EXHIBIT 2.1
PURCHASE AND SALE OF ASSETS AGREEMENT
AMONG
LONE STAR FASTENERS, LP
AS "BUYER";
LSS-LONE STAR-HOUSTON, INC.
BOLT MANUFACTURING CO., INC.
D/B/A ▇▇▇▇▇▇ BOLT MANUFACTURING COMPANY
AND WHIR ACQUISITION, INC.
D/B/A AMERITECH FASTENER MANUFACTURING
AS "SELLERS"
AND
T-3 ENERGY SERVICES, INC.
AS "SHAREHOLDER"
EFFECTIVE AS OF FEBRUARY 19, 2004
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TABLE OF CONTENTS
RECITALS
TERMS AND CONDITIONS
1. PURCHASE AND SALE OF ASSETS
(a) SALE
(b) WARRANTIES OF ASSETS
(c) ASSIGNMENTS AND ASSUMPTIONS
(d) CONSENT BY SHAREHOLDER
2. PURCHASE PRICE
(a) INITIAL ESTIMATE OF PURCHASE PRICE
(b) POST-CLOSING FINALIZATION OF PURCHASE PRICE
(c) PAYMENT OF FINAL PURCHASE PRICE
(d) COLLECTIONS ON ACCOUNTS RECEIVABLE
(e) ADJUSTMENTS TO NOTES
(f) ALLOCATIONS OF PURCHASE PRICE FOR TAX PURPOSES
3. NO LIABILITIES ASSUMED
4. CLOSING
5. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF SELLERS AND SHAREHOLDER
(a) INTERPRETATIONS OF REPRESENTATIONS AND WARRANTIES
(b) ORGANIZATION; AUTHORITY; NAME
(c) AUTHORITY
(d) STOCK OWNERSHIP; BINDING EFFECT
(e) NO CONFLICT
(f) GOVERNMENTAL CONSENTS AND APPROVALS
(g) FINANCIAL INFORMATION; BOOKS AND RECORDS
(h) INVENTORIES
(i) INTELLECTUAL PROPERTY RIGHTS
(j) TANGIBLE PERSONAL PROPERTY
(k) CUSTOMER CONTRACTS
(l) INSURANCE COVERAGES
(m) EMPLOYEES; EMPLOYEE BENEFITS
(n) LABOR MATTERS
(o) COMPLIANCE WITH LAW
(p) TAXES
(q) LITIGATION AND THREATENED OR PENDING LITIGATION
(r) ABSENCE OF PRICE RENEGOTIATION CONTRACTS
(s) CONDUCT OF SELLERS' BUSINESS
(t) ACCOUNTS RECEIVABLE
(u) ENVIRONMENTAL AND OTHER PERMITS; HAZARDOUS MATERIALS; DISPOSAL
SITES
(v) NONCOMPETE AGREEMENTS
(w) REAL PROPERTY
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(x) LEASED PROPERTIES
(y) RELIANCE ON ADVISORS
(z) REPRESENTATION CONCERNING TOTALITY OF ASSETS
(aa) COMPLETE DISCLOSURE
(bb) KNOWLEDGE REGARDING BUYER REPRESENTATIONS AND WARRANTIES
6. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF BUYER
(a) INTERPRETATIONS OF REPRESENTATIONS AND WARRANTIES
(b) ORGANIZATION; AUTHORITY
(c) NO CONFLICT
(d) GOVERNMENTAL CONSENTS AND APPROVALS
(e) RELIANCE ON ADVISORS
(f) BINDING AGREEMENT
(g) EMPLOYMENT CONTRACTS
(h) WARN ACT NOTIFICATIONS
(i) KNOWLEDGE REGARDING SELLERS AND SHAREHOLDER REPRESENTATIONS
AND WARRANTIES
(j) NO SOLICITATION OF EMPLOYEES
(k) BUYER'S USE OF SELLER'S HUMAN RESOURCES POLICIES
7. DELIVERIES BY SELLERS AND SHAREHOLDER
8. DELIVERIES BY BUYER
9. TITLE COMMITMENT
10. ENVIRONMENTAL ASSESSMENTS
11. PRORATIONS AND CHARGES
12. COVENANTS AND COOPERATION
(a) ADDITIONAL INSTRUMENTS
(b) SHAREHOLDER CONSULTING AGREEMENT
(c) TRANSITION
(d) CONTACT WITH THIRD PARTIES
(e) ADDITIONAL ASSETS
(f) TRADE ORGANIZATIONS
(g) ADDITIONAL ACCESS TO RECORDS
13. NAME CHANGE
14. COVENANTS OF SELLERS AND SHAREHOLDER BEFORE CLOSING
(a) ACCESS TO OWNED REAL PROPERTY, LEASED PROPERTIES AND RECORDS
(b) REQUIRED ACTIVITIES OF SELLERS BEFORE CLOSING
(c) PROHIBITED ACTIVITIES BEFORE CLOSING
(d) STANDSTILL AGREEMENT
(e) TITLE DEFECTS
(f) CONFIDENTIALITY; FAILURE TO ATTAIN CLOSING
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15. PUBLIC ANNOUNCEMENTS
16. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS AND SHAREHOLDER
(a) REPRESENTATIONS AND WARRANTIES
(b) COVENANTS
(c) NO ADVERSE PROCEEDING
(d) CLOSING DELIVERIES
(e) GENERAL
17. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
(a) REPRESENTATIONS AND WARRANTIES
(b) COVENANTS
(c) NO ADVERSE PROCEEDING
(d) CORPORATE APPROVAL
(e) NO ADVERSE CHANGE OR MATERIAL ADVERSE EFFECT
(f) TRANSFERABILITY OF PERMITS
(g) DUE DILIGENCE REVIEW
(h) CONSENTS
(i) CLOSING DELIVERIES
(j) GOVERNMENTAL APPROVALS
(k) ZONING VARIANCES
(l) ENVIRONMENTAL
(m) GENERAL
18. INDEMNIFICATION
(a) BY SELLERS AND SHAREHOLDERS
(b) BY BUYER
19. SURVIVAL OF INDEMNIFICATIONS
20. TERMINATION OF AGREEMENT
(a) TERMINATION BY BUYER
(b) TERMINATION BY SELLER OR SHAREHOLDER
(c) TERMINATION FOR FAILURE TO CLOSE
(d) EFFECT OF TERMINATION
21. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
22. LEGAL OPINIONS [DELETED]
23. GENERAL PROVISIONS
(a) ASSIGNMENT
(b) BINDING EFFECT; NO THIRD PARTY BENEFICIARIES
(c) AMENDMENT
(d) ENTIRE AGREEMENT
(e) COUNTERPARTS
(f) ATTORNEYS' FEES
(g) NOTICES
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(h) WAIVER
(i) SEVERABILITY
(j) CONSTRUCTION
(k) MUTUAL DRAFTING
(l) EXPENSES OF TRANSACTION
(m) NO BROKERS
(n) GOVERNING LAW
(o) NO THIRD PARTY BENEFICIARIES
24. DEFINITIONS AND RULES OF INTERPRETATION
(a) DEFINITIONS
(b) RULES OF INTERPRETATION
EXHIBITS
Exhibit A Legal Description of Owned Real Property
Exhibit B Lone Star Leased Premises and Leases
Exhibit C ▇▇▇▇▇▇ Bolt/Ameritech Leased Premises and Leases
Exhibit D Persons Under Employment Contracts
Exhibit E Contracts
Exhibit F Form of Promissory Note
Exhibit G
Exhibit H Resolutions of Sellers Authorizing Transaction
Exhibit I August 31, 2003 Balance Sheet
Exhibit J Financial Statements
Exhibit K Sellers' Intellectual Property
Exhibit L Vehicles and Equipment
Exhibit M Insurance Certificates and Insurance Loss Runs as of January
31, 2004.
Exhibit N Employee Lists; Automobile Benefits
Exhibit O Governmental Orders
Exhibit P Litigation
Exhibit Q Resolutions of Buyer Authorizing Transaction
Exhibit R Form of ▇▇▇▇ of Sale
Exhibit S Closing Certificates from Sellers and Shareholder
Exhibit T Form of Warranty Deed Regarding Owner Real Property
Exhibit U
Exhibit V Environmental Matters
Exhibit W Non-Competition and Non-Solicitation Agreement
Exhibit X Spreadsheet for Determining Purchase Price Adjustment
Exhibit Y
Exhibit Z Initial Schedule for Inventory, Receivables, and Payables and
Aging Analysis
Exhibit AA Form of Assignment and Transfer of Intellectual Property
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PURCHASE AND SALE OF ASSETS AGREEMENT
This PURCHASE AND SALE OF ASSETS AGREEMENT ("AGREEMENT") is executed and
delivered as of February 19, 2004, among Lone Star Fasteners, LP, a Texas
limited partnership ("BUYER"); LSS-Lone Star-Houston, Inc. ("LONE STAR"), a
Delaware corporation, Bolt Manufacturing Co., Inc. d/b/a ▇▇▇▇▇▇ Bolt
Manufacturing ("▇▇▇▇▇▇ BOLT"), a Texas corporation, and WHIR Acquisition, Inc.
d/b/a Ameritech Fastener Manufacturing ("AMERITECH," collectively with Lone Star
and ▇▇▇▇▇▇ Bolt, the "SELLERS"), and T-3 Energy Services, Inc., a Delaware
corporation, the sole shareholder of Sellers ("SHAREHOLDER").
RECITALS
A. Lone Star manufacturers and distributes a broad line of standard and
metric fasteners in ASTM grades and exotic metals such as Monel,
titanium, Inconel, Alloy 20, and Hastelloy. Lone Star also custom
manufactures and coats fasteners to customer specifications.
Additionally, Lone Star provides electronic commerce EDI and XML
internet seamless connectivity for vendor stocking programs, managed
inventory on site, turn-around supply trailers, integrated supply,
in-house processing, manufacturing, electroplating, fluropolymer
coating, and heat treating, and in-house laboratory testing (tensile
and proof load, charpy impact, spectroanalysis, salt spray, ASTM B117,
NDE, and macroetch) (the "LONE STAR BUSINESS").
▇. ▇▇▇▇▇▇ Bolt specializes in manufacturing quality fasteners in small
quantities for dependable, quick deliveries for commercial and military
applications. ▇▇▇▇▇▇ Bolt specializes in exotic materials (titanium,
Inconel, Hastelloy, Monel, Incoloy and stainless steel) and
manufacturing/supply of items within specifications required by ASTM,
ASME, ANSI, DIN, and SAE. In-house capabilities include: forging, heat
treating, machining, bending, testing, inspection, certification and
technical support (the "▇▇▇▇▇▇ BOLT BUSINESS").
C. Ameritech manufactures parts in accordance with specifications covered
by NAS-AN-MS-NA per military and aerospace industry requirements.
Manufacturing capabilities of Ameritech include cold heading, heat
treating, grinding, thread rolling, head and shank drilling, and
knurling. Ameritech also provides quality control in accordance with
MIL-I-45208A calibration per MIL-STD-45662A, and traceability from raw
materials to finished products (the "AMERITECH BUSINESS," collectively
with the Lone Star Business and ▇▇▇▇▇▇ Bolt Business, the "BUSINESS").
For purposes of this Agreement, the Business does not include Lone
Star's specialty coating operations currently conducted out of its
facilities at 7135 Ardmore, Houston, Texas (the "Ardmore Facility")
under the name of Custom Coating Applicators.
D. Lone Star owns an approximately nine (9) acre parcel of real property
located in Spring, Texas more fully described on Exhibit A (together
with all improvements thereon the
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"OWNED REAL PROPERTY") and leases two additional offices in Houston,
only one of which shall be assigned to Buyer, which lease is described
on Exhibit B (the "LONE STAR LEASED PREMISES") upon which Lone Star
conducts the Lone Star Business.
▇. ▇▇▇▇▇▇ Bolt leases the facility and land upon which ▇▇▇▇▇▇ Bolt and
Ameritech conduct their Business as described on Exhibit C (the "▇▇▇▇▇▇
BOLT/AMERITECH LEASED PREMISES," together with the Lone Star Leased
Premises, the "LEASED PROPERTIES").
F. Collectively, Sellers own or lease all of the assets used in the
Business in addition to certain other assets which are located at the
Ardmore Facility and which are not included within the scope of the
Business.
G. Buyer desires to purchase and acquire all of the "Assets" (as defined
in Section 1(a) below) and Sellers desire to sell the Assets to Buyer.
H. Shareholder owns all of the issued and outstanding shares of each of
the Sellers.
I. None of the Parties is willing to enter into this Agreement without the
representations, warranties and agreements of other Parties set forth
in this Agreement.
Accordingly, for good and valuable consideration, the receipt and sufficiency of
which are acknowledged, and with the intent to be legally bound hereby, the
Parties agree as follows:
TERMS AND CONDITIONS
1. PURCHASE AND SALE OF ASSETS.
(a) SALE.
Upon the terms and subject to the conditions set forth in this
Agreement, Sellers shall, on the Closing Date, sell to Buyer, and Buyer
shall purchase from Sellers all of Sellers' assets, properties and
contractual rights related to the Business and related tangible and
intangible interests related thereto (the "ASSETS"), free and clear of
all encumbrances, including, but not limited to, the following:
(i) the Owned Real Property;
(ii) all real and personal rights in the Leased Properties,
including leasehold interests, improvements, fixtures, and
rights of way (the "LEASEHOLD INTERESTS");
(iii) all tangible personal property located on the Owned Real
Property, on the Leased Properties, or elsewhere (except as
described in the last paragraph of this Section 1(a)),
including all equipment, machinery, molds, dyes, furnishings,
fixtures, improvements, tools, utensils, computers, books,
records, signage, files, research and development reports and
records, production reports and records, advertising
materials, studies, reports, correspondence and other similar
documents and records (the "TANGIBLE PERSONAL PROPERTY");
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Section 1(a) (iv) all motor vehicles, including those listed on Exhibit L but
excluding the vehicle described in the last paragraph of this
Section 1(a) ("VEHICLES AND EQUIPMENT");
(v) all inventories, raw materials, finished goods and
work-in-progress (the "INVENTORIES");
(vi) (A) all intangibles, including creative materials,
software, licenses, manuals, customer lists, pre-paid
accounts, accounts receivable, employee lists, files,
rights, claims of Sellers against third parties
relating to the Assets and/or the Business, whether
▇▇▇▇▇▇ or inchoate, known or unknown, contingent or
non-contingent, customer relationships, telephone
numbers, facsimile numbers, e-mail addresses,
websites, directory listings, master service
agreements, license agreements, customer contracts,
goodwill, names, assumed names, trade names, and
other intellectual property required to operate the
Business, including those identified in Exhibit K,
but excluding the trade name "Custom Coating
Applicators" pertaining solely to Lone Star's Custom
Coating Applicators' business based at the Ardmore
Facility (which is not required to operate the
Business), all rights of Sellers relating to
deposits, down payments, and advance payments (but
excluding any amounts in Sellers' banking or
investment accounts with financial institutions),
rights to refunds and prepaid expenses and rights to
offset in respect thereof, and all other intangible
property used in, or associated with, the Business.
(B) Notwithstanding the forgoing:
(1) Shareholder holds a license with Microsoft
Corporation for the use of certain software
programs provided by Microsoft. Shareholder
has informed Buyer that this license is
non-assignable. Buyer shall be responsible
for obtaining any required licenses from
Microsoft, the cost of which shall be borne
50% by Buyer and 50% by Sellers, with
Sellers' portion being paid solely through a
reduction in the Purchase Price at Closing.
If the documentation substantiating the cost
of a new Microsoft license is not available
at Closing, Buyer shall provide such
documentation to Shareholder within thirty
days after Closing and Shareholder shall
reimburse Buyer for 50% of the actual cost
within fifteen days after receipt of such
documentation and an invoice.
Section 1(a)(vi)(B) (2) Licenses for software provided by Visual
Manufacturing and Oracle will not be
assigned to Buyer and will no longer
available for Buyer's use ninety days after
the Closing Date.
(3) Lone Star uses IBM's Universe Software. The
Parties have each seen a copy of a letter to
Lone Star wherein JCL Associates, Inc.
(▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President, 713-582-6522,
▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇), distributor of record
for this software, has stated that the IBM
Universe Software is freely assignable if
the computer hardware is assigned in which
such software is installed. However, after
the assignment of the
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hardware and software, Buyer will need to
contact JCL to arrange for an assignment of
the maintenance agreement with IBM.
(4) The current International Standards
Organization ("ISO") 9001:2000 registration
maintained by Sellers and other affiliates
of Shareholder was granted in September 2003
by the Quality Certification Bureau, Inc.
("QCB"). This registration is good for one
full year but a surveillance audit will be
required in August 2004. The ISO 9001:2000
registration certifies that the facilities
associated with the Business meet the
minimum requirements as set by ISO for
quality management systems as outlined in
the international standard issued in 2000.
The current scope of the ISO registration
includes "coating, manufacturing, testing
and distribution of specialty fasteners, and
coatings of customer supplied product". All
of Sellers' operations at the ▇▇▇▇▇▇ Bolt,
Ameritech, and Lone Star facilities included
in this scope are considered ISO 9001:2000
compliant.
The Parties have each received a copy of a
letter sent by QCB to Shareholder that
notwithstanding the transfer of the
Business, as contemplated under this
Agreement, such transfer will not cause the
registration to be invalid so long as Buyer
continues to use the systems and procedures
under the current certification and
continues to abide by the requirements and
conditions of this certification.
