendment, and nothing contained herein shall
affect the validity or enforceability of the Agreement (as amended hereby) or
any of the documents or instruments
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delivered pursuant to the Agreement by any of the parties hereto or thereto.
ENTERED into as of the date first written above.
BELLVILLE ACQUISITION, INC.
By: /s/ Robert Campana
--------------------------------
Its: Executive Vice President
-------------------------------
GUARANTOR:
LONE STAR TECHNOLOGIES, INC.
By: /s/ Rhys J. Best
--------------------------------
Its: Chief Executive Officer
-------------------------------
BELLVILLE TUBE CO., L.P.
By: BTC S-1, L.L.C.
Its: General Partner
By: /s/ Rhys J. Best
--------------------------------
Its: Chief Executive Officer
-------------------------------
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EXHIBIT 2.3
Dated: March 31, 2000
To: THE CIT GROUP/BUSINESS CREDIT, INC., AS AGENT
From: LONE STAR TECHNOLOGIES, INC.
Address: 15660 N. Dallas Parkway, Suite 500 Dallas, Texas 75248
- ----------------------------------------------------
LIMITED GUARANTY
RE: LONE STAR STEEL COMPANY
T&N LONE STAR WAREHOUSE CO.
LONE STAR LOGISTICS, INC.
15660N. Dallas Parkway, Suite 500
Dallas, Texas 75248
------------------------------------
(herein collectively, the "Company" or the "Companies")
Gentlemen:
Reference is made to that certain Financing Agreement between the
Companies, the Agent and the Lenders party thereto, dated March 12, 1999, as
the same may be amended from time to time (the "Agreement"). Capitalized terms
used herein and defined in the Financing Agreement shall have the same meanings
as specified therein unless otherwise specifically defined herein.. The
undersigned (herein the "Guarantor") hereby unconditionally jointly and
severally guarantees and agrees to be liable for the full and indefeasible
payment and performance when due of all now existing and future indebtedness,
obligations or liabilities of the Companies or any one of them to you, as Agent
on behalf of the Lenders, howsoever arising, whether direct or indirect,
absolute or contingent, secured or unsecured, whether arising under the
Agreement as now written or as amended or supplemented hereafter, or by
operation of law or otherwise, including, without limitation, all Obligations
(as defined in the Agreement) of the Companies or any one of them to you (and
the Lenders). Further the Guarantor agrees to pay to you, on behalf of the
Lenders, on demand the amount of all expenses (including reasonable attorney's
fees) incurred by you in collecting or attempting to collect any of the
Companies' obligations to you, whether from the Companies or any one of them,
or from any other obligor, or from the Guarantor, or in realizing upon any
collateral; and agrees to pay any interest at the lesser of the Default Rate of
Interest specified in the Agreement or the highest lawful rate on all amounts
payable to you hereunder, even if such amount cannot be collected from the
Companies or any one of them. (All of the aforementioned obligations,
liabilities, expenses and interest are
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hereinafter collectively called the "Obligations"). To the extent you receive
payment on account of Obligations guaranteed hereby, which payment is
thereafter set aside or required to be repaid by you (or any Lender) in whole
or in part, then, to the extent of any sum not finally retained by you
(regardless of whether such sum is recovered from you by the Companies or any
one of them, its or their trustee, or any other party acting for, on behalf of
or through any of the Companies or their representative), the Guarantor's
obligation to you under this Guaranty, as amended, modified or supplemented,
shall remain in full force and effect (or be reinstated) until the Guarantor
has made payment to you therefor, which payment shall be due upon demand.
This Guaranty is executed as an inducement to you to make loans or advances to
the Company or otherwise to extend credit or financial accommodations to the
Company, or to enter into or continue a financing arrangement with the Company,
and is executed in consideration of your doing or having done any of the
foregoing. The Guarantor agrees that any of the foregoing shall be done or
extended by you in your sole discretion, and shall be deemed to have been done
or extended by you in consideration of and in reliance upon the execution of
this Guaranty, but that nothing herein shall obligate you to do any of the
foregoing.
Notwithstanding anything herein to the contrary, the Obligations of the
Guarantor hereunder are limited to $5,000,000 plus, in the event the Agent has
to enforce its rights hereunder, including for payment hereunder, any applicable
interest thereon, costs, fees and expenses (including attorneys fees).
