Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - NORD Resources Corporation - Exhibit 10.3

Execution Version

DEPOSIT ESCROW AGREEMENT

          This
Deposit Escrow Agreement is entered into as of October 23, 2006, by and among
Platinum Diversified Mining USA, Inc., a Delaware corporation (the “PDM
USA”), NORD Resources Corporation (“NORD”) and American Stock
Transfer & Trust Company (the “Escrow Agent”). Capitalized terms not
otherwise defined herein shall have the respective meanings ascribed to them in
the Merger Agreement (as defined below).

          WHEREAS,
PDM USA, Platinum Diversified Mining, Inc., a Cayman Islands corporation (“PDM”)
and NORD have entered into an Agreement and Plan of Merger dated as of October
23, 2006 (the “Merger Agreement”) by and among NORD, PDM, PDM USA and a
subsidiary of PDM USA, pursuant to which such subsidiary will be merged (the
“Merger”) into NORD which, as the surviving corporation (the
“Surviving Corporation”), will become a wholly-owned subsidiary of PDM
USA;

          WHEREAS,
the Merger Agreement provides that a deposit of up to One Million Dollars
(US$1,000,000) (the “Deposit Fund”) will be established to (i) provide
NORD with Security in the event that the holders of PDM Shares do not approve
the Merger and (ii) to the extent that the holders of PDM Shares do approve the
Merger and the Merger closes, act as a down payment of the Final Net Merger
Consideration under the Merger Agreement; and

          WHEREAS,
the parties hereto desire to establish the terms and conditions pursuant to
which such Deposit Fund will be established and maintained.

          NOW,
THEREFORE, the parties hereto hereby agree as follows:

          1.      Establishment
of Deposit Fund. By virtue of the execution of the Merger Agreement, the
parties have agreed to establish the Deposit Fund. The parties have further
agreed that the Deposit Fund will be distributed as follows: (a) to NORD if the
holders of PDM Shares do not approve the Merger, (b) to PDM if the holders of
PDM Shares do approve the Merger but the NORD Stockholders do not approve the
Merger and (c) into the Exchange Fund for distribution to the holders of
Securities of NORD at the Effective Time.

          2.     
Escrow and Indemnification.

                    (a)      Deposit
Fund Amount. At the date hereof, PDM USA shall deposit with the Escrow
Agent, by wire transfer, Five Hundred Thousand Dollars (US$500,000). The Escrow
Agent hereby acknowledges receipt of such sum. On each of November 30, 2006 and
December 27, 2006, PDM USA shall further deposit Two Hundred Fifty Thousand
Dollars (US$250,000) on each such date with the Escrow Agent, by wire transfer.
The amount actually deposited in the Deposit Fund on the occurrence of any of
the events in Section 1 above shall be deemed to be the Deposit Fund. The
Deposit Fund shall be held as a trust fund and shall not be subject to any lien,
attachment, trustee process or any other judicial process of any creditor of any
party hereto. The Deposit Fund shall be invested in accordance with Section 4 of
this Agreement. The Escrow Agent agrees to hold the Deposit Fund in an escrow
account subject to the terms and conditions of this Agreement.

Execution Version

                    (b)     
Transferability. The respective interests of NORD and PDM USA in
the Deposit Fund ultimately available for distribution shall not be assignable
or transferable, other than by operation of law. Notice of any such assignment
or transfer by operation of law shall he given to the Escrow Agent and the other
party, and no such assignment or transfer shall he valid until such notice is
given.

          3.      Disbursement
of Deposit Fund.

                    (a)      Disbursement
by Escrow Agent. The Escrow Agent shall disburse the Deposit Fund only
in accordance with (i) a written instrument delivered to the Escrow Agent that
is executed by both PDM USA and NORD and that instructs the Escrow Agent as to
the disbursement of some or all of the Deposit Fund, as the case may be, (ii) an
order of a court of competent jurisdiction, a copy of which is delivered to the
Escrow Agent by either PDM USA or NORD, that instructs the Escrow Agent as to
the disbursement of some or all of the Deposit Fund, as the case maybe, or (iii)
the provisions of Section 3(b) and Section 4(b). In addition, upon delivery of
an officer’s certificate from PDM USA certifying that the holders of PDM shares
have not approved the Merger, the Escrow Agent shall disburse the Deposit Fund
to NORD. Further, upon delivery of (i) an officer’s certificate from PDM USA
certifying that the holders of PDM shares have approved the Merger and (ii) an
officer’s certificate from NORD certifying that the NORD Stockholders have not
approved the Merger, the Escrow Agent shall disburse the Deposit Fund to PDM
USA. Finally, upon delivery of a certified and filed copy of the Certificate of
Merger at the Effective Time by either PDM USA or NORD, the Escrow Agent shall
disburse the Deposit Fund to the Exchange Fund held by the Escrow Agent as the
Paying Agent.

                    (b)      Early
Disbursement of Deposit Fund. At any time after December 29, 2006, if
either PDM USA or NORD has terminated the Merger Agreement pursuant to Section
7.2(c) of the Merger Agreement, NORD may deliver a notice to the Escrow Agent
with a copy to PDM USA that the Merger Agreement has been terminated pursuant to
such section of the Merger Agreement. Upon delivery of such notice, the Escrow
Agent shall distribute to NORD all of the Deposit Fund then held in escrow.

                    (c)      Final
Disbursement of Deposit Fund. At any time after February 15, 2007, if
the Merger has not closed in accordance with the terms of the Agreement, PDM USA
may deliver a notice to the Escrow Agent with a copy to NORD that the Merger
Agreement has been terminated pursuant to Section 7.2(a) of the Merger
Agreement. Upon delivery of such notice, the Escrow Agent shall distribute to
PDM USA all of the Deposit Fund then held in escrow.

                    (d)     
Method of Disbursement. Any distribution of all or a portion of
the Deposit Fund to NORD or PDM USA pursuant to Sections 3(a), (b) and (c) shall
be made by wire transfer, as applicable and shall be made ten (10) days after
delivery of the proper notices or certificates set forth in Section 3(a), (b)
and (c). Any distribution of all or a portion of the Deposit Fund to the
Exchange Fund shall be made in accordance with Section 2.2 of the Merger
Agreement.

2

Execution Version

          4.      Investment
of Deposit Fund.

                    (a)      Permitted
Investments. Any monies held in the Deposit Fund shall be invested by
the Escrow Agent, to the extent permitted by law and as directed by PDM USA, in
(i) obligations issued or guaranteed by the United States of America or any
agency or instrumentality thereof; (ii) obligations (including certificates of
deposit and bankers’ acceptances) of domestic commercial banks which at the date
of their last public reporting had total assets in excess of $500,000,000, (iii)
commercial paper rated at least A-1 or P-1 or, if not rated, issued by companies
having outstanding debt rated at least AA or Aa and (iv) money market mutual
funds invested exclusively in some or all of the securities described in the
foregoing clauses (i), (ii) and (iii). Absent receipt of specific written
investment instructions from PDM USA, the Escrow Agent shall have no obligation
or duty to invest (or otherwise pay interest on) the Deposit Fund. The Escrow
Agent shall have no liability for any investment losses, including without
limitation any market loss on any investment liquidated prior to maturity in
order to make a payment required hereunder.

                    (b)      Escrow
Income. All interest and other income earned from the investment of the
Deposit Fund, after deduction of and remittance to PDM USA of the amount of any
taxes payable by PDM USA with respect to such interest and other income
(“Escrow Income Taxes”), shall be used to pay fees and expenses of the
Escrow Agent described in Section 5 below. The parties agree that, for tax
reporting purposes, all Escrow Income Taxes shall be taxable to PDM USA. PDM USA
agrees to provide the Escrow Agent with a certified tax identification number by
signing and returning a Form W-9 (or Form W-8, in the case of non-U.S. persons)
to the Escrow Agent prior to the date on which any income earned on the
investment of the Deposit Fund is credited to the Deposit Fund. Five (5) days
prior to any of the distributions set forth in Section 3(d), PDM USA shall
submit to the Escrow Agent, with a copy to NORD, a notice specifying the Escrow
Income Taxes so payable and showing in reasonable detail the calculation of the
applicable Escrow Income Taxes, and Escrow Agent shall remit to PDM USA, out of
the interest and other income earned on the Deposit Fund, the amount so
specified, and PDM USA shall be responsible for paying such Escrow Income Taxes
to the appropriate taxing authorities.

          5.      Fees
and Expenses of Escrow Agent. The fees of the Escrow Agent for the
services to be rendered by the Escrow Agent hereunder shall be deducted first
from the interest and other income on the Deposit Fund and second, if there are
any remaining fees owed to the Escrow Agent after payment from the interest and
other income, from the Deposit Fund. The Escrow Agent shall also be reimbursed
for its reasonable expenses (including reasonable attorney’s fees and expenses)
incurred in connection with the performance of its duties under this Agreement
in the same manner as the fees owed to the Escrow Agent.

          6.      Limitation
of Escrow Agent’s Liability. 

                    (a)      Limitation
on Liability. The Escrow Agent shall incur no liability with respect to
any action taken or suffered by it in reliance upon any notice, direction,
instruction, consent, statement or other documents believed by it to be genuine
and duly authorized, nor for any other action or inaction, except its own
willful misconduct or gross negligence. The Escrow Agent shall not be
responsible for the validity or sufficiency of this Agreement or any other

3

Execution Version

agreement referred to herein. In all questions arising under
the Escrow Agreement, the Escrow Agent may rely on the advice of counsel, and
the Escrow Agent shall not be liable to anyone for anything done, omitted or
suffered in good faith by the Escrow Agent based on such advice. The Escrow
Agent shall not be required to take any action hereunder involving any expense
unless the payment of such expense is made or provided for in a manner
reasonably satisfactory to it. In no event shall the Escrow Agent be liable for
indirect, punitive, special or consequential damages.

                    (b)      Indemnification.
PDM USA and NORD, jointly and severally, agree to indemnify the Escrow Agent
for, and hold it harmless against, any loss, liability or expense incurred
without gross negligence or willful misconduct on the part of Escrow Agent,
arising out of or in connection with its carrying out of its duties
hereunder.

          7.      Covenants.

                    (a)     
Vote of the holders of PDM Shares. Within two (2) business days of
the EGM, PDM USA shall deliver an officer’s certificate to the Escrow Agent
certifying the results of the vote on the Merger by the holders of PDM
Shares.

                    (b)     
Vote of the NORD Stockholders. Within two (2) business days of the
NORD Stockholders Meeting, NORD shall deliver an officer’s certificate to the
Escrow Agent certifying the results of the vote on the Merger by the NORD
Stockholders.

          8.      Termination.
This Agreement shall terminate upon the disbursement by the Escrow Agent of
all of the Deposit Fund in accordance with this Agreement; provided that
the provisions of Section 6 shall survive such termination.

          9.      Successor
Escrow Agent. In the event the Escrow Agent becomes unavailable or
unwilling to continue in its capacity herewith, the Escrow Agent may resign and
be discharged from its duties or obligations hereunder by delivering a
resignation to the parties to this Escrow Agreement, not less than 60 days’
prior to the date when such resignation shall take effect. PDM USA may appoint a
successor Escrow Agent without the consent of NORD so long as such successor is
a United States branch of a United States bank with assets of at least
$500,000,000, and may appoint any other successor Escrow Agent with the consent
of NORD, which shall not be unreasonably withheld. If, within such notice
period, PDM USA provides to the Escrow Agent written instructions with respect
to the appointment of a successor Escrow Agent and directions for the transfer
of the Deposit Fund, as the case may be, then held by the Escrow Agent to such
successor, the Escrow Agent shall act in accordance with such instructions and
promptly transfer the Deposit Fund to such designated successor. If no successor
Escrow Agent is named as provided in this Section 9 prior to the date on which
the resignation of the Escrow Agent is to properly take effect, the Escrow Agent
may apply to a court of competent jurisdiction for appointment of a successor
Escrow Agent.

          10.      General.

                    (a)      Entire
Agreement. Except for those provisions of the Merger Agreement
referenced herein, this Agreement constitutes the entire agreement among the
parties and 

4

Execution Version

supersedes any prior understandings, agreements or
representations by or among the parties, written or oral, with respect to the
subject matter hereof.

                    (b)      Succession
and Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties named heroin and their respective successors and
permitted assigns.

                    (c)      Counterparts
and Facsimile Signature. 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 one and the same instrument. This Agreement may be
executed by facsimile signature.

                    (d)      Headings.
The section headings contained in this Agreement arc inserted for convenience
only and shall not affect in any way the meaning or interpretation of this
Agreement.

                    (e)     
Notices. All notices, instructions and other communications
hereunder shall he in writing. Any notice, instruction or other communication
hereunder shall be deemed duly delivered four business days after it is sent by
registered or certified mail, return receipt requested, postage prepaid, or one
business day after it is sent for next business day delivery via a reputable
nationwide overnight courier service, in each case to the intended recipient as
set forth below:

If to PDM USA:

Platinum Diversified Mining USA, Inc.

152 West 57th Street 
54th Floor 
New York, NY 10019 
Attention:
Corporate Secretary 
Facsimile: (212) 581-0002

with a copy to:

Holland & Hart LLP 
Attention:
Kevin W. Johnson 
555 Seventeenth Street 
Suite 3200 
Denver, CO 80202

Facsimile: (303) 295-8261

If to Nord:

NORD Resources Corporation

Attention: Ronald A. Hirsch 
1 West Wetmore Road, Suite 203 
Tucson,
AZ 85705 
Facsimile: (520) 292-0268

5

Execution Version

with a copy to:

Lang Michener LLP
1500-1055 West
Georgia Street 
Vancouver, British Columbia 
V6E 4N7 
Attention:
Stephen D. Wortley 
Facsimile: (604) 893-2378

If to the Escrow Agent:

American Stock Transfer & Trust
Company 
59 Maiden Lane 
New York, NY 10038 
Facsimile: (718) 331-1852

Attention: Herbert J. Lemmer

Any party may give any notice, instruction or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail or
electronic mail), but no such notice, instruction or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party to whom it is intended. Any party may change the address to which
notices, instructions, or other communications hereunder are to he delivered by
giving the other parties notice in the manner set forth in this Section.

                    (f)      Governing
Law. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Delaware without giving effect to any
choice or conflict of law provision or rule (whether of the State of Delaware or
any other jurisdiction) that would cause the application of laws of any
jurisdiction other than those of the State of Delaware.

                    (g)      Amendments
and Waivers. This Agreement may be amended only with the written consent
of PDM USA, the Escrow Agent and NORD. No waiver of any right or remedy
hereunder shall be valid unless the same shall be in writing and signed by the
party giving such waiver. No waiver by any party with respect to any condition,
default or hi-each of covenant hereunder shall be deemed to extend to any prior
or subsequent condition, default or breach of covenant hereunder or affect in
any way any rights arising by virtue of any prior or subsequent such
occurrence.

                    (h)     
Submission to Jurisdiction. Each of the parties hereto (i) submits
to the jurisdiction of any state or federal court sitting in the State of
Delaware in any action or proceeding arising out of or relating to this
Agreement, (ii) agrees that all claims in respect of such action or proceeding
may be heard and determined in any such court, (iii) waives any claim of
inconvenient forum or other challenge to venue in such court, (iv) agrees not to
bring any action or proceeding arising out of or relating to this Agreement in
any other court and (v) waives any right it may have to a trial by jury with
respect to any action or proceeding arising out of or relating to this
Agreement. Each party agrees to accept service of any summons, 

6

Execution Version

complaint or other initial pleading made in the manner provided
for the giving of notices in Section 10(c), provided that nothing in this
Section 10(h) shall affect the right of any party to serve such summons,
complaint or other initial pleading in any other manner permitted by law.

[Remainder of Page Initially Left Blank]

7

Execution Version

          IN
WITNESS WHEREOF, the parties hereto have caused this Deposit Escrow Agreement to
be duly executed on the day and year first above written.

Platinum Diversified Mining USA,
Inc.

 

By: /s/ Bobby E.
Cooper                                                 
Name:
Bobby E.
Cooper                                                  

Title: Chief Executive
Officer                                          

NORD Resources Corporation

 

By: /s/ Ronald A.
Hirsch                                                 

Name: Ronald A.
Hirsch                                                  

Title:
Chairman                                                                  

 

American Stock Transfer & Trust
Company

 

By: /s/ H.J.
Lemmer                                                           
Name:
Herbert J.
Lemmer                                                  

Title: Vice
President                                                          

[Deposit Escrow Signature Page]Exhibit
10.1

CONTRIBUTION
AGREEMENT

AMONG

APOLO TUBOS E EQUIPAMENTOS S.A.

LONE STAR BRAZIL HOLDINGS
2 LTDA.

APOLO MECÂNICA E ESTRUTURAS LTDA.

GPC
PARTICIPACOES S.A.

CIRRUS
PARTICIPACOES LTDA.

AND

LONE STAR
TECHNOLOGIES, INC.

 

 

Dated as of October 24, 2006

 

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
   

  	
  DEFINITIONS

  	
   

  	
  2

  
	
  1.1

  	
   

  	
  Defined Terms

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
   

  	
  CONTRIBUTION

  	
   

  	
  12

  
	
  2.1

  	
   

  	
  LSB 2 Investment

  	
   

  	
  12

  
	
  2.2

  	
   

  	
  Anticipated Payments of the Promissory Note

  	
   

  	
  13

  
	
  2.3

  	
   

  	
  Closing Statement

  	
   

  	
  13

  
	
  2.4

  	
   

  	
  Purchase Price Adjustment

  	
   

  	
  14

  
	
  2.5

  	
   

  	
  Use of the LSB 2 Investment

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
   

  	
  CLOSING

  	
   

  	
  17

  
	
  3.1

  	
   

  	
  Closing Date

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
   

  	
  DELIVERABLES

  	
   

  	
  17

  
	
  4.1

  	
   

  	
  Items to Be Delivered by Tubos

  	
   

  	
  17

  
	
  4.2

  	
   

  	
  Items to Be Delivered by LSB 2

  	
   

  	
  18

  
	
  4.3

  	
   

  	
  Items to Be Delivered by the Company

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
   

  	
  REPRESENTATIONS AND WARRANTIES OF TUBOS, THE
  COMPANY, GPC AND CIRRUS

  	
   

  	
  19

  
	
  5.1

  	
   

  	
  Existence and Good Standing

  	
   

  	
  20

  
	
  5.2

  	
   

  	
  Authorization of Agreement

  	
   

  	
  20

  
	
  5.3

  	
   

  	
  Conflicts; Consents of Third Parties

  	
   

  	
  21

  
	
  5.4

  	
   

  	
  No Undisclosed Liability

  	
   

  	
  21

  
	
  5.5

  	
   

  	
  Real Property

  	
   

  	
  22

  
	
  5.6

  	
   

  	
  Environmental Matters

  	
   

  	
  23

  
	
  5.7

  	
   

  	
  Taxes

  	
   

  	
  23

  
	
  5.8

  	
   

  	
  Intellectual Property

  	
   

  	
  24

  
	
  5.9

  	
   

  	
  Ownership

  	
   

  	
  25

  
	
  5.10

  	
   

  	
  Subsidiaries

  	
   

  	
  25

  
	
  5.11

  	
   

  	
  Compliance with Law

  	
   

  	
  25

  
	
  5.12

  	
   

  	
  Financial Statements

  	
   

  	
  25

  
	
  5.13

  	
   

  	
  Material Adverse Effect

  	
   

  	
  26

  
	
  5.14

  	
   

  	
  Material Contracts

  	
   

  	
  26

  

 

 i
 

 

TABLE OF CONTENTS

(continued)

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.15

  	
   

  	
  Employee Matters

  	
   

  	
  28

  
	
  5.16

  	
   

  	
  Legal Proceeding

  	
   

  	
  29

  
	
  5.17

  	
   

  	
  Insurance

  	
   

  	
  29

  
	
  5.18

  	
   

  	
  Inventory

  	
   

  	
  29

  
	
  5.19

  	
   

  	
  Accounts Receivable

  	
   

  	
  30

  
	
  5.20

  	
   

  	
  Related Persons

  	
   

  	
  30

  
	