Section 1(a) (vii) all contractual rights of Sellers in any way related to the
Business where the failure to assign or otherwise transfer
such rights to Buyer, when considered in the aggregate with
other failures to assign, would have a Material Adverse
Effect on Buyer (the "CONTRACT RIGHTS"). Exhibit E sets forth
a listing of the major Contract Rights with customers,
licensors, and landlords associated with the Business and the
status of Sellers' efforts to assign such major Contract
Rights to Buyer. To the extent Buyer elects to proceed to
Closing without a written assignment of any Contract Rights
or a substitute contract which provides substantially the
same benefits to Buyer, Sellers and Shareholders shall
continue to use all reasonable efforts to procure such
assignments or reasonably equivalent new contracts on behalf
of Buyer.
In the event Sellers or Shareholder, as applicable, have not
so procured such assignments or new contracts with the
following persons within ninety days after the Closing,
Sellers and Shareholder shall reduce the Purchase Price by
the following amounts and shall reimburse to Buyer such
amounts as designated below within fifteen days thereafter:
CONTRACT DESCRIPTION AMOUNT OF REIMBURSEMENT:
-------------------- -----------------------
Sermagard Industrial Coating Application $30,000
License Agreement
Magni Industries, Inc. License Agreement $30,000
▇▇▇▇▇▇▇▇ Corporation $30,000
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Lyondell-Citgo Refining LP $30,000
Aramco Services Company $30,000
Flow Products, Inc. $30,000
FMC $30,000
(viii) All Permits, including all Environmental Permits, held by
Sellers, but subject to any qualifications or limitations set
forth in Section 5(u).
The Parties acknowledge that (i) Lone Star's assets located at and
related to its operations at the Ardmore Facility and (ii) a 1997 3/4
ton Chevrolet pickup truck (vehicle identification # 1GCGC 24RX VZ 122
619) are expressly excluded from any of the foregoing items. Sellers
and Shareholder represent that the schedules of assets and accounting
reports previously provided by Sellers to Buyer have excluded such
items
Section 1(b) WARRANTIES OF ASSETS.
(i) (A) The Assets are to be sold with standard warranties of
title, free and clear of all liens (excluding (1) any
liens held by Shareholder's and Seller's lenders,
which shall immediately be released upon payment of
the Purchase Price and (2) a State of Texas
Employment Commission lien for unpaid employment
taxes filed on or about January 26, 1986 in
▇▇▇▇▇▇▇▇▇▇ County, Texas which may or may not be
applicable to Lone Star and its assets), claims,
encumbrances, assignments, options, restrictions,
pledges, mortgages, and security interests, and the
warranty that the Assets are in good working order as
of the Closing Date (reasonable wear and tear
excepted) and that the Assets are capable of being
used in the continued operations of the Business for
a period of at least six months following the Closing
Date. All movable property has been maintained in
substantially its present condition, reasonable wear
and tear excepted. In the event any of the Assets are
determined to be encumbered with liens, Sellers and
Shareholder shall immediately remove such liens,
which removal shall be Buyer's sole remedy for a
failure to sell such Assets to Buyer free and clear
of all liens, however, in the event there is a
failure to remove the liens, Buyer's remedy shall not
be so limited.
(B) In the event that Buyer incurs more than $150,000 in
costs for repairs and replacement parts from third
parties with respect to Assets sold by Sellers to
Buyers ("THIRD PARTY REPAIR COSTS") during the
six-month period after the Closing, Sellers and
Shareholder collectively shall reimburse Buyer for
50% of any additional Third Party Repair Costs;
provided that Sellers and Shareholder shall not be
required to incur more than an aggregate of $100,000
in Third Party Repair Costs.
(1) Prior to incurring any Third Party Repair
Costs during such six-month period, Buyer
shall submit to Shareholder's vice president
of operations written documentation
regarding the need for such third Party
Repair Costs. This individual currently is
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇; ▇▇▇-▇▇▇-▇▇▇▇.
No such Third Party Repair Costs shall be
incurred without Shareholder's prior written
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consent, which shall not be unreasonably
withheld, provided that no prior Shareholder
consent shall be required under the
following circumstances, provided that
information regarding such circumstances
shall be provided to Shareholder as soon as
practicable:
(a) if any machine or other item of
equipment becomes inoperable or soon
will be rendered inoperable if
immediate repairs are not made;
(b) if any machine or other item of
equipment requires immediate repair
in order avoid injuries or damage to
property.
Section 1(b)(i)(B) (2) Sellers and Shareholder shall be under no
obligation to contribute toward Third Party
Repair Costs pursuant to subsection (B)
above where such costs are attributable to
Buyer's failure to follow manufacturer's
recommendations and industry practice and
procedures with regard to the operation and
maintenance of any machine or other item of
equipment.
(3) Sellers and Shareholder shall be entitled to
audit the incurrence of any Third Party
Repair Costs for accuracy and prudency.
(4) The reimbursement obligations of Sellers and
Shareholder under this Section 1(b)(i)(B)
shall be Buyer's exclusive remedy for
failure of any item of machinery or
equipment to conform with the warranty set
forth in Section 1.(b)(i)(A) above.
(ii) Lone Star shall convey and deliver to Buyer the Owned Real
Property with full warranty of title, free and clear of all
liens, claims, encumbrances, deeds of trust, assignments,
options, restrictions, pledges, mortgages, and security
interests, except as otherwise specified in the Title
Commitment and where Buyer has not objected to any such item
in its Title Objections pursuant to Section 9, and in full
substitution and subrogation in and to all rights and actions
of warranty, if any, which Lone Star has or may have against
all proceeding owners and vendors.
(c) ASSIGNMENTS AND ASSUMPTIONS.
Sellers shall assign to Buyer, or otherwise make available for Buyer's
use, all Contract Rights and Leasehold Interests, subject to
Section 1(a)(vii) above), effective as of 12:01 a.m. the day after the
Closing Date. Buyer agrees to assume Sellers' obligations under any and
all leases, license agreements, and customer contracts listed in
Exhibit E but only to the extent that such obligations first mature and
are required to be performed after the Closing Date (the "ASSUMED
OBLIGATIONS").
(d) CONSENT BY SHAREHOLDER.
Shareholder hereby specifically acknowledges, ratifies, and consents to
the sale of the Assets by Sellers to Buyer as contained in this
Agreement. To the extent that the Shareholder has any ownership or
other rights or interests in the Assets, Shareholder hereby expressly
waives
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and relinquishes those rights in favor of Sellers (excluding any
license rights related to the Assets which are not assignable to Buyer
or where Buyer has not otherwise been provided through Shareholder's
efforts such rights pursuant to a new license with the licensor, but
for which Buyer has otherwise obtained such rights to the extent
necessary to conduct the continued operation of the Business effective
as of the Closing Date) in order to fully and completely carry out the
transactions contained in this Agreement.
2. PURCHASE PRICE.
(a) INITIAL ESTIMATE OF PURCHASE PRICE.
(i) PURCHASE PRICE.
Pursuant to the Letter of Intent, the Parties have agreed that
the purchase price for the transactions contemplated in this
Agreement (the "PURCHASE PRICE") shall be $8,000,000, subject
to a "working capital adjustment" based upon any positive or
negative change in the aggregated Adjustment Items while
excluding from all calculations the Custom Coatings
Applicators operations at the Ardmore Facility. The August 31,
2003 Balance Sheet reflects the base case from which the
Purchase Price is to determined while factoring in the impact
of the Adjustment Items on the Purchase Price.
(ii) Pursuant to the methodology set forth in the "Purchase Price
Adjustment" spreadsheet set forth in Exhibit X and in the
underlying supporting documentation and calculations, Sellers
have estimated that the actual Purchase Price to be paid at
Closing shall be $7,664,472.
(iii) Buyer shall pay such estimated Purchase Price at Closing as
follows:
(A) $7,164,472 payable by wire transfer in immediately
identifiable funds to the following account:
Account Name: T-3 Energy Services Master Account
Account Number: 4130956048
ABA (Routing) Number: ▇▇▇▇▇▇▇▇▇
Address: 420 ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ Fargo Contact Information: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
(B) One promissory note in the sum of $200,000 drawn to
the order of Lone Star (the "LONE STAR NOTE") and one
promissory note in the sum of $100,000 drawn to the
order of Ameritech (the "AMERITECH NOTE"). Each of
the Lone Star Note and the Ameritech Note shall be
dated the date of the Closing. Each note shall have a
stated term of two years and shall bear interest at
the rate of 8% per annum from its date until paid.
Interest shall be payable in semi-annual payments,
with all accrued and unpaid interest and the
outstanding principal due on the due date. Each of
the Lone Star Note and the Ameritech Note shall be
substantially in the form set forth in Exhibit F.
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Buyer shall pay a portion of the Purchase Price to or for the
account of each Seller in the amount directed by Shareholder
in writing to Buyer at Closing.
Section 2(b) POST-CLOSING FINALIZATION OF PURCHASE PRICE.
(i) After the Closing, Buyer shall consult with Sellers in
determining the actual amount of the Purchase Price which
should have been paid at Closing while applying the
methodology set forth in Exhibit X which was utilized to
determine the estimated Purchase Price at Closing. Within
fifteen days after Closing, Buyer shall present Sellers and
Shareholder with its proposed final Purchase Price with a
supporting spreadsheet prepared in accordance with Exhibit X
and with any additional supporting documentation which Sellers
and Shareholder reasonably may request.
(ii) As a part of such supporting documentation, Buyer shall update
Exhibit Z based upon the information in Buyer's books and
records. Buyer also shall provide Sellers and Shareholder with
an accounting of all Inventory transferred by Sellers as of
the Closing Date. Each Party's representatives shall be
authorized to be present if any physical inventory counts are
conducted as a part of such accountings. Any differences
between the accounting of all Inventory prepared by Sellers
and appearing in Exhibit Z to this Agreement and the Inventory
accounting prepared by Buyer shall be reconciled by mutual
agreement of the Parties, subject to each Party's right to
have such differences resolved by an independent accountant
pursuant to Section 2(b)(iv)(B) below.
(iii) For the purposes of any final Purchase Price determination
calculations, any and all rebates due ▇▇▇▇▇▇▇▇ Corporation and
FMC under their respective pricing agreements with Lone Star
and any other pricing agreement between any of the Sellers and
their respective customers shall be classified as an account
payable.
(iv) Sellers shall provide such assistance and cooperation to Buyer
as Buyer may request in connection with Buyer's preparation of
Buyer's proposed final Purchase Price Adjustment. Such
assistance and cooperation shall include providing Buyer or
Buyer's accountants with copies of all accounting books and
records not in Buyer's possession which are related to the
Business.
(v) If Sellers disagree with the Buyer's proposed final Purchase
Price, they shall so notify Buyer in writing within fifteen
days after Sellers' receipt of Buyer's determination of its
proposed final Purchase Price. Any such Sellers' notification
shall include in reasonable detail Sellers' preliminary
assessment of such disagreement, including the amounts in
dispute and any undisputed amounts, as well as a request for
any information required by Seller in order to be able to
finalize their assessment. Sellers shall be granted an
additional fifteens days to revise their notice of
disagreement upon receipt of the information requested from
Buyer pursuant to the previous sentence.
(vi) If Sellers do not provide a notice or revised notice of
disagreement within any such fifteen day period, Sellers shall
be deemed to have accepted Buyer's Purchase Price
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Adjustment, which shall be final, binding and conclusive for
all purposes hereunder and which shall then become the final
Purchase Price.
Section 2(b) (vi) After Sellers' delivery of any notice of disagreement pursuant
to Section 2(b)(vi) above, Sellers and Buyer shall use their
reasonable good faith efforts for a period of thirty days (or
such longer period as they may mutually agree) to resolve in
writing any disagreements with respect to the calculation of
the determination of the final Purchase Price. If, at the end
of such period, they are unable to resolve such disagreements,
then an independent accounting firm mutually agreed upon by
Buyer and Sellers shall resolve any remaining disagreements.
If Buyer and Sellers are unable to agree upon the independent
accounting firm, then the independent accounting firm shall be
Price WaterhouseCoopers.
(A) Each Party shall furnish, at its own expense, the
independent accounting firm and the other Parties
with such documents and information as the
independent accountants may request. Each Party may
also furnish to the independent accountant such other
information and documents as it deems relevant with
appropriate copies or notification being given to the
other Parties. The independent accountant may conduct
a conference concerning the disagreement with the
Sellers and Buyer, at which conference each Party
shall have the right to present additional documents,
materials and other information and to have present
its advisers, counsel, and accountants. In connection
with such process, there shall be no hearings, oral
examinations, testimony, depositions, discovery, or
other similar proceedings conducted by any Party;
however, the independent accountant may request
whatever information it deems relevant to its
determination.
(B) The independent accountant firm shall, as promptly as
practicable, but in any event within thirty days of
the date on which the dispute is referred to the
independent accountant shall:
(1) determine the final amount of the Purchase
Price in accordance with the principles set
forth herein; and
(2) deliver a written notice of such
determination to Buyer and Sellers.
(3) The independent accountant shall determine
the proportion of its fees and expenses to
be paid by Sellers and Buyer based on the
degree to which the independent accounting
firm has accepted the positions of the
Parties.
(4) The determination of the independent
accountant shall be final, conclusive, and
binding on all Parties.
(vii) The date on which the Purchase Price is finally determined in
accordance with this Section 2(b) is referred as to the
"Purchase Price Determination Date."
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Section 2(c) PAYMENT OF FINAL PURCHASE PRICE.
(i) Subject to clause (ii) below, if the final Purchase Price is
higher than the amount paid at Closing, Buyer shall pay to
Sellers the incremental amount. If the final Purchase Price is
lower than the amount paid at Closing, Sellers shall reimburse
Buyer the decremental amount. Any such payment shall be made
within two business days after the Final Purchase Price
Determination Date and shall be made by wire transfer of
immediately available funds to the account(s) designated by
the Party or Parties receiving the payment.
(ii) If the variance between the Purchase Price amount paid at
Closing and the amount determined to be the final Purchase
Price is less than $10,000, no payment or refund shall be
required for any Purchase Price adjustment.
Section 2(d) COLLECTIONS ON ACCOUNTS RECEIVABLE.
(i) Included within Exhibit Z are Seller's estimates of the
accounts receivable and bad debt associated with the Business
as of the Closing. The Parties shall cooperate, as a part of
the determination of the final Purchase Price, in revising
Exhibit Z to reflect actual conditions as of the Closing.
(ii) Buyer shall, with the exercise of diligent and reasonable
efforts, attempt to collect within 90 days after the Closing
Date the accounts receivable listed on Exhibit Z, as so
modified. Within 30 days after the end of such 90-day period,
Buyer shall prepare another revised Exhibit Z (the "Final
Exhibit on Receivables"). At that time, Buyer shall assign to
Sellers the right to collect any accounts receivable which
were set forth in such revised Exhibit Z and which have not
yet been paid to Sellers. Sellers shall pay to Buyer the
aggregate amount of all such uncollected accounts receivable.
All of the foregoing amounts shall be offset by any payments
which Buyer may have received from accounts which had been
classified as bad debt. Sellers, however, shall contact Buyer
in advance if Seller intends to contact the customer who has
not made payment. In the event Buyer requests Seller not to
contact any such customer, the Parties shall mutually agree,
in good faith, as to the amounts which shall be paid by Buyer
to Seller for not proceeding to collection against such
customer.
Section 2(e) ADJUSTMENTS TO NOTES.
(i) If within thirty days after the Closing ▇▇▇▇▇▇ ▇▇▇▇▇ has not
executed an agreement, with terms acceptable to Buyer, whereby
she transfers to Buyer any and all rights she may have to the
Lone Star Screw name or any derivation thereof, and an
agreement, with terms acceptable to Buyer, whereby she agrees
not to compete against Lone Star or Buyer in the State of
Texas for at least one year, the Purchase Price will be
reduced by a $200,000.00 reduction of the principal amount of
the Lone Star Note. Buyer agrees that it will enter into a
consulting agreement with ▇▇. ▇▇▇▇▇ at Sellers' expense as a
part of the consideration to be obtained for the foregoing
acknowledgement and transfer; provided that Buyer shall be
under no obligation to make any payment to ▇▇. ▇▇▇▇▇ except
for hourly consulting fees. Buyer shall be under no obligation
to call upon ▇▇. ▇▇▇▇▇ for consulting services for which she
would be entitled to compensation.
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(ii) If Ameritech has not obtained a full release prior to the due
date of the Ameritech Note of all claims of ▇▇▇▇▇▇▇ Control
which may arise out of the Ameritech/▇▇▇▇▇▇▇ Control
Investigation, or if ▇▇▇▇▇▇▇ Control ceases to maintain its
business relationship with Ameritech, in a manner financially
consistent with the two years prior to the Closing Date, as a
result of this dispute, Buyer shall be entitled to a $100,000
reduction in the principal amount of the Ameritech Note, as
well as the forgiveness of all accrued interest thereon. All
interest paid prior to the reduction of the Ameritech Note
pursuant to this Section 2(c)(ii) need not be reimbursed by
Sellers to Buyer.
Section 2(f) ALLOCATION OF PURCHASE PRICE FOR TAX PURPOSES.
Within sixty days after the Closing, the Parties shall meet and confer
to allocate the purchase price for tax purposes. This allocation shall
include information regarding the purchase and sale of capital goods
and other items which will need to be consistently designated in
Buyer's and Sellers' respective tax returns. Buyer and Sellers shall
follow and use such allocation in all tax returns, filings or other
related reports made by them to any governmental agencies. To the
extent that disclosures of this allocation are required to be made by
the Parties to the IRS under the provisions of Section 1060 of the
Internal Revenue Code of 1986, as amended (the "CODE"), or any
regulations thereunder, Buyer and Sellers will disclose and coordinate
such reports (including the Form 8594 to be filed by Shareholder and
Buyer) to the other prior to filing with the IRS. If the Purchase Price
is adjusted after the Closing Date, including adjustments based on
Section 2.2 and adjustments for satisfying Title Objections pursuant to
Article 9, the Parties shall negotiate in good faith a corresponding
adjustment to the Purchase Price allocation.
