ASSET PURCHASE AND SALE AGREEMENT

Exhibit 99.1

 

ASSET PURCHASE AND SALE AGREEMENT

 

THIS ASSET PURCHASE AND SALE AGREEMENT (this “Agreement”), dated January 27, 2005 by and among ROCKINGHAM STEEL, INC., a Virginia corporation (“Purchaser”), RESCO STEEL PRODUCTS CORPORATION, a Virginia corporation (“Seller”), and ROANOKE ELECTRIC STEEL CORPORATION, a Virginia corporation, the sole shareholder of Seller (“Shareholder”).

 

W I T N E S S E T H :

 

WHEREAS , Seller desires to sell to Purchaser substantially all the assets and properties of Seller’s business of reinforcing bar fabrication conducted at facilities in Salem, Virginia and Kernersville, North Carolina (the “Business”), other than certain assets specifically excluded hereunder;

 

WHEREAS , Shareholder, being the holder of all of the issued and outstanding capital stock of Seller, desires that Seller sell to Purchaser substantially all of the assets of Seller upon the terms and conditions hereinafter set forth; and

 

WHEREAS , Purchaser desires to purchase said assets and assume certain specified liabilities and obligations of Seller on the terms and conditions set forth herein.

 

NOW, THEREFORE , in consideration of the premises and the covenants and agreements herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, it is hereby agreed as follows:

 

1. SALE AND PURCHASE OF ASSETS .

 

1.1 Sale and Purchase . Subject to the terms and conditions of this Agreement, Seller shall sell, convey, assign, transfer and deliver to Purchaser, and Purchaser shall purchase, receive and accept delivery from Seller, at the Closing, all of Seller’s right, title and interest in and to the following properties and assets (but specifically excluding the assets described on Schedule 1.1 attached hereto (the “Excluded Assets”)), real, personal or mixed, tangible or intangible, wherever located, and whether on or off the books of Seller relating to the Business (collectively, the “Purchased Assets”):

 

(a) Seller’s rights to all goodwill associated with the Business (the “Proprietary Rights”), except for Seller’s corporate name, trade name(s) and trademarks listed with the Excluded Assets on Schedule 1.1 ;

 

(b) All of Seller’s furniture, equipment, improvements, machinery, furnishings, motor vehicles, office equipment, tools and other articles of personal property, whether on or off the books of Seller, used in connection with the Business (the “Furniture and Equipment”), the material items of which are described on Schedule 1.1(b) attached hereto;

(c) Seller’s fee simple interest in and to the real property more fully described on Schedule 1.1(c) attached hereto and all right, title and interest of Seller in and to all easements, rights-of-way, privileges and appurtenances related to such real property (the “Appurtenances”, and collectively with such real property and all improvements and fixtures thereon, the “Real Property”);

 

(d) All contracts, assignable permits, rights-of-entry, and/or leases relating to the Real Property and any other real property used by Seller solely in connection with the Business, which contracts, permits, rights-of-entry, and/or leases are described and are identified on Schedule 1.1(d) attached hereto (the “Real Property Leases”);

 

(e) All of Seller’s right, title and interest, as lessee(s), in any personal property used in connection with the Business, which leases are described and are identified on Schedule 1.1(e) attached hereto (the “Equipment Leases”);

 

(f) All product designs, transferable licenses, transferable permits and trade secrets, if any, owned and used by Seller in connection with the Business (the “Intangible Rights”);

 

(g) All of Seller’s accounts receivable, as determined in accordance with GAAP, existing as of the Closing Date (the “Accounts Receivable”);

 

(h) All supplies and sundry items, to the extent transferable (the “Supplies”), including, without limitation, telephone numbers, keys and lock combinations, transferable computer software programs and systems, customer records, product information, promotional materials, and books and records, used in connection with the Business including, but not limited to, all customer files, supplier records, records relating to accounts payable and copies of all tax and accounting records of the Seller, but excluding (i) records relating solely to executory contracts not assumed by Purchaser, if any, (ii) original accounting records (but copies will be provided) and (iii) records related to the Excluded Assets;

