ASSET PURCHASE AGREEMENT
by and among
Midwest Tube Mills, Inc. ("Seller")
Richard L. Russell, individually and Richard L. Russell
in his Fiduciary
Capacity as Trustee of the
Richard L. Russell 2004 Annuity Trust
(collectively, "Shareholders")
and
MTM Acquisition Company ("Buyer")
Dated: August 30, 2005
<PAGE>
TABLE OF CONTENTS
1.
Definitions and
Usage...........................................1
2. Sale
and Transfer of Assets; Closing............................1
2.1 Assets to
be Sold......................................1
2.2 Excluded
Assets........................................2
2.3
Consideration..........................................2
2.4
Liabilities............................................3
2.5
Allocation.............................................3
2.6
Closing................................................3
2.7 Closing
Obligations....................................4
2.8 Adjustment
Amount and Payment..........................5
2.9 Adjustment
Procedure...................................5
2.10
Consents...............................................6
3.
Representations and Warranties of Seller and
Shareholders.......7
3.1
Organization and Good Standing.........................7
3.2
Enforceability; Authority; No Conflict.................7
3.3
Capitalization.........................................8
3.4 Financial
Statements...................................8
3.5 Books and
Records......................................8
3.6 Title to
and Sufficiency of Assets.....................8
3.7
Description of Leased Real Property....................9
3.8 Condition
of Facilities................................9
3.9 Accounts
Receivable....................................9
3.10
Inventories............................................9
3.11
No Undisclosed Liabilities.............................9
3.12
Taxes..................................................10
3.13
No Material Adverse Change.............................10
3.14
Employee Benefits......................................10
Governmental Authorizations............................11
3.16
Legal Proceedings; Orders..............................12
3.17
Absence of Certain Changes and Events..................13
3.18
Contracts; No Defaults.................................13
3.19
Insurance..............................................16
3.20
Environmental Matters..................................16
3.21
Employees..............................................18
3.22
Labor Disputes; Compliance.............................18
3.23
Intellectual Property Assets...........................18
3.24
Relationships with Related Persons.....................18
3.25
Brokers or Finders.....................................19
3.26
Disclosure.............................................19
4.
Representations and Warranties of
Buyer.........................19
4.1
Organization and Good Standing.........................19
4.2 Authority;
No Conflict.................................19
4.3 Certain
Proceedings....................................20
4.4 Brokers or
Finders.....................................20
5.
Covenants of Seller Prior to
Closing............................20
5.1 Access and
Investigation...............................20
5.2 Operation
of the Business of Seller....................20
5.3 Negative
Covenant......................................21
5.4 Required
Approvals.....................................21
5.5
Notification...........................................21
5.6 No
Negotiation.........................................21
5.7 Best
Efforts...........................................21
5.8 Interim
Financial Statements...........................21
5.9 Change of
Name.........................................21
5.10
Payment of Liabilities.................................21
5.11
Audited Financial Statements...........................21
5.12
Environmental Work.....................................22
5.13
Bank Subordination.....................................22
6.
Covenants of Buyer Prior to
Closing.............................22
6.1 Best
Efforts...........................................22
7.
Conditions Precedent to Buyer' s Obligation to
Close............22
7.1 Accuracy
of Representations............................22
7.2 Seller's
Performance...................................22
7.3
Consents...............................................22
7.4 Additional
Documents...................................22
7.5 Audited
Financial Statements...........................23
7.6 No
Proceedings.........................................23
7.7 No
Conflict............................................23
7.8
Environmental Report/Remediation.......................23
7.9
Employees..............................................23
7.10
Condition of Equipment and Facilities..................23
7.11
Inventory..............................................24
8.
Conditions Precedent to Seller's Obligation to
Close............24
8.1 Accuracy
of Representations............................24
8.2 Buyer's
Performance....................................24
8.3
Consents...............................................24
8.4 Additional
Documents...................................24
8.5 No
Injunction..........................................24
9.
Termination.....................................................25
9.1
Termination Events.....................................25
9.2 Effect of
Termination..................................25
10. Additional
Covenants and Agreements.............................26
10.1
Employees and Employee Benefits........................26
10.2
Non-Competition, Non-Solicitation and
Non-Disparagement......................................28
10.3
Customer and Other Business Relationships..............29
10.4
Transition; Shareholders Assistance....................29
10.5
Retention of and Access to Records.....................29
10.6
Accounts Receivable Repurchase.........................29
10.7
Further Assurances.....................................29
10.8
Corporate Continuation.................................29
11.
Indemnification;
Remedies.......................................30
11.1
Survival...............................................30
11.2
Indemnification and Reimbursement by Seller
and Shareholders.......................................30
11.3
Indemnification and Reimbursement by
Seller-Environmental Matters...........................30
11.4
Indemnification and Reimbursement by Buyer.............31
11.5
Limitations on Amount-Seller and Shareholders..........31
11.6
Limitations on Amount-Buyer............................31
11.7
Time Limitations.......................................32
11.8
Right of Setoff........................................32
11.9
Third-Party Claims.....................................32
11.10
Other Claims...........................................34
11.11
Indemnification in Case of Strict Liability or
Indemnitee Negligence..................................34
12.
Confidentiality.................................................34
12.1
Definition of Confidential Information.................34
12.2
Restricted Use of Confidential Information.............35
12.3
Exceptions.............................................35
12.4
Legal Proceedings......................................36
12.5
Return or Destruction of Confidential Information......36
12.6
Attorney-Client Privilege..............................36
13. General
Provisions..............................................37
13.1
Expenses...............................................37
13.2
Public Announcements...................................37
13.3
Notices................................................37
13.4
Arbitration............................................38
13.5
Enforcement of Agreement...............................39
13.6
Waiver; Remedies Cumulative............................39
13.7
Entire Agreement and Modification......................39
13.8
Schedules..............................................39
13.9
Assignments, Successors and No Third-Party Rights......40
13.10
Severability...........................................40
13.11
Construction...........................................40
13.12 Time
of Essence........................................40
13.13
Governing Law..........................................40
13.14
Execution of Agreement.................................40
13.15
Shareholders Obligations...............................40
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset
Purchase Agreement
("Agreement")
is dated August 30,
2005, by
and among MTM ACQUISITION COMPANY, a Michigan corporation ("Buyer"); MIDWEST
TUBE MILLS, INC., an Indiana corporation ("Seller"); RICHARD L. RUSSELL, a
resident of Indiana and RICHARD L. RUSSELL
in his fiduciary
capacity as Trustee
of the Richard L. Russell 2004 Annuity Trust u/t/d August 11, 2004 (each a
"Shareholder,"together "Shareholders").
RECITALS
Shareholders
own two hundred (200)
shares of the common stock, of Seller,
which constitutes one hundred percent (100%) of the issued and
outstanding
shares of common capital stock of Seller. Seller desires to sell, and Buyer
desires to purchase, the Assets of Seller
for the consideration and on the terms
set forth in this Agreement.
The parties,
intending to be legally bound, agree as follows:
1. DEFINITIONS AND USAGE. The definitions
and usage applicable to this Agreement
are set forth on Exhibit 1.
2. SALE AND TRANSFER OF ASSETS;
CLOSING.
2.1 Assets to be Sold. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing, but effective as of the Closing
Date,
Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer
shall purchase and acquire from Seller,
free and clear of any Encumbrances other
than Permitted Encumbrances, all of
Seller's right, title and interest in and to
all of Seller's property and assets, real, personal or mixed, tangible and
intangible, of every kind and description, wherever located, including the
following (but excluding the Excluded
Assets):
(a) all Tangible
Personal Property, including those items described in
Schedule 2.1(a);
(b) all cash,
cash equivalents and short-term investments
(c) all
Inventories;
(d) all Accounts
Receivable;
(e) all Seller
Contracts, including
those listed in Schedule 3.18(a), and
all outstanding offers or solicitations
made by or to Seller
to enter into any
Contract;
(f) all
Governmental
Authorizations and all pending applications therefor
or renewals thereof, in each case to the
extent transferable to Buyer, including
those listed in Schedule 3.16(b);
(g) all data and
Records related to the
operations
of Seller,
including
customer lists and Records, referral sources, research and development
reports
and Records, production reports and Records, service and warranty Records,
equipment logs, operating guides and
manuals, financial and
accounting Records,
creative materials, advertising materials, promotional materials, studies,
reports, correspondence and other similar
documents and Records and, subject to
Legal Requirements, copies of all personnel Records
and other Records described
in Section 2.2(d);
(h) all of the intangible rights and property of Seller, including
Intellectual Property Assets, going concern value, Seller's name and any
derivative of Seller's name, goodwill, world wide web address and site,
telephone, telecopy and email addresses and
listings;
(i) all
insurance benefits,
including rights and proceeds, arising from or
relating to the Assets or the Assumed Liabilities prior to the Closing Date,
unless expended in accordance with this
Agreement;
(j) all claims
of Seller against
third parties
relating to the Assets
or
Assumed Liabilities, whether choate or
inchoate, known or unknown, contingent or
non-contingent, including all such claims
listed in Schedule 2.1(k); and
(k) all rights
of Seller relating to deposits and prepaid expenses, claims
for refunds and rights to offset in
respect thereof
relating to the Assets
or
Assumed Liabilities.
All of the property and assets to be
transferred to Buyer
hereunder are
herein
referred to collectively as the
"Assets."
Notwithstanding
the foregoing, the
transfer of the Assets pursuant to this
Agreement shall not include the assumption of any Liability related to the
Assets unless Buyer expressly assumes that Liability pursuant to Section
2.4(a).
2.2 Excluded
Assets.
Notwithstanding anything to the contrary contained in
Section 2.1 or elsewhere in this Agreement, the following assets of Seller
(collectively, the "Excluded Assets") are not part of the sale and
purchase
contemplated hereunder, are excluded from the Assets and shall remain the
property of Seller after the Closing:
(a) all minute
books, stock Records and corporate seals;
(b) all
insurance policies and rights thereunder (except to the extent
specified in Sections 2.1(j) and
2.1(k));
(c) all
personnel Records and
other Records that Seller is required by law
to retain in its possession;
(d) all
claims for refund of Taxes and other governmental charges of
whatever nature for periods arising prior
to the Closing Date;
(e) all rights
in connection with and assets of the Employee Plans;
(f) all rights
of Seller under this
Agreement, the Bill of
Sale, and the
Assignment and Assumption Agreement;
and
(g) the assets
listed on Schedule 2.2.
2.3
Consideration. The
consideration for the Assets (the "Purchase Price")
will be (a) Twenty-Seven Million Five Hundred Thousand Dollars ($27,500,000)
plus or minus the Adjustment Amount and (b) the assumption of the Assumed
Liabilities. In accordance with Section 2.7(b), at the Closing, the Purchase
Price, prior to adjustment on the account of the Adjustment Amount shall be
delivered by Buyer to Seller as follows: (a) Twenty-Five Million Dollars
($25,000,000) by wire transfer; (b) Two Million Five Hundred
Thousand Dollars
($2,500,000) payable by delivery of a Promissory Note, subordinated to the
senior lender of Buyer (or Buyer's parent) in the form of Exhibit 2.3 (the
"Promissory Note"); and (c) the balance of the
Purchase Price by the execution
and delivery of the Assignment and
Assumption Agreement.
The Adjustment
Amount
shall be paid in accordance with Section
2.8.
2.4
Liabilities.
(a) Assumed
Liabilities.