3. NO LIABILITIES ASSUMED
Under no circumstances does Buyer assume, or shall Buyer be liable for, any
liabilities or obligations of Sellers whatsoever arising prior to or on the
Closing Date. Buyer shall not by the execution and performance of this Agreement
or otherwise assume, become responsible for, or incur any Liability of any
nature of Sellers or Shareholder or any other Person, including any liability
arising out of or relating to any of the following events on or before the
Closing with respect to the Business:
(a) any occurrence or circumstance (whether known or unknown) which occurs
or exists and which constitutes, or which by the lapse of time or
giving notice would constitute, a breach or default under any lease,
contract, or other instrument or agreement (whether written or oral)
including, but not limited to any and all Permits, leases, license
agreements, and customer contracts;
(b) injury to or death of any person or damage to or destruction of any
property, whether based on negligence, breach of warranty, or any other
theory;
(c) violation of the requirements of any applicable Law or Governmental
Authority or of the rights of any third person, including any
requirements relating to the reporting and payment of taxes;
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(d) the handling, transportation or release of Hazardous Materials;
(e) any Liabilities under any agreement or arrangement between Sellers and
the employees of Sellers or any labor or collective bargaining unit
representing any such employees;
(f) any Plan;
(g) any severance pay obligation of Sellers or of any Plan or any other
fringe benefit program maintained or sponsored by Sellers and/or
Shareholder or to which Sellers contribute or any contributions,
benefits or Liabilities therefor or any Liability for the withdrawal or
partial withdrawal from or termination of any such Plan or program by
Sellers;
(h) any accounts payable incurred prior to the Closing Date unless
otherwise agreed to by Buyer and included in the initial schedule for
inventory, receivables, and payables set forth in Exhibit Z, as such
schedule shall be revised by Sellers within two days after the Closing
and further revised by mutual agreement of the Parties within fifteen
days after the Closing and thereafter as circumstances equitably
require future adjustments to be made;
(i) any Liability resulting from non-compliance with any applicable bulk
sales laws;
(j) any Action or Litigation, or the Houston Chemical Investigation, or the
Ameritech/▇▇▇▇▇▇▇ Matter; and
(k) any and all other Liabilities of Sellers or Shareholder whether
disclosed in this Agreement or otherwise. Sellers and Shareholder agree
that they shall pay and discharge all such Liabilities as and when they
become due and payable.
4. CLOSING.
Unless otherwise agreed to by the Parties in writing, the closing on the sale of
the Assets (the "CLOSING") shall take place at the offices of ▇▇▇▇▇▇▇▇▇▇▇ &
Price, L.L.P., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ on or
before February 20, 2004 (the "CLOSING DATE").
5. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF SELLERS AND SHAREHOLDER
Sellers and Shareholder, jointly and severally with each other, represent and
warrant to Buyer as follows:
(a) INTERPRETATIONS OF REPRESENTATIONS AND WARRANTIES.
The statements contained in this Section 5:
(i) are correct and complete as of the date of this Agreement;
(ii) unless otherwise stated to the contrary, will be correct and
complete as of the Closing Date as though made then and as
though the Closing Date were substituted for the date of this
Agreement throughout this Section 5 unless Sellers and
Shareholder notify Buyer to the contrary in writing, in which
case Buyer shall not be required to close the transactions
contemplated under this Agreement.
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(b) ORGANIZATION; AUTHORITY; NAME.
Lone Star is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware and is duly authorized
and qualified under all applicable laws to carry on its business in the
places and in the manner (except as otherwise disclosed in this
Agreement) presently conducted, including the State of Texas.
▇▇▇▇▇▇ Bolt is a corporation duly organized, validly existing and in
good standing under the laws of the state of Texas and is duly
authorized and qualified under all applicable laws to carry on its
business in the places and in the manner (except as otherwise disclosed
in this Agreement) presently conducted.
Ameritech is a corporation duly organized, validly existing and in good
standing under the laws of the state of Texas and is duly authorized
and qualified under all applicable laws to carry on its business in the
places and in the manner (except as otherwise disclosed in this
Agreement) presently conducted.
(c) AUTHORITY.
Sellers and Shareholder have the full legal right, power and authority
to enter into this Agreement and to consummate the transactions
contemplated herein. On or before the Closing, all actions of the
respective boards of directors of Sellers and Shareholder necessary to
approve the transactions shall have been taken. Exhibit H hereto sets
forth the authorizing resolutions of the boards of directors of Sellers
and Shareholder and includes a certificate from the Secretary of each
of the Sellers and Shareholder as to the incumbency of the individuals
executing this Agreement and the related documentation on behalf of
each of the Sellers and Shareholder.
Section 5(d) STOCK OWNERSHIP; BINDING EFFECT.
Shareholder owns all of the issued and outstanding shares of the
capital stock of each of the Sellers and no person other than the
Shareholder has any right to vote such shares. Sellers and Shareholder
have duly executed and delivered this Agreement, and (assuming due
authorization, execution, and delivery by Buyer) this Agreement
constitutes a legal, valid and binding obligation of Sellers and
Shareholder enforceable against each of them in accordance with its
terms when excluding equitable principles in general. There are no
outstanding subscriptions, options, convertible securities, warrants,
or calls of any kind issued or granted by, or binding upon, the Sellers
or Shareholder to purchase or otherwise acquire or to sell or otherwise
dispose of any security of or equity interest in the Sellers.
(e) NO CONFLICT.
The execution, delivery and performance of this Agreement by Sellers
and Shareholder and the consummation of the transactions contained
herein do not and will not:
(i) violate, conflict with or result in the breach of any
provision of the articles of incorporation or bylaws of Lone
Star, ▇▇▇▇▇▇ Bolt, Ameritech, or Shareholder, or
(ii) conflict with or violate any Law, Governmental Order, or
Permit applicable to the Assets, the Business, Sellers,
Shareholder or any of their respective assets, properties or
businesses; or
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(iii) subject to Sellers' obligations to obtain releases of certain
security instruments from certain lenders prior to the Closing
Date, conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of
time would become a default) under, require any consent under,
or give to any other person any rights of termination,
amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any encumbrance
on the Assets or the properties of Sellers pursuant to any
note, bond, mortgage, deed of trust, indenture, contract,
agreement, lease, sublease, license, Permit, authorization,
franchise or other instrument or arrangement to which Sellers
or Shareholder is a party or by which any of the Assets are
bound or affected.
(f) GOVERNMENTAL CONSENTS AND APPROVALS.
To Sellers' and Shareholder's knowledge, the execution, delivery
and performance of this Agreement by Sellers and Shareholder do not
and will not require any Consent or action by, filing with or
notification to, any Governmental Authority other than with respect
to
(i) certain notifications which may need to be made by Buyer after
the Closing, including fastener insignia filings which may
need to be made with the U.S. Patent and Trademark Office
under the U.S. Fastener Quality Act, and
(ii) certain notifications or subsequent approvals with respect to
the transfer of certain Environmental Permits.
(g) FINANCIAL INFORMATION; BOOKS AND RECORDS.
True and complete copies of the federal income tax returns of
Sellers for the periods ending December 31, 2001 and December 31,
2002, together with all related schedules thereto (collectively,
the "INCOME TAX RETURNS") have been provided to Buyer. The Income
Tax Returns (a) were prepared in accordance with Sellers' books of
account and other financial records; and (b) have been prepared in
accordance with the accrual-basis method of accounting. Attached as
Exhibit J are the balance sheets of Sellers as of December 31,
2002, August 31, 2003, and December 31, 2003, and the income
statement of Sellers for the periods ended December 31, 2002,
August 31, 2003, and December 31, 2003 (together the "FINANCIAL
STATEMENTS"). The Financial Statements were prepared in accordance
with GAAP consistently applied. The information used to prepare the
Financial Statements is consistent with the information used to
prepare the Sellers' audited financial statements of 2000, 2001,
2002, and 2003. The Financial Statements are in all material
respects complete and correct, and do not contain or reflect any
material inaccuracies or discrepancies.
Section 5(h) INVENTORIES. To Sellers' and Shareholder's knowledge Sellers'
Inventories are in good and merchantable condition and usable for
the purposes for which they are intended under applicable industry
specifications. All Inventory consist of a quality and quantity
usable and saleable at normal prices (including discounts and
rebates) in accordance with the ordinary course of business of
Sellers except for obsolete items and items of below-standard
quality, all of which have been written off or written down to net
realizable value in the Financial Statements or on the accounting
records of Sellers as of the Closing Date, as the case may be. All
Inventory reserves reflected on the Financial Statements are in
accordance with GAAP. Sellers are not in possession of any physical
inventory not owned by Sellers,
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excluding goods already sold and which are not designated as inventory
belonging to any Seller in Sellers' accounting records. All of the
Inventories have been priced at the lower of cost or market on an
average price basis. Inventories now on hand that were purchased
subsequent to the date of the latest Financial Statement were purchased
in the ordinary course of business. The quantities of each item of
Inventories (whether raw materials, work-in-process, or finished goods)
are not excessive, but are reasonable in the present circumstances of
Sellers. Inventories are now and will be valued on the Closing Date
according to GAAP as reflected in the Estimated Closing Balance Sheet.
(i) INTELLECTUAL PROPERTY RIGHTS.
(i) Sellers and Shareholder hereby represent and warrant that
Sellers will be transferring to Buyer all Intellectual
Property presently used by Sellers and required for the
continued operation of the Business as presently conducted.
(ii) To Sellers' and Shareholder's knowledge:
(A) Exhibit K sets forth:
(1) a true and complete list of all
applications, registrations, or other such
governmental filings, grants of rights or
certifications concerning Sellers'
Intellectual Property with respect to the
Business;
(2) a list of all jurisdictions in which any of
such Sellers' Intellectual Property is the
subject of a patent, registration,
certificate or other such governmental
acknowledgment or grant or application
therefore, together with all identifying
numbers or other designations related to
such patents, registrations, certificates or
applications, including, as applicable,
title, filing date, serial number, current
owner, priority date and priority document;
and
(3) the events with deadlines affecting the good
standing of any of such forms of Sellers'
Intellectual Property (such as maintenance
fees due, renewals or responses to official
correspondence) within the period of 90 days
following the Closing Date.
Section 5(i)(ii) (B) unless and only to the extent expressly stated
otherwise below or in Exhibit K, and without regard
to any Specialty Customer Intellectual Property or
any intellectual property rights which may be held by
▇▇▇▇▇▇ ▇▇▇▇▇ or any entity owned by ▇▇▇▇▇▇ ▇▇▇▇▇:
(1) Sellers collectively own (free and clear of
any liens, joint interests or licenses) the
Sellers' Intellectual Property;
(2) Sellers collectively have the unrestricted
right to make, have made, use, sell, offer
for sale, execute, reproduce, display,
perform, modify, enhance, enforce, transfer,
distribute, prepare derivative works of and
sublicense, without payment or provision of
consideration in any form to any other
person, all Sellers' Intellectual Property;
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(3) the consummation of the transactions
contemplated hereby will not conflict with,
alter, forfeit, terminate or impair any such
rights; and
(4) There are no outstanding rights granted by
Sellers or Shareholder to third parties of
any kind relating to Sellers' Intellectual
Property.
(C) Sellers have taken all steps reasonably required to
ensure that all patents, copyright registrations,
trademark registrations, domain name registrations
and other registrations and grants of rights included
in the Sellers' Intellectual Property (including
recordings thereof and pending applications in
respect thereof) are in good standing as of the
Closing or if not in good standing, all required
applications and registrations have been filed which,
once approved by the appropriate governmental entity,
will cause the attainment of good standing, and that
all requirements and all fees, annuities or other
payments which are due as of the consummation of this
transaction for any patent, registration, certificate
or other such governmental acknowledgment or grant or
application therefore have been met or paid, as well
as all reasonable steps required to safeguard and
maintain the secrecy of confidential information of
Sellers. However, if there is an unauthorized
disclosure of Sellers' confidential information, the
Buyer shall bear the burden of proof that there has
been a breach of the foregoing representation
regarding the reasonable steps taken by Sellers and
Shareholder, and the Parties agree that such
unauthorized disclosure shall not, in and of itself,
be conclusive proof of such breach.
Section 5(i)(ii) (D) In cases where any of the Sellers' Intellectual
Property was co-developed, co-invented, co-authored
or otherwise created in collaboration with any third
party, but excluding any Specialty Customer
Intellectual Property, Sellers have taken all steps
reasonably required to ensure that all right, title,
and interest in such co-developed Intellectual
Property has been caused to vest permanently and
exclusively in the Sellers (taken as a whole) upon
creation thereof, or else ensure that such third
party has irrevocably assigned in writing all of its
right, title and interest in such co-developed
Sellers' Intellectual Property to one or more of the
Sellers.
(E) With respect to the Sellers' Intellectual Property
and the conduct of the Business:
(1) no claims are pending or threatened against
any Seller by any person
(a) with respect to the ownership,
validity, enforceability,
infringement, effectiveness or use
of any Sellers' Intellectual
Property, or
(b) that allege that the conduct of the
Business infringes, dilutes,
disparages, misappropriates or
contributes to or induces the
infringement of any patent claim,
copyright, trademark, trade
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dress, trade secret or other
intellectual property rights of any
third party in either the United
States or any foreign country;
(2) During the time that Shareholder has owned
Sellers, no Seller has received any written
communication alleging that any Sellers or
the conduct of the Business has violated any
rights relating to intellectual property
rights of any third party, and to Sellers'
and Shareholders' knowledge no Seller is
aware of any basis for any such claim other
than claims which could potentially be
asserted by ▇▇▇▇▇▇ ▇▇▇▇▇;
Section 5(i)(ii)(E) (3) Without regard to any Specialty Customer
Intellectual Property, the manufacture, use,
sale, offering for sale, copying, and
preparing of derivative works of the
Sellers' Intellectual Property does not and
will not infringe on, misappropriate, or
induce or contribute to the infringement of
any copyright, trade secret, patent or any
other intellectual property right of any
third party in either the United States or
any other foreign country (including those
of Sellers), and no Seller believes that the
Sellers' Intellectual Property or the
conduct of the Business infringes the rights
of other persons or involves the
misappropriation or improper use of the
information of other persons;
(4) To Sellers' and Shareholder's knowledge, but
excluding any claims which Sellers and
Shareholder may have against ▇▇▇▇▇▇ ▇▇▇▇▇
with respect to certain intellectual
property matters, no third party is
infringing, diluting, disparaging, or
misappropriating the Sellers' Intellectual
Property listed in Exhibit K or is
contributing to or inducing the infringement
thereof;
(5) the Sellers' Intellectual Property listed on
Exhibit K includes all rights necessary for
the continued conduct of the Business but
excluding any need which Sellers may have to
apply Specialty Customer Intellectual
Property;
(6) without waiving any defenses Seller may have
in any litigation or other similar
proceedings between Buyer and any Seller, no
Seller will henceforth challenge, oppose or
otherwise contest the validity or good
standing of any item of Sellers'
Intellectual Property listed on Exhibit K,
and, in the case of patents or patent
applications included in the Sellers'
Intellectual Property, will not
(a) oppose or seek re-examination of
such patents or patent applications,
or
(b) file prior art against such patents
or patent applications under the
provisions Chapters 30 and 31 of
Title 35, United States Code, or
under analogous laws in other
jurisdictions;
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Section 5(i)(ii) (E) (7) on or before the Closing, Sellers and
Shareholder will assign, transfer and convey
all of its rights, title and interest in the
Sellers' Intellectual Property listed in
Exhibit K unto Buyer in substantially in the
form of Exhibit AA. Notwithstanding the
foregoing, Shareholder will not be required
to assign to Buyer the right to any of the
content on Shareholder's website relating to
Sellers' business; provided that Shareholder
shall promptly modify its website to delete
any references to Sellers without noting
that substantially all of Sellers assets
have been transferred to Buyer.
(F) All use of third-party software residing on
electronic equipment in the possession or control of
the Sellers is lawfully licensed from the copyright
holders thereof, and is being used in full compliance
with such licenses.
(G) (1) With respect to the domain names used by
Sellers, Sellers represent that they have
registered the following domain names with
Network Solutions:
▇▇▇▇▇▇▇▇▇▇.▇▇▇ expiration date: February 25, 2004
▇▇▇▇▇▇-▇▇▇▇.▇▇▇ expiration date: March 28, 2005
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ expiration date: June 24, 2005
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ expiration date: August 31, 2005
(2) Once Buyer has established after the Closing
Date the hardware, software, and procedures
required to assume control over these domain
names, Buyer shall provide email notice of
such establishment to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ at
▇▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇
at ▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, whereupon
Shareholder will require ▇▇. ▇▇▇▇▇▇▇▇▇▇▇, or
another employee of Shareholder having such
authority and knowledge, to transfer
administrative powers under the Network
Solutions account to the sole individual
designated by Buyer. In no event shall such
notice be delivered later than 90 days after
the Closing Date.
(3) Concurrent with Buyer's notice under
subsection (2) above, , Shareholder and
Sellers shall be entitled to remove any and
all identities and email addresses of
Buyer's employees (Sellers' former
employees) from the computer network system
maintained by Shareholder.
Section 5(j) TANGIBLE PERSONAL PROPERTY.
(i) Exhibit L is a complete and accurate list of all equipment
owned by or leased by Sellers and used in the Business.
Exhibit L also includes a listing of all equipment owned by
the Sellers which has been depreciated or amortized by any of
the Sellers, as well as a complete and accurate list of all
motor vehicles owned by or leased by Sellers and used in the
Business, described by manufacturer, model number, model year,
and VIN Number.
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(ii) Sellers have not, nor has anyone else, made any modifications
to any of the Assets that would void or invalidate any
manufacturer's warranty or cause the Assets not to be in
compliance with any Law.