Notice of acceptance of this Guaranty, the making of loans or advances, or the
extension of credit under the Agreement, the amendment, execution or
termination of the Agreement or any other agreements in connection therewith,
and presentment, demand, protest, notice of protest, notice of non-payment and
all other notices to which the Guarantor may be entitled (whether under this
Guaranty or the Agreement), and your reliance on this Guaranty are hereby
waived. The Guarantor also waives notice of: changes in terms or extensions of
the time of payment, the taking and releasing of collateral or guarantees
(including the release of any other Guarantors) and the settlement, compromise
or release of any Obligations, and agree that, as to the Guarantor, the amount
of the Obligations shall not be diminished by any of the foregoing. The
Guarantor also agrees that you need not attempt to collect any Obligations from
any other Guarantors or any other obligor or to realize upon any collateral,
but may require the Guarantor to make immediate payment of Obligations to you
when due or at any time thereafter. You shall not be liable for failure to
collect Obligations or to realize upon any collateral or security therefor, or
any part thereof, or for any delay in so doing, nor shall you be under any
obligation to take any action whatsoever with regard thereto.
This Guaranty is absolute, unconditional and continuing, regardless of the
validity, regularity or enforceability of any of the Obligations or the fact
that a security interest or lien in any collateral or security therefor may not
be enforceable by you or may otherwise be subject to equities or defenses or
prior claims in favor of others or may be invalid or defective in any way and
for any reason, including any action, or failure to act, on your part. The
liability of the Guarantor under this Guaranty shall be unaffected by the death
of any other Guarantors. Payment by the Guarantor shall be made to you at your
office from time to time on demand as Obligations
2
<PAGE>
become due, and one or more successive or concurrent actions may be brought
hereon against the Guarantor (or any one or more of them) either in the same
action or in separate actions. In the event any claim or action, or action on
any judgment, based on this Guaranty, is made or brought against the Guarantor,
the Guarantor agrees not to assert against you any set-off or counterclaim
which the Company may have, and, further, the Guarantor agrees not to deduct,
set-off, or seek to counterclaim for or recoup, any amounts which are or may be
owed by you to the Guarantor, or for any loss of contribution from any other
guarantor. Furthermore, in any litigation based on the Guaranty in which you
and the Guarantor shall be adverse parties, the Guarantor hereby waives trial
by jury and waive the right to interpose any defense based upon any Statute of
Limitations or any claim of laches and waive the performance of each and every
condition precedent to which the Guarantor might otherwise be entitled by law.
The Guarantor hereby consents to the in personam jurisdiction of the courts of
the State of New York. In the event that you bring any action or suit in any
court of record of New York State or the Federal Government to enforce any or
all liabilities of the Guarantor hereunder, service of process may be made on
the Guarantor by mailing a copy of the summons to the Guarantor at the address
below set forth.
All sums at any time to the credit of the Guarantor and any property of the
Guarantor on which you at any time have a lien or security interest, or of
which you at any time have possession, shall secure payment and performance of
all Obligations and any and all other obligations of the Guarantor to you
however arising. The Guarantor shall have no right of subrogation,
indemnification or recourse to any Obligations or collateral or guarantees
therefor, or to any assets of the Company.
Upon the occurrence of any of the following events:
(1) any Event of Default under, or termination of, the Agreement;
(2) failure of the Guarantor to observe or perform any agreements, warranties
or covenants contained herein; or
(3) (a) dissolution or cessation of the Guarantor's business;
(b) calling of a meeting of the creditors of the Guarantor for the
purposes of compromising the debts of such Guarantor;
(c) failure of the Guarantor to meet its debts as they mature;
(d) commencement by the Guarantor of any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceeds under
federal or state law (herein collectively "Insolvency Proceeding");
(e) commencement of any Insolvency Proceeding against the Guarantor,
then, in the case of events set forth above the liability of the Guarantor for
the entire Obligations
3
<PAGE>
shall mature for the entire Obligations even if the liability of the Companies
or any one of them therefor does not.