On the Closing Date,
Buyer will assume and agree
to pay, perform or otherwise discharge only the Liabilities of Seller (the
"Assumed Liabilities") as follows:
(i) any trade account
payable (other than a trade account payable to
any Shareholder or a Related
Person of Seller or any Shareholder) incurred
by Seller in the
Ordinary Course of Business and reflected on Seller's
books that
remains unpaid at and is not delinquent as of the Closing Date;
(ii) any Liability
to Seller's
customers incurred by Seller in the
Ordinary
Course of Business for
orders outstanding as
of the Closing Date
reflected
on Seller's
customer purchase orders which are not more than
thirty (30) days
past their respective
due dates (other than any Liability
arising out of
or relating to a Breach that occurred prior to the Closing
Date);
(iii) any Liability
arising after the Closing Date under the
Seller
Contracts
described in Schedule
3.18(a)(other
than any Liability
arising
out of or
relating to a Breach that occurred prior to the Closing Date);
(iv) any Liability of Seller arising after the Closing Date
under any
Seller Contract
included in the Assets that is entered into by Seller after
the date hereof
in accordance with the provisions of this Agreement (other
than any
Liability arising out of or relating to a Breach that
occurred
prior to the
Closing Date); and
(v) any Liability of Seller described in Schedule 2.4(a)(v).
(b) Retained
Liabilities.
The Retained
Liabilities
will remain the
sole
responsibility of and will be retained,
paid, performed or
otherwise discharged
solely by Seller; provided, that this paragraph will
not create any third party
beneficiary rights in any Person other than
Buyer. "Retained
Liabilities" mean
every Liability of Seller other than the
Assumed Liabilities,
including but not
limited to any Liability relating to the
Employee Plans.
2.5 Allocation.
The Purchase Price shall be allocated in accordance with an
allocation to be mutually agreed to on or prior to Closing.
After the Closing,
the parties shall make consistent use of the allocation, for all Tax purposes
and in all filings, declarations and reports with the IRS in
respect thereof,
including the reports required to be filed
under Section 1060 of the Code.
2.6 Closing. The purchase and sale provided for in this Agreement (the
"Closing") will take place at the offices of Buyer's counsel at Raymond &
Prokop, P.C., 26300 Northwestern Highway,
4th Floor, Southfield, Michigan 48076,
commencing at 10:00 a.m. (local time) five (5) Business
Days after receipt
by
Buyer of audited financial statements for Seller's 2002,
2003, and 2004 fiscal
years, or such other date as Buyer and
Seller may mutually
agree (the "Closing
Date").
2.7 Closing
Obligations. In addition to any other documents to be delivered
under other provisions of this Agreement,
at the Closing:
(a) Seller and
Shareholders,
as the case may be,
shall deliver to
Buyer,
together with funds sufficient to pay all Taxes necessary for the transfer,
filing or recording thereof:
(i) a bill of sale for all of the Assets that are Tangible Personal
Property in the
form of Exhibit
2.7(a)(i)(the "Bill of
Sale") executed by
Seller;
(ii) an assignment of all of the Assets that are intangible personal
property in the
form of Exhibit
2.7(a)(ii), which
assignment
shall also
contain Buyer's
undertaking and
assumption of the Assumed Liabilities (the
"Assignment and
Assumption Agreement") executed by Seller;
(iii) a lease
agreement with respect to the premises located at 2971
Michigan Road,
Madison, Indiana in form and substance satisfactory to Buyer
and its counsel
and executed by Barr Properties, LLC in the form of Exhibit
2.7(a)(iii) (the
"Facility Lease");
(iv) assignments
of all Intellectual Property Assets and separate
assignment of
Seller's domain name executed by Seller;
(v) such other deeds,
bills of sale,
assignments,
certificates
of
title,
documents and other
instruments
of transfer and
conveyance as may
reasonably be
requested by Buyer,
each in form and substance satisfactory
to Buyer and its
legal counsel and executed by Seller;
(vi) a certificate
executed by Seller and each Shareholder as to the
accuracy of
their representations
and warranties as of the date of this
Agreement
and as of the Closing
in accordance
with Section 7.1 and
as to
their compliance
with and performance of their covenants and obligations to
be performed or
complied with at or before the Closing in accordance with
Section
7.2);
(vii) UCC termination
statements
for all lien
filings against the
Assets
including from, but not limited to, National City Bank and Home
Federal
Bank;
(viii) a Non-Competition Agreement in the form of Exhibit
2.7(a)(viii)
(the
"Non-Competition") executed by Richard Russell;
(ix) a certificate of the Secretary of Seller certifying,
as complete
and accurate as
of the Closing,
attached copies of the Governing Documents
of Seller,
certifying and attaching all requisite resolutions or actions
of
Seller's
board of directors and
Shareholders
approving the
execution and
delivery
of this Agreement and the consummation of the Contemplated
Transactions
and the change of name contemplated by Section 5.9 and
certifying
to the incumbency and signatures of the officers of Seller
executing
this Agreement and any other document relating to the
Contemplated
Transactions
and accompanied by the
requisite documents
for
amending the
relevant Governing Documents of Seller required to effect such
change
of name in form sufficient for filing with the appropriate
Governmental
Body; and
(x) an Opinion of Seller's counsel in the form of Exhibit
2.7(a)(x).
(b) Buyer shall
deliver to Seller and Shareholders, as the case may be:
(i) Twenty-Five
Million Dollars ($25,000,000) by wire transfer of
immediately
available funds to an
account specified by Seller in a writing
delivered
to Buyer at least
three (3) Business
Days prior to the
Closing
Date;
(ii) the Assignment and Assumption Agreement executed by Buyer;
(iii) the
Non-Competition
Agreement executed by Buyer and Richard
Russell;
(iv) the Lease in the
form of Exhibit
2.7(a)(iii)
executed by the
Buyer;
(v) a Guarantee in the
form of Exhibit
2.7(b)(v) executed by
Tarpon
Industries,
Inc.;
(vi) a certificate executed by Buyer as to the accuracy of its
representations
and warranties as of the date of this
Agreement and as of
the Closing in
accordance with
Section 8.1 and as to its compliance with
and performance of its covenants and obligations to be performed or
complied with at
or before the Closing in accordance with Section 8.2;
(vii) a certificate of the Secretary of Buyer certifying,
as complete
and accurate as
of the Closing,
attached copies of the Governing Documents
of Buyer and
certifying and attaching all requisite resolutions or actions
of Buyer's
board of managers
approving the
execution and delivery of this
Agreement
and the consummation of the Contemplated Transactions and
certifying
to the incumbency and signatures of the officers of Buyer
executing
this Agreement and any other document relating to the
Contemplated
Transactions; and
(viii) the Promissory Note in the form of Exhibit 2.3.
2.8 Adjustment
Amount and Payment.
The "Adjustment Amount" (which may be a
positive or negative number) will be equal to the amount determined by
subtracting the Closing Working Capital
from the Initial Working Capital. If the
Adjustment Amount is positive, the Adjustment Amount shall be paid by wire
transfer by Seller to an account specified
by Buyer. If the Adjustment Amount is
negative, the difference between the Closing Working Capital and the Initial
Working Capital shall be paid by wire
transfer by Buyer to an account specified
by Seller. All payments shall be made together with interest at the rate set
forth in the Promissory Note, which
interest shall begin accruing on the Closing
Date and end on the date that the
payment is made.
Within three (3) Business
Days after the calculation of the Closing
Working Capital becomes binding and
conclusive on the parties pursuant to
Section 2.9, Seller or Buyer, as the case
may be, shall make the wire transfer
payment provided for in this Section 2.8.
2.9 Adjustment
Procedure.
(a) "Working
Capital"shall
mean Seller's
average working
capital for the
twelve calendar month period immediately
preceding April 30,
2005 calculated by
subtracting, for each such month, the current
liabilities of Seller included in
the Assumed Liabilities from the current
assets of Seller (including any cash or
cash equivalents) included in the Assets for each
such month and
dividing the
sum of the foregoing by twelve.
Inventory included in the Assets will be
based
on a physical inventory conducted by Buyer prior to the Closing and
valued at
cost. The Working Capital of Seller as of
the twelve months
preceding April 30,
2005 (the "Initial Working Capital") is Four Million Nine
Hundred
Eighty-Eight
Thousand Two Hundred Thirty-Nine Dollars
($4,988,239).
(b) Buyer shall prepare financial statements ("Closing Financial
Statements") of Seller as of the Closing
Date and for the
period from the date
of the Balance Sheet through the Closing
Date on the same basis and applying the
same accounting principles, policies and practices that were
used in preparing
the Balance Sheet, including the
principles, policies and practices set forth on
Exhibit 2.9. Buyer shall then determine the
Working Capital as of
the Closing
Date (the "Closing Working Capital") based
upon the Closing Financial Statements
and using the same methodology as was used to calculate the Initial Working
Capital. Buyer shall deliver the Closing Financial Statements and its
determination of the Closing Working Capital to Seller within sixty
(60) days
following the Closing Date.
(c) If within
fifteen (15) days following delivery of the Closing Financial
Statements and the Closing Working Capital calculation Seller has not given
Buyer written notice of its objection as to the Closing Working Capital
calculation (which notice shall state the
basis of Seller's objection), then the
Closing Working Capital calculated by Buyer shall be
binding and conclusive on
the parties and be used in computing the
Adjustment Amount.
(d) If Seller
duly gives Buyer such notice of objection, and if Seller and
Buyer fail to resolve the issues outstanding with respect to the Closing
Financial Statements and the calculation of the Closing Working
Capital within
thirty (30) days of Buyer's receipt of Seller's objection notice, Seller and
Buyer shall submit the issues remaining in dispute to the Independent
Accountants for resolution applying the principles, policies and practices
referred to in Section 2.9(b). If issues are submitted to the Independent
Accountants for resolution, (i) Seller and Buyer shall furnish
or cause to be
furnished to the Independent Accountants such work papers and other
documents
and information relating to the disputed issues as
the Independent
Accountants
may request and are available to that party or its
agents and shall be afforded
the opportunity to present to the
Independent
Accountants any material relating
to the disputed issues and to discuss the issues with the Independent
Accountants; (ii) the determination by the
Independent Accountants, as set forth
in a notice to be delivered to both Seller and Buyer within
sixty (60) days of
the submission to the Independent Accountants of the issues remaining in
dispute, shall be final, binding and
conclusive on the parties and shall be used
in the calculation of the Closing Working
Capital; and (iii) Seller and Buyer
will each bear fifty percent (50%) of the fees and costs of the
Independent
Accountants for such determination.
2.10
Consents. If there are any Consents
that have not yet been
obtained
(or otherwise are not in full force and effect)
as of the Closing, in
the case
of each Seller Contract as to which such Consents were not obtained (or
otherwise are not in full force and effect)
(the "Restricted Contracts"), Buyer
may waive the closing conditions as to any such Consent
and either (a) elect to
have Seller continue its efforts to obtain the
Consents; or (b) elect to have
Seller retain that Restricted Contract and all Liabilities
arising therefrom or
relating thereto.