  5.21

  	
   

  	
  Tubular Products Contracts

  	
   

  	
  30

  
	
  5.22

  	
   

  	
  GPC, Cirrus or Tubos Legal
  Proceeding

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
   

  	
  REPRESENTATIONS AND WARRANTIES OF LSB 2 AND LONE
  STAR

  	
   

  	
  31

  
	
  6.1

  	
   

  	
  Existence and Good Standing

  	
   

  	
  31

  
	
  6.2

  	
   

  	
  Authorization of Agreement

  	
   

  	
  31

  
	
  6.3

  	
   

  	
  Conflicts; Consents of Third Parties

  	
   

  	
  32

  
	
  6.4

  	
   

  	
  Ownership of Star Brazil Cayman

  	
   

  	
  32

  
	
  6.5

  	
   

  	
  No Liabilities; Assets

  	
   

  	
  32

  
	
  6.6

  	
   

  	
  Employee Matters

  	
   

  	
  32

  
	
  6.7

  	
   

  	
  Legal Proceeding

  	
   

  	
  32

  
	
  6.8

  	
   

  	
  Compliance with Law

  	
   

  	
  33

  
	
  6.9

  	
   

  	
  Contracts

  	
   

  	
  33

  
	
  6.10

  	
   

  	
  Taxes

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
   

  	
  COVENANTS

  	
   

  	
  34

  
	
  7.1

  	
   

  	
  No-Shop

  	
   

  	
  34

  
	
  7.2

  	
   

  	
  Operations Prior to the
  Closing Date

  	
   

  	
  34

  
	
  7.3

  	
   

  	
  Indebtedness

  	
   

  	
  37

  
	
  7.4

  	
   

  	
  Employees

  	
   

  	
  37

  
	
  7.5

  	
   

  	
  Transfer of Assets

  	
   

  	
  37

  
	
  7.6

  	
   

  	
  Subsidiaries

  	
   

  	
  38

  
	
  7.7

  	
   

  	
  PAT Registration

  	
   

  	
  38

  
	
  7.8

  	
   

  	
  Antitrust Filing

  	
   

  	
  39

  
	
  7.9

  	
   

  	
  Realization of Tax Receivables and Other Tax
  Assets/Credits

  	
   

  	
  39

  

 

 ii
 

 

TABLE OF CONTENTS

(continued)

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.10

  	
   

  	
  Conversion of the Company

  	
   

  	
  39

  
	
  7.11

  	
   

  	
  Special Oto Mills Production
  Line

  	
   

  	
  39

  
	
  7.12

  	
   

  	
  Best Efforts

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
   

  	
  CONDITIONS TO CLOSING

  	
   

  	
  40

  
	
  8.1

  	
   

  	
  Conditions Precedent to Obligations of Tubos

  	
   

  	
  40

  
	
  8.2

  	
   

  	
  Conditions Precedent to Obligations of LSB 2

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
   

  	
  TERMINATION

  	
   

  	
  42

  
	
  9.1

  	
   

  	
  Termination of Agreement

  	
   

  	
  42

  
	
  9.2

  	
   

  	
  Procedure for Termination

  	
   

  	
  43

  
	
  9.3

  	
   

  	
  Effect of Termination

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
   

  	
  INDEMNIFICATION

  	
   

  	
  43

  
	
  10.1

  	
   

  	
  Survival of Representations, Warranties and
  Covenants

  	
   

  	
  43

  
	
  10.2

  	
   

  	
  Indemnification

  	
   

  	
  44

  
	
  10.3

  	
   

  	
  Indemnification Procedures

  	
   

  	
  45

  
	
  10.4

  	
   

  	
  Limitations on Indemnification for Breaches of Representations
  and Warranties

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  48

  
	
  11.1

  	
   

  	
  Waiver of Default

  	
   

  	
  48

  
	
  11.2

  	
   

  	
  Amendment

  	
   

  	
  48

  
	
  11.3

  	
   

  	
  No Third Party Rights

  	
   

  	
  48

  
	
  11.4

  	
   

  	
  Severability

  	
   

  	
  48

  
	
  11.5

  	
   

  	
  Binding Effect; Assignment

  	
   

  	
  49

  
	
  11.6

  	
   

  	
  Headings

  	
   

  	
  49

  
	
  11.7

  	
   

  	
  Word Meanings

  	
   

  	
  49

  
	
  11.8

  	
   

  	
  Counterparts

  	
   

  	
  49

  
	
  11.9

  	
   

  	
  Entire Agreement

  	
   

  	
  49

  
	
  11.10

  	
   

  	
  Arbitration

  	
   

  	
  49

  
	
  11.11

  	
   

  	
  Governing Law

  	
   

  	
  50

  
	
  11.12

  	
   

  	
  Notices

  	
   

  	
  50

  

 

 iii
 

 

TABLE OF CONTENTS

(continued)

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.13

  	
   

  	
  Guarantee of the Obligations of Tubos

  	
   

  	
  54

  
	
  11.14

  	
   

  	
  Guarantee of the Obligations of LSB 2

  	
   

  	
  54

  
	
  11.15

  	
   

  	
  Expenses

  	
   

  	
  55

  
	
  11.16

  	
   

  	
  Further Assurances

  	
   

  	
  55

  
	
  11.17

  	
   

  	
  Language

  	
   

  	
  55

  

 

 iv
 

 

TABLE OF CONTENTS

(continued)

EXHIBITS

	
  EXHIBIT A

  	
   

  	
  AMENDED AND RESTATED BY-LAWS

  
	
  EXHIBIT B

  	
   

  	
  LSS TRADEMARK CROSS LICENSE AGREEMENT

  
	
  EXHIBIT C

  	
   

  	
  PROMISSORY NOTE

  
	
  EXHIBIT D

  	
   

  	
  SALE, MARKETING AND SUPPLY AGREEMENT

  
	
  EXHIBIT E

  	
   

  	
  SHAREHOLDERS AGREEMENT

  
	
  EXHIBIT F

  	
   

  	
  TUBOS TRANSITION SERVICES AGREEMENT

  
	
  EXHIBIT G

  	
   

  	
  TUBOS TRADEMARK LICENSE AGREEMENT

  
	
  EXHIBIT H

  	
   

  	
  LSS TRANSITION SERVICES AGREEMENT

  
	
  EXHIBIT I

  	
   

  	
  MEMORANDUM AND ARTICLES OF ASSOCIATION OF STAR
  CAYMAN BRAZIL

  
	
  EXHIBIT J

  	
   

  	
  AA PURCHASE AGREEMENT

  

 

SCHEDULES

	
  SCHEDULE 1.1

  	
   

  	
  COMPANY ASSETS

  
	
  SCHEDULE 2.3

  	
   

  	
  AGREED PRINCIPLES

  
	
  SCHEDULE 2.4(a)

  	
   

  	
  AGREED PROCEDURES FOR PREPARATION OF CLOSING
  STATEMENT AND CLOSING BALANCE SHEET

  
	
  SCHEDULE 2.5

  	
   

  	
  USE OF THE LSB 2 INVESTMENT

  
	
  SCHEDULE 5.2(b)

  	
   

  	
  AUTHORIZATION OF AGREEMENT

  
	
  SCHEDULE 5.3

  	
   

  	
  CONFLICTS; CONSENTS OF THIRD PARTIES

  
	
  SCHEDULE 5.5(a)

  	
   

  	
  REAL PROPERTY LIENS

  
	
  SCHEDULE 5.5(b)

  	
   

  	
  REAL PROPERTY STRUCTURAL DEFECTS

  
	
  SCHEDULE 5.5(c)

  	
   

  	
  REAL PROPERTY CERTIFICATES OF OCCUPANCY AND
  OTHER PERMITS

  
	
  SCHEDULE 5.6

  	
   

  	
  ENVIRONMENTAL MATTERS

  
	
  SCHEDULE 5.8

  	
   

  	
  INTELLECTUAL PROPERTY

  
	
  SCHEDULE 5.9(a)

  	
   

  	
  OWNERSHIP OF THE COMPANY

  
	
  SCHEDULE 5.9(b)

  	
   

  	
  OWNERSHIP OF APOLO AMERICA

  
	
  SCHEDULE 5.10

  	
   

  	
  SUBSIDIARIES

  
	
  SCHEDULE 5.14

  	
   

  	
  MATERIAL CONTRACTS

  
	
  SCHEDULE 5.15(a)

  	
   

  	
  EMPLOYEES

  
	
  SCHEDULE 5.15(b)

  	
   

  	
  EMPLOYEE MATERIAL BENEFITS

  
	
  SCHEDULE 5.16

  	
   

  	
  LEGAL PROCEEDING

  
	
  SCHEDULE 5.20

  	
   

  	
  RELATED PERSONS

  
	
  SCHEDULE 5.21

  	
   

  	
  TUBULAR PRODUCTS CONTRACTS

  
	
  SCHEDULE 5.22

  	
   

  	
  GPC, CIRRUS OR TUBOS LEGAL PROCEEDING

  
	
  SCHEDULE 6.2(b)

  	
   

  	
  AUTHORIZATION OF AGREEMENT

  
	
  SCHEDULE 6.3

  	
   

  	
  CONFLICTS; CONSENTS OF THIRD PARTIES

  
	
  SCHEDULE 6.6

  	
   

  	
  EMPLOYEE MATTERS

  

 

 v
 

 

TABLE OF CONTENTS

(continued)

	
  SCHEDULE 7.3(a)

  	
   

  	
  AFFILIATE INDEBTEDNESS

  
	
  SCHEDULE 7.3(b)

  	
   

  	
  EXCLUDED INDEBTEDNESS

  
	
  SCHEDULE 7.5(a)

  	
   

  	
  TRANSFER OF ASSETS

  
	
  SCHEDULE 7.5(c)

  	
   

  	
  TRANSFER OF CALDERARIA ASSETS

  
	
  SCHEDULE 7.9(a)

  	
   

  	
  TAX RECEIVABLES

  
	
  SCHEDULE 7.9(b)

  	
   

  	
  FIS AND COFINS

  

 

 vi

CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT
(this “Agreement”) is made and entered into as of the 24th day of October,
2006, by and among Apolo Tubos e Equipamentos S.A., a corporation (sociedade anônima / stock corporation), organized under the
laws of the Federative Republic of Brazil, with head offices in the city of Rio de
Janeiro, State of Rio de Janeiro, at Av. Chrisótomo Pimentel de Oliveira, No.
2651, Pavuna, CEP 21650-000, duly enrolled with the CNPJ under No. 33.017.088/0001-03,
herein represented by its undersigned legal representatives, duly authorized as
they solely declare (“Tubos”), Lone Star Brazil Holdings 2 Ltda., a
limited liability company (sociedade empresária
limitada) organized under the laws of
the Federative Republic of Brazil, with head offices at City of São Paulo, State of São Paulo, at Rua
Funchal, 263, 10o andar, sala 17-I, CEP 04551-060, duly enrolled with
the CNPJ under No. 08.278.633/0001-78, herein represented by its undersigned legal
representatives, duly authorized as they solely declare (“LSB 2”), Apolo
Mecânica e Estruturas Ltda., a limited liability company (sociedade
empresária  limitada),
organized under the laws of the Federative Republic of Brazil, with head
offices in the
city of Lorena, State of São Paulo, at Av. Dr. Léo de Affonseca Netto, 750, CEP
12600-000, duly enrolled with the CNPJ under No. 42.419.150/0001-84, herein represented
by its undersigned legal representatives, duly authorized as they solely
declare (the “Company”), Lone Star Technologies, Inc., a Delaware
corporation, herein represented by its undersigned legal representatives, duly
authorized as they solely declare (“Lone Star”), GPC Participacoes S.A.,
a corporation (sociedade anônima / stock corporation),
organized under the laws of the Federative Republic of Brazil, with head
offices in the
city of Rio de Janeiro, State of Rio de Janeiro, at Rua do Passeio, No. 70, 13rd floor - part, CEP 20021-290, duly
enrolled with the CNPJ under No. 02.193.750/0001-52, herein represented by its
undersigned legal representatives, duly authorized as they solely declare (“GPC”),
and Cirrus Participacoes Ltda., a limited liability company (sociedade empresária  limitada)
organized under the laws of the Federative Republic of Brazil, with head
offices in the
city of of Rio de Janeiro, State of Rio de Janeiro, at Rua do Passeio, No. 70,
10th floor - part, CEP 20021-290, duly
enrolled with the CNPJ under No. 27.083.872/0001-17, herein represented by its
undersigned legal representatives, duly authorized as they solely declare (“Cirrus”).  Each of Tubos and LSB 2 are periodically
referred to herein as a “Shareholder” and collectively as the “Shareholders.”

WHEREAS, Lone Star has agreed to contribute the LSB 2
Investment (as defined below) to the Company using LSB 2, an indirect
wholly-owned subsidiary of Lone Star, as a vehicle for such investment upon the
terms and subject to the conditions of this Agreement;

WHEREAS, prior to the contribution by LSB 2 of the LSB
2 Investment, Tubos owns one-hundred percent (100%) of the outstanding Common
Shares (as defined below) of the Company;

 

WHEREAS, after the contribution by LSB 2 of the LSB 2
Investment, each of LSB 2 and Tubos (including their respective directors of
the Company) shall own fifty percent (50%) of the outstanding Common Shares of
the Company;

WHEREAS, at a future date, LSB 2 will merge with and
into the Company and LSB 1 (as defined below) will succeed to all the rights
and obligations of LSB 2 under this Agreement;

WHEREAS, such merger will not result in the dilution
of the Common Shares held by the Shareholders; and

WHEREAS, upon the terms and subject to the conditions
contained in this Agreement, LSB 2 desires to make certain contributions to the
Company, and the Company desires to accept such contributions from LSB 2.

NOW, THEREFORE, in consideration of the premises and
the mutual agreements contained herein, the parties hereto agree as follows:

ARTICLE
1

DEFINITIONS

1.1           Defined Terms.

As used herein, the following terms shall have the following
meanings, unless the context otherwise requires:

“AA Purchase Agreement” means the Stock
Purchase Agreement by and among the Company, Tubos, GPC, Cirrus, Antonio
Joaquim Peixoto de Castro Palhares and Paulo Cesar Peixoto de Castro Palhares,
in substantially the form attached hereto as Exhibit J.

“Actions” means any suit, action, claim,
hearing, administrative action, demand letter, investigation by any
Governmental Authority, notice of violation, or proceeding arising out of any
violation or alleged violation of any Law, breach or alleged breach of any
Contract or violation or alleged violation relating to any Person.

“Adjusted LSB 2 Investment” has the meaning set
forth in Section 2.3 hereof.

“Affiliate” of a specified person (the “Specified
Person”) means any Person (a) who, directly or indirectly, controls,
is controlled by, or is under common control with the Specified Person, (b)
who, directly or indirectly, owns or controls fifty percent (50%) or more of
the Specified Person’s outstanding voting securities or equity interests, (c)
of whom the Specified Person, directly or indirectly, owns or controls fifty
percent (50%) or more of the outstanding voting securities or equity interests
or (d) who has the right, directly or indirectly, to appoint or elect fifty
percent (50%) or more of the Specified Person’s board of directors or
equivalent managing body.

 2
 

 

“Agreed Principles” has the meaning set forth
in Section 2.3 hereof.

“Agreement” means this Contribution Agreement,
as amended from time to time.

“Amended and Restated By-Laws” means the
Amended and Restated By-Laws of the Company, in substantially the form attached
hereto as Exhibit A.

“Ancillary Agreements” means each of the Sale,
Marketing and Supply Agreement, the Shareholders Agreement, the LSS Trademark
Cross License Agreement, the Tubos Trademark License Agreement, the Tubos
Transition Services Agreement, the LSS Transition Services Agreement, the
Amended and Restated By-Laws, the Promissory Note and the AA Purchase
Agreement.

“Apolo America” means Apolo America Pipe and
Tube Corp., a Texas corporation.

“Apolo America Financial Statements” means the
financial statements of Apolo America, as of and for
the year ended December 31, 2005, and as of and for the period ended June 30,
2006, and the financial statements of Apolo America as of September 30, 2006,
all prepared in accordance with Brazilian GAAP.

“Apolo America Shares” has the meaning set
forth in Section 7.6(a).

“BACEN” means the Central Bank of Brazil.

“Balance Sheet Date” means December 31, 2005.

“Basket” has the meaning set forth in Section 10.4(a)
hereof.

“Brazilian GAAP” means generally accepted
accounting principles as used in Brazil, from time to time, applied on a
consistent basis from period to period.

“Business” means the business of manufacturing,
processing and finishing Tubular Products.

“Business Day” means a day on which banks are
open for general banking business in both São Paulo, Brazil and Dallas, Texas,
the United States of America (excluding Saturdays, Sundays and public
holidays).

“CADE”
has the meaning set forth in Section 7.8(a) hereof.

“Calderaria Assets” has the meaning set forth
in Section 7.5(c) hereof.

“Cap” has the meaning set forth in Section
10.4(b) hereof.

“Cayman Shares” has the meaning set forth in Section
2.1(a) hereof.

 3
 

 

“Charter Documents” means the limited liability
company agreement, limited partnership agreement, certificate or articles of
incorporation, certificate of formation, certificate of limited partnership,
by-laws, articles of association or other governing documents, as applicable,
of the Person in question, as may be in effect from time to time.

“Cirrus” has the meaning set forth in the
introductory paragraph hereof.

“Closing” has the meaning set forth in Section
3.1 hereof.

“Closing Balance Sheet” has the meaning set
forth in Section 2.4(a) hereof.

“Closing Date” has the meaning set forth in Section 3.1
hereof.

“Closing Statement” has the meaning set forth
in Section 2.4(a) hereof

“Closing Working Capital” has the meaning set
forth in Section 2.4(a) hereof.

“Cofins” means Contribution for the Financing of Social
Security (Contribuição para o Financiamento da Seguridade Social).

“Common Shares” means the common shares of the
Company.

“Company” has the meaning set forth in the
introductory paragraph hereof.

“Company Assets” means all properties and
assets of the Company as of the date hereof, including but not limited to the
Facility and the assets set forth on Schedule 1.1.

“Contingent Tax Credit/Asset” has the meaning
set forth in Section 7.9(b) hereof.

 “Contract”
means any contract, agreement, instrument, commitment or other binding
arrangement, whether written or oral.

“Coupling” means a tubular section used for the
exclusive purpose of joining two threaded pin ends of pipe or equipment having
the same external and internal diameters and same thread.

“Coupling Materials” means seamless pipes from
which tubular sections are prepared for the manufacture of Couplings or
Cross-Overs.

“Cross-Over” means a tubular section used for
the exclusive purpose of joining two threaded pin ends of pipe having different
dimensions or threads.

“Demand” has the
meaning set forth in Section 2.2(a) hereof.

 4
 

 

“Dispute” has the meaning set forth in Section 11.10
hereof.

“Environmental Costs” means, with respect to
any Person, all liabilities, obligations, responsibilities, Remedial Actions,
losses, damages, punitive damages, consequential damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any Action by any other
Person or in response to any violation of Environmental Law, whether known or
unknown, accrued or contingent, whether based in contract, implied or express
warranty, strict liability, criminal or civil statute, to the extent based
upon, related to, or arising under or pursuant to any Environmental Law,
Environmental Permit, Order or agreement with any Governmental Authority or
other Person, which relates to any environmental, health or safety condition,
violation of Environmental Law or a Release or threatened Release of Hazardous
Materials.

“Environmental Laws” means any Laws as now or
hereafter in effect in any way relating to the protection of human health and
safety, the environment or natural resources, applicable to the Company, the
Company Assets and the Business, as each has been or may be amended and the
regulations promulgated pursuant thereto.

“Environmental Permits” means any Permits
required by Environmental Laws for the operation of the Business.

“Estimate Statement” has the meaning set forth
in Section 2.3 hereof.

“Estimate Statement Delivery Date” has the
meaning set forth in Section 2.3 hereof.

“Estimated Closing Balance Sheet” has the
meaning set forth in Section 2.3 hereof.

“Estimated Closing Working Capital” has the
meaning set forth in Section 2.3 hereof.