Except as provided in the next paragraph, this Guaranty may be terminated as to
the Guarantor only as of any Anniversary Date (as defined in the Agreement) and
then only upon actual receipt by one of your officers of at least ninety (90)
days prior written notice of termination sent by registered or certified mail;
provided however, that the Guarantor so terminating this Guaranty shall remain
bound hereunder, and this Guaranty shall continue in full force and effect,
with respect to any and all Obligations created or arising prior to the
effective date of such termination and with respect to any and all extensions,
renewals or modifications of said pre-existing Obligations. Termination as to
any other Guarantors shall not affect the obligations of the Guarantor
hereunder, nor relieve the one giving such notice from liability for any post
termination collection expenses or interest. Except as provided in the next
paragraph, this is a continuing agreement and written notice as above provided
shall be the only means of termination, notwithstanding the fact that for
certain periods of time there may be no Obligations owing to you by the Company.
Notwithstanding anything herein to the contrary, this Guaranty shall
automatically and without notice terminate upon the following conditions having
been met and the Agent's receipt of an officer's certificate (in form and
substance satisfactory to the Agent) from the Companies confirming compliance
with such conditions:
a) twelve (12) months or more from the date hereof have elapsed;
b) based upon a trailing twelve months of financial information, the
Companies have achieved a Fixed Charge Coverage Ratio (on a
consolidated basis and for calculation thereof, including capital
expenditures in the denominator, all as defined in the Agreement) of
at least 1.25x 1.0;
c) there is at least $20,000,000 of Availability within the Revolving
Line of Credit for the prior quarter (all as defined in the
Agreement);
d) the outstanding balance of the Companies Term Loan is $5,000,000 or
less; and
e) no Default or Event of Default shall have occurred under the
Agreement or hereunder (which Event of Default has not been waived
by, or cured to the satisfaction of, the required Lenders
[as defined in the Agreement]).
Your books and records showing the account between you and the Company shall be
admissible in evidence in any action or proceeding as prima facie proof of the
items therein set forth. Your monthly statements rendered to the Company shall
be binding upon the Guarantor (whether or not the Guarantor received copies
thereof) and shall constitute an account stated between you and the Company
unless you shall have received a written statement of the Company's exceptions
within thirty (30) days after the statement was mailed to the Company.
The Guarantor expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim which it
may now or hereafter have against the Company or any other person directly or
contingently liable for the Obligations guaranteed hereunder, or against or
with respect to the Company's property (including, without limitation, property
collateralizing its Obligations to you) arising from the existence or
performance of this
4
<PAGE>
Guaranty.
This Guaranty embodies the whole agreement of the parties and may not be
modified except in writing, and no course of dealing between you and the
Guarantor shall be effective to change or modify this Guaranty. Your failure to
exercise any right hereunder shall not be construed as a waiver of the right to
exercise the same or any other right at any other time and from time to time
thereafter, and such rights shall be considered as cumulative rather than
alternative. No knowledge of any breach or other nonobservance by the Guarantor
of the terms and provisions of this Guaranty shall constitute a waiver thereof,
nor a waiver of any obligations to be performed by the Guarantor hereunder.
This Guaranty may be assigned by you and shall be for your benefit and for the
benefit of any of your assignees or transferees, and shall cover any
Obligations owed to you at the time of assignment or transfer as well as any
and all future Obligations, loans, advances or extensions of credit made to the
Company by, or otherwise owed by the Company to, such assignee or transferee.
This instrument is executed and given in addition to, and not in substitution,
reduction, replacement, or satisfaction of, any other endorsements or
guarantees of the Obligations, now existing or hereafter executed by the
Guarantor or others in your favor.
When used in this agreement, all pronouns shall, wherever applicable, be deemed
to include the singular and plural as well as the masculine, feminine, and
neuter genders. This agreement shall inure to the benefit of you, your
successors and assigns and any parent, subsidiary or affiliate of yours; shall
be binding jointly and severally upon the Guarantor and upon the respective
heirs, executors, administrators, successors and assigns of the Guarantor; and
shall pertain to the Company and its successors and assigns.