(iii) Sellers own or lease all of the Assets constituting Tangible
Personal Property. There is no contract, agreement or other
arrangement granting any person any preferential right to
purchase any of the Assets other than the letter of intent
between ▇▇▇▇▇ ▇. ▇▇▇▇ and Shareholder dated November 5, 2003,
as the same may be extended or otherwise modified from time to
time (the "LETTER OF INTENT").
(k) CUSTOMER CONTRACTS.
Exhibit E contains a listing of the most significant contracts between
each of the Sellers and their respective customers, licensors, and
landlords as of the date of this Agreement which are material for the
operation of the Business. The pricing agreements included within the
contracts listing in Exhibit E identify all material customer pricing
agreements as of the Closing Date. Sellers are not in default in, nor
has there occurred an event or condition (other than Sellers' execution
and delivery of or performance under this Agreement) which, with the
passage of time or the giving of notice, would constitute a default
under such contracts with regard to the payment or performance of any
obligation thereunder. Sellers have not received any notice that any
person intends or desires to amend or terminate any such contract.
(l) INSURANCE COVERAGES.
Attached as Exhibit M are certificates of insurance evidencing the
insurance coverages carried by the Sellers as additional insureds under
Shareholder's program of insurance. Exhibit M also includes an accurate
list of all insurance loss runs and workers' compensation claims as of
December 31, 2003 for the previous three policy years. All such
insurance policies are in full force and effect and shall remain in
full force and effect through the Closing Date but will not be required
to remain in full force and effect thereafter.
Section 5(m) EMPLOYEES; EMPLOYEE BENEFITS.
(i) Exhibit N is a complete and accurate list of all employees of
Sellers as of January 28, 2004, their date of hire, and their
rate of compensation as of such date. Excluded from Exhibit N
is the salary information of the eight Lone Star employees who
work at the Ardmore Facility.
Exhibit N also contains a list of:
(A) all employees who are still employed by any of the
Sellers and who have received bonus compensation
during the past three years, and
(B) those employees who have received automobile
allowances in the past and who currently are
authorized to use Sellers' vehicles for their
personal use.
(ii) Sellers shall be responsible for severance (if applicable) and
all other employment related payments and all employment and
compensation obligations accrued as of the Closing Date.
Sellers shall issue all required COBRA notices to their
employees and Sellers shall be responsible for the
administration of same.
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(iii) Buyer and Seller anticipate that the employment of all
employees of the Sellers, other than the eight individuals who
will continue to be employed by Lone Star at the Ardmore
Facility, will be terminated as of the Closing Date. All
accrued bonuses and commissions due any of Sellers' employees
shall be paid by Sellers on or prior to the times required
under the Texas Pay Day Act and, with respect to Sellers'
independent contractors, within the time periods required
under the applicable agreement with each independent
contractor. Sellers will not, without Buyer's prior written
consent, enter into any material agreement with such
employees, increase the rate of compensation or bonus payable
to or to become payable to any such employee, or effect any
changes in the management, personnel policies, or employee
benefits with respect to such employees, except in accordance
with existing employment practices.
(iv) To Sellers' and Shareholder's knowledge, there are no matters
or events which would render the classification of Sellers'
employees under any and all worker's compensation insurance
policies to be incorrect or inaccurate.
(v) Sellers are not party to any written or (to the knowledge of
Sellers and Shareholder) unwritten (i) employment contract;
(ii) collective bargaining agreement; (iii) deferred
compensation, profit sharing, pension, retirement (excluding
an employee 401(k) savings program), or stock purchase plan;
(iv) dealer, manufacturer's representative, distributor, or
agency agreement; (v) or any other contracts, agreements or
arrangements of any nature with any employees, consultants,
professionals or any other person for which Sellers are or may
become liable, other than agreements which are cancelable at
will or upon 30 days notice without penalty to Sellers or
Buyer.
Section 5(m) (vi) Sellers or Shareholder will have made or properly accrued all
payments for employee compensation and benefits (including
employee insurance benefits and employer contributions to the
employee 401(k) savings program as of the Closing Date. All
bonuses heretofore granted to employees or independent
contractors of Sellers shall be paid as required as of the
Closing Date under the Texas Pay Day Act. As of the date on
which this Agreement is executed and delivered, Sellers have
paid to each employee and independent contractor any and all
salary and benefits payable at that time. Neither Sellers nor
Shareholder have informed any employee or independent
contractor that such person will receive any increase in or
continued compensation, benefits or any ownership interest in
Sellers as the result of the transactions contemplated by this
Agreement.
(vii) Sellers have no obligations to make contributions that have
not already been made or accrued as of the Closing Date to any
pension, profit sharing, retirement or other "employee pension
benefit plan" as that term is defined by the Employee
Retirement Income Security Act of 1974 ("ERISA"). To Sellers'
and Shareholder's knowledge, Sellers have never engaged in a
"prohibited transaction" as such term is defined in Section
406 of ERISA, contributed to any "Multiemployer Plan" as
defined in Section 3(37) of ERISA, withdrawn from any such
plan in a complete or partial withdrawal, or engaged in a
"prohibited transaction" as such term is defined in Section406
of ERISA.
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Sellers and Shareholder further represent that during the past
three years, Sellers have never engaged in a "prohibited
transaction" as such term is defined in Section 406 of ERISA,
contributed to any "Multiemployer Plan" as defined in Section
3(37) of ERISA, withdrawn from any such plan in a complete or
partial withdrawal, or engaged in a "prohibited transaction"
as such term is defined in Section 406 of ERISA.
(n) LABOR MATTERS.
No collective bargaining or other labor union contracts apply to
Sellers' employees. There has not been within the previous three years
nor is there pending or to the best of Sellers' and Shareholder's
knowledge threatened, a labor dispute, strike or work stoppage against
Sellers. To the knowledge of Sellers and Shareholder, neither Sellers
nor Shareholder, nor any of their respective representatives or
employees, has committed any unfair labor practices in connection with
the operation of Sellers.
(o) COMPLIANCE WITH LAW.
Subject to the following paragraph and to the disclosures made
elsewhere in this Agreement regarding compliance with Environmental
Laws and other Laws, to Sellers' and Shareholder's knowledge, Sellers
conduct the Business in accordance with all Laws, Permits and
Governmental Orders (including Environmental Laws), zoning and land use
restrictions, and employment laws applicable to any of the Sellers, the
Assets and the Business. Sellers are not in violation of any such Law,
Permit or Governmental Order to the extent any such violation could
have a Material Adverse Effect on Buyer. Exhibit O identifies each
Governmental Order applicable to Sellers, the Assets or the Business,
and no such Governmental Order has or has had a Material Adverse
Effect. Except with regard to the Houston Chemical Investigation and
the Ameritech/▇▇▇▇▇▇▇ Control Investigation, neither Sellers nor
Shareholder has received any citation or notice that Sellers or any of
their current or former officers, directors, members, shareholders or
employees is under investigation or other form of review relating to
the Assets or the Business with respect to any applicable Law.
Notwithstanding the foregoing, Ameritech and ▇▇▇▇▇▇ Bolt, as a federal
subcontractors and under certain circumstances, could possibly be
deemed not to be in compliance with Executive Order #11246's
requirements, including requirements for affirmative action programs
for certain federal contractors. This potential noncompliance would
arise if ▇▇▇▇▇▇ Bolt and Ameritech were deemed to be a single
enterprise and if all employees of both entities were deemed to be
employees of that single enterprise. Ameritech and ▇▇▇▇▇▇ Bolt would
dispute any such contention on the basis that their respective
operations, as separate entities, are not staffed by at least fifty
employees. Sellers and Shareholder agree that Buyer will have no
liability with respect to any non-compliance with Executive Order
#11246 occurring prior to or on the Closing Date, and Sellers and
Shareholder will indemnify and hold Buyer harmless from any and all
Liabilities arising out of any breach of and/or non-compliance with
Executive Order #11246 occurring prior to or on the Closing Date.
(p) TAXES.
(i) Sellers and Shareholder have duly filed, or will duly file in
a timely manner, with the relevant tax authorities all returns
with respect to taxes relating to Sellers, including
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estimated tax returns and other information returns and
reports which they are required to file, and each such
document is complete, accurate and in accordance with all
requirements of applicable law. Sellers and Shareholder have
paid and discharged all taxes shown as due on all tax returns
and have paid all other taxes as are due, other than such
taxes as are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves are
being maintained in accordance with GAAP. All taxes required
to be withheld, collected or deposited by Sellers have been
timely withheld, collected or deposited and, to the extent
required, have been paid to the relevant tax authority. .
Sellers have not granted any waiver of any statute of
limitations with respect to, or any extension of a period for
the assessment of, any tax. There are no tax liens on any of
the Assets or the Business.
(ii) Neither the Internal Revenue Service nor any other taxing
authority or agency, domestic or foreign, is now asserting or,
to the best of Sellers' knowledge, threatening to assert
against Sellers or Shareholder any deficiency or claim for
additional taxes or interest thereon or penalties in
connection therewith
Section 5(q) LITIGATION AND THREATENED OR PENDING LITIGATION.
(i) Except for the Litigation set forth on Exhibit P or as
otherwise described in this Agreement, no action is pending
or, to Sellers' and Shareholder's knowledge, threatened,
against any Sellers relating to the Assets or the Business, at
law or in equity where the potential exposure to Sellers could
have a Material Adverse Effect on the Assets or the Business.
Neither any of the Sellers nor Shareholder has received notice
of any of the above, and, to Sellers' and Shareholder's
knowledge, no facts or circumstances exist which would give
rise to any of the foregoing. Also listed on Exhibit P are all
instances where any of the Sellers is the plaintiff, or
complaining or moving party, in any way related to the Assets
or the Business.
(ii) Sellers and Shareholder acknowledge that the State of Texas
and ▇▇▇▇▇▇ County have filed an environmental cleanup action
against Houston Chemical Services (the "HOUSTON CHEMICAL
INVESTIGATION"). Based solely upon a review of the uniform
hazardous waste manifests that Lone Star completed when
sending items to Houston Chemical Services, it may be possible
that Lone Star sent hazardous wastes to a site controlled by
Houston Chemical. Lone Star is waiting for instructions or
requests for information with respect to the Houston Chemical
Investigation from a Governmental Authority regarding an
identification of the types of materials which actually may
have been sent to Houston Chemical Services. On October 30,
2003, the Texas Attorney General's office requested from Lone
Star documents reflecting the manifests and generator reports
of any "hazardous waste" shipped to Houston Chemical. Lone
Star has complied with that request by providing copies of
certain documents to the Texas Attorney General's office,
copies of which are in Lone Star's files at the Owned Real
Property. At this time, Lone Star is not aware of any claims
or threatened claims against Lone Star or any other alleged
generator with respect to this matter. Shareholder and Sellers
agree that they shall continue to investigate and seek
resolution to all issues arising with respect to the Houston
Chemical investigation and that Buyer shall have no liability
with respect to this matter.
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(iii) Shareholder and Sellers acknowledge that a former employee of
▇▇▇▇▇▇ Bolt and Ameritech recently advised ▇▇▇▇▇▇▇ Controls &
Aerospace ("▇▇▇▇▇▇▇ Control"), a customer of Ameritech, that
certain products sold by Ameritech to ▇▇▇▇▇▇▇ Control did not
meet the specifications to which Ameritech had agreed.
Ameritech and Shareholder are currently investigating this
matter (the "AMERITECH/▇▇▇▇▇▇▇ CONTROL INVESTIGATION") and
have discovered that there was merit to the former employee's
assertion. Ameritech and Shareholder have also learned, as a
part of its investigation, that at least four other customers
received products which did not comply with a customer's
specifications. Shareholder and Sellers agree that they shall
continue to investigate and seek resolution to all issues
arising with respect to the Ameritech/▇▇▇▇▇▇▇ Control
Investigation and all other customers where Sellers learn that
products sold did not meet customer specifications and Buyer
shall have no liability with respect to this matter. Sellers
and Shareholder agree to be fully responsible for all Losses
incurred in conjunction therewith and to defend, indemnify,
and hold Buyer harmless from and against any and all Losses
with respect thereto.
(iv) QUTI CORP (QUESTRON TECHNOLOGY) BANKRUPTCY PROCEEDINGS.
On December 17, 2003, Ameritech received a demand letter from
a law firm representing ▇▇▇▇ ▇▇▇▇▇, who is the bankruptcy
trustee for Questron Technology, Inc. in In re QUTI Corp.
f/k/a/ Questron Technology, Inc., U.S. Bankruptcy Court for
the District of Delaware Case # 02-10319 (PJW). In this
letter, the law firm alleged that certain preferential
payments aggregating $13,414.45 had been made by the debtors
in this case to Ameritech shortly before the filing of the
bankruptcy petition on February 3, 2002.
On January 20, 2004, Ameritech responded through its attorney,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, that Ameritech's records reflected that
Ameritech had received no payments from any of the debtors
during the 90-day period prior to the filing of the bankruptcy
petition. Based upon Ameritech's discussions with accounting
personnel with one of the debtors, it appears that the
payments in question may have been paid to a telephone or
communications company which also uses the Ameritech name.
Ameritech understands that an adversary proceeding was filed
against an "Ameritech Bolt" in early February, 2004. Neither
Ameritech nor ▇▇▇▇▇▇ Bolt have been served in this action
(Case # 04-51888-___).
Shareholder and Sellers agree that they shall continue to
investigate and seek resolution to all issues arising with
respect to the Ameritech/▇▇▇▇▇▇▇ Control Investigation and all
other customers where Sellers learn that products sold did not
meet customer specifications and Buyer shall have no liability
with respect to this matter. Sellers and Shareholder agree to
be fully responsible for all Losses incurred in conjunction
therewith and to defend, indemnify, and hold Buyer harmless
from and against any and all Losses with respect thereto
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(r) ABSENCE OF PRICE RENEGOTIATION CONTRACTS.
Sellers are not a party to any governmental contracts related to the
Assets or the Business that are subject to price redetermination or
renegotiation.
(s) CONDUCT OF SELLERS' BUSINESS.
Since August 31, 2003, except for the execution and delivery of the
Letter of Intent and this Agreement and as otherwise disclosed in this
Agreement, the Business has been conducted in all material respects in
the ordinary course and consistent with past practice, and there has
not been any:
(i) work interruption, labor grievance or unfair labor practice
claim filed or, to the best of Sellers' knowledge, threatened;
(ii) sale or transfer of, or any agreement to sell or transfer, any
of the Assets or any plan, agreement or arrangement granting
any preferential right to purchase or acquire any interest in
any of the Assets, or requiring consent of any party to the
transfer and assignment of any of the Assets, or any loss or
damage to the Assets;
(iii) waiver of any rights or claims of Sellers related to the
Assets which could have a Material Adverse Effect upon Buyer;
(iv) breach or termination of any lease, customer contract, license
agreement, Permit which has not been cured or, if not cured,
could have a Material Adverse Effect upon the Buyer;
(v) transaction by Sellers outside the ordinary course of their
business and related to the Assets or the Business;
(vi) any other occurrence, event, incident, action or failure to
act outside the ordinary course of business of Sellers; or
(vii) any action by Sellers, Shareholder, or any employee, officer
or agent of Sellers or Shareholder committing to do any of the
foregoing; or
(viii) any Material Adverse Effect on Sellers' Assets or Business
(excluding the Houston Chemical Clean-Up Action, the
Ameritech/▇▇▇▇▇▇▇ Control Investigation, and any other matters
otherwise expressly disclosed in this Agreement).
Section 5(t) ACCOUNTS RECEIVABLE.
Except as described in Exhibit Z, none of the accounts receivable of
the Sellers are subject to assignments, pledges, liens or other
interests of third parties. All accounts receivable of the Sellers (i)
are listed on Exhibit Z, together with an aging analysis as of January
31, 2004; (ii) arose in the regular course of business; and (iii)
represent valid obligations of customer to Sellers.
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Section 5(u) ENVIRONMENTAL AND OTHER PERMITS; HAZARDOUS MATERIALS; DISPOSAL
SITES.
(i) Sellers currently hold all Permits, including Environmental
Permits, necessary for the current use, occupancy, and
operation of the Business and each asset and property of
Sellers with respect to the conduct of the Business, except
where the failure to have such Permit would not have a
Material Adverse Effect, and all such Permits are in full
force and effect. Exhibit V identifies all such Permits and
specifically identifies each such Permit that will require
the Consent of any Governmental Authority to consummate the
Transactions.
Notwithstanding the previous paragraph, and based on the
manner in which the Business is currently conducted, Sellers
may not be in all instances in strict compliance with all
rules and regulations related to Environmental Laws but any
such non-compliance will not have a Material Adverse Effect
on Buyer after it acquires the Assets.
To Sellers' and Shareholder's knowledge, the ▇▇▇▇▇▇
Bolt/Ameritech Leased Premises, the ▇▇▇▇▇▇ Bolt Business, and
the Ameritech Business, as presently being conducted, meet
all requirements, including all requirements set forth in 30
TAC Section 106.4 (Requirements for Permitting by Rule), for
a permit by rule for air emissions.
(ii) Neither Sellers nor Shareholder have received any notice from
any Governmental Authority revoking, canceling, rescinding,
materially modifying, or refusing to renew any Permit or
providing written notice of violations under any
Environmental Law that have not been resolved or for which
restrictions on future use of property are not already in
place.
Notwithstanding the foregoing, it has come to Sellers'
attention that a recent change in the Texas Drinking Water
Act regulations has required Sellers to implement a written
on-site potable water distribution management plan. This
written plan does not have to be submitted to any
Governmental Authority but is subject to inspection upon
request. This plan is not yet in place but Sellers are
working to implement it.