 

(i) All right, title and interest of Seller in any assignable agreements, contracts and licenses to which Seller is a party and that relate to the Business (the “Contracts”), with all Contracts involving annual or aggregate payment amounts in excess of $10,000 or which cannot be fully terminated by Seller upon not more than 30 days notice being listed on Schedule 1.1(i) attached hereto;

 

(j) The benefit of all pre-paid expenditures paid by Seller prior to the Closing Date that relate to the Business, which expenditures are described and are identified on Schedule 1.1(j) attached hereto (the “Prepaid Expenses”);

 

(k) All inventory of the Seller as of the Closing Date according to a physical inventory taken by Seller and Purchaser after close of business on the day before the Closing Date, including but not limited to supply, works-in-progress, and finished goods, including without limitation those listed on Schedule 1.1(k) attached hereto (the “Inventory”).

 

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(l) All warranty claims of Seller against third parties relating to the Purchased Assets.

 

2. CONSIDERATION .

 

2.1 Purchase Price . The total purchase price for the Purchased Assets shall be Four Million Two Hundred Eight Thousand Eight Hundred Sixty Eight and 00/100 Dollars ($4,208,868.00) (the “Purchase Price”). The Purchase Price shall be allocated among the Seller’s assets and the non-competition restrictions contained in Section 8.4 hereof, all in accordance with Schedule 2.1 attached hereto.

 

2.2 Assumption and Payment of Certain Liabilities and Obligations . On the Closing Date, Purchaser shall assume only those liabilities and obligations of Seller listed on Schedule 2.2 attached hereto (collectively, the “Assumed Liabilities”). Such assumption shall be pursuant to an assumption agreement to be executed and delivered at the Closing in the form of Exhibit B hereto. If Purchaser assumes the benefits of any other contract which Seller inadvertently omitted from Schedule 2.2 , Purchaser shall also be deemed to have assumed any liabilities associated therewith.

 

2.3 Nonassumption of other Liabilities . Other than the Assumed Liabilities, and except as otherwise provided in this Agreement, Purchaser does not assume and shall in no event be liable for any liabilities, debts or obligations of Seller. Purchaser recognizes that Seller may pay any and all such fees and expenses out of Seller’s cash prior to the Closing Date.

 

3. NON-ASSIGNABLE PURCHASED ASSETS .

 

Seller shall hold in trust for the benefit of and account of Purchaser, any non-assignable Purchased Assets and all Purchased Assets with respect to which consents to assignments shall not have been obtained prior to the Closing Date, and, insofar as permissible, assign to the Purchaser, from time to time, all of such Purchased Assets, and remit to the Purchaser all amounts paid to Seller with respect thereto after the Closing promptly upon the receipt thereof less all charges properly allocable thereto. Schedule 3 attached hereto lists all consents required to transfer the Purchased Assets to Purchaser (the “Required Consents”). Seller shall use commercially reasonable efforts and otherwise reasonably cooperate with Purchaser in Purchaser’s efforts to obtain the Required Consents.

 

4. EMPLOYEES AND EMPLOYEE BENEFITS .

 

4.1 Termination of Employees . Purchaser shall not be obligated to hire any person employed by Seller in the Business as of the Closing Date, and any employees so hired will be on employment, salary and benefit terms established by Purchaser in its sole discretion. Following the full execution of this Agreement, Seller shall facilitate Purchaser’s interview of such Seller’s employees as it may choose, and Purchaser will thereafter notify Seller no later than the Closing Date of the names of Seller’s employees to whom Purchaser intends to offer employment. Seller shall cooperate with Purchaser in Purchaser’s efforts to hire any employees of Seller requested by Purchaser to accept employment by Purchaser. Seller shall remain responsible to pay accrued

 

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benefits and applicable severance benefits, if any, and Seller shall also remain responsible for extending COBRA coverage required as a result of Seller’s termination of the employment of any employee of Seller.