“Exchange Rate” means for any
given date, the selling rate for US Dollars as quoted by BACEN via SISBACEN for
PTAX-800, option 5, rates for accounting transaction, on the Business Day
immediately preceding the relevant date. If, by any reason, the PTAX-800 rate
is not quoted by BACEN, the Exchange Rate shall be the exchange rate determined
by BACEN for US Dollars referring to the foreign investment transactions,
registered or to be registered before BACEN or, if such determination is not
made, the Exchange Rate shall be the average of the three average exchange
selling rates of US Dollars quoted by each of the following Brazilian banks:
(a) Citibank S.A., (b) Banco ABN-AMRO Real S.A. and (c) Unibanco – União de
Bancos Brasileiros S.A. for the commercial transactions performed in the
Business Day immediately preceding the relevant date.

 5
 

 

“E&Y” means Ernst & Young LLP.

“Facility” means the real property,
improvements, equipment and other assets located at Lorena, State of São Paulo,
Brazil.

“Final Closing Balance Sheet” has the meaning
set forth in Section 2.4(e) hereof.

“Final Working Capital” has the meaning set
forth in Section 2.4(e) hereof.

“FINAME Loan” means the Industrial Credit Certificate No. 343.700.406
between Banco do Brasil S/A and the Company dated September 12, 2005 in the
amount of R$339,705.89 originated by the Special Agency for Industrial
Financing (FINAME) for the purposes of the purchase of a mechanical lathe.

“Financial Statements”
means the financial statements of the Company and its subsidiaries
audited by KPMG as a part of the audited consolidated financial statements of
its parent company, Tubos, as of and for
the year ended December 31, 2005, and as of and for the period ended June 30,
2006, and the unaudited balance sheet of the Company as of September 30, 2006,
all prepared in accordance with Brazilian GAAP.

“Governmental Authority” means any authority,
regulatory or administrative agency, commission, department, board, bureau,
agency, instrumentality or court of Brazil, the United States of America, or
any other nation or sovereign state, any federal, bilateral, or multilateral
governmental authority, any state, possession, territory, county, district,
city, or other governmental unit or subdivision, and any branch, agency, or
judicial body of any of the foregoing.

“GPC” has the meaning set forth in the
introductory paragraph hereof.

“Hazardous Material” means any substance,
material or waste that is regulated, classified, or otherwise characterized
under or pursuant to any Environmental Law as “hazardous,” “toxic,” “pollutant,”
“contaminant,” “radioactive,” or words of similar meaning or effect, including
petroleum and its by-products, asbestos, polychlorinated biphenyls, radon, mold
or other fungi and urea formaldehyde insulation.

“ICMS” means the Tax on the Circulation of Goods and Interstate
and Inter-municipal Transportation Services and Communication Services (Imposto
sobre Circulação de Mercadorias e Serviços de Transporte Interestadual e
Intermunicipal e de Comunicação).

“IFC” has the meaning set forth in Section 8.2(g)
hereof.

“Indebtedness” of any Person means, without
duplication, (a) the principal, accreted value, accrued and unpaid
interest, prepayment and redemption premiums or penalties (if any), unpaid fees
or expenses and other monetary obligations in respect of (i) indebtedness
of such Person for money borrowed and (ii) indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
such

 6
 

 

Person is responsible or liable, (b) all
obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations of such Person and all obligations
of such Person under any title retention agreement (but excluding trade accounts
payable and other accrued current liabilities arising in the ordinary course of
business) (other than the current liability portion of any indebtedness for
borrowed money), (c) all obligations of such Person under leases required
to be capitalized in accordance with Brazilian GAAP, (d) all obligations
of such Person for the reimbursement of any obligor on any letter of credit,
banker’s acceptance or similar credit transaction, (e) all obligations of
such Person under interest rate or currency swap transactions (valued at the
termination value thereof), (f) the liquidation value, accrued and unpaid
dividends and prepayment or redemption premiums and penalties (if any), unpaid
fees or expense and other monetary obligations in respect of any and all
redeemable preferred stock of such Person, (g) all obligations of the type
referred to in clauses (a) through (f) of any Persons for the payment of
which such Person is responsible or liable, directly or indirectly, as obligor,
guarantor, surety or otherwise, including guarantees of such obligations and
(h) all obligations of the type referred to in clauses (a) through (g) of
other Persons secured by (or for which the holder of such obligations has an
existing right, contingent or otherwise, to be secured by) any Lien on any
property or asset of such Person (whether or not such obligation is assumed by
such Person).

“Independent Accountant”
has the meaning set forth in Section 2.4(c) hereof.

“Intellectual Property”
means all intellectual property rights and related priority rights, arising
from or in respect of the following, whether protected, created or arising
under the Laws of Brazil or any other jurisdiction or under any international
convention, including: (a) all patents and patent applications, including all continuations,
divisionals, continuations-in-part and provisionals and patents issuing
thereon, and all reissues, reexaminations, substitutions, renewals and
extensions thereof (collectively, “Patents”); (b) all trademarks,
service marks, trade names, trade dress, logos, corporate names and other
source or business identifiers, together with the goodwill associated with any
of the foregoing, and all applications, registrations, renewals and extensions
thereof; (c) all Internet domain names; (d) all copyrights, works of authorship
and moral rights, and all registrations, applications, renewals, extensions and
reversions thereof; and (e) all discoveries, concepts, ideas, research and
development, know-how, formulae, inventions, compositions, manufacturing and production
processes and techniques, technical data, procedures, designs, drawings,
specifications, databases, and other proprietary or confidential information,
including customer lists, supplier lists, pricing and cost information, and
business and marketing plans and proposals, in each case excluding any rights
in respect of any of the foregoing that comprise or are protected by Patents.

“Knowledge” is
deemed to include knowledge, information and belief which a party would have if
the party had made all reasonable enquiries and, without limitation, includes
the knowledge, information and belief of its directors, officers and employees.

“KPMG” means KPMG International.

 7
 

 

“Law” means any statute, law, treaty,
ordinance, rule, regulation, instrument, directive, decree, permit, agreement,
Order or injunction of or with any Governmental Authority, and includes,
without limitation, rules or regulations of any regulatory or self-regulatory
authority compliance with which is required by law.

“Legal Proceedings” means any judicial,
administrative or arbitral actions, suits, proceedings (public or private),
claims or governmental proceedings.

“Liability” means any debt, loss, damage,
adverse claim, adverse Action, fines, penalties, liability or obligation
(whether direct or indirect, known or unknown, asserted or unasserted, absolute
or contingent, accrued or unaccrued, matured or unmatured, determined or
determinable, disputed or undisputed, liquidated or unliquidated, or due or to
become due, and whether in contract, tort, strict liability or otherwise), and
including all costs and expenses relating thereto (including all fees,
disbursements and expenses of legal counsel, experts, engineers and consultants
and costs of investigation).

“Lien” means any lien, encumbrance, pledge,
mortgage, deed of trust, security interest, claim, lease, charge, option, right
of first refusal, easement, servitude, proxy, voting trust or agreement,
transfer restriction under any shareholder or similar agreement, encumbrance or
any other restriction or limitation whatsoever.

“Line Pipe” means finished
or unfinished line pipe.

“Lone Star” has the meaning set forth in the
introductory paragraph hereof.

“Lone Star Steel” means Lone Star Steel
Company, L.P., a Delaware limited partnership.

“Loss” and “Losses” have the meaning set
forth in Section 10.2(a) hereof.

“LSB 1” means Lone Star Brazil Holdings 1
Ltda., a limited liability company (sociedade empresária
limitada) organized under the laws of
the Federative Republic of Brazil, with head offices at City of São Paulo,
State of São Paulo, at Rua Funchal, 263, 10o andar, sala 16-I, CEP 04551-060,
duly enrolled with the CNPJ under No. 08.278.615/0001-96 and an indirect wholly-owned
subsidiary of Lone Star.

“LSB 2” has the meaning set forth in the introductory
paragraph hereof and shall include LSB1 as successor upon the merger of LSB 2
with and into the Company.

“LSB 2 Indemnified Parties” has the meaning set
forth in Section 10.2(a) hereof.

“LSB 2 Investment” has the meaning set forth in
Section 2.1 hereof.

“LSB 2 Obligations” has the meaning set forth
in Section 11.14 hereof.

“LSS Trademark Cross License Agreement” means
the Trademark Cross License Agreement between Lone Star Steel and the Company
pursuant to which the Company

 8
 

 

shall license certain trademarks to Lone Star Steel
and Lone Star Steel shall license certain trademarks to the Company, in
substantially the form attached hereto as Exhibit B.

“LSS Transition Services
Agreement” means the Transition Services Agreement between Lone Star Steel and
the Company pursuant to which Lone Star Steel shall provide certain transition
services to the Company, in substantially the form attached hereto as Exhibit
H.

“Material Adverse Effect” means a material
adverse effect on (a) the near-term or long-term projected business, assets,
properties, results of operations, condition (financial or otherwise) or
prospects of the Company, (b) the value of the Facility or (c) the ability of
LSB 2, Lone Star, Tubos, GPC or Cirrus, as the case may be, to consummate the
transactions contemplated by this Agreement or perform their respective
obligations under this Agreement or the Ancillary Agreements to which either of
them is a party.

“Material Contracts” has the meaning set forth
in Section 5.14 hereof.

“Negative
Adjustment” has the meaning set forth in Section 2.3
hereof.

“Net
Working Capital” has the meaning set forth in Section 2.3
hereof.

“Notional
Account” has the meaning set forth in Section 10.3(e) hereof.

“Notice” means a writing, containing the
information required by this Agreement to be communicated to a party, delivered
or sent in the manner set forth in Section 11.12 hereof.

“Oil Country Tubular
Goods or OCTG” means casing, tubing, drill pipe, semi-finished and
unfinished green tubes, integral connections, Coupling Materials and finished
Couplings.

“Order” means any writ, judgment, decree,
injunction or similar order of any Governmental Authority.

“PAT” means Programa de Alimentação do
Trabalhador, controlled by the Ministry of Labor of the Federative
Republic of Brazil.

“PAT Registration” has the meaning set forth in
Section 7.7 hereof.

“Patents” has the meaning set forth in the
definition of Intellectual Property.

“Permits” means any approvals, authorizations,
consents, licenses, permits or certificates of a Governmental Authority.

“Permitted Exceptions” means (a) all
defects, exceptions, restrictions, easements, rights of way and encumbrances
disclosed in policies of title insurance that have been

 9
 

 

delivered to LSB 2, (b) statutory liens for
current Taxes, assessments or other governmental charges not yet delinquent or
the amount or validity of which is being contested in good faith by appropriate
proceedings and which have been disclosed in writing to LSB 2, (c) the
liens arising or incurred in the ordinary course of business that have been
disclosed to LSB 2 on Schedule 5.5(a) and are not material to the
business, operations and financial condition of the asset so encumbered and
that are not resulting from a breach, default or violation by Tubos or any of
its subsidiaries of any Contract or Law, (d) zoning, entitlement and other
land use and environmental regulations by any Governmental Authority, provided
that such regulations have not been violated and will not be violated in the
operation of the Business, and (e) liens resulting from any Actions in respect
of which the Company is a party, and that may be required for the purposes of
enabling the Company to present a defense, counterclaim or appeal, as
applicable.

“Person” means any individual, partnership, limited
liability company, corporation, cooperative, joint venture, trust, estate or
other entity.

“PIS” means Program of
Social Integration (Programa de Integração
Social).

“Positive
Adjustment” has the meaning set forth in Section 2.3
hereof.

“Promissory
Note” means the Promissory Note to be issued by Star Capital Funding to Star Brazil
Cayman in substantially the form attached hereto as Exhibit C.

“PTAX” means the exchange rate calculated at
the end of each day, which is the average rate of all the exchanges made in US
Dollars on the same date in the interbank exchange market, with liquidation D2.

“Realization Date” has the meaning set forth in
Section 7.9 hereof.

“Related Persons” has the meaning set forth in Section 5.20
hereof.

“Release” means any release, spill, emission,
leaking, pumping, pouring, injection, deposit, dumping, emptying, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment, or into or out of any property.

“Remedial Action” means all actions including
any capital expenditures undertaken to (a) clean up, remove, treat or in
any other way address any Hazardous Material, (b) prevent the Release or
threat of Release, or minimize the further Release of any Hazardous Material so
it does not endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform pre-remedial studies and
investigations or post-remedial monitoring and care or (d) to correct a
condition of noncompliance with Environmental Laws.

“R$”, “Reais”, “Real” or “Centavos”
means the lawful currency of the Federative Republic of Brazil.

 10
 

 

“Sale, Marketing and Supply Agreement” means
the Sale, Marketing and Supply Agreement between the Company and Lone Star
Steel, in substantially the form attached hereto as Exhibit D.

“SELIC” means the interest rate equivalent to
the reference interest rate of the Sistema Especial de
Liquidação e Custódia for federal bonds of the Brazilian government.

“Shareholders” has the meaning set forth in the
introductory paragraph hereof.

“Shareholders Agreement” means the Shareholders
Agreement of the Company between Tubos, LSB 2, GPC, Cirrus and Lone Star, in
substantially the form attached hereto as Exhibit E.

“SISBACEN” means the Information System
of BACEN (Sistema de Informações do Banco
Central do Brasil).

“Specialty Tubing” means
mechanical and pressure tubes, cold drawn and hot finished tubes, shells for
redraw and other boiler tubes.

“Specified Person” has the meaning set forth in
the definition of Affiliate.

“Star Capital Funding”
means Star Capital Funding, Inc., a corporation organized under the laws of the
State of Delaware.

“Star Brazil Cayman” means Star Brazil Cayman
Ltd., a corporation organized under the laws of the Cayman Islands.

“Survival Period” has the meaning set forth in Section
10.1 hereof.

“Target Working Capital” has the meaning set
forth in Section 2.3 hereof

“Tax” or “Taxes” means (a) any and
all federal, state, local or foreign taxes, charges, fees, imposts, levies or
other assessments, including all net income, gross receipts, capital, sales,
use, ad valorem, value added, transfer, franchise, profits, inventory, capital
stock, license, withholding, payroll, employment, social security,
unemployment, excise, severance, stamp, occupation, property and estimated
taxes, customs duties, fees, assessments and charges of any kind whatsoever,
(b) all interest, penalties, fines, additions to tax or additional amounts
imposed by any Taxing Authority in connection with any item described in
clause (a), and (c) any Liability in respect of any items described in
clauses (a) and/or (b) payable by reason of Contract, assumption,
transferee Liability, operation of law, or otherwise.

“Tax Return” means any return, report or
statement required to be filed with respect to any Tax (including any
elections, declarations, schedules or attachments thereto, and any amendment
thereof), including any information return, claim for refund,

 11
 

 

amended return or declaration of estimated Tax, and
including, where permitted or required, combined, consolidated or unitary
returns for any group of entities.

“Taxing Authority” means the Brazilian Federal,
State and Municipal Tax Authority, the United States Internal Revenue Service,
and any other Governmental Authority responsible for the administration of any
Tax.

“Termination Agreement” has the meaning set
forth in Section 4.1(g) hereof.

“Third Party Claim” has the meaning set forth
in Section 10.3(b) hereof.

“Tubos” has the meaning set forth in the
introductory paragraph hereof.

“Tubos Guarantors” has the meaning set forth in
Section 11.13 hereof.

“Tubos Indemnified Parties” has the meaning set
forth in Section 10.2(b) hereof.

“Tubos Obligations” has the meaning set forth
in Section 11.13 hereof.

“Tubos Trademark License Agreement” means the
Trademark License Agreement between Tubos and the Company pursuant to which
Tubos shall license certain trademarks to the Company, in substantially the
form attached hereto as Exhibit G.

“Tubos Transition
Services Agreement” means the Transition Services Agreement between Tubos
and the Company pursuant to which Tubos shall provide certain transition
services to the Company, in substantially the form attached hereto as Exhibit
F.

“Tubular Products” means Oil Country
Tubular Goods, Specialty Tubing, and/or Line Pipe; for greater clarity, such
term shall not include galvanized unfinished line or other pipe.

“US Dollars” or “US$” means legal
currency in the United States of America.

“Working Capital Payment Date” has the meaning
set forth in Section 2.4(f) hereof.

 12
 

 

ARTICLE 2

CONTRIBUTION

2.1           LSB 2 Investment.

(a)           The aggregate consideration
made by LSB 2 for 38,346,462 Common Shares (fifty percent (50%) of the
outstanding Common Shares) shall be the amount in Reais (R$) equivalent to US$42,350,000,
consisting of US$23,550,000 in cash and US$18,800,000 by means of the
contribution of all of the outstanding shares (the “Cayman Shares”) of
Star Brazil Cayman, the holder of the Promissory Note as of the date hereof
(the “LSB 2 Investment”).  The LSB
2 Investment will be subject to adjustment pursuant to Sections 2.3 and 2.4.

(i)            For the purposes of Section
2.1(a) above, Tubos, in its capacity as controlling shareholder of the
Company, agrees to call a Shareholders’ Meeting to be held on or before the
Closing Date, at which Tubos shall approve the issuance of 38,346,462 Common
Shares, and with respect to which Tubos shall waive, and shall cause all
remaining shareholders to waive, their right of first refusal for the
subscription of such Common Shares.

(b)           At the Closing, upon the terms
and subject to the conditions contained herein, LSB 2 shall subscribe for the
Adjusted LSB 2 Investment (as defined below) in exchange for 38,346,462 Common Shares
(fifty percent (50%) of the outstanding Common Shares).

(c)           At the Closing, upon the terms
and subject to the conditions contained herein, LSB 2 shall contribute the
amount in Reais (R$) equivalent to US$23,550,000, in cash, in immediately
available funds, to the Company, to pay-up for 21,099,728 Common Shares.

(d)           At the Closing, upon the terms and subject to
the conditions contained herein, LSB 2 shall contribute the Cayman Shares to
pay-up for the remaining 17,246,734 Common Shares.

(e)           Upon the receipt of the amount referred to in Section
2.1(c) and the Cayman Shares by the Company, the LSB 2 Investment shall be
considered fully paid, and the 38,346,462 Common Shares subscribed by LSB 2 shall be considered fully paid-up.

(f)            The parties agree that the LSB 2 Investment
will be registered in the Company’s balance sheet partly as capital, in the
amount equivalent to the net worth value of the Common Shares subscribed as
determined by E&Y and verified by KPMG, acting in its capacity as the
Company’s auditor, and applying Brazilian GAAP, and partly as a capital
reserve, in the amount equivalent to the difference between the total amount of
the LSB 2 Investment and the net worth value of the Common Shares subscribed,

 13
 

 

provided that in any event the
number of Common Shares to be subscribed by LSB 2 shall be 38,346,462 Common Shares.

2.2           Anticipated Payments of the Promissory Note.  Without prejudice to any of the foregoing provisions in this Article 2,
the Company shall have the right to demand (or cause Star Brazil Cayman to
demand) from Star Capital Funding the anticipated payment of the Promissory
Note, upon the delivery to Star Capital Funding, with a copy to LSB 2, of a
request notice, in accordance with the terms and conditions set forth herein
(the “Demand”).  The Demand will
only be valid and enforceable when approved by all of the members of the Board
of Directors of the Company and issued by the Board of Officers.