For purposes hereof "Company" shall mean Companies or any one of the Companies
as applicable, and "you" shall mean The CIT/Group Business credit, Inc. as
Agent on behalf of the Lenders and the Agent and the Lenders, as applicable and
construed to give the broadest possible meaning consistent herewith and as set
forth in the Agreement.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS GUARANTY SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK. TO THE EXTENT THAT TEXAS LAW MAY EVER
APPLY TO THIS GUARANTY, FINANCING AGREEMENT AND THE OTHER LOAN DOCUMENTS,
NOTWITHSTANDING THE FOREGOING CHOICE OF LAW, THE PROVISIONS OF CHAPTER 346
(OTHER THAN SECTION 346.004 THEREOF) OF THE TEXAS FINANCE CODE (VERNONS TEXAS
CODE ANNOTATED), AS AMENDED FROM TIME TO TIME (AS AMENDED, THE "TEXAS FINANCE
CODE"), SHALL NOT BE APPLICABLE TO ANY LOAN(S) OR EXTENSIONS OF CREDIT
EVIDENCED BY THE FINANCING AGREEMENT AND/OR THE PROMISSORY NOTES, AND THE
GUARANTOR HEREBY WIAVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY AND ALL
DEFENSES AND CLAIMS BASED ON SURETYSHIP AND APPLICABLE USUARY STATUTES AND
PROVISIONS.
5
<PAGE>
This Guaranty may be executed in any number of counterparts, each of which when
so executed shall be deemed an original and such counterparts shall together
constitute but one and the same document.
IN WITNESS WHEREOF the Guarantor has executed and delivered this Guaranty
effective as of the date above set forth.
LONE STAR TECHNOLOGIES, INC.
BY: /s/ Charles J. Keszler
------------------------------------
TITLE: Vice President - Finance
Address: 15660 N. Dallas Parkway, Suite 500
Dallas, Texas 75248
---------------------------------------------
6
<PAGE>
EXHIBIT 2.4
STOCK PLEDGE AGREEMENT
To: THE CIT GROUP/BUSINESS CREDIT, INC., as agent
From: LONE STAR TECHNOLOGIES, INC.
Address: 15660 N. Dallas Parkway, Suite 500
Dallas, Texas 75248
- ----------------------------------------------
RE: LONE STAR STEEL COMPANY
T&N LONE STAR WAREHOUSE CO.
LONE STAR LOGISTICS, INC.
15660 N. Dallas Parkway, Suite 500
Dallas, Texas 75248
-----------------------------------------
(herein collectively, the "Company" or the "Companies")
March 31, 2000
STOCK PLEDGE AGREEMENT
Gentlemen:
Reference is made to that certain Financing Agreement between the Companies, the
Agent and the Lenders party thereto, dated March 12, 1999, as the same may be
amended from time to time (the "Financing Agreement"). Capitalized terms used
herein and defined in the Financing Agreement shall have the same meanings as
specified therein unless otherwise specifically defined herein. As security for:
(a) the full and indefeasible payment and performance when due of all now
existing and future (i) Obligations of the undersigned (herein the "Pledgor")
arising pursuant to any guaranty now or hereafter executed by the Pledgor in
your favor (as Agent on behalf of the Lenders) regarding the Companies or any
one of them (herein collectively the "Guaranty") and (ii) Obligations of the
Companies or any one of them to you and/or the Lenders, in each case whether
absolute or contingent, however acquired by you, and whether arising under the
Financing Agreement and/or Guaranty as now written or as amended or supplemented
or augmented hereafter, in law or otherwise (herein collectively the
"Obligations"); (b) any liability or indebtedness you may incur because of any
guaranty you may issue at the request of the Company, including, without
limitation, any Letter of Credit Guaranty; (c) the amount of all expenses
(including reasonable attorneys' fees) incurred by you and/or the Lenders in
collecting or attempting to collect any of the Obligations whether from the
Companies or any one of them, the Pledgor or any other obligor or in realizing
upon collateral; and (d) any interest from the due date at the Default Rate of
Interest specified in the Financing Agreement on all amounts payable to you
hereunder (all of which are herein called the "Secured Obligations"), the
Pledgor hereby pledges,
<PAGE>
assigns, transfers, delivers and sets over to you (as Agent on behalf of the
Lenders) all of its right, title and interest in and to the securities listed
on the attached schedule, issued as indicated on said schedule (the
"Securities").
This pledge includes all right, title and interest in and to and a continuing
lien upon and security interest in, all of said Securities together with any and
all rights, coupons, warrants or rights to subscribe, options, dividends,
liquidating dividends, splits, dividends paid in stock, dividends paid in
Securities, new or reclassified Securities, or any other property which the
Pledgor is or may hereafter become entitled to receive on account of such
Securities, any and all increments, substitutions, additions or replacements
thereof, and any and all proceeds thereof (all collectively hereinafter referred
to as the "Pledged Collateral").