If Buyer elects
to have Seller
continue its efforts to obtain any Consents
and the Closing occurs, notwithstanding Sections 2.1 and 2.4, neither this
Agreement nor the Assignment and Assumption Agreement nor any other
document
related to the consummation of the
Contemplated
Transactions shall constitute a
sale, assignment, assumption, transfer, conveyance or delivery
or an attempted
sale, assignment, assumption, transfer,
conveyance or delivery of the Restricted
Contracts, and following the Closing,
the parties shall use
Best Efforts, and
cooperate with each other, to obtain the Consent relating to each Restricted
Contract as quickly as practicable. Pending the obtaining of such Consents
relating to any Restricted Contract, the
parties shall cooperate with each other
in any reasonable and lawful arrangements designed to provide to Buyer the
benefits of use of the Restricted Contract
for its term (or any right or benefit
arising thereunder, including the enforcement for the benefit of
Buyer of any
and all rights of Seller against a third
party thereunder).
Once a Consent for
the sale, assignment, assumption, transfer, conveyance and delivery of a
Restricted Contract is obtained,
Seller shall promptly
assign, transfer, convey
and deliver such Restricted Contract to Buyer, and Buyer shall assume the
obligations under such Restricted
Contract assigned to
Buyer from and after the
date of assignment to Buyer pursuant to a special-purpose assignment and
assumption agreement substantially similar in terms to those of the
Assignment
and Assumption Agreement (which special-purpose agreement the parties shall
prepare, execute and deliver in good faith
at the time of such transfer, all at
no additional cost to Buyer).
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS. Seller and
Shareholders represent and warrant, jointly
and severally, to Buyer as follows:
3.1 Organization and Good Standing. Schedule 3.1 contains a complete
and
accurate list of Seller's jurisdiction of incorporation and any other
jurisdictions in which it is qualified to
do business as a foreign corporation.
Seller is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of
incorporation,
with full corporate
power
and authority to conduct its business
as it is now being
conducted, to own
or
use the properties and assets that it
purports to own or use, and to perform all
its obligations under the Seller Contracts. Seller is duly qualified to do
business as a foreign corporation and is in
good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the
nature of the activities conducted by it,
requires such qualification, except those jurisdictions in which a failure
to
qualify would not have a material
adverse effect on the business,
operations,
assets, condition or prospects of Seller or upon the Assets. Seller has
delivered to Buyer complete and accurate copies of the Governing
Documents of
Seller, as currently in effect.
Seller has no
Subsidiary and, does not own any
shares of capital stock or other securities
of any other Person.
3.2
Enforceability; Authority; No Conflict.
(a) This
Agreement constitutes
the legal, valid and
binding obligation of
Seller and each of the Shareholders, enforceable against each of them in
accordance with its terms. Upon the execution and delivery by Seller and the
Shareholders of the other agreement to be
executed or delivered by any or all of
Seller and Shareholders at the Closing (collectively, the "Seller's Closing
Documents"), each of Seller's Closing
Documents will constitute the legal, valid
and binding obligation of each of Seller and each of the Shareholders,
enforceable against each of them in accordance
with its terms. Seller
has full
corporate power and authority to execute and deliver this
Agreement and the
Seller's Closing Documents to which it is a
party and to perform its obligations
under this Agreement and the Seller's
Closing Documents, and such action has
been duly authorized by all necessary
action by Seller's
shareholders and board
of directors. Each of the Shareholders has
all necessary legal capacity to enter
into this Agreement and the Seller's
Closing Documents to which the Shareholders
are a party and to perform such Shareholder's obligations hereunder and
thereunder.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without
notice or lapse of time):
(i) Breach (A) any
provision of any of
the Governing
Documents of
Seller
or (B) any
resolution
adopted by the board of directors or the
shareholders of
Seller;
(ii) Breach
any Legal Requirement or any Order to which Seller or
Shareholders, or
any of the Assets, may be subject;
(iii) contravene,
conflict with or result in a violation or Breach of
any of the terms
or requirements of any Governmental Authorization that is
held by Seller
or that otherwise
relates to the Assets
or to the business
of Seller;
(iv) cause Buyer to
become subject
to, or to become
liable for the
payment of, any
Tax;
(v) Breach any provision of, or cause an acceleration of the maturity
or performance of, or payment under, cancellation, termination or
modification of
any Seller Contract; or
(vi) result in the imposition or creation of any Encumbrance upon or
with respect to
any of the Assets.
(c) Except as
set forth in Schedule 3.2(c), neither Seller nor Shareholders
are required to give any notice to or obtain any
Consent from any Person in
connection with the execution and delivery
of this Agreement or the consummation
or performance of any of the Contemplated
Transactions.
3.3 Capitalization. The authorized equity securities
of Seller consist of
One Thousand (1,000) shares of common stock of which
Two Hundred (200)
shares
are issued and outstanding. The
Shareholders are and will be on the Closing Date
the record and beneficial owners and holders of Two Hundred (200) shares
representing one hundred percent (100%) of the issued and
outstanding
voting
securities of Seller.
3.4 Financial
Statements.
Seller has delivered
to Buyer: (a) an unaudited
balance sheet of Seller as at December 31,
2004 (the "Balance
Sheet"), and the
related unaudited statements of income for the
fiscal year then ended; (b) an
unaudited balance sheet of Seller as at
December 31, 2003 and December 31, 2002,
and the related unaudited statements of income for the
fiscal years then ended;
(c) an unaudited balance sheet of Seller as at April 30,
2005 (the "Interim
Balance Sheet"), and the related unaudited
statements of income. Such financial
statements reflect (and the financial
statements
delivered pursuant to
Section
5.8 will reflect) the financial condition and the results of operations of
Seller as at the respective dates of and for the periods referred to in such
financial statements except for certain
"Seller add-backs"
previously disclosed
in writing to Buyer. The financial statements have been and will be prepared
from and are in accordance with the
accounting Records of Seller. The workpapers
and other financial information that Seller delivers to Grant Thornton in
connection with the preparation of audited
financial statements will be true and
correct in all material respects.
3.5 Books and
Records. The books of
account and other financial Records of
Seller, all of which have been made
available to Buyer, are complete and correct
in all material respects and represent
actual, bona fide transactions.
3.6 Title to and
Sufficiency of Assets.
Seller owns good and
transferable
title to all the Assets free and clear of any Encumbrances other than those
identified on Schedule 3.6 as acceptable to Buyer (the "Permitted
Encumbrances"). Seller warrants to Buyer that, at the
time of Closing, all
of
the Assets will be free and clear of any
Encumbrances
except for the
Permitted
Encumbrances. Except as set forth in Schedule
3.6, the Assets (a) constitute
all of the assets, tangible and intangible,
of any nature whatsoever, necessary
to operate Seller's business in the manner
presently operated by
Seller and (b)
include all of the operating assets of
Seller.
3.7 Description of Leased Real
Property. Schedule 3.7 contains a
correct
legal description, street address and tax parcel
identification number
of real
property in which Seller has a leasehold
interest and an accurate description of
all Real Property Leases.
3.8 Condition of
Facilities.
(a) Use of the
Real Property
for the various purposes for which it is
presently being used is permitted as of
right under all applicable zoning legal
requirements and is not subject to "permitted
non-conforming"use
or structure
classifications. All Improvements are in compliance with all
applicable Legal
Requirements, including those pertaining to
zoning, building and
the disabled,
are in good repair and in good condition,
ordinary wear and tear
excepted, and
are free from latent and patent
defects.
(b) Each item of
Tangible Personal Property is in good repair and good
operating condition, ordinary wear and tear excepted,
is suitable for immediate
use in the Ordinary Course of Business of Seller and is free from latent
and
patent defects. No item of Tangible Personal Property is in need of repair
or
replacement other than as part of routine
maintenance in the
Ordinary Course of
Business of Seller. Except as disclosed in Schedule 3.8(b), all Tangible
Personal Property used in Seller's business
is in the possession of Seller.
3.9 Accounts
Receivable. All
Accounts Receivable that are reflected on the
Balance Sheet or the Interim Balance Sheet or on the accounting Records of
Seller as of the Closing Date represent or will represent valid obligations
arising from sales actually made or
services actually performed by Seller in the
Ordinary Course of Business. Except to the extent paid prior to the Closing
Date, such Accounts Receivable are or will
be as of the Closing Date current and
collectible. Each of such Accounts Receivable either has been or will be
collected in full, without any setoff,
within ninety (90)
days after the day on
which it first becomes due and payable except as set forth on
Schedule 3.9.
There is no contest, claim, defense or right of setoff,
other than returns
in
the Ordinary Course of Business of Seller,
under any Contract
with any account
debtor of an Account Receivable relating to the amount or validity of such
Account Receivable, except as set forth on
Schedule 3.9.
3.10
Inventories.
All items included in the Inventories consist of a
quality and quantity usable and, with respect to
finished goods,
saleable, in
the Ordinary Course of Business of Seller
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 Balance Sheet
or on the accounting Records of Seller
as of the Closing Date, as the case may be. Seller is not
in possession of any
inventory not owned by Seller, including goods already sold. All of the
Inventories have been valued at (i) actual
cost in the case of
raw materials,
and (ii) eighty-five (85%) percent of anticipated sale price in the case of
finished goods.
3.11 No
Undisclosed
Liabilities.
Except as set forth in
Schedule 3.11,
Seller has no Liability except for
Liabilities reflected
or reserved against in
the Balance Sheet or the Interim Balance
Sheet and current liabilities incurred
in the Ordinary Course of Business of Seller since the date of the Interim
Balance Sheet.
3.12 Taxes.
(a) Seller has filed or caused to be filed on a timely
basis all Tax
Returns and all reports with respect to Taxes that are or were
required to be
filed pursuant to applicable Legal Requirements to the best of Seller and
Shareholder's Knowledge. Seller has paid, or made provision
for the payment of,
all Taxes shown to be due and owing by such
Tax Returns. No claim
has ever been
made or is expected to be made by any
Governmental Body in a jurisdiction where
Seller does not file Tax Returns that it is or may be subject to
taxation by
that jurisdiction. There are no Encumbrances on any
of the Assets that arose in
connection with any failure (or alleged
failure) to pay any
Tax, and Seller has
no Knowledge of any basis for assertion of any claims attributable to Taxes,
which if adversely determined, would result
in any such Encumbrance.
(b) Seller has
delivered or made available to Buyer copies of, and Schedule
3.12(b) contains a complete and accurate
list of, all Tax
Returns filed
since
January 1, 1996. None of Seller's Tax Returns
filed since January 1,
1996 have
been audited or are currently under audit. All Taxes that Seller is or was
required by Legal Requirements to withhold, deduct or collect have been
duly
withheld, deducted and collected and, to the
extent required, have been paid to
the proper Governmental Body or other
Person.
3.13 No Material
Adverse Change. Except as set forth on
Schedule 3.13,
since December 31, 2004, there has not been any material
adverse change in
the
business, operations, prospects, assets, results of operations or condition
(financial or other) of Seller,
and to the Knowledge
of Seller, without
regard
to general economic conditions or fluctuating steel prices, no event has
occurred or circumstance exists that may result in such a
material adverse
change.
3.14 Employee
Benefits.
(a) Set forth in
Schedule 3.14(a) is a
complete and
correct list of all
"employee benefit plans"as defined by Section 3(3) of ERISA, all specified
fringe benefit plans as defined in Section 6039D of the Code, and all other
plans and trusts for the benefit of
Seller's employees
(the "Employee
Plans").
Schedule 3.14(a) identifies as such any Employee Plan that is (i) a "Define
Benefit Plan"(as defined in Section 414(l)
of the Code), (ii) a plan intended to
meet the requirements of Section 401(a) of the Code, (iii) a "Multiemployer
Plan"(as defined in Section 3(37) of
ERISA), or (iv) a plan
which is subject to
Title IV of ERISA, other than a Multiemployer
Plan. Also set forth
on Schedule
3.14(a) is a complete and correct list of
all ERISA Affiliates
of Seller during
the last six (6) years.