(iii) To Sellers' and Shareholders' knowledge, and except as
otherwise disclosed in this Agreement, there have been no
Releases into the Environment or onto or under the Owned Real
Property or any other real property now or in the past owned,
leased, or used by Sellers of any Hazardous Materials which
have not already been mitigated, otherwise managed through a
program subject to the oversight of a Governmental Authority,
or otherwise corrected.
(iv) No Encumbrance with respect to Environmental Liability has
been imposed against Sellers or any of the Assets under any
Environmental Law, and no facts or circumstances exist which
would give rise to the same;
(v) Subject to the following paragraph, no portion of the Owned
Real Property, the Leased Properties, or any other real
property now or in the past owned, leased or used by Sellers
is listed on the Comprehensive Environmental Response,
Compensation, and Liability Information System ("CERCLIS")
maintained by the
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U.S. Environmental Protection Agency, the National Priorities
List of Hazardous Waste Sites, or any other similar list
maintained by any Governmental Authority.
(vi) Notwithstanding the foregoing, Sellers understand that the
Owned Real Property was the subject of a governmental
investigation due to a complaint or notice filed by a
neighboring individual or entity. Sellers also understand that
this investigation is closed and that no action was taken by
any Governmental Authority. Sellers are unaware if the Owned
Real Property was consequently ever placed on any type of
CERCLIS list or other similar list.
(vii) No Seller:
(A) is listed as a potentially responsible party with
respect to the Assets or as a result of the operation
of the Business or Assets under any Environmental
Law;
(B) has received a notice of such listing; or
(C) has knowledge of any facts or circumstances which
could give rise to such a listing (excluding the
Houston Chemical Investigation).
(viii) Exhibit V is a complete and accurate list of the names and
addresses of all disposal sites now or at any time during the
past three years utilized by Sellers or any predecessor of
Sellers for the disposal of Hazardous Materials. No such
disposal site is listed on the CERCLIS or the National
Priorities List of Hazardous Waste Sites or any similar list
maintained by any Governmental Authority (excluding the
Houston Chemical Services site).
(ix) Subject to the next sentence, all underground or above-ground
storage tanks and piping associated with such tanks containing
Hazardous Materials regulated by 40 CFR Section 280 or other
Environmental Law or other applicable Law located on the Owned
Real Property, the Leased Properties or any other real
property now or in the last three years owned, leased, or used
by Sellers have been used and maintained in material
compliance with all Environmental Laws or other applicable
Laws.
Notwithstanding the foregoing, due to long-term Releases of
Hazardous Materials that leached into the Owned Real Property
shallow subsurface as a result of the usage of industrial
equipment, Lone Star has enrolled in the Texas Commission on
Environmental Quality Voluntary Clean-Up Program. As a result
of such enrollment, those certain restrictions specified in
the document entitled "Exhibit "C" Texas Natural Resource
Conservation Commission Voluntary Cleanup Program Permanent
Institutional Control", executed on November 20, 2001, by Lone
Star, attached to Exhibit V of this Agreement, are placed upon
the Owned Real Property.
(x) During the past three years, Sellers have at all times
produced or received and retained all transportation
documentation, including all appropriate trip tickets,
required to evidence compliance with applicable Laws in
connection with the hauling or disposal of Hazardous
Materials. Sellers have retained all documentation
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described in the preceding sentence, all of which is currently
maintained in Sellers' files and records, and such
documentation shall constitute a part of the Assets.
Section 5(v) NONCOMPETE AGREEMENTS.
Other than as disclosed in the next paragraph, no Seller is a party to
any agreement which restricts its right to compete or to solicit
customers provided that such Seller does not violate any general
obligations of confidentiality it may have with a third party. Sellers
and Shareholder hereby warrant and represent that no such obligations
of confidentiality will have a Material Adverse Effect upon the
Business after the Closing.
Shareholder acknowledges that an essential element of Buyer's agreement
to purchase the Assets is Shareholder's agreement to enter into the
Non-Competition and Non-Solicitation Agreement contained on Exhibit W
attached hereto, which shall be executed by Shareholder and Buyer at
Closing.
(w) REAL PROPERTY.
(i) Exhibit A sets forth a complete and accurate street address
and legal description of the Owned Real Property and, except
as described therein, Sellers do not own any real property.
Lone Star has good and marketable fee simple title to the
Owned Real Property free and clear of any and all encumbrances
except as otherwise disclosed in the Title Commitment. Lone
Star presently enjoys peaceful and quiet possession of the
Owned Real Property and there is no condemnation or eminent
domain proceeding pending or, to the best of Lone Star's
knowledge, threatened against the Owned Real Property.
(ii) To Sellers' and Shareholder's knowledge, Buyer will have the
right to use the Owned Real Property after the Closing for its
current uses in the manner currently operated by Lone Star,
without violating any Law or private restriction, and such
uses are legal conforming use(s). There are no proceedings
pending and brought by or, to the best of Lone Star's
knowledge, threatened by, any third party which would result
in a change in the allowable use(s) of the Owned Real Property
or which would modify the right of Buyer to use the Owned Real
Property for its current use(s) after the Closing Date.
(iii) To Sellers' and Shareholder's knowledge:
(A) Lone Star has delivered to Buyer all engineering,
geologic and other similar reports, documentation,
plats and maps in its possession or control relating
to the Owned Real Property and all plans and
specifications, as-builts, contracts and warranties
in its possession or control in connection with the
improvements thereon;
(B) As of the Closing Date, no Party except Lone Star has
a present or future right to possession of all or any
part of the Owned Real Property;
(C) There are no pending or threatened special
assessments affecting the Owned Real Property, or any
contemplated improvements affecting the Owned Real
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Property that may result in special assessments
affecting the Owned Real Property.
(D) There is no fact or condition that may result in the
termination of any currently existing access to or
from the Owned Real Property and any public rights of
ways and roads.
(E) Except as otherwise described in this Agreement with
respect to Environmental matters, no written or
verbal commitments have been made to any Governmental
Authority or other person relating to the Owned Real
Property which would impose an obligation upon Lone
Star or its successors or assigns (including Buyer)
to make any contribution or dedication of money or
Owned Real Property or to construct, install, or
maintain any improvements of a public or private
nature on or off the Owned Real Property.
(iv) All utilities serving the Owned Real Property are supplied
directly to the Owned Real Property by through public or
private easements in favor of public utilities benefiting the
Owned Real Property (even though the supplier of the utility
service may not be a public utility) and are adequate to
service the normal operations of the Owned Real Property and
the operations of the Business. Lone Star has disclosed to
Buyer all facts and conditions regarding Material Adverse
Effects with respect to the Owned Real Property. To Sellers'
and Shareholder's knowledge, there are no unrecorded
contracts, leases, easements or other agreements, or claims of
any third party, affecting the use, title, occupancy or
development of the Owned Real Property, and no Person has any
right of first refusal, option or the right to acquire all or
any part of the Owned Real Property.
Section 5(x) LEASED PROPERTIES.
Exhibits B and C set forth a complete and accurate street address of
the Leased Properties and copies of all leases pertaining thereto. The
leases include all of Sellers' locations and other real property
currently under a lease, whether written or verbal, as of the Closing
Date, which will be assigned to Buyer. All payments under the leases
have been made in full. All leases for the Leased Properties are in
full force and effect and are valid, binding and enforceable against
the respective parties thereto in accordance with their respective
terms, subject to principles of equity (including bankruptcy). Sellers
are not in default in, nor has there occurred an event or condition
which otherwise has not been cured (other than Sellers' execution and
delivery of or performance under this Agreement) or which, with the
passage of time or the giving of notice, would constitute a default
with regard to the payment or performance of any obligation under any
lease. Sellers have not received any notice that any person intends or
desires to amend or terminate any lease for the Leased Properties.
(y) RELIANCE ON ADVISORS.
Sellers and Shareholder have relied on their own advisors for all
legal, accounting, tax or other advice whatsoever in connection with
this Agreement and the transactions contained herein.
(z) REPRESENTATION CONCERNING TOTALITY OF ASSETS.
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Sellers have good and marketable title to the Assets, or, in the case
of leased or subleased Assets, valid and subsisting leasehold interests
in all such Assets, free and clear of all encumbrances other than
Permitted Encumbrances. For purposes of this Agreement, "PERMITTED
ENCUMBRANCES" means the following:
(i) zoning ordinances and regulations that do not, in Buyer's sole
judgment, adversely affect Buyer's use of the Owned Real
Property for its current uses after the Closing;
(ii) real estate Taxes and assessments, both general and special,
which are a lien but are not yet due and payable at the
Closing Date; and
(iii) easements, covenants, conditions, reservations and
restrictions of record, if any, as have been approved by Buyer
before the Closing Date.
The Assets constitute all the assets and rights forming a part of, used
in, intended to be used in, or necessary in the conduct of, the
Business except as otherwise disclosed in this Agreement.
(aa) COMPLETE DISCLOSURE.
Subject to any representations made in this Agreement that have been
made to the knowledge of either or both of the Sellers and the
Shareholder, this Agreement, including the Exhibits hereto, and all
other documents and written information furnished to Buyer and its
representatives by Sellers, Shareholder, or their respective
representatives, taken as a whole, do not and will not include any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading. For four years
after the Closing Date, if any of the Parties becomes aware of any fact
or circumstance that would change a representation or warranty of that
Party in this Agreement or in any other document or agreement delivered
pursuant to this Agreement, or any other statement made or document
provided to another Party, the Party with such knowledge shall promptly
give notice of such fact or circumstance to the other Parties.
Notwithstanding the previous sentence, Sellers' and Shareholder's
obligations with respect to any noncompliance with any Environmental
Law, Permit, or, with respect to any other Law the violation of which
could have a Material Adverse Effect upon the Business, shall not
terminate after four years. None of such notification or the Closing,
shall relieve any Party of its indemnification or other obligations
under this Agreement. Sellers do not have knowledge of any fact that
has specific application to Sellers (other than general economic or
industry conditions or trends) and that may have a Material Adverse
Effect on the Assets or Business that has not been set forth in this
Agreement or in the exhibits attached hereto.
(bb) KNOWLEDGE REGARDING BUYER REPRESENTATIONS AND WARRANTIES.
As of the Closing Date, Sellers and Shareholder are not aware of any
fact or condition which would render any representation or warranty
given by Buyer under this Agreement to be untrue or misleading.
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6. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF BUYER.
Buyer represents and warrants to each of the Sellers and to Shareholder as
follows:
(a) INTERPRETATIONS OF REPRESENTATIONS AND WARRANTIES.
The statements contained in this Section 5:
(i) are correct and complete as of the date of this Agreement; and
(ii) unless otherwise stated to the contrary, will be correct and
complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this
Agreement throughout this Section 6) unless Buyer shall notify
Sellers and Shareholder to the contrary, in which case Sellers
and Shareholder shall not be required to close the
transactions contemplated under this Agreement.
(b) ORGANIZATION; AUTHORITY.
Buyer is a limited partnership duly organized, validly existing and in
good standing under the laws of the state of Texas, and is duly
authorized, qualified and licensed under all applicable laws to carry
on its business in the places and in the manner presently conducted,
except for where the failure to be so authorized, qualified or licensed
would not have a Material Adverse Effect. Buyer has the full legal
right, power and authority to enter into this Agreement and to
consummate the transactions contemplated herein. On or before the
Closing, all corporate action of Buyer necessary to approve the
transactions shall have been taken. Exhibit Q hereto sets forth the
authorizing resolutions of the governing bodies of Buyer and includes a
certificate from the secretary of each such body as to the incumbency
of the individuals executing this Agreement and the related
documentation on behalf of Buyer.
(c) NO CONFLICT.
The execution, delivery and performance of this Agreement by Buyer and
the consummation of the transactions do not and will not violate,
conflict with, or result in a breach of any provision of Buyer's
Certificate of Limited Partnership or Limited Partnership Agreement.
(d) GOVERNMENTAL CONSENTS AND APPROVALS.
The execution, delivery and performance of this Agreement by Buyer do
not and will not require any Consent or other action by, filing with,
or notification to, any governmental authority.
(e) RELIANCE ON ADVISORS.
Buyer has relied upon its own advisors for all legal, accounting, tax
or other advice whatsoever in connection with this Agreement and the
transactions contained herein.
(f) BINDING AGREEMENT.
Buyer has duly executed and delivered this Agreement, and (assuming due
authorization, execution and delivery by Sellers and Shareholder) this
Agreement constitutes a legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms.
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(g) EMPLOYMENT CONTRACTS.
Buyer has entered into employment contracts with each of the current
employees of Seller listed in Exhibit D hereto, which employment
contracts will become effective as of the Closing Date.
(h) WARN ACT NOTIFICATIONS.
Sellers have not issued any notification which otherwise might have
been required under the federal Worker Adjustment and Retraining
Notification Act (the "WARN ACT") if Buyer were to not rehire
immediately specified numbers of Sellers' employees or if Buyer were to
terminate specified numbers of Sellers' former employees within sixty
days after the Closing Date. Buyer therefore agrees to indemnify
Sellers and Shareholder against any costs or expenses which Sellers or
Shareholders may incur if Buyer terminates employees in a manner which
exposes Sellers or Shareholder to liability under the WARN Act.
(i) KNOWLEDGE REGARDING SELLERS AND SHAREHOLDER REPRESENTATIONS AND
WARRANTIES.
As of the Closing Date, Buyer is not aware of any fact or condition
which would render any representation or warranty given by any Seller
or Shareholder under this Agreement to be untrue or misleading.
(j) NO SOLICITATION OF EMPLOYEES.
Buyer agrees that for a period of two years following the Closing,
Buyer shall not solicit, whether directly or indirectly, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ or any employee of Lone Star currently working full-time for
Lone Star's Custom Coating Applications business at the Ardmore
Facility for the purpose of leaving the employ of Lone Star.
Buyer acknowledges that a breach by Buyer of the covenants and
agreements set forth in this Section 6(t)(j) would cause immediate and
irreparable harm to Sellers and Shareholder for which an adequate
monetary remedy does not exist. Hence, Buyer agrees that, in the event
of a breach or threatened breach by Buyer of this Section 6(t)(j),
Sellers and Shareholder shall be entitled to injunctive relief
restraining Buyer from violation of any such covenant or agreement
without the necessity of proof of actual damage or the posting of any
bond, except as required by non-waivable, applicable law. Nothing
herein shall be construed as prohibiting Sellers and Shareholder from
pursuing any other remedy at law or in equity to which any of them may
be entitled under applicable law in the event of a breach or threatened
breach of this Section 6(t)(j) by Buyer, including recovery of costs
and expenses such as reasonable attorneys' fees incurred by reason of
any such breach and actual damages sustained by Sellers and Shareholder
as a result of any such breach.
(k) BUYER'S USE OF SHAREHOLDER'S HUMAN RESOURCES POLICIES
(i) Buyer acknowledges that Sellers and Shareholder make no
representations regarding the completeness or suitability of
such policies and that Buyer's use of such policies is at
Buyer's own risk.
(ii) If Buyer distributes any copies of such policies to any of
Buyer's employees, future employees, or to any other person,
Buyer shall first remove from such policies any references to
Shareholder and the usage of the T-3 logo.
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(iii) Buyer shall defend and indemnify Sellers and Shareholder
against, and hold them harmless from, any claim, demand, or
cause of action brought by any of Sellers' current employees
and Buyer's current or future employees arising after the
Closing Date and any costs or expenses related thereto,
including attorneys' fees; provided that the foregoing
indemnity and hold harmless obligations shall not apply to the
extend that any such claim, demand, or cause of action relates
to circumstances or events which took place on or prior to the
Closing Date.
7. DELIVERIES BY SELLERS AND SHAREHOLDER.
(a) At the Closing, Sellers and Shareholder shall deliver to Buyer, all
duly executed:
(i) the ▇▇▇▇ of Sale substantially in the form of Exhibit R,
together with vehicle titles duly endorsed for transfer and
such other separate instruments of sale, transfer, or
assignment as Buyer reasonably requests;
(ii) certified copies of resolutions of the directors of the
respective Sellers and of the Shareholder, authorizing the
execution of this Agreement, the sale of the Assets to Buyer,
and the consummation of the transactions contemplated herein;
(iii) releases and satisfactions of all encumbrances related to the
Assets and the Owned Real Property unless otherwise excused or
waived by Buyer;
(iv) a closing certificate in the form of Exhibit S signed by the
respective duly authorized officer of Sellers and by the
Shareholder;
(v) all original assignments of the Contract Rights and Leased
Properties;
(vi) estoppel certificates from each of the landlords of the Leased
Properties;
(vii) a warranty deed in the form of Exhibit T, conveying good,
valid, and merchantable title to the Owned Real Property to
Buyer, subject only to the Permitted Exceptions. Sellers and
Shareholder will execute an owner's affidavit or affidavits
together with such other evidence as may be required by the
Buyer's title company, which affidavits or other documentary
evidence, if required, will be in form and substance
satisfactory to the Sellers and to the title company and
sufficient to cause the title company to issue the Title
Policy.
(viii) all documents, reports and affidavits required to be delivered
to any governmental authority in connection with the payment
of any real estate transfer tax, transfer of ownership of the
Assets, or recordation of the deeds;
(ix) all documents, indemnity agreements, affidavits and other
documents reasonably required by the Title Company to issue
the Title Policy;
(x) the Non-Competition and Non-Solicitation Agreement in the form
of Exhibit "W" signed by a duly authorized officer of
Shareholder; and
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(ix) a sublease of the lease agreement for the Ameritech/▇▇▇▇▇▇
Bolt Premises.
(x) all such other documents or instruments as Buyer may
reasonably request.