2.3           Closing Statement.  At
least three (3) Business Days before Closing (the ”Estimate
Statement Delivery Date”), the Company shall cause to be prepared and
delivered to LSB 2 an estimated balance sheet of the Company as of the end of
business on the Closing Date and prior to the consummation of the transactions
contemplated hereby (the ”Estimated Closing Balance Sheet”) and a
statement (the ”Estimate Statement”) setting forth the Company’s
good faith estimate of Net Working Capital (as defined below) derived from the
Estimated Closing Balance Sheet (the “Estimated Closing Working Capital”) and, if applicable, the corresponding
Adjusted LSB 2 Investment (as defined below) to be paid at Closing, if
any.  The Company shall provide LSB 2
with copies of or reasonable access to such books, records and personnel as are
reasonably necessary for purposes of verifying the amounts set forth in the
Estimated Closing Balance Sheet and the Estimate Statement.  “Net Working Capital” means, at the
time of determination, all assets of the Company (excluding net fixed assets) reduced
by all liabilities of the Company (which shall include all Indebtedness,
whether current or long-term), in each case as determined in accordance with
Brazilian GAAP, and the accounting principles set forth on Schedule 2.3
(the ”Agreed Principles”). 
An example, for illustrative purposes only, of the calculation of Net
Working Capital as of September 30, 2006 is set forth on Schedule 2.3.  The Company shall use the latest available
information as of the Estimate Statement Delivery Date to prepare the Estimated
Closing Balance Sheet and to calculate the Estimated Closing Working Capital
and the Adjusted LSB 2 Investment.  The
preparation of the Estimate Statement shall be for the purpose of determining
the difference between Estimated Closing Working Capital and Target Working
Capital.  If Estimated Closing Working
Capital exceeds US$8,500,000 (“Target Working Capital”), the LSB 2
Investment shall be increased by the amount of such excess by increasing the
amounts in Sections 2.1(a) and 2.1(c) by the amount of such
excess (such increase, a ”Positive Adjustment”) and, if Target
Working Capital exceeds Estimated Closing Working Capital, the LSB 2 Investment
shall be reduced by the amount of such excess by reducing the amounts in Sections
2.1(a) and 2.1(c) by the amount of such excess (such reduction, a “Negative
Adjustment”).  “Adjusted LSB 2
Investment” means the LSB 2 Investment plus any Positive Adjustment or the
LSB 2 Investment minus any Negative Adjustment, as applicable.

 14

 

2.4              Purchase Price Adjustment.

(a)           As promptly as practicable, but no later than
ninety (90) days after the Closing Date, LSB 2 shall cause E&Y to prepare
and deliver to Tubos a balance sheet of the Company (the “Closing Balance
Sheet”) and a closing statement (the “Closing Statement”) based on
the Closing Balance Sheet setting forth LSB 2’s calculation of Net Working
Capital (“Closing Working Capital”). 
The Closing Statement and the Closing Balance Sheet will be prepared by
E&Y based upon the agreed-upon procedures set forth on Schedule 2.4(a),
and shall be prepared in accordance with Brazilian GAAP, utilizing Brazilian
generally accepted auditing standards. 
The Company, and to the extent applicable, Tubos, shall permit LSB 2 and
E&Y to have full access to all books, records and working papers of or
relating to the Company, the Facility and the Business, and all personnel
(including KPMG personnel) who have knowledge of, or have participated in,
preparation of financial statements or audits of the Company prior to
Closing.  For greater clarity, Tubos
acknowledges that prior to Closing, the accounting and finance functions of the
Company were conducted by Tubos personnel on Tubos premises, and audits
involving the Company have been conducted by KPMG in its preparation of
consolidated financial statements for Tubos, and that, consequently, access to
the relevant books, records, working papers, facilities and personnel of Tubos
and certain personnel of KPMG will be necessary for the preparation of the
Closing Balance Sheet and the Closing Statement.  The preparation of the Closing Statement
shall be for the purpose of determining the difference between Estimated
Closing Working Capital and Closing Working Capital.

(b)           If Tubos disagrees with the
amounts reflected on the Closing Balance Sheet or LSB 2’s calculation of
Closing Working Capital delivered pursuant to Section 2.4(a), Tubos
may, within thirty (30) days after delivery of the Closing Statement,
deliver a notice to LSB 2 disputing such amounts reflected on the Closing
Balance Sheet and/or disagreeing with such calculation of Closing Working
Capital and setting forth Tubos’ calculation of such amounts.  If no dispute notice is so delivered, Tubos
will be deemed to have accepted the Closing Statement and LSB 2’s estimate of
Closing Working Capital.  Any such Tubos
notice of dispute or disagreement shall specify those items or amounts as to
which Tubos disagrees, provide an explanation for such disagreement, and Tubos
shall be deemed to have agreed with all other items and amounts contained in
the Closing Balance Sheet and the Closing Statement, including the calculation
of Closing Working Capital delivered pursuant to Section 2.4(a).

(c)           If a notice of disagreement
shall be duly delivered pursuant to Section 2.4(b), Tubos and LSB 2
shall, during the fifteen (15) days following such delivery, use their
commercially reasonable efforts to reach agreement on the disputed items or
amounts in order to determine, as may be required, the proper amounts to be set
forth on the Closing Balance Sheet and the amount of actual Closing Working
Capital, which amount shall not be less than the amount thereof shown in LSB 2’s
calculation delivered pursuant to Section 2.4(a) nor more than the
amount thereof shown in Tubos’ calculation delivered pursuant to Section 2.4(b).  If the parties so resolve all disputes, the
Closing Balance Sheet and the computation of Closing Working Capital, as
amended

 15
 

 

to the extent necessary to reflect the resolution of
the dispute, shall be conclusive and binding on the parties.  If during such period, Tubos and LSB 2 are
unable to reach an agreement, they shall promptly thereafter cause
PriceWaterhouseCoopers (or if PriceWaterhouseCoopers is unable or unwilling to
accept its mandate, an independent internationally recognized accounting firm
to be mutually agreed upon by Tubos and LSB 2, in either such case, the “Independent
Accountant”) to review this Agreement and the disputed items or amounts for
the purpose of determining the proper amounts on the Closing Balance Sheet and
calculating Closing Working Capital (it being understood that in making such
determination and calculation, the Independent Accountant shall be functioning
as an expert and not as an arbitrator). 
In making such determination and calculation, the Independent Accountant
shall consider only those items or amounts in the Closing Balance Sheet, the
Closing Statement and LSB 2’s calculation of Closing Working Capital as to
which Tubos has disagreed.  The
Independent Accountant shall deliver to Tubos and LSB 2, as promptly as
practicable (but in any case no later than thirty (30) days from the date of
engagement of the Independent Accountant), a report setting forth such
determination and calculation, which amount shall not be less than the amount
thereof shown in LSB 2’s calculation delivered pursuant to Section 2.4(a)
nor more than the amount thereof shown in Tubos’ calculation delivered pursuant
to Section 2.4(b).  Such
report shall be final and binding upon Tubos and LSB 2.  The fees, costs and expenses of the
Independent Accountant’s review and report shall be borne equally by Tubos and
LSB 2.

(d)           The Company, Tubos and LSB 2
shall, and shall cause their respective representatives to, cooperate and
assist in the preparation of the Closing Balance Sheet, the Closing Statement
and the calculation of Closing Working Capital and in the conduct of the review
referred to in this Section 2.4, including the making available to
the extent necessary of books, records, work papers and personnel.

(e)           If Estimated Closing Working
Capital exceeds Final Working Capital, Tubos shall pay to the Company, in the
manner and with interest (if applicable) as provided in Section 2.4(f),
the amount of such excess as an adjustment to the LSB 2 Investment.  If Final Working Capital exceeds Estimated
Closing Working Capital, LSB 2 shall pay to the Company, in the manner and with
interest (if applicable) as provided in Section 2.4(f), the amount
of such excess as an adjustment to the LSB 2 Investment.  “Final Closing Balance Sheet” and “Final
Working Capital” mean, respectively, the Closing Balance Sheet and Closing
Working Capital (i) as shown in LSB 2’s calculation delivered pursuant to Section 2.4(a)
if no notice of disagreement with respect thereto is duly delivered
pursuant to Section 2.4(b); or (ii) if such a notice of
disagreement is delivered, (A) as agreed by Tubos and LSB 2 pursuant to Section 2.4(c)
or (B) in the absence of such agreement, as shown in the Independent
Accountant’s calculation delivered pursuant to Section 2.4(c); provided,
however, that in no event shall Final Working Capital be more than Tubos’
calculation of Closing Working Capital delivered pursuant to Section 2.4(b)
or less than LSB 2’s calculation of Closing Working Capital delivered pursuant
to Section 2.4(a).

 16
 

 

(f)            Any payment made pursuant to Section 2.4(e)
shall be made within three (3) Business Days after Final Working Capital has
been determined (the “Working Capital Payment Date”) by wire transfer by
Tubos or LSB 2, as the case may be, of immediately available funds to the
account of the Company as may be designated in writing by the Company prior to
such transfer.  In the event that any
payment made pursuant to Section 2.4(e) is not made by the Working
Capital Payment Date, the amount of any payment to be made pursuant to Section 2.4(e)
shall bear interest from but not including the Working Capital Payment Date to
but excluding the date of payment at a rate per annum equal to the SELIC rate during
the period from the date following the Working Capital Payment Date to the date
of payment.  Such interest shall be
payable at the same time as the payment to which it relates and shall be
calculated daily on the basis of a year of three-hundred and sixty-five (365)
days and the actual number of days elapsed. 
To the extent that the Company has accumulated losses on its balance
sheet, any payment made pursuant to Section 2.4(e) will be made in the
form of an interest-free loan which shall be used to reduce such accumulated
losses dollar-for-dollar up to the full amount of the loan, resulting in the
release and discharge of such loan in an equivalent amount.  For the purposes of greater clarity, any loan
made pursuant to this Section 2.4(f) will not reduce the net operating
losses of the Company.

2.5           Use of the LSB 2 Investment. 
Tubos and LSB 2 hereby agree that they shall cause the Company to use
the LSB 2 Investment in accordance with Schedule 2.5.

ARTICLE 3

CLOSING

3.1           Closing Date.  The
closing of the transactions contemplated by this Agreement (the “Closing”)
shall take place at the offices of Souza, Cescon
Avedissian, Barrieu e Flesch - Advogados, Rua Funchal, 263 11o andar, 04551-060, São Paulo,
SP, Brazil, at 10:00 a.m. (São Paulo, SP, Brazil time) on the third (3rd)
Business Day after the conditions set forth in Article 8 hereof have
been satisfied or waived by the party entitled to do so, or at such other date,
time and/or place as may mutually be agreed upon by the parties hereto.  The date on which the Closing is held is
referred to in this Agreement as the “Closing Date.”

ARTICLE 4

DELIVERABLES

4.1           Items to Be Delivered by Tubos.

Simultaneously with the Closing, Tubos shall deliver
or cause to be delivered:

(a)           to LSB 2 and the Company, a
duly executed Shareholders Agreement;

 17
 

 

(b)           to LSB 2 and the Company, a
letter from each administrator of the Company, confirming his/her resignation
from the position of administrator;

(c)           to LSB 2, a certified copy of
its organizational documents, confirming the powers of representation of the
undersigned legal representatives, and including any approvals required for the
purposes of executing this Agreement and implementing the transactions
contemplated herein;

(d)           the Closing certificate
referred to in Section 8.2(c); 

(e)           to the Company, a duly executed
Tubos Transition Services Agreement;

(f)            to the Company, a duly
executed Tubos Trademark License Agreement;

(g)           to LSB 2, a duly executed
termination agreement terminating the agreement between Tubos and Lone Star
Steel dated April 10, 2006, related to the sale of Tubular Products in North
America (the “Termination Agreement”); and

(h)           to the Company, a duly
executed transfer form, transferring the Apolo America Shares to the Company.

4.2           Items to Be Delivered by LSB 2.

Simultaneously with the Closing, LSB 2 shall deliver
or cause to be delivered:

(a)           to Tubos and the Company, a
duly executed Shareholders Agreement;

(b)           to Tubos, a certified copy of
its organizational documents, confirming the powers of representation of the
undersigned legal representatives, and including any approvals required for the
purposes of executing this Agreement and implementing the transactions
contemplated herein;

(c)           the Closing certificate
referred to in Section 8.1(c);

(d)           to the Company, a duly
executed Sale, Marketing and Supply Agreement;

(e)           to the Company, a duly
executed LSS Trademark Cross License Agreement;

(f)            to the Company, the amount in
Reais (R$) equivalent to US$23,550,000 in immediately available funds, wire
transferred to such bank account of the Company designated to LSB 2 in writing
three (3) Business Days prior to the Closing Date;

(g)           to the Company, a duly
executed transfer form, transferring the Cayman Shares to the Company;

 18
 

 

(h)           to the Company, a valuation
report made by E&Y, pursuant to the provisions of Article 8 of the
Corporation Law, estimating the value of the Cayman Shares;

(i)            to the Company, a duly
executed LSS Transition Services Agreement; and

(j)            to Tubos, a duly executed
Termination Agreement.

4.3           Items to Be Delivered by the
Company.

Simultaneously with the Closing, the Company shall
deliver or cause to be delivered:

(a)           to Tubos and LSB 2, duly
executed minutes of its special shareholders meeting approving (i) the increase
of its corporate capital by the amount in Reais (R$) equivalent to US$42,350,000,
represented by 38,346,462 new Common Shares and (ii) the issuance of the Common
Shares to LSB 2;

(b)           to LSB 2, an appropriate
receipt in connection to the pay in of the 38,346,462 new Common Shares
subscribed to by LSB 2;

(c)           to LSB 2, a duly executed
Sale, Marketing and Supply Agreement;

(d)           to LSB 2, a duly executed LSS
Trademark Cross License Agreement;

(e)           to Tubos and LSB 2, a duly
executed Tubos Trademark License Agreement;

(f)            to Tubos and LSB 2, a duly
executed Amended and Restated By-Laws;

(g)           to Tubos and LSB 2, a duly
executed Tubos Transition Services Agreement;

(h)           to Tubos and LSB 2, a duly
executed LSS Transition Services Agreement;

(i)            to LSB 2, a certified copy of
the Company’s books, confirming the subscription of fifty percent (50%) of the
Common Shares by LSB 2; and

(j)            a duly executed AA Purchase
Agreement.

ARTICLE
5

REPRESENTATIONS
AND WARRANTIES OF TUBOS, THE COMPANY, GPC AND CIRRUS

Each of Tubos, the Company, GPC and Cirrus hereby
represent and warrant to LSB 2 that:

 19
 

 

5.1           Existence and Good Standing.  Tubos is validly existing and in good
standing under the laws of Brazil and is duly qualified to do business in all
jurisdictions where it is so required to qualify.  The Company is validly existing and in good
standing under the laws of Brazil and is duly qualified to do business in all
jurisdictions where it is so required to qualify.  GPC is validly existing and in good standing
under the laws of Brazil and is duly qualified to do business in all
jurisdictions where it is so required to qualify.  Cirrus is validly existing and in good
standing under the laws of Brazil and is duly qualified to do business in all
jurisdictions where it is so required to qualify.  Apolo America is validly existing and in good
standing under the laws of the State of Texas and is duly qualified to do
business in all jurisdictions where it is so required to qualify.

5.2           Authorization of Agreement.

(a)           Each of Tubos, the Company,
GPC and Cirrus has all requisite power and authority to enter into this
Agreement and the Ancillary Agreements and each of Tubos, the Company, GPC and
Cirrus has all requisite power and authority to perform all of its respective
obligations under this Agreement and the Ancillary Agreements to which it is a
party.  Tubos has taken all corporate
action, including securing the requisite approval of its board of officers,
necessary to authorize the execution, delivery and performance of this
Agreement and the Ancillary Documents to which Tubos is a party.  The Company has taken all corporate action,
including securing the requisite approval of its board of officers and general
shareholders meeting, necessary to authorize the execution, delivery and
performance of this Agreement and the Ancillary Documents to which the Company
is a party.  GPC has taken all corporate
action, including securing the requisite approval of its board of directors,
necessary to authorize the execution, delivery and performance of this
Agreement and the Ancillary Documents to which GPC is a party.  Cirrus has taken all corporate action,
including securing the requisite approval of the general meeting of its
quotaholders, necessary to authorize the execution, delivery and performance of
this Agreement and the Ancillary Documents to which Cirrus is a party.  The board of directors of Tubos has all
requisite power and authority to cause Tubos to enter into and perform all of
its respective obligations under this Agreement and the Ancillary Documents to
which Tubos is a party, and has taken all action necessary to authorize the
execution, delivery and performance of this Agreement and the Ancillary
Documents by Tubos.  The board of
directors of the Company has all requisite power and authority to cause the
Company to enter into and perform all of its respective obligations under this
Agreement and the Ancillary Documents to which the Company is a party, and has
taken all action necessary to authorize the execution, delivery and performance
of this Agreement and the Ancillary Documents by the Company.  The board of directors of GPC has all
requisite power and authority to cause GPC to enter into and perform all of its
respective obligations under this Agreement and the Ancillary Documents to
which GPC is a party, and has taken all action necessary to authorize the
execution, delivery and performance of this Agreement and the Ancillary
Documents by GPC.  The board of directors
of Cirrus has all requisite power and authority to cause Cirrus to enter into
and perform all of its respective obligations under this Agreement and

 20
 

 

the Ancillary Documents to which Cirrus is a party,
and have taken all action necessary to authorize the execution, delivery and
performance of this Agreement and the Ancillary Documents by Cirrus.

(b)           The execution and delivery of
this Agreement and the Ancillary Agreements to which Tubos, the Company, GPC
and/or Cirrus is a party do not require Tubos, the Company, GPC or Cirrus, as
the case may be, to obtain any approval or consent of, or make any notice to or
filing with, any Person or Governmental Authority, other than approvals,
consents, notices and filings obtained or made prior to the date hereof or as
listed on Schedule 5.2(b) hereto.

(c)           Following execution and
delivery by the parties hereto or thereto, this Agreement and each of the Ancillary
Agreements to which Tubos, the Company, GPC and/or Cirrus is a party will
constitute Tubos’, the Company’s, GPC’s and/or Cirrus’ legal, valid and binding
obligations, enforceable in accordance with their terms, subject to
(i) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar Laws relating to or affecting the rights of
creditors generally, or (ii) limitations imposed by applicable Law upon the
enforceability of any of the remedies, covenants or other provisions of this
Agreement or such Ancillary Agreements and upon the availability of injunctive
relief or other equitable remedies.

5.3              Conflicts; Consents of Third Parties.  Subject to obtaining any consents or
approvals or making any notice or filing referred to on Schedule 5.3
hereto and except for the Permits listed on Schedule 5.3, the execution,
delivery and performance of this Agreement or any of the Ancillary Agreements
to which Tubos, the Company, GPC and/or Cirrus is a party does not conflict
with or result in a violation of (a) the Charter Documents of Tubos, the
Company, GPC or Cirrus, (b) any Law or Order applicable to Tubos, the Company,
GPC or Cirrus or any of their respective assets and properties or,
(c) currently or with the passage of time, any Contract or Permit to which
Tubos, the Company, GPC and/ or Cirrus is a party or by which any of the
properties or assets of Tubos, the Company, GPC or Cirrus are bound.  There are no Actions pending or, to the Knowledge
of Tubos, the Company, GPC, Cirrus or Apolo America, threatened against Tubos,
the Company, GPC, Cirrus or Apolo America relating to or affecting Tubos, the
Company, GPC, Cirrus or Apolo America or any of their respective assets and
properties that could reasonably be expected to result in the issuance of an
Order (a) restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Ancillary Agreements to which Tubos, the Company, GPC
and/or Cirrus is a party or (b) that would be likely to result in a
Material Adverse Effect.

5.4              No Undisclosed Liability. 
The Company does not have any Liabilities other than those (a)
specifically reflected on and fully reserved against in the Financial Statements, (b) incurred
in the ordinary course of business consistent with past practice since the
Balance Sheet Date or (c) that are immaterial to the Company.  Apolo America does not have any Liabilities
other than those (a) specifically reflected on and fully reserved against in the Apolo America Financial Statements,
(b) incurred in the

 21
 

 

ordinary course of business consistent with past practice since the
Balance Sheet Date or (c) that are immaterial to Apolo America.  No representation or warranty of Tubos, the
Company, GPC, Cirrus or Apolo America contained in this Agreement and no
written statement made by or on behalf of Tubos, the Company, GPC, Cirrus or
Apolo America to LSB 2 or any of its Affiliates pursuant to this Agreement
contains an untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading.  There are no facts which
Tubos, the Company, GPC, Cirrus and/or Apolo America have not disclosed to LSB
2 in writing which could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company or Apolo America.