(b) Seller has
delivered to Buyer true, accurate and complete copies of the
documents comprising each Employee
Plan.
(c) Except as
disclosed in Schedule 3.14(c), full payment has been made of
all amounts which are required under the terms of each Employee
Plan to be paid
as contributions with respect to the last day of
the most recent fiscal year of
such Employee Plan ended on or before the
date of this Agreement.
(d) Except as disclosed in Schedule 3.14(d), Seller and its ERISA
Affiliates have
complied with the continuation coverage provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"), as
amended,
with respect to all current employees and former employees and "qualified
beneficiaries" [as defined in Code Section 4980B(g)(1) and ERISA Section
607(3)]. All current and former Employee
Plans that are "group health plans,"as
defined in Section 5000(b) of the Code,
have been operated in
conformance with
the Medicare as Secondary Payer provisions of the Social
Security Act, and
no
person is subject to liability under
Section 5000(a) of the Code with respect to
any such Employee Plan.
(e) The form of
all Employee
Plans is in
compliance
or exempt with the
applicable terms of ERISA, the Code, and any other
applicable laws,
including
the Americans with Disabilities Act, the
Family Medical Leave Act and the Health
Insurance Portability and Accountability
Act, and such plans have been operated
in compliance with such laws and the written
Employee Plan
documents.
To the
best of Seller's Knowledge, Seller is not aware of any facts nor has
it been
notified of any violations of the Americans with
Disabilities
Act, the Family
medical Leave Act, and the Health Insurance
Portability an Accountability Act.
(f) There is no material pending or to Seller's Knowledge threatened
Proceeding relating to any Employee Plan, nor
is there, to Seller's
Knowledge,
any basis for any such Proceeding. Neither Seller nor any fiduciary of an
Employee Plan has engaged in a transaction with respect to any Employee
Plan
that, assuming the taxable period of such transaction expired as of the date
hereof, could subject Seller or Buyer to a tax or
penalty imposed by either
Section 4975 of the Code or Section
502(l) of ERISA or a
violation of
Section
406 of ERISA.
(g) Seller has
maintained
workers' compensation coverage as required by
applicable state law through purchase of
insurance and not by
self-insurance or
otherwise except as disclosed to Buyer on Schedule 3.14(g) and has properly
reported and paid all amounts in connection
therewith.
(h) Except as
required by Legal Requirements, the consummation of the
Contemplated Transactions will not
accelerate the time of vesting or the time of
payment, or increase the amount, of
compensation due to any director, employee,
officer, former employee or former officer
of Seller.
(i) Except for
the continuation
coverage requirements of COBRA, Seller has
no obligations or potential liability for benefits to employees, former
employees or their respective dependents following termination
of employment or
retirement under any of the Employee
Plans that are
Employee Welfare
Benefit
Plans.
(j) No provision
of any Employee Plan provides that such Employee Plan will
automatically be amended, modified or
terminated as a result of the Contemplated
Transactions. No written or oral
representations have been made by Seller to any
employee or former employee of Seller
concerning the employee benefits of Buyer.
3.15
Compliance
With Legal Requirements; Governmental Authorizations.
Except as set forth in Schedule 3.15:
(a) Seller is, and at all times has been,
in full compliance with each
material Legal Requirement that is or was
applicable to it or to the conduct or
operation of its business or the ownership
or use of any of its assets;
(b) to the
Knowledge of Seller, no event has occurred or circumstance
exists that (with or without notice or lapse of time) (i)
constitutes
or will
result in a violation by Seller of, or a
failure on the part of Seller to comply
with, any material Legal Requirement or
(ii) gives rise to any obligation on the
part of Seller to undertake, or to bear all or any portion of
the cost of, any
remedial action of any nature;
(c) Seller has
not received any notice or other communication (whether oral
or written) from any Governmental Body or any other Person
regarding (i) any
actual or alleged violation of, or failure
to comply with, any Legal Requirement
or (ii) any actual or alleged obligation on
the part of Seller to undertake, or
to bear all or any portion of the cost of, any
remedial action of any nature;
and
(d) Schedule 3.15(d) contains a complete and accurate list of each
Governmental Authorization that is held by Seller or that
otherwise relates to
Seller's business or the Assets. Each Governmental Authorization listed or
required to be listed in Schedule 3.15(d)
is valid and in full force and effect.
Except as set forth in Schedule
3.15(d):
(i) Seller is, and at all times has been, in full compliance with all
of the material
terms and requirements of each Governmental Authorization
identified or
required to be identified in Schedule 3.15(d);
(ii) to the Knowledge of Seller, no event has occurred or
circumstance
exists that
(with or without
notice or lapse of time) (A) constitutes or
will result
directly or indirectly in a material violation of or a failure
to comply with
any term or
requirement of any
Governmental
Authorization
listed or
required to be listed in Schedule 3.15(d) or (B) will result
directly
or indirectly in the revocation, withdrawal, suspension,
cancellation or
termination of, or any
modification to, any
Governmental
Authorization
listed or required to be listed in Schedule 3.15(d); and
(iii) Seller
has not received, at any time any notice or other
communication
(whether oral or
written) from any Governmental Body or any
other Person
regarding (A) any actual or alleged violation of or failure to
comply
with any material term or requirement of any Governmental
Authorization
or (B) any actual or proposed revocation, withdrawal,
suspension,
cancellation,
termination
of or modification to any
Governmental
Authorization.
The Governmental
Authorizations
listed in Schedule
3.15(d) collectively
constitute all of the Governmental
Authorizations
necessary to permit Seller to
lawfully conduct and operate its
business in the manner
in which it
currently
conducts and operates such business and to permit Seller to own and use its
assets in the manner in which it currently
owns and uses such assets.
3.16 Legal
Proceedings; Orders.
(a) Except as
set forth in Schedule
3.16(a), there is no pending or, to
Seller's Knowledge, threatened
Proceeding:
(i) by or against
Seller or that
otherwise relates to
or may affect
the business of,
or any of the assets owned or used by Seller; or
(ii) that challenges, or that may have the effect of preventing,
delaying,
making illegal or otherwise interfering with, any of the
Contemplated
Transactions.
Seller has
delivered to Buyer copies of all pleadings, correspondence and
other documents relating to each Proceeding listed
in Schedule 3.16(a).
Except
as set forth on Schedule 3.16(a), there are
no Proceedings listed or required to
be listed in Schedule 3.16(a) that could have a material
adverse effect on
the
business, operations, assets, condition or prospects of Seller or upon the
Assets.
(b) Except as
set forth in Schedule
3.16(b), there is no
Order to which
Seller, its business or any of the Assets
is subject.
3.17 Absence of
Certain Changes and Events. Except as set forth in Schedule
3.17, since April 30, 2005, Seller has conducted its business only in the
Ordinary Course of Business and there has
not been any:
(a) change in
Seller's authorized or
issued capital
stock, grant of any
stock option or right to purchase
shares of capital
stock of Seller or issuance
of any security convertible into such
capital stock;
(b) amendment to
the Governing Documents of Seller;
(c) payment
(except in the
Ordinary Course of Business) or increase by
Seller of any bonuses, salaries or other compensation to any shareholder,
director, officer or employee or entry into
any employment, severance or similar
Contract with any director, officer or
employee;
(d) adoption of, amendment to or increase in the
payments to or benefits
under, any Employee Plan;
(e) damage to or
destruction or loss of
any Asset, whether or
not covered
by insurance;
(f) entry into,
termination
of or receipt of
notice of termination of any
Material Contract to which Seller is a party, or (ii) any Contract or
transaction involving a total remaining commitment by Seller of at least Ten
Thousand Dollars ($10,000);
(g) sale
(other than sales of Inventories in the Ordinary Course of
Business), lease or other disposition of any Asset or property of Seller
(including the Intellectual Property Assets) or the creation
of any Encumbrance
on any Asset;
(h) cancellation or waiver of any claims or rights
with a value to Seller
in excess of Ten Thousand Dollars
($10,000);
(i) indication by any customer or
supplier of an intention to discontinue
or change the terms of its relationship
with Seller;
(j) material
change in the accounting methods used by Seller; or
(k) Contract by
Seller to do any of the foregoing.
3.18 Contracts;
No Defaults.
(a) Schedule
3.18(a) contains an accurate and complete list, and Seller has
delivered to Buyer accurate and complete
copies, of:
(i) each Seller
Contract that
involves performance of services or
delivery of
goods or materials by Seller of an amount or value in excess of
Twenty-Five
Thousand Dollars ($25,000);
(ii) each Seller
Contract that involves
performance
of services or
delivery of
goods or materials to Seller of an amount or value in excess of
Twenty-Five
Thousand Dollars ($25,000);
(iii) each Seller
Contract that was not
entered into in the Ordinary
Course of
Business and that involves expenditures or receipts of Seller
in
excess of Fifty
Thousand Dollars ($50,000)
(iv) each Seller
Contract affecting the
ownership of, leasing of,
title to, use of
or any leasehold or other interest in any real or personal
property (except
personal property leases and installment
and conditional
sales agreements
having a value per item or aggregate payments of less than
Ten Thousand
Dollars ($10,000) and with a term of less than one (1) year);
(v) each Seller
Contract with any labor union or other employee
representative
of a group of employees relating to wages, hours and other
conditions of
employment;
(vi) each Seller
Contract (however named) involving a sharing of
profits, losses,
costs or liabilities by Seller with any other Person;
(vii) each
Seller Contract containing covenants that in any way
purport to
restrict Seller's business activity or limit the freedom of
Seller to engage
in any line of business or to compete with any Person;
(viii) each Seller Contract providing for payments to or by any
Person
based on sales,
purchases or profits, other than direct payments for goods;
(ix) each power of attorney of Seller that is currently
effective and
outstanding;
(x) each Seller
Contract entered into
other than in the Ordinary Course of
Business that contains or provides for an
express undertaking
by Seller to be
responsible for consequential damages;
(xi) each Seller Contract for capital expenditures in excess of
Twenty-Five
Thousand Dollars ($25,000);
(xii) each Seller Contract not denominated in U.S. dollars;
(xiii) each
written warranty, guaranty and/or other similar
undertaking with respect to contractual performance extended by Seller
other than in
the Ordinary Course of Business; and
(xiv) each amendment,
supplement and
modification
(whether oral or
written) in
respect of any of the foregoing.
Schedule
3.18(a) sets forth the
parties to the Contracts and the amount of
the remaining commitment of Seller under
the Contracts.
(b) Except as
set forth in Schedule
3.18(b), no
shareholder of Seller has
or may acquire any rights under, and no
shareholder has or may become subject to
any obligation or liability under, any Contract that relates
to the business of
Seller or any of the Assets.
(c) Except as
set forth in Schedule 3.18(c):
(i) each Contract
identified or required to be identified in Schedule
3.18(a)
and which is to be
assigned to or assumed by Buyer under this
Agreement
is in full
force and effect and is valid and enforceable in
accordance with
its terms;
(ii) each Contract identified or required to be identified in
Schedule
3.18(a) and
which is being assigned to or assumed by Buyer is assignable by
Seller to Buyer
without the consent of any other Person; and
(iii)to the Knowledge of Seller, no Contract identified or required
to
be identified in
Schedule 3.18(a) and which is to be assigned to or assumed
by Buyer under
this Agreement will upon completion or performance
thereof
have a material
adverse affect on the business, assets or condition of
Seller or the
business to be conducted by Buyer with the Assets.