 

4.2 Workers’ Compensation . Seller shall be responsible for any workers compensation claims based on injuries occurring solely prior to the Closing Date regardless of the date on which the claim was filed, and Seller shall indemnify and hold Purchaser harmless against any and all losses, damages, costs and expenses (including, without limitation, reasonable attorney’s fees and related expenses) arising out of or relating to all such claims in accordance with Section 10.1 hereof. Purchaser shall be responsible for all such claims of its employees based on injuries occurring on and after the Closing Date and shall indemnify and hold Seller harmless against any and all losses, damages, costs and expenses (including, without limitation, reasonable attorneys fees and related expenses) arising out of or relating to all such claims in accordance with Section 10.2 hereof.

 

5. THE CLOSING .

 

5.1 The Closing . The “Closing” or “Closing Date” means the time at which Seller effects the transfer of the Purchased Assets in exchange for the consideration to be delivered by Purchaser pursuant to Section 2 hereof. The Closing shall take place at the offices of Woods Rogers PLC, 10 S. Jefferson Street, Suite 1400, Roanoke, Virginia, and shall be effective at 12:01 a.m. on January 27, 2005, or at such other date, time and place as may be mutually agreeable to the parties.

 

5.2 Certain Events at Closing . At the Closing, in addition to such other actions as may be provided for herein, the following actions shall be taken:

 

(a) Seller shall deliver the following to Purchaser:

 

(i) A duly executed and acknowledged bill of sale in the form of Exhibit C hereto;

 

(ii) A duly executed and acknowledged deed(s) for the Real Property in the form of Exhibit E hereto; and

 

(iiii) Any and all such other executed endorsements, assignments, vehicle registrations and other instruments of transfer and conveyance as Purchaser may reasonably request to effectively vest in Purchaser all of the right, title and interest of Seller in the Purchased Assets, which, in all transfer documents, shall be conveyed free and clear of all mortgages, liens and encumbrances of any kind whatsoever except as disclosed on Schedule 5.2(a)(iv) (“Permitted Encumbrances”) attached hereto.

 

(iv) A certificate addressed to Purchaser and executed by an officer of Seller, dated as of the Closing Date, in the form attached hereto as Exhibit F .

 

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(b) Purchaser shall deliver the following to Seller:

 

(i) $4,208,868 by wire transfer pursuant to wire instruction provided by Seller to Purchaser ;

 

(ii) An assumption agreement as provided for in Section 2.2 hereof;

 

(iii) Such other instruments of assumption of the debts, liabilities and obligations of Seller to be assumed by Purchaser, pursuant to the provisions hereof in form and substance reasonably satisfactory to counsel for Seller;

 

(iv) A certificate addressed to Seller and executed by an authorized officer of Purchaser, dated as of the Closing Date, in the form attached hereto as Exhibit G .

 

5.3 Certain Events Post-Closing . Following Closing, in addition to such other actions as may be provided for herein, Seller agrees to provide Purchaser with a copy of daily reports generated by Wachovia Bank, N.A. showing payments on Accounts Receivable received by Wachovia Bank, N.A. at the lockbox account maintained for Shareholder and its subsidiaries. Seller and Purchaser covenant and agree to hold in trust and remit by wire transfer (with the payee paying the expense of the wire transfer), within three (3) business days of receipt, to the other party any payments received by such party, which payments are on or in respect of Accounts Receivable or Excluded Assets, as the case may be.. If a payment is made pursuant to the terms hereof and the underlying check from the customer is returned for insufficient funds or other reason (the “Bounced Check”), the party receiving payment for such Bounced Check shall promptly reimburse the paying party for the amount of such Bounced Check. Payments not made within the period set forth in the preceding sentence shall accrue interest at the rate of six percent (6%) per annum.