5.5           Real Property.

(a)           The Company has good and
marketable fee title to all of the Company Assets, including but not limited to
the Facility, free and clear of all Liens, except (i) those Liens set forth on Schedule
5.5(a) and (ii) Permitted Exceptions. 
The Company Assets constitute all of the assets and properties necessary
to operate the business of the Company. 
The Company has delivered to LSB 2 true, correct and complete copies of
all deeds, title reports and surveys for the Facility, together with all
amendments, modifications or supplements, if any, thereto.  The Facility is not subject to any leases,
rights of first refusal, options to purchase or rights of occupancy.

(b)           The Facility includes all
interests in real property which are necessary for the intended operation of
the Business.  The Facility and
infrastructure, buildings, fixtures and improvements thereon (i) have been in
operation since 1974 and have been manufacturing and processing Tubular
Products since 2003 and (ii) except as set forth on Schedule 5.5(b), the
Facility is in good operating condition without structural defects, and all
mechanical and other systems (including, without limitation, any fire
protection systems) are in good operating condition, and no condition exists
requiring material repairs, alterations or corrections.  The Facility and the personal property
thereon are suitable, sufficient and appropriate in all respects for their
contemplated uses and the intended operation of the Business.

(c)           Schedule 5.5(c)
sets forth the material certificates of occupancy and other Permits currently
held by the Company, and the Company has fully complied with all conditions of
the Permits applicable to them.  No
default or violation, or event that with the lapse of time or giving of notice
or both would become a default or violation, has occurred with respect to any
such Permit.

(d)           There does not exist any
actual or, to the Knowledge of Tubos or the Company, threatened or contemplated
condemnation or eminent domain proceedings that affect the Facility or any part
thereof, and the Company has not received any notice, oral or written, of the
intention of any Governmental Authority or other Person to take or use all or
any part thereof.

 22
 

 

(e)           Both the Company and the
Facility are in compliance with all Laws applicable to the Facility.  The Company has not received any written or
other notice of or been charged with the violation of any Laws with respect to
the Facility.

5.6           Environmental Matters. 
Except as set forth on Schedule 5.6 hereto:

(a)           the operations of the Company,
to the Knowledge of Tubos or the Company, are and have been in compliance with
all applicable Environmental Laws, which compliance includes obtaining,
maintaining in good standing and complying with all Environmental Permits
necessary to own or operate the Facility and no action or proceeding is pending
or, to the Knowledge of Tubos or the Company, threatened to revoke, modify or
terminate any such Environmental Permit, and, to the Knowledge of Tubos or the
Company, no facts, circumstances or conditions currently exist that could
adversely affect such continued compliance with Environmental Laws and Environmental
Permits or require capital expenditures to achieve or maintain such continued
compliance with Environmental Laws and Environmental Permits;

(b)           the Company is not the subject
of any outstanding Order or Contract with any Governmental Authority or Person
respecting (i) Environmental Laws, (ii) Remedial Action or
(iii) any Release or threatened Release of a Hazardous Material;

(c)           no claim has been made or is
pending, or to the Knowledge of Tubos or the Company, threatened against the
Company, alleging that the Company may be in violation of any Environmental Law
or any Environmental Permit or may have any Liability under any Environmental
Law;

(d)           to the Knowledge of Tubos or
the Company, no facts, circumstances or conditions exist with respect to the
Facility that could reasonably be expected to result in the Facility incurring
Environmental Costs or Liabilities in connection with the operation of the
Business;

(e)           to the Knowledge of Tubos or
the Company, there are no investigations of the Company pending, or to the
Knowledge of Tubos or the Company, threatened that could lead to the imposition
of any Environmental Costs or Liabilities or Liens under Environmental Law;

(f)            there is not located at the
Facility any (i) underground storage tanks, (ii) landfill,
(iii) surface impoundment, (iv) asbestos-containing material or
(v) equipment containing polychlorinated biphenyls; and

(g)           the Company has provided to
LSB 2 all environmentally related audits, studies, reports, analyses and
results of investigations that have been performed with respect to the
Facility.

 23
 

 

5.7           Taxes.

(a)           (i) All Tax Returns required
to be filed by or on behalf of the Company or Apolo America have been duly and
timely filed with the appropriate Taxing Authority in all jurisdictions in
which such Tax Returns are required to be filed, and all such Tax Returns are
true, complete and correct in all material respects and (ii) all such Taxes
have been fully and timely paid.

(b)           All deficiencies asserted or
assessments made in respect of the Company or Apolo America as a result of any
examinations by any Taxing Authority of the Tax Returns have been fully paid,
and there are no other audits or investigations by any Taxing Authority in
progress, nor has the Company or Apolo America received any notice from any
Taxing Authority that it intends to conduct such an audit or investigation.

(c)           No agreement, waiver or other
document or arrangement extending or having the effect of extending the period
for assessment or collection of Taxes (including, but not limited to, any
applicable statute of limitation) or the period for filing any Tax Return has
been executed or filed with any Taxing Authority by or on behalf of the Company
or Apolo America.  Neither the Company
nor Apolo America has requested any extension of time within which to file any
Tax Return, which Tax Return has since not been filed.

(d)           There are no Liens for Taxes
upon the Company Assets or the assets of Apolo America, except for Permitted
Exceptions.

(e)           No power of attorney with respect
to any Tax matter is currently in force with respect to the Company or Apolo
America.

(f)            Neither the Company nor Apolo
America is a party to any Tax sharing, allocation, indemnity or similar
agreement or arrangement (whether or not written) pursuant to which it will
have any obligation to make any payments after the Closing.

5.8           Intellectual Property.

(a)           Schedule
5.8 sets forth an accurate and complete list of all Intellectual Property
owned or used by the Company and sets forth the Person that owns such
Intellectual Property.  The Company and
Tubos are the sole and exclusive owners of, or have valid and continuing rights
to use, sell or license, as the case may be, all Intellectual Property used,
sold or licensed by the Company in its business as presently conducted and as
currently proposed to be conducted, free and clear of all Liens or obligations
to others save for the restrictions under the applicable Brazilian Law and the
obligations provided in the relevant Intellectual Property licensing agreements.

(b)           With respect to any Intellectual Property not identified on Schedule 5.8 which is determined after Closing to
be owned by Tubos or an Affiliate thereof, but used primarily in the business
of the Company, Tubos shall transfer ownership of such Intellectual
Property to the Company promptly and
without charge.  With respect to any Intellectual
Property not identified on Schedule
5.8 which is determined after Closing to

 24
 

 

be licensed to Tubos or an
Affiliate thereof, but used primarily in the business of the Company, Tubos or
such Affiliate shall sublicense or arrange for an assignment of the primary
license to the Company, without charge. 
If any such Intellectual Property not identified on Schedule 5.8 that is used in the business of the
Company, but is determined after Closing to be owned by or licensed to Tubos or
an Affiliate, Tubos or such Affiliate, as applicable, shall grant to the
Company a license or sublicense, as appropriate, to use such Intellectual
Property. 
Any such license shall be worldwide, perpetual, non-exclusive and
royalty free.

5.9           Ownership.

(a)           The shareholders of the Company are as set forth on
Schedule 5.9(a).  The Common
Shares in the Company are validly issued, fully paid and non-assessable and are
free and clear of any and all Liens, including any claims by any third party,
including any Governmental Authority, voting proxy arrangement or voting right
trust arrangement.  There are no
agreements or understandings that give any Person other than LSB 2 the right to
acquire an interest in the Company. 
There are no agreements or understandings that require the Company to
repurchase the equity interests of any equity holder.  There are no options, warrants or other
rights to acquire Common Stock or any equity interest in the Company.

(b)           The shareholders of Apolo
America are as set forth on Schedule 5.9(b).  On the Closing Date, the Company shall own
all of the issued and outstanding Apolo America Shares.  The Apolo America Shares are validly issued,
fully paid and non-assessable and are free and clear of any and all Liens,
including any claims by any third party, including any Governmental Authority,
voting proxy arrangement or voting right trust arrangement.  There are no agreements or understandings
that give any Person other than the Company the right to acquire an interest in
the Apolo America Shares.  There are no
agreements or understandings that require Apolo America to repurchase the
equity interests of any equity holder. 
There are no options, warrants or other rights to acquire Apolo America
Shares or any equity interest in Apolo America.

5.10           Subsidiaries.  Except as
set forth on Schedule 5.10, the Company has no subsidiaries and does not
own any equity interests in another Person. 
Apolo America has no subsidiaries and does not own any equity interests
in another Person.

5.11            Compliance with Law. 
The Company has complied with applicable Law and product standards of
Brazil whether in the design and manufacturing of products or otherwise.  Apolo America has complied with applicable
Law.  The Company has all of the
necessary manufacturing Permits for all of the products manufactured by the
Company that are subject to manufacturing Permit requirements.

5.12            Financial Statements. 
The Financial Statements and the Apolo Financial Statements are complete
and correct and present fairly the consolidated financial position, results of
operations and cash flows of the Company and Apolo America, respectively, as at
the dates and for the periods indicated therein.  All books,

 25
 

 

records and accounts of the Company and Apolo America are accurate and
complete and are maintained in all material respects in accordance with good
business practice and all applicable Laws. 
The Company and Apolo America maintain systems of internal accounting
controls sufficient to provide reasonable assurances that: (a) transactions are
executed in accordance with management’s general or specific authorization; (b)
transactions are recorded as necessary to permit the preparation of financial
statements and to maintain accountability for assets; (c) access to assets is
permitted only in accordance with management’s general or specific
authorization; and (d) the recorded accountability for assets is compared with
the actual levels at reasonable intervals and appropriate action is taken with
respect to any differences.

5.13            Material Adverse Effect. 
Except as expressly contemplated by this Agreement, since the Balance
Sheet Date (a) the Company and Apolo America have conducted its business only
in the ordinary course of business consistent with past practice and (b) there
has not been any event, change, occurrence or circumstance that, individually
or in the aggregate with any such events, changes, occurrences or
circumstances, has had or could reasonably be expected to have a Material
Adverse Effect on the Company or Apolo America.

5.14         Material Contracts.

Schedule 5.14 sets forth, by
reference to the applicable sub-article of this Section 5.14, all of the
following effective contracts, whether written or oral, or understandings, to
which the Company and/or Apolo America is a party or by which the Company
and/or Apolo America or the Company Assets or the assets of Apolo America are
bound (collectively, the “Material Contracts”):

(a)           Contracts with Tubos or any
current or former officer, director, shareholder, employee or Affiliate of the
Company, Apolo America or Tubos;

(b)           Contracts with any labor union
or association representing any employee of the Company or Apolo America;

(c)           Contracts for joint ventures,
strategic alliances, partnerships, licensing arrangements, or sharing of
profits or proprietary information;

(d)           Contracts containing covenants
of the Company or Apolo America not to compete in any line of business or with
any Person in any geographical area or not to solicit or hire any person with
respect to employment or covenants of any other Person not to compete with the
Company or Apolo America in any line of business or in any geographical area or
not to solicit or hire any person with respect to employment;

(e)           Contracts relating to the
acquisition (by merger, purchase of stock or assets or otherwise) by the
Company or Apolo America of any operating business or material assets or the
equity of any other Person;

 26
 

 

(f)            Contracts relating to the
incurrence, assumption or guarantee of any Indebtedness or imposing a Lien on
any of the assets of the Company or Apolo America, including indentures,
guarantees, loan or credit agreements, sale and leaseback agreements, purchase
money obligations incurred in connection with the acquisition of property,
mortgages, pledge agreements, security agreements, conditional sale or title
retention agreements, or outstanding Contracts of surety or indemnification,
direct or indirect, by the Company or Apolo America;

(g)           purchase Contracts giving rise
to Liabilities of the Company or Apolo America other than in the ordinary
course of business in excess of the amount equivalent in Reais to US$200,000,
according to the Exchange Rate;

(h)           Contracts providing for
payments by or to the Company or Apolo America, other than in the ordinary
course of business, in excess of the amount equivalent in Reais to US$200,000,
according to the Exchange Rate, in any fiscal year or the amount equivalent in
Reais to US$200,000, according to the Exchange Rate in the aggregate during the
term thereof;

(i)            Contracts obligating the
Company or Apolo America to provide or obtain products or services for a period
of one (1) year or more or requiring the Company or Apolo America to purchase
or sell a stated portion of its requirements or outputs;

(j)            Contracts under which the
Company or Apolo America has made advances or loans to any other Person;

(k)           Contracts providing for
severance, retention, change in control or other similar payments;

(l)            Contracts for the employment
of any individual on a full-time, part-time or consulting or other basis
providing annual compensation in excess of the amount equivalent in Reais to
US$200,000, according to the Exchange Rate;

(m)          material management Contracts
and Contracts with independent contractors or consultants (or similar
arrangements) that are not cancellable without penalty or further payment and
without more than thirty (30) days notice;

(n)           Contracts (or group of related
Contracts) which fall outside the ordinary course of business and involve the
expenditure of more than the amount equivalent in Reais to US$200,000,
according to the Exchange Rate annually, or the amount equivalent in Reais to
US$200,000, according to the Exchange Rate, in the aggregate or require performance
by any party more than six (6) months from the date hereof; and

(o)           Contracts that are otherwise
material to the Company or Apolo America.

Each of the Material Contracts is in full force and effect and is the
legal, valid and binding obligation of the Company and/or Apolo America and of
the other parties

 27
 

 

thereto, enforceable against each of them in accordance with its terms
and, upon consummation of the transactions contemplated by this Agreement,
shall, except as otherwise stated in Schedule 5.14, continue in full
force and effect without penalty or other adverse consequence.  Neither the Company nor Apolo America is in
default under any Material Contract, nor, to the Knowledge of Tubos or the
Company, is any other party to any Material Contract in breach of or default
thereunder, and no event has occurred that with the lapse of time or the giving
of notice or both would constitute a breach or default by the Company or Apolo
America or any other party thereunder. 
No party to any of the Material Contracts has exercised any termination
rights with respect thereto, and no party has given notice of any significant
dispute with respect to any Material Contract. 
The Company has delivered to LSB 2 true, correct and complete copies of
all of the Material Contracts, together with all amendments, modifications or
supplements thereto.

5.15         Employee Matters.

(a)           Schedule 5.15(a) sets forth the name,
current title, current monthly compensation amount and current employer of all
officers and employees of the Company and Apolo America or any Affiliate of the
Company (including but not limited to Tubos) involved in the Business or the
operation of the Facility.

(b)           Schedule 5.15(b) sets
forth all material benefits that the Company will be required to provide to its
employees on an ongoing basis in accordance with Contracts entered into with
such employees or in accordance with applicable Brazilian Law.

(c)           The
Company has complied with all applicable labor laws of Brazil, including but
not limited to making all required filings with the Governmental
Authorities.  The Company has properly
accrued for or otherwise reflected in the Financial Statements all obligations
in respect of employees or independent contractors providing services to the
Company.

(d)           Each employee of the Company
and each employee involved in the Business and in the operation of the Facility
is regularly registered as such in the relevant books and records, jointly with
its respective salary, all in accordance with applicable Law.  The Company has obtained all registrations
and fillings and has taken all necessary actions required under all applicable
Law with respect to the employees of the Company and the employees of any
Affiliates involved with the Business and/or the operation of the Facility,
including but not limited to labor and social security laws and
regulations.  The Company is not a party
to any labor dispute or litigation which could create a material Liability for
the Company, or which could otherwise have a Material Adverse Affect on the assets
of the Company, the Business or the Facility, except as otherwise disclosed on Schedule
5.16.  To the Knowledge of the
Company, Tubos, GPC and Cirrus, there is no basis for any action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand, against
the Company by any person or any group of persons rendering services to the
Company, other than employees who are duly registered in the relevant books and
records, which may give rise, in the aggregate, to any material

 28
 

 

labor or social security Liability, including but not
limited to claims seeking recognition of an employment bond.

(e)           Since December 31, 2005, the
Company has not changed in any material way its employment policies, including
those applicable to increase of salary, deferred compensation, severance pay
plans or retirement plans related to its employees, directors and/or officers,
other than in order to comply with applicable regulations or collective
bargaining agreements.  The Company has
not entered into any arrangement, other than those required in order to comply
with applicable regulations or collective bargaining agreements, with any of
its employees, directors and/or officers providing for special plans relating
to salary, deferred compensation, retirement and severance pay.

5.16            Legal Proceeding.  Except as set forth on Schedule 5.16,
there is no Legal Proceeding pending or, to the Knowledge of Tubos or the
Company, threatened against the Company or Apolo America (or to the Knowledge
of Tubos or the Company, pending or threatened against any of the officers,
directors or employees of the Company or Apolo America with respect to their
business activities on behalf of the Company or Apolo America, respectively),
or to which the Company or Apolo America is otherwise a party before any
Governmental Authority; nor to the Knowledge of Tubos or the Company is there
any reasonable basis for any such Legal Proceeding.  Except as set forth on Schedule 5.16,
neither the Company nor Apolo America is subject to any effective Order that has not been fully performed, nor is
it in breach or violation of such Order. 
Except as set forth on Schedule 5.16, neither the Company nor
Apolo America is engaged in any legal action to recover monies due it or for
damages sustained by it.  There are no
Legal Proceedings pending or, to the Knowledge of Tubos or the Company,
threatened against the Company or Apolo America or to which the Company or
Apolo America is otherwise a party relating to this Agreement or the
transactions contemplated hereby.

5.17            Insurance.  The Company has insurance policies in full
force and effect (a) for such amounts as are sufficient for all requirements of
applicable Law and insurance related provisions of agreements requiring
insurance policies to be taken out to which the Company is a party or by which
it is bound and (b) which are in such amounts, with such deductibles and
against such risks and losses, as are reasonable for the Business and Company
Assets.

5.18            Inventory.  The inventories of the Company and Apolo America
are in good and marketable condition and are usable and saleable in the
ordinary course of business.  The
inventories of the Company and Apolo America set forth in the Financial
Statements and the Apolo America Financial Statement, respectively, were properly
stated therein in accordance with Brazilian GAAP.  Adequate reserves have been reflected in the
Financial Statements and the Apolo Financial Statements for obsolete, damaged,
unqualified, excess, slow-moving or otherwise unusable inventory in accordance
with Brazilian GAAP.  The inventories of
the Company constitute sufficient quantities for the normal operation of
business in accordance with past practice.

 29
 

 

5.19            Accounts Receivable.  All accounts and notes receivable of the
Company and Apolo America have arisen from bona fide transactions in the
ordinary course of business consistent with past practice and are payable on
ordinary trade terms.  All accounts and
notes receivable of the Company and Apolo America reflected in the Financial
Statements and the Apolo America Financial Statements, respectively, are good
and collectible at the aggregate recorded amounts thereof, or doubtful account reserves have been fully made in accordance with
Brazilian GAAP.  None of the accounts or
the notes receivable of the Company or Apolo America (a) are subject to any
setoffs or counterclaims or (b) represent obligations for goods sold on
consignment, on approval or on a sale-or-return basis or subject to any other
repurchase arrangement.  All accounts
payable of the Company and Apolo America reflected in the Financial Statements
and the Apolo America Financial Statements, respectively, or arising after the
Balance Sheet Date are the result of bona fide transactions in the ordinary
course of business and have been paid or are not yet due and payable and have
been recorded in accordance with Brazilian GAAP.

5.20            Related Persons.  Except as set forth on Schedule 5.20,
no director or senior management personnel or equity holder of the Company, its
directors or senior management personnel, any member of his, her or their
immediate family or any of their respective Affiliates (“Related Persons”)
(a) owes any amount to the Company nor does the Company owe any amount to, or
has the Company committed to make any loan or extend or guarantee credit to or
for the benefit of, any Related Person, (b) is involved in any business
arrangement or other relationship with the Company (whether written or oral),
(c) owns any property or right, tangible or intangible, that is used by the Company,
(d) has any claim or cause of action against the Company or (e) owns any direct
or indirect interest of any kind in, or controls or is a director, officer,
employee or partner of, or consultant to, or lender to or borrower from or has
the right to participate in the profits of, any Person which is a competitor,
supplier, customer, landlord, tenant, creditor or debtor of the Company.

5.21            Tubular Products Contracts.  Except as set forth on Schedule 5.21,
neither the Company nor
Apolo America has entered into any Contracts, whether written or oral, for the
sale of Tubular Products.