(d) Except as
set forth in Schedule 3.18(d):
(i) Seller
is, and at all times has been,
in compliance with all
applicable
terms and requirements of each Seller Contract which is
being
assumed by
Buyer;
(ii) to Seller's
Knowledge,
each other
Person that has or had any
obligation or
liability under any
Seller Contract which
is being assigned
to Buyer
is, and at all times has been, in full compliance with all
applicable terms
and requirements of such Contract;
(iii) to Seller's
Knowledge, no event
has occurred or
circumstance
exists
that (with or without notice or lapse of time) contravenes,
conflicts with
or will result in a Breach of, or accelerates the maturity
or performance
of, or payment under,
or cancels,
terminates or
modifies,
any Seller
Contract that is being assigned to or assumed by Buyer;
(iv) to Seller's
Knowledge no event has occurred or circumstance
exists under or
by virtue of any Contract that (with or without notice or
lapse of time)
would cause the creation of any Encumbrance affecting any of
the Assets;
and
(v) Seller
has not given to or
received from any other Person any
notice or other
communication
(whether oral or written) regarding any
actual or
alleged Breach of, or default under, any Contract which is being
assigned to or assumed
by Buyer.
(e) There are no
renegotiations of,
attempts to renegotiate or outstanding
rights to renegotiate any material amounts paid or payable to Seller
under
current or completed Contracts with any Person having the contractual or
statutory right to demand or require such
renegotiation
and no such Person
has
made written demand for such
renegotiation.
(f) Each
Contract relating to the sale, design, manufacture or provision
of
products or services by Seller has been
entered into in the
Ordinary Course of
Business of Seller and has been entered
into without the
commission of any
act
alone or in concert with any other Person,
or any consideration having been paid
or promised, that is or would be in
violation of any Legal Requirement.
3.19
Insurance.
(a) Seller has
delivered to Buyer:
(i) accurate and
complete copies of all policies of
insurance (and
correspondence
relating to coverage
thereunder) to which Seller is a party
or under which
Seller is or has been
covered at any time since January 1,
2003, a list of
which is included in Schedule 3.19(a);
(ii) accurate
and complete copies of all pending applications by
Seller for
policies of insurance; and
(iii) any statement by the auditor of Seller's financial statements
or
any consultant or risk management advisor with regard to the
adequacy of
Seller's
coverage or of the reserves for claims.
(b) Schedule
3.19(b) describes:
(i) any self-insurance
arrangement by or affecting Seller, including
any reserves
established thereunder;
(ii) any Contract or
arrangement, other
than a policy of
insurance,
for the transfer
or sharing of any risk to which Seller is a party or which
involves the
business of Seller; and
(iii) all obligations of Seller to provide insurance coverage to
Third
Parties (for
example, under Leases
or service agreements)
and identifies
the policy under
which such coverage is provided.
(c) Except as
set forth in Schedule 3.19(c):
(i) all policies
of insurance to which Seller is a party or that
provide
coverage to Seller are valid, outstanding and enforceable in
accordance with
their respective terms;
(ii) Seller has paid all premiums due, and has otherwise performed
all
of its
obligations,
under each policy of
insurance to which it is a party
or that provides
coverage to Seller; and
(iii) Seller has given
notice to the insurer
of all claims for which
Seller has
asserted coverage that may be insured thereby.
3.20
Environmental Matters. Except as disclosed in Schedule 3.20:
(a) Seller is in
full compliance with all Environmental Laws applicable to
Seller's business as they relate to the
conduct of Seller's business. Seller has
no Knowledge of any non-compliance with
such laws by others.
Neither Seller nor
either Shareholder has received, any actual
or threatened order, notice or other
communication from (i) any Governmental Body or private citizen acting in
the
public interest or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential
violation or failure
to comply with any
Environmental Law, or of any actual or
threatened
obligation
to undertake or
bear the cost of any Environmental, Health and Safety Liabilities with
respect
to any Facility or other property or asset
(whether real,
personal or mixed) in
which Seller has or had an interest, or
with respect to any property or Facility
at or to which Hazardous Materials were generated, manufactured, refined,
transferred, imported, used or processed by
Seller or any other Person for whose
conduct it is or may be held responsible,
or from which Hazardous Materials have
been transported, treated, stored, handled,
transferred, disposed,
recycled or
received.
(b) There are no
pending or, to the Knowledge of Seller, threatened claims,
Encumbrances, or other restrictions of any nature resulting from any
Environmental, Health and Safety
Liabilities or arising under or pursuant to any
Environmental Law with respect to or affecting any Facility or any other
property or asset (whether real, personal or mixed) in which Seller
has or had
an interest.
(c) Neither Seller nor either Shareholder has received any citation,
directive, inquiry, notice, Order, summons,
warning or other communication that
relates to Hazardous Activity, Hazardous Materials, or any
alleged, actual,
or
potential violation or failure to comply
with any Environmental
Law, or of any
alleged, actual, or potential obligation to undertake or bear
the cost of any
Environmental, Health and Safety Liabilities with respect to any Facility or
property or asset (whether real, personal or mixed) in which Seller
has or had
an interest, or with respect to any property or facility to which
Hazardous
Materials generated, manufactured, refined, transferred, imported, used or
processed by Seller or any other
Person for whose
conduct it is or may
be held
responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled or received.
(d) There are no
Hazardous Materials
present on or in the
Environment at
any Facility or at any geologically or hydrologically adjoining property
resulting from Seller's operations and neither Seller nor
any Shareholder
has
any Knowledge of the presence of any other
Hazardous Materials, including any
Hazardous Materials contained in barrels, aboveground or underground
storage
tanks, landfills, land deposits, dumps, equipment
(whether movable or fixed) or
other containers, either temporary or permanent,
and deposited or
located in
land, water, sumps, or any other part of the Facility or such adjoining
property, or incorporated into any
structure therein or thereon. Neither Seller
nor any Person for whose conduct it is or may be held responsible, or to the
Knowledge of Seller, any other Person,
has permitted or
conducted, or is
aware
of, any Hazardous Activity conducted with respect to any
Facility or any other
property or assets (whether real,
personal or mixed) in
which Seller has or had
an interest except in full compliance with
all applicable Environmental Laws.
(e) There has
been, as a result of Seller's operations, no Release or, to
the Knowledge of Seller, Threat of Release, of any Hazardous Materials at or
from any Facility or at any other
location where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by any Facility,
or from any other
property or asset (whether
real, personal or mixed) in which Seller has or had an interest, or to the
Knowledge of Seller, as a result of the operations of others or from any
geologically or hydrologically adjoining property, whether by Seller or any
other Person.
(f) Seller has
delivered to Buyer
true and complete
copies and results of
any reports, studies, analyses, tests, or monitoring
possessed or initiated by
Seller pertaining to Hazardous Materials or Hazardous
Activities
in, on, or
under the Facilities, or concerning compliance, by Seller or any other Person
for whose conduct it is or may be held
responsible, with Environmental Laws.
3.21
Employees.
(a) Schedule
3.21(a) contains a complete and accurate list of the following
information for each employee and independent
contractor of Seller,
including
each employee on leave of absence or layoff
status: employer;
name; job title;
date of hiring or engagement; date of commencement of employment
or engagement;
current compensation paid or payable and any change in compensation since
January 1, 2004; sick and vacation leave
that is accrued but unused; and service
credited for purposes of vesting and eligibility to participate under any
Employee Plan, or any other employee or
director benefit plan.
(b) Seller does not provide any
benefits for any retired employees or
their dependents.
(c) Seller
warrants that it is not subject to the
Worker Adjustment
and
Retraining Notification Act (the "WARN
Act") or any similar state or local Legal
Requirement.
(d) No former or
current employee of
Seller is a party to, or is otherwise
bound by, any Contract that in any way adversely affected, affects, or will
affect the ability of Seller or Buyer to
conduct the
business as heretofore
carried on by Seller.
3.22 Labor
Disputes; Compliance.
(a) Seller has complied in all respects with all Legal Requirements
relating to employment practices, terms and conditions of employment, equal
employment opportunity, non-discrimination,
immigration, wages, hours, benefits,
and other requirements the payment of social security and similar Taxes and
occupational safety and health.
(b) Except as
disclosed in Schedule
3.22(b), (i) since January 1, 2004,
there has not been, there is not presently
pending or existing,
and to Seller's
Knowledge there is not threatened, any strike, slowdown, picketing, work
stoppage or employee grievance process involving Seller; (ii) to Seller's
Knowledge no event has occurred or
circumstance
exists that could
provide the
basis for any work stoppage or other labor
dispute; (iii) there is not pending
or, to Seller's Knowledge, threatened
against or affecting Seller any Proceeding
relating to the alleged violation of any
Legal Requirement
pertaining to
labor
relations or employment matters, and there is no organizational activity or
other labor dispute against or affecting Seller or the Facilities; (iv) no
application or petition for an election of
or for certification
of a collective
bargaining agent is pending; (v) no grievance or arbitration
Proceeding exists
that might have an adverse effect upon Seller or the conduct of its
business;
(vi) there is no lockout of any employees by Seller, and no such action is
contemplated by Seller; and (vii) to
Seller's Knowledge there has been no charge
of discrimination filed against or threatened against Seller with the Equal
Employment Opportunity Commission or
similar Governmental Body.
3.23
Intellectual
Property Assets.
Except as shown in
Schedule 3.23, the
Seller has no Intellectual Property Assets owned or used by
it in its business
or computer software licenses the cost of which is over
Five Hundred
Dollars
($500) each. With respect to such software
licenses, Seller has fully paid for
the licenses and not otherwise in Breach.
Neither Seller nor
Shareholders
nor
any Related Person owns any Patent,
Mark or Copyright
which is used in Seller's
Business.
3.24
Relationships
with Related Persons.
Except as disclosed in
Schedule
3.24, neither Seller nor Shareholders nor
any Related Person of any of them has,
or since January 1, 2004 has had, any
interest in any property (whether real,
personal or mixed and whether tangible or intangible)
used in or pertaining
to
Seller's business. Neither Seller nor
Shareholders nor any Related Person of any
of them owns, or since January 1, 2004, [the first day of the next to
last
completed fiscal year of Seller] has owned,
of record or as a beneficial owner,
an equity interest or any other financial or
profit interest in any Person that
has (a) had business dealings or a material financial interest in any
transaction with Seller other than business
dealings or
transactions
disclosed
in Schedule 3.24 or (b) engaged in
competition
with Seller with
respect to any
line of the products or services of Seller (a "Competing Business") in any
market presently served by Seller, except
for ownership of less than one percent
(1%) of the outstanding capital stock of
any Competing Business that is publicly
traded on any recognized exchange or in the
over-the-counter
market. Except as
set forth in Schedule 3.24, neither Seller nor Shareholders nor any Related
Person of any of them is a party to any
Contract with, or has any claim or right
against, Seller.
3.25 Brokers or
Finders. Neither Seller nor any of its Representatives have
incurred any obligation or liability,
contingent or
otherwise, for brokerage or
finders' fees or agents' commissions or other similar payments in connection
with the sale of Seller's business or the Assets or the Contemplated
Transactions.
3.26
Disclosure.