 

6. REPRESENTATIONS REGARDING SELLER AND SHAREHOLDER .

 

Seller and, solely with respect to Section 6.3, Shareholder hereby severally, but not jointly, represent and warrant to Purchaser that each of the following statements (i) is true and correct in all respects as of the date of this Agreement and (ii) will be true and correct in all respects as of the Closing Date:

 

6.1 Organization and Qualification . Seller is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia. Seller has all requisite power and authority to own its property and to carry on its business as now being conducted and is duly qualified to do business in each jurisdiction in which the character of its properties and assets owned or leased or the nature of its business transacted, makes such qualification necessary. Copies of the articles and bylaws of Seller, as amended to date, (the “Organic Documents”) which have been delivered to Purchaser are complete and correct, and no amendments have been made thereto since the date hereof. Seller has also provided Purchaser with true and accurate copies of its certificates to do business in all foreign jurisdictions where Seller has qualified to transact business.

 

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6.2 Subsidiaries and other Equity Investments . Seller does not own, directly or indirectly, any shares of capital stock of any corporation or any equity investment in any partnership, association or other business organization.

 

6.3 Authority . Seller and Shareholder have the full corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Seller and the performance by it of all obligations contemplated hereby have been duly authorized by all requisite corporate actions including the approval of Shareholder and the Seller’s Board of Directors. This Agreement and all other agreements entered into in connection with the transactions contemplated hereby to which Seller and/or Shareholder are a party constitute, or will constitute upon execution and delivery, the valid and legally binding obligation of Seller and/or Shareholder enforceable against Seller and/or Shareholder, as the case may be, in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance and other similar laws affecting generally the enforcement of creditors’ rights. Shareholder is the sole shareholder of Seller.

 

6.4 No Violations . Neither the execution nor delivery of this Agreement, the consummation of any of the transactions contemplated hereby, nor the fulfillment of any of the terms hereof except to the extent disclosed herein or in any Schedule hereto (i) will violate or conflict with the Organic Documents, (ii) will result in any breach of or default under any provision of any contract or agreement of any kind to which Seller is a party or by which Seller is bound or to which any property or asset of Seller is subject, which would have an adverse effect on the Purchased Assets, or (iii) will result in a violation of any statutes, laws, ordinances, rules, regulations or requirements of governmental authorities having jurisdiction over Seller or the Business.

 

6.5 Financial Statements . Seller has delivered to Purchaser its unaudited balance sheets at the end of its fiscal years ending October 31, 2002, 2003 and 2004, and the related income statements for each such fiscal year (collectively, the “Year-End Financial Statements”). The Year-End Financial Statements were prepared on a consistent basis throughout the periods covered thereby and present fairly the financial position of Seller at the fiscal year-end dates, and the results of its operations on the accrual basis of accounting. Seller has also delivered to Purchaser the unaudited balance sheet and the statement of income of Seller (the “Interim Financial Statements”) for the period from November 1, 2004 through December 31, 2004 (the “Interim Financial Statements Date”). The Interim Financial Statements present fairly the financial position of Seller at the Interim Financial Statements Date and the results of its operations on the accrual basis of accounting and consistent with the method used in the immediately preceding fiscal year except for normal year end adjustments. The Year-End Financial Statements and the Interim Financial Statements are sometimes collectively referred to herein as the “Financial Statements.”

 

6.6 Sufficiency and Ownership of Purchased Assets . The Purchased Assets and the Excluded Assets together constitute the material assets necessary to operate the Business in the manner in which it has been operated during the last year or in which it is currently being operating.

 

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6.7 No Undisclosed Liabilities, Etc. Except as set forth on Schedule 6.7 , Seller has no material liability or obligation (and, to the best of our knowledge, there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against it giving rise to any material liability or obligation), except for liabilities set forth in the Financial Statements.