5.22            GPC, Cirrus or Tubos
Legal Proceeding.  Except as set forth on Schedule 5.22,
there is no Legal Proceeding pending or, to the Knowledge of GPC, Cirrus or
Tubos, threatened against GPC, Cirrus and/or Tubos and/or any of their
Affiliates with respect to the activities and businesses of the Company (or to
the Knowledge of GPC, Cirrus or Tubos, pending or threatened against any of the
officers, directors or employees of GPC, Cirrus and/or Tubos and/or any of
their Affiliates with respect to the activities and businesses of the Company),
or to which GPC, Cirrus and/or Tubos and/or their Affiliates are otherwise a
party before any Governmental Authority, with respect to the activities and
businesses of the Company; nor to the Knowledge of GPC, Cirrus and/or Tubos is
there any reasonable basis for any such Legal Proceeding.  Except as set forth on Schedule 5.22,
none of GPC, Cirrus or Tubos or any of their Affiliates are subject to any
effective Order, related to the activities and businesses of

 30

 

the Company that has not been fully performed,
nor is it in breach or violation of such Order. 
Except as set forth on Schedule 5.22, none of GPC, Cirrus or
Tubos or their Affiliates are engaged in any legal action to recover monies due
it or for damages sustained by it, related to the activities or businesses of
the Company.  There are no Legal
Proceedings pending or, to the Knowledge of GPC, Cirrus or Tubos, threatened
against the GPC, Cirrus and/or Tubos or any of their Affiliates related to the
activities and businesses of the Company to which any of them is otherwise a
party relating to this Agreement or the transactions contemplated hereby.

ARTICLE
6

REPRESENTATIONS AND WARRANTIES OF LSB 2 AND
LONE STAR

Each of LSB 2 and Lone
Star hereby represents and warrants to the Company that:

6.1              Existence and Good Standing. 
LSB 2 is validly existing and in good standing under the Laws of Brazil
and is duly qualified to do business in all jurisdictions where it is so
required to qualify.  Lone Star is
validly existing and in good standing under the Laws of the State of Delaware,
United States of America, and is duly qualified to do business in all
jurisdictions where it is so required to qualify.  Star Brazil Cayman is validly existing and in
good standing under the laws of the Cayman Islands and is duly qualified to do
business in all jurisdictions where it is so required to qualify.  The memorandum and articles of association of
Star Brazil Cayman are attached hereto as Exhibit I.

6.2              Authorization of Agreement.

(a)           Each of LSB 2 and Lone Star
has all requisite corporate power and authority to enter into this Agreement
and the Ancillary Agreements and has all requisite corporate power and
authority to perform all of their respective obligations under this Agreement
and the Ancillary Agreements to which LSB 2 or Lone Star is a party.  LSB 2 has taken all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement and the Ancillary Agreements to which LSB 2 is a party.  Lone Star has taken all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the Ancillary Agreements to which Lone Star is a party.

(b)           The execution and delivery of
this Agreement and the Ancillary Agreements to which LSB 2 and/or Lone Star is
a party do not require LSB 2 or Lone Star, as the case may be, to obtain any
approval or consent of, or make any notice to or filing with, any Person or
Governmental Authority, other than approvals, consents, notices and filings
obtained or made prior to the date hereof or as listed on Schedule 6.2(b)
hereto.

 31
 

 

(c)           Following execution and
delivery by the parties hereto or thereto, this Agreement and each of the
Ancillary Agreements to which LSB 2 and/or Lone Star is a party will constitute
LSB 2’s and/or the Lone Star’s legal, valid and binding obligations,
enforceable in accordance with their terms, subject to (i) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
Laws relating to or affecting the rights of creditors generally or (ii)
limitations imposed by applicable Law or equitable principles upon the
enforceability of any of the remedies, covenants or other provisions of this
Agreement or such Ancillary Agreements and upon the availability of injunctive
relief or other equitable remedies.

6.3              Conflicts; Consents of Third Parties.  Subject to obtaining any consents or
approvals or making any notice or filing referred to on Schedule 6.3
hereto, the execution, delivery and performance of this Agreement or any of the
Ancillary Agreements to which LSB 2 and/or Lone Star is a party does not
conflict with or result in a violation of (a) the Charter Documents of LSB
2 and/or Lone Star, (b) any Law or Order applicable to LSB 2 and/or Lone
Star or any of its assets and properties or (c) any Contract or Permit to
which LSB 2 and/or Lone Star is a party or by which any of the properties or
assets of LSB 2 and/or Lone Star are bound. 
There are no Actions pending or, to the Knowledge of LSB 2 and/or Lone
Star, threatened against LSB 2 and/or Lone Star relating to or affecting LSB 2’s
or Lone Star’s assets and properties that could reasonably be expected to
result in the issuance of an Order (a) restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Ancillary Agreements to which LSB
2 and/or Lone Star is a party or (b) that would be likely to result in a
Material Adverse Effect.

6.4              Ownership of Star Brazil Cayman.  LSB 2 owns all of the issued and outstanding
Cayman Shares. The Cayman Shares are validly issued, fully paid and
non-assessable and are free and clear of any and all Liens, including any
claims by any third party, including any Governmental Authority, voting proxy
arrangement or voting right trust arrangement. 
There are no agreements or understandings that give any Person other
than the Company the right to acquire an interest in Star Brazil Cayman.  There are no agreements or understandings that
require Star Brazil Cayman to repurchase the equity interests of any equity
holder in Star Brazil Cayman.  There are
no options, warrants or other rights to acquire Cayman Shares or any equity
interest in Star Brazil Cayman.

6.5              No Liabilities; Assets. 
Star Brazil Cayman does not have any Liabilities and its only asset is
the Promissory Note.

6.6              Employee Matters.  Schedule
6.6 sets forth the name, current title, and current annual compensation
amount of all directors, officers and employees of Star Brazil Cayman.

6.7              Legal Proceeding.  There is no Legal Proceeding pending or, to
the Knowledge of LSB 2 or Lone Star, threatened against Star Brazil Cayman (or
to the

 32
 

 

Knowledge of LSB 2 or Lone Star, pending or threatened, against any of
the officers, directors or employees of Star Brazil Cayman with respect to
their business activities on behalf of Star Brazil Cayman), or to which Star
Brazil Cayman is otherwise a party before any Governmental Authority; nor to
the Knowledge LSB 2 or Lone Star is there any reasonable basis for any such
Legal Proceeding.  Star Brazil Cayman is
not subject to any effective
Order that has not been fully
performed, nor is it in breach or violation of such Order.  Star Brazil Cayman is not engaged in any
legal action to recover monies due it or for damages sustained by it.

6.8              Compliance with Law. 
Star Brazil Cayman has complied with applicable Law.

6.9              Contracts.  Except for
the Promissory Note, there are no contracts, whether written or oral, to which
Star Brazil Cayman is a party.

6.10            Taxes.

(a)           (i) All Tax Returns required
to be filed by or on behalf of Star Brazil Cayman have been duly and timely
filed with the appropriate Taxing Authority in all jurisdictions in which such
Tax Returns are required to be filed, and all such Tax Returns are true,
complete and correct in all material respects and (ii) all such Taxes have been
fully and timely paid.

(b)           All deficiencies asserted or
assessments made in respect of Star Brazil Cayman as a result of any
examinations by any Taxing Authority of the Tax Returns have been fully paid,
and there are no other audits or investigations by any Taxing Authority in
progress, nor has Star Brazil Cayman received any notice from any Taxing
Authority that it intends to conduct such an audit or investigation.

(c)           No agreement, waiver or other
document or arrangement extending or having the effect of extending the period
for assessment or collection of Taxes (including, but not limited to, any
applicable statute of limitation) or the period for filing any Tax Return has
been executed or filed with any Taxing Authority by or on behalf of Star Brazil
Cayman.  Star Brazil Cayman has not
requested any extension of time within which to file any Tax Return, which Tax
Return has since not been filed.

(d)           There are no Liens for Taxes
upon the assets of Star Brazil Cayman.

(e)           No power of attorney with
respect to any Tax matter is currently in force with respect to Star Brazil
Cayman.

(f)            Star Brazil Cayman is not a
party to any Tax sharing, allocation, indemnity or similar agreement or
arrangement (whether or not written) pursuant to which it will have any
obligation to make any payments after the Closing.

 33
 

 

ARTICLE 7

COVENANTS

7.1              No-Shop.  From the date of this Agreement until the
Closing Date or the earlier termination of this Agreement, Tubos and the
Company shall not, and shall cause their respective Affiliates and each of
their respective officers, directors, employees, representatives and agents not
to, directly or indirectly, initiate, solicit, encourage or otherwise
facilitate any inquiry, proposal, offer or discussion, or engage in any
discussions or negotiations, with any party (other than Lone Star) concerning
any business transaction involving the sale of the Company, any equity interest
in the Company, or any subsidiaries of the Company, or the sale of all or
substantially all of the assets of the Company or any of its subsidiaries.  Tubos shall notify Lone Star within three (3)
Business Days of receipt by Tubos, the Company or any Affiliate thereof of an
unsolicited offer or indication of interest received from any party (other than
Lone Star) concerning any business transaction involving the sale of the
Company, any equity interest in the Company, or any subsidiaries of the
Company, or the sale of all or substantially all of the assets of the Company
or any of its subsidiaries.

7.2              Operations
Prior to the Closing Date.

(a)           Between the execution of this Agreement and
the Closing Date, unless otherwise consented to in writing by LSB 2 or
expressly permitted or required under this Agreement, each of Tubos and
the Company shall ensure that each of
the Company and Apolo America shall not:

(i)            make any material change in its
business or its operations, except such changes as may be required to comply
with any applicable Law;

(ii)           enter into any Contract or commitment
to make a capital expenditure in excess of the amount equivalent in Reais to
US$500,000, according to the Exchange Rate;

(iii)          enter into any material transaction or
enter into, modify, terminate or renew any material Contract, in each case,
other than in the ordinary course of business;

(iv)          enter into any Contract for the
purchase of real property;

(v)           sell, lease (as lessor), transfer or
otherwise dispose of (including any transfers to any of its Affiliates), or
mortgage or pledge, or impose or suffer to be imposed any Lien on, any of the
Company Assets or the assets of Apolo America, other than inventory and
personal property sold or otherwise disposed of in the ordinary course of
business and other than Permitted Exceptions;

 34
 

 

(vi)          cancel any Indebtedness owed to or
claims held by the Company or Apolo America (including the settlement of any
claims or litigation) other than in the ordinary course of business, except as
provided for in Section 7.3;

(vii)         create, incur or assume, or agree to
create, incur or assume, any Indebtedness, other than in the ordinary course of
business (which shall expressly exclude the creation, incurrence or assumption
of Indebtedness on behalf of an Affiliate);

(viii)        declare,
set aside, make, or agree to make, any distribution of Company Assets or the
assets of Apolo America or dividend to Tubos or any of its Affiliates, or
repurchase, redeem or otherwise acquire any Common Shares or Apolo America
Shares;

(ix)           effect any recapitalization,
reclassification, share split or like change in the capitalization of the
Company or Apolo America, except for the capitalization of the Company in the
total aggregate amount of R$84,868,094.12 and related issuance of Common
Shares, in connection with the transfer of the Special Oto Mills production
line (R$40,688,948.74), the payment in Common Shares of outstanding
Indebtedness of the Company for inter-company loans (R$11,491,839.90) and the
capitalization of the monetary correction reserve (R$32,687,305.48);

(x)            institute any material increase in
any benefit provided under any profit-sharing, bonus, incentive, deferred
compensation, insurance, pension, retirement, medical, hospital, disability,
welfare or other employee benefit plan maintained for the Company’s and Apolo
America’s employees, other than as required by applicable Law;

(xi)           make any material change in the
compensation of the Company’s or Apolo America’s employees, other than changes
made in accordance with normal compensation practices or pursuant to existing
Contractual commitments and consistent with past compensation practices;

(xii)          enter into, modify or terminate any
labor or collective bargaining agreement of the Company or Apolo America or,
through negotiation or otherwise, make any commitment or incur any Liability to
any labor organization with respect to the Company or Apolo America;

(xiii)         make or rescind any election relating
to Taxes, change the Company’s or Apolo America’s method of Tax accounting or
change the Tax accounting treatment of any item, settle or compromise any claim
or proceedings relating to Taxes;

(xiv)        make any material change in the
accounting policies applied in the preparation of the Financial Statements or
the Apolo Americas Financial Statements, unless such change is required by
Brazilian GAAP;

 35
 

 

(xv)         enter into any Contract, understanding
or commitment that restrains, restricts, limits or impedes the ability of the
Company or Apolo America to compete or conduct any business or line of business
in any geographic area;

(xvi)        terminate, amend, restate, supplement or
waive any material rights under any Material Contract;

(xvii)       make any change in the Company’s or Apolo
America’s Charter Documents or issue any Common Shares or Apolo America Shares or
other equity securities (or securities exchangeable, convertible or exercisable
for Common Shares, Apolo America Shares or other equity securities of the
Company or Apolo America); or

(xviii)      agree in writing or otherwise to take any
of the prohibited actions described in this Section 7.2(a).

(b)           Between the execution of this Agreement and
the Closing Date, unless otherwise consented to in writing by Tubos or
expressly permitted or required under this Agreement, each of LSB 2 and
Lone Star shall ensure that Star
Brazil Cayman shall not:

(i)            make any material change in its
business or its operations, except such changes as may be required to comply
with any applicable Law;

(ii)           except for the Promissory Note, enter
into any Contract in excess of US$10,000;

(iii)          except for the Promissory Note, enter
into any material transaction or enter into, modify, terminate or renew any
material Contract, in each case, other than in the ordinary course of business;

(iv)          enter into any Contract for the
purchase of real property;

(v)           sell, lease (as lessor), transfer or
otherwise dispose of (including any transfers to any of its Affiliates), or
mortgage or pledge, or impose or suffer to be imposed any Lien on, any of the
assets of Star Brazil Cayman;

(vi)          cancel any Indebtedness owed to or
claims held by Star Brazil Cayman (including the settlement of any claims or
litigation) other than in the ordinary course of business;

(vii)         create, incur or assume, or agree to
create, incur or assume, any Indebtedness, other than in the ordinary course of
business (which shall expressly exclude the creation, incurrence or assumption
of Indebtedness on behalf of an Affiliate);

(viii)        declare, set aside, make, or agree to
make, any distribution of the assets of Star Brazil Cayman or dividend to LSB 2
or any of its Affiliates, or repurchase, redeem or otherwise acquire any Cayman
Shares;

 36
 

 

(ix)           effect any recapitalization,
reclassification, share split or like change in the capitalization of Star
Brazil Cayman;

(x)            make or rescind any election
relating to Taxes, change Star Brazil Cayman’s method of Tax accounting or
change the Tax accounting treatment of any item, settle or compromise any claim
or proceedings relating to Taxes;

(xi)           make any change in Star Cayman Brazil’s
Charter Documents or issue any Cayman Shares or other equity securities, except
in exchange for the Promissory Note (or securities exchangeable, convertible or
exercisable for Cayman Shares or other equity securities); or

(xii)          agree in writing or otherwise to take
any of the prohibited actions described in this Section 7.2(b).

7.3              Indebtedness.

(a)           On or before the Closing Date, the Company shall
have fully paid all Indebtedness owed by the Company to GPC, Cirrus, Tubos,
Syntecko Produtos Quimicos S.A., Syntax Comercio Importacao and any other
Affiliates of the Company, except for the Indebtedness set forth on Schedule
7.3(a) and any accounts receivable owed by the Company to an Affiliate of
the Company which arose in the ordinary course of business.  On or before the Closing Date, all
Indebtedness owed to the Company by GPC, Cirrus, Tubos, Syntecko Produtos
Quimicos S.A., Syntax Comercio Importacao and any other Affiliate of the
Company shall have been fully paid, except for the Indebtedness set forth on Schedule
7.3(a) and any accounts payable owed by an Affiliate of the Company to the
Company which arose in the ordinary course of business for goods and services.

(b)           On or before the Closing Date,
the Company shall have fully paid all Indebtedness owed by the Company and all Indebtedness
related to the Business or the Facility, except for (i) the Indebtedness set
forth on Schedule 7.3(b) and (ii) any accounts payable owed by the
Company which arose in the ordinary course of business for goods and services.

7.4              Employees.  On, before
or immediately after the Closing Date, all employees of any Affiliate of the
Company involved in the Business and/or in the operation of the Facility shall
have been transferred to and registered with the Company and shall not be
engaged in the business of Tubos or its Affiliates (other than the Company).

7.5              Transfer of Assets.

(a)           On or before the Closing Date,
all assets necessary for the intended operation of the Business and the
Facility that are owned by Affiliates of the Company, including but not limited
to the assets set forth on Schedule 7.5(a), shall be transferred to the
Company free and clear of all Liens.

 37
 

 

(b)           On or before the Closing Date,
the Company shall transfer ownership of the mechanical lathe purchased by the
Company with the proceeds of the FINAME Loan to Tubos.  Tubos hereby agrees to (i) assume all
Liabilities and obligations of the Company under the FINAME Loan, including but
not limited to the obligation to make all payments as they become due under the
FINAME Loan and (ii) fully indemnify and hold harmless the Company from any and
all Liabilities based upon, attributable to or resulting from the FINAME Loan.

(c)           On or before one (1) year from
the Closing Date, the Company shall sell the assets currently owned by the
Company related to the Calderaria business line in exchange for R$4,697,000 in
cash.  A list of such assets is set forth
on Schedule 7.5(c) (the “Calderaria Assets”).  If, during such one (1) year period, the
Company sells the Calderaria Assets for an amount that is less than
R$4,697,000, Tubos shall pay to the Company the difference between R$4,697,000
and the sales price of the Calderaria Assets. 
If, during such one (1) year period, the Company sells the Calderaria
Assets for an amount that is more than R$4,697,000, the Company shall pay to
Tubos the difference between the sales price of the Calderaria Assets and
R$4,697,000, less any applicable Taxes. 
Tubos shall indemnify and hold harmless the Company for any Losses arising
out of or resulting from any sale of the Calderaria Assets.  In the event that the Company has not sold
the Calderaria Assets on or before one (1) year from the Closing Date, Tubos
shall be required to purchase the Calderaria Assets from the Company in exchange
for R$4,697,000 in cash no later than fifteen (15) Business Days after one (1)
year from the Closing Date.

7.6              Subsidiaries.

(a)           On or before the Closing Date,
the Company shall purchase all of the outstanding common shares in Apolo
America (the “Apolo America Shares”) pursuant to the terms of the AA
Purchase Agreement.

(b)           On or before the Closing Date,
the Company shall transfer all of the outstanding securities of MYTHRA S/A, a
stock corporation organized under the laws of Uruguay and a wholly-owned
subsidiary of the Company, to Tubos or an Affiliate of Tubos (excluding the
Company).

7.7           PAT Registration.  Prior
to the Closing Date, Tubos shall use its reasonable efforts to cause the
Company to register with PAT, including all types of benefits granted by the
Company with respect to meals (including cesta básica,  vale alimentação,
 vale refeição,
provision of meals to employees and any other, as applicable) for all of the
employees of the Company (the “PAT Registration”).  In the event that the PAT Registration is not
completed on or before the Closing Date, Tubos and LSB 2 shall use their best
efforts to cause the Company to complete the PAT Registration as soon as
reasonably possible after the Closing Date. 
As an exception to Section 10.2(a) hereof, Tubos hereby agrees to
fully indemnify and hold harmless the Company from any and all Liabilities
(including but not limited to Taxes) based upon, attributable to or resulting
from the provision of meals (including cesta básica,  vale

 38
 

 

alimentação,  vale refeição)
for any of the employees of the Company prior to the date the PAT Registration
is completed.

7.8              Antitrust Filing.

(a)           Tubos and LSB 2 expressly
agree that they shall jointly submit the transactions provided for herein and
in the Ancillary Agreements to the approval of the Brazilian Antitrust
Authority, the Administrative Counsel of Economic Defense (“CADE”) and that they shall jointly
share any filing fees in connection with such submission.  LSB 2 will take the lead relating to such
submission, and Tubos and GPC expressly undertake to fully cooperate in a
timely manner with LSB 2 in order to file the relevant applications, supply the
necessary information and obtain CADE’s approval.

