FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: September 26, 1997
Commission File Number 333-26601
METALS USA, INC.
(Exact name of Registrant as Specified in its Charter)
DELAWARE 76-0533626
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
THREE RIVERWAY, SUITE 600
HOUSTON, TEXAS 77056
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 965-0990
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METALS USA, INC.
FORM 8-K
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 26, 1997, Metals USA, Inc. ("Metals") completed the acquisition
of four metal processing companies with combined net sales of approximately $255
million. These companies include Jeffreys Steel Company ("Jeffreys"), Meier
Metal Servicenters, Inc. ("Meier"), Harvey Titanium Ltd. ("Harvey"), and the
business of Federal Bronze Products Inc. ("Federal Bronze"). Metals acquired the
four companies for a combination of cash and stock. The consideration paid was
determined by negotiations between appropriate representatives of Jeffreys,
Meier, Harvey, Federal Bronze and Metals. Total consideration for the
acquisitions consisted of 5,315,946 shares of Metals' common stock and cash of
$43.4 million. The cash component of the purchase acquisition was paid with
borrowings from Metals' existing $150.0 million revolving credit facility. For
financial accounting purposes, the acquisition of Jeffreys has been accounted
for under the "pooling-of-interests" method, and the acquisitions of Meier and
Harvey and the business of Federal Bronze have been accounted for under the
purchase method.
Jeffreys was founded by Mr. Leon Jeffreys in 1966 and is headquartered in
Mobile, Alabama. Jeffreys operates steel service centers in the south and
southeastern United States. These service center operations include the original
location in Mobile, Alabama and additional locations in Muscle Shoals and
Attalla, Alabama; Columbus, Mississippi; Kenner, Louisiana; Jacksonville,
Lakeland and Ft. Lauderdale, Florida; and Oakwood, Georgia. Jeffreys is a
value-added processor/service center specializing in steel plate and structural
components and provides products and services to the marine (including new ship
construction and repair), offshore oil and gas, construction and fabrication,
transportation, pulp and paper and chemical industries. Jeffreys had fiscal 1997
net sales of $126.9 million and currently has 450 employees. Leon Jeffreys, the
Founder of Jeffreys and currently Chairman of the Board, will become a director
of Metals.
Meier, headquartered in Hazel Park, Michigan, was founded in 1945 by Louis
F. Meier and operates primarily in the upper midwest and southeastern regions of
the United States. Meier operates service centers in Hazel Park and Grand
Rapids, Michigan; Chicago, Illinois; Dayton and Cleveland, Ohio; and Greensboro,
North Carolina and is a value-added processor and distributor of nonferrous
metals, including aluminum, brass, copper, bronze and stainless steel. Meier
sells its products to customers in the tool and die, screw machine products,
industrial machinery, transportation and aerospace industries. Meier had fiscal
1996 net sales of $61.4 million and currently has 113 employees.
Harvey, headquartered in Santa Monica, California, was founded in 1978 by
Barry Harvey and operates on a global basis through its international sales
office in the United Kingdom and through agents around the world. Harvey is a
value-added metal service center supplying primarily custom orders of titanium
products, as well as nickel-based alloys, vacuum melted stainless steels and
other exotic alloys. Harvey's customers are primarily in the aerospace industry,
however Harvey also serves customers in the recreation, petrochemical and
biomedical industries. Harvey had fiscal 1997 net sales of $52.9 million and
currently has 51 employees.
Federal Bronze, headquartered in Newark, New Jersey, was founded in 1947 by
Steve Stefiuk and operates primarily in the northeast region of the United
States. Federal Bronze is a specialty metals processor, providing products and
services primarily to the fluid power, machine tool, power transmission, and the
pump and valve industries. Federal Bronze had fiscal 1996 net sales of $12.8
million and currently has 53 employees. The business assets and assumed
liabilities of Federal Bronze were acquired by a newly organized wholly owned
subsidiary of Metals, Federal Bronze Alloys Inc.
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ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
Metals believes that it is impractical to provide financial statements of
the companies acquired on the date of this filing, and will, if required, file
such financial statements when available but not later than 60 days after the
date on which this Current Report on Form 8-K must be filed.
(B) PRO FORMA FINANCIAL INFORMATION
Metals believes that it is impractical to provide pro forma financial
information reflecting the four acquisitions, and will, if required, file such
financial information when available but not later than 60 days after the date
on which this Current Report on Form 8-K must be filed.
(C) EXHIBITS:
10.31 Agreement and Plan of Merger dated as of September 26, 1997 by and
among Metals USA, Inc., HTL Acquisition Corp., Harvey Titanium, Ltd.
and the Seller named therein.
10.32 Agreement dated September 26, 1997 by and among Metals USA, Inc.,
Jeffreys Steel Company, Inc. and the Stockholders named therein.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, who has signed this report on behalf of
the Registrant.
METALS USA, INC.
Date: October 1, 1997 By: TERRY L. FREEMAN
Terry L. Freeman
Vice President and Corporate
Controller
AGREEMENT AND PLAN OF MERGER
dated as of September 26, 1997
by and among
METALS USA, INC.
HTL ACQUISITION CORP.
HARVEY TITANIUM, LTD.
and
the Seller named herein
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TABLE OF CONTENTS
Page
1 THE MERGER.............................................................1
1.1 The Merger.......................................................1
1.2 Effective Time...................................................1
1.3 Certificate of Incorporation, By-laws and Board of Directors
of Surviving Corporation.........................................2
1.4 Effect of Merger.................................................2
1.5 Manner of Conversion.............................................3
1.6 Delivery of Certificates.........................................4
1.7 Closing..........................................................4
1.8 Name Change......................................................4
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER...........................4
2.1 Due Organization.................................................4
2.2 Authorization....................................................5
2.3 Capital Stock of the Company.....................................5
2.4 Subsidiaries.....................................................5
2.5 Financial Statements.............................................5
2.6 Liabilities and Obligations......................................6
2.7 Accounts and Notes Receivable....................................6
2.8 Permits and Intangibles..........................................6
2.9 Environmental Matters............................................7
2.10 Personal Property................................................8
2.11 Significant Customers; Material Contracts and Commitments........8
2.12 Real Property....................................................9
2.13 Insurance........................................................9
2.14 Compensation; Employment Agreements; Organized Labor Matters.....9
2.15 Employee Benefit Plans..........................................10
2.16 Conformity with Law; Litigation.................................11
2.17 Taxes...........................................................12
2.18 No Violations; All Required Consents Obtained...................12
2.19 Government Contracts............................................13
2.20 Absence of Changes..............................................13
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2.21 Powers of Attorney..............................................14
2.22 Competing Lines of Business; Related-party Transactions.........14
2.23 Disclosure......................................................14
2.24 Prohibited Activities...........................................15
2.25 Certain Business Practices......................................15
3. REPRESENTATIONS OF METALS.............................................15
3.1 Due Organization................................................15
3.2 Authorization...................................................15
3.3 No Violations...................................................15
3.4 Validity of Obligations.........................................16
3.5 Capital Stock...................................................16
3.6 Financial Statements............................................16
3.7 No Material Adverse Change......................................16
4. COVENANTS PRIOR TO CLOSING............................................16
4.1 Access and Cooperation; Due Diligence...........................16
4.2 Conduct of Business Pending Closing.............................17
4.3 Prohibited Activities...........................................17
4.4 No Shop.........................................................18
4.5 Notice to Bargaining Agents.....................................18
4.6 Agreements......................................................19
4.7 Notification of Certain Matters.................................19
4.8 Amendment of Schedules..........................................19
4.9 Further Assurances..............................................19
4.10 Compliance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act")........................19
4.11 Notices and Consents............................................20
4.12 Seller's Commitment.............................................20
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
AND THE COMPANY.......................................................20
5.1 Representations and Warranties; Performance of Obligations......20
5.2 Satisfaction....................................................20
5.3 Consents and Approvals..........................................20
5.4 Employment and Consulting Agreements............................21
5.5 Opinion of Counsel..............................................21
5.6 Registration....................................................21
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5.7 No Material Adverse Effect......................................21
5.8 Tax Matters.....................................................21
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF METALS AND NEWCO...............21
6.1 Representations and Warranties; Performance of Obligations......21
6.2 No Material Adverse Effect......................................22
6.3 Satisfaction....................................................22
6.4 Opinion of Counsel..............................................22
6.5 Consents and Approvals..........................................22
6.6 Good Standing Certificates......................................22
6.7 Employment Agreement............................................22
6.8 Escrow Agreement................................................22
7. POST-CLOSING COVENANTS................................................22
7.1 Future Cooperation..............................................23
7.2 Expenses........................................................23
7.3 Preservation of Tax and Accounting Treatment....................23
7.4 Preparation and Filing of Tax Returns...........................23
7.5 Preservation of Employee Benefit Plans..........................23
8. INDEMNIFICATION.......................................................24
8.1 Survival of Seller's Representations and Warranties. ..........24
8.2 General Indemnification by the Seller...........................24
8.3 Indemnification by Metals.......................................25
8.4 Specific Indemnification........................................25
8.5 Third Person Claims.............................................25
8.6 Method of Payment...............................................26
8.7 Limitations on Indemnification..................................26
9. TERMINATION OF AGREEMENT..............................................27
9.1 Termination.....................................................27
9.2 Liabilities in Event of Termination.............................27
10. NONCOMPETITION........................................................28
10.1 Prohibited Activities...........................................28
10.2 Equitable Relief................................................28
10.3 Reasonable Restraint............................................28
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10.4 Severability; Reformation.......................................29
10.5 Independent Covenant............................................29
11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................29
11.1 General.........................................................29
11.2 Equitable Relief................................................30
11.3 Survival........................................................30
12. SECURITIES LAW MATTERS................................................30
12.1 Contractual Restrictions........................................30
13. GENERAL...............................................................31
13.1 Successors and Assigns..........................................31
13.2 Entire Agreement................................................31
13.3 Counterparts....................................................31
13.4 Brokers and Agents..............................................31
13.5 Notices.........................................................31
13.6 Governing Law...................................................32
13.7 Survival of Representations and Warranties......................32
13.8 Effect of Investigation; Knowledge..............................32
13.9 Exercise of Rights and Remedies.................................33
13.10 Time............................................................33
13.11 Reformation and Severability....................................33
13.12 Remedies Cumulative.............................................33
13.13 Captions........................................................33
13.14 Press Releases and Public Announcements.........................33
13.15 No Third-Party Beneficiaries....................................33
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ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Seller
Annex III - Form of Opinion of Counsel to Metals
Annex IV - Form of Escrow Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of September 26, 1997 by and among Metals USA, Inc., a Delaware
corporation ("Metals"), HTL Acquisition Corp., a Delaware corporation wholly
owned by Metals ("Newco"), Harvey Titanium, Ltd., a California corporation (the
"Company"), and Barry Harvey, the sole stockholder of the Company (the
"Seller").
WHEREAS, the respective Boards of Directors of Newco and the Company
(collectively called the "Constituent Corporations") deem it advisable and in
the best interests of the Constituent Corporations and their respective
stockholders that the Company merge with and into Newco pursuant to this
Agreement and the applicable provisions of the laws of the State of California
(the "State of Incorporation") and of the State of Delaware; and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1 THE MERGER
1.1 THE MERGER. On the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below), the Company shall be merged
with and into Newco (the "Merger") and the separate existence of the Company
shall cease, all in accordance with the provisions hereof and of the law of the
State of Incorporation and Delaware. Newco shall be the surviving corporation in
the Merger and, after the Effective Time, is sometimes hereinafter called the
"Company" or the "Surviving Corporation".
1.2 EFFECTIVE TIME. The Merger shall become effective at such time (the
"Effective Time") as a certificate of merger, in form appropriate for filing, is
filed with the Secretary of State of the State of Delaware (the "Merger
Filing"). The Merger Filing shall be made simultaneously with or as soon as
practicable after the closing of the transactions contemplated by this
Agreement. A certificate of merger also shall be filed with the appropriate
authorities of the State of Incorporation prior to the date six months after the
date on which the Effective Time occurs.
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1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time:
(i) the Certificate of Incorporation of Newco then in effect shall
be the Certificate of Incorporation of the Surviving Corporation until they
shall thereafter be duly amended;
(ii) the By-laws of Newco then in effect shall be the By-laws of the
Surviving Corporation until they shall thereafter be duly amended;
(iii) the members of the Board of Directors of the Company
immediately prior to the Effective Time shall become the members of the Board of
Directors of the Surviving Corporation, and Michael J. Kirksey shall also become
a director of the Surviving Corporation (and the Surviving Corporation shall
take such action as may be necessary to effect the appointment of Mr. Kirksey to
the such Board of Directors), and such persons shall serve as such until their
resignation or replacement in accordance with the provisions applicable law and
of the Certificate of Incorporation and By-laws of the Surviving Corporation;
and
(iv) the officers of the Company immediately prior to the Effective
Time shall become officers of the Surviving Corporation holding the positions
and titles with the Surviving Corporation they held with the Company immediately
prior to the Effective Time, and Michael J. Kirksey shall be appointed as a Vice
President of the Surviving Corporation, Keith St. Clair shall be appointed as an
Assistant Treasurer of the Surviving Corporation and John A. Hageman shall be
appointed as an Assistant Secretary of the Surviving Corporation, each of such
officers to serve, subject to the provisions of the Certificate of Incorporation
and By-laws of the Surviving Corporation, until his or her successor is duly
elected and qualified.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the law of the State of Incorporation and Delaware.
Except as herein specifically set forth, the identity, existence, purposes,
powers, objects, franchises, privileges, rights and immunities of Newco shall
continue unaffected and unimpaired by the Merger and the corporate franchises,
existence and rights of the Company shall be merged with and into Newco, and
Newco, as the Surviving Corporation, shall be fully vested therewith. At the
Effective Time, the separate existence of the Company shall cease and, in
accordance with the terms of this Agreement, the Surviving Corporation shall
possess all the rights, privileges, immunities and franchises, of a public, as
well as of a private, nature, and all property, real, personal and mixed, and
all debts due on whatever account, including subscriptions to shares, and all
taxes, including those due and owing and those accrued, and all other choses in
action, and all and every other interest of or belonging to or due to the
Company and Newco shall be taken and deemed to be transferred to, and vested in,
the Surviving Corporation without further act or deed; and all property, rights
and privileges, powers and franchises and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the Company and Newco; and the title to any real estate, or
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interest therein, whether by deed or otherwise, under the laws of the state of
incorporation or Delaware vested in the Company and Newco, shall not revert or
be in any way impaired by reason of the Merger. Except as otherwise provided
herein, the Surviving Corporation shall thenceforth be responsible and liable
for all the liabilities and obligations of the Company and Newco and any claim
existing, or action or proceeding pending, by or against the Company or Newco
may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the Company or Newco shall be impaired by the
Merger, and all debts, liabilities and duties of the Company and Newco shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
1.5 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the Company ("Company Stock") and (ii) the capital
stock of Newco ("Newco Stock") issued and outstanding immediately prior to the
Effective Time, respectively, into shares of (x) Metals Stock (as defined below)
and (y) common stock of the Surviving Corporation, respectively, shall be as
follows:
As of the Effective Time:
(i) each share of Company Stock issued and outstanding immediately
prior to the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, automatically shall be converted
into the right to receive its pro rata interest in the aggregate
consideration payable to all holders of Company Stock, which consideration
shall be $35,540,000, consisting of (a) $15,770,000 in cash (payable by
wire transfer of immediately available funds), (b) delivery of 1,292,363
shares of Metals Stock, and (c) such additional amount, if any, as may be
distributed to Seller in accordance with the terms of the Escrow Agreement
being entered into in connection herewith; and
(ii) all shares of Company Stock, if any, that are held by the
Company as treasury stock shall be canceled and retired and no shares of
Metals Stock or other consideration shall be delivered or paid in exchange
therefor; and
(iii) each share of Newco Stock issued and outstanding immediately
prior to the Effective Time, shall continue and remain unaffected by the
Merger, and such shares shall constitute all of the issued and outstanding
shares of common stock of the Surviving Corporation immediately after the
Effective Time, and all of such shares shall be owned by Metals.
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Pursuant to the right described in Section 1.5(i) above, 1,292,363 shares
of Metals Stock were issued to Seller at the Effective Time.
1.6 DELIVERY OF CERTIFICATES. At the Closing, in addition to the other
instruments and agreements contemplated hereby, (i) the Seller shall deliver to
Metals the certificates representing the Company Stock, duly endorsed by the
Seller, or accompanied by duly executed stock powers, and (ii) Metals shall
deliver to the Seller certificates representing the Metals Stock described in
Section 1.5(i) above. The Seller agrees promptly to cure any deficiencies with
respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
1.7 CLOSING. The closing of the transactions contemplated by this
Agreement shall take place on the date hereof (the "Closing Date") by the
exchange of faxed documents and signature pages, which shall be followed by the
exchange of manually signed originals of all documents contemplated hereby
promptly after the Closing Date.
1.8 NAME CHANGE. After the Effective Time, the Surviving Corporation shall
have the right to change its name to "Harvey Titanium, Ltd."
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER
For purposes of this Section 2, except as otherwise indicated, the term
"Company" shall mean Harvey Titanium, Ltd. and all of its Subsidiaries, if any.
The Seller represents and warrants to Metals, except as set forth on Seller's
disclosure schedule attached hereto (the "Disclosure Schedule"; it being agreed
that each reference herein to any numbered Schedule shall mean the appropriate
portion of the Disclosure Schedule) as follows:
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation, and
has all requisite power and authority to carry on its business as it is now
being conducted. The Company is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so authorized or qualified would not have a
material adverse effect on the business, assets, operations or condition
(financial or otherwise), of the Company taken as a whole (as used herein with
respect to the Company, or with respect to any other person, a "Material Adverse
Effect"). Schedule 2.1 sets forth a list of all jurisdictions in which the
Company is authorized or qualified to do business. True, complete and correct
copies of the Articles of Incorporation and By-laws, each as amended, of the
Company (the "Charter Documents") have been provided to Metals. The stock
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records of the Company made available to Metals are correct and complete in all
material respects. There are no minutes in the possession of the Company or the
Seller which have not been made available to Metals.
2.2 AUTHORIZATION. (i) The representatives of the Company executing this
Agreement have the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been unanimously approved by all of the shareholders and the
Board of Directors of the Company. This Agreement has been validly executed and
delivered by the Company and the Seller and constitutes the legal, valid and
binding obligation of each of them enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of (i) 7,500 shares of common stock, no par value, of
which 489 shares are issued and outstanding and constitute all of the Shares,
all of which are owned of record and beneficially by the Seller free and clear
of all liens, security interests, pledges, charges, voting trusts, restrictions
(other than restrictions on transfer resulting solely from applicable state or
federal securities laws), encumbrances and claims of every kind, except as set
forth on Schedule 2.3. All of the Shares have been duly authorized and validly
issued, are fully paid and nonassessable, and were offered, issued, sold and
delivered by the Company in compliance with all applicable state and federal
laws concerning the issuance of securities. None of the Shares were issued in
violation of any preemptive rights or similar rights of any person. No option,
warrant, call, conversion right or commitment of any kind exists which obligates
the Company to issue any additional shares of its capital stock or obligates the
Seller to transfer any of the Shares to any person.
2.4 SUBSIDIARIES. Except as set forth on Schedule 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in Schedule 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Schedule 2.5 hereto includes complete and
correct copies of the balance sheets of the Company as of June 30, 1997 (the
"Balance Sheet Date") and June 30, 1996 and 1995 and the related statements of
operations, stockholder's equity and cash flows for the three-year period ended
June 30, 1997, together with the related notes and schedules (such balance
sheets, the related statements of operations, stockholder's equity and cash
flows and the related notes
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and schedules are referred to herein as the "Year-end Financial Statements").
The Financial Statements have been prepared from the books and records of the
Company in conformity with generally accepted accounting principles applied on a
basis consistent with preceding years and throughout the periods involved
("GAAP") and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The books of account of the Company have been kept accurately in all
material respects in the ordinary course of business, the transactions entered
therein represent bona fide transactions, and the revenues, expenses, assets and
liabilities of the Company have been properly recorded therein in all material
respects.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on the Disclosure
Schedule, the Company has no liabilities or obligations of any kind, whether
accrued, absolute, secured or unsecured, contingent or otherwise. Except and to
the extent disclosed on the Disclosure Schedule, there are no claims,
liabilities or obligations, nor any reasonable basis for assertion against the
Company, of any claim, liability or obligation, of any nature whatsoever.
Schedule 2.6 contains a reasonable good faith estimate of the maximum amount
which may be payable with respect to liabilities which are not fixed. For each
such liability for which the amount is not fixed, Schedule 2.6 includes a
summary description of the liability. Copies of all relevant documentation
relating thereto have been furnished to Metals.
2.7 ACCOUNTS AND NOTES RECEIVABLE. Schedule 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the Balance
Sheet Date and generated subsequent to the Balance Sheet Date, including any
such amounts which are not reflected in the balance sheet as of the Balance
Sheet Date. Receivables from and advances to employees and the Seller and any
entities or persons related to or affiliated with the Seller are separately
identified on Schedule 2.7. Schedule 2.7 also sets forth an accurate aging
analysis of all accounts, notes and other receivables as of the Balance Sheet
Date, showing amounts due in 30-day aging categories. Except to the extent
reflected on Schedule 2.7, all such accounts, notes and other receivables were
incurred in the ordinary course of business, are stated in accordance with GAAP
and, to the best of the Stockholder's knowledge, are collectible in the amounts
shown on Schedule 2.7, net of reserves reflected in the balance sheet as of the
Balance Sheet Date.
2.8 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations ("Authorizations") required in
connection with the conduct of the Company's business except where the failure
to hold any such Authorization would not have a Material Adverse Effect.
Schedule 2.8 sets forth an accurate list and summary description of all such
Authorizations, including permits, titles (including licenses, franchises,
certificates, trademarks, trade
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names, patents, patent applications and copyrights owned or held by the Company
or any of its employees (including interests in software or other technology
systems, programs and intellectual property) (collectively, the "Intangible
Assets") (it being understood and agreed that a list of all environmental
permits and other environmental approvals is set forth on Schedule 2.9). To the
best of the Company's knowledge, the Intangible Assets and other Authorizations
listed on Schedules 2.8 and 2.9 are valid, and the Company has not received any
notice that any person intends to cancel, terminate or not renew any such
Intangible Assets or other Authorization. The Company has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in the Intangible Assets and other Authorizations
listed on Schedules 2.8 and 2.9 and is not in violation of any of the foregoing
except where any such violation would not have a Material Adverse Effect. Except
as specifically set forth on Schedule 2.8 or 2.9, (a) the transactions
contemplated by this Agreement will not result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded to the
Company by, any such Intangible Assets or Authorizations, and (b) all of such
rights and benefits will be rights and benefits of the Surviving Corporation
upon consummation of the Merger.
2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances including petroleum and petroleum
products (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, (i) has not had and will not have a Material Adverse Effect on
the Company or any of its businesses, and (ii) will not necessitate any material
expenditure by or on behalf of the Company. The Company has obtained and adhered
to all necessary permits and other approvals necessary to treat, transport,
store, dispose of and otherwise handle Hazardous Wastes, Hazardous Materials and
Hazardous Substances, a list of all of which permits and approvals is set forth
on Schedule 2.9, and have reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the Company where Hazardous Wastes, Hazardous Materials or Hazardous
Substances have been treated, stored, disposed of or otherwise handled. During
the time the Company has been in possession, there have been no releases or
threats of releases (as defined in Environmental Laws) at, from, in or on any
property owned or operated by the Company, and, to the knowledge of the Company,
there were no such releases prior to the time the Company took possession of
such properties, except as permitted by Environmental Laws. There is no on-site
or off-site location to which the Company has transported or disposed of
Hazardous Wastes, Hazardous
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Materials or Hazardous Substances or arranged for the transportation of
Hazardous Wastes, Hazardous Materials or Hazardous Substances which is the
subject of any federal, state, local or foreign enforcement action or any other
investigation which is reasonably likely to lead to any claim against the
Company or Metals for any clean-up cost, remedial work, damage to natural
resources, property damage or personal injury, including, but not limited to,
any claim under (i) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, (ii) the Resource Conservation and Recovery
Act, (iii) the Hazardous Materials Transportation Act or (iv) comparable state
or local statutes and regulations. The Company has no contingent liability in
connection with any release of any Hazardous Waste, Hazardous Material or
Hazardous Substance into the environment.
2.10 PERSONAL PROPERTY. Schedule 2.10 sets forth an accurate list of (a)
all material personal property included in "plant, property and equipment" on
the balance sheet of the Company, (b) all other personal property material to
the operations of the Company owned by the Company with an individual value in
excess of $10,000 as of the Balance Sheet Date or acquired since the Balance
Sheet Date, (c) all material leases and agreements in respect of personal
property (true, complete and correct copies of which have been provided to
Metals) and (d) an indication as to which assets are currently owned, or were
formerly owned, by Seller, relatives of Seller, or Affiliates of the Company or
the Seller. Except as set forth on Schedule 2.10, (i) all material personal
property used by the Company in its business is either owned by the Company or
leased by the Company pursuant to a lease included on Schedule 2.10, (ii) all of
the personal property listed on Schedule 2.10 is in good working order and
condition, ordinary wear and tear excepted and (iii) all leases and agreements
included on Schedule 2.10 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms. Except as set forth on Schedule 2.10, the Company
has good and marketable title to the tangible and intangible personal property
it purports to own, subject to no mortgage, lien, charge, encumbrance, easement,
or security interests, except (a) liens for current taxes not due and payable,
(b) purchase money security interests incurred in the ordinary course of
business, (c) matters disclosed in the Financial Statements, (d) any such
matters that do not in the aggregate materially detract from the value of the
property or materially detract from or interfere with the use of property in the
ordinary conduct of business as currently conducted, (e) the matter set forth on
Schedule 2.10, or (f) materialmens', mechanics', carriers', workmens',
repairmens' or other like liens arising in the ordinary course of business
(collectively, "Encumbrances").
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. Schedule
2.11 sets forth a list of (i) all customers representing 2% or more of the
Company's revenues in either fiscal 1996 or fiscal 1997, and (ii) all material
contracts, commitments and similar agreements to which the Company is a party or
by which it or any of its properties are bound (including, but not
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limited to, contracts with significant customers, joint venture or partnership
agreements, contracts with any labor organizations, strategic alliances and
options to purchase land). True, complete and correct copies of such agreements
have been provided to Metals. None of the Company's significant customers
(including those identified on Schedule 2.11) have canceled or substantially
reduced or, to the knowledge of the Company, are currently attempting or
threatening to cancel a contract or substantially reduce utilization of the
services provided by the Company. The Company has complied with all material
commitments and obligations pertaining to it, and is not in default under any
contracts or agreements listed on Schedule 2.11 and no notice of default under
any such contract or agreement has been received. The transactions contemplated
by this Agreement will not result in a default under or a breach or violation
of, or adversely affect the rights and benefits afforded to the Company by, any
such contracts or agreements, and all of the rights and benefits under all such
contracts and agreements will be rights and benefits of the Surviving
Corporation upon consummation of the Merger. The Company has no plans or
projects involving the opening of new operations, expansion of existing
operations, the acquisition of any property, business or assets requiring, in
any event, the payment of more than $50,000.
2.12 REAL PROPERTY. Schedule 2.12 includes a list of all real property
owned or leased by the Company at the date hereof, and all other real property,
if any, used by the Company in the conduct of its business. True, complete and
correct copies of all leases and agreements in respect of real property leased
by the Company have been provided to Metals, and an indication as to which such
properties, if any, are currently owned, or were formerly owned, by Seller or
affiliates of the Company or Seller is included in Schedule 2.12. Except as set
forth on Schedule 2.12, (a) all of such leases included on Schedule 2.12 are in
full force and effect and, to the best knowledge of the Company, constitute
valid and binding agreements of the parties (and their successors) thereto in
accordance with their respective terms, (b) the transactions contemplated by
this Agreement will not result in a default under or a breach or violation of,
or adversely affect the rights and benefits afforded to the Company by, any such
leases, and (c) all of the rights and benefits under all such leases will be
rights and benefits of the Surviving Corporation upon consummation of the
Merger.
2.13 INSURANCE. Schedule 2.13 sets forth an accurate list as of the
Balance Sheet Date of all insurance policies now carried by the Company and an
accurate list of all insurance loss runs and workers compensation claims
received for the past five policy years. True, complete and correct copies of
all insurance policies currently in effect have been provided to Metals. Such
insurance policies evidence all of the insurance that the Company is required to
carry pursuant to all of its contracts and other agreements and pursuant to all
applicable laws. None of such policies is a "claims made" policy.
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2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
Schedule 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of (i) the Balance Sheet Date and (ii)
the date hereof. Since the Balance Sheet Date, there have been no increases in
the compensation payable or any special bonuses to any officer, director, key
employee or other employee, except ordinary salary increases implemented on a
basis consistent with past practices.
Except as set forth on Schedule 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any group of its employees. The Company has not experienced any
labor interruptions over the past three years. The Company considers its
relationship with its employees to be good.
2.15 EMPLOYEE BENEFIT PLANS. Schedule 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on Schedule 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on Schedule 2.15, the Company does not sponsor,
maintain or contribute to any plan program, fund or arrangement that constitutes
an "employee pension benefit plan," nor does the Company have any obligation to
contribute to or accrue or pay any benefits under any deferred compensation or
retirement funding arrangement on behalf of any employee or employees (such as,
for example, and without limitation, any individual retirement account or
annuity, any "excess benefit plan" (within the meaning of Section 3(36) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or any
non-qualified deferred compensation arrangement). For the purposes of this
Agreement, the term "employee pension benefit plan" shall have the same meaning
as is given that term in Section 3(2) of ERISA. The Company has not sponsored,
maintained or contributed to any employee pension benefit plan other than the
plans set forth on Schedule 2.15, and is not required to contribute to any
retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of the
Company's employees.
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Except as set forth on Schedule 2.15, the Company is not now, and will not
as a result of its past activities become, liable to the Pension Benefit
Guaranty Corporation or to any multi employer employee pension benefit plan
under the provisions of Title IV of ERISA. All employee benefit plans listed on
Schedule 2.15 and the administration thereof are in compliance in all material
respects with their terms and all applicable provisions of ERISA and the
regulations issued thereunder, as well as with all other applicable federal,
state and local statutes, ordinances and regulations. All accrued contribution
obligations of Company with respect to any plan listed on Schedule 2.15 have
either been fulfilled in their entirety or are fully reflected on the balance
sheet of the Company as of the Balance Sheet Date. All plans listed on Schedule
2.15 that are intended to qualify (the "Qualified Plans") under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the "Code") are, and have
been, so qualified and have been determined by the Internal Revenue Service to
be so qualified. All reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries have
been timely filed or distributed, and copies thereof are included as part of
Schedule 2.15. Neither the Seller, any plan listed in Schedule 2.15 nor the
Company has engaged in any transaction prohibited under the provisions of
Section 4975 of the Code or Section 406 of ERISA. No plan listed in Schedule
2.15 has incurred an accumulated funding deficiency, as defined in Section
412(a) of the Code and Section 302(1) of ERISA; and the Company has not incurred
any liability for excise tax or penalty due to the Internal Revenue Service or
any liability to the Pension Benefit Guaranty Corporation. There have been no
terminations, partial terminations or discontinuance of contributions to any
such Qualified Plan intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service; no plan listed in
Schedule 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed in Schedule 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the Company
that is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on Schedule
2.16, there are no claims, actions, suits or proceedings, pending or threatened
against or affecting the Company, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over the Company that, if
adversely determined, would have a Material Adverse Effect. Except as set forth
on Schedule 2.16, no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been
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received by the Company during the last five years and there is no basis
therefor. Except as set forth on Schedule 2.16, the Company has conducted for
the past five years and now conducts its business in substantial compliance with
the requirements, standards, criteria and conditions set forth in applicable
laws, regulations, writs, injunctions, decrees and orders applicable to the
Company or its assets, except where any failure to comply would not have a
Material Adverse Effect. The Company is not in violation of any law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them that could have a Material Adverse Effect.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof, whether
computed on a separate, consolidated, unitary, combined or any other basis; and
such term shall include any interest, fines, penalties or additional amounts
attributable to or imposed with respect to any such taxes, charges, fees, levies
or other assessments. Notwithstanding anything else to the contrary in this
Agreement, including, but not limited to, any reference with respect to laws,
regulations, filings, GAAP, or other similar matters, all representations and
warranties in this Agreement with respect to Taxes are exclusively those set
forth under this Section 2.17, and no other representation or warranty shall be
deemed to be made with reference to Taxes.
The Company has timely filed all federal, state and other tax returns or
extension requests for all fiscal periods ended on or before the Balance Sheet
Date. There are no examinations in progress or claims pending against the
Company for federal, state or other taxes (including penalties and interest) for
any period or periods prior to or on the Balance Sheet Date and no notice of any
claim for taxes, whether pending or threatened, has been received. All Taxes,
including interest and penalties, shown on any tax return to be owed by the
Company or any member of an affiliated or consolidated group which includes or
included the Company, has been paid or an amount sufficient to make such payment
has been accrued in the Financial Statements. Copies of (i) any tax
examinations, (ii) extensions of time for filing and (iii) the federal and local
income tax returns and franchise tax returns of Company (including any
subsidiaries) for the last three fiscal years, or such shorter period of time as
any of them shall have existed have been delivered to Metals. The Company is not
an S corporation. The Company uses the accrual method of accounting for income
tax purposes, and the Company's methods of accounting have not changed in the
past five years. The Company is not an investment company as defined in Section
351(e)(1) of the Code.
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2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents . Neither the Company nor, to the
knowledge of the Company, any other party thereto, is in default under any
lease, instrument, license, permit or material agreement to which the Company is
a party or by which its properties are bound (the "Material Documents") that
would have a Material Adverse Effect. The execution of this Agreement by the
Company and the performance by the Company of its obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the Material Documents or the Charter Documents. At and after the
Closing and the Merger the Surviving Corporation will be entitled to the rights
and benefits the under the Material Documents to which the Company is entitled
immediately prior to the Merger. Except for consents already obtained, none of
the Material Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect, and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any material right
or benefit. None of the Material Documents prohibits the use or publication of
the name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company or will prevent or restrict the
Surviving Corporation or Metals from freely providing services to any person.
2.19 GOVERNMENT CONTRACTS. The Company is not a party to any governmental
contract subject to price redetermination or renegotiation.
2.20 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on Schedule 2.20, there has not been:
(i) any material adverse change in the business, assets, or
financial condition of the Company;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting any of the material assets or
the business of the Company;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
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(v) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by the Company to any of its
officers, directors, stockholders, employees, consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any similar event or condition of any character, materially adversely
affecting the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of Company to any person other
than in the ordinary course of business, including, without limitation,
the Seller or any of his affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, other than in the ordinary course
of business, including without limitation any indebtedness or obligation
of any Seller or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
provided that this shall not be deemed to apply to ordinary adjustments of
bills with non-affiliated customers in a manner consistent with past
practice,
(xii) any amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(xiii) any transaction by the Company outside the ordinary course of
its business; (xiv) any cancellation or termination of a material contract
with a customer or client prior to the scheduled termination date; or
(xv) any distribution of property or assets by the Company.
2.21 POWERS OF ATTORNEY. Schedule 2.21 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.22 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Neither the
Seller nor any other affiliate of the Company owns, directly or indirectly, any
interest in, or is an officer, director, employee or consultant of or otherwise
receives remuneration from, any business which is a competitor, lessor, lessee,
customer or supplier of the Company, except for ownership of less than 1% of the
outstanding capital stock of any publicly traded company in which such person
has no management or other similar position. Neither the Stockholder nor any
officer or director of the
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Company has any interest in any property, real or personal, tangible or
intangible, used in or pertaining to the Company's business.
2.23 DISCLOSURE. The Seller has provided Metals with all the information
that Metals has requested in analyzing whether to consummate the transactions
contemplated hereby. There is no fact not disclosed on the Disclosure Schedule
that to Seller's actual knowledge has specific application to the Company or its
business or assets (other than general economic or industry conditions) which
materially adversely affects or, so far as the Seller can reasonably foresee,
materially threatens, the Company or its business or assets, or the condition
(financial or otherwise), results of operations or prospects of the Company.
2.24 PROHIBITED ACTIVITIES. Except as set forth on Schedule 2.24, the
Company has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) described in Section 4.3.
2.25 CERTAIN BUSINESS PRACTICES. Neither the Company nor, to the knowledge
of the Company or the Stockholder, any person acting on behalf of the Company
has given or offered anything of value to any governmental official, political
party or candidate for government office nor has it or any of them otherwise
taken any action which would cause the Company to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any law of similar effect.
3. REPRESENTATIONS OF METALS
Metals represents and warrants that all of the following representations
and warranties in this Section 3 are true at the date of this Agreement and
shall be true at the time of Closing.
3.1 DUE ORGANIZATION. Metals and Newco are each duly incorporated, validly
existing and in good standing under the laws of the state of their
incorporation, and each has the requisite power and authority to carry on its
business as it is now being conducted. Metals and Newco are each qualified to do
business and is in good standing in each jurisdiction in which the nature of
their business makes such qualification necessary, except where the failure to
be so authorized or qualified would not have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of Metals and Newco executing
this Agreement have the authority to enter into and bind Metals and Newco to the
terms of this Agreement and (ii) Metals and Newco have the full legal right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby.
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3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Certificate of Incorporation or Bylaws of
Metals and Newco.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by Metals and Newco and the performance of the transactions contemplated hereby
have been duly and validly authorized by the Boards of Directors of Metals and
Newco and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of Metals and
Newco.
3.5 CAPITAL STOCK. The authorized capital stock of Metals is as described
in the Prospectus contained in Metals' Registration Statement on Form S-1 as
filed with the Securities and Exchange Commission on September 12, 1997 (the
"Prospectus"). At the date hereof, 18,544,109 shares of Metals Stock are issued
and outstanding, 3,122,914 shares of Metals Restricted Voting Common Stock are
issued and outstanding, and no shares of Metals Preferred Stock are issued or
outstanding. The shares of Metals Stock to be issued to Seller pursuant to this
Agreement will be validly issued, fully paid and nonassessable, and will be
freely tradeable, subject to applicable securities laws and the contractual
restrictions set forth herein.
3.6 FINANCIAL STATEMENTS. The financial statements of Metals contained in
the Prospectus have been prepared from the books and records of Metals in
conformity with GAAP and present fairly the financial position and results of
operations of Metals as of the dates of such statements and for the periods
covered thereby. The books of account of Metals have been kept accurately in all
material respects in the ordinary course of business, the transactions entered
therein represent bona fide transactions, and the revenues, expenses, assets and
liabilities of Metals have been properly recorded therein in all material
respects.
3.7 NO MATERIAL ADVERSE CHANGE. Since the date of the most recent
financial statements referred to in Section 3.6, there has not been any material
adverse change in the business, assets or financial condition of Metals.
4. COVENANTS PRIOR TO CLOSING
4.1 ACCESS AND COOPERATION; DUE DILIGENCE. Between the date of this
Agreement and the Closing Date, the Company will afford to the officers and
authorized representatives of Metals and Newco access (in a manner that will not
disrupt the Company's operations) to all of the Company's sites, properties,
books and records and will furnish Metals and Newco with such
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additional financial and operating data and other information as to the business
and properties of the Company as Metals and Newco may from time to time
reasonably request. The Company will cooperate with Metals and Newco, their
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with the transactions
contemplated by this Agreement. Metals, Newco, the Seller and the Company will
treat all information obtained in connection with the negotiation and
performance of this Agreement as confidential in accordance with the provisions
of Section 11 hereof.
4.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing Date, the Company will use commercially reasonable
efforts to:
(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects all of its respective
obligations under agreements relating to or affecting its respective
assets, properties or rights;
(iv) use all reasonable efforts to keep in full force and effect
present insurance policies or other comparable insurance coverage;
(v) use its reasonable efforts to maintain and preserve its business
organization intact, retain its respective present key employees and
maintain its respective relationships with suppliers, customers and others
having business relations with the Company;
(vi) maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities; and
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments without the knowledge and consent
of Metals (which consent shall not be unreasonably withheld), provided
that debt and/or lease instruments may be replaced without the consent of
Metals if such replacement instruments are on terms at least as favorable
to the Company as the instruments being replaced.
4.3 PROHIBITED ACTIVITIES. Except as set forth on Schedule 4.3, between
the date hereof and the Closing Date, the Company will not, without prior
written consent of Metals (which will not be unreasonably withheld):
(i) make any change in its Articles of Incorporation or By-laws;
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(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase,
redeem or otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except in the normal
course of business consistent with past practice in an amount not in
excess of $10,000;
(v) create, assume or permit to exist any new Encumbrance upon any
assets or properties whether now owned or hereafter acquired;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up
of any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation or other entity;
(ix) waive any material rights or claims of the Company, provided
that the Company may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice;
(x) amend or terminate any material agreement, permit, license or
other right of the Company;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder; or
(xii) increase or commit to any increase in the salary, bonus,
commission or other compensation of any officer, director, employee or
agent of the Company.
4.4 NO SHOP. None of the Seller, the Company, nor any agent, officer,
director, trustee or any representative of any of the foregoing will, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than Metals and
Newco or their authorized agents relating to, any acquisition or purchase
of all or a material amount of the assets (except for sales in the
ordinary course of business) of, or any equity interest in, the Company or
a merger, consolidation or business combination involving the Company.
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4.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide Metals and Newco with proof that any required notice has been sent.
4.6 AGREEMENTS. Upon the request of Metals, at, or at any time after, the
Closing, the Seller and the Company shall terminate any existing agreements
between the Company and the Seller.
4.7 NOTIFICATION OF CERTAIN MATTERS. The Seller and the Company shall give
prompt notice to Metals of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the Company or the Seller contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing and (ii)
any material failure of any Seller or the Company to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such person
hereunder. Metals shall give prompt notice to the Company of (i) the occurrence
or non-occurrence of any event the occurrence or non-occurrence of which would
be likely to cause any representation or warranty of Metals contained herein to
be untrue or inaccurate in any material respect at or prior to the Closing and
(ii) any material failure of Metals to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 4.7 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, (ii) modify the conditions to Closing set forth herein, or (iii) limit
or otherwise affect the remedies available hereunder to the party receiving such
notice.
4.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Closing occurs to
notify the other parties hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules.
4.9 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
4.10 COMPLIANCE WITH THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF
1976 (THE "HSR ACT"). Each of the parties hereto agrees to cooperate and use its
best efforts to comply with the HSR Act. The expiration or termination of the
applicable waiting period under the HSR Act shall be deemed a condition
precedent in addition to the conditions precedent set forth elsewhere
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in this Agreement. The costs and expenses of HSR Act filings (including filing
fees) shall be borne by the parties required to make the filings.
4.11 NOTICES AND CONSENTS. The Company will give any notices to third
parties, and the Company will use commercially reasonable efforts to obtain any
third party consents, that may be necessary to consummate the transactions
contemplated hereby or that Metals may request.
4.12 SELLER'S COMMITMENT. The Seller hereby agrees to cause the Company to
comply with its obligations under this Agreement and to use its best efforts to
cause the conditions to the Closing to be satisfied.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND THE COMPANY
The obligations of the Seller and the Company with respect to actions to
be taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions. If any such
conditions has not been satisfied, the Seller shall have the right to terminate
this Agreement, or in the alternative, waive any condition not so satisfied. Any
act or action of the Seller in consummating the Closing shall constitute a
waiver of any conditions not so satisfied. However, no such waiver shall be
deemed to affect the survival of the representations and warranties of Metals
contained in Section 3 or the indemnification obligations contained in Section
8.
5.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of Metals contained in Section 3 shall be true
and correct in all material respects as of the Closing Date as though such
representations and warranties had been made as of that time; all of the terms,
covenants and conditions of this Agreement to be complied with and performed by
Metals on or before the Closing Date shall have been duly complied with and
performed in all material respects; and certificates to the foregoing effect
dated the Closing Date and signed by the President or any Vice President of
Metals shall have been delivered to the Seller.
5.2 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to the Seller and his counsel.
5.3 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated hereby shall have been obtained and made, and no
governmental agency or body shall have taken
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any other action or made any requests of the Company or Seller as a result of
which the Seller reasonably deems it inadvisable to proceed with the
transactions hereunder.
5.4 EMPLOYMENT AND CONSULTING AGREEMENTS. Seller shall have been afforded
an opportunity to enter into an Employment Agreement with the Company in the
form of Annex I.
5.5 OPINION OF COUNSEL. Seller and the Company shall have received an
opinion from counsel for the Purchaser, date of the Closing Date, in
substantially the form annexed hereto as Annex III.
5.6 REGISTRATION. Any registration statement required on the part of
Metals to have been declared effective by the Securities and Exchange Commission
in order to register the shares of Metal that constitute a portion of the
Purchase Price shall have been declared effective.
5.7 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to Metals or the Purchaser that would constitute a
Material Adverse Effect.
5.8 TAX MATTERS. The Seller shall have received advice from his tax
advisers that the transaction contemplated hereby, to the extent of the receipt
of the Metals Stock, will not be taxable and that the Seller will not recognize
gain to the extent he exchanges stock of the Company for Metals Stock (but not
cash or other property) pursuant hereto.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF METALS AND NEWCO
The obligations of Metals and Newco with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. If any such conditions has not
been satisfied, Metals and Newco shall have the right to terminate this
Agreement, or in the alternative, waive any condition not so satisfied. Any act
or action of Metals and Newco in consummating the Closing shall constitute a
waiver of any conditions not so satisfied. However, no such waiver shall be
deemed to affect the survival of the representations and warranties of the
Seller contained in Section 2 or the indemnification obligations contained in
Section 8 as they relate to non-waived matters.
6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of the Seller contained in this Agreement shall
be true and correct in all material respects as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of such date; all of the terms, covenants and conditions of this Agreement to
be complied with or performed by the Seller and the Company on or before the
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Closing Date, as the case may be, shall have been duly performed or complied
with in all material respects; and the Seller shall have delivered to Metals and
Newco certificates dated the Closing Date and signed by Seller to such effect.
6.2 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its material assets, whether or not covered by insurance, or any material
adverse change, loss or damage to the Company's business.
6.3 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to Metals and Newco.
6.4 OPINION OF COUNSEL. Metals shall have received an opinion, dated the
Closing Date, substantially in the form annexed hereto as Annex II.
6.5 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all consents
and approvals of third parties listed on Schedule 2.18 shall have been obtained;
and no action or proceeding shall have been instituted or threatened to restrain
or prohibit the transactions contemplated hereby and no governmental agency or
body shall have taken any other action or made any request of Metals or Newco as
a result of which Metals reasonably deems it inadvisable to proceed with the
transactions hereunder.
6.6 GOOD STANDING CERTIFICATES. The Seller shall have delivered to Metals
certificates, dated as of a date no later than the Closing Date, duly issued by
the appropriate governmental authority in the State of Incorporation and in each
state in which the Company is authorized to do business, showing the Company is
in good standing and authorized to do business.
6.7 EMPLOYMENT AGREEMENT. Seller shall have entered into the Employment
Agreement referred to therein.
6.8 ESCROW AGREEMENT. The parties identified in the form of Escrow
Agreement attached hereto as Annex IV shall have entered into an escrow
agreement in the form of Annex IV.
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7. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
7.1 FUTURE COOPERATION. The Seller, the Company, Metals and Newco shall
each deliver or cause to be delivered to the other following the date hereof
such additional instruments as the other may reasonably request for the purpose
of effecting the Merger and fully carrying out the intent of this Agreement.
7.2 EXPENSES. Metals will pay the fees, expenses and disbursements of
Metals and Newco and their agents, representatives, financial advisors,
accountants and counsel incurred in connection with the execution, delivery and
performance of this Agreement. The Seller will pay the fees, expenses and
disbursements of the Seller and Seller's agents, representatives, financial
advisors, accountants and counsel incurred in connection with the execution,
delivery and performance of this Agreement.
7.3 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. After the Closing Date,
Metals will not, and will not permit any of its subsidiaries to, undertake any
act that would jeopardize the tax-free status of the reorganization contemplated
hereby.
7.4 PREPARATION AND FILING OF TAX RETURNS. The Surviving Corporation,
under the direction of Barry Harvey, will prepare and file or cause to be filed
all federal and state income tax returns for all taxable periods that end on or
before the Closing Date; provided, however, that all such filings shall be
reviewed prior to filing by Metals' independent accountants (the "Independent
Accountants"), and such filings shall not take any positions the Independent
Accountants advise Metals are not supported by substantial authority. Except to
the extent of Taxes reserved or accrued on the Financial Statements, Seller will
pay or cause to be paid all Tax liabilities owing by the Company for periods
prior to the Closing Date, subject to the procedures set forth in Section 8.
Each party will provide the other party such cooperation and information as any
of them reasonably requests in filing any Tax return, amended return or claim
for refund, determining a liability for Taxes or a right to refund of Taxes or
in conducting any audit or other proceeding in respect of Taxes. Neither Metals
nor the Surviving Corporation will amend any tax return of the Company (or the
Surviving Corporation) for any period ending on or prior to the Closing Date
without the consent of Seller, which consent shall not be unreasonably withheld.
7.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. On the Closing Date, the
employees of the Company will become the employees of the Purchaser with date of
employment and service for all employee benefit purposes dating to the date of
their original employment by the Company. The
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foregoing will not (except as set forth in any Employment Agreement), have any
effect on the employment status of any employee and the foregoing will not in
any way limit the management rights of the Surviving Corporation to assess work
force needs and make appropriate adjustments as necessary or desirable within
their discretion subject to applicable laws.
8. INDEMNIFICATION
The Seller and Metals each make the following covenants that are
applicable to them, respectively:
8.1 SURVIVAL OF SELLER'S REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Seller made in this
Agreement and in the documents and certificates delivered in connection herewith
shall survive the Closing for a period of two years from the Closing Date,
except that:
(i) such representations and warranties that relate to Taxes shall
survive until the expiration of the applicable statutes of limitations for
such Taxes (including any extensions thereof granted with Seller's
consent, which shall not be unreasonably withheld); and
(ii) the representations and warranties in Sections 2.8, 2.9, 2.16
and 2.25 hereof shall survive for a period of ten years; provided,
however, that representations and warranties with respect to which a good
faith claim is made, together with related indemnification obligations,
within the applicable survival period, shall survive until such claim is
finally determined and paid (if applicable).
(b) The representations and warranties of Metals made in this
Agreement and in the certificates delivered in connection herewith shall survive
the Closing for a period of two years following the Closing Date, provided,
however, that representations and warranties (and related indemnification
obligations) with respect to which a good faith claim is made within such two
year period shall survive until such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
8.2 GENERAL INDEMNIFICATION BY THE SELLER. The Seller covenants and agrees
that Seller will indemnify, defend, protect, and hold harmless Metals and the
Surviving Corporation at all times from and after the date of this Agreement
until the Expiration Date from and against all claims,
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damages actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but not limited to, reasonable attorneys'
fees and expenses of investigation) (collectively, "Damages") incurred as a
result of (i) any breach of any representation or warranty of the Seller set
forth herein or in the certificates or other documents delivered at the Closing,
and (ii) any breach or nonfulfillment of any covenant or agreement by the
Company or the Seller under this Agreement. Metals and the Purchaser acknowledge
and agree that other than the representations and warranties of the Seller and
the Company specifically contained in this Agreement, there are no
representations or warranties of the Seller or the Company, either express or
implied, with respect to the transactions contemplated by this Agreement, the
Company, its assets, or business.
8.3 INDEMNIFICATION BY METALS. Metals covenants and agrees that it will
indemnify, defend, protect and hold harmless the Seller at all times from and
after the date of this Agreement until the Expiration Date from and against all
Damages incurred by the Seller as a result of (i) any breach of any
representation or warranty of Metals set forth herein or in the certificates
delivered at the Closing; (ii) any breach or nonfulfillment of any covenant or
agreement by Metals under this Agreement; (iii) any liability, contingent or
otherwise, of the Company that was either set forth on the Balance Sheet,
disclosed to the Purchaser in the Disclosure Schedule, incurred in the ordinary
course of the business of the Company in a manner not requiring disclosure under
this Agreement (other than such matters as to which Seller has specifically
provided indemnification herein); and (iv) any liability of Seller under his
Guaranty of the Lease dated June 1, 1996 between Parr Investment Co. of Santa
Monica and the Company relating to the property at 1330 Colorado Avenue, Santa
Monica, California.
8.4 SPECIFIC INDEMNIFICATION.
(a) In addition to the indemnification provided for in Section 8.1,
Seller shall indemnify, defend, protect and hold harmless Metals and the
Surviving Corporation from all Damages resulting from any breach of the
representation and warranty set forth in Section 2.9.
(b) In addition to the indemnification provided for in Section 8.1,
Seller shall indemnify, defend, protect and hold harmless Metals and the
Surviving Corporation from and against all tax liabilities of any nature
whatsoever payable by the Company for any period ending on or prior to the
Closing Date, to the extent they are in excess of the amounts reserved therefor
on the Company's Financial Statements.
8.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") that could give rise to Damages or the
commencement of any action or proceeding by a
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Third Person that may give rise to a right of indemnification hereunder, such
Indemnified Party shall give to the party obligated to provide indemnification
hereunder (an "Indemnifying Party") written notice of such claim or the
commencement of such action or proceeding; provided, however, that the failure
to give such notice will not relieve such Indemnifying Party from liability
under this Section with respect to such claim, action or proceeding, except to
the extent that the Indemnifying Party has been actually prejudiced as a result
of such failure. The Indemnifying Party (at its own expense) shall have the
right and shall be given the opportunity to associate with the Indemnified Party
in the defense of such claim, suit or proceedings, and the Indemnified Party and
the Indemnifying Party shall make a good faith effort to cooperate in such
defense, provided that, unless the Indemnified Party otherwise agrees, counsel
for the Indemnified Party shall act as lead counsel in all matters pertaining to
the defense or settlement of such claims, suit or proceedings. In the event that
the Indemnified Party and the Indemnified Party are unable to agree on the
selection of lead counsel, each party shall be entitled, at its own expense, to
retain counsel and to participate in the defense of such suit, claim or
proceeding. The Indemnified Party shall not, except at its own cost, make any
settlement with respect to any such claim, suit or proceeding without the prior
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnified Party to settle a claim expeditiously could have a
Material Adverse Effect on the Indemnified Party, the failure of the
Indemnifying Party to act upon the Indemnified Party's request for consent to
such settlement within ten business days of the Indemnifying Party's receipt of
notice thereof from the Indemnified Party shall be deemed to constitute consent
by the Indemnifying Party of such settlement for purposes of this Section.
8.6 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash. In no event will any Indemnified Party have the right, nor will it assert,
any right to withhold payments of amounts otherwise due from the Indemnifying
Party, including, but not limited to, any amounts owing at the time or in the
future under any Employment Agreement. Any indemnification payment under this
Section 8 will be treated as an adjustment to the exchange consideration for tax
purposes unless a final determination with respect to the Indemnified Party or
any of its affiliates causes such payment not to be treated as an adjustment to
the exchange consideration for United States federal income tax purposes.
8.7 LIMITATIONS ON INDEMNIFICATION. Metals and the Surviving Corporation
and the other persons or entities indemnified pursuant to this Section shall not
assert any claim for indemnification hereunder against the Seller until such
time as, and solely to the extent that, the aggregate of all claims which such
persons may have against such the Seller shall exceed $350,000 (the
"Indemnification Threshold"). The Seller shall not assert any claim for
indemnification hereunder against Metals until such time as, and solely to the
extent that the aggregate of all claims which
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Seller may have against Metals shall exceed the Indemnification Threshold. In no
event shall Seller or Metals be obligated to make indemnification payments
hereunder in excess of an aggregate of $8,000,000.
No person shall be entitled to indemnification under this Section 8 if and
to the extent that such person's claim for indemnification is directly or
indirectly caused by a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement.
The amount of any Damages payable hereunder shall be reduced by the amount
of any tax benefit actually realized and any insurance payment actually received
by the Indemnified Party as a result of the event giving rise to such Damages.
9. TERMINATION OF AGREEMENT
9.1 TERMINATION.This Agreement may be terminated at any time prior to the
Closing Date solely:
(i) by mutual consent of Metals and the Seller;
(ii) by the Metals or by the Seller, if the transactions
contemplated by this Agreement to take place at the Closing shall not have
occurred by October 31, 1997 (the "Termination Date"), unless the failure
of such transactions to be consummated is due to the willful failure of
the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by
it prior to or on the Closing Date; or
(iii) by Metals or by the Seller if a material breach or default
shall be made by the other in the observance or in the due and timely
performance of any of the covenants or agreements contained herein, and
the curing of such default shall not have been made within ten business
days after written notice thereof is delivered to the breaching or
defaulting party by the other party.
9.2 LIABILITIES IN EVENT OF TERMINATION. The termination of this Agreement
will in no way limit any obligation or liability of any party based on or
arising from a breach or default by such party with respect to any of its
representations, warranties, covenants or agreements contained in this Agreement
including, but not limited to, legal and audit costs and out of pocket expenses.
In no event will any party be obligated to any other party for any Damage in the
nature of lost profits, consequential damages, or punitive damages. Any Damage
resulting from a breach of this Agreement will be limited to the direct
out-of-pocket expenses of the party and subject to the other limitations set
forth in this Agreement.
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10. NONCOMPETITION
10.1 PROHIBITED ACTIVITIES. The Seller will not, for a period of five (5)
years following the Closing Date, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Company anywhere in the world or in competition with
Metals or any of its subsidiaries within 200 miles of where Metals or any
of its subsidiaries conducts business (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company, Metals or any of its other
subsidiaries for the purpose or with the intent of enticing such employee
away from or out of the employ of the Company, Metals or any of its other
subsidiaries;
(iii) call upon any person or entity which is, at that time, or
which has been, within one year prior to the Closing Date, a customer of
the Company, Metals or any of its other subsidiaries within the Territory
for the purpose of soliciting or selling products or services in direct
competition with the Company, Metals or any of its other subsidiaries
within the Territory.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any Seller from acquiring as a passive investor with no involvement in
the operations or management of the business, not more than one percent (1%) of
the capital stock of a competing business whose stock is publicly traded on a
national securities exchange or over-the-counter market, unless otherwise
approved in writing by Metals, such approval not to be unreasonably withheld.
10.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to the Company or Metals as a result of a breach of the foregoing
covenant, and because of the immediate and irreparable damage that could be
caused to the Company or Metals for which it would have no other adequate
remedy, each Seller agrees that the foregoing covenant may be enforced by the
Company or Metals in the event of breach by such Seller, by injunctions,
restraining orders and other equitable actions.
10.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the Seller
in light of the activities and business of
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the Company or Metals and its other subsidiaries on the date of the execution of
this Agreement and the current plans of the Company or Metals.
10.4 SEVERABILITY; REFORMATION. The covenants in this Section are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the provisions of this Section 10 shall thereby be
reformed.
10.5 INDEPENDENT COVENANT. The Seller acknowledges that his covenants set
forth in this Section 10 are material conditions to Metals' willingness to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All of the covenants in this Section 10 shall be construed
as an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of any Seller against Metals or any
subsidiary thereof, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company or Metals of such
covenants. It is specifically agreed that the period of five (5) years stated at
the beginning of this Section 10, during which the agreements and covenants of
each Seller made in this Section 10 shall be effective, shall be computed by
excluding from such computation any time during which such Seller shall have
been determined by a court of competent jurisdiction to have been in material
violation of any provision of this Section 10. The covenants contained in
Section 10 shall not be affected by any breach of any other provision hereof by
any party hereto and shall have no effect if the transactions contemplated by
this Agreement are not consummated.
11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
11.1 GENERAL. The Seller recognizes and acknowledges that he has had
access to certain confidential information of the Company, such as operational
policies, pricing and cost policies, and other information, that are valuable,
special and unique assets of the Company. The Seller agrees that he will not
disclose such confidential information, or any confidential information of the
Company or Metals to which he may have access in the future, to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the Company or Metals,
(b) following the Closing, such information may be disclosed by Seller as may be
required in the course of performing his duties for the Company and (c) to
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 11.1, unless (i) such
information becomes known to the public generally through no fault of the
Seller, or (ii) disclosure is required by law or the order of
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any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), the Seller shall give
prior written notice thereof to the Company or Metals and provide the Company or
Metals with the opportunity to contest such disclosure. In the event of a breach
or threatened breach by the Seller of the provisions of this Section, the
Company or Metals shall be entitled to injunctive or other equitable relief
restraining the Seller from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting the Company or
Metals from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages, subject to the limitations of Section
9.2.
11.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which the Company or
Metals would have no other adequate remedy, the Seller agrees that the foregoing
covenants may be enforced against him by injunctions, restraining orders and
other appropriate equitable relief.
11.3 SURVIVAL. The obligations of the parties under this Article 11 shall
survive the termination of this Agreement for a period of five years.
12. SECURITIES LAW MATTERS
12.1 CONTRACTUAL RESTRICTIONS. The Seller agrees that he will not offer,
sell, assign, pledge, hypothecate, transfer or otherwise dispose of or reduce
his risk with respect to any of the shares of Metals Stock issued to the Seller
pursuant to this Agreement prior to the date one year after the Closing Date,
except with the approval of Metals, which will not be unreasonably withheld. The
foregoing shall not apply to any transfer by Seller to a trust, limited
liability company, family partnership, S corporation or other entity controlled
by Seller for the benefit of Seller, Seller's immediate relatives, or his or
their descendants, or any combination of them or (subject to Metals' consent,
which will not be unreasonably withheld), any transfer to any charitable,
educational, religious or nonprofit organization, provided that any such
transferee described in this sentence agrees to be bound by the foregoing
one-year holding period. Certificates representing the Metals Stock issued to
the Seller shall bear substantially the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTION ON
TRANSFER AND MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE ENCUMBERED,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY SUCH
TRANSACTION, UNTIL SEPTEMBER 26, 1998, WITHOUT THE WRITTEN CONSENT OF THE
ISSUER.
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13. GENERAL
13.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
Metals, and the heirs and legal representatives of the Seller.
13.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Seller, the Company
and Metals, and supersede any prior agreement and understanding relating to the
subject matter of this Agreement except for the provisions of the
Confidentiality Agreement between the parties, which shall remain in effect
until the Closing. This Agreement, upon execution, constitutes a valid and
binding agreement of the parties hereto enforceable in accordance with its terms
and may be modified or amended only by a written instrument executed by the
Seller, the Company and Metals.
13.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
13.4 BROKERS AND AGENTS. Each party agrees to pay and hereby indemnifies
the other parties hereto against any fees due to any broker or finder engaged by
such party.
13.5 NOTICES. All notices, including communications required or permitted
hereunder shall be in writing. Any notice will be deemed to have been duly given
if personally delivered, sent by a recognized messenger or next day courier
service or sent by United States mail, telex or facsimile transmission, and will
be deemed received, unless earlier received (a) if sent by express, certified or
regular mail, return receipt requested, when actually received or delivery
refused; (b) if sent by messenger or courier, when actually received or delivery
refused; (c) if delivered by hand, on the date of delivery; and (d) if sent by
telex or facsimile transmission, on the date sent, so long as a confirming
notice is sent by one of the foregoing methods.
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If to Metals, addressed to it at:
Metals USA, Inc.
Three Riverway, Suite 600
Houston, Texas 77056
Attn: General Counsel
Facsimile: (713) 965-0067
If to the Company, addressed to it at:
1330 Colorado Avenue
Santa Monica, California 90404-3313
Facsimile (310) 664-1961
If to the Seller, addressed to him at:
1330 Colorado Avenue
Santa Monica, California 90404-3313
Facsimile (310) 664-1961
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
13.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of California other than its principles governing
conflicts of laws, except to the extent that the law of the State of Delaware
applies to the Merger.
13.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the applicable Expiration
Date.
13.8 EFFECT OF INVESTIGATION; KNOWLEDGE. No investigation by the parties
hereto in connection with this Agreement or otherwise shall affect the
representations and warranties of the parties contained herein or in any
certificate or other document delivered in connection herewith and each such
representation and warranty shall survive such investigation.
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13.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
13.10 TIME. Time is of the essence with respect to this Agreement.
13.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
reasonably possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties, and if
such modification is not possible, such provision shall be severed from this
Agreement, and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
13.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
13.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
13.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that any party may, after making a reasonable effort to obtain such
approval, make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities.
13.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
METALS USA, INC.
By:/s/ A. L. FRENCH
Name: A. L. French
Title: CEO
HTL ACQUISITION CORP.
By:/s/ J. MICHAEL KIRKSEY
Name: J. Michael Kirksey
Title: Sr. VP & CFO
HARVEY TITANIUM, LTD.
By:/s/ BARRY HARVEY
Name: Barry Harvey
Title: President & CEO
<PAGE>
Seller:
/s/ BARRY HARVEY
Barry Harvey
Sole Stockholder
/s/ JERI HARVEY
Jeri Harvey
AGREEMENT
dated as of the 26th day of September, 1997
by and among
METALS USA, INC.
JEFFREYS STEEL COMPANY, INC.
and
the STOCKHOLDERS named herein
<PAGE>
TABLE OF CONTENTS
Page
1. THE EXCHANGE...........................................................2
1.1 Effective Time of the Exchange...................................2
1.2 Articles of Incorporation, Bylaws and Board of Directors.........2
1.3 Certain Information With Respect to the Capital Stock
of the Company and Metals........................................2
2. EXCHANGE OF STOCK......................................................3
2.1 Manner of Exchange...............................................3
2.2 Rights of Exchanged Metals Stock.................................3
2.3 Voluntary Share Exchange.........................................3
3. DELIVERY OF EXCHANGE CONSIDERATION.....................................3
3.1 Delivery of Metals Stock; Escrow.................................3
3.2 Delivery of Company Stock........................................4
4. CLOSING................................................................4
5. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.....................4
5.1 Due Organization.................................................4
5.2 Authorization....................................................5
5.3 Capital Stock of the Company.....................................5
5.4 Subsidiaries.....................................................5
5.5 Financial Statements.............................................6
5.6 Liabilities and Obligations......................................6
5.7 Accounts and Notes Receivable....................................6
5.8 Permits and Intangibles..........................................7
5.9 Environmental Matters............................................7
5.10 Personal Property................................................8
5.11 Significant Customers; Material Contracts and Commitments........9
5.12 Real Property....................................................9
5.13 Insurance........................................................9
5.14 Compensation; Employment Agreements; Organized Labor Matters....10
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5.15 Employee Benefit Plans..........................................10
5.16 Conformity with Law; Litigation.................................12
5.17 Taxes...........................................................12
5.18 No Violations; No Consents Required.............................13
5.19 Government Contracts............................................14
5.20 Absence of Changes..............................................14
5.21 Deposit Accounts; Powers of Attorney............................15
5.22 Competing Lines of Business; Related-party Transactions.........15
5.23 Disclosure......................................................16
5.24 Prohibited Activities...........................................16
5.25 Preemptive Rights...............................................16
5.26 Certain Business Practices......................................16
5.27 Pooling-of-Interests Accounting.................................16
6. REPRESENTATIONS OF METALS.............................................17
6.1 Due Organization................................................17
6.2 Authorization...................................................17
6.3 No Violations...................................................17
6.4 Validity of Obligations.........................................17
6.5 Metals Stock....................................................17
6.6 Metals' Financial Statements....................................18
6.7 Liabilities.....................................................18
6.8 No Material Adverse Change......................................18
6.9 No Litigation...................................................18
6.10. Taxes...........................................................18
7. COVENANTS PRIOR TO CLOSING............................................18
7.1 Access and Cooperation; Due Diligence...........................18
7.2 Notice to Bargaining Agents.....................................18
7.3 Agreements......................................................19
7.4 Notification of Certain Matters.................................19
7.5 Amendment of Schedules..........................................19
7.6 Further Assurances..............................................19
7.7 Compliance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "Hart-Scott Act").................19
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF
STOCKHOLDERS AND COMPANY..............................................20
8.1 Representations and Warranties; Performance of Obligations......20
8.2 Satisfaction....................................................20
8.3 Opinion of Counsel..............................................20
8.4 Consents and Approvals..........................................20
8.5 Employment Agreement............................................21
8.6 ESOP Opinion....................................................21
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF METALS.........................21
9.1 Representations and Warranties; Performance of Obligations......21
9.2 No Material Adverse Effect......................................21
9.3 Stockholders' Release...........................................22
9.4 Satisfaction....................................................22
9.5 Opinion of Counsel..............................................22
9.6 Consents and Approvals..........................................22
9.7 Good Standing Certificates......................................22
9.8 FIRPTA Certificate..............................................22
9.9 Related Party Transactions......................................23
9.10 Employment Agreement............................................23
9.11 Pooling Treatment...............................................23
9.12 Escrow Agreement................................................23
10. COVENANTS AFTER CLOSING...............................................23
10.1 Release From Guarantees.........................................23
10.2 ESOP Loan.......................................................23
11. INDEMNIFICATION.......................................................23
11.1 Survival of Stockholders' Representations and Warranties........24
11.2 General Indemnification by the Stockholders.....................24
11.3 Indemnification by Metals.......................................24
11.4 Specific Indemnification........................................25
11.5 Third Person Claims.............................................25
11.6 Limitations on Indemnification..................................25
11.7 Indemnification by ESOP.........................................26
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12. NONCOMPETITION........................................................26
12.1 Prohibited Activities...........................................26
12.2 Equitable Relief................................................27
12.3 Reasonable Restraint............................................27
12.4 Severability; Reformation.......................................27
12.5 Independent Covenant............................................27
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................28
13.1 General.........................................................28
13.2 Equitable Relief................................................28
13.3 Survival........................................................28
14. INTENDED TAX TREATMENT AND POOLING-OF-INTERESTS
ACCOUNTING............................................................28
14.1 Tax-Free Reorganization.........................................28
14.2 Restrictions on Resale..........................................29
15. SECURITIES LAW MATTERS................................................29
15.1 Economic Risk; Sophistication...................................29
15.2 Private Placement...............................................30
16. REGISTRATION RIGHTS...................................................30
16.1 Piggyback Registration Rights...................................30
16.2 Demand Registration Rights......................................31
16.3 Registration Procedures.........................................32
16.4 Indemnification.................................................33
16.5 Underwriting Agreement..........................................34
16.6 Rule 144 Reporting..............................................35
16.7 Assignment of Registration Rights...............................35
16.8 Allocation of Registration Opportunities........................35
17. GENERAL...............................................................36
17.1 Cooperation.....................................................36
17.2 Successors and Assigns..........................................36
17.3 Entire Agreement................................................36
17.4 Counterparts....................................................36
17.5 Brokers and Agents..............................................36
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17.6 Expenses........................................................37
17.7 Notices.........................................................37
17.8 Governing Law...................................................37
17.9 Survival of Representations and Warranties......................38
17.10 Effect of Investigation; Knowledge..............................38
17.11 Exercise of Rights and Remedies.................................38
17.12 Time............................................................38
17.13 Reformation and Severability....................................38
17.14 Remedies Cumulative.............................................38
17.15 Captions........................................................38
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ANNEXES
ANNEX I - FORM OF LEASE
ANNEX II - FORM OF OPINION OF COUNSEL TO METALS
ANNEX III - FORM OF EMPLOYMENT AGREEMENT
ANNEX IV-A - FORM OF OPINION OF COALE, DUKES & KIRKPATRICK
ANNEX IV-B - FORM OF OPINION OF LYONS, PIPES & COOK
ANNEX V - FORM OF ESCROW AGREEMENT
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<PAGE>
AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of the 26th day of September,
1997, by and among Metals USA, Inc., a Delaware corporation ("Metals"), Jeffreys
Steel Company, Inc., an Alabama corporation (the "Company"), (a) Toby L.
Jeffreys, individually, (b) Toby L. Jeffreys, as Trustee of the A. Leon Jeffreys
Qualified Annuity Trust, (c) Toby L. Jeffreys, as Trustee of the Mary Helen Sims
Jeffreys Qualified Annuity Trust, (d) Toby L. Jeffreys, as General Partner of
the Jeffreys Family Limited Partnership, and (e) South Trust Bank, N.A., as
Trustee (the "ESOP Trustee") of the Jeffreys Steel Company, Inc. Employee Profit
Sharing Pension Stock Ownership Plan and Trust (the "ESOP") (the individuals and
trustees identified in the foregoing clauses (a), (b), (c) and (d) acting in
their respective capacities as such, being hereinafter called the
"Stockholders"). The Stockholders and the ESOP are all the stockholders of the
Company.
WHEREAS, the Stockholders and the ESOP desire to exchange all of the
outstanding capital stock of the Company ("Company Stock") for the
consideration described herein;
WHEREAS, Metals desires to acquire all of the outstanding shares of
Company Stock in exchange for the consideration described herein;
WHEREAS, the Board of Directors of the Company desires to evidence
its approval of the transactions contemplated hereby and to obligate the
Company to perform its obligations hereunder;
WHEREAS, the Stockholders and the ESOP desire to transfer the
capital stock of the Company to Metals in exchange for the consideration
described herein (the "Exchange");
WHEREAS, concurrently with the execution and delivery hereof, a
wholly owned subsidiary of Metals (or, at Metal's election, a wholly owned
subsidiary of the Company) is purchasing certain real estate from the
Jeffreys Family Limited Partnership;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
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1. THE EXCHANGE
1.1 EFFECTIVE TIME OF THE EXCHANGE. The Exchange shall become effective at
such time (the "Effective Time") as Metals and the Stockholders have completed
their obligations pursuant to Section 4 hereof (the "Closing"). At the Effective
Time of the Exchange, the Company shall become a wholly owned subsidiary of
Metals, and the Stockholders and the ESOP shall be entitled to receive the
consideration described herein, subject to the provisions hereof and as set
forth herein.
1.2 ARTICLES OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS. At the
Effective Time of the Exchange:
(i) the Articles of Incorporation of the Company then in effect
shall remain the Articles of Incorporation of the Company until changed as
provided by law;
(ii) the Board of Directors of the Company shall consist of the
persons who are on the Board of Directors of the Company immediately prior
to the Effective Time of the Exchange, provided that Michael J. Kirksey
shall be elected as a director of the Company effective as of the
Effective Time of the Exchange; the Board of Directors of the Company
shall hold office subject to the provisions of the laws of the State of
Alabama and of the Articles of Incorporation and Bylaws of the Company;
and
(iii) the officers of the Company immediately prior to the Effective
Time of the Exchange shall continue as the officers of the Company in the
same capacity or capacities, and effective upon the Effective Time of the
Exchange Michael J. Kirksey shall be appointed as a vice president of the
Company, Keith St. Clair shall be appointed as an Assistant Treasurer and
John A. Hageman shall be appointed as an Assistant Secretary of the
Company, each of such officers to serve, subject to the provisions of the
Articles of Incorporation and Bylaws of the Company, until his or her
successor is duly elected and qualified.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY
AND METALS. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the Company and
Metals as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the Company is as set forth on Schedule 1.3 hereto; and
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(ii) immediately prior to the Closing, the authorized capital stock
of Metals will consist of 50,000,000 shares of common stock, $.01 par
value ("Metals Stock"), of which the number of issued and outstanding
shares will be 18,544,109, and 5,000,000 shares of preferred stock, $.01
par value, of which no shares will be issued and outstanding, and
3,122,914 shares of Restricted Voting Common Stock, $.01 par value, all of
which will be issued and outstanding.
2. EXCHANGE OF STOCK
2.1 MANNER OF EXCHANGE. The manner of exchanging (i) all of the
outstanding shares of capital stock of the Company ("Company Stock") for (ii)
shares of Metals Stock shall be as follows:
As of the Effective Time of the Exchange, all of the shares of Company
Stock issued and outstanding immediately prior to the Effective Time of the
Exchange, shall be exchanged by the Stockholders and the ESOP for the number of
shares of Metals Stock set forth on Schedule 3.1 hereto with respect to each
Stockholder and the ESOP.
2.2 RIGHTS OF EXCHANGED METALS STOCK. All Metals Stock received by the
Stockholders and the ESOP pursuant to this Agreement shall, except for
restrictions on resale or transfer described in Sections 16 and 17 hereof, have
the same rights as all the other shares of outstanding Metals Stock by reason of
the provisions of the Certificate of Incorporation of Metals or as otherwise
provided by the Delaware General Corporation Law. All voting rights of such
Metals Stock received by the Stockholders and the ESOP shall be fully
exercisable by the Stockholders and the ESOP and the Stockholders and the ESOP
shall be neither deprived nor restricted in exercising those rights. At the
Effective Time of the Exchange, Metals shall have no class of capital stock
issued and outstanding other than the Metals Stock.
2.3 VOLUNTARY SHARE EXCHANGE. The parties agree that the Exchange is
intended to qualify as a voluntary share exchange pursuant to Code of Alabama
ss. 10-2B-11.02(d) and not as a compulsory share exchange.
3. DELIVERY OF EXCHANGE CONSIDERATION
3.1 DELIVERY OF METALS STOCK; ESCROW. At the Closing the Stockholders and
the ESOP, who are the holders of all outstanding certificates representing
shares of Company Stock, shall, upon surrender of such certificates, receive the
respective number of shares of Metals Stock set forth on Schedule 3.1; provided
that the number of shares shown on Schedule 3.1 as being subject to the
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Escrow Agreement described herein (including a portion of the shares otherwise
deliverable to the ESOP pursuant to this Agreement) shall be deposited directly
into escrow and shall be held, administered and distributed by the Escrow Agent
identified in the Escrow Agreement in accordance with the terms of the Escrow
Agreement.
3.2 DELIVERY OF COMPANY STOCK. The Stockholders and the ESOP shall deliver
to Metals at the Closing the certificates representing Company Stock, duly
endorsed in blank by the Stockholders and the ESOP, or accompanied by blank
stock powers, and with all necessary transfer tax and other revenue stamps,
acquired at the expense of the Stockholders and the ESOP, affixed and canceled.
Each Stockholder and the ESOP agrees to promptly cure any deficiencies with
respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
4. CLOSING
At or prior to the Closing, the parties shall take all actions necessary
to prepare to (i) effect the Exchange and (ii) effect the delivery of shares
referred to in Section 3 hereof. The closing of the transactions contemplated by
this Agreement shall take place at the offices of Coale, Dukes & Kirkpatrick,
51-D Tacon Street, Mobile, Alabama 36607, following the satisfaction or waiver
of all conditions set forth herein to the obligations of the parties to
consummate the transactions contemplated hereby (other than conditions to be
satisfied at or concurrently with the Closing) or on such other date as Metals
and the Company may mutually determine (the "Closing Date").
5. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders (specifically excluding the ESOP and its participants and
their beneficiaries in their capacities as such) jointly and severally represent
and warrant that all of the following representations and warranties are true at
the date of this Agreement.
5.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Alabama (the "State
of Incorporation"), and has all requisite corporate power and authority to carry
on its business as it is now being conducted. The Company is duly qualified to
do business and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification necessary, except where the failure to be so authorized or
qualified would not have a material adverse effect on the business, operations,
properties, assets or condition (financial or otherwise), of the Company taken
as a whole (as used herein with respect to the Company, or with respect to any
other person, a "Material Adverse Effect"). Schedule 5.1 sets forth a list of
all jurisdictions in which
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<PAGE>
the Company is authorized or qualified to do business. True, complete and
correct copies of the Articles of Incorporation and Bylaws, each as amended, of
the Company (the "Charter Documents") are all attached to Schedule 5.1. The
stock records of the Company, a copy of which is attached to Schedule 5.1, are
correct and complete in all material respects. There are no minutes in the
possession of the Company or the Stockholders which have not been made available
to Metals, and all of such minutes are correct and complete in all respects.
5.2 AUTHORIZATION. (i) The representatives of the Company executing this
Agreement have the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, corporate power
and authority to enter into this Agreement. This Agreement has been approved by
the Board of Directors of the Company, and copies of resolutions unanimously
adopted by the Board of Directors of the Company approving this Agreement,
certified by the Secretary or an Assistant Secretary of the Company, are
attached hereto as Schedule 5.2. This Agreement has been validly executed and
delivered by the Company, and the Stockholders and constitutes the legal, valid
and binding obligation of each of them enforceable in accordance with its terms.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 100,000 shares of common stock, par value $0.415 per
share, of which 100,000 shares are issued and outstanding and represent all of
the Company Stock. Each of the Stockholders and the ESOP represents and
warrants, severally, that each such Stockholder and the ESOP owns, of record
and, except for the beneficial interests of the participants and beneficiaries
in the shares held of record by the ESOP, beneficially, the number of issued and
outstanding shares of the capital stock of the Company set forth on Schedule 5.3
and, except as set forth on Schedule 5.3, thatsuch shares are owned free and
clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the issued and
outstanding shares of the capital stock of the Company have been duly authorized
and validly issued, are fully paid and nonassessable, and were offered, issued,
sold and delivered by the Company in compliance with all applicable state and
federal laws concerning the issuance of securities. None of such shares were
issued in violation of any preemptive rights or similar rights of any person.
Except as set forth on Schedule 5.3, no option, warrant, call, conversion right
or commitment of any kind exists which obligates the Company to issue any shares
of its capital stock or obligates any of the Stockholders or the ESOP to
transfer any shares of the Company Stock to any person except pursuant to this
Agreement.
5.4 SUBSIDIARIES. Except as set forth on Schedule 5.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name on its certificate or articles of incorporation. Except as
set forth in Schedule 5.4, the Company does not
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<PAGE>
own, of record or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity interest in
any corporation, association or other business entity, and the Company is not,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as Schedule 5.5: the balance sheets of the
Company as of July 31, 1997 (the "Balance Sheet Date") and July 31, 1996 and the
related statements of operations, stockholder's equity and cash flows for the
two-year period ended July 31, 1997, together with the related notes and
schedules (such balance sheets, the related statements of operations,
stockholder's equity and cash flows and the related notes and schedules are
referred to herein as the "Financial Statements"). The Financial Statements have
been prepared from the books and records of the Company in conformity with
generally accepted accounting principles applied on a basis consistent with
preceding years and throughout the periods involved ("GAAP") (except as
otherwise indicated in the notes thereto) and present fairly in all material
respects the financial position and results of operations of the Company as of
the dates of such statements and for the periods covered thereby. The books of
account of the Company have been kept accurately in all material respects in the
ordinary course of business, the transactions entered therein represent bona
fide transactions, and the revenues, expenses, assets and liabilities of the
Company have been properly recorded therein in all material respects.
5.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on Schedule 5.6 hereto,
the Company has no material liabilities or obligations of any kind, whether
accrued, absolute, secured or unsecured, contingent or otherwise. Except and to
the extent disclosed on Schedule 5.6, there are no material claims, liabilities
or obligations, nor any reasonable basis for assertion against the Company, of
any claim, liability or obligation, of any nature whatsoever. Except as
expressly set forth on Schedule 5.6, all of the liabilities of the Company
listed on Schedule 5.6 are covered by the Company's insurance policies, and no
such liability will exceed the policy limits of such insurance policies.
Schedule 5.6 contains a reasonable estimate by the Stockholders of the maximum
amount which may be payable with respect to liabilities which are not fixed. For
each such liability for which the amount is not fixed, the Stockholders have
provided a summary description of the liability together with copies of all
relevant documentation relating thereto.
5.7 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the Balance
Sheet Date and generated subsequent to the Balance Sheet Date, including any
such amounts which are not reflected in the balance sheet as of the Balance
Sheet Date. Receivables from and advances to employees and the
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Stockholders and any entities or persons related to or affiliated with any of
the Stockholders are separately identified on Schedule 5.7. Schedule 5.7 also
sets forth an accurate aging analysis of all accounts, notes and other
receivables as of the Balance Sheet Date, showing amounts due in 30-day aging
categories. Except to the extent reflected on Schedule 5.7, all such accounts,
notes and other receivables were incurred in the ordinary course of business,
are stated in accordance with GAAP and are collectible in the amounts shown on
Schedule 5.7, net of reserves reflected in the balance sheet as of the Balance
Sheet Date.
5.8 PERMITS AND INTANGIBLES. To the best knowledge of the Stockholders,
the Company and its employees hold all material licenses, franchises, permits
and other governmental authorizations required in connection with the conduct of
the Company's business as it is now being conducted. Schedule 5.8 sets forth an
accurate list and summary description of all such licenses, franchises, permits
and other governmental authorizations, including permits, titles (including
licenses, franchises, certificates, trademarks, trade names, patents, patent
applications and copyrights owned or held by the Company or any of its employees
(including interests in software or other technology systems, programs and
intellectual property) (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on Schedule
5.9). To the best knowledge of the Stockholders, the licenses, franchises,
permits and other governmental authorizations listed on Schedules 5.8 and 5.9
are valid. The Company has not received any notice that any person intends to
cancel, terminate or not renew any such license, franchise, permit or other
governmental authorization. The Company has conducted for the past five years
and is conducting its business in compliance with the requirements, standards,
criteria and conditions set forth in the licenses, franchises, permits and other
governmental authorizations listed on Schedules 5.8 and 5.9 and is not in
violation of any of the foregoing, except where any such violation has not had
and will not have a Material Adverse Effect. Except as specifically set forth on
Schedule 5.8 or 5.9, the transactions contemplated by this Agreement will not
result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded to the Company by, any such licenses, franchises,
permits or government authorizations.
5.9 ENVIRONMENTAL MATTERS. To the best knowledge of the Stockholders and
except as set forth on Schedule 5.9, the Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to it or any of its properties, assets, operations
and businesses relating to environmental protection (collectively "Environmental
Laws") including, without limitation, Environmental Laws relating to air, water,
land and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes, Hazardous Materials and Hazardous Substances
including petroleum and petroleum products (as such terms are defined in any
applicable Environmental Law) except to the extent that noncompliance with any
Environmental
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Laws, either singly or in the aggregate, (i) has not had and will not have a
Material Adverse Effect on the Company or any of its businesses, and (ii) will
not necessitate any material expenditure by or on behalf of the Company. The
parties acknowledge that Metals has caused the reports attached to Schedule 5.9
to be prepared and the Stockholders have reviewed the same. The Company has
obtained and adhered to all necessary permits and other approvals necessary to
treat, transport, store, dispose of and otherwise handle Hazardous Wastes,
Hazardous Materials and Hazardous Substances, a list of all of which permits and
approvals is set forth on Schedule 5.9, and have reported to the appropriate
authorities, to the extent required by all Environmental Laws, all past and
present sites owned and operated by the Company where Hazardous Wastes,
Hazardous Materials or Hazardous Substances have been treated, stored, disposed
of or otherwise handled. To the best knowledge of the Stockholders, there have
been no releases or threats of releases (as defined in Environmental Laws) at,
from, in or on any property owned or operated by the Company except as permitted
by Environmental Laws. To the best knowledge of the Stockholders, there is no
on-site or off-site location to which the Company has transported or disposed of
Hazardous Wastes, Hazardous Materials or Hazardous Substances or arranged for
the transportation of Hazardous Wastes, Hazardous Materials or Hazardous
Substances which is the subject of any federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against the Company, or Metals for any clean-up cost, remedial work, damage to
natural resources, property damage or personal injury, including, but not
limited to, any claim under (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (ii) the Resource
Conservation and Recovery Act, (iii) the Hazardous Materials Transportation Act
or (iv) comparable state or local statutes and regulations. To the best
knowledge of the Stockholders, the Company has no contingent liability in
connection with any release or threatened release of any Hazardous Waste,
Hazardous Material or Hazardous Substance into the environment except as set
forth in Schedule 5.9.
5.10 PERSONAL PROPERTY. Schedule 5.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" on the balance
sheet of the Company, (b) all other personal property owned by the Company with
an individual value in excess of $10,000 (i) as of the Balance Sheet Date and
(ii) acquired since the Balance Sheet Date and (c) all leases and agreements in
respect of personal property, including, in the case of each of (a), (b) and
(c), (1) true, complete and correct copies of all such leases and (2) an
indication as to which assets are currently owned, or were formerly owned, by
Stockholders, relatives of Stockholders, or Affiliates of the Company or the
Stockholders. Except as set forth on Schedule 5.10, (i) all material personal
property used by the Company in its business is either owned by the Company or
leased by the Company pursuant to a lease included on Schedule 5.10, (ii) all of
the personal property listed on Schedule 5.10 is in good working order and
condition, ordinary wear and tear excepted and (iii) all leases and agreements
included on Schedule 5.10 are in full force and effect and constitute valid and
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binding agreements of the parties (and their successors) thereto in accordance
with their respective terms.
5.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. Schedule
5.11 sets forth a list of (i) all customers representing 5% or more of the
Company's revenues in any of the periods covered by the Financial Statements,
and (ii) all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with significant customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). True, complete and correct copies of
such agreements are attached to Schedule 5.11. Except as described on Schedule
5.11, (i) none of the Company's significant customers (including those
identified on Schedule 5.11) have canceled or substantially reduced or, to the
knowledge of the Company, are currently attempting or threatening to cancel a
contract or substantially reduce utilization of the services provided by the
Company, and (ii) to the best knowledge of the Stockholders, the Company has
complied with all material commitments and obligations pertaining to it, and is
not in default under any contracts or agreements listed on Schedule 5.11 which
would cause a Material Adverse Effect and no notice of default under any such
contract or agreement has been received. Schedule 5.11 also includes a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations, the acquisition of any property, business or
assets requiring, in any event, the payment of more than $10,000 by the Company.
5.12 REAL PROPERTY. Schedule 5.12 includes a list of all real property
owned or leased by the Company at the date hereof, and all other real property,
if any, currently used by the Company in the conduct of its business. True,
complete and correct copies of all leases and agreements in respect of real
property leased by the Company are attached to Schedule 5.12, and all other real
estate used by the Company and owned by the Stockholders or entities controlled
by the Stockholders is being transferred to a wholly owned subsidiary of Metals
on the date hereof. An indication as to which such properties, if any, are
currently owned, or were formerly owned, by Stockholders or affiliates of the
Company or Stockholders is included in Schedule 5.12. Except as set forth on
Schedule 5.12, all of such leases included on Schedule 5.12 are in full force
and effect and constitute valid and binding agreements of the parties (and their
successors) thereto in accordance with their respective terms.
5.13 INSURANCE. Schedule 5.13 sets forth an accurate list as of the
Balance Sheet Date of all insurance policies carried by the Company and an
accurate list of all insurance loss runs or workers compensation claims received
for the past five policy years. True, complete and correct copies of all
insurance policies currently in effect are attached to Schedule 5.13. Such
insurance policies evidence all of the insurance that the Company is required to
carry pursuant to all of its
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contracts and other agreements and pursuant to all applicable laws, and provide
adequate coverage against the risks involved in the Company's business. None of
such policies is a "claims made" policy. All of such insurance policies are
currently in full force and effect and shall remain in full force and effect
through the Closing Date.
5.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
Schedule 5.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of (i) the Balance Sheet Date and (ii)
the date hereof. Attached to Schedule 5.14 are true, complete and correct copies
of any employment agreements for the persons listed on Schedule 5.14 and all
other employment and other agreements of any nature containing any provision
that could require the Company to make any payment to any person as a result of
the transactions contemplated by this Agreement, which provisions are
specifically identified on Schedule 5.14. Since the Balance Sheet Date, there
have been no increases in the compensation payable or any special bonuses to any
officer, director, key employee or other employee, except ordinary salary
increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the best knowledge of the Stockholders, no
campaign to establish such representation is in progress and (iv) there is no
pending or, to the best knowledge of the Stockholders, threatened, labor dispute
involving the Company and any group of its employees. The Company has not
experienced any labor interruptions over the past five years. The Company's
relationship with its employees is good.
5.15 EMPLOYEE BENEFIT PLANS. Schedule 5.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on Schedule 5.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on Schedule 5.15, the Company does not sponsor,
maintain or contribute to any plan program, fund or arrangement that constitutes
an "employee pension benefit plan," nor does the Company have any obligation to
contribute to or accrue or pay any benefits under any deferred compensation or
retirement funding arrangement on behalf of any employee or employees (such as,
for example, and without limitation, any individual retirement account or
annuity, any "excess
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benefit plan" (within the meaning of Section 3(36) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or any non-qualified deferred
compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan other than the plans set forth
on Schedule 5.15, and the Company is not required to contribute to any
retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of the
Company's employees.
The Company is not now, and to the best knowledge of the Stockholders,
cannot as a result of its past activities become, liable to the Pension Benefit
Guaranty Corporation or to any multi employer employee pension benefit plan
under the provisions of Title IV of ERISA. To the best knowledge of the
Stockholders, all employee benefit plans listed on Schedule 5.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on Schedule 5.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance Sheet
Date. All plans listed on Schedule 5.15 that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Code are, and have been so
qualified and have been determined by the Internal Revenue Service to be so
qualified, and copies of the determination letters relating thereto are included
as part of Schedule 5.15. To the best knowledge of the Stockholders, except as
disclosed on Schedule 5.15, all reports and other documents required to be filed
with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, actuarial reports, audits or tax
returns) have been timely filed or distributed, and copies thereof are included
as part of Schedule 5.15. Neither the Stockholders, any plan listed in Schedule
5.15 nor the Company has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No plan listed
in Schedule 5.15 has incurred an accumulated funding deficiency, as defined in
Section 412(a) of the Code and Section 302(1) of ERISA; and the Company has not
incurred any liability for excise tax or penalty due to the Internal Revenue
Service or any liability to the Pension Benefit Guaranty Corporation. There have
been no terminations, partial terminations or discontinuance of contributions to
any such Qualified Plan intended to qualify under Section 401(a) of the Code
without notice to and approval by the Internal Revenue Service; no plan listed
in Schedule 5.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed in Schedule 5.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC
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under Title IV of ERISA or to the Internal Revenue Service for any excise tax or
penalty, or being subject to any statutory lien to secure payment of any such
liability) with respect to any plan now or heretofore maintained or contributed
to by any entity other than the Company that is, or at any time was, a member of
a "controlled group" (as defined in Section 412(n)(6)(B) of the Code) that
includes the Company.
5.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on Schedule
5.16, there are no claims, actions, suits or proceedings, pending or threatened
against or affecting the Company, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over the Company. Except
as set forth on Schedule 5.16, no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received by the Company
during the last five years and, to the best knowledge of the Stockholders, there
is no basis therefor. Except as set forth on Schedule 5.16, and except for any
failures to comply or violations that have not had and will not have a Material
Adverse Effect or require any material expenditure by the Company, the Company
has conducted for the past five years and now conducts its business in
compliance with all laws, regulations, writs, injunctions, decrees and orders
applicable to the Company or its assets, and is not in violation of any law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them. The Company has conducted for the past
five years and is conducting its business in substantial compliance with the
requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations, including all such permits,
licenses, orders and other governmental approvals set forth on Schedules 5.8 and
5.9.
5.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof, whether
computed on a separate, consolidated, unitary, combined or any other basis; and
such term shall include any interest, fines, penalties or additional amounts
attributable to or imposed with respect to any such taxes, charges, fees, levies
or other assessments. The Company (including any subsidiaries) has timely filed
all requisite federal, state and other tax returns or extension requests for all
fiscal periods ended on or before the Balance Sheet Date. Except as set forth on
Schedule 5.17, there are no examinations in progress or claims against the
Company for federal, state or other taxes (including penalties and interest) for
any period or periods prior to or on the Balance Sheet Date and no notice of any
claim for taxes, whether pending or threatened, has been received. All Taxes,
including interest and
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penalties (whether or not shown on any tax return) owed by the Company, any of
the Company's subsidiaries, any member of an affiliated or consolidated group
which includes or included the Company or any of the Company's subsidiaries,
have been paid. The amounts shown as accruals for taxes on the Financial
Statements are sufficient for the payment of all taxes of the kinds indicated
(including penalties and interest) for all periods shown. Copies of (i) any tax
examinations, (ii) extensions of time for filing and (iii) the federal and local
income tax returns and franchise tax returns of Company (including any
subsidiaries) for the last three fiscal years, or such shorter period of time as
any of them shall have existed, are attached hereto as Schedule 5.17. The
Company uses the accrual method of accounting for income tax purposes, and the
Company's methods of accounting have not changed in the past five years. The
Company is not an investment company as defined in Section 351(e)(1) of the
Code. No liens for Taxes exist upon any asset of the Company except for Taxes
not yet due. The Company is not and has not been a party to any tax sharing
agreement. All amounts required to be withheld by the Company and paid to
governmental agencies for income, social security, unemployment insurance,
sales, excise, use and other Taxes have been collected or withheld and paid to
the proper authority. The Company has made all deposits required by law to be
made with respect to employees' withholding and other employment Taxes. The
Company has not made is not obligated to make and is not a party to any
agreement that could require it to make any payment that is not deductible under
Section 280G of the Code.
5.18 NO VIOLATIONS; NO CONSENTS REQUIRED. The Company is not in violation
of its Articles of Incorporation or Bylaws, each as amended to date ("Charter
Documents") . Neither the Company nor, to the best knowledge of the
Stockholders, any other party thereto, is in material default under any lease,
instrument, license, permit or material agreement to which the Company is a
party or by which its properties are bound (the "Material Documents"). Except as
set forth in Schedule 5.18, (a) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) the rights and benefits of the
Company under the Material Documents will not be adversely affected by the
transactions contemplated hereby. Except as set forth on Schedule 5.18, none of
the Material Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect and consummation
of the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any right or benefit.
Except as set forth on Schedule 5.18, none of the Material Documents prohibits
the use or publication by the Company or Metals of the name of any other party
to such Material Document, and none of the Material Documents prohibits or
restricts the Company from freely providing services to any other customer or
potential customer of the Company or Metals.
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5.19 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.19, the
Company is not a party to any governmental contracts subject to price
redetermination or renegotiation.
5.20 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on Schedule 5.20, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
the Company;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by the Company to any of its
officers, directors, Stockholders, employees, consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of Company to any person,
including, without limitation, the Stockholders and their affiliates;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without limitation any
indebtedness or obligation of any Stockholder or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or
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requiring consent of any party to the transfer and assignment of any such
assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(xiii)any transaction by the Company outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any distribution of property or assets by the Company other
than in the ordinary course of business.
5.21 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Schedule 5.21 sets forth a
schedule as of the date of this Agreement of: (i) the name of each financial
institution in which the Company has accounts or safe deposit boxes, (ii) the
names in which the accounts or boxes are held, (iii) the type of account and
account number, (iv) the type of account and the amount of cash, cash
equivalents and securities held in such account, and (v) the name of each person
authorized to draw thereon or have access thereto. Schedule 5.21 also sets forth
the name of each person, corporation, firm or other entity holding any general
or special power of attorney from the Company and a description of the terms of
each such power.
5.22 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on Schedule 5.22, neither any of the Stockholders nor any other
affiliate of the Company owns, directly or indirectly, any interest in, or is an
officer, director, employee or consultant of or otherwise receives remuneration
from, any business which is a competitor, lessor, lessee, customer or supplier
of the Company. Except as set forth on Schedule 5.22, no officer, director or
Stockholder of the Company has, nor during the period beginning January 1, 1990
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
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5.23 DISCLOSURE. The Stockholders have provided Metals with all the
information that Metals has requested in analyzing whether to consummate the
Exchange. Neither the information so provided nor any representation or warranty
of the Stockholders contained in this Agreement contains any untrue statement or
omits to state a material fact necessary in order to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Stockholders which has specific
application to the Company (other than general economic or industry conditions)
which materially adversely affects or, so far as the Stockholders can reasonably
foresee, materially threatens, the assets, business, condition (financial or
otherwise), results of operations or prospects of the Company, which has not
been described in this Agreement or the Schedules hereto. The disclosures in the
Schedules, and those in any supplement thereto, shall relate only to the
representations and warranties in the Section of this Agreement to which each
Schedule expressly relates, and to no other representation or warranty in this
Agreement.
5.24 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.24, the
Company has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) set forth in Section 7.3.
5.25 PREEMPTIVE RIGHTS. Neither the ESOP nor any Stockholder has, and the
ESOP and each Stockholder hereby waives, any preemptive or other right to
acquire shares of Company Stock or Metals Stock that such Stockholder has or may
have had other than rights of any Stockholder to acquire Metals Stock pursuant
to (i) this Agreement or (ii) any option granted by Metals.
5.26 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on its behalf has given or offered anything of value to any governmental
official, political party or candidate for government office nor has it or any
of them otherwise taken any action which would cause the Company to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law
of similar effect.
5.27 POOLING-OF-INTERESTS ACCOUNTING. The Company has never been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded and, within the past two years, there has not been any sale
or spin-off of a significant amount of assets of the Company or any affiliate of
the Company other than in the ordinary course of business. Except as set forth
on Schedule 5.27, the Company owns no capital stock of Metals. The Company has
not acquired any of its capital stock during the past two years. Except as set
forth on Schedule 5.27, the Company has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any of the Company Stock or any
interest therein or to pay any dividend or make any distribution in respect
thereof. Neither the voting stock structure of the Company nor the relative
ownership of
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shares among any of the Company's stockholders has been altered or changed
within the last two years in contemplation of the Exchange. There has been no
transaction or action taken with respect to the equity ownership of the Company
in contemplation of the Exchange which would prevent Metals from accounting for
the Exchange under the pooling-of-interests method of accounting in accordance
with Opinion No. 16 of the Accounting Principles Board ("Opinion No. 16"). If
required, the Stockholders and the President or Chief Financial Officer of the
Company will execute any documentation reasonably required by Metals'
independent public accountants to enable Metals to account for the Exchange as a
pooling-of-interests.
6. REPRESENTATIONS OF METALS
Metals represents and warrants that all of the following representations
and warranties in this Section 6 are true at the date of this Agreement and
shall be true at the time of Closing.
6.1 DUE ORGANIZATION. Metals is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of Delaware, and has
the requisite power and authority to carry on its business as it is now being
conducted. Metals is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
6.2 AUTHORIZATION. (i) The representatives of Metals executing this
Agreement have the authority to enter into and bind Metals to the terms of this
Agreement and (ii) Metals has the full legal right, power and authority to enter
into this Agreement and the Exchange.
6.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, of Metals or the Amended and Restated Bylaws of Metals.
6.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by Metals and the performance of the transactions contemplated herein have been
duly and validly authorized by the Board of Directors of Metals and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of Metals.
6.5 METALS STOCK. At the time of issuance thereof, the Metals Stock to be
delivered to the Stockholders pursuant to this Agreement will constitute valid
and legally issued, fully paid and nonassessable shares of Metals.
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6.6 METALS' FINANCIAL STATEMENTS. Prior to the execution and delivery
hereof, Metals had delivered to the Company for delivery to the Stockholders and
the ESOP copies of Metals' Prospectus contained in its Registration Statement on
Form S-1 filed with the Securities and Exchange Commission on September 12, 1997
(the "Public Reports"). The financial statements of Metals contained in the
Public Reports have been prepared from and in accordance with the books and
records of Metals in accordance with GAAP, except to the extent otherwise
disclosed therein.
6.7 LIABILITIES.Metals has no material liabilities of any kind, whether
absolute or contingent, which are not reflected in the financial statements or
other information contained in the Public Reports.
6.8 NO MATERIAL ADVERSE CHANGE. No material adverse change has occurred in
Metals' business since the date of the most recent balance sheet contained in
the Public Reports.
6.9 NO LITIGATION. There is no litigation pending or, to the knowledge of
Metals, threatened, against Metals that would have a Material Adverse Effect on
Metals.
6.10. TAXES. Metals has filed all required federal and state income tax
returns due through the date hereof and has paid, or made adequate provision for
the payment of, all taxes shown thereon to be due.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. The Company will afford to the
officers and authorized representatives of Metals access to all of the Company's
sites, properties, books and records and will furnish Metals with such
additional financial and operating data and other information as to the business
and properties of the Company as Metals may from time to time reasonably
request. The Company will cooperate with Metals, its representatives, auditors
and counsel in the preparation of any documents or other material which may be
required in connection with any documents or materials required by this
Agreement. Metals, the Stockholders and the Company will treat all information
obtained in connection with the negotiation and performance of this Agreement as
confidential in accordance with the provisions of Section 16 hereof.
7.2 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide Metals with proof that any required notice has been sent.
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7.3 AGREEMENTS. The Stockholders and the Company shall terminate (i) any
stockholders agreements, voting agreements, voting trusts, options, warrants and
employment agreements between the Company and any employee except as
specifically approved in writing by Metals and (ii) any existing agreement
between the Company and any Stockholder except as specifically approved in
writing by Metals, on or prior to the Closing Date. Copies of such termination
agreements shall be delivered to Metals at the Closing or prior thereto. The
parties acknowledge and agree that no employee benefit plans, including the
ESOP, will be terminated on the Closing Date, except as otherwise listed on
Schedule 7.3.
7.4 NOTIFICATION OF CERTAIN MATTERS. The Stockholders and the Company
shall give prompt notice to Metals of (i) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the Company or the Stockholders contained herein
to be untrue or inaccurate in any material respect at or prior to the Closing
and (ii) any material failure of any Stockholder or the Company to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by such person hereunder at or prior to the Closing. Metals shall give prompt
notice to the Company of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of Metals contained herein to be untrue or inaccurate
in any material respect at or prior to the Closing and (ii) any material failure
of Metals to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder at or prior to the Closing. The
delivery of any notice pursuant to this Section 7.4 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, (ii) modify the conditions to Closing set forth herein, or (iii) limit
or otherwise affect the remedies available hereunder to the party receiving such
notice.
7.5 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Closing occurs to
notify the other parties hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules.
7.6 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.7 COMPLIANCE WITH THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF
1976 (THE "HART-SCOTT ACT"). All parties to this Agreement hereby recognize that
one or more filings under the Hart-Scott Act may be required in connection with
the transactions contemplated herein.
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If it is determined by the parties to this Agreement that filings under the
Hart-Scott Act are required, then: (i) each of the parties hereto agrees to
cooperate and use its best efforts to comply with the Hart-Scott Act, (ii) such
filings and expiration or termination of the applicable waiting period
thereunder shall be deemed a condition precedent in addition to the conditions
precedent set forth elsewhere in this Agreement, and (iii) the parties agree to
cooperate and use their best efforts to cause all filings required under the
Hart-Scott Act to be made. If filings under the Hart-Scott Act are required, the
costs and expenses thereof (including filing fees) shall be borne by Metals.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of Stockholders and the Company with respect to actions to
be taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions. If any such
conditions has not been satisfied, the Stockholders (acting in unison) shall
have the right to terminate this Agreement, or in the alternative, waive any
condition not so satisfied. Any act or action of the Stockholders in
consummating the Closing or delivering certificates representing Company Stock
as of the Closing Date shall constitute a waiver of any conditions not so
satisfied. However, no such waiver shall be deemed to affect the survival of the
representations and warranties and indemnification obligations of Metals
contained herein.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of Metals contained in Section 6 shall be true
and correct in all material respects as of the Closing Date as though such
representations and warranties had been made as of that time; all of the terms,
covenants and conditions of this Agreement to be complied with and performed by
Metals on or before the Closing Date shall have been duly complied with and
performed in all material respects; and certificates to the foregoing effect
dated the Closing Date and signed by the President or any Vice President of
Metals shall have been delivered to the Stockholders.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to the Company and its counsel.
8.3 OPINION OF COUNSEL. The Company shall have received an opinion from
counsel for Metals, dated the Closing Date, in the form annexed hereto as Annex
II.
8.4 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated
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herein shall have been obtained and made and no action or proceeding shall have
been instituted or threatened to restrain or prohibit the Exchange and no
governmental agency or body shall have taken any other action or made any
request of the Company as a result of which the Company deems it inadvisable to
proceed with the transactions hereunder.
8.5 EMPLOYMENT AGREEMENT. A. Leon Jeffreys, Toby L. Jeffreys and Sam
Sciple shall have been afforded an opportunity to enter into an Employment
Agreement with the Company in the form of Annex III hereto.
8.6 ESOP OPINION. The ESOP shall have received in form and substance
acceptable to the ESOP (i) an opinion from Shareholder Strategies, Inc. to the
effect that as of the Closing Date, the value of each share of Company Stock
held by the ESOP immediately prior to the Closing is not more than the
consideration per share received by the ESOP (the "Appraisal") and (ii) an
opinion from Shareholder Strategies, Inc. to the effect that as of the Closing
Date, the transactions contemplated hereby are fair to the ESOP from a financial
point of view (the "Fairness Opinion").
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF METALS
The obligations of Metals with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. If any such conditions has not
been satisfied, Metals shall have the right to terminate this Agreement, or in
the alternative, waive any condition not so satisfied. Any act or action of
Metals in consummating the Closing shall constitute a waiver of any conditions
not so satisfied. However, no such waiver shall be deemed to affect the survival
of the representations and warranties of the Stockholders contained herein or of
the indemnification obligations of the Stockholders contained herein.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of the Stockholders and the Company contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date; all of the terms, covenants and conditions
of this Agreement to be complied with or performed by the Stockholders and the
Company on or before the Closing Date, as the case may be, shall have been duly
performed or complied with in all material respects; and the Stockholders shall
have delivered to Metals certificates dated the Closing Date and signed by them
to such effect.
9.2 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not
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covered by insurance, which change, loss or damage could affect or impair the
ability of the Company to conduct its business.
9.3 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to Metals
an instrument dated the Closing Date releasing the Company from (i) any and all
claims of the Stockholders against the Company and Metals and (ii) obligations
of the Company and Metals to the Stockholders, except for (a) items specifically
identified on Schedule 5.6 or 5.12 as being claims of or obligations to the
Stockholders, (b) continuing obligations to Stockholders relating to their
employment by the Company, (c) obligations arising under this Agreement or the
transactions contemplated hereby, and (d) obligations of the Company to the
ESOP.
9.4 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to Metals.
9.5 OPINION OF COUNSEL. Metals shall have received opinions from counsel
to the Company and the Stockholders, dated the Closing Date, in the forms
annexed hereto as Annexes IV-A and IV-B.
9.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all consents
and approvals of third parties listed on Schedule 5.18 shall have been obtained;
and no action or proceeding shall have been instituted or threatened to restrain
or prohibit the Exchange and no governmental agency or body shall have taken any
other action or made any request of Metals as a result of which Metals deems it
inadvisable to proceed with the transactions hereunder.
9.7 GOOD STANDING CERTIFICATES. The Company shall have delivered to Metals
a certificate, dated as of a date no earlier than ten days prior to the Closing
Date, duly issued by the appropriate governmental authority in the State of
Incorporation and in each state in which the Company is authorized to do
business, showing the Company is in good standing and authorized to do business
and that all state franchise and/or income tax returns and taxes for the Company
for all periods prior to the Closing have been filed and paid.
9.8 FIRPTA CERTIFICATE. Each Stockholder shall have delivered to Metals a
certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
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9.9 RELATED PARTY TRANSACTIONS. All existing leases, agreements and
arrangements between the Company and the Stockholder or any affiliate of the
Stockholder shall either have been canceled or the terms thereof shall have been
renegotiated on an arm's length basis satisfactory to Metals.
9.10 EMPLOYMENT AGREEMENT. The persons identified in Section 8.5 shall
have entered into the Employment Agreement referred to therein.
9.11 POOLING TREATMENT. Metals shall have received advice in form and
substance satisfactory to Metals from an accounting firm satisfactory to Metals
to the effect that the Exchange will qualify for pooling-of-interests accounting
under Opinion No. 16.
9.12 ESCROW AGREEMENT. The Stockholders and the ESOP and the other parties
identified in the form of Escrow Agreement attached hereto as Annex V shall have
entered into an Escrow Agreement in the form of Annex V.
10. COVENANTS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES. Metals shall use all reasonable efforts to
have the Stockholders released from any and all guarantees of the Company's
indebtedness identified on Schedule 10.1. In the event that Metals cannot obtain
such releases on or prior to the date 120 days subsequent to the Closing Date,
Metals shall pay off or otherwise refinance or retire such indebtedness.
10.2 ESOP LOAN. The ESOP Trustee hereby agrees to effect the repayment of
the existing loan to the ESOP with funds to be generated by the sale of a
portion of the Metals Stock to be received by the ESOP pursuant to this
Agreement; such sale and repayment to be effected reasonably promptly after such
shares may be sold publicly by the ESOP Trustee pursuant to Rule 144 under the
Securities Act of 1933, as amended, or otherwise. The Company shall pay interest
accruing on such loan until the loan is repaid as described above.
11. INDEMNIFICATION
The Stockholders (specifically excluding the ESOP and its participants and
their beneficiaries in their capacities as such) and Metals each make the
following covenants that are applicable to them, respectively:
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11.1 SURVIVAL OF STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholders (and the
representation and warranty of the ESOP in Section 5.3 regarding its ownership
of shares of Company Stock) made in this Agreement and in the documents and
certificates delivered in accordance herewith shall survive the Exchange for a
period of one year from the Closing Date, except that the specific
indemnification provided in Section 11.4 hereof shall survive for a period of
ten years after the Closing Date; provided, however, that representations and
warranties and indemnification obligations with respect to which a claim is made
within the applicable survival period shall survive until such claim is finally
determined and paid.
(b) The representations and warranties of Metals made in this
Agreement and in the certificates delivered in connection herewith shall survive
the Exchange for a period of one year following the Closing Date, provided,
however, that representations and warranties with respect to which a claim is
made within such one-year period shall survive until such claim is finally
determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date.
11.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders
(specifically excluding the ESOP and its participants and their beneficiaries,
in their capacities as such) covenant and agree that they will jointly and
severally indemnify, defend, protect, and hold harmless the Company and Metals
at all times from and after the date of this Agreement until the Expiration Date
from and against all claims, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively "Damages") incurred by such indemnified person as a result of or
incident to (i) any breach of any representation or warranty of any Stockholder
set forth herein or in the certificates or other documents delivered in
accordance herewith, and (ii) any breach or nonfulfillment of any covenant or
agreement by the Company or the Stockholders under this Agreement; provided,
however, that the payment of the amount of any Damages shall be reduced by any
tax benefit accruing to the Indemnified Party (as defined below) and any
insurance proceeds paid to the Indemnified Party as a result of the event giving
rise to such Damages, even though such benefit may arise after the Expiration
Date.
11.3 INDEMNIFICATION BY METALS. Metals covenants and agrees that it will
indemnify, defend, protect and hold harmless the Stockholders at all times from
and after the date of this
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Agreement until the Expiration Date from and against all Damages incurred by the
Stockholders as a result of (i) any breach of any representation or warranty of
Metals set forth herein or in the certificates or other documents delivered in
accordance with this Agreement; (ii) any breach or nonfulfillment of any
covenant or agreement by Metals under this Agreement, and (iii) any Damages
incurred by the Stockholders as a result of violations by Metals of
Environmental Laws after the Closing Date.
11.4 SPECIFIC INDEMNIFICATION. In addition to the indemnification provided
for in Section 11.1, each Stockholder (specifically excluding the ESOP and its
participants and their beneficiaries, in their capacities as such) covenants and
agrees that he will jointly and severally indemnify, defend, protect and hold
harmless the Company and Metals from and against all Damages incurred by any of
them as a result of any condition of the properties owned or operated by the
Company at any time prior to the Closing Date and described in the report or
reports of ENSR, copies of which are attached hereto.
11.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person") or the commencement of any
action or proceeding by a Third Person that may give rise to a right of
indemnification hereunder, such Indemnified Party shall give to the party
obligated to provide indemnification hereunder (an "Indemnifying Party") written
notice of such claim or the commencement of such action or proceeding; provided,
however, that the failure to give such notice will not relieve such Indemnifying
Party from liability under this Section with respect to such claim, action or
proceeding, except to the extent that the Indemnifying Party has been actually
prejudiced as a result of such failure. The Indemnifying Party (at its own
expense) shall have the right and shall be given the opportunity to associate
with the Indemnified Party in the defense of such claim, suit or proceedings,
provided that counsel for the Indemnified Party shall act as lead counsel in all
matters pertaining to the defense or settlement of such claims, suit or
proceedings. The Indemnified Party shall not, except at its own cost, make any
settlement with respect to any such claim, suit or proceeding without the prior
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed.
11.6 LIMITATIONS ON INDEMNIFICATION. Metals and the other persons or
entities indemnified pursuant to this Section shall not assert any claim for
indemnification hereunder against the Stockholders until such time as, and
solely to the extent that, the aggregate of all claims which such persons may
have against such the Stockholders shall exceed $375,000 (the "Indemnification
Threshold"). The Stockholders shall not assert any claim for indemnification
hereunder against Metals until such time as, and solely to the extent that the
aggregate of all claims which Stockholders may have against Metals shall exceed
the Indemnification Threshold.
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No person shall be entitled to indemnification under this Section 11 if
and to the extent that such person's claim for indemnification is directly or
indirectly caused by a breach by such person of any representation, warranty,
covenant or other agreement set forth is this Agreement.
11.7 INDEMNIFICATION BY ESOP. Notwithstanding anything else set forth in
this Agreement, no benefit which shall be payable out of the ESOP to any person
(including a participant or his or her beneficiary) shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge the same shall be void.
12. NONCOMPETITION
12.1 PROHIBITED ACTIVITIES. A. Leon Jeffreys and Toby L. Jeffreys will
not, for a period of five (5) years following the Closing Date, for any reason
whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with Metals or any of its subsidiaries within 200 miles of
where the Company and Metals or any of its subsidiaries conducts business
(the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of Metals or any of its subsidiaries for the
purpose or with the intent of enticing such employee away from or out of
the employ of Metals or any of its subsidiaries;
(iii) call upon any person or entity which is, at that time, or
which has been, within one year prior to the Closing Date, a customer of
Metals or any of its subsidiaries within the Territory for the purpose of
soliciting or selling products or services in direct competition with
Metals or any of its subsidiaries within the Territory.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any Stockholder from acquiring as a passive investor with no
involvement in the operations or management of the business, not more than one
percent (1%) of the capital stock of a competing business whose stock is
publicly traded on a national securities exchange or over-the-counter market.
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12.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to Metals as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to Metals for which
it would have no other adequate remedy, each Stockholder agrees that the
foregoing covenant may be enforced by Metals in the event of breach by such
Stockholder, by injunctions, restraining orders and other equitable actions.
12.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholders in light of the activities and business of Metals and its
subsidiaries on the date of the execution of this Agreement and the current
plans of Metals; but it is also the intent of Metals and the Stockholders that
such covenants be construed and enforced in accordance with the changing
activities; business and locations of Metals and its subsidiaries throughout the
term of this covenant. During the term of this covenant, if Metals or one of its
subsidiaries engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business it is currently conducting in the
locations currently established therefor, then the Stockholders will be
precluded from soliciting the customers or employees of such new activities or
business or from such new location and from directly competing with such new
activities or business within 100 miles of its then-established operating
location(s) through the term of this covenant.
12.4 SEVERABILITY; REFORMATION. The covenants in this Section are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
12.5 INDEPENDENT COVENANT. The Stockholders acknowledge that their
covenants set forth in this Section 12 are material conditions to Metals'
willingness to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All of the covenants in this Section 12 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against Metals or any subsidiary thereof, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by Metals of
such covenants. It is specifically agreed that the period of five (5) years
stated at the beginning of this Section 12, during which the agreements and
covenants of each Stockholder made in this Section 12 shall be effective, shall
be computed by excluding from such computation any time during which such
Stockholder is in violation of any provision of this Section 12. The covenants
contained in this Section 12 shall not be affected by any breach of any other
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provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
13.1 GENERAL. The Stockholders recognize and acknowledge that they had in
the past, currently have, and in the future may possibly have, access to certain
confidential information of the Company and/or Metals, such as operational
policies, pricing and cost policies, and other information, that are valuable,
special and unique assets of the Company and/or Metals. The Stockholders agree
that they will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of Metals, (b) following the Closing,
such information may be disclosed by the Stockholders as is required in the
course of performing their duties for the Company and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 13.1, unless (i) such information
becomes known to the public generally through no fault of the Stockholders, or
(ii) disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information pursuant
to this clause (ii), the Stockholders shall, if possible, give prior written
notice thereof to Metals and provide Metals with the opportunity to contest such
disclosure. In the event of a breach or threatened breach by any of the
Stockholders of the provisions of this Section, Metals shall be entitled to
injunctive or other equitable relief restraining such Stockholders from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Metals from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
13.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which Metals would
have no other adequate remedy, the Stockholders agree that the foregoing
covenants may be enforced against them by injunctions, restraining orders and
other appropriate equitable relief.
13.3 SURVIVAL. The obligations of the parties under this Section 13 shall
survive the termination of this Agreement for a period of five years.
14. INTENDED TAX TREATMENT AND POOLING-OF-INTERESTS ACCOUNTING
14.1 TAX-FREE REORGANIZATION. Metals and the Stockholders are entering
into this Agreement with the intention that the Exchange qualify as a tax-free
reorganization for federal
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income tax purposes, and the Stockholders will not take any actions that
disqualify the Exchange for such treatment. The Stockholders represent, warrant
and covenant that:
(i) the Company operates at least one historic business line, or
owns at least a significant portion of its historic business assets, in
each case within the meaning of Reg. 1.368-1(d) under the Code; and
(ii) none of the Stockholders has any present plan, intention or
arrangement to dispose of any of the Metals Stock to be received in the
Exchange that would reduce the fair value of the Metals Stock (measured as
of the Effective Time) retained by such Stockholder to an amount less than
50% of the fair value of the Company Stock held by such Stockholder
immediately prior to the Effective Time.
14.2 RESTRICTIONS ON RESALE. Metals has informed the Stockholders that
Metals intends to account for the Exchange as a pooling-of-interests under
Opinion No. 16. Metals has also informed the Stockholders that its ability to
account for the Exchange as a pooling-of-interests was a material factor
considered by Metals in Metals' decision to enter into this Agreement.
Therefore, pursuant to Opinion No. 16, prior to the publication and
dissemination by Metals of consolidated financial results which include results
of the combined operations of the Company and Metals for at least thirty days on
a consolidated basis following the Effective time, the Stockholders shall not
sell, offer to sell, or otherwise transfer or dispose of, any shares of the
Metals Common Stock received by Stockholders, engage in put, call, short-sale,
straddle or similar transactions, or in any other way reduce the Stockholders'
risk of owning shares of Metals. The certificates evidencing the Metals Common
Stock to be received by the Stockholders will bear a legend substantially in the
form set forth below:
The shares represented by this certificate have not been registered and
may not be sold, transferred or assigned, and the issuer shall not be
required to give effect to any attempted sale, transfer or assignment,
except pursuant to an exemption from federal registration requirements
(such as the exemption provided by Rule 144) and all applicable state
registration requirements.
15. SECURITIES LAW MATTERS
15.1 ECONOMIC RISK; SOPHISTICATION. Each Stockholder represents and
warrants that such Stockholder has not relied on any purchaser representative,
or on the Company or any other Stockholder, in connection with the acquisition
of shares of Metals Stock hereunder. The Stockholders each (A) have such
knowledge, sophistication and experience in business and financial
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matters that they are capable of evaluating the merits and risks of an
investment in the shares of Metals Stock, (B) fully understand the nature, scope
and duration of any limitations on transfer described in this Agreement and (C)
can bear the economic risk of an investment in the shares of Metals Stock and
can afford a complete loss of such investment. The Stockholders have each had an
adequate opportunity to ask questions and receive answers from the officers of
Metals concerning any and all matters relating to the transactions described
herein including without limitation the background and experience of the
officers and directors of Metals, the plans for the operations of the business
of Metals, the business, operations and financial condition of Metals, and any
plans for additional acquisitions and the like. The Stockholders have each asked
any and all questions in the nature described in the preceding sentence and all
questions have been answered to their satisfaction.
15.2 PRIVATE PLACEMENT. The Stockholders understand that the issuance of
the shares of Metals Stock to be issued hereunder has not been registered under
the Securities Act of 1933, as amended (the "Act"), and may not be sold as
transferred in the absence of registration thereunder or an exemption from the
registration requirements of the Act.
16. REGISTRATION RIGHTS
16.1 PIGGYBACK REGISTRATION RIGHTS. For purposes of this Section 16, the
term "Stockholders" shall include the ESOP. At any time following the Closing,
whenever Metals proposes to register any Metals Stock for its own or others
account under the 1933 Act for a public offering, other than (i) any
registration of shares to be used as consideration for the acquisition of
businesses or (ii) registrations relating to employee benefit plans, Metals
shall give each of the Stockholders prompt written notice of its intent to do
so. Upon the written request of any of the Stockholders given within 30 days
after receipt of such notice, Metals shall cause to be included in such
registration the number of shares of Stockholders' Metals Stock (including any
stock issued as (or issuable upon the conversion or exchange of any convertible
security, warrant, right or other security which is issued by Metals as) a
dividend or other distribution with respect to, or in exchange for, or in
replacement of such Metals Stock) specified in such written request by such
Stockholder, provided that (i) Metals shall not be required to register more
than 30% of the Stockholders' Metals Stock in any such registration, and (ii) if
Metals is advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered that the number of shares
to be sold by persons other than Metals is greater than the number of such
shares which can be offered without adversely affecting the offering, Metals may
reduce pro rata the number of shares offered for the accounts of such persons
(based upon the number of shares held by such person) to a number deemed
satisfactory by such managing underwriter.
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16.2 DEMAND REGISTRATION RIGHTS.
(a) At any time after the date one year after the Closing and prior
to the date three years after the Closing, the holders of twenty percent or more
of the shares of Metals Stock issued to the Stockholders pursuant to this
Agreement which have not been previously registered or sold and which are not
entitled to be sold under Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act may request in writing that Metals file a
registration statement under the 1933 Act covering the registration of all or
any part of the shares of Metals Stock issued to the Stockholders pursuant to
this Agreement (including any stock issued as (or issuable upon the conversion
or exchange of any convertible security, warrant, right or other security which
is issued by Metals as) a dividend or other distribution with respect to, or in
exchange for, or in replacement of such Metals Stock) then held by such
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
such request, Metals shall give written notice of such request to all
Stockholders. As soon as practicable but in no event later than 45 days after
the initial written request of Stockholders regarding such registration, Metals
shall file and use its best efforts to cause to become effective a registration
statement covering (i) all of the shares requested to be included in such
registration pursuant to the initial written request and (ii) of all of the
shares of other Stockholders joining in such request within 20 days following
Metals' notice. Metals shall be obligated to effect only one Demand Registration
hereunder, and will keep such Demand Registration current and effective for not
less than 120 days (or such shorter period as is required to complete the
distribution of the shares registered thereby).
(b) Notwithstanding the foregoing paragraph, following any such a
demand, a majority of Metals' disinterested directors (i.e. directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for up to a 30 day period after the
date on which Metals would otherwise be required to make such filing pursuant to
the foregoing paragraph.
If at the time of any request by the Stockholders for a Demand
Registration Metals has fixed plans to file within 60 days after such request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, Metals may so inform the Stockholders requesting
registration and no registration of the Stockholders' Metals Stock shall be
initiated under this Section 16.2 until 90 days after the effective date of such
registration unless Metals is no longer proceeding diligently to effect such
registration; provided that Metals shall provide the Stockholders the right to
participate in such public offering pursuant to, and subject to, Section 16.1
hereof. If, pursuant to this paragraph, Metals does not effect the requested
Demand Registration (and some or all of the Stockholders do not sell all of
their shares of Metals Stock pursuant to any offering effected pursuant to
Section 16.1), such Stockholders shall be entitled to a second Demand
Registration.
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16.3 REGISTRATION PROCEDURES. Whenever Metals is required to register
shares of Metals Stock pursuant to Sections 16.1 and 16.2, Metals will, as
expeditiously as possible:
(a) Prepare and file with the SEC a registration statement with
respect to such shares and use its best efforts to cause such registration
statement to become effective (provided that before filing a registration
statement or prospectus or any amendments or supplements or term sheets thereto,
Metals will furnish a representative of the Stockholders with copies of all such
documents proposed to be filed) as promptly as practical;
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to comply with the provisions of the Securities Act and to keep
such registration statement effective for a period of not less than 120 days;
(c) Furnish to each Stockholder who so requests such number of
copies of such registration statement, each amendment and supplement thereto and
the prospectus included in such registration statement (including each
preliminary prospectus and any term sheet associated therewith), and such other
documents as such Stockholder may reasonably request in order to facilitate the
disposition of the relevant shares;
(d) Use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Stockholders,
and to keep such registration or qualification effective during the period such
registration statement is to be kept effective, provided that Metals shall not
be required to become subject to taxation, to qualify to do business or to file
a general consent to service of process in any such states or jurisdictions;
(e) Cause all such shares of Metals Stock to be listed or included
on any securities exchanges or trading systems on which similar securities
issued by Metals are then listed or included;
(f) Notify each Stockholder at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act within the period that
Metals is required to keep the registration statement effective of the happening
of any event as a result of which the prospectus included in such registration
statement, together with any associated term sheet, contains an untrue statement
of a material fact or omits any fact necessary to make the statement therein not
misleading, and, at the request of any such Stockholder, Metals will prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of the covered shares, such prospectus
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will not contain an untrue statement of material fact or omit to state any fact
necessary to make the statements therein not misleading.
All expenses incurred in connection with the registration under this
Section 16 (including all registration, filing, qualification, legal, printer
and accounting fees, but excluding underwriting commissions and discounts),
shall be borne by Metals.
16.4 INDEMNIFICATION.
(a) In connection with any demand registration, Metals shall
indemnify, to the extent permitted by law, each Stockholder (an "Indemnified
Party") against all losses, claims, damages, liabilities and expenses arising
out of or resulting from any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus or preliminary prospectus or
associated term sheet or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading except insofar as the same are caused by or contained in
or omitted from any information furnished in writing to Metals by such
Indemnified Party expressly for use therein or by any Indemnified Parties'
failure to deliver a copy of the registration statement or prospectus or any
amendment or supplements thereto after Metals has furnished such Indemnified
Party with a sufficient number of copies of the same.
(b) In connection with any demand registration, each Stockholder
shall furnish to Metals in writing such information as is reasonably requested
by Metals for use in any such registration statement or prospectus and will
indemnify, to the extent permitted by law, Metals, its directors and officers
and each person who controls Metals (within the meaning of the 1933 Act) against
any losses, claims, damages, liabilities and expenses resulting from any untrue
or alleged untrue statement or material fact or any omission or alleged omission
of a material fact required to be stated in the registration statement or
prospectus or any amendment thereof or supplement thereto necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in information so furnished in writing by
such Stockholder specifically for use in preparing the registration statement.
Notwithstanding the foregoing, the liability of a Stockholder under this Section
16.4 shall be limited to an amount equal to the net proceeds actually received
by such Stockholder from the sale of the relevant shares covered by the
registration statement.
(c) Any person entitled to indemnification hereunder will (i) give
prompt notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified parties' reasonable
judgment, a conflict of interest between such indemnified
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and indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. Any failure to give prompt notice shall
deprive a party of its right to indemnification hereunder only to the extent
that such failure shall have adversely effected the indemnifying party. If the
defense of any claim is assumed, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent
shall not be unreasonably withheld). An indemnifying party who is not entitled
or elects not, to assume the defense of a claim, will not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) If the indemnification provided for in this Section 16.4 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of as a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
16.5 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 16.1 and 16.2 covering an underwritten registered offering, Metals
and each participating holder agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of Metals's size and investment stature,
including indemnification.
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16.6 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the SEC that may permit the sale of Metals
stock to the public without registration, Metals agrees to use its best efforts
to:
(i) make and keep public information regarding Metals available as
those terms are defined in Rule 144 under the 1933 Act, for a period of
four years beginning on the Closing Date;
(ii) file with the SEC in a timely manner all reports and other
documents required of Metals under the 1933 Act and the 1934 Act; and
(iii) so long as a Stockholder owns any restricted Metals Common
Stock, furnish to each Stockholder forthwith upon written request a
written statement by Metals as to its compliance with the reporting
requirements of Rule 144 and of the 1933 Act and the 1934 Act, a copy of
the most recent annual or quarterly report of Metals, and such other
reports and documents so filed as a Stockholder may reasonably request in
availing itself of any rule or regulation of the SEC allowing a
Stockholder to sell any such shares without registration.
16.7 ASSIGNMENT OF REGISTRATION RIGHTS. A Stockholder or any person to
which such rights under this Agreement have been transferred may transfer the
rights granted by this Section 16 only to a transferee or assignee of Metals
Stock representing no less than 10% of the aggregate number of shares of Metals
Stock (as adjusted for any stock dividends, combinations or splits with respect
to such shares) issued pursuant to this Agreement (or, if less, 100% of the
Metals Stock originally issued to such Stockholder or transferred to such other
person). Any transfer or assignment of the registration rights granted under
this Agreement shall be conditioned upon (i) the Company's being given written
notice at the time of or within 10 days after said transfer or assignment,
stating the name and address of the transferee or assignee and identifying the
securities with respect to which such registration rights are being transferred
or assigned and (ii) the assumption in writing by the transferee or assignee of
the obligations of a Stockholder under this Section 16.
16.8 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance in
which all of the Metals Stock requested to be included in a registration on
behalf of the Stockholders cannot be so included as a result of limitations of
the aggregate number of shares of Metals Stock that may be so included, the
number of shares of Metals Stock that may be so included by the Stockholders
shall be allocated among the Stockholders requesting inclusion of shares pro
rata on the basis of the number of shares of Metals Stock held by such
Stockholders. The Company shall not limit the number of shares of Metals Stock
to be included in a registration pursuant to this Section 16 in order
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to include shares held by stockholders with no registration rights or, with
respect to registrations under Section 16.2 hereof, in order to include in such
registration securities registered for the Company's own account or securities
held by persons other than the Stockholders.
17. GENERAL
17.1 COOPERATION. The Company, Stockholders and Metals shall each deliver
or cause to be delivered to the other on the Closing Date, and at such other
times and places as shall be reasonably agreed to, such additional instruments
as the other may reasonably request for the purpose of carrying out this
Agreement. The Company will cooperate and use its reasonable efforts to have the
present officers, directors and employees of the Company cooperate with Metals
on and after the Closing Date in furnishing information, evidence, testimony and
other assistance in connection with any tax return filing obligations, actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date.
17.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
Metals, and the heirs and legal representatives of the Stockholders.
17.3 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Company and Metals and supersede any prior agreement and understanding relating
to the subject matter of this Agreement. This Agreement, upon execution,
constitutes a valid and binding agreement of the parties hereto enforceable in
accordance with its terms and may be modified or amended only by a written
instrument executed by the Stockholders, the Company and Metals, acting through
their respective officers, duly authorized by their respective Boards of
Directors.
17.4 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
17.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
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17.6 EXPENSES. Whether or not the transactions herein contemplated shall
be consummated, Metals will pay the fees and expenses of Metals'
representatives, accountants and counsel incurred in connection herewith, and
the Stockholders will pay the fees and expenses of the Stockholders'
representatives, accountants and counsel incurred in connection herewith. Each
Stockholder shall pay all sales, use, transfer, real property transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") imposed in connection with the Exchange. Each Stockholder shall file all
necessary documentation and Returns with respect to such Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company or Metals,
will pay all taxes due upon receipt of the consideration payable pursuant to
this Agreement.
17.7 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, as follows:
(a) If to Metals, addressed to it at:
Metals USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056
Attn: General Counsel
(b) If to the Company, addressed to it at:
Jeffreys Steel Company, Inc.
1251 Woodland Avenue
P.O. Box 2763
Mobile, Alabama 36652
Attn: President
(c) If to the Stockholders, addressed to them at their addresses
set forth Schedule 1.3 hereto;
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 17.7 from time to time.
17.8 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Alabama other than its principles governing conflicts
of laws.
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17.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the applicable Expiration
Date.
17.10 EFFECT OF INVESTIGATION; KNOWLEDGE.
(a) No investigation by the parties hereto in connection with this
Agreement or otherwise shall affect the representations and warranties of the
parties contained herein or in any certificate or other document delivered in
connection herewith and each such representation and warranty shall survive such
investigation.
(b) When a representation or warranty contained herein or in any
certificate or other document delivered in connection herewith is made to the
"knowledge" of a party, such party shall be deemed to know all facts and
circumstances that a reasonable investigation of the subject matter of such
representation or warranty would have revealed.
17.11 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
17.12 TIME. Time is of the essence with respect to this Agreement.
17.13 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
17.14 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
17.15 CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
METALS USA, INC.
By: /s/ ARTHUR L. FRENCH
Arthur L. French
President and Chief Executive Officer
JEFFREYS STEEL COMPANY, INC.
By:/s/ TOBY JEFFREYS
Name: Toby Jeffreys
Title: President and CEO
<PAGE>
STOCKHOLDERS:
/s/ TOBY L. JEFFREYS
Toby L. Jeffreys, Individually
/s/ TOBY L. JEFFREYS
Toby L. Jeffreys, as Trustee of Leon
Jeffreys Qualified Annuity Trust
/s/ TOBY L. JEFFREYS
Toby L. Jeffreys, as Trustee of the
Mary Helen Sims Jeffreys Qualified
Annuity Trust
The Jeffreys Family Limited Partnership
By: /s/ TOBY L. JEFFREYS
Toby L. Jeffreys
General Partner
The Jeffreys Steel Company, Inc. Employee
Profit Sharing Pension Stock Ownership Plan
and Trust
By: South Trust Bank, N.A., Trustee
By: /s/ LESLIE L. DEAN
Name: Leslie L. Dean
Title: VP and Trust Officer