 

6.8 Absence of Certain Changes . Except as disclosed in the Financial Statements or on Schedule 6.8 , since November 30, 2004, to Seller’s knowledge, there have been no events, changes or occurrences which have had, or are reasonably likely to have, individually or in the aggregate, a material adverse effect on the Purchased Assets, the Business or the financial condition, the results of operations or the prospects of the Business. Since November 30, 2004, the Seller has conducted its business in the ordinary course of business, in substantially the same manner in which it has been previously conducted. Without limiting the generality of the foregoing, since the November 30, 2004, except as disclosed in the Financial Statements or on Schedule 6.8 , Seller has not:

 

(a) suffered any damage, destruction or loss of physical property (whether or not covered by insurance) materially and adversely affecting its condition, operations, the Purchased Assets or the Business;

 

(b) incurred or agreed to incur more than $10,000 in aggregate indebtedness for borrowed money or capitalized lease obligations ;

 

(c) made any capital expenditure, or entered into commitments therefore, totaling in the aggregate more than $10,000;

 

(d) outside the ordinary course of the Business, entered into any material agreement, contract, lease or license, or submitted a proposal that if accepted would constitute a material agreement, contract, lease or license;

 

(e) accelerated, terminated, made material modifications to, or canceled any material agreement, contract, lease, or license to which it is a party or by which it or any of the Purchased Assets is bound (nor has any other party thereto taken any such action);

 

(f) sold, transferred or otherwise disposed of, or agreed to sell, transfer or otherwise dispose of, any assets having a fair market value at the time of sale, transfer or disposition of $10,000 or more in the aggregate, or cancelled, or agreed to cancel, any debts or claims in the amount of $10,000 or more in the aggregate, other than in the ordinary course of business and consistent with past practice;

 

(g) mortgaged, pledged or subjected to any charges, liens, claims or encumbrances, or agreed to mortgage, pledge or subject to any charges, liens, claims or encumbrances, any of the Purchased Assets, except for Permitted Encumbrances;

 

(h) increased, or agreed to increase, the compensation or bonuses or special compensation of any kind of any of its officers, employees or agents over the rate being paid to them on November 30, 2004, other than merit, incentive, and/or cost of living increases made in

 

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the ordinary course of business following past practice or increase in accordance with the terms of contracts disclosed on Schedule 1.1(i) , or adopted or increased any benefit under any insurance, pension or other employee benefit plan, program or arrangement made to, for or with any such officer, employee or agent;

 

(i) had any resignation or termination of employment of any of its key officers or employees or received written notification of any impending or threatened resignation or resignations or termination or terminations of employment that would have a material adverse effect on the Business;

 

(j) made any loan to any of its directors, officers, or employees;

 

(k) had any strike, work stoppage or any other material labor dispute;

 

(l) made any material change in its accounting methods or practices with respect to its condition, operations, business, properties, assets or liabilities;

 

(m) entered into any other material transaction not in the ordinary course of its business;

 

(n) declared or made payment of, or set aside payment for, any dividends or distributions of any assets.

 

Seller has no knowledge of any existing or threatened occurrence, event or development which, as far as can be reasonably foreseen, is likely to have a material adverse effect on Seller or any of the Purchased Assets.

 

6.9 Title to and Condition of Properties and Assets .

 

(a) Seller has good and marketable title to, or has a valid leasehold interest in, or the right to use, as the case may be, all tangible personal property included as part of the Purchased Assets. None of the tangible personal property included as part of the Purchased Assets are subject to any mortgage, pledge, conditional sales contract, lien, security interest, right of possession in favor of any third party, claim or other encumbrance, except (i) the lien of current taxes not yet due and payable, (ii) as set forth in Schedule 5.2(a)(iv) (“Permitted Encumbrances”), (iii) as reflected in the Financial Statements, (iv) for such minor imperfections of title, if any, as do not interfere with the present use of such personal property, (v) liens not material in amount and arising from the ordinary course of conduct of the business of Seller, or (vi) items listed on Schedule 1.1(e) (“Equipment Leases”). Subsequent to November 30, 2004, except as contemplated by this Agreement, Seller has not sold or disposed of any of its tangible personal property or assets (other than the Excluded Assets) or obligated itself to do so except in the ordinary course of business.