This Stock Pledge Agreement is executed as an inducement to you to make loans or
advances to the Company or issue guaranties at the request of the Company, or
otherwise to extend credit or financial accommodations to the Company or to
enter into or continue a financing arrangement with the Company, and is executed
in consideration of your doing or having done any of the foregoing.
The Pledgor agrees that any of the foregoing shall be deemed to have been done
or extended by you in consideration of and in reliance upon the execution of
this Stock Pledge Agreement, but nothing herein shall obligate you to do any of
the foregoing.
The Pledgor shall be in default under this Pledge Agreement upon the occurrence
of any of the following (herein any such default shall be referred to as an
"Event of Default"):
1. the occurrence of any Default or Event of Default under the
Financing Agreement;
2. if any warranty, representation or statement contained in this
Stock Pledge Agreement is materially or substantially breached,
or is, or becomes materially or substantially untrue;
3. the commencement by or against the Pledgor of any bankruptcy,
insolvency, arrangement, reorganization, receivership or
similar proceedings under any federal or state law; or
4. the liability of the Pledgor under the Guaranty matures in
accordance with the provisions thereof.
In the event of the happening of any such Event of Default, then on ten (10)
days prior notice to the Pledgor, without the curing of such default within such
time, you may, without demand of performance, advertisement or notice of
intention to sell, or of the time or place of sale, and without notice to
redeem, or other notice or demand whatsoever to or upon the Pledgor (all and
each of which demands, advertisements and/or notices are hereby expressly
waived), forthwith or at any time or times thereafter, transfer to and/or
register in your name, or the name of your nominee, any or all of the Pledged
Collateral and/or collect, receive, appropriate and realize upon said Pledged
Collateral. In addition, and also without any of the aforesaid demands,
advertisements, and/or notices, upon the occurrence of any Event of Default as
defined herein, you may sell, assign, transfer and deliver the whole or any part
of the Pledged Collateral then held by you under this Stock Pledge Agreement or
subject to this Stock Pledge Agreement in one or more parcels, at public or
private sale or sales, at any Exchange Broker's Board, at your office or
elsewhere, on such terms and conditions, and at such prices as you may deem
advisable, for cash, upon credit, or for future delivery, with the right on your
part to become the purchaser thereof at any such sale or sales, free and clear
of any right to equity of redemption (which
<PAGE>
right or equity is hereby expressly waived and released). Any notice of sale,
disposition, or other intended action by you required by applicable law and
sent to the Pledgor at least ten (10) days prior to such action shall
constitute reasonable notice to the Pledgor. Prior to exercising your rights
contained herein you may in your discretion forward the various coupons coming
due on any bonds covered hereby directly to the Pledgor for collection.
Notwithstanding the foregoing or any provision to the contrary contained
herein, you shall not be entitled to sell or otherwise realize upon the Pledged
Collateral until ten (10) days after a demand for payment has been made under
that certain Limited Guaranty dated March 31, 2000 executed by Pledgor in your
favor and then only if the Pledgor has failed to pay its obligations thereunder
in full.
Net proceeds of any such disposition as aforesaid, after deduction all costs,
including reasonable attorney's fees and expenses of every kind incurred
therein, shall be applied to the payment in whole or in part, in such order as
you may elect, of any of the Secured Obligations, whether then due or not due.
You agree to pay over and return any remaining balance to the Pledgor or to any
person entitled thereto, upon proper demand being made therefor, and if there be
any deficiency, the Pledgor and the Company shall continue to be fully liable
for same.
Further, you are hereby expressly granted the right and irrevocable proxy, in
the event of the happening of any Event of Default (as defined herein), and on
ten (10) days prior notice to the Pledgor, without the curing of such Event of
Default within such time, to transfer to yourself or to your nominee any or all
of the Pledged Collateral or to register same in your name on the books of the
company or entity issuing same; to receive cash dividends, coupons and income
thereon and to hold the same as additional collateral security hereunder, or to
apply it against the Secured Obligations and to exercise any voting rights with
respect to said Collateral for any purposes as you in your discretion deem
advisable, and to otherwise exercise as to such Pledged Collateral, all rights,
powers and remedies as the owner thereof.