(b) Within 90 days after the Closing, Sellers and Shareholder shall deliver
to Buyer:
(i) an agreement executed by A&B Bolt & Supply Inc., d/b/a A&B
Valve & Piping Systems ("A&B"), regarding
(A) a post-Closing purchase by A&B of certain nuts,
bolts, and gaskets acquired for a cost of
approximately $230,000, held in Lone Star's inventory
and designated for eventual sale to A&B, at a 7.5%
markup over the acquisition cost, with payment to be
made by A&B in six equal interest-free monthly
installments commencing thirty days after the
Closing, and
(B) a two-year commitment by A&B to continue purchases
from Buyer in accordance with historical practices
with Lone Star and at market terms, but only to the
extent any such items are needed by A&B; and
(ii) an assignment of each contract listed in Exhibit E or a
reasonably equivalent new contract to the extent not delivered
to Buyer at Closing.
8. DELIVERIES BY BUYER.
At the Closing, Buyer shall deliver to Sellers the following items, all duly
executed where applicable:
(a) The Purchase Price;
(b) all documents, reports and affidavits required to be delivered to any
governmental authority in connection with the payment of any real
estate transfer tax, transfer of ownership of the Assets, or
recordation of the deeds;
(c) all documents, indemnity agreements, affidavits and other documents
reasonably required by the Title Company to issue the Title Policy; and
(d) all such other documents or instruments as Sellers and the Shareholder
may reasonably request.
9. TITLE COMMITMENT.
(a) Buyer has ordered, at Sellers' expense, an examination of the title to
the Owned Real Property. Buyer has delivered to Sellers and Shareholder
a copy of a commitment for an owners title insurance policy covering
title to the Owned Real Property, with standard exceptions (the "TITLE
POLICY"), setting forth the state of title to the Owned Real Property
and all objections and exceptions thereto, including rights of way,
easements, restrictions, reservations, covenants, liens, encumbrances,
leases, estates, and other conditions, if any, affecting the Owned Real
Property (the "TITLE COMMITMENT").
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(b) Buyer may obtain, at Sellers' expense, for Buyer's use and for the use
of the Title Company in connection with the issuance of the Title
Policy, a current and complete ALTA/ACSM survey of the Owned Real
Property, prepared by a competent registered surveyor in the State of
Texas, so as to permit the issuance of a survey endorsement and an ALTA
Extended Owner's Policy of Title Insurance. Sellers shall use good
faith efforts to ensure the delivery of the survey to Buyer and the
Title Company within 30 days after execution of this Agreement. Sellers
also shall use good faith efforts to deliver a certification by the
surveyor and such additional supporting reports and other certificates
as the Title Company may reasonably require to enable the Title Company
to deliver a survey endorsement and the Title Policy.
(c) If the condition of title, as set forth in the Title Commitment, is not
satisfactory to Buyer, Buyer shall give Sellers and Shareholder written
notice of its objections to title ("TITLE OBJECTIONS"), simultaneously
with its delivery of the Title Commitment to Sellers and Shareholder.
The Parties shall mutually agree to the resolution of all issues raised
by the Title Objections as a condition to Closing. If Buyer does not
elect to satisfy the Title Objections, or attempts to cure them but is
unable to do so prior to the Closing Date, Buyer may, at its option,
(i) accept title subject to the Title Objections, with an adjustment in
the Purchase Price for any liens or encumbrances of a definite or
ascertainable amount, or (ii) terminate this Agreement. Any exceptions
to title that are either accepted or waived by Buyer are referred to as
the "PERMITTED EXCEPTIONS."
(d) If Sellers and Shareholder fail to pay the costs associated with the
survey for title insurance, Buyer shall have the right, but not the
obligation, to satisfy such payments on behalf of Sellers and
Shareholder and to deduct from the Purchase Price the actual costs of
the survey.
10. ENVIRONMENTAL ASSESSMENTS.
(a) Buyer has caused a Phase I environmental site assessment of the Owned
Real Property and the Leased Properties to be conducted. Prior to the
Closing, Buyer may, in Buyer's sole judgment and discretion and at
Buyer's sole expense, cause additional Phase I and Phase II
environmental site assessments (the "ENVIRONMENTAL ASSESSMENTS") of the
Owned Real Property and the Leased Properties to be conducted by a
qualified engineer or environmental consultant of Buyer's choice. The
Environmental Assessments shall be performed in such a manner as to not
physically damage the Owned Real Property or the Leased Properties or
violate the requirements of the TCEQ Voluntary Cleanup Program.
(b) Upon reasonable advance notice, Sellers shall allow reasonable access
to the Owned Real Property and the Leased Properties for the purpose of
conducting the Environmental Assessments. Sellers and Shareholder may,
at their option, participate in the Environmental Assessments,
including, accompanying Buyer's representatives on any physical
investigation of the Owned Real Property and the Leased Properties. If
requested, Buyer shall furnish to Sellers and Shareholder copies of all
information, raw data, opinions, and test results generated by the
Environmental Assessments.
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11. PRORATIONS AND CHARGES.
(a) The Parties shall prorate and apportion, on a calendar year basis, as
of the close of business on the Closing Date, the real estate taxes and
assessments, both general and special, for the Owned Real Property,
based upon the last available tax statement. If the actual real estate
taxes paid by Buyer in respect of the period of the proration exceed
the credit given Buyer at closing for such taxes, Lone Star shall, upon
presentation of appropriate paid tax bills, reimburse Buyer for any
amounts incurred by Buyer for such taxes in excess of the prorated
credit. Alternatively, if the actual real estate taxes paid by Buyer in
respect of the period of the proration are less that the credit given
Buyer at closing for such taxes, Buyer shall reimburse Lone Star for
such amount in excess of the actual amount of the taxes. In addition,
Lone Star shall be charged the following closing costs:
(i) the state and local real estate transfer and similar taxes and
conveyance fees;
(ii) the cost of discharging, pursuant to this Agreement,
encumbrances on the Owned Real Property; and
(iii) the cost of recording all deeds and the releases of all
encumbrances.
(b) All other amounts paid by the Parties shall be prorated in accordance
with local custom. If any prorated amounts are not known as of the
Closing Date, adjustments shall be made post-Closing at such time as
they are known to the Parties.
(c) Additionally, all other prepaid or accrued items shall be prorated
between Buyer and Sellers to reflect the transfer of ownership to Buyer
effective as of the Closing.
(d) Sellers and Shareholder, as appropriate, shall pay in a timely manner
all taxes resulting from the sale of the Assets pursuant to this
Agreement.
12. COVENANTS AND COOPERATION.
(a) ADDITIONAL INSTRUMENTS.
(i) After the Closing, and without further consideration, the
Parties shall each deliver or cause to be delivered to any
other Party, at such times and places as shall reasonably be
requested, such additional instruments as any of the others
may reasonably request for the purpose of carrying out this
Agreement and the transactions contained therein. Sellers
agree, and the Shareholder agrees to cause Sellers, without
further consideration, to cooperate with Buyer and to use
commercially reasonable efforts to have the officers and
employees of Sellers cooperate for ninety days after the
Closing in furnishing to Buyer information, evidence,
testimony, and other assistance in connection with obtaining
or transferring all necessary Permits and approvals and in
connection with any actions, proceedings, arrangements or
disputes of any nature with respect to matters pertaining to
all periods before the Closing.
(ii) After such 90-day period, the matters performed under the
foregoing subsection (a)(i) shall be performed pursuant to
subsection (b) below.
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Section 12(b) SHAREHOLDER CONSULTING AGREEMENT.
(i) For the purpose of orderly transfer of business and
administrative functions, certain administrative personnel of
Shareholder will be made available to Buyer, at no additional
cost to Buyer for their services, from time to time to consult
for a period of up to ninety (90) days following the Closing.
Such personnel shall not have the primary function for
providing administrative services such as computer support and
accounting for the Buyer, but such personnel will be available
to provide a limited support and consulting role to assist
Buyer's employees and consultants in such orderly transfer.
After the 90-day period has expired, an hourly rate of $75 for
certain administrative personnel will be paid until the
transition has been completed. Shareholder and Sellers agree
to provide help in negotiating the transfer of any client
contracts which may be subject to termination based on the
sale.
(ii) Notwithstanding the preceding paragraph,
(A) Shareholder's business personnel will take an active
role in arranging for an assignment to purchaser of
all major contracts (including master service
agreements and license agreements) pertaining to the
business and affairs of the Sellers;
(B) To the extent that Buyer desires to retain the
services of any legal personnel which have been
retained by Sellers or Shareholder with respect to
negotiation and preparation of this Agreement,
Sellers and Shareholder shall arrange for such
services under the same terms and conditions as are
provided to Sellers and Shareholder.
(C) Shareholder's computer personnel shall provide Buyer
with all required computer support services
(exclusive of parts) consistent with historical
support levels after due consideration of the
computer systems support which historically has been
performed by the on-site employees and contractors
who, after the Closing, will be working for Buyer.
Shareholder shall continue to provide such support
for Buyer until Buyer acquires in an expeditious
manner its own stand-alone computer support systems;
provided that Buyer's personnel also shall provide
the cooperation and support to Shareholder's computer
personnel as may be reasonably required under the
circumstances; and
(D) Shareholder's personnel initially will serve in the
mode of maintaining the Buyer's accounting books and
records while the Buyer prepares to assume full
responsibility for invoicing, accounts payable, and
other accounting functions prior to the end of such
90-day period.
(E) The foregoing provisions shall not be applicable to
any fees chargeable under any consulting agreement
which any or all of the Parties may enter into with
▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇.
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Section 12(c) TRANSITION.
Neither Sellers nor Shareholder shall take any action that is designed
or intended to have the effect of discouraging any customer or business
associate of Sellers from maintaining the same business relationships
with Buyer after the Closing that such customer or business associate
maintained with Sellers before the Closing, or interfering with Buyer's
operation of the Business after the Closing. Sellers and Shareholder
shall refer all customer inquiries relating to the Business to Buyer
from and after the Closing. Shareholder will forward to Buyer all
referrals and deliveries directed to Shareholder related to the
Business. All mail, correspondence, facsimiles, and telephone calls
will immediately be re-directed to Buyer at its address or telephone
number contained in Section 23(g). Shareholder and Sellers will, on a
daily basis, cause to have all accounts receivable with respect to the
Business received in the Sellers' respective bank lockboxes, forwarded
to Buyer on the date subsequent to its receipt, to Buyer's address
contained in Section 23(g).
(d) CONTACT WITH THIRD PARTIES.
Sellers and Shareholder shall each use commercially reasonable efforts
to cooperate with Buyer in making contact with
(i) the appropriate governmental authorities and officials having
information about or jurisdiction over Sellers, the Business,
or the Assets, including environmental and land use agencies
and officials, to assist Buyer in completing its regulatory
evaluation of the Business and the Assets and securing any
Consents or transfers necessary with respect to existing
Permits or in securing new Permits;
(ii) the customers under customer contracts to secure any Consents
necessary with respect thereto,
(iii) the landlords under the leases for the Leased Properties to
secure any Consents necessary with respect thereto; and
(iv) the licensors under the license agreements
(v) and to share any assignments and Consents with respect
thereto. Sellers and Shareholder each shall use commercially
reasonable efforts to obtain all Consents and transfers
necessary with respect to the customer contracts, leases,
license agreements, and Permits (or obtain new Permits as
necessary) before the Closing. If the transactions, without
the Consent of a third party, would constitute a breach of any
customer contract, lease, license agreement, or Permit and
such consent has not been obtained as of the Closing Date, but
nevertheless Buyer elects to consummate the transactions, in
each such case Sellers and Shareholder each shall use
commercially reasonable efforts to obtain the applicable
Consent as promptly as possible after the Closing, shall use
commercially reasonable efforts to make appropriate
arrangements to enable Buyer to fully enjoy the economic
benefits of such customer contracts, leases, license
agreements, or Permits, and shall assign the same, if any, at
such time as the Consent is obtained.
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Section 12(e) ADDITIONAL ASSETS.
If additional assets or rights forming a part of, used in or intended
to be used in, or necessary in the conduct of, the Business, are
identified post-Closing as not having been adequately transferred to
Buyer, Sellers shall promptly transfer and assign to Buyer such assets
or rights without additional consideration.
(f) TRADE ORGANIZATIONS.
Lone Star acknowledges that it maintains a reserved seat at the yearly
Offshore Technology Conference. Shareholder and Lone Star shall use
commercially reasonable efforts to transfer this Offshore Technology
Conference seat to Buyer at Closing, provided that Shareholder and Lone
Star shall not be required to pay any fees associated with such
transfer. Lone Star also acknowledges that it is a member of numerous
trade organizations. Lone Star and Shareholder shall assist Buyer in
becoming a member of all trade organizations that Lone Star is
currently a member. Additionally, Buyer will receive the benefit of all
current deposits of Lone Star and/or Shareholder with regards to
membership in the above mentioned trade organizations and the Offshore
Technology Conference to the extent all such groups so allow.
(g) ADDITIONAL ACCESS TO RECORDS.
Shareholder and Sellers will give Buyer access to all books and records
concerning the Business, to the extent that they are not transferred by
the transactions contemplated herein, for the year 2004 and all prior
years to conduct any and all subsequent financial and/or inventory
audits. Within fifteen days of the Closing, Buyer's accountants shall
have the right to inspect any and all financial books and records of
Sellers with respect to the Business.
13. NAME CHANGE.
Within 30 days after the Closing Date, Sellers shall file, and Shareholder shall
cause Sellers to file, with the appropriate governmental authorities in the
respective states of Sellers' organization and in other states where Sellers are
qualified to transact business as a foreign corporation or other foreign entity
such documents as may be necessary, and shall take such additional action as may
be necessary, to change (i) Lone Star's name to a name not including the word(s)
"Lone Star" or "Screw," any derivative thereof, (ii) ▇▇▇▇▇▇ Bolt's name to a
name not including the word(s) "▇▇▇▇▇▇ Bolt" or "Bolt Manufacturing," or any
derivative thereof, (iii) Ameritech's name to a name not including the word(s)
"Ameritech" or "WHIR Acquisitions," or any derivatives thereof. In addition,
from and after the Closing Date, Sellers shall not, and Shareholder shall cause
Sellers not to, use any of the Intellectual Property Rights, and neither Sellers
nor Shareholder shall use any internet domain name that includes the names "Lone
Star," "▇▇▇▇▇▇ Bolt," "Ameritech," or any derivatives thereof.
14. COVENANTS OF SELLERS AND SHAREHOLDER BEFORE CLOSING.
(a) ACCESS TO OWNED REAL PROPERTY, LEASED PROPERTIES AND RECORDS.
Between the date of this Agreement and the Closing Date, Sellers shall:
(i) at reasonable times and upon reasonable notice, grant Buyer
and its representatives access to
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(A) the Owned Real Property and the Leased Properties for
the purpose of performing all testing, inspections
and other procedures reasonably considered desirable
by Buyer, and
(B) the books and records of Sellers, and
(ii) furnish Buyer with such additional financial and operating
data and other information as to the Assets and the Business
as Buyer may reasonably request.
(iii) Sellers and Shareholder will cooperate with Buyer and its
representatives in the preparation of any documents or other
material that may be required by any governmental authority.
(b) REQUIRED ACTIVITIES OF SELLERS BEFORE CLOSING.
Until the Closing, Sellers shall and Shareholder shall cause Sellers to
(i) maintain the Assets in as good working order and condition
ordinary wear and tear excepted and conduct their affairs only
in the ordinary course of business;
(ii) perform all of their obligations under the Permits, customer
contracts, license agreements, leases, and their debt
instruments;
(iii) keep in full force and effect present insurance policies,
bonds, letters of credit or other insurance coverage with
reputable insurers and issuers;
(iv) use commercially reasonable efforts to preserve intact the
Assets and to keep available the services of their officers
and employees and maintain good relationships with suppliers,
customers and others having business relationships with
Sellers, including but not limited paying all vendors and
suppliers in a manner consistent with past business practices;
(v) maintain compliance with all applicable Laws;
(vi) use commercially reasonable efforts to preserve their
respective business organizations;
(vii) cooperate with Buyer to promptly prepare the necessary
documents; and
(viii) provide all reasonable assistance to Buyer to provide for an
orderly transfer of the Assets from Sellers to Buyer.
Section 14(c) PROHIBITED ACTIVITIES BEFORE CLOSING.
Until the Closing, Sellers shall not, without the prior written consent
of Buyer
(i) consent to any new lien, security interest, or encumbrance
upon any Asset;
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(ii) breach, amend or terminate any permit, license agreement,
lease or customer contract in any material manner or fail to
maintain the Business, the Assets or the quality of customer
service consistent with past practice;
(iii) enter into any transaction outside the ordinary course of the
Business of Sellers or otherwise prohibited under this
Agreement;
(iv) change their tax status; or
(v) allow any other action or omission, or series of actions or
omissions, that would cause a representation or warranty of
Sellers or Shareholder made in Section 5 to be untrue on the
Closing.
(d) STANDSTILL AGREEMENT.
Unless and until this Agreement is terminated pursuant to Section 20
without the Closing having taken place, Sellers and Shareholder shall
not, directly or indirectly, solicit offers for the Assets, for the
capital stock of Sellers, or for a merger or consolidation involving
Sellers, or respond to inquiries from, share information with,
negotiate with or in any way facilitate inquiries or offers from, third
parties who express or who have expressed an interest in acquiring
Sellers or the Business by merger, consolidation, or other combination
or by acquiring any of the capital stock, membership interest or
material Assets of Sellers. Shareholder shall not vote its stock in
favor of any such transaction.
(e) TITLE DEFECTS.
Neither Sellers nor the Shareholder shall cause or consent to any title
defect being placed of record on the Owned Real Property from the date
of this Agreement to the Closing. If any title defect is so placed or
recorded or otherwise exists contrary to the provisions of this
Agreement, the effect of which can be removed and/or eliminated by the
payment of money, Sellers shall immediately cause sufficient monies to
be deposited with Buyer so as to enable Buyer to cause such title
defect to be eliminated and/or removed of record; provided that Sellers
and Shareholders shall not be required to spend in excess of an
aggregate of $100,000 in performing under this subsection.