 

(b) Except as disclosed on Schedule 6.9(b) , the facilities, machinery, furniture, office and other equipment (including computer software) of Seller that are used in the Business and included in the Purchased Assets are in reasonable operating condition and repair, subject to ordinary wear and tear. Since January 1, 2004, Seller has not received any written notice from

 

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any governmental agency, board, bureau, body, department or authority of any federal, state, municipal or foreign jurisdiction, to the effect that Seller or any tangible personal property or asset owned or leased by Seller is in violation of any applicable ordinance, regulation or building, zoning, environmental or other law in respect thereof.

 

6.10. Real Property .

 

(a) Title . Seller is the owner of record of all right, title and interest in and to the Real Property, free from any mortgage, deed of trust, lien, security interest, right of possession or encumbrance in favor of any third party, defect in title, easement, adverse claim or charge of any kind except (i) the lien for real estate taxes not yet due and payable, (ii) as set forth in Schedule 6.10(a) attached hereto. At the Closing, the Real Estate will be conveyed subject only to liens for real estate taxes not yet due and payable and Permitted Encumbrances as set forth on Schedule 5.2(a)(iv) .

 

(b) Condemnation . To the best of Seller’s knowledge, there is no pending condemnation, requisition or similar proceeding affecting the Real Property or any portion thereof. Seller has received no notice and has no actual knowledge that any such proceeding is contemplated as of the date hereof.

 

(c) Violations . As of the date hereof, to the best of Seller’s knowledge, there are no existing violations of and Seller has not received notice of any alleged violation, which remains uncured, of any federal, state or municipal laws, ordinances, orders, regulations or requirements affecting the real property included in the Purchased Assets.

 

(d) Zoning and Use . The use of any real property included in the Purchased Assets by Seller through the Closing Date has been and is in material compliance with all applicable laws including zoning, subdivision and other land use laws, building codes, laws for the protection of rights of individuals with disabilities, fire and floodplain regulations and ordinances pertaining thereto. The Seller has not received written notice of building violations which remain uncured against any real property included in the Purchased Assets. All improvements made by Seller to the Real Property comply with all then-applicable laws including zoning, subdivision and other land use laws, building codes, laws for the protection of rights of individuals with disabilities, fire and floodplain regulations and ordinances pertaining thereto.

 

(e) Compliance with Covenants, etc . Seller is not in material default or breach of any of the covenants, conditions, restrictions, rights-of-way, easements or deeds of trust affecting any portion of the Real Property included in the Purchased Assets.

 

(f) Real Estate Leases . Schedule 1.1(d) sets forth a list and summary description of the Real Property Leases. Seller has furnished Purchaser with a copy of each lease by which Seller has acquired an interest in the Real Property Leases. Each Real Property Lease is in full force and effect and is valid and enforceable in accordance with its terms. There is not under any Real Property Lease any default by Seller. To the best of Seller’s actual knowledge, there is not under any Real Property Lease any default by any other party thereto.

 

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6.11. Hazardous Materials or Toxic Substances .

 

(a) Except as set forth on Schedule 6.11(a) attached hereto, as of the date hereof and on the Closing Date, the Real Property does not, to the best of Seller’s knowledge contain (A) asbestos in any form; (B) radon levels above acceptable standards; or (C) any underground storage tanks, Hazardous Materials, Hazardous Waste, or Toxic Substances, as hereinafter defined.

 

(b) Except as set forth on Schedule 6.11(b) attached hereto since the date of purchase of the Real Property by Seller, (A) the Real Property included in the Purchased Assets is not now and, to the best of Seller’s knowledge, has never been used to generate, manufacture, refine, transport, treat,