ASSET PURCHASE AND SALE AGREEMENT
This Agreement is entered into this 4th day of May, 2000, by
L&S Automotive Products Co., a Delaware corporation ("LSAP"), L&S
Bearing Co., an Oklahoma corporation ("LSBC"), LSB Extrusion Co.,
an Oklahoma corporation ("LSBE"), and Rotex Corporation, an
Oklahoma corporation ("Rotex") (LSAP, LSBC, LSBE, and Rotex are
sometimes herein collectively referred to as "Sellers"), and
DriveLine Technologies, Inc., an Oklahoma corporation
("Purchaser" or "DriveLine"). In consideration of the mutual
promises contained herein, the parties agree as follows:
1. Purchase and Sale. Purchaser shall purchase from
Sellers, and Sellers shall sell to Purchaser, at the Closing on
the Closing Date, all of the right, title and interest in and to
the business, properties, assets and rights of any kind, whether
tangible or intangible, real or personal, but excluding operating
loss carryforwards (NOLs) of Sellers, the shares of the capital
stock in International Bearings, Inc., an Oklahoma corporation,
and the shares of the capital stock in LSBC, LSBE and Rotex
(collectively, "Purchased Assets"), owned by Sellers as of the
Closing Date, subject to the terms and conditions hereafter
specified.
2. Assumption of Liabilities. Except liabilities that are
covered by insurance policies of Sellers (and not to include any
deductibles or retention amounts), and except for liabilities
arising out of the intentional wrongdoing of Sellers, Purchaser
shall assume and hereby assumes, and becomes liable for, all
debts, liabilities or obligations of Sellers of all kinds
whatsoever (collectively the "Assumed Liabilities"), including
without limitation (a) accounts payable for Inventory and trade
payables, (b) warranty obligations relating to past sales of
Sellers, (c) environmental and superfund liabilities, (d) all
outstanding contracts and agreements, (e) indebtedness to LSB
Industries, Inc. ("LSB"), (f) indebtedness, loan payments and
lease payments relating to certain machinery and equipment
("Machinery") and certain other obligations assumed which are
described on Exhibit 1 attached hereto, and (g) indebtedness
relating to the termination of any employees by Seller upon the
Closing or any termination of employees by Purchaser. Purchaser
shall and hereby does accept assignment of and sole
responsibility for the Assumed Liabilities. Purchaser shall pay
all assumed debt and other assumed liabilities when due, and
shall perform all assumed obligations pursuant to their terms.
3. Purchase Price. The total purchase price to be paid by
Purchaser to Sellers for the Purchased Assets shall be Eight
Million Six Hundred Sixty-Six Thousand ($8,666,000) ("Purchase
Price"). The Purchase Price shall be paid at Closing by the
execution and delivery by Purchaser of a) a promissory note in
the principal amount of Five Million Nine Hundred Thirty-Four
Thousand Dollars ($5,934,000) made payable to LSB which amount
reflects the assumption by DriveLine of certain existing secured
indebtedness of LSAP to LSB ("Note A"), and b) a promissory note
in the principal amount of Two Million Seven Hundred Thirty-Two
Thousand Dollars ($2,732,000) ("Note B") which LSAP shall and
hereby does assign to LSB. Accordingly, Note B shall be made
payable to LSB. The form of Note A and Note B is attached to
this Agreement as Exhibits 2 and 3. Both Note A and Note B
(collectively the "Notes") shall be secured by a lien on all the
assets of Purchaser and guaranteed by (a)L&S Manufacturing Corp.,
an Oklahoma corporation and subsidiary of Purchaser, pursuant to
the terms of a Secured Guaranty Agreement by L&S Manufacturing
Corp. in favor of LSB, such guaranty secured by all of the assets
of L&S Manufacturing Corp., and (b) MC Automotive Acquisition
Corp., an Oklahoma corporation, pursuant to the terms of a
Secured Guaranty Agreement by MC Automotive Acquisition Corp. in
favor of LSB, such guaranty secured by all of the assets of MC
Automotive Acquisition Corp., which associated loan, security
agreements and secured guarantees (collectively, the "Note
Agreements") shall be in the form as set forth in Exhibit 4
attached hereto.
4. Consigned Inventory. Purchaser shall not purchase any
Inventory consigned to Sellers.
5. Representations and Warranties of Sellers.
5.1 Incorporation and Qualification. Sellers,
except for LSAP, are corporations duly organized and validly
existing under the laws of Oklahoma. LSAP is a corporation
duly organized and validly existing under the laws of
Delaware. Sellers have all requisite corporate power and
authority to own the Purchased Assets and to carry on their
business as presently being conducted, to enter into this
Agreement, and to carry out and perform the terms and
provisions of this Agreement.
5.2 Title to Purchased Assets. Sellers have, or
will have at the Closing, good and marketable title to the
Purchased Assets held in each case subject to no lease,
mortgage, pledge, lien, charge, security interest,
encumbrance or restriction whatsoever, except as may be
permitted herein, as provided in Exhibit 5 (relating to the
Machinery), as relates to Congress Financial Corporation
(Southwest), or as provided in Exhibit 5.2 attached hereto.
5.3 Authority to Consummate Transaction. The
execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will
not, violate any provisions of the Articles of Incorporation
or By-Laws of Sellers, or any provision in any agreement
affecting the Purchased Assets, or any judgment, decree,
order, statute or regulation to which the Sellers are
subject. This Agreement constitutes the valid and binding
agreement of the Sellers enforceable against the Sellers in
accordance with its terms.
5.4 Employees. Exhibit 5.4 attached hereto sets
forth the names and positions of employees of Sellers as of
the Closing Date.
5.5 Compliance with Law. All material licenses,
certificates and permits necessary for the legal conduct of
Sellers' business activities are valid and in full force and
effect.
6. Representations and Warranties of Purchaser.
6.1 Incorporation and Qualification. Purchaser
is a duly organized and existing limited liability company
under the laws of the State of Oklahoma and has all power
and the authority to enter into this Agreement and to carry
out and perform the terms and provisions hereof.
6.2 Authority to Consummate Transaction. The
execution and delivery of this Agreement does not, and the
consummation of the transaction contemplated hereby will
not, violate any provisions of the Articles of Incorporation
or Bylaws of Purchaser. Purchaser has full power and
authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of
Purchaser enforceable and binding against Purchaser in
accordance with its terms.
6.3 No Claims. There is no suit, action or claim of
any nature, legal or administrative, pending or threatened,
against Purchaser.
6.4 Insurance. Exhibit 6.4 attached hereto
contains a description of all insurance policies maintained
by Sellers on their assets or business, including the
insurance carrier, the type of coverage and the expiration
dates of the current policies.
6.5 Full and Complete Disclosure. Purchaser
agrees and acknowledges that it has conducted detailed and
extensive due diligence of Sellers and the Purchased Assets.
Purchaser further agrees and acknowledges that it has been
provided with all information and material relating to the
Sellers and the Purchased Assets as requested by Purchaser,
and that Purchaser has been given unlimited access to the
facilities and the books and records of Sellers.
7. Sellers' Employees. Sellers shall use reasonable
efforts to assist Purchaser, if requested, to obtain the services
of any employees listed on Exhibit 5.4 whom Purchaser desires to
employ. Purchaser shall be liable for, and hereby indemnifies
Sellers for, all loss costs, damages and expenses (including
reasonable attorneys fees) incurred in connection with the
termination of employment of any employee by Seller or Purchaser
in connection with the purchase and sale of the Purchased Assets
or the purchase by the Purchaser of the automotive parts business
of Sellers. At the Closing Purchaser shall hire at least the
requisite number of employees of the Sellers at wages and
benefits essentially equivalent to their current compensation
package sufficient to avoid the applicability of the Workers
Adjustment and Retaining Notification Act, 29 U.S.C. '2101, et
seq. ("WARN ACT"). In reliance thereon, the Sellers have
determined that the notification requirements of the WARN Act
will not be triggered by the termination of their employees. In
the event that the Purchaser fails to employ the requisite number
of employees terminated by the Sellers at wages and benefits
essentially equivalent to their current compensation package
under terms sufficient to avoid applicability of the WARN Act as
a result of the Sellers' termination of their employees as
provided above, then, notwithstanding anything in this Agreement
to the contrary, the Purchaser shall indemnify, defend and hold
harmless the Sellers and their officers, directors, agents,
representatives, shareholders and affiliates from and against any
and all liabilities, claims, demands, losses, damages, fines,
penalties, costs and expenses (including, without limitation,
reasonable attorney's fees) which any of them suffered or
incurred or may suffer or incur as a result of, or in connection
with, or arising out of the Sellers' failure to comply with, or
give notification under, the WARN Act.
8. "Run-off". Purchaser shall promptly reimburse Sellers
for the full amount of all "run-off" claims connected but not
limited to any insurance program of whatever type and/or claims
connected to DriveLine's and Sellers' employees under the Self-
insured Workers' Compensation programs, health benefit plans,
disability programs, Section 125 Cafeteria plan, or life
insurance programs, whether such claims are incurred as active,
inactive or terminated employees. For the purpose of this
Agreement, "run-off" shall mean any claim paid, in part or in
whole, on or after the Closing Date, regardless of when such
claim was incurred. This is intended to include, without
limitation, claims resulting from COBRA elections.
9. No Brokerage. Sellers shall indemnify Purchaser
against all loss, cost, damage, or expense, including attorney's
fees, incurred by Purchaser in any action based upon a claim by a
broker that Sellers have employed or otherwise engaged such
broker in connection with the transaction contemplated by this
Agreement; and, Purchaser shall indemnify Sellers against all
loss, cost, damage or expense, including attorney's fees,
incurred by Sellers in any action based upon the claim of a
broker that Purchaser has employed or otherwise engaged such
broker in connection with the transaction contemplated by this
Agreement.
10. Actions of Sellers After February 1, 2000 and Pending
Closing. Sellers represent and warrant that from February 1,
2000 to the date of this Agreement, Sellers have conducted their
business only in the ordinary course of business and have not
taken any action proscribed in Section 9.1, except for the
acquisition of certain assets of The Zeller Corporation. Sellers
covenant that from February 1, 2000 through the Closing Date:
10.1 Conduct of Business. Unless Purchaser shall
otherwise consent in writing or as otherwise disclosed
herein, Sellers shall:
(a) Conduct their business only in the ordinary
course;
(b) Use reasonable efforts to keep intact their
business, keep available their present employees and
preserve the goodwill of all suppliers, customers and
others having business relations with them;
(c) Have in effect and maintain all insurance of
the kind and in the amounts consistent with their
normal business practices; and
(d) Maintain their assets on a basis consistent
with that prevailing generally in the industry or trade
and as required by good business practice.
10.2 Availability of Books and Records. Sellers
shall make available for inspection by Purchaser, its
agents, accountants and attorneys, at reasonable times, all
of their assets, books and records of accounts, contracts
and other information, documentary or otherwise, as is
appropriate to provide to Purchaser all pertinent
information pertaining to or affecting the Purchased Assets.
Until the Closing, Purchaser will hold in confidence all
information so obtained and any document or instrument
heretofore or hereafter obtained by Purchaser in connection
herewith shall be held in express trust for and on behalf of
Sellers. If the transactions contemplated by this Agreement
are not consummated for any reason, then after the Agreement
is terminated, Purchaser will continue to hold in confidence
all information obtained from Sellers and will return to
Sellers all copies of any documents or instruments obtained
by Purchaser from Sellers in connection with the
transactions contemplated by this Agreement.
10.3 Notice of Material Events. Sellers shall
promptly give Purchaser notice of the occurrence of any
material event relating to the Purchased Assets or the
occurrence of any event or change in facts, which cause any
of the representations made by Sellers in this Agreement to
be inaccurate in any material respect.
11. Possession and Risks of Loss. Possession or the right
to possession of all the Purchased Assets shall be delivered by
Sellers to Purchaser as of the Closing. The risk of loss of and
destruction to any of the Purchased Assets occurring by any cause
whatsoever until the Closing shall be upon Sellers.
12. Conditions Precedent to Obligations of Sellers. Unless
waived, in whole or in part, in writing by Sellers, the
obligations of Sellers hereunder are subject to the following
conditions:
(a) the representations and warranties of Purchaser herein
shall be deemed to have been made again as of the
Closing Date and shall then be true and correct in all
material respects, subject to any changes contemplated
by this Agreement;
(b) Sellers shall not have discovered any material error,
misstatement or omission therein;
(c) the ultimate parent company of LSAP, LSB Industries,
Inc., shall have received a written fairness opinion
acceptable to LSB Industries, Inc., at its sole
discretion, regarding the sale of the Purchased Assets
to Purchaser hereunder;
(d) Purchaser shall have obtained financing acceptable to
Sellers for the transactions contemplated by this
Agreement, including a subordination agreement and
other agreements with Congress Financial Corporation
(Southwest) that are acceptable to Sellers at their
sole discretion;
(e) receipt by Sellers of an opinion of counsel from
Purchaser's counsel, the form and content of which
shall be satisfactory to Sellers;
(f) execution and delivery by DriveLine of the Notes, the
Note Agreements, and any related documents;
(g) execution and delivery by MC Automotive Acquisition
Corp. of the Note Agreements to which it is a party;
(h) execution and delivery by L&S Manufacturing Corp. of
the Note Agreements to which it is a party;
(i) Purchaser shall have complied with all of its covenants
and obligations contained herein;
(j) delivery of certified resolutions of the Board and
Shareholder(s) of the Purchaser approving the
execution, delivery and performance of the Agreement,
the Notes and the Note Agreements;
(k) delivery of certified resolutions of the Board of MC
Automotive Acquisition Corp. and L&S Manufacturing
Corp. as to execution, delivery and performance of the
all documents to which they are to be parties,
including, without limitation, the Note Agreements and
UCC-1 financing statements;
(l) receipt by LSB of a letter from Ernst & Young regarding
the preservation of operating loss carry forwards, in
form and substance acceptable to LSB; and
(m) execution and delivery of the lease agreements
identified in Exhibit 12(m) attached hereto
13. Conditions Precedent to Obligations of Purchaser.
Unless waived, in whole or in part, in writing by the Purchaser,
the obligations of Purchaser hereunder are subject to each of the
following conditions:
(a) MC Automotive Acquisition Corp. shall have acquired all
of the equity shares of Purchaser;
(b) the representations and warranties of Sellers herein
shall be deemed to have been made again on the Closing
Date and shall then be true and correct in all material
respects, subject to any changes contemplated by this
Agreement;
(c) Purchaser shall not have discovered any material error,
misstatement or omission therein; and
(d) Purchaser shall have obtained financing acceptable to
Sellers at their sole discretion for the transactions
contemplated by this Agreement.
14. Closing.
14.1 Place and Date. The Closing shall be held in
Dallas, Texas, at 10:00 a.m. on May 4, 2000, unless another
time or place is mutually agreed upon by Purchaser and
Sellers. The date and time of Closing are referred to
herein as the "Closing Date".
14.2 Closing Costs. Except as otherwise provided
herein, each of the parties shall pay its respective
attorney's fees and expenses incidental to this transacting.
14.3 Taxes. Purchaser shall pay any sales or use
taxes which become due by reason of the consummation of the
transactions contemplated hereby. Personal property taxes
imposed on the Purchased Assets for the year in which the
Closing occurs shall be prorated as of the Closing Date.
14.4 Sellers' Transfer Instruments. Sellers will
execute and deliver such bills of sale, assignments,
certificates of title and other good and sufficient
instruments of conveyance and transfer in form reasonably
satisfactory to Purchaser. From time to time, following
Closing, Sellers will execute and deliver to Purchaser such
bills of sale, assignments, and other instruments of
conveyance and transfer, as Purchaser may reasonably require
to more effectively convey, transfer and vest in Purchaser
title to any of the Purchased Assets.
14.5 Payment. At Closing, Purchaser shall deliver
to LSAP, as directed by LSAP in paragraph 3 herein, the
fully executed Notes and Note Agreements.
15. Indemnification by Sellers. For a period of one (1)
year following the Closing Date, Sellers shall indemnify and hold
Purchaser and its principals harmless, at all times from and
after the Closing Date, against and in respect to any Damages.
The term "Damages" means any claims, actions, demands, lawsuits,
costs, expenses, liabilities, penalties and damages (including
reasonable counsel fees incidental thereto) resulting to
Purchaser from: (a) any representation set forth herein made to
Purchaser shown to be materially inaccurate, or (b) breach or
default in the performance by Sellers of any of their obligations
under this Agreement. Sellers shall reimburse Purchaser on
demand for any payment made by Purchaser at any time after the
Closing, based upon the judgment of any court of competent
jurisdiction or pursuant to a bona fide compromise or settlement
of claims, demands or actions, in respect of any Damages to which
the foregoing indemnity relates, provided, however, that Sellers
shall have had the opportunity to negotiate and defend same and
provided Purchaser shall have given prompt notice of all facts
relating thereto and shall have fully cooperated with Sellers
with respect thereto. Seller's liability hereunder shall not
exceed, in the aggregate, in any event, $250,000.
16. Indemnification by Purchaser. Purchaser shall
indemnify and hold Sellers harmless, at all times from and after
the Closing Date, against and in respect to any Damages. The
term "Damages" means any claims, actions, demands, lawsuits,
costs, expenses, liabilities, penalties and damages (including
reasonable counsel fees incidental thereto) resulting to any of
the Sellers from: (a) the Assumed Liabilities, (b) any
representation set forth herein made to Sellers shown to be
materially inaccurate, (c) breach or default in the performance
by Purchaser of any of its obligations under this Agreement, (d)
the acquisition of assets from The Zeller Corporation , (e) any
liabilities of the type described in Section 7 hereof, (f) any
retro adjustment liabilities relating to or arising out of
general liability insurance, property insurance, automobile
insurance and any other type of insurance, and (g) debts,
liabilities or obligations in any manner relating to the
Purchased Assets or Assumed Liabilities that accrue after the
Closing Date. Purchaser shall reimburse Sellers on Demand for
any payment made by either Seller at any time after the Closing,
based upon the judgment of any court of competent jurisdiction or
pursuant to a bona fide compromise or settlement of claims,
demands or actions, in respect of any Damages to which the
foregoing indemnity relates, provided Sellers shall have given
prompt notice of all facts relating thereto and shall have fully
cooperated with Purchaser with respect thereto.
17. General.
17.1 Notices. All notices required or permitted
herein must be in writing and shall be sufficient if
delivered personally, mailed by certified or registered
mail, return receipt requested, postage and charges prepaid,
or delivered by a nationally recognized carrier service, to
the other parties at the address set forth on the signature
page of this Agreement, or to such other addresses as any
party hereto may designate to the other from time to time
for this purpose. All notices shall be deemed received when
delivered personally, or if mailed by U.S. Postal Service or
courier, within three (3) days after being mailed or
deposited with such courier service.
17.2 Integrated Agreement. This instrument
contains and constitutes the entire agreement by and among
the parties herein and supersedes all prior agreements and
understandings by and among the parties hereto relating to
the subject matter hereof and there are no agreements,
understandings, restrictions, warranties or representations
among the parties hereto relating to the subject matter
hereof and there are no agreements, understandings,
restrictions, warranties or representations among the
parties relating to the subject matter hereof other than
those set forth herein. All exhibits attached hereto are
hereby incorporated herein and made a part of this
Agreement. This instrument is not intended to have any
legal effect whatsoever, or to be a legally binding
agreement, or any evidence thereof, until it has been signed
by all parties hereto.
17.3 Construction. All pronouns and any
variations thereof shall be deemed to refer to the
masculine, feminine or neuter gender thereof or to the
plurals of each, as the identity of the person or persons or
the context may require. The descriptive headings contained
in this Agreement are for reference purposes only and are
not intended to describe, interpret, define or limit the
scope, extent or intent of this Agreement or any provision
contained herein.
17.4 Invalidity. If any provision contained in
this Agreement shall for any reason be held to be invalid,
illegal, void or unenforceable in any respect, such
provision shall be deemed modified so as to constitute a
provision conforming as nearly as possible to such invalid,
illegal, void or unenforceable provisions while still
remaining valid and enforceable, and the remaining terms or
provisions contained herein shall not be affected thereby.
17.5 Binding Effect. This Agreement shall be
binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective heirs, personal
representatives, successors and assigns. The rights of
Purchaser under this Agreement may be assigned in whole or
in part to any third party provided Purchaser remains liable
for the obligations hereunder of any such assignee.
17.6 Counterpart Execution. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall
constitute but one and the same instrument.
17.7 Amendment and Waiver. This Agreement may be
amended at any time, but only by an instrument in writing
executed by all parties hereto. A party hereto may waive
any requirement to be performed by the other party (or
parties), provided that such waiver shall be in writing and
executed by the party waiving the requirement.
17.8 Authorization. Each party for itself, its
heirs, personal representatives, successors and assigns
hereby represents and warrants that it has the full capacity
and authority to enter into, execute, deliver and perform
this Agreement, and that such execution, delivery and
performance does not violate any contractual or other
obligation by which it is bound.
17.9 Choice of Law and Venue. This Agreement
shall be construed, enforced and governed in accordance with
the laws of the State of Oklahoma, and the parties hereto
consent to and accept the jurisdiction of the State and
Federal courts within the Western District of the State of
Oklahoma with respect to the determination of any claim,
dispute or disagreement which may arise from the
interpretation, performance, or breach of this Agreement or
with respect to any matter involved herein or relating to
this Agreement.
17.10 No Personal Liability of Shareholder(s) of
Purchaser. Nothing in this Agreement is intended to confer
any personal liability on or by any shareholder(s) of MC
Automotive Acquisition Corp., except for the obligations of
any shareholder(s) of MC Automotive Acquisition Corp. with
respect to its pledged shares under the Stock Pledge
Agreement of even date herewith by and between the Murray
Cohen Revocable Trust #2 and LSB Industries, Inc.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year set forth below.
SELLERS:
L&S AUTOMOTIVE PRODUCTS CO.,
a Delaware corporation
By:_________________________________
Name:______________________________
Title:_______________________________
Date:_______________________________
Address:____________________________
______________________________
______
L&S BEARING CO.,
an Oklahoma corporation
By:_________________________________
Name:______________________________
Title:_______________________________
Date:_______________________________
Address:____________________________
______________________________
______
LSB EXTRUSION CO.,
an Oklahoma corporation
By:_________________________________
Name:______________________________
Title:_______________________________
Date:_______________________________
Address:____________________________
______________________________
______
ROTEX CORPORATION,
an Oklahoma corporation
By:_________________________________
Name:______________________________
Title:_______________________________
Date:_______________________________
Address:____________________________
______________________________
______
PURCHASER:
DRIVELINE TECHNOLOGIES, INC.,
an Oklahoma corporation
By:_________________________________
Name:______________________________
Title:_______________________________
Date:_______________________________
Address:____________________________
______________________________
______
Exhibit 1 - Loan and Lease Payments relating to Machinery
Exhibit 2 - Note A
Exhibit 3 - Note B
Exhibit 4 - Note Agreements
Exhibit 5 - Permitted Liens on Purchased Assets
Exhibit 5.2 - Other Permitted Liens
Exhibit 5.4 - Sellers' Employees
Exhibit 6.4 - Insurance Schedule
Exhibit 12(m) - Lease Agreements