The Pledgor hereby represents and warrants that the Pledged Collateral is owned
by the Pledgor absolutely, and is free and clear of all liens and encumbrances
except for the pledge in your favor and except for Permitted Encumbrances (as
defined in the Financing Agreement); that there are no restrictions upon the
pledge or transfer of any of the Pledged Collateral; that the Pledgor has full
right to pledge and transfer the same in accordance with the terms and
conditions of this Stock Pledge Agreement, free of all encumbrances (except said
Permitted Encumbrances) and without the consent of any other person, firm,
entity or corporation and without the need to notify the issuing company and/or
obtain their consent to the pledge; and that said Pledged Collateral is not
subject to any assessment. The Pledgor agrees to defend its title to the Pledged
Collateral at its own cost and expense, and to pay, satisfy and discharge and
any all assessments, liens or charges now or thereafter placed upon the Pledged
Collateral.
In the event that it becomes necessary to comply with any Federal or State law
or regulation or to make or file any registration thereunder in order for you to
exercise any of your rights hereunder, the Pledgor expressly agrees to do or
will cause to be done all acts and prepare and execute all documents necessary
to affect such compliance or registration, and to bear all reasonable costs in
connection therewith. The Pledgor agrees to indemnify and to hold you harmless
from and against any claim or liability; and to hold you harmless from and
against any claim or liability caused by (i) any untrue statement of material
fact, or omission to state a material fact (as required in any registration or
prospectus) or (ii) a failure to register or comply with any such law or
regulation.
The Pledgor recognizes that you may be unable to effect a public sale of any or
all of the Collateral, by reason of certain prohibitions contained in the
Securities Act of 1933 and applicable state securities law or otherwise, and may
be compelled to resort to one or more private sales thereof to a restricted
group
<PAGE>
of purchasers which will be obligated to agree, among other things, to acquire
such securities for their own account for investment and not with a view to the
distribution or resale thereof. The Pledgor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable to you
than if such sale were a public sale and agrees that such circumstances shall
not, in and of themselves, result in a determination that such sale was not
made in a commercially reasonable manner. You shall be under no obligation to
delay a sale of any of the Pledged Collateral for the period of time necessary
to permit the issuer to register such securities for public sale under the
Securities Act of 1933, or under applicable state securities laws, even if the
issuer agrees to do so.
The Pledgor affirms and certifies that the Secured Obligations were not, and
will not be, incurred for the purpose of providing or obtaining any credit for
purchasing or trading in registered equity securities or other marketable
securities.
The Pledgor hereby agrees at your request to execute all necessary stock powers
in blank, to have the signatures on said powers guaranteed, to execute a letter
or other form confirming that the Pledged Collateral is not being pledged to you
for the purpose of providing or obtaining any credit for purchasing or trading
in registered equity securities or other marketable securities, and to execute
any further documents or papers whatsoever in order to carry out the intent and
purpose of this Stock Pledge Agreement.
The pledge provided for herein shall be in addition to, and shall not be deemed
to affect, modify or limit any other rights, collateral, agreements or security
which you may now or hereafter hold whether granted or given to you by the
Pledgor, the Company or by any other person, firm or corporation.
It is understood and agreed that the rights and remedies herein enumerated are
not intended to be exhaustive but are in addition to any other rights or
remedies at law or in equity. You shall have the absolute right in your sole
discretion to determine the order in which your rights and remedies are to be
exercised, and your exercise of any right or remedy shall not preclude the
exercise of any other rights or remedies or be deemed to be a waiver thereof. No
act of forbearance, or agreement to forebear the enforcement of, or extension of
the date of maturity of, any Secured Obligation, shall in any way constitute a
release of, or a waiver or relinquishment of any of your rights or remedies.
The Pledgor expressly waives and relinquishes any rights of subrogation,
reimbursement, indemnity or recourse to or with respect to any of the assets or
properties of the Company.
For purposes hereof "Company" shall mean Companies or any one of the Companies
as applicable, and "you" shall mean The CIT/Group Business credit, Inc. as Agent
on behalf of the Lenders and the Agent and the Lenders, as applicable and
construed to give the broadest possible meaning consistent herewith and as set
forth in the Agreement.