(a) No
representation
or warranty or other statement made by Seller or
Shareholders in this Agreement,
the Schedules, any
supplement to the Schedules,
or the certificates delivered pursuant to Section 2.7(a)
contains any
untrue
statement of material fact or omits to
state a material fact
necessary to make
any of them, in light of the circumstances
in which it was made, not misleading.
(b) Seller does not have Knowledge of any fact that has specific
application to Seller (other than general
economic or industry
conditions) and
that may materially adversely affect the
assets, business, prospects, financial
condition or results of operations of
Seller that has not been set forth in this
Agreement or the Schedules.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to
Seller and Shareholders as follows:
(a) Organization
and Good Standing.
Buyer is a corporation duly organized,
validly existing and in good standing
under the laws of the
State of Michigan,
with full corporate power and authority to conduct its business as it is
now
conducted.
(b) Authority;
No Conflict.
(a) This
Agreement constitutes
the legal, valid and
binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Upon the
execution and delivery by Buyer of the
Assignment and Assumption Agreement, the
Promissory Note and each other agreement to
be executed or delivered by Buyer at
Closing (collectively, the "Buyer's Closing Documents"), each of the Buyer's
Closing Documents will constitute the legal, valid and binding obligation of
Buyer, enforceable against Buyer in
accordance with its respective terms. Buyer
has full corporate power and authority to
execute and deliver this Agreement and
the Buyer's Closing Documents and to perform its obligations under this
Agreement and the Buyer's Closing Documents, and such action has been duly
authorized by all necessary corporate
action.
(b) Neither the
execution and delivery
of this Agreement by
Buyer nor the
consummation or performance of any of the
Contemplated
Transactions
by Buyer
will give any Person the right to prevent,
delay or otherwise interfere with any
of the Contemplated Transactions pursuant
to:
(i) any provision of Buyer's Governing Documents;
(ii) any resolution adopted by the board of directors or the
shareholder of
Buyer;
(iii) any Legal Requirement or Order to which Buyer may be subject;
or
(iv) any Contract
to which Buyer is a
party or by which Buyer may be
bound.
Buyer is not and will not be required
to obtain any Consent
from any Person in
connection with the execution and delivery
of this Agreement or the consummation
or performance of any of the Contemplated
Transactions.
4.3 Certain Proceedings. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal or otherwise
interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
threatened.
4.4 Brokers or
Finders. Other than an obligation to pay a consulting fee to
Bainbridge Advisors, Inc. (which Buyer acknowledges is
its sole responsibility)
neither Buyer nor any of its Representatives have incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or
agents'
commissions or other similar payment in connection with the Contemplated
Transactions.
5. COVENANTS OF SELLER PRIOR TO
CLOSING.
5.1 Access and
Investigation.
Between the date of
this Agreement and
the
Closing Date, and upon reasonable advance notice received from Buyer, Seller
shall (and Shareholders shall cause Seller to) (a) afford Buyer and its
Representatives and prospective lenders and
their Representatives (collectively,
"Buyer Group") full access, during regular business hours, to Seller's
personnel, properties (including subsurface
testing), Contracts,
Governmental
Authorizations, books and Records and other
documents and data,
such rights of
access to be exercised in a manner that
does not unreasonably interfere with the
operations of Seller, and upon prior notice
to and consent of Richard L. Russell
which consent will not be unreasonably withheld; (b) furnish Buyer Group with
copies of all such Contracts, Governmental
Authorizations, books and Records and
other existing documents and data as Buyer
may reasonably
request; (c)
furnish
Buyer Group with such additional financial, operating and other relevant
data
and information as Buyer may reasonably
request; and (d) otherwise cooperate and
assist, to the extent reasonably requested
by Buyer, with Buyer's
investigation
of the properties, assets and financial condition related to Seller. In
addition, Buyer shall have the right to have the
Real Property
and Tangible
Personal Property inspected by Buyer Group for purposes of determining the
physical condition and legal characteristics of the Real
Property and Tangible
Personal Property. In the event subsurface or other destructive testing is
recommended by any of Buyer Group, Buyer shall be permitted to have the same
performed.
5.2 Operation of
the Business of Seller. Between the date of this Agreement
and the Closing, Seller shall (and Shareholders
shall cause Seller to)
conduct
its business only in the Ordinary Course of
Business.
5.3 Negative
Covenant. Except as otherwise expressly permitted herein,
between the date of this Agreement and the Closing Date,
Seller shall not,
and
Shareholders shall not permit Seller to,
without the prior
written Consent of
Buyer, allow the levels of raw materials,
supplies or other
materials included
in the Inventories to vary materially from
the levels customarily
maintained by
Seller.
5.4 Required
Approvals. Seller and
Shareholders shall cooperate with Buyer
and its Representatives in attempting to obtain all Consents
identified
in
Schedule 7.3.
5.5 Notification. Between the date of this Agreement and the Closing,
Seller and Shareholders shall promptly
notify Buyer in writing if either of them
becomes aware of any fact or condition
that causes or
constitutes a Breach
of
any of Seller's representations and warranties made as of the date of this
Agreement. Should any such fact or condition require any change to the
Schedules, Seller shall deliver to Buyer a supplement to the Schedules
specifying such change at least five (5)
Business Days prior to Closing. During
the same period, Seller and Shareholders
also shall promptly notify Buyer of the
occurrence of any Breach of any covenant of Seller or Shareholders in this
Section 5 or of the occurrence of any event that may
make the satisfaction
of
the conditions in Section 7 impossible or
unlikely.
5.6 No
Negotiation.
Until such time as
this Agreement shall be terminated
pursuant to Section 9.1, neither Seller nor Shareholders shall directly or
indirectly solicit, initiate, encourage or entertain any
inquiries or proposals
from, discuss or negotiate with, provide any non-public information to or
consider the merits of any inquiries or proposals
from any Person
(other than
Buyer) relating to any business combination transaction involving Seller,
including the sale by Shareholders of Seller's stock, the merger or
consolidation of Seller or the sale of
Seller's business or any of the Assets
(other than in the Ordinary Course of
Business). Seller and
Shareholders shall
notify Buyer of any such inquiry or
proposal within
twenty-four
(24) hours of
receipt or awareness of the same by Seller
or Shareholders.
5.7 Best
Efforts. Seller and
Shareholders
will cooperate with Buyer in
attempting to cause the conditions in
Section 7 and Section 8.3 to be satisfied.
5.8 Interim
Financial Statements. Until the Closing Date, Seller shall
deliver to Buyer within fifteen (15) days after the end of
each month a copy of
Seller's balance sheet, profit and loss statement,
working capital report
and
aged list of accounts receivable for such month prepared in a manner and
containing information consistent with
Seller's current practices.
5.9 Change of
Name. On or before the Closing Date, Seller shall (a) amend
its Governing Documents and take all other
actions necessary to change its name
to one sufficiently dissimilar to Seller's
present name, in Buyer's judgment, to
avoid confusion and (b) take all actions
requested by Buyer to
enable Buyer to
change its name to Seller's present
name.
5.10 Payment of
Liabilities. Seller
shall pay or otherwise
satisfy in the
Ordinary Course of Business all of its
Liabilities and obligations arising prior
to Closing. Buyer and Seller hereby waive compliance with the bulk-transfer
provisions of the Uniform Commercial Code (or any similar law) ("Bulk Sales
Laws") in connection with the Contemplated
Transactions.
5.11 Audited
Financial Statements.
As soon as reasonably possible, and in
no event later than September 30, 2005, Seller will, at Seller's expense,
prepare or cause to be prepared
financial statements which Seller will
deliver
to Grant Thornton along with all necessary work papers and any other
information, records or documents as reasonably requested by Buyer and Grant
Thornton to assist Grant Thornton in preparing an audited balance sheet of
Seller as of December 31, 2004,
December 31, 2003 and
December 31, 2002 and the
related audited statements of income,
changes in
shareholder's equity
and cash
flows for the fiscal year then ended,
including in each case the notes thereto.
5.12
Environmental
Work. Seller will on or before
September 30, 2005,
complete the ESA and the Phase II ESA
described in Section 7.8.
5.13 Bank
Subordination.
Seller and Shareholders will cooperate with
Buyer's lenders in negotiating a subordination agreement with respect to the
Promissory Note and Seller and Shareholders
will not unreasonably withhold their
consent to the request of commercially
reasonable requests by such lenders.
6. COVENANTS OF BUYER PRIOR TO CLOSING.
6.1 Best
Efforts. Buyer shall
use its Best Efforts to cause the conditions
in Section 8 and Section 7.3 to be
satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation to
purchase the Assets and to take the other
actions required to be
taken by Buyer
at the Closing is subject to the
satisfaction,
at or prior to the
Closing, of
each of the following conditions (any of which may be
waived by Buyer, in whole
or in part):
7.1 Accuracy of
Representations.
(a) All of
Seller's and
Shareholders'
representations and
warranties in
this Agreement (considered collectively),
and each of these
representations and
warranties (considered individually), shall have been accurate in all
material
respects as of the date of this Agreement,
and shall be accurate in all material
respects as of the time of the Closing as
if then made, without giving effect to
any supplement to the Schedules.
(b) Each of the
representations and
warranties in Sections 3.2(a) and 3.4,
and each of the representations and warranties in this Agreement
that contains
an express materiality qualification, shall have been accurate in all
respects
as of the date of this Agreement, and shall be accurate in all
respects as of
the time of the Closing as if then made,
without giving effect to any supplement
to the Schedules.
7.2 Seller's
Performance. All of
the covenants and obligations that Seller
and Shareholders are required to perform or to comply
with pursuant to this
Agreement at or prior to the Closing (considered collectively), and each of
these covenants and obligations (considered
individually), shall
have been duly
performed and complied with in all material
respects.
7.3 Consents. Each of the Consents identified in Schedule 7.3 (the
"Consents") shall have been obtained and
shall be in full force and effect.
7.4 Additional
Documents.
Seller and
Shareholders
shall have caused
the
documents and instruments required by
Section 2.7(a) and the following documents
to be delivered (or tendered subject only
to Closing) to Buyer:
(a) The articles
of incorporation
and all amendments thereto of Seller,
duly certified as of a recent date by the
Secretary of State of the jurisdiction
of Seller's incorporation;
(b) Releases of
all Encumbrances
on the Assets
except for the
Permitted
Encumbrances;
(c) An opinion
of C. Christopher
Trower, dated the Closing Date, in the
form of Exhibit 2.7(a)(x);
(d) Evidence that Seller has amended its
Articles of
Incorporation to a
name which is substantially dissimilar from
Midwest Tube Mills;
(e) Certificates dated as of a date not
earlier than the third (3rd)
Business Day prior to the Closing as to the
good standing of
Seller and payment
of all applicable state Taxes by Seller,
executed by the
appropriate
officials
of the State of Indiana and each jurisdiction in which Seller is licensed or
qualified to do business as a foreign
corporation; and
(f) Such other
documents as Buyer may reasonably request for the purpose of
facilitating the consummation or performance of any of the Contemplated
Transactions.
7.5 Audited Financial Statements. Buyer shall have received and be
reasonably satisfied with the audited balance sheets of Seller as of
December
31, 2004, December 31, 2003 and December 31,
2002 (including notes thereto) and
the related audited statements of income, changes in shareholder's
equity and
cash flows for the fiscal years then
together with the
report thereon of
Grant
Thornton.