(f) CONFIDENTIALITY; FAILURE TO ATTAIN CLOSING.
In the event the Parties fail to attain the Closing by the Closing Date
for any reason, neither Party shall have any right to damages or other
compensation under this Agreement except with regard to any obligations
of confidentiality between the Parties hereunder, and Buyer shall
deliver all documents relating to the Environmental Assessment to
Sellers and Shareholder and shall keep the results thereof
confidential, except as required by law. To the greatest extent
practicable, Buyer shall give Sellers and Shareholder advance notice
prior to making any disclosures that it believes are required by law,
necessary in connection with the sale, lease, or development of or
financing secured by all or part of the Owned Real Property or the
Leased Properties, or in defense of a claim asserted against Buyer, and
shall provide Sellers and Shareholder with a copy of any such
disclosure. This confidentiality requirement shall survive termination
of this Agreement.
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15. PUBLIC ANNOUNCEMENTS
(a) Except to the extent required by Law or the Parties consent in writing,
the Parties shall keep the existence and terms of this Agreement
confidential and no Party shall make, or cause to be made, any press
release or public announcement in respect of this Agreement or the
Transactions or otherwise communicate with any media.
(b) The Parties acknowledge that Shareholder is a publicly-traded
corporation and that it may have to make disclosure of all or a part of
this Agreement to the U.S. Securities and Exchange Commission or other
Governmental Authority and that other disclosures may be required
pursuant to the rules of a securities exchange. No such disclosures
shall be deemed to constitute a breach of this Agreement.
16. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS AND SHAREHOLDER
The obligations of Sellers and Shareholder under this Agreement are subject to
the completion, satisfaction, or at their option, waiver, on or before the
Closing Date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Buyer contained in this Agreement
shall be accurate on and as of the Closing Date.
(b) COVENANTS.
Buyer shall have duly complied with or performed each of the covenants
of this Agreement to be complied with or performed by Buyer on or
before the Closing Date.
(c) NO ADVERSE PROCEEDING.
No Action before a governmental authority shall have been instituted or
threatened to restrain or prohibit any of the transactions contemplated
herein.
(d) CLOSING DELIVERIES.
Buyer shall have timely delivered (if required to be delivered before
the Closing) or shall be prepared to deliver the items set forth in
Section 8.
(e) GENERAL.
All actions taken by Buyer in connection with the consummation of the
transactions described or contemplated under this Agreement and all
certificates, opinions and other documents required to effect such
transactions shall be reasonably satisfactory in form and substance to
Sellers and Shareholder.
17. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
The obligations of Buyer under this Agreement are subject to the completion,
satisfaction or, at its option, waiver, on or before the Closing Date, of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Sellers and Shareholder contained
in this Agreement shall be accurate on and as of the Closing Date.
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(b) COVENANTS.
Sellers and Shareholder shall have duly complied with or performed each
of the terms, covenants and conditions of this Agreement to be complied
with or performed by Sellers and Shareholder on or before the Closing
Date.
(c) NO ADVERSE PROCEEDING.
No action shall have been instituted or threatened to restrain or
prohibit any of the transactions contemplated herein. No Governmental
Authority shall have taken any other action or made any request of
Buyer as a result of which Buyer deems it inadvisable to proceed with
the transactions contemplated herein.
(d) CORPORATE APPROVAL.
Sellers' and Shareholder's Boards of Directors shall have approved the
transactions contained herein.
(e) NO ADVERSE CHANGE OR MATERIAL ADVERSE EFFECT.
Except as otherwise disclosed in this Agreement, no adverse change in
the results of operations, financial condition or business of Sellers
shall have occurred since August 31, 2003 which could result in a
Material Adverse Effect. Sellers shall not have suffered any loss or
damage to any of the Assets or the Business since the date of this
Agreement, which loss or damage would result in a Material Adverse
Effect or would materially impair Buyer's ability to operate the
Business after the Closing Date.
(f) TRANSFERABILITY OF PERMITS.
Buyer shall have determined, in its sole discretion, that as a result
of the transactions contemplated herein all of the Permits required for
the operation of the Business will be transferred to Buyer at Closing;
provided, however, that Buyer, in its sole discretion, may elect at any
time to proceed to close even if all such Permits may not be
transferred to Buyer.
(g) DUE DILIGENCE REVIEW.
Buyer must have received results satisfactory to it, in its sole
discretion, from its due diligence review of Sellers, the Business, and
the Assets.
(h) CONSENTS.
All necessary notices to, Consents of, and filings with any
Governmental Authority relating to the consummation of the transactions
contemplated herein to be made or obtained by Sellers shall have been
made and obtained by Sellers, and Buyer shall have determined, in its
sole discretion, that Buyer will be receiving at Closing all the
consents or assignments it deems necessary under any Customer Contract,
License Agreement, Leasehold Interest, or Permit requiring consent to
assignment.
(i) CLOSING DELIVERIES.
Sellers and Shareholder shall have timely delivered (if required to be
delivered before the Closing) or shall be prepared to deliver the items
set forth in Section 7.
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(j) GOVERNMENTAL APPROVALS.
Sellers and Buyer shall have received all governmental approvals deemed
necessary by Buyer, in its sole discretion, to proceed with the
transactions.
(k) ZONING VARIANCES.
Buyer shall have received all governmental approvals deemed necessary
by Buyer, in its sole discretion, to and operate the Business on the
Owned Real Property and Leased Property.
(l) ENVIRONMENTAL.
Buyer shall be satisfied with the results of the Phase I and/or Phase
II Environmental Assessment. No Hazardous Materials shall be present
on, under, in or above any of the Owned Real Property or the Leased
Properties, or any portion thereof except as properly used and disposed
of or stored both before and after use or as otherwise disclosed in
this Agreement.
(m) GENERAL.
All actions taken Sellers and Shareholder in connection with the
consummation of the transactions described or contemplated under this
Agreement and all certificates, opinions and other documents required
to effect such transactions shall be reasonably satisfactory in form
and substance to Buyer.
18. INDEMNIFICATION.
(a) BY SELLERS AND SHAREHOLDERS.
(i) FOUR-YEAR INDEMNIFICATION FOR MISREPRESENTATION.
Sellers and Shareholder agree that they will each, jointly and
severally, indemnify, defend, protect and hold harmless Buyer,
its members, partners and their respective owners', officers,
directors, divisions, subdivisions, Affiliates, shareholders,
agents, employees, successors and assigns for four years from
and after the Closing Date from and against all Losses that
arise as a result of or incident to any breach of,
misrepresentation in, untruth in or inaccuracy in the
representations and warranties by Sellers or Shareholder in
Sections 5 or in any other document delivered pursuant to
those sections of this Agreement.
(ii) UNLIMITED INDEMNIFICATIONS FOR OTHER MATTERS.
Notwithstanding the indemnification set forth in Section
18(a)(i) above, Sellers and Shareholder agree that they will
each, jointly and severally, indemnify, defend, protect and
hold harmless Buyer, its members, partners and their
respective owners, officers, directors, divisions,
subdivisions, Affiliates, shareholders, agents, employees,
successors and assigns from and after the Closing Date, and
without any time restriction thereafter, from and against all
Losses that arise as a result of or incident to:
(A) acts, omissions, and occurrences related to any lack
of compliance by any of the Sellers with any Law
(including any tax law or Environmental Law), any
Permit (including any Environmental Permit), any
Environmental Condition,
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or the failure by Sellers to obtain any required
Consents prior to the Closing Date;
(B) any breach of, misrepresentation in, untruth in or
inaccuracy in the representations and warranties by
Sellers or Shareholder in Sections 5(b) [due
organization], 5(c) [authority to enter into
Agreement], 5(d) [stock ownership], 5(e) [no
conflict], 5(g) [tax returns and financial
statements], 5(p)(i) [taxes], and 5(w) [real
property] in this Agreement, any Exhibit, or in any
other document delivered pursuant to those Sections
of this Agreement;
(C) Sellers' failure to convey, assign, or otherwise
transfer to Buyer any Intellectual Property which
Buyer requires to operate the Business in the same
manner as Sellers operated the Business prior to
Closing
(D) a knowing misrepresentation made by Sellers and/or
Shareholder in Section 5;
(E) nonfulfillment or nonperformance of any agreement,
covenant or condition on the part of Sellers or
Shareholder made in this Agreement or in any other
document delivered pursuant to those Sections of this
Agreement;
(F) any Liabilities or obligations not expressly assumed
by Buyer under this Agreement;
(G) any Litigation where the underlying cause of action
arose on or prior to the Closing Date;
(H) the Houston Chemical Investigation and the
Ameritech/▇▇▇▇▇▇▇ Control Investigation; or
(I) any claim by a third party for actions or events
arising on or prior to the Closing Date that, if
true, would mean that a condition for indemnification
set forth in this Section 18 had been satisfied.
(b) BY BUYER.
Buyer agrees that it will indemnify, defend (as to third party claims
only), protect and hold harmless Sellers and Shareholder, and their
respective members, partners, officers, directors, divisions,
subdivisions, Affiliates, members, shareholders, agents, employees,
successors and assigns at all times from and after the Closing Date
from and against all Losses that arise as a result of or incident to:
(i) any breach of, misrepresentation in, untruth in or inaccuracy
in the representations and warranties by Buyer set forth in
this Agreement;
(ii) nonfulfillment or nonperformance of any agreement, covenant or
condition on the part of Buyer made in this Agreement or in
any other document delivered pursuant to this Agreement;
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(iii) any claim by a third party for actions for events arising
after the Closing Date that, if true, would mean that a
condition for indemnification set forth in this Section 18 had
been satisfied; and
(iv) a knowing misrepresentation made by Buyer in Section 5.
19. SURVIVAL OF INDEMNIFICATIONS.
Nothing herein shall limit any other remedies available to any Party. The
indemnification provisions in this Agreement are in addition to any statutory,
equitable or common law remedy any party may have for breach of any
representation, warranty or covenant.
20. TERMINATION OF AGREEMENT.
(a) TERMINATION BY BUYER.
Buyer, by notice in the manner provided in Section 23(g) on or before
the Closing Date, may terminate this Agreement if any of the conditions
set forth in Section 17 shall not have been satisfied or in the event
of a breach by Sellers or Shareholder in the observance or in the due
and timely performance of any of the covenants or conditions contained
in this Agreement on their part to be performed, and such breach shall
not have been cured within 15 days after notice to Sellers.
Additionally, if Buyer reasonably believes that the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Customer Contract, contained as part of Exhibit "E" is not going to be
renewed on terms and conditions acceptable to Buyer, then Buyer, by
notice as provided in Section 23(g) on or before the Closing Date, may
terminate this Agreement.
(b) TERMINATION BY SELLER OR SHAREHOLDER.
Each of the Sellers or Shareholder, by notice in the manner provided in
Section 23(g) on or before the Closing Date, may terminate this
Agreement in the event of a breach by Buyer in the observance or in the
due and timely performance of any of the covenants, or conditions
contained in this Agreement on its part to be performed, and such
breach shall not have been cured within 15 days after notice to Buyer.
(c) TERMINATION FOR FAILURE TO CLOSE.
Either Buyer or Sellers, by notice in the manner provided in Section
23(g), may terminate this Agreement if the Closing has not occurred on
or before February 27, 2004; provided, however, that no Party in
default under this Agreement shall have the right to terminate pursuant
to this Section 20.
(d) EFFECT OF TERMINATION.
Termination of this Agreement pursuant to this Section 20 shall not in
any way terminate, limit or restrict the rights and remedies of any
Party against any other Party which has breached this Agreement before
termination.
21. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Each Party acknowledges that it has had and may in the future have access to
confidential information, that will as of the date of this Agreement and as of
the Closing Date be valuable, special and unique assets of another Party. Each
Party agrees, at all times from and after the Closing, to, and shall cause their
affiliates, officers, directors, employees and agents to:
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(a) treat and hold as confidential (and not disclose or provide access to
any Person or to use) any confidential information;
(b) if any Party or any of its respective Affiliates, or any officer,
director, member, partner, employee or agent of any of the foregoing
entities becomes legally compelled to disclose any such confidential
information, provide the other Parties with prompt written notice of
such requirement so that Buyer may seek a protective order or other
remedy; and
(c) promptly furnish (prior to, at, or as soon as practicable after the
Closing) to the other Parties any and all copies (in whatever form or
medium) of all such confidential information then in the possession of
such Person.
(d) This Section 21, however, shall not apply to any information which:
(i) at the time of disclosure, is available publicly and was not
disclosed in breach of this Agreement;
(ii) received from a third party which the receiving Party believed
in good faith was not violating any obligations of
confidentiality;
(iii) must be disclosed in accordance with any Law or the rules of
any stock exchange; or
(iv) relates to the liabilities retained by Sellers under this
Agreement.
(e) Each Party acknowledges and agrees that the other Parties' remedies
at law for any breach or threatened breach of this Section 21 are
inadequate, and that in addition to such remedies, such other Parties
shall be entitled to equitable relief, including injunctive relief and
specific performance, in the event of any such breach or threatened
breach without the need to demonstrate that monetary damages are
inadequate.
(f) The Parties acknowledge and agree that if any Party breaches any of
these restrictive covenants, such breach would cause irreparable harm
to the non-violating Parties and, in the event of such breach, the
non-violating Parties shall be entitled, in addition to monetary
damages and to any other remedies available to the non-violating
Parties under this Agreement and at law, to equitable relief, including
injunctive relief, and the payment by the violating Party of all costs
incurred by the non-violating Parties in enforcing these restrictive
covenants, including reasonable attorneys' fees.
22. LEGAL OPINIONS. [Deleted]
23. GENERAL PROVISIONS.
(a) ASSIGNMENT.
This Agreement may not be assigned (except by operation of Law) or
otherwise transferred without the express written consent of Sellers
and Buyer (which may be granted or withheld in the sole and absolute
discretion of Sellers and Buyer); provided, however, that Buyer may
assign this Agreement to an Affiliate of Buyer or any successor of
Buyer to the Business without the consent of Sellers.
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(b) BINDING EFFECT; NO THIRD PARTY BENEFICIARIES.
This Agreement shall be binding upon and inure solely to the benefit of
the Parties hereto and their successors and assigns. Nothing in this
Agreement is intended to or shall confer upon any other Person,
including any employee or former employee of Sellers, any legal or
equitable right, benefit or remedy of any nature whatsoever, including
any rights of consultation, audit services, or employment for any
specified period.
(c) AMENDMENT.
This Agreement may not be amended except by a written instrument
executed by each Party.
(d) ENTIRE AGREEMENT.
The Letter of Intent is hereby terminated in its entirety, save and
except that portion of Section 3 that provides for a $100,000.00 break
up fee payable to Buyer in the event of a breach of the said Section 3.
This Agreement (together with the other agreements to be delivered at
Closing) are the final, complete and exclusive statement of the
agreement among the Parties with relation to the subject matter of this
Agreement. There are no oral representations, understandings or
agreements covering the same subject matter as this Agreement or any
other agreement to be delivered at Closing. This Agreement supersedes
and cannot be varied, contradicted or supplemented by evidence of, any
prior or contemporaneous discussions, correspondence, or oral or
written agreements or arrangements of any kind.
(e) COUNTERPARTS.
This Agreement may be executed in several counterparts and all such
executed counterparts shall constitute a single agreement, binding on
all Parties and their successors and permitted assigns, notwithstanding
that not all Parties may be signatories to the original or to the same
counterpart. Each counterpart signature page so executed may be
attached to another counterpart of this Agreement and such
counterparts, when so attached, shall constitute a single agreement.
Delivery of an executed counterpart of a signature page of this
Agreement by telephonic facsimile transmission shall be as effective as
delivery of a manually executed original counterpart of this Agreement.
Section 23(f) ATTORNEYS' FEES.
Should any litigation be commenced under this Agreement, the successful
Party in such litigation shall be entitled to recover, in addition to
such other relief as the court may award, its reasonable attorneys'
fees, expert witness fees, litigation related expenses, and court or
other costs incurred in such litigation or proceeding. For purposes of
this clause, the term "successful party" means the net winner of the
dispute, taking into account the claims pursued, the claims on which
the pursuing party was successful, the amount of money sought, the
amount of money awarded, and offsets or counterclaims pursued
(successfully or unsuccessfully) by the other party. Notwithstanding
the foregoing, if a written settlement offer is rejected and the
judgment or award finally obtained is equal to or more favorable to the
offeror than an offer made in writing to settle, the offeror is deemed
to be the successful Party from the date of the offer forward.
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(g) NOTICES.
(i) All notices or other communications required or permitted
under this Agreement (other than routine correspondence in the
ordinary course of business) shall be in writing and may be
given by depositing the same in the United States mail,
addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, by
overnight courier, by delivering the same in person to such
party, addressed as follows, or by telephone facsimile
transmission (provided that the sending party receives
confirmation that the recipient's fax equipment has received
the notice):
If to Sellers or Shareholder, addressed to them at:
[name of applicable entity]
c/o T-3 Energy Services, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: President
fax ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Attorney at Law
▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
fax: ▇▇▇-▇▇▇-▇▇▇▇
If to Buyer, addressed to it at:
Lone Star Fasteners, LP
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇. ▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇, APLC
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
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Fax: ▇▇▇-▇▇▇-▇▇▇▇
(ii) Notice shall be deemed given and effective the day personally
delivered or the day actually received, subject to written
verification of receipt or fax receipt confirmation.
(iii) Any Party may change the address for notice by notifying the
other Parties of such change in accordance with this Section.
(h) WAIVER.
No delay of or omission in the exercise of any right, power or remedy
accruing to any Party as a result of any breach or default by any other
Party under this Agreement shall impair any such right, power or
remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default
occurring later. No waiver of any single breach or default shall be
deemed a waiver of any other breach or default occurring before or
after that waiver.