Notwithstanding anything herein to the contrary, this Stock Pledge Agreement and
the pledge of the Pledged Collateral shall terminate automatically and without
notice effective as of the effective date of the termination of that certain
Limited Guaranty dated March 31, 2000 executed by Pledgor in favor of The CIT
Group/Business Credit, Inc. Immediately upon such termination, Agent, on behalf
of the Lenders, shall take any and all further steps as may be necessary or
appropriate to document such termination and the release of the Pledged
Collateral.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
TO THE EXTENT THAT TEXAS LAW MAY EVER APPLY TO THIS PLEDGE AGREEMENT, THE
FINANCING AGREEMENT AND THE OTHER LOAN DOCUMENTS, NOTWITHSTANDING THE FOREGOING
CHOICE OF LAW, THE PROVISIONS OF CHAPTER 346 (OTHER THAN SECTION 346.004
THEREOF) OF THE TEXAS FINANCE CODE (VERNONS TEXAS CODE ANNOTATED), AS AMENDED
FROM TIME TO TIME (AS AMENDED, THE "TEXAS FINANCE CODE"), SHALL NOT BE
APPLICABLE TO ANY LOAN(S) OR EXTENSIONS OF CREDIT EVIDENCED BY THE FINANCING
AGREEMENT AND/OR THE PROMISSORY NOTES, AND THE GUARANTOR HEREBY WIAVES TO THE
FULLEST EXTENT PERMITTED BY LAW ANY AND ALL DEFENSES AND CLAIMS BASED ON
SURETYSHIP AND APPLICABLE USUARY STATUTES AND PROVISIONS.
This Stock Pledge Agreement shall be binding on the heirs, administrators,
executors, successors and assigns of the Pledgor, and shall inure to the benefit
of you and your successors and assigns.
Very truly yours,
LONE STAR TECHNOLOGIES, INC.
BY: /s/ Charles J. Keszler
----------------------------------
TITLE: Vice President - Finance
Address: 15660 N. Dallas Parkway, Suite 500
Dallas, Texas 75248
--------------------------------------
<PAGE>
SCHEDULE TO STOCK PLEDGE AGREEMENT BETWEEN THE CIT GROUP/BUSINESS CREDIT, INC.,
AS AGENT AND LONE STAR TECHNOLOGIES, INC. (THE "PLEDGOR")
<TABLE>
Issuer Owner Certificate # # of Shares
-------- ------- --------------- -------------
<S> <C> <C> <C>
Bellville Tube Corporation Lone Star Technologies, Inc. 2 100%
(formerly, Bellville Acquisition, Inc.)
</TABLE>
LONE STAR TECHNOLOGIES, INC.
(the "Pledgor")
By: /s/ Charles J. Keszler
------------------------------
Title: Vice President - Finance
<PAGE>
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
PURCHASE OF BELLVILLE TUBE CORPORATION'S ASSETS
Dallas, TX, March 31, 2000 ..... Lone Star Technologies, Inc. (Lone Star),
NYSE:LSS, announced that it has completed the purchase of Bellville Tube
Corporation's (Bellville) assets, a privately held Houston-area based tubular
goods manufacturer.
Bellville is a high quality, low cost producer of oil country tubular goods and
line pipe between 1.9 inches and 4.5 inches in outside diameter. In addition to
oilfield products, Bellville also produces tubing for industrial applications.
Bellville's management and employees will remain with the company. No change in
employment levels is expected.
Lone Star acquired Bellville's assets through a new subsidiary for a cash
purchase price of approximately $14.5 million. The purchase price was provided
by Lone Star's cash and borrowings of $5 million. Bellville's revenues, which
primarily consist of conversion fees from Steel, and EBITDA for the 1999
calendar year were $9.2 million and $2.5 million, respectively. The acquisition
is anticipated to be accretive to Lone Star's earnings per share as a result of
reduced conversion fees and other costs.
Rhys J. Best, Chairman, President and Chief Executive Officer of Lone Star,
stated: "The acquisition of Bellville will increase our flexibility to meet our
customers' growing demand for a wide range of premium quality tubular products
on short notice. The Bellville brand product line is preferred by many end users
for oilfield applications and industrial uses."
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.,
which manufactures and markets finned tubes used in a variety of heat recovery
operations.
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, 1999.