7.6 No
Proceedings. Since the
date of this Agreement, there shall not have
been commenced or threatened
against Buyer, or against any Related Person
of
Buyer, any Proceeding (a) involving any challenge to, or seeking
Damages or
other relief in connection with, any of the Contemplated Transactions or (b)
that may have the effect of preventing, delaying, making illegal, imposing
limitations or conditions on or otherwise interfering with any of the
Contemplated Transactions.
7.7 No Conflict.
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or
without notice
or lapse of time), contravene or conflict with or result in a violation of
or
cause Buyer or any Related Person of Buyer to suffer any
adverse consequence
under (a) any applicable Legal Requirement
or Order or (b) any Legal Requirement
or Order that has been published,
introduced or
otherwise proposed by or before
any Governmental Body, excluding Bulk Sales
Laws.
7.8 Environmental Report/Remediation. At Seller's sole cost and
expense,
Buyer shall have received an environmental
site assessment
("ESA") report and a
Phase II environmental site assessment
("Phase II ESA") with respect to Seller's
Facilities, which report shall be acceptable in form and substance
to Buyer in
its sole discretion. In addition, Seller shall have caused the clean up or
removal of any existing contamination caused by the adjoining
property owners
unless Seller delivers to Buyer a report, addressed to Buyer and Tarpon
Industries, Inc., from a reputable environmental engineering firm, that the
level of contamination with respect to
Seller's Facilities
does not meet levels
necessary to require remediation.
7.9 Employees.
Buyer shall have entered into employment or other agreements
with those employees and/or independent contractors of Seller identified in
Schedule 7.9.
7.10 Condition
of Equipment and Facilities. At Buyer's expense, Buyer will
engage one (1) or more independent experts, who are acceptable to Seller,
to
inspect and evaluate the condition of:
(a) the Assets,
including but not limited to, the slitter, operating mills
and related equipment to determine that
they are in good working order, ordinary
wear and tear excepted, are suitable for
immediate use in the Ordinary Course of
Business and are free from any latent or
patent defects; and
(b) the
Facilities to determine that they are in good repair and
condition,
ordinary wear and tear excepted and free
from latent and patent defects.
The independent experts will provide a report to
Buyer identifying any
defects
and Buyer will provide a copy of the report to
Seller. For a period
of fifteen
(15) days after receipt of an inspection
report, Buyer and Seller will negotiate
in good faith with respect to the payment of the cost to repair the
defects
identified in the independent expert's
report. If Buyer and Seller are unable to
reach an agreement with respect to the payment of such repairs within such
fifteen (15) day period, or any extension
agreed to by the parties, Buyer shall
have the right to either waive this condition and proceed to closing or
terminate this Agreement.
7.11
Inventory.
At the Closing, Seller shall have adequate inventory,
including but not limited to raw materials, slit coil and finished goods,
satisfactory to supply current levels of
customer requirements
consistent with
Seller's past business practices. At Closing, the level of inventory
will be
sufficient to provide for the smooth and
orderly transition of
the Business to
Buyer and to meet the current and ongoing
needs of the Business.
The inventory
necessary to meet this condition shall not include obsolete or distressed
inventory. Buyer shall have the right to
conduct a physical
inventory prior to
Closing.
8. CONDITIONS PRECEDENT TO SELLER'S
OBLIGATION TO CLOSE.
Seller's obligation to
sell the Assets and to take the other
actions required to be
taken by Seller at
the Closing is subject to the satisfaction,
at or prior to the
Closing, of each
of the following conditions (any of which
may be waived by Seller in whole or in
part):
8.1 Accuracy of Representations. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), shall have been
accurate in all material respects as of the date of this
Agreement and shall be
accurate in all material respects as of the
time of the Closing as if then made.
8.2 Buyer's
Performance. All of the covenants and obligations that Buyer is
required to perform or to comply with
pursuant to this
Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), shall have been performed and
complied
with in all material respects.
8.3 Consents. Each of the Consents identified in Schedule 8.3 shall
have
been obtained and shall be in full force
and effect.
8.4 Additional Documents. Buyer will have caused the documents and
instruments required by Section 2.7(b) and such other documents as Seller and
Shareholders may reasonably request for the purpose of facilitating the
consummation or performance of any of the
Contemplated Transactions.
8.5 No
Injunction.
There shall not be in
effect any Legal
Requirement or
any injunction or other Order that (a) prohibits the consummation of the
Contemplated Transactions and (b) has been
adopted or issued, or
has otherwise
become effective, since the date of this
Agreement.
9. TERMINATION.
9.1 Termination
Events. By notice given prior to or at the Closing, subject
to Section 9.2, this Agreement may be
terminated as follows:
(a) by Buyer if
a material Breach of
any provision of this
Agreement has
been committed by Seller or Shareholders
and such Breach has
not been waived by
Buyer;
(b) by Seller if
a material Breach of
any provision of this
Agreement has
been committed by Buyer and such Breach has
not been waived by Seller;
(c) by Buyer if
any condition in Section 7 has not been satisfied as of the
date specified for Closing in the first sentence of Section 2.6 or if
satisfaction of such a condition by such date
is or becomes
impossible (other
than through the failure of Buyer to comply
with its obligations under this
Agreement), and Buyer has not waived such
condition on or before such date;
(d) by Seller if
any condition
in Section 8 has not
been satisfied as
of
the date specified for Closing in the first sentence of Section 2.6 or if
satisfaction of such a condition by such date
is or becomes
impossible (other
than through the failure of Seller or the
Shareholders
to comply with
their
obligations under this Agreement),
and Seller has not
waived such condition on
or before such date;
(e) by mutual
consent of Buyer and Seller;
(f) by Buyer if
(i) Seller fails or
refuses to Close five
Business Days
after Grant Thornton has delivered to Buyer audited financial statements of
Seller for the fiscal years ended
December 31, 2002,
2003, and 2004, or (ii)
five Business Days after Grant Thornton notifies the parties that it is
unable
to prepare audited financial statements of Seller for the fiscal years
ended
December 31, 2002, 2003, and/or 2004, or (iii) such later date as the
parties
may agree upon, unless the Buyer is in
material Breach of this Agreement; or
(g) by Seller if
(i) Buyer fails or
refuses to Close five
Business Days
after Grant Thornton has delivered to Buyer audited financial statements of
Seller for the fiscal years ended
December 31, 2002,
2003, and 2004, or
(ii) )
five Business Days after Grant Thornton notifies the parties that it is
unable
to prepare audited financial statements of Seller for the fiscal years
ended
December 31, 2002, 2003, and/or 2004, or such later date as the parties
may
agree upon, unless the Seller or Shareholders are in material Breach of this
Agreement.
9.2 Effect of
Termination. Except
for their
indemnification rights
under
Section 11, each party's right of
termination under Section 9.1 is its exclusive
remedy with respect to breaches of
representations
and warranties of the
other
above. For purposes of clarification, however Buyer may waive any
breaches by
Seller or the Shareholders and require Seller to close. Notwithstanding the
foregoing, if Seller and Shareholders breach a pre-closing covenant under
Section 5, Buyer may seek specific performance of such covenant or terminate
this Agreement. If this Agreement is terminated
pursuant to Section
9.1, all
obligations of the parties under this
Agreement will terminate, except that the
obligations of the parties in Sections 12 and 13 (except for
those in Section
13.5) will survive.
10. ADDITIONAL COVENANTS AND
AGREEMENTS.
10.1 Employees
and Employee Benefits.
(a) Information
on Active Employees. For the purpose of this Agreement, the
term "Active Employees" shall mean all
employees employed on the Closing Date by
Seller for its business who are employed
exclusively
in Seller's
business as
currently conducted, including employees on temporary leave of absence,
including family medical leave, military leave, temporary disability or sick
leave, but excluding employees on long-term
disability leave.
(b) Employment
of Active Employees by Buyer.
(i) Buyer is not obligated to hire any Active Employee but may
interview all
Active Employees.
Buyer will provide
Seller with a list
of
Active
Employees to whom Buyer has made an offer of
employment
that has
been
accepted to be effective on the Closing Date (the "Hired Active
Employees").
Subject to Legal
Requirements,
Buyer will have reasonable
access to the
Facilities
and personnel Records (including performance
appraisals,
disciplinary actions, grievances and medical Records) of Seller
for the purpose
of preparing for and conducting employment interviews with
all Active
Employees and will
conduct the interviews as expeditiously as
possible prior
to the Closing Date.
Access will be provided by Seller upon
reasonable prior
notice during normal business hours. Effective immediately
before the
Closing, Seller will
terminate the employment of all of its
Hired Active
Employees.
(ii) Neither Seller nor Shareholders nor their Related Persons
shall
solicit the
continued employment
of any Active Employee
(unless and until
Buyer has
informed Seller in
writing that the particular Active Employee
will not receive
any employment offer
from Buyer) or the employment of any
Hired Active
Employee after the Closing. Buyer shall inform Seller promptly
of the
identities
of those Active Employees to whom it will not make
employment
offers, and Seller shall assist Buyer in complying with the
WARN
Act as to those
Active Employees.
(iii) It is understood and agreed that (A) Buyer's expressed
intention
to extend
offers of employment as set forth in this section shall not
constitute any
commitment, Contract or understanding (expressed or implied)
of any
obligation
on the part of Buyer to a post-Closing employment
relationship
of any fixed term or
duration or upon any terms or conditions
other than those
that Buyer may establish pursuant to individual offers
of
employment,
and (B) employment offered by Buyer is "at
will"and may be
terminated
by Buyer or by an
employee at any time for any reason (subject
to any written
commitments to the contrary made by Buyer or an employee and
Legal
Requirements).
Nothing in this
Agreement shall be deemed to prevent
or restrict in
any way the right of Buyer to terminate, reassign, promote
or demote any of
the Hired Active
Employees after the Closing or to change
adversely
or favorably the title, powers, duties, responsibilities,
functions,
locations,
salaries, other
compensation or terms or conditions
of employment of
such employees.
(c) Salaries and
Benefits.
(i) Seller shall be
responsible for (A)
the payment of all wages and
other
remuneration
due to Active
Employees with respect to their services
as employees of
Seller through the
close of business on the Closing Date,
including pro
rata bonus payments
and all vacation pay earned prior to the
Closing Date;
and (B) the payment of any termination or severance payments
and the
provision of health plan continuation coverage in accordance with
the requirements
of COBRA and Sections 601 through 608 of ERISA.
(ii) Seller shall be
liable for any claims made or incurred by Active
Employees
and their beneficiaries through the Closing Date under the
Employee
Plans. For purposes of the immediately preceding sentence, a
charge will be
deemed incurred, in the case of hospital, medical or dental
benefits,
when the services that are the subject of the charge are
performed
and, in the case of
other benefits
(such as disability or
life
insurance),
when an event has occurred or when a condition has been
diagnosed that
entitles the employee to the benefit.
(d) Seller's
Retirement and Savings Plans.
(i) All Hired
Active Employees who are participants in Seller's
retirement
plans shall retain their accrued benefits under Seller's
retirement plans
as of the Closing Date, and Seller (or Seller's retirement
plans) shall
retain sole liability
for the payment of such benefits as and
when such Hired
Active Employees become eligible therefor under such plans.
All Hired Active
Employees shall become fully vested in their accrued
benefits under
Seller's retirement plans as of the Closing Date, and Seller
will so amend
such plans if necessary to achieve this result. Seller shall
cause the
assets of each
Employee Plan to equal or exceed the benefit
liabilities
of such Employee Plan on a plan-termination basis as of the
Closing
Date.
(ii) Seller
will cause its savings plan to be amended in order to
provide
that the Hired
Active Employees shall be fully vested in their
accounts under
such plan as of the Closing Date and all payments thereafter
shall be made
from such plan as provided in the plan.
(e) Neither
Seller nor Shareholders nor their respective Related Persons
will make any transfer of pension or other employee benefit plan assets to
Buyer.
(f) General
Employee Provisions.
(i) Seller
and Buyer shall give any notices required by Legal
Requirements
and take whatever other actions with respect to the
plans,
programs and
policies described in this Section 10.1 as may be necessary to
carry out the
arrangements described in this Section 10.1.
(ii) Seller
and Buyer shall provide each other with such plan
documents and
summary plan descriptions, employee data or other information
as may be reasonably
required to carry out
the arrangements
described in
this Section
10.1.
(iii) If any of the
arrangements described
in this Section 10.1
are
determined by
the IRS or other
Governmental Body to
be prohibited by law,
Seller and Buyer
shall modify such
arrangements to as
closely as possible
reflect
their expressed intent and retain the allocation of economic
benefits and
burdens to the parties contemplated herein in a manner that is
not prohibited by
law.
(iv) Seller
shall provide Buyer with completed I-9 forms and
attachments
with respect to all Hired Active
Employees,
except for such
employees
as Seller certifies in writing to Buyer are exempt from such
requirement.
(v) Buyer shall not have any responsibility, liability or obligation,
whether to
Active Employees,
former employees,
their beneficiaries or
to
any other
Person, with respect
to any employee
benefit plans,
practices,
programs
or arrangements (including the establishment, operation or
termination
thereof and the
notification
and provision of COBRA
coverage
extension)
maintained by Seller.
10.2
Non-Competition, Non-Solicitation and Non-Disparagement.
(a) For a period
of five (5) years after the Closing Date, Seller shall not
directly or indirectly invest in, own, manage, operate, finance, control,
advise, render services to or guarantee the obligations of any Person (i)
engaged in or planning to become engaged in the steel tube manufacturing
business, (ii) who is or was, at any time, a customer or supplier of Seller
("Competing Business"), provided, however,
that Seller may purchase or otherwise
acquire up to (but not more than) five percent (5%) of any class of the
securities of any Person (but may not
otherwise participate in the activities of
such Person) if such securities are listed on any national or regional
securities exchange or have been registered
under Section 12(g) of the Exchange
Act.
(b) For a period
of five (5) years after the Closing Date, Seller shall
not, directly or indirectly:
(i) solicit the business of any Person who is a customer of
Buyer;
(ii) cause,
induce or attempt to cause or induce any customer,
supplier,
licensee, licensor,
franchisee,
employee, consultant or other
business
relation of Buyer to cease doing business with Buyer, to deal
with
any competitor
of Buyer or in any way interfere with its relationship with
Buyer;
(iii) cause,
induce or attempt to cause or induce any customer,
supplier,
licensee, licensor,
franchisee,
employee, consultant or other
business
relation of Seller on the Closing Date or within the year
preceding the
Closing Date to cease doing business with Buyer, to deal with
any competitor
of Buyer or in any way interfere with its relationship with
Buyer; or
(iv) hire,
retain or attempt to hire or retain any employee or
independent
contractor
of Buyer or in any way interfere with the
relationship
between Buyer and any of its employees or independent
contractors.
(c) After the
Closing Date, Seller will not disparage Buyer or any of
Buyer's shareholders, directors, officers,
employees or agents.
(d) If a final
judgment of a court or
tribunal of competent
jurisdiction
determines that any term or provision contained in Sections 10.2(a) through
10.2(c) is invalid or unenforceable, then the parties agree that the court or
tribunal will have the power to reduce the
scope, duration or geographic area of
the term or provision, to delete specific words or phrases or to replace
any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest
to expressing the intention of the
invalid or unenforceable term or provision. This Section 10.2 will be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed. This Section 10.2 is reasonable and necessary to
protect and preserve Buyer's legitimate
business interests and
the value of the
Assets and to prevent any unfair advantage
conferred on Seller.
10.3 Customer
and Other Business
Relationships. After
the Closing, Seller
will cooperate with Buyer in its efforts to continue and maintain for the
benefit of Buyer those business
relationships
of Seller existing prior to the
Closing and relating to the business to be
operated by Buyer after the Closing,
including relationships with lessors, employees, regulatory authorities,
licensors, customers, suppliers and others. Seller will refer to Buyer all
inquiries relating to such business.
10.4 Transition;
Shareholders
Assistance.
For a period of six
(6) months
following the Closing Date, Richard L.
Russell ("Russell")
will be available to
Buyer at the Buyer's request to assist
Buyer in the day-to-day operations of the
business to be operated by Buyer after the Closing (the "Transitional
Services"). Russell will provide the Transitional Services at no additional
compensation. Russell will not be required to
spend more than six (6) hours per
week in connection with his performance of
the Transitional Services.
10.5
Retention of and Access to Records.
After the Closing
Date, Buyer
shall retain for a period consistent with
Buyer's record-retention policies and
practices those Records of Seller
delivered to Buyer.
Buyer also shall
provide
Seller and Shareholders and their Representatives reasonable access thereto,
during normal business hours and on at least three (3) days' prior written
notice, to enable them to prepare
financial statements or tax returns or
deal
with tax audits. After the Closing Date, Seller shall provide Buyer and its
Representatives reasonable access to Records that are
Excluded Assets,
during
normal business hours and on at least three
(3) days' prior written notice, for
any reasonable business purpose specified
by Buyer in such notice.
10.6 Accounts
Receivable Repurchase. Buyer shall have the right, by written
notice (the "Receivables Notice") to Seller
given on or after one hundred eighty
(181) days following the Closing Date (the
"Repurchase Date"), to require Seller
to repurchase for cash and without
recourse, within five (5) days of the date of
the Receivables Notice, all of the Accounts Receivable of Seller reflected
on
the books and records of the Seller on the Closing Date that are at the
Repurchase Date uncollected. Seller shall repurchase uncollected Accounts
Receivable for a purchase price equal to
their aggregate face value, and Seller
shall purchase and immediately pay by wire transfer to Buyer the
uncollected
Accounts Receivable. When a payment (including payments
received by affiliates
of Buyer for shipments to customers of
Seller subsequent to Closing) is received
from a customer subsequent to Closing,
the payment will be
applied by Buyer to
the oldest outstanding receivable for that customer unless the customer has
notified Buyer in writing of a dispute regarding the products or services
covered by the receivable.
10.7 Further
Assurances. The
parties shall cooperate reasonably with each
other and with their respective Representatives in connection with any steps
required to be taken as part of their respective obligations under this
Agreement, and shall (a) furnish upon request to each other such further
information; (b) execute and deliver to
each other such other documents; and (c)
do such other acts and things, all as the
other party may reasonably request for
the purpose of carrying out the intent of
this Agreement
and the Contemplated
Transactions.
10.8 Corporate
Continuation.
Until the date which
is five (5) years after
the Closing, Seller and the Shareholders will continue Seller's corporate
existence.
11. INDEMNIFICATION; REMEDIES.
11.1 Survival.
All representations,
warranties and
covenants set forth in
this Agreement, the Schedules, the supplements to the Schedules, the
certificates delivered pursuant to Section 2.7 and any other
certificate
or
document delivered pursuant to this
Agreement shall survive the Closing and the
consummation of the Contemplated
Transactions, as
provided by Section 11.7. The
right to indemnification, reimbursement or other remedy based upon such
representations, warranties, covenants and
obligations shall not be affected by
any investigation (including any environmental investigation or assessment)
conducted with respect to, or any Knowledge acquired (or capable of being
acquired) at any time, whether before or after the execution and delivery of
this Agreement or the Closing Date,
with respect to the
accuracy or inaccuracy
of or compliance with any such
representation, warranty, covenant or obligation.
The waiver of any condition based upon the accuracy of any
representation
or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to
indemnification, reimbursement or other
remedy based upon such representations,
warranties, covenants and obligations.
11.2
Indemnification and
Reimbursement by Seller and Shareholders. Seller
and Shareholders, jointly and severally,
will indemnify and hold harmless Buyer,
and its Representatives, shareholders, subsidiaries and Related Persons
(collectively, the "Buyer Indemnified
Persons"),
and will reimburse the
Buyer
Indemnified Persons for any loss,
liability, claim,
damage, expense
(including
costs of investigation and defense and
reasonable attorneys'
fees and expenses)
or diminution of value, whether or not involving a Third-Party Claim
(collectively, "Damages"), arising from or
in connection with:
(a) any Breach of any representation or warranty made by Seller or
Shareholders in (i) this Agreement,
(ii) the certificates
delivered pursuant to
Section 2.7 (for this purpose, each such certificate will be deemed to have
stated that Seller's and Shareholders' representations and warranties in this
Agreement fulfill the requirements of
Section 7.1 as of the Closing Date as if
made on the Closing Date, (iii) any transfer instrument or (iv) any other
certificate, document, writing or
instrument delivered by Seller or Shareholders
pursuant to this Agreement;
(b) any Breach
of any covenant or obligation of Seller or Shareholders in
this Agreement or in any other
certificate,
document, writing or instrument
delivered by Seller or Shareholders
pursuant to this Agreement;
(c) any
Liability arising out of the ownership or
operation of the Assets
prior to the Closing Date other than the
Assumed Liabilities;
(d) any
brokerage or finder's fees or commissions or similar payments
based
upon any agreement or understanding made, or alleged to have been
made, by any
Person with Seller or Shareholders (or any Person acting on their behalf) in
connection with any of the Contemplated
Transactions; or
(e) any Retained
Liabilities.
11.3
Indemnification
and Reimbursement by
Seller-Environmental
Matters.
Buyer's sole and exclusive remedy for any breach of the environmental
representations and warranties of Section 3.20 is as follows: Seller and
Shareholders, jointly and severally, will
indemnify and hold harmless Buyer and
the other Buyer Indemnified Persons, and will reimburse Buyer and the other
Buyer Indemnified Persons, for any Damages (including costs of cleanup,
containment or other remediation) arising from or in connection with any
Environmental, Health and Safety Liabilities arising out of: (a) Seller's
operation of any of the Facilities, Assets or the business of Seller,
(b) any
Environmental, Health and Safety Liabilities
arising out of Hazardous Materials
or other contaminants that (i) to the Knowledge of Seller were present
on the
Facilities or Assets at any time on or prior
to the Closing Date
and (ii) were
not disclosed or otherwise identified in
the ESA or the Phase II ESA and did not
arise out of Seller's operation of any of
the Facilities, Assets or the business
of Seller.
Buyer will be entitled to control any
Remedial Action, any
Proceeding
relating
to an Environmental Claim and, except as
provided in the following sentence, any
other Proceeding with respect to which indemnity may be sought under this
Section 11.3. The procedure described in Section 11.9 will
apply to any claim
solely for monetary Damages relating to a
matter covered by this Section 11.3.
11.4
Indemnification
and Reimbursement by
Buyer. Buyer will indemnify and
hold harmless Seller, and will reimburse
Seller, for any Damages arising from or
in connection with:
(a) any
Breach of any
representation
or warranty made by Buyer in this
Agreement or in any certificate,
document, writing or instrument delivered by
Buyer pursuant to this Agreement;
(b) any Breach
of any covenant or obligation of Buyer in this Agreement or
in any other certificate, document, writing or instrument delivered by Buyer
pursuant to this Agreement;
(c) any claim by
any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement
or understanding
alleged