(i) SEVERABILITY.
If any provision of this Agreement shall be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such
manner as to be valid, legal and enforceable but so as most nearly to
retain the intent of the Parties. If such modification is not possible,
such provision shall be severed from this Agreement. In either case the
validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
(j) CONSTRUCTION.
The headings in this Agreement are inserted for convenience only, and
shall not constitute a part of this Agreement or be used to construe or
interpret any of its provisions.
(k) MUTUAL DRAFTING.
The Parties have participated jointly in negotiating and drafting this
Agreement. If a question of interpretation arises, this Agreement shall
be construed as if drafted jointly by the Parties, and no presumption
or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any provision of this Agreement.
Section 23(l) EXPENSES OF TRANSACTION.
Whether or not the transactions contemplated under this Agreement are
consummated:
(a) Each Party shall pay the fees, expenses and disbursements and
those of its representatives incurred in connection with, and
as provided for, this Agreement and any activities associated
with conducting due diligence investigations or in preparing
or negotiating this Agreement; and
(b) Sellers shall pay any such fees, expenses and disbursements
which must be paid to avoid the possibility that that the
Assets will not be charged with or diminished thereby.
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(m) NO BROKERS.
Sellers and Shareholder represent and warrant to Buyer and Buyer
represents and warrants to Sellers and Shareholder that the warranting
Party has had no dealings with any broker, agent or other Person so as
to entitle such Person to a commission or fee in connection with the
Transactions. If for any reason a commission or fee becomes or is
claimed to be due with respect to dealings by Buyer, Buyer shall
indemnify and hold harmless Sellers and Shareholder from all losses
relating to such claim. If for any reason a commission or fee becomes
or is claimed to be due with respect to dealings by Sellers or
Shareholder, Sellers and Shareholder, jointly and severally, shall
indemnify and hold harmless Buyer from all losses relating to such
claim.
(n) GOVERNING LAW.
This Agreement shall be governed by and construed under the laws of the
State of Texas without regard to the choice of law provisions thereof
which would require the application of the law of another jurisdiction;
provided that each of the Parties hereby waives any and all rights to a
trial by jury.
(o) NO THIRD PARTY BENEFICIARIES.
By their entry into and performance under this Agreement, the Parties
acknowledge that they do not intend to create any rights in favor of
any person or entity not a party to this Agreement and that no such
third party shall have any right to enforce any of the terms or
conditions of this Agreement.
24. DEFINITIONS AND RULES OF INTERPRETATION.
(a) DEFINITIONS.
For the purposes of this Agreement, each of the following terms shall have the
respective meanings ascribed thereto as set forth below:
"A&B" has the meaning specified in Section 7(b) of this Agreement.
"ACTION" means any claim, action, suit, formal or informal arbitration or
mediation, inquiry, proceeding or investigation by or before any Governmental
Authority or private authority.
"ADJUSTMENT ITEMS" means the aggregate net amount of
(i) gross fixed assets (less Sellers' historical amortization and
depreciation),
(ii) receivables (less reserves for bad debts),
(iii) deposits made by Sellers with suppliers and other deposits (excluding
deposits in accounts with financial institutions) mutually agreed to by
the Parties,
(iv) Inventories (less any required reserve (if any) for obsolete or excess
items),
LESS:
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(v) trade payables, customer deposits and any other payables, and
(vi) accrued expenses mutually agreed to between the Parties, as
substantiated by either Party pursuant to Section 2(b) by appropriate
calculations and supporting documentation (including corresponding
schedules for Inventory, receivables, and payables).
"AFFILIATE" means, with respect to any specified Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
"AGREEMENT" has the meaning specified in the introductory paragraph of this
Agreement.
"AMERITECH" has the meaning specified in the introductory paragraph of this
Agreement.
"AMERITECH BUSINESS" has the meaning specified in the Recitals of this
Agreement.
"AMERITECH NOTE" has the meaning specified in Section 2(a)(ii) of this
Agreement.
"AMERITECH/▇▇▇▇▇▇▇ CONTROL INVESTIGATION" has the meaning specified in
Section 5(q)(iii).
"ARDMORE FACILITY" has the meaning specified in Recital C of this Agreement.
"ASSETS" has the meaning specified in the Recitals of this Agreement.
"ASSUMED OBLIGATIONS" has the meaning specified in Section 1(a) of this
Agreement.
"AUGUST 31, 2003 BALANCE SHEET" means a consolidated balance sheet of the
Sellers as of August 31, 2003, including a detailed listing of the Adjustment
Items, the Estimated Amounts and a detailed listing of the accrued expenses or
portion thereof that comprise all retained Liabilities as of August 31, 2003,
and setting forth Sellers' good faith calculations of the aggregate net amounts
of these items, as set forth in Exhibit I. The August 31, 2003 Balance Sheet
excludes the assets and liabilities associated with Lone Star's operations at
the Ardmore Facility.
"BUSINESS" has the meaning specified in the Recitals.
"BUYER" has the meaning specified in the introductory paragraph of this
Agreement.
"CERCLIS" has the meaning specified in Section 5(t)(iii).
"CLOSING" has the meaning specified in Section 4.
"CLOSING DATE" has the meaning specified in Section 4.
"CODE" has the meaning specified in Section 2(c).
"CONSENTS" means those authorizations, consents, waivers, orders, approvals and
clearances of Governmental Authorities and officials and other Persons which are
necessary for the sale and
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transfer to Buyer of the Assets or the consummation of the Transactions
(including the continuation of Customer Contracts) where the approval of any
other Person may be required.
"CONTRACT RIGHTS" has the meaning specified in Section 1(a).
"ENCUMBRANCE" means any security interest, pledge, mortgage, deed of trust, lien
(including Environmental and Tax liens), charge, judgment, encumbrance, adverse
claim, claim arising under Section 506(c) of the Bankruptcy Code, preferential
arrangement, fraudulent transfer or other avoidance claim or restriction of any
kind, including any restriction on the use, voting, transfer, receipt of income
or other exercise of any attributes of ownership, and any lien, interest,
restriction or limitation arising from or relating to personal or other property
tax, sales and transaction privilege, claim of successor liability for any
alleged unpaid sales or other tax, and any other lien or assessment of any
Governmental Authority, whether or not allowable, recorded or contingent.
"ENVIRONMENT" or "ENVIRONMENTAL" means matters relating to surface waters,
ground waters, soil, subsurface strata and ambient air.
"ENVIRONMENTAL ASSESSMENTS" has the meaning specified in Section 10(a).
"ENVIRONMENTAL CONDITION" means the presence or Release of any Hazardous
Materials into the Environment on, in or from the Owned Real Property or the
Leased Properties, that potentially violates any Law.
"ENVIRONMENTAL LAW(S)" means any Law and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment, relating to the Environment, health, safety or Hazardous
Materials, including CERCLA; the Resource Conservation and Recovery Act; the
Hazardous Materials Transportation Act; the Clean Water Act; the Toxic
Substances Control Act; the Clean Air Act; the Safe Drinking Water Act; the
Atomic Energy Act; the Federal Insecticide, Fungicide and Rodenticide Act; and
the Federal Food, Drug and Cosmetic Act; and the state or local equivalents.
"ENVIRONMENTAL PERMITS" means all Permits and identification numbers required
under any applicable Environmental Law.
"ERISA has the meaning specified in Section 5(m).
"FINAL EXHIBIT ON RECEIVABLES" has the meaning specified in Section 2(d)(ii).
"FINANCIAL STATEMENTS" has the meaning specified in Section 5(g).
"GAAP" means generally accepted accounting principles generally in effect and as
consistently applied in the United States of America from time to time.
"GOVERNMENTAL AUTHORITY" means any United States federal, state or local or any
foreign government, governmental, regulatory or administrative authority, agency
or commission or any court, tribunal, or judicial or arbitral body.
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"GOVERNMENT ORDER" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority and applicable to a specified Party.
"HAZARDOUS MATERIALS" means:
(a) petroleum and petroleum products, radioactive materials, asbestos in
any form that is or could become friable, urea formaldehyde foam
insulation, transformers, or other equipment that contain
polychlorinated biphenyls, and radon gas;
(b) any other chemicals, materials or substances defined as or included in
the definition of "hazardous materials," "hazardous wastes," "hazardous
substances," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic wastes," "toxic pollutants,"
"pollutants or contaminants" (as defined under CERCLA), "infectious
wastes," "medical wastes," "radioactive wastes," "sewage sludges" or
words of similar import under any applicable Law.
"HOUSTON CHEMICAL INVESTIGATION" has the meaning specified in Section 5(q)(ii).
"INCOME TAX RETURNS" has the meaning specified in Section 5(g).
"INTELLECTUAL PROPERTY" shall mean all of the following, as they exist in all
jurisdictions throughout the world, in each case, and further including all
rights of priority thereto:
(a) patents, patent applications, and other patent or industrial property
rights (including any divisions, continuations, continuations-in-part,
substitutions, re-examinations or reissues thereof, whether or not
patents are eventually issued on any such applications, and whether or
not any such applications are in interference or opposition
proceedings, or are modified, withdrawn or resubmitted);
(b) trademarks, service marks, trade dress, trade names, brand names,
designs, logos or corporate names, whether registered or unregistered,
and all registrations and applications for registration thereof and all
goodwill associated therewith and symbolized thereby;
(c) copyrights and mask works, registrations therefore and applications for
registration thereof;
(d) trade secrets, designs, layouts, software, electronic files, research,
processes, procedures, techniques, methods, shop rights, know-how,
data, works made for hire by others, inventions, works of authorship
(whether published or unpublished) and other proprietary and intangible
rights (whether or not patentable or subject to copyright, mask work,
or trade secret protection);
(e) domain names (including registrations and reservations thereof and
rights of priority thereto), and URLs.
"ISO" has the meaning specified in Section 1(a)(vi)(B)(4).
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"LAW" means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, Governmental Order, requirement or rule of common law,
including any Environmental Law, applicable to a specified Party.
"LEASED PROPERTIES" has the meaning specified in the Recitals paragraph of this
Agreement.
"LEASEHOLD INTERESTS" has the meaning specified in Section 1(a).
"LETTER OF INTENT" has the meaning specified in Section 5(j).
"LIABILITIES" means all debts, liabilities and obligations, whether legal or
equitable, accrued or fixed, absolute or contingent, matured or unmatured,
determined or determinable, foreseen or unforeseen, ordinary or extraordinary,
patent or latent, including those arising under any Law (including any
Environmental Law) or Action and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"LITIGATION" means any and all lawsuits to which Sellers and Shareholder are a
party, whether as a Plaintiff, Defendant, or otherwise, including but not
limited to those contained on Exhibit P.
"LONE STAR" has the meaning specified in the introductory paragraph of this
Agreement.
"LONE STAR BUSINESS" has the meaning specified in the Recitals paragraph of this
Agreement.
"LONE STAR NOTE" has the meaning specified in Section 2(a)(ii) of this
Agreement.
"LONE STAR LEASED PREMISES" has the meaning specified in the Recitals of this
Agreement.
"LOSSES" means Liabilities, claims, damages, Actions, demands, assessments,
adjustments, penalties, losses, costs and expenses whatsoever (including court
costs, reasonable attorneys' fees and expenses of investigation), whether
equitable or legal, matured or contingent, known or unknown, foreseen or
unforeseen, ordinary or extraordinary, patent or latent. In no event shall
Losses be deemed to include consequential or incidental damages.
"MATERIAL ADVERSE EFFECT" means any circumstance, change in, or effect on, the
Assets or the Business that, individually or in the aggregate with any and all
other circumstances, changes in, or effects thereon: (i) is or could reasonably
be expected to be materially adverse to the Assets or to the Business, financial
condition (i.e. a financial impact of $50,000 or more), assets or liabilities
(including contingent liabilities), customer or supplier relationships,
prospects, value, results of operations or the condition (financial or
otherwise) of the Business; or (ii) could reasonably be expected to materially
adversely affect the ability of Buyer to use the Assets or operate the Business
in the manner in which they are currently used or operated by Sellers.
"OWNED REAL PROPERTY has the meaning specified in the Recitals paragraph of this
Agreement.
"PARTY" means any of Buyer, Lone Star, ▇▇▇▇▇▇, Ameritech, and Shareholder.
"PERMITS" means all permits, licenses, franchises, consents and approvals of
every kind necessary to operate the Business.
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"PERMITTED ENCUMBRANCES" has the meaning specified in Section 5(y).
"PERMITTED EXCEPTIONS" has the meaning specified in Section 9.
"PERSON" means any individual, partnership, firm, corporation, limited liability
company, association, trust, unincorporated organization, Governmental Authority
or other entity.
"PLAN" means: (i) any employee benefit plan, employee welfare benefit plan,
employee benefit pension plan, multi-employer plan or multiple-employer welfare
arrangement (within the meaning of Section 3 of ERISA) and all bonus, stock
option, stock purchase, restricted stock, incentive, deferred compensation,
retiree medical, dental or life insurance, supplemental retirement, severance or
other benefit plans, programs or arrangements, and all employment, termination,
severance, "golden parachute" or other contracts or agreements, formal or
informal, legally binding or not, with respect to which Sellers are a party,
with respect to which Sellers have or could have any obligation (whether primary
or secondary) or which are maintained, contributed to or sponsored by Sellers or
any member of their controlled group of organizations within the meaning of
Section 414 of the Code for the benefit of any current or former employee,
officer or director of Sellers; and (ii) each employee benefit plan for which
Sellers could incur liability under Section 4069 of ERISA if such plan were
terminated, or under Section 4212(c) of ERISA, or in respect of which Sellers
remain secondarily liable under Section 4204 of ERISA.).
"PURCHASE PRICE" has the meaning specified in Section 2(a).
"PURCHASE PRICE DETERMINATION DATE" has the meaning specified in
Section 2(b)(iv)(D).
"QCB" has the meaning specified in Section 1(a)(vi)(B)(4).
"RELEASE" means disposing, discharging, injecting, spilling, leaking, leaching,
dumping, emitting, escaping, emptying, seeping, placing or otherwise releasing
into, upon or under any land, water, or air or otherwise entering into the
Environment.
"RESTRICTIVE AGREEMENTS" has the meaning specified in Section 5(u).
"▇▇▇▇▇▇▇ CONTROL" has the meaning specified in Section 5(q)(iii).
"SELLERS" has the meaning specified in the introductory paragraph of this
Agreement.
"SELLERS' ESTIMATED CLOSING BALANCE SHEET" has the meaning specified in
Section 2(b)(ii)(A).
"SELLERS' INTELLECTUAL PROPERTY" shall mean all Intellectual Property, used,
held for use, or required for use in the conduct of the Business and owned by,
licensed to, or otherwise used by any Seller, save and except the intellectual
property pertaining solely to Lone Star's Custom Coating Applicator business.
"SELLERS' PURCHASE PRICE ADJUSTMENT" has the meaning specified in
Section 2(b)(ii)(C).
"SHAREHOLDER" has the meaning specified in the introductory paragraph of this
Agreement.
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"SPECIALTY CUSTOMER INTELLECTUAL PROPERTY" means any intellectual property
rights owned by any customer of the Sellers where the Sellers make use of such
intellectual property, with the permission of such customer, when performing
services or manufacturing items for that customer or its Affiliates.
"TANGIBLE PERSONAL PROPERTY" has the meaning specified in Section 1(a)(iii).
"TCEQ" means the Texas Commission on Environmental Quality.
"TCEQ VOLUNTARY CLEANUP PROGRAM" means the voluntary cleanup program of the
Texas Commission on Environmental Quality described in Section 5(u)(ix).
"THIRD PARTY COSTS" has the meaning specified in Section 1(b)(i).
"TITLE COMMITMENT" has the meaning specified in Section 9.
"TITLE OBJECTIONS" has the meaning specified in Section 9.
"VEHICLES" has the meaning specified in Section 1(a)(iv).
"▇▇▇▇▇▇ BOLT" has the meaning specified in the introductory paragraph of this
Agreement.
"▇▇▇▇▇▇ BOLT/AMERITECH LEASED PREMISES" has the meaning specified in the
Recitals paragraph of this Agreement.
"▇▇▇▇▇▇ BOLT BUSINESS" has the meaning specified in the Recitals paragraph of
this Agreement.
(b) RULES OF INTERPRETATION.
(i) wherever a representation or warranty in this Agreement is
qualified as having been made to a Party's knowledge, such
phrase shall be construed as meaning the knowledge and belief
of the officers, directors, and senior managers of Sellers and
Shareholder responsible for the operation of the Business or
the Assets, including ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇.▇.,
Shareholder's EH&S Director.
(ii) Any reference to any statute shall be deemed to refer to the
statute, as amended, and to all rules and regulations
promulgated thereunder, as amended, unless the context
requires otherwise.
(iii) The word "include", "included", and "including" shall be
construed as being without limitation.
(iv) Terms defined in the singular shall be construed as being
defined in the plural and vice versa.
[balance of page intentionally left blank]
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Sellers, Shareholder and Buyer have caused this Agreement to be executed as of
the date contained below by their respective duly authorized officers.
BUYER:
LONE STAR FASTENERS, L.P.
By: RHRS, L.L.C., General Partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇
Title: President
Date: 2/19/04
SELLERS:
LSS-LONE STAR-HOUSTON, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: President
Date: 2/20/04
BOLT MANUFACTURING CO., INC. d/b/a ▇▇▇▇▇▇ BOLT MANUFACTURING
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: President
Date: 2/20/04
WHIR ACQUISITION, INC. d/b/a AMERITECH FASTENER MANUFACTURING
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: President
Date: 2/20/04
SHAREHOLDER:
T-3 ENERGY SERVICES, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: President
Date: 2/20/04
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