(b)           Tubos and LSB 2 further agree
that the closing of the transactions provided for herein shall not be delayed
by the absence of CADE’s approval. 
Therefore, Tubos and LSB 2 jointly assume all the risks relating to such
approval, including the non-granting of such approval or the granting of the
approval with restrictions.

7.9              Realization of Tax Receivables and Other Tax Assets/Credits.  

(a)              Tubos hereby agrees that, to the
extent that the tax receivables and other tax assets/credits listed on Schedule
7.9(a) have not been fully realized by the Company within three (3) years
from the Closing Date (the “Realization Date”), Tubos shall reimburse
the Company the amount of such shortfall within thirty (30) Business Days after
the Realization Date by wire transfer of immediately available funds to the
account of the Company as may be designated in writing by the Company prior to
such transfer.  Schedule 7.9(a)
sets forth the manner in which the realization of the tax receivables and other
tax assets/credits will be calculated.

(b)           Tubos and LSB 2 hereby agree
that they shall use their commercially reasonable efforts to cause the Company to
file a suit against the Brazilian Federal Government to recover the excess PIS
and Cofins paid by the Company on account of the inclusion of the ICMS in the
tax base of those taxes, an estimate of which is set forth as Schedule
7.9(b) (the “Contingent Tax Credit/Asset”).  The Contingent Tax Credit/Asset does not
include the tax credits and tax assets identified on Schedule 7.9(a).  

 39
 

 

 

7.10            Conversion of the
Company.  Prior to the Closing Date,
the Company shall have completed its conversion from a limited liability company
(sociedade empresaria limitada) to a
corporation (sociedade anonima/stock corporation).

7.11            Special Oto Mills Production Line.  Prior to the Closing Date, Tubos shall
transfer the Special Oto Mills production line to the Company at its net book
value of R$40,689,000, which includes R$1,225,000 of ICMS tax paid by Tubos on
the purchase of the Special Oto Mills production line, which shall be
capitalized as part of its historical cost. 
Tubos has submitted a request to the Brazilian Taxing Authority seeking
to offset this ICMS tax paid against future ICMS tax payables of Tubos.  In the event that the Brazilian Taxing
Authority authorizes the use of these ICMS tax credits for offset against
future ICMS tax payables, the use of such ICMS tax credits will result in a
reduction of the value of the net book value of the Special Oto Mills
production line and therefore Tubos shall reimburse the Company for the value
of the ICMS tax credits used.

7.12            Best Efforts.  Tubos and LSB 2 shall use their best efforts
to cause the conditions in Article 8 to be satisfied.

 40
 

 

ARTICLE 8

CONDITIONS TO CLOSING

8.1              Conditions Precedent to
Obligations of Tubos.

The obligations of Tubos to consummate the
transactions contemplated by this Agreement are subject to the fulfillment,
prior to or on the Closing Date, of each of the following conditions (any or
all of which may be waived expressly in writing by the Company in whole or in
part to the extent permitted by applicable Law):

(a)           each of the representations
and warranties of LSB 2 and/or Lone Star contained herein qualified as to
materiality shall be true and correct, and all representations and warranties
of LSB 2 and/or Lone Star contained herein not qualified as to materiality
shall be true and correct in all material respects, at and as of the Closing
Date with the same effect as though those representations and warranties had
been made again at and as of that date; it being understood that, to the extent
any such representation or warranty was made as of a specified date, the same
shall continue on the Closing Date to be true and correct as of the specified
date;

(b)           LSB 2 and/or Lone Star shall
have performed and complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by LSB 2
and/or Lone Star on or prior to the Closing Date;

(c)           Tubos shall have been
furnished with a certificate (dated the Closing Date and in form and substance
reasonably satisfactory to the Company) executed by an officer of each of LSB 2
and Lone Star certifying as to the fulfillment of the conditions specified in Sections
8.1(a) and 8.1(b);

(d)           LSB 2 shall have executed
and/or delivered to Tubos and the Company at the Closing all of the documents
required to be executed and/or delivered by it pursuant to Section 4.2;
and

(e)           no Legal Proceedings shall
have been instituted or threatened or claim or demand made against LSB 2, Lone
Star, GPC, Cirrus, the Company or Tubos seeking to restrain or prohibit or
obtain substantial damages with respect to the consummation of the transactions
contemplated hereby, and there shall not be in effect any Order by a
Governmental Authority of
competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby.

8.2              Conditions Precedent to
Obligations of LSB 2.

The obligations of LSB 2 to consummate the
transactions contemplated by this Agreement, including but not limited to the
LSB 2 Investment, are subject to the fulfillment, prior to or on the Closing
Date, of each of the following conditions (any or all of which may be waived
expressly in writing by LSB 2 in whole or in part to the extent permitted by
applicable Law):

(a)           each of the representations
and warranties of Tubos, the Company, GPC and/or Cirrus contained herein
qualified as to materiality shall be true and correct, and each of the
representations and warranties of Tubos, the Company, GPC and/or Cirrus
contained herein not qualified as to materiality shall be true and correct in
all material

 41
 

 

respects, at and as of the Closing Date with the same
effect as though those representations and warranties had been made again at
and as of that date; it being understood that, to the extent any such
representation or warranty was made as of a specified date, the same shall
continue on the Closing Date to be true and correct as of the specified date;

(b)           Tubos, the Company, GPC and/or
Cirrus shall have performed and complied in all material respects with all
obligations and covenants required by this Agreement to be performed or
complied with by Tubos, the Company, GPC and/or Cirrus, as the case may be, on
or prior to the Closing Date;

(c)           LSB 2 shall have been
furnished with a certificate (dated the Closing Date and in form and substance
reasonably satisfactory to LSB 2) executed by an officer of Tubos certifying as
to the fulfillment of the conditions specified in Sections 8.2(a)
and 8.2(b);

(d)           Tubos shall have executed
and/or delivered to LSB 2 and the Company at the Closing all of the documents
required to be executed and/or delivered by Tubos pursuant to Section 4.1;

(e)           the Company shall have
executed and/or delivered to LSB 2 and Tubos at the Closing all of the
documents required to be executed and/or delivered by the Company pursuant to Section 4.3;

(f)            no Legal Proceedings shall
have been instituted or threatened or claim or demand made against LSB 2, Lone
Star, GPC, Cirrus, the Company or Tubos seeking to restrain or prohibit or
obtain substantial damages with respect to the consummation of the transactions
contemplated hereby, and there shall not be in effect any Order by a
Governmental Authority of
competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby; and

(g)           Tubos shall have obtained the
consent of the International Finance Corporation (the “IFC”), pursuant
to which the IFC shall have consented to the transactions contemplated by this
Agreement and the Ancillary Agreements, in a form reasonably satisfactory to
LSB 2, and Tubos shall have delivered a copy of such consent to LSB 2.

ARTICLE 9

TERMINATION

9.1              Termination of
Agreement.

This Agreement may only be terminated prior to the
Closing as follows:

(a)           by the written agreement of
LSB 2 and Tubos;

 42
 

 

(b)           by either LSB 2 or Tubos if
there shall be in effect a final nonappealable Order restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby;

(c)           by LSB 2 if, prior to the
Closing Date, Tubos, the Company, GPC or Cirrus is in material breach of any representation,
warranty, covenant or agreement herein contained and such breach shall not have
been cured within ten (10) days after the date a Notice of default is delivered
to Tubos and the Company by LSB 2; provided, that the right to terminate this Agreement
pursuant to this Section 9.1(c) shall not be available to LSB 2 if
LSB 2 is in material breach of this Agreement at the time Notice of termination
is delivered;

(d)           by Tubos if, prior to the
Closing Date, LSB 2 or Lone Star is in material breach of any representation,
warranty, covenant or agreement herein contained and such breach shall not have
been cured within ten (10) days after the date a Notice of default is delivered
to LSB 2 by Tubos; provided, that the right to terminate this Agreement pursuant
to this Section 9.1(d) shall not be available to Tubos if any of
Tubos, the Company, GPC or Cirrus is in material breach of this Agreement at
the time Notice of termination is delivered;

(e)           by LSB 2, if Tubos, the
Company, GPC or Cirrus becomes insolvent, makes a general assignment for the
benefit of creditors, suffers or permits the appointment of a receiver for its
business or assets, becomes subject to any proceeding under any bankruptcy or
insolvency Law, or winds up or liquidates, voluntarily or otherwise;

(f)            by Tubos, if either of LSB 2
or Lone Star becomes insolvent, makes a general assignment for the benefit of
creditors, suffers or permits the appointment of a receiver for its business or
assets, becomes subject to any proceeding under any bankruptcy or insolvency
Law, or winds up or liquidates, voluntarily or otherwise;

(g)           by LSB 2, if a Material
Adverse Effect shall have occurred; provided, however, that LSB 2 may not
terminate if LSB 2’s or Lone Star’s willful actions have caused the Material
Adverse Effect; and

(h)           by Tubos, if a Material
Adverse Effect shall have occurred; provided, however, that Tubos may not
terminate if any of Tubos’, the Company’s, GPC’s or Cirrus’ willful actions
have caused the Material Adverse Effect.

9.2              Procedure for Termination. 
The termination of this Agreement pursuant to Section 9.1(b) -
9.1(h) shall be effectuated by the delivery of a written Notice of such
termination from the party terminating this Agreement to the other party.

 43
 

 

9.3              Effect of Termination.

If this Agreement is terminated in accordance with Section 9.1
and the transactions contemplated hereby are not consummated:

(a)           Each party shall redeliver all
documents and other materials of the other parties hereto, and all copies of
any such materials, relating to the transactions contemplated hereby, whether
obtained before or after the execution hereof, to the party furnishing the
same.

(b)           No party hereto shall have any Liability or further
obligation to the other parties to this Agreement resulting from such
termination except that: (i) this Section 9.3 and Section 11.10
shall remain in full force and effect and the parties shall have the
obligations stated therein, and (ii) no party waives any claim or right for
damages against a breaching party to the extent that such termination results
from the breach by a party hereto of any of its representations, warranties,
covenants or agreements set forth herein.

ARTICLE 10

INDEMNIFICATION

10.1            Survival of Representations, Warranties and Covenants.  The representations and warranties of the
parties contained in this Agreement or any certificate delivered pursuant
hereto shall survive the Closing through and including the second anniversary
of the Closing Date; provided, however, that the representations and warranties
(a) of Tubos, the Company, GPC and/or Cirrus set forth in Section 5.1
(existence and good standing), Section 5.2 (authorization of
agreement) and Section 5.5(a) (title) shall survive the Closing until
thirty (30) days following the expiration of the applicable laches or statute
of limitations with respect to the particular matter that is the subject matter
thereof, (b) of Tubos, the Company, GPC and/or Cirrus set forth in Section
5.7 (taxes), Section 5.6 (environmental matters) Section 5.9
(ownership) and Section 5.15 (employee matters) shall survive the
Closing until ninety (90) days following the expiration of the applicable
laches or statute of limitations with respect to the particular matter that is
the subject matter thereof, (c) of LSB 2 and/or Lone Star set forth in Section
6.1 (existence and good standing) and Section 6.2 (authorization of
agreement) shall survive the Closing until thirty (30) days following the
expiration of the applicable laches or statute of limitations with respect to
the particular matter that is the subject matter thereof and (d) of LSB 2
and/or Lone Star set forth in Section 6.4 (ownership), Section 6.6
(employee matters) and Section 6.10 (taxes) shall survive the Closing
until ninety (90) days following the expiration of the applicable laches or
statute of limitations with respect to the particular matter that is the
subject matter thereof (in each case, the “Survival Period”); provided,
however, that any obligations under Sections 10.2(a)(i) and 10.2(b)(i)
shall not terminate with respect to any Losses as to which the Person to be
indemnified shall have given Notice (stating in reasonable detail the basis of
the claim for indemnification) to the indemnifying party in accordance with Section 10.3(a)
before the termination of the applicable Survival Period.

 44
 

 

10.2            Indemnification.

(a)           Subject to Sections 10.1
and 10.4, Tubos hereby agrees to indemnify and hold LSB 2 and its
Affiliates (other than the Company) and their respective directors, officers,
employees, stockholders, agents, attorneys, representatives, successors and
assigns (collectively, the “LSB 2 Indemnified Parties”) harmless from
and against, and pay to the applicable LSB 2 Indemnified Parties the amount of,
any and all losses, liabilities, claims, obligations, deficiencies, demands,
judgments, damages (including incidental and consequential damages), interest,
fines, penalties, claims, suits, Actions, causes of action, assessments,
awards, costs and expenses (including costs of investigation and defense and
attorneys’ and other professionals’ fees), or any diminution in value, whether
or not involving a Third Party Claim (individually, a “Loss” and,
collectively, “Losses”):

(i)            based upon, attributable to or
resulting from the failure of any of the representations or warranties made by
Tubos, the Company, GPC or Cirrus in this Agreement to be true and correct in
all respects at and as of the date hereof and at and as of the Closing Date;

(ii)           based upon, attributable to or
resulting from the breach of any covenant or other agreement on the part of
Tubos, the Company, GPC or Cirrus under this Agreement;

(iii)          imposed under or pursuant to any
Environmental Laws (including any loss of use of the Company Assets) arising
from or related to any condition, act or omission, by Tubos, the Company or any
predecessor thereof or related to the operations of the Company or any
predecessor thereof on or relating to the Facility, whether known or unknown,
accrued or contingent, to the extent existing on or prior to the Closing Date,
including any Environmental Costs and Liabilities imposed associated with a
Release of Hazardous Materials;

(iv)          based upon, attributable to or
resulting from any acts, facts, omissions, activities, events or transactions
of Tubos, Apolo America, the Company or an Affiliate of Tubos which occurred on
or before the Closing Date;

(v)           based upon, attributable to or
resulting from any Liabilities arising out of, relating to or otherwise in
respect of Tubos, Apolo America, the Company or an Affiliate of Tubos before
the Closing Date; and/or

(vi)          based upon, attributable to or
resulting from any Taxes for taxable periods (or portions thereof) ending on or
before the Closing Date.

(b)           Subject to Section 10.1
and 10.4, LSB 2 hereby agrees to indemnify and hold Tubos, the Company
and their Affiliates and their respective directors, officers, employees,
stockholders, partners, members, agents, attorneys, representatives, successors
and permitted assigns (collectively, the “Tubos Indemnified Parties”)
harmless from and against, and pay to the applicable Tubos Indemnified Parties
the amount of, any and all Losses:

 45
 

 

(i)            based upon, attributable to or
resulting from the failure of any of the representations or warranties made by
LSB 2 and/or Lone Star in this Agreement to be true and correct in all respects
at the date hereof and as of the Closing Date; and

(ii)           based upon, attributable to or
resulting from the breach of any covenant or other agreement on the part of LSB
2 and/or Lone Star under this Agreement.

(c)           The right to indemnification
or any other remedy based on representations, warranties, covenants and
agreements in this Agreement shall not be affected by any investigation
conducted at any time, 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 agreement.  The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any such covenant or agreements, will not affect the right to
indemnification or any other remedy based on such representations, warranties,
covenants and agreements.

10.3            Indemnification Procedures.

(a)           A claim for indemnification
for any matter not involving a Third Party Claim may be asserted by Notice to
the party from whom indemnification is sought; provided, however, that failure
to so notify the indemnifying party shall not preclude the indemnified party
from any indemnification which it may claim in accordance with this Article
10.

(b)           In the event that any Legal
Proceedings shall be instituted or that any claim or demand shall be asserted
by any third party in respect of which indemnification may be sought under Section
10.2 hereof (regardless of the limitations set forth in Section 10.4)
(“Third Party Claim”), the indemnified party shall promptly cause
written Notice of the assertion of any Third Party Claim which is covered by
this indemnity to be forwarded to the indemnifying party.  The failure of the indemnified party to give
reasonably prompt Notice of any Third Party Claim shall not release, waive or
otherwise affect the indemnifying party’s obligations with respect thereto
except to the extent that the indemnifying party can demonstrate actual loss
and prejudice as a result of such failure. 
Subject to the provisions of this Section 10.3(b), the
indemnifying party shall have the right, at its sole expense, to be represented
by counsel of its choice, which must be reasonably satisfactory to the
indemnified party, and to defend against, negotiate, settle or otherwise deal
with any Third Party Claim which relates to any Losses indemnified against by it
hereunder; provided that the indemnifying party shall have acknowledged in
writing to the indemnified party its unqualified obligation to indemnify the
indemnified party as provided hereunder. 
If the indemnifying party elects to defend against, negotiate, settle or
otherwise deal with any Third Party Claim which relates to any Losses
indemnified against by it hereunder, it shall within five (5) days of the
indemnified party’s written Notice of the assertion of such Third Party Claim
(or sooner, if the nature of the Third Party Claim so requires) notify the
indemnified party of its

 46
 

 

intent to do so; provided that the indemnifying party
must conduct its defense of the Third Party Claim actively and diligently
thereafter in order to preserve its rights in this regard.  If the indemnifying party elects not to
defend against, negotiate, settle or otherwise deal with any Third Party Claim
which relates to any Losses indemnified against by it hereunder, fails to
notify the indemnified party of its election as herein provided or contests its
obligation to indemnify the indemnified party for such Losses under this
Agreement, the indemnified party may defend against, negotiate, settle or
otherwise deal with such Third Party Claim. 
If the indemnified party defends any Third Party Claim, then the
indemnifying party shall reimburse the indemnified party for the expenses of
defending such Third Party Claim upon submission of periodic bills.  If the indemnifying party shall assume the
defense of any Third Party Claim, the indemnified party may participate, at its
own expense, in the defense of such Third Party Claim; provided, however, that
such indemnified party shall be entitled to participate in any such defense
with separate counsel at the expense of the indemnifying party if (i) so
requested by the indemnifying party to participate or (ii) in the reasonable
opinion of counsel to the indemnified party a conflict or potential conflict
exists between the indemnified party and the indemnifying party that would make
such separate representation advisable; and provided, further, that the
indemnifying party shall not be required to pay for more than one such counsel
(plus any appropriate local counsel) for all indemnified parties in connection
with any Third Party Claim.  Each party
hereto agrees to provide reasonable access to each other party to such
documents, personnel and information as may reasonably by requested in
connection with the defense, negotiation or settlement of any such Third Party
Claim.  Notwithstanding anything in this Section 10.3(b)
to the contrary, neither the indemnifying party nor the indemnified party
shall, without the written consent of the other party, settle or compromise any
Third Party Claim or permit a default or consent to entry of any judgment unless
the claimant (or claimants) and such party provide to such other party an
unqualified release from all Liability in respect of the Third Party
Claim.  If the indemnifying party makes
any payment on any Third Party Claim, the indemnifying party shall be
subrogated, to the extent of such payment, to all rights and remedies of the
indemnified party to any insurance benefits or other claims of the indemnified
party with respect to such Third Party Claim.

(c)           After any final decision,
judgment or award shall have been rendered by a Governmental Authority of
competent jurisdiction and the expiration of the time in which to appeal
therefrom, or a settlement shall have been consummated, or the indemnified
party and the indemnifying party shall have arrived at a mutually binding
agreement, in each case with respect to a Third Party Claim hereunder, the
indemnified party shall forward to the indemnifying party Notice of any sums
due and owing by the indemnifying party pursuant to this Agreement with respect
to such matter and the indemnifying party shall pay all of such remaining sums
so due and owing to the indemnified party by wire transfer of immediately
available funds within five (5) Business Days after the date of such Notice.  The non-payment of all of such
remaining sums so due and owing to the indemnified party within the five (5) Business Days after
the date of such Notice shall subject the indemnifying Party to the payment of a penalty
equivalent to ten percent (10%) annually, plus interest at the SELIC rate of
the amount of

 47
 

 

such
sums due and owing through the date of payment of such amount, plus the costs
of collection.

(d)           At
the sole discretion of LSB 2 or Tubos, as the case may be, if it is the
indemnified party, it may elect to recover all or any portion of such sums that
are due and owing from dividends distributed to either Tubos or LSB 2, as the
case may be, under Section 4.1 of the Shareholders Agreement or cash
distributions upon dissolution under Section 9.3 of the Shareholders
Agreement; provided, however, that such sums due shall be adjusted according to the
variation of SELIC, from the date on which the sum was due until the date on
which it is effectively paid, accrued proportionally on a daily basis.

(e)           The Shareholders shall keep a notional account
of Losses (the “Notional Account”) related to this Agreement, both in
Reais and US Dollars, (the amount in US Dollars to be calculated in accordance
with the applicable Exchange Rate on the date on which payment of any such
amount is made), which will allow the Shareholders to keep track of the
payments due or made by Tubos to LSB 2 in order to ascertain whether or not the
Basket threshold set forth below is met. There shall be entered in the Notional Account, within five (5) Business Days
as of the date on which the Loss is effectively incurred by LSB 2, the amounts
of any Loss to determine if and when the sum of the amounts corresponding to
Losses incurred by LSB 2 have exceeded the Basket as provided below.  Any amounts in Reais included in the Notional
Account shall be adjusted, from time to time, at any given time that the
Shareholders decide to confirm whether the Basket was met, according to the
variation of the IGP-M/FGV, from the date on which the sum was included in the
Notional Account, accrued on a pro-rata basis.

10.4            Limitations on Indemnification
for Breaches of Representations and Warranties.

(a)           Tubos shall not have any
Liability under Section 10.2(a)(i) with respect to Losses related
to the breach of the representations and warranties set forth in Section 5.5(b)
(good operating condition and sufficiency) unless and until the aggregate
amount of Losses incurred by LSB 2 and indemnifiable thereunder based upon,
attributable to or resulting from the failure of any of such representations or
warranties to be true and correct exceeds US$1,000,000 (the “Basket”)
and, in such event, Tubos and/or the Company shall be required to pay only the
amount that exceeds the Basket.

(b)           Neither Tubos, on the one
hand, nor LSB 2, on the other hand, shall be required to indemnify any Person
under Sections 10.2(a)(i) or 10.2 (b)(i) for an
aggregate amount of Losses exceeding US$40,000,000 (the “Cap”) in
connection with Losses related to the failure to be true and correct of any of
the representations or warranties of Tubos, the Company or LSB 2, respectively;
provided, that there shall be no Cap with respect to Losses related to the
failure to be true and correct of any of the representations or warranties
contained in Section 5.1 (existence and good standing), Section
5.2 (authorization of agreement), Section 5.5(a) (title), Section
5.7 (taxes), Section 5.9 (ownership), Section 6.1 (existence
and good standing) and Section 6.2 (authorization of agreement) and Section
6.4 (ownership of Star Brazil Cayman) of this Agreement.

 48

 

(c)           For purposes of determining
the failure of any representations or warranties to be true and correct, the
breach of any covenants or agreements, and calculating Losses hereunder any
materiality or Material Adverse Effect qualifications in the representations,
warranties, covenants and agreements shall be disregarded.

ARTICLE 11

MISCELLANEOUS

11.1            Waiver of Default.  No
consent or waiver, express or implied, by any party hereto with respect to any
breach or default by another party hereunder shall be deemed or construed to be
a consent or waiver with respect to any other breach or default by any party of
the same provision or any other provision of this Agreement.  Failure on the part of a party to complain of
any act or failure to act of another party or to declare such party in default
shall not be deemed or constitute a waiver by a party of any rights hereunder.

11.2            Amendment.  This
Agreement shall not be altered, modified or changed except by an amendment
approved in writing by Tubos, the Company, LSB 2, Lone Star, GPC and Cirrus.

11.3            No Third Party Rights. 
None of the provisions contained in this Agreement shall be for the
benefit of or enforceable by any third parties, including creditors of the
Company.  The parties hereto expressly
retain any and all rights to amend this Agreement as herein provided.

11.4            Severability.  In the
event any provision of this Agreement is held to be illegal, invalid or
unenforceable to any extent, the legality, validity and enforceability of the
remainder of this Agreement shall not be affected thereby and shall remain in
full force and effect and shall be enforced to the greatest extent permitted by
law.

11.5            Binding Effect; Assignment. 
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns.  No assignment of this Agreement or of any
rights or obligations hereunder may be made by any of the parties hereto
without the prior written consent of the other parties hereto and any attempted
assignment without the required consents shall be void.  The parties hereby agree that upon the merger
of LSB 2 with and into the Company, LSB 1 shall succeed to all of the rights
and obligations of LSB 2 under this Agreement.

11.6            Headings.  The headings
of the articles and sections of this Agreement are for convenience only and
shall not be considered in construing or interpreting any of the terms or
provisions hereof.

11.7            Word Meanings.  The
words such as “herein,” “hereinafter,” “hereof,” and “hereunder” refer to this
Agreement as a whole and not merely to a subdivision in

 49
 

 

which such words appear unless the context otherwise requires.  The singular shall include the plural, and
vice versa, unless the context otherwise requires.

11.8            Counterparts.  This
Agreement may be executed in several counterparts, all of which together shall
constitute one agreement binding on all parties hereto, notwithstanding that
all the parties have not signed the same counterpart.

11.9            Entire Agreement.  This
Agreement, together with all schedules and exhibits hereto, contains the entire
agreement between the parties and supersedes all prior writings or agreements
with respect to the subject matter hereof.

11.10          Arbitration.  The
parties shall make every effort to settle amicably any and all disputes,
controversies and conflicts arising out of or relating to or in connection with
this Agreement, the performance or non-performance of the obligations set forth
herein (including any questions regarding its existence, validity or termination)
(a “Dispute”).  Except as provided
in this Section 11.10, Disputes or claims, if any, which
cannot be settled amicably between the parties, within thirty (30) days after
written Notice of such Dispute has been given by one or more party(ies) to the
other party(ies), shall be referred to and finally resolved by arbitration in
Sao Paulo, Brazil under the Rules of Arbitration of the International Chamber
of Commerce (“ICC Rules”) for the time being in force.  The ICC Rules shall be deemed to be
incorporated by reference into this Section 11.10.  Each of Tubos and LSB 2 shall appoint one (1)
arbitrator and the arbitrators appointed by Tubos and LSB 2 shall appoint the
third arbitrator.  The costs of the
arbitration, including administrative and arbitrator’s fees, shall be shared
equally by the parties.  Each party shall
bear the costs of its own attorney’s fees and expert witness fees.  The arbitration proceedings shall be in
English and Portuguese and all pleadings and written evidence shall be in
English and Portuguese.  The parties agree that the arbitration shall
be kept confidential and that the existence of the proceeding and any element
of it (including but not limited to any pleadings, briefs or other documents
submitted or exchanged, any testimony or other oral submissions, and any
awards) shall not be disclosed beyond the tribunal, the ICC, the parties, their
counsel and any person necessary to the conduct of the proceeding, except as
may be lawfully required in judicial proceedings relating to the arbitration or
otherwise, or as required by applicable Law. 
The decision of the tribunal shall be final, binding and
enforceable upon the parties and judgment upon any award rendered by the
tribunal may be entered in any court having jurisdiction thereof.  In the event that the failure of a party or
parties to this Agreement to comply with the decision of the tribunal requires
the other party or parties to apply to any court for enforcement of such award,
the non-complying party or parties shall be liable to the other for all cost of
such litigation including attorneys’ fees. 
The parties may apply to any court of competent jurisdiction in
accordance with this Section 11.10 for temporary or permanent injunctive
or preliminary relief, without breach of this Section 11.10 or
abridgement of the powers of the tribunal. 
For the purposes of obtaining temporary or permanent injunctive or
preliminary relief and without abridgement of the powers of the tribunal, the
parties elect the courts of the City of Sao Paulo, State of Sao Paulo, with the
express waiver of any other courts, no matter how privileged they may be.  Except for applications

 50
 

 

regarding preliminary or injunctive relief, no party shall be entitled
to commence or maintain any action in any court of law upon any matter in
dispute until such matter shall have been submitted to, and finally determined
under, the dispute resolution and arbitration procedures in this Section
11.10.  Process may be served on any
party in the manner set forth in this Agreement or by such other method
authorized by applicable Law or court rule.

11.11          Governing Law.  This
Agreement shall be construed according to and governed by the laws of Brazil.

11.12          Notices.  Any notice or
other communication provided for in this Agreement shall be in writing in the
Portuguese and English languages and shall be deemed to have been duly given if
(a) delivered personally, (b)  sent by commercial courier services or
overnight mail or delivery or (c) sent by facsimile with confirmation by personal
delivery or overnight mail, as follows:

If to Tubos, to:

Apolo Tubos e Equipamentos Ltda.

Av. Chrisóstomo Pimentel de Oliveira no. 2.651,
Pavuna

CEP 21650-000 Rio de Janeiro, RJ

Brasil

telefax: 21 – 3452-9139

at. Diretoria

with a copy to:

Luciano
de Souza Leão Jr.

Bulhões
Pedreira, Bulhões Carvalho, Piva, Rosman e Souza Leão Advogados

Rua
da Assembléia 10, 38o andar

CEP
20011-901 Rio de Janeiro, RJ

Brasil

telefax: 21 – 2531 2665

If to LSB 2, to:

Lone
Star Technologies, Inc.

15660
N. Dallas Pkwy., Suite 500

Dallas,
TX 75248

United
States of America

Telefax:  972-770-6474

Attn:  General
Counsel

 51
 

 

with a copy to:

Mary
R. Korby

Weil,
Gotshal & Manges LLP

200
Crescent Court, Suite 300

Dallas,
Texas  75201

Telefax: 
214-746-7777

with a copy to:

Marcos Flesch/Fabíola C.L. Cammarota de Abreu

Souza, Cescon Avedissian, Barrieu e Flesch -
Advogados

Rua
Funchal, 263 11o andar

04551-060   São Paulo, SP

Telefax:  (55 11) 3089 6565

If to the Company, to:

Apolo Mecânica e Estruturas Ltda.

Av. Dr. Leo de Affonseca Neto, 750 Mondesire

CEP 12600-970 Lorena, São Paulo

Brasil

at. Diretoria

telefax: 21 – 3153 2290

with a copy to:

Apolo Tubos e Equipamentos Ltda.

Av. Chrisóstomo Pimentel de Oliveira no. 2.651, Pavuna

CEP 21650-000 Rio de Janeiro, RJ

Brasil

telefax: 21 – 3452-9139

at. Diretoria

 

 52
 

 

with a copy to:

Lone Star
Technologies, Inc.

15660 N. Dallas
Pkwy., Suite 500

Dallas, TX 75248

United States of
America

Telefax:  972-770-6474

Attn:  General
Counsel

with a copy to:

Luciano de Souza
Leão Jr.

Bulhões Pedreira,
Bulhões Carvalho, Piva, Rosman e Souza Leão Advogados

Rua da Assembléia
10, 38o andar

CEP 20011-901 Rio
de Janeiro, RJ

Brasil

telefax: 21 – 2531 2665

If to Lone Star, to:

Lone Star
Technologies, Inc.

15660 N. Dallas
Pkwy., Suite 500

Dallas, TX 75248

United States of
America

Telefax:  972-770-6474

Attn:  General
Counsel

with a copy to:

Mary R. Korby

Weil, Gotshal & Manges LLP

200 Crescent Court, Suite 300

Dallas, Texas 
75201

Telefax: 
214-746-7777

with a copy to:

Marcos Flesch/Fabíola C.L. Cammarota de Abreu

Souza, Cescon Avedissian, Barrieu e Flesch -
Advogados

Rua
Funchal, 263 11o andar

04551-060   São Paulo, SP

Telefax:  (55 11) 3089 6565

 53
 

 

If to GPC, to:

GPC Participações S.A.

Rua do Passeio no 70, 13o andar

CEP 20021-290 Rio de Janeiro, RJ

Brasil

telefax: 21 – 3814-0741

at. Diretoria

with a copy to:

Luciano de Souza Leão Jr.

Bulhões Pedreira, Bulhões Carvalho, Piva, Rosman e Souza Leão Advogados

Rua da Assembléia 10, 38o andar

CEP 20011-901 Rio de Janeiro, RJ

Brasil

telefax: 21 – 2531 2665

If
to Cirrus, to:

Cirrus Participações Ltda..

Rua do Passeio no 70, 10o andar

CEP 20021-290 Rio de Janeiro, RJ

Brasil

telefax: 21 – 3814-0709

at. Diretoria

 54
 

 

with a copy to:

Luciano de Souza Leão Jr.

Bulhões Pedreira, Bulhões Carvalho, Piva, Rosman e
Souza Leão Advogados

Rua da Assembléia 10, 38o andar

CEP 20011-901 Rio de Janeiro, RJ

Brasil

telefax: 21 – 2531 2665

or to such other
person, address or telefax number as any party may specify by notice in writing
to the other.  All such notices, shall be
deemed to have been received (a) if by personal delivery on the day after
such delivery, (b)  if by courier services or overnight mail or delivery,
on the day delivered, and (c) if by facsimile, on the next day following the
day on which such facsimile was sent, provided that it is followed immediately
by confirmation by personal delivery or overnight mail that is received
pursuant to subclause (a) or (b), provided that if the date of receipt is not a
Business Day at the place of the principal office of the Shareholder receiving
the notice, or if the receipt is after 5:00 p.m. on a Business Day, the notice
or other communication shall be deemed given, received, and effective on the
next Business Day at the place of the principal office of the addressee.

11.13          Guarantee of the Obligations of Tubos.  Subject to the terms, limitations and
conditions set forth herein, GPC and Cirrus (the “Tubos Guarantors”),
jointly and severally, hereby unconditionally, irrevocably and absolutely
guarantee to LSB 2 (and its successors and assigns) the due and punctual performance
and discharge of all of Tubos’ obligations under this Agreement and the
transactions contemplated hereby, existing on the date hereof or hereafter of
any kind or nature whatsoever, including, without limitation, any amount that
Tubos or any of its Affiliates is or may become obligated to pay pursuant to
this Agreement and the transactions contemplated hereby (collectively, the “Tubos
Obligations”).  The guarantee under
this Section 11.13 is a guarantee of timely payment and performance of
the Tubos Obligations by the Tubos Guarantors as primary obligor and not merely
of collection.  The Tubos Guarantors
unconditionally waive: (a) any right to receive demands, protests, or other
notices of any kind or character whatsoever, as the same may pertain to Tubos, including the “benefício
de ordem”, in accordance with Art. 828 of the Brazilian Civil Code, (b)
any right to require LSB 2 to proceed first against Tubos or to pursue any
other remedy and (c) all suretyship and other defenses of every kind and nature.

11.14          Guarantee of the Obligations of LSB 2.  Subject to the terms, limitations and
conditions set forth herein, Lone Star hereby unconditionally, irrevocably and
absolutely guarantees to Tubos (and its successors and assigns) the due and
punctual performance and discharge of all of LSB 2’s obligations under this
Agreement and the transactions contemplated hereby, existing on the date hereof
or hereafter of any kind or nature whatsoever, including, without limitation,
any amount that LSB 2 or any of its

 55
 

 

Affiliates is or may become obligated to pay pursuant to this Agreement
and the transactions contemplated hereby (collectively, the “LSB 2
Obligations”).  The guarantee under
this Section 11.14 is a guarantee of timely payment and performance of
the LSB 2 Obligations by Lone Star as primary obligor and not merely of
collection.  Lone Star unconditionally
waives: (a) any right to receive demands, protests, or other notices of any
kind or character whatsoever, as the same may pertain to LSB 2, including the “benefício
de ordem”, in accordance with Art. 828 of the Brazilian Civil Code, (b)
any right to require Tubos to proceed first against LSB 2 or to pursue any
other remedy and (c) all suretyship and other defenses of every kind and
nature.

11.15          Expenses.  Except as
otherwise expressly provided in this Agreement, each party will bear and be
responsible for costs and expenses incurred by it in connection with the
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby.

11.16          Further Assurances.  LSB
2, Tubos and the Company each agree to execute and deliver such other documents
or agreements and to take such other action as may be reasonably necessary or
desirable for the implementation of this Agreement and the consummation of the
transactions contemplated hereby.

11.17          Language.  This Agreement is written and executed in
Portuguese and English and the two (2) versions shall have equal validity. In
the event of any inconsistency between both versions, the English version shall
prevail.

[The Remainder of This Page Is Intentionally Left Blank.]

 56

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first written above.

	
  

  	
  APOLO TUBOS E EQUIPAMENTOS S.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Antonio Joaquim Peixoto de Castro Palhares

  
	
   

  	
   

  	
  Name: Antonio Joaquim Peixoto de Castro Palhares

  
	
   

  	
   

  	
  Title: Presidente

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Carlos Eduardo de Sá Baptista

  
	
   

  	
   

  	
  Name: Carlos Eduardo de Sá Baptista

  
	
   

  	
   

  	
  Title: Diretor Superintendente

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LONE STAR BRAZIL HOLDINGS 2

  LTDA.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marcos Flesch

  
	
   

  	
   

  	
  Name: Marcos Flesch

  
	
   

  	
   

  	
  Title: Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  APOLO MECANICA E ESTRUTURAS

  LTDA.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paulo Cesar Peixoto de Castro Palhares

  
	
   

  	
   

  	
  Name: Paulo Cesar Peixoto de Castro Palhares

  
	
   

  	
   

  	
  Title: Presidente

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Alcides Morales Filho

  
	
   

  	
   

  	
  Name: Alcides Morales Filho

  
	
   

  	
   

  	
  Title: Vice-Presidente

  

 

 SIGNATURE PAGE TO 
 CONTRIBUTION AGREEMENT
 

 

 

	
  

  	
  GPC PARTICIPACOES S.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paulo Cesar Peixoto de Castro Palhares

  
	
   

  	
   

  	
  Name: Paulo Cesar Peixoto de Castro Palhares

  
	
   

  	
   

  	
  Title: Presidente

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Alcides Morales Filho

  
	
   

  	
   

  	
  Name: Alcides Morales Filho

  
	
   

  	
   

  	
  Title: Vice-Presidente Corporativo

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CIRRUS PARTICIPACOES LTDA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Antonio Joaquim Peixoto de Castro Palhares

  
	
   

  	
   

  	
  Name: Antonio Joaquim Peixoto de Castro Palhares

  
	
   

  	
   

  	
  Title: Presidente

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paulo Cesar Peixoto de Castro Palhares

  
	
   

  	
   

  	
  Name: Paulo Cesar Peixoto de Castro Palhares

  
	
   

  	
   

  	
  Title: Vice-Presidente

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LONE STAR TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rhys Best

  
	
   

  	
   

  	
  Name: Rhys Best

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witnesses:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  /s/ Mario
  Cristiano Benford Leal

  	
   

  	
   

  	
   

  
	
  Name: Mario
  Cristiano Benford Leal

  	
   

  	
   

  
	
  ID#: 04637448-4
  IFP-RJ

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  /s/ Emanuel
  Alberto Nunes de Almeida

  	
   

  	
   

  	
   

  
	
  Name: Emanuel
  Alberto Nunes de Almeida

  	
   

  	
   

  
	
  ID#: 14075
  CRC-BA

  	
   

  	
   

  
						

 

 SIGNATURE PAGE TO 
 CONTRIBUTION AGREEMENT

 

EXHIBIT A

AMENDED AND RESTATED BY-LAWS

 

EXHIBIT B

LSS TRADEMARK CROSS LICENSE AGREEMENT

 

EXHIBIT C

PROMISSORY NOTE

 

EXHIBIT D

SALE, MARKETING AND SUPPLY AGREEMENT

 

EXHIBIT E

SHAREHOLDERS AGREEMENT

 

EXHIBIT F

TUBOS TRANSITION SERVICES AGREEMENT

 

EXHIBIT G

TUBOS TRADEMARK LICENSE AGREEMENT

 

EXHIBIT H

LSS TRANSITION SERVICES AGREEMENT

 

EXHIBIT I

MEMORANDUM
AND ARTICLES OF ASSOCIATION OF STAR CAYMAN BRAZIL

 

EXHIBIT J

AA PURCHASE AGREEMENT